Business Combinations

9 Months Ended

Jun. 30, 2015

Business Combinations [Abstract]

Business Combinations

Note 2.Business Combinations

The Company believes the Bad Daddy Burger Bar brand has significant growth potential and can be expanded beyond its current regional footprint. In order to acquire control over the Bad Daddy's Burger Bar brand to take advantage of this growth potential, on April 28, 2015, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) to purchase from five sellers all of the membership interests in BDI, a North Carolina limited liability company. The Company closed on the purchase of BDI on May 7, 2015, and BDI became a wholly-owned subsidiary of the Company.BDI owns all of the member interests in four limited liability companies, each of which owns and operates a Bad Daddy's Burger Bar restaurant in North Carolina.  In addition, BDI owns a portion of the member interests in three other limited liability companies, each of which also owns a Bad Daddy's Burger Bar restaurant in North Carolina.  BDI also owns the intellectual property associated with the Bad Daddy's Burger Bar concept and owns 52 percent of the member interests in BDFD, which has granted franchises for the ownership and operation of Bad Daddy's Burger Bar restaurants in South Carolina and Tennessee. BDI has also granted a license for the operation of a Bad Daddy's Burger Bar at the Charlotte airport.  As a result of the purchase of BDI, the Company has acquired all of the foregoing interests and assets.Prior to the acquisition, the Company owned the remaining 48 percent of the member interests in BDFD and carried an Investment in Affiliates balance of $498,000.

The aggregate price paid by the Company for the purchase of BDI was $21,407,000, comprised of $18,988,000 payable in cash and a one-year secured promissory note bearing interest at 3.25 percent in the amount of $2,419,000.  The total price paid is subject to adjustments for the final calculation of the net working capital balance. Pursuant to a Pledge Agreement (the “Pledge Agreement”), the promissory note is secured by a pledge of the ownership of the two entities which own two of the acquired restaurants. Upon the reduction of the principal of the promissory note by at least 50% the sellers are to select one of the entities for release from the pledge.The Company acquired all of BDI's ownership interests.

The Company has incurred non-recurring costs of $365,000 and $562,000 for the three and nine months ended June 30, 2015, respectively, related to the BDI acquisition which are included in the condensed consolidated statements of operations.

The preliminary estimated fair values of the assets acquired and liabilities assumed for the acquisition approximated the following (in thousands):

		Allocated Fair Value
Cash	$	1,376
Receivables		124
Prepaid expenses and other		49
Inventories		133
Deposits		52
Property and equipment		3,672
Trademarks		3,900
Franchise agreements		116
Non-compete agreements		15
Goodwill		14,974
Total assets purchased		24,411
Accounts payable and other accrued liabilities		(749)
Unfavorable lease liability		(481)
Non-controlling interests in partnerships		(1,276)
Total liabilities assumed		(2,506)
Investment in BDFD balance		(498)
Total purchase price	$	21,407
Cash	$	18,988
Notes payable		2,419
Total purchase price	$	21,407

 
The excess of the purchase price over the aggregate fair value of net assets acquired was allocated to goodwill. The portion of the purchase price attributable to goodwill represents benefits expected as a result of the acquisition, including sales and unit growth opportunities in addition to supply-chain synergies.

Included in the consolidated statement of operations for the three and nine months ended June 30, 2015 are revenues of $3,002,000 and net income of $147,000 attributed to BDI and BDFD from the date of acquisition.

Estimates of acquired goodwill and identifiable intangible assets related to the acquisition are as follows (in thousands):

	Estimated Fair Value	Weighted Average Estimated Useful Life (yrs)
Trademarks and trade names	$ 3,900	Indefinite
Franchise Agreements	116	3 – 9
Non-Compete Agreements	15	3
Goodwill, including assembled workforce	14,974	Indefinite

The table below presents the proforma revenue and net income for the three and nine months ended June 30, 2015 and 2014, assuming the acquisition had occurred on October 1, 2013.This proforma information does not purport to represent what the actual results of operations of the Company would have been had the acquisition occurred on this date nor does it purport to predict the results of operations for future periods (in thousands).

	Three Months Ended		Nine months Ended
	June 30, (1)		June 30, (2)
	2015	2014	2015	2014
Revenues	$14,825	$11,476	$39,866	$30,016
Net income (loss)	$641	$596	$409	$(178)
Net income (loss) attributable to Good Times Restaurants, Inc.	$480	$474	$131	$(162)
Net income (loss)attributable to common shareholders	$480	$474	$131	$(221)
Basic income (loss) per share	$.04	$.07	$.01	$(.04)
Diluted income (loss) per share	$.04	$.06	$.01	$(.04)

(1)

Net loss during the three months ended June 30, 2015 excludes acquisition related costs of $365,000

(2)

Net loss during the nine months ended June 30, 2015 excludes acquisition related costs of $562,000