Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock $.001 par value	GTIM	NASDAQ Capital Market

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company”, in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).~~

~~As of February 2, 2022, there were 12,563,491 shares of the Registrant's common stock, par value $0.001 per share, issued and outstanding.~~

~~INDEX~~

~~PAGE~~

If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
~~PART I - FINANCIAL INFORMATION~~
~~Item 1.Financial Statements~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).		3
	Yes ☐	No ☒
~~Condensed Consolidated Balance Sheets (unaudited) – December 28, 2021 and September 28, 2021~~		3
			As of August 8, 2022, there were 12,361,450 shares of the Registrant's common stock, par value $0.001 per share, issued and outstanding.
~~Condensed Consolidated Statements of Operations (unaudited) for the fiscal quarters ended December 28, 2021~~ ~~and December 29, 2020~~		4

~~Consolidated Statements of Shareholders’ Equity (unaudited) Year-to-Date December 28, 2021 and~~ ~~December 29, 2020~~		5

~~Condensed Consolidated Statements of Cash Flows (unaudited) for the fiscal year-to-date periods ended~~ ~~December 28, 2021 and December 29, 2020~~		6

~~Notes to Condensed Consolidated Financial Statements (unaudited)~~		7

~~Item 2.~~	~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~		16


~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~		24

Form 10-Q

Quarter Ended June 28, 2022

	INDEX
~~Item 4.~~	~~Controls and Procedures~~	24PAGE

	PART III - ~~OTHER~~FINANCIAL INFORMATION

Item 1.	~~Legal Proceedings~~Financial Statements (Unaudited)	25

~~Item 1A.~~	~~Risk Factors~~	25

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	25

~~Item 3.~~	~~Defaults Upon Senior Securities~~	25

~~Item 4.~~	~~Mine Safety Disclosures~~	25

~~Item 5.~~	~~Other Information~~	25

~~Item 6.~~	~~Exhibits~~	253

	~~SIGNATURES~~Condensed Consolidated Balance Sheets (unaudited)	263

	Condensed Consolidated Statements of Operations (unaudited)	4

	Consolidated Statements of Shareholders’ Equity (unaudited)	5 - 6

	Condensed Consolidated Statements of Cash Flows (unaudited)	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	28

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	29

	SIGNATURES	30

	CERTIFICATIONS

Table of Contents

~~Table of Contents~~

PART I. - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

~~ITEM 1.FINANCIAL STATEMENTS~~

Good Times Restaurants Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except share and per share data)

	December 28, 2021			September 28, 2021			June 28, 2022			September 28, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	7,640		$	8,856		$	9,704		$	8,856
Receivables, net of allowance for doubtful accounts of $0		2,350			644			662			644
Prepaid expenses and other		1,572			641
Prepaid expenses and other current assets								1,387			641
Inventories		1,309			1,303			1,385			1,303
Total current assets		12,871			11,444			13,138			11,444
PROPERTY AND EQUIPMENT:
Land and building		4,670			4,704			4,670			4,704
Leasehold improvements		34,700			35,089			35,541			35,089
Fixtures and equipment		29,527			30,286			30,011			30,286
Total property and equipment		68,897			70,079			70,222			70,079
Less accumulated depreciation and amortization		(42,573	)		(42,852	)		(46,683	)		(42,852	)
Total net property and equipment		26,324			27,227			23,539			27,227
OTHER ASSETS:
Operating lease right-of-use assets, net		44,972			45,737			43,566			45,737
Deposits and other assets		177			219			176			219
Trademarks		3,900			3,900			3,900			3,900
Other intangibles, net		0-			4			22			4
Goodwill		5,150			5,150			5,713			5,150
Total other assets		54,199			55,010			53,377			55,010

TOTAL ASSETS:	$	93,394		$	93,681		$	90,054		$	93,681
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		593			1,496		$	753		$	1,496
Deferred income		63			61			57			61
Operating lease liabilities, current		5,051			4,935			5,349			4,935
Other accrued liabilities		7,121			6,394			7,412			6,394
Total current liabilities		12,828			12,886			13,571			12,886
LONG-TERM LIABILITIES:
Operating lease liabilities, net of current portion		48,784			49,723			46,859			49,723
Deferred and other liabilities		193			202			161			202
Total long-term liabilities		48,977			49,925			47,020			49,925
SHAREHOLDERS’ EQUITY:
Good Times Restaurants Inc. shareholders’ equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized, 0 shares issued and outstanding as of December 28, 2021 and September 28, 2021		0-			0-
Common stock, $.001 par value; 50,000,000 shares authorized, 12,539,694 and 12,512,072 shares issued and outstanding as of December 28, 2021 and September 28, 2021, respectively		13			13
Preferred stock, $.01 par value; 5,000,000 shares authorized, no shares issued and outstanding as of June 28, 2022 and September 28, 2021								-			-
Common stock, $.001 par value; 50,000,000 shares authorized, 12,393,843 and 12,512,072 shares issued and outstanding as of June 28, 2022 and September 28, 2021, respectively								13			13
Capital contributed in excess of par value		59,122			59,021			59,318			59,021
Treasury stock, at cost; 376,351 and 376,651 shares as of December 28, 2021 and September 28, 2021, respectively		(1,608	)		(1,608	)
Treasury stock, at cost; 545,999 and 376,351 shares as of June 28, 2022 and September 28, 2021, respectively								(2,213	)		(1,608	)
Accumulated deficit		(27,350	)		(27,680	)		(29,031	)		(27,680	)
Total Good Times Restaurants Inc. shareholders’ equity		30,177			29,746
Total Good Times Restaurants Inc. shareholders' equity								28,087			29,746

Non-controlling interests		1,412			1,124			1,376			1,124
Total shareholders’ equity		31,589			30,870			29,463			30,870

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	93,394		$	93,681		$	90,054		$	93,681

See accompanying notes to condensed consolidated financial statements (unaudited)

Table of Contents

~~Table of Contents~~

Good Times Restaurants Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands except share and per share data)

	Quarter Ended						Quarter Ended						Year-to-Date
	December 28, 2021 (13 Weeks)			December 29, 2020 (13 Weeks)			June 28, 2022 (13 Weeks)			June 29, 2021 (13 Weeks)			June 28, 2022 (39 Weeks)			June 29, 2021 (39 Weeks)
NET REVENUES:
Restaurant sales	$	32,676		$	27,081		$	36,265		$	33,701		$	102,305		$	89,777
Franchise revenues		240			215			232			245			705			657
Total net revenues		32,916			27,296			36,497			33,946			103,010			90,434

RESTAURANT OPERATING COSTS:
Food and packaging costs		10,226			7,841			11,767			9,989			32,450			26,037
Payroll and other employee benefit costs		11,177			8,881			12,295			11,261			35,027			29,787
Restaurant occupancy costs		2,328			2,195			2,383			2,183			7,088			6,533
Other restaurant operating costs		4,138			3,469			4,753			3,730			13,558			10,841
Preopening costs		50			39			0			301			50			420
Depreciation and amortization		984			929			993			938			2,990			2,797
Total restaurant operating costs		28,903			23,354			32,191			28,402			91,163			76,415

General and administrative costs		2,705			2,174			2,379			2,505			7,661			7,097
Advertising costs		641			509			807			597			2,260			1,616
Franchise costs		5			5			5			5			16			22
Gain on restaurant asset sales and lease termination		(614	)		(9	)
Impairment of long-lived assets								303			-			2,056			-
Gain on restaurant asset sale and lease termination								(9	)		(9	)		(666	)		(28	)
Litigation contingencies								-			-			332			-

INCOME FROM OPERATIONS		1,276			1,263
INCOME (LOSS) FROM OPERATIONS:								821			2,446			188			5,312

Interest expense, net		(18	)		(98	)
Other Expenses:
Interest and other expense, net								(12	)		(66	)		(41	)		(244	)
Gain on debt extinguishment								0			11,778			0			11,778
Total other income (expense), net								(12	)		11,712			(41	)		11,534

NET INCOME BEFORE PROVISION FOR INCOME TAXES	$	1,258		$	1,165
NET INCOME BEFORE INCOME TAXES:								809			14,158			147			16,846

PROVISION FOR INCOME TAXES		8			0-
Provision for Income Taxes								(1	)		-			(9	)		-

NET INCOME		1,250			1,165

NET INCOME:							$	808		$	14,158		$	138		$	16,846
Income attributable to non-controlling interests		(920	)		(363	)		(339	)		(524	)		(1,489	)		(1,313	)

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	330		$	802
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS							$	469		$	13,634		$	(1,351	)	$	15,533

BASIC AND DILUTED INCOME PER SHARE:
Net income attributable to Common Shareholders	$	0.03		$	0.06

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
NET (LOSS) INCOME PER SHARE, ATTRIBUTABLE TO COMMON SHAREHOLDERS:
Basic		12,522,471			12,622,178		$	0.04		$	1.07		$	(0.11	)	$	1.22
Diluted		12,684,979			12,698,284		$	0.04		$	1.04		$	(0.11	)	$	1.21

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic								12,457,251			12,787,390			12,502,449			12,689,587
Diluted								12,560,658			13,076,635			12,502,449			12,793,915

See accompanying notes to condensed consolidated financial statements (unaudited)

Table of Contents

~~Table of Contents~~

Good Times Restaurants Inc. and Subsidiaries

Consolidated Statements of Shareholders’ Equity (Unaudited)

~~For the fiscal quarters ending December~~
Year-to-Date June 28, ~~2021 and December 29, 2020~~2022

(In thousands, except share and per share data)

	Treasury Stock, at cost					Common Stock															Treasury Stock, at cost					Common Stock
	Shares		Amount			Issued Shares		Par Value		Capital Contributed in Excess of Par Value		Non- Controlling Interest In Partnerships			Accumulated Deficit			Total			Shares		Amount			Issued Shares			Par Value		Capital Contributed in Excess of Par Value		Non- Controlling Interest In Partnerships			Accumulated Deficit			Total

BALANCES, September 29, 2020		43,110	$	(75	)		12,612,852	$	13	$	58,219	$	1,293		$	(44,467	)	$	14,983

Stock-based compensation cost		-		-			-		-		61		-			-			61
Restricted stock unit vesting		-		-			16,548		-		-		-			-			-
Stock option exercise		-		-			7,984		-		13		-			-			13
Non-controlling interests:
Income		-		-			-		-		-		363			-			363
Distributions		-		-			-		-		-		(319	)		-			(319	)
Net Income attributable to common shareholders and comprehensive income		-		-			-		-		-		-			802			802

BALANCES, December 29, 2020		43,110	$	(75	)		12,637,384	$	13	$	58,293	$	1,337		$	(43,665	)	$	15,903

BALANCES, September 28, 2021		376,351	$	(1,608	)		12,512,072	$	13	$	59,021	$	1,124		$	(27,680	)	$	30,870
BALANCES, September 28,2021																						376,351	$	(1,608	)		12,512,072		$	13	$	59,021	$	1,124		$	(27,680	)	$	30,870

Stock-based compensation cost		-		-			-		-		95		-			-			95			-		-			-			-		95		-			-			95
Restricted stock unit vesting		-		-			13,366		-		-		-			-			-			-		-			13,366			-		-		-			-			-
Common stock grants		-		-			9,256		-		-		-			-			-			-		-			9,256			-		-		-			-			-
Stock option exercise		-		-			5,000		-		6		-			-			6			-		-			5,000			-		6		-			-			6
Non-controlling interests:
Non-controlling interests:
Income		-		-			-		-		-		920			-			920			-		-			-			-		-		920			-			920
Distributions		-		-			-		-		-		(632	)		-			(632	)		-		-			-			-		-		(632	)		-			(632	)
Net Income attributable to common shareholders and comprehensive income		-		-			-		-		-		-			330			330			-		-			-			-		-		-			330			330

BALANCES, December 28, 2021		376,351	$	(1,608	)		12,539,694	$	13	$	59,122	$	1,412		$	(27,350	)	$	31,589			376,351	$	(1,608	)		12,539,694		$	13	$	59,122	$	1,412		$	(27,350	)	$	31,589

Stock-based compensation cost																						-		-			-			-		52		-			-			52
Restricted stock unit vesting																						-		-			-			-		-		-			-			-
Stock option exercise																						-		-			23,797			-		84		-			-			84
Repurchases of common stock																						75,900		(331	)		(75,900	)		-		-		-			-			(331	)
Non-controlling interests:
Income																						-		-			-			-		-		230			-			230
Distributions																						-		-			-			-		-		(112	)		-			(112	)
Net Income (Loss) attributable to common shareholders and comprehensive loss																						-		-			-			-		-		-			(2,150	)		(2,150	)

BALANCES, March 29, 2022																						452,251	$	(1,939	)		12,487,591		$	13	$	59,258	$	1,530		$	(29,500	)	$	29,362

Stock-based compensation cost																						-		-			-			-		60		-			-			60
Repurchases of common stock																						93,748		(274	)		(93,748	)		-		-		-			-			(274	)
Non-controlling interests:
Income																						-		-			-			-		-		339			-			339
Distributions																						-		-			-			-		-		(493	)		-			(493	)
Net Income attributable to common shareholders and comprehensive loss																						-		-			-			-		-		-			469			469

BALANCES, June 28, 2022																						545,999	$	(2,213	)		12,393,843		$	13	$	59,318	$	1,376		$	(29,031	)	$	29,463

See accompanying notes to consolidated financial statements (unaudited)

Table of Contents

~~Table of Contents~~

Good Times Restaurants Inc. and Subsidiaries
Consolidated Statements of Shareholders’ Equity (Unaudited)
Year-to-Date June 29, 2021

(In thousands, except share and per share data)

	Treasury Stock, at cost					Common Stock
	Shares		Amount			Issued Shares		Par Value		Capital Contributed in Excess of Par Value		Non- Controlling Interest In Partnerships			Accumulated Deficit			Total

BALANCES, September 29, 2020		43,110	$	(75	)		12,612,852	$	13	$	58,219	$	1,293		$	(44,467	)	$	14,983

Stock-based compensation cost		-		-			-		-		61		-			-			61
Restricted stock unit vesting		-		-			16,548		-		-		-			-			-
Stock option exercise		-		-			7,984		-		13		-			-			13
Non-controlling interests:
Income		-		-			-		-		-		363			-			363
Distributions		-		-			-		-		-		(319	)		-			(319	)
Net Income attributable to common shareholders and comprehensive loss		-		-			-		-		-		-			802			802

BALANCES, December 29, 2020		43,110	$	(75	)		12,637,384	$	13	$	58,293	$	1,337		$	(43,665	)	$	15,903

Stock-based compensation cost		-		-			-		-		215		-			-			215
Common stock granted		-		-			12,948		-		-		-			-			-
Performance shares granted							10,000		-		-		-			-			-
Stock option exercise		-		-			35,346		-		83		-			-			83
Non-controlling interests:
Income		-		-			-		-		-		426			-			426
Distributions		-		-			-		-		-		(536	)		-			(536	)
Net Income attributable to common shareholders and comprehensive income		-		-			-		-		-		-			1,097			1,097

BALANCES, March 30, 2021		43,110	$	(75	)		12,695,678	$	13	$	58,591	$	1,227		$	(42,568	)	$	17,188

