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 December 26, 2023 | ||||
OR | ||||
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES | ||||
EXCHANGE ACT OF 1934 | ||||
Commission File Number: 0-18590 | ||||
Good Times Restaurants Inc. | ||||
(Exact Name of Registrant as Specified in Its Charter) |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
Nevada 84-1133368 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer 651 CORPORATE CIRCLE, GOLDEN, CO 80401 (Address of Principal Executive Offices, Including Zip Code) (303) 384-1400 (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock $.001 par value GTIM NASDAQ Capital Market Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company”, in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No Form 10-Q Quarter Ended December PART I. - FINANCIAL INFORMATION ITEM 1.FINANCIAL STATEMENTS Good Times Restaurants Inc. and Subsidiaries (In thousands, except share and per share data) December 26, 2023 September 26, 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents Receivables Prepaid expenses and other Inventories Total current assets PROPERTY AND EQUIPMENT: Land and building Leasehold improvements Fixtures and equipment Total property and equipment Less accumulated depreciation and amortization Total net property and equipment OTHER ASSETS: Operating lease right-of-use assets, net Deferred tax assets, net Deposits and other assets Trademarks Other intangibles, net Goodwill TOTAL ASSETS: LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable Deferred income Operating lease liabilities, current Other accrued liabilities Total current liabilities LONG-TERM LIABILITIES: Maturities of long-term debt, net of current portion Operating lease liabilities, net of current portion Deferred and other liabilities Total long-term liabilities 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 December 26, 2023 and September 26, 2023 Common stock, $.001 par value; 50,000,000 shares authorized; 12,977,433 issued; 11,285,815 and 11,446,587 shares outstanding as of December 26, 2023 and September 26, 2023, respectively Capital contributed in excess of par value Treasury stock, at cost; 1,691,618 and 1,530,846 shares as of December 26, 2023 and September 26, 2023, respectively Accumulated deficit Total Good Times Restaurants Inc. shareholders' equity Non-controlling interests Total shareholders’ equity TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY See accompanying notes to condensed consolidated financial statements (unaudited) Good Times Restaurants Inc. and Subsidiaries (In thousands except share and per share data) Quarter Ended December 26, 2023 December 27, 2022 NET REVENUES: Restaurant sales Franchise revenues Total net revenues RESTAURANT OPERATING COSTS: Food and packaging costs Payroll and other employee benefit costs Restaurant occupancy costs Other restaurant operating costs Depreciation and amortization Total restaurant operating costs General and administrative costs Advertising costs Gain on restaurant and equipment asset sales (LOSS) INCOME FROM OPERATIONS OTHER INCOME (EXPENSE): Interest expense, net NET (LOSS) INCOME BEFORE INCOME TAXES Provision for income taxes NET (LOSS) INCOME Income attributable to non-controlling interests NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS NET LOSS PER SHARE, ATTRIBUTABLE TO COMMON SHAREHOLDERS: Basic and Diluted WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic Diluted See accompanying notes to condensed consolidated financial statements (unaudited) Good Times Restaurants Inc. and Subsidiaries (In thousands, except share and per share data) Treasury Stock, Common Stock Shares Amount Issued Par Capital Non- Accumulated Total BALANCES, September 27, 2022 Stock-based compensation cost Restricted stock unit vesting Stock option exercise Treasury shares purchased Income attributable to non-controlling interests Distributions to unrelated limited partners Contributions from unrelated limited partners Net loss attributable to Good Times Restaurants Inc and comprehensive loss BALANCES, December 27, 2022 BALANCES, September 26, 2023 Stock-based compensation cost Treasury shares purchased Income attributable to non-controlling interests Distributions to unrelated limited partners Net loss attributable to Good Times Restaurants Inc and comprehensive loss BALANCES, December 26, 2023 See accompanying notes to consolidated financial statements (unaudited) Good Times Restaurants Inc. and Subsidiaries (In thousands) Fiscal Year to Date December 26, 2023 December 27, 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization Gain on restaurant and equipment asset sales Stock-based compensation expense Provision for income taxes Changes in operating assets and liabilities: (Increase) decrease in: Receivables and prepaids Inventories Deposits and other assets Increase (decrease) in: Accounts payable Accrued and other liabilities Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Payments for the purchase of property and equipment Proceeds from the sale of fixed assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings against credit facility Payment for the purchase of treasury stock Payment for restricted stock vesting settled in cash Proceeds from stock option exercise Contributions from non-controlling interests Distributions to non-controlling interests Net cash provided by (used in) financing activities (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, beginning of period CASH AND CASH EQUIVALENTS, end of period SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest Change in accounts payable attributable to the purchase of property and equipment See accompanying notes to condensed consolidated financial statements (Unaudited) GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Tabular dollar amounts in thousands, except share and per share data) Note 1.Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Good Times Restaurants Inc. (the “Company”) and its wholly-owned subsidiaries as well as The Company operates, and licenses full-service restaurants under the brand Bad The Company operates and franchises drive-thru The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles and practices of the United States of America (“GAAP”) for interim financial information. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all of the normal recurring adjustments necessary to present fairly the financial position of the Company as of December Fiscal Year – The Company’s fiscal year is a 52/ Reclassification – Certain prior year balances have been reclassified to conform to the current year’s presentation. Such reclassifications had no effect on the net income (loss). Advertising Costs – 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, payments due from third party delivery and online ordering partners, and payments due to us for sales of gift cards to third party retailers. Receivables consist of the following as of: December 26, 2023 September 26, 2023 Large box retail partners Vendor rebates and incentives Third party delivery partners Franchise and other Total ASU 2023-07–Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures was issued November 2023 and is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. It is to be applied retrospectively. The Company expects to retrospectively implement ASU 2023-07 in fiscal year 2025 and does not anticipate that it will have a material effect on the Company’s consolidated financial statements. The Company reviewed Note 3.Revenue Revenue Recognition Revenues consist primarily of sales from restaurant The Company recognizes revenues in the form of restaurant sales at the time of the sale when payment is made by the customer, as the Company has completed its performance obligation, namely the provision of food and beverage, and the accompanying customer service, during the customer’s visit to the restaurant. The Company sells gift cards to customers and recognizes revenue from gift cards primarily in the form of restaurant revenue. Gift Card breakage, which is recognized when the likelihood of a gift card being redeemed is remote, is determined based upon the Company’s historic redemption patterns, and is immaterial to our overall financial statements. Late in fiscal 2023, the Company began operating a loyalty program known as GT Rewards. With each purchase, GT Rewards members earn loyalty points that can be redeemed in the future for free products. Activity related to the new reward program is immaterial to the Company’s financial statements for the quarter ended December 26, 2023. 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 Note 4.Goodwill and Intangible Assets The following table presents goodwill and intangible assets as of December December 26, 2023 September 26, 2023 Gross Accumulated Net Gross Accumulated Net Reacquired franchise rights The Company had no goodwill impairment losses in the periods presented in the above table. The aggregate amortization expense related to these intangible assets subject to amortization was $3,000 for the quarter ended December 26, 2023 and $2,000 for the quarter ended December 27, Note 5.Stock-Based Compensation The Company has traditionally maintained incentive compensation plans that include provision for the issuance of equity-based awards. The Company established the 2008 Omnibus Equity Incentive Compensation Plan in 2008 (the 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 Stock Option awards The Company measures the compensation cost associated with stock option awards by estimating the fair value of the award as of the grant date using the Black-Scholes pricing model. The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the Company’s stock options and stock awards granted during the quarter ended December There were In addition to the exercise and grant date prices of the stock option awards, certain weighted average assumptions that were used to estimate the fair value of stock option grants are listed in the following table: Quarter Ended December 26, 2023 Incentive and Non-Qualified Stock Options Quarter Ended December 27, 2022 Incentive and Non-Qualified Stock Options We estimate expected volatility based on historical weekly price changes of our common stock for a period equal to the current expected term of the options. The risk-free interest rate is based on the United States treasury yields in effect at the time of grant corresponding with the expected term of the options. The expected option term is the number of years we estimate that options will be outstanding prior to exercise considering vesting schedules and our historical exercise patterns. The following table summarizes stock option activity for the quarter ended December Shares Weighted Weighted Average Outstanding at beginning of year Options granted Outstanding December 26, 2023 Exercisable December 26, 2023 As of December 26, 2023 and December 27, 2022, the aggregate intrinsic value of the outstanding and exercisable options was As of December There were no stock options exercised during the quarter ended December 26, 2023. There were 2,000 stock options exercised that resulted in an issuance of 2,000 shares during the quarter ended December 27, 2022 with proceeds of approximately $5,000. Restricted Stock Units There were 34,000 restricted stock units granted during the quarter ended December 26, 2023 and 25,750 restricted stock units granted during the quarter ended December 27, A summary of the status of non-vested restricted stock units as of December Shares Grant Date Fair Non-vested units at beginning of year Units granted during the quarter Non-vested units at December 26, 2023 As of December Restricted and Unrestricted Common Stock Awards No grants of restricted or unrestricted