-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GPag2kd48dn1JoHKOrKeyxygDa25VfUWc3QNC1wfE9KvIn7ITuPKF5THhi16sD6V C898Vog5DpGfgfRRsTXM0w== 0000825324-98-000009.txt : 19980807 0000825324-98-000009.hdr.sgml : 19980807 ACCESSION NUMBER: 0000825324-98-000009 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980806 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOOD TIMES RESTAURANTS INC CENTRAL INDEX KEY: 0000825324 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 841133368 STATE OF INCORPORATION: NV FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-18590 FILM NUMBER: 98678629 BUSINESS ADDRESS: STREET 1: 8620 WOLFF CT STE 330 CITY: WESTMINSTER STATE: CO ZIP: 80030 BUSINESS PHONE: 3034274221 MAIL ADDRESS: STREET 1: 8620 WOLFF COURT STREET 2: SUITE 330 CITY: WESTMINSTER STATE: CO ZIP: 80030 FORMER COMPANY: FORMER CONFORMED NAME: PARAMOUNT VENTURES INC DATE OF NAME CHANGE: 19900205 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended: June 30, 1998 Commission File Number: 0-18590 GOOD TIMES RESTAURANTS INC. (Exact name of registrant as specified in its charter) NEVADA (State or other jurisdiction of incorporation or organization) 84-1133368 (I.R.S. Employer Identification No.) 601 CORPORATE CIRCLE, GOLDEN, CO 80401 (Address of principal executive offices) (Zip Code) (303) 384-1400 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No APPLICABLE ONLY TO CORPORATE ISSUERS: Total number of shares of common stock outstanding at June 30, 1998. 1,321,252 SHARES OF COMMON STOCK, .001 PAR VALUE Form 10-QSB Quarter Ended June 30, 1998 INDEX PAGE PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Balance Sheets - 3 June 30, 1998 and September 30, 1997 Consolidated Statements of Operations - 5 For the three months ended June 30, 1998 and 1997 and for the nine months ended June 30, 1998 and 1997 Consolidated Statements of Cash Flow - 6 For the three months ended June 30, 1998 and 1997 and for the nine months ended June 30, 1998 and 1997 Notes to Financial Statements 7 ITEM 2. Management's Discussion and Analysis 8 PART II - OTHER INFORMATION ITEMS 1 through 6. 11 Signature 12 GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS June 30, September 30, 1998 1997 CURRENT ASSETS: Cash and cash equivalent $ 283,000 $ 408,000 Receivables 61,000 81,000 Inventories 49,000 51,000 Prepaid expenses and other 96,000 11,000 Receivable from settlement of RTC Claims 0 300,000 Notes receivable 66,000 41,000 Total current assets 555,000 892,000 PROPERTY AND EQUIPMENT, at cost: Land and building 2,630,000 2,561,000 Leasehold improvements 2,636,000 2,646,000 Fixtures and equipment 3,128,000 3,082,000 8,394,000 8,289,000 Less accumulated depreciation and amortization (2,935,000) (2,459,000) 5,459,000 5,830,000 OTHER ASSETS: Notes receivable 388,000 414,000 Deposits & other 27,000 56,000 415,000 470,000 TOTAL ASSETS $6,429,000 $7,192,000 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 28,000 $ 25,000 Short-term debt 0 0 Current portion of capital lease obligations 98,000 122,000 Accounts payable 430,000 465,000 Accrued liabilities - Las Vegas 22,000 14,000 Accrued liabilities - RTC 155,000 125,000 Accrued liabilities - other 520,000 675,000 Total current liabilities 1,253,000 1,426,000 LONG-TERM LIABILITIES: Debt 456,000 478,000 Las Vegas accrued liabilities 138,000 166,000 RTC accrued liabilities 163,000 277,000 Capital lease obligations, net of current portion 0 68,000 Deferred liabilities 301,000 265,000 Total long-term liabilities 1,058,000 1,254,000 MINORITY INTERESTS IN PARTNERSHIPS 1,504,000 1,619,000 STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; 5,000,000 shares authorized, 1,000,000 shares of Series A Convertible Cumulative Preferred Stock issued and outstanding as of June 30, 1998 and 1,000,000 issued and outstanding at September 30, 1997 (liquidation preference of $493,750 includes unpaid dividends of $25,000) 10,000 10,000 GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Cont.) June 30, September 30, 1998 1997 Common stock, $.001 par value; 50,000,000 shares authorized, 1,321,252 shares issued and outstanding as of March 31, 1998 and 1,286,970 shares issued and outstanding as of September 30, 1997 6,000 6,000 Capital contributed in excess of par value 11,836,000 11,822,000 Accumulated deficit (9,238,000) (8,945,000) Total stockholders' equity 2,614,000 2,893,000 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,429,000 $7,192,000 GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended June 30, June 30, 1998 1997 1998 1997 NET REVENUES: Restaurant sales, net $3,358,000 $3,119,000 $9,398,000 $8,337,000 Franchise net revenues 63,000 46,000 143,000 108,000 Total revenues 3,421,000 3,165,000 9,541,000 8,445,000 RESTAURANT OPERATING EXPENSES: Food & paper costs 1,198,000 1,143,000 3,349,000 3,102,000 Labor, occupancy & other 1,381,000 1,331,000 4,076,000 3,836,000 Accretion of deferred rent 13,000 12,000 33,000 36,000 Depreciation & amortization 162,000 153,000 496,000 445,000 Total restaurant operating costs 2,754,000 2,639,000 7,954,000 7,419,000 INCOME FROM RESTAURANT OPERATIONS 667,000 526,000 1,587,000 1,026,000 OTHER OPERATING EXPENSES: Selling, general & administrative expenses 528,000 519,000 1,638,000 1,490,000 Loss, (income) from operating RTC stores 13,000 44,000 25,000 12,000 Total other operating expenses 541,000 563,000 1,663,000 1,502,000 INCOME (LOSS) FROM OPERATIONS 126,000 (37,000) (76,000) (476,000) OTHER INCOME & (EXPENSES) Minority income (expense), net (87,000) (62,000) (168,000) (79,000) Interest, net (15,000) (10,000) (45,000) (25,000) Loss from RTC & Las Vegas lease liabilities 0 0 (55,000) (356,000) Other, net (3,000) (42,000) 50,000 (24,000) Total other income & (expenses) (105,000) (114,000) (218,000) (484,000) NET INCOME (LOSS) $ 21,000 ($ 151,000) ($294,000) ($ 960,000) PREFERRED STOCK DIVIDENDS IN ARREARS 0 20,000 40,000 45,000 NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $ 21,000 ($ 171,000) ($334,000) ($1,005,000) NET INCOME (LOSS) PER COMMON SHARE $.02 ($0.13) ($.26) ($0.79) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1,321,064 1,279,556 1,307,888 1,279,556
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended Nine Months Ended June 30, June 30, 1998 1997 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 21,000 ($151,000) ($294,000) ($960,000) Depreciation and amortization 175,000 169,000 534,000 504,000 Changes in operating assets & liabilities-- (Increase) decrease in: Prepaids & receivables (27,000) 33,000 236,000 (98,000) Inventories 6,000 (2,000) 2,000 (8,000) Other assets (6,000) 1,000 28,000 23,000 Opening expenses 0 (62,000) 0 (65,000) (Decrease) increase in: Accounts payable 0 78,000 (35,000) 92,000 Accrued interest 0 0 0 0 Accrued property taxes (93,000) (60,000) (54,000) (18,000) Accrued payroll & P/R taxes 7,000 21,000 (3,000) 36,000 Deposits 0 0 0 0 Other accrued liabilities/deferred income (36,000) 69,000 (167,000) 25,000 Net cash provided by (used in) operating activities 47,000 96,000 247,000 (469,000) CASH FLOWS FROM INVESTING ACTIVITIES: (Purchase) sale - FF&E, land, building & improvements (21,000) (446,000) (163,000) (162,000) CASH FLOWS FROM FINANCING ACTIVITIES: Debt incurred (paid) (136,000) (29,000) (110,000) (678,000) Minority interest (37,000) 59,000 (115,000) 18,000 Paid in capital activity 0 250,000 15,000 1,039,000 Net cash provided by (used in) (173,000) 280,000 210,000 379,000 financing activities INCREASE (DECREASE) IN CASH ($147,000) ($70,000) ($126,000) ($252,000)
1. UNAUDITED FINANCIAL STATEMENTS: In the opinion of management, the accompanying unaudited consolidated financial statements contain all of the normal recurring adjustments necessary to present fairly the financial position of the Company as of June 30, 1998, the results of its operations and its cash flow for the three month period ended June 30, 1998 and for the nine month period ended June 30, 1998. Operating results for the three month period ended June 30, 1998 and for the nine month period ended June 30, 1998 are not necessarily indicative of the results that may be expected for the year ending September 30, 1998. The consolidated balance sheet as of September 30, 1997 is derived from the audited financial statements, but does not include all disclosures required by generally accepted accounting principles. As a result, these financial statements should be read in conjunction with the Company's Form 10-KSB for the fiscal year ended September 30, 1997. 2. REVERSE STOCK SPLIT: On February 12, 1998, the shareholders approved a one-for-five reverse stock split of the Company's Common Stock. All references to number of shares, except shares authorized, and to per share information in the consolidated financial statements have been adjusted to reflect the reverse stock split on a retroactive basis. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE COMPANY General On September 30, 1995, the Company completed the sale of Round The Corner Restaurants, Inc. ("RTC") to Hot Concepts Management Group, L.L.C. In October 1996, RTC filed for Chapter 11 bankruptcy. The Company entered into a settlement agreement with RTC whereby RTC would pay the Company $300,000 in two installments for the settlement of all of the Company's claims against RTC. Both installments have been received as of June 30, 1998. As of June 30, 1998, the Company has assessed the impact of the Year 2000 Issue on its computer systems and is in the process of remediating the affected hardware and software, which coincides with planned systems upgrades. The Company does not anticipate the Year 2000 Issue to materially affect its business operations. Capital expenditures for the Year 2000 remediation and planned system upgrades are estimated to be $150,000 in 1999. Drive Thru had twenty-eight units open at June 30, 1998, of which twelve were franchised units, nine joint-venture units and seven company-owned units compared to twenty-seven units open at June 30, 1997, of which eleven were franchised units, nine joint-venture units and seven company-owned units. In March 1998, one company-owned unit was closed and moved to temporary storage due to the condemnation of the property on which it was located. The Company is currently negotiating with the condemning authority to recover condemnation proceeds which is anticipated to offset the costs incurred to move the building and equipment as well as the cost of all abandoned site improvements. The building and equipment will be moved to a new location as soon as a suitable site is found. Management anticipates that Drive Thru and its existing franchisees will develop a total of two additional Good Times units in the Denver ADI in 1998. The following presents certain historical financial information of the operations of the Company. This financial information includes the results of the Company and Drive Thru for the three months and nine months ended June 30, 1997 and the results of the Company and Drive Thru for the three months and nine months ended June 30, 1998. Results of Operations Net Revenues. Net restaurant sales for the three months ended June 30, 1998 increased $239,000 (7.6%) to $3,358,000 from $3,119,000 for the same prior year period. Increased net restaurant sales of $309,000 were attributable to three Drive Thru units that were not open for the same prior year period. Decreased net restaurant sales of $155,000 were attributable to one company-owned unit that was closed in March 1998. Same store net restaurant sales for company-owned and joint-venture units increased $85,000 or 3.0% for the three months ended June 30, 1998 from the same prior year period. Franchise revenue increased $17,000 for the three months ended June 30, 1998 from the same prior year period due to an increase in franchise fee income. Net restaurant sales for the nine months ended June 30, 1998 increased $1,061,000 (12.7%) to $9,398,000 from $8,337,000 for the same prior year period. Increased net restaurant sales of $1,104,000 were attributable to three Drive Thru units that were not open for the same prior year period. Decreased net restaurant sales of $343,000 were attributable to one joint- venture unit that was sold to a franchisee in November 1996 and one company- owned unit that was closed in March 1998. Same store net restaurant sales for company-owned and joint-venture units increased $300,000 or 3.9% for the nine months ended June 30, 1998 from the same prior year period. Franchise revenue increased $35,000 during the nine months ended June 30, 1998 from the same prior year period due to higher franchise royalty fees and lower franchise expenses. Food and Paper Costs. Food and paper costs decreased to 35.7% of net restaurant sales for the three months ended June 30, 1998, compared to 36.6% for the same prior year period. The decrease in Drive Thru's food and paper costs is primarily attributable to menu price increases taken during the last eight months of the fiscal year ended September 30, 1997, with less than proportionate increases in food and paper costs. Food and paper costs decreased to 35.6% of net restaurant sales for the nine months ended June 30, 1998 compared to 37.2% for the same prior year period. Income From Restaurant Operations. For the three months ended June 30, 1998, income from restaurant operations increased to $667,000 from $526,000 for the same prior year period. Drive Thru's income from