Stock-based compensation cost		-		-			-		-		51		-			-			51
Stock option exercises		-		-			126,918		-		311		-			-			311
Restricted stock unit vesting		-		-			8,283		-		-		-			-			-
Non-controlling interests:
Income		-		-			-		-		-		524			-			524
Contributions		-		-			-		-		-		14			-			14
Distributions		-		-			-		-		-		(617	)		-			(617	)
Net Income attributable to common shareholders and comprehensive income		-		-			-		-		-		-			13,634			13,634

BALANCES, June 29, 2021		43,110	$	(75	)		12,830,879	$	13	$	58,953	$	1,148		$	(28,934	)	$	31,105

See accompanying notes to consolidated financial statements (unaudited)

Table of Contents

Good Times Restaurants Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

Fiscal Year to Date
December 28, 2021
(13 Weeks)
December 29, 2020
(13 Weeks)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
1,250
$
1,165

Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization
1,078
967
Amortization of operating lease assets
757
1,055
Stock-based compensation expense
95
61
Gain on lease termination
(614
)
(9
)
Provision for income taxes
8
0-
Changes in operating assets and liabilities:
Receivables and other
(961
)
(55
)
Inventories
(6
)
6
Deposits and other
(896
)
(610
)
Accounts payable
(915
)
(1,340
)
Lease incentives receivable
0-
0-
Operating lease liabilities
(823
)
(1,136
)
Accrued and other liabilities
808
743
Net cash provided by (used in) operating activities
(219
)
847

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for the purchase of property and equipment
(237
)
(483
)
Payments received from franchisees and others
0-
3
Net cash used in investing activities
(237
)
(480
)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable and long-term debt
0-
(1,500
)
Proceeds from stock option exercise
6
13
Distributions to non-controlling interests
(766
)
(319
)
Net cash used in financing activities
(760
)
(1,806
)

NET CHANGE IN CASH AND CASH EQUIVALENTS
(1,216
)
(1,439
)

CASH AND CASH EQUIVALENTS, beginning of period
8,856
11,454

CASH AND CASH EQUIVALENTS, end of period
$
7,640
$
10,015

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest
$
0-
$
59
Change in accounts payable attributable to the purchase of property and equipment
$
(12
)
$
(133
)

	Fiscal Year-to-Date
	June 28, 2022 (39 Weeks)			June 29, 2021 (39 Weeks)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	138		$	16,846

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		3,129			2,920
Amortization of operating lease assets		2,908			2,631
Decrease in ROU assets		57			-
Gain on debt extinguishment		-			(11,778	)
Impairment of long-lived assets		2,056			-
Gain on lease termination		(642	)		-
Stock-based compensation expense		207			327
Recognition of deferred gain on sale of restaurant building		(24	)		(28	)
Income tax provision		9			-
Changes in operating assets and liabilities:
Receivables and other		(18	)		280
Prepaid expense		(742	)		-
Inventories		(62	)		(102	)
Deposits and other assets		70			(260	)
Accounts payable		(529	)		(820	)
Operating lease liabilities		(3,262	)		(2,922	)
Deferred liabilities		-			(4	)
Accrued and other liabilities		1,123			296
Net cash provided by operating activities		4,418			7,386

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for the purchase of property and equipment		(1,623	)		(2,098	)
Acquisition of restaurant from franchisee, net of cash acquired		(728	)		-
Proceeds from sale of fixed assets		745
Payments received from franchisees and others		-			13
Net cash used in investing activities		(1,606	)		(2,085	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for the purchase of treasury stock		(605	)		-
Principal payments on notes payable and long-term debt		-			(5,500	)
Proceeds from stock option exercise		90			407
Contributions from non-controlling interests		-			14
Distributions to non-controlling interests		(1,449	)		(1,375	)
Net cash used in financing activities		(1,964	)		(6,454	)

NET CHANGE IN CASH AND CASH EQUIVALENTS		848			(1,153	)

CASH AND CASH EQUIVALENTS, beginning of period		8,856			11,454

CASH AND CASH EQUIVALENTS, end of period	$	9,704		$	10,301

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	14		$	33
Change in accounts payable attributable to the purchase of property and equipment	$	(214	)	$	500

See accompanying notes to condensed consolidated financial statements (Unaudited)

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~~Table of Contents~~

GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular dollar amounts in thousands, except share and per share data)

Note 1.

Basis of Presentation

~~Note 1.~~ ~~Basis of Presentation~~

The accompanying unaudited condensed consolidated financial statements include the accounts of Good Times Restaurants Inc. (the “Company”) and its wholly-owned subsidiaries as well as six partnerships in which the Company is the controlling partner. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company operates, ~~franchises,~~ and licenses full-service restaurants under the brand Bad Daddy’s Burger Bar that are primarily located in Colorado and in the Southeast region of the United States.

The Company operates and franchises drive-thru fast food hamburger restaurants under the brand Good Times Burgers & Frozen Custard, all of which are located in Colorado and Wyoming.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles and practices of the United States of America (“GAAP”) for interim financial information. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all of the normal recurring adjustments necessary to present fairly the financial position of the Company as of ~~December~~June 28, ~~2021~~2022 and the results of its operations and its cash flows for the three fiscal quarters ended ~~December~~June 28, ~~2021~~2022 and ~~December~~June 29, ~~2020.~~2021. Operating results for the three fiscal ~~quarter~~quarters ended ~~December~~June 28, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the year ending September ~~28, 2021.~~27, 2022. The condensed consolidated balance sheet as of September 28, 2021 is derived from the audited financial statements but does not include all disclosures required by generally accepted accounting principles. As a result, these condensed consolidated financial statements should be read in conjunction with the Company's Form 10-K for the fiscal year ended September 28, 2021.

Fiscal Year – The Company’s fiscal year is a 52/53-week year ending on the last Tuesday of September. In a 52-week fiscal year, each of the Company’s quarterly periods consist of 13 weeks. The additional week in a 53-week fiscal year is added to the first quarter, making such quarter consist of 14 weeks. The quarters ended ~~December~~June 28, ~~2021~~2022 and ~~December~~June 29, ~~2020~~2021 each consisted of 13 weeks. The year-to-date periods ended June 28, 2022 and June 29, 2021 each consisted of 39 weeks.

Advertising Costs – We utilize Advertising Funds to administer certain advertising programs for both the Bad Daddy’s and Good Times brands that benefit both us and our franchisees. We and our franchisees are required to contribute a percentage of gross sales to the fund. The contributions to these funds are designated and segregated for advertising. We consolidate the Advertising Funds into our financial statements whereby contributions from franchisees, when received, are recorded and included as a component of franchise revenues. ~~As we intend to utilize all of the advertising contributions towards advertising expenditures, we~~We recognize costs ~~equal to franchisee contributions to~~associated with the advertising funds ~~on a quarterly basis.~~based upon the same expense recognition principles we apply to other expenses. Contributions to the Advertising Funds from our franchisees were ~~$69,000~~$204,000 and ~~$67,000~~$205,000 for the three quarters ended ~~December~~June 28, 2022 and June 29, 2021, respectively and ~~December 29, 2020, respectively.~~are included in franchise revenues.

Receivables– Our receivables typically consist of royalties and other fees due to us from independent franchisees of our brands as well as product rebates and other incentives due to us under agreements with our food and beverage ~~vendors. During~~vendors, amounts receivable from our delivery partners, and amounts receivable from Tivoli Brewing Company in connection with our partnership where we operate the ~~quarter ended December 28, 2021, we entered into agreements with large-box retail partners to carry pre-loaded gift cards in various~~kitchen at their brewery taproom.

COVID-19

Currently all of ~~their locations~~our Bad Daddy’s and Good Times restaurants are operating without COVID-19 related government restrictions or mask mandates. However, the receivable balance for this quarter also includes amounts due to us of approximately $619,000 associated with gift cards sold to those partners. Additionally, the receivable balance for the quarter ended December 28, 2021 includes approximately $745,000 to us under the lease termination agreement further described in Note 6 to these financial statements, such amount which has been deposited into an escrow account with a qualified escrow agent.

~~COVID-19~~

~~The global crisis resulting~~second-and third-order effects from the ~~spread of COVID-19~~pandemic have had a ~~substantial~~lingering impact on our restaurant operations for the ~~quarter~~three quarters ended ~~December~~June 28, ~~2021.~~2022 including disruptions and other impacts to the supply chain and labor markets, and varying changes in consumer behavior. During portions of the month of November 2020 through early January 2021, all of the Company’s Bad Daddy’s Burger Bar restaurants in Colorado were open only for limited outdoor dining, delivery and carry-out service, with indoor dining rooms closed by government orders. Beginning in early January 2021, we began to re-open Colorado dining rooms at Bad Daddy’s, with limited occupancy, as local regulations allowed. Our dining rooms in all other states in which Bad Daddy’s has operations were open during this time. Although certain dining rooms were open, all were operating at some reduction of capacity, whether driven by explicit capacity reductions under government orders, or due to social distancing protocols that are either mandated by the same government orders, or which we abide by as under our own internal protocols designed to maintain a safe foodservice environment, both for our employees and for our customers.

~~Table of Contents~~

Our operating results substantially depend upon our ability to drive traffic to our restaurants, and for our Bad Daddy’s Burger Bar restaurants, to serve guests in our dining rooms. We cannot currently ~~estimate~~predict the ~~duration~~continued impact of the ~~impact~~effect of the COVID-19 pandemic on our business, including ~~the impact of~~any mutations of the virus and additional ~~variants including but not limited to the recent delta and omicron~~ variants; neither are we able to predict how the pandemic will evolve nor how ~~various government entities~~the long-lived impacts on supply chain, labor market, and customer behavior will ~~respond to its evolution.~~evolve. Should ~~additional~~ dining room closures ~~occur,~~or mask mandates reoccur, our business ~~would~~could be adversely affected. Even without government orders, customers may choose to reduce or eliminate in-restaurant dining ~~because of~~if there are increasing numbers of COVID-19 cases, hospitalizations, or deaths. Furthermore, although the development of certain vaccines that are currently being administered may reduce the risk of further government restrictions, there is no guarantee that the vaccine will be effective in eradicating the virus, additional mutations or variants of the virus may be resistant to any vaccine, and the length of the ongoing pandemic may change consumer behavior such that potential customers may still choose to reduce or eliminate in-restaurant dining.

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Additionally, in connection with spread of COVID-19, there have been disruptions in various food supply chains in the United States. Our operating results substantially depend upon our ability to obtain sufficient quantities of products such as beef, bacon, packaging and other products used in the production of menu items ~~served and sold to~~for our guests. Ongoing impacts of the COVID-19 pandemic could result in product shortages and in-turn could require us to serve a limited menu, restrict number of items purchased per guest, or close some or all of our restaurants for an indeterminate period of time. ~~Ongoing material adverse~~The long-lived, residual impacts from the COVID-19 pandemic and its evolution could result in reduced revenue and cash flow and could affect our assessments of impairment of intangible assets, long-lived assets, or goodwill.

War in Ukraine

Although we conduct all of our restaurant operations within the USA, worldwide product supply chains have been impacted by the war in Ukraine. Specifically sunflower oil and wheat, which are fungible commodities, are used as ingredients in our raw materials and purchased by our suppliers, have significant supplies that typically originate in Ukraine. The lack of availability of supplies of such products may impact the availability and supplier pricing for products purchased by us for use in our business, which could result in higher food and packaging costs or reduced revenues.

Note 2.

Recent Accounting Pronouncements

~~Note 2.Recent Accounting Pronouncements~~

The Company reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on the Company’s consolidated financial statements.

~~Note 3.~~ ~~Revenue~~

Note 3.

Revenue

Revenue Recognition

Revenues consist primarily of sales from restaurant ~~operations;~~operations and franchise revenue, which includes franchisee contributions to advertising funds. Revenues associated with gift card breakage are immaterial to our financials. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer, typically a restaurant customer or a franchisee/licensee.

The Company recognizes revenues in the form of restaurant sales at the time of the sale when payment is made by the customer, as the Company has completed its performance obligation, namely the provision of food and beverage, and the accompanying customer service, during the customer’s visit to the restaurant. The Company sells gift cards to customers and recognizes revenue from gift cards primarily in the form of restaurant revenue. Gift Card breakage, which is recognized when the likelihood of a gift card being redeemed is remote, is determined based upon the Company’s historic redemption patterns, and is immaterial to our overall financial statements.

Revenues we receive from our franchise and license agreements include sales-based royalties, and from our franchise agreements also may include advertising fund contributions, area development fees, and franchisee fees. We recognize sales-based royalties from franchisees and licensees as the underlying sales occur. We similarly recognize advertising fund contributions from franchisees as the underlying sales occur. The Company also provides its franchisees with services associated with opening new restaurants and operating them under franchise and development agreements in exchange for area development and franchise fees. The Company would capitalize these fees upon receipt from the franchisee and then would amortize those over the contracted franchise term as the services comprising the performance obligations are satisfied. We have not received material development or franchise fees in the years presented, and the primary performance obligations under existing franchise and development agreements have been satisfied prior to the earliest period presented in our financial statements.

Note 4.

Goodwill and Intangible Assets

~~Note 4.Goodwill and Intangible Assets~~

The following table presents goodwill and intangible assets as of ~~December~~June 28, ~~2021~~2022 and September 28, 2021 (in thousands):

December 28, 2021
September 28, 2021
Gross Carrying Amount
Accumulated Amortization
Net Carrying
Amount
Gross Carrying Amount
Accumulated Amortization
Net Carrying
Amount
Intangible assets subject to amortization:
Non-compete agreements
$
0-
$
0-
$
0-
$
50
$
(46
)
$
4
Indefinite-lived intangible assets:
Trademarks
3,900
-
3,900
3,900
-
3,900
Intangible assets, net
$
3,900
$
0-
$
3,900
$
3,950
$
(46
)
$
3,904

Goodwill
$
5,150
$
0-
$
5,150
$
5,150
$
0-
$
5,150

	June 28, 2022							September 28, 2021
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Intangible assets subject to amortization:
Non-compete agreements	$	25	$	(3	)	$	22	$	50	$	(46	)	$	4
Indefinite-lived intangible assets:
Trademarks		3,900		-			3,900		3,900		-			3,900
Intangible assets, net	$	3,925	$	(3	)	$	3,922	$	3,950	$	(46	)	$	3,904

Goodwill	$	5,713	$	-		$	5,713	$	5,150	$	-		$	5,150

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~~Table of Contents~~

The Company had no goodwill impairment losses in the periods presented in the above table. The aggregate amortization expense related to ~~these~~ intangible assets subject to amortization was ~~$4,000~~$3,000 for the ~~quarter~~three quarters ended ~~December~~June 28, ~~2021~~2022 and ~~$4,000~~$46,000 for the ~~quarter~~three quarters ended ~~December~~June 29, ~~2020. The company’s non-compete agreements were fully amortized at the end of the first fiscal quarter of 2021 and were written off at that time.~~2021.

Note 5.

Stock-Based Compensation

~~Note 5.Stock-Based Compensation~~

The Company has traditionally maintained incentive compensation plans that include a provision for the issuance of equity-based awards. The Company established the 2008 Omnibus Equity Incentive Compensation Plan in 2008 (the “2008 Plan”) and has outstanding awards that were issued under the 2008 Plan. Subsequently, the 2008 Plan expired in 2018 and the Company established a new plan, the 2018 Omnibus Equity Incentive Plan (the “2018 Plan”) ~~during the third fiscal quarter of 2018,~~, pursuant to shareholder approval. Future awards will be issued under the 2018 Plan. Currently, the maximum number of shares available for issuance under the 2018 Plan is 900,000. The Company, in its annual proxy statement filed with the United States Securities and Exchange Commission on December 17, 2021, for the Company’s 2022 Annual Meeting of Shareholders to be held on February 9, 2022, submitted a proposal for shareholder approval on an amendment to increase the number of shares available for issuance under the 2018 Plan from 900,000 to 1,050,000.

