Good Times Restaurants Inc., which lately has seen its business improve but continues to face the threat of delisting by the NASDAQ exchange, said it found a buyer for the majority of its common shares that will help to improve the brand’s fortunes.
The Golden, Colo.-based company, which operates 20 Good Times Burgers & Frozen Custard restaurants, partners in seven more and franchises 22 to others, said Small Island Investments Ltd. has agreed to pay $2.1 million for 4.2 million shares of the stock.
At the close of the transaction, SII, a Bermuda corporation based in Boston, will own 51.4 percent of Good Times’ outstanding common shares, according to Good Times officials.
“This capital infusion along with improved operating results provides stability for the company, resources for longer term growth of Good Times, allows us to regain compliance for our continued NASDAQ Capital Market listing and creates the opportunity to partner with an investment group with deep experience in owning restaurants,” said Boyd Hoback, Good Times president and chief executive.
In August, NASDAQ officials informed the publicly traded restaurant operator that it was in danger of being delisted from the exchange. That possible delisting stems from Good Times’ failure to comply with exchange rules related to maintaining certain minimum levels of stockholder equity, market value or levels of net income, company filings show.
Good Times representatives said the deal’s closing is subject to stockholder approval of the transaction and of a reverse split of the common stock to take effect after the closing. They said the deal arranged by financial advisor Mastodon Ventures is expected to close by Nov. 30.
SII is an affiliate of an unnamed company that owns three restaurant brands operating in Canada and the United States that generate an aggregate $75 million in annual revenue.
The negotiated purchase amount is equal to a per-share price of 50 cents. The company’s stock during the past year has traded from a low of 30 cents a share to a high of $1.56 per share and closed Nov. 3 at 75 cents a share, up 7.1 percent from the previous close.
Good Times also said same-store sales at company units increased 20.3 percent in October compared to the prior year. The company, when it reports third quarter results, is expected to report a reversal of fortunes and an end to nine consecutive quarters of negative same-store comparisons. It previously said company comps had been off by 1.7 percent in July, but up by 0.4 percent in August and by 7.5 percent in September.
Hoback said the company estimated that about 10 percent of the October improvement in same-store sales resulted from better weather this year and the other 10 percent was tied to general improvement in the economy and consumer response to sales-building initiatives.
“Since June of 2010, we have seen gradually improving sales trends as we introduced a new lower-priced Craver Combo category, two fry alternatives with Fresh Cut Fries and our heritage Wild Fry, Fresh Hand Spun Custard Shakes and other items that are truly unique to Good Times,” he said.
Hoback noted that Good Times has “lived through the influx of several fast-casual ‘better burger’ competitors and are seeing our customers returning.”
For the nine months ended in June, Good Times Restaurants Inc. reported a 9.3-percent fall off in revenue, to $14.8 million, compared with the prior year. The company said it had a net loss of about $2.6 million, or 62 cents per share, versus a loss of $1.5 million, or 37 cents a share, for the same 2009 period.
For the fiscal year ended in September 2009, the company’s revenue fell by 8.2 percent to $23.7 million, primarily as a result of a 12.4-percent decline in company same-store sales, compared with a 1.5-percent dip in fiscal 2008. Its net loss grew from about $1.1 million, or 28 cents per share, in fiscal 2008, to $1.6 million, or 42 cents a share, it said.
Declining sales and capital challenges have virtually shut down new-store development at Good Times since 2007, when the chain had a total of 54 restaurants. During the six months ended June 30, the company said, it closed a dual-branded Taco John’s-Good Times store in Commerce City, Colo., and a joint venture Good Times unit in Denver.
Contact Alan J. Liddle at [email protected].