UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended ~~July 4, 2021~~April 3, 2022

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

Commission File Number 001-39053

BBQ HOLDINGS, INC.

(Exact Name of Registrant as Specified in its Charter)

MMiMinsd
Minnesota		83-4222776
State or Other Jurisdiction of Incorporation or Organization		I.R.S. Employer Identification No.

12701 Whitewater Drive, Suite 100 Minnetonka, MN		55343
Address of Principal Executive Offices		Zip Code

Registrant’s Telephone Number, Including Area Code (952) 294-1300

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

DAVE
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	BBQ	The Nasdaq Global 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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, indicate 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 Act). Yes ☐ No ☒

As of ~~August 13, 2021, 10,358,450~~May 9, 2022, 10,755,801 shares of the registrant’s Common Stock were outstanding.

BBQ HOLDINGS, INC.

TABLE OF CONTENTS

			Page
PART I	FINANCIAL INFORMATION

Item 1	Condensed Consolidated Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets as of ~~July 4, 2021~~April 3, 2022 and January ~~3, 2021~~2, 2022		3

	Condensed Consolidated Statements of Operations for the Three ~~and Six~~ Months Ended ~~July~~April 3, 2022 and April 4, 2021 ~~and June 28, 2020~~		4

	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the ~~Six~~Three Months Ended ~~July~~April 3, 2022 and April 4, 2021		5

	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~July~~April 3, 2022 and April 4, 2021 ~~and June 28, 2020~~		6

	Notes to Condensed Consolidated Financial Statements		7

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

Item 3	Quantitative and Qualitative Disclosures About Market Risk		2624

Item 4	Controls and Procedures		2624

PART II	OTHER INFORMATION

Item 1	Legal Proceedings		2624

Item 1A		Risk Factors	2624

Item 6	EXHIBITS		2624

	SIGNATURES		2826

	CERTIFICATIONS

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (unaudited)

BBQ HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

~~JULY 4, 2021 AND JANUARY 3, 2021~~

(in thousands, except per share data)

(Unaudited)

ASSETS

Current assets:

July 4, 2021

January 3, 2021
Cash and cash equivalents

$
38,358

$
18,101
Restricted cash

824

1,502
Accounts receivable, net of allowance for doubtful accounts of $259,000 and $132,000, respectively

4,966

4,823
Inventories

2,433

2,271
Prepaid expenses and other current assets

2,881

1,252
Assets held for sale

1,024

1,070
Total current assets

50,486

29,019

Property, equipment and leasehold improvements, net

31,112

32,389

Other assets:




Operating lease right-of-use assets

60,787

61,634
Goodwill

601

601
Intangible assets, net

9,733

9,967
Deferred tax asset, net

4,623

4,934
Other assets

1,660

1,724

$
159,002

$
140,268

LIABILITIES AND SHAREHOLDERS’ EQUITY



Current liabilities:




Accounts payable

$
7,050

$
6,385
Current portion of lease liabilities

6,844

6,185
Current portion of long-term debt

2,165

2,111
Accrued compensation and benefits

6,313

2,390
Other current liabilities

8,814

9,766
Total current liabilities

31,186

26,837




Long-term liabilities:




Lease liabilities, less current portion

61,839

63,105
Long-term debt, less current portion

7,131

22,169
Other liabilities

1,376

1,224
Total liabilities

101,532

113,335

Shareholders’ equity:




Common stock, $.01 par value, 100,000 shares authorized, 10,357 and 9,307 shares issued and outstanding at July 4, 2021 and January 3, 2021, respectively

104

93
Additional paid-in capital

22,147

8,748
Retained earnings

35,955

19,370
Total shareholders’ equity

58,206

28,211
Non-controlling interest

(736)

(1,278)
Total equity

57,470

26,933

$
159,002

$
140,268


ASSETS
Current assets:		April 3, 2022		January 2, 2022
Cash and cash equivalents		$	35,431	$	40,309
Restricted cash			1,677		1,152
Accounts receivable, net of allowance for doubtful accounts of $301,000 and $270,000, respectively			3,188		5,476
Inventories			3,281		3,316
Prepaid expenses and other current assets			4,313		3,919
Total current assets			47,890		54,172

Property, equipment and leasehold improvements, net			39,748		39,943

Other assets:
Operating lease right-of-use assets			81,248		78,843
Goodwill			5,676		3,037
Intangible assets, net			23,714		23,444
Deferred tax asset, net			3,922		3,692
Other assets			1,493		1,292
Total assets		$	203,691	$	204,423

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable		$	6,951	$	7,661
Current portion of operating lease liabilities			12,511		11,904
Current portion of long-term debt and finance lease liabilities			1,488		1,621
Accrued compensation and benefits			6,157		7,121
Gift card liability			8,809		11,257
Other current liabilities	��		8,752		8,510
Total current liabilities			44,668		48,074

Long-term liabilities:
Operating lease liabilities, less current portion			79,362		77,729
Finance lease liabilities, less current portion			292		79
Long-term debt, less current portion			12,819		13,197
Other liabilities			1,087		997
Total liabilities			138,228		140,076

Shareholders’ equity:
Common stock, $.01 par value, 100,000 shares authorized, 10,750 and 10,495 shares issued and outstanding at April 3, 2022 and January 2, 2022, respectively			108		105
Additional paid-in capital			22,248		21,782
Retained earnings			44,158		43,391
Total shareholders’ equity			66,514		65,278
Non-controlling interest			(1,051)		(931)
Total equity			65,463		64,347
Total liabilities and equity		$	203,691	$	204,423

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

BBQ HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

~~JULY~~APRIL 3, 2022 AND APRIL 4, 2021 ~~AND JUNE 28, 2020~~

(in thousands, except per share data)

(Unaudited)


	Three Months Ended
	April 3, 2022		April 4, 2021
Revenue:
Restaurant sales, net	$	58,731	$	33,603
Franchise royalty and fee revenue		3,607		2,374
Franchisee national advertising fund contributions		490		328
Licensing and other revenue		1,356		1,014
Total revenue		64,184		37,319

Costs and expenses:
Food and beverage costs		18,357		10,057
Labor and benefits costs		19,386		10,254
Operating expenses		17,239		10,249
Depreciation and amortization expenses		2,423		1,552
General and administrative expenses		5,291		4,038
National advertising fund expenses		490		328
Asset impairment, estimated lease termination charges and other closing costs, net		409		12
Pre-opening expenses		65		28
Loss (gain) on disposal of property, net		44		(8)
Total costs and expenses		63,704		36,510

Income from operations		480		809

Other income (expense):
Interest expense		(120)		(54)
Interest income		8		24
Gain on bargain purchase		38		—
Total other income (expense)		(74)		(30)

Income before income taxes		406		779

Income tax (expense) benefit		241		(82)

Net income		647		697
Net loss attributable to non-controlling interest		120		102
Net income attributable to shareholders	$	767	$	799


Income per common share:
Basic net income per share attributable to shareholders	$	0.07	$	0.09
Diluted net income per share attributable to shareholders	$	0.07	$	0.08
Weighted average shares outstanding - basic		10,552		9,208
Weighted average shares outstanding - diluted		10,649		9,501

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

BBQ HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED APRIL 3, 2022 AND APRIL 4, 2021

(in thousands)

(Unaudited)


				Additional				Total
	Common Stock			Paid-in		Retained		Shareholders'		Non-controlling		Total
	Shares	Amount		Capital		Earnings		Equity		Interest		Equity
Balance - January 2, 2022	10,495	$	105	$	21,782	$	43,391	$	65,278	$	(931)	$	64,347
Issuance of restricted common stock, net of shares withheld for taxes	227		3		(22)		—		(19)		—		(19)
Issuance of common stock upon exercise of options, net of shares withheld for taxes	28		—		104		—		104		—		104
Stock-based compensation	—		—		384		—		384		—		384
Net income	—		—		—		767		767		(120)		647
Balance - April 3, 2022	10,750	$	108	$	22,248	$	44,158	$	66,514	$	(1,051)	$	65,463


				Additional				Total
	Common Stock			Paid-in		Retained		Shareholders'		Non-controlling		Total
	Shares	Amount		Capital		Earnings		Equity		Interest		Equity
Balance - January 3, 2021	9,307	$	93	$	8,748	$	19,370	$	28,211	$	(1,278)	$	26,933
Stock-based compensation	—		—		318		—		318		—		318
Net income	—		—		—		799		799		(102)		697
Balance - April 4, 2021	9,307	$	93	$	9,066	$	20,169	$	29,328	$	(1,380)	$	27,948

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

BBQ HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

APRIL 3, 2022 AND APRIL 4, 2021

(in thousands)

(Unaudited)

Three Months Ended

Six Months Ended

July 4, 2021

June 28, 2020

July 4, 2021

June 28, 2020

Revenue:









Restaurant sales, net
$
41,205

$
24,989

$
74,808

$
45,692

Franchise royalty and fee revenue

2,946

1,951

5,320

4,475

Franchisee national advertising fund contributions

421

242

749

524

Licensing and other revenue

948

580

1,962

926

Total revenue

45,520

27,762

82,839

51,617

Costs and expenses:









Food and beverage costs

11,932

7,717

21,989

14,471

Labor and benefits costs

12,429

8,066

22,683

15,787

Operating expenses

11,594

9,104

21,843

15,730

Depreciation and amortization expenses

1,433

1,378

2,985

2,423

General and administrative expenses

4,544

3,803

8,582

6,835

National advertising fund expenses

421

242

749

524

Asset impairment, estimated lease termination charges and other closing costs, net

25

4,779

37

4,952

Pre-opening expenses

92

2

120

27

Gain (loss) on disposal of property, net

143

(100)

135

(577)

Total costs and expenses

42,613

34,991

79,123

60,172

Income (loss) from operations

2,907

(7,229)

3,716

(8,555)

Other income (expense):









Interest expense

(261)

(237)

(315)

(356)

Interest income

74

59

98

102

Gain upon debt extinguishment

14,109

—

14,109

—

Gain on bargain purchase

—

(689)

—

13,675

Total other income (expense) income

13,922

(867)

13,892

13,421

Income (loss) before income taxes

16,829

(8,096)

17,608

4,866

Income tax (expense) benefit

(399)

1,897

(481)

2,246

Net income (loss)

16,430

(6,199)

17,127

7,112

Net (income) loss attributable to non-controlling interest

(644)

(53)

(542)

343

Net income (loss) attributable to shareholders
$
15,786

$
(6,252)

$
16,585

$
7,455

Income (loss) per common share:









Basic net income (loss) per share attributable to shareholders
$
1.70

$
(0.68)

$
1.79

$
0.82

Diluted net income (loss) per share attributable to shareholders
$
1.64

$
(0.68)

$
1.73

$
0.82

Weighted average shares outstanding - basic

9,304

9,138

9,256

9,132

Weighted average shares outstanding - diluted

9,615

9,138

9,567

9,132


	Three Months Ended
	April 3, 2022		April 4, 2021
Cash flows from operating activities:
Net income	$	647	$	697
Adjustments to reconcile net income to cash flows provided by operations:
Depreciation and amortization		2,423		1,552
Stock-based compensation		384		318
Net (gain) loss on disposal		44		(8)
Asset impairment, estimated lease termination charges and other closing costs, net		409		12
Gain on bargain purchase		(38)		—
Amortization of operating right-of-use assets		2,894		2,134
Deferred tax asset		(230)		82
Other non-cash items		(6)		186
Changes in operating assets and liabilities:
Accounts receivable, net		2,296		598
Prepaid expenses and other assets		(114)		(1,197)
Accounts payable		(710)		1,635
Accrued compensation and benefits		(871)		1,678
Lease liabilities		(3,258)		(1,513)
Gift card liability		(2,544)		(1,563)
Accrued and other liabilities		62		(425)
Cash flows provided by operating activities		1,388		4,186
Cash flows from investing activities:
Purchases of property, equipment and leasehold improvements		(722)		(691)
Payments for acquired restaurants		(4,434)		—
Payments received on note receivable		—		6
Cash flows used for investing activities		(5,156)		(685)
Cash flows from financing activities:
Payments on long-term debt		(562)		(519)
Tax payments for restricted stock units and stock options exercised		(130)		—
Proceeds from exercise of stock options		107		—
Cash flows used for financing activities		(585)		(519)
Increase (decrease) in cash, cash equivalents and restricted cash		(4,353)		2,982
Cash, cash equivalents and restricted cash, beginning of period		41,461		19,603
Cash, cash equivalents and restricted cash, end of period	$	37,108	$	22,585

Supplemental Disclosures
Cash paid for interest, net	$	107	$	116

Non-cash investing and financing activities:
Operating right-of-use assets acquired		4,533		—
Lease liabilities assumed pursuant to acquisitions		4,574		—
Gift card liability assumed pursuant to acquisitions		96		—
Inventory acquired pursuant to acquisitions		85		—

See accompanying notes to condensed consolidated financial statements.