Stock-based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite service period (generally the vesting period of the grant). The Company recognizes the impact of forfeitures as forfeitures occur.

Our net income (loss) for the three quarters ended ~~December~~June 28, 2022 and June 29, 2021 includes $207,000 and ~~December 29, 2020 includes $95,000 and $61,000,~~$327,000, respectively, of compensation costs related to our stock-based compensation arrangements.

Stock Option awards

The Company measures the compensation cost associated with stock option awards by estimating the fair value of the award as of the grant date using the Black-Scholes pricing model. The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the Company’s stock options and stock awards granted during the ~~quarter~~three quarters ended ~~December~~June 28, ~~2021.~~2022. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the employees who receive equity awards.

During the quarter ended December 28, 2021, the Company granted 80,000 incentive stock options to its Chief Executive Officer, from available shares under its 2018 Plan, with an exercise price of $5.20 per share and a per share weighted average fair value of $2.65. These options were granted pursuant to the Chief Executive Officer’s Second Amended and Restated Employment Agreement dated December 24, 2020.

During the quarter ended December 29, 2020, the Company granted 90,000 incentive stock options to its Chief Executive Officer, from available shares under its 2018 Plan, with an exercise price of $2.33 per share and a per share weighted average fair value of $1.24. These options were granted pursuant to the Chief Executive Officer’s Second Amended and Restated Employment Agreement dated December 24, 2020.

In addition to the exercise and grant date prices of the stock option awards, certain weighted average assumptions that were used to estimate the fair value of stock option grants are listed in the following table:

Quarter Ended December 28, 2021
Incentive and Non-Qualified Stock Options
Quarter Ended December 29, 2020
Incentive and Non-Qualified Stock Options

Expected term (years)
4.5
4.5
Expected volatility
61.3%
67.6%
Risk-free interest rate
0.9%
0.3%
Expected dividends
0-
0-

	Three Quarters Ended June 28, 2022 Incentive and Non-Qualified Stock Options	Three Quarters Ended June 29, 2021 Incentive and Non-Qualified Stock Options

Expected term (years)	6.5	3.63
Expected volatility	61.31%	74.62%
Risk-free interest rate	1.76%	0.24%
Expected dividends	-	-

We estimate expected volatility based on historical weekly price changes of our common stock for a period equal to the current expected term of the options. The risk-free interest rate is based on the United States treasury yields in effect at the time of grant corresponding with the expected term of the options. The expected option term is the number of years we estimate that options will be outstanding prior to exercise considering vesting schedules and our historical exercise patterns.

~~Table of Contents~~

The following table summarizes stock option activity for the ~~quarter~~three quarters ended ~~December~~June 28, ~~2021~~2022 under all plans:

Shares
Weighted
Average
Exercise Price
Weighted Average
Remaining
Contractual Life (Yrs)

Outstanding at beginning of year
443,815
$
3.63
Options granted
80,000
$
5.20
Options exercised
(5,000
)
$
1.31
Outstanding December 28, 2021
518,815
$
3.89
5.7
Exercisable December 28, 2021
376,732
$
3.56
5.4

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Yrs)

Outstanding at beginning of year		443,815		$	3.63
Options granted		105,000		$	4.90
Options exercised		(28,797	)	$	3.10
Options Forfeited		(20,362	)	$	4.63
Outstanding June 28, 2022		499,656		$	3.89	5.7
Exercisable June 28, 2022		351,872		$	3.52	5.1

As of ~~December~~June 28, ~~2021,~~2022, the aggregate intrinsic value of the outstanding and exercisable options was ~~$393,000 and $369,000, respectively.~~$57,000. Only options whose exercise price is below the ~~current market~~closing price of the ~~underlying~~Company’s common stock as of June 28, 2022 are included in the intrinsic value calculation.

During the three quarters ended June 28, 2022, the Company granted 105,000 stock options, which includes 25,000 non-qualified stock options to its Senior Vice President of Finance pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market Listing Rules as an inducement to employment.

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As of ~~December~~June 28, ~~2021,~~2022, the total remaining unrecognized compensation cost related to non-vested stock options was ~~$265,000~~approximately $239,000 and is expected to be recognized over a weighted average period of approximately ~~1.7~~1.6 years.

There were ~~5,000~~28,797 stock options exercised ~~that resulted in an issuance of 5,000 shares~~ during the ~~quarter~~three quarters ended ~~December~~June 28, 2022 with proceeds of approximately $90,000. There were 170,248 stock options exercised during the three quarters ended June 29, 2021 with proceeds of approximately ~~$6,000. There were 7,984 stock options exercised that resulted in an issuance of 7,984 shares during the quarter ended December 29, 2020 with proceeds of approximately $13,000.~~$407,000.

Restricted Stock Units

During the three quarters ended ~~December~~June 28, ~~2021 and December 29, 2020,~~2022 there were 28,000 restricted stock units granted, and no restricted stock units ~~granted.~~ granted during the three quarters ended June 29, 2021.

A summary of the status of non-vested restricted stock as of ~~December~~June 28, ~~2021~~2022 is presented below.

Shares
Grant Date Fair
Value Per Share

Non-vested shares at beginning of year
61,952
$1.54 to $3.95
Vested
(15,616
)
$3.95
Non-vested shares at December 28, 2021
46,336
$1.54

	Shares			Grant Date Fair Value Per Share

Non-vested shares at September 28, 2021		61,952		$1.54 to $3.95
Granted		28,000		$4.50
Vested		(15,616	)	$3.95
Non-vested shares at June 28, 2022		74,336		$1.54 to $4.50

As of ~~December~~June 28, ~~2021,~~2022, there was ~~$22,000~~$120,000 of total unrecognized compensation cost related to non-vested restricted stock. This cost is expected to be recognized over a weighted average period of approximately ~~0.7~~2.4 years.

Restricted and Unrestricted Common Stock Awards

During the ~~quarter~~three quarters ended ~~December~~June 28, ~~2021~~2022 there were 9,256 unrestricted shares of common stock granted to directors of the Company. These shares had a grant date fair value of $4.35 per share which is equal to the closing price of the stock on the date of grant and resulted in the recognition of $40,000 of stock-based compensation expense. ~~No grants~~During the three quarters ended June 29, 2021, the Company granted its directors 12,948 shares of ~~restricted or unrestricted~~ common stock and its Chief Executive Officer 10,000 performance shares from available shares under its 2018 Plan. The shares were ~~made during~~issued with a grant date fair market value of $2.78 and $2.77, respectively, which is equal to the ~~quarter ended December 29, 2020.~~closing price of the stock on the date of grants. The performance shares granted to the Chief Executive Officer became fully vested on April 6, 2021 pursuant to the vesting provisions set forth in the grant notice.

Note 6.

Gain on Sale of Assets and Lease Termination

~~Note 6.Gain on Sale of Assets and Lease Termination~~

The Company had previously entered into an agreement with the landlord for one of its Good Times restaurants which provided the landlord an option to terminate the lease with a six-month notice in exchange for a specific termination penalty. During the fiscal quarter ended December 28, 2021 the landlord for this location exercised the termination ~~option and we recognized a $607,000 gain in connection with the lease termination.~~option. The Company ~~will continue~~continued to operate this location through the majority of the notice period ending March 31, 2022. During the quarter ended March 29, 2022, ~~and will vacate~~we recognized a $642,000 gain in connection with the ~~leased premises on or prior to that date.~~lease termination. The remainder of the gain recognized during the ~~period~~three quarters ended June 28, 2022 is the periodic recognition of deferred gains resulting from prior sale-leaseback transactions associated with certain Good Times restaurants.

Note 7.

Prepaid expense and other current assets

Prepaid expenses and other current assets consist of the following as of:

	June 28, 2022		September 28, 2021
Prepaid Rent	$	773	$	-
Other		614		641
Total	$	1,387	$	641

Note 8.

Other Accrued Liabilities

Other accrued liabilities consist of the following as of:

	June 28, 2022		September 28, 2021
Wages and other employee benefits	$	3,115	$	3,282
Taxes, other than income taxes		1,248		1,334
Gift card liability, net of breakage		980		375
General expense accrual and other		2,069		1,403
Total	$	7,412	$	6,394

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Note 9.

Notes Payable and Long-Term Debt

~~Note 7.Notes Payable and Long-Term Debt~~

Cadence Credit Facility

The Company maintains a credit agreement with Cadence Bank (“Cadence”) pursuant to which, as amended, Cadence has agreed to loan the Company up to $8,000,000 with a maturity date of January 31, 2023 (as amended, the “Cadence Credit Facility”). As amended by the various amendments, the Cadence Credit Facility accrues commitment fees on the daily unused balance of the facility at a rate of 0.25%. As of ~~December~~June 28, ~~2021,~~2022, any borrowings under the Cadence Credit Facility, as amended, bear interest at a variable rate based upon the Company’s election of (i) 2.5% plus the base rate, which is the highest of the (a) Federal Funds Rate plus 0.5%, (b) the Cadence ~~bank~~Bank publicly announced prime rate, and (c) LIBOR plus 1.0%, or (ii) LIBOR, with a 0.250% floor, plus 3.5%. Interest is due at the end of each calendar quarter if the Company ~~selects~~elects to pay interest based on the base rate and at the end of each LIBOR period if it ~~selects~~elects to pay interest based on LIBOR. The Cadence Credit Facility includes provisions for the Administrative Agent of the facility to amend the facility to replace LIBOR with an alternate benchmark rate, which may be (but is not required to be) SOFR, at such point in time when appliable LIBOR rates are no longer available or no longer reliable. The exact timing of any transition of LIBOR to an alternate benchmark rate is not currently known.

~~Table of Contents~~

~~During the fiscal quarter ended December 28, 2021, the weighted average interest rate applicable to borrowings under the Cadence Credit Facility was 3.75%.~~

As of ~~December~~June 28, ~~2021,~~2022, the Cadence Credit Facility contains certain affirmative and negative covenants and events of default that the Company considers customary for an agreement of this type, including financial covenants setting a maximum leverage ratio of 5.15:1, a minimum pre-distribution fixed charge coverage ratio of 1.25:1, a minimum post-distribution fixed charge coverage ratio of 1.10:1 and minimum liquidity of $2.0 million. As of ~~December~~June 28, ~~2021,~~2022, the Company was in compliance with all of these financial covenants under the Cadence Credit Facility.

As a result of entering into the Cadence Credit Facility and the various amendments, the Company paid loan origination costs including professional fees of approximately $308,500 and is amortizing these costs over the term of the credit agreement.

The obligations under the Cadence Credit Facility are collateralized by a first-priority lien on substantially all of the Company’s assets.

As of ~~December~~June 28, ~~2021,~~2022, there were no outstanding borrowings against the facility. Availability of the Cadence Credit Facility for borrowings is reduced by the outstanding face value of any letters of credit issued under the facility. As of ~~December~~June 28, ~~2021,~~2022, there were no outstanding letters of credit issued under the facility.

~~Paycheck Protection Program Loans~~

On May 7, 2020, Good Times and three of its wholly-owned subsidiaries entered into unsecured loans in the aggregate principal amount of $11,645,000 (the “Loans”) with Cadence Bank, N.A. pursuant to the PPP.

Note 10.

Net (Loss) Income per Common Share

In June 2021, the SBA approved forgiveness in full of the Loans, including accrued interest, in the aggregate amount of $11,778,226, which was recognized as gain on debt extinguishment in the fiscal year ended September 28, 2021. The principal and accrued interest balance on each of these Loans is now zero, as of the forgiveness date specific to each of the Loans.

~~Note 8.Net Income per Common Share~~

Our basic earnings per share calculation is computed based on the weighted-average number of common shares outstanding. Our diluted earnings per share calculation is computed based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued. Potentially dilutive securities for this calculation consist of in-the-money outstanding stock options, restricted stock units and warrants (which were assumed to have been exercised at the average market price of the common shares during the reporting period). The treasury stock method is used to measure the dilutive impact of in-the-money stock options.

The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding:

Quarter Ended

December 28, 2021
December 29, 2020

Weighted-average shares outstanding basic
12,522,471
12,622,178

Effect of potentially dilutive securities:

Stock options
116,172
1,048

Restricted stock units
46,336
75,058

Weighted-average shares outstanding diluted
12,684,979
12,698,284

Excluded from diluted weighted-average
shares outstanding:

Antidilutive
153,118
684,114

	Quarter Ended				Year-to-Date
	June 28 2022		June 29, 2021		June 28, 2022		June 29, 2021
Weighted-average shares outstanding basic		12,457,251		12,787,390		12,502,449		12,689,587
Effect of potentially dilutive securities:
Stock options		29,071		225,471		-		40,553
Restricted stock units		74,336		63,774		-		63,774
Weighted-average shares outstanding diluted		12,560,658		13,076,635		12,502,449		12,793,915
Excluded from diluted weighted average shares outstanding:
Antidilutive		387,378		289,611		249,752		474,528

Note 11.

Contingent Liabilities and Liquidity

~~Note 9.Contingent Liabilities and Liquidity~~

There may be various claims in process, matters in litigation, and other contingencies brought against the company by employees, vendors, customers, franchisees, or other parties. Evaluating these contingencies is a complex process that may involve substantial judgment on the potential outcome of such matters, and the ultimate outcome of such contingencies may differ from our current analysis. We regularly review the adequacy of accruals and disclosures related to such contingent liabilities in consultation with legal counsel. While it is not possible to predict the outcome of these claims with certainty, subject to our disclosure immediately below, it is management’s opinion that any reasonably possible losses associated with such contingencies would be immaterial to our financial statements. ~~There~~

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The Company is the defendant in a lawsuit styled as White Winston Select Asset Funds, LLC and GT Acquisition Group, Inc. v. Good Times Restaurants, Inc., arising from the failed negotiations between plaintiffs and the Company for the sale of the Good Times Drive Thru subsidiary to plaintiffs. The lawsuit was initially filed on September 24, 2019 in Delaware Chancery Court, and Company removed the case to federal court in the US District Court for the District of Delaware on November 5, 2019. On July 30, 2021, the plaintiffs moved the Court for leave to amend their complaint and add new causes of action and a claim for $18 million in damages. On April 11, 2022, the Court heard the parties’ respective motions for summary judgment on the plaintiffs’ claims. The Court verbally ruled that it was dismissing all of the plaintiffs’ claims except for their claim for breach of an express and implied obligation to negotiate in good faith under the parties’ letter of intent. On May 5, 2022, the Court issued a written order confirming this ruling. On May 25, 2022, the Court issued an order that the plaintiffs are only entitled to reliance damages should they prevail on their claim for breaches of the express and implied obligations to negotiate in good faith. Trial is set on this lone remaining claim for August 22, 2022.

