UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.DC 20549

FORM 10-Q

For the quarterly period ended: October 2, 2022

or

For the quarterly period ended: March 29, 2020

or

For the transition period from ________ to _________ 

Commission File Number: 333-23323333-233233

(307) 223-1663

(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:

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

If an emerging growth company, indicate by a 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,November 14, 2022, there were 8,095,0046,461,118 shares of common stock outstanding.

CAUTIONIONARYCAUTIONARY 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 ownedwholly-owned subsidiaries (together, "BT Brands" or the “Company”"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”"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-lookingForward-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 believeswe believe 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,public health, which include risks and uncertainties related to the current unknown duration of the COVID-19 pandemic,COVID in its various forms, 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 2019our 2021 annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”"SEC") on April 15, 2020.March 17, 2022. Many of these risks and uncertainties are beyond theour ability of the Company to control nor can the Company predict,or 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 Companyreport. We expressly disclaimsdisclaim any obligation or undertaking to report any updates or revisions to any such statement to reflect any change in the Company’sour expectations or any change in events, conditions, or circumstances on which any such statement is based, except as required by law.

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BT BRANDS, INC.  AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

See Notes to Condensed Consolidated Financial Statements (unaudited)

BT BRANDS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

See Notes to Condensed Consolidated Financial Statements (Unaudited)

BT BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (Unaudited)BALANCE SHEETS

See Notes to Condensed Consolidated Financial Statements (Unaudited)

BT BRANDS, INC. AND SUBSIDIARYSUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See Notes to Consolidated Condensed Financial Statements

BT BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See Notes to Consolidated Condensed Consolidated Financial Statements (Unaudited)

BT BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

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," "BT Brands," or "BT") and have been prepared in accordance with the US generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Securities and Exchange Commission ("SEC") requirements for Form 10-Q and Article 10 of Regulation S-X. All intercompany accounts and transactions have been eliminated in consolidation. These interim condensed consolidatedThe financial statements 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.ending January 2, 2022. In our opinion, all adjustments, which are normalregular and recurring in nature,adjustments 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, 2020October 2, 2022, 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, 2019January 2, 2022, and the related notes thereto included in the Company’sour Form 10-K for the fiscal year ended December 29, 2019.ending January 2, 2022.

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 TransactionThe 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.2016. Effective on July 30, 2018, the Companyit acquired 100% of the ownership BTND, LLC. in exchange for common stockLLC

Business

As of October 2, 2022, BT Brands owned and operated thirteen restaurants, including nine Burger Time restaurants in the Company throughNorth Central region of the United States, a Share Exchange Agreement (“Share Exchange”Dairy Queen fast-food franchised location in suburban Minneapolis, Minnesota, collectively ("BTND") with BTND, LLC (“BTND”), and its Members.. Following the Share Exchange, BTND became a wholly owned subsidiaryend of the third quarter on November 6, 2022, the Burger Time in West St. Paul, Minnesota was permanently closed. The Company is considering alternate uses for reporting purposes under GAAP.the site. We own Keegan's Seafood Grille ("Keegan's"), a dine-in restaurant located in Florida, Pie In The Sky Coffee and Bakery ("PIE"), a casual dining coffee shop bakery located in Woods Hole, Massachusetts, and the Village Bier Garten, a German-themed restaurant in Cocoa, Florida. Our Burger Time restaurants feature a variety of burgers and other affordable foods, sides, and soft drinks. Our Dairy Queen restaurant offers a proscribed menu consisting of burgers, chicken, sides, ice cream, other desserts, and various beverages. Keegan's Seafood Grille has operated in Indian Rocks Beach, Florida, for more than thirty-five years and offers a variety of traditional fresh seafood items for lunch and dinner. The menu at Keegan's includes beer and wine. PIE features an array of fresh baked goods, freshly made sandwiches, and our locally roasted coffee. The Village Bier Garten is a full-service restaurant and bar featuring a German-themed menu, specialty imported European beers, and regular entertainment. Our revenues are derived from food and beverages at our restaurants; retail goods such as apparel, private-labeled "Keegan's Hot Sauce," and other souvenir items account for an insignificant portion of our income.

BusinessOn June 2, 2022, BT Brands purchased 11,095,085 common shares representing 41.2% of Bagger Dave's Burger Tavern, Inc. ("Bagger Dave's"). We acquired the shares from its founder for $1,260,000, or approximately $0.114 per share. Following the investment, representatives of BT Brands were appointed to two of the three positions on Bagger Dave's Board of Directors. Bagger Dave's specializes in locally sourced, never-frozen prime rib recipe burgers, all-natural lean turkey burgers, hand-cut fries, locally crafted beers on draft, milkshakes, salads, black bean turkey chili, and pizza. The first Bagger Dave's opened in January 2008 in Berkley, Michigan. There are currently six Bagger Dave's restaurants, including four in Michigan and single units in Ft. Wayne, Indiana, and Centerville, Ohio.

The Company’sOur Dairy Queen storelocation is operated pursuant to the terms ofunder a franchise agreement with International Dairy Queen. The Company is required toWe pay regular royalty and advertising payments to the franchisor and to remain in compliance with the terms ofas the franchise agreement.agreement requires.