~~- 4 -~~

~~Table of Contents~~

~~BBQ HOLDINGS, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY~~

~~FOR THE SIX MONTHS ENDED JULY 4, 2021~~

~~(in thousands)~~

~~(Unaudited)~~

Additional

Total

Common Stock

Paid-in

Retained

Shareholders'

Non-controlling

Total


Shares

Amount

Capital

Earnings

Equity

Interest

Equity
Balance - January 3, 2021

9,307

$
93

$
8,748

$
19,370

$
28,211

$
(1,278)

$
26,933
Issuance of restricted common stock

—

—

—

—

—

—

—
Issuance of common stock pursuant to PIPE

1,000

10

12,452

—

12,462

—

12,462
Exercise of stock options

50

1

309

—

310

—

310
Stock-based compensation

—

—

638

—

638

—

638
Net income

—

—

—

16,585

16,585

542

17,127
Balance - July 4, 2021

10,357

$
104

$
22,147

$
35,955

$
58,206

$
(736)

$
57,470

~~See accompanying notes to condensed consolidated financial statements.~~

~~- 5 -~~

~~Table of Contents~~

~~BBQ HOLDINGS, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~JULY 4, 2021 AND JUNE 28, 2020~~

~~(in thousands)~~

~~(Unaudited)~~

Six Months Ended


July 4, 2021

June 28, 2020
Cash flows from operating activities:




Net income

$
17,127

$
7,112
Adjustments to reconcile net income to cash flows provided by operations:




Depreciation and amortization

2,985

2,423
Stock-based compensation

638

248
Net gain (loss) on disposal

135

(577)
Asset impairment, estimated lease termination charges and other closing costs, net

—

4,710
Gain on forgivenss of debt

(14,109)

—
Gain on bargain purchase

—

(13,675)
Deferred income taxes

481

(2,295)
Other non-cash items

168

547
Changes in operating assets and liabilities:

Accounts receivable, net

(188)

(240)
Prepaid expenses and other current assets

(2,479)

(1,991)
Accounts payable

665

2,292
Accrued and other liabilities

3,461

964
Cash flows provided by (used for) operating activities

8,884

(482)

Cash flows from investing activities:




Purchases of property, equipment and leasehold improvements

(1,114)

(2,000)
Payments for acquired restaurants

—

(4,952)
Transfer from HFS

46

—
Payments received on note receivable

23

12
Cash flows used for investing activities

(1,045)

(6,940)

Cash flows from financing activities:




Proceeds from long-term debt

—

22,058
Payments for debt issuance costs

10

(45)
Payments on long-term debt

(1,042)

—
Proceeds from sale of common stock, net of offering costs

12,462

—
Proceeds from exercise of stock options

310

—
Cash provided by financing activities

11,740

22,013

Increase in cash, cash equivalents and restricted cash

19,579

14,591
Cash, cash equivalents and restricted cash, beginning of period

19,603

6,086
Cash, cash equivalents and restricted cash, end of period

$
39,182

$
20,677

Supplemental Disclosures

Cash paid for interest, net

$
587

$
47

Non-cash investing and financing activities:

Gift card liability assumed pursuant to acquisitions

—

3,968

~~See accompanying notes to condensed consolidated financial statements.~~

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Table of Contents

BBQ HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

Basis of Presentation

In September 2019 a holding company reorganization was completed in which Famous Dave’s of America, Inc. (“FDA”) became a wholly owned subsidiary of the new parent holding company named BBQ Holdings, Inc. (“BBQ Holdings”). As used in this Form ~~10-K,~~10-Q, “Company”, “we” and “our” refer to BBQ Holdings and its wholly owned subsidiaries. BBQ Holdings was incorporated on March 29, 2019 under the laws of the State of Minnesota, while FDA was incorporated in Minnesota on March 14, 1994. The Company develops, owns and operates restaurants under the name “Famous Dave’s”, “Village Inn”, “Barrio Queen”, “Granite City”, Real Urban Barbecue”, “Clark Crew BBQ”, ~~“Granite City Food~~“Tahoe Joe’s Steakhouse”, “Bakers Square”, “Craft Republic”, and “Fox & ~~Brewery”, “Real Urban Barbecue”, “Village Inn” and “ Bakers Square.”~~Hound”. Additionally, the Company franchises restaurants under the name “Famous Dave’s” and “Village Inn”. As of ~~July 4, 2021,~~April 3, 2022, there were ~~127~~144 Famous Dave’s restaurants operating in 3 countries, including 2740 Company-owned restaurants and ~~100~~104 franchise-operated restaurants. This includes the 8 Famous Dave’s ghost kitchens the Company operates out of its Granite City restaurants. The first Clark Crew BBQ restaurant opened in December 2019 in Oklahoma City, Oklahoma. BBQ Holdings has a 20% ownership in this venture. ~~In March 2020, the~~The Company ~~purchased~~owns and operates 18 Granite City Food & Brewery restaurants located throughout the Midwest and 12 Real Urban Barbecue ~~restaurant~~restaurants located in ~~Vernon Hills,~~ Illinois. On July 30, 2021, the Company completed the purchase of the Village Inn family restaurant concept currently with 2122 Company-owned restaurants and ~~114~~103 franchised restaurants, and the Bakers Square pie and comfort food concept currently with 1314 Company-owned ~~restaurants.~~restaurants and 4 locations where Bakers Square pies are licensed. On October 4, 2021, the Company opened its second Real Urban Barbecue restaurant located in Oak Brook, Illinois and on October 8, 2021 the Company acquired the Tahoe Joe's Steakhouse brand. On March 11, 2022 the Company acquired 3 bar-centric locations, collectively referred to as “Famous Craft Concepts”, and on April 25, 2022, the Company executed an Asset Purchase Agreement for another bar-centric restaurant. On April 11, 2022, the Company closed the purchase of Barrio Queen, a chain of 7 authentic Mexican fine dining restaurants in Phoenix, Arizona.

~~These~~The accompanying condensed consolidated balance sheet as of January 2, 2022, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and Securities and Exchange Commission (“SEC”) Rules and Regulations. The information furnished in these condensed consolidated financial statements include normal recurring adjustments and reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These unaudited financial statements represent the condensed consolidated financial statements of the Company and its subsidiaries as of ~~July 4, 2021~~April 3, 2022 and January ~~3, 2021,~~2, 2022, and for the three ~~and six~~ months ended ~~July~~April 3, 2022 and April 4, ~~2021 and June 28, 2020.~~2021. The results for the three ~~and six~~ months ended ~~July 4, 2021~~April 3, 2022 are not necessarily indicative of the results to be expected for the full fiscal year or any other interim period. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in BBQ ~~Holding,~~Holdings, Inc.’s Annual Report on Form 10-K for the fiscal year ended January ~~3, 2021~~2, 2022 as filed with the SEC on ~~April 2, 2021.~~March 16, 2022.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic and the United States declared a National Public Health Emergency. As a result, public health measures were taken to minimize exposure to the virus. These measures, some of which are government-mandated, have been implemented globally resulting in a dramatic decrease in economic activity. During the first quarter of 2021, mandated restrictions began to ease in a number of the markets in which the Company operates. Although the Company has experienced some recovery from the initial impact of COVID-19, the long-term impact of COVID-19 on the economy and on its business remains uncertain, the duration and scope of which cannot currently be predicted. As new variants of COVID-19 are being discovered and cases ~~in unvaccinated people rise~~continue to occur at material rates throughout the markets in which the Company does business, the Company cannot predict the severity of another surge, what additional restrictions may be enacted, to what extent it can maintain off-premise sales volumes, whether it can maintain sufficient staffing levels, or if individuals will be comfortable returning to its dining rooms during or following social distancing protocols, and what long-lasting effects the COVID-19 pandemic may have on the restaurants industry as a whole. The ~~extent of the reopening process, along with the~~ potential impact of the COVID-19 pandemic on consumer spending behavior, which may be a function of continued concerns over safety and/or depressed consumer sentiment due to adverse economic conditions, including job losses, will determine the significance of the impact to the Company’s operating results and financial position.

The full impact of the COVID-19 pandemic continues to evolve as of the date of this report. Despite the fact that vaccines are now widely available across the country, there are widespread increases in diagnosed cases reported since the end of the second quarter of 2021 largely due to the spread of COVID-19 variants. The duration of the disruption on global, national, and local

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BBQ HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

economies cannot be reasonably estimated at this time due to the ongoing effects of this situation. Management is continually evaluating the impact of this global crisis on its financial condition, liquidity, operations, suppliers, industry, and workforce and will take additional actions as necessary.

~~Reclassifications~~

Certain prior period amounts have been reclassified to conform to the current period’s presentation. These reclassifications did not have an impact on the reported net income for any of the periods presented.

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~~Table of Contents~~

~~BBQ HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Income Taxes

The Company maintains a federal deferred tax asset (“DTA”) which was in the amount of ~~$4.6~~$3.9 million as of ~~July 4, 2021~~April 3, 2022 and ~~$4.9~~$3.7 million as of January ~~3, 2021.~~2, 2022. The Company evaluates the DTA on a quarterly basis to determine whether current facts and circumstances indicate that the DTA may not be fully realizable. As of ~~July 4, 2021,~~April 3, 2022, the Company concluded that the DTA is fully realizable and that no further valuation allowance was necessary; however, the Company will continue to evaluate the DTA on a quarterly basis until the DTA has been fully utilized.

The following table presents the Company’s effective tax rates for the periods presented:


	Three Months Ended						Six Months Ended						Three Months Ended
	July 4, 2021			June 28, 2020			July 4, 2021			June 28, 2020			April 3, 2022			April 4, 2021
Effective tax rate		2.4	%		23.4	%		2.7	%		(46.2)	%		(59.4)	%		10.5	%

The Company uses the discrete method to calculate the quarterly tax provision due to its inability to reliably estimate annual ordinary income (loss). The Company provides for income taxes based on its estimate of federal and state income tax liabilities. These estimates include, among other items, effective rates for state and local income taxes, allowable tax credits for items such as taxes paid on reported tip income, estimates related to depreciation and amortization expense allowable for tax purposes, and the tax deductibility of certain other items. The Company’s estimates are based on the information available at the time that the Company prepares the income tax provision. The Company generally files its annual income tax returns several months after its fiscal year-end. Income tax returns are subject to audit by federal, state, and local governments, generally years after the tax returns are filed. These returns could be subject to material adjustments due to differing interpretations of the tax laws.