common stock were made during the quarter ended December Note 6.Gain on Sale of Assets For the fiscal quarter ended December 26, 2023, the Company had $10,000 of deferred gains on prior sale-leaseback transactions related to certain Good Times restaurants. For the fiscal quarter ended December 27, 2022, the Company had $8,000 of deferred gains on prior sale-leaseback transactions related to certain Good Times restaurants offset by approximately $8,000 of losses incurred in the disposal of miscellaneous assets. Note 7.Prepaid expense and other current assets Prepaid expenses and other current assets consist of the following as of: December 26, 2023 September 26, 2023 Prepaid Insurance Other Total Note 8.Other Accrued Liabilities Other accrued liabilities consist of the following as of: December 26, 2023 September 26, 2023 Wages and other employee benefits Taxes, other than income taxes Gift card liability, net of breakage General expense accrual and other Total Note 9.Notes Payable and Long-Term Debt Cadence Credit Facility The Company Proceeds from the Cadence Credit Facility, 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. The Cadence Credit Facility includes customary affirmative and negative covenants and events of default. The Cadence Credit Facility also requires the Company to maintain various financial condition ratios, including minimum liquidity, an amended maximum leverage ratio and an amended minimum fixed charge coverage ratio. In addition, to the extent the aggregate outstanding balance under the revolver under the Cadence Credit Facility exceeds $4.0 million, the Company is required to meet a new specified leverage ratio, on a pro forma basis, before making further borrowings as During the fiscal quarter ended December As a result of entering into the Cadence Credit Facility and the various amendments, the Company paid loan origination costs including professional fees of approximately In connection with the Cadence Credit Facility, As of Note 10.Earnings (Loss) per Common Share Our basic earnings per share calculation is computed based on the weighted-average number of common shares outstanding. Our diluted earnings per share calculation is computed based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued. Potentially dilutive securities for this calculation consist of in-the-money outstanding stock options, restricted stock units and warrants (which were assumed to have been exercised at the average market price of the common shares during the reporting period). The treasury stock method is used to measure the dilutive impact of in-the-money stock options. The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding: Quarter Ended December 26, 2023 December 27, 2022 Weighted-average shares outstanding basic Effect of potentially dilutive securities: Stock options Restricted stock units Weighted-average shares outstanding diluted Excluded from diluted weighted-average shares outstanding: Antidilutive Note 11.Contingent Liabilities and Liquidity There may be various claims in process, matters in litigation, and other contingencies brought against the company by employees, vendors, customers, franchisees, or other parties. Evaluating these contingencies is a complex process that may involve substantial judgment on the potential outcome of such matters, and the ultimate outcome of such contingencies may differ from our current analysis. We regularly review the adequacy of accruals and disclosures related to such contingent liabilities in consultation with legal counsel. While it is not possible to predict the outcome of these claims with certainty, 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 the 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. The parties conducted a bench trial on 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. The plaintiffs filed a notice of appeal of the Court’s January 25, 2023 decisions. Good Times, in turn, filed a notice of appeal of the Court’s previous dismissal of its counterclaim against the plaintiffs. On May 18, 2023, the plaintiffs filed their opening brief. On June 23, 2023, Good Times filed its brief in response to the plaintiffs’ The Company previously recorded an accrual for contingent litigation expense in the fiscal quarter ended March 28, 2022 in the amount of $332,000. This amount represented the Company’s best estimate of the likely amount of plaintiffs’ damage 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 renewal options of 10 to 15 years. The lease term is generally the minimum of the noncancelable period or the lease term including renewal options which are reasonably certain of being exercised up to a term of approximately 20 years. 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. Components of operating lease costs are as follows for the fiscal quarters ended December 26, 2023 and December 27, Classification December 26, 2023 December 27, 2022 Occupancy, Other restaurant operating costs and General and administrative expenses, net Occupancy Occupancy Weighted average lease term and discount rate are as follows: December 26, 2023 December 27, 2022 Supplemental cash flow December 26, 2023 December 27, 2022 Supplemental balance sheet disclosures: December 26, 2023 December 27, 2022 Operating lease assets Operating lease liability Operating lease liability, less current portion Total lease liabilities Future minimum rent payments for our operating leases for each of the next five years as of December Total Remainder of 2024 2028 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. Note 13.Impairment of Long-Lived Assets and Goodwill Long-Lived Assets. We review our long-lived assets including land, property, and equipment for impairment when there are factors that indicate that the carrying amount of an asset may not be recoverable. We assess recovery of assets at the individual restaurant level and typically include an analysis of historical cash flows, future operating plans, and cash flow projections in assessing whether there are indicators of impairment. Recoverability of assets to be held and used is measured by comparing the net book value of the assets of an individual restaurant to the fair value of those assets. This impairment process involves significant judgment in the use of estimates and assumptions pertaining to future projections and operating results. There were no impairments of long-lived assets recorded in the fiscal quarters ended December 26, 2023 and December 27, Trademarks. Trademarks have been determined to have an indefinite life. We evaluate our trademarks for impairment annually and on an interim basis as events and circumstances warrant by comparing the fair value of the trademarks with their carrying amount. There was no impairment required to the acquired trademarks as of December 26, 2023 and December 27, 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: Note 14.Income Taxes We account for income taxes using the liability method, whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. The deferred tax assets are reviewed periodically for recoverability and valuation allowances are adjusted as necessary. The 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 Note 15.Non-controlling Interests Non-controlling interests are presented as a separate item in the shareholders’ equity section of the condensed consolidated balance sheet. The amount of consolidated net income or loss attributable to non-controlling interests is presented on the face of the condensed consolidated statement of operations. Changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions, while changes in ownership interest that do result in deconsolidation of a subsidiary require gain or loss recognition based on the fair value on the deconsolidation date. The equity interests of the unrelated limited partners and members are shown on the accompanying consolidated balance sheet in the shareholders’ equity section as a non-controlling interest and is adjusted each period to reflect the limited partners’ and members’ share of the net income or loss as well as any cash contributions or distributions to or from the limited partners and members for the period. The limited partners’ and members’ share of the net income or loss in the subsidiary is shown as non-controlling interest income or expense in the accompanying consolidated statement of operations. All inter-company accounts and transactions are eliminated. The following table summarizes the activity in non-controlling interests during the quarter ended December Total Balance at September 26, 2023 Income Distributions Balance at December 26, 2023 Our non-controlling interests at the end of the quarter consisted of one joint-venture partnership involving Note 16.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 December 26, 2023 December 27, 2022 (Loss) income from operations December 26, 2023 September 26, 2023 Property and equipment, net Bad Daddy’s Good Times Total assets Bad Daddy’s Good Times Note 17.Subsequent Events 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 (I) The disruption to our business from (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) 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) 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 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 adjust prices sufficiently to offset the effect of 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 Overview. 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 concepts. Growth Strategies and Outlook. We believe there are significant opportunities to grow customer traffic and increase awareness of our brands. Prior to the COVID-19 pandemic, we reduced our development profile as we sought to improve our financial position, and while we believe there are unit growth opportunities for both of our concepts, we continue to evaluate that Restaurant locations. As of December Company-Owned/Co-Developed/Joint-Venture: Bad Daddy’s Good Times Burgers Total 2023 2022 2023 2022 2023 2022 Franchise/License: Bad Daddy’s Good Times Burgers Total 2023 2022 2023 2022 2023 2022 Colorado North Carolina Wyoming Total Results of Operations Fiscal quarter ended December Net Revenues. Net revenues for the quarter ended December Bad Daddy’s restaurant sales Good Times restaurant sales Franchise revenues decreased 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. Bad Daddy’s same store restaurant sales Good Times same store restaurant sales increased Restaurant Operating Costs Food and Packaging Costs. Food and packaging costs for the quarter ended December Bad Daddy’s food and packaging costs were Good Times food and packaging costs were $2,719,000 (30.8% of restaurant sales) for the quarter ended December 26, 2023, up from $2,634,000 (32.9% of restaurant sales) for the quarter ended December 27, Payroll and Other Employee Benefit Costs. Payroll and other employee benefit costs for the quarter ended December Bad Daddy’s payroll and other employee benefit costs were Good Timespayroll and other employee benefit costs were Occupancy Costs. Occupancy costs for the quarter ended December Bad Daddy’s occupancy costs were $1,719,000 (7.1% of restaurant sales) for the quarter ended December Other Operating Costs. Other operating costs for the quarter ended December 26, 2023, increased $236,000 to $4,728,000 (14.4% of restaurant sales) from $4,492,000 (13.5% of restaurant sales) for the quarter ended December 27, Bad Daddy’s other operating costs were $3,581,000 (14.8% of restaurant sales) for the quarter ended December 26, 2023 up from Good Times other operating costs were $1,147,000 (13.0% of restaurant sales) for the quarter ended December 26, 2023, up from $971,000 (12.1% of restaurant sales) in the same prior year