restaurant operations as a percentage of net restaurant sales increased to 19.9% for the three months ended June 30, 1998 from 16.9% for the same prior year period. Cash flow from restaurant operations (income from restaurant operations plus depreciation and amortization) increased to 24.7% of net restaurant sales for the three months ended June 30, 1998 from 21.8% for the same prior year period. For the nine months ended June 30, 1998, income from restaurant operations increased to $1,587,000 from $1,026,000 for the same prior year period. Drive Thru's income from restaurant operations as a percentage of net restaurant sales increased to 16.9% for the nine months ended June 30, 1998 from 12.3% for the same prior year period. Cash flow from restaurant operations (income from restaurant operations plus depreciation and amortization) increased to 22.2% of net restaurant sales for the nine months ended June 30, 1998 from 17.6% for the same prior year period. The improvement in both income and cash flow from restaurants as a percentage of net restaurant sales is a direct result of 1) management's focus on improving restaurant labor efficiencies and restaurant expenses; 2) a reduction in food and paper costs as a percentage of net restaurant sales due to menu price increases; and 3) an increase in same store net restaurant sales, which causes restaurant expenses to decrease as a percentage of net restaurant sales. Income (Losses) From Operations. The Company had income from operations of $126,000 in the three months ended June 30, 1998 compared to a loss from operations of ($37,000) for the three months ended June 30, 1997. The improvement in income from operations of $163,000 is primarily attributable to an increase in income from restaurant operations of $141,000, and a decrease in the loss from operating RTC stores of $31,000 compared to the same prior year period. For the nine months ended June 30, 1998, losses from operations decreased to ($76,000) from ($476,000) in the same prior year period. The improvement in income from operations of $400,000 for the nine months ended June 30, 1998 is primarily attributable to an increase in income from restaurant operations of $561,000 offset by an increase in selling, general and administrative expenses of $148,000 compared to the same prior year period, primarily attributable to costs incurred for a television advertising campaign launched in September 1997. Net Income (Loss). The net income for the Company was $21,000 for the three months ended June 30, 1998 compared to a net loss for the Company of ($151,000) for the comparable prior year period. Minority interest expense increased $25,000 in the three months ended June 30, 1998 from the same prior year period. This increase was attributable to the improved income from restaurant operations from the Colorado joint-venture units compared to the same prior year period. Net interest expense increased $5,000 for the three months ended June 30, 1998 from the same prior year period. Other net expense decreased ($39,000) for the three months ended June 30, 1998 from the same prior year period. During the three months ended June 30, 1997 other net expense included $17,000 in lease termination charges and $25,000 for the settlement of a legal dispute associated with a lease termination on an undeveloped site. For the nine months ended June 30, 1998, the net loss for the Company was ($294,000) compared to a net loss for the Company of ($960,000) from the same prior year period. Minority interest expense increased $89,000 in the nine months ended June 30, 1998 from the same prior year period. Other income for the nine months ended June 30, 1998 increased $74,000 from the same prior year period. Included in other income for the nine months ended June 30, 1998 is a gain of $53,000 related to the sale of a long-term land investment held by the Company. Liquidity and Capital Resources As of June 30, 1998, the Company and Drive Thru had $283,000 cash and cash equivalents on hand. Management is actively negotiating the sale of one existing Drive Thru restaurant to a franchisee, the proceeds of which will be used for increasing the Company's working capital reserves and for the development of new restaurants. New sources of financing will be required to augment these proceeds for the development of additional company-owned restaurants. Management is in negotiation for mortgage and equipment debt financing for up to seven additional