UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

	For the quarterly period ended: ~~March 29, 2020~~July 4, 2021

or

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

	For the transition period from ________ to

_________

Commission File Number: ~~333-23323~~333-233233

BT BRANDS, INC.

(Exact name of registrant as specified in its charter)

~~(Exact name of registrant as specified in its charter)~~

Delaware	~~81-4744185~~90-1495764
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

405 Main Avenue West, Suite 2D, West Fargo, ND	58078
(Address of principal executive offices)	(Zip Code)	~~(Zip Code)~~

(701) 277-0080
(Registrant’s telephone number, including area code)

NONE
(Former name former address and former fiscal year if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
~~Securities registered pursuant to Section 12(b) of the Act:~~

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
common stock, $0.001 per share

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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging ~~Growth Company~~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 Exchange Act). ☐ Yes ☒ No

At ~~May 12, 2020,~~August 16, 2021, there were ~~8,095,004~~4,047,502 shares of common stock outstanding.

~~CAUTIONIONARY~~CAUTIONARY STATEMENT REGARDING RISKS

AND UNCERTAINTIES THAT MAY AFFECT FUTURE RESULTS

Forward-Looking Information

This quarterly report contains forward-looking statements about the business, financial condition and prospects of BT Brands, Inc. and its wholly owned subsidiaries (together, the “Company”). Forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, can be identified by the use of forward-looking terminology such as “believes,” “projects,” “expects,” “may,” “estimates,” “should,” “plans,” “targets,” “intends,” “could,” “would,” “anticipates,” “potential,” “confident,” “optimistic” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, guidance, expectations and future plans. Forward-looking statements can also be identified by the fact these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties.

While the Company believes the expectations reflected in forward-looking statements are reasonable, there can be no assurances such expectations will prove to be accurate. Security holders are cautioned such forward-looking statements involve risks and uncertainties. Certain factors may cause results to differ materially from those anticipated by the forward-looking statements made in this quarterly report. Such factors may include, without limitation, the risks, uncertainties and regulatory developments (1) related to the COVID-19 pandemic, which include risks and uncertainties related to the current unknown duration of the COVID-19 pandemic, the impact of governmental regulations that have been, and may in the future be, imposed in response to the pandemic including regulations which could adversely affect the Company’s ability to continue to operate as an “essential business,” potential changes in consumer behavior and dining patterns, which could impact patronage at the Company’s restaurants, the potential effects of government stimulus packages, the deterioration in the economic conditions in the United States, which potentially could have an impact on discretionary consumer spending and (2) those discussed and described in the Company’s ~~2019~~2020 annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on ~~April 15, 2020.~~March 11, 2021. Many of these risks and uncertainties are beyond the ability of the Company to control, nor can the Company predict, in many cases, all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. The forward-looking statements contained in this quarterly report speak only as of the date of this quarterly report, and the Company expressly disclaims any obligation or undertaking to report any updates or revisions to any such statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which any such statement is based, except as required by law.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION		4

ITEM 1.	FINANCIAL STATEMENTS (unaudited)		4
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION		14 13
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK		19 24
ITEM 4.	CONTROLS AND PROCEDURES.		19 24

PART II—OTHER INFORMATION			20

ITEM 1.	LEGAL PROCEEDINGS		20 25
ITEM 1A.	RISK FACTORS		20 25
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		20 25
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		20 25
ITEM 4.	MINE SAFETY DISCLOSURES		20 25
ITEM 5.	OTHER INFORMATION		20 25
ITEM 6.	EXHIBITS.		20
			26
	SIGNATURES			21	27

~~Table of Contents~~

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

~~BT BRANDS, INC. AND SUBSIDIARY~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)~~

March 29,
2020

December 29,
2019

ASSETS

CURRENT ASSETS

Cash

$ 310,134

$ 258,101

Receivables

5,782

15,363

Inventory

52,973

56,432

Prepaid expenses

5,297

6,929

Total current assets

374,186

336,825

PROPERTY AND EQUIPMENT, net

1,605,617

1,650,012

LAND AND BUILDINGS HELD FOR SALE

449,244

449,244

INVESTMENT IN NOTES RECEIVABLE FROM RELATED COMPANY

207,000

179,000

OTHER ASSETS, net

18,034

18,459

Total assets

$ 2,654,081

$ 2,633,539

LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES

Current maturities of long-term debt

$ 243,784

$ 277,666

Accounts payable

483,622

321,855

Accrued expenses

179,083

202,732

Income taxes payable

2,898

2,898

Total current liabilities

909,387

805,151

LONG-TERM DEBT, less current maturities

3,254,808

3,221,035

UNEARNED VENDOR REBATE

2,445

3,668

Total liabilities

4,166,640

4,029,854

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' DEFICIT

Preferred stock, $.001 par value, 500,000 shares authorized, no shares outstanding at March 29, 2020 and December 29, 2019

-

-

Common stock, $.001 par value, 50,000,000 authorized, 8,095,004 shares outstanding at March 29, 2020 and December 29, 2019

8,095

8,095

Additional paid-in capital

497,671

497,671

Accumulated deficit

(2,018,325 )

(1,902,081 )

Total shareholders' deficit

(1,512,559 )

(1,396,315 )

Total liabilities and shareholders' deficit

$ 2,654,081

$ 2,633,539

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

~~Table of Contents~~

~~BT BRANDS, INC. AND SUBSIDIARY~~

~~CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)~~

13 Weeks Ended,

March 29,
2020

March 31,
2019

SALES

$ 1,303,430

$ 1,377,833

COSTS AND EXPENSES

     Restaurant operating expenses

           Food and paper costs

540,100

560,271

           Labor costs

483,309

486,245

           Occupancy costs

162,588

207,603

           Other operating expenses

86,174

64,612

     Depreciation

44,395

58,810

     Amortization

425

425

     General and administrative

66,216

127,784

           Total costs and expenses

1,383,207

1,505,750

           Income (loss) from operations

(79,777 )

(129,177 )
INTEREST EXPENSE

(36,467 )

(42,573 )
INCOME (LOSS) BEFORE TAXES

(116,244 )

(170,490 )
PROVISION FOR INCOME TAXES

-

-

NET LOSS

$ (116,244 )

$ (170,490 )
LOSS PER COMMON SHARE - Basic and Diluted

$ (0.01 )

$ (0.02 )
WEIGHTED AVERAGE SHARES USED IN

     COMPUTING PER COMMON SHARE AMOUNTS - Basic and Diluted

8,095,004

8,086,004

~~See Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Table of Contents~~

BT BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENTS OF SHAREHOLDERS' DEFICIT (Unaudited)~~BALANCE SHEETS

Common Stock

Additional

Accumulated

Shares

Amount

Paid-in Capital

(Deficit)

Total

Balances, December 30, 2018

8,086,004

$ 8,086

$ 484,180

$ (1,533,504 )

$ (1,041,238 )

Net (loss)

-

-

-

(170,490 )

(170,490 )

Balances, March 31, 2019

8,086,004

$ 8,086

$ 484,180

$ (1,703,994 )

$ (1,211,728 )

Common Stock

Additional

Accumulated

Shares

Amount

Paid-in Capital

(Deficit)

Total

Balances, December 29, 2019

8,095,004

$ 8,095

$ 497,671

$ (1,902,081 )

$ (1,396,315 )

Net (loss)

-

-

-

(116,244 )

(116,244 )

Balances, March 29, 2020

8,095,004

$ 8,095

$ 497,671

$ (2,018,325 )

$ (1,512,559 )

	July 4, 2021			January 3, 2021
ASSETS	(Unaudited)
CURRENT ASSETS
Cash	$	1,720,917		$	1,321,244
Receivables		31,751			19,030
Inventory		70,489			60,576
Prepaid expenses and other current assets		20,429			5,348

Total current assets		1,843,586			1,406,198

PROPERTY AND EQUIPMENT, net		1,587,200			1,632,457
LAND AND BUILDINGS HELD FOR SALE		258,751			258,751
INVESTMENT IN RELATED COMPANY		75,000			75,000
OTHER ASSETS, net		15,625			16,759

Total assets	$	3,780,162		$	3,389,165

LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Current maturities of long-term debt	$	174,350		$	245,306
Accounts payable		398,301			270,487
Accrued expenses		259,660			420,734
Income taxes payable		112,972			97,978

Total current liabilities		945,283			1,034,505

LONG-TERM DEBT, less current maturities		3,043,762			2,938,983
DEFERRED INCOME TAXES		146,000			118,000
Total liabilities		4,135,045			4,091,488

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' DEFICIT
Preferred stock, $.001 par value, 2,000,000 shares authorized, no shares outstanding at July 4, 2021 and January 3, 2021		0			0
Common stock, $.002 par value, 50,000,000 authorized, 4,047,502 shares outstanding at July 4, 2021 and January 3, 2021		8,095			8,095
Additional paid-in capital		497,671			497,671
Accumulated deficit		(860,649	)		(1,208,089	)

Total shareholders' deficit		(354,883	)		(702,323	)

Total liabilities and shareholders' deficit	$	3,780,162		$	3,389,165

See Notes to Condensed Consolidated Financial Statements ~~(Unaudited)~~

Table of Contents

BT BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

~~Table of Contents~~

(Unaudited)

~~BT BRANDS, INC. AND SUBSIDIARY~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

13 Weeks Ended

13 Weeks Ended

March 29, 2020

March 31, 2019

CASH FLOWS FROM OPERATING ACTIVITIES

     Net Income (loss)

$ (116,244 )

$ (170,490 )
     Adjustments to reconcile net loss to net cash provided by (used in) operating activities-

          Depreciation

44,395

58,810

          Amortization of franchise agreement

425

425

          Amortization of debt issuance cost

1,295

1,277

          Changes in operating assets and liabilities

                Receivables

9,581

7,199

                Inventory

3,459

4,367

                Prepaid expenses

1,632

125

                Accounts payable

161,767

104,380

                Unearned vendor rebate

(1,223 )

(815 )
                Accrued expenses

(23,649 )

(30,918 )
          Net cash provided by (used in) operating activities

81,438

(25,640 )
CASH FLOWS FROM INVESTING ACTIVITIES

     Investment in notes receivable from related entity

(28,000 )

-

          Net cash used in investing activities

(28,000 )

-

CASH FLOWS FROM FINANCING ACTIVITIES

     Proceeds from long-term debt

50,000

-

     Principal payments on long-term debt

(51,405 )

(63,293 )
          Net cash used in financing activities

(1,405 )