Cash and cash equivalents

~~On May 14, 2020, the Company invested $3.5 million in a certificate~~Cash equivalents include all investments with original maturities of ~~deposit (CD) through Choice Bank. The interest rate on this CD is 3.0%. Interest is compounded every 30 days and the CD automatically renews monthly. This balance is included with~~three months or less or which are readily convertible into known amounts of cash and ~~cash equivalents on~~are not legally restricted. Accounts at each institution are insured by the ~~Company’s balance sheet.~~Federal Deposit Insurance Corporation up to $250,000, while the remaining balances are uninsured.

Restricted cash and marketing fund

The Company has a Marketing Development ~~Fund,~~Funds, to which Company-owned Famous Dave’s and Village Inn restaurants, in addition to the majority of franchise-operated restaurants, contribute a percentage of net sales, for use in public relations and marketing development efforts. The funds held in this account are used in part to reimburse the Company for its marketing and digital services activities on behalf of the Famous Dave’s ~~brand.~~and Village Inn brands. The Company also receives funds from its suppliers to be used exclusively for point-of-sale equipment purchases for its own stores as well as its Famous Dave’s franchisees. As the assets held by these funds are considered to be restricted, the Company reflects the cash related to these funds within restricted cash and ~~reflect~~reflects the related liability within accrued expenses on its consolidated balance sheets. The Company had approximately ~~$824,000~~$1.7 and ~~$1.5~~$1.2 million in these funds as of ~~July 4, 2021~~April 3, 2022 and January ~~3, 2021,~~2, 2022, respectively.

~~Assets Held for Sale~~

As of July 4, 2021, the Company had assets held for sale of approximately $1.0 million related to an owned property for which it has entered into agreements to sell for a contract purchase price of $2.5 million.

Net income per common share

Basic net income ~~(loss)~~ per common share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the reporting period. Diluted EPS equals net income divided by the sum of the weighted average number of shares of common stock outstanding plus all additional common stock equivalents, such as stock options and restricted stock units, when dilutive.

The following table is a reconciliation of basic and diluted net income per common share:

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


	Three Months Ended
(in thousands, except per share data)	April 3, 2022		April 4, 2021
Net income per share – basic:
Net income attributable to shareholders	$	767	$	799
Weighted average shares outstanding - basic		10,552		9,208
Basic net income per share attributable to shareholders	$	0.07	$	0.09

Net income per share – diluted:
Net income attributable to shareholders	$	767	$	799
Weighted average shares outstanding - diluted		10,649		9,501
Diluted net income per share attributable to shareholders	$	0.07	$	0.08

There were approximately 20,250 and 24,000 stock options outstanding as of April 3, 2022 and April 4, 2021, respectively, that were not included in the computation of diluted EPS because they were anti-dilutive.

(2) Restaurant Acquisitions

On February 21, 2022, the Company completed the acquisition of the assets and operations of a Famous Dave’s franchise location in La Crosse, Wisconsin. The contract purchase price of the restaurant was approximately $50,000, exclusive of closing costs plus the assumption of the lease, gift card, and certain other liabilities. The assets acquired and the liabilities assumed were considered to be immaterial and were recorded at estimated fair values based on information available, including an ROU asset and offsetting liability of approximately $682,000. Pro forma results were deemed immaterial to the Company.

On March 11, 2022, the Company completed the acquisiton of 3 bar-centric locations, 2 of which are Craft Republic locations and 1 of which is a Fox and Hound location (collectively, “Famous Craft Concepts” or “FCC”). The purchase price of $4.6 million was funded with cash. Due to the timing of the signing and closing of this acquisition, the initial accounting for this acquisition is incomplete as of the date of this filing. As such, complete ASC 805 “Business Combinations” disclosures could not be made. Management recorded preliminary fair values for the assets acquired and liabilities assumed based on information available as of the date of this filing and will adjust those estimates in a subsequent period once the full independent valuation and management review is finalized. The consolidated statements of operations include the results of these operations from the date of acquisition. Revenue and earnings of FCC included in the consolidated statements of operations in the quarter ended April 3, 2022 totaled approximately $603,000 and $121,000, respectively.

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BBQ HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended

Six Months Ended

(in thousands, except per share data)
July 4, 2021

June 28, 2020

July 4, 2021

June 28, 2020

Net income (loss) per share – basic:









Net income (loss) attributable to shareholders
$
15,786

$
(6,252)

$
16,585

$
7,455

Weighted average shares outstanding - basic

9,304

9,138

9,256

9,132

Basic net income (loss) per share attributable to shareholders
$
1.70

$
(0.68)

$
1.79

$
0.82

Net income per share – diluted:









Net income (loss) attributable to shareholders
$
15,786

$
(6,252)

$
16,585

$
7,455

Weighted average shares outstanding - diluted

9,615

9,138

9,567

9,132

Diluted net income (loss) per share attributable to shareholders
$
1.64

$
(0.68)

$
1.73

$
0.82

The following table presents the allocation of assets acquired and liabilities assumed for the Famous Craft Concepts Transaction:


(in thousands)
Assets acquired:
Inventory		106
Property, plant, equipment and leasehold improvements, net		1,216
Lease right-of-use asset, net of unfavorable lease value		3,851
Identifiable intangible assets, net		689
Other current assets		30
Total identifiable assets acquired		5,892
Liabilities assumed:
Lease liability		(3,851)
Other current liabilities		(269)
Net assets acquired		1,772
Goodwill		2,639
Total consideration transferred	$	4,411

~~There were approximately 250~~Unaudited pro forma results of operations for the three months ended April 3, 2022 as if the Company had acquired the operations of Famous Craft Concepts, Village Inn and ~~299,617 stock options outstanding~~Bakers Square, and Tahoe Joe’s at the beginning of each period presented is as follows. The pro forma results include estimates and assumptions which management believes are reasonable. However, pro forma results are not necessarily indicative of ~~July 4, 2021 and June 28, 2020, respectively,~~the results that ~~were not included~~would have occurred if the business combination had been in effect on the dates indicated, or which may result in the ~~computation~~future. For allocation of ~~diluted EPS because they were anti-dilutive.~~assets acquired and liabilities assumed regarding the Village Inn and Bakers Square and Tahoe Joe’s acquisitions see 10-K filed by the Company on March 16, 2022.


	Three Months Ended
	April 3, 2022		April 4, 2021
(in thousands)
Pro forma revenues	$	65,523	$	54,950
Pro forma net income attributable to shareholders	$	921	$	2,037
Basic pro forma net income per share attributable to shareholders	$	0.09	$	0.22
Diluted pro forma net income per share attributable to shareholders	$	0.09	$	0.21

~~(2)~~(3) Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following at:

(in thousands)

July 4, 2021

January 3, 2021
Prepaid expenses and deferred costs

$
2,212

$
950
Prepaid insurance

669

302
Prepaid expenses and other current assets

$
2,881

$
1,252

~~(3)~~

~~Property, Equipment and Leasehold Improvements, net~~

~~Property, equipment and leasehold improvements, net, consisted of the following:~~

(in thousands)

July 4, 2021

January 3, 2021
Land, buildings, and improvements

$
31,867

$
31,731
Furniture, fixtures, equipment and software

28,201

28,373
Décor

425

475
Construction in progress

968

1,121
Accumulated depreciation and amortization

(30,349)

(29,311)
Property, equipment and leasehold improvements, net

$
31,112

$
32,389

~~(4) Intangible Assets, net~~

The Company has intangible assets that consist of liquor licenses, database, trademarks and patents, and reacquired franchise rights, net. The liquor licenses and trademarks/logos are indefinite-lived assets and are not subject to amortization. Reacquired franchise rights are amortized to depreciation and amortization expense on a straight-line basis over the remaining life of the reacquired franchise agreement. The database is amortized over three years.

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~~Table of Contents~~

~~BBQ HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Intangible assets consisted of the following:~~

(in thousands)

July 4, 2021

January 3, 2021
Reacquired franchise rights, net

1,050

1,246
Liquor licenses

868

868
Trademark/Logos/Patents

7,688

7,688
Database

127

165
Intangible assets, net

$
9,733

$
9,967

~~(5) Other Current Liabilities~~

~~Other current liabilities consisted of the following at:~~

(in thousands)

July 4, 2021

January 3, 2021
Gift cards payable

$
5,584

$
6,553
Sales tax payable

1,305

1,286
Other accrued expense

1,381

1,394
Accrued interest

—

115
Accrued utilities

230

199
Deferred revenue, other

230

124
Deferred franchise fees

84

95
Other current liabilities

$
8,814

$
9,766

~~(6) Long-Term Debt~~

On June 20, 2019, the Company entered into a Loan Agreement among the Company and Choice Financial Group. The Loan Agreement provides for a term loan in the principal amount of up to $24.0 million and is evidenced by a promissory note. The note has a maturity date of June 20, 2025. The first year of the note provided for payments of interest only, with the remaining five years requiring payments of interest and principal based on a 60 month amortization period. Interest is payable in an amount equal to the Wall Street Journal Prime Rate, but in no circumstances shall the rate of interest be less than 5.00%. The note may be prepaid, partially or in full, at any time and for 0 prepayment penalty. The Company is subject to various financial and non-financial covenants on this debt, including a debt-service coverage ratio. As of July 4, 2021, the note balance was $9.4 million, and the Company was compliant with all of its covenants.

In fiscal year 2020, the Company received funds of approximately $14.0 million in aggregate in connection with “Small Business Loans” under the Paycheck Protection Program (“PPP Loans”). These amounts were borrowed pursuant to the terms of the PPP Loans, in favor of Choice Financial Group. On June 11, 2020, the Company received a notification from Choice Financial Group that the Small Bussiness Administration approved the Company’s loan forgiveness applications for the entire $14.0 million balance of the PPP Loans and that the remaining balance of the PPP Loans is 0~~. As such, the Company wrote of the debt balance and related accrued interest of $14.1 million. Such amount was included in the Company’s income statement in the second quarter of 2021.~~

~~Debt outstanding under the above referenced promissory notes consisted of the following as of the periods presented:~~

(in thousands)

July 4, 2021

January 3, 2021
Term Loan

$
9,361

$
10,403
PPP Loans

—

13,957
Less: deferred financing costs

(65)


(80)
Less: current portion of long-term debt

(2,165)


(2,111)
Long-term debt, less current portion

$
7,131

$
22,169


(in thousands)	April 3, 2022		January 2, 2022
Prepaid expenses and deferred costs	$	1,891	$	2,241
Prepaid rent		1,368		1,384
Prepaid insurance		867		257
Other prepaid expenses		187		37
Prepaid expenses and other current assets	$	4,313	$	3,919

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BBQ HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(4)	Property, Equipment and Leasehold Improvements, net

Property, equipment and leasehold improvements, net, consisted of the following:


(in thousands)	April 3, 2022		January 2, 2022
Land, buildings, and improvements	$	40,622	$	39,632
Furniture, fixtures, equipment and software		34,125		33,565
Décor		434		434
Construction in progress		175		—
Accumulated depreciation and amortization		(35,608)		(33,688)
Property, equipment and leasehold improvements, net	$	39,748	$	39,943

(5) Intangible Assets, net

The Company has intangible assets that consist of liquor licenses, database, trademarks and patents, and franchise rights, net. The liquor licenses and trademarks/logos are indefinite-lived assets and are not subject to amortization. Franchise rights are amortized to depreciation and amortization expense on a straight-line basis over the remaining life of the franchise agreement.