period. The increase was primarily attributable Depreciation and Amortization Costs. Depreciation and amortization costs for the quarter ended December Bad Daddy’s depreciation and amortization costs for the quarter ended December Good Timesdepreciation and amortization costs for the quarter ended December General and Administrative Costs. General and administrative costs for the quarter ended December This decrease in general and administrative expenses ● Decrease in professional services of ● Decrease in ● Decrease in general travel related expenses of ● Decrease ● Decrease in health insurance costs of $18,000 ● Increase in home office payroll and benefit costs of $22,000 ● Increase in costs associated with new multi-unit supervisory roles of ● Increase in ● Increase in other costs of $14,000 For the balance of the fiscal year, we expect general and administrative costs to Advertising Costs.Advertising costs for the quarter ended December Bad Daddy’s advertising costs were Good Times advertising costs were Good Times advertising costs consist primarily of Gain on Restaurant Asset (Loss) Income from Operations. The change in the Interest Expense. Interest expense was $32,000 during the quarter ended December 26, 2023 compared with $12,000 during the quarter ended December 27, Provision for Income Taxes.There was Net (Loss) Income. Net loss was ($483,000) for the quarter ended December 26, 2023 compared to net income of The change from the quarter ended December Income Attributable to Non-Controlling Interests. The non-controlling interest represents the limited partners’ or members’ share of income in the Good Times and Bad Daddy’s joint-venture restaurants. For the quarter ended December Of the current quarter’s income attributable to non-controlling interests, The full $73,000 of Adjusted EBITDA EBITDA is defined as net income (loss) before interest, income taxes and depreciation and amortization. Adjusted EBITDA is defined as EBITDA plus non-cash stock-based compensation expense, preopening expense, non-recurring acquisition costs, GAAP rent in excess of cash rent, and non-cash disposal of assets. Adjusted EBITDA is intended as a supplemental measure of our performance that is not required by or presented in accordance with GAAP. We believe that EBITDA and Adjusted EBITDA provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results. Our management uses EBITDA and Adjusted EBITDA (i) as a factor in evaluating management's performance when determining incentive compensation, and (ii) to evaluate the effectiveness of our business strategies. We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company's financial measures with other fast casual restaurants, which may present similar non-GAAP financial measures to investors. In addition, you should be aware when evaluating EBITDA and Adjusted EBITDA that in the future we may incur expenses similar to those excluded when calculating these measures. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies do not calculate Adjusted EBITDA in the same fashion. Our management does not consider EBITDA or Adjusted EBITDA in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of EBITDA and Adjusted EBITDA is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company's financial statements. Some of these limitations are: ● Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; ● Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; ● Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; ● Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; ● Stock based compensation expense is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing performance for a particular period; ● Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and ● Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only as a supplemental measure. You should review the reconciliation of net loss to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate our business. The following table reconciles net loss/income to EBITDA and Adjusted EBITDA (in thousands) for the first fiscal quarter: Quarter Ended December 26, 2023 December 27, 2022 Adjusted EBITDA: Net loss, as reported Depreciation and amortization Interest expense, net Provision for income taxes EBITDA Non-cash stock-based compensation (1) GAAP rent-cash rent difference (2) Gain on restaurant and equipment asset sales (3) Adjusted EBITDA (1) Represents non-cash stock-based compensation as described in Note 5 to the Consolidated Financial Statements. (2) Represents the excess of cash rent incurred over the amount of GAAP rent recorded in the Financial Statements. (3) Represents deferred gains on previous sale-leaseback transactions on two Good Times restaurants. Liquidity and Capital Resources Cash and Working Capital As of December 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 amount of repurchases will depend upon the Company’s stock price, economic and market conditions, regulatory requirements, and other corporate considerations. Financing Cadence Credit Facility The Company Proceeds from the Cadence Credit Facility, The Cadence Credit Facility includes During the fiscal quarter ended December As a result of entering into the Cadence Credit Facility and the various amendments, the Company paid loan origination costs including professional fees of approximately In connection with the Cadence Credit Facility, As of Cash Flows Quarter ended December 26, 2023 December 27, 2022 Net cash used in operating activities Net cash used in investing activities Net cash provided by (used in) financing activities Net change in cash and cash equivalents Operating cash flows Net cash Net cash used in investing activities for the Financing cash flows Net cash Net cash used in financing activities for the quarter ended December 27, 2022 was $1,119,000, which includes Impact of Inflation and Wage Increases at Both Concepts Commodity prices, particularly for key proteins, In addition to food and supplies cost inflation, we have also experienced the need to meaningfully increase wages to attract We have historically used menu price increases to manage profitability in times of inflation, however consumer preferences and the Seasonality Revenues of the Company are subject to seasonal fluctuations based on weather conditions adversely affecting Colorado restaurant sales primarily during the months of December, January, February, and QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required. 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 10-Q, the Company’s Chief Executive Officer (its principal executive officer) and Senior Vice President of Finance and Accounting (its principal financial officer) Changes in Internal Control over Financial Reporting There have been no significant changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended December LEGAL PROCEEDINGS For a discussion of material legal proceedings affecting the Company, see Note 11 to the unaudited, consolidated financial statements included in this report. RISK FACTORS There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of our Form 10-K for the fiscal year ended September 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 December Repurchases of common stock under the share repurchase plan during the quarter ended December Period Total number of Average price Total number of Maximum dollar 09/27/2023–10/24/2023 10/25/2023–11/21/2023 11/22/2023–12/26/2023 Total DEFAULTS UPON SENIOR SECURITIES None. MINE SAFETY DISCLOSURES Not applicable. OTHER INFORMATION EXHIBITS (a) Exhibits. The following exhibits are furnished as part of this report: Exhibit No. Description *31.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 *31.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 *32.1 Certification of Chief Executive Officer and Principal? Financial Officer pursuant to Section 906 101.INS XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document *104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) *Filed herewith In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GOOD TIMES RESTAURANTS INC. DATE: Ryan M. Zink Chief Executive Officer (Principal Executive Officer) Senior Vice President of Finance and Accounting ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934For the quarterly period ended December 27, 2022OR☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934Commission File Number: 0-18590(Exact Name of Registrant as Specified in Its Charter)NEVADA
Identification Number)651 CORPORATE CIRCLE, GOLDEN, CO 80401(Address of Principal Executive Offices, Including Zip Code)(303) 384-1400(Registrant's Telephone Number, Including Area Code)Securities registered pursuant to Section 12(b) of the Act: As of January 24, 2023,23, 2024, there were 11,854,70911,190,413 shares of the Registrant's common stock, par value $0.001 per share, issued and outstanding.27, 202226, 20232ITEM 1.FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets (Unaudited) $ 3,515 $ 4,182 1,334 769 705 163 1,424 1,407 6,978 6,521 5,722 5,722 38,345 38,191 33,333 33,040 77,400 76,953 (54,847 ) (53,917 ) 22,553 23,036 39,153 40,007 11,506 11,583 270 277 3,900 3,900 48 51 5,713 5,713 60,590 61,531 $ 90,121 $ 91,088 $ 2,642 $ 2,585 60 67 5,902 5,787 6,874 6,451 15,478 14,890 1,250 750 41,202 42,332 109 122 42,561 43,204 - - 13 13 56,739 56,701 (5,346 ) (4,908 ) (19,791 ) (19,235 ) 31,615 32,571 467 423 32,082 32,994 $ 90,121 $ 91,088 December 27, 2022 September 27, 2022 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 6,914 $ 8,906 Receivables, net of allowance for doubtful accounts of $0 1,119 694 Prepaid expenses and other 1,962 888 Inventories 1,394 1,387 Total current assets 11,389 11,875 PROPERTY AND EQUIPMENT: Land and building 4,670 4,670 Leasehold improvements 36,277 35,906 Fixtures and equipment 31,164 30,664 Total property and equipment 72,111 71,240 Less accumulated depreciation and amortization (49,919 ) (48,989 ) Total net property and equipment 22,192 22,251 OTHER ASSETS: Operating lease right-of-use assets, net 40,867 42,463 Deposits and other assets 159 166 Trademarks 3,900 3,900 Other intangibles, net 18 20 Goodwill 5,713 5,713 Total other assets 50,657 52,262 TOTAL ASSETS: $ 84,238 $ 86,388 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable 951 628 Deferred income 48 48 Operating lease liabilities, current 5,394 5,430 Other accrued liabilities 7,038 6,791 Total current liabilities 13,431 12,897 LONG-TERM LIABILITIES: Operating lease liabilities, net of current portion 43,846 45,544 Deferred and other liabilities 151 159 Total long-term liabilities 43,997 45,703 SHAREHOLDERS’ EQUITY: Good Times Restaurants Inc. shareholders’ equity: Preferred stock, $.01 par value; 5,000,000 shares authorized,
no shares issued and outstanding as of December 27, 2022 and
September 27, 2022 - - Common stock, $.001 par value; 50,000,000 shares
authorized, 11,913,240 and 12,274,351 shares issued and
outstanding as of December 27, 2022 and September 27,
2022, respectively 13 13 Capital contributed in excess of par value 59,386 59,427 Treasury stock, at cost; 1,064,193 and 692,798 shares as of
December 27, 2022 and September 27, 2022, respectively (3,507 ) (2,634 ) Accumulated deficit (30,448 ) (30,321 ) Total Good Times Restaurants Inc. shareholders' equity 25,444 26,485 Non-controlling interests 1,366 1,303 Total shareholders’ equity 26,810 27,788 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 84,238 $ 86,388 3
Condensed Consolidated Statements of Operations (Unaudited)
(13 Weeks)
(13 Weeks) $ 32,946 $ 33,179 186 215 33,132 33,394 10,327 10,607 11,624 11,548 2,505 2,458 4,728 4,492 927 910 30,111 30,015 2,313 2,378 1,092 894 (10 ) - (374 ) 107 (32 ) (12 ) $ (406 ) $ 95 (77 ) - (483 ) 95 (73 ) (222 ) $ (556 ) $ (127 ) $ (.05 ) $ (.01 ) 11,377,579 12,041,628 11,377,579 12,041,628 Quarter Ended December 27, 2022