(63,293 )

CHANGE IN CASH

52,033

(88,933 )

CASH, BEGINNING OF PERIOD

258,101

663,511

-

CASH, END OF PERIOD

$ 310,134

$ 574,578

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

     Cash paid for interest

$ 35,172

$ 41,296

	26 Weeks Ended,						13 Weeks Ended,
	July 4, 2021			June 28, 2020			July 4, 2021			June 28, 2020

SALES	$	4,323,555		$	3,699,768		$	2,382,683		$	2,396,338

COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		1,636,053			1,435,992			908,760			895,892
Labor costs		1,186,719			1,094,007			621,227			610,698
Occupancy costs		303,654			334,033			167,106			171,445
Other operating expenses		252,081			191,274			128,872			105,100	��
Depreciation and amortization		113,394			90,920			58,558			46,100
Impairment of assets held for sale		0			100,000			0			100,000
General and administrative		220,982			183,163			115,644			116,947

Total costs and expenses		3,712,883			3,429,389			2,000,167			2,046,182

Income from operations		610,672			270,379			382,516			350,156

INTEREST EXPENSE		(128,232	)		(91,159	)		(89,661	)		(54,692	)
INTEREST INCOME		0			64,200			0			64,200
OTHER INCOME		0			466,758			0			466,758

INCOME BEFORE TAXES		482,440			710,178			297,516			826,422

PROVISION FOR INCOME TAXES		(135,000	)		(149,000	)		(85,000	)		(149,000	)

NET INCOME	$	347,440		$	561,178		$	212,516		$	677,422

NET INCOME PER COMMON SHARE -
Basic and Diluted	$	0.09		$	0.14		$	0.05		$	0.17

WEIGHTED AVERAGE NUMBER OF SHARES USED IN
COMPUTING PER COMMON SHARE AMOUNTS -
Basic and Diluted		4,047,502			4,047,502			4,047,502			4,047,502

See Notes to Condensed Consolidated Financial Statements ~~(Unaudited)~~

Table of Contents

BT BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

~~Table of Contents~~

(Unaudited)

			Common		Additional
For the 26-week periods -	Shares		Stock Amount		Paid-in Capital		Accumulated (Deficit)			Total

Balances, January 3, 2021		4,047,502	$	8,095	$	497,671	$	(1,208,089	)	$	(702,323	)

Net income		-		0		0		347,440			347,440

Balances, July 4, 2021		4,047,502	$	8,095	$	497,671	$	(860,649	)	$	(354,883	)

			Common		Additional
	Shares		Stock Amount		Paid-in Capital		Accumulated (Deficit)			Total

Balances, December 29, 2019		4,047,502	$	8,095	$	497,671	$	(1,902,081	)	$	(1,396,315	)

Net income		-		0		0		561,178			561,178

Balances, June 28, 2020		4,047,502	$	8,095	$	497,671	$	(1,340,903	)	$	(835,137	)

			Common		Additional
For the 13-week periods -	Shares		Stock Amount		Paid-in Capital		Accumulated (Deficit)			Total

Balances, April 4, 2021		4,047,502	$	8,095	$	497,671	$	(1,073,165	)	$	(567,399	)

Net income		-		0		0		212,516			212,516

Balances, July 4, 2021		4,047,502	$	8,095	$	497,671	$	(860,649	)	$	(354,883	)

			Common		Additional
	Shares		Stock Amount		Paid-in Capital		Accumulated (Deficit)			Total

Balances, March 29, 2020		4,047,502	$	8,095	$	497,671	$	(2,018,325	)	$	(1,512,559	)

Net income		-		0		0		677,422			677,422

Balances, June 28, 2020		4,047,502	$	8,095	$	497,671	$	(1,340,903	)	$	(835,137	)

See Notes to Condensed Consolidated Financial Statements

Table of Contents

BT BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	26 Weeks Ended			26 Weeks Ended
	July 4, 2021			June 28, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	347,440		$	561,178
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization		113,394			90,920
Amortization of debt issuance costs included in interest expense		54,205			2,568
Deferred taxes		28,000			(11,788	)
Noncash interest income		0			(64,200	)
Payment on in-kind interest		0			39,368
Impairment of assets held for sale		0			100,000
Changes in operating assets and liabilities -
Receivables		(12,721	)		(3,511	)
Inventory		(9,913	)		(544	)
Prepaid expenses and other current assets		(5,888	)		3,967
Accounts payable		127,814			(41,013	)
Unearned vendor rebate		0			(2,446	)
Accrued expenses		(161,074	)		47,400
Income taxes payable		14,994			154,701
Net cash provided by operating activities		496,251			876,600

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(67,003	)		(16,393	)
Net cash used in investing activities		(67,003	)		(16,393	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt		3,107,100			77,500
Principal payments on long-term debt		(3,077,784	)		(104,656	)
Payment of debt issuance costs		(49,699	)		0
Payment of deferred offering costs		(9,192	)		0
Net cash used in financing activities		(29,575	)		(27,156	)

CHANGE IN CASH		399,673			833,051

CASH, BEGINNING OF PERIOD		1,321,244			258,101
					-
CASH, END OF PERIOD	$	1,720,917		$	1,091,152

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	$	68,700		$	49,204
Cash paid for income taxes	$	92,006		$	0

See Notes to Condensed Consolidated Financial Statements

Table of Contents

BT BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of BT Brands, Inc., and its ~~subsidiaries.~~subsidiaries (the “Company”, “we”, “our”, “us”, or “BT Brands”) and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. All intercompany accounts and transactions have been eliminated in ~~consolidation. These interim condensed consolidated financial statements~~consolidation and have been prepared ~~in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and~~ on a basis consistent in all material respects with the accounting policies for the fiscal year ended ~~December 29, 2019.~~January 3, 2021. In our opinion, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of our financial position and results of operation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.

The accompanying Condensed Consolidated Balance Sheet as of ~~March 29, 2020~~July 4, 2021, does not include all of the disclosures required by GAAP. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of ~~December 29, 2019~~January 3, 2021, and the related notes thereto included in the Company’s Form 10-K for the fiscal year ended ~~December 29, 2019.~~January 3, 2021.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those ~~estimates.~~estimates, and the differences could be material.

~~Reverse Merger Transaction~~The Company

BT Brands, Inc. (the “Company”) was incorporated as Hartmax of NY Inc. on January 19, 2016, with the objective of acquiring an operating entity. Effective on July 30, 2018, the Company acquired 100% of the ownership BTND, LLC. in exchange for common stock in the Company through a Share Exchange Agreement (“Share Exchange”) with members of BTND, LLC (“BTND”)~~, and its Members. Following the Share Exchange, BTND became a wholly owned subsidiary of the Company for reporting purposes under GAAP.~~.

Business

The Company currently operates company-owned fast-food restaurants called Burger Time. The Company also operates one unit in Minnesota as a franchisee of International Dairy Queen. The Company operates three Burger Time locations in Minnesota, four in North Dakota, and two in South Dakota. The Company closed a store in Richmond, Indiana during ~~the year,~~2018 which is listed for ~~sale, resulting in~~sale. There were a total of ten operating restaurants ~~at March 29, 2020. The Company owns a restaurant property in St. Louis, Missouri currently held for sale.~~on July 4, 2021.

The Company’s Dairy Queen store is operated pursuant to the terms of a franchise agreement with International Dairy Queen. The Company is required to pay regular royalty and advertising payments to the franchisor and to remain in compliance with the terms of the franchise agreement.

Fiscal Year Period

The Company’s fiscal year is a 52/53-week year, ending on the Sunday closest to December 31. Most years consist of four 13-week accounting periods comprising the 52-week year. All references to years in this report refer to the ~~13-week~~26-week periods in the respective fiscal year periods. Fiscal ~~2020~~2021 is a ~~53-week~~52-week year ending January ~~3, 2021.~~2, 2022.

Table of Contents

~~Table of Contents~~

Cash

For purposes of reporting cash and cash flows, cash is net of outstanding checks and includes, amounts on deposit at banks ~~a money market mutual fund holding,~~ and deposits in transit.

Receivables

Receivables ~~consists~~consist mainly of rebates due from a primary vendor.

Inventory

Inventory consists of food, beverages and supplies and is stated at lower of cost (first-in, first-out method) or net realizable value.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives which range from three to thirty years.

The Company reviews long-lived assets to determine if the carrying value of these assets may not be recoverable based on estimated cash flows. Assets are reviewed at the lowest level for which cash flows can be identified, which is at the restaurant level. In determining future cash flows, significant estimates are made by the Company with respect to future operating results of each restaurant over its remaining life. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets.

Assets Held for Sale

From time-to-time the Company may sell an existing operating unit or may close an operating unit and list the property for sale. A property in the St. Louis area ~~is currently listed~~was written-off in 2020 and certain signage originally purchased for ~~sale. Also,~~use in that location has been used in other locations In September of 2018 the Company closed an operating Burger Time unit in Richmond, Indiana and the Richmond property is listed for sale. In the second quarter of fiscal 2019 it was concluded to record a charge of $93,488 for impairment of the value of the Richmond ~~location.~~location and in the second quarter of 2020 an additional $100,000 impairment charge was recorded. The Company believes the Richmond property will be sold at or above its current carrying cost of assets held for sale.

Income Taxes

We ~~account~~provide for income taxes under (Accounting Standards Codification (ASC), 740), Accounting for Income Taxes. ASC 740 using an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the ~~liability method, whereby deferred~~differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. The deferred tax assets are reviewed periodically for recoverability and valuation allowances are adjusted, as necessary. As of July 4, 2021, the Company estimates a current tax provision for federal and state income taxes at the combined statutory rate of approximately 27.5%

The Company currently has a net operating loss carry-forward from the prior year and incurred additional net operating losses during the periods ended March 29, 2020 and March 31, 2019. These losses resulted in an increase in the related deferred tax assets; however, full valuation allowances were made which reduced these deferred tax assetsno accrued interest or penalties relating to ~~zero; therefore, no~~any income tax ~~provision~~obligations. The Company currently has no federal or ~~benefit was recognized~~state examinations in progress, nor has it had any federal or state tax examinations since its inception and all periods since inception remain open for ~~the periods ending March 29, 2020 and March 31, 2019 resulting in an effective income tax rate of 0% for both periods.~~examination.

