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 27, 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

~~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~~

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)~~

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:~~

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 (§232.405 of this chapter) 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,~~July 25, 2023, there were ~~12,361,450~~11,560,197 shares of the Registrant's common stock, par value $0.001 per share, ~~issued and~~ outstanding.

Table of Contents

Form 10-Q

Quarter Ended June ~~28, 2022~~27, 2023

	INDEX	PAGE

			PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

~~Item 1.~~	~~Financial Statements (Unaudited)~~Condensed Consolidated Balance Sheets (unaudited) – June 27, 2023 and September 27, 2022	3

	Condensed Consolidated ~~Balance Sheets~~Statements of Operations (unaudited) for the fiscal quarters and year-to-date periods ended June 27, 2023 and June 28, 2022	3 4

	~~Condensed~~ Consolidated Statements of ~~Operations~~Shareholders’ Equity (unaudited) for the fiscal year-to-date periods ended June 27, 2023 and June 28, 2022	4 5 - 6

	Condensed Consolidated Statements of ~~Shareholders’ Equity~~Cash Flows (unaudited) for the fiscal year-to-date periods ended June 27, 2023 and June 28, 2022	~~5 - 6~~ 7

	Notes to Condensed Consolidated Financial Statements ~~of Cash Flows~~ (unaudited)	7 8

	~~Notes to Condensed Consolidated Financial Statements (unaudited)~~	8

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28 27

Item 4.	Controls and Procedures	27

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	27

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

Item 3.	Defaults Upon Senior Securities	28

Item 4.	Mine Safety Disclosures	28

Item 5.	Other Information	28

Item 6.	Exhibits	29

	~~PART II - OTHER INFORMATION~~SIGNATURES

~~Item 1.~~	~~Legal Proceedings~~	28

~~Item 1A.~~	~~Risk Factors~~	28

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

~~Item 3.~~	~~Defaults Upon Senior Securities~~	29

~~Item 4.~~	~~Mine Safety Disclosures~~	29

~~Item 5.~~	~~Other Information~~	29

~~Item 6.~~	~~Exhibits~~	29 30

	~~SIGNATURES~~	30
	CERTIFICATIONS
	~~CERTIFICATIONS~~

2

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2

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PART I. - FINANCIAL INFORMATION

~~ITEM 1.~~

~~FINANCIAL STATEMENTS~~

ITEM 1.FINANCIAL STATEMENTS

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

(In thousands, except share and per share data)

	June 27, 2023			September 27, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	3,684		$	8,906
Receivables		729			694
Prepaid expenses and other		1,414			888
Inventories		1,353			1,387
Total current assets		7,180			11,875
PROPERTY AND EQUIPMENT:
Land and building		4,670			4,670
Leasehold improvements		37,520			35,906
Fixtures and equipment		31,730			30,664
Total property and equipment		73,920			71,240
Less accumulated depreciation and amortization		(52,429	)		(48,989	)
Total net property and equipment		21,491			22,251
OTHER ASSETS:
Operating lease right-of-use assets, net		41,283			42,463
Deferred tax assets		11,398			-
Deposits and other assets		285			166
Trademarks		3,900			3,900
Other intangibles, net		14			20
Goodwill		5,713			5,713
Total other assets		62,593			52,262

TOTAL ASSETS:	$	91,264		$	86,388
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		1,022			628
Deferred income		72			48
Operating lease liabilities, current		5,673			5,430
Other accrued liabilities		6,834			6,791
Total current liabilities		13,601			12,897
LONG-TERM LIABILITIES:
Operating lease liabilities, net of current portion		43,683			45,544
Deferred revenues and other liabilities		137			159
Total long-term liabilities		43,820			45,703
SHAREHOLDERS’&NBSP;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 27, 2023, and September 27, 2022		-			-
Common stock, $.001 par value; 50,000,000 shares authorized; 12,977,433 issued; 11,622,727 and 12,274,351 outstanding as of June 27, 2023 and September 27, 2022, respectively		13			13
Capital contributed in excess of par value		56,768			59,427
Treasury stock, at cost; 1,354,706 and 692,798 shares as of June 27, 2023, and September 27, 2022, respectively		(4,354	)		(2,634	)
Accumulated deficit		(18,985	)		(30,321	)
Total Good Times Restaurants Inc. shareholders' equity		33,442			26,485

Non-controlling interests		401			1,303
Total shareholders’ equity		33,843			27,788

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	91,264		$	86,388

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

TOTAL ASSETS: $ 90,054 $ 93,681
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 753 $ 1,496
Deferred income 57 61
Operating lease liabilities, current 5,349 4,935
Other accrued liabilities 7,412 6,394
Total current liabilities 13,571 12,886
LONG-TERM LIABILITIES:
Operating lease liabilities, net of current portion 46,859 49,723
Deferred and other liabilities 161 202
Total long-term liabilities 47,020 49,925
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
Capital contributed in excess of par value 59,318 59,021
Treasury stock, at cost; 545,999 and 376,351 shares as of June
28, 2022 and September 28, 2021, respectively (2,213 ) (1,608 )
Accumulated deficit (29,031 ) (27,680 )
Total Good Times Restaurants Inc. shareholders' equity 28,087 29,746

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

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

See accompanying notes to condensed consolidated financial statements (unaudited)

3

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

(In thousands except share and per share data)

Quarter Ended (13 Weeks)

Year-to-Date (39 Weeks)

June 27, 2023

June 28, 2022

June 27, 2023

June 28, 2022

NET REVENUES:

Restaurant sales
$ 35,376 $ 36,265 $ 103,123 $ 102,305
Franchise revenues
244 232 676 705
Total net revenues
35,620 36,497 103,799 103,010

RESTAURANT OPERATING COSTS:

Food and packaging costs
10,923 11,767 32,185 32,450
Payroll and other employee benefit costs
11,940 12,295 35,477 35,027
Restaurant occupancy costs
2,432 2,383 7,318 7,088
Other restaurant operating costs
4,811 4,753 14,129 13,558
Preopening costs
80 - 110 50
Depreciation and amortization
919 993 2,740 2,990
Total restaurant operating costs
31,105 32,191 91,959 91,163

General and administrative costs
2,365 2,384 7,040 7,677
Advertising costs
751 807 2,423 2,260
Impairment of long-lived assets
965 303 1,041 2,056
Gain on restaurant asset sale and lease termination
(10 ) (9 ) (32 ) (666 )
Litigation contingencies
- - - 332

INCOME FROM OPERATIONS:
444 821 1,368 188

Interest and other expense, net
(18 ) (12 ) (56 ) (41 )

NET INCOME BEFORE INCOME TAXES:
426 809 1,312 147

Provision for income taxes
551 (1 ) 10,503 (9 )

NET INCOME:
$ 977 $ 808 $ 11,815 $ 138

Income attributable to non-controlling interests
(135 ) (339 ) (479 ) (1,489 )

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS
$ 842 $ 469 $ 11,336 $ (1,351 )

NET INCOME (LOSS) PER COMMON SHARE:

Basic
$ 0.07 $ 0.04 $ 0.96 $ (0.11 )
Diluted
$ 0.07 $ 0.04 $ 0.95 $ (0.11 )

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic
11,700,044 12,457,251 11,853,441 12,502,449
Diluted
11,769,286 12,560,658 11,910,491 12,502,449

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)
NET REVENUES:
Restaurant sales $ 36,265 $ 33,701 $ 102,305 $ 89,777
Franchise revenues 232 245 705 657
Total net revenues 36,497 33,946 103,010 90,434

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

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

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

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

NET INCOME BEFORE INCOME TAXES: 809 14,158 147 16,846

Provision for Income Taxes (1 ) - (9 ) -

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

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

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

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 12,457,251 12,787,390 12,502,449 12,689,587
Diluted 12,560,658 13,076,635 12,502,449 12,793,915
See accompanying notes to condensed consolidated financial statements (unaudited)
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Good Times Restaurants Inc. and Subsidiaries
Consolidated Statements of ~~Shareholders’~~Shareholders’ Equity (Unaudited)
Year-to-Date June ~~28, 2022~~27, 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
Repurchases of common stock
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
Repurchases of common stock
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

Stock-based compensation cost
- - - - 14 - - 14
Repurchases of common stock
123,623 (380 ) (123,623 ) - - - - (380 )
Non-controlling interests:

Income
- - - - - 135 - 135
Distributions
- - - - - (97 ) - (97 )
Net Income attributable to common shareholders and comprehensive income
- - - - - - 842 842

BALANCES, June 27, 2023
1,354,706 $ (4,354 ) 11,622,727 $ 13 $ 56,768 $ 401 $ (18,985 ) $ 33,843

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

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

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

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

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

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

BALANCES, June 28, 2022 545,999 $ (2,213 ) 12,393,843 $ 13 $ 59,318 $ 1,376 $ (29,031 ) $ 29,463
See accompanying notes to consolidated financial statements (unaudited)
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Good Times Restaurants Inc. and Subsidiaries
Consolidated Statements of ~~Shareholders’~~Shareholders’ Equity (Unaudited)
Year-to-Date June ~~29, 2021~~28, 2022

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

Stock-based compensation cost
- - - - 95 - - 95
Restricted stock unit vesting
- - 13,366 - - - - -
Common stock grants
- - 9,256 - - - - -
Stock option exercise
- - 5,000 - 6 - - 6
Non-controlling interests:

Income
- - - - - 920 - 920
Distributions
- - - - - (632 ) - (632 )
Net Income attributable to common shareholders and comprehensive income
- - - - - - 330 330

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

Stock-based compensation cost
- - - - 52 - - 52
Restricted stock unit vesting
- - - - - - - -
Stock option exercise
- - 23,797 - 84 - - 84
Repurchases of common stock
75,900 (331 ) (75,900 ) - - - - (331 )
Non-controlling interests:

Income
- - - - - 230 - 230
Distributions
- - - - - (112 ) - (112 )
Net Loss attributable to common shareholders and comprehensive loss
- - - - - - (2,150 ) (2,150 )

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

Stock-based compensation cost
- - - - 60 - - 60
Repurchases of common stock
93,748 (274 ) (93,748 ) - - - - (274 )
Non-controlling interests:

Income
- - - - - 339 - 339
Distributions
- - - - - (493 ) - (493 )
Net Income attributable to common shareholders and comprehensive income
- - - - - - 469 469

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

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

(In thousands)

Fiscal Year to Date (39 Weeks)

June 27, 2023

June 28, 2022

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income
$ 11,815 $ 138

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization
2,809 3,129
Impairment of long-lived assets
1,041 2,056
Stock-based compensation expense
103 207
Loss (gain) on lease termination and disposal of assets
44 (642 )
Recognition of deferred gain on sale of restaurant building
(76 ) (24 )
Deferred income taxes
(10,510 ) 9
Changes in operating assets and liabilities:

Receivables and other
(35 ) (18 )
Prepaid expense
(526 ) (742 )
Inventories
34 (62 )
Deposits and other
(119 ) 70
Accounts payable
444 (529 )
Net change in ROU assets and operating lease liabilities
(438 ) (297 )
Accrued and other liabilities
121 1,123
Net cash provided by operating activities
4,707 4,418

CASH FLOWS FROM INVESTING ACTIVITIES:

Payments for the purchase of property and equipment
(3,178 ) (1,623 )
Acquisition of restaurant from franchisee, net of cash acquired
- (728 )
Proceeds from sale of fixed assets
- 745
Purchase of non-controlling interests
(4,394 ) -
Net cash used in investing activities
(7,572 ) (1,606 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Payment for the purchase of treasury stock
(1,720 ) (605 )
Restricted stock vesting settled in cash
(92 ) -
Proceeds from stock option exercise
5 90
Distributions to non-controlling interests
(563 ) (1,449 )
Contributions from non-controlling interests
13 -
Net cash used in financing activities
(2,357 ) (1,964 )

NET CHANGE IN CASH AND CASH EQUIVALENTS
(5,222 ) 848

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

CASH AND CASH EQUIVALENTS, end of period
$ 3,684 $ 9,704

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid for interest
$ 15 $ 14
Change in accounts payable attributable to the purchase of property and equipment
$ (50 ) $ (214 )

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

Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 3,129 2,920
Amortization of operating lease assets 2,908 2,631
Decrease in ROU assets 57 -
Gain on debt extinguishment
-

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

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

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

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

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

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

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest $ 14 $ 33
Change in accounts payable attributable to the purchase of
property and equipment
$ (214 ) $ 500
See accompanying notes to condensed consolidated financial statements (Unaudited)
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7
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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~~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. Those memberships were acquired by the Company in January 2023. 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~~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 ~~28, 2022~~ 27, 2023 and the results of its operations and its cash flows for the ~~three~~ fiscal quarters ended June 27, 2023 and June 28, ~~2022 and June 29, 2021.~~ 2022. Operating results for the ~~three~~ fiscal ~~quarters~~quarter ended June ~~28, 2022~~ 27, 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~~10-K for the fiscal year ended September ~~28, 2021.~~27, 2022.

Fiscal Year – The Company’s fiscal year is a 52/~~53-week~~53-week year ending on the last Tuesday of September. In a ~~52-week~~52-week fiscal year, each of the Company’s quarterly periods consist of 13 weeks. The additional week in a ~~53-week~~53-week fiscal year is added to the first quarter, making such quarter consist of 14 weeks. The quarters ended June 27, 2023 and June 28, 2022 ~~and June 29, 2021~~ 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.
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. ~~We recognize costs associated with the advertising funds based upon the same expense recognition principles we apply to other expenses.~~ Contributions to the Advertising Funds from our franchisees were ~~$204,000~~$212,000 and ~~$205,000~~$204,000 for the three quarters ended June 27, 2023 and June 28, 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 June 27, 2023, total receivables were $729,000, which consists of $84,000 in receivables from ~~our~~large box retail partners, $291,000 in rebate receivables, $298,000 in receivables from delivery and online ordering partners, and ~~amounts receivable from Tivoli Brewing Company in connection with our partnership where we operate~~$56,000 of franchise and other receivables, compared to $694,000 as of the ~~kitchen at their brewery taproom.~~
~~COVID-19~~
Currently all of our Bad Daddy’s and Good Times restaurants are operating without COVID-19 related government restrictions or mask mandates. However, the second-and third-order effects from the pandemic have had a lingering impact on our restaurant operations for the three quartersfiscal year ended June 28, 2022, ~~including disruptions~~consisting of $235,000 in receivables from large box retail partners, $127,000 in rebate receivables, $229,000 in receivables from delivery and online ordering partners, and $103,000 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.receivables.

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.
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Additionally, in connection with spread of COVID-19, there have been disruptions in various food supply chains in the United States. Our operating results substantially depend upon our ability to obtain sufficient quantities of products such as beef, bacon, packaging and other products used in the production of menu items 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.
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 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.

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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 ~~28,~~27, 2023 and September 27, 2022 ~~and September 28, 2021 (in~~(in thousands):

June 28, 2022 September 28, 2021
June 27, 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 $ (11 ) $ 14 $ 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 $ (11 ) $ 3,914 $ 3,925 $ (5 ) $ 3,920

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

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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 $6,000 for the three quarters ended June 27, 2023 and $3,000 for the three quarters ended June 28, 2022. As of both June 27, 2023 and June 28, 2022, the Company had $96,000 of goodwill attributable to the Good Times reporting unit and ~~$46,000 for the three quarters ended June 29, 2021.~~$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~~“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~~“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 quarters ended June 27, 2023 and June 28, 2022 includes $104,000 and ~~June 29, 2021 includes~~ $207,000, ~~and $327,000,~~ respectively, of compensation costs related to our stock-based compensation arrangements.

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Stock ~~Option~~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~~this valuation ~~technique~~method and the approach ~~utilized~~used 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 quarters ended June ~~28, 2022.~~ 27, 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.

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
Three Quarters Ended June 27, 2023
Incentive and Non-Qualified
Stock Options

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

Expected term (years) 6.5 3.63 7.5 6.5
Expected volatility 61.31% 74.62% 60.0% - 60.2% 61.31%
Risk-free interest rate 1.76% 0.24% 3.33% - 4.21% 1.76%
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~~effective at the time of grant corresponding ~~with~~to 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~~historic exercise patterns.

The following table summarizes stock option activity for the three quarters ended June ~~28, 2022~~ 27, 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

45,000 $ 2.81
Options exercised (28,797 ) $ 3.10

(2,000 ) $ 2.31
Options Forfeited (20,362 ) $ 4.63

(64,137 ) $ 3.43
Outstanding June 28, 2022 499,656 $ 3.89 5.7
Exercisable June 28, 2022 351,872 $ 3.52 5.1
Outstanding June 27, 2023
449,024 $ 3.94 5.0
Exercisable June 27, 2023
334,103 $ 3.66 4.6

As of June ~~28, 2022,~~ 27, 2023, the aggregate intrinsic value of ~~the outstanding and~~ exercisable options was ~~$57,000.~~$296,000. 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.

As of June 27, 2023, the total remaining unrecognized compensation cost related to non-vested stock options was $104,000 and is expected to be recognized over a weighted average period of approximately 1.9 years.
There were 45,000 stock options awarded during the three quarters ended June 27, 2023.
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)~~5635(c)(4) of the Nasdaq Stock Market Listing Rules as an inducement to employment. Prior to the end of the quarter ended June 27, 2023, these stock options were forfeited due to the officer’s employment separation.

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~~As of June 28, 2022, the total remaining unrecognized compensation cost related to non-vested~~There were 2,000 stock options ~~was approximately $239,000 and is expected to be recognized over a weighted average period~~exercised resulting in the issuance of 2,000 shares during the three quarters ended June 27, 2023 with proceeds of approximately ~~1.6 years.~~
$5,000. There were 28,797 stock options exercised during the three quarters ended June 28, 2022 with proceeds of approximately $90,000. ~~There were 170,248 stock options exercised during the three quarters ended June 29, 2021 with proceeds of approximately $407,000.~~

Restricted Stock Units

~~During~~There were 25,750 restricted stock units granted during the three quarters ended June ~~28, 2022~~27, 2023 and there were 28,000 restricted stock units granted ~~and no restricted stock units granted~~ during the three quarters ended June ~~29, 2021.~~28, 2022.

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A summary of the status of non-vested restricted stock units as of June ~~28, 2022~~ 27, 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
(2,750 ) $2.29 to
$4.50

Non-vested units at June 27, 2023
50,000 $2.29 to
$4.50

As of June ~~28, 2022,~~ 27, 2023, there was ~~$120,000~~$106,000 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~~1.9 years.

Restricted and Unrestricted Common Stock Awards

No grants of restricted or unrestricted common stock were made during the three quarters ended June 27, 2023. During the three quarters ended June 28, 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 three fiscal quarters ended June 27, 2023, the Company ~~had previously entered into an agreement with the landlord for one~~recognized $76,000 of ~~its~~deferred gains on prior sale-leaseback transactions related to certain Good Times restaurants ~~which provided the landlord an option to terminate the lease with a six-month notice in exchange for a specific termination penalty.~~and $44,000 of net loss on disposal of miscellaneous assets. During the threefiscal ~~quarter~~quarters ended ~~December~~June 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 quarter ended March 29, 2022 we recognized a $642,000 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
Prepaid Rent $ 773 $ -
Other 614 641
Total $ 1,387 $ 641

June 27, 2023

September 27, 2022

Prepaid Rent
$ 779 $ 765
Prepaid Insurance
382 3
Other
253 120
Total
$ 1,414 $ 888

Note 8.
Other Accrued Liabilities

Other accrued liabilities consist of the following as of:

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

June 27, 2023

September 27, 2022

Wages and other employee benefits
$ 3,116 $ 2,773
Taxes, other than income taxes
1,215 1,166
Gift card liability, net of breakage
1,229 985
General expense accrual and other
1,274 1,867
Total
$ 6,834 $ 6,791

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Note 9.
Notes Payable and Long-Term Debt

Cadence Credit Facility

The Company ~~maintains a~~and its wholly owned subsidiaries (the “Subsidiaries”) maintain an amended and restated credit agreement with Cadence Bank (“Cadence”) pursuant to which, ~~as amended,~~ Cadence ~~has~~ agreed to loan the Company up to $8,000,000, ~~with~~has a maturity date of ~~January 31, 2023 (as amended,~~ April 20, 2028 (the “Cadence Credit Facility”). AsThe Cadence Credit Facility amended byand restated the ~~various amendments, the~~Company’s prior credit facility with Cadence in its entirety. The Cadence Credit Facility accrues commitment fees on the daily unused balance of the facility at a rate of 0.25%. AsThe loans may from time to time consist of ~~June 28, 2022, any borrowings under the Cadence Credit Facility, as amended, bear~~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 ~~and (c) LIBOR plus 1.0%,~~ or ~~(ii) LIBOR, with a 0.250% floor, plus 3.5%.~~Term SOFR. 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~~Each of ~~any transition~~the Subsidiaries are guarantors of ~~LIBOR to an alternate benchmark rate is not currently known.~~the Cadence Credit Facility.

~~As of June 28, 2022,~~Proceeds from the Cadence Credit Facility, ~~contains~~if and when drawn, may be used (i) to fund new restaurant development, (ii) to finance the buyout of non-controlling 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.
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The Cadence Credit Facility includes customary affirmative and negative covenants and events of ~~default that~~default. The Cadence Credit Facility also requires the Company ~~considers customary for~~to maintain various financial condition ratios, including minimum liquidity, an ~~agreement of this type, including financial 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 outstanding balance under the Revolver exceeds $4.0 million, the Company ~~was in compliance with all of these 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~~In connection with the Cadence Credit Facility, the Company and the ~~various amendments,~~Subsidiaries entered into an Amended and Restated Security and Pledge Agreement (the “Security Agreement”) with Cadence. Under the Security Agreement, the Cadence Credit Facility is secured by a first priority security interest in substantially all the assets of 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.~~Subsidiaries.