(13 Weeks) December 28, 2021
(13 Weeks) NET REVENUES: Restaurant sales $ 33,179 $ 32,676 Franchise revenues 215 240 Total net revenues 33,394 32,916 RESTAURANT OPERATING COSTS: Food and packaging costs 10,607 10,226 Payroll and other employee benefit costs 11,548 11,177 Restaurant occupancy costs 2,458 2,328 Other restaurant operating costs 4,492 4,138 Preopening costs - 50 Depreciation and amortization 910 984 Total restaurant operating costs 30,015 28,903 General and administrative costs 2,375 2,705 Advertising costs 894 641 Franchise costs 3 5 Gain on restaurant asset sales and lease termination - (614 ) INCOME FROM OPERATIONS 107 1,276 Interest expense, net (12 ) (18 ) NET INCOME BEFORE PROVISION FOR INCOME TAXES $ 95 $ 1,258 PROVISION FOR INCOME TAXES - 8 NET INCOME 95 1,250 Income attributable to non-controlling interests (222 ) (920 ) NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (127 ) $ 330 BASIC AND DILUTED INCOME PER SHARE: Net (loss) income attributable to Common Shareholders $ (.01 ) $ .03 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 12,041,628 12,522,471 Diluted 12,041,628 12,684,979 4
Consolidated Statements of Shareholders’Shareholders’ Equity (Unaudited)
For the fiscal quarters ending December 27, 202226, 2023 and December 28, 202127, 2022
at cost
Shares
Value
Contributed in
Excess of Par
Value
Controlling
Interest In
Partnerships
Deficit 692,798 $ (2,634 ) 12,274,351 $ 13 $ 59,427 $ 1,303 $ (30,321 ) $ 27,788 - - - - 46 - - 46 - - 8,284 - (92 ) - - (92 ) - - 2,000 - 5 - - 5 371,395 (873 ) (371,395 ) - - - - (873 ) - - - - - 222 - 222 - - - - - (172 ) - (172 ) - - - - - 13 - 13 - - - - - - (127 ) (127 ) 1,064,193 $ (3,507 ) 11,913,240 $ 13 $ 59,386 $ 1,366 $ (30,448 ) $ 26,810 1,530,846 $ (4,908 ) 11,446,587 $ 13 $ 56,701 $ 423 $ (19,235 ) $ 32,994 - - - - 38 - - 38 160,772 (438 ) (160,772 ) - - - - (438 ) - - - - - 73 - 73 - - - - - (29 ) - (29 ) - - - - - - (556 ) (556 ) 1,691,618 $ (5,346 ) 11,285,815 $ 13 $ 56,739 $ 467 $ (19,791 ) $ 32,082 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 - - - - - Non-controlling interests: - - - 6 - - 6 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 BALANCES, September 27, 2022 692,798 $ (2,634 ) 12,274,351 $ 13 $ 59,427 $ 1,303 $ (30,321 ) $ 27,788 Stock-based compensation cost - - - - 46 - - 46 Restricted stock unit vesting - - 8,284 - (92 ) - - (92 ) Stock option exercise - - 2,000 - 5 - - 5 Treasury Shares Purchased 371,395 (873 ) (371,395 ) - - - - (873 ) Non-controlling interests: Income - - - - - 222 - 222 Distributions - - - - - (172 ) - (172 ) Contributions - - - - - 13 - 13 Net Income attributable to common
shareholders and comprehensive income - - - - - - (127 ) (127 ) BALANCES, December 27, 2022 1,064,193 $ (3,507 ) 11,913,240 $ 13 $ 59,386 $ 1,366 $ (30,448 ) $ 26,810 5
Condensed Consolidated Statements of Cash Flows (Unaudited)
(13 Weeks)
(13 Weeks) Net (loss) income $ (483 ) $ 95 948 932 Net change in operating lease right-of-use assets and liabilities (161 ) (682 ) (10 ) - 38 46 77 - (1,107 ) (956 ) (17 ) (6 ) 7 7 43 162 413 248 (252 ) (154 ) (448 ) (723 ) - 4 (448 ) (719 ) 500 - (438 ) (873 ) - (92 ) - 5 - 13 (29 ) (172 ) 33 (1,119 ) (667 ) (1,992 ) 4,182 8,906 $ 3,515 $ 6,914 $ 21 $ 5 $ (14 ) $ (161 ) Fiscal Year to Date December 27, 2022
(13 Weeks) December 28, 2021
(13 Weeks) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 95 $ 1,250 Adjustments to reconcile net income to net cash provided by
(used in) operating activities: Depreciation and amortization 932 1,078 Stock-based compensation expense 46 95 Gain on lease termination and disposal of assets - (614 ) Provision for income taxes - 8 Changes in operating assets and liabilities: Receivables and other (1,500 ) (961 ) Inventories (6 ) (6 ) Deposits and other 7 (896 ) Accounts payable 162 (915 ) Lease incentives receivable - - Net change in ROU assets and operating lease liabilities (138 ) (66 ) Accrued and other liabilities 248 808 Net cash provided by (used in) operating activities (154 ) (219 ) CASH FLOWS FROM INVESTING ACTIVITIES: Payments for the purchase of property and equipment (723 ) (237 ) Proceeds from the sale of fixed assets 4 - Payments received from franchisees and others - - Net cash used in investing activities (719 ) (237 ) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on notes payable and long-term debt - - Payment for the purchase of treasury stock (873 ) - Restricted stock vesting settled in cash (92 ) - Proceeds from stock option exercise 5 6 Distributions to non-controlling interests (172 ) (766 ) Contributions from non-controlling interests 13 - Net cash used in financing activities (1,119 ) (760 ) NET CHANGE IN CASH AND CASH EQUIVALENTS (1,992 ) (1,216 ) CASH AND CASH EQUIVALENTS, beginning of period 8,906 8,856 CASH AND CASH EQUIVALENTS, end of period $ 6,914 $ 7,640 SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION: Cash paid for interest $ 5 $ - Change in accounts payable attributable to the purchase of
property and equipment $ (161 ) $ (12 ) 6Note 1.Basis of Presentationsix partnershipsone partnership in which the Company is the general partner, and five limited liability companies in which the Company was the controlling partner.member during the period of time in which unrelated parties owned membership interests in those limited liability companies. All significant intercompany balances and transactions have been eliminated in consolidation.Daddy’sDaddy’s Burger Bar that are primarily located in Colorado and in the Southeast region of the United States.fast foodfast-food hamburger restaurants under the brand Good Times Burgers & Frozen Custard, all of which are located in Colorado and Wyoming.27, 2022 26, 2023 and the results of its operations and its cash flows for the fiscal quarters ended December 26, 2023 and December 27, 2022 and December 28, 2021. 2022. Operating results for the fiscal quarter ended December 27, 2022 26, 2023 are not necessarily indicative of the results that may be expected for the year ending September 26, 2023. 24, 2024. The condensed consolidated balance sheet as of September 27, 2022 26, 2023 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-K10-K for the fiscal year ended September 27, 2022.26, 2023.53-week53-week year ending on the last Tuesday of September. In a 52-week52-week fiscal year, each of the Company’s quarterly periods consist of 13 weeks. The additional week in a 53-week53-week fiscal year is added to the first quarter, making such quarter consist of 14 weeks. The quarters ended December 26, 2023 and December 27, 2022 and December 28, 2021 each consisted of 13 weeks.We utilizeThe 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. As we intend to utilize all of the advertising contributions towards advertising expenditures, we recognize costs equal to franchisee contributions to the advertising funds on a quarterly basis. Contributions to the Advertising Funds from our franchisees were $66,000$47,000 and $67,000$66,000 for the quarters ended December 26, 2023 and December 27, 2022, and December 28, 2021, respectively. For the quarter ended December 27, 2022, total receivables were $1,119,000, which consists of $208,000 in receivables from large box retail partners, retailed receivables, $288,000 in rebate receivables, $319,000 in third party delivery receivables, and $304,000 of franchise and other receivables, compared to $2,350,000 for the quarter ended December 28, 2021, consisting primarily of $619,000 in receivables from large box retailers, $249,000 in rebate receivables, $243,000 in third party delivery receivables, $745,000 for a lease termination agreement entered in the quarter for one of our Good Times locations, - and $494,000 of franchise and other receivables.Macro-Economic Factors and Operating EnvironmentThe global crisis resulting from the spread of coronavirus (“COVID-19”) continued to our restaurant operations for the quarter ended December 27, 2022 although the impact was more modest than in the prior year. We expect local conditions to continue to dictate limitations on restaurant operations, capacity, and hours of operation. The lingering impacts of the pandemic have also contributed to labor challenges, which have increased hourly wages and management salaries at both concepts, and in limited cases have resulted in reduced operating hours at certain restaurants. Supply chain constraints have affected both of our concepts, resulting in higher food and beverage cost associated with general increases in input price levels as well as increased product substitutions, elevated freight costs, and increased variability in product quality, primarily in produce items. In addition, during the quarter ended December 27, 2022, high rates of inflation have been seen globally which have also resulted in increases in commodity, labor and energy costs for both concepts. Further significant 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 adjust prices sufficiently to offset the effect of cost increases without negatively impacting consumer demand.7 $ 638 $ 291 341 185 308 269 47 24 $ 1,334 $ 769 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 PronouncementsNote 2.Recent Accounting Pronouncementsallother 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.Revenueoperations;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.yearsperiods 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 Assets27, 2022 26, 2023 and September 27, 2022 (in26, 2023 (in thousands): December 27, 2023 September 27, 2022 Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount
Carrying
Amount
Amortization
Carrying
Amount
Carrying
Amount
Amortization
Carrying
Amount Intangible assets subject to
amortization: Non-compete agreements $ 25 $ (7 ) $ 18 $ 25 $ (5 ) $ 20 $ 50 $ (16 ) $ 34 $ 50 $ (14 ) $ 36 $ 15 $ (1 ) $ 14 $ 15 $ - $ 15 $ 65 $ (17 ) $ 48 $ 65 $ (14 ) $ 51 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 $ (7 ) $ 3,918 $ 3,925 $ (5 ) $ 3,920 $ 3,965 $ (17 ) $ 3,948 $ 3,965 $ (14 ) $ 3,951 Goodwill $ 5,700 $ - $ 5,700 $ 5,700 $ - $ 5,700 $ 5,713 $ - $ 5,713 $ 5,713 $ - $ 5,713 2022 and $4,000 for the quarter ended December 28, 2021.2022.8Note 5.Stock-Based Compensation“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”) during the 2018 fiscal year, which was approved by shareholders on May 24, 2018. Future awards will be issued under the 2018 Plan. 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.incomeloss for the quarters ended December 26, 2023 and December 27, 2022 includes $38,000 and December 28, 2021 includes $46,000, and $95,000, respectively, of compensation costs related to our stock-based compensation arrangements.27, 2022. 26, 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.20,00038,000 incentive stock options awarded during the quarter ended December 26, 2023 to the Company’s Chief Executive Officer and its Senior Vice President of Operations from available shares under the 2018 Plan, with an exercise price of $2.51 per share and a per share weighted average fair value of $1.58. During the quarter ended December 27, 2022, the Company granted 20,000 incentive stock options to the Company’sits Chief Executive Officer, from available shares under the 2018 Plan, with an exercise price of $3.00 per share and a per share weighted average fair value of $2.29. During the quarter ended December 28, 2021, the Company granted 90,000 incentive stock options to its Chief Executive Officer, from available shares under the 2018 Plan, with an exercise price of $2.33 per share and a per share weighted average fair value of $1.24 pursuant to the Chief Executive Officer’s Second Amended and Restated Employment Agreement dated December 24, 2020. Quarter Ended December 27, 2022