While the Court’s rulings have ~~been no material developments~~significantly limited plaintiff’s opportunity for recovery in the case, in light of the ruling and the Court’s order, the inherent uncertainties of trial and the Company’s posture in respect of settlement, among other things, the Company has determined that some loss in respect of the lawsuit is probable and accordingly recorded an accrual in the quarter ended March 28, 2022 in the amount of $332,000. This amount represents the Company’s best estimate of the likely amount of plaintiffs’ damage recovery assuming a finding of liability in their favor at trial and their ability to satisfy the legal standard for proving damages in such amount, based upon the Company’s retained expert and a report he made in response to the plaintiffs’ claims for damages. The accrual is an estimate and is based on current information, ~~provided~~the judgment of management and advice of counsel. The Company will continue to evaluate this matter based on new information as it becomes available. The outcome of the case could result in ~~Part I, Item 3~~losses less than or in excess of ~~our Form 10-K~~amounts accrued. Any additional liability in excess of the accrual could have a material impact on the Company’s results of operations, liquidity or financial condition for the ~~fiscal year ended September 28, 2021.~~annual or interim period during which any such additional liability is accrued. The Company will continue to vigorously pursue a full defense of this matter on the merits.

Note 12.

Leases

~~Table of Contents~~

~~Note 10.Leases~~

The Company determines if a contract contains a lease at inception. The Company's material long-term operating lease agreements are for the land and buildings for our restaurants as well as our corporate office. The initial lease terms range from 10 years to 20 years, most of which include multiple renewal options, typically 5 years each, with cumulative renewal option periods of 10 to 15 years. The lease term is generally the minimum of the noncancelable period or the lease term including renewal options which are reasonably certain of being exercised up to a term of approximately 20 years.

Operating lease assets and liabilities are recognized at the lease commencement date for material leases with a term of greater than 12 months. Operating lease liabilities represent the present value of future minimum lease payments. Since our leases do not provide an implicit rate, our operating lease liabilities are calculated using our estimated incremental borrowing rate based on a collateralized borrowing over the term of each individual lease. Minimum lease payments include only fixed lease components of the agreement, as well as variable rate payments that depend on an index, initially measured using the index at the lease commencement date.

Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepaid or accrued lease payments, initial direct costs and lease incentives. Lease incentives are recognized when earned and reduce our operating lease asset related to the lease. They are amortized through the operating lease assets as reductions of rent expense over the lease term.

Operating lease expense is recognized on a straight-line basis over the lease term. Certain of the Company’s operating leases contain clauses that provide for contingent rent based on a percentage of sales greater than certain specified target amounts. Variable lease payments that do not depend on a rate or index, escalation in the index subsequent to the initial measurement, payments associated with non-lease components such as common area maintenance, real estate taxes and insurance, and short-term lease payments (leases with a term with 12 months or less) are expensed as incurred or when the achievement of the specified target that triggers the contingent rent is considered probable.

Some of the leases provide for base rent, plus additional rent based on gross sales, as defined in each lease agreement. The Company is also generally obligated to pay certain real estate taxes, insurance and common area maintenance charges, and various other expenses related to properties, which are expensed as ~~incurred.Components~~incurred.

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Components of operating lease costs are as follows for the fiscal quarters ~~ended December 28, 2021 and December 29, 2020:~~ended:

Lease cost
Classification
December 28, 2021
December 29, 2020
Operating lease cost
Occupancy, Other restaurant operating costs and General and administrative expenses, net
$
1,795
$
1,757
Variable lease cost
Occupancy
20
20
Sublease income
Occupancy
(136
)
(129
)

$
1,679
$
1,648

Lease cost	Classification	June 28, 2022			June 29, 2021
Operating lease cost	Occupancy, Preopening costs, and General and administrative expenses, net	$	1,866		$	1,693
Variable lease cost	Occupancy		27			20
Sublease income	Occupancy		(136	)		(136	)
		$	1,757		$	1,577

Components of operating lease costs are as follows for the three fiscal quarters ended:

Lease cost	Classification	June 28, 2022			June 29, 2021
Operating lease cost	Occupancy, Preopening costs, and General and administrative expenses, net	$	5,491		$	5,220
Variable lease cost	Occupancy		106			61
Sublease income	Occupancy		(408	)		(400	)
		$	5,189		$	4,881

Weighted average lease term and discount rate are as follows:

December 28, 2021
December 29, 2020
Weighted average remaining lease term (in years)
9.3
10.2

Weighted average discount rate
5.0
%
5.0
%

	June 28, 2022			June 29, 2021
Weighted average remaining lease term (in years)		8.85			9.8

Weighted average discount rate		5.0	%		5.0	%

Supplemental cash flow disclosures for the three fiscal ~~quarter ended December 28, 2021:~~quarters ended:

December 28, 2021
December 29, 2020
Cash paid for operating lease liabilities
$
1,718
$
1,732

Non-cash operating lease assets obtained in exchange for operating lease liabilities
$
60
$
11

	June 28, 2022		June 29, 2021
Cash paid for operating lease liabilities	$	5,383	$	5,168

Non-cash operating lease assets obtained in exchange for operating lease liabilities	$	734	$	57

Supplemental balance sheet disclosures:

December 28, 2021
December 29, 2020
Right-of-use assets
Operating lease assets
$
44,972
$
48,202

Current lease liabilities
Operating lease liability
$
5,051
$
4,771
Non-current lease liabilities
Operating lease liability, less current portion
48,784
52,524
Total lease liabilities
$
53,835
$
57,295

Balance Sheet Classification	Lease Classification	June 28, 2022		June 29,2021
Right-of-use assets	Operating lease assets	$	43,566	$	46,678

Current lease liabilities	Operating lease liabilities		5,349		4,857
Non-current lease liabilities	Operating lease liabilities, less current portion		46,859		50,698
Total lease liabilities		$	52,208	$	55,555

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Future minimum rent payments for our operating leases for each of the next five years as of ~~December~~June 28, ~~2021~~2022 are as follows:

Fiscal year ending:
Total

Remainder of 2022
$
5,707

2023
7,684

2024
7,546

2025
7,654

2026
7,108

Thereafter
32,229

Total minimum lease payments
67,928

Less: imputed interest
(14,093
)
Present value of lease liabilities
$
53,835

Fiscal year ending:	Total
Remainder of 2022	$	1,951
2023		7,833
2024		7,730
2025		7,814
2026		7,256
Thereafter		32,539
Total minimum lease payments		65,123
Less: imputed interest		(12,915	)
Present value of lease liabilities	$	52,208

The above future minimum rental amounts exclude the amortization of deferred lease incentives, renewal options that are not reasonably assured of renewal, and contingent rent. The Company generally has escalating rents over the term of the leases and records rent expense on a straight-line basis.

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Note 13.

Impairment of Long-Lived Assets and Goodwill

~~Note 11.Impairment of Long-Lived Assets and Goodwill~~

Long-Lived Assets. We review our long-lived assets including land, property, and equipment for impairment when there are factors that indicate that the carrying amount of an asset may not be recoverable. We assess recovery of assets at the individual restaurant level and typically include an analysis of historical cash flows, future operating plans, and cash flow projections in assessing whether there are indicators of impairment. Recoverability of assets to be held and used is measured by comparing the net book value of the assets of an individual restaurant to the fair value of those assets. This impairment process involves significant judgment in the use of estimates and assumptions pertaining to future projections and operating results.

~~There were no impairments~~

During the quarter ended June 28, 2022, we recognized $303,000 in impairment cost related to one Good Times restaurant. For the ~~fiscal~~three quarters ended ~~December~~June 28, 2022, we recognized $2,056,000 in total asset impairments for four restaurants. Of this amount, $790,000 was related to three Good Times restaurants and $1,266,000 was related to one Bad Daddy’s restaurant. During the three quarters ended June 29, 2021 ~~and December 29, 2020.~~no asset impairment costs were recognized.

Trademarks. Trademarks have been determined to have an indefinite life. We evaluate our trademarks for impairment annually and on an interim basis as events and circumstances warrant by comparing the fair value of the trademarks with their carrying amount. There was no impairment required to the acquired trademarks ~~as of December~~for the three quarters ended June 28, ~~2021~~2022 and ~~December~~June 29, ~~2020.~~2021.

Goodwill. Goodwill represents the excess of cost over fair value of the assets of businesses the Company acquired. Goodwill is not amortized, but rather, the Company is required to test goodwill for impairment on an annual basis or whenever indications of impairment arise. The Company considers its operations to be comprised of 2two reporting units: (1) Good Times restaurants and (2) Bad Daddy’s restaurants. As of ~~December~~June 28, ~~2021,~~2022, the Company had $96,000 of goodwill attributable to the Good Times reporting unit and ~~$5,054,000~~$5,617,000 of goodwill attributable to its Bad Daddy’s reporting unit. No goodwill impairment charges were recognized ~~as of December~~during the three quarters ended June 28, ~~2021 and December 29, 2020.~~2022.

~~Note 12.Income Taxes~~

Note 14.

Income Taxes

We account for income taxes using the liability method, whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. The deferred tax assets are reviewed periodically for recoverability and valuation allowances are adjusted as necessary.

~~Although the~~

The Company ~~had net income in both the quarter ended December 28, 2021 and the quarter ended December 29, 2020, we~~continues to have significant net operating loss carryforwards from prior years and a history of net losses through the duration of our existence. Full valuation allowances were established to reduce any deferred tax assets recorded to 0zero for both the quarters ended ~~December 28,2021~~June 28, 2022 and ~~December~~June 29, ~~2020.~~2021. Although we have established a full valuation allowance on our deferred tax assets, we are subject to income tax in certain jurisdictions where we do not have substantial net operating loss carry forwards. As such, we have recognized a provision for income taxes of ~~$8,000~~$9,000 for the ~~quarter~~three quarters ended ~~December~~June 28, ~~2021~~2022 related to state income taxes resulting in an effective income tax rate of ~~2.0%~~(0.7%) for the period. For the ~~period~~three quarters ended ~~December~~June 29, ~~2020,~~2021, we did not recognize any provision for income taxes as we estimated ~~0no~~no current tax liability either for federal or state jurisdictions resulting in an effective tax rate of ~~0%.~~zero for the period.

The Company is subject to taxation in various jurisdictions within the U.S. The Company continues to remain subject to examination by U.S. federal authorities for the years ~~2017~~2019 through ~~2020.~~2022. The Company believes that its income tax filing positions and deductions will be sustained upon audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flows. Therefore, 0no reserves for uncertain income tax positions have been recorded. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. ~~NaN~~No accrual for interest and penalties was considered necessary as of ~~December~~June 28, ~~2021.~~2022.

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Note 15.

Non-controlling Interests

~~Note 13.Non-controlling Interests~~

Non-controlling interests are presented as a separate item in the shareholders’ equity section of the condensed consolidated balance sheet. The amount of consolidated net income or loss attributable to non-controlling interests is presented on the face of the condensed consolidated statement of operations. Changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions, while changes in ownership interest that do result in deconsolidation of a subsidiary require gain or loss recognition based on the fair value on the deconsolidation date.

The equity interests of the unrelated limited partners and members are shown on the accompanying consolidated balance sheet in the shareholders’ equity section as a non-controlling interest and is adjusted each period to reflect the limited partners’ and members’ share of the net income or loss as well as any cash contributions or distributions to or from the limited partners and members for the period. The limited partners’ and members’ share of the net income or loss in the subsidiary is shown as non-controlling interest income or expense in the accompanying consolidated statement of operations. All inter-company accounts and transactions are eliminated.

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The following table summarizes the activity in non-controlling interests during the ~~quarter~~three quarters ended ~~December~~June 28, ~~2021~~2022 (in thousands):

Bad Daddy’s
Good Times
Total
Balance at September 28, 2021
$
913
$
211
$
1,124
Income
684
236
920
Distributions
(516
)
(116
)
(632
)
Balance at December 28, 2021
$
1,081
$
331
$
1,412

	Bad Daddy’s			Good Times			Total
Balance as of September 28, 2021	$	915		$	209		$	1,124
Income		1,025			464			1,489
Distributions		(840	)		(397	)		(1,237	)
Balance as of June 28, 2022	$	1,100		$	276		$	1,376

Our non-controlling interests consist of one joint-venture partnership involving seven Good Times restaurants and five joint-venture partnerships involving five Bad Daddy’s restaurants.

Note 16.

Subsequent Events

~~Note 14.~~None.~~Subsequent Events~~

~~Share Repurchase and Amendment to the Cadence Credit Agreement~~

On February 3, 2022 the Company issued a press release announcing a share repurchase program of up to an aggregate amount of $5.0 Million of the Company’s common stock beginning February 7, 2022. The authorization to repurchase will continue until the maximum value of shares is achieved or the Company terminates the program. The timing and amount of repurchases will depend upon the Company’s stock price, economic and market conditions, regulatory requirements, and other corporate considerations. In connection with this share repurchase program, the Cadence Credit Facility was amended to, among other things, modify the “Restricted Payments” covenant to exempt Company repurchases of common stock until December 31, 2022 in an aggregate amount not to exceed $5.0 million.

Note 17.

Segment Reporting

~~Note 15.Segment Reporting~~

All of our Bad Daddy’s Burger Bar restaurants (Bad Daddy’s) compete in the full-service segment of the restaurant industry while our Good Times Burgers and Frozen Custard restaurants (Good Times) compete in the quick-service segment of the dining industry. We believe that providing this additional financial information for each of our brands will provide a better understanding of our overall operating results. Income (loss) from operations represents revenues less restaurant operating costs and expenses, directly allocable general and administrative expenses, and other restaurant-level expenses directly associated with each brand including depreciation and amortization, pre-opening costs and losses or gains on disposal of property and equipment. Unallocated corporate capital expenditures are presented below as reconciling items to the amounts presented in the consolidated financial statements.

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The following tables present information about our reportable segments for the respective periods (in thousands):

Quarter Ended
December 28, 2021
(13 Weeks)
December 29, 2020
(13 Weeks)
Revenues
Bad Daddy’s
$
24,672
$
18,816
Good Times
8,244
8,480
$
32,916
$
27,296
Income from operations
Bad Daddy’s
$
308
$
178
Good Times
968
1,085
$
1,276
$
1,263
Capital expenditures
Bad Daddy’s
$
192
$
370
Good Times
45
113
$
237
$
483

	Quarter Ended				Year-to-Date
	June 28, 2022 (13 Weeks)		June 29, 2021 (13 Weeks)		June 28, 2022 (39 Weeks)		June 29, 2021 (39 Weeks)
Revenues
Bad Daddy’s	$	27,231	$	24,481	$	77,427	$	64,263
Good Times		9,266		9,465		25,583		26,171
		36,497		33,946		103,010		90,434
Income (Loss) from operations
Bad Daddy’s		635		1,577		138		2,760
Good Times		186		869		50		2,552
		821		2,446		188		5,312
Capital expenditures
Bad Daddy’s		652		802		1,480		1,826
Good Times		364		110		471		272
	$	1,016	$	912	$	1,951	$	2,098

	June 28, 2022		September 28, 2021
Property and equipment, net
Bad Daddy’s	$	20,990	$	23,293
Good Times		2,548		3,773
	$	23,538	$	27,066

December 28, 2021
September 28, 2021
Property and equipment, net
$
23,082
$
23,293
Bad Daddy’s
3,242
3,773
Good Times
$
26,324
$
27,066

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Form 10-Q contains or incorporates by reference forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the disclosure of risk factors in the Company’s Form 10-K for the fiscal year ended September 28, 2021. Also, documents subsequently filed by us with the SEC and incorporated herein by reference may contain forward-looking statements. We caution investors that any forward-looking statements made by us are not guarantees of future performance and actual results could differ materially from those in the forward-looking statements as a result of various factors, including but not limited to the following:

(II)

The disruption to our business from the novel coronavirus (COVID-19) pandemic and the impact of the pandemic on our results of operations, financial condition and prospects. The disruption and effect on our business may vary depending on the duration and extent of the COVID-19 pandemic and the impact of federal, state and local governmental actions and customer behavior in response to the pandemic.