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Per Common Share Amounts

Net income ~~(loss)~~ per common share is computed pursuant to section 260-10-45 of the FASB ~~Accounting Standards Codification.~~ASC. Basic net income ~~or (loss)~~ per share is computed by dividing net income ~~or loss~~ by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. Common stock equivalents are excluded from the computation of diluted net ~~loss per share because~~income if their effect would be anti-dilutive. There were no potentially dilutive shares outstanding as of the periods ending in ~~2020~~2021 and ~~2019,~~2020, as the strike price for warrants outstanding was above the fair market price of the underlying stock in both periods.

Other Assets

Other assets ~~principally is~~are the allocated fair value of the acquired Dairy Queen franchise agreement related to the Company’s location in Ham Lake, Minnesota, ~~and~~which is being amortized over an estimated useful life of 14 years.

Liquidity and Capital Resources

~~The consolidated financial statements have been prepared on a going concern basis.~~ For the 1326 weeks ended ~~March 29, 2020,~~July 4, 2021, the Company ~~incurred a net loss~~earned an after-tax profit of ~~$116,244. On March 29, 2020,~~$347,440. At July 4, 2021, the Company had ~~$310,134~~$1,720,917 in cash and a working capital ~~deficit~~ of ~~$535,201~~$898,303 an increase of ~~$66,875~~$526,610 from the ~~year-end deficit of $468,326. On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (‘Covid-19”) a global pandemic.~~ year-end.

Covid-19 ~~is having~~and its various variants are expected to continue to have a significant adverse impact on the United States economy. ~~At this time, it~~It is ~~impossible~~difficult to predict either ~~the near-term effects or~~ the ultimate impact of the ~~Covid-19 pandemic~~virus and governmental responses on the Company’s operating results and financial ~~condition as the situation is rapidly evolving.~~condition.

~~A cash flow forecast for~~In June 2021, the ~~next 12 months prepared by management has been adjusted~~Company completed a refinancing of substantially all of its property mortgages lowering the nominal mortgage rate to ~~reflect recent offers by banks, in the wake~~a 10-year fixed rate of ~~the COVID-19 Pandemic, including the Company’s principal lenders, Northview Bank and Bremer Bank, to abate all loan payments for the period~~3.45% from ~~March through May of 2020.~~4.75%. In May 2020, the Company received pandemic-related loans oftotaling $487,900 of that amount, $460,400 was borrowed under the Small Business ~~Administration~~Administration’s Payroll Protection Program under the terms of the program, the loans were forgiven in 2020, and ~~assuming certain conditions are met, these loans may be forgiven.~~the amount of the loan forgiveness was accounted for as a “grant” and is in included in other income for the six-month ended June 28, 2020. In May 2020, the Company also borrowed $27,500 at no interest under the Minnesota Small Business Emergency Loan Program. ~~The Company expects~~Under certain conditions related to ~~have sufficient cash assets~~continues employment at the Company’s Dairy Queen location the remaining balance of this note may be converted to ~~meet its obligations for~~ a year from the issuance of these consolidated financial statements. No adjustments have been made relating to recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company not continue as a going concern.Grant.

NOTE 2 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following ~~at end of the respective fiscal years:~~at:

03/29/2020

12/29/2019

Land

$ 555,885

$ 555,885

Equipment

2,390,545

2,390,545

Buildings

1,363,642

1,363,642

Total property and equipment

4,310,072

4,310,072

Accumulated depreciation

(2,255,211 )

(2,210,816 )
Less - Property held for sale

(449,244 )

(449,244 )
Net property and equipment

$ 1,605,617

$ 1,650,012

	July 4, 2021			January 3, 2021
Land	$	485,239		$	485,239
Equipment		2,555,874			2,497,576
Buildings		1,313,669			1,306,896

Total property and equipment		4,354,782			4,289,711
Accumulated depreciation		(2,508,831	)		(2,398,503	)
Less - property held for sale		(258,751	)		(258,751	)
Net property and equipment	$	1,587,200		$	1,632,457

Depreciation expense for the ~~13-week~~26-week periods in 2021 and 2020 was $112,261 and ~~2019 was $44,395 and $58,810,~~$90,070, respectively.

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NOTE 3 – ACCRUED EXPENSES

Accrued expenses consisted of the following ~~at the dates:~~at:

3/29/2020

12/29/2019

Accrued real estate taxes

$ 24,888

$ 66,959

Accrued payroll

38,529

69,572

Accrued payroll taxes

7,522

7,058

Accrued sales taxes payable

82,763

35,380

Accrued vacation pay

24,791

23,204

Other accrued expenses

590

559

$ 179,083

$ 202,732

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	July 4, 2021		January 3, 2021
Accrued real estate taxes	$	94,343	$	106,935
Accrued bonus compensation		7,000		162,000
Accrued payroll		48,099		56,139
Accrued payroll taxes		9,691		8,519
Accrued sales taxes payable		64,865		66,632
Accrued vacation pay		19,657		19,657
Other accrued expenses		16,005		852

	$	259,660	$	420,734

NOTE 4 – LONG TERM DEBT

The ~~Company had the following long term~~Company’s long-term debt ~~obligations~~is as ~~of:~~follows:

3/29/2020

12/29/2019

Note payable to bank dated October 30, 2015 due in monthly installments

of $6,916 through October 30, 2030, which includes principal and interest at a

fixed rate of 4.75%. This note is secured by two of the Company's Minnesota

locations and the personal guaranty of a shareholder of the Company.

$ 691,092

$ 699,311

Note payable to bank dated November 16, 2015 due in monthly installments

of $14,846, which includes principal and interest at fixed rate of 4.75% through

November 16, 2030. This note is secured by four of the Company's North Dakota

locations and the personal guaranty of a shareholder of the Company.

1,482,482

1,509,435

Note payable to bank dated October 10, 2015 due in monthly

installments of $4,153 through March 11, 2030, which includes principal

and interest at fixed rate of 4.75%. This note is secured by the Company's

Dairy Queen location and the personal guaranty of a shareholder of the Company.

409,686

414,562

Note payable to bank dated March 11, 2016 due in monthly installments

of $3,692 through March 11, 2031 which includes principal and interest at

a fixed rate of 4.75%. This note is secured by one of the Company's South Dakota

locations and the personal guaranty of a shareholder of the Company.

377,618

384,208

Notes payable to bank dated November 10, 2016 payable in monthly installments

of $1,331 which includes principal and interest at 4%, the interest rate is subject

to adjustment based on 5-year Treasury Note rate 2021 and cannot be

be less than 4%. This note is secured by property held for sale in Richmond

Indiana and the personal guaranty of a shareholder of the Company.

148,737

151,234

Unsecured 8% notes payable to an entity controlled by shareholders of the

Company dated December 26, 2017 originally due on demand after June 1, 2020.

Effectice July 1, 2019 a revised note was entered into due June 1, 2021

with monthly payments of $5,000 due beginning August 1, 2019. An additional

$50,000 was advanced to the Company in January 2020 and this advance

is included in current maturities.

257,264

207,264

Note payable to bank dated December 28, 2018 due in monthly

installments of $1,644 through December 31, 2023 which includes principal

and interest at a fixed rate of 5.50%. This note is secured by the West St. Paul

location and the personal guaranty of a shareholder of the Company.

189,800

192,068

3,556,679

3,558,082

Less - unamortized debt issuance costs

(58,087 )

(59,381 )
Current maturities

(243,784 )

(277,666 )

Total

$ 3,254,808

$ 3,221,035

In the first quarter of fiscal 2020, as a result of the many uncertainties surrounding the economy during the COVID-19 response, two of the Company’s mortgage lenders agreed to suspend current payments for a period of three months. The loans will continue to accrue interest at the stated rate, which included in the principal outstanding, and the suspended payments will be treated as balloon-payments due at the end of the mortgage term.

	July 4, 2021			January 3, 2021

Notes payable to bank with interest at 4.75%. Secured by eight of the Company's locations and the personal guaranty of a shareholder of the Company These notes were paid in full on June 27, 2021.	$	0		$	2,884,650

Three notes payable to bank dated June 28, 2021 due in monthly installments totalling $22,213 which includes principal and interest at fixed rate of 3.45% through June 28, 2031. Beginning in July 2031, the interest rate will be equal to the greater of the "prime rate" plus .75%, or 3.45% . These notes mature on June 28, 2036. The notes are secured by mortgages covering the Company's ten operating locations. The notes are guaranteed by BT Brands, Inc. and a shareholder of the Company.		3,107,100			0

Note payable to bank dated December 28, 2018 due in monthly installments of $1,644 through December 31, 2023 which included principal and interest at a fixed rate of 5.50%. This note is secured by the West St. Paul location and the personal guaranty of a shareholder of the Company. This note was paid in full on April 6, 2021, and is included in current liabilities at April 4, 2021.		0			185,219

Notes payable to bank dated November 10, 2016 payable in monthly installments of $1,331 which includes principal and interest at 4%, the interest rate is subject to adjustment based on 5-year Treasury Note rate 2021 and cannot be less than 4%. This note is secured by property held for sale in Richmond, Indiana and the personal guaranty of a shareholder of the Company.		135,961			141,125

Minnesota Small Business Emergency Loan dated April 29, 2020 payable in monthly installments of $458.33 beginning December 15, 2020 which includes principal and interest at 0%. This note is secured by the personal guaranty of a shareholder of the Company.		24,750			27,500
		3,267,811			3,238,494
Less - unamortized debt issuance costs		(49,699	)		(54,205	)
Current maturities		(174,350	)		(245,306	)
Total	$	3,043,762		$	2,938,983

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NOTE 5 – RELATED PARTY TRANSACTIONS

~~BTND Trading~~

BTND Trading is an entity separate from the Company owned by certain significant shareholders of the Company, from time-to-time BTND Trading has advanced funds to the Company. In 2020 no payments have been made on this note and during the first quarter BTND Trading advanced an additional $50,000 to the Company which amount has been added to the current portion long-term debt as it is anticipated this advance will be repaid before the end of the year.