Intangible assets consisted of the following:


(in thousands)	April 3, 2022		January 2, 2022
Franchise rights, net		10,741		11,104
Liquor licenses		981		1,018
Trademark/Logos/Patents		11,922		11,233
Database		70		89
Intangible assets, net	$	23,714	$	23,444

(6) Other Current Liabilities

Other current liabilities consisted of the following at:


(in thousands)	April 3, 2022		January 2, 2022
Sales tax payable and state income tax payable		1,763		1,657
Other accrued expense		2,319		3,613
Accrued real estate taxes		2,240		2,170
Accrued interest		28		26
Accrued utilities		568		560
Deferred revenue, other		1,716		366
Deferred franchise fees		118		118
Other current liabilities	$	8,752	$	8,510

(7) Long-Term Debt

On November 23, 2021, the Company, as borrower, entered into a credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. The Credit Agreement had a five-year term and provided for up to a $5.0 million revolving line of credit and a $15.0 million term loan. The Credit Agreement also provided for the issuance of letters of credit in an aggregate amount up to $1,000,000 which, upon issuance, would be deemed advances under the revolving line of credit. Proceeds of borrowings were used to refinance all indebtedness previously owed to Choice Financial Group. The proceeds were also used for accretive capital allocation and for working capital purposes.

The Credit Agreement was amended on April 11, 2022 (the “Amended Credit Agreement”), increasing the revolving line of credit to $25.0 million and the term loan to $25.0 million. The Amended Credit Agreement has a five-year term. Proceeds of

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BBQ HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

borrowings shall be used for accretive capital allocation and for working capital purposes. Specifically, a portion of the increased borrowings was used to fund the acquisition of Barrio Queen that closed on April 11, 2022. The Company’s obligations under the Amended Credit Agreement are secured by substantially all of its assets, excluding real property. Subject to certain conditions, borrowings under the Amended Credit Agreement bear interest in the range of 1.75% to 2.25% per annum plus SOFR. If SOFR becomes unavailable, the replacement rate will be determined pursuant to the terms of the Amended Credit Agreement. Quarterly principal payments are required with a balloon payment due at maturity.

The Amended Credit Agreement contains customary representations, warranties and covenants, including the financial covenants to maintain a rent adjusted leverage ratio not greater than 4.5 to 1.0 and a fixed charge coverage ratio of not less than 1.1 to 1.0. In addition, the Amended Credit Agreement places restrictions on the Company’s ability to incur additional indebtedness, to create liens or other encumbrances, to sell or otherwise dispose of assets, to merge or consolidate with other entities, to make restricted payments such as dividends and stock repurchases, and to make capital expenditures in excess of $10.0 million in the aggregate during any fiscal year.

Debt outstanding consisted of the following as of the periods presented:



(in thousands)	April 3, 2022		January 2, 2022
Term Loan	$	14,438	$	15,000
Less: deferred financing costs		(213)		(209)
Less: current portion of long-term debt		(1,406)		(1,594)
Long-term debt, less current portion	$	12,819	$	13,197

~~(7)~~

(8) Leases

The Company leases the property for its corporate headquarters, most of its Company-owned stores, and certain office and restaurant equipment. The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of use (“ROU”) assets, current portion of operating lease liabilities, and operating lease liabilities in its consolidated balance sheets.

Lease expense for lease payments is recognized on a straight-line basis over the lease term and is included in operating expenses and general and administrative expenses on the statement of operations. The components of lease expense for the period presented is as follows:

Three Months Ended

Three Months Ended

Six Months Ended

Six Months Ended
(in thousands)

July 4, 2021

June 28, 2020

July 4, 2021

June 28, 2020
Operating lease cost

$
2,527

$
2,352

$
4,969

$
3,948
Short-term lease cost

166

106

262

137
Variable lease cost

130

194

498

194
Sublease income

(30)

-

(74)

-
Total lease cost

$
2,793

$
2,652

$
5,655

$
4,279


	Three Months Ended		Three Months Ended
(in thousands)	April 3, 2022		April 4, 2021
Operating lease cost	$	3,742	$	2,442
Short-term lease cost		128		96
Variable lease cost		216		368
Sublease income		(54)		(44)
Total lease cost	$	4,032	$	2,862

Supplemental cash flow information related to leases for the period presented is as follows:


	Three Months Ended			Three Months Ended
(in thousands)	April 3, 2022			April 4, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,964		$	2,155
Right-of-use assets obtained in exchange for new operating lease liabilities		5,451			-
Weighted-average remaining lease term of operating leases (in years)		7.88			10.10
Weighted-average discount rate of operating leases		4.62	%		5.27	%

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BBQ HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Supplemental cash flow information related to leases for the period presented is as follows:~~

Six Months Ended

Six Months Ended

(in thousands)

July 4, 2021

June 28, 2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

$
4,517

$
3,774

Right-of-use assets obtained in exchange for new operating lease liabilities

1,163

51,682

Weighted-average remaining lease term of operating leases (in years)

10.0

11.0

Weighted-average discount rate of operating leases

5.31
%

5.24
%

~~(8)~~(9) Revenue Recognition

Deferred franchise fee revenue included in other liabilities consist primarily of franchise fees which are recognized straight-line over the life of the agreements, and area development fees which are deferred until a new restaurant is opened pursuant to the agreement. The following table illustrates estimated revenues expected to be recognized in the future related to unsatisfied performance obligations as of ~~July 4, 2021:~~April 3, 2022:


(in thousands)
Fiscal Year
2021	$	42
2022		84	$	90
2023		84		112
2024		84		136
2025		80		79
2026				167
Thereafter		460		216
Total	$	834	$	800

The following table reflects the change in contract liabilities between ~~July 4, 2021~~January 2, 2022 and ~~January~~April 3, ~~2021:~~2022:



(in thousands)	July 4, 2021		April 3, 2022
Beginning Balance	$	901	$	806
Additions				25
Revenue recognized		(67)		(31)
Ending Balance	$	834	$	800

(

~~(9)~~(10) Stock-based Compensation

Effective May 5, 2015, the Company adopted the 2015 Equity Plan (the “2015 Plan”), pursuant to which it may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units and other stock and cash awards to eligible participants. The number of common stock reserved for issuance is 2,000,000. The Company also maintains an Amended and Restated 2005 Stock Incentive Plan (the “2005 Plan”). The 2005 Plan expired in 2015 and 0 additional options may be granted. Nonetheless, the 2005 Plan will remain in effect until all outstanding incentives granted thereunder have either been satisfied or terminated. As of ~~July 4, 2021,~~April 3, 2022, there were ~~685,324~~552,082 shares available for grant pursuant to the 2015 Plan.

Stock options granted to employees and directors generally vest over two to five years, in monthly or annual installments, as outlined in each agreement. Options generally expire ten years from the date of grant. Compensation expense equal to the grant date fair value of the options is recognized in general and administrative expense over the applicable service period.

The Company utilizes the Black-Scholes option pricing model when determining the compensation cost associated with stock options issued using the following significant assumptions:

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~~BBQ HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

●

Stock price – Published trading market values of the Company’s common stock as of the date of grant.

●

Exercise price – The stated exercise price of the stock option.

●

Expected life – The simplified method as outlined in ASC 718.

●

Expected dividend – The rate of dividends that the Company expects to pay over the term of the stock option.

●

Volatility – Actual volatility over the most recent historical period equivalent to the expected life of the option.

●

Risk-free interest rate – The daily United States Treasury yield curve rate.

~~The Company recognized stock-based compensation expense in its consolidated statements of operations for the three and six months ended July 4, 2021 and June 28, 2020, respectively, as follows:~~

Three Months Ended

Six Months Ended

(in thousands)

July 4, 2021

June 28, 2020

July 4, 2021

June 28, 2020

Stock options

$
94

$
44

$
183

$
125

Restricted stock

226

67

455

123

$
320

$
111

$
638

$
248

~~Information regarding the Company’s stock options is summarized below:~~

Weighted

Average

Remaining

Number of

Weighted Average

Contractual
(number of options in thousands)

Options

Exercise Price

Life in Years
Options outstanding at January 3, 2021

557

$
4.53

Granted

24

9.63

Exercised

(50)

6.20

Canceled, forfeited or expired

(22)

3.97

Options outstanding at July 4, 2021

509

$
4.62

6.3

Six Months Ended

July 4, 2021

June 28, 2020

Weighted-average fair value of options granted during the period

$
5.17

$
1.81

Expected life (in years)

4.0

5.4

Expected dividend

$
0

$
0

Expected stock volatility

71.12
%

53.64
%
Risk-free interest rate

0.6
%

1.1
%

~~Information regarding the Company’s restricted stock is summarized below:~~

Weighted

Average

Remaining

Number of

Weighted Average

Contractual
(number of awards in thousands)

Awards

Award Date Fair Value

Life in Years
Unvested at January 3, 2021

475

$
4.43

Granted

—

—

Exercised/Released

(25)

4.84

Unvested at July 4, 2021

450

$
4.41

1.5

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BBQ HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company recognized stock-based compensation expense in its consolidated statements of operations for the three months ended April 3, 2022, and April 4, 2021, respectively, as follows:


	Three Months Ended
(in thousands)	April 3, 2022		April 4, 2021
Stock options	$	87	$	89
Restricted stock		297		229
	$	384	$	318

Information regarding the Company’s stock options is summarized below:


				Weighted
				Average
				Remaining
	Number of	Weighted Average		Contractual
(number of options in thousands)	Options	Exercise Price		Life in Years
Options outstanding at January 2, 2022	388	$	7.13	7.3
Granted	—		—
Exercised	(28)		3.70
Canceled, forfeited or expired	—		—
Options outstanding at April 3, 2022	360	$	7.40	7.2


	Three Months Ended
	April 3,��2022			April 4, 2021
Weighted-average fair value of options granted during the period	$	—		$	2.74
Expected life (in years)		—			2.5
Expected dividend	$	—		$	—
Expected stock volatility		—	%		76.48	%
Risk-free interest rate		—	%		0.2	%

Information regarding the Company’s restricted stock is summarized below:


				Weighted
				Average
				Remaining
	Number of	Weighted Average		Contractual
(number of awards in thousands)	Awards	Award Date Fair Value		Life in Years
Unvested at January 2, 2022	305	$	5.75	2.1
Granted	235		13.80
Exercised/Released	(6)		10.25
Canceled, forfeited or expired	(2)		13.25
Unvested at April 3, 2022	532	$	9.21	2.6

~~(10)~~(11)

Shareholders’ Equity

On June 24, 2021, the Company entered into 2 separate Securities Purchase Agreements (each, a “Securities Purchase Agreement”) with institutional investors pursuant to which the Company raised (i) gross proceeds of $10,000,000, pursuant to an agreement to sell 800,000 shares of the Company’s common stock , and (ii) gross proceeds of $3,000,000 pursuant to an agreement to sell 200,000 shares of the Company’s common stock (such shares of common stock collectively referred to herein as the “Securities”, and the aggregate sale of 1,000,000 Securities referred to herein as the “Offering”). The Company used the net proceeds of the Offering for the ~~acquisition~~VIBS Transaction described in Note 112 Restaurant Acquisitions. found in our fiscal 2021 10-K filing. In connection with the closing of the Offering, the Company paid expenses of approximately of ~~$500,000.~~$572,000.