(II)

We compete with numerous well-established competitors who have substantially greater financial resources and longer operating histories than we do. Competitors have increasingly offered selected food items and combination meals, including hamburgers, at discounted prices, and continued discounting by competitors may adversely affect revenues and profitability of Company restaurants.

(II)

We may be negatively impacted if we experience same store sales declines. Same store sales comparisons will be dependent, among other things, on the success of our advertising and promotion of new and existing menu items. No assurances can be given that such advertising and promotions will in fact be successful.

(II)

We may be negatively impacted if we are unable to pass on to customers, through menu price increases, the increased costs that we incur through inflation experienced in our input costs including both the cost of food and the cost of labor. Recent metrics have indicated that increased levels of price inflation are prevalent throughout the economy and the impacts of such inflation, including the impact of related governmental response, cannot be accurately predicted.

We may also be negatively impacted by other factors common to the restaurant industry such as: changes in consumer tastes away from red meat and fried foods; increases in the cost of food, paper, labor, health care, workers’ compensation, or energy; inadequate number of hourly paid employees; and/or decreases in the availability of affordable capital resources. We caution the reader that such risk factors are not exhaustive, particularly with respect to future filings. For further discussion of our exposure to market risk, refer to Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 28, 2021.

~~Overview.~~Overview

Good Times ~~Restaurant~~Restaurants Inc., through its subsidiaries (collectively, the “Company” or “we”, “us” or “our”) operates and ~~franchises/~~licenses full-service hamburger-oriented restaurants under the name Bad Daddy’s Burger Bar (Bad Daddy’s) and operates and franchises hamburger-oriented drive-through restaurants under the name Good Times Burgers & Frozen Custard (Good Times).

We are focused on targeted unit growth of the Bad Daddy’s concept while at the same time growing same store sales and improving the profitability of both the Bad Daddy’s and the Good ~~Times~~Times’ concepts.

COVID-19

~~The global crisis resulting~~Currently all of our Bad Daddy’s and Good Times restaurants are operating without COVID-19 related government restrictions or mask mandates. However, the second-and third-order effects from the ~~spread of COVID-19, including second- and third-order effects of the~~ pandemic ~~continues to~~ have had a ~~substantial~~lingering impact on our restaurant ~~operations.~~operations for the three quarters ended June 28, 2022 including disruptions and other impacts to the supply chain and labor markets, and varying changes in consumer behavior. During portions of the month of November 2020 through early January 2021, all of the Company’s Bad Daddy’s Burger Bar restaurants in Colorado were open only for limited outdoor dining, delivery and carry-out service, with indoor dining rooms closed by government orders. Beginning in early January 2021, we began to re-open Colorado dining rooms at Bad Daddy’s, with limited occupancy, as local regulations allowed. Our dining rooms in all other states in which Bad Daddy’s has operations were open during this time. Although ~~all of our~~certain dining rooms ~~at Bad Daddy’s~~ were open, ~~our Good Times restaurants with dining rooms continued to operate without opening dining rooms. Further, periodically we have closed individual dining rooms,~~all were operating at some reduction of capacity, whether driven by explicit capacity reductions under government orders, or due to social distancing protocols that are either mandated by the same government orders, or which we abide by as under our own internal protocols designed to maintain a safe foodservice environment, both for our employees and for our customers.

Our operating results substantially depend upon our ability to drive traffic to our restaurants, and for our Bad Daddy’s Burger Bar restaurants, to serve guests in our dining rooms. We cannot currently ~~estimate~~predict the ~~duration~~continued impact of the ~~impact~~effect of the COVID-19 pandemic on our business, including ~~the impact of~~any mutations of the virus and additional ~~variants including but not limited to the recent delta and omicron~~ variants; neither are we able to predict how the pandemic will evolve nor how ~~various government entities~~the long-lived impacts on supply chain, labor market, and customer behavior will ~~respond to its evolution.~~evolve. Should additional dining room closures or mask mandates occur, our business ~~would~~could be adversely affected. Even without government orders, customers may choose to reduce or eliminate in-restaurant dining ~~because of~~if there are increasing numbers of COVID-19 cases, hospitalizations, or deaths. Furthermore, although the development of certain vaccines that are currently being administered may reduce the risk of further government restrictions, there is no guarantee that the vaccine will be effective in eradicating the virus, additional mutations or variants of the virus may be resistant to any vaccine, and the length of the ongoing pandemic may change consumer behavior such that potential customers may still choose to reduce or eliminate in-restaurant dining.

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Additionally, in connection with spread of COVID-19, there have been disruptions in various food supply chains in the United States. Our operating results substantially depend upon our ability to obtain sufficient quantities of products such as beef, bacon, packaging and other products used in the production and serving of items served and sold to our guests. Ongoing impacts of the COVID-19 pandemic could result in product shortages and in-turn could require us to serve a limited menu, restrict number of items purchased per guest, or close some or all of our restaurants for an indeterminate period of time. ~~Ongoing material adverse~~The long-lived, residual impacts from the COVID-19 pandemic and its evolution still could result in reduced revenue and cash flow and could affect our assessments of impairment of intangible assets, long-lived assets, or goodwill.

War in Ukraine

Growth Strategies and ~~Outlook.~~Outlook

We believe there are significant opportunities to grow customer traffic and increase awareness of our brands. Prior to the COVID-19 pandemic, we reduced our development profile as we sought to improve our financial position, and while we believe there are unit growth opportunities for both of our concepts, we are evaluating that ~~in-line~~in line with the impact of the pandemic on the restaurant industry. We currently are filling a restaurant development pipeline and expect new Bad Daddy’s restaurant openings ~~beginning~~ in fiscal 2023.

Restaurant locations.

As of ~~December~~June 28, ~~2021,~~2022, we operated, franchised, or licensed a total of forty-two Bad Daddy’s restaurants and ~~thirty-two~~thirty-one Good Times restaurants. The following table presents the number of restaurants operating at the end of the ~~first~~third fiscal quarters of 2022 and 2021.

Company-Owned/Co-Developed/Joint-Venture

	Bad Daddy’s Burger Bar				Good Times Burgers & Frozen Custard				Total				Bad Daddy’s Burger Bar				Good Times Burgers & Frozen Custard				Total
	2021		2020		2021		2020		2021		2020		2022		2021		2022		2021		2022		2021
Alabama		2		1		-		-		2		1		2		1		-		-		2		1
Colorado		12		12		24		25		36		37		12		12		23		24		35		36
Georgia		5		4		-		-		5		4		5		5		-		-		5		5
North Carolina		14		14		-		-		14		14		14		14		-		-		14		14
Oklahoma		1		1		-		-		1		1		1		1		-		-		1		1
South Carolina		3		3		-		-		3		3		4		3		-		-		4		3
Tennessee		2		2		-		-		2		2		2		2		-		-		2		2
Total		39		37		24		25		63		62		40		38		23		24		63		62

We purchased one previously franchised Bad Daddy’s during the second fiscal quarter of 2022 and one BD location opened in Alabama in the final quarter of 2021. One company-owned Good Times restaurant closed, and the property was subleased during fiscal 2021.

Franchise/License

Bad Daddy’s
Burger Bar Good Times Burgers
& Frozen Custard Total
2021 2020 2021 2020 2021 2020
Colorado - - 6 6 6 6
North Carolina 1 1 - - 1 1
South Carolina 1 1 - - 1 1
Wyoming - - 2 2 2 2
Total 2 2 8 8 10 10

	Bad Daddy’s Burger Bar				Good Times Burgers & Frozen Custard				Total
	2022		2021		2022		2021		2022		2021
Colorado		-		-		6		6		6		6
North Carolina		1		1		-		-		1		1
South Carolina		-		1		-		-		-		1
Wyoming		-		-		2		2		2		2
Total		1		2		8		8		9		10

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Non-Traditional^*

Bad Daddy’s
Burger Bar Good Times Burgers
& Frozen Custard Total
2021 2020 2021 2020 2021 2020
Colorado 1 - - - 1 -
Total 1 - - - 1 -

	Bad Daddy’s Burger Bar				Good Times Burgers & Frozen Custard				Total
	2022		2021		2022		2021		2022		2021
Colorado		1		-		-		-		1		-
Total		1		-		-		-		1		-

* The non-traditional Bad Daddy’s Burger Bar location is a location where we operate the kitchen under our Bad Daddy’s brand for a local brewery’s taproom.

~~Table of Contents~~

Results of Operations

Fiscal quarter ended ~~December~~June 28, ~~2021~~2022 (13 weeks) compared to fiscal quarter ended ~~December~~June 29, ~~2020~~2021 (13 weeks):

Net Revenues. Net revenues for the quarter ended ~~December~~June 28, ~~2021~~2022 increased ~~$5,620,000~~$2,551,000 or ~~20.5%~~7.5% to ~~$32,916,000~~$36,497,000 from ~~$27,296,000~~$33,946,000 for the quarter ended ~~December~~June 29, ~~2020.~~2021. Bad Daddy’s concept revenues increased ~~$5,856,000~~$2,750,000 while our Good Times concept revenues decreased ~~$236,000.~~$199,000.

Bad Daddy’s restaurant sales increased ~~$5,899,000~~$2,764,000 to ~~$24,590,000~~$27,172,000 for the quarter ended ~~December~~June 28, ~~2021~~2022 from ~~$18,691,000~~$24,408,000 for the quarter ended ~~December~~June 29, ~~2020. Sales were positively impacted by two new restaurants opened in the fourth fiscal quarter of 2021 and increases in sales~~2021. This increase is primarily due to ~~stronger customer~~increased traffic, ~~compared to the prior year in connection with easing of COVID restrictions.~~as well as menu price increases. The average menu price increase for the quarter ended ~~December~~June 28, ~~2021~~2022 over the same prior-year quarter was approximately ~~4.6%~~6.8%.

Good Times restaurant sales decreased ~~$304,000~~$200,000 to ~~$8,086,000~~$9,093,000 for the quarter ended ~~December~~June 28, ~~2021~~2022 from ~~$8,390,000~~$9,293,000 for the quarter ended ~~December~~June 29, ~~2020.~~2021. This decrease is primarily due to the loss of sales associated with the closure of one restaurant in the second quarter of 2022, partially offset by menu price increases. The average menu price increase for the quarter ended ~~December~~June 28, ~~2021~~2022 over the same prior-year quarter was approximately ~~5.9%~~8.2%.

Franchise revenues were ~~$240,000~~$232,000 in the quarter ended ~~December~~June 28, ~~2021~~2022 compared to ~~$215,000~~$245,000 in the quarter ended ~~December~~June 29, ~~2020.~~2021. This ~~increase~~decrease is primarily due to ~~increased~~decreased royalties atresulting from the Company’s purchase of a previously franchised Bad Daddy’s ~~franchisee and licensee restaurants attributable to increased sales.~~restaurant.

Same Store Sales

Sales store sales is a metric used in evaluating the performance of established restaurants and is a commonly used metric in the restaurant industry. Same store sales for our brands are calculated using all units open for at least eighteen full fiscal months and use the comparable operating weeks from the prior year to the current year quarter’s operating weeks.

Bad Daddy’s same store restaurant sales increased ~~24.0%~~5.3% during the quarter ended ~~December~~June 28, ~~2021~~2022 compared to the same thirteen-week period ended ~~December~~June 29, ~~2020~~2021 in the prior-year ~~quarter, substantially driven by the easing of COVID-19 related capacity restrictions, prior-year dining room closures throughout Colorado, and changes in consumer behavior~~quarter. This increase is primarily due to increased traffic as ~~the pandemic progresses.~~well as menu price increases. There were ~~thirty-seven~~thirty-eight restaurants included in the same store sales base at the end of the quarter.

Good Times same store restaurant sales ~~decreased 2.5%~~increased 1.6%% during the quarter ended ~~December~~June 28, ~~2021~~2022 compared to the same thirteen-week period ended ~~December~~June 29, ~~2020~~2021 in the prior-year ~~quarter,~~quarter. This increase is primarily due to ~~reduced customer~~increased traffic ~~in November and December~~ as ~~a result of restaurant dining rooms in other restaurants being open in the current year compared with them being closed during the prior year,~~well as ~~customers had alternatives other than carry-out-only and drive-thru restaurants for dining experiences in the current year.~~menu price increases. There were ~~twenty-four~~twenty-three restaurants included in the same store sales base at the end of the quarter.

Restaurant Operating Costs

Food and Packaging Costs. Food and packaging costs for the quarter ended ~~December~~June 28, ~~2021~~2022 increased ~~$2,385,000~~$1,778,000 to ~~$10,226,000 (31.3%~~$11,767,000 (32.4% of restaurant sales) from ~~$7,841,000 (29.0%~~$9,989,000 (29.6% of restaurant sales) for the quarter ended ~~December~~June 29, ~~2020.~~2021.

Bad Daddy’s food and packaging costs were ~~$7,812,000 (31.8%~~$8,832,000 (32.5% of restaurant sales) for the quarter ended ~~December~~June 28, ~~2021,~~2022, up from ~~$5,356,000 (28.7%~~$7,257,000 (29.7% of restaurant sales) for the quarter ended ~~December~~June 29, ~~2020.~~2021. This increase is primarily attributable to higher restaurant sales during the current quarter versus the same quarter in the prior year. The increase as a percent of sales is attributable the significant inflation noted during the quarter with most of our food and packaging products seeing meaningful unit price increases.

Good Times food and packaging costs were ~~$2,414,000 (29.9%~~$2,935,000 (32.3% of restaurant sales) for the quarter ended ~~December~~June 28, ~~2021, down~~2022, up from ~~$2,485,000 (29.6%~~$2,732,000 (29.4% of restaurant sales) for the quarter ended ~~December~~June 29, ~~2020.~~2021. This ~~decrease~~increase is primarily attributable ~~to decreased restaurant sales. The increase as a percent of sales is due primarily~~ to the impact of higher purchase ~~price~~prices on food and paper goods, partially offset by increased menu pricing.

Payroll and Other Employee Benefit Costs. Payroll and other employee benefit costs for the quarter ended ~~December~~June 28, ~~2021~~2022 increased ~~$2,151,000~~$1,034,000 to ~~11,177,000 (34.1%~~12,295,000 (33.9% of restaurant sales) from ~~$8,881,000 (32.8%~~$11,261,000 (33.4% of restaurant sales) for the quarter ended ~~December~~June 29, ~~2020.~~

Bad Daddy’s payroll and other employee benefit costs were $8,418,000 (34.2% of restaurant sales) for the quarter ended December 28, 2021 up from $6,267,000 (33.5% of restaurant sales) in the same prior year period. The $2,151,000 increase is primarily attributable to higher restaurant sales during the current quarter versus the same quarter in the prior year, as well as higher average pay rates. As a percent of sales, payroll and employee benefits costs increased by 0.7% primarily attributable to higher average wage rates paid to attract qualified employees.

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Good Times payroll and other employee benefit costs were $2,759,000 (34.1% of restaurant sales) in the quarter ended December 28, 2021, up from $2,614,000 (31.2% of restaurant sales) in the same prior-year period. The $145,000 increase, both in nominal dollars and as measured as a percent of restaurant sales, was attributable to higher average wage rates paid to attract qualified employees.

~~Occupancy Costs.~~ ~~Occupancy costs for the quarter ended December 28, 2021 increased $133,000 to $2,328,000 (7.1% of restaurant sales) from $2,195,000 (8.1% of restaurant sales) for the quarter ended December 29, 2020.~~

Bad Daddy’s occupancy costs were $1,649,000 (6.7% of restaurant sales) for the quarter ended December 28, 2021, up from $1,454,000 (7.8% of restaurant sales) in the same prior year period. The increase was primarily attributable to increases in our operating lease costs and property taxes, including additional costs for the two restaurants opened during the fourth quarter of fiscal 2021. The decrease as a percentage of sales was primarily due to the leveraging effect of higher restaurant sales.

Good Times occupancy costs were $679,000 (8.4% of restaurant sales) in the quarter ended December 28, 2021, down from $741,000 (8.8% of restaurant sales) in the same prior year period. The decrease was primarily attributable to decreases in our operating lease costs including rent abatement associated with a lease termination agreement for one good times restaurant.

~~Other Operating Costs.~~ Other operating costs for the quarter ended December 28, 2021, increased $699,000 to $4,138,000 (12.7% of restaurant sales) from $3,469,000 (12.8% of restaurant sales) for the quarter ended December 29, 2020.

Bad Daddy’s other operating costs were $3,285,000 (13.4% of restaurant sales) for the quarter ended December 28, 2021 up from $2,648,000 (14.1% of restaurant sales) in the same prior year period. The $637,000 increase was attributable to higher overall sales including sales from the two new restaurants opened in the fourth quarter of fiscal 2021. The percentage decrease was primarily attributable to the shift in sales mix favoring dine-in sales compared to delivery sales as a percentage of overall sales, as the increase in sales was primarily see in dine-in traffic comparing to dining room closures in the prior year quarter.

Good Times other operating costs were $853,000 (10.5% of restaurant sales) in the quarter ended December 28, 2021, up from $821,000 (9.8% of restaurant sales) in the same prior year period. The increase was primarily attributable to general price inflation in supplies costs and increases in commissions paid to delivery service providers due to increases in overall delivery sales.

~~New Store Preopening Costs.~~ In the quarter ended December 28, 2021, we incurred $50,000 of preopening costs compared to $39,000 for the quarter ended December 29, 2020. All of the preopening costs are related to our Bad Daddy’s restaurants and relate primarily to the restaurant opened in Montgomery, AL during the fourth quarter of fiscal 2021.

~~Depreciation and Amortization Costs~~. ~~Depreciation and amortization costs for the quarter ended December 28, 2021, increased $55,000 to $984,000 from $929,000 in the quarter ended December 29, 2020.~~

Bad Daddy’s depreciation and amortization costs for the quarter ended December 28, 2021 increased $47,000 to $784,000 from $737,000 in the quarter ended December 29, 2020. This increase was primarily attributable to the two new restaurants opened in final quarter of fiscal 2021.

~~Good Times depreciation and amortization costs for the quarter ended December 28, 2021 increased $8,000 to $200,000 from $192,000 in the quarter ended December 29, 2020.~~

~~General and Administrative Costs.~~ General and administrative costs for the quarter ended December 28, 2021, increased $531,000 to $2,705,000 (8.2% of total revenue) from $2,174,000 (8.0% of total revenues) for the quarter ended December 29, 2020.

~~This increase in general and administrative expenses in the quarter ended December 28, 2021 is primarily attributable to:~~

Decrease in administrative related payroll and benefit costs of $164,000 primarily related the prior-year one-time bonus awarded to the CEO during the quarter ended December 28, 2021 in connection with the amendment of his employment agreement and reduced health insurance underwriting losses, partially offset by increased administrative salaries and wages.

~~Increase in costs associated with multi-unit management of $126,000 primarily related to increased multi-unit travel costs and incentive compensation~~

~~Increase in professional services of $280,000, primarily attributable to increased legal costs~~

~~Increase in general travel costs of $29,000 attributable primarily to greater restaurant travel by restaurant support personnel~~

~~Increase of $49,000 in recruiting and travel costs primarily associated with training managers for Bad Daddy’s restaurants~~

~~Increase of $91,000 associated with in-person restaurant general managers’ conference held in the current year that had not been held in the prior year~~

~~Increased director and officer liability insurance costs of approximately $21,000~~

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Bad Daddy’s payroll and other employee benefit costs were $9,296,000 (34.2% of restaurant sales) for the quarter ended June 28, 2022 up from $8,381,000 (34.3% of restaurant sales) in the same prior year period. The $915,000 increase is primarily attributable to increased wage rates paid, primarily to back of house employees, during the current quarter versus the same quarter in the prior year, the result of a competitive labor market.

Good Times payroll and other employee benefit costs were $2,999,000 (33% of restaurant sales) in the quarter ended June 28, 2022, up from $2,880,000 (31.0% of restaurant sales) in the same prior-year period. This increase, both in nominal dollars and as measured as a percent of restaurant sales, was primarily attributable to higher average wage rates. These higher wages are in-part driven by a combination of the significant statutory wage increase in the City and County of Denver and the impact of the extremely competitive labor market for qualified restaurant employees in Colorado.

Occupancy Costs. Occupancy costs for the quarter ended June 28, 2022 increased $200,000 to $2,383,000 (6.6% of restaurant sales) from $2,183,000 (6.5% of restaurant sales) for the quarter ended June 29, 2021.

Bad Daddy’s occupancy costs were $1,684,000 (6.2% of restaurant sales) for the quarter ended June 28, 2022, up from $1,485,000 (6.1% of restaurant sales) in the same prior year period. The increase was primarily attributable to lease costs with newly opened restaurants, lease costs associated with the restaurant acquired from a former franchisee and increased real property tax assessments.

Good Times occupancy costs were $699,000 (7.7% of restaurant sales) in the quarter ended June 28, 2022, up from $698,000 (7.5% of restaurant sales) in the same prior year period.

Other Operating Costs. Other operating costs for the quarter ended June 28, 2022, increased $1,023,000 to $4,753,000 (13.1% of restaurant sales) from $3,730,000 (11.1% of restaurant sales) for the quarter ended June 29, 2021.

Bad Daddy’s other operating costs were $3,742,000 (13.8% of restaurant sales) for the quarter ended June 28, 2022 up from $2,939,000 (12.0% of restaurant sales) in the same prior year period. The increase was attributable to higher overall sales. As a percent of sales, the increase is attributable to higher increased spending on restaurant technology, and higher repair and maintenance expenses.

Good Times other operating costs were $1,011,000 (11.1% of restaurant sales) in the quarter ended June 28, 2022, up from $791,000 (8.5% of restaurant sales) in the same prior year period. The increase was primarily attributable to general price inflation in operating supplies costs, increases in commissions paid to delivery service providers due to increases in overall delivery sales, and higher repair and higher preventive maintenance expenses.

New Store Preopening Costs. There were no preopening costs incurred during the quarter ended June 28, 2022 compared to $301,000 for the quarter ended June 29, 2021.

Depreciation and Amortization Costs. Depreciation and amortization costs for the quarter ended June 28, 2022, increased $55,000 to $993,000 from $938,000 in the quarter ended June 29, 2021.

Bad Daddy’s depreciation and amortization costs for the quarter ended June 28, 2022 increased $105,000 to $846,000 from $741,000 in the quarter ended June 29, 2021. This increase was primarily attributable to the two new restaurants opened in final quarter of fiscal 2021 as well as the acquisition of our franchise unit in the 2^nd quarter of 2022

Good Times depreciation and amortization costs for the quarter ended June 28, 2022 decreased $50,000 to $147,000 from $197,000 in the quarter ended June 29, 2021. This decrease is primarily attributable to assets reaching full amortization and the closure of a restaurant in the prior quarter associated with a landlord termination option.

General and Administrative Costs. General and administrative costs for the quarter ended June 28, 2022, decreased $126,000 to $2,379,000 (6.5% of total revenue) from $2,505,000 (7.4% of total revenue) for the quarter ended June 29, 2021.

This decrease in general and administrative expenses in the quarter ended June 28, 2022 is primarily attributable to:

~~Increased technology~~Decreased costs in legal and professional services of $419,000

Increase in recruiting and training costs of ~~$99,000 primarily attributable to expenses~~$118,000, including costs related to ~~maintenance~~a multi-unit supervisor training conference

Increase in administrative related payroll and benefit costs of ~~mobile applications and financial reporting systems, as well as costs associated with~~$77,000, primarily related to additional administrative ~~personnel~~and consultant salary expenses, offset by reduced health insurance underwriting losses.

Increase in general travel-related expenses of $33,000

Increase in the cost of business insurance including D&O, EPL, and cyber coverage of $24,000

Increase in corporate technology expenses of $16,000

Increase in stock compensation expense of $10,000

Net increase in all other expenses of approximately $24,000

For the balance of the fiscal year, we expect general and administrative costs to trend similarly in nominal terms to costs incurred during the current quarter.

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Advertising Costs. Advertising costs for the quarter ended ~~December~~June 28, 2021, increased ~~$132,000~~$210,000 to ~~$641,000 (1.9%~~$807,000 (2.2% of total revenue) from ~~$509,000 (1.9%~~$597,000 (1.8% of total revenue) for the quarter ended ~~December~~June 29, ~~2020.~~2021.

Bad Daddy’s advertising costs were ~~$313,000 (1.3%~~$448,000 (1.6% of total revenue) in the quarter ended ~~December~~June 28, ~~2021~~2022 compared to ~~$168,000~~$222,000 (0.9% of total revenue) in the same prior year period. The increase is primarily due to ~~greater spending~~recognition of commission earned by third parties on ~~physical menus~~gift cards sold through large-box retailers and ~~point-of-sale materials~~a radio advertising campaign in ~~the current quarter versus the same~~Colorado. The prior year quarter ~~when menus and point-of-sale merchandising materials were digital. The current and prior year quarters each include~~includes advertising costs of $4,000 associated with franchise advertising contributions.

~~Bad Daddy’s advertising costs consist primarily of contributions made to the advertising materials fund based on a percentage of restaurant sales as well as local store marketing efforts.~~

Good Times advertising costs were ~~$328,000 (4.0%~~$359,000 (3.9% of total revenue) in the quarter ended ~~December~~June 28, ~~2021~~2022 compared to ~~$341,000~~$375,000 (4.0% of total revenue) in the same prior year period. The slight decrease is primarily due to decreased advertising expenditures in the current quarter versus the same prior year quarter. The current and prior year quarters include advertising costs of ~~$65,000~~$68,000 and ~~$67,000,~~$71,000, respectively, of costs associated with franchise advertising contributions.

Good Times advertising costs consists primarily of contributions made to the advertising materials fund and a regional advertising cooperative based on a percentage of restaurant sales which are used to provide television and radio advertising, social media and on-site and point-of-purchase. Advertising costs are presented gross, with franchisee contributions to the fund being recognized as a component of franchise revenues. As a percentage of total revenue, we expect advertising costs to remain relatively stable, at approximately 4.0% of total revenue for the Good Times segment.

Franchise Costs. Franchise costs were $5,000 and $5,000 for the quarters ended ~~December~~June 28, ~~2021~~2022 and ~~December~~June 29, ~~2020,~~2021, respectively. The costs are primarily related to the Good Times franchised restaurants. We currently have minimal direct costs associated with maintaining our franchise systems as those employees overseeing franchisee relations primarily perform responsibilities associated with company operations.

Impairment Costs. Costs related to the impairment of long-lived assets were $303,000 for the quarter ended June 28, 2022, which were attributable to one Good Times restaurant.

Gain on Restaurant Asset Sales and Lease Termination. The gain on restaurant asset sales and lease termination for the quarter ended ~~December~~June 28, ~~2021~~2022 was ~~$614,000~~$9,000 compared to $9,000 for the quarter ended ~~December~~June 29, ~~2020.~~

~~The Company had previously entered into an agreement with the landlord for one of its Good Times restaurants which provided the landlord an option~~2021 related to terminate the lease with a six-month notice in exchange for a specific termination penalty. During the fiscal quarter ended December 28, 2021 the landlord for this location exercised the termination option and we recognized a $607,000 gain in connection with the lease termination. The Company will continue to operate this location through the majority of the notice period and will vacate the leased premises no later than March 31, 2022. The remainder of the gain recognized during the period ended December 28, 2021 and all of the gain recognized during the period ended December 28, 2021 is the periodic recognition of deferred gains resulting from two priorpast sale-leaseback transactions ~~associated with certain~~of Good Times restaurants.

Income (Loss) from Operations. Income from operations was ~~$1,276,000~~$821,000 in the quarter ended ~~December~~June 28, ~~2021~~2022 compared to income from operations of ~~$1,263,000~~$2,446,000 in the quarter ended ~~December~~June 29, ~~2020.~~ 2021.

The change in the ~~income~~loss from operations for the quarter ended ~~December~~June 28, ~~2021~~2022 is ~~due~~ primarily due to matters discussed in the ~~“Net Revenues,” “Restaurant Operating Costs,” “General and Administrative Costs” and “Advertising Costs”~~ sections above.

Interest ~~Expense.~~and other expense, net. ~~Income tax~~Interest and other expense, net was ~~$18,000~~$12,000 during the quarter ended ~~December~~June 28, ~~2021, primarily related~~2022, compared to ~~the amortization of loan initiation fees, compared with $98,000 during~~$66,000 for the quarter ended ~~During December~~June 29, ~~2020.~~2021. The $54,000 reduction is primarily due to lower interest costs attributable to there being no outstanding long-term debt in the current year. The remaining interest expense is attributable to commitment fees and the ~~reduction~~amortization of loan costs associated with the Cadence Credit Facility.

Gain on Debt Extinguishment. There was no gain on debt extinguishment for the quarter compared to $11,778,000 for the quarter ended June 29, 2021. The gain in ~~outstanding loan balances.~~the prior year quarter was related to forgiveness of PPP loans by the SBA.

Provision for Income Taxes. Provision for income taxes was ~~$8,000~~$1,000 for the quarter ended ~~December~~June 28, ~~2021, compared to zero~~2022 primarily associated with estimated cash taxes due for ~~the quarter ended December 29,2020. The provision for income taxes during the quarter ended December 28, 2021 relates to the recognition of current~~ state income ~~taxes where the Company does not have substantial net operating loss carry-forwards.~~tax.

Net (Loss) Income. Net income was ~~$1,250,000~~$808,000 for the quarter ended ~~December~~June 28, ~~2021~~2022 compared to net income of ~~$1,165,000~~$14,158,000 in the quarter ended ~~December~~June 29, ~~2020.~~2021.

The change from the quarter ended ~~December~~June 28, ~~2021~~2022 to the quarter ended ~~December~~June 29, ~~2020~~2021 was primarily attributable to the matters discussed in the relevant sections above.

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Income Attributable to Non-Controlling Interests. The non-controlling interest represents the limited partners’ or members’ share of income in the Good Times and Bad Daddy’s joint-venture restaurants.

For the quarter ended ~~December~~June 28, ~~2021,~~2022, the income attributable to non-controlling interests was ~~$920,000~~$339,000 compared to ~~$363,000~~$524,000 for the quarter ended ~~December~~June 29, ~~2020.~~2021.

Of the current quarter’s income attributable to non-controlling interests, ~~$684,000~~$184,000 is attributable to Bad Daddy’s joint-venture restaurants, compared to ~~$180,000~~$263,000 in the same prior year period. This ~~$504,000~~$79,000 decrease is primarily due to reduced restaurant-level profitability in the relevant restaurants. The remaining $155,000 is attributable to the Good Times joint-venture restaurants, compared to $261,000 in the same prior year period. This $106,000 decrease is primarily due to reduced restaurant-level profitability in the relevant restaurants.

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Fiscal three quarters ended June 28, 2022 (39 weeks) compared to fiscal three quarters ended June 29, 2021 (39 weeks):

Net Revenues. Net revenues for the three quarters ended June 28, 2022 increased $12,576,000 or 13.9% to $103,010,000 from $90,434,000 for the three quarters ended June 29, 2021. Bad Daddy’s concept revenues increased $13,164,000 while our Good Times concept revenues decreased $588,000.

Bad Daddy’s restaurant sales increased $13,128,000 to $77,210,000 for the three quarters ended June 28, 2022 from $64,082,000 for the three quarters ended June 29, 2021. This increase is primarily due to strong customer demand, as well as a increases in menu prices. The average menu price increase for the three quarters ended June 28, 2022 over the same prior-year quarter was approximately 5.5%.

Good Times restaurant sales decreased $600,000 to $25,095,000 for the three quarters ended June 28, 2022 from $25,695,000 for the three quarters ended June 21, 2021. This decrease is primarily due to decreased traffic, the loss of sales associated with the closure of one restaurant in the second quarter of 2022, partially offset by menu price increases. The average menu price increase for the three quarters ended June 29, 2021 over the same prior-year quarter was approximately 7.2%.

Franchise revenues were $705,000 in the three quarters ended June 28, 2022 compared to $657,000 in the three quarters ended June 29, 2021. This increase is primarily due to increased royalties at the Bad Daddy’s franchisee and licensee restaurants attributable to increased sales.

Same Store Sales

Bad Daddy’s same store restaurant sales increased 14.0% during the three quarters ended June 28, 2022 compared to the same thirteen-week period ended June 29, 2021 in the prior-year quarter. This increase is primarily due to increased traffic as well as menu price increases. There were thirty-eight restaurants included in the same store sales base at the end of the quarter.

Good Times same store restaurant sales decreased 0.6% during the three quarters ended June 28, 2022 compared to the same thirteen-week period ended June 29, 2021 in the prior-year quarter. This decrease is primarily due to slightly lower traffic, partially offset by menu price increases. There were twenty-three restaurants included in the same store sales base at the end of the quarter.

Restaurant Operating Costs

Food and Packaging Costs. Food and packaging costs for the three quarters ended June 28, 2022 increased $6,413,000 to $32,450,000 (31.7% of restaurant sales) from 26,037,000 (29.0% of restaurant sales) for the three quarters ended June 29, 2021.

Bad Daddy’s food and packaging costs were $24,615,000 (31.9% of restaurant sales) for the three quarters ended June 28, 2022, up from $18,494,000 (28.9% of restaurant sales) for the three quarters ended June 29, 2021. This increase is primarily attributable to higher restaurant sales during the three quarters versus the same period in the prior year. The increase as a percent of sales is attributable the significant inflation noted during the quarter with most of our food and packaging products seeing meaningful unit price increases.

Good Times food and packaging costs were $7,835,000 (31.2% of restaurant sales) for the three quarters ended June 28, 2022, up from $7,543,000 (29.4% of restaurant sales) for the three quarters ended June 29, 2021. The increase as a percent of sales is due primarily to the impact of higher purchase prices on food and paper goods, partially offset by increased menu pricing.

Payroll and Other Employee Benefit Costs. Payroll and other employee benefit costs for the three quarters ended June 28, 2022 increased $5,240,000 to 35,027,000 (34.2% of restaurant sales) from $29,787,000 (33.2% of restaurant sales) for the three quarters ended June 29, 2021.

Bad Daddy’s payroll and other employee benefit costs were $26,450,000 (34.3% of restaurant sales) for the three quarters ended June 28, 2022 up from $21,644,000 (33.8% of restaurant sales) in the same prior year period. The $4,806,000 increase is primarily attributable to greater hours to support increased guests at restaurants during the current year versus the same prior year period, as well as higher average pay rates. As a percent of sales, payroll and employee benefits costs increased by 0.4% primarily attributable to higher average wage rates paid to attract qualified employees.

Good Times payroll and other employee benefit costs were $8,577,000 (34.2% of restaurant sales) in the three quarters ended June 28, 2022, up from $8,143,000 (31.7% of restaurant sales) in the same prior-year period. The $434,000 increase, both in nominal dollars and as measured as a percent of restaurant sales, was attributable to higher average wage rates paid to attract qualified employees. These higher wages are in-part driven by a combination of the significant statutory wage increase in the City and County of Denver and the impact of the overall market for quick service restaurant employees.

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Occupancy Costs. Occupancy costs for the three quarters ended June 28, 2022 increased $555,000 to $7,088,000 (6.9% of restaurant sales) from $6,533,000 (7.3% of restaurant sales) for the three quarters ended June 29, 2021.

Bad Daddy’s occupancy costs were $5,011,000 (6.5% of restaurant sales) for the three quarters ended June 28, 2022, up from $4,352,000 (6.8% of restaurant sales) in the same prior year period. The increase was primarily attributable to lease costs with newly opened restaurants and increased property tax assessments. The decrease as a percentage of sales was primarily due to the leveraging effect of higher restaurant sales.

Good Times occupancy costs were $2,077,000 (8.3% of restaurant sales) in the three quarters ended June 28, 2022, down from $2,181,000 (8.5% of restaurant sales) in the same prior year period. The decrease was primarily attributable to decreases in property tax expense and end-of-term rent abatement and associated with a lease termination agreement for one good times restaurant

Other Operating Costs. Other operating costs for the three quarters ended June 28, 2022, increased $2,717,000 to $13,558,000 (13.3% of restaurant sales) from $10,841,000 (12.1% of restaurant sales) for the three quarters ended June 29, 2021.

Bad Daddy’s other operating costs were $10,696,000 (13.9% of restaurant sales) for the three quarters ended June 28, 2022 up from 8,448,000 (13.2% of restaurant sales) in the same prior year period. The $2,281,000 increase was attributable to higher overall sales as well as higher repair and maintenance expenses.

Good Times other operating costs were $2,862,000 (11.4% of restaurant sales) in the three quarters ended June 28, 2022, up from $2,393,000 (9.3% of restaurant sales) in the same prior year period. The increase was primarily attributable to general price inflation in supplies costs and increases in commissions paid to delivery service providers due to increases in overall delivery sales, as well as higher repair and maintenance expenses.

New Store Preopening Costs. Preopening costs for the three quarters ended June 28, 2022 decreased $370,000 to $50,000 from $420,000 in the three quarters ended June 29, 2021. The costs in the prior year were related to a Bad Daddy’s restaurant opened near the end of fiscal 2021.

Depreciation and Amortization Costs. Depreciation and amortization costs for the three quarters ended June 28, 2022, increased $193,000 to $2,990,000 from $2,797,000 in the three quarters ended June 29, 2021.

Bad Daddy’s depreciation and amortization costs for the three quarters ended June 28, 2022 increased $248,000 to $2,464,000 from $2,216,000 in the three quarters ended June 29, 2021. This increase was primarily attributable to the two new restaurants opened in final quarter of fiscal 2021.

Good Times depreciation and amortization costs for the three quarters ended June 28, 2022 decreased $55,000 to $526,000 from $581,000 in the three quarters ended June 29, 2021.

General and Administrative Costs. General and administrative costs for the three quarters ended June 28, 2022, increased $564,000 to $7,661,000 (7.4% of total revenue) from $7,097,000 (7.8% of total revenue) for the three quarters ended June 29, 2021.

This increase in general and administrative expenses in the three quarters ended June 28, 2022 is primarily attributable to:

Increase in Training and Recruiting costs, including incentives, of $269,000, including costs associated with the annual general manager conference and a multi-unit supervisor training conference.

Decrease in administrative related payroll and benefit costs of $245,000, primarily related to the prior-year one-time bonus awarded to the CEO in connection with the amendment of his employment agreement, and reduced health insurance underwriting losses, partially offset by increased administrative salaries and wages.

Increase in legal and professional services costs of $138,000

Decreased stock compensation cost, primarily related to the prior-year accelerated recognition of stock-based compensation cost in connection with the vesting of performance shares and incentive stock options that were issued to the CEO in connection in connection with the amendment of his employment agreement

Increase in corporate technology expenses of $133,000

Increase in the cost of multi-unit supervision cost of $87,000, primarily related to increased multi-unit travel costs and incentive compensation

Increase in professional services of $15,000

Increase in general travel-related costs of $72,000

Increase in vendor fees primarily related to lower corporate vendor rebates.

Increase in the cost of business insurance including D&O, EPL, and cyber coverage of $68,000

Increase in general office expenses of $38,000

Increase in various other expenses of $23,000

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Advertising Costs. Advertising costs for the three quarters ended June 28, 2022, increased $644,000 to $2,260,000 (2.2% of total revenue) from $1,616,000 (1.8% of total revenue) for the three quarters ended June 29, 2021.

Bad Daddy’s advertising costs were $1,228,000 (1.6% of total revenue) in the three quarters ended June 29, 2021 compared to $575,000 (0.9% of total revenue) in the same prior year period. The increase is primarily due to greater spending on physical menus and point-of-sale materials in the current quarter versus the same prior year quarter when menus and point-of-sale merchandising materials were digital; recognition of commission earned by third parties on gift cards sold through large-box retailers; and a radio advertising campaign in Colorado. The current and prior year quarters each include advertising costs of $9,000 and $4,000 respectively, associated with franchise advertising contributions.

Good Times advertising costs were $1,032,000 (4.0% of total revenue) in the three quarters ended June 28, 2022 compared to $1,041,000 (4.0% of total revenue) in the same prior year period. The current and prior year quarters include advertising costs of $195,000 and $71,000, respectively, of costs associated with franchise advertising contributions.

Franchise Costs. Franchise costs were $16,000 and $22,000 for the quarters ended June 28, 2022 and June 29, 2021, respectively. The costs are related to the Good Times franchised restaurants. We currently have minimal direct costs associated with maintaining our franchise systems as those employees overseeing franchisee relations primarily perform responsibilities associated with company operations.

Impairment Costs. Costs related to the impairment of long-lived assets were $2,056,000 for the quarter ended June 28, 2022. Good Times Impairment costs for the three quarters ended June 28, 2022 were $790,000 due to the asset impairments of three Good Times restaurants. Bad Daddy’s impairment costs for the three quarters ended June 28, 2022 were $1,266,000 due to the impairment of one Bad Daddy’s restaurant.

Gain on Restaurant Asset Sales and Lease Termination. The gain on restaurant asset sales and lease termination for the three quarters ended June 28, 2022 was $666,000 compared to $28,000 for the three quarters ended June 29, 2021, primarily related to the termination of a lease of a good times restaurant. The remainder being related to past sale-leaseback transactions of Good Times restaurants

Income (Loss) from Operations. Income from operations was $188,000 in the three quarters ended June 28, 2022 compared to income from operations of $5,311,000 in the three quarters ended June 29, 2021.

The change in the income from operations for the three quarters ended June 28, 2022 is primarily due to matters discussed in the relevant sections above.

Interest and other expense, net. Interest and other expense, net was $41,000 during the three quarters ended June 28, 2022 compared to $244,000 in the three quarters ended June 29, 2021. The $203,000 reduction is primarily due to lower interest costs attributable to there being no outstanding long-term debt in the current year. The remaining interest expense is attributable to commitment fees and the amortization of loan costs associated with the Cadence Credit Facility.

Gain on Debt Extinguishment. There was no gain on debt extinguishment for the three quarters ended June 28, 2022 compared to $11,778,000 for the three quarters ended June 29, 2021. The gain in the prior year to date was related to forgiveness of PPP loans by the SBA.

Litigation Contingencies. The Company recorded a contingent loss of $332,000 during the three quarters ended June 28, 2022 related to in-process litigation. No similar losses were recorded during the same prior year period.

Provision for Income Taxes. Provision for income taxes was $9,000 for the three quarters ended June 28, 2022, primarily associated with estimated cash taxes due for state income tax.

Net Income (Loss). Net Income was $147,000 for the three quarters ended June 28, 2022 compared to net income of $16,846,000 in the three quarters ended June 29, 2021.

The change from the three quarters ended June 28, 2022 to the three quarters ended June 29, 2021 was primarily attributable to the matters discussed in the relevant sections above.

For the three quarters ended June 28, 2022, the income attributable to non-controlling interests was $1,489,000 compared to $1,313,000 for the three quarters ended June 29, 2021.

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Of the three quarter’s income attributable to non-controlling interests, $1,025,000 is attributable to Bad Daddy’s joint-venture restaurants, compared to $688,000 in the same prior year period. Income attributable to non-controlling interests for Bad Daddy’s includes a one-time special allocation to the non-controlling partners in these partnerships of approximately $516,000 related to a rebate of payroll costs, partially offset by slightly decreased restaurant level profitability in the current fiscal quarter. ~~Of the current quarter’s income, $236,000~~The remaining $464,000 is attributable to the Good Times joint-venture restaurants, compared to ~~$183,000~~$625,000 in the same prior year ~~period. This $47,000 increase is~~period, primarily ~~due~~attributable to ~~the noncontrolling partner’s share of gain recognized on disposal of assets in connection with the landlord exercising a termination right at one Good Times~~reduced restaurant ~~owned by the partnership, partially offset by decreased restaurant level~~ profitability in ~~the current fiscal quarter.~~

those joint venture restaurants.

Adjusted EBITDA

EBITDA is defined as net income (loss) before interest, income taxes and depreciation and amortization.

Adjusted EBITDA is defined as EBITDA plus non-cash stock-based compensation expense, preopening expense, non-recurring acquisition costs, GAAP rent in excess of cash rent, and non-cash disposal of assets. Adjusted EBITDA is intended as a supplemental measure of our performance that is not required by or presented in accordance with GAAP. We believe that EBITDA and Adjusted EBITDA provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results. Our management uses EBITDA and Adjusted EBITDA (i) as a factor in evaluating management's performance when determining incentive compensation and (ii) to evaluate the effectiveness of our business strategies.

We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company's financial measures with other fast casual restaurants, which may present similar non-GAAP financial measures to investors. In addition, you should be aware when evaluating EBITDA and Adjusted EBITDA that in the future we may incur expenses similar to those excluded when calculating these measures. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies do not calculate Adjusted EBITDA in the same fashion.

Our management does not consider EBITDA or Adjusted EBITDA in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of EBITDA and Adjusted EBITDA is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company's financial statements. Some of these limitations are:

Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;

stock based compensation expense is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing performance for a particular period;

Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and

other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only as a supplemental measure. You should review the reconciliation of net loss to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.