Next Gen Ice

In 2019, the Company made ~~a series of~~cash advances ~~in the form of investments in~~to Next Gen Ice, Inc. (NGI) in the form of Series C Notes totaling ~~$179,000. In the first quarter~~a principal amount of ~~2020 the Company advanced an additional $28,000 to NGI and the $28,000 advance was repaid following the end of the quarter, in April 2020.~~$179,000 (“Notes”). The Company’s CEO, Gary Copperud, is Chairman of the Board of Directors of NGI and the Company’s Chief Operating Officer, Kenneth Brimmer, is also a member of the Board of Directors of NGI and ~~is currently serving~~serves as Chief Financial Officer of NGI on a part-time contract basis. Mr. Copperud, and a limited liability ~~companies~~company controlled by him together own approximately ~~55%~~34% of the outstanding equity of NGI. ~~The Series C~~On March 2, 2020, the Notes, were ~~originally due on March 3, 2020. On March 3, 2020, the Company~~modified and ~~NGI entered into a Loan Modification and Extension Agreement pursuant to which the Company agreed to extend~~ the maturity ~~date of the NGI Notes~~extended to August 31, 2020. ~~In consideration~~As part of the ~~extension of the term of the NGI Notes: (i) NGI granted to~~Note modification, the Company ~~a security interest in all of NGI’s assets, (ii) issued to the Company a warrant entitling it to purchase~~received 179,000 shares of common stock in Next Gen Ice from the founders of NGI representing approximately2% of NGI shares outstanding. The Company also holds warrants to purchase 358,000 shares of common stock at a price of $1.00 per share ~~at any time~~ through March 31, ~~2023,~~2023. The common stock and ~~(iii)~~common stock purchase warrants received by the ~~founders~~Company were recorded at a value determined by the Company of $75,000. This amount was also recorded at a discount to the note receivable and was recognized as interest income over the extended term of the Notes. The Company has determined that its investment in NGI ~~including Mr. Copperud agreed to transfer~~does not have a readily determinable market value and therefore is carried at the cost determined by the Company at the time the shares and warrants were received. The Notes were repaid in August 2020, with interest, and currently there are no outstanding amounts due to the Company ~~179,000 common shares of~~from NGI.

NOTE 6 – CONTINGENCIES

~~In the course of its business, the~~The Company may be a party to claims and legal or regulatory actions arising from the conduct of its business. The Company is not aware of any significant asserted or potential claims which could impact its financial ~~position~~

~~NOTE 7 – Covid-19 AND EMERGENCY LOAN RELIEF~~

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (‘Covid-19”) a global pandemic. Covid-19 has had a significant adverse impact on the United States economy. While we have experienced some product shortages and some labor shortages, we have continued to operate all of our locations on a drive-through basis only with some limited hours and closing access to both the walk-up window and any indoor seating. Indoor seating is only available in our Dairy Queen and one other location. At this time, it is impossible to predict the ultimate impact of the Covid-19 pandemic on the Company’s operating results and financial condition as the situation and regulations surrounding government response to the pandemic are constantly changing.

On May 1, 2020, the Company received funding in connection with “Small Business Loans” under the federal Paycheck Protection Program provided in Section 7(a) of the Small Business Act of 1953, as amended by the Coronavirus Aid, Relief and Economic Security Act, as amended from time to time (the “PPP”). Pursuant to the terms of the Promissory Notes dated May 1, 2020, by BTND and BTNDDQ, L.L.C. in favor of Northview Bank. BTND borrowed $418,900 original principal amount, and BTNDDQ, L.L.C. borrowed $41,500 original principal amount. Both PPP loans were funded on May 1, 2020. The PPP Loans bear interest at 1% per annum and mature in two years from the date of disbursement of funds. Interest and principal payments under the PPP Loans will be deferred for a period of six months. Under certain circumstances, all or a portion of the PPP Loans may be forgiven, however, there can be no assurance that any portion of the PPP Loans will be forgiven and that BTND and BTNDDQ, L.L.C. would not be required to repay the PPP Loans in full. The PPP Loan contains certain covenants which, among other things, restrict the borrower’s use of the proceeds of the PPP Loan to the payment of payroll costs, interest on mortgage obligations, rent obligations and utility expenses, require compliance with all other loans or other agreements with any creditor of the borrower, to the extent that a default under any loan or other agreement would materially affect the borrower’s ability to repay the PPP Loan and limit the ability of the borrower to make certain changes to its ownership structure.

On April 29, 2020, BTNDDQ, L.L.C. also borrowed $27,500 at no interest under the Minnesota Small Business Emergency Loan Program from Central Minnesota Development Corporation. This loan is interest free and under certain conditions up to 50% of the loan may be forgiven, BTNDDQ, L.L.C., initially, is required to make 18 monthly payments of $458.33 beginning December 15, 2020, following the initial 18 months, in the event the note does not qualify for loan forgiveness, it will be repaid in equal installments over an additional 36 months.position.

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

The following discussion of financial condition, results of operations, liquidity and capital resources of BT Brands, Inc. and its wholly-owned subsidiaries (together, the “Company”) should be read in conjunction with the Company’s condensed consolidated financial statements and accompanying notes included under Part I, Item 1 of this quarterly report on Form 10-Q, as well as with the audited consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s annual report on Form 10-K for the year ended ~~December 29, 2019.~~January 3, 2021.

~~Overview~~Introduction

We own and operate ten fast food restaurants, including nine Burger Time restaurants and one Dairy Queen restaurant, all of which are in the North Central region of the United States. Our Burger Time restaurants feature a wide variety of burgers and other affordably priced foods such as chicken sandwiches, pulled pork sandwiches, sides and soft drinks. Our Dairy Queen restaurant offers the established Dairy Queen menu consisting of burgers, chicken, sides, ice cream and other desserts, and a wide array of beverages. Our revenues are derived from the sale of food and beverages at our restaurants.

Our Burger Time operating principles include: (i) offering bigger burgers and more value for the money; (ii) offering a limited menu to permit attention to quality and speed of preparation; (iii) providing fast service by way of single and double drive-thru designs and a point-of-sale system that expedites the ordering and preparation process; and (iv) great tasting quality food made fresh to order at a fair price. Our primary strategy is to serve the drive-thru and take-out segment of the quick-service restaurant industry.

Operationally, we take several steps to maintain efficiency, including maintaining inventory of approximately $5,000 to $15,000 per store at any given time (which also has the advantage of allowing for frequent deliveries of fresh food). Historically, our Burger Time investment model targeted an average total cash investment of between $325,000 and $535,000. Real estate and finance costs vary materially by location but, assuming the average investment figure applies, the amount allocated to the purchase of real estate would be approximately $225,000.

Our average customer transaction increased by approximately 4% in the first six months of fiscal 2021 compared to 2020 and currently is approximately $11.50. This recent increase is principally because of a menu price increase implemented in the middle of 2020. Our sales trends are influenced by many factors and the environment remains challenging for smaller restaurant chains as competition from the major fast-food hamburger-focused business is intense.

~~Business~~Material Trends ~~- Effects of COVID-19~~and Uncertainties

There are industry trends which may have an impact on our business. These trends principally relate to the rapidly changing area of technology and food delivery. The major companies in the restaurant industry have rapidly adopted and developed applications for the smart phone and mobile delivery, have aggressively expanded drive-through operations and have developed loyalty programs and data base marketing supported by a robust technology platform. We expect these trends to continue as restaurants aggressively complete for customers. Further, the major industry participants have continued to strategically discount prices through promotions such as a “dollar menu.” We expect these significant trends will continue.

The cost of food has increased over the last two years, and we expect to see continued inflationary pressure in the remainder of 2021. Beef costs were stable in 2020 and recently have increased by approximately 4% per pound following an increase of approximately 5% in 2019. Given the competitive nature of the fast-food burger restaurant industry, it may be difficult to raise menu prices to fully cover future cost increases. During 2020 and continuing into 2021, a significant increase in business volume contributed to improved profit margins. Additional margin improvements may have to be made through operational improvements, equipment advances and increased volumes to help offset any food cost increases, due to the competitive state of the restaurant industry.

Labor is a critical factor in operating our stores. In most areas where we operate our restaurants, there historically has been a shortage of suitable labor and recently, securing staff for restaurant has become more challenging. This has resulted in higher wages as the competition for employees intensifies, not only in the restaurant industry, but in practically all retail and service industries. It is crucial for the Company to develop and maintain programs to attract and retain quality employees.

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Increases in the federally and state mandated minimum wage may also impact our operations. A variety of proposals have been made to increase the federal minimum wage to $15 per hour and state and local governments have, in some cases, implemented minimum wage rates. In North Dakota, the minimum wage is set at the federally mandated minimum wage of $7.25 per hour and the rates are annually adjusted to reflect any increase in cost of living. South Dakota has established a minimum wage of $9.10 per hour which is annually adjusted to increase with the cost of living. Minnesota’s minimum-wage rate for small employers, such as us, is $8.04 per hour. Our hourly employees earn a wage of on average of approximately $12 to $13 per hour. An increase in the minimum wage to $15 per hour would adversely impact our profit margins.

Since March 2020, we have faced the ~~World Health Organization declared~~effects of the ~~novel strain of coronavirus (“COVID-19”)~~COVID-19 and its more recent variants as a global ~~pandemic. This contagious virus,~~pandemic which has ~~continued to spread,~~been both unpredictable and persistent, The COVID-19 pandemic has adversely affected workforces, customers, economies, and financial markets ~~globally. It~~globally and has ~~also~~ disrupted the normal ~~operations of~~flow the US economy. Our stores have, for the most part, remained open for drive-through business during the last year, however, many businesses experienced a disruption of normal operations. More recently, food service businesses, including ~~ours.~~ ours, have faced challenges in attracting and hiring workers and it is possible the labor shortages may become more acute in the busier summer months.

In ~~response~~2020 extending through early 2021, many states, including Minnesota, mandated limited public gatherings to ~~this outbreak, many state~~halt or delay the spread of disease. Under these emergency orders, essential services remained open, including, but not limited to gas stations, pharmacies, grocery stores, food banks, convenience stores, take-out and ~~local authorities~~delivery restaurants, banks, hospitals, and laundromats. Under the directions limiting public gatherings, regulators generally allowed drive-through restaurant services to remain open. To date, our restaurants have ~~mandated the temporary closure of non-essential businesses and dine-in restaurant activity. While~~remained open although we have curtailed hours at some stores and have experienced ~~some product shortages, for now,~~temporary restaurant closures while locations have been cleaned and employees tested. Thus far, we have ~~continued~~been able to ~~operate all~~reopen after two or three days. Local, regional or national governments may, at any time, implement directives that limit or order our business to close or take other measures intended to mitigate the spread of ~~our locations on~~disease. Further, some customers may choose to remain in self-imposed isolation and avoid public gathering places.