As part of each Securities Purchase Agreement, the Company agreed to register the Securities sold in the Offering (the “Registrable Securities”) for resale or other disposition, pursuant to a Registration Rights Agreement with each investor (each, a ~~“Registration~~

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

“Registration Rights Agreement”). On August 4, 2021, the Company filed with the Securities and Exchange Commission (the “SEC”) a shelf registration statement with respect to the resale of the Registrable Securities. The ~~Company agreed to use commercially reasonable efforts to have the~~ shelf registration statement was declared effective by the SEC ~~as soon as possible after the initial filing, and in any event no later than~~ September ~~9, 2021 (or October 9, 2021 in the event of a full review of the shelf registration statement by the SEC). Additionally, the~~3, 2021. The Company agreed to keep the shelf registration statement effective until such time as all Registrable Securities may be sold pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”) without the need for current public information or other restrictions. If the Company is unable to comply with any of the above covenants, it will be required to pay liquidated damages to the investors in the amount of 1% of the investors’ purchase price for every month until such non-compliance is cured (subject to a 6% cap), with such liquidated damages payable in cash.

~~(11)~~

~~Acquisitions~~

~~On June 24, 2021, the Company entered in to a Membership Interest Purchase Agreement (the “MIPA”) with VIBSQ Holdco, LLC, aDelawarelimitedliabilitycompany(the“Seller”)andBakersSquareHoldings,LLC,~~a~~Delawarelimitedliabilitycompany(“BSQHoldings”),VillageInnHoldings,LLC,~~a~~Delawarelimitedliabilitycompany(“VIHoldings”),SVCC~~I,~~LLC,~~an~~Arizonalimitedliabilitycompany(“SVCC”andcollectivelywithBSQHoldingsand~~VI~~Holdings,the “Target Companies), and for certain limited purposes as described in the MIPA, RG Group Holdco, LLC, a Delaware limited liability company (the “Parent”),pursuant~~to~~whichtheCompanyhasagreed,subject~~to~~specifiedtermsandconditions,~~to~~purchasefromtheSellerall~~of~~theissuedandoutstandingmembershipinterests(the“Interests”) ineach~~of~~theTargetCompanies(suchpurchase~~of~~Interests~~as~~contemplated~~by~~theMIPA,the“Transaction”).TheTransactionclosed~~on~~July30,2021. As~~a~~result~~of~~theTransaction, each of the Target Companies became a wholly-owned subsidiary of the Company, and each of the subsidiaries of the Target Companies, whichsubsidiariesown~~or~~franchiseVillageInnRestaurantsandBakersSquareRestaurants,became wholly-ownedindirectsubsidiaries~~of~~theCompany. The purchase price of the Transaction was approximately $13.0 million and subject to certain purchase price adjustments.~~

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~~BBQ HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

(12) Variable Interest Entities

A variable interest holder is considered to be the primary beneficiary of a variable interest entity (“VIE”) if it has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. Once an entity is determined to be a VIE, the primary beneficiary is required to consolidate the entity. The Company has an installment agreement with 1 of its franchisees as a result of refranchising its Lincoln, Nebraska restaurant. This franchisee is a VIE; however, the owners of the franchise operations are the primary beneficiaries of the entities, not the Company. Therefore, the franchise operations are not required to be consolidated in the Company’s consolidated financial statements.

On July 18, 2018, the Company and Clark Championship Products LLC (“Clark”), an entity owned by Travis Clark, became members of Mercury BBQ LLC (“Mercury”) for the purposes of building out and operating the inaugural Clark Crew BBQ restaurant in Oklahoma City, Oklahoma (the “Restaurant”). Clark ~~will own~~owns 80% of the units outstanding of Mercury and the Company ~~will own~~owns 20% of the units outstanding of Mercury. Also in July 2019, the Company entered into a secured promissory note with Mercury which was amended in October 2019. This promissory note as amended (the “Loan”) was in the amount of $3.9 million, the proceeds of which are required to be used for the build out of the Restaurant. The Loan bears interest at a rate of 8% per annum and requires payments of 100% of the excess monthly cash flows until the Loan and all interest accrued thereon is repaid. The Loan requires a balloon payment of unpaid principal and accrued interest on July 15, 2025 and may be prepaid at any time. Also on July 18, 2018, the Company and Clark entered into an intellectual property license agreement (the “License Agreement”) pursuant to which Clark granted to the Company an exclusive license to use and sublicense the patents, trademarks, trade names, service marks, logos and designs related to Clark Crew BBQ restaurants and products. The term of the License Agreement is indefinite and may only be terminated by mutual written consent, unless the Company breached the License Agreement.

Because the Company has provided more than half of the subordinated financial support of Mercury and control Mercury via its representation on the board of managers, the Company has concluded that Mercury is a VIE, of which the Company is the primary beneficiary and must consolidate Mercury. Mercury generated net ~~income~~loss of approximately ~~$678,000~~$150,000 during the first ~~half~~quarter of fiscal year ~~2021,~~2022, of which ~~$542,000~~$120,000 was recorded as non-controlling interest on our condensed consolidated financial statements. During the first ~~half~~quarter of fiscal year ~~2020,~~2021, Mercury generated a net loss of ~~$429,000,~~approximately $128,000, of which ~~$343,000~~$102,000 was recorded as non-controlling interest on our condensed consolidated financial statements. As of ~~July 4, 2021,~~April 3, 2022, Mercury’s assets included approximately ~~$2.8~~$2.4 million of property, equipment and leasehold improvements, net, a ~~$1.8~~$1.7 million ROU asset and ~~$111,000~~$121,000 of inventory. The liabilities recognized as a result of consolidating Mercury BBQ’s results of operations do not represent additional claims on the general assets of BBQ Holdings, Inc.; rather, they represent claims against the specific assets of the Mercury BBQ’s. Conversely, assets recognized as a result of consolidating the Mercury BBQ’s results of operations do not represent additional assets that could be used to satisfy claims against the general assets of BBQ Holdings.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(13) Litigation

In the normal course of business, the Company is involved in a number of litigation matters that are incidental to the operation of the business. These matters generally include, among other things, matters with regard to employment, leases and general business-related issues. The Company currently believes that the resolution of any of these pending matters will not have a material adverse effect on its financial position or liquidity, but an adverse decision in more than one of the matters could be material to its consolidated results of operations.

(14) Related Party Transactions

Charles Davidson, a franchisee of the Company, currently serves as a director of the Company and is the beneficial owner of approximately ~~16.3%~~15.7% of the Company’s common stock as of the date that these financial statements were available to be issued, by virtue of his ownership interest in Wexford Capital.

The following table outlines amounts received from related parties during the three months ended ~~July~~April 3, 2022, and April 4, 2021, ~~and June 28, 2020:~~respectively:

Three Months Ended

Six Months Ended

Three Months Ended

(in thousands)

July 4, 2021

June 28, 2020

July 4, 2021

June 28, 2020

April 3, 2022

April 4, 2021

Revenues and NAF contributions - Charles Davidson

179

252

316

292

167

138

The following table outlines accounts receivable from related parties as of ~~July 4, 2021~~April 3, 2022 and January ~~3, 2021:~~2, 2022:

(in thousands)

July 4, 2021

January 3, 2021
Accounts receivable, net - Charles Davidson

70

52

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~~BBQ HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~


(in thousands)	April 3, 2022		January 2, 2022
Accounts receivable, net - Charles Davidson		71		64

(15) Subsequent Events

On ~~July 12, 2021,~~March 10, 2022, the Company executed an Asset Purchase Agreement for substantially all the assets related to the Barrio Queen restaurant group, and closed the transaction on April 11, 2022. Barrio Queen is known for their authentic Mexican fine dining in Phoenix, Arizona. There are currently 7 operating restaurants and a lease signed for an eighth with a target opening date in 2023. The purchase price of approximately $28.5 million was funded with cash and debt.

On April 11, 2022, the Company refinanced its debt agreement with JPM Chase bank (the “Amended Credit Agreement”), increasing the revolving line of credit to $25.0 million and the term loan to $25.0 million. The Amended Credit Agreement has a five-year term. Proceeds of borrowings shall be used for accretive capital allocation and for working capital purposes. Specifically, a portion of the increased borrowings was used to fund the acquisition of Barrio Queen that closed on April 11, 2022. The Company’s obligations under the Amended Credit Agreement are secured by substantially all of its assets, excluding real property. Subject to certain conditions, borrowings under the Amended Credit Agreement bear interest in the range of 1.75% to 2.25% per annum plus SOFR.

On April 25, 2022, the Company executed an Asset Purchase Agreement for another bar-centric restaurant, and we expect to close the transaction in Q2 2022. The purchase price of $3.4 million will be funded with cash.

On May 2, 2022, the Company completed of the acquisition of the assets and ~~certain liabilities~~operations of 42 Famous Dave’s ~~restaurants, the combined purchase price~~franchise locations in Nebraska, for total consideration of ~~which was $1.1 million. NaN of these restaurants are located in Tennessee and 1 is located in Kentucky.~~

~~On July 30, 2021, the Company closed on the Membership Interest Purchase Agreement (the “MIPA”) described in Note 11~~ ~~Acquisitions~~~~. As a result of this transaction, the Company acquired~~ ~~21 Village Inn restaurants and 13~~ ~~Bakers Square restaurants. Additionally, the Company acquired the franchise rights to~~ ~~114~~ ~~Village Inn restaurants. The cash purchase price was~~ approximately ~~$13.0 million, subject to certain adjustments.~~

$400,000.

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BBQ HOLDINGS, INC. AND SUBSIDIARIES

Item 2.