Incentive and Non-Qualified Stock
Options Quarter Ended December 28, 2021
Incentive and Non-Qualified Stock
Options Expected term (years) 5.0 4.5 6.25 5.0 Expected volatility 60.22% 61.3% 62.50 % 60.22 % Risk-free interest rate 4.21% 0.9% 4.68 % 4.21 % Expected dividends - - - - 27, 2022 26, 2023 under all plans: Shares Weighted
Average
Exercise Price Weighted Average
Remaining
Contractual Life (Yrs) Outstanding at beginning of year 470,161 $ 3.97 Options granted 20,000 $ 3.00 Options exercised (2,000 ) $ 2.31 Options Forfeited (12,253 ) $ 3.95 Outstanding December 27, 2022 475,908 $ 3.94 5.5 Exercisable December 27, 2022 326,631 $ 3.66 4.8
Average
Exercise Price
Remaining
Contractual Life (Yrs) 437,528 $ 3.95 38,000 $ 2.51 475,528 $ 3.83 4.8 341,528 $ 3.70 4.0 $199,000$21,269 and $369,000,$199,000, respectively. Only options whose exercise price is below the current market price of the underlying stock are included in the intrinsic value calculation.927, 2022, 26, 2023, the total remaining unrecognized compensation cost related to non-vested stock options was $192,000$123,000 and is expected to be recognized over a weighted average period of approximately 2.23.2 years. There were 7,984 stock options exercised that resulted in an issuance of 7,984 shares during the quarter ended December 28, 2021 with proceeds of approximately $13,000.2022 and there were no restricted stock units granted during the quarter ended December 28, 2021.2022.27, 2022 26, 2023 is presented below. Shares Grant Date Fair
Value Per Share Non-vested units at beginning of year 73,336 $1.54 to $4.50 Units granted during the quarter 25,750 $2.29 Units vested during the quarter (46,336 ) $1.54 Units forfeited during the quarter (1,000 ) $4.50 Non-vested units at December 27, 2022 51,750 $1.54
Value Per Share 45,250 $2.29 to $4.50 34,000 $2.52 79,250 $2.29 to $4.50 27, 2022, 26, 2023, there was $138,000$149,000 of total unrecognized compensation cost related to non-vested restricted stock units. This cost is expected to be recognized over a weighted average period of approximately 2.432.2 years.27, 2022. During the quarter ended December 28, 2021 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 and resulted in the recognition of $40,000 of stock-based compensation expense.26, 2023.Note 6.Gain on Sale of Assets and Lease Termination During the fiscal quarter ended December 27, 2021 we recognized a $607,000 gain in connection with a landlord’s exercising a lease termination option for one Good Times restaurant and also recognized $7,000 in deferred gain on prior sale-leaseback transactions related to certain Good Times restaurants.Note 7.Prepaid expense and other current assets December 27, 2022 September 27, 2022 Prepaid Rent $ 785 $ 765 Prepaid Insurance 1,027 3 Other 150 120 Total $ 1,962 $ 888 $ 474 $ - 231 163 $ 705 $ 163 Note 8.Other Accrued Liabilities December 27, 2022 September 27, 2022 Wages and other employee benefits $ 2,561 $ 2,773 Taxes, other than income taxes 1,441 1,166 Gift card liability, net of breakage 1,537 985 General expense accrual and other 1,499 1,867 Total $ 7,038 $ 6,791 10 $ 2,442 $ 2,892 1,396 1,275 1,907 1,108 1,129 1,176 $ 6,874 $ 6,451 Note 9.Notes Payable and Long-Term Debtmaintains aand its wholly owned subsidiaries (the “Subsidiaries”) maintain an amended and restated credit agreement with Cadence Bank (“Cadence”) pursuant to which, as amended, Cadence agreed to loan the Company up to $8,000,000, which as of December 27, 2022 hadhas a maturity date of January 31, 2023 (theApril 20, 2028 (the “Cadence Credit Facility”). The Cadence Credit Facility amended and restated 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 December 27, 2022, any borrowingsa mixture of SOFR Rate Loans and Base Rate Loans with differing interest rates based upon varying additions to the Federal Funds Rate, the Cadence prime rate or Term SOFR. Each of the Subsidiaries are guarantors of the Cadence Credit Facility.amended, bear interest at a variable rate based upon the Company’s election of (i) 2.5% plus the base rate, which is the highestwell as certain restricted payments, investments and growth capital expenditures. As of the (a) Federal Funds Rate plus 0.5%, (b)date of filing of this report, the Company was in compliance with each of these covenants under the Cadence bank publicly announced prime rate, and (c) LIBOR plus 1.0%, or (ii) LIBOR, with a 0.250% floor, plus 3.5%. Interest is due at the end of each calendar quarter if the Company selects to pay interest based on the base rate and at the end of each LIBOR period if it selects to pay interest based on LIBOR. The Cadence Credit Facility includes provisions for the Administrative Agent of the facility to amend the facility to replace LIBOR with an alternate benchmark rate, which may be (but is not required to be) SOFR, at such point in time when appliable LIBOR rates are no longer available or no longer reliable. The exact timing of any transition of LIBOR to an alternate benchmark rate is not currently known.Facility.27, 2022, 26, 2023 the weighted average interest rate applicable to borrowings under the Cadence Credit Facility was 7.8%8.45%.The Cadence Credit Facility contains certain affirmative and negative covenants and events of default that the Company considers customary for an agreement of this type, including covenants setting a maximum leverage ratio of 5.15:1, a minimum pre-distribution fixed charge coverage ratio of 1.25:1, a minimum post-distribution fixed charge coverage ratio of 1.10:1 and minimum liquidity of $2.0 million. As of December 27, 2022, the Company was in compliance with all financial covenants under the Cadence Credit Facility.$308,500$299,000 and is amortizing these costs over the term of the credit agreement. The remaining amount to be amortized asAs of December 27, 2022 is $13,000. The obligations under26, 2023, the unamortized balance of these fees was $115,000.are collateralizedthe Company and the 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 lien onfirst priority security interest in substantially all the assets of the Company’s assets.Company and the Subsidiaries.the date of filing this Form 10-Q, December 26, 2023, there were no outstanding$1,250,000 of borrowings against the facility.facility, all of which is due during the fiscal year ending September 26, 2028 and is classified as a long-term liability in the accompanying balance sheet. 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 filing this Form 10-Q, December 26, 2023, there were noapproximately $10,000 in outstanding letters of credit issued under the facility.facility, and approximately $6,740,000 of committed funds available.On January 24,Total interest expense on notes payable was $26,000 and $0 for the quarters ended December 26, 2023 subsequent to the end of the fiscal quarter ended and December 27, 2022, the Company and Cadence amended the Cadence Credit Facility to extend its expiration date to April 30, 2023, to provide consent for the Company’s acquisition of certain non-controlling interests in Bad Daddy’s limited liability company partnerships, and to provide pro-forma credit for a portion of the full-year EBITDA, as that term is defined in the Cadence Credit Facility previously attributed to the non-controlling partners in those limited liability company partnerships. The Company is currently reviewing its future credit facility needs and expects to negotiate an amendment to the existing credit agreement or enter into a new credit agreement prior to the current maturity date of April 30, 2023.respectively.Note 10.Net Income per Common Share 11,377,579 12,041,628 - - - - 11,377,579 12,041,628 435,900 527,658 Quarter Ended December 27, 2022 December 28, 2021 Weighted-average shares outstanding basic 12,041,628 12,522,471 Effect of potentially dilutive securities: Stock options - 116,172 Restricted stock units - 46,336 Weighted-average shares outstanding diluted 12,041,628 12,684,979 Excluded from diluted weighted-average
shares outstanding: Antidilutive 527,658 153,118 11Note 11.Contingent Liabilities and Liquidity 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.deadlines foropening brief and Good Times own opening brief regarding its appeal of the dismissal of its counterclaims against the plaintiffs. On August 7, 2023, the plaintiffs filed their reply brief in support of their appeal and a motion for new trial or,response to Good Times appeal. Good Times filed a reply brief in support of its appeal on August 28, 2023 and briefing is now closed. The court of appeals had previously indicated it may hold oral argument the week of January 29, 2024 but has subsequently indicated it would no longer hold oral argument in its review and decision in the alternative, an appeal are February 22 and February 25, 2023, respectively.matter. The court of appeals may render a decision at any time.recovery assuming a finding of liability in their favor at trial.recovery. While the Company was successful at trial, in light of plaintiff’s continuing right to seek a new trial or appeal, at this time, the Company has determined to maintain the accrual and will continue to evaluate this matter based on new information as it becomes available. The ultimate resolution of the case (including any new trial or appeal if granted) could result in losses less than or in excess of amounts accrued. Any additional liability in excess of the accrual could have aa` 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, including any new trial or appeal if granted.merits.Note 12.Leases122022 and December 28, 2021:2022:Lease cost Classification December 27, 2022 December 28, 2021 Operating lease cost Occupancy, Other restaurant
operating costs and General and
administrative expenses, net $ 1,825 $ 1,795 $ 1,901 $ 1,825 Variable lease cost Occupancy 37 20 5 37 Sublease income Occupancy (129 ) (136 ) (139 ) (129 ) $ 1,733 $ 1,679 $ 1,767 $ 1,733 December 27, 2022 December 28, 2021 Weighted average remaining lease term (in years) 8.49 9.3 7.75 8.49 Weighted average discount rate 5.0 % 5.0 % 5.0 % 5.0 % disclosures for the fiscal quarter ended December 27, 2022:disclosures: December 27, 2022 December 28, 2021 Cash paid for operating lease liabilities $ 1,853 $ 1,718 $ 1,922 $ 1,853 Non-cash operating lease assets obtained in exchange for