~~The obligations~~As of June 27, 2023, the interest rate that would have been applicable to borrowings under the Cadence Credit Facility ~~are collateralized by a first-priority lien on substantially all of the Company’s assets.~~would have been 8.07%.

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.
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.

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

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

Quarter Ended

Year-to-Date

June 27, 2023

June 28, 2022

June 27, 2023

June 28, 2022

Weighted-average shares outstanding basic
11,700,044 12,457,251 11,853,441 12,502,449
Effect of potentially dilutive securities:

Stock options
19,242 29,071 7,050 -
Restricted stock units
50,000 74,336 50,000 -
Weighted-average shares outstanding diluted
11,769,286 12,560,658 11,910,491 12,502,449
Excluded from diluted weighted average shares outstanding:

Antidilutive
345,691 387,378 354,024 249,752

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.

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The Company is the defendant in a lawsuit styled as White Winston Select Asset Funds, LLC and GT Acquisition Group, Inc. v. Good Times Restaurants, Inc., arising from the failed negotiations between plaintiffs and the Company for the sale of the Good Times Drive Thru subsidiary to plaintiffs. The lawsuit was initially filed on September 24, 2019 in Delaware Chancery Court, and Company removed the case to federal court in the US District Court for the District of Delaware on November 5, 2019. On July 30, 2021, the plaintiffs moved the Court for leave to amend their complaint and add new causes of action and a claim for $18 million in damages. On April 11, 2022, the Court heard the parties’ respective motions for summary judgment on the plaintiffs’ claims. The Court verbally ruled that it was dismissing all of the plaintiffs’ claims except for their claim for breach of an express and implied obligation to negotiate in good faith under the parties’ letter of intent. 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 parties are now conducting appellate briefing. On May 18, 2023, the plaintiffs filed their opening brief. On June 23, 2023, Good Times filed its brief in response to the plaintiffs’ opening brief and Good Times’s own opening brief regarding its appeal of the dismissal of its counterclaims against the plaintiffs. The plaintiffs’ deadline for the reply brief in support of their appeal and response to Good Times’s appeal is August 7, 2023. Good Times’s deadline to file a reply brief in support of its appeal is August 28, 2023. At that time, briefing will be closed, and the ~~Court’s order, the inherent uncertainties~~court of ~~trial and the Company’s posture in respect of settlement, among other things, the~~appeals may render a decision at any time.
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.

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.

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Components of operating lease costs are as follows for the fiscal quarters ~~ended:~~ended June 27, 2023 and June 28, 2022:

Lease cost Classification June 28, 2022 June 29, 2021
Classification

June 27, 2023

June 28, 2022

Operating lease cost Occupancy, Preopening costs, and General and administrative expenses, net $ 1,866 $ 1,693
Occupancy, Other restaurant operating costs and General and administrative expenses, net
$ 1,824 $ 1,866
Variable lease cost Occupancy 27 20
Occupancy
60 27
Sublease income Occupancy (136 ) (136 )
Occupancy
(137 ) (136 )
$ 1,757 $ 1,577 $ 1,747 $ 1,757

~~Components of operating lease costs are as follows for the three fiscal quarters ended:~~
Lease cost Classification June 28, 2022 June 29, 2021
Operating lease cost Occupancy, Preopening costs, and General and administrative expenses, net $ 5,491 $ 5,220
Variable lease cost Occupancy 106 61
Sublease income Occupancy (408 ) (400 )
$ 5,189 $ 4,881
Weighted average lease term and discount rate are as follows:

June 28, 2022 June 29, 2021
June 27, 2023

June 28, 2022

Weighted average remaining lease term (in years) 8.85 9.8 8.16 8.85

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

Supplemental cash flow disclosures for the three fiscal quarters ~~ended:~~ended June 27, 2023:

June 28, 2022 June 29, 2021
June 27, 2023

June 28, 2022

Cash paid for operating lease liabilities $ 5,383 $ 5,168 $ 5,771 $ 5,383

Non-cash operating lease assets obtained in exchange for
operating lease liabilities $ 734 $ 57 $ 1,201 $ 734

Supplemental balance sheet disclosures:

Balance Sheet Classification Lease Classification June 28, 2022 June 29,2021

June 27, 2023

September 27, 2022

Right-of-use assets Operating lease assets $ 43,566 $ 46,678
Operating lease assets
$ 41,283 $ 42,463

Current lease liabilities Operating lease liabilities 5,349 4,857
Operating lease liability
$ 5,673 $ 5,430
Non-current lease liabilities Operating lease liabilities, less current portion 46,859 50,698
Operating lease liability, less current portion
43,683 45,544
Total lease liabilities $ 52,208 $ 55,555
Total lease liabilities
$ 49,356 $ 50,974

Future minimum rent payments for our operating leases for each of the next five years as of June ~~28, 2022~~ 27, 2023 are as follows:

Fiscal year ending: Total
Total

Remainder of 2022 $ 1,951
2023 7,833
Remainder of 2023
$ 1,986
2024 7,730 7,983
2025 7,814 8,081
2026 7,256 7,665
2027
7,368
Thereafter 32,539 27,413
Total minimum lease payments 65,123 60,496
Less: imputed interest (12,915 ) (11,140 )
Present value of lease liabilities $ 52,208 $ 49,356

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

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Note 13.
Impairment of Long-Lived Assets and ~~Goodwill~~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.

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During the quarter ended June 27, 2023 there were no impairments of long-lived assets recorded. There were $1,041,000 of asset impairments in the three quarters ended June 27, 2023, related primarily to the assets of one Bad Daddy’s restaurant in the Atlanta, Georgia market, and to a much lesser extent 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 three quarters ended June 28, 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 in total asset impairments for four restaurants. Of this amount, $790,000 was related to three Good Times restaurants and $1,266,000 was related to one Bad Daddy’s restaurant. ~~During the three quarters ended June 29, 2021 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~~their fair value ~~of the trademarks~~ with their carrying amount. There was no impairment ~~required~~ to the acquired trademarks ~~for the three quarters ended~~ as of June 27, 2023 and June 28, ~~2022 and June 29, 2021.~~2022.

~~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

~~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~~Deferred tax assets are reviewed periodically for ~~recoverability~~realizability 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 ~~28, 2022 related to state income taxes resulting in~~27, 2023 was (189.98%), a decrease from an effective income tax rate of ~~(0.7%~~(0.21%) for the ~~period. For~~three months ended June 28, 2022. The decrease is due to the release of the Company’s valuation allowance during the second quarter that has been adjusted during the third quarter as a result of a change in the Company’s forecast for the year. The Company’s effective income tax rate for the three quarters 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~~27, 2023 was (1,261.02%), a decrease from an effective income tax rate of ~~zero~~(0.7%) for the ~~period.~~three quarters ended June 28, 2022. The decrease is also attributed to the release of the Company’s valuation allowance and the forecast adjustments that occurred during the second and third quarters, respectively.

During the second quarter of this fiscal year, 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.
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~~2020 through ~~2022~~.2023. 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 ~~28, 2022.~~27, 2023.

Note 15.
Non-controlling Interests

Non-controlling interests are presented ~~as a separate item~~separately 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~~ resulting 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.

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The following table summarizes the activity in non-controlling interests during the three quarters ended June ~~28, 2022 (in~~27, 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 1,489 219 260 479
Purchase of Non-controlling Interests
(831 ) - (831 )
Distributions (840 ) (397 ) (1,237 ) (442 ) (121 ) (563 )
Balance as of June 28, 2022 $ 1,100 $ 276 $ 1,376
Contribution
13 - 13
Balance at June 27, 2023
- 401 401

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~~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

~~None.~~
~~Note 17.~~ ~~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
Quarter Ended (13 Weeks)

Year-to-Date (39 Weeks)

June 28, 2022
(13 Weeks) June 29, 2021
(13 Weeks) June 28, 2022
(39 Weeks) June 29, 2021
(39 Weeks)
June 27, 2023

June 28, 2022

June 27, 2023

June 28, 2022

Revenues
Bad Daddy’s $ 27,231 $ 24,481 $ 77,427 $ 64,263 $ 26,161 $ 27,231 $ 77,795 $ 77,427
Good Times 9,266 9,465 25,583 26,171 9,459 9,266 26,004 25,583
36,497 33,946 103,010 90,434 $ 35,620 36,497 $ 103,799 103,010
Income (Loss) from
operations
Income from operations

Bad Daddy’s 635 1,577 138 2,760 $ (946 ) 635 $ (277 ) 138
Good Times 186 869 50 2,552 $ 1,390 186 $ 1,645 50
821 2,446 188 5,312 $ 444 821 $ 1,368 188
Capital expenditures
Bad Daddy’s 652 802 1,480 1,826 $ 1,295 652 $ 1,901 1,480
Good Times 364 110 471 272 302 364 1,277 471
$ 1,016 $ 912 $ 1,951 $ 2,098 $ 1,597 $ 1,016 $ 3,178 $ 1,951

June 27, 2023

September 27, 2022

Property and equipment, net

Bad Daddy’s
$ 18,048 $ 19,575
Good Times
3,443 2,676
$ 21,491 $ 22,251

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
Note 17.
Subsequent Events
None.

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ITEM 2.
~~MANAGEMENT’S~~
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Form 10-Q contains or incorporates by reference forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the disclosure of risk factors in the Company’s Form 10-K for the fiscal year ended September ~~28, 2021.~~27, 2022 and subsequent filings with the SEC. 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:

(I)
~~(II)~~
The disruption to our business from the novel coronavirus (COVID-19) pandemic and the impact of the pandemic on our results of operations, financial condition and prospects. The disruption and effect on our business may vary depending on the duration and extent of the COVID-19 pandemic and the ~~impact~~associated government response, change in consumer behavior, labor market effects and supply chain impacts significantly affected the results of ~~federal, state~~operations and ~~local governmental actions~~financial condition of our business. Though the effects of this specific pandemic have mostly subsided, the risk of similar government and ~~customer behavior in~~consumer response to future pandemics or other public health concerns, and the ~~pandemic.~~risk of similar impacts within the labor markets and global supply chain, could cause significant disruption to our business.

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

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

(IV)
~~(II)~~
We may be negatively impacted if we are unable to pass on to customers through menu price increases the increased costs that we incur through inflation experienced in our input costs including both the cost of food and the cost of labor. Recent metrics have indicated that increased levels of price inflation are prevalent throughout the economy which have resulted in increases in commodity, labor and energy costs for both concepts as well as increased product substitutions, elevated freight costs, and increased variability in product quality. Further significant increases in inflation could affect the ~~impacts~~global and U.S. economies, which could have an adverse impact on our business and results of ~~such inflation, including~~operations if we and our franchisees are not able to adjust prices sufficiently to offset the ~~impact~~effect of ~~related governmental response, cannot be accurately predicted.~~cost increases without negatively impacting consumer demand.

