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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 FOR THE FISCAL YEAR ENDED DECEMBER 30, 2006
 o
    
    Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 1-12104
 BACK YARD BURGERS, INC.
  Delaware
    
    64-0737163(State or other jurisdiction of
    
    (IRS employerincorporation or organization)
    
    identification no.)1657 N. Shelby Oaks Drive, Suite 105Memphis, Tennessee
    
    38134-7401(Address of principal executive offices)
    
    (Zip code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredCommon Stock $.01 par value
    
    NASDAQ Capital Market
 Securities registered pursuant to Section 12(g) of the Act:
 o x
 o x
 x o
 x
  o o x
  o x
   Certain portions of Part III are incorporated by reference from the registrants proxy
statement relating to the annual meeting of stockholders which will be filed with the Commission no
later than 120 days from the fiscal year end covered by this Form 10-K .




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TABLE OF CONTENTS  FORWARD-LOOKING STATEMENTS:ASSUMPTIONS USED IN THIS REPORTPART IPART IIPERFORMANCE GRAPHPART IIIPART IVSIGNATURESINDEX TO FINANCIAL SUPPLEMENT TO ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 30, 2006Selected Consolidated Financial DataEx-10.31 Retention and Change in Control Agreement dated October 9, 2006Ex-21 Subsidiaries of the RegistrantEx-23.1 Consent of Independent Registered Public Accounting FirmEx-31.1 Section 302 Certification of the CEOEx-31.2 Section 302 Certification of the CFOEx-32.1 Section 906 Certification of the CEOEx-32.2 Section 906 Certification of the CFO    Table of Contents  
 FORWARD-LOOKING STATEMENTS:
  
 ASSUMPTIONS USED IN THIS REPORT
  
 PART I
 ITEM 1. BUSINESS
 General
  Corporate History
  Recent Developments
  2




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
    
    Annual stock option grants
    
    Grants made to rank and file existing employees by the Companys Chief Executive Officer
    
    Grants made to new hires by the Companys Chief Executive Officer
    
    Grants made to the Companys independent directors (other than as part of the Companys
annual option grants)
 Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees
(APB No. 25),
 APB No. 25 APB No. 25
 3




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##### Table of Contents




    
    the report prepared by the Audit Committees legal counsel relating to the Companys
historical stock option granting practices;
    
    minutes of meetings of the Companys Board of Directors and Compensation Committee, and
any available related documentation;
    
    personnel files;
    
    payroll records;
    
    reports on Form 4 filed with the SEC;
    
    contemporaneous emails; and
    
    information obtained in interviews with various current and former Company employees and
members of the Board of Directors and Compensation Committee.
    Stock options issued with favorable exercise prices in certain periods compared to stock prices
before or after grant date
   4




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Inaccurate measurement date for 2002 automatic grants to three independent directors
 th
 Inaccurate measurement dates for two new hires and one independent director
   5




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Additional Inconsistencies Not Requiring Financial Statement Adjustments
   New Board Policy for Stock Options and other Equity Awards
     6




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##### Table of Contents




    
    Name of grantee;
    
    Number of shares of common stock covered by any options or other Equity Awards being
granted to the grantee;
    
    Statement that the grant date is the date of the meeting at which the options are
approved;
    
    Statement that the exercise price of the option or other Equity Award shall be the
closing price of the Companys common stock on the NASDAQ
Capital Market (or applicable
successor market) on such date.
   Stock Option Amendment Agreements with Certain Executive Officers
   Regulatory Matters
  7




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##### Table of Contents



Costs
of Investigation and Legal Activities
  Operating Strategy
  
    
    serving premium quality, great tasting food comparable to that of the best
full-service casual dining restaurants;
    
    utilizing restaurant designs featuring a single drive-thru concept integrated
with an inviting indoor dining area, which projects a uniform image and creates
pleasing curb appeal;
    
    providing fast and friendly service with emphasis on a positive customer
experience;
    
    offering a diverse menu of freshly prepared food items that are competitive
with the everyday prices of the three largest hamburger chains; and
    
    actively training, supervising and supporting franchised and Company-operated
restaurants.
 8




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Growth Strategy
  
    
    set our restaurants apart from fast-food competition by serving premium fast
food, enhancing the interiors of our dine-in facilities and re-imaging existing
franchise facilities with the Companys new logo and color schemes so that the design
and feel of our restaurants will match the standards set by the quality of the food;
    
    improve the work flow of existing units to improve productivity and throughput;
    
    develop additional Company-operated restaurants in existing markets and fund such development with cash flow from
operations and additional debt or equity financing where warranted;
    
    test new and improved operational technology systems that should enable the
Company and our franchisees to increase sales, control operating costs and build
customer loyalty through innovative technology solutions including: new state of the
art biometric point-of-sale systems, self-serve kiosks, interactive customer ordering,
back office software, enterprise reporting, loyalty programs, point-of-sale hardware
and support;
    
    analyze results of two new Company-operated restaurants with playgrounds and
determine if future store facilities will include playgrounds (each playground
centerpiece is a tree house, which the company feels will further enhance our back yard
theme and increase restaurant traffic);
    
    develop additional franchised restaurants, primarily within existing markets,
with a committed and experienced group of franchisees (we expect that 14 to 18
franchised restaurants will open in 2007); and
    
    continue to develop and improve sales of our breakfast menu with targeted
system-wide availability by the end of 2007 (currently, breakfast is being served at 21
of our locations, thirteen of which are Company-operated and eight franchised).
 9




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##### Table of Contents



Restaurant Operations
 Restaurant Locations .
 Company-operated:
    
    
    
    
    
    Franchised:Number of
    
    
    
    Number ofCore Markets
    
    Restaurants
    
    Core Markets
    
    RestaurantsMemphis, TN Area
    
    
    27
    
    
    Kansas City, MO Area
    
    
    12Little Rock, AR Area
    
    
    7
    
    
    Atlanta, GA Area
    
    
    10Nashville, TN Area
    
    
    6
    
    
    Springfield, MO Area
    
    
    6Gulf Coast, FL Area
    
    
    4
    
    
    Charlotte, NC Area
    
    
    5Total
    
    
    44
    
    
    Birmingham, AL Area
    
    
    4Jackson, MS Area
    
    
    4Orlando, FL Area
    
    
    4Hickory, NC Area
    
    
    3Knoxville, TN Area
    
    
    3Memphis, TN Area
    
    
    3Tulsa, OK Area
    
    
    3Waco, TX Area
    
    
    3Asheville, NC Area
    
    
    2Baton Rouge, LA Area
    
    
    2Chattanooga, TN Area
    
    
    2Huntsville, AL Area
    
    
    2Lexington, KY Area
    
    
    2Little Rock, AR Area
    
    
    2Montgomery, AL Area
    
    
    2Oklahoma City, OK Area
    
    
    2Paducah, KY Area
    
    
    2State College, PA Area
    
    
    2Tupelo, MS Area
    
    
    2Other Markets(1)Georgia
    
    
    9Mississippi
    
    
    8Kentucky
    
    
    6Louisiana
    
    
    4Alabama
    
    
    3South Carolina
    
    
    3North Carolina
    
    
    3Tennessee
    
    
    3Florida
    
    
    2Indiana
    
    
    2Missouri
    
    
    2Virginia
    
    
    2Arkansas
    
    
    1Illinois
    
    
    1Kansas
    
    
    1Nebraska
    
    
    1Ohio
    
    
    1Pennsylvania
    
    
    1Texas
    
    
    1Total
    
    
    136
 (1)
 10




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##### Table of Contents



Restaurant Openings and Closings
 Year EndedDecember 30,
    
    
    December 31,
    
    
    January 1,
    
    
    January 3,2006
    
    
    2005
    
    
    2005
    
    
    2004RestaurantsCompany-operatedOpen at beginning of period
    
    
    44
    
    
    
    42
    
    
    
    42
    
    
    
    42Opened during period
    
    
    2
    
    
    
    1
    
    
    
    2
    
    
    
    1Converted to Company
    
    
    0
    
    
    
    4
    
    
    
    0
    
    
    
    0Converted to Franchise
    
    
    (1
    )
    
    
    0
    
    
    
    (1
    )
    
    
    0Closed during period
    
    
    (1
    )
    
    
    (3
    )
    
    
    (1
    )
    
    
    (1
    )Open at end of period
    
    
    44
    
    
    
    44
    
    
    
    42
    
    
    
    42Franchised (a)Open at beginning of period
    
    
    127
    
    
    
    114
    
    
    
    90
    
    
    
    77Opened during period
    
    
    17
    
    
    
    32
    
    
    
    31
    
    
    
    19Converted to Company
    
    
    0
    
    
    
    (4
    )
    
    
    0
    
    
    
    0Converted to Franchise
    
    
    1
    
    
    
    0
    
    
    
    1
    
    
    
    0Closed during period
    
    
    (9
    )
    