operating lease liabilities $ (73 ) $ 60 $ 364 $ (73 ) December 27, 2022 December 28, 2021 Right-of-use assets Operating lease assets $ 40,867 $ 44,972 $ 39,153 $ 41,652 Current lease liabilities Operating lease liability $ 5,394 $ 5,051 $ 5,902 $ 5,394 Non-current lease liabilities Operating lease liability, less current portion 43,846 48,784 41,202 43,846 Total lease liabilities $ 49,240 $ 53,835 $ 47,104 $ 49,240 27, 2022 26, 2023 are as follows:Fiscal year: Total Remainder of 2023 $ 5,818 2024 7,589 $ 6,130 2025 7,669 8,219 2026 7,217 7,791 2027 6,917 7,494 6,733 Thereafter 25,644 20,858 Total minimum lease payments 60,854 57,225 Less: imputed interest (11,614 ) (10,121 ) Present value of lease liabilities $ 49,240 $ 47,104 Note 13.Impairment of Long-Lived Assets and Goodwill2022 and December 28, 2021.2022.132022 and December 28, 2021.2022.(1)(1) Good Times restaurants and (2)(2) Bad Daddy’s restaurants. As of December 26, 2023 and December 27, 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 as of December 27, 2022 and December 28, 2021.Note 14.Income TaxesCompany had net lossCompany’s effective income tax rate for the quarterthree months ended December 26, 2023 was (14.04%), a decrease from the effective income tax rate of 0.0% for the three months ended December 27, 2022 and net income for2022. The decrease is due to the quarter ended December 28, 2021, we have significant net operating loss carryforwards from prior years and a historyrelease 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 December 27, 2022 and December 28, 2021. Although we have established a fullCompany’s valuation allowance on our deferred tax assets, we are subject to income tax in certain jurisdictions where we do not have substantial net operating loss carry forwards.during fiscal year 2023. For the quarter ended December 27, 2022, we did not recognize any provision for income taxes as we estimated no current tax liability for either federal or state jurisdictionsthe Company held a full valuation allowance resulting in an effective income tax rate of zero for the period. For the period ended December 28, 2021, we recognized a provision for income taxes of $8,000 related to our estimate of current income taxes payable resulting in an effective tax rate of 2.0%.thetax years 20192020 through 2022. The Company believes that its income tax filing positions and deductions will be sustained upon audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flows. Therefore, no reserves for uncertain income tax positions have been recorded. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. No accrual for interest and penalties was considered necessary as of December 27, 2022.26, 2023.Note 15.Non-controlling Interests27, 2022 (in26, 2023(in thousands): Bad Daddy’s Good Times Total Balance at September 27, 2022 $ 1,041 $ 262 $ 1,303 Income 179 43 222 Distributions (147 ) (25 ) (172 ) Contribution 13 - 13 Balance at December 27, 2022 $ 1,086 $ 280 $ 1,366 $ 423 73 (29 ) $ 467 sevensix Good Times restaurants, and five joint-venture partnerships involving five Bad Daddy’s restaurants. Subsequent to the quarter ended December 27, 2022,in which the Company acquired all ofis the membership interests in five Bad Daddy’s as described in Note 17 to the unaudited, consolidated financial statements included in this report.controlling partner and owns a 50.0% interest.14Note 16.Segment Reporting Quarter Ended December 27, 2022
(13 Weeks) December 28, 2021
(13 Weeks)
(13 Weeks)
(13 Weeks) Revenues Bad Daddy’s $ 25,226 $ 24,672 $ 24,193 $ 25,226 Good Times 8,168 8,244 8,939 8,168 $ 33,394 $ 32,916 $ 33,132 $ 33,394 Income (Loss) from operations Bad Daddy’s $ (7 ) $ 308 $ (763 ) $ (7 ) Good Times 114 968 389 114 $ 107 $ 1,276 $ (374 ) $ 107 Capital expenditures Bad Daddy’s $ 158 $ 192 $ 132 $ 158 Good Times 726 45 330 726 $ 884 $ 237 $ 462 $ 884 $ 18,468 $ 18,053 4,085 4,983 $ 22,553 $ 23,036 $ 66,614 $ 67,720 23,507 23,368 $ 90,121 $ 91,088 Property and equipment, net December 27, 2022 September 27, 2022 Bad Daddy’s $ 18,926 $ 19,575 Good Times 3,266 2,676 Total $ 22,192 $ 22,251 Note 17.Subsequent EventsOn January 24, 2023, the Company and Cadence amended the Cadence Credit Facility to extend its expiration date to provide consent for the acquisition of certain non-controlling interests in five Bad Daddy’s restaurant joint-ventures and to provide EBITDA credit with respect to those acquired interests.None.On January 25, 2023, the Company acquired all15ITEM 2. MANAGEMENT’S27, 2022.26, 2023. 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:the novel coronavirus (COVID-19) pandemicpandemics or other public health emergencies and the impact of the pandemiccould have 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 pandemicpandemics and other public health emergencies and the impact of federal, state and local governmental actions and customer behavior in response to the pandemic.response.27, 2022.26, 2023.RestaurantRestaurants 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).Macro-Economic Factors and Operating Environment.The global crisis resulting from the spread of coronavirus (“COVID-19”) continued to our restaurant operations for the quarter ended December 27, 2022 although the impact was more modest than in the prior year. We expect local conditions to continue to dictate limitations on restaurant operations, capacity, and hours of operation. The lingering impacts of the pandemic have also contributed to labor challenges, which have increased hourly wages and management salaries at both concepts, and in limited cases have resulted in reduced operating hours at certain restaurants. Supply chain constraints have affected both of our concepts, resulting in higher food and beverage cost associated with general increases in input price levels as well as increased product substitutions, elevated freight costs, and increased variability in product quality, primarily in produce items. In addition, during the quarter ended December 27, 2022, high rates of inflation have been seen globally which have also resulted in increases in commodity, labor and energy costs for both concepts. Further significant 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 adjust prices sufficiently to offset the effect of cost increases without negatively impacting consumer demand.16Although 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.in-linein line with the inflationary impact currently seen inexperienced by the restaurant industry. However, we do anticipate the opening of one new restaurant in late Fiscal 2023 in the greater Huntsville, Alabama market.27, 2022,26, 2023, we operated, franchised, or licensed a total of forty-one Bad Daddy’s restaurants and thirty-one Good Times restaurants. The following table presents the number of restaurants operating at the end of the first fiscal quarters of 20222023 and 2021. Subsequent to the quarter ended December 27, 2022, the Company acquired all2022. Bad Daddy’s
Burger Bar Good Times Burgers
& Frozen Custard Total
Burger Bar
& Frozen Custard 2022 2021 2022 2021 2022 2021 Alabama 2 2 - - 2 2 3 2 - - 3 2 Colorado 12 12 23 24 35 36 11 12 25 23 36 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 39 23 24 63 63 40 40 25 23 65 63 One company-ownedWe acquired two Good Times restaurant closed, due to a termination by the landlord, for redevelopmentrestaurants in Greenwood Village and Lafayette, Colorado from franchisees during fiscal year 2022.2023. 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 Non-Traditional* Bad Daddy’s
Burger Bar Good Times Burgers
& Frozen Custard Total 2022 2021 2022 2021 2021 2021 Colorado - 1 - - - 1 Total - 1 - - - 1 *The non-traditional Bad Daddy’s Burger Bar location, where we operated the kitchen under our Bad Daddy’s brand for a local brewery’s taproom, closed in 2022.
Burger Bar
& Frozen Custard - - 4 6 4 6 1 1 - - 1 1 - - 2 2 2 2 1 1 6 8 7 9 27, 202226, 2023 (13 weeks) compared to fiscal quarter ended December 28, 202127, 2022 (13 weeks):27, 2022 increased $478,00026, 2023 decreased $262,000 or 1.5%0.8% to $33,394,000$33,132,000 from $32,916,000$33,394,000 for the quarter ended December 28, 2021.27, 2022. Bad Daddy’s concept revenues increased $554,000decreased $1,033,000 while our Good Times concept revenues decreased $76,000.increased $771,000.17increased $575,000decreased $1,045,000 to 25,165,000$24,120,000 for the quarter ended December 26, 2023 from $25,165,000 for the quarter ended December 27, 2022 from $24,590,000 for the quarter ended December 28, 2021. Sales were positively impacted by and increases in sales2022. This decrease is due to strongerthe prior-year closure of the Cherry Creek location, reduced customer traffic, compared toconcentrated in several key markets, partially offset by menu price increases and sales from the prior year in connection with easingMadison, Alabama restaurant which opened during the fourth quarter of COVID restrictions.fiscal 2023. The average menu price increase for the quarter ended December 27, 202226, 2023 over the same prior-year quarter was approximately 5.3%4.2%.decreased $72,000increased $812,000 to 8,014,000$8,826,000 for the quarter ended December 26, 2023 from $8,014,000 for the quarter ended December 27, 2022 from $8,086,000 for2022. This increase is primarily due to the quarter ended December 28, 2021.acquisition, by the Company during fiscal 2023, of two Good Times restaurants previously owned by franchisees as well as increased customer traffic and menu price increases. The average menu price increase for the quarter ended December 27, 202226, 2023 over the same prior-year quarter was approximately 8.8%4.6%.25,000$29,000 to $186,000 in the quarter ended December 26, 2023 compared to $215,000 in the quarter ended December 27, 2022 compared to $240,000 in the quarter ended December 28, 2021.2022. This decrease is primarily due to the acquisition, during the second fiscal quarter of 2022, by the Company during fiscal 2023, of one Bad Daddy’s restauranttwo Good Times restaurants previously owned by a franchisee.franchisees.increased 2.4%decreased 6.2% during the fiscal quarter ended December 26, 2023 compared to the fiscal quarter ended December 27, 2022, compared to the same thirteen-week period ended December 28, 2021 in the prior-year quarter, primarily driven by strong off premisegeneral weakness in the casual dining restaurant segment as indicated by sequentially lower same store sales andas measured by Black Box Intelligence, weaker traffic specific to Bad Daddy’s in several key markets, offset by menu price increases. There were thirty-nine restaurants included in the same store sales base at the end of the quarter.3.0%4.1% during the quarter ended December 27, 202226, 2023 compared to the same thirteen-week period ended December 28, 2021 in the prior-year quarter,27, 2022, primarily due to increased customer traffic and menu price increases, slightly offset by lower traffic.increases. There were twenty-threetwenty-five restaurants included in the same store sales base at the end of the quarter.27, 2022 increased $381,00026, 2023 decreased $280,000 to 10,607,000 (32.0%$10,327,000 (31.3% of restaurant sales) from $10,226,000 (31.3%$10,607,000 (32.0% of restaurant sales) for the quarter ended December 28, 2021.27, 2022.7,973,000$7,608,000 (31.5% of restaurant sales) for the quarter ended December 26, 2023, down from $7,973,000 (31.7% of restaurant sales) for the quarter ended December 27, 2022, up from $7,812,000 (31.8% of restaurant sales) for the quarter ended December 28, 2021.2022. This increasedecrease is primarily attributable to highera combination of lower restaurant sales during the current fiscal quarter versus the prior fiscal quarter.quarter and lower purchase prices for food and paper goods. The decrease, as a percent of sales, is attributable to the impact of a 4.2% average annual increase in menu pricing as well as generally lower purchase prices in our commodity basket compared to the prior-year period.2022, up from $2,414,000 (29.9% of restaurant sales) for the quarter ended December 28, 2021.2022. This increase is primarily attributable to the impact of higher sales, offset by lower purchase prices on food and paper goods, partially offset byas well as the impact of an 8.8%a 4.6% increase in menu pricing.27, 202226, 2023 increased $371,000$76,000 to 11,548,000 (34.8%$11,624,000 (35.3% of restaurant sales) from $11,177,000 (34.2%$11,548,000 (34.8% of restaurant sales) for the quarter ended December 28, 2021.27, 2022.