While a ~~drive-through basis only eliminating access~~program to ~~the walk-up service window and any indoor seating which~~vaccinate a majority of Americans is ~~only available at our Dairy Queen location and one other location. Also, most of our locations have outdoor picnic table seating for use~~currently in ~~nicer summer weather, and in, most cases, these dining areas have been closed. At this time,~~progress, it is ~~impossible~~not possible for us to predict the ~~near-term effects~~duration or ~~the ultimate impact~~magnitude of the ~~Covid-19 pandemic on the Company’s operating results and financial condition as the situation and regulations surrounding government response to the pandemic are constantly changing. As a result~~effects of the ~~many uncertainties potentially threatening~~outbreak and its impact on our business or results of operations at this time. The conditions may influence restaurant customer traffic and our ability to adequately staff our restaurants, receive deliveries on a timely basis or perform functions at the corporate level. Further, such conditions could impact the availability of the menu items we offer and the ability of suppliers to deliver such products. We also may be adversely affected if jurisdictions in which we have restaurants impose mandatory closures, seek voluntary closures or impose restrictions on operations. Even if such measures are not implemented, the perceived risk of infection or significant health risk may adversely affect our business. We expect to continue ~~as a going concern.~~to navigate an unprecedented time for our business and industry.

~~The Coronavirus Aid, Relief,~~As the restrictions on behavior eased with approved vaccines being distributed and ~~Economic Security Act (the “CARES Act”) was signed into law on March 27, 2020, providing provisions aid small businesses through programs~~ administered, byall the ~~Small Business Administration (“SBA”). The CARES Act includes, among other things, provisions relating~~states in which we operate have lifted mandatory mask mandates and we expect that, in most respects, restaurant industry operations will return to ~~payroll tax credits~~pre-pandemic norms. Our restaurants may revert to more typical pre-pandemic operations and ~~deferrals, net operating loss carryback periods, alternative minimum tax credits~~revenues which may result in sales declines from recent levels. We may be subject to additional competition, as many restaurants initiated take home and ~~technical corrections~~delivery services during the pandemic and customers may have grown accustomed to ~~tax depreciation methods for qualified improvement property.~~ a wider range of take-out foods beyond quick-service restaurant (QSR) options, which would negatively impact our revenue.

We ~~are currently evaluating~~continue to monitor the ~~impact~~course of the ~~provisions~~pandemic and its impact on our customer base and the wider country. It is not possible for us to predict the future course of the ~~CARES Act. The CARES Act~~pandemic in light of a multitude of factors, including the spread of new variants of the original coronavirus disease among the U.S. population and the efficacy of existing treatments and vaccines.

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Future conditions may influence restaurant customer traffic and our ability to adequately staff our restaurants, receive deliveries on a timely basis or perform functions at the corporate level. Further, such conditions could impact the availability of the menu items we offer and the ability of suppliers to deliver such products. We also ~~established a Paycheck Protection Program (“PPP”), whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs. The loan~~ may be ~~forgiven~~adversely affected if jurisdictions in which we have restaurants impose mandatory closures, seek voluntary closures or impose restrictions on operations. Even if such measures are not implemented, the ~~funds are used for payroll and other qualified expenses. Given the absence~~perceived risk of any funding alternatives, the Company applied for and was granted loans totaling $460,400 under the United States Small Business Administration’s Payroll Protection Program. The Company expects to use these funds to meet payroll expenses. The Company’s BTNDDQ, L.L.C. subsidiary also received a $27,500 loan from a State of Minnesota Small Business Emergency Loan Program.

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infection or significant health risk may adversely affect our business.

Growth Strategy and Outlook

We are seeking to increase value for our shareholders in the foodservice industry. ~~We expect to pursue the acquisition of~~Our principal strategy comprises acquiring multi-unit restaurant concepts and individual restaurant properties at attractive multiples of earnings. ~~Once acquired,~~Though we ~~will operate the business or businesses with a shared central management organization. Assuming we are successful in acquiring an operating business, following the acquisition, we expect~~do not currently plan to ~~pursue growth strategies to both expand the number of locations and to increase comparable store sales and profits.~~

~~Our business plan is to grow through acquisitions in the foodservice industry. In addition,~~do so, under certain circumstances, we may develop additional Burger Time locations through the acquisition and conversion of existing properties. ~~We also expect to identify and complete acquisitions~~Other key elements of ~~existing restaurant units and multi-unit chains which could be operated and expanded through the addition of new locations. Our~~our growth strategy ~~is predicated upon (i) building or acquiring new restaurants, (ii) growing comparable restaurant~~encompass increasing same store sales and ~~profits, and (iii) quickly and cost-effectively scaling our growth while leveraging our corporate services.~~introducing a campaign to boost brand awareness.

Expansion Through Acquisitions

We intend to make strategic and opportunistic acquisitions that provide an entrance into targeted restaurant segments and geographic areas. Restaurant businesses become available for acquisition frequently and we believe that we ~~will have opportunities~~may be able to purchase either individual restaurant properties or multi-unit businesses at prices providing an attractive return on our investment. Alternatively, we may acquire ~~new restaurant businesses.~~operating assets where a franchise program of the acquired foodservice business is concluded by management to be the most appropriate growth plan. We intend to follow a disciplined strategy of evaluating acquisition opportunities that seek to ~~determine~~ensure and enable the accretive and efficient acquisition and integration of additional restaurant concepts. Successful execution of our acquisition strategy will allow us to diversify our operations both into other dining concepts and geographic locations.

In evaluating potential acquisitions, we may consider the following characteristics, among others that management considers relevant to each distinct opportunity:

	·	the value proposition offered by acquisition targets when comparing the purchase price to the potential return on our investment;
	·	established, recognized brands within their geographic footprint;
	·	steady cash flow;
	·	track records of long-term operating performance;
	·	sustainable operating results;
	·	geographic diversification; and
	·	growth potential.

Assuming we are successful in ~~markets meeting our demographic, real estate and investment criteria. Our ability~~acquiring new businesses, we will operate the business or businesses with a shared central management organization. Following the acquisition, we expect to ~~successfully evaluate an acquisition opportunity and~~pursue a growth plan to ~~understand the competitive landscape of a new market will be critical in making a successful acquisition. Additionally, our ability to identify, recruit and hire~~ both ~~salaried and hourly staff will impact our ability to~~ expand as will changes in the legal environment, including increases to the minimum wage, which could impact our ability to expand into certain areas. Further, we believe that there has been an oversaturation of restaurants in certain areas which could decrease the number of ~~markets~~locations and to increase comparable store sales and profits, as described below. We anticipate that by leveraging our management services platform, we will be able to achieve post-acquisition cost benefits by reducing the corporate overhead of the acquired business. If we acquire one or more restaurant chains or individual units in close proximity to each other, we believe the concentration of operations will provide economic synergies with respect to management functions, marketing and advertising, supply chain assistance, staff training and operational oversight.

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Future Development of Additional Burger Time Restaurants

We may, in certain circumstances, consider developing additional Burger Time location. Conditions which might give rise to developing additional Burger Time locations include the opportunity to acquire and convert a property that previously had operated as a fast-food establishment at a highly attractive price in a location that fits naturally within Burger Time’s geographic footprint so that we ~~believe~~may share service expenses, including advertising costs.

If we elect to open additional Burger Time restaurants, we expect that development of these restaurants will, based on our experience, require a minimum six to nine months after opening, to achieve the targeted restaurant-level sales and operating margins. In a case where we open a restaurant in new and untested markets, achieving targeted sales may take longer since the local population will not be ~~attractive to expand into. Even if we can acquire restaurants, the~~familiar with our brand and building brand awareness takes time. How quickly new restaurants achieve their targeted sales and operating margin depends on many factors, including the level of consumer familiarity with our ~~Company,~~brand, as well as the availability of experienced managers and other staff. However, every restaurant has a unique opening sales pattern, and this pattern is difficult to predict.

Increase Same-Store Sales

Same-store sales growth reflects the change in year-over-year sales for the comparable store base. We intend to deploy a multi-faceted same-store sales growth strategy to optimize restaurant performance. We will ~~be subject~~apply techniques proven in the restaurant industry to ~~various risks, some of which, including factors impacting~~increase same store sales at our ~~customers, such~~Burger Time restaurants and at our acquired properties and to develop new approaches that reflect our corporate character and restaurant composition. We expect to utilize customer feedback and analyze sales data to introduce, test and hone existing and new menu items. In addition, we will investigate utilizing public relations and experiential marketing to engage customers. We expect that our strategies to increase same-store sales will evolve as ~~declining economic conditions, are entirely out~~we acquire new restaurant concepts in new markets.

Increase Brand Awareness

We appreciate that increasing brand awareness is important to the growth of our ~~control.~~Company. We will develop and implement forward-looking branding strategies both for our Burger Time concept and for any businesses that we acquire. We will seek to ~~quickly~~leverage social media and ~~cost-effectively scale~~employ targeted digital advertising to expand the reach of our ~~growth by leveraging~~brands and drive traffic to our ~~general~~stores. In addition, we intend to develop mobile applications that will allow consumers to find restaurants, order online and ~~administrative costs.~~earn rewards. We will deploy internet advertising to match specific menu items targeted to specific demographic groups. We will deploy cross-over ads with radio and social media interacting with each other. We expect that our branding initiatives will evolve as we consummate acquisitions of restaurant concepts that appeal to distinct consumer markets in differing geographic areas.

Our ability to acquire or open new restaurants is predicated on the availability of capital for such purposes. We cannot be certain that capital will be available to us on acceptable terms if at all.

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Results of Operations for the Thirteen Weeks Ended July 4, 2021, and the Thirteen Weeks Ended June 28, 2020

The following table sets forth, for the fiscal periods indicated, our Condensed Statements of Operations expressed as percentage of total revenues. Percentages below may not reconcile because of rounding.