    
    (15
    )(b)
    
    
    (8
    )
    
    
    (6
    )Open at end of period
    
    
    136
    
    
    
    127
    
    
    
    114
    
    
    
    90Total Restaurants
    
    
    180
    
    
    
    171
    
    
    
    156
    
    
    
    132
 (a)
    
    As of March 30, 2007, two franchised restaurants have opened since December 30,
2006, one in Florence, AL and one in Branson, MO, and two franchised restaurants closed, one
in Alpharetta, GA and one in Springfield, MO.
 (b)
    
    Includes the closing of 9 co-branded restaurants with Taco Bell. The
co-branding relationship between the Company and YUM! Brands, Inc. was terminated during 2005.
 Site Selection
 Restaurant Design and Service
    11




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Supplies
 Management and Employees
 Supervision and Training
 Advertising and Promotion
 Restaurant Reporting .
 12




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Franchise Operations
 Strategy
 Franchisee Support Services .
   Advertising and Promotion
 Area Development and Franchise Agreements
  13




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Franchise Fees and Royalties .
 Competition
 Restaurant Operations.
 14




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Franchise Operations .
 Trademarks and Service Marks
  Government Regulations
     15




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Employees
  Available Information
 www.backyardburgers.com
 ITEM 1A. RISK FACTORS
 We face the possibility of additional actions relating to our past stock option granting practices.
  Our ability to open and operate new restaurants is subject to factors beyond our control.
  
    
    our ability to identify, and secure an adequate supply of, available and suitable restaurant sites;
    
    availability and retention of qualified operating personnel;
    
    increases in minimum wage and other operating costs cost;
    
    shortages in raw food products and volatility of commodity prices;
    
    consumer preferences, spending patterns and demographic trends;
    
    securing required governmental approvals and permits;
    
    competition in our markets and competitive discounting;
    
    availability of capital; and
    
    the possibility of unforeseen events affecting our industry generally and in the
Southeastern region of the
United States in particular.
 16




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The locations of our Company-owned and franchised restaurants are critical to our success.
  Our business is dependent on the availability and retention of qualified operating personnel.
  Our operations are susceptible to the cost of and changes in food availability.
  Changes in consumer preferences could negatively impact our results of operations.
  Health concerns relating to the consumption of beef or chicken could negatively impact our results
of operations.
  We are subject to government regulation that may adversely hinder or impact the growth of our
business.
  17




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Our success depends on our ability to compete effectively in the quick service restaurant industry.
   If our franchisees cannot develop new restaurants, our growth and success may be impeded.
  Our expansion into new markets may present increased risks due to our unfamiliarity with the area.
 ®
 The acquisition of existing restaurants from our franchisees may have an adverse impact on our
operating results or financial condition.
  18




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Our restaurants are located primarily in the Southeast region of the United States and, as a
result, we are sensitive to economic and other trends and developments in this region.
  Our franchisees could take actions that could harm our business.
  If we are not able to transition the role of CEO to a qualified person, our business could suffer.
  Compliance with changing regulation of corporate governance and public disclosure may result in
additional expense.
  Our future success depends on our ability to protect our proprietary information.
 ® ®
 A significant increase in litigation could have a material adverse effect on our results of
operations, financial condition and business prospects.
  ITEM 1B. UNRESOLVED STAFF COMMENTS
  19




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ITEM 2. PROPERTIES
   ITEM 3. LEGAL PROCEEDINGS
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
  Quarter Ended
    
    High
    
    
    LowApril 2, 2005
    
    $
    7.53
    
    
    $
    5.76July 2, 2005
    
    $
    6.04
    
    
    $
    5.13October 1, 2005
    
    $
    5.80
    
    
    $
    4.70December 31, 2005
    
    $
    5.55
    
    
    $
    4.75March 31, 2006
    
    $
    5.07
    
    
    $
    4.32June 30, 2006
    
    $
    5.80
    
    
    $
    4.60September 29, 2006
    
    $
    6.05
    
    
    $
    5.00December 30, 2006
    
    $
    6.11
    
    
    $
    5.08
  20




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PERFORMANCE GRAPH
  
 INDEXED RETURNSBase
    
    
    Years EndingPeriodCompany/Index
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006Back Yard Burgers, Inc.
    
    
    100
    
    
    
    97.99
    
    
    
    156.76
    
    
    
    188.44
    
    
    
    124.87
    
    
    
    131.91S&P Smallcap 600 Index*
    
    
    100
    
    
    
    84.55
    
    
    
    117.69
    
    
    
    144.11
    
    
    
    155.18
    
    
    
    178.64S&P SmallCap 600 Restaurants*
    
    
    100
    
    
    
    93.25
    
    
    
    126.15
    
    
    
    153.37
    
    
    
    157.11
    
    
    
    174.75
 
 *
    
    Source  Standard & Poors Investment Services Division 21




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ITEM 6. SELECTED FINANCIAL DATA
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
   ITEM 9A. CONTROLS AND PROCEDURES
      22




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
    
    Name of grantee;
    
    Number of shares of common stock covered by any options or other Equity Awards being
granted to the grantee;
    
    Statement that the grant date is the date of the meeting at which the options are
approved;
    
    Statement that the exercise price of the option or other Equity Award shall be the
closing price of the Companys common stock on the Nasdaq Stock Market (or applicable
successor market) on such date.
     ITEM 9B. OTHER INFORMATION
  23




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PART III
 ITEM 10. DIRECTORS, EXECUTIVE AND CORPORATE GOVERNANCE
 ITEM 11. EXECUTIVE COMPENSATION
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
 PART IV
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)(1) Consolidated Financial Statements
  
    
    Consolidated Balance Sheets as of December 30, 2006 and December 31, 2005
    
    Consolidated Statements of Operations for the years ended December 30, 2006 and
December 31, 2005 and January 1, 2005
    
    Consolidated Statements of Changes in Stockholders Equity for the years ended
December 30, 2006 and December 31, 2005 and January 1, 2005
    
    Consolidated Statements of Cash Flows for the years ended December 30, 2006 and
December 31, 2005 and January 1, 2005
    
    Notes to Consolidated Financial Statements
    
    Reports of Independent Registered Public Accounting Firms
 (a)(2) Consolidated Financial Statement Schedules:
  24




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(a)(3) Exhibits
 ExhibitNumber
    
    Description3.1
    
    
    Restated Certificate of Incorporation.(4)3.2
    
    
    Amended and Restated By-Laws.(2)4.1
    
    
    Specimen Common Stock Certificate.(2)10.1
    
    
    Employment Agreement, dated April 15, 1993, between the Registrant and Lattimore M.
Michael.(1)10.2
    
    
    Form of Incentive Stock Option Plan of 1993.(1)10.3
    
    
    Lease, dated February 1, 1990, between Trezevant Properties and the Registrant.(1)10.4
    
    
    Joint Venture Agreement of Lesters Back Yard Burgers Joint Venture I by and among William L.
Lester, Pattie F. Lester, Patricia B. Litow, Elizabeth B. Fox and Back Yard Burgers, Inc.,
dated November 15, 1994.(3)10.5
    
    
    Joint Venture Agreement of Lesters Back Yard Burgers Joint Venture II by and among William
L. Lester, Pattie F. Lester, Patricia B. Litow, Elizabeth B. Fox, Charles B. Fox, David P. Fox
and Back Yard Burgers, Inc., dated November 15, 1994.(3)10.6
    
    
    1995 Employee Stock Purchase Plan of Back Yard Burgers, Inc.(4)10.7
    
    
    The 1995 Incentive Award Plan of Back Yard Burgers, Inc.(4)10.8
    
    
    Joint Venture Agreement of Lesters Back Yard Burgers Joint Venture III by and among Pattie
F. Lester, Patricia B. Litow, Elizabeth B. Fox, Charles B. Fox, David P. Fox, Alexandra B.
Litow, Andrew R. Litow and Back Yard Burgers, Inc., dated September 12, 1995.(4)10.9
    
    
    Capital Contribution Agreement between Back Yard Burgers, Inc. and BYB Properties, Inc. dated
October 10, 1997.(5)10.10
    
    
    Trademark Assignment by Back Yard Burgers, Inc. to BYB Properties, Inc. dated October 10,
1997.(5)10.11
    
    
    Trademark License Agreement between BYB Properties, Inc. and Back Yard Burgers, Inc. dated
October 10, 1997.(5)10.12
    
    
    Revolving Loan Agreement regarding Uncommitted Line of Credit Agreement from BYB Properties,
Inc. to Back Yard Burgers, Inc. dated October 10, 1997.(5)10.13
    
    
    Promissory Note by and between BYB Properties, Inc. and Back Yard Burgers, Inc. dated
October 10, 1997.(5)
 25




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ExhibitNumber
    
    Description10.14
    
    
    Tax Sharing Agreement between BYB Properties, Inc. and Back Yard Burgers, Inc. dated October
10, 1997.(5)10.15
    