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.

~~Overview~~Overview.

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.

~~COVID-19~~Macro-Economic Factors and Operating Environment.

Currently all of our Bad Daddy’s and Good Times restaurants are operating without COVID-19 related government restrictions or mask mandates. However, the second-and third-order effects from the pandemic have had a lingering impact on our restaurant operations forDuring the three quarters ended June ~~28, 2022 including disruptions~~27, 2023, high rates of inflation have been seen globally which have also resulted in increases in commodity, labor and ~~other impacts~~energy costs for both concepts. Further significant continued increases in inflation could affect the global and U.S. economies, which could have an adverse impact on our business and results of operations if we and 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.
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 ofoffset the effect of ~~the COVID-19 pandemic on our business, including any mutations~~cost increases without negatively impacting consumer demand.
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~~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 ~~adversely affected. Even without government orders, customers may choose to reduce or eliminate in-restaurant dining if there are increasing numbers~~made in the case of ~~COVID-19 cases, hospitalizations, or deaths.~~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.

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

Although we conduct all of our restaurant operations within the USA, worldwide product supply chains have been impacted by ~~the war in Ukraine.~~international conflicts. 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.~~outside of the USA. 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.

Growth Strategies and ~~Outlook~~Outlook.

We believe there are significant opportunities to grow customer traffic and increase awareness of our brands. ~~Prior to the COVID-19 pandemic,~~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~~have been focused on organic growth of sales in our existing restaurants, but have also recently acquired certain franchisee restaurants and repurchased noncontrolling interests in certain partnerships where we are ~~filling~~the controlling partner. We may opportunistically make similar acquisitions in the future. We anticipate the opening of one new restaurant in August 2023 in the greater Huntsville, Alabama market and are developing a ~~restaurant development~~ pipeline for greater growth in 2024 and ~~expect new Bad Daddy’s restaurant openings in fiscal 2023.~~beyond.

Restaurant locations.

As of June ~~28, 2022,~~27, 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 ~~of 2022~~ended June 27, 2023 and ~~2021.~~June 28, 2022.

Company-Owned/~~Co-Developed/Joint-Venture~~Co-Developed:

	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

~~We purchased one previously franchised~~One company-owned Bad Daddy’s ~~during the second fiscal quarter of 2022 and one BD location opened in Alabama in the final quarter of 2021. One company-owned Good Times~~ restaurant closed, ~~and~~due to a termination by the ~~property was subleased during fiscal 2021.~~landlord, for redevelopment in March 2023.

Franchise/~~License~~License:

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

Bad Daddy’s
Burger Bar

Good Times Burgers
& Frozen Custard

Total

2023

2022

2023

2022

2023

2022

Colorado
- - 6 6 6 6
North Carolina
1 1 - - 1 1
Wyoming
- - 2 2 2 2
Total
1 1 8 8 9 9

Non-Traditional^*

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

Colorado 1 - - - 1 - - 1 - - - 1
Total 1 - - - 1 - - 1 - - - 1

*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.

Results of Operations

Fiscal quarter ended June ~~28, 2022~~27, 2023 (13 weeks) compared to fiscal quarter ended June ~~29, 2021~~28, 2022 (13 weeks):

Net Revenues. Net revenues for the fiscal quarter ended June 27, 2023 decreased $877,000 or 2.4% to 35,620,000 from $36,497,000 for the fiscal quarter ended June 28, ~~2022 increased $2,551,000 or 7.5% to $36,497,000 from $33,946,000 for the quarter ended June 29, 2021.~~2022. Bad Daddy’s concept revenues ~~increased $2,750,000~~decreased $1,070,000 while our Good Times concept revenues ~~decreased $199,000.~~increased $193,000.
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Table of Contents

Bad Daddy’s restaurant sales ~~increased $2,764,000~~decreased $1,087,000 to $26,085,000 for the fiscal quarter ended June 27, 2023 from $27,172,000 for the fiscal quarter ended June 28, 2022 from $24,408,000 for the quarter ended June 29, 2021. This increase is primarily due to increased traffic, as well as menu price increases. The average menu price increase for the quarter ended June 28, 2022 over the same prior-year quarter was approximately 6.8%.
Good Times restaurant sales decreased $200,000 to $9,093,000 for the quarter ended June 28, 2022 from $9,293,000 for the quarter ended June 29, 2021. This decrease is primarily due to the loss of sales associated with2022. Sales were negatively affected by the closure of the Cherry Creek location and the temporary closure one restaurant for remodeling. Sales were also affected by reduced customer traffic, particularly in the ~~second quarter of 2022,~~Atlanta market, partially offset by menu price increases. The average menu price increase for the fiscal quarter ended June ~~28, 2022~~27, 2023 over the same prior-year quarter was approximately ~~8.2%~~4.3%.
Good Times restaurant sales increased $198,000 to $9,291,000 for the fiscal quarter ended June 27, 2023 from $9,093,000 for the fiscal quarter ended June 28, 2022. The average menu price increase for the fiscal quarter ended June 27, 2023 over the same prior-year quarter was approximately 10.5%.

Franchise revenues ~~were~~increased $12,000 to $244,000 in the fiscal quarter ended June 27, 2023 compared to $232,000 in the fiscal quarter ended June 28, ~~2022 compared~~2022. This increase is due primarily to ~~$245,000 in~~ the ~~quarter ended June 29, 2021. This decrease is primarily due to decreased~~additional royalties ~~resulting~~generated from ~~the Company’s purchase of a previously~~higher restaurant level sales at our franchised ~~Bad Daddy’s restaurant.~~and licensed units.

Same Store Sales

Sales store sales is a metric used in evaluating the performance of established restaurants and is a commonly used metric in the restaurant industry. Same store sales for our brands are calculated using all 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 April fiscal month due to that restaurant’s extended remodel closure.

Bad Daddy’s same store restaurant sales ~~increased 5.3%~~decreased 1.4% during the fiscal quarter ended June ~~28, 2022~~27, 2023 compared to the same thirteen-week period ended June ~~29, 2021~~28, 2022, primarily driven by weaker traffic, particularly in the ~~prior-year quarter. This increase is primarily due to increased traffic as well as~~Atlanta market, partially offset by 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%%~~2.1% during the fiscal quarter ended June ~~28, 2022~~27, 2023 compared to the same thirteen-week period ended June ~~29, 2021 in the prior-year quarter. This increase is~~28, 2022, primarily due to ~~increased traffic as well as~~ menu price ~~increases.~~increases, offset by lower traffic associated with more precipitation and cooler temperatures in the Denver metro area compared to the prior-year quarter. There were twenty-three restaurants included in the same store sales base at the end of the current quarter.

Restaurant Operating Costs

Food and Packaging Costs. Food and packaging costs for the fiscal quarter ended June ~~28, 2022 increased $1,778,000~~27, 2023 decreased $844,000 to $10,923,000 (30.9% of restaurant sales) from $11,767,000 (32.4% of restaurant sales) ~~from $9,989,000 (29.6% of restaurant sales)~~ for the fiscal quarter ended June ~~29, 2021.~~28, 2022.

Bad Daddy’s food and packaging costs were $8,106,000 (31.1% of restaurant sales) for the fiscal quarter ended June 27, 2023, down from $8,832,000 (32.5% of restaurant sales) for the fiscal quarter ended June 28, ~~2022, up from $7,257,000 (29.7% of restaurant sales) for the quarter ended June 29, 2021.~~2022. This ~~increase~~decrease is primarily attributable to ~~higher~~a combination of lower restaurant sales during the current fiscal quarter versus ~~the same~~prior fiscal quarter ~~in the prior year. The increase as a percent of sales is attributable the significant inflation noted during the quarter with most of our~~to lower purchase prices for chicken, oil-based products, and other food ~~and packaging products seeing meaningful unit price increases.~~commodities.

Good Times food and packaging costs were $2,817,000 (30.3% of restaurant sales) for the fiscal quarter ended June 27, 2023, down from $2,935,000 (32.3% of restaurant sales) for the fiscal quarter ended June 28, ~~2022, up from $2,732,000 (29.4% of restaurant sales) for the quarter ended June 29, 2021.~~2022. This ~~increase~~decrease is primarily attributable to the ~~impact of~~ higher menu prices and reduced purchase prices ~~on food and paper goods, partially offset by increased menu pricing.~~across most of our commodity basket.

Payroll and Other Employee Benefit Costs. Payroll and other employee benefit costs for the fiscal quarter ended June ~~28, 2022 increased $1,034,000~~27, 2023 decreased $355,000 to ~~12,295,000 (33.9%~~$11,940,000 (33.8% of restaurant sales) from ~~$11,261,000 (33.4%~~$12,295,000 (33.9% of restaurant sales) for the fiscal quarter ended June ~~29, 2021.~~28, 2022.
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Bad Daddy’s payroll and other employee benefit costs were $9,054,000 (34.7% of restaurant sales) for the fiscal quarter ended June 27, 2023 down from $9,296,000 (34.2% of restaurant sales) for the fiscal quarter ended June 28, ~~2022 up from $8,381,000 (34.3% of restaurant sales) in the same prior year period.~~2022. The ~~$915,000 increase~~$242,000 decrease is primarily attributable to ~~increased wage rates paid, primarily to back of house employees,~~lower restaurant sales during the current quarter ~~versus~~compared to the same quarter in the prior year ~~the result~~partially offset by slightly higher average pay rates. As a percent of ~~a competitive labor market.~~sales, payroll and employee benefits costs increased by 0.5% primarily attributable to higher average wage rates paid to attract qualified employees.

Good Timespayroll and other employee benefit costs were ~~$2,999,000 (33%~~$2,886,000 (31.1% of restaurant sales) in the fiscal quarter ended June ~~28, 2022, up~~27, 2023, down from ~~$2,880,000 (31.0%~~$2,999,000 (33.0% of restaurant sales) in the same prior-year period. ~~This increase, both in nominal dollars and~~The decrease as is due primarily to increased labor productivity as measured ~~as a percent of restaurant~~in sales was primarily attributable to higher average wage rates. These higher wages are in-part driven by a combination of the significant statutory wage increase in the City and County of Denver and the impact of the extremely competitiveper labor ~~market for qualified restaurant employees in Colorado.~~hour.

Occupancy Costs. Occupancy costs for the fiscal quarter ended June ~~28, 2022~~27, 2023 increased ~~$200,000~~$49,000 to $2,432,000 (6.9% of restaurant sales) from $2,383,000 (6.6% of restaurant sales) ~~from $2,183,000 (6.5% of restaurant sales)~~ for the fiscal quarter ended June ~~29, 2021.~~28, 2022.

Bad Daddy’s occupancy costs were $1,700,000 (6.5% of restaurant sales) for the fiscal quarter ended June 27, 2023, up from $1,684,000 (6.2% of restaurant sales) for the fiscal quarter ended June 28, 2022, up from $1,485,000 (6.1% of restaurant sales) in the same prior year period. The increase was primarily attributable to lease costs with newly opened restaurants, lease costs associated with the restaurant acquired from a former franchisee and increased real property tax assessments.2022.