13 Weeks Ended,

March 29, 2020

March 31, 2019

SALES

100.0 %

100.0 %

COSTS AND EXPENSES

     Restaurant operating expenses

           Food and paper costs

41.4

40.7

           Labor costs

37.1

35.3

         Occupancy costs

12.5

15.1

           Other operating expenses

6.6

4.7

     Depreciation

3.4

4.3

     Amortization

0.0

0.0

     General and administrative

5.1

9.3

           Total costs and expenses

106.1

109.3

           Loss from operations

(6.1 )

(9.3 )
INTEREST EXPENSE

(2.8 )

(3.1 )
NET LOSS

(8.9 )%

(12.4 )%


15 13 Weeks Ended
	July 4, 2021			June 28, 2020
~~Table~~
SALES		100.0	%		100.0	%
COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		38.1			37.3
Labor costs		26.1			25.5
Occupancy costs		7.0			7.2
Other operating expenses		5.4			4.4
Depreciation and amortization		2.5			1.9
Impairment of ~~Contents~~assets held for sale		-			4.2

~~13 Week Period Ended March 29 (Fiscal 2020) compared to the 13 Week Period Ended March 31, (Fiscal 2019)~~

General and administrative

4.9

Total costs and expenses

84.0

85.4

Income from operations

16.0

14.6

INTEREST EXPENSE

(3.8

)

(2.3

)

INTEREST INCOME

2.7

OTHER INCOME (PAYROLL PROTECTION GRANT)

19.5

INCOME TAXES

(3.5

)

(6.2

)

NET INCOME

8.7

28.3

Net Revenues:

Net sales for ~~Fiscal 2020~~fiscal second quarter of 2021 decreased ~~$74,403 or 5.4%~~$13,655 to ~~$1,303,430~~$2,382,683 from ~~$1,377,833~~$2,396,338 in ~~Fiscal 2019. The decrease~~fiscal 2020. Sales in ~~sales was principally the result~~2021 have continued to be strong. We have held most of the ~~West St. Paul location being closed for approximately seven weeks~~gains realized during the period of significant dining restrictions resulting in a favorable impact on drive-through locations. This continuing trend has led to an increase in consumers choosing Burger Time as a ~~result of a fire in the location, and the effects of weather conditions during the period.~~meal alternative.

Restaurant unit sales for the 13-week period ranged from a low of ~~$99,384 (excluding West St. Paul)~~approximately $154,000 to a high of ~~$185,500~~approximately $312,500 and average sales for each Burger Time unit during the period was approximately ~~$146,000~~$237,200 in ~~2020 declining~~2021 essentially unchanged from ~~$154,000~~the same period in ~~2019.~~2020.

Costs of Sales - food and paper:

Cost of sales - food and paper for ~~Fiscal 2020~~second quarter of fiscal 2021 increased as a percentage of sales ~~slightly~~ to ~~$540,100 (41.4%~~38.1% of restaurant sales from 37.3% of restaurant sales in the second quarter of fiscal 2020. This increase was the net result of inflationary pressures of certain items, a favorable six-month verbal fixed price arrangement on the price of ground beef patties at $2.51 per pound which more recently has increased to $2.61 per pound, offset by the impact of a price increase taken at the end of second quarter in 2020 fully realized in 2021.

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Restaurant Operating Costs:

Restaurant operating costs (which refer to all the costs associated with the operation of our restaurants, but do not include general and administrative costs, impairment charges and depreciation and amortization) as a percent of restaurant sales increased to 76.6% of sales in the second fiscal quarter of 2021 from 74.4% in similar period of fiscal 2020. This was due to the net effect of the higher cost incurred for personal protection equipment, the impact of the 2020 price increase, offset by tighter labor markets and the matters discussed in the “Cost of Sales,” “Labor Costs,” “Occupancy and Other Operating Cost” sections below.

Labor Costs

For the second quarter of fiscal 2021, labor and benefits costs increased slightly by $10,529 to $621,227 and increased as a percentage of sales to 26.1% of restaurant sales from 25.5%of restaurant sales in fiscal 2020. The increase in the percentage was the result of tighter labor markets leading to higher hourly wage costs offset by the leveraging of existing staffing. Payroll costs are semi-variable in nature, meaning that they do not decrease proportionally to decreases in revenue, thus they increase as a percentage of restaurant sales when there is a decrease in restaurant sales.

Occupancy and Other Operating Expenses

For the second fiscal quarter of 2021, occupancy and other expenses increased $14,430 to $295,978 (12.4% of sales) in 2021 from 11.6% of sales in similar period in 2020.

Depreciation and Amortization Expense:

For second fiscal quarter of 2021, depreciation and amortization increased $12,458 to $58,558 (2.5% of sales) from ~~$560,271 (40.7%~~$46,100 (1.9% of sales) in the second quarter of fiscal 2020.

General and Administrative Costs

General and administrative costs decreased $1,303 from $116,947 (4.9% of sales) to $115,644 (4.9% of sales) in the second fiscal quarter of 2021.

Income from Operations

The income from operations for the 13 week-period was $382,516 in fiscal 2021 compared to an income from operations of $350,156 in similar period in 2020. The increase in the percentage of income from operations to 16.0% in fiscal 2021 compared to 14.6% fiscal 2020 was principally the result of a $100,000 impairment charge in the 2020 period to reduce the carrying value of property held for sale and the matters discussed in the “Net Revenues” and “Restaurant Operating Costs” sections above.

Restaurant-level EBITDA:

To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company uses restaurant-level EBITDA, which is not a measure defined by GAAP. This non-GAAP operating measure is useful to both management and, we believe, to investors because it represents one means of gauging the overall profitability of our recurring and controllable core restaurant operations. This measure is not, however, indicative of our overall results, nor does restaurant-level profit accrue directly to the benefit of stockholders, primarily due to the exclusion of corporate-level expenses. Restaurant-level EBITDA should not be considered a substitute for, or superior to, operating income, which is calculated in accordance with GAAP, and the reconciliations to operating income set forth below should be carefully evaluated.

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We define restaurant-level EBITDA as operating income before pre-opening costs, if any, general and administrative costs, depreciation and amortization and impairment charges. General and administrative costs are excluded as they are generally not specifically identifiable to restaurant specific costs. Depreciation and amortization and impairment charges are excluded because they are not ongoing controllable cash expenses, and they are not related to the health of ongoing operations.

	13 Weeks Ended,
	July 4, 2021			June 28, 2020
Revenues	$	2,382,683		$	2,396,338
Reconciliation:
Income from operations	$	382,516		$	350,156
Depreciation and amortization and impairment charge		58,558			146,100
General and administrative, corporate level expenses		115,644			116,947
Restaurant-level EBITDA	$	556,718		$	613,203
Restaurant-level EBITDA margin		23.4	%		25.6	%

Our Results of Operations for the Twenty-Six Weeks Ended July 4, 2021 and the Twenty-Six Weeks Ended June 28, 2020

	26 Weeks Ended,
	July 4, 2021			June 28, 2020
SALES		100.0	%		100.0	%
COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		37.9			38.8
Labor costs		27.5			29.6
Occupancy costs		7.0			9.0
Other operating expenses		5.8			5.2
Depreciation and amortization		2.6			2.4
Impairment of assets held for sale		-			2.7
General and administrative		5.1			5.0
Total costs and expenses		85.9			92.8
Income from operations		14.1			7.2
INTEREST EXPENSE		(3.0	)		(2.5	)
INTEREST INCOME		-			1.7
OTHER INCOME – PAYROLL PROTECTION GRANT		-			12.6
INCOME TAXES		(3.1	)		(4.0	)
NET INCOME		8.0	%		15.1	%

Net Revenues:

Net sales for 26-week period representing the first half of fiscal 2021 increased $623,787 or 16.9% to $4,323,555 from $3,699,768 in fiscal 2020. The increase in sales was principally the result of favorable impact in the first half of the 26-week period the government shutdown restrictions on social gatherings for dining alternatives resulting in consumers choosing Burger Time as a meal alternative combined with generally favorable weather conditions during the period.

Restaurant sales for the 26-week period for our Burger Time locations ranged from a low of approximately $280,300 to high of approximately $587,600 and average sales for each Burger Time unit during the period was approximately $438,200 in 2021 an increase from approximately $382,300 in same 26-week period in 2020.

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Costs of Sales - food and paper:

Cost of sales - food and paper for the first half of fiscal 2021 decreased as a percentage of sales to 37.9% from 38.8% of restaurant ~~sales)~~sales in ~~Fiscal 2019.~~the similar period in 2020. This ~~increase~~decrease was mainly due to ancombined effects of second half 2020 menu price increase and the overall increase in ~~average~~business activity supported by a relatively stable market for ground beef and other products. Average beef prices ofpaid by the Company were approximately ~~18% to an average~~ of $2.51 per pound in ~~2020.~~2021 which was unchanged from 2020 contributing to an improved gross margin.

Restaurant Operating Costs:

Restaurant operating costs (which refer to all the costs associated with the operation of our restaurants, but do not include general and administrative costs, impairment charge and depreciation and amortization) as a percent of restaurant sales ~~increased slightly~~declined to ~~97.6%~~78.2% of sales in ~~2020~~2021 from ~~95.8%~~82.6% in ~~Fiscal 2019.~~fiscal 2020. This was due primarily to ~~matters~~the increase in sales activity and its impact as further discussed in the “Cost of Sales,” “Labor Costs,” “Occupancy and Other Operating Cost” sections below.

Labor Costs

For ~~Fiscal 2020,~~the first half of fiscal 2021, labor and benefits costs decreased ~~slightly by $2,936~~ to ~~$483,309 (increasing to 37.1%~~27.5% of restaurant ~~sales)~~sales from ~~$486,245 (35.3%~~29.6% of restaurant ~~sales)~~sales in ~~Fiscal 2019.~~the fiscal 2020 period. The Company was able to favorably leverage staffing levels against the significant increase in volume during the ~~percentage was~~second half of the ~~result minimum staffing level required as sales declined. The~~period. While the hiring markets have become more challenging in terms of filling open positions, the Company continued to benefit from ~~virtually no~~limited turnover in its unit restaurant management which tends to cause unfavorable variations in labor costs. Payroll costs are semi-variable in nature, meaning that they do not decrease proportionally to decreases in revenue, thus they increase as a percentage of restaurant sales when there is a decrease in restaurant sales.

Occupancy and Other Operating Expenses

For ~~Fiscal 2020,~~the first 26 weeks of fiscal 2021, occupancy and other expenses ~~decreased $23,453 to 19.1%~~increased $30,428 or 12.8% of sales ~~or $248,762~~to $555,735 from ~~$272,215 (19.8%~~$525,307 (14.2% of restaurant sales) in ~~Fiscal 2019.~~the similar period in 2020 many of these costs are fixed and the lower percentage reflect the increase in restaurant sales, this was offset by an increased focus on maintenance projects resulting from very high volume at our stores impacting our major systems such as HVAC and refrigeration.

Depreciation and Amortization Expense:

~~For Fiscal 2020, depreciation~~Depreciation and amortization ~~decreased 24.5% or $14,415~~expense in the first half of fiscal 2021 increased by $22,474 to ~~$46,115 (3.5%~~$113,394 (2.6% of sales) from ~~$60,512 (4.4%~~$90,920 (2.4% of sales) in ~~Fiscal 2019.~~the first half of fiscal 2020 and is the result of capital additions at several of our locations.