    
    Form of Joint Venture Agreement of Lesters Back Yard Burgers Joint Venture IV by and among
William L. Lester, Pattie F. Lester, Alexandra B. Litow, Andrew R. Litow and Back Yard
Burgers, Inc., dated August 28, 1998.(6)10.16
    
    
    Lease agreement by and between Belz Devco, L.P. and Back Yard Burgers, Inc. dated November 12, 1999.(7)10.17
    
    
    2002 Equity Incentive Plan of Back Yard Burgers, Inc.(8)10.18
    
    
    Loan agreement by and between First Tennessee Bank and Back Yard Burgers, Inc. dated
February 11, 2003.(9)10.19
    
    
    Lease agreement by and between Batesville Back Yard Properties, LLC and Back
Yard Burgers, Inc. dated May 1, 2002. (10)10.20
    
    
    Severance Agreement, dated October 11, 2004, between the Registrant and Lattimore M.
Michael. (11)10.21
    
    
    Separation Agreement by and between Back Yard Burgers, Inc. and William N. Griffith dated
January 7, 2005.(12)10.22
    
    
    Consulting Services Agreement by and between Back Yard Burgers, Inc. and William N. Griffith
dated January 7, 2005.(12)10.23
    
    
    Amendment to Stock Option Plans and Agreement by and between Back Yard Burgers, Inc. and
William N. Griffith dated January 7, 2005.(12)10.24
    
    
    Franchise Agreement by and between Back Yard Burgers, Inc. and William N. Griffith dated
January 7, 2005.(12)10.25
    
    
    Area Development Agreement by and between Back Yard Burgers, Inc. and William N. Griffith
dated January 7, 2005.(12)10.26
    
    
    Agreement for Purchase and Sale of Assets dated as of the 18 th day of
October, 2005 by and among Back Yard Burgers, Inc., Charles L. Rodgers, Tennessee, Southern
Restaurant Development, LLC, and CLR Management, LLC.(13)10.27
    
    
    Loan Agreement dated November 17, 2005 by and among First Tennessee Bank National
Association and Back Yard Burgers, Inc. and its subsidiaries.(14)10.28
    
    
    Form of Secured Promissory Note dated November 17, 2005 in the principal amount of
$6,200,000 payable by Back Yard Burgers, Inc. to First Tennessee Bank National
Association.(14)10.29
    
    
    Separation Agreement and General Release dated February 27, 2006 by and between Michael W.
Myers and Back Yard Burgers, Inc.(15)10.30
    
    
    Employment Agreement dated April 4, 2006 by and between Lattimore M. Michael and Back Yard
Burgers, Inc.(16)10.31*
    
    
    Retention and Change in Control Agreement dated October 9, 2006 by and between Michael G.
Webb and Back Yard Burgers, Inc.21*
    
    
    Subsidiaries of the Registrant.23.1*
    
    

Consents
of Independent Registered Public Accounting Firms
 26




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ExhibitNumber
    
    Description31.1*
    
    
    Certification by the Chief Executive Officer.31.2*
    
    
    Certification by the Chief Financial Officer.32.1*
    
    
    Certification by the Chief Executive Officer.32.2*
    
    
    Certification by the Chief Financial Officer.
 
 *
    
    Filed herewith.(1)
    
    Previously filed with the Securities and Exchange Commission (the Commission) as an Exhibit
to the Registrants Form SB-2 on April 20, 1993 (File No. 33-61356).(2)
    
    Previously filed with the Commission as an Exhibit to the Registrants Amendment No. 2 to
Form SB-2 on June 25, 1993 (File No. 33-61356).(3)
    
    Previously filed with the Commission as an Exhibit to the Registrants Form 10-K, dated
December 31, 1994 and filed on March 31, 1995.(4)
    
    Previously filed with the Commission as an Exhibit to the Registrants Form 10-QSB, dated
September 30, 1995 and filed on November 14, 1995.(5)
    
    Previously filed with the Commission as an Exhibit to the Registrants Form 10-K, dated
January 3, 1998 and filed on April 3, 1998.(6)
    
    Previously filed with the Commission as an Exhibit to the Registrants Form 10-QSB dated
October 3, 1998 and filed on November 17, 1998.(7)
    
    Previously filed with the Commission as an Exhibit to the Registrants Form 10-K dated
January 1, 2000 and filed on March 31, 2000.(8)
    
    Previously filed with the Commission as an Exhibit to the Registrants Form 10-K dated
December 29, 2001 and filed on March 28, 2002.(9)
    
    Previously filed with the Commission as an Exhibit to the Registrants Form 10-Q dated March
29, 2003 and filed on May 13, 2003.(10)
    
    Previously filed with the Commission as an Exhibit to the Registrants Form 10-K dated
January 3, 2004 and filed on April 2, 2004.(11)
    
    Previously filed with the Commission as an Exhibit to the Registrants Form 10-Q dated
October 2, 2004 and filed on November 16, 2004.(12)
    
    Previously filed with the Commission as an Exhibit to the Registrants Form 10-K dated
January 1, 2005 and filed on April 18, 2005.(13)
    
    Previously filed with the Commission as an Exhibit to the Registrants Form 8-K filed on
October 24, 2005.(14)
    
    Previously filed with the Commission as an Exhibit to the Registrants Form 8-K filed on
November 18, 2005.(15)
    
    Previously filed with the Commission as an Exhibit to the Registrants Form 8-K filed on
February 28, 2006.(16)
    
    Previously filed with the Commission as an Exhibit to the Registrants Form 8-K filed on
April 4, 2006. 27




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SIGNATURES
  BACK YARD BURGERS, INC.By:
    /s/ Lattimore M. MichaelLattimore M. Michael, Chairmanand Chief Executive Officer April 16, 2007
  Signature
    
    Title
    
    Date/s/ Lattimore M. Michael

Lattimore M. Michael
    
    Chairman of the Board and
Chief Executive Officer
    
    April 16, 2007/s/ Joseph L. Weiss

Joseph L. Weiss
    
    Chief Operating Officer
and Director
    
    April 16, 2007/s/ Michael G. Webb

Michael G. Webb
    
    Chief Financial Officer
    
    April 16, 2007/s/ W. Kurt Henke

W. Kurt Henke
    
    Director
    
    April 16, 2007/s/ Jim L. Peterson

Jim Peterson
    
    Director
    
    April 16, 2007/s/ William B. Raiford, III

William B. Raiford, III
    
    Director
    
    April 16, 2007/s/ Gina A. Balducci

Gina A. Balducci
    
    Director
    
    April 16, 2007/s/ Dane C. Andreeff

Dane C. Andreeff
    
    Director
    
    April 16, 2007
 28




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INDEX TO FINANCIAL SUPPLEMENT
TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 30, 2006
 PageSelected Consolidated Financial Data
    
    
    F-1Managements Discussion And Analysis
of Financial Condition And Results Of Operations
    
    
    F-4Consolidated Balance Sheets
as of December 30, 2006 and December 31, 2005
    
    
    F-16Consolidated Statements of Operations
for the years ended December 30, 2006 and December 31, 2005 and January 1, 2005
    
    
    F-17Consolidated Statements of Changes in Stockholders Equity
for the years ended December 30, 2006 and December 31, 2005 and January 1, 2005
    
    
    F-18Consolidated Statements of Cash Flows
for the years ended December 30, 2006 and December 31, 2005 and January 1, 2005
    
    
    F-19Notes to the Consolidated Financial Statements
    
    
    F-20Reports of
Independent Registered Public Accounting Firms
    
    
    F-38




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##### Table of Contents



Selected Consolidated Financial Data
 (in thousands, except per share data)
  December 30,
    
    
    December 31,
    
    
    January 1,
    
    
    January 3,
    
    
    December 28,2006
    
    
    2005
    
    
    2005
    
    
    2004(1)
    
    
    2002(restated)
    
    
    (restated)OPERATIONSRestaurant Sales
    
    $
    37,423
    
    
    $
    34,479
    
    
    $
    34,912
    
    
    $
    34,279
    
    
    $
    30,951Total revenues
    
    
    44,710
    
    
    
    41,001
    
    
    
    40,183
    
    
    
    38,647
    
    
    
    34,464Total royalties (2)
    
    
    4,792
    
    
    
    4,143
    
    
    
    3,108
    
    
    
    2,621
    
    
    
    2,172Income(loss) before income
taxes
    
    
    1,384
    
    
    
    (117
    )
    
    
    1,789
    
    
    
    1,772
    
    
    
    2,082Net income
    
    
    876
    (4)
    
    
    (44
    )
    
    
    1,264
    
    
    
    1,225
    
    
    
    1,397FINANCIAL POSITIONTotal assets
    
    $
    33,410
    
    
    $
    31,641
    
    
    $
    24,269
    
    
    $
    24,769
    
    
    $
    22,405Property and equipment, net
    
    
    23,393
    
    
    
    23,035
    
    
    
    17,746
    
    
    
    18,672
    
    
    
    17,307Debt
    
    
    9,952
    
    
    
    10,965
    
    
    
    4,900
    
    
    
    5,676
    
    
    
    6,250Shareholders equity
    
    
    17,305
    
    
    
    15,302
    
    
    
    14,476
    
    
    
    13,078
    
    
    
    11,759PER SHARE DATANet (loss) income  basic
    
    $
    0.17
    
    
    $
    (0.01
    )
    
    $
    0.26
    
    
    $
    0.26
    
    
    $
    0.30Net (loss) income  diluted
    
    
    0.17
    
    
    
    (0.01
    )
    
    
    0.25
    
    
    
    0.24
    
    
    
    0.28Dividends
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00Market price at year end
    
    
    5.25
    
    
    
    4.97
    
    
    
    7.50
    
    
    
    6.52
    
    
    
    4.00OTHER DATACapital expenditures
    
    
    2,806
    (3)
    
    
    8,614
    (3)
    
    
    2,178
    
    
    
    2,702
    (3)
    
    
    4,861
 (1)
    
    Because the Companys fiscal year ends on the Saturday closest to December 31,
the fiscal year ended January 3, 2004 contains 53 weeks, while the fiscal years ended December
30, 2006, December 31 2005, January 1, 2005 and December 28, 2002 contain 52 weeks.
 (2)
    
    Total royalties are derived from sales at franchised restaurants of $121.6 million
in 2006, $104.3 million in 2005, $78.3 million in 2004, $66.2 million in 2003 and $54.0
million in 2002.
 (3)
    
    Expenditures exclude non-cash transactions of $305,000 in
2006, $646,000 in 2005 and $627,000 in 2003.
 (4)
    
    As described in Note 3 of the Notes to the Consoldiated Financial Statements, the
Company recorded $311,000 (net of a $118,000 tax benefit) in compensation expense as a result
of its review of the Companys historical stock option practices.
 F-1




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##### Table of Contents



Year Ended December 30, 2006First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterIncome Statement Data:Revenues:Restaurant sales
    
    $
    8,932
    
    
    $
    9,686
    
    
    $
    9,444
    
    
    $
    9,361Franchise and area development fees
    
    
    86
    
    
    
    204
    
    
    
    39
    
    
    
    98Royalty fees
    
    
    1,135
    
    
    
    1,245
    
    
    
    1,207
    
    
    
    1,205Advertising fees
    
    
    297
    
    
    
    314
    
    
    
    303
    
    
    
    302Other
    
    
    191
    
    
    
    246
    
    
    
    212
    
    
    
    203Total Revenues
    
    
    10,641
    
    
    
    11,695
    
    
    
    11,205
    
    
    
    11,169Expenses:Cost of restaurant sales
    
    
    2,997
    
    
    
    3,120
    
    
    
    2,987
    
    
    
    2,902Restaurant operating expenses
    
    
    4,290
    
    
    
    4,646
    
    
    
    4,580
    
    
    
    4,669General and administrative
    
    
    1,748
    
    
    
    1,634
    
    
    
    2,045
    (1)
    
    
    2,042
    (2)Advertising
    
    
    685
    
    
    
    668
    
    
    
    737
    
    
    
    754Depreciation
    
    
    551
    
    
    
    543
    
    
    
    548
    
    
    
    550Other operating income
    
    
    (162
    )
    
    
    
    
    
    
    
    
    
    
    Total expenses
    
    
    10,109
    
    
    
    10,611
    
    
    
    10,897
    
    
    
    10,917Operating income (loss)
    
    
    532
    
    
    
    1,084
    
    
    
    308
    
    
    
    252Interest income
    
    
    7
    
    
    
    16
    
    
    
    36
    
    
    
    31Interest expense
    
    
    (189
    )
    
    
    (198
    )
    
    
    (207
    )
    
    
    (208
    )Other, net
    
    
    (23
    )
    
    
    (24
    )
    
    
    (28
    )
    
    
    (5
    )Income (loss) before income taxes
    
    
    327
    
    
    
    878
    
    
    
    109
    
    
    
    70Income tax expense (benefit)
    
    
    110
    
    
    
    302
    
    
    
    71
    
    
    
    25Net income (loss)
    
    $
    217
    
    
    $
    576
    
    
    $
    38
    
    
    $
    45Income per share:Basic
    
    $
    0.04
    
    
    $
    0.11
    
    
    $
    0.01
    
    
    $
    0.01Diluted
    
    $
    0.04
    
    
    $
    0.11
    
    
    $
    0.01
    
    
    $
    0.01Weighted average number of common
shares and common equivalent
shares outstanding:Basic
    
    
    4,943
    
    
    
    5,022
    
    
    
    5,105
    
    
    
    5,123Diluted
    
    
    5,105
    
    
    
    5,151
    
    
    
    5,105
    
    
    
    5,200
 (1)
    
    The Company recorded $429,000 in stock compensation expense as general and
administrative expenses in the third quarter of 2006 in conjunction with its review of
historical stock option practices as described in Note 3 of the Notes to the Consolidated
Financial Statements.
 (2)
    
    The Company incurred $350,000 in fees in the fourth quarter of 2006 associated with
its review of historical stock option practices as described in Note 3 of the Notes to the
Consolidated Financial Statements.
 F-2




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##### Table of Contents



Year Ended December 31, 2005First
    
    
    
    
    
    
    
    
    
    
    FourthQuarter
    
    
    Second
    
    
    Third
    
    
    Quarter(a)
    
    
    Quarter
    
    
    Quarter
    
    
    (b)Income Statement Data:Revenues:Restaurant sales
    
    $
    8,208
    
    
    $
    9,072
    
    
    $
    8,450
    
    
    $
    8,749Franchise and area development fees
    
    
    165
    
    
    
    146
    
    
    
    209
    
    
    
    109Royalty fees
    
    
    931
    
    
    
    1,038
    
    
    
    1,059
    
    
    
    1,115Advertising fees
    
    
    244
    
    
    
    271
    
    
    
    267
    
    
    
    279Other
    
    
    129
    
    
    
    210
    
    
    
    144
    
    
    
    206Total Revenues
    
    
    9,677
    
    
    
    10,737
    
    
    
    10,129
    
    
    
    10,458Expenses:Cost of restaurant sales
    
    
    2,639
    
    
    
    2,951
    
    
    
    2,749
    
    
    
    2,786Restaurant operating expenses
    
    
    3,995
    
    
    
    4,275
    
    
    
    4,089
    
    
    
    4,539General and administrative
    
    
    2,054
    
    
    
    1,579
    
    
    
    1,531
    
    
    
    1,659Advertising
    
    
    554
    
    
    
    713
    
    
    
    598
    
    
    
    682Depreciation
    
    
    563
    
    
    
    515
    
    
    
    523
    
    
    
    605Other operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )Impairment of long-lived assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    986Total expenses
    
    
    9,805
    
    
    
    10,033
    
    
    
    9,490
    
    
    
    11,252Operating income
    
    
    (128
    )
    
    
    704
    
    
    
    639
    
    
    
    (794
    )Interest income
    
    
    6
    
    
    
    7
    
    
    
    7
    
    
    
    7Interest expense
    
    
    (108
    )
    
    
    (104
    )
    
    
    (100
    )
    
    
    (140
    )Other, net
    
    
    (21
    )
    
    
    (23
    )
    
    
    (26
    )
    
    
    (43
    )Income before income taxes
    
    
    (251
    )
    
    
    584
    
    
    
    520
    
    
    
    (970
    )Income tax (benefit) expense
    
    
    (88
    )
    
    
    180
    
    
    
    166
    
    
    
    (331
    )Net Income
    
    $
    (163
    )
    
    $
    404
    
    
    $
    354
    
    
    $
    (639
    )Income per share:Basic
    
    $
    (0.03
    )
    
    $
    0.08
    
    
    $
    0.07
    
    
    $
    (0.13
    )Diluted
    
    $
    (0.03
    )
    
    $
    0.08
    
    
    $
    0.07
    
    
    $
    (0.13
    )Weighted average number of common
shares and common equivalent
shares outstanding:Basic
    
    
    4,791
    
    
    
    4,806
    
    
    
    4,834
    
    
    
    4,900Diluted
    
    
    4,791
    
    
    
    5,107
    
    
    
    5,072
    
    
    
    4,900
 (a)
    
    The Company recorded a non-cash charge of approximately $358,000 (net of a tax benefit of
$153,000) relating to the extension of the exercise date of certain stock options upon the
resignation of an officer/director on January 7, 2005 during the first quarter of 2005.(b)
    
    The Company recorded a non-cash charge of approximately $600,000 (net of a tax benefit
of $386,000) under FAS No. 144 relating to three Company-operated stores during the fourth quarter of 2005.
 F-3




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##### Table of Contents



Managements Discussion and Analysis  of Financial Condition and Results of Operations
 Introduction
   Results of Operations
  For the Years EndedDecember 30,
    
    
    December 31,
    
    
    January 1,2006
    
    
    2005
    
    
    2005RevenuesRestaurant sales
    
    
    83.7
    %
    
    
    84.1
    %
    
    
    86.9
    %Franchise and area development fees
    
    
    1.0
    
    
    
    1.5
    
    
    
    1.5Royalty fees
    
    
    10.7
    
    
    
    10.1
    
    
    
    7.7Advertising fees
    
    
    2.7
    
    
    
    2.6
    
    
    
    2.2Other operating revenue
    
    
    1.9
    
    
    
    1.7
    
    
    
    1.7Total revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs and ExpensesCost of restaurant sales (1)
    
    
    32.1
    %
    
    
    32.3
    %
    
    
    31.7
    %Restaurant operating expenses (1)
    
    
    48.6
    
    
    
    49.0
    
    
    
    47.9General and administrative
    
    
    16.7
    
    
    
    16.6
    
    
    
    13.3Advertising
    
    
    6.4
    
    
    
    6.2
    
    
    
    6.6Depreciation
    
    
    4.9
    
    
    
    5.4
    
    
    
    5.2Other operating income
    
    
    (0.4
    )
    
    
    (0.0
    )
    
    
    (0.2
    )Impairment of long-lived assets
    
    
    0.0
    
    
    
    2.4
    
    
    
    0.0Operating income
    
    
    4.9
    
    
    
    1.0
    
    
    
    5.9Interest income
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.0Interest expense
    
    
    (1.8
    )
    
    
    (1.1
    )
    
    
    (1.2
    )Other, net
    
    
    (0.2
    )
    
    
    (0.3
    )
    
    
    (0.2
    )Income (loss) before taxes
    
    
    3.1
    
    
    
    (0.3
    )
    
    
    4.5Income tax expense (2)
    
    
    36.7
    
    
    
    62.4
    
    
    
    29.3Net (loss) income
    
    
    2.0
    
    
    
    (0.1
    )
    
    
    3.1
 (1)
    
    As a percentage of restaurant sales.
 (2)
    
    As a percentage of income before taxes.
 F-4




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##### Table of Contents



For the Years EndedDecember 30,
    
    
    December 31,
    
    
    January 1,2006
    
    
    2005
    
    
    2005Average annual sales per restaurant open for a full year(1)Company-operated
    
    $
    871,000
    
    
    $
    835,000
    
    
    $
    828,000Franchised
    
    
    892,000
    
    
    
    823,000
    
    
    
    808,000Combined
    
    
    885,000
    
    
    
    827,000
    
    
    
    815,000Number of restaurants(2)Company-operated
    
    
    44
    
    
    
    44
    
    
    
    42Franchised
    
    
    136
    
    
    
    127
    
    
    
    114Total
    
    
    180
    
    
    
    171
    
    
    
    156
 (1)
    
    Includes sales for restaurants open for entire trailing twelve-month period.
Restaurants are included in the calculation after the completion of six months of operations,
as sales during the period immediately after opening tend to be higher due to promotions and
trial by public.
 (2)
    
    As of March 30, 2006, two franchised restaurants have opened since December 30,
2006, one in Florence, AL and one in Branson, MO, and two franchised restaurants closed, one
in Alpharetta, GA and one in Springfield, MO.
 COMPARISON OF FISCAL YEAR 2006 TO FISCAL YEAR 2005
 Restaurant sales
 Franchise and area development fees
 Royalty fees
 Advertising fees
 Other
 F-5




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##### Table of Contents



Cost of restaurant sales
 Restaurant operating expenses,
 General and administrative
 Advertising
 Depreciation
 Other operating income
 Impairment of Long-Lived Assets SFAS No. 144 Accounting for the Impairment or Disposal
of Long-Lived Assets.
 Interest expense
 F-6




---



##### Table of Contents



Other, net
 Income tax expense
 COMPARISON OF FISCAL YEAR 2005 TO FISCAL YEAR 2004
 Restaurant sales
 Franchise and area development fees
 Royalty fees
 Advertising fees
 Other
 Cost of restaurant sales
 Restaurant operating expenses,
 F-7




---



##### Table of Contents



General and administrative
 Advertising
 Depreciation
 Other operating (income)
 Impairment of Long-Lived Assets SFAS No. 144 Accounting for the Impairment or Disposal
of Long-Lived Assets.
 Interest expense
 Other, net
 Income tax benefit
 F-8




---



##### Table of Contents



Impairment of Long-Lived Assets
 Accounting
for the Impairment and Disposal of Long-Lived Assets,
    Liquidity and Capital Resources
     F-9




---



##### Table of Contents



Contractual Commitments
  Less than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 yearsLong-term debt
    
    $
    6,608
    
    
    $
    802
    
    
    $
    658
    
    
    $
    655
    
    
    $
    4,493Interest payments
    
    
    2,271
    
    
    
    392
    
    
    
    692
    
    
    
    615
    
    
    
    572Capital leases
    
    
    4,877
    
    
    
    1,115
    
    
    
    834
    
    
    
    558
    
    
    
    2,370Operating leases (1)
    
    
    4,575
    
    
    
    1,119
    
    
    
    1,626
    
    
    
    1,068
    
    
    
    762Purchase obligations
    
    
    3,337
    
    
    
    1,127
    
    
    
    1,555
    
    
    
    655
    
    
    
    Total contractual obligations
    
    $
    21,668
    
    
    $
    4,555
    
    
    $
    5,365
    
    
    $
    3,551
    
    
    $
    8,197
 (1)
    
    Represents aggregate minimum lease payments. Some of the leases also require
contingent rent in addition to the minimum rent based on a percentage of sales.
 F-10




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##### Table of Contents



Qualitative and Quantitative Disclosure about Market Risk
 Interest Rate Risk
   Commodity Price Risk
  Seasonality and Inflation
  Conversion of Preferred Stock
  Recent Accounting Pronouncements
  F-11




---



##### Table of Contents



Critical Accounting Policies and Estimates
    Revenue Recognition
    Long-Lived Assets
   F-12




---



##### Table of Contents



Deferred Income Taxes
  Leases
   Stock-Based Compensation
 SFAS
No. 123, Accounting for Stock-Based Compensation,
 F-13




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Known Trends and Uncertainties
  F-14




---



##### Table of Contents



F-15




---



##### Table of Contents



BACK YARD BURGERS, INC.
Consolidated Balance Sheets
 December 30,
    
    
    December 31,2006
    
    
    2005ASSETSCash and cash equivalents
    
    $
    5,444
    
    
    $
    3,602Receivables, less allowance for doubtful accounts of
$218 and $153
    
    
    739
    
    
    
    786Inventories
    
    
    257
    
    
    
    281Income taxes receivable
    
    
    265
    
    
    
    268Current deferred tax asset
    
    
    226
    
    
    
    193Prepaid expenses
    
    
    153
    
    
    
    186Total current assets
    
    
    7,084
    
    
    
    5,316Property and equipment, at depreciated cost
    
    
    23,393
    
    
    
    23,035Goodwill
    
    
    1,506
    
    
    
    1,751Noncurrent deferred tax asset
    
    
    763
    
    
    
    871Notes receivable, less allowance of $17
    
    
    73
    
    
    
    73Other assets
    
    
    591
    
    
    
    595Total assets
    
    $
    33,410
    
    
    $
    31,641LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable
    
    $
    1,452
    
    
    $
    1,295Accrued expenses
    
    
    2,692
    
    
    
    1,734Reserve for closed stores
    
    
    
    
    
    
    15Current installments of long-term debt
    
    
    1,645
    
    
    
    966Total current liabilities
    
    
    5,789
    
    
    
    4,010Long-term debt, less current installments
    
    
    8,307
    
    
    
    9,999Deferred franchise and area development fees
    
    
    1,227
    
    
    
    1,441Other deferred income
    
    
    250
    
    
    
    276Other deferred liabilities
    
    
    532
    
    
    
    613Total liabilities
    
    
    16,105
    
    
    
    16,339Commitments and contingencies (Note 9 and Note 17)Stockholders equityPreferred stock, $.01 par value; 2,000,000 shares authorized;
1,836 and 19,269 shares issued and outstanding
    
    
    
    
    
    
    Common stock, $.01 par value; 12,000,000 shares authorized;
5,124,861 and 4,940,151 shares issued and outstanding
    
    
    51
    
    
    
    49Paid-in capital
    
    
    12,632
    
    
    
    11,507Treasury stock, at cost, 25,000 shares
    
    
    (28
    )
    
    
    (28
    )Retained earnings
    
    
    4,650
    
    
    
    3,774Total stockholders equity
    
    
    17,305
    
    
    
    15,302Total liabilities and stockholders equity
    
    $
    33,410
    
    
    $
    31,641
  F-16




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##### Table of Contents



BACK YARD BURGERS, INC.
Consolidated Statements of Operations
 Years EndedDecember 30,
    
    
    December 31,
    
    
    January 1,2006
    
    
    2005
    
    
    2005Revenues:Restaurant sales
    
    $
    37,423
    
    
    $
    34,479
    
    
    $
    34,912Franchise and area development fees
    
    
    427
    
    
    
    629
    
    
    
    620Royalty fees
    
    
    4,792
    
    
    
    4,143
    
    
    
    3,108Advertising fees
    
    
    1,216
    
    
    
    1,061
    
    
    
    866Other
    
    
    852
    
    
    
    689
    
    
    
    677Total revenues
    
    
    44,710
    
    
    
    41,001
    
    
    
    40,183Expenses:Cost of restaurant sales
    
    
    12,006
    
    
    
    11,125
    
    
    
    11,066Restaurant operating expenses
    
    
    18,185
    
    
    
    16,898
    
    
    
    16,726General and administrative
    
    
    7,469
    
    
    
    6,823
    
    
    
    5,349Advertising
    
    
    2,844
    
    
    
    2,547
    
    
    
    2,652Depreciation
    
    
    2,192
    
    
    
    2,206
    
    
    
    2,096Other operating income
    
    
    (162
    )
    
    
    (5
    )
    
    
    (69
    )Impairment of long-lived assets
    
    
    
    
    
    
    986
    
    
    
    Total expenses
    
    
    42,534
    
    
    
    40,580
    
    
    
    37,820Operating income
    
    
    2,176
    
    
    
    421
    
    
    
    2,363Interest income
    
    
    90
    
    
    
    27
    
    
    
    5Interest expense
    
    
    (802
    )
    
    
    (452
    )
    
    
    (479
    )Other, net
    
    
    (80
    )
    
    
    (113
    )
    
    
    (100
    )Income (loss) before income taxes
    
    
    1,384
    
    
    
    (117
    )
    
    
    1,789Income tax expense (benefit)
    
    
    508
    
    
    
    (73
    )
    
    
    525Net income (loss)
    
    $
    876
    
    
    $
    (44
    )
    
    $
    1,264Income (loss) per share:Basic
    
    $
    0.17
    
    
    $
    (0.01
    )
    
    $
    0.26Diluted
    
    $
    0.17
    
    
    $
    (0.01
    )
    
    $
    0.25Weighted average number of common shares and
common equivalent shares outstanding:Basic
    
    
    5,084
    
    
    
    4,833
    
    
    
    4,774Diluted
    
    
    5,206
    
    
    
    4,833
    
    
    
    5,096
  F-17




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##### Table of Contents



BACK YARD BURGERS, INC.
Consolidated Statements of Changes in Stockholders Equity
 Preferred Stock
    
    
    Common Stock
    
    
    Treasury StockPaid-in
    
    
    RetainedShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    TotalBalance at year
ended January 3,
2004
    
    
    19,617
    
    
    $
    
    
    
    
    4,748,948
    
    
    $
    48
    
    
    
    25,000
    
    
    $
    (28
    )
    
    $
    10,504
    
    
    $
    2,554
    
    
    $
    13,078Conversion of
preferred stock
    
    
    (348
    )
    
    
    
    
    
    
    348
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Employee stock
purchases
    
    
    
    
    
    
    
    
    
    
    6,038
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    
    
    
    
    31Exercise of stock
options
    
    
    
    
    
    
    
    
    
    
    35,140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103
    
    
    
    
    
    
    
    103Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,264
    
    
    
    1,264Balance at year
ended January 1,
2005
    
    
    19,269
    
    
    
    
    
    
    
    4,790,474
    
    
    
    48
    
    
    
    25,000
    
    
    
    (28
    )
    
    
    10,638
    
    
    
    3,818
    
    
    
    14,476Employee stock
purchases
    
    
    
    
    
    
    
    
    
    
    4,877
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    24Exercise of stock
options
    
    
    
    
    
    
    
    
    
    
    144,800
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    334
    
    
    
    
    
    
    
    335Stock option
Modification
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    511
    
    
    
    
    
    
    
    511Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44
    )
    
    
    (44
    )Balance at year
ended December 31,
2005
    
    
    19,269
    
    
    
    
    
    
    
    4,940,151
    
    
    
    49
    
    
    
    25,000
    
    
    
    (28
    )
    
    
    11,507
    
    
    
    3,774
    
    
    
    15,302Conversion of
preferred stock
    
    
    (17,433
    )
    
    
    
    
    
    
    17,433
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock
options
    
    
    
    
    
    
    
    
    
    
    162,250
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    624
    
    
    
    
    
    
    
    626Stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    479
    
    
    
    
    
    
    
    479Employee stock
purchases
    
    
    
    
    
    
    
    
    
    
    5,027
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    22Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    876
    
    
    
    876Balance at year
ended December 30,
2006
    
    
    1,836
    
    
    $
    
    
    
    
    5,124,861
    
    
    $
    51
    
    
    
    25,000
    
    
    $
    (28
    )
    
    $
    12,632
    
    
    $
    4,650
    
    
    $
    17,305
  F-18




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##### Table of Contents



BACK YARD BURGERS, INC.
Consolidated Statements of Cash Flows
 Years EndedDecember 30,
    
    
    December 31,
    
    
    January 1,2006
    
    
    2005
    
    
    2005Cash flows from operating activities:Net income
    
    $
    876
    
    
    $
    (44
    )
    
    $
    1,264Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation of property and equipment
    
    
    2,192
    
    
    
    2,206
    
    
    
    2,096Impairment of long-lived assets
    
    
    
    
    
    
    986
    
    
    
    Tax benefit of impairment of long-lived assets
    
    
    
    
    
    
    (386
    )
    
    
    Deferred income taxes
    
    
    75
    
    
    
    80
    
    
    
    (123
    )Modification of stock plan
    
    
    
    
    
    
    511
    
    
    
    Tax benefit of modification of stock plan
    
    
    
    
    
    
    (153
    )
    
    
    Stock based compensation
    
    
    479
    
    
    
    
    
    
    
    Provision for losses on receivables
    
    
    65
    
    
    
    93
    
    
    
    35(Gain) on sale of assets
    
    
    (162
    )
    
    
    (5
    )
    
    
    (68
    )Changes in assets and liabilities:Receivables
    
    
    (18
    )
    
    
    (118
    )
    
    
    10Inventories
    
    
    24
    
    
    
    (22
    )
    
    
    (8
    )Prepaid expenses and other current assets
    
    
    33
    
    
    
    19
    
    
    
    (147
    )Other assets
    
    
    4
    
    
    
    (46
    )
    
    
    (172
    )Accounts payable and accrued expenses
    
    
    820
    
    
    
    595
    
    
    
    (1,038
    )Reserve for closed stores
    
    
    (15
    )
    
    
    15
    
    
    
    (81
    )Income taxes payable/receivable
    
    
    3
    
    
    
    (280
    )
    
    
    (129
    )Other deferred income
    
    
    (26
    )
    
    
    (103
    )
    
    
    (141
    )Other deferred liabilities
    
    
    (81
    )
    
    
    2
    
    
    
    10Deferred franchise and area development fees
    
    
    (214
    )
    
    
    (16
    )
    
    
    257Net cash provided by operating activities
    
    
    4,055
    
    
    
    3,334
    
    
    
    1,765Cash flows from investing activities:Additions to property and equipment
    
    
    (2,806
    )
    
    
    (8,614
    )
    
    
    (2,178
    )Proceeds from sale of property and equipment
    
    
    958
    
    
    
    784
    
    
    
    1,076Proceeds on notes receivable
    
    
    
    
    
    
    
    
    
    
    7Net cash used in investing activities
    
    
    (1,848
    )
    
    
    (7,830
    )
    
    
    (1,095
    )Cash flows from financing activities:Issuance of stock
    
    
    648
    
    
    
    359
    
    
    
    134Principal payments on short-term debt
    
    
    
    
    
    
    (1,950
    )
    
    
    Proceeds from issuance of short-term debt
    
    
    
    
    
    
    1,950
    
    
    
    Principal payments on long-term debt
    
    
    (1,013
    )
    
    
    (781
    )
    
    
    (776
    )Proceeds from issuance of long-term debt
    
    
    
    
    
    
    6,200
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (365
    )
    
    
    5,778
    
    
    
    (642
    )Net increase in cash and cash equivalents
    
    
    1,842
    
    
    
    1,282
    
    
    
    28Cash and cash equivalents:Beginning of year
    
    
    3,602
    
    
    
    2,320
    
    
    
    2,292End of year
    
    $
    5,444
    
    
    $
    3,602
    
    
    $
    2,320Noncash operating and investing activitiesAccrued property and equipment additions
    
    $
    305
    
    
    $
    
    
    
    $
    Property acquired with a capital lease
    
    $
    
    
    