Good Times occupancy costs were $732,000 (7.9% of restaurant sales) in the fiscal quarter ended June 27, 2023, up from $699,000 (7.7% of restaurant sales) in the fiscal quarter ended June 28, ~~2022, up from $698,000 (7.5%~~2022. The increase was primarily attributable to increased property taxes and insurance costs.
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Table of ~~restaurant sales) in the same prior year period.~~
Contents

Other Operating Costs. Other operating costs for the fiscal quarter ended June ~~28, 2022,~~27, 2023, increased ~~$1,023,000~~$58,000 to $4,811,000 (13.6% of restaurant sales) from $4,753,000 (13.1% of restaurant sales) ~~from $3,730,000 (11.1% of restaurant sales)~~ for the fiscal quarter ended June ~~29, 2021.~~28, 2022.

Bad Daddy’s other operating costs were $3,750,000 (14.4% of restaurant sales) for the fiscal quarter ended June 27, 2023 up from $3,742,000 (13.8% of restaurant sales) for the fiscal quarter ended June 28, ~~2022 up from $2,939,000 (12.0% of restaurant sales) in the same prior year period.~~2022. The increase ~~was attributable to higher overall sales. As~~as a percent of sales ~~the increase is~~was primarily attributable to a higher ~~increased spending on restaurant technology,~~mix of delivery and ~~higher repair and maintenance expenses.~~other off-premises sales.

Good Times other operating costs were $1,061,000 (11.4% of restaurant sales) in the fiscal quarter ended June 27, 2023, up from $1,011,000 (11.1% of restaurant sales) in the fiscal quarter ended June 28, ~~2022, up from $791,000 (8.5% of restaurant sales) in the same prior year period.~~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~~increased delivery and ~~higher preventive maintenance expenses.~~off-premises sales.

New Store Preopening Costs. ~~There~~In the fiscal quarter ended June 27, 2023, preopening costs were $80,000 compared to no preopening costs ~~incurred during~~for the fiscal quarter ended June 28, ~~2022 compared~~2022. These costs primarily relate to ~~$301,000 for the quarter ended June 29, 2021.~~training costs incurred as part of our new Bad Daddy’s location in Madison, Alabama and 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 27, 2023, decreased $74,000 to $919,000 from $993,000 in the fiscal quarter ended June 28, ~~2022, increased $55,000~~2022. These decreases at both concepts are due to ~~$993,000 from $938,000~~assets performing past their estimated usable lives and the prior-year impairment of assets, partially offset by new asset additions in ~~the quarter ended June 29, 2021.~~existing restaurants.

Bad Daddy’s depreciation and amortization costs for the fiscal quarter ended June 27, 2023 decreased $78,000 to $768,000 from $846,000 in the fiscal quarter ended June 28, 2022 increased $105,000 to $846,000 from $741,000 in the quarter ended June 29, 2021. This increase was primarily attributable to the two new restaurants opened in final quarter of fiscal 2021 as well as the acquisition of our franchise unit in the 2^nd ~~quarter of 2022~~2022.

Good Timesdepreciation and amortization costs for the fiscal quarter ended June 27, 2023 increased $4,000 to $151,000 from $147,000 in the fiscal quarter ended June 28, 2022 decreased $50,000 to $147,000 from $197,000 in the quarter ended June 29, 2021. This decrease is primarily attributable to assets reaching full amortization and the closure of a restaurant in the prior quarter associated with a landlord termination option.2022.

General and Administrative Costs. General and administrative costs for the fiscal quarter ended June ~~28, 2022,~~27, 2023, decreased ~~$126,000~~$19,000 to ~~$2,379,000 (6.5%~~$2,365,000 (6.6% of total ~~revenue)~~revenues) from ~~$2,505,000 (7.4%~~$2,384,000 (6.5% of total revenue) for the fiscal quarter ended June ~~29, 2021.~~28, 2022.

This decrease in general and administrative expenses in the fiscal quarter ended June ~~28, 2022~~27, 2023 is primarily attributable to:

·
●
~~Decreased~~
Increase in costs associated with multi-unit supervisory roles of $172,000
●
Increase in ~~legal~~administrative, accounting, and ~~professional services~~technology costs of ~~$419,000~~$116,000
·
●
Increase attributable to underwriting gains/losses on the company’s health plan of $15,000
●
Decrease in recruiting and training related costs of ~~$118,000, including costs related to a multi-unit supervisor training conference~~$96,000
·
●
~~Increase~~
Decrease in ~~administrative related~~home office payroll and ~~benefit~~benefits costs of ~~$77,000, primarily~~$94,000
●
Decrease in professional services of $62,000
●
Decrease in insurance related ~~to additional administrative and consultant salary expenses, offset by reduced health insurance underwriting losses.~~costs $53,000
·
●
~~Increase~~
Decrease in stock compensation costs of $45,000
●
Decrease in general travel-related ~~expenses~~costs of ~~$33,000~~$24,000
·
●
~~Increase in the cost of business insurance including D&O, EPL, and cyber coverage of $24,000~~
· ~~Increase in corporate technology expenses of $16,000~~
· ~~Increase in stock compensation expense of $10,000~~
·
Net increase in ~~all~~ other ~~expenses~~costs of ~~approximately $24,000~~$57,000
~~For the balance of the fiscal year, we expect general and administrative costs to trend similarly in nominal terms to costs incurred during the current quarter.~~
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Advertising Costs.Advertising costs for the fiscal quarter ended June ~~28, 2021, increased $210,000~~27, 2023, decreased to $751,000 (2.1% of total revenue) from $807,000 (2.2% of total revenue) ~~from $597,000 (1.8% of total revenue)~~ for the fiscal quarter ended June ~~29, 2021.~~28, 2023.

Bad Daddy’s advertising costs were $384,000 (1.5% of restaurant sales) in the fiscal quarter ended June 27, 2023 compared to $448,000 (1.6% of total revenue) infor the fiscal quarter ended June 28, ~~2022 compared to $222,000 (0.9% of total revenue) in the same prior year period.~~2022. The ~~increase~~decrease is primarily due to lesser recognition of ~~commission~~commissions earned by third parties on gift cards sold through large-box ~~retailers and a radio advertising campaign in Colorado. The prior year quarter includes~~retailers. Bad Daddy’s advertising costs consist primarily of ~~$4,000 associated with franchise~~a combination of menus and other point of purchase materials, digital advertising, ~~contributions.~~and commissions incurred for placement of gift parties at third party retailers, as well as local store marketing efforts.

Good Times advertising costs were $367,000 (3.9% of restaurant sales) in the fiscal quarter ended June 27, 2023 compared to $359,000 (3.9% 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. The current and prior year quarters include advertising costs of $68,000 and $71,000, respectively, of costs associated with franchise advertising contributions.2022.

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.~~point-of-purchase printing costs. Advertising costs are presented gross, with franchisee contributions to the fund being recognized as a component of franchise revenues. ~~As a percentage of total revenue, we expect advertising costs to remain relatively stable, at approximately 4.0% of total revenue for the Good Times segment.~~
~~Franchise Costs.~~ Franchise costs were $5,000 and $5,000 for the quarters ended June 28, 2022 and June 29, 2021, respectively. The costs are primarily related to the Good Times franchised restaurants. We currently have minimal direct costs associated with maintaining our franchise systems as those employees overseeing franchisee relations primarily perform responsibilities associated with company operations.
~~Impairment Costs.~~ ~~Costs related to the impairment of long-lived assets were $303,000 for the quarter ended June 28, 2022, which were attributable to one Good Times restaurant.~~

Gain on Restaurant Asset Sales and Lease Termination. The gain on restaurant asset sales and lease termination for the fiscal quarter ended June ~~28, 2022~~27, 2023 was ~~$9,000~~$10,000, compared to $9,000 for the fiscal quarter ended June ~~29, 2021 related~~28, 2022.
Impairment of Long-Lived Assets Costs. The costs associated with impairments for the fiscal quarter ended June 27, 2023 was $965,000, which primarily consists of assets in one Atlanta-area restaurant, compared to ~~past sale-leaseback transactions~~$303,000 for the fiscal quarter ended June 28, 2022.
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Table of ~~Good Times restaurants.~~Contents
Litigation Contingency Costs. There were no litigation contingency costs in either of the fiscal quarters ended June 27, 2023 or June 28, 2022.

Income ~~(Loss)~~ from Operations. Income from operations was ~~$821,000~~$444,000 in the fiscal quarter ended June ~~28, 2022~~27, 2023 compared to income from operations of ~~$2,446,000~~$821,000 in the fiscal quarter ended June ~~29, 2021.~~28, 2022.

The change in the ~~loss~~income from operations for the fiscal quarter ended June ~~28, 2022~~27, 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 $18,000 during the fiscal quarter ended June 27, 2023, primarily related to the amortization of loan initiation fees, compared with $12,000 during the fiscal quarter ended June 28, 2022, compared 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 with the Cadence Credit Facility.
~~Gain on Debt Extinguishment.~~ There was no gain on debt extinguishment for the quarter compared to $11,778,000 for the quarter ended June 29, 2021. The gain in the prior year quarter was related to forgiveness of PPP loans by the SBA.2022.

Provision for Income Taxes.Provision for income taxes was ~~$1,000~~a $551,000 benefit for the fiscal quarter ended June 27, 2023, compared to $1,000 provision for income taxes for the fiscal quarter ended June 28, ~~2022 primarily associated with estimated cash taxes due for state~~2022. This most significant driver of this provision was related to changes in the projections of full-year net income ~~tax.~~and available tax credits.

Net ~~(Loss)~~ Income. Net income was ~~$808,000~~$977,000 for the fiscal quarter ended June ~~28, 2022~~27, 2023 compared to net income of ~~$14,158,000~~$138,000 in the fiscal quarter ended June ~~29, 2021.~~28, 2022.

The change from the fiscal quarter ended June 27, 2023 to the fiscal quarter ended June 28, 2022 ~~to the quarter ended June 29, 2021~~ 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 during the periods of time non-controlling partners owned interests in these restaurants.

For the fiscal quarter ended June ~~28, 2022,~~27, 2023, the income attributable to non-controlling interests was ~~$339,000~~$135,000 compared to ~~$524,000~~$339,000 for the fiscal quarter ended June ~~29, 2021.~~28, 2022.

Of the ~~current~~ quarter’s income attributable to non-controlling interests, ~~$184,000~~none is attributable to Bad Daddy’s joint-venture restaurants, compared to ~~$263,000~~$183,000 in the same prior year period. This ~~$79,000~~ decrease is ~~primarily~~ due to ~~reduced restaurant-level profitability~~the Company’s purchase of all the Bad Daddy’s non-controlling 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, $135,000 is attributable to the Good Times joint-venture restaurants, compared to ~~$261,000~~$155,000 in the same prior year period. This ~~$106,000~~ decrease is primarily due to reduced ~~restaurant-level~~restaurant level profitability in the ~~relevant restaurants.~~
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current fiscal quarter at the restaurants involved in the joint-venture partnership.