restaurants. The financing will require a partial guaranty by The Bailey Company. As a result, the Company has extended The Bailey Company's conversion rights under the Convertible Preferred Stock Agreement as a part of the negotiations of the guaranty provisions. The Company had a working capital deficit of ($698,000) including $98,000 of current maturities of capital lease obligations, $28,000 in current maturities of long-term debt and $177,000 of accrued lease expenses associated with the RTC and Las Vegas lease liabilities. Because restaurant sales are collected in cash and accounts payable for food and paper products are paid two to four weeks later, restaurant companies often operate with working capital deficits. Cash flow from operating activities for the three months ended June 30, 1998 includes the payment of $123,000 in property taxes due annually. Cash flow from financing activities for the three months ended June 30, 1998 includes the payment of $100,000 for a short-term working capital loan agreement entered into by the Company in February 1998. For the nine months ended June 30, 1998, cash decreased ($126,000). Cash provided by operations was $247,000, cash used in investing activities was $163,000, and cash used in financing activities was $210,000. Cash flow from operating activities for the nine months ended June 30, 1998 includes $300,000 received from RTC for the settlement of all of the Company's claims against RTC. Neither the Company nor Drive Thru have any bank lines of credit. Impact of Inflation Drive Thru has not experienced a significant impact from inflation. It is anticipated any operating expense increases will be recovered by increasing menu prices to the extent that is prudent considering competition. Seasonality Revenues of Drive Thru are subject to seasonal fluctuation based primarily on weather conditions adversely affecting restaurant sales in January, February and March. GOOD TIMES RESTAURANTS INC. & SUBSIDIARIES Part II. - Other Information Item 1. - Legal Proceedings O'Brien v. Harkins and Good Times Drive Thru Inc. On September 11, 1997, Amy Colleen O'Brien ("O'Brien") filed a complaint in the Colorado District Court for Jefferson County alleging that she, as a former employee of Drive Thru in 1995, was physically assaulted by co-defendant Richard Everett Harkins, a former Drive Thru employee, and that Drive Thru was responsible for any resulting injuries because of its alleged negligent hiring and supervision of Harkins. On June 11, 1998, the Colorado District Court for Jefferson County granted Good Times Drive Thru Inc's motion for summary judgement and dismissed the case against the Company. The Company requested that its applicable worker's compensation insurance carrier concede coverage and provide a defense to this action. The insurance carrier acknowledged its agreement with Drive Thru's position and the basis for which the summary motion was granted that the exclusive remedy for O'Brien's claims are those remedies available pursuant to the Colorado Worker's Compensation Act, but denied that the Company is entitled to either coverage or a defense to this action. Accordingly, the Company has filed a declaratory judgment action against the insurance carrier requesting a determination that the Company is entitled to coverage in a defense to this action and reimbursement of attorneys fees. Item 2. - Changes in Securities On February 12, 1998, the date of the Company's annual shareholder's meeting, a one-for-five reverse split was approved. The reverse split was necessary to meet the revised listing requirements for continued listing on the NASDAQ stock exchange. Item 3. - Defaults Upon Senior Securities None. Item 4. - Submission of Matters to a Vote of Security Holders None. Item 5. - Other Information None. Item 6. - Exhibits and Reports on Form 8-K (a) No reports on Form 8-K. SIGNATURE Pursuant to the requirements of The Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GOOD TIMES RESTAURANTS INC. DATE: August 6, 1998 BY: /s/ Boyd E. Hoback, President and Chief Executive Officer Boyd E. Hoback, President and Chief Executive Officer BY: /s/ Susan Knutson, Controller Susan Knutson, Controller EX-27 2
5 9-MOS SEP-30-1997 JUN-30-1998 283000 0 61000 0 49000 555000 8394000 (2935000) 6429000 1253000 0 0 10000 6000 2614000 6429000 3358000 3421000 1198000 2754000 541000 0 (15000) 21000 0 0 0 0 0 21000 .02 .02
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