General and Administrative Costs

General and administrative costs ~~decreased 51.8%~~increased 20.6%, or ~~$61,568~~$37,819, from ~~$127,784 (9.3%~~$183,163 (5.0% of sales) in ~~Fiscal 2019~~the first half of fiscal 2020 to ~~$66,216~~$220,982 (5.1% of sales) ~~in Fiscal 2020. The increase in general and administrative costs is primarily attributable to a reduction in officer salary~~for the first half of ~~approximately $37,500 during the period and the elimination of a general manager position.~~fiscal 2021.

Income ~~(loss)~~ from Operations

~~The loss~~Income from operations was ~~$79,777~~$610,672 in ~~Fiscal 2020~~the first half of fiscal 2021 compared to ~~a loss from operations~~$270,379 in the first half of ~~$129,177 in Fiscal 2019.~~fiscal 2020. The change in income from operations in ~~Fiscal 2020~~the first half of fiscal 2021 compared to ~~Fiscal 20120~~fiscal 2020 was due primarily to the ~~matters reduction in General and Administrative Expense~~impact of the 2020 impairment charge, continued robust sales activity and the matters discussed in the “Net Revenues” and “Restaurant Operating Costs” sections above.

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Restaurant-level EBITDA:

13-Week Period

2020

2019

Revenues

$ 1,303,430

$ 1,377,833

Reconciliation:

(Loss) from operations

(79,777 )

(129,177 )
Depreciation and amortization

44,820

59,235

General and administrative, corporate level expenses

66,216

127,784

Restaurant-level EBITDA

(1,598 )

59,119

Restaurant-level EBITDA margin

0.0 %

4.2 %

	26 Weeks Ended,
	July 4, 2021			June 28, 2020
Revenues	$	4,323,555		$	3,699,768
Reconciliation:
Income from operations	$	610,672		$	270,379
Depreciation and amortization and impairment charge		113,394			190,920
General and administrative, corporate level expenses		220,982			183,571
Restaurant-level EBITDA	$	945,048		$	644,462
Restaurant-level EBITDA margin		21.8	%		17.4	%

Liquidity and Capital Resources

~~The condensed consolidated financial statements have been prepared on~~Since March of 2020, the COVID-19 pandemic has had a ~~going concern basis.~~positive impact of the Company’s sales and liquidity. For the ~~period ending March 29,2020,~~26 weeks ended July 4, 2021, the Company ~~incurred a net loss~~earned an after-tax profit of ~~$116,244. Cash flow provided by operating activities increased to $81,438 in 2020 from a negative $25,640 in fiscal 2019 principally as a result of increases in vendor accounts payable.~~$347,440. On ~~March 29, 2020,~~July 4, 2021, the Company had ~~$310,134~~$1,720,917 in cash and working capital ~~deficit~~ of ~~$535,201~~$898,303 an increase of ~~$65,875~~$526,610 from January 3, 2021. The is partially the result of Company completing a refinancing of the mortgages covering all its Burger Time properties including approximately $185,000 of current maturities of long-term debt from the ~~year-end deficit of $468,326.~~Company’s which was included in the long-term refinancing. In the 13-week period ending July 4, 2021, the Company continued to benefit from excellent results and positive operating cash flow even as government restriction on dining requirement were eased.

~~The coronavirus (“Covid-19”) global pandemic is significantly harming~~COVID-19, and its variants, including what has been described as the fast-spreading “Delta” variant, likely will to continue to have a significant impact on the United States economy. ~~Many businesses have closed, and many citizens are subject to “shelter at home” governmental orders. At this time, all of our units continue to operate, however, it~~It is ~~impossible~~difficult to predict either ~~the near-term effects or~~ the ultimate impact of the ~~Covid-19~~COVID-19 pandemic or the impact of governmental responses on the United States economy in general, and specifically the impact on the quick service drive-through segment of the food service industry and on Company’s operating results and financial condition as the situation is ~~rapidly~~ evolving. A cash flow forecast for the next 12 months prepared by management has been adjusted to reflect recent offers by banks, in the wake of the COVID-19 Pandemic, including the Company’s principal lenders, Northview Bank and Bremer Bank, to abate all loan payments for the next three months. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law on March 27,

In May 2020, and additional avenues of relief may be available to small businesses through programs administered by the Small Business Administration (“SBA”). The CARES Act includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. Given the absence of any funding alternatives, the Company ~~applied for and was granted~~received pandemic-related loans totaling $487,900. Included in that amount was $460,400 borrowed under the Small Business ~~Administration Payroll~~Administration’s Paycheck Protection ~~Program.~~Program (“PPP”). Under the terms of the program, the loans were forgiven in 2021. The SBA’s forgiveness of the PPP is accounted for as a “grant” and $466,400 was reflected as “Other Income” in the second quarter of 2020. Also, in May 2020, the Company ~~expects to use these funds to meet payroll expenses. The Company’s BTNDDQ, L.L.C. subsidiary also received a~~borrowed $27,500 ~~no-interest loan from a State of~~at no interest under the Minnesota Small Business Emergency ~~loan program.~~Loan Program which under certain circumstance, may become a grant.

Our primary requirements for liquidity are to fund our working capital needs, capital expenditures, and general corporate needs, as well as to invest in or acquire businesses that are synergistic with or complimentary to our business. Our operations do not require significant working capital, and, like many restaurant companies, we generally operate with negative working capital. We anticipate that working capital deficits may be incurred in the future and possibly increase. Our primary sources of liquidity and cash flows are operating cash flows and cash on hand. We use this to service debt and to maintain our stores to operate in an efficient manner, and to increase our working capital. Our working capital position benefits from the fact that we collect cash from sales from our customers at the point of sale, or within a few days from our credit card processor, and in general, payments to our vendors are not due for thirty days.

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Summary of Cash Flows

Cash Flows Provided by Operating Activities

Operating cash flow in 2020 included $466,758 of “other income” in operating cash flow which did not reoccur in 2021 contributing to a decline in cash flow from operations in the first six months of 2021 compared to 2020. As a result of the strong sales increase over the prior year, we generated $496,251 in cash flow for operations in the 26-week period ending July 4, 2021. The winter months have historically been seasonally the slowest part of the Company’s business generating a lower level of cash flow in comparison to the balance of the year.

Cash Flows Used in Investing Activities

In 2020 through the second quarter of 2021 the Company ~~expects~~has focused on its primary business and building its working capital reserves.

Cash Flows Used in Financing Activities

A significant portion of the Company’s cash flow is allocated to ~~have sufficient cash assets~~service the Company’s debt.

Contractual Obligati

As of July 4, 2021, we had $3,268,000 in contractual obligations relating principally to ~~meet~~amounts due under mortgages on the real property on which are stores are situated. Our monthly required payment is approximately $24,000. In the second quarter of fiscal 2021, the Company refinanced most of its ~~obligations~~outstanding mortgage debt with a new lender lowering its nominal interest cost from 4.75% to 3.45% fixed for the next twelve months. No adjustments have been made relating to recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company not continue as a going concern.

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ten years.

Qualitative and Quantitative Disclosure about Market Risk

Commodity Price Risk

We are subject to volatility in food costs as a result of market risk associated with commodity prices. Our ability to recover increased costs through higher pricing is, at times, limited by the competitive environment in which we operate. We do not enter into pricing agreements with any of our suppliers to manage these risks. Beef is our largest single food purchase and the price we pay for beef fluctuates weekly based on beef commodity prices. We do not currently manage this risk with commodity future and option contracts. A ten percent increase in the cost of beef would result in approximately ~~$98,000~~$175,000 of additional food costs for the Company annually.

Seasonality and Inflation

Seasonal factors and the timing of holidays cause our revenue to fluctuate from quarter to quarter. Our revenue per restaurant is typically slightly lower in the first and fourth quarters due to holiday closures and the impact of cold weather at all our locations. Adverse weather conditions may also affect customer traffic, especially in the first and fourth quarters, when customers do not use our outdoor seating areas, which impacts the use of these areas and may adversely affect our revenue.

Management does not believe that inflation has had a material effect on income during the ~~2019 or 2018 fiscal~~recent years. Increases in food, labor or other operating costs could adversely affect the Company’s operations. In the past, however, the Company generally has been able to increase menu prices or modify its operating procedures to substantially offset increases in its operating costs.

The cost of construction has also increased in recent history. We expect that costs to construct new restaurants in our existing and contiguous markets will be more expensive than several years ago, but we expect to achieve higher restaurant sales volumes and/or margin improvements to offset these or addition construction cost increases. Construction cost increases could have an adverse effect on our business and operations, particularly for new restaurant development.

Our business is subject to a wide range of federal, state and local regulations, which are subject to change in ways we cannot now anticipate. We are uncertain as to the effect, if any, that changes in the regulatory environment may have on our Company.

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Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

Recent Accounting Pronouncements

There has been no impact to our financial statements and our results of operations and financial condition as the result of the adoption of Recent Accounting Pronouncements, see “Part I, Item 1, Note 1. Summary of Significant Accounting Policies” of the Notes to Condensed Consolidated Financial Statements included in this quarterly report.

Critical Accounting Policies and Estimates

Our discussion and analysis of operating results and financial condition are based upon our condensed consolidated financial statements. The preparation of our condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses and related disclosures of contingent assets and liabilities. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.

Our critical accounting policies are those that materially affect our financial statements and involve subjective or complex judgments by management. Although these estimates are based on management’s best knowledge of current events and actions that may impact us in the future, actual results may be materially different from the estimates.

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All of our significant accounting policies are disclosed in our Form 10-K for the fiscal year ended January 3, 2021.