$8,754,000 (34.8%$8,641,000 (35.8% of restaurant sales) for the quarter ended December 27, 2022 up26, 2023 down from $8,418,000 (34.2%$8,754,000 (34.8% of restaurant sales) in the same prior year period. The $336,000 increase$113,000 decrease is primarily attributable to higherlower restaurant sales during the current quarter versus the same quarter in the prior year, as well asoffset by higher average pay rates. As a percent of sales, payroll and employee benefits costs increased by 0.6%1.0% primarily attributable to higher average wage rates paid to attract qualified employees.employees and the deleveraging impact of lower sales on fixed labor costs, primarily manager salaries.2,794,000 (34.9%$2,983,000 (33.8% of restaurant sales) in the quarter ended December 27, 2022,26, 2023, up from $2,759,000 (34.1%$2,794,000 (34.9% of restaurant sales) in the same prior-year period. The $35,000$189,000 increase both in nominal dollars and as measured as a percent of restaurant sales, wasis attributable to higher sales and higher average wage rates, paidpartially offset by increased labor productivity. As a percent of sales, payroll and employee benefits costs decreased by 1.1% primarily attributable to attract qualified employees.a 4.6% increase in menu pricing and increased labor productivity, partially offset by increased wage rates.27, 202226, 2023 increased $130,000$47,000 to $2,505,000 (7.6% of restaurant sales) from $2,458,000 (7.4% of restaurant sales) from $2,328,000for the quarter ended December 27, 2022.28, 2021.26, 2023, down from $1,732,000 (6.9% of restaurant sales) in the same prior year period.Bad Daddy’sGood Times occupancy costs were 1,732,000 (6.9%$786,000 (8.9% of restaurant sales) in the quarter ended December 26, 2023, up from $726,000 (9.1% of restaurant sales) in the same prior year period. The increase was primarily due to the acquisition, by the Company during fiscal 2023, of two Good Times restaurants previously owned by franchisees.2022,2022.$1,649,000 (6.7%$3,521,000 (14.0% of restaurant sales) in the same prior year period. The $60,000 increase was primarily attributable to increased repair and maintenance, technology and utility expenses, offset by reduced commissions paid to delivery service providers, due to decreases in delivery sales.to additional lease costs associated with the purchase of our Bad Daddy’s Franchisee in the second quarter of Fiscal 2022 and increase property tax assessments overall.18Good Times occupancy costs were $726,000 (9.1% of restaurant sales) in the quarter ended December 27, 2022, up from $679,000 (8.4% of restaurant sales) in the same prior year period. The increase was primarily attributable to increased property and liability insurance costs.Other Operating Costs. Other operating costs for the quarter ended December 27, 2022, increased $354,000 to $4,492,000 (13.5% of restaurant sales) from $4,138,000 (12.7% of restaurant sales) for the quarter ended December 28, 2021.Bad Daddy’s other operating costs were $3,521,000 (14.0% of restaurant sales) for the quarter ended December 27, 2022 up from $3,285,000 (13.4% of restaurant sales) in the same prior year period. The $236,000 increase and the increase as a percentage of sales was attributable to higher overall sales, increased repair and maintenance expenses, increased third party delivery fees, and increased payroll service fees.Good Times other operating costs were $971,000 (12.1% of restaurant sales) in the quarter ended December 27, 2022, up from $853,000 (10.5% of restaurant sales) in the same prior year period. The increase was primarily attributable to general price inflation in supplies costs and increases in commissions paid to delivery service providers due to increases in overall delivery sales.New Store Preopening Costs. In the quarter ended December 27, 2022, there were no preopening costs compared to $50,000 for the quarter ended December 28, 2021.sales as well as increased repair and maintenance and utility expenses.27, 2022, decreased $74,00026, 2023, increased $17,000 to 910,000$927,000 from $984,000$910,000 in the quarter ended December 28, 2021.27, 2022.27, 202226, 2023 decreased $11,000$23,000 to $773,000$750,000 from $784,000$773,000 in the quarter ended December 28, 2021.27, 2022.27, 2022 decreased $63,00026, 2023 increased $40,000 to $137,000$177,000 from $200,000$137,000 in the quarter ended December 28, 2021.27, 2022.27, 2022,26, 2023, decreased $330,000$65,000 to $2,375,000$2,313,000 (7.0% of total revenues) from $2,378,000 (7.1% of total revenues) from $2,705,000 (8.2% of total revenue) for the quarter ended December 28, 2021.27, 2022.infor the quarter ended December 27, 202226, 2023 is primarily attributable to:$267,000Officeoffice lease and equipment expense of $24,000$17,000 in home office payroll ad benefit costs of $27,000●Decrease in insurance costs of $84,000●Decrease in Stock Compensation costs of $49,000●Decrease in other costs of $19,000●Increase in recruiting and training related costs of $28,000$108,000$23,000$154,000 administrative, accounting, and technology costs of $106,000trend similarly in nominal terms to costs incurred during the current quarter.be approximately 7.0% - 8.0% of total revenues.27, 2022,26, 2023, increased to $1,092,000 (3.3% of total revenues) from $894,000 (2.7% of sales from $641,000 (1.9% of total revenue)revenues) for the quarter ended December 28, 2021.27, 2022.$610,000 (2.4%$732,000 (3.0% of restaurant sales)total revenues) in the quarter ended December 27, 202226, 2023 compared to $314,000 (1.3%$610,000 (2.4% of total revenue)revenues) in the same prior year period. The increase is primarily due to recognition of commission earned by third parties on gift cards sold through large-box retailers. Bad Daddy’s advertising costs consist primarily of third party gift card commissions, menu development, printing costs, local store marketing and social media. The current quarter had no advertising costs associated with franchise contributions. The prior year quarter includes advertising costs of $4,000 associated with franchise advertising contributions.Bad Daddy’s advertising costs consist primarily of a combination of menus and other point of purchase materials, digital advertising, and commissions incurred for placement of gift parties at third party retailers, as well as local store marketing efforts.$284,000 (3.5%$360,000 (4.0% of restaurant sales)total revenues) in the quarter ended December 27, 202226, 2023 compared to $327,000 (4.0%$284,000 (3.5% of total revenue)revenues) in the same prior year period. The currentincrease is primarily due to radio advertising and prior year quarters include advertising costs of $66,000gift card and $67,000, respectively, of costs associated with franchise advertising contributions.loyalty program expense.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 on an annual basis, at approximately 3.5% of total revenue for the Good Times segment, though because we consolidate the advertising fund into our results, quarterly costs will fluctuate.19Franchise Costs. Franchise costs were $3,000 and $5,000 for the quarters ended December 27, 2022 and December 28, 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.Sales and Lease Termination.Equipment Sales. The gain on restaurant asset sales and lease terminationequipment sales for the quarter ended December 27, 202226, 2023 was zero,$10,000 compared to $0, which is composed of a net $8,000 loss on disposal of miscellaneous assets, offset by $8,000 of deferred gains, compared to $614,000 for the quarter ended December 28, 2021, of which $607,000 is attributable to gains in connection with a lease termination at a Good Times restaurant and the remainder primarily attributable to deferred gains on prior sale-leaseback transactions of certain Good Times restaurants.27, 2022.IncomeLoss from operations was ($374,000) in the quarter ended December 26, 2023 compared to income from operations of $107,000 in the quarter ended December 27, 2022 compared to income from operations of $1,276,000 in the quarter ended December 28, 2021.2022.incomeloss from operations for the quarter ended December 27, 202226, 2023 is due primarily due to matters discussed in the “Net Revenues,” “RestaurantRevenues”, “Food and Packaging Costs”, “Payroll and Other Employee Benefits Costs”, “Other Operating Costs,”Costs”, “General and Administrative Costs”, and “Advertising Costs”, and “Gain on Restaurant Sales and Lease Termination” sections above.2022, primarily related to the amortization of loan initiation fees, compared with $18,000 during the quarter ended December 28, 2021.2022.no$77,000 provision for income taxes for the quarter ended December 27, 2022,26, 2023, compared to $8,000 for the quarter ended December 28, 2021.Net Income. Net income was $95,000$0 for the quarter ended December 27, 20222022.$1,258,000$95,000 in the quarter ended December 28, 2021.27, 2022.27, 202226, 2023 to the quarter ended December 28, 202127, 2022 was primarily attributable to the matters discussed in the relevant sections above.27, 2022,26, 2023, the income attributable to non-controlling interests was $222,000$73,000 compared to $920,000$222,000 for the quarter ended December 28, 2021.27, 2022.$179,000zero is attributable to Bad Daddy’s joint-venture restaurants, compared to $684,000$179,000 in the same prior year period. This $505,000 decreasereduction is primarily due to a one-time special allocation to the non-controlling partners in these partnershipsacquisition by the Company during fiscal year 2023 of approximately $516,000the interests in the quarter ended December 28, 2021 related to a rebatelimited liability companies held by non-controlling parties. payroll costs, partially offset by slightly decreased restaurant level profitability in the current fiscal quarter. Of the current quarter’s income $43,000 is attributable to the Good Times joint-venture restaurants, compared to $236,000$43,000 in the same prior year period. This $193,000 decrease$30,000 increase is primarily due to decreased restaurant levelincreased profitability of the restaurants involved in the current fiscal quarter. Subsequent to the quarter ended December 27, 2022, the Company acquired all of the membership interests in five Bad Daddy’s as described in Note 17 to the unaudited, consolidated financial statements included in this report.limited partnership with a non-controlling partner.20althoughstockother Quarter Ended December 27, 2022
(13 Weeks) December 28, 2021
(13 Weeks) Adjusted EBITDA: Net (loss) income, as reported $ (127 ) $ 330 Depreciation and amortization1 867 1,004 Interest expense, net 12 18 Provision for income taxes - 8 EBITDA 752 1,360 Preopening expense - 50 Non-cash stock-based compensation 46 95 GAAP rent-cash rent difference (124 ) (73 ) Gain on restaurant asset sales and lease termination2 - (484 ) One-time special allocation to Bad Daddy’s partnerships - 516 Adjusted EBITDA $ 674 $ 1,464
(13 Weeks)