Fiscal Year Period

The Company’sBT Brand'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 thea 52-week year. All references to years in this report refer to the 13-week periods in the respective fiscal year periods. Fiscal 20202022 is a 53-week52-week year ending January 1, 2023, and fiscal 2021 was a 52-week year ending January 2, 2022.

Cash

Our bank deposits often exceed the amount insured by the Federal Deposit Insurance Corporation. In addition, we maintain cash deposits in brokerage accounts, including money market funds above the insured amount. We do not believe there is a significant risk related to cash.

Investment

Our 41.2% ownership of Bagger Dave's is accounted for using the "equity method" of accounting. Under the equity method, our share of the net income (loss) is recognized as income (loss) in our condensed consolidated statements of income and added to (subtracted from) the investment account. Dividends received, if any, are deducted from the investment. See Note 9 for information regarding our related party investment.

Fair Value of Financial Instruments

Our accounting for fair value measurements of assets and liabilities, including available-for-sale securities, is that they are recognized or disclosed at fair value in the statements on a recurring or nonrecurring basis, adhere to the Financial Accounting Standards Board (FASB) fair value hierarchy that prioritizes the input to valuation techniques used to measure fair value.

The hierarchy prioritizes unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 2021.measurements).

The three levels of the fair value hierarchy are as follows:

The level in the fair value hierarchy within which a fair measurement in its entirety falls is based on the lowest level input that is significant to fair value measurement in its entirety.

The carrying values of cash, receivables, accounts payable, and other financial working capital items approximate fair value due to the short maturity nature of these instruments.  

Investments in marketable equity securities are carried at fair value. On October 2, 2022, marketable securities consisted of exchange-listed equity securities with a historical cost of $808,619. These investments are reflected in the accompanying financial statements on October 2, 2022, at the level-one fair value quoted in an active market of $653,399.

Receivables

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 consistsconsist of rebates due from a primary vendor.

Inventory

Inventory consists of food, beverages, and supplies and is stated at a 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 rangeranging from three to thirty years.

The Company reviewsWe review long-lived assets to determine if the carrying value of these assets may not beis recoverable based on estimated cash flows. Assets are reviewedevaluated 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 us for the Company with respect to future operating results of each restaurant over its remaining life.restaurant. 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.

Goodwill

Goodwill is the excess of the purchase price over the estimated fair value of acquired business assets. In accordance with GAAP, goodwill is not amortized. We periodically assess goodwill for impairment and have determined there is no goodwill impairment at October 2, 2022. 

Intangible Assets

Intangible assets with estimated finite lives result from business acquisitions and include the allocated cost of trademarks, tradenames, a covenant not to compete, websites, and social media accounts. The costs of purchased intangible assets are recorded at the estimated value and are amortized over 4 to 20 years.

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. AAs of October 2, 2022, a property in the St. Louis area, is currently listed for sale. Also, in Septemberwhich has a carrying value of 2018 the Company closed an operating Burger Time unit$0, and a property in Richmond, Indiana, andare held for sale. We believe 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 thewill be sold at or above its current-carrying cost. The remaining book value of $258,751 is included in Other Assets in the Richmond location.accompanying balance sheet.

Income Taxes

We accountThe Company provides for income taxes using theunder Accounting Standards Codification (ASC), 740, Accounting for Income Taxes. ASC 740 uses an asset and liability method, whereby deferredapproach in accounting for income taxes. Deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities andliabilities. They are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company providesIf necessary, we provide 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 October 2, 2022, we estimated a current tax provision at the net combined federal and state rate of approximately 27.5%.

The Company 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 income tax provisionobligations. There currently are no federal or benefit was recognizedstate examinations in progress. The Company has not had any federal or state tax examinations since its inception. 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.inspection.

Per Common Share Amounts

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. 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 or loss per share is computedcalculated 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 becauseamounts if their effect would beis anti-dilutive. There were no potentially dilutive shares outstanding as offor the periods ending in 20202022 and 2019,2021.  

NOTE 2 – ACQUISITIONS

Restaurant Acquisition - Keegan's

On March 2, 2022, we purchased the net assets of Keegan's, a fresh seafood restaurant located in Indian Rocks Springs, Florida. Concurrent with the purchase, we entered a 131-month lease for the approximately 2800 square foot space that Keegan's has occupied for more than 35 years. We acquired Keegan's tradename as part of the strikepurchase and will continue to operate the business as Keegan's Seafood Grille. The purchase price was approximately $1.15 million, paid in cash at closing.

The acquisition of Keegan's was accounted for warrants outstanding was aboveusing the acquisition method of accounting following ASC 805 "Business Combinations." Accordingly, the consolidated statements of operations include the results of these operations from the date of acquisition. The assets acquired were recorded at their estimated fair marketvalues. The Company recorded provisional amounts and will complete the acquisition accounting once it finalizes its valuation analysis.

For the Keegan's acquisition, we provisionally recorded $204,211 in goodwill, representing the excess of fair value over the purchase price of the underlying stock in both periods.identifiable assets; the allocation to purchased goodwill is expected to be deductible for income tax purposes over fifteen years.

Other Assets

Other assets principally isThe following table presents the allocatedpreliminary estimate of the fair value of the assets acquired Dairy Queen franchise agreement relatedand liabilities assumed in the transaction: