~~UNITED STATES~~

~~SECURITIES AND EXCHANGE COMMISSION~~

~~WASHINGTON, D.C. 20549~~

~~FORM 10-Q~~

~~(Mark One)~~

☒ ~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE~~

~~ACT OF 1934~~

~~For the quarterly period ended June 28, 2022~~

☐ ~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES~~

~~EXCHANGE ACT OF 1934~~

~~Commission File Number: 0-18590~~

~~(Exact Name of Registrant as Specified in Its Charter)~~

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended March 28, 2023

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-18590


(Exact Name of Registrant as Specified in Its Charter)
NEVADA					84-1133368
(State or Other Jurisdiction of Incorporation or Organization)					(I.R.S. Employer Identification Number)

~~651 CORPORATE CIRCLE, GOLDEN, CO 80401~~

~~(Address of Principal Executive Offices, Including Zip Code)~~

~~(303) 384-1400~~

~~(Registrant's Telephone Number, Including Area Code)~~

~~Securities registered pursuant to Section 12(b) of the Act:~~


651 CORPORATE CIRCLE, GOLDEN, CO 80401
(Address of Principal Executive Offices, Including Zip Code)
(303) 384-1400
(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:
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: (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	☐


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).
	Yes ☐	No ☒

As of ~~August 8, 2022,~~April ‌28, 2023, there were ~~12,361,450~~‌11,720,963 shares of the Registrant's common stock, par value $0.001 per share, ~~issued and~~ outstanding.

Form 10-Q

Quarter Ended ~~June~~March 28, ~~2022~~2023

	INDEX	PAGE

	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements ~~(Unaudited)~~	3

	Condensed Consolidated Balance Sheets (unaudited) – March 28, 2023 and September 27, 2022	3

	Condensed Consolidated Statements of Operations (unaudited) for the fiscal quarters ended March 28, 2023 and March 29, 2022	4

	Consolidated Statements of Shareholders’ Equity (unaudited) for the fiscal year-to-date periods ended March 28, 2023 and March 29, 2022	5 - 6

	Condensed Consolidated Statements of Cash Flows (unaudited) for the fiscal year-to-date periods ended March 28, 2023 and March 29, 2022	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	2827

Item 4.	Controls and Procedures	2827

	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	2928

Item 4.	Mine Safety Disclosures	2928

Item 5.	Other Information	2928

Item 6.	Exhibits	29

	SIGNATURES	30

	CERTIFICATIONS

Table of Contents

PART I. - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Good Times Restaurants Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except share and per share data)

	June 28, 2022			September 28, 2021			March 28, 2023			September 27, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	9,704		$	8,856		$	5,367		$	8,906
Receivables, net of allowance for doubtful accounts of $0		662			644
Prepaid expenses and other current assets		1,387			641
Receivables								603			694
Prepaid expenses and other								1,745			888
Inventories		1,385			1,303			1,321			1,387
Total current assets		13,138			11,444			9,036			11,875
PROPERTY AND EQUIPMENT:
Land and building		4,670			4,704			4,670			4,670
Leasehold improvements		35,541			35,089			36,492			35,906
Fixtures and equipment		30,011			30,286			31,143			30,664
Total property and equipment		70,222			70,079			72,305			71,240
Less accumulated depreciation and amortization		(46,683	)		(42,852	)		(50,461	)		(48,989	)
Total net property and equipment		23,539			27,227			21,844			22,251
OTHER ASSETS:
Operating lease right-of-use assets, net		43,566			45,737			40,383			42,463
Deferred tax assets								10,847			-
Deposits and other assets		176			219			157			166
Trademarks		3,900			3,900			3,900			3,900
Other intangibles, net		22			4			16			20
Goodwill		5,713			5,150			5,713			5,713
Total other assets		53,377			55,010			61,016			52,262

TOTAL ASSETS:	$	90,054		$	93,681		$	91,896		$	86,388
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	753		$	1,496			2,382			628
Deferred income		57			61			45			48
Operating lease liabilities, current		5,349			4,935			5,506			5,430
Other accrued liabilities		7,412			6,394			7,437			6,791
Total current liabilities		13,571			12,886			15,370			12,897
LONG-TERM LIABILITIES:
Operating lease liabilities, net of current portion		46,859			49,723			43,063			45,544
Deferred and other liabilities		161			202
Deferred revenues and other liabilities								134			159
Total long-term liabilities		47,020			49,925			43,197			45,703
SHAREHOLDERS’ EQUITY:
Good Times Restaurants Inc. shareholders’ equity:
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
Preferred stock, $.01 par value; 5,000,000 shares authorized, no shares issued and outstanding as of March 28, 2023 and September 27, 2022								-			-
Common stock, $.001 par value; 50,000,000 shares authorized; 12,977,433 issued; and 11,746,350 and 12,274,351 outstanding as of March 28, 2023 and September 27, 2022, respectively								13			13
Capital contributed in excess of par value		59,318			59,021			56,754			59,427
Treasury stock, at cost; 545,999 and 376,351 shares as of June 28, 2022 and September 28, 2021, respectively		(2,213	)		(1,608	)
Treasury stock, at cost; 1,231,083 and 692,798 shares as of March 28, 2023 and September 27, 2022, respectively								(3,974	)		(2,634	)
Accumulated deficit		(29,031	)		(27,680	)		(19,827	)		(30,321	)
Total Good Times Restaurants Inc. shareholders' equity		28,087			29,746			32,966			26,485

Non-controlling interests		1,376			1,124			363			1,303
Total shareholders’ equity		29,463			30,870			33,329			27,788

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	90,054		$	93,681		$	91,896		$	86,388

See accompanying notes to condensed consolidated financial statements (unaudited)

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						Year-to-Date						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)			March 28, 2023 (13 Weeks)			March 29, 2022 (13 Weeks)			March 28, 2023 (26 Weeks)			March 29, 2022 (26 Weeks)
NET REVENUES:
Restaurant sales	$	36,265		$	33,701		$	102,305		$	89,777		$	34,568		$	33,364		$	67,747		$	66,040
Franchise revenues		232			245			705			657			217			233			432			473
Total net revenues		36,497			33,946			103,010			90,434			34,785			33,597			68,179			66,513

RESTAURANT OPERATING COSTS:
Food and packaging costs		11,767			9,989			32,450			26,037			10,655			10,457			21,262			20,683
Payroll and other employee benefit costs		12,295			11,261			35,027			29,787			11,989			11,555			23,537			22,732
Restaurant occupancy costs		2,383			2,183			7,088			6,533			2,428			2,377			4,886			4,705
Other restaurant operating costs		4,753			3,730			13,558			10,841			4,826			4,667			9,318			8,805
Preopening costs		0			301			50			420			30			-			30			50
Depreciation and amortization		993			938			2,990			2,797			911			1,013			1,821			1,997
Total restaurant operating costs		32,191			28,402			91,163			76,415			30,839			30,069			60,854			58,972

General and administrative costs		2,379			2,505			7,661			7,097			2,297			2,577			4,672			5,282
Advertising costs		807			597			2,260			1,616			778			812			1,672			1,453
Franchise costs		5			5			16			22			-			6			3			11
Impairment of long-lived assets		303			-			2,056			-			76			1,753			76			1,753
Gain on restaurant asset sale and lease termination		(9	)		(9	)		(666	)		(28	)		(22	)		(43	)		(22	)		(657	)
Litigation contingencies		-			-			332			-			-			332			-			332

INCOME (LOSS) FROM OPERATIONS:		821			2,446			188			5,312			817			(1,909	)		924			(633	)

Other Expenses:
Interest and other expense, net		(12	)		(66	)		(41	)		(244	)		(26	)		(11	)		(38	)		(29	)
Gain on debt extinguishment		0			11,778			0			11,778
Total other income (expense), net		(12	)		11,712			(41	)		11,534

NET INCOME BEFORE INCOME TAXES:		809			14,158			147			16,846
NET INCOME (LOSS) BEFORE INCOME TAXES:														791			(1,920	)		886			(662	)

Provision for Income Taxes		(1	)		-			(9	)		-
Provision for income taxes														9,952			-			9,952			(8	)

NET INCOME:	$	808		$	14,158		$	138		$	16,846
NET INCOME (LOSS):													$	10,743		$	(1,920	)	$	10,838		$	(670	)
Income attributable to non-controlling interests		(339	)		(524	)		(1,489	)		(1,313	)		(122	)		(230	)		(344	)		(1,150	)

NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	469		$	13,634		$	(1,351	)	$	15,533
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS													$	10,621		$	(2,150	)	$	10,494		$	(1,820	)

NET (LOSS) INCOME PER SHARE, ATTRIBUTABLE TO COMMON SHAREHOLDERS:
NET INCOME (LOSS) PER SHARE, ATTRIBUTABLE TO COMMON SHAREHOLDERS:
Basic	$	0.04		$	1.07		$	(0.11	)	$	1.22		$	0.90		$	(0.17	)	$	0.88		$	(0.15	)
Diluted	$	0.04		$	1.04		$	(0.11	)	$	1.21		$	0.89		$	(0.17	)	$	0.88		$	(0.15	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		12,457,251			12,787,390			12,502,449			12,689,587			11,818,651			12,527,625			11,930,140			12,525,048
Diluted		12,560,658			13,076,635			12,502,449			12,793,915			11,884,123			12,527,625			11,985,254			12,525,048

See accompanying notes to condensed consolidated financial statements (unaudited)

Table of Contents

Good Times Restaurants Inc. and Subsidiaries
Consolidated Statements of Shareholders’ Equity (Unaudited)
Year-to-Date ~~June~~March 28, 2023

(In thousands, except share and per share data)

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

BALANCES, September 27, 2022		692,798	$	(2,634	)		12,274,351		$	13	$	59,427		$	1,303		$	(30,321	)	$	27,788

Stock-based compensation cost		-		-			-			-		46			-			-			46
Restricted stock unit vesting		-		-			8,284			-		(92	)		-			-			(92	)
Stock Option Exercise		-		-			2,000			-		5			-			-			5
Treasury Shares Purchased		371,395		(873	)		(371,395	)		-		-			-			-			(873	)
Non-controlling interests:
Income		-		-			-			-		-			222			-			222
Distributions		-		-			-			-		-			(172	)		-			(172	)
Contributions		-		-			-			-		-			13			-			13
Net Income attributable to common shareholders and comprehensive income																		(127	)		(127	)
BALANCES, December 27, 2022		1,064,193	$	(3,507	)		11,913,240		$	13	$	59,386		$	1,366		$	(30,448	)	$	26,810

Stock-based compensation cost		-		-			-			-		43			-			-			43
Treasury Shares Purchased		166,890		(467	)		(166,890	)		-		-			-			-			(467	)
Non-controlling interests:
Income		-		-			-			-		-			122			-			122
Distributions		-		-			-			-		-			(294	)		-			(294	)
Purchase of non-controlling interests		-		-			-			-		(2,675	)		(831	)		-			(3,506	)
Net Income attributable to common shareholders and comprehensive income		-		-			-			-		-			-			10,621			10,621

BALANCES, March 28, 2023		1,231,083	$	(3,974	)		11,746,350		$	13	$	56,754		$	363		$	(19,827	)	$	33,329

See accompanying notes to consolidated financial statements (unaudited)

Table of Contents

Good Times Restaurants Inc. and Subsidiaries
Consolidated Statements of Shareholders’ Equity (Unaudited)
Year-to-Date March 29, 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			Outstanding Shares			Par Value		Capital Contributed in Excess of Par Value		Non- Controlling Interest In Partnerships			Accumulated Deficit			Total

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:
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			-		-			-			-		52		-			-			52
Restricted stock unit vesting		-		-			-			-		-		-			-			-
Stock option exercise		-		-			23,797			-		84		-			-			84			-		-			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	)		75,900		(331	)		(75,900	)		-		-		-			-			(331	)
Non-controlling interests:
Income		-		-			-			-		-		339			-			339			-		-			-			-		-		230			-			230
Distributions		-		-			-			-		-		(493	)		-			(493	)		-		-			-			-		-		(112	)		-			(112	)
Net Income attributable to common shareholders and comprehensive loss		-		-			-			-		-		-			469			469			-		-			-			-		-		-			(2,150	)		(2,150	)

BALANCES, June 28, 2022		545,999	$	(2,213	)		12,393,843		$	13	$	59,318	$	1,376		$	(29,031	)	$	29,463
BALANCES, March 29, 2022																							452,251	$	(1,939	)		12,487,591		$	13	$	59,258	$	1,530		$	(29,500	)	$	29,362

See accompanying notes to consolidated financial statements (unaudited)

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							Fiscal Year to Date
	June 28, 2022 (39 Weeks)			June 29, 2021 (39 Weeks)				March 28, 2023 (13 Weeks)			March 29, 2022 (13 Weeks)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	138		$	16,846
Net income (loss)							$	10,838		$	(670	)

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		3,129			2,920			1,859			2,114
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			-			76			1,753
Gain on lease termination		(642	)		-
Stock-based compensation expense		207			327			89			147
Gain on lease termination and disposal of assets								9			(642	)
Recognition of deferred gain on sale of restaurant building		(24	)		(28	)		(31	)		(15	)
Income tax provision		9			-
Provision for income taxes								(9,959	)		8
Changes in operating assets and liabilities:
Receivables and other		(18	)		280			135			(26	)
Prepaid expense		(742	)		-
Pre-paid expense								(857	)		(1,172	)
Inventories		(62	)		(102	)		66			(57	)
Deposits and other assets		70			(260	)
Deposits and other								10			33
Accounts payable		(529	)		(820	)		1,596			(370	)
Operating lease liabilities		(3,262	)		(2,922	)
Deferred liabilities		-			(4	)
Net change in ROU assets and operating lease liabilities								(325	)		(186	)
Accrued and other liabilities		1,123			296			652			395
Net cash provided by operating activities		4,418			7,386			4,158			1,312

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for the purchase of property and equipment		(1,623	)		(2,098	)		(1,423	)		(1,177	)
Acquisition of restaurant from franchisee, net of cash acquired		(728	)		-			-			(728	)
Proceeds from sale of fixed assets		745
Payments received from franchisees and others		-			13
Purchase of non-controlling interests								(4,394	)		-
Net cash used in investing activities		(1,606	)		(2,085	)		(5,817	)		(1,905	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for the purchase of treasury stock		(605	)		-
Principal payments on notes payable and long-term debt		-			(5,500	)
Payment for the purchase of treasury stock								(1,340	)		(331	)
Restricted stock vesting settled in cash								(92	)		-
Proceeds from stock option exercise		90			407			5			90
Distributions to non-controlling interests								(466	)		(956	)
Contributions from non-controlling interests		-			14			13			-
Distributions to non-controlling interests		(1,449	)		(1,375	)
Net cash used in financing activities		(1,964	)		(6,454	)		(1,880	)		(1,197	)

NET CHANGE IN CASH AND CASH EQUIVALENTS		848			(1,153	)		(3,539	)		(1,790	)

CASH AND CASH EQUIVALENTS, beginning of period		8,856			11,454			8,906			8,856

CASH AND CASH EQUIVALENTS, end of period	$	9,704		$	10,301		$	5,367		$	7,066

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	14		$	33		$	5		$	9
Change in accounts payable attributable to the purchase of property and equipment	$	(214	)	$	500		$	158		$	(421	)

See accompanying notes to condensed consolidated financial statements (Unaudited)

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

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~~one partnership in which the Company is the general partner, and five limited liability companies in which the Company was the controlling ~~partner.~~member during the period of time in which unrelated parties owned membership interests in those limited liability companies. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company operates 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~~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 ~~June~~March 28, ~~2022~~2023 and the results of its operations and its cash flows for the ~~three~~ fiscal quarters ended ~~June~~March 28, ~~2022~~2023 and ~~June~~March 29, ~~2021.~~2022. Operating results for the ~~three~~ fiscal ~~quarters~~quarter ended ~~June~~March 28, ~~2022~~2023 are not necessarily indicative of the results that may be expected for the year ending September ~~27, 2022.~~26, 2023. The condensed consolidated balance sheet as of September ~~28, 2021~~27, 2022 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.~~27, 2022.

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 ~~June~~March 28, ~~2022~~2023 and ~~June~~March 29, ~~2021~~2022 each consisted of 13 weeks. ~~The year-to-date periods ended June 28, 2022 and June 29, 2021 each consisted of 39 weeks.~~

Reclassification – Certain prior year balances have been reclassified to conform to the current year’s presentation. Such reclassifications had no effect on the net income (loss).

Advertising Costs – ~~We utilize~~The company utilizes 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. WeAdditionally, the Company intends to utilize all of the advertising contributions towards advertising expenditures, we recognize costs ~~associated with~~equal to franchisee contributions to the advertising funds ~~based upon the same expense recognition principles we apply to other expenses.~~on a quarterly basis. Contributions to the Advertising Funds from our franchisees were ~~$204,000~~$129,000 and ~~$205,000~~$136,000 for the ~~three~~two quarters ended ~~June~~March 28, 2023 and March 29, 2022, ~~and June 29, 2021, respectively and are included in franchise revenues.~~respectively.

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, ~~amounts receivable~~and payments due to us for sales of gift cards to third party retailers. As of March 28, 2023, total receivables were $603,000, which consists of $78,000 in receivables from ~~our~~large box retail partners, retailed receivables, $122,000 in rebate receivables, $312,000 in third party delivery ~~partners,~~receivables, and ~~amounts receivable from Tivoli Brewing Company~~$91,000 of franchise and other receivables, compared to $1,239,000 as of the fiscal quarter ended March 29, 2022, consisting primarily of $745,000 for a lease termination agreement entered in ~~connection with our partnership where we operate~~ the ~~kitchen at their brewery taproom.~~

~~COVID-19~~

~~Currently all~~quarter for one 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 pandemic have had a lingering impact on our restaurant operations for the three quarters ended June 28, 2022 including disruptionslocations, and $494,000 of franchise 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.

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 predict the continued impact of the effect of the COVID-19 pandemic on our business, including any mutations of the virus and additional variants; neither are we able to predict how the pandemic will evolve nor how the long-lived impacts on supply chain, labor market, and customer behavior will evolve. Should dining room closures or mask mandates reoccur, our business could be adversely affected. Even without government orders, customers may choose to reduce or eliminate in-restaurant dining if there are increasing numbers of COVID-19 cases, hospitalizations, or deaths.

~~Table of Contents~~

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 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. 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.receivables.

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

Revenue Recognition

Revenues consist primarily of sales from restaurant ~~operations and~~operations; 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.

Table of Contents

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~~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

The following table presents goodwill and intangible assets as of ~~June~~March 28, ~~2022~~2023 and September ~~28, 2021~~27, 2022 (in thousands):

	June 28, 2022							September 28, 2021							March 28, 2023							September 27, 2022
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		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	$	25	$	(9	)	$	16	$	25	$	(5	)	$	20
Indefinite-lived intangible assets:
Trademarks		3,900		-			3,900		3,900		-			3,900		3,900		-			3,900		3,900		-			3,900
Intangible assets, net	$	3,925	$	(3	)	$	3,922	$	3,950	$	(46	)	$	3,904	$	3,925	$	(9	)	$	3,916	$	3,925	$	(5	)	$	3,920

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

~~Table of Contents~~

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 two reporting units: (1) Good Times restaurants and (2) Bad Daddy’s restaurants. 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 ~~$3,000~~$9,000 for the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 and ~~$46,000~~$5,000 for the ~~three~~two quarters ended ~~June~~March 29, ~~2021.~~2022.As of both March 28, 2023 and March 29, 2022, the Company had $96,000 of goodwill attributable to the Good Times reporting unit and $5,617,000 of goodwill attributable to its Bad Daddy’s reporting unit.

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”)~~, pursuant to shareholder approval.~~ during the 2018 fiscal year, which was approved by shareholders on May 24, 2018. Future awards will be issued under the 2018 Plan. ~~Currently,~~On February 8, 2022 the Company’s shareholders approved a proposal to increase the number of shares available for issuance under the 2018 Plan from 900,000 to 1,050,000, which currently represents the maximum number of shares available for issuance under the 2018 ~~Plan is 1,050,000.~~Plan.

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~~two quarters ended ~~June~~March 28, 2023 and March 29, 2022 includes $89,000 and ~~June 29, 2021 includes $207,000 and $327,000,~~$147,000, respectively, of compensation costs related to our stock-based compensation arrangements.

Table of Contents

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 ~~three~~two quarters ended ~~June~~March 28, ~~2022.~~2023. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the employees who receive equity awards.

There were 20,000 incentive stock options awarded during the two quarters ended March 28, 2023 to the Company’s Chief Executive Officer from available shares under the 2018 Plan, with an exercise price of $3.00 per share and a per share weighted average fair value of $2.29. During the two quarters ended March 29, 2022, the Company granted 90,000 incentive stock options to its Chief Executive Officer, from available shares under the 2018 Plan, with an exercise price of $2.33 per share and a per share weighted average fair value of $1.24 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:

	Three Quarters Ended June 28, 2022 Incentive and Non-Qualified Stock Options	Three Quarters Ended June 29, 2021 Incentive and Non-Qualified Stock Options	Two Quarters Ended March 28, 2023 Incentive and Non-Qualified Stock Options		Two Quarters Ended March 29, 2022 Incentive and Non-Qualified Stock Options

Expected term (years)	6.5	3.63		7.5		6.5
Expected volatility	61.31%	74.62%		60.2%		61.3%
Risk-free interest rate	1.76%	0.24%		4.21%		1.8%
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.

The following table summarizes stock option activity for the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 under all plans:

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

Outstanding at beginning of year		443,815		$	3.63			470,161		$	3.97
Options granted		105,000		$	4.90			20,000		$	3.00
Options exercised		(28,797	)	$	3.10			(2,000	)	$	2.31
Options Forfeited		(20,362	)	$	4.63			(12,253	)	$	3.95
Outstanding June 28, 2022		499,656		$	3.89	5.7
Exercisable June 28, 2022		351,872		$	3.52	5.1
Outstanding March 28, 2023								475,908		$	3.94		5.5
Exercisable March 28, 2023								334,965		$	3.67		4.7

As of ~~June~~March 28, ~~2022,~~2023, the aggregate intrinsic value of the outstanding and exercisable options was ~~$57,000.~~$177,000. Only options whose exercise price is below the ~~closing~~current market price of the ~~Company’s common~~underlying 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.

~~Table of Contents~~

As of ~~June~~March 28, ~~2022,~~2023, the total remaining unrecognized compensation cost related to non-vested stock options was ~~approximately $239,000~~$164,000 and is expected to be recognized over a weighted average period of approximately ~~1.6~~2.0 years.

There were ~~28,797~~2,000 stock options exercised that resulted in an issuance of 2,000 shares during the ~~three~~two quarters ended ~~June~~March 28, 2023 with proceeds of approximately $5,000. There were 23,797 stock options exercised that resulted in an issuance of 23,797 shares during the two quarters ended March 29, 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 $407,000.~~

Restricted Stock Units

~~During~~There were 25,750 restricted stock units granted during the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 and there were 28,000 restricted stock units granted ~~and no restricted stock units granted~~ during the ~~three~~two quarters ended ~~June~~March 29, ~~2021.~~2022.

Table of Contents

A summary of the status of non-vested restricted stock units as of ~~June~~March 28, ~~2022~~2023 is presented below.

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

	Shares			Grant Date Fair Value Per Share

Non-vested units at beginning of year		73,336		$1.54 to $4.50
Units granted		25,750		$2.29
Units vested		(46,336	)	$1.54
Units forfeited		(1,000	)	$4.50
Non-vested units at March 28, 2023		51,750		$2.29 to $4.50

As of ~~June~~March 28, ~~2022,~~2023, there was ~~$120,000~~$123,000 of total unrecognized compensation cost related to non-vested restricted ~~stock.~~stock units. This cost is expected to be recognized over a weighted average period of approximately ~~2.4~~2.2 years.

Restricted and Unrestricted Common Stock Awards

No grants of restricted or unrestricted common stock were made during the two quarters ended March 28, 2023. During the ~~three~~two quarters ended ~~June 28,~~March 29, 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. During the three quarters ended June 29, 2021, the Company granted its directors 12,948 shares of common stock and its Chief Executive Officer 10,000 performance shares from available shares under its 2018 Plan. The shares were issued with a grant date fair market value of $2.78 and $2.77, respectively, which is equal to the 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

~~The~~For the two fiscal quarters ended March 28, 2023, the Company had ~~previously entered into an agreement with the landlord for one~~$19,000 of ~~its~~deferred gains on prior sale-leaseback transactions related to certain Good Times restaurants ~~which provided~~and $3,000 of net gains in the ~~landlord an option to terminate the lease with a six-month notice in exchange for a specific termination penalty.~~loss and disposal of miscellaneous assets. During the two fiscal quarter ended December 28, 2021 the landlord for this location exercised the termination option. The Company continued to operate this location through the majority of the notice period ending March 31, 2022. During the quarterquarters ended March 29, 2022 we recognized a ~~$642,000~~$607,000 gain in connection with ~~the~~a landlord’s exercising a lease ~~termination. The remainder of the~~termination option for one Good Times restaurant and we also recognized $7,000 in deferred gain ~~recognized during the three quarters ended June 28, 2022 is the periodic recognition of deferred gains resulting from~~on prior sale-leaseback transactions ~~associated with~~related to 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		March 28, 2023		September 27, 2022
Prepaid Rent	$	773	$	-	$	769	$	765
Prepaid Insurance						736		3
Other		614		641		240		120
Total	$	1,387	$	641	$	1,745	$	888

Note 8.

Other Accrued Liabilities

Other accrued liabilities consist of the following as of:

	June 28, 2022		September 28, 2021		March 28, 2023		September 27, 2022
Wages and other employee benefits	$	3,115	$	3,282	$	2,987	$	2,773
Taxes, other than income taxes		1,248		1,334		1,025		1,166
Gift card liability, net of breakage		980		375		1,182		985
General expense accrual and other		2,069		1,403		2,243		1,867
Total	$	7,412	$	6,394	$	7,437	$	6,791

~~Table of Contents~~

Note 9.

Notes Payable and Long-Term Debt

Cadence Credit Facility

The Company ~~maintains~~maintained 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~~which as of March 28, 2023 had a maturity date of ~~January 31,~~April 30, 2023 ~~(as amended, the “Cadence~~(the “Prior Cadence Credit Facility”). ~~As amended by the various amendments, the~~The Prior Cadence Credit Facility accrues commitment fees on the daily unused balance of the facility at a rate of 0.25%. As of ~~June~~March 28, ~~2022,~~2023, any borrowings under the Prior 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 ~~elects~~selects to pay interest based on the base rate and at the end of each LIBOR period if it ~~elects~~selects 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.~~

~~As of June 28, 2022,~~On January 24, 2023, the Company and Cadence amended the Prior Cadence Credit Facility ~~contains~~to extend its expiration date to April 30, 2023, to provide consent for the Company’s acquisition of certain non-controlling interests in Bad Daddy’s limited liability company partnerships, and to provide pro-forma credit for a portion of the full-year EBITDA, as that term is defined in the Prior Cadence Credit Facility previously attributed to the non-controlling partners in those limited liability company partnerships.

Table of Contents

During the fiscal quarter ended March 28, 2023, the weighted average interest rate applicable to borrowings under the Prior Cadence Credit Facility was 7.6%.

The Prior Cadence Credit Facility contained 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 ~~June~~March 28, ~~2022,~~2023, the Company was in compliance with all ~~of these~~ financial covenants under the Prior Cadence Credit Facility.

As a result of entering into the Prior 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 remaining amount to be amortized as of March 28, 2023 is $9,000. The obligations under the Prior Cadence Credit Facility ~~are~~were collateralized by a first-priority lien on substantially all of the Company’s assets.

~~As of June 28, 2022,~~Prior to entered into the Company’s new credit facility as described below, there were no outstanding borrowings against the ~~facility.~~Prior Cadence Credit Facility. Availability of the Prior Cadence Credit Facility for borrowings iswas reduced by the outstanding face value of any letters of credit issued under the facility. ~~As of June 28, 2022,~~Prior to entering into the Company’s new credit facility as described below, there were no outstanding letters of credit issued under the facility.

On April 20, 2023, subsequent to the end of the fiscal quarter ended March 28, 2023, the Company and each of its wholly-owned subsidiaries, as guarantors (the “Subsidiary Guarantors”), entered into an Amended and Restated Credit Agreement (the “Senior Credit Facility”) with Cadence Bank, as administrative agent and sole lender (“Cadence”). The Senior Credit Facility provides for an $8.0 million senior revolving loan (the “Revolver”) and amends and restates the Prior Cadence Credit Facility in its entirety.

Proceeds from the Senior Credit Facility, if and when drawn, will be used (i) to fund new restaurant development, (ii) to finance the buyout of non-controlling joint venture partners in certain restaurants, (iii) to finance the redemption, purchase or other acquisition of equity interests in the Company and (iv) for working capital and other general corporate purposes.

The Revolver will be available until April 20, 2028. The loans may from time to time consist of a mixture of SOFR Rate Loans and Base Rate Loans with differing interest rates based upon varying additions to the Federal Funds Rate, the Cadence prime rate or Term SOFR. The Senior Credit Facility also carries an upfront fee of 0.25% of the aggregate principal amount of the Revolver commitment and a commitment fee of 0.25% per annum on the unused portion of the Revolver commitment.

The Senior Credit Facility includes customary affirmative and negative covenants and events of default. The Senior Credit Facility also requires the Company to maintain various financial condition ratios, including minimum liquidity, an amended maximum leverage ratio and an amended minimum fixed charge coverage ratio. In addition, to the extent the aggregate outstandings under the Revolver exceed $4.0 million, the Company is required to meet a new specified leverage ratio, on a pro forma basis, before making further borrowings as well as certain restricted payments, investments and growth capital expenditures.

Note 10.

Net Income (Loss) ~~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.

Table of Contents

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

	Quarter Ended				Year-to-Date				Quarter Ended				Year-to-Date
	June 28 2022		June 29, 2021		June 28, 2022		June 29, 2021		March 28, 2023		March 29, 2022		March 28, 2023		March 29, 2022
Weighted-average shares outstanding basic		12,457,251		12,787,390		12,502,449		12,689,587		11,818,651		12,527,625		11,930,140		12,525,048
Effect of potentially dilutive securities:
Stock options		29,071		225,471		-		40,553		13,722		-		3,364		-
Restricted stock units		74,336		63,774		-		63,774		51,750		-		51,750		-
Weighted-average shares outstanding diluted		12,560,658		13,076,635		12,502,449		12,793,915		11,884,123		12,527,625		11,985,254		12,525,048
Excluded from diluted weighted average shares outstanding:
Antidilutive		387,378		289,611		249,752		474,528		372,575		406,515		385,908		386,101

Note 11.

Contingent Liabilities and Liquidity

The failure of banks where we maintain deposits in excess of the limits insured by FDIC or other government or quasi-government agencies could materially affect our financial position and operating results.

The Company maintains deposits with certain banks in excess of the maximum insured limits by the FDIC. The significant interest rate increases by the Federal Reserve have caused recent bank failures. Although in certain of those cases, depositors have been protected from loss by government intervention, no assurances can be made in the case of any failure of a bank in which the Company has uninsured deposits, that the Company would be similarly protected against loss of such uninsured deposits.

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.

~~Table of Contents~~

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. The Court also indicated its intent to dismiss Good Times’s counterclaim against the plaintiffs for breach of a covenant not to sue over the failed negotiations. 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~~The parties conducted a bench trial on ~~this lone remaining claim for August 22,~~the plaintiffs’ claims. The parties concluded post-trial briefing on October 24, 2022. On January 25, 2023, the Court rendered judgment dismissing the plaintiffs’ claims in their entirety and denying all of the requested relief.

~~While~~The plaintiffs filed a notice of appeal of the Court’s ~~rulings have significantly limited plaintiff’s opportunity for recovery~~January 25, 2023 decisions. Good Times, in ~~the case, in light~~turn, filed a notice of appeal of the ~~ruling~~Court’s previous dismissal of its counterclaim against the plaintiffs. The deadline for the plaintiffs’ opening appellate brief is May 10, 2023. Good Times’s deadline to file a response to the plaintiffs’ opening brief and ~~the Court’s order, the inherent uncertainties of trial and the Company’s posture in respect of settlement, among other things, the~~Good Times’s own opening brief on its appeal is June 9, 2023.

The Company ~~has determined that some loss in respect of the lawsuit is probable and accordingly~~previously recorded an accrual for contingent litigation expense in the fiscal quarter ended March 28, 2022 in the amount of $332,000. This amount ~~represents~~represented the Company’s best estimate of the likely amount of plaintiffs’ damage ~~recovery assuming a finding of liability in their favor~~recovery. While the Company was successful at trial, ~~and their ability~~in light of plaintiff’s appeal, the Company has determined to ~~satisfy~~maintain the ~~legal standard for proving damages in such amount, based upon the Company’s retained expert~~accrual and ~~a report he made in response to the plaintiffs’ claims for damages. The accrual is an estimate and is based on current information, 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~~ultimate resolution of the case could result in losses less than or in excess of 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 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.

Table of Contents

Note 12.

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~~non-cancelable period or the lease term including the renewal options which are reasonably certain of being exercised up to a term of approximately 20 years. The Company reassesses the number of remaining renewal options to include in a lease term for a specific lease when it exercises an option to extend such lease.

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.

~~Table of Contents~~

Components of operating lease costs are as follows for the fiscal quarters ~~ended:~~ended March 28, 2023 and March 29, 2022:

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			Classification	March 28, 2023			March 29, 2022
Operating lease cost	Occupancy, Preopening costs, and General and administrative expenses, net	$	5,491		$	5,220		Occupancy, Other restaurant operating costs and General and administrative expenses, net	$	1,853		$	1,830
Variable lease cost	Occupancy		106			61		Occupancy		-			59
Sublease income	Occupancy		(408	)		(400	)	Occupancy		(143	)		(136	)
		$	5,189		$	4,881			$	1,710		$	1,753

Weighted average lease term and discount rate are as follows:

	June 28, 2022			June 29, 2021			March 28, 2023			March 29, 2022
Weighted average remaining lease term (in years)		8.85			9.8			8.24			9.06

Weighted average discount rate		5.0	%		5.0	%		5.0	%		5.0	%

Supplemental cash flow disclosures for the ~~three~~two fiscal quarters ~~ended:~~ended March 28, 2023:

	June 28, 2022		June 29, 2021		March 28, 2023		March 29, 2022
Cash paid for operating lease liabilities	$	5,383	$	5,168	$	3,734	$	3,621

Non-cash operating lease assets obtained in exchange for operating lease liabilities	$	734	$	57	$	184	$	872

Supplemental balance sheet disclosures:

Balance Sheet Classification	Lease Classification	June 28, 2022		June 29,2021
							March 28, 2023		September 27, 2022
Right-of-use assets	Operating lease assets	$	43,566	$	46,678	Operating lease assets	$	40,383	$	42,463

Current lease liabilities	Operating lease liabilities		5,349		4,857	Operating lease liability	$	5,506	$	5,430
Non-current lease liabilities	Operating lease liabilities, less current portion		46,859		50,698	Operating lease liability, less current portion		43,063		45,544
Total lease liabilities		$	52,208	$	55,555		$	48,569	$	50,974

Table of Contents

Future minimum rent payments for our operating leases for each of the next five years as of ~~June~~March 28, ~~2022~~2023 are as follows:

Fiscal year ending:	Total			Total
Remainder of 2022	$	1,951
2023		7,833
Remainder of 2023				$	3,901
2024		7,730			7,762
2025		7,814			7,829
2026		7,256			7,378
2027					7,079
Thereafter		32,539			25,718
Total minimum lease payments		65,123			59,667
Less: imputed interest		(12,915	)		(11,098	)
Present value of lease liabilities	$	52,208		$	48,569

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.

~~Table of Contents~~

Note 13.

Impairment of Long-Lived Assets and ~~Goodwill~~Trademarks

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~~The 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 $76,000 of asset impairments in the two quarters ended March 28, 2023, related primarily to new assets deployed in restaurants where impairment was previously assessed, and the Company’s current analysis indicated impairment of assets associated with those restaurants. During the ~~quarter~~two quarters ended ~~June 28,~~March 29, 2022, we recognized ~~$303,000 in impairment cost related to one Good Times restaurant. For the three quarters ended June 28, 2022, we recognized $2,056,000~~$1,753,000 in total asset impairments for ~~four~~three restaurants. Of this amount, ~~$790,000~~$487,000 was related to ~~three~~two Good Times restaurants and $1,266,000 was related to one Bad Daddy’s restaurant. ~~During the three quarters ended June 29, 2021 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 ~~for the three quarters ended June~~as of March 28, ~~2022~~2023 and ~~June~~March 29, ~~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 two reporting units: (1) Good Times restaurants and (2) Bad Daddy’s restaurants. As of June 28, 2022, the Company had $96,000 of goodwill attributable to the Good Times reporting unit and $5,617,000 of goodwill attributable to its Bad Daddy’s reporting unit. No goodwill impairment charges were recognized during the three quarters ended June 28, 2022.

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.

The Company 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 zero for both the quarters ended June 28, 2022 and June 29, 2021. Although we have established a full valuation allowance on our deferred tax assets, we are subject toCompany’s effective 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 $9,000~~rate for the three ~~quarters~~months ended ~~June~~March 28, ~~2022 related to state income taxes resulting in~~2023 was (1,487%), a decrease from an effective income tax rate of ~~(0.7%~~)2.0% for the ~~period. For~~three months ended March 29, 2022. The decrease is due to the ~~three quarters~~release of the Company’s valuation allowance previously recorded to reduce the deferred tax assets to zero. The Company’s effective income tax rate for the six months ended ~~June 29, 2021, we did not recognize any provision for income taxes as we estimated no current tax liability either for federal or state jurisdictions resulting in~~March 28, 2023 was (1,836%), a decrease from an effective income tax rate of ~~zero~~2.0% for the ~~period.~~six months ended March 29, 2022. The decrease is also attributed to the release of the Company’s valuation allowance that occurred during the second quarter.

During the current quarter, the Company entered into a transaction in which it purchased the non-controlling interests in several joint ventures that have historically collectively generated significant income. Due to this transaction and a recent history of cumulative earnings, management believes the Company is now in a position to realize its tax benefits beginning in the current year, as well as in future years, and as such, has released the full valuation allowance recorded to reduce its deferred tax assets.

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 2019 through ~~2022~~.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, no 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. No accrual for interest and penalties was considered necessary as of ~~June~~March 28, ~~2022.~~2023.

Table of Contents

Note 15.

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 non-controlling 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 non-controlling members’ share of the net income or loss as well as any cash contributions or distributions to or from the limited partners and non-controlling 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 attributable to non-controlling interests in the accompanying consolidated statement of operations. All inter-company accounts and transactions are eliminated.

~~Table of Contents~~

The following table summarizes the activity in non-controlling interests during the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 (in thousands):

	Bad Daddy’s			Good Times			Total			Bad Daddy’s			Good Times			Total
Balance as of September 28, 2021	$	915		$	209		$	1,124
Balance at September 27, 2022										$	1,041		$	262		$	1,303
Income		1,025			464			1,489			219			125			344
Purchase of Non-controlling Interests											(831	)		-			(831	)
Distributions		(840	)		(397	)		(1,237	)		(442	)		(24	)		(466	)
Balance as of June 28, 2022	$	1,100		$	276		$	1,376
Contribution											13			-			13
Balance at March 28, 2023											0			363			363

~~Our non-controlling~~Non-controlling interests ~~consist~~at the end of the quarter consisted of one ~~joint-venture~~limited liability partnership, currently involving ~~seven~~six Good Times restaurants, ~~and~~of which the Company is the general partner. During the fiscal quarter ended March 28, 2023, the Company acquired all of the non-controlling membership interests in all outstanding limited liability companies, which included five ~~joint-venture partnerships involving five~~total Bad Daddy’s restaurants. The aggregate purchase price paid to the sellers was $4,394,000.

Note 16.

~~Subsequent Events~~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.

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

	Quarter Ended					Year-to-Date
	March 28, 2023 (13 Weeks)		March 29, 2022 (13 Weeks)			March 28, 2023 (26 Weeks)		March 29, 2022 (26 Weeks)
Revenues
Bad Daddy’s	$	26,408	$	25,524		$	51,634	$	50,196
Good Times		8,377		8,073			16,545		16,317
	$	34,785	$	33,597		$	68,179	$	66,513
Income (Loss) from operations
Bad Daddy’s	$	678	$	(807	)	$	668	$	(499	)
Good Times	$	139	$	(1,102	)	$	256	$	(134	)
	$	817	$	(1,909	)	$	924	$	(633	)
Capital expenditures
Bad Daddy’s	$	448	$	636		$	606	$	828
Good Times		249		62			975		107
	$	697	$	698		$	1,581	$	935

Table of Contents

~~None.~~

	March 28, 2023		September 27, 2022
Property and equipment, net
Bad Daddy’s	$	18,551	$	19,575
Good Times		3,293		2,676
	$	21,844	$	22,251

Note 17.

~~Segment Reporting~~Subsequent Events

As discussed more specifically in Note 9 above, on April 20, 2023, subsequent to the end of the fiscal quarter ended March 28, 2023, the Company and each of its wholly-owned subsidiaries, as guarantors, entered into an Amended and Restated Credit Agreement with Cadence Bank, as administrative agent and sole lender (“Cadence”). The ~~following tables present information about our reportable segments~~Senior Credit Facility provides for an $8.0 million senior revolving loan and amends and restates the ~~respective periods (in thousands):~~Company’s prior Cadence Credit Facility with Cadence in its entirety.

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

~~Table of Contents~~

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.~~27, 2022. 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:

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; increased wages and salaries for hourly and salaried 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.~~27, 2022.

Good Times ~~Restaurants~~Restaurant 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.

~~Currently all~~During the two quarters ended March 28, 2023, high rates of ~~our Bad Daddy’s~~inflation have been seen globally which have also resulted in increases in commodity, labor and ~~Good Times restaurants are operating without COVID-19 related government restrictions or mask mandates. However,~~energy costs for both concepts. Further significant continued increases in inflation could affect the ~~second-and third-order effects from the pandemic~~global and U.S. economies, which could have ~~had a lingering~~an adverse impact on our ~~restaurant~~business and results of operations ~~for the three quarters ended June 28, 2022 including disruptions~~if we and ~~other impacts~~our franchisees are not able 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 beganadjust prices sufficiently 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.

The Company maintains deposits with certain banks in excess of the ~~virus and additional variants; neither are we able to predict how~~maximum insured limits by the ~~pandemic will evolve nor how~~FDIC. The significant interest rate increases by the long-lived impacts on supply chain, labor market, and customer behavior will evolve. Should additional dining room closures or mask mandates occur, our business could be adversely affected. Even without government orders, customers may choose to reduce or eliminate in-restaurant dining if there are increasing numbersFederal Reserve have caused recent bank failures. Although in certain of ~~COVID-19~~those cases, ~~hospitalizations, or deaths.~~

~~Additionally, in connection with spread of COVID-19, there~~depositors have been ~~disruptions in various food supply chains~~protected from loss by government intervention, no assurances can be made in the ~~United States. Our operating results substantially depend upon our ability to obtain sufficient quantities~~case of ~~products~~any failure of a bank in which the Company has uninsured deposits, that the Company would be similarly protected against loss of 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. 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.

We believe there are significant opportunities to grow customer traffic and increase awareness of our brands. ~~Prior to the COVID-19 pandemic,~~In 2019 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~~continue to evaluate that ~~in line~~in-line with the inflationary impact ~~of the pandemic on~~currently seen in the restaurant industry. We ~~currently are filling a~~anticipate the opening of one new restaurant ~~development pipeline and expect new Bad Daddy’s restaurant openings~~ in ~~fiscal 2023.~~late Fiscal 2023 in the greater Huntsville, Alabama market.

As of ~~June~~March 28, ~~2022,~~2023, we operated, franchised, or licensed a total of ~~forty-two~~forty Bad Daddy’s restaurants and thirty-one Good Times restaurants. The following table presents the number of restaurants operating at the end of the ~~third~~ fiscal quarters ended March 28, 2023 and March 29, 2022. During the fiscal quarter ended March 28, 2023, the Company acquired all of ~~2022~~the membership interests in five Bad Daddy’s, four located in North Carolina and ~~2021.~~one located in South Carolina.

~~We purchased one previously franchised~~One company-owned Bad Daddy’s restaurant closed, due to a termination by the landlord, for redevelopment 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.~~ended March 28, 2023.

*The non-traditional Bad Daddy’s Burger Bar location, ~~is a location~~ where we ~~operate~~operated the kitchen under our Bad Daddy’s brand for a local brewery’s ~~taproom.~~taproom, closed in 2022.

Fiscal quarter ended ~~June~~March 28, ~~2022~~2023 (13 weeks) compared to fiscal quarter ended ~~June~~March 29, ~~2021~~2022 (13 weeks):

Net Revenues. Net revenues for the fiscal quarter ended ~~June~~March 28, ~~2022~~2023 increased ~~$2,551,000~~$1,188,000 or ~~7.5%~~3.5% to ~~$36,497,000~~$34,785,000 from ~~$33,946,000~~$33,597,000 for the fiscal quarter ended ~~June~~March 29, ~~2021.~~2022. Bad Daddy’s concept revenues increased ~~$2,750,000~~$884,000 while our Good Times concept revenues ~~decreased $199,000.~~increased $304,000.

Bad Daddy’s restaurant sales increased ~~$2,764,000~~$895,000 to ~~$27,172,000~~$26,342,000 for the fiscal quarter ended ~~June~~March 28, ~~2022~~2023 from ~~$24,408,000~~$25,447,000 for the fiscal quarter ended ~~June~~March 29, ~~2021. This increase is primarily~~2022. Sales were positively impacted due to ~~increased~~stronger customer traffic as well as increased menu ~~price increases.~~prices. The average menu price increase for the fiscal quarter ended ~~June~~March 28, ~~2022~~2023 over the same prior-year quarter was approximately ~~6.8%~~3.4%.

Good Times restaurant sales ~~decreased $200,000~~increased $309,000 to ~~$9,093,000~~$8,226,000 for the fiscal quarter ended ~~June~~March 28, ~~2022~~2023 from ~~$9,293,000~~$7,917,000 for the fiscal quarter ended ~~June~~March 29, ~~2021.~~2022. The average menu price increase for the fiscal quarter ended March 28, 2023 over the same prior-year quarter was approximately 10.5%.

Franchise revenues decreased $16,000 to $217,000 in the fiscal quarter ended March 28, 2023 compared to $233,000 in the fiscal quarter ended March 29, 2022. This decrease is primarily due to the ~~loss of sales associated with~~acquisition, during the ~~closure of one restaurant in the~~ second fiscal quarter of 2022, ~~partially offset~~ by ~~menu price increases. The average menu price increase for~~ the ~~quarter ended June 28, 2022 over the same prior-year quarter was approximately 8.2%.~~

Franchise revenues were $232,000 in the quarter ended June 28, 2022 compared to $245,000 in the quarter ended June 29, 2021. This decrease is primarily due to decreased royalties resulting from the Company’s purchaseCompany of ~~a previously franchised~~one Bad Daddy’s ~~restaurant.~~restaurant previously owned by a franchisee.

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 company-owned 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. The calculation of same store sales for Bad Daddy’s excludes the results of one restaurant for the March fiscal month due to that restaurant’s extended remodel closure.

Bad Daddy’s same store restaurant sales increased ~~5.3%~~4.6% during the fiscal quarter ended ~~June~~March 28, ~~2022~~2023 compared to the same thirteen-week period ended ~~June~~March 29, ~~2021 in the prior-year quarter. This increase is~~2022, primarily ~~due to increased traffic as well as~~driven by strong off premise sales and menu price increases. There were ~~thirty-eight~~thirty-nine restaurants included in the same store sales base at the end of the current quarter.

Good Times same store restaurant sales increased ~~1.6%%~~7.6% during the fiscal quarter ended ~~June~~March 28, ~~2022~~2023 compared to the same thirteen-week period ended ~~June~~March 29, ~~2021 in the prior-year quarter. This increase is~~2022, primarily due to ~~increased traffic as well as~~ menu price ~~increases.~~increases, slightly offset by lower traffic. There were twenty-three restaurants included in the same store sales base at the end of the current quarter.

Food and Packaging Costs. Food and packaging costs for the fiscal quarter ended ~~June~~March 28, ~~2022~~ 2023 increased ~~$1,778,000~~$198,000 to ~~$11,767,000 (32.4%~~$10,655,000 (30.8% of restaurant sales) from ~~$9,989,000 (29.6%~~$10,457,000 (31.3% of restaurant sales) for the fiscal quarter ended ~~June 29, 2021.~~March 28, 2022.

Bad Daddy’s food and packaging costs were ~~$8,832,000 (32.5%~~8,052,000 (30.6% of restaurant sales) for the fiscal quarter ended ~~June~~March 28, ~~2022,~~2023, up from ~~$7,257,000 (29.7%~~$7,972,000 (31.3% of restaurant sales) for the fiscal quarter ended ~~June~~March 29, ~~2021.~~2022. This increase is primarily attributable to higher restaurant sales during the current fiscal quarter versus prior fiscal quarter, and the decrease as a percent of sales is attributed to lower purchase prices for beef, chicken, and other food commodities.

Good Times food and packaging costs were $2,603,000 (31.6% of restaurant sales) for the fiscal quarter ended March 28, 2023, up from $2,485,000 (31.4% of restaurant sales) for the fiscal quarter ended March 29, 2022. This increase is primarily attributable to the impact of higher sales. This slight increase as a percent of sales is due to the pricing of our all-natural beef and custard, which continued to be elevated compared to the prior year during the quarter, offsetting purchase price reductions for other commodities.

Payroll and Other Employee Benefit Costs. Payroll and other employee benefit costs for the fiscal quarter ended March 28, 2023 increased $434,000 to $11,989,000 (34.7% of restaurant sales) from $11,555,000 (34.6% of restaurant sales) for the fiscal quarter ended March 29, 2022.

Bad Daddy’s payroll and other employee benefit costs were $9,143,000 (34.7% of restaurant sales) for the fiscal quarter ended March 28, 2023 up from $8,736,000 (34.3% of restaurant sales) for the fiscal quarter ended March 29, 2022. The $407,000 increase is primarily attributable to higher restaurant sales during the current quarter versus the same quarter in the prior ~~year. The increase~~year, as well as slightly higher average pay rates. As a percent of sales, ~~is attributable the significant inflation noted during the quarter with most of our food~~payroll and ~~packaging products seeing meaningful unit price increases.~~

~~Good Times food and packaging~~employee benefits costs ~~were $2,935,000 (32.3% of restaurant sales) for the quarter ended June 28, 2022, up from $2,732,000 (29.4% of restaurant sales) for the quarter ended June 29, 2021. This increase is~~increased by 0.4% primarily attributable 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 quarter ended June 28, 2022 increased $1,034,000 to 12,295,000 (33.9% of restaurant sales) from $11,261,000 (33.4% of restaurant sales) for the quarter ended June 29, 2021.

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 increasedaverage 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.~~attract qualified employees.

Good Times payroll and other employee benefit costs were ~~$2,999,000 (33%~~$2,846,000 (34.6% of restaurant sales) in the fiscal quarter ended ~~June~~March 28, ~~2022,~~2023, up from ~~$2,880,000 (31.0%~~$2,819,000 (35.6% of restaurant sales) in the same prior-year period. ~~This increase, both in nominal dollars and as measured~~The decrease as a percent of ~~restaurant~~ sales ~~was~~is due 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 competitiveincreased labor ~~market for qualified restaurant employees in Colorado.~~productivity.

Occupancy Costs. Occupancy costs for the fiscal quarter ended ~~June~~March 28, ~~2022~~2023 increased ~~$200,000~~$51,000 to ~~$2,383,000 (6.6%~~$2,428,000 (7.0% of restaurant sales) from ~~$2,183,000 (6.5%~~$2,377,000 (7.1% of restaurant sales) for the fiscal quarter ended March 29, 2022.

Bad Daddy’s occupancy costs were $1,693,000 (6.4% of restaurant sales) for the fiscal quarter ended ~~June 29, 2021.~~

~~Bad Daddy’s occupancy costs were $1,684,000 (6.2%~~March 28, 2023, up from $1,679,000 (6.6% of restaurant sales) for the fiscal quarter ended ~~June 28,~~March 29, 2022 ~~up from $1,485,000 (6.1%~~.

Good Times occupancy costs were $735,000 (8.9% of restaurant sales) in the ~~same prior year period.~~fiscal quarter ended March 28, 2023, up from $698,000 (8.8% of restaurant sales) in the fiscal quarter ended March 29, 2022. The increase was primarily attributable to ~~lease costs with newly opened restaurants, lease costs associated with the restaurant acquired from a former franchisee~~increased property and ~~increased real property tax assessments.~~liability insurance costs.

~~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 fiscal quarter ended ~~June~~March 28, ~~2022,~~2023, increased ~~$1,023,000~~$160,000 to ~~$4,753,000 (13.1%~~$4,827,000 (14.0% of restaurant sales) from ~~$3,730,000 (11.1%~~$4,667,000 (14.0% of restaurant sales) for the fiscal quarter ended ~~June~~March 29, ~~2021.~~2022.

Bad Daddy’s other operating costs were ~~$3,742,000 (13.8%~~$3,812,000 (14.5% of restaurant sales) for the fiscal quarter ended ~~June~~March 28, ~~2022~~2023 up from ~~$2,939,000 (12.0%~~$3,670,000 (14.4% of restaurant sales) infor the ~~same prior year period.~~fiscal quarter ended March 29, 2022. The $142,000 increase was attributable to higher overall ~~sales. As a percent of~~ sales, ~~the increase is attributable to higher~~ increased ~~spending on~~delivery charges, and increased restaurant ~~technology, and higher repair and maintenance expenses.~~supply costs.

Good Times other operating costs were ~~$1,011,000 (11.1%~~$1,015,000 (12.3% of restaurant sales) in the fiscal quarter ended ~~June~~March 28, ~~2022,~~2023, up from ~~$791,000 (8.5%~~$997,000 (12.6% of restaurant sales) in the ~~same prior year period.~~fiscal quarter ended March 29, 2022. 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~~increased overall ~~delivery sales, and higher repair and higher preventive maintenance expenses.~~sales.

New Store Preopening Costs. ~~There~~In the fiscal quarter ended March 28, 2023, preopening costs were $30,000 compared to no preopening costs ~~incurred during~~for the fiscal quarter ended ~~June 28, 2022 compared~~March 29, 2022. These costs primarily relate to ~~$301,000 for the quarter ended June 29, 2021.~~re-training costs incurred as part of our closure and remodel of our Greenville, SC Bad Daddy’s location.

Depreciation and Amortization Costs. Depreciation and amortization costs for the fiscal quarter ended ~~June~~March 28, ~~2022, increased $55,000~~2023, decreased $102,000 to ~~$993,000~~$911,000 from ~~$938,000~~$1,013,000 in the fiscal quarter ended ~~June~~March 29, ~~2021.~~2022. These decreases at both concepts are due to assets performing past their estimated usable lives and the prior-year impairment of assets.

Bad Daddy’s depreciation and amortization costs for the fiscal quarter ended ~~June~~March 28, ~~2022 increased $105,000~~2023 decreased $73,000 to ~~$846,000~~$761,000 from ~~$741,000~~$834,000 in the fiscal quarter ended ~~June~~March 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~~2022.

Good Times depreciation and amortization costs for the fiscal quarter ended ~~June~~March 28, ~~2022~~2023 decreased ~~$50,000~~$29,000 to ~~$147,000~~$150,000 from ~~$197,000~~$179,000 in the fiscal quarter ended ~~June~~March 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.~~2022.

General and Administrative Costs. General and administrative costs for the fiscal quarter ended ~~June~~March 28, ~~2022,~~2023, decreased ~~$126,000~~$280,000 to ~~$2,379,000 (6.5%~~$2,297,000 (7.1% of total ~~revenue)~~revenues) from ~~$2,505,000 (7.4%~~$2,577,000 (6.6% of total revenue) for the fiscal quarter ended ~~June~~March 29, ~~2021.~~2022.

This decrease in general and administrative expenses in the fiscal quarter ended ~~June~~March 28, ~~2022~~2023 is primarily attributable to:

~~For the balance of~~Advertising Costs. Advertising costs for the fiscal ~~year, we expect general~~quarter ended March 28, 2023, decrease to $778,000 (2.2% of total revenue) from $812,000 (2.4% of total revenue) for the fiscal quarter ended March 29, 2023.

Bad Daddy’s advertising costs were $422,000 (1.6% of restaurant sales) in the fiscal quarter ended March 28, 2023 compared to $467,000 (1.8% of total revenue) for the fiscal quarter ended March 29, 2022. The decrease is primarily due to lesser recognition of commissions earned by third parties on gift cards sold through large-box retailers. Bad Daddy’s advertising costs consist primarily of a combination of menus and ~~administrative costs to trend similarly in nominal terms to costs~~other point of purchase materials, digital advertising, and commissions incurred ~~during the current quarter.~~for placement of gift parties at third party retailers, as well as local store marketing efforts.

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

Bad Daddy’s advertising costs were $448,000 (1.6% of total revenue) in the quarter ended June 28, 2022 compared to $222,000 (0.9% of total revenue) in the same prior year period. The increase is primarily due to recognition of commission earned by third parties on gift cards sold through large-box retailers and a radio advertising campaign in Colorado. The prior year quarter includes advertising costs of $4,000 associated with franchise advertising contributions.

Good Times advertising costs were ~~$359,000 (3.9%~~$356,000 (4.2% of restaurant sales) in the fiscal quarter ended March 28, 2023 compared to $345,000 (4.3% of total revenue) in the fiscal quarter ended June 28, 2022 compared to $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.March 29, 2022. The current and prior year quarters include advertising costs of ~~$68,000~~$65,000 and ~~$71,000,~~$62,000, respectively, of costs associated with franchise advertising contributions.

Good Times advertising costs ~~consists~~consist 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~~There were no franchise costs ~~were $5,000 and $5,000~~ for the ~~quarters~~fiscal quarter ended ~~June~~March 28, ~~2022 and June~~2023 compared to $6,000 for the fiscal quarter ended March 29, ~~2021,~~2022, 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 fiscal quarter ended ~~June~~March 28, ~~2022~~2023 was $22,000, which is composed of a net loss of $9,000 on disposal of miscellaneous assets, and $31,000 of deferred gains, compared to ~~$9,000~~$43,000 for the fiscal quarter ended ~~June~~March 29, ~~2021 related~~2022, of which $35,000 is attributable to ~~past~~gains in connection with a lease termination at a Good Times restaurant and the remainder primarily attributable to deferred gains on prior sale-leaseback transactions of certain Good Times restaurants.

Impairment of Long-Lived Assets Costs. The costs associated with impairments for the fiscal quarter ended March 28, 2023 was $76,000, which primarily consists of new assets associated with previously impaired locations, compared to $1,753,000 for the fiscal quarter ended March 29, 2022.

Litigation Contingency Costs. There were no litigation contingency costs in the fiscal quarter ended March 28, 2023, compared to $332,000 for the fiscal quarter ended March 29, 2022.

Income (Loss) from Operations. Income from operations was ~~$821,000~~$817,000 in the fiscal quarter ended ~~June~~March 28, ~~2022~~2023 compared to ~~income~~loss from operations of ~~$2,446,000~~ $1,909,000 in the fiscal quarter ended ~~June~~March 29, ~~2021.~~2022.

The change in the ~~loss~~income (loss) from operations for the fiscal quarter ended ~~June~~March 28, ~~2022~~2023 is due primarily due to matters discussed in the “Net Revenues,” “Restaurant Operating Costs,” “General and Administrative Costs”, “Advertising Costs”, “Gain on Restaurant Sales and Lease Termination”, “Impairment of Long-Lived Assets Costs”, and “Litigation Contingency Costs” sections above.

Interest ~~and other expense, net.~~Expense. Interest ~~and other~~ expense ~~net~~ was ~~$12,000~~$26,000 during the fiscal quarter ended ~~June~~March 28, ~~2022, compared~~2023, primarily related to $66,000 for the quarter ended June 29, 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 amortization of loan ~~costs associated~~initiation fees, compared with $11,000 during the ~~Cadence Credit Facility.~~fiscal quarter ended March 29, 2022.

~~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 the prior year quarter was related to forgiveness of PPP loans by the SBA.

Provision for Income Taxes. Provision for income taxes was ~~$1,000~~$(9,952,000) for the fiscal quarter ended ~~June~~March 28, ~~2022 primarily associated with estimated cash~~2023, compared to no provision for income taxes ~~due~~ for ~~state income tax.~~the fiscal quarter ended March 29, 2022. This most significant driver of this provision was the release, during this quarter, of the valuation allowance during previously assessed on the deferred tax assets.

Net Income (Loss) ~~Income~~. Net income was ~~$808,000~~$10,743,000 for the fiscal quarter ended ~~June~~March 28, ~~2022~~2023 compared to net ~~income~~loss of ~~$14,158,000~~$1,920,000 in the fiscal quarter ended ~~June~~March 29, ~~2021.~~2022.

The change from the fiscal quarter ended ~~June~~March 28, ~~2022~~2023 to the fiscal quarter ended ~~June~~March 29, ~~2021~~2022 was primarily attributable to the matters discussed in the relevant sections above.

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 fiscal quarter ended ~~June~~March 28, ~~2022,~~2023, the income attributable to non-controlling interests was ~~$339,000~~$122,000 compared to ~~$524,000~~$230,000 for the fiscal quarter ended ~~June~~March 29, ~~2021.~~2022.

Of the ~~current~~ quarter’s income attributable to non-controlling interests, ~~$184,000~~$40,000 is attributable to Bad Daddy’s joint-venture restaurants, compared to ~~$263,000~~ $157,000 in the same prior year period. This ~~$79,000~~$117,000 decrease is primarily due to ~~reduced restaurant-level profitability~~the company’s purchase of all the Bad Daddy’s membership interests during the fiscal quarter ended March 28, 2023, as described in Note 15 to the ~~relevant restaurants. The remaining $155,000~~unaudited, consolidated financial statements included in this report.

Of the current fiscal quarter’s income, $82,000 is attributable to the Good Times joint-venture restaurants, compared to ~~$261,000~~ $73,000 in the same prior year period. This ~~$106,000 decrease~~$9,000 increase is primarily due to ~~reduced restaurant-level~~increased restaurant level profitability in the ~~relevant restaurants.~~

Fiscal ~~three~~two quarters ended ~~June~~March 28, ~~2022 (39~~2023 (26 weeks) compared to fiscal ~~three~~two quarters ended ~~June~~March 29, ~~2021 (39~~2022 (26 weeks):

Net Revenues. Net revenues for the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 increased ~~$12,576,000~~$1,666,000, or ~~13.9%~~2.5%, to ~~$103,010,000~~$68,179,000 from ~~$90,434,000~~$66,513,000 for the ~~three~~two quarters ended ~~June~~March 29, ~~2021.~~2023. Bad Daddy’s concept revenues increased ~~$13,164,000~~$1,438,000 while our Good Times concept revenues ~~decreased $588,000.~~increased $228,000.

Bad Daddy’s restaurant sales increased ~~$13,128,000~~$1,470,000 to ~~$77,210,000~~$51,507,000 for the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 from ~~$64,082,000~~$50,037,000 for the ~~three~~two quarters ended ~~June~~March 29, ~~2021. This increase is~~2022. Sales were positively impacted by increases in sales primarily due to ~~strong customer demand,~~higher average menu prices as well as the purchase of a ~~increases~~previously franchised Bad Daddy’s location that occurred in March 2022. The average menu price increase for the two quarters ended March 28, 2023 over the same prior-year quarter was approximately 4.4%.

Good Times restaurant sales decreased $237,000 to $16,240,000 for the two quarters ended March 28, 2023 from $16,003,000 for the two quarters ended March 29, 2022, primarily due to increased menu prices. The average menu price increase for the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 over the same prior-year quarter was approximately ~~5.5%~~9.2%.

~~Good Times restaurant sales~~Franchise revenues decreased ~~$600,000~~$41,000 to ~~$25,095,000 for~~$432,000 in the ~~three~~two quarters ended ~~June~~March 28, ~~2022 from $25,695,000 for~~2023 compared to $473,000 in the ~~three~~two quarters ended ~~June 21, 2021.~~March 29, 2022. This decrease is primarily due to ~~decreased traffic,~~ the ~~loss of sales associated with the closure of one restaurant in~~acquisition, during the second fiscal 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~~Company of one Bad Daddy’s ~~franchisee and licensee restaurants attributable to increased sales.~~restaurant previously owned by a franchisee.

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 company-owned units open for at least eighteen full fiscal months and use the comparable operating weeks from the prior ~~year~~year-to-date period to the current ~~year quarter’s~~year-to-date period’s operating weeks. The calculation of same store sales for Bad Daddy’s excludes the results of one restaurant for the March fiscal month due to that restaurant’s extended remodel closure.

Bad Daddy’s same store restaurant sales increased ~~14.0%~~3.5% during the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 compared to the same ~~thirteen-week period~~two quarters ended ~~June~~March 29, ~~2021 in the prior-year quarter. This increase is~~2022, primarily ~~due to increased traffic as well as~~driven by strong off premise sales and menu price increases. There were ~~thirty-eight~~thirty-nine restaurants included in the same store sales base at the end of the current quarter.

Good Times same store restaurant sales ~~decreased 0.6%~~increased 5.3% during the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 compared to the same ~~thirteen-week~~two quarters period ended ~~June~~March 29, ~~2021 in the prior-year quarter. This decrease is~~2022, primarily due to menu price increases, slightly ~~lower traffic, partially~~ offset by ~~menu price increases.~~lower traffic. There were twenty-three restaurants included in the same store sales base at the end of the current quarter.

Food and Packaging Costs. Food and packaging costs for the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~ 2023 increased ~~$6,413,000~~$579,000 to ~~$32,450,000 (31.7%~~$21,262,000 (31.4% of restaurant sales) from ~~26,037,000 (29.0%~~$20,683,000 (31.3% of restaurant sales) for the ~~three~~two quarters ended ~~June 29, 2021.~~March 28, 2022.

Bad Daddy’s food and packaging costs were ~~$24,615,000 (31.9%~~$16,025,000 (31.1% of restaurant sales) for the ~~three~~two quarters ended ~~June~~March 28, ~~2022,~~2023, up from ~~$18,494,000 (28.9%~~$15,784,000 (31.5% of restaurant sales) for the ~~three~~two quarters ended ~~June~~March 29, ~~2021.~~2022. This increase is primarily attributable to higher restaurant sales during the ~~three quarters~~current fiscal quarter versus the ~~same period in the~~ prior ~~year.~~fiscal quarter. The ~~increase~~decrease as a percent of sales ~~is attributable the significant inflation noted~~reflects lower input prices experienced during the ~~quarter with most of our food and packaging products seeing meaningful unit price increases.~~second fiscal quarter.

Good Times food and packaging costs were ~~$7,835,000 (31.2%~~$5,237,000 (32.2% of restaurant sales) for the ~~three~~two quarters ended ~~June~~March 28, ~~2022,~~2023, up from ~~$7,543,000 (29.4%~~$4,899,000 (30.6% of restaurant sales) for the ~~three~~two quarters ended ~~June~~March 29, ~~2021. The~~2022. This increase ~~as a percent of sales~~ is ~~due~~ primarily attributable to the impact of higher purchase prices on food and paper goods, partially offset by ~~increased~~the impact of an 8.8% increase in menu pricing.

Payroll and Other Employee Benefit Costs. Payroll and other employee benefit costs for the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 increased ~~$5,240,000~~$805,000 to ~~35,027,000 (34.2%~~$23,537,000 (34.7% of restaurant sales) from ~~$29,787,000 (33.2%~~$22,732,000 (34.4% of restaurant sales) for the ~~three~~two quarters ended ~~June~~March 29, ~~2021.~~2022.

Bad Daddy’s payroll and other employee benefit costs were ~~$26,450,000~~$17,898,000 (34.7% of restaurant sales) for the two quarters ended March 28, 2023 up from $17,154,000 (34.3% of restaurant sales) for the ~~three~~two quarters ended ~~June 28,~~March 29, 2022 ~~up from $21,644,000 (33.8% of restaurant sales) in the same prior year period.~~. The ~~$4,806,000~~$744,000 increase is primarily attributable to ~~greater hours to support increased guests at restaurants~~higher restaurant sales during the current ~~year~~quarter versus the same quarter in the prior year, ~~period,~~ as well as slightly 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%~~$5,639,000 (34.7% of restaurant sales) in the ~~three~~two quarters ended ~~June~~March 28, ~~2022,~~2023, up from ~~$8,143,000 (31.7%~~$5,578,000 (34.9% of restaurant sales) in the same prior-year period. The ~~$434,000~~$61,000 increase ~~both in nominal dollars and as measured as a percent of restaurant sales,~~ was attributable to higher ~~average wage rates paid~~sales.

Occupancy Costs. Occupancy costs for the two quarters ended March 28, 2023 increased $181,000 to ~~attract qualified employees. These higher wages are in-part driven by a combination~~$4,886,000 (7.2% of restaurant sales) from $4,705,000 (7.1% of restaurant sales) for the ~~significant statutory wage~~two quarters ended March 29, 2022.

Bad Daddy’s occupancy costs were $3,425,000 (6.6% of restaurant sales) for the two quarters ended March 28, 2023, up from $3,327,000 (6.6% of restaurant sales) for the two quarters ended March 29, 2022. The increase was primarily attributable to additional lease costs associated with the purchase of our Bad Daddy’s Franchisee in the ~~City~~second quarter of fiscal 2022.

Good Times occupancy costs were $1,461,000 (9.0% of restaurant sales) in the two quarters ended March 28, 2023, up from $1,378,000 (8.6% of restaurant sales) in the two quarters ended March 29, 2022. The increase was primarily attributable to increased property and ~~County of Denver and the impact of the overall market for quick service restaurant employees.~~liability insurance costs.

~~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~~two quarters ended ~~June~~March 28, ~~2022,~~2023, increased ~~$2,717,000~~$514,000 to ~~$13,558,000~~$9,319,000 (13.8% of restaurant sales) from $8,805,000 (13.3% of restaurant sales) ~~from $10,841,000 (12.1% of restaurant sales)~~ for the ~~three~~two quarters ended ~~June~~March 29, ~~2021.~~2022.

Bad Daddy’s other operating costs were ~~$10,696,000~~$7,334,000 (14.2% of restaurant sales) for the two quarters ended March 28, 2023 up from $6,955,000 (13.9% of restaurant sales) for the ~~three~~two quarters ended ~~June 28,~~March 29, 2022 ~~up from 8,448,000 (13.2%~~. The $379,000 increase and the increase as a percentage of ~~restaurant sales) in the same prior year period. The $2,281,000 increase~~sales was attributable to higher overall sales, ~~as well as higher repair~~increased third party delivery fees, increased utility costs, and ~~maintenance expenses.~~a general increase in restaurant supplies.

Good Times other operating costs were ~~$2,862,000 (11.4%~~$1,985,000 (12.2% of restaurant sales) in the ~~three~~two quarters ended ~~June~~March 28, ~~2022,~~2023, up from ~~$2,393,000 (9.3%~~$1,850,000 (11.6% of restaurant sales) in the ~~same prior year period.~~two quarters ended March 29, 2022. The increase was primarily attributable to increased sales and 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.~~costs.

New Store Preopening ~~Costs~~Costs.. ~~Preopening~~ New store preopening costs were $30,000 for the ~~three~~two quarters ended ~~June~~March 28, ~~2022 decreased $370,000~~2023, primarily associated with re-training costs in connection with our remodel of our Greenville, SC Bad Daddy’s, compared to $50,000 ~~from $420,000 in~~for the ~~three~~two quarters ended ~~June~~March 29, ~~2021. The costs in the prior year were related to a Bad Daddy’s restaurant opened near the end of fiscal 2021.~~2022.

Depreciation and Amortization Costs. Depreciation and amortization costs for the ~~three~~two quarters ended ~~June~~March 28, ~~2022, increased $193,000~~2023, decreased $176,000 to ~~$2,990,000~~1,821,000 from ~~$2,797,000~~$1,997,000 in the ~~three~~two quarters ended ~~June~~March 29, ~~2021.~~2022.

Bad Daddy’s depreciation and amortization costs for the ~~three~~two quarters ended ~~June~~March 28, ~~2022 increased $248,000~~2023 decreased $83,000 to ~~$2,464,000~~$1,535,000 from ~~$2,216,000~~$1,618,000 in the ~~three~~two quarters ended ~~June~~March 29, ~~2021. This increase was primarily attributable to the two new restaurants opened in final quarter of fiscal 2021.~~2022.

Good Times depreciation and amortization costs for the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 decreased ~~$55,000~~$93,000 to ~~$526,000~~$286,000 from ~~$581,000~~$379,000 in the ~~three~~two quarters ended ~~June~~March 29, ~~2021.~~2022.

General and Administrative Costs. General and administrative costs for the ~~three~~two quarters ended ~~June~~March 28, ~~2022, increased $564,000~~2023, decreased $610,000 to ~~$7,661,000 (7.4%~~$4,672,000 (6.9% of total ~~revenue)~~revenues) from ~~$7,097,000 (7.8%~~$5,282,000 (7.9% of total revenue) for the ~~three~~two quarters ended ~~June~~March 29, ~~2021.~~2022.

This ~~increase~~decrease in general and administrative expenses in the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 is primarily attributable to:

Advertising Costs. Advertising costs for the ~~three~~two quarters ended ~~June~~March 28, ~~2022,~~2023, increased ~~$644,000~~ to ~~$2,260,000~~$1,672,000 (2.5% of sales from $1,453,000 (2.2% ~~of total revenue) from $1,616,000 (1.8%~~ of total revenue) for the ~~three~~two quarters ended ~~June~~March 29, ~~2021.~~2023.

Bad Daddy’s advertising costs were ~~$1,228,000~~$1,031,000 (1.6% of restaurant sales) in the two quarters ended March 28, 2023compared to $781,000 (1.6% of total revenue) infor the ~~three~~two quarters ended ~~June~~March 29, ~~2021 compared to $575,000 (0.9% of total revenue) in the same prior year period.~~2022. 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~~retailers. Bad Daddy’s advertising costs consist primarily of ~~$9,000~~menu development, printing costs, local store marketing and ~~$4,000 respectively,~~social media. The two fiscal quarters ended March 28, 2023 had no advertising costs associated with franchise ~~advertising~~ contributions.

Good Times advertising costs were ~~$1,032,000 (4.0%~~$641,000 (3.9% of restaurant sales) in the two quarters ended March 28, 2023 compared to $672,000 (4.1% of total revenue) in the ~~three~~two quarters ended ~~June 28, 2022 compared to $1,041,000 (4.0% of total revenue) in the same prior year period.~~March 29, 2022. The current and prior year quarters include advertising costs of ~~$195,000~~$129,000 and ~~$71,000,~~$127,000, respectively, of costs associated with franchise advertising contributions.

Franchise Costs. Franchise costs were ~~$16,000~~$3,000 and ~~$22,000~~$11,000 for the two quarters ended ~~June~~March 28, ~~2022~~2023 and ~~June~~March 29, ~~2021,~~2022, 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~~two quarters ended ~~June~~March 28, ~~2022~~2023 was ~~$666,000~~$22,000, which is composed of a net $3,000 gain on the sale miscellaneous assets, and $19,000 of deferred gains, compared to ~~$28,000~~$657,000 for the ~~three~~two quarters ended ~~June~~March 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~~2022.

Impairment of Long-Lived Assets Costs. The costs associated with impairments for the two quarters ended March 28, 2023 was $76,000, which primarily consists of new assets associated with previously impaired locations, compared to $1,753,000 for the two quarters ended March 29, 2022.

Litigation Contingency Costs. There were no litigation contingency costs in the two quarters ended March 28, 2023, compared to $332,000 for the two quarters ended March 29, 2022.

Income (Loss) from Operations. Income from operations was ~~$188,000~~$924,000 in the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 compared to ~~income~~loss from operations of ~~$5,311,000~~ $633,000 in the ~~three~~two quarters ended ~~June~~March 29, ~~2021.~~2022.

The change in the income (loss) from operations for the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 is due primarily due to matters discussed in the ~~relevant~~ “Net Revenues,” “Restaurant Operating Costs,” “General and Administrative Costs”, “Advertising Costs”, “Gain on Restaurant Sales and Lease Termination”, “Impairment of Long-Lived Assets Costs”, and “Litigation Contingency Costs” sections above.

Interest ~~and other expense, net.~~Expense. Interest ~~and other~~ expense ~~net~~ was ~~$41,000~~$38,000 during the ~~three~~two quarters ended ~~June~~March 28, ~~2022 compared~~2023, primarily related 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~~initiation fees, compared with $29,000 during the ~~Cadence Credit Facility.~~two quarters ended March 29, 2022.

~~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~~$9,952,000 for the ~~three~~two quarters ended ~~June~~March 28, ~~2022, primarily associated with estimated cash~~2023, compared to no provision for income taxes ~~due~~ for ~~state income tax.~~the two quarters ended March 29, 2022. This most significant driver of this provision was the release, during the quarter ended March 28, 2023, of the valuation allowance during previously assessed on the deferred tax assets.

Net Income (Loss). Net ~~Income~~income was ~~$147,000~~$10,838,000 for the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 compared to net ~~income~~loss of ~~$16,846,000~~$670,000 in the ~~three~~two quarters ended ~~June~~March 29, ~~2021.~~2022.

The change from the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 to the ~~three~~two quarters ended ~~June~~March 29, ~~2021~~2022 was primarily attributable to the matters discussed in the relevant sections above.

For the ~~three~~two quarters ended ~~June~~March 28, ~~2022,~~2023, the income attributable to non-controlling interests was ~~$1,489,000~~$344,000 compared to ~~$1,313,000~~$1,150,000 for the ~~three~~two quarters ended ~~June~~March 29, ~~2021.~~2022.

Of the ~~three quarter’s~~two quarters’ income attributable to non-controlling interests, ~~$1,025,000~~$219,000 is attributable to Bad Daddy’s joint-venture restaurants, compared to ~~$688,000~~ $840,000 in the same prior year period. ~~Income attributable~~This $621,000 decrease is primarily due 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 in the fiscal quarter ended December 28, 2021 related to a rebate of payroll ~~costs, partially offset by slightly decreased restaurant level profitability in~~costs. Of the current ~~fiscal quarter. The remaining $464,000~~quarter’s income, $125,000 is attributable to the Good Times joint-venture restaurants, compared to ~~$625,000~~ $310,000 in the same prior year ~~period,~~period. This $185,000 decrease is primarily ~~attributable~~due to ~~reduced~~decreased restaurant level profitability in ~~those joint venture restaurants.~~the current fiscal quarter. The Company acquired all of the membership interests in Bad Daddy’s during the two quarters ended March 28, 2023, as described in Note 15 to the unaudited, consolidated financial statements included in this report.

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:

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.

The following table reconciles net ~~income/loss~~loss/income to EBITDA and Adjusted EBITDA (in thousands) for the ~~third~~ fiscal quarter ~~and year-to-date:~~ended March 28, 2023:

~~Depreciation and amortization expense has been reduced by amounts~~Amount represents the portion of a payroll cost rebate attributable to the non-controlling ~~interests of $63,000 and $49,000 for the quarters ended June 28, 2022 and June 29, 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 $138,000 and zero for the three quarters ended June 28, 2022 and June 29, 2021, respectively.partners in these partnerships.

As of ~~June~~March 28, ~~2022,~~2023, we had a working capital deficit of ~~$433,000.~~$6,334,000. 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 some of 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 2023. As of ~~June~~March 28, ~~2022,~~2023, we ~~had no commitments related~~entered into a construction contract for one new Bad Daddy’s restaurant development located in Alabama, scheduled to open in Q4 2023. The construction ~~contracts for any restaurants currently under development.~~is expected to begin in Q3 2023 and is not anticipated to materially impact the Company’s liquidity or operations.

On January 31, 2022, 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~~amount of ~~shares repurchased~~repurchases will depend ~~on a variety of factors, including~~upon the Company’s stock price, ~~general business~~economic and market conditions, regulatory requirements, and 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.other corporate considerations.

~~The~~Through the end of the period covered by this report on Form 10-Q, the Company ~~maintains~~maintained 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~~which as of March 28, 2023 had a maturity date of ~~January 31,~~April 30, 2023 ~~(as amended, the “Cadence~~(the “Prior Cadence Credit Facility”). ~~As amended by the various amendments, the~~The Prior Cadence Credit Facility ~~accrues commitment fees on the daily unused balance~~is discussed in more detail in Note 9 of the ~~facility at a rate~~Company’s unaudited, consolidated financial statements contained in this Form 10-Q.

On April 20, 2023, subsequent to the end of ~~0.25%~~the fiscal quarter ended March 28, 2023, the Company and each of its wholly-owned subsidiaries, as guarantors (the “Subsidiary Guarantors”), entered into an Amended and Restated Credit Agreement (the “Senior Credit Facility”) with Cadence Bank, as administrative agent and sole lender (“Cadence”). ~~As of June 28, 2022, any borrowings under~~The Senior Credit Facility provides for an $8.0 million senior revolving loan (the “Revolver”) and amends and restates the Company’s prior Cadence Credit Facility ~~as amended, bear~~with Cadence in its entirety.

Proceeds from the Senior Credit Facility, [if and when drawn] will be used (i) to fund new restaurant development, (ii) to finance the buyout of non-controlling joint venture partners in certain restaurants, (iii) to finance the redemption, purchase or other acquisition of equity interests in the Company and (iv) for working capital and other general corporate purposes.

The Revolver will be available until April 20, 2028. The loans may from time to time consist of a mixture of SOFR Rate Loans and Base Rate Loans with differing interest ~~at a variable rate~~rates based upon varying additions to 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 publicly announced~~ prime rate or Term SOFR. The Senior Credit Facility also carries an upfront fee of 0.25% of the aggregate principal amount of the Revolver commitment and ~~(c) LIBOR plus 1.0%, or (ii) LIBOR, with~~ a ~~0.250% floor, plus 3.5%. Interest is due at the end~~commitment fee of ~~each calendar quarter if the Company elects to pay interest based~~0.25% per annum on the ~~base rate and at~~unused portion of the ~~end of each LIBOR period if it elects to pay interest based on LIBOR.~~ Revolver commitment.

The ~~Cadence~~Senior 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 quarter ended March 29, 2022 the Company entered into an amendment to the Cadence Credit Facility which, 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~~customary affirmative and negative covenants and events of ~~default that~~default. The Senior Credit Facility also requires the Company ~~considers customary for~~to maintain various financial condition ratios, including minimum liquidity, an ~~agreement of this type, including covenants setting a~~amended maximum leverage ratio ~~of 5.15:1, a~~and an amended 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 June 28, 2022,~~ratio. In addition, to the extent the aggregate outstandings under the Revolver exceed $4.0 million, the Company ~~was in compliance with all financial covenants under the Cadence Credit Facility.~~is required to meet a new specified leverage ratio, on a pro forma basis, before making further borrowings as well as certain restricted payments, investments and growth capital expenditures.

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.Cash Flows

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

As of June 28, 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 June 28, 2022, there were no outstanding letters of credit issued under the facility.

Net cash provided by operating activities was ~~$4,418,000~~$4,158,000 for the ~~three~~two quarters ended ~~June~~March 28, ~~2022.~~2023. The net cash used in operating activities for the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 was the result of net income of ~~$138,000~~$10,838,000 as well as cash and non-cash reconciling items totaling ~~$4,280,000.~~$6,680,000. These reconciling items are primarily comprised of 1) depreciation and amortization of general assets of ~~$3,129,000,~~$1,859,000, 2) amortization of operating lease assets of ~~$2,908,000,~~$1,836,000, 3) decrease of ROU assets of $2,161,000 4) stock-based compensation expense of $89,000, 5) a net gain on sales and disposals of assets of $22,000, 5) an increase in receivables and other assets of $643,000, 5) a decrease in deferred liabilities and accrued expenses of $649,000, 7) an increase in accounts payable of $1,596,000 and 8) a net decrease in amounts related to our operating leases of $2,161,000, 8) impairment of long lived assets of $76,000, and 9) income tax provision of $9,959,000.

Net cash provided by operating activities was $1,312,000 for the two quarters ended March 29, 2022. The net cash provided by operating activities for the two quarters ended March 29, 2022 was the result of net loss of $670,000 as well as cash and non-cash reconciling items totaling $1,982,000. These reconciling items are primarily comprised of 1) depreciation and amortization of general assets of $2,114,000, 2) amortization of operating lease assets of $1,751,000, 3) impairment of long-lived assets of ~~$2,056,000~~$1,753,000 4) stock-based compensation expense of ~~$207,000~~$147,000 5) a gain on lease termination and deferred gain on sale/leaseback of restaurants of ~~$666,000,~~$657,000, 6) A decrease in ROU assets of ~~$57,000,~~$39,000, 7) Income tax provision of ~~$9,000,~~$8,000, 8) an increase in prepaids of ~~$742,000,~~$1,176, primarily attributable to an ~~increase~~ in prepaid rent, 9) an increase in accrued expenses of ~~$1,123,000,~~$395,000, 10) a decrease in accounts payable of ~~$529,000,~~$370,000, 11) a net decrease in amounts related to our operating lease liabilities of ~~$3,262,000~~$1,976,000 and 12) An ~~net~~ increase of ~~$10,000~~$46,000 in inventory ~~other receivables, and deposits~~ and other ~~assets.~~receivables.

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

Net cash used in investing activities for the ~~three~~two quarters ended ~~June~~March 28, ~~2022~~2023 was ~~$1,606,000~~$5,817,000 which primarily reflects the ~~general~~ purchases of property and equipment of ~~$1,623,000~~$1,423,000, and ~~an acquisition~~the net purchase of ~~a restaurant from franchisee, net~~all non-controlling interests in our Bad Daddy’s locations of ~~cash acquired, for $728,000, as well as $745,000 for the proceeds of the sale of a fixed asset.~~$4,394,000. Purchases of property and equipment is comprised of the following:

Net cash used in investing activities for the two quarters ended March 29, 2022 was $1,905,000 which primarily reflects the general purchases of property and equipment of $1,177,000 and an acquisition of a restaurant from franchisee, net of cash acquired, for $728,000. Purchases of property and equipment is comprised of the following:

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

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

~~Net cash used in~~ financing activities for the ~~three~~two fiscal quarters ended ~~June~~March 28, ~~2022~~2023 was ~~$1,964,000,~~$1,880,000, which includes proceeds from stock option exercises of $5,000 and net distributions to non-controlling interests of ~~$1,449,000~~$453,000, $92,000 in restricted stock vesting paid in cash, and ~~payment~~$1,340,000 in payments for the ~~repurchase~~purchase of ~~the Company’s common stock of $605,000 and proceeds from stock option exercise of $90,000.~~treasury stock.

Net cash used in financing activities for the ~~three~~two fiscal quarters ended ~~June~~March 29, ~~2021~~2022 was ~~$6,454,000,~~$1,197,000, which includes ~~principal payments on notes payable and long-term debt of $5,500,000, proceeds from stock option exercises of 407,000 and net~~ distributions to non-controlling interests of ~~$1,361,000.~~$956,000, payment for the repurchase of the Company’s common stock of $331,000 and proceeds from stock option exercise of $90,000.

Commodity prices, particularly for key proteins, have recently been at near-record highs and have exhibited extreme volatility. Though we have seen some moderation in certain commodities, we continue to experience higher year-over-year prices on many goods, including food and beverage items, paper and packaging, other restaurant supplies, and energy (utilities) costs. 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~~volatility 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,commodity pricing, we are ~~not able~~unable to reasonably predict the impact of future inflationary pressures.

In addition to food cost inflation, we have also experienced the need to meaningfully increase wages to attract workers in our restaurants. While we are hopeful that wage rate inflation moderates, the persistent shortage of qualified workers, rather than statutory wage rate increases, which have traditionally created rate pressure, is the primary factor creating upward pressure on ~~our food and packaging costs~~wages, as demand for labor is currently significantly exceeding the ~~balance~~supply of ~~the year.~~ qualified workers.

We have ~~adjusted menu prices with intentional discipline, particularly at Bad Daddy’s. The total~~historically used menu price increases atto manage profitability in times of inflation, however the current unusually high rate of inflation, both of goods and labor, exceeds what we believe we can reasonably pass through to our ~~Good Times restaurants during fiscal 2021 were approximately 8.0%,~~customers without negatively affecting frequency and ~~we raised menu prices approximately 4.1% on average during the first three quarters of fiscal 2022. We raised menu prices at~~trial by our Bad Daddy’s restaurants during fiscal 2021 by approximately 3.1% and raised menu prices during the first three quarters of fiscal 2022 by approximately 5.1% on average. We continue to monitor inflationary pressures and customer reaction to competitive pricing benchmarks. We expect to increase menu pricing at least once during the next six months, if not potentially more frequently, but cannot reasonably predict the magnitude or exact timing of such price adjustments.customers.

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

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,~~10-Q, the Company’s Chief Executive Officer (its principal executive officer) and Senior Vice President of Finance (its principal financial officer) have concluded that the Company’s disclosure controls and procedures were effective as of ~~June~~March 28, ~~2022.~~2023.

There have been no significant changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended ~~June~~March 28, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

For a discussion of material legal proceedings affecting the Company, see ~~note~~Note 11 to the unaudited, consolidated financial statements included in this report.

~~There have been no material changes from~~The risk factor below updates the risk factors ~~previously disclosed~~contained in ~~Part I,~~ Item 1A of our Annual Report on Form 10-K for the fiscal year ended September ~~28, 2021.~~27, 2022.

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~~March 28, ~~2022~~2023 the Company has purchased ~~169,648~~827,435 shares of its common stock pursuant to the share repurchase plan leaving approximately ~~$4,395,000~~$2,697,000 available for repurchases under the plan.

Repurchases of common stock under the share repurchase plan during the fiscal quarter ended ~~June~~March 28, ~~2022~~2023 were as follows:

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.

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

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
12/28/2023 – 1/24/2023		58,531	$	2.59		58,531
1/25/2023 – 2/21/2023		66,188	$	2.94		66,188
2/22/2023 – 3/28/2023		42,171	$	2.87		42,171
Total		166,890				166,890	$	2,697,000

Exhibit No.	Description

10.1	Membership Interest Purchase Agreement, dated January 25, 2023 by and among Bad Daddy’s International, LLC and Thompson Family Associates, RFM Ventures, LLC, Richard Miller, Vicki T. Ponce, Covington DeRamus, ACR Capital Ventures, LLC, Bill Duke, Jim Verney and Jim Abbott(previously filed as Exhibit 10.1 to the Registrant Current Report on Form 8-K filed on January 30, 2023 and incorporated herein by reference)
10.2	Eighth Amendment to Credit Agreement and Waiver, dated January 24, 2023 by and among Good Times Restaurants Inc., each of its wholly-owned subsidiaries and Cadence Bank, N.A. (previously filed as Exhibit 10.1 to the Registrant Current Report on Form 8-K filed on January 30, 2023 and incorporated herein by reference)
*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)

	GOOD TIMES RESTAURANTS INC.
DATE: ~~August 11, 2022~~May 9, 2023

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


		~~Mathew~~
		Ryan M. Zink Chief Executive Officer (Principal Executive Officer)


		Matthew Karnes Senior Vice President of Finance (Principal Financial ~~Officer and Principal Accounting~~ Officer)

	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

	Bad Daddy’s Burger Bar				Good Times Burgers & Frozen Custard				Total				Bad Daddy’s Burger Bar				Good Times Burgers & Frozen Custard				Total
	2022		2021		2022		2021		2022		2021		2023		2022		2023		2022		2023		2022
Alabama		2		1		-		-		2		1		2		2		-		-		2		2
Colorado		12		12		23		24		35		36		11		12		23		23		34		35
Georgia		5		5		-		-		5		5		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		4		3		-		-		4		3		4		4		-		-		4		4
Tennessee		2		2		-		-		2		2		2		2		-		-		2		2
Total		40		38		23		24		63		62		39		40		23		23		62		63