Jumpstart Our Business Startups Act of 2012

We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

Subject to certain conditions set forth in the JOBS Act, we are also eligible for and intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We may take advantage of these exemptions until we are no longer an emerging growth company. We will continue to be an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which we had total annual gross revenue of $1 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the completion of our initial public offering.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

~~Our management carried out an evaluation,~~(1) Evaluation of Disclosure Controls and Procedures

We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports filed under the ~~supervision~~Securities Exchange Act, is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. Disclosure controls are also designed with the ~~participation~~objective of ensuring that this information is accumulated and communicated to our ~~principal~~management, including our chief executive officer and ~~principal~~chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As of July 4, 2021, our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness ~~of the design and operation~~ of our disclosure controls and procedures ~~(as defined in~~pursuant to Rule ~~13a-15(e) of~~13a-15(b) promulgated under the Exchange ~~Act)~~Act. Based upon that evaluation and the material weakness in our internal control over financial reporting as disclosed in the Company’s Form 10-K for the fiscal year ended January 3, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~the end of the period covered by this quarterly report. Based on this evaluation, our principal executive officer and principal financial officer concluded that~~July 4, 2021, our disclosure controls and procedures were not effective asat a reasonable assurance level in ensuring that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules, regulations and forms of the ~~end of the period covered~~SEC, including ensuring that such material information is accumulated by ~~this quarterly report.~~

~~The design of any system of control is based upon certain assumptions about the likelihood of future events,~~ and there can be no assurance that any design will succeed in achieving its stated objectives under all future events, no matter how remote, or that the degree of compliance with the policies or procedures may not deteriorate. Because of its inherent limitations, disclosure controls and procedures may not prevent or detect all misstatements. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and thatcommunicated to our management, isincluding our Chief Executive Officer, Chief Financial Officer, as appropriate to allow timely decisions regarding required ~~to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.~~disclosure.

(2) Changes in Internal Control over Financial Reporting

~~There have~~The Company disclosed material weakness for a lack of segregation of duties and not performing an effective risk assessment on monitoring of internal controls over financial reporting in its Form 10-K for the fiscal year ended January 3, 2021. While the Company is addressing these deficiencies, there has been no ~~changes~~significant change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934 that occurred during our most recent fiscal quarter that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

1924

Table of Contents

~~Table of Contents~~

PART ~~II—~~II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are presently no pending legal proceedings to which the Company is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information required under this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Since the date on which the Company filed its annual report on Form 10-K and through the date of this quarterly report, the Company did not sell any securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None

Table of Contents

ITEM 6. EXHIBITS.

Exhibit		Description
	~~Description~~
31.1		Certification of the Company’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~March 29, 2020.~~July 4, 2021.

31.2		Certification of the Company’s Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~March 29, 2020.~~July 4, 2021.

32.1*		Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
32.2*
32.2*		Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
101.INS
~~101.INS~~		Inline XBRL Instance Document
		(the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH		Inline XBRL Taxonomy Extension Schema ~~Document~~
		Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation ~~Link base Document~~
		Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase ~~Document~~
		Document.
101.LAB		Inline XBRL Taxonomy Extension ~~Label~~Labels Linkbase ~~Document~~
		Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

2026

Table of Contents

~~Table of Contents~~

SIGNATURES

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

	BT BRANDS, INC.

Date: ~~May 12, 2020~~	~~By:~~	~~/s/ Gary Copperud~~
	~~Name:~~	~~Gary Copperud~~
	~~Title:~~	~~Chief Executive Officer~~

~~Date: May 12, 2020~~August 18, 2021	By:	/s/ Kenneth Brimmer
	Name:	Kenneth Brimmer
	Title:	Chief Operating Officer and Principal Financial Officer

	March 29, 2020			December 29, 2019
ASSETS
CURRENT ASSETS
Cash	$	310,134		$	258,101
Receivables		5,782			15,363
Inventory		52,973			56,432
Prepaid expenses		5,297			6,929

Total current assets		374,186			336,825

PROPERTY AND EQUIPMENT, net		1,605,617			1,650,012
LAND AND BUILDINGS HELD FOR SALE		449,244			449,244
INVESTMENT IN NOTES RECEIVABLE FROM RELATED COMPANY		207,000			179,000
OTHER ASSETS, net		18,034			18,459

Total assets	$	2,654,081		$	2,633,539

LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Current maturities of long-term debt	$	243,784		$	277,666
Accounts payable		483,622			321,855
Accrued expenses		179,083			202,732
Income taxes payable		2,898			2,898

Total current liabilities		909,387			805,151

LONG-TERM DEBT, less current maturities		3,254,808			3,221,035
UNEARNED VENDOR REBATE		2,445			3,668

Total liabilities		4,166,640			4,029,854

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' DEFICIT

Preferred stock, $.001 par value, 500,000 shares authorized, no shares outstanding at March 29, 2020 and December 29, 2019		-			-
Common stock, $.001 par value, 50,000,000 authorized, 8,095,004 shares outstanding at March 29, 2020 and December 29, 2019		8,095			8,095
Additional paid-in capital		497,671			497,671
Accumulated deficit		(2,018,325	)		(1,902,081	)

Total shareholders' deficit		(1,512,559	)		(1,396,315	)

Total liabilities and shareholders' deficit	$	2,654,081		$	2,633,539

	13 Weeks Ended,
	March 29, 2020			March 31, 2019

SALES	$	1,303,430		$	1,377,833

COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		540,100			560,271
Labor costs		483,309			486,245
Occupancy costs		162,588			207,603
Other operating expenses		86,174			64,612
Depreciation		44,395			58,810
Amortization		425			425
General and administrative		66,216			127,784

Total costs and expenses		1,383,207			1,505,750
Income (loss) from operations		(79,777	)		(129,177	)
INTEREST EXPENSE		(36,467	)		(42,573	)
INCOME (LOSS) BEFORE TAXES		(116,244	)		(170,490	)
PROVISION FOR INCOME TAXES		-			-
NET LOSS	$	(116,244	)	$	(170,490	)
LOSS PER COMMON SHARE - Basic and Diluted	$	(0.01	)	$	(0.02	)
WEIGHTED AVERAGE SHARES USED IN
COMPUTING PER COMMON SHARE AMOUNTS - Basic and Diluted		8,095,004			8,086,004

			Common Stock		Additional		Accumulated
	Shares		Amount		Paid-in Capital		(Deficit)			Total

Balances, December 30, 2018		8,086,004	$	8,086	$	484,180	$	(1,533,504	)	$	(1,041,238	)

Net (loss)		-		-		-		(170,490	)		(170,490	)

Balances, March 31, 2019		8,086,004	$	8,086	$	484,180	$	(1,703,994	)	$	(1,211,728	)

	13 Weeks Ended			13 Weeks Ended
	March 29, 2020			March 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)	$	(116,244	)	$	(170,490	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities-
Depreciation		44,395			58,810
Amortization of franchise agreement		425			425
Amortization of debt issuance cost		1,295			1,277
Changes in operating assets and liabilities
Receivables		9,581			7,199
Inventory		3,459			4,367
Prepaid expenses		1,632			125
Accounts payable		161,767			104,380
Unearned vendor rebate		(1,223	)		(815	)
Accrued expenses		(23,649	)		(30,918	)
Net cash provided by (used in) operating activities		81,438			(25,640	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in notes receivable from related entity		(28,000	)		-
Net cash used in investing activities		(28,000	)		-
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt		50,000			-
Principal payments on long-term debt		(51,405	)		(63,293	)
Net cash used in financing activities		(1,405	)		(63,293	)

CHANGE IN CASH		52,033			(88,933	)

CASH, BEGINNING OF PERIOD		258,101			663,511
					-
CASH, END OF PERIOD	$	310,134		$	574,578

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	$	35,172		$	41,296

	03/29/2020			12/29/2019
Land	$	555,885		$	555,885
Equipment		2,390,545			2,390,545
Buildings		1,363,642			1,363,642

Total property and equipment		4,310,072			4,310,072
Accumulated depreciation		(2,255,211	)		(2,210,816	)
Less - Property held for sale		(449,244	)		(449,244	)
Net property and equipment	$	1,605,617		$	1,650,012

	3/29/2020		12/29/2019
Accrued real estate taxes	$	24,888	$	66,959
Accrued payroll		38,529		69,572
Accrued payroll taxes		7,522		7,058
Accrued sales taxes payable		82,763		35,380
Accrued vacation pay		24,791		23,204
Other accrued expenses		590		559

	$	179,083	$	202,732

	3/29/2020			12/29/2019

Note payable to bank dated October 30, 2015 due in monthly installments
of $6,916 through October 30, 2030, which includes principal and interest at a
fixed rate of 4.75%. This note is secured by two of the Company's Minnesota
locations and the personal guaranty of a shareholder of the Company.	$	691,092		$	699,311

Note payable to bank dated November 16, 2015 due in monthly installments
of $14,846, which includes principal and interest at fixed rate of 4.75% through
November 16, 2030. This note is secured by four of the Company's North Dakota
locations and the personal guaranty of a shareholder of the Company.		1,482,482			1,509,435

Note payable to bank dated October 10, 2015 due in monthly
installments of $4,153 through March 11, 2030, which includes principal
and interest at fixed rate of 4.75%. This note is secured by the Company's
Dairy Queen location and the personal guaranty of a shareholder of the Company.		409,686			414,562

Note payable to bank dated March 11, 2016 due in monthly installments
of $3,692 through March 11, 2031 which includes principal and interest at
a fixed rate of 4.75%. This note is secured by one of the Company's South Dakota
locations and the personal guaranty of a shareholder of the Company.		377,618			384,208

Notes payable to bank dated November 10, 2016 payable in monthly installments
of $1,331 which includes principal and interest at 4%, the interest rate is subject
to adjustment based on 5-year Treasury Note rate 2021 and cannot be
be less than 4%. This note is secured by property held for sale in Richmond
Indiana and the personal guaranty of a shareholder of the Company.		148,737			151,234

Unsecured 8% notes payable to an entity controlled by shareholders of the
Company dated December 26, 2017 originally due on demand after June 1, 2020.
Effectice July 1, 2019 a revised note was entered into due June 1, 2021
with monthly payments of $5,000 due beginning August 1, 2019. An additional
$50,000 was advanced to the Company in January 2020 and this advance
is included in current maturities.		257,264			207,264

Note payable to bank dated December 28, 2018 due in monthly
installments of $1,644 through December 31, 2023 which includes principal
and interest at a fixed rate of 5.50%. This note is secured by the West St. Paul
location and the personal guaranty of a shareholder of the Company.		189,800			192,068

		3,556,679			3,558,082
Less - unamortized debt issuance costs		(58,087	)		(59,381	)
Current maturities		(243,784	)		(277,666	)

Total	$	3,254,808		$	3,221,035

	13-Week Period
	2020			2019
Revenues	$	1,303,430		$	1,377,833
Reconciliation:
(Loss) from operations		(79,777	)		(129,177	)
Depreciation and amortization		44,820			59,235
General and administrative, corporate level expenses		66,216			127,784
Restaurant-level EBITDA		(1,598	)		59,119
Restaurant-level EBITDA margin		0.0	%		4.2	%