(13 Weeks) $ (556 ) $ (127 ) 929 867 32 12 77 - 482 752 38 46 (163 ) (124 ) (10 ) - $ 347 $ 674 1Depreciation and amortization expense hasand the difference between GAAP rent and cash rent have been reduced by any amounts attributable to non-controlling interests of 66,000 and $67,000 for the quarters ended December 27, 2022 and December 28, 2021, respectively.2Gain on restaurant asset sales and lease termination has been reduced by amounts attributable to non-controlling interests of and $130,000 for the quarter ended December 28, 2021, respectively.Amount represents the portion of a payroll cost rebate attributable to the non-controlling partners in these partnerships.interests.27, 2022,26, 2023, we had a working capital deficit of $2,042,000.$8,500,000. 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 wesale and have negotiated payment terms of up to four weeks with many of our vendors we pay our primary foodservice vendors on 1-3 day payment terms to take advantage of early pay discountsthat are typically between 14 and generally pay most outstanding accounts payable upon review for accuracy and validity. In addition, our21 days. Our current working capital position includesdeficit is additionally affected by the recognition of the current portion ofshort-term lease liabilities, as we lease substantially all of our real estate and have both short-termcurrent- 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 throughoutin fiscal 2023. As2024. We anticipate any commitments in fiscal 2024 will be funded out of December 27, 2022, we had no commitments related to construction contracts for any restaurants currently under development.existing cash or future borrowings against the Cadence Credit Facility.21maintains aand its wholly owned subsidiaries (the “Subsidiaries”) maintain an amended and restated credit agreement with Cadence Bank (“Cadence”) pursuant to which, as amended, Cadence agreed to loan the Company up to $8,000,000, which as of December 27, 2022 hadhas a maturity date of January 31, 2023April 20, 2028 (the “Cadence Credit Facility”). The Cadence Credit Facility amended and restated 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 December 27, 2022, any borrowings undera mixture of SOFR Rate Loans and Base Rate Loans with differing interest rates based upon varying additions to the Federal Funds Rate, the Cadence prime rate or Term SOFR. Each of the Subsidiaries are guarantors of the Cadence Credit Facility.as amended, bear interest at a variable rate based uponif and when drawn, may be used (i) to fund new restaurant development, (ii) to finance the Company’s electionbuyout of (i) 2.5% plusnon-controlling partners in certain restaurants, (iii) to finance the base rate, which is the highestredemption, purchase or other acquisition 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%. Interest is due at the end of each calendar quarter ifequity interests in the Company selects to pay interest based on the base rate and at the end of each LIBOR period if it selects to pay interest based on LIBOR. (iv) for working capital and other general corporate purposes.provisions forcustomary affirmative and negative covenants and events of default. The Cadence Credit Facility also requires the Administrative AgentCompany to maintain various financial condition ratios, including minimum liquidity, an amended maximum leverage ratio and an amended minimum fixed charge coverage ratio. In addition, to the extent the aggregate outstanding balance under the revolver exceeds $4.0 million, the Company is required to meet a new specified leverage ratio, on a pro forma basis, before making further borrowings as well as certain restricted payments, investments and growth capital expenditures. As of the facility to amenddate of filing of this report, the facility to replace LIBORCompany was in compliance 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 timingeach of any transition of LIBOR to an alternate benchmark rate is not currently known.these covenants under the Cadence Credit Facility.27, 2022,26, 2023 the weighted average interest rate applicable to borrowings under the Cadence Credit Facility was 7.8%8.45%.The Cadence Credit Facility contains certain affirmative and negative covenants and events of default that the Company considers customary for an agreement of this type, including covenants setting a maximum leverage ratio of 5.15:1, a minimum pre-distribution fixed charge coverage ratio of 1.25:1, a minimum post-distribution fixed charge coverage ratio of 1.10:1 and minimum liquidity of $2.0 million. As of December 27, 2022, the Company was in compliance with all financial covenants under the Cadence Credit Facility.$308,500$299,000 and is amortizing these costs over the term of the credit agreement. The remaining amount to be amortized asAs of December 27, 2022 is $13,000. The obligations under26, 2023, the unamortized balance of these fees was $115,000.are collateralizedthe Company and the 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 lien onfirst priority security interest in substantially all the assets of the Company’s assets.Company and the Subsidiaries.the date of filing this Form 10-Q,December 26, 2023, there were no outstanding$1,250,000 of borrowings against the facility.facility, all of which is due during the fiscal year ending September 26, 2028 and is classified as a long-term liability in the accompanying balance sheet. 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 filing this Form 10-Q,December 26, 2023, there were noapproximately $10,000 in outstanding letters of credit issued under the facility.facility, and approximately $6,740,000 of committed funds available.On January 24,Total interest expense on notes payable was $26,000 and $0 for the quarters ended December 26, 2023 subsequent to the end of the fiscal quarter endedand December 27, 2022, the Company and Cadence amended the Cadence Credit Facility to extend its expiration date to April 30, 2023, to provide consent for the Company’s acquisitionrespectively.Cash FlowsThe table below summarizes our cash flows from operating, investing, and financing activities for each period presented (in thousands): $ (252 ) $ (154 ) (448 ) (719 ) 33 (1,119 ) $ (667 ) $ (1,992 ) used infrom operating activities was $153,000 for the quarter ended December 27, 2022. The net cash used in operating activities for the quarter ended December 27, 2022 was the result ofdecreased by $98,000, primarily due to decreased net income of $95,000 as well as cash and non-cash reconciling items totaling $248,000. These reconciling items are primarily comprised of 1) depreciation and amortization of general assets of $932,000, 2) amortization of operating lease assets of $988,000, 3) decrease of ROU assets of $608,000 4) stock-based compensation expense of $46,000, 5) a net gain on sales and disposals of assets of $1,000, 5)(loss), offset by an increase in receivablescash provided by ROU assets and other assets of $1,499,000, 5) an increase in deferredoperating lease liabilities and accrued expensesother liabilities, as presented on the Condensed Consolidated Statements of $248,000, 7) an increase in accounts payable of $162,000 and 8) a net decrease in amounts related to our operating leases of $1,734,000.Cash Flows.NetInvesting cash provided by operating activities was $219,000 for the quarter ended December 28, 2021. The net cash provided by operating activities for the quarter ended December 28, 2021 was the result of net income of $1,250,000 as well as cash and non-cash reconciling items totaling $1,469,000. These reconciling items are primarily comprised of 1) depreciation and amortization of general assets of $1,078,000, 2) amortization of operating lease assets of $757,000, 3) stock-based compensation expense of $95,000, 4) an increase in receivables and other assets of $961,000, 5) an increase in deferred liabilities and accrued expenses of $808,000, 6) a decrease in accounts payable of $915,000 and 7) a net increase in amounts related to our operating leases of $823,000.flows22quarterquarters ended December 26, 2023 and December 27, 2022 was $720,000were $448,000 and $719,000, respectively, which primarily reflectsreflect the purchases of property and equipment of $724,000, offset by proceeds from the sale of an asset. Purchases of property and equipment is comprised of the following:in each quarter.●$281,000 for miscellaneous capital expenditures related to our existing Bad Daddy’s restaurants●$443,000 for miscellaneous capital expenditures related to our existing Good Times restaurantsused in investingprovided by financing activities for the quarter ended December 28, 202126, 2023 was $237,000$33,000, which primarily reflectsincludes proceeds from long-term debt of $500,000, distributions to non-controlling interests of $29,000, and $438,000 in payments for the purchasesrepurchase of property and equipment of $237,000. Purchases of property and equipment is comprised ofcommon stock under the following:Company’s share repurchase program.●$192,000 in costs for the development of new Bad Daddy’s locations●$45,000 for miscellaneous capital expenditures related to our existing Bad Daddy’s restaurants●$81,000 for miscellaneous capital expenditures related to our existing Good Times restaurantsproceeds from stock option exercisesdistributions to (net of $5,000 and distributions tocontributions from) non-controlling interests of $159,000, payments for the purchase of treasury stock of $873,000, $92,000 in restricted stock vesting paid in cash, and $873,000 in payments for the purchase of treasury stock.Net cash used in financing activities for the quarter ended December 28, 2021 was $760,000, which includes proceeds formfrom stock option exercisesexercise of $6,000 and distributions to non-controlling interests of $766,000, the latter including a one-time special allocation of approximately $516,000 to the non-controlling partners in our Bad Daddy’s partnerships related to a rebate of payroll costs.$5,000.have recently been at near-record highsremain high and have exhibited extreme volatility. Though wevolatile. We have seen some moderationlower costs across many commodities in certain commodities,our basket. Based on general industry consensus, we project that due to reductions in supply, ground beef costs will increase during the second half of fiscal 2024, as will other proteins and food-based commodities. We continue to experience higher year-over-year prices on many goods, including food and beverage items,elevated costs for paper and packaging, other restaurant supplies, and energy (utilities) costs. Due to the volatility in commodity pricing, we are unable to reasonably predict the impact of future inflationary pressures.workersrestaurant employees, and in our restaurants. While we are hopeful that wage rate inflation moderates, the persistent shortage of qualified workers, rather thanColorado inflation-indexed statutory wage rate increases which have traditionally created rate pressure, is the primary factorare creating upward pressure on wages, as demand for labor is currently significantly exceeding the supply of qualified workers.wages.current unusually high raterelative pricing of inflation,competitors may prevent us from raising prices sufficient to offset the significant increases in labor costs, particularly in Colorado where wage pressures are caused by both of goodsstatutory and labor, exceeds what we believe we can reasonably pass through to our customers without negatively affecting frequency and trial by our customers.market forces.March.March, which affects both of the Company’s brands, but the Company’s Good Times restaurants are more sensitive to these weather-based seasonal fluctuations. The Company’s Bad Daddy’s restaurants typically experience seasonal reductions in revenues between the months of November and January resulting from general consumer spending patterns.hashave concluded that the Company’s disclosure controls and procedures were effective as of December 27, 2022.26, 2023.27, 202226, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.2327, 2022.26, 2023.27, 202226, 2023 the Company has purchased 660,5351,287,960 shares of its common stock pursuant to the share repurchase plan leaving approximately $3,165,000$1,343,000 available for repurchases under the plan.27, 202226, 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 9/28/2022 - 10/25/2022 184,803 $ 2.25 184,803 10/26/2022 - 11/22/2022 126,171 $ 2.40 126,171 11/23/2022 - 12/27/2022 60,421 $ 2.57 60,421 Total 371,395 $ 3,165,000
shares (or units)
purchased
paid per share
(or unit)
shares (or units)
purchased as part
of publicly
announced plans
or programs
value of shares
that may yet be
purchased under
the plans or
programs 41,950 $ 2.93 41,950 40,199 $ 2.68 40,199 78,623 $ 2.59 78,623 160,772 160,772 $ 1,343,000 ITEM 5.None.During the quarter ended December 26, 2023, none of the Company’s directors or our officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) adopted, modified or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933).” 24February 2, 2023Matthew KarnesKeri A. August (Principal(Principal Financial Officer)25--09-26 NV false Q1 2023 0000825324 Good Times Restaurants Inc. iso4217:USD xbrli:shares