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The following table reconciles net income/loss to EBITDA and Adjusted EBITDA (in thousands) for the third fiscal quarter and year-to-date:

	Quarter Ended						Quarter Ended						Year-to-Date
	December 28, 2021 (13 Weeks)			December 29, 2020 (13 Weeks)			June 28, 2022 (13 Weeks)			June 29, 2021 (13 Weeks)			June 28, 2022 (39 Weeks)			June 29, 2021 (39 Weeks)
Adjusted EBITDA:
Net income, as reported	$	330		$	802
Net Income (Loss), as reported							$	469		$	13,634		$	(1,351	)	$	15,533
Depreciation and amortization		1,004			909			951			925			2,933			2,745
Interest expense, net		18			98			12			67			41			245
Provision for income taxes		8			-			1			-			9			-
EBITDA		1,360			1,809			1,433			14,626			1,632			18,523
Preopening expense		50			39			-			301			50			420
Non-cash stock-based compensation		95			61			60			50			208			326
Asset Impairment								303			-			2,056			-
GAAP rent-cash rent difference		(73	)		(107	)		(103	)		(108	)		(286	)		(280	)
Gain on restaurant asset sales and lease termination		(484	)		(9	)
One-time special allocation to Bad Daddy’s partnerships		516			-
Loss (Gain on restaurant asset sales and lease termination								(9	)		(9	)		(528	)		(28	)
One-time special allocation to Bad Daddy’s Partnerships								-			-			516			-
Gain on debt extinguishment											(11,778	)					(11,778	)
Litigation contingencies								-			-			332			-
Adjusted EBITDA	$	1,464		$	1,793		$	1,684		$	3,082		$	3,980		$	7,183

Depreciation and amortization expense has been reduced by amounts attributable to non-controlling interests of ~~$67,000~~$63,000 and ~~$41,000~~$49,000 for the quarters ended ~~December 28,2021~~June 28, 2022 and ~~December~~June 29, ~~2020,~~2021, respectively.

Gain on restaurant asset sales and lease termination has not been reduced by any amounts for the quarter ended June 28, 2022 and June 29, 2021, respectively. Gain on restaurant asset sales and lease termination has been reduced by amounts attributable to non-controlling interests of ~~$130,000~~$138,000 and zero for the three quarters ended ~~December~~June 28, 2022 and June 29, 2021, ~~and December 29, 2020,~~ respectively.

~~Amount represents the portion of a payroll cost rebate attributable to the non-controlling partners in these partnerships.~~

Liquidity and Capital Resources

Cash and Working Capital

As of ~~December~~June 28, ~~2021,~~2022, we had a working capital deficit of ~~$43,000.~~$433,000. Our working capital position benefits from the fact that we generally collect cash from sales to customers the same day, or in the case of credit or debit card transactions, within a few days of the related sale. Although we have negotiated payment terms of up to four weeks with many of our vendors, we pay our primary foodservice vendors on 1-3 day payment terms to take advantage of early pay discounts and generally pay most outstanding accounts payable immediately upon review for accuracy and validity. In addition, our working capital position includes the recognition of the current portion of lease liabilities as we lease substantially all of our real estate and have both short-term and long-term obligations to our landlords. We believe that we will have sufficient capital to meet our working capital, recurring operating costs and recurring capital expenditure needs throughout fiscal ~~2022.~~2023. As of ~~December~~June 28, ~~2021,~~2022, we had no commitments related to construction contracts for any restaurants currently under development.

~~On January 31, 2022 the Company’s~~The Company‘s Board of Directors authorized a $5.0 Million share repurchase program which ~~will become~~became effective February 7, 2022. The authorization to repurchase will continue until the maximum value of shares is achieved or the Company terminates the program. The timing and ~~amount~~actual number of ~~repurchases~~shares repurchased will depend ~~upon the Company’s stock~~on a variety of factors, including price, ~~economic~~general business and market conditions, ~~regulatory requirements,~~ and ~~other corporate considerations.~~alternative investment opportunities. As of June 28, 2022 the Company has repurchased 169,648 shares of its common stock pursuant to the share repurchase plan leaving approximately $4,395,000 available for repurchases under the plan.

Financing

Cadence Credit Facility

The Company maintains a credit agreement with Cadence Bank (“Cadence”) pursuant to which, as amended, Cadence has agreed to loan the Company up to $8,000,000 with a maturity date of January 31, 2023 (as amended, the “Cadence Credit Facility”). As amended by the various amendments, the Cadence Credit Facility accrues commitment fees on the daily unused balance of the facility at a rate of 0.25%. As of ~~December~~June 28, ~~2021,~~2022, any borrowings under the Cadence Credit Facility, as amended, bear interest at a variable rate based upon the Company’s election of (i) 2.5% plus the base rate, which is the highest of the (a) Federal Funds Rate plus 0.5%, (b) the Cadence ~~bank~~Bank publicly announced prime rate, and (c) LIBOR plus 1.0%, or (ii) LIBOR, with a 0.250% floor, plus 3.5%. Interest is due at the end of each calendar quarter if the Company ~~selects~~elects to pay interest based on the base rate and at the end of each LIBOR period if it ~~selects~~elects to pay interest based on LIBOR. The Cadence Credit Facility, includes provisions for the Administrative Agent of the facility to amend the facility to replace LIBOR with an alternate benchmark rate, which may be (but is not required to be) SOFR, at such point in time when appliable LIBOR rates are no longer available or no longer reliable. The exact timing of any transition of LIBOR to an alternate benchmark rate is not currently known.

~~During the fiscal year ended December 28, 2021, the weighted average interest rate applicable to borrowings under the Cadence Credit Facility was 3.75%.~~

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~~As of December 28, 2021,~~During the quarter ended March 29, 2022 the Company entered into an amendment to the Cadence Credit Facility aswhich, among other things, amends the Credit Agreement to modify the “Restricted Payments” covenant in the Credit Agreement to exempt Company repurchases of common stock made in connection with the Company’s publicly announced share repurchase program described above.

As of June 28, 2022, the Cadence Credit Facility, contains certain affirmative and negative covenants and events of default that the Company considers customary for an agreement of this type, including covenants setting a maximum leverage ratio of 5.15:1, a minimum pre-distribution fixed charge coverage ratio of 1.25:1, a minimum post-distribution fixed charge coverage ratio of 1.10:1 and minimum liquidity of $2.0 million. As of ~~December~~June 28, ~~2021,~~2022, the Company was in compliance with all financial covenants under the Cadence Credit Facility.

The obligations under the Cadence Credit Facility are collateralized by a first-priority lien on substantially all of the Company’s assets.

~~Paycheck Protection Program Loans~~

Cash Flows

Net cash ~~used in~~provided by operating activities was ~~$219,000~~$4,418,000 for the ~~quarter~~three quarters ended ~~December~~June 28, ~~2021.~~2022. The net cash used in operating activities for the ~~quarter~~three quarters ended ~~December~~June 28, ~~2021~~2022 was the result of net income of ~~$1,250,000~~$138,000 as well as cash and non-cash reconciling items totaling ~~$1,469,000.~~$4,280,000. These reconciling items are primarily comprised of 1) depreciation and amortization of general assets of ~~$1,078,000,~~$3,129,000, 2) amortization of operating lease assets of ~~$757,000,~~$2,908,000, 3) impairment of long-lived assets of $2,056,000 4) stock-based compensation expense of ~~$95,000, 4)~~$207,000 5) a gain on lease termination and deferred gain on sale/leaseback of restaurants of ~~$614,000, 4)~~$666,000, 6) A decrease in ROU assets of $57,000, 7) Income tax provision of $9,000, 8) an increase in ~~receivables and other assets~~prepaids of ~~$961,000, 5)~~$742,000, primarily attributable to an increase in ~~deferred liabilities and~~prepaid rent, 9) an increase in accrued expenses of ~~$808,000, 6)~~$1,123,000, 10) a decrease in accounts payable of ~~$915,000 and 7)~~$529,000, 11) a net decrease in amounts related to our operating ~~leases~~lease liabilities of ~~$823,000.~~

$3,262,000 and 12) An net increase of $10,000 in inventory, other receivables, and deposits and other assets.

Net cash provided by operating activities was ~~$847,000~~$7,386,000 for the ~~quarter~~three quarters ended ~~December~~June 29, ~~2020.~~2021. The net cash provided by operating activities for the ~~quarter~~three quarters ended ~~December~~June 29, ~~2020~~2021 was the result of net income of ~~$1,165,000 as well as~~$16,846,000 offset by cash and non-cash reconciling items totaling ~~$318,000.~~$9,460,000. These reconciling items are primarily comprised of 1) depreciation and amortization of general assets of ~~$967,000,~~$2,920,000, 2) amortization of operating lease assets of ~~$1,055,000,~~$2,631,000, 3) stock-based compensation expense of ~~$61,000,~~$327,000, 4) gain on debt forgiveness of $11,778,000, 5) an increase in receivables and other assets of ~~$659,000, 5)~~$82,000, 6) an increase in deferred liabilities and accrued expenses of ~~$743,000, 6)~~$264,000, 7) a decrease in accounts payable of ~~$1,340,000~~$820,000 and 7)8) a net ~~increase~~decrease in amounts related to our operating leases of ~~$1,136,000.~~$2,922,000..

Net cash used in investing activities for the ~~quarter~~three quarters ended ~~December~~June 28, ~~2021~~2022 was ~~$237,000~~$1,606,000 which primarily reflects the general purchases of property and equipment of ~~$237,000.~~$1,623,000 and an acquisition of a restaurant from franchisee, net of cash acquired, for $728,000, as well as $745,000 for the proceeds of the sale of a fixed asset. Purchases of property and equipment is comprised of the following:

$~~192,000~~936,000 for miscellaneous capital expenditures related to our existing Bad Daddy’s restaurants

$~~45,000~~471,000 for miscellaneous capital expenditures related to our existing Good Times restaurants

$~~81,000~~216,000 for miscellaneous capital expenditures related to our restaurant support center, primarily initial development costs for the software underlying our two brands’ mobile apps and automotive assets used by our internal maintenance team

Net cash used in investing activities for the ~~quarter~~three quarters ended ~~December~~June 29, ~~2020~~2021 was ~~$480,000~~ $2,085,000

which primarily reflects the purchases of property and equipment of ~~$483,000.~~$2,098,000. Purchases of property and equipment is comprised of the following:

$~~102,000~~1,136,000 in costs for the development of ~~new~~ Bad Daddy’s locations

$~~220,000~~486,000 for miscellaneous capital expenditures related to our ~~existing~~ Bad Daddy’s restaurants

$~~113,000~~82,000 in costs related to remodeling of one Good Times location

$190,000 for miscellaneous capital expenditures related to our ~~existing~~ Good Times restaurants

$~~48,000~~204,000 for miscellaneous capital expenditures related to our restaurant support center

Net cash used in financing activities for the quarter ended December 28, 2021 was $760,000, which includes proceeds from stock option exercises of $6,000 and distributions to non-controlling interests of $766,000, the latter including a one-time special allocation of approximately $516,000 to the non-controlling partners in our Bad Daddy’s partnerships related to a rebate of payroll costs.

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Net cash used in financing activities for the ~~quarter~~three quarters ended ~~December~~June 28, 2022 was $1,964,000, which includes distributions to non-controlling interests of $1,449,000 and payment for the repurchase of the Company’s common stock of $605,000 and proceeds from stock option exercise of $90,000.

Net cash used in financing activities for the three quarters ended June 29, ~~2020~~2021 was ~~$1,806,000,~~$6,454,000, which includes principal payments on notes payable and long-term debt of ~~$1,500,000,~~$5,500,000, proceeds from stock option exercises of ~~$13,000~~407,000 and net distributions to non-controlling interests of ~~$319,000.~~

$1,361,000.

Impact of Inflation

Due to the impact of the COVID-19 pandemic, availability of certain commodities could be constrained and prices for those commodities could be substantially more volatile than in recent history. Additionally, headline inflation as measured by the Consumer Price Index has recently exceeded inflation amounts recorded at any time during the past forty years. We have experienced significant inflationary pressure both on the cost of labor in the form of salaries and wages, and also in raw products, across many of the commodities we use in our operations. Due to these factors, we are not able to predict the impact of inflation on our food and packaging costs for the balance of the year. We have adjusted menu prices with intentional discipline, particularly at Bad Daddy’s. The total menu price increases at our Good Times restaurants during fiscal 2021 were approximately 8.0%, and we raised menu prices approximately ~~2.0%~~4.1% on average during the first ~~quarter~~three quarters of fiscal 2022. We raised menu prices at our Bad Daddy’s restaurants during fiscal 2021 by approximately ~~3.2%~~3.1% and raised menu prices during the first ~~quarter~~three quarters of fiscal 2022 by approximately ~~2.1%.~~5.1% on average. We continue to monitor inflationary pressures and customer reaction to competitive pricing benchmarks. We expect to ~~subsequently raise~~increase menu ~~prices~~pricing at ~~our Bad Daddy’s restaurants by an approximately 2.5%~~least once during the ~~second fiscal quarter~~next six months, if not potentially more frequently, but cannot reasonably predict the magnitude or exact timing of ~~2022.~~such price adjustments.

Seasonality

Revenues of the Company are subject to seasonal fluctuations based primarily on weather conditions adversely affecting Colorado restaurant sales ~~in December, January, February,~~between the months of November and March.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

ITEM 4.

CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Based on an evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this report on Form 10Q, the Company’s Chief Executive Officer (its principal executive ~~officer~~officer) and Senior Vice President of Finance (its principal financial officer) ~~has~~have concluded that the Company’s disclosure controls and procedures were effective as of ~~December~~June 28, ~~2021.~~2022.

Changes in Internal Control over Financial Reporting

There have been no significant changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended ~~December~~June 28, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~Table of Contents~~

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

~~There have been no~~For a discussion of material ~~developments~~legal proceedings affecting the Company, see note 11 to the ~~information provided~~unaudited, consolidated financial statements included in ~~Part I, Item 3 of our Form 10-K for the fiscal year ended September 28, 2021.~~this report.

ITEM 1A.

RISK FACTORS

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of our Form 10-K for the fiscal year ended September 28, 2021.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~None.~~The Company‘s Board of Directors authorized a $5.0 Million share repurchase program which became effective February 7, 2022. The authorization to repurchase will continue until the maximum value of shares is achieved or the Company terminates the program. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities. As of June 28, 2022 the Company has purchased 169,648 shares of its common stock pursuant to the share repurchase plan leaving approximately $4,395,000 available for repurchases under the plan.

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Repurchases of common stock under the share repurchase plan during the quarter ended June 28, 2022 were as follows:

Period	Total number of shares (or units) purchased		Average price paid per share (or unit)		Total number of shares (or units) purchased as part of publicly announced plans or programs		Maximum dollar value of shares that may yet be purchased under the plans or programs
3/30/2022 – 4/28/2022		-		-		-
4/29/2022 – 5/26/2022		44,575	$	2.80		44,575
5/27/2022 – 6/28/2022		49,173	$	2.97		49,173
Total		93,748					$	4,395,114

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

~~None.~~None

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

(a) Exhibits. The following exhibits are furnished as part of this report:

Exhibit No.	Description

*31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
*31.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350
*32.1	Certification of Chief Executive Officer and ~~Principal?~~Principal Financial Officer pursuant to Section 906
101.INS	XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
*104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Filed herewith

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	GOOD TIMES RESTAURANTS INC.
DATE: ~~February 3,~~August 11, 2022

	Ryan M. Zink Chief Executive Officer (Principal Executive Office)


		~~Ryan M. Zink~~ ~~Chief Executive~~Mathew Karnes Senior Vice President of Finance (Principal Financial Officer and Principal Accounting Officer)

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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.
	Yes ☒	No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
	Yes ☒	No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company”, in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