Fiscal three quarters ended June ~~28, 2022~~27, 2023 (39 weeks) compared to fiscal three quarters ended June ~~29, 2021~~28, 2022 (39 weeks):

Net Revenues. Net revenues for the three quarters ended June ~~28, 2022~~27, 2023 increased ~~$12,576,000~~$789,000, or ~~13.9%~~0.8%, to ~~$103,010,000~~$103,799,000 from ~~$90,434,000~~$103,010,000 for the three quarters ended June ~~29, 2021.~~28, 2022. Bad Daddy’s concept revenues increased ~~$13,164,000~~$368,000 while our Good Times concept revenues ~~decreased $588,000.~~increased $421,000.

Bad Daddy’s restaurant sales increased ~~$13,128,000~~$382,000 to $77,592,000 for the three quarters ended June 27, 2023 from $77,210,000 for the three quarters ended June 28, ~~2022 from $64,082,000~~2022. Sales were positively impacted by increases in sales primarily due to higher average menu prices as well as the purchase of a previously franchised Bad Daddy’s location that occurred in March 2022. The average menu price increase for the three quarters ended June ~~29, 2021. This increase is~~27, 2023 over the same prior-year quarter was approximately 4.4%.
Good Times restaurant sales increased $436,000 to $25,531,000 for the three quarters ended June 27, 2023 from $25,095,000 for the three quarters ended June 28, 2022, primarily due to ~~strong customer demand, as well as a increases in~~increased menu prices. The average menu price increase for the three quarters ended June ~~28, 2022~~27, 2023 over the same prior-year quarter was approximately ~~5.5%~~9.6%.

~~Good Times restaurant sales~~Franchise revenues decreased ~~$600,000~~$29,000 to ~~$25,095,000 for~~$676,000 in the three quarters ended June ~~28, 2022 from $25,695,000 for the three quarters ended June 21, 2021. This decrease is primarily due~~27, 2023 compared to decreased traffic, the loss of sales associated with the closure of one restaurant in the second quarter of 2022, partially offset by menu price increases. The average menu price increase for the three quarters ended June 29, 2021 over the same prior-year quarter was approximately 7.2%.
~~Franchise revenues were~~ $705,000 in the three quarters ended June 28, ~~2022 compared to $657,000 in the three quarters ended June 29, 2021.~~2022. This ~~increase~~decrease is primarily due to the acquisition, during the second fiscal quarter of 2022, by the Company of one Bad Daddy’s restaurant previously owned by a franchisee, partially offset by increased royalties arising from higher restaurant sales at ~~the Bad Daddy’s franchisee~~franchised and ~~licensee restaurants attributable to increased sales.~~licensed locations.

Same Store Sales

Sales store sales is a metric used in evaluating the performance of established restaurants and is a commonly used metric in the restaurant industry. Same store sales for our brands are calculated using all 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 and April fiscal months due to that restaurant’s extended remodel closure.

Bad Daddy’s same store restaurant sales increased ~~14.0%~~1.8% during the three quarters ended June ~~28, 2022~~27, 2023 compared to the same ~~thirteen-week period~~three quarters ended June ~~29, 2021~~28, 2022, primarily driven by strong off premise sales and menu price increases, partially offset by traffic declines, particularly in the ~~prior-year~~Atlanta market, during the third fiscal quarter. ~~This increase is primarily due to increased traffic as well as menu price increases.~~ There were ~~thirty-eight~~thirty-nine restaurants included in the same store sales base at the end of the current quarter.
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Table of Contents

Good Times same store restaurant sales ~~decreased 0.6%~~increased 4.1% during the three quarters ended June ~~28, 2022~~27, 2023 compared to the same ~~thirteen-week~~three quarters period ended June ~~29, 2021 in the prior-year quarter. This decrease is~~28, 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.

Restaurant Operating Costs

Food and Packaging Costs. Food and packaging costs for the three quarters ended June ~~28, 2022 increased $6,413,000~~27, 2023 decreased $265,000 to ~~$32,450,000 (31.7%~~$32,185,000 (31.2% of restaurant sales) from ~~26,037,000 (29.0%~~$32,450,000 (31.7% of restaurant sales) for the three quarters ended June ~~29, 2021.~~28, 2022.

Bad Daddy’s food and packaging costs were $24,131,000 (31.1% of restaurant sales) for the three quarters ended June 27, 2023, down from $24,615,000 (31.9% of restaurant sales) for the three quarters ended June 28, ~~2022, up from $18,494,000 (28.9%~~2022. This decrease is primarily attributable to lower purchase prices on food and paper goods, and menu price increases, offset by decreased traffic in the third fiscal quarter.
Good Times food and packaging costs were $8,054,000 (31.5% of restaurant sales) for the three quarters ended June 29, 2021. This increase is primarily attributable to higher restaurant sales during the three quarters versus the same period in the prior year. The increase as a percent of sales is attributable the significant inflation noted during the quarter with most of our food and packaging products seeing meaningful unit price increases.
~~Good Times food and packaging costs were~~27, 2023, up from $7,835,000 (31.2% of restaurant sales) for the three quarters ended June 28, ~~2022, up from $7,543,000 (29.4%~~2022. This increase is primarily attributable to the impact of ~~restaurant sales) for the three quarters ended June 29, 2021. The increase~~higher sales, and as a percent of sales the increase is ~~due~~ primarily attributable to ~~the impact of~~ higher year-to-date purchase prices on food and paper goods partially offset by ~~increased~~the impact of an 9.6% increase in menu pricing.

Payroll and Other Employee Benefit Costs. Payroll and other employee benefit costs for the three quarters ended June ~~28, 2022~~27, 2023 increased ~~$5,240,000~~$450,000 to ~~35,027,000 (34.2%~~$35,477,000 (34.4% of restaurant sales) from ~~$29,787,000 (33.2%~~$35,027,000 (34.2% of restaurant sales) for the three quarters ended June ~~29, 2021.~~28, 2022.

Bad Daddy’s payroll and other employee benefit costs were $26,951,000 (34.7% of restaurant sales) for the three quarters ended June 27, 2023 up from $26,450,000 (34.3% of restaurant sales) for the three quarters ended June 28, ~~2022 up from $21,644,000 (33.8% of restaurant sales) in the same prior year period.~~2022. The ~~$4,806,000~~$501,000 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 Timespayroll and other employee benefit costs were ~~$8,577,000 (34.2%~~$8,526,000 (33.4% of restaurant sales) in the three quarters ended June ~~28, 2022, up~~27, 2023, down from ~~$8,143,000 (31.7%~~$8,577,000 (34.2% of restaurant sales) in the same prior-year period. The ~~$434,000 increase, both in nominal dollars and as measured as a percent of restaurant sales,~~$51,000 decrease was attributable to higher average wage rates paid to attract qualified employees. These higher wages are in-part driven by a combination of the significant statutory wage increase in the City and County of Denver and the impact of the overall market for quick service restaurant employees.improved labor productivity.
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Occupancy Costs. Occupancy costs for the three quarters ended June ~~28, 2022~~27, 2023 increased ~~$555,000~~$230,000 to ~~$7,088,000 (6.9%~~$7,318,000 (7.1% of restaurant sales) from ~~$6,533,000 (7.3%~~$7,088,000 (6.9% of restaurant sales) for the three quarters ended June ~~29, 2021.~~28, 2022.

Bad Daddy’s occupancy costs were $5,124,000 (6.6% of restaurant sales) for the three quarters ended June 27, 2023, up from $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.~~2022. The increase was primarily attributable to additional lease costs associated with ~~newly opened restaurants and increased property tax assessments. The decrease as a percentage~~the purchase of ~~sales was primarily due to~~our Bad Daddy’s Franchisee in the ~~leveraging effect~~second quarter of ~~higher restaurant sales.~~fiscal 2022.

Good Times occupancy costs were $2,194,000 (8.6% of restaurant sales) in the three quarters ended June 27, 2023, up from $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.~~2022. The ~~decrease~~increase was primarily attributable to ~~decreases in~~increased property ~~tax expense~~taxes and ~~end-of-term rent abatement and associated with a lease termination agreement for one good times restaurant~~insurance costs.

Other Operating Costs. Other operating costs for the three quarters ended June ~~28, 2022,~~27, 2023, increased ~~$2,717,000~~$571,000 to ~~$13,558,000 (13.3%~~$14,129,000 (13.7% of restaurant sales) from ~~$10,841,000 (12.1%~~$13,558,000 (13.3% of restaurant sales) for the three quarters ended June ~~29, 2021.~~28, 2022.

Bad Daddy’s other operating costs were $11,084,000 (14.3% of restaurant sales) for the three quarters ended June 27, 2023 up from $10,696,000 (13.9% of restaurant sales) for the three quarters ended June 28, ~~2022 up from 8,448,000 (13.2%~~2022. The $338,000 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 $3,045,000 (11.9% of restaurant sales) in the three quarters ended June 27, 2023, up from $2,862,000 (11.4% of restaurant sales) in the three quarters ended June 28, ~~2022, up from $2,393,000 (9.3% of restaurant sales) in the same prior year period.~~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 $110,000 for the three quarters ended June 27, 2023, primarily associated with training costs associated with our new Bad Daddy’s in Madison, Alabama and re-training costs in connection with the remodel of our Greenville, SC Bad Daddy’s, compared to $50,000 for the three quarters ended June 28, ~~2022 decreased $370,000 to $50,000 from $420,000 in the three quarters ended June 29, 2021. The costs in the prior year were related to a Bad Daddy’s restaurant opened near the end of fiscal 2021.~~2022.

Depreciation and Amortization Costs. Depreciation and amortization costs for the three quarters ended June ~~28, 2022, increased $193,000~~27, 2023, decreased $250,000 to ~~$2,990,000~~2,740,000 from ~~$2,797,000~~$2,990,000 in the three quarters ended June ~~29, 2021.~~28, 2022.
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Bad Daddy’s depreciation and amortization costs for the three quarters ended June ~~28, 2022 increased $248,000~~27, 2023 decreased $161,000 to ~~$2,464,000~~$2,303,000 from ~~$2,216,000~~$2,464,000 in the three quarters ended June ~~29, 2021. This increase was primarily attributable to the two new restaurants opened in final quarter of fiscal 2021.~~28, 2022.

Good Timesdepreciation and amortization costs for the three quarters ended June ~~28, 2022~~27, 2023 decreased ~~$55,000~~$89,000 to ~~$526,000~~$437,000 from ~~$581,000~~$526,000 in the three quarters ended June ~~29, 2021.~~28, 2022.