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

Overview

In September 2019 a holding company reorganization was completed in which Famous Dave’s of America, Inc. (“FDA”) became a wholly owned subsidiary of the new parent holding company named BBQ Holdings, Inc. (“BBQ Holdings”). As used in this Form 10-Q, “Company”, “we” and “our” refer to BBQ Holdings and its wholly owned subsidiaries. BBQ Holdings was incorporated on March 29, 2019 under the laws of the State of Minnesota, while FDA was incorporated in Minnesota on March 14, 1994. ~~We develop, own~~The Company develops, owns and ~~operate~~operates restaurants under the name “Famous Dave’s”, “Village Inn”, “Barrio Queen”, “Granite City”, Real Urban Barbecue”, “Clark Crew BBQ”, ~~“Granite City Food~~“Tahoe Joe’s Steakhouse”, “Bakers Square”, “Craft Republic”, and “Fox & ~~Brewery”, “Real Urban Barbecue”, “Village Inn” and “ Bakers Square.”~~Hound”. Additionally, ~~we franchise~~the Company franchises restaurants under the name “Famous Dave’s” and “Village Inn”. As of ~~July 4, 2021,~~April 3, 2022, there were ~~127~~144 Famous Dave’s restaurants operating in three countries, including 2740 Company-owned restaurants and ~~100~~104 franchise-operated restaurants. This includes the eight Famous Dave’s ghost kitchens the Company operates out of its Granite City restaurants. The first Clark Crew BBQ restaurant opened in December 2019 in Oklahoma City, Oklahoma. BBQ Holdings has a 20% ownership in this venture. ~~In March 2020, we purchased~~The Company owns and operates 18 Granite City Food & Brewery restaurants located throughout the Midwest and ~~one~~two Real Urban Barbecue ~~restaurant~~restaurants located in ~~Vernon Hills,~~ Illinois. On July 30, 2021, wethe Company completed the purchase of the Village Inn family restaurant concept currently with 2122 Company-owned restaurants and ~~114~~103 franchised restaurants, and the Bakers Square pie and comfort food concept currently with 1314 Company-owned ~~restaurants.~~restaurants and four locations where Bakers Square pies are licensed. On October 4, 2021, the Company opened its second Real Urban Barbecue restaurant located in Oak Brook, Illinois and on October 8, 2021 the Company acquired the Tahoe Joe's Steakhouse brand. On March 11, 2022 the Company acquired three bar-centric locations, collectively referred to as “Famous Craft Concepts”, and on April 25, 2022, the Company executed an Asset Purchase Agreement for another bar-centric restaurant. On April 11, 2022, the Company closed the purchase of Barrio Queen, a chain of seven authentic Mexican fine dining restaurants in Phoenix, Arizona.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic and the United States declared a National Public Health Emergency. As a result, public health measures were taken to minimize exposure to the virus. These measures, some of which are government-mandated, have been implemented globally resulting in a dramatic decrease in economic activity. During the first quarter of 2021, mandated restrictions began to ease in a number of the markets in which ~~we operate.~~the Company operates. Although ~~we have~~the Company has experienced some recovery from the initial impact of COVID-19, the long-term impact of COVID-19 on the economy and on ~~our~~its business remains uncertain, the duration and scope of which cannot currently be predicted. As new variants of COVID-19 are being discovered and cases ~~in unvaccinated people rise~~continue to occur at material rates throughout the markets in which ~~we do~~the Company does business, wethe Company cannot predict the severity of another surge, what additional restrictions may be enacted, to what extent weit can maintain off-premise sales volumes, whether weit can maintain sufficient staffing levels, or if individuals will be comfortable returning to ~~our~~its dining rooms during or following social distancing protocols, and what long-lasting effects the COVID-19 pandemic may have on the restaurants industry as a whole. The ~~extent of the reopening process, along with the~~ potential impact of the COVID-19 pandemic on consumer spending behavior, which may be a function of continued concerns over safety and/or depressed consumer sentiment due to adverse economic conditions, including job losses, will determine the significance of the impact to ~~our~~the Company’s operating results and financial position.

~~The following table includes the number of Company-owned and franchise-operated restaurants as of the dates presented:~~

BBQ Holdings

Six Months Ended

Six Months Ended

July 4, 2021

June 28, 2020

Company-owned restaurants:

Famous Dave's

27

30

Granite City Food & Brewery

18

18

Real Urban Barbecue

1

1

Clark Crew BBQ

1

1

End of period

47

50

% of system

32
%

34
%
Franchise-operated restaurants:

Famous Dave's

100

94

Real Famous

—

1

End of period

100

95

% of system

68
%

66
%
System end of period total

147

145

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The following table includes the number of Company-owned and franchise-operated restaurants as of the dates presented:


	BBQ Holdings
	Three Months Ended		Three Months Ended
	April 3, 2022		April 4, 2021
Company-owned restaurants:
Famous Dave's	40		27
Granite City Food & Brewery	18		18
Real Urban Barbecue	2		1
Clark Crew BBQ	1		1
Village Inn	22		—
Bakers Square	14		—
Tahoe Joe's	4		—
Famous Craft Concepts	3		—
End of period	104		47
% of system	33	%	32	%
Franchise-operated and licensed restaurants:
Famous Dave's	104		100
Village Inn	103		—
Bakers Square	4		—
End of period	211		100
% of system	67	%	68	%
System end of period total	315		147

Of the ~~100~~104 franchise-operated restaurants, 1719 are Famous Dave’s ghost kitchens operating out of the kitchen of another restaurant location or a shared kitchen space. Additionally, eight of our Granite City locations are operating Famous Dave’s ghost kitchens under licensing agreements.

Fiscal Year

Our fiscal year ends on the Sunday closest to December 31^st. Our fiscal year is generally 52 weeks; however, it periodically consists of 53 weeks. ~~Fiscal~~Both fiscal year 2022, ending January 1, 2023, and fiscal year 2021, ~~ending~~ended January 2, 2022, ~~will have~~consist of 52 ~~weeks while fiscal year 2020 which ended January 3, 2021 included 53~~ weeks.

Revenue

Our revenue consists of restaurant sales, franchise-related revenue and licensing, national advertising fund contributions and other revenue. Our franchise-related revenue is comprised of three separate and distinct earnings processes: area development fees, initial franchise fees, and continuing royalty and national advertising fund payments. Currently, our domestic area development fee consists of a one-time, non-refundable payment of approximately $15,000 per restaurant in consideration for the services we perform in preparation of executing each area development agreement. For our international area development agreements, the one-time, non-refundable payment is negotiated on a per development basis and is determined based on the costs incurred to arrange for the sale of that development area. Currently, our initial, non-refundable, franchise fee for domestic growth depends on the restaurant model and varies from $15,000 to $45,000 per location. Finally, franchisees are also required to pay us a monthly royalty equal to a percentage of their net sales. Licensing revenue includes royalties from a retail line of business, including Famous Dave’s branded sauces, rubs, marinades and seasonings. Other revenue includes the recognition of gift card breakage, opening assistance and training we provide to our franchise partners, the sale of Real Urban Barbeque consumer packaged goods, and the sale of raw brewing products produced at the Granite City brewing facility.

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BBQ HOLDINGS, INC. AND SUBSIDIARIES

Costs and Expenses

Restaurant costs and expenses include food, beverage and merchandise costs; labor and benefits costs; and operating expenses, which include occupancy costs, repair and maintenance costs, supplies, advertising and promotion. Certain of these costs and expenses are variable and will increase or decrease with sales volume. The primary fixed costs are restaurant management, operations, and catering support salaries, occupancy and insurance costs.

General and Administrative Expenses

General and administrative expenses include all corporate and administrative functions to support future growth. Salaries and benefits, legal fees, accounting fees, professional consulting fees, travel, rent and general insurance are major items in this category. We also provide franchise services for which the revenue is included in other revenue and the expenses are included in general and administrative expenses.

Results of Operations – the three ~~and six~~ months ended ~~July 4, 2021~~April 3, 2022 compared to the three ~~and six~~ months ended ~~June 28, 2020.~~April 4, 2021.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes, and the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended January ~~3, 2021.~~2, 2022.

The table below presents items in our unaudited condensed consolidated statements of operations as a percentage of net restaurant sales or total revenue, as indicated, for the periods presented.


	Three Months Ended				Six Months Ended				Three Months Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020		April 3, 2022		April 4, 2021
Food and beverage costs⁽¹⁾	29.0	%	30.9	%	29.4	%	31.7	%	31.3	%	29.9	%
Labor and benefits costs⁽¹⁾	30.2	%	32.3	%	30.3	%	34.6	%	33.0	%	30.5	%
Operating expenses⁽¹⁾	28.1	%	36.4	%	29.2	%	34.4	%	29.3	%	30.5	%
Restaurant level operating margin⁽¹⁾⁽²⁾	12.7	%	0.4	%	11.1	%	(0.6)	%
Restaurant-level operating margin⁽¹⁾⁽²⁾									6.4	%	9.1	%
Depreciation and amortization expenses⁽³⁾	3.1	%	5.0	%	3.6	%	4.7	%	3.8	%	4.2	%
General and administrative expenses⁽³⁾	10.0	%	13.7	%	10.4	%	13.2	%	8.2	%	10.8	%
Income (loss) from operations⁽³⁾	6.4	%	(26.0)	%	4.5	%	(16.6)	%	0.7	%	2.2	%

(1)	As a percentage of restaurant sales, net

(2)	~~Restaurant level~~Restaurant-level margins are equal to restaurant sales, net, less restaurant level food and beverage costs, labor and benefit costs, and operating expenses.

(3)	As a percentage of total revenue

Total Revenue

Our components of and changes in revenue consisted of the following for the three ~~and six~~ months ended ~~July~~April 3, 2022 and April 4, ~~2021 and June 28, 2020:~~2021:


	Three Months Ended									Three Months Ended
(dollars in thousands)	July 4, 2021		June 28, 2020		$ Change		% Change			April 3, 2022		April 4, 2021		$ Change		% Change
Revenue:
Restaurant sales, net	$	41,205	$	24,989	$	16,216		64.9	%	$	58,731	$	33,603	$	25,128		74.8	%
Franchise royalty and fee revenue		2,946		1,951		995		51.0	%		3,607		2,374		1,233		51.9	%
Franchisee national advertising fund contributions		421		242		179		74.0	%		490		328		162		49.4	%
Licensing and other revenue		948		580		368		63.4	%		1,356		1,014		342		33.7	%
Total revenue	$	45,520	$	27,762	$	17,758		64.0	%	$	64,184	$	37,319	$	26,865		72.0	%

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BBQ HOLDINGS, INC. AND SUBSIDIARIES

Six Months Ended

(dollars in thousands)

July 4, 2021

June 28, 2020


$ Change

% Change

Revenue:









Restaurant sales, net

$
74,808

$
45,692

$
29,116

63.7
%
Franchise royalty and fee revenue

5,320

4,475

845

18.9
%
Franchisee national advertising fund contributions

749

524

225

42.9
%
Licensing and other revenue

1,962

926

1,036

111.9
%
Total revenue

$
82,839

$
51,617

$
31,222

60.5
%

Restaurant Sales, net

The increase in year-over-year net restaurant sales for the three ~~and six~~ months ended ~~July 4, 2021~~April 3, 2022 was ~~partially~~primarily due to the acquisition of ~~the Granite City~~32 Village Inn and Bakers Square restaurants in ~~March 2020~~July 2021, the acquisiton of Tahoe Joe’s in October 2021, and the ~~easing~~acquisition of 5 Famous Dave’s franchise locations over the past 12 months. Additionally, dining restrictions related to the COVID-19 pandemic eased throughout 2021, resulting in an increase in dine-in sales in the ~~first half of 2021~~three months ended April 3, 2022 compared to the ~~first half of 2020.~~three months ended April 4, 2021.

It is our policy to include in same store net sales base, restaurants that have been open for 12 months under BBQ Holdings’ ownership. In the ~~second~~first quarter ~~and first half~~ of ~~2021,~~2022, same store net sales for Company-owned restaurants ~~overall~~ increased ~~65.6% and 45.5% compared to the second quarter and first half of 2020, respectively.~~

Same store net sales for Company-owned Famous Dave’s restaurants for the three and six months ended July 4, 2021 increased 35.2% and 26.5% compared to the three and six months ended June 28, 2020, respectively. Same store net sales for franchise-operated restaurants for the three and six months ended July 4, 2021 increased 42.7% and 29.6% compared to the three and six months ended June 28, 2020, respectively.

Same store sales at our Granite City restaurants increased 138.6% during the second quarter of 2021 compared to the second quarter of 2020. Sales for the first half of 2021 at our Granite City restaurants increased 54.5%14.5% compared to the first ~~half of 2020 which was under prior ownership through March 8, 2020.~~

~~Same store sales at Clark Crew and Real Urban BBQ increased 35.9% and 31.7% in the second~~ quarter of 2021, ~~compared to the second quarter of 2020,~~ respectively. ~~For the six months ended July 4, 2021 compared to the six months ended June 28, 2020, same store sales at Clark Crew and Real Urban BBQ increased 18.9% and 11.4%, respectively.~~

The increases in our same store sales is primarily a result of the public health measures taken to minimize exposure to the COVID-19 virus in March 2020. These measures virtually eliminated dine-in business at our restaurants for a portion of the majority of the first half of year 2020. During the first half of 2021, most of our restaurants were operating at partial to full dine-in capacity.

Franchise-Related Revenue, including national advertising fund contributions

The increase in franchise royalty revenue and national advertising fund contributions year over year was due primarily to the ~~increase~~acquisition of the Village Inn brand in ~~same store sales, as royalties~~July 2021 with over 100 franchise locations. Royalties and advertising fund contributions are based on franchisee ~~sales. The net~~ sales, ~~increase was due to~~so the easing of the COVID-19 dining restrictions ~~related to the COVID-19 pandemic in 2021.~~starting mid-2021 helped increase franchise-related revenue.

Licensing and Other Revenue

For the three ~~and six~~ months ended ~~July 4, 2021,~~April 3, 2022, licensing and other revenue grew ~~63.4% and 111.9%,~~33.7% compared to the three ~~and six~~ months ended ~~June 28, 2020, respectively. In addition~~April 4, 2021. This is due primarily to the recognition of increased gift card ~~breakage, this increase is due to the addition of Real Urban BBQ consumer packaged goods in 2021, and the sale of raw brewing products produced at the Granite City brewing facility.~~breakage.

Average Weekly Net Sales

The following table shows Company-owned and franchise-operated average weekly same store sales for the periods presented:

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~~BBQ HOLDINGS, INC. AND SUBSIDIARIES~~


	Three Months Ended				Six Months Ended				Three Months Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020		April 3, 2022		April 4, 2021
Average Weekly Net Sales (AWS):
Franchise-Operated Famous Dave's⁽¹⁾	$	57,499	$	40,280	$	52,660	$	40,684	$	49,585	$	45,640
Company-Owned Famous Dave's		60,947		44,667		55,284		44,157		54,022		49,661
Company-Owned Granite City		71,282		28,417		64,332		42,150		71,512		57,382
Company-Owned Clark Crew		161,046		117,272		149,914		127,373		146,851		138,782
Company-Owned Real Urban BBQ		55,139		41,958		47,216		42,841		44,086		39,459
Company-Owned Village Inn⁽²⁾										32,791		27,347
Franchise-Operated Village Inn⁽¹⁾⁽²⁾										33,519		27,940
Company-Owned Bakers Square⁽²⁾										27,573		23,200
Company-Owned Tahoe Joe's⁽²⁾										84,664		79,262

(1)

AWS for franchise-operated restaurants are not our revenues and are not included in our condensed consolidated financial statements. We believe that disclosure of comparable restaurant net sales for franchise-operated restaurants provides useful information to investors because historical performance and trends of Famous Dave’s and Village Inn franchisees relate directly to trends in franchise royalty revenues that we receive from such franchisees and have an impact on the perceived success and value of the Famous Dave’s ~~brand.~~and Village Inn brands. It also provides a comparison against which management and investors can analyze the extent to which Company-owned restaurants are realizing their revenue potential.

(2)	Management notes that Village Inn, Bakers Square, and Tahoe Joe’s were not owned by the Company in Q1 of 2021, and as such the respective amounts presented above are pro forma in nature.

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BBQ HOLDINGS, INC. AND SUBSIDIARIES

Food and Beverage Costs

Our food and beverage costs consisted of the following for the three ~~and six~~ months ended ~~July~~April 3, 2022, and April 4, ~~2021 and June 28, 2020:~~2021:


	Three Months Ended									Three Months Ended
(dollars in thousands)	July 4, 2021		June 28, 2020		$ Change		% Change			April 3, 2022		April 4, 2021		$ Change		% Change
Food and beverage costs	$	11,932	$	7,717	$	4,215		54.6	%	$	18,357	$	10,057	$	8,300		82.5	%


	Six Months Ended
(dollars in thousands)	July 4, 2021		June 28, 2020		$ Change		% Change
Food and beverage costs	$	21,989	$	14,471	$	7,518		52.0	%

Food and beverage costs for the three months ended ~~July~~April 3, 2022, and April 4, 2021, ~~and June 28, 2020,~~ represented approximately ~~29.0%~~31.3% and ~~30.9% of net restaurant sales, respectively. Food and beverage costs for the six months ended July 4, 2021 and June 28, 2020, represented approximately 29.4% and 31.7%~~29.9% of net restaurant sales, respectively. This year-over-year ~~decrease,~~increase, as a percentage of net restaurant sales, was a result of ~~the reduction of menu items offered as the restaurants reacted to the increase~~increases in ~~to-go business and limited in-store dining~~commodity costs, which was partially offset by a more favorable commodity mix due to ~~COVID-19 restrictions. Additionally, in the first quarter of 2020, our restaurants experienced waste with the initial shut down of in-store dining.~~2021 acquisitions.

Labor and Benefits Costs

Our labor and benefits costs consisted of the following for the three months ended ~~July~~April 3, 2022, and April 4, ~~2021 and June 28, 2020:~~2021:


	Three Months Ended									Three Months Ended
(dollars in thousands)	July 4, 2021		June 28, 2020		$ Change		% Change			April 3, 2022		April 4, 2021		$ Change		% Change
Labor and benefits costs	$	12,429	$	8,066	$	4,363		54.1	%	$	19,386	$	10,254	$	9,132		89.1	%


	Six Months Ended
(dollars in thousands)	July 4, 2021		June 28, 2020		$ Change		% Change
Labor and benefits costs	$	22,683	$	15,787	$	6,896		43.7	%

Labor and benefits costs for the three months ended ~~July~~April 3, 2022, and April 4, 2021, ~~and June 28, 2020,~~ represented approximately ~~30.2%~~33.0% and ~~32.3%~~30.5% of net restaurant sales, respectively. ~~Labor~~The year-over-year increase, as a percentage of net restaurant sales, was driven in part by increased hourly and ~~benefits costs~~salary wage rates, as well as an increase in dine-in sales requiring a higher level of staffing.

Operating Expenses

Our operating expenses consisted of the following for the ~~six~~three months ended ~~July~~April 3, 2022, and April 4, 2021:


	Three Months Ended
(dollars in thousands)	April 3, 2022		April 4, 2021		$ Change		% Change
Operating expenses	$	17,239	$	10,249	$	6,990		68.2	%

Operating expenses for the three months ended April 3, 2022, and April 4, 2021 represented approximately 29.3% and ~~June 28, 2020,~~30.5% of net restaurant sales, respectively. This year-over-year decrease in expense as a percentage of net restaurant sales was due primarily to leverage on our fixed operating costs.

Depreciation and Amortization

Depreciation and amortization expense for the three months ended April 3, 2022 was $2.4 million, compared to $1.6 million for the three months ended April 4, 2021. The increase in depreciation and amortization expense was due to the acquisitions that occurred in the 12 months following the end of the first quarter of 2021.

General and Administrative Expenses

Our general and administrative expenses consisted of the following for the three months ended April 3, 2022, and April 4, 2021:


	Three Months Ended
(dollars in thousands)	April 3, 2022		April 4, 2021		$ Change		% Change
General and administrative expenses	$	5,291	$	4,038	$	1,253		31.0	%

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BBQ HOLDINGS, INC. AND SUBSIDIARIES

represented approximately 30.3% and 34.6% of net restaurant sales, respectively. The year-over-year decrease as a percentage of net restaurant sales, was driven in part by a concerted effort by management to increase efficiency at the restaurants and in part by the decrease in labor needed for service staff as dining room sales decreased with the closure of dining rooms as a result of COVID-19.

~~Operating Expenses~~

~~Our operating expenses consisted of the following for the three months ended July 4, 2021 and June 28, 2020:~~

Three Months Ended

(dollars in thousands)

July 4, 2021

June 28, 2020


$ Change

% Change

Operating expenses

$
11,594

$
9,104

$
2,490

27.4
%

Six Months Ended

(dollars in thousands)

July 4, 2021

June 28, 2020


$ Change

% Change

Operating expenses

$
21,843

$
15,730

$
6,113

38.9
%

Operating expenses for the three months ended July 4, 2021 and June 28, 2020 represented approximately 28.1% and 36.4% of net restaurant sales, respectively. Operating expenses for the six months ended July 4, 2021 and June 28, 2020 represented approximately 29.2% and 34.4% of net restaurant sales, respectively. This year over year decrease in expense as a percentage of net restaurant sales was due primarily to the increased revenue resulting from easing of dine-in restrictions which were put in place in the first quarter of 2020 due to COVID-19. With the higher revenue base, those operating costs that are fixed, decreased as a percent of revenue.

~~Depreciation and Amortization~~

Depreciation and amortization expense for the three and six months ended July 4, 2021 was $1.4 million and $3.0 million, respectively, compared to $1.4 million and $2.4 million for the three and six months ended June 28, 2020, respectively. The increase in depreciation and amortization expense was due to improvements made to established locations and the acquisition of additional locations in the first quarter of 2020.

~~General and Administrative Expenses~~

~~Our general and administrative expenses consisted of the following for the three and six months ended July 4, 2021 and June 28, 2020:~~

Three Months Ended

(dollars in thousands)

July 4, 2021

June 28, 2020


$ Change

% Change

General and administrative expenses

$
4,544

$
3,803

$
741

19.5
%

Six Months Ended

(dollars in thousands)

July 4, 2021

June 28, 2020


$ Change

% Change

General and administrative expenses

$
8,582

$
6,835

$
1,747

25.6
%

General and administrative expenses for the three months ended ~~July~~April 3, 2022, and April 4, 2021 ~~and June 28, 2020~~ represented approximately ~~10.0%~~8.2% and ~~13.7%~~10.8% of total revenues, respectively. General and administrative expenses for the six months ended July 4, 2021 and June 28, 2020 represented approximately 10.4% and 13.2% of total revenues, respectively. While general and administrative expenses increasedThis year-over-year decrease in ~~the first half of 2021 compared to the first half of 2020 due to additional overhead related to the Granite City and Real Urban BBQ acquisitions,~~expense as a percentage of total revenues ~~general~~was due primarily to leverage from the increased revenue resulting from 2021 acquisitions and ~~administrative expense decreased year over year, due~~an increase in ~~part to a higher revenue base.~~dine-in sales.

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~~BBQ HOLDINGS, INC. AND SUBSIDIARIES~~

Asset Impairment, Estimated Lease Termination and Other Closing Costs

The following is a summary of the asset impairment, estimated lease termination and other closings costs we incurred for the periods presented:


	Three Months Ended				Six Months Ended				Three Months Ended
(dollars in thousands)	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020		April 3, 2022		April 4, 2021
Asset impairments, net	$	—	$	4,710	$	—	$	4,710	$	181	$	—
Lease termination charges and related costs		—		83		—		200
Restaurant closure expenses		25		(14)		37		42
Lease termination and restaurant closure expenses										228		12
Asset impairment, estimated lease termination charges and other closing costs	$	25	$	4,779	$	37	$	4,952	$	409	$	12

Income Tax (Expense) Benefit

Income tax ~~expense~~benefit for the three months ended ~~July 4, 2021~~April 3, 2022 was approximately ~~$399,000,~~$241,000, or ~~2.4%~~59.4% of our pretax income and the income tax ~~benefit~~expense for the three months ended ~~June 28, 2020~~April 4, 2021 was ~~$1.9 million~~$82,000, or ~~23.4%~~10.5% of our pretax loss. Income tax expense for the six months ended July 4, 2021 was approximately $481,000, or 2.7% of our pretax income and the income tax benefit for the six months ended June 28, 2020 was $2.2 million or 46.2% of our pretax loss.income.

~~Basic and Diluted Net Income (loss) per Common Share Attributable to Shareholders~~

Net income attributable to shareholders for the three months ended July 4, 2021 was approximately $15.8 million, or $1.70 per share, basic and $1.64 per share assuming dilution, compared to net loss attributable to shareholders for the three months ended June 28, 2020 of $6.3 million, or $0.68 per basic and diluted share. Net income attributable to shareholders for the six months ended July 4, 2021 was approximately $16.6 million, or $1.79 per share, basic and $1.73 per share assuming dilution, compared to net income attributable to shareholders for the six months ended June 28, 2020 of $7.5 million, or $0.82 per basic and diluted share. Of the net income attributable to shareholders in the second quarter of 2021, $14.1 million was related to gain upon forgiveness of our PPP loans. Of the net income attributable to shareholders in the second quarter of 2020, $14.4 million was related to the gain on bargain purchase of the Granite City restaurants. The basic and diluted weighted-average number of common shares outstanding for the three months ended July 4, 2020 were approximately 9,304,000 and 9,615,000, respectively, while the basic and diluted number of common shares outstanding for the three months ended June 28, 2020 was 9,138,000. The basic and diluted weighted-average number of common shares outstanding for the six months ended July 4, 2021 were approximately 9,256,000 and 9,567,000, respectively, while the basic and diluted number of common shares outstanding for the six months ended June 28, 2020 was 9,132,000.

Financial Condition, Liquidity and Capital Resources

Our balance of unrestricted cash and cash equivalents was approximately ~~$38.4~~$35.4 million and ~~$18.1~~$40.3 million as of ~~July 4, 2021~~April 3, 2022, and January ~~3, 2021,~~2, 2022, respectively. Our current ratio, which measures our immediate short-term liquidity, was ~~1.6 and~~ 1.1 as of ~~July 4, 2021~~April 3, 2022, and January ~~3, 2021~~2, 2022, respectively. The current ratio is computed by dividing total current assets by total current liabilities.

Net cash provided inby operating activities was approximately $1.4 million for the ~~six~~first three months ended ~~July 4, 2021~~April 3, 2022, and was approximately ~~$8.9~~$4.2 million ~~which reflects~~for the first three months ended April 4, 2021. The $2.8 million year-over-year decrease in net ~~income of approximately $16.8 decreased primarily~~cash provided by $14.1 million related to the forgiveness of our PPP loans and related accrued interest as well as a decrease of prepaid, receivables and other current assets of $2.7 million. Such amount was increased in part primarily by $3.0 million of depreciation and amortization, $4.1 million of accounts payable and other liabilities and $638,000 of stock-based compensation.

~~Net cash used in~~ operating activities ~~for~~was driven by an additional $1 million in gift card liability redemptions which corresponded with higher gift card sales in the ~~six months ended June 28, 2020 was~~fourth quarter of 2021. Additionally, working capital changes decreased cash flow from operations by approximately ~~$482,000, which reflects net income of approximately $7.1~~$2.1 million reduced primarily by the $13.6 million non-cash bargain purchase gain on the Granite City Acquisition and increased by $4.7 million non-cash impairment expense. Changes in operating assets and liabilities for the six months ended June 28, 2020 primarily included cash outflows from an increase in prepaids and other assets of $2.2 million, offset in part by cash inflows of $3.3 million from an increase in accounts payable and other accrued liabilities.year-over-year.

Net cash used for investing activities was approximately ~~$1.0~~$5.2 million for the ~~six~~three months ended ~~July~~April 3, 2022 relating primarily to the purchase of the Famous Craft Concepts restaurants, the acquisition of which we closed in March 2022.

Net cash used for investing activities was approximately $685,000 for the three months ended April 4, 2021, ~~related primarily~~relating to payments for the purchase of equipment and leasehold improvements.

Net cash used for ~~investing activities was approximately~~

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~~BBQ HOLDINGS, INC. AND SUBSIDIARIES~~

~~$6.9 million for the six months ended June 28, 2020, related to payments for acquired restaurants of $5.0 million and the purchase of property, equipment and leasehold improvements of $2.0 million.~~

~~Net cash provided by~~ financing activities for the ~~six~~three months ended ~~July 4, 2021~~April 3, 2022, was approximately ~~$11.7 million~~$585,000 which was primarily the result of ~~the sale of stock to accredited investors, the proceeds of which netted approximately $12.5 million and proceeds from exercise of stock options of approcimatly $310,000, offset in part by~~ payments of ~~$1.0 million~~$562,000 on our long-term debt.

Net cash ~~provided by~~used for financing activities for the ~~six~~three months ended ~~June 28, 2020~~April 4, 2021, was approximately ~~$22.1 million~~$519,000 which was ~~related to the proceeds from~~for payments on our ~~loan with Choice Bank and the proceeds from our PPP Loans. Such funds from our loan with Choice Bank were used to fund acquisitions while the funds from the PPP Loans were used to fund operations.~~long-term debt.

We are subject to various financial and non-financial covenants on our long-term debt, including a debt-service coverage ratio. As of ~~July 4, 2021,~~April 3, 2022, we were in compliance with all of our covenants.

Critical Accounting Policies

Our significant accounting policies are described in Note 1 – Nature of Business and Significant Accounting Policies to the ~~condensed~~ consolidated financial statements included in our Annual Report on Form 10-K for the year ended January ~~3, 2021.~~2, 2022. Except as disclosed in Note 1 “Basis of Presentation” to the accompanying notes to the consolidated financial statements, there have been no updates to our critical accounting policies.

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BBQ HOLDINGS, INC. AND SUBSIDIARIES

Forward-Looking Information

BBQ Holdings makes written and oral statements from time to time, including statements contained in this Quarterly Report on Form 10-Q regarding its business and prospects, such as projections of future performance, statements of management’s plans and objectives, forecasts of market trends and other matters that are forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. Statements containing the words or phrases “will likely result”, “anticipates”, “are expected to”, “will continue”, “is anticipated”, “estimates”, “projects”, “believes”, “expects”, “intends”, “target”, “goal”, “plans”, “objective”, “should” or similar expressions identify forward-looking statements which may appear in documents, reports, filings with the SEC, news releases, written or oral presentations made by our officers or other representatives to analysts, shareholders, investors, news organizations, and others, and discussions with our management and other Company representatives. For such statements, including those contained in this report, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Our future results, including results related to forward-looking statements, involve a number of risks and uncertainties that are difficult to predict, including but not limited to those identified herein under Part II, Item 1A. “Risk Factors” and under Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January ~~3, 2021.~~2, 2022. No assurance can be given that the results reflected in any forward-looking statements will be achieved. Any forward-looking statements made by us or on our behalf speak only as of the date on which such statement is made. Our forward-looking statements are based upon assumptions that are sometimes based upon estimates, data, communications and other information from suppliers, government agencies and other sources that may be subject to revision. We do not undertake any obligation to update or keep current either (i) any forward-looking statements to reflect events or circumstances arising after the date of such statement, or (ii) the important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or which are reflected from time to time in any forward-looking statement which may be made by us or on our behalf.

Additional Information on BBQ Holdings

We are currently subject to the informational requirements of the Securities Exchange Act of 1934, as amended. As a result, we are required to file periodic reports and other information with the SEC, such as annual, quarterly, and current reports, proxy and information statements. You are advised to read this Quarterly Report on Form 10-Q in conjunction with the other reports, proxy statements and other documents we file from time to time with the SEC. If you would like more information regarding BBQ Holdings, our SEC filings are also available to the public free of charge at the SEC’s website. The address of this website is http://www.sec.gov. Our most current SEC filings, such as our annual, quarterly and current reports, proxy statements and press releases are available to the public free of charge on our website.

The address of our website is http://www.bbq-holdings.com. Our website is not intended to be, and is not, a part of this Quarterly Report on Form 10-Q. We will provide electronic or paper copies of our SEC filings (excluding exhibits) to any BBQ Holdings shareholder free of charge upon receipt of a written request for any such filing. All requests for our SEC filings should be sent to the attention of Investor Relations at BBQ Holdings, Inc., 12701 Whitewater Drive, Suite 100, Minnetonka, MN 55343.

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Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to smaller reporting companies.

Item 4.CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

There has been no change in our internal control over financial reporting during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial ~~reporting, except for the following.~~reporting.

PART II. OTHER INFORMATION

Item 1.LEGAL PROCEEDINGS.

The information contained in Note 13 – Litigation of the notes to the accompanying consolidated financial statements included in this Quarterly Report on Form 10-Q is incorporated by reference into this Item 1. Except as set forth therein, as of the end of the period covered by this Quarterly Report on Form 10-Q, we are not a party to any material pending legal proceedings.

Item 1A.RISK FACTORS.

The most significant risk factors applicable to the Company are described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended January ~~3, 2021,~~2, 2022, filed with the SEC on ~~April 2, 2021,~~March 16, 2022, as updated by this Part II, Item 1A “Risk Factors” and our subsequent filings with the Securities and Exchange Commission. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K.

Item 6.EXHIBITS


Exhibit	~~Description~~
Number	Description

10.1	Asset Purchase Agreement, dated March 10, 2022, relating to the purchase of the assets of the Barrio Queen restaurant group, incorporated by reference to Exhibit 10.1 to Form 8-K filed on March 14, 2022.

10.2	Employment Agreement dated March 15, 2022 between BBQ Holdings, Inc. and Jeffery Crivello, incorporated by reference to Exhibit 10.29 to Form 10-K filed on March 16, 2022.

10.3	Restricted Stock Agreement for Jeffery Crivello, dated March 15, 2022, granted under the Amended and Restated 2015 Equity Incentive Plan, incorporated by reference to Exhibit ~~10.1~~10.30 to Form ~~8-K~~10-K filed ~~June 17, 2021.~~on March 16, 2022.

~~10.2~~		~~Membership Interest Purchase Agreement, dated June 24, 2021, incorporated by reference to Exhibit 10.1 to Form 8-K filed June 25, 2021.~~

~~10.3~~			~~Form of Securities Purchase Agreement, incorporated by reference to Exhibit 10.2.1 to Form 8-K filed June 25, 2021.~~

~~10.4~~			~~Form of Securities Purchase Agreement, incorporated by reference to Exhibit 10.2.2 to Form 8-K filed June 25, 2021.~~

~~10.5~~			~~Form of Registration Rights Agreement, incorporated by reference to Exhibit 10.3 to Form 8-K filed June 25, 2021.~~

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document

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101.SCH		Inline XBRL Schema Document

101.CAL		Inline XBRL Calculation Linkbase Document

101.LAB		Inline XBRL Label Linkbase Document

101.PRE		Inline XBRL Presentation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

Exhibit 104		Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BBQ HOLDINGS, INC.

(“Registrant”)



Dated: ~~August 16, 2021~~May 12, 2022	By:	/s/Jeffery Crivello
		Jeffery Crivello
		Chief Executive Officer and Director
		(Principal Executive Officer)


Dated: ~~August 16, 2021~~May 12, 2022		/s/ ~~James G. Gilbertson~~Jason Schanno
		~~James G. Gilbertson~~Jason Schanno
		Chief Financial Officer and Secretary
		(Principal Financial Officer and Principal Accounting Officer)

- 2826 -


(in thousands)	July 4, 2021		January 3, 2021
Prepaid expenses and deferred costs	$	2,212	$	950
Prepaid insurance		669		302
Prepaid expenses and other current assets	$	2,881	$	1,252