    $
    646
    
    
    $
    Stock option plan (Note 1)
    
    $
    
    
    
    $
    358
    
    
    $
    Supplemental disclosure of cash flow information:Income taxes paid
    
    $
    165
    
    
    $
    666
    
    
    $
    777Interest paid
    
    $
    790
    
    
    $
    444
    
    
    $
    481
  F-19




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##### Table of Contents



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Business Activity.
 Consolidation Policy.
 Fiscal Year.
 Use of Estimates.
 Cash and Cash Equivalents.
 Inventories.
 Property and Equipment.
 Goodwill. Goodwill and Other Intangible Assets
     Other Deferred Income. Accounting by a
Customer (Including a Reseller) for Certain Consideration Received from a Vendor
 F-20




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##### Table of Contents



Income Taxes.
 Franchise and Area Development Fee Income.
  Restaurant Sales.
 Royalty and Advertising Fee Income.
 Allowance for Doubtful Accounts.
 Other Revenue.
 Restaurant Operating Expenses.
 Preopening costs.
 F-21




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##### Table of Contents



Advertising Costs.
 Impairment of Long-Lived Assets. Accounting for the Impairment
and Disposal of Long-Lived Asset
    Leases.
  Preferred Stock.
 Treasury Stock.
 Earnings Per Share. Earnings per Share
 F-22




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##### Table of Contents



Stock-Based Employee Compensation.
 Accounting for Stock Issued to Employees,
 Accounting for Stock-Based Compensation,
 2005
    
    
    2004Net income (loss), as reported
    
    $
    (44
    )
    
    $
    1,264Add: Expense recognized, net of tax
    
    
    358
    
    
    
    Deduct: Total stock-based employee
compensation expense determined under
fair value based methods for all rewards,
net of related taxes
    
    
    (101
    )
    
    
    (263
    )Pro forma
    
    
    213
    
    
    
    1,001Basic (loss) earnings per share:As reported
    
    
    (0.01
    )
    
    
    0.26Pro forma
    
    
    0.04
    
    
    
    0.21Diluted (loss) earnings per share:As reported
    
    
    (0.01
    )
    
    
    0.25Pro forma
    
    
    0.04
    
    
    
    0.20
  2005
    
    
    2004Average expected life (years)
    
    
    5.0
    
    
    
    5.0Average expected volatility
    
    
    53.5
    %
    
    
    63.4
    %Risk-free interest rates
    
    
    4.1
    %
    
    
    3.7
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
  Fair Value of Financial Instruments.
 F-23




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##### Table of Contents



NOTE 2  RECENTLY ISSUED ACCOUNTING STANDARDS
 Considering the Effects
of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements
 Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109 ,
 NOTE 3  HISTORICAL STOCK OPTION PRACTICE REVIEW
    F-24




---



##### Table of Contents




    
    Annual stock option grants
    
    Grants made to rank and file existing employees by the Companys Chief Executive Officer
    
    Grants made to new hires by the Companys Chief Executive Officer
    
    Grants made to the Companys independent directors (other than as part of the Companys
annual option grants)
   
    
    the report prepared by the Audit Committees legal counsel relating to the Companys
historical stock option granting practices;
    
    minutes of meetings of the Companys Board of Directors and Compensation Committee, and
any available related documentation;
    
    personnel files;
    
    payroll records;
    
    reports on Form 4 filed with the SEC;
    
    contemporaneous emails; and
    
    information obtained in interviews with various current and former Company employees and
members of the Board of Directors and Compensation Committee.
    Stock options with favorable exercise prices in certain periods compared to stock prices before or
after grant date
 F-25




---



##### Table of Contents



Inaccurate measurement date for 2002 automatic grants to three independent directors
 th
 Inaccurate measurement dates for two new hires and one independent director
  F-26




---



##### Table of Contents



Additional Inconsistencies Not Requiring Financial Statement Adjustments
   New Board Policy for Stock Options and other Equity Awards
   F-27




---



##### Table of Contents




    
    Name of grantee;
    
    Number of shares of common stock covered by any options or other Equity Awards being
granted to the grantee;
    
    Statement that the grant date is the date of the meeting at which the options are
approved;
    
    Statement that the exercise price of the option or other Equity Award shall be the
closing price of the Companys common stock on the NASDAQ Capital Market (or applicable
successor market) on such date.
   Stock Option Amendment Agreements with Certain Executive Officers
   F-28




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##### Table of Contents



Regulatory Matters
    Costs
of Investigation and Legal Activities
  Adjustment Summary
  Consolidated Balance SheetUnadjusted
    
    
    Adjustments
    
    
    AdjustedDecember 30, 2006Income taxes receivable
    
    $
    202
    
    
    
    63
    
    
    
    265Total current assets
    
    
    7,021
    
    
    
    63
    
    
    
    7,084Non-current deferred tax asset
    
    
    655
    
    
    
    108
    
    
    
    763Total assets
    
    
    33,239
    
    
    
    171
    
    
    
    33,410Accrued expenses
    
    
    2,666
    
    
    
    26
    
    
    
    2,692Total current liabilities
    
    
    5,763
    
    
    
    26
    
    
    
    5,789Total liabilities
    
    
    16,079
    
    
    
    26
    
    
    
    16,105Paid-in capital
    
    
    12,176
    
    
    
    456
    
    
    
    12,632Retained earnings
    
    
    4,961
    
    
    
    (311
    )
    
    
    4,650Total shareholders equity
    
    
    17,160
    
    
    
    145
    
    
    
    17,305Total liabilities and shareholders equity
    
    
    33,239
    
    
    
    171
    
    
    
    33,410
 F-29




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##### Table of Contents



Consolidated Statements of OperationsUnadjusted
    
    
    Adjustments
    
    
    AdjustedFifty-two weeks ended December 30, 2006General and administrative
    
    
    7,040
    
    
    
    429
    
    
    
    7,469Total expenses
    
    
    42,105
    
    
    
    429
    
    
    
    42,534Operating income
    
    
    2,605
    
    
    
    (429
    )
    
    
    2,176Income before income taxes
    
    
    1,813
    
    
    
    (429
    )
    
    
    1,384Income tax expense
    
    
    626
    
    
    
    (118
    )
    
    
    508Net income
    
    
    1,187
    
    
    
    (311
    )
    
    
    876Net income per common shares  basic
    
    
    0.23
    
    
    
    (0.06
    )
    
    
    0.17Net income per common shares  diluted
    
    
    0.23
    
    
    
    (0.06
    )
    
    
    0.17
 Consolidated Statement of Cash FlowsUnadjusted
    
    
    Adjustments
    
    
    AdjustedFifty-two weeks ended December 30, 2006Net cash provided by operating activities
    
    
    4,307
    
    
    
    (53
    )
    
    
    4,360Net cash provided by financing activities
    
    
    (418
    )
    
    
    53
    
    
    
    (365
    )
 NOTE 4  ACCOUNTS RECEIVABLE
  December 30,
    
    
    December 30,2006
    
    
    2005Corporate receivables
    
    $
    558
    
    
    $
    442National Advertising Fund receivables
    
    
    116
    
    
    
    113Credit card receivables
    
    
    96
    
    
    
    162Rebate receivables
    
    
    117
    
    
    
    123Other
    
    
    70
    
    
    
    99957
    
    
    
    939Allowance for doubtful accounts
    
    
    (218
    )
    
    
    (153
    )$
    739
    
    
    $
    786
 NOTE 5  PROPERTY AND EQUIPMENT
  December 30,
    
    
    December 31,2006
    
    
    2005Land
    
    $
    7,444
    
    
    $
    7,560Buildings
    
    
    14,573
    
    
    
    13,052Building and site improvements
    
    
    2,931
    
    
    
    2,965Fixtures and equipment
    
    
    13,130
    
    
    
    13,182Transportation vehicles
    
    
    266
    
    
    
    22438,344
    
    
    
    36,983Accumulated depreciation and amortization
    
    
    (14,951
    )
    
    
    (13,948
    )$
    23,393
    
    
    $
    23,035
  F-30




---



##### Table of Contents



NOTE 6  INVESTMENT IN JOINT VENTURES
 
 NOTE 7  ACCRUED EXPENSES
  December 30,
    
    
    December 31,2006
    
    
    2005Payroll related
    
    $
    909
    
    
    $
    652Sales taxes
    
    
    316
    
    
    
    295Property taxes
    
    
    230
    
    
    
    184Interest
    
    
    86
    
    
    
    45Utilities
    
    
    101
    
    
    
    109Professional fees
    
    
    383
    
    
    
    47Construction in progress
    
    
    305
    
    
    
    Other miscellaneous accruals
    
    
    362
    
    
    