General and Administrative Costs. General and administrative costs for the three quarters ended June ~~28, 2022, increased $564,000~~27, 2023, decreased $621,000 to ~~$7,661,000 (7.4%~~$7,040,000 (6.8% of total ~~revenue)~~revenues) from ~~$7,097,000 (7.8%~~$7,661,000 (7.4% of total revenue) for the three quarters ended June ~~29, 2021.~~28, 2022.

This ~~increase~~decrease in general and administrative expenses in the three quarters ended June ~~28, 2022~~27, 2023 is primarily attributable to:
·
●
Increase in ~~Training~~administrative, accounting, and ~~Recruiting~~technology costs ~~including incentives,~~ of ~~$269,000, including~~$362,000
●
Increase in costs associated with ~~the annual general manager conference and a~~ multi-unit ~~supervisor training conference.~~supervisory roles of $258,000
·
●
Decrease in administrative related payroll and benefit costs of $245,000, primarily related to the prior-year one-time bonus awarded to the CEO in connection with the amendment of his employment agreement, and reduced health insurance underwriting losses, partially offset by increased administrative salaries and wages.
· ~~Increase in legal and professional services costs of $138,000~~
· Decreased stock compensation cost, primarily related to the prior-year accelerated recognition of stock-based compensation cost in connection with the vesting of performance shares and incentive stock options that were issued to the CEO in connection in connection with the amendment of his employment agreement
· ~~Increase in corporate technology expenses of $133,000~~
· ~~Increase in the cost of multi-unit supervision cost of $87,000, primarily related to increased multi-unit travel costs and incentive compensation~~
· ~~Increase~~ in professional services of ~~$15,000~~$759,000
·
●
~~Increase~~
Decrease in insurance related costs $163,000
●
Decrease in stock compensation costs of $103,000
●
Decrease attributable to underwriting gains/losses on the company’s health plan of $97,000
●
Decrease in recruiting and training related costs of $55,000
●
Decrease in general office expenses of $21,000
●
Decrease in general travel-related costs of ~~$72,000~~$15,000
· ~~Increase in vendor fees primarily related to lower corporate vendor rebates.~~
· ~~Increase in the cost of business insurance including D&O, EPL, and cyber coverage of $68,000~~
· ~~Increase in general office expenses of $38,000~~
· ~~Increase in various other expenses of $23,000~~
23
●
~~Table~~
Net decrease in other costs of ~~Contents~~$28,000

Advertising Costs.Advertising costs for the three quarters ended June ~~28, 2022,~~27, 2023, increased ~~$644,000~~ to $2,423,000 (2.3% of sales) from $2,260,000 (2.2% ~~of total revenue) from $1,616,000 (1.8%~~ of total revenue) for the three quarters ended June ~~29, 2021.~~28, 2023.

Bad Daddy’s advertising costs were ~~$1,228,000 (1.6%~~$1,414,000 (1.8% of ~~total revenue)~~restaurant sales) in the three quarters ended June ~~29, 2021~~27, 2023 compared to ~~$575,000 (0.9%~~$1,228,000 (1.6% of total revenue) infor the ~~same prior year period.~~three quarters ended June 28, 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, associated with franchise advertising contributions.~~social media.

Good Times advertising costs were $1,009,000 (3.9% of restaurant sales) in the three quarters ended June 27, 2023 compared to $1,032,000 (4.0% of total revenue) in the three quarters ended June 28, 2022 compared to $1,041,000 (4.0% of total revenue) in the same prior year period. The current and prior year quarters include advertising costs of $195,000 and $71,000, respectively, of costs associated with franchise advertising contributions.2022.

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.~~point-of-purchase printing costs. Advertising costs are presented gross, with franchisee contributions to the fund being recognized as a component of franchise revenues. ~~As a percentage of total revenue, we expect advertising costs to remain relatively stable, at approximately 4.0% of total revenue for the Good Times segment.~~
~~Franchise Costs.~~ Franchise costs were $16,000 and $22,000 for the quarters ended June 28, 2022 and June 29, 2021, respectively. The costs are related to the Good Times franchised restaurants. We currently have minimal direct costs associated with maintaining our franchise systems as those employees overseeing franchisee relations primarily perform responsibilities associated with company operations.
~~Impairment Costs.~~ Costs related to the impairment of long-lived assets were $2,056,000 for the quarter ended June 28, 2022. Good Times Impairment costs for the three quarters ended June 28, 2022 were $790,000 due to the asset impairments of three Good Times restaurants. Bad Daddy’s impairment costs for the three quarters ended June 28, 2022 were $1,266,000 due to the impairment of one Bad Daddy’s restaurant.

Gain on Restaurant Asset Sales and Lease Termination. The gain on restaurant asset sales and lease termination for the three quarters ended June ~~28, 2022~~27, 2023 was ~~$666,000~~$32,000, compared to ~~$28,000~~$666,000 for the three quarters ended June ~~29, 2021, primarily related to~~28, 2022. The prior-year gain included the gain on termination of a lease ofassociated with a ~~good times restaurant. The remainder being related to past sale-leaseback transactions of~~ Good Times ~~restaurants~~restaurant.
Impairment of Long-Lived Assets Costs. The costs associated with impairments for the three quarters ended June 27, 2023 was $1,041,000, which primarily consists of the impairment of one Bad Daddy’s restaurant, compared to $2,056,000 for the three quarters ended June 28, 2022.
Litigation Contingency Costs. There were no litigation contingency costs in the three quarters ended June 27, 2023, compared to $332,000 for the three quarters ended June 28, 2022.

Income ~~(Loss)~~ from Operations. Income from operations was $1,368,000 in the three quarters ended June 27, 2023 compared to income from operations of $188,000 in the three quarters ended June 28, ~~2022 compared to income from operations of $5,311,000 in the three quarters ended June 29, 2021.~~2022.

The change in the income from operations for the three quarters ended June ~~28, 2022~~27, 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 $56,000 during the three quarters ended June 27, 2023, primarily related to the amortization of loan initiation fees, compared with $41,000 during the three quarters ended June 28, 2022 compared to $244,000 in the three quarters ended June 29, 2021. The $203,000 reduction is primarily due to lower interest costs attributable to there being no outstanding long-term debt in the current year. The remaining interest expense is attributable to commitment fees and the amortization of loan costs associated with the Cadence Credit Facility.
~~Gain on Debt Extinguishment.~~ There was no gain on debt extinguishment for the three quarters ended June 28, 2022 compared to $11,778,000 for the three quarters ended June 29, 2021. The gain in the prior year to date was related to forgiveness of PPP loans by the SBA.
~~Litigation Contingencies.~~ ~~The Company recorded a contingent loss of $332,000 during the three quarters ended June 28, 2022 related to in-process litigation. No similar losses were recorded during the same prior year period.~~2022.

Provision for Income Taxes.Provision for income taxes was a $10,503,000 benefit for the three quarters ended June 27, 2023, compared to $9,000 provision for income taxes for the three quarters ended June 28, ~~2022, primarily associated with estimated cash taxes due for state income tax.~~2022. This most significant driver of this provision was the release of the valuation allowance during previously assessed on the deferred tax assets.

Net Income ~~(Loss)~~. Net ~~Income~~income was ~~$147,000~~$11,815,000 for the three quarters ended June ~~28, 2022~~27, 2023 compared to net income of ~~$16,846,000~~$147,000 in the three quarters ended June ~~29, 2021.~~28, 2022.

The change from the three quarters ended June ~~28, 2022~~27, 2023 to the three quarters ended June ~~29, 2021~~28, 2022 was primarily attributable to the matters discussed in the relevant sections above.

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

For the three quarters ended June ~~28, 2022,~~27, 2023, the income attributable to non-controlling interests was ~~$1,489,000~~$479,000 compared to ~~$1,313,000~~$1,489,000 for the three quarters ended June ~~29, 2021.~~28, 2022.
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Of the three ~~quarter’s~~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~~$1,024,000 in the same prior year period. ~~Income attributable~~This $805,000 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~~and to the company’s purchase of all the Bad Daddy’s non-controlling membership interests during the fiscal quarter ended March 28, 2023, as described in Note 15 to the unaudited, consolidated financial statements included in this report. Of the current ~~fiscal quarter. The remaining $464,000~~quarter’s income, $260,000 is attributable to the Good Times joint-venture restaurants, compared to ~~$625,000~~$464,000 in the same prior year period at the restaurants involved in the joint-venture partnership. This $204,000 decrease is primarily ~~attributable~~due to ~~reduced~~decreased restaurant level profitability in ~~those joint venture restaurants.~~the current fiscal quarter.

Adjusted EBITDA

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

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

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

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

·
●
Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
·
●
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
·
●
Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;
·
●
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;
·
●
stock based compensation expense is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing performance for a particular period;
·
●
Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and
·
●
~~other~~
Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

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

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Table of Contents

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:~~
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)
Adjusted EBITDA:
Net Income (Loss), as reported $ 469 $ 13,634 $ (1,351 ) $ 15,533
Depreciation and amortization 951 925 2,933 2,745
Interest expense, net 12 67 41 245
Provision for income taxes 1 - 9 -
EBITDA 1,433 14,626 1,632 18,523
Preopening expense - 301 50 420
Non-cash stock-based compensation 60 50 208 326
Asset Impairment 303 - 2,056 -
GAAP rent-cash rent difference (103 ) (108 ) (286 ) (280 )
Loss (Gain on restaurant asset sales
and lease termination (9 ) (9 ) (528 ) (28 )
One-time special allocation to Bad
Daddy’s Partnerships - - 516 -
Gain on debt extinguishment (11,778 ) (11,778 )
Litigation contingencies - - 332 -
Adjusted EBITDA $ 1,684 $ 3,082 $ 3,980 $ 7,183
~~Depreciation and amortization expense has been reduced by amounts attributable to 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 27, 2023:

Quarter Ended (13 Weeks)

Year-to-Date (39 Weeks)

June 27, 2023

June 28, 2022

June 27, 2023

June 28, 2022

Adjusted EBITDA:

Net Income (loss) attributable common shareholders, as reported
$ 842 $ 469 $ 11,336 $ (1,351 )
Depreciation and amortization¹
924 951 2,691 2,933
Interest expense, net
18 12 56 41
Provision for income taxes
(551 ) 1 (10,503 ) 9
EBITDA
1,233 1,433 3,580 1,632
Preopening expense
80 - 110 50
Non-cash stock-based compensation
15 60 104 208
Asset Impairment
965 303 1,041 2,056
GAAP rent-cash rent difference¹
(135 ) (103 ) (450 ) (286 )
Gain on restaurant asset sales and lease termination²
(10 ) (9 ) (32 ) (528 )
One-time special allocation to Bad Daddy’s partnerships³
- - - 516
Litigation contingencies
- - - 332
Adjusted EBITDA
$ 2,148 1,684 $ 4,353 $ 3,980
¹
Depreciation and amortization expense and GAAP rent-cash rent difference together have been reduced by amounts attributable to non-controlling interests of $17,000 and $63,000 for the quarters ended June 27, 2023 and June 28, 2022, respectively. Depreciation and amortization expense and GAAP rent-cash rent difference have been reduced by amounts attributable to non-controlling interests of $107,000 and $133,000 for the three quarters ended March 28, 2023 and March 29, 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.
²
Gain (Loss) on restaurant asset sales and lease termination had no impact from amounts attributable to non-controlling interests in the three quarters ended June 27, 2023 and June 28, 2022. Gain (loss) on restaurant asset sales and lease termination had no impact from amounts attributable to non-controlling interests in the three quarters ended June 27, 2023 and was reduced by $138,000 for the three quarters ended June 28, 2022.
³
Represents the portion of a payroll cost rebate attributable to the non-controlling partners in these partnerships.

Liquidity and Capital Resources

Cash and Working Capital

As of June ~~28, 2022,~~27, 2023, we had a working capital deficit of ~~$433,000.~~$6,421,000. 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 ~~28, 2022,~~27, 2023 we had no$206,000 of commitments outstanding related to a construction ~~contracts~~contract for ~~any restaurants~~the Bad Daddy’s restaurant currently under ~~development.~~development in greater Huntsville, Alabama. Construction began in early April 2023 and the restaurant is expected to open in the late fourth quarter of this fiscal year. This construction and the expected resulting expenditures are not anticipated to materially impact the Company’s liquidity or operations.

~~The~~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~~other corporate considerations.
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Table 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.~~
Contents

Financing

Cadence Credit Facility

The Company ~~maintains a~~and its wholly owned subsidiaries (the “Subsidiaries”) maintain an amended and restated credit agreement with Cadence Bank (“Cadence”) pursuant to which, ~~as amended,~~ Cadence ~~has~~ agreed to loan the Company up to $8,000,000, ~~with~~has a maturity date of ~~January 31, 2023 (as amended, the~~April 20, 2028 (the “Cadence Credit Facility”). AsThe Cadence Credit Facility amended byand restated the ~~various amendments, the~~Company’s prior credit facility with Cadence in its entirety. The Cadence Credit Facility accrues commitment fees on the daily unused balance of the facility at a rate of 0.25%. AsThe loans may from time to time consist of ~~June 28, 2022, any borrowings under the Cadence Credit Facility, as amended, bear~~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 ~~and (c) LIBOR plus 1.0%,~~ or ~~(ii) LIBOR, with a 0.250% floor, plus 3.5%.~~Term SOFR. 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~~Each of ~~any transition~~the Subsidiaries are guarantors of ~~LIBOR to an alternate benchmark rate is not currently known.~~the Cadence Credit Facility.

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~~During the quarter ended March 29, 2022 the Company entered into an amendment to~~Proceeds from the Cadence Credit Facility, ~~which, among~~if and when drawn, may be used (i) to fund new restaurant development, (ii) to finance the buyout of non-controlling partners in certain restaurants, (iii) to finance the redemption, purchase or other ~~things, amends the Credit Agreement to modify the “Restricted Payments” covenant~~acquisition of equity interests 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.~~and (iv) for working capital and other general corporate purposes.

~~As of June 28, 2022, the~~The Cadence Credit Facility ~~contains certain~~includes customary affirmative and negative covenants and events of ~~default that~~default. The Cadence 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 outstanding balance under the Revolver exceeds $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~~In connection with the Cadence Credit Facility, the Company and the ~~various amendments,~~Subsidiaries entered into an Amended and Restated Security and Pledge Agreement (the “Security Agreement”) with Cadence. Under the Security Agreement, the Cadence Credit Facility is secured by a first priority security interest in substantially all the assets of 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.~~Subsidiaries.

~~The obligations~~As of June 27, 2023, the interest rate that would have been applicable to borrowings 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.would have been 8.07%.

Cash Flows
The table below summarizes our cash flows from operating, investing, and financing activities for each period presented (in thousands):

Year-to-date period ended

June 27, 2023

June 28, 2022

Net cash provided by operating activities
$ 4,707 $ 4,418
Net cash used in investing activities
(7,572 ) (1,606 )
Net cash used in financing activities
(2,357 ) (1,964 )
Net change in cash and cash equivalents
$ (5,222 ) $ 848
Operating cash flows

Net cash provided by operating activities ~~was $4,418,000 for~~increased by $289,000, primarily due to decreased general and administrative costs, offset by slightly lower restaurant-level profitability as presented on the ~~three quarters ended June 28, 2022. The net~~Condensed Consolidated Statements of Cash Flows.
Investing cash flows
Net cash used in ~~operating~~investing activities for the three quarters ended June ~~28, 2022~~27, 2023 was $7,572,000 which primarily reflects the ~~result~~purchases of property and equipment of $3,178,000, and the net ~~income~~purchase of ~~$138,000 as well as cash~~all non-controlling interests in our Bad Daddy’s locations of $4,394,000. Purchases of property and ~~non-cash reconciling items totaling $4,280,000. These reconciling items are primarily~~equipment is comprised of 1) depreciation and amortization of general assets of $3,129,000, 2) amortization of operating lease assets of $2,908,000, 3) impairment of long-lived assets of $2,056,000 4) stock-based compensation expense of $207,000 5) a gain on lease termination and deferred gain on sale/leaseback of restaurants of $666,000, 6) A decrease in ROU assets of $57,000, 7) Income tax provision of $9,000, 8) an increase in prepaids of $742,000, primarily attributable to an increase in prepaid rent, 9) an increase in accrued expenses of $1,123,000, 10) a decrease in accounts payable of $529,000, 11) a net decrease in amounts related to our operating lease liabilities of $3,262,000 and 12) An net increase of $10,000 in inventory, other receivables, and deposits and other assets.the following:

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..
●
$1,901,000 for miscellaneous capital expenditures related to our existing Bad Daddy’s restaurants, primarily related to the remodel of the Greenville, South Carolina restaurant and the construction of the new restaurant in Madison, Alabama;
●
$1,277,000 for capital expenditures related to our existing Good Times restaurants, primarily related to new signs, menu boards and lane timers, and the replacement of HVAC and other restaurant equipment.

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

·
●
$936,000 for miscellaneous capital expenditures related to our existing Bad Daddy’s restaurants, including the payment of amounts in accounts payable at September 29, 2021 associated with the construction of one new Bad Daddy’s restaurant near the end of fiscal 2021
·
●
$471,000 for miscellaneous capital expenditures related to our existing Good Times restaurants
·
●
$216,000 for miscellaneous capital expenditures related to our restaurant support center, primarily initial development costs for the computer software underlying our two brands’ mobile apps and automotive assets used by our internal maintenance team

~~Net cash used in investing activities for the three quarters ended June 29, 2021 was $2,085,000~~
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~~which primarily reflects the purchases of property and equipment of $2,098,000. Purchases of property and equipment is comprised of the following:~~Financing cash flows
· ~~$1,136,000 in costs for the development of Bad Daddy’s locations~~
· ~~$486,000 for miscellaneous capital expenditures related to our Bad Daddy’s restaurants~~
· ~~$82,000 in costs related to remodeling of one Good Times location~~
· ~~$190,000 for miscellaneous capital expenditures related to our Good Times restaurants~~
· ~~$204,000 for miscellaneous capital expenditures related to our restaurant support center~~
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~~Table of Contents~~

Net cash used in financing activities for the three fiscal quarters ended June 27, 2023 was $2,357,000, which includes proceeds from stock option exercises of $5,000 and distributions to (net of contributions by) non-controlling interests of $563,000, $92,000 in restricted stock vesting paid in cash, and $1,720,000 in payments for the purchase of treasury stock.
Net cash used in financing activities for the three fiscal quarters ended June 28, 2022 was $1,964,000, which includes distributions to non-controlling interests of $1,449,000, ~~and~~ payment for the repurchase of the Company’s common stock of $605,000 and proceeds from stock option exercise of $90,000.

Net cash used in financing activities for the three quarters ended June 29, 2021 was $6,454,000, 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.
Impact of Inflation

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.

Seasonality

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.

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

ITEM 4.
CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Based on an evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this report on Form ~~10Q,~~10-Q, the Company’s Chief Executive Officer (its principal executive ~~officer)~~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 ~~28, 2022.~~27, 2023.

Changes in Internal Control over Financial Reporting

There have been no significant changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended June ~~28, 2022~~27, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.
LEGAL PROCEEDINGS

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

ITEM 1A.
RISK FACTORS

~~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 and subsequent filings with the SEC.

The inability of the company to successfully negotiate extended terms on leases reaching end-of-term may reduce future profitability.
The company leases the real estate underlying substantially all of its restaurants. While our leases generally have options for extension of the initial term, in the case of some of our Good Times restaurants, we have exercised all of the options granted to us under the lease. Additionally, some options are set at fair market rental rates, and in the case of one Bad Daddy’s restaurant, no option to extend exists in the lease. Furthermore, many of our Good Times leases are at rates below current market prices. Although the Company has generally been successful in negotiations with our landlords, the risk that we are unable negotiate additional lease term on expiring leases at reasonable rental rates could materially impact our future profitability.
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Table of Contents
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company‘s Board of Directors authorized a $5.0 Million share repurchase program which became effective February 7, 2022. The authorization to repurchase will continue until the maximum value of shares is achieved or the Company terminates the program. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities. As of June ~~28, 2022~~27, 2023 the Company has purchased ~~169,648~~951,048 shares of its common stock pursuant to the share repurchase plan leaving approximately ~~$4,395,000~~$2,326,000 available for repurchases under the plan.
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~~Table of Contents~~

Repurchases of common stock under the share repurchase plan during the fiscal quarter ended June ~~28, 2022~~27, 2023 were as follows:

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

3/29/2023 – 4/25/2023
21,879 $ 2.76 21,879
4/26/2023 – 5/23/2023
32,707 $ 2.82 32,707
5/24/2023 – 6/27/2023
69,037 $ 3.17 69,037
Total
123,623 123,623 $ 2,326,000

ITEM 3.
DEFAULTS UPON SENIOR SECURITIES

~~None~~None.

ITEM 4.
MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.
OTHER INFORMATION

None.

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ITEM 6.
EXHIBITS

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

Exhibit No.
Description
3.1
Amended and Restated Bylaws of Good Times Restaurants Inc., effective April 20, 2023 (previously filed as Exhibit 3.1 to the Registrant’s Form 8-K filed on April 26, 2023 and incorporated herein by reference)
10.1
Amended and Restated Credit Agreement dated April 20, 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’s Form 8-K filed on April 26, 2023.and incorporated herein by reference)
10.2
Security and Pledge Agreement, dated April 20, 2023, by and among Good Times Restaurants Inc., each of its wholly-owned subsidiaries and Cadence Bank, N.A. (previously filed as Exhibit 10.2 to the Registrant’s Form 8-K filed on April 26, 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
Inline XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
*104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Filed herewith

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Table of Contents

SIGNATURES

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

DATE: August 3, 2023
GOOD TIMES RESTAURANTS INC.
~~DATE: August 11, 2022~~

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

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

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