    402$
    2,692
    
    
    $
    1,734
 NOTE 8  DEFERRED FRANCHISE AND AREA DEVELOPMENT FEES
  2006
    
    $
    1012005
    
    
    208Previous years
    
    
    918$
    1,227
 F-31




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##### Table of Contents



NOTE 9  INDEBTEDNESS
  December 30,
    
    
    December 31,2006
    
    
    2005Notes payable, payable in monthly
installments ranging from $47 to $52,
including interest ranging from 5.2% to
7.75%
    
    $
    6,608
    
    
    $
    7,364Capital lease obligations for leased
buildings, payable in monthly installments
of approximately $5, and effective interest
rates ranging from 8.7% to 10.7%
    
    
    3,246
    
    
    
    3,353Equipment-related capital lease obligation,
payable in monthly installment of
approximately $5, and effective interest
rate of 7.9%
    
    
    46
    
    
    
    106Capital lease obligations to Lesters Back
Yard Burgers Joint Venture I, II and IV
(See Note 6), payable in monthly
installments ranging from $4 to $7 and
effective interest rates ranging from 12.0%
to 12.5%
    
    
    1,585
    
    
    
    1,84611,485
    
    
    
    12,669Less interest payments for capital leases
    
    
    (1,533
    )
    
    
    (1,704
    )Less current installments
    
    
    (1,645
    )
    
    
    (966
    )Total
    
    $
    8,307
    
    
    $
    9,999
      F-32




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##### Table of Contents













NOTE 10  OPERATING LEASES




2007
    
    $
    1,1192008
    
    
    9292009
    
    
    6972010
    
    
    6402011
    
    
    428Thereafter
    
    
    762$
    4,575




F-33



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##### Table of Contents



NOTE 11  RELATED PARTY TRANSACTIONS
  NOTE 12  INCOME TAXES
  2006
    
    
    2005
    
    
    2004Federal, current
    
    $
    434
    
    
    $
    395
    
    
    $
    638State, current
    
    
    
    
    
    
    (9
    )
    
    
    10Federal, deferred
    
    
    78
    
    
    
    (504
    )
    
    
    (131
    )State, deferred
    
    
    (4
    )
    
    
    45
    
    
    
    8$
    508
    
    
    $
    (73
    )
    
    $
    525
   December 30,
    
    
    December 31,2006
    
    
    2005CurrentCurrent deferred tax assets:Allowance for doubtful receivable
    
    $
    85
    
    
    $
    60Accrued expenses
    
    
    141
    
    
    
    133Net current deferred tax asset
    
    $
    226
    
    
    $
    193NoncurrentNoncurrent deferred tax assets:Franchise and area development fees
    
    $
    480
    
    
    $
    563Net operating loss carryforwards
    
    
    694
    
    
    
    547Trademark amortization
    
    
    22
    
    
    
    24Goodwill amortization
    
    
    (172
    )
    
    
    (105
    )Stock based compensation
    
    
    75
    
    
    
    Other deferred income
    
    
    292
    
    
    
    335Impaired asset write-off
    
    
    144
    
    
    
    266Other
    
    
    57
    
    
    
    83Gross noncurrent deferred tax assets
    
    
    1,592
    
    
    
    1,713Noncurrent deferred tax liabilities:Depreciation
    
    
    (48
    )
    
    
    (198
    )Gross noncurrent deferred tax liabilities
    
    
    (48
    )
    
    
    (198
    )Net noncurrent deferred tax assets
    
    
    1,544
    
    
    
    1,515Deferred tax asset valuation allowance
    
    
    (781
    )
    
    
    (644
    )$
    763
    
    
    $
    871
 F-34
    Table of Contents    2006
    
    
    2005
    
    
    2004Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Computed tax at 35%
statutory rate
    
    $
    484
    
    
    
    35.0
    
    
    $
    (41
    )
    
    
    35.0
    
    
    $
    626
    
    
    
    35.0State income taxes, net of
federal benefit
    
    
    (4
    )
    
    
    (0.3
    )
    
    
    35
    
    
    
    (29.9
    )
    
    
    7
    
    
    
    0.4Stock option expense
    
    
    26
    
    
    
    1.9
    
    
    
    74
    
    
    
    (63.4
    )
    
    
    
    
    
    
    Work opportunity tax credit
    
    
    (49
    )
    
    
    (3.5
    )
    
    
    (100
    )
    
    
    85.5
    
    
    
    (100
    )
    
    
    (5.6
    )Valuation allowance releases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28
    )
    
    
    (1.6
    )Other
    
    
    51
    
    
    
    3.6
    
    
    
    (41
    )
    
    
    35.2
    
    
    
    20
    
    
    
    1.1$
    508
    
    
    
    36.7
    
    
    $
    (73
    )
    
    
    62.4
    
    
    $
    525
    
    
    
    29.3
  NOTE 13  NATIONAL ADVERTISING FUND
  NOTE 14  STOCK OPTION AND BENEFIT PLANS
     F-35




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##### Table of Contents



2006
    
    
    2005
    
    
    2004Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding at
beginning of year
    
    
    559,846
    
    
    $
    3.77
    
    
    
    629,576
    
    
    $
    3.29
    
    
    
    659,051
    
    
    $
    3.24Granted
    
    
    
    
    
    
    
    
    
    
    93,500
    
    
    
    5.00
    
    
    
    7,000
    
    
    
    7.90Exercised
    
    
    (162,250
    )
    
    
    2.22
    
    
    
    (144,800
    )
    
    
    2.31
    
    
    
    (35,140
    )
    
    
    2.93Canceled
    
    
    (46,220
    )
    
    
    5.77
    
    
    
    (18,430
    )
    
    
    5.41
    
    
    
    (1,335
    )
    
    
    3.07Outstanding at end of year
    
    
    351,376
    
    
    
    4.23
    
    
    
    559,846
    
    
    
    3.77
    
    
    
    629,576
    
    
    
    3.29Exercisable at end of year
    
    
    332,896
    
    
    
    4.19
    
    
    
    464,036
    
    
    
    3.51
    
    
    
    599,216
    
    
    
    3.13
  Weighted
    
    
    
    
    
    
    
    
    
    Weightedaverage
    
    Weighted
    
    
    
    
    
    Average
    
    WeightedRange of
    
    
    
    
    
    remaining
    
    average
    
    
    
    
    
    remaining
    
    Averageexercise
    
    Options
    
    contractual
    
    exercise
    
    Options
    
    contractual
    
    Exerciseprices
    
    Outstanding
    
    life
    
    price
    
    exercisable
    
    Life
    
    Price$0.50 - $1.00
    
    
    25,000
    
    
    
    4.0
    
    
    $
    0.72
    
    
    
    25,000
    
    
    
    4.0
    
    
    $
    0.72$1.00 - $3.00
    
    
    75,776
    
    
    
    3.1
    
    
    
    1.44
    
    
    
    75,776
    
    
    
    3.1
    
    
    
    1.44$3.00 - $5.00
    
    
    93,600
    
    
    
    5.5
    
    
    
    4.05
    
    
    
    93,600
    
    
    
    5.5
    
    
    
    4.05$5.00 - $7.00
    
    
    130,000
    
    
    
    7.9
    
    
    
    5.51
    
    
    
    111,520
    
    
    
    7.8
    
    
    
    5.60$7.00 -$12.00
    
    
    27,000
    
    
    
    5.9
    
    
    
    9.74
    
    
    
    27,000
    
    
    
    5.9
    
    
    
    9.74$0.50 -$12.00
    
    
    351,376
    
    
    
    5.8
    
    
    $
    4.23
    
    
    
    332,896
    
    
    
    5.7
    
    
    $
    4.19
  F-36




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##### Table of Contents



NOTE 15- EARNINGS PER SHARE
  2006
    
    
    2005
    
    
    2004Per-Share
    
    
    
    
    
    
    
    
    
    
    Per-Share
    
    
    
    
    
    
    
    
    
    
    Per-ShareIncome
    
    
    Shares
    
    
    Amount
    
    
    (Loss)
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    AmountBasic EPSIncome available to
common stockholders
    
    $
    876
    
    
    
    5,084
    
    
    $
    0.17
    
    
    $
    (44
    )
    
    
    4,833
    
    
    $
    (0.01
    )
    
    $
    1,264
    
    
    
    4,774
    
    
    $
    0.26Effect of Dilutive
SecuritiesConvertible preferred
stock
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20Stock options
    
    
    
    
    
    
    108
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    302Diluted EPSIncome available to
common stockholders
plus assumed
conversions
    
    $
    876
    
    
    
    5,206
    
    
    $
    0.17
    
    
    $
    (44
    )
    
    
    4,833
    
    
    $
    (0.01
    )
    
    $
    1,264
    
    
    
    5,096
    
    
    $
    0.25
  NOTE 16  SUBSEQUENT EVENTS
  NOTE 17- COMMITMENTS AND CONTINGENCIES
 Concentration of Risk.
 Legal Proceedings.
 Employment Agreements.
  F-37




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
   ,
   F-38




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 To the Board of Directors and Stockholders of Back Yard Burgers, Inc.
  
 F-39