UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: ~~October~~April 3, ~~2021~~2022

☐ 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: 333-233233

BT BRANDS, INC.

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

Wyoming		~~91-1495764~~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)

~~(701) 277-0080~~(307) 291-9885
(~~Registrant’s~~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:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
~~common stock,~~Common Stock, $0.002 per share	BTBD	The NASDAQ Stock Market LLC
~~warrants~~Warrant to ~~purchase common stock~~Purchase Common Stock	BTBDW	The NASDAQ Stock Market LLC

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated ~~filer~~Filer	☒	Smaller reporting company	☒
		Emerging Growth Company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

At ~~November~~May 16, ~~2021,~~2022, there were ~~6,447,506~~6,461,118 shares of common stock outstanding.

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~~wholly-owned subsidiaries (together, 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-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~~You should evaluate all forward-looking statements made in this ~~quarterly report. Such~~report in the context of the factors that could cause outcomes to differ materially from our expectations. These factors include, but are not limited to:

	·	capital requirements and the availability of capital to fund our growth and to service our existing bank debt;
	·	difficulties executing our growth strategy, including completing profitable acquisitions;
	·	our anticipated use of the net proceeds from this offering;
	·	economic uncertainties and business interruptions resulting from the coronavirus global pandemic and its aftermath;
	·	following the global pandemic, it will be difficult for us to maintain recent sales gains, and we will likely experience a decline in comparable-store sales;
	·	all risks of acquiring an existing restaurant business, including identifying a suitable target, completing comprehensive due diligence, the impact on our financial condition of the debt we may incur in acquiring the target, and the ability to integrate the target's operations with our existing operations, our ability to retain management and key employees of the target, among other factors attendant to acquisitions;
	·	difficulties in increasing restaurant revenue and comparable restaurant sales;
	·	challenges related to hiring and retaining store employees at competitive wage rates;
	·	our failure to prevent food safety and foodborne illness incidents;
	·	shortages or interruptions in the supply or delivery of food products;
	·	our dependence on a small number of suppliers and a single distribution company;
	·	negative publicity relating to any one of our restaurants;
	·	competition from other restaurant chains with significantly greater resources than we have;
	·	changes in consumer tastes and nutritional and dietary trends;
	·	our inability to manage our growth;
	·	our inability to maintain an adequate level of cash flow, or access to capital, to meet growth expectations;
	·	changes in management, loss of key personnel, or an inability to attract, hire, integrate and retain skilled personnel;
	·	labor shortages and increased labor costs;
	·	our vulnerability to increased food, commodity, and energy costs;
	·	the impact of governmental laws and regulation;
	·	failure to obtain and maintain required licenses and permits to comply with food control regulations;
	·	changes in economic conditions and adverse weather and other unforeseen conditions, especially in the north-central United States where most of our restaurants currently are located;
	·	protecting our intellectual property or breaches of security of confidential information.

Table of Contents

We caution you that the important factors referenced above may ~~include, without limitation,~~not contain all of the ~~risks, uncertainties~~factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences we anticipate or affect us or our operations in the ways we expect. The forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law. If we update one or more forward-looking statements, no inference should be made that we will make additional updates regarding those or other forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

From time to time, oral or written forward-looking statements are also included in our reports on Forms 10-K, 10-Q, and ~~regulatory developments (1) related~~8-K, our Schedule 14A, our press releases and other materials released to the ~~COVID-19 pandemic, which include~~public. Although we believe that at the time made, the expectations reflected in all of these forward-looking statements are and will be reasonable, any or all of the forward-looking statements may prove to be incorrect. This may occur as a result of inaccurate assumptions or as a consequence of known or unknown risks and ~~uncertainties related to the current unknown duration of the COVID-19 pandemic, the impact of governmental regulations that have been, and may~~uncertainties. Many factors discussed in ~~the future be, imposed in response to the pandemic which potentially could have an impact on discretionary consumer spending and (2) those discussed and described in the Company’s 2020 annual report~~this Quarterly Report on Form ~~10-K~~10-Q, certain of which are beyond our control, will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from forward-looking statements. In light of these and other uncertainties, you should not regard the inclusion of a forward-looking statement in this Quarterly Report on Form 10-Q or other public communications that we might make as a representation by us that our plans and objectives will be achieved, and you should not place undue reliance on such forward-looking statements.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in our subsequent periodic reports filed with the Securities and Exchange Commission (the “SEC”) on 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.Commission.

Table of Contents

TABLE OF CONTENTS

PART ~~I —~~ I— FINANCIAL ~~INFORMATION~~INFORMATION.		5

ITEM 1.	FINANCIAL ~~STATEMENTS~~STATEMENTS.	5	4
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF ~~OPERATION~~OPERATION.	16	13
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET ~~RISK~~RISK.	23	23
ITEM 4.	CONTROLS AND PROCEDURES.		23

PART II—OTHER ~~INFORMATION~~INFORMATION.		24

ITEM 1.	LEGAL ~~PROCEEDINGS~~PROCEEDINGS.	24	24
ITEM 1A.	RISK ~~FACTORS~~FACTORS.	24	24
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF ~~PROCEEDS~~PROCEEDS.	24	24
ITEM 3.	DEFAULTS UPON SENIOR ~~SECURITIES~~SECURITIES.	24	24
ITEM 4.	MINE SAFETY ~~DISCLOSURES~~DISCLOSURES.	24	24
ITEM 5.	OTHER ~~INFORMATION~~INFORMATION.	24	24
ITEM 6.	EXHIBITS.	25	25
~~SIGNATURES~~SIGNATURES.		26	26

~~PART I — FINANCIAL INFORMATION~~

~~ITEM 1. FINANCIAL STATEMENTS~~

~~BT BRANDS, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED BALANCE SHEETS~~

October 3,
2021
(Unaudited)

January 3,
2021

ASSETS

CURRENT ASSETS

Cash

$ 2,078,812

$ 1,321,244

Receivables

31,751

19,030

Inventory

69,443

60,576

Prepaid expenses and other current assets

66,366

5,348

Total current assets

2,246,372

1,406,198

PROPERTY AND EQUIPMENT, net

1,546,038

1,632,457

LAND AND BUILDINGS HELD FOR SALE

258,751

258,751

INVESTMENT IN RELATED COMPANY

75,000

75,000

OTHER ASSETS, net

15,200

16,759

Total assets

$ 4,141,361

$ 3,389,165

LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES

Current maturities of long-term debt

$ 178,611

$ 245,306

Accounts payable

419,007

270,487

Accrued expenses

304,598

420,734

Income taxes payable

177,088

97,978

Total current liabilities

1,079,304

1,034,505

LONG-TERM DEBT, less current maturities

3,005,113

2,938,983

DEFERRED INCOME TAXES

176,000

118,000

Total liabilities

4,260,417

4,091,488

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' DEFICIT

Preferred stock, $.001 par value, 2,000,000 shares authorized, no shares outstanding at October 3, 2021 and January 3, 2021

0

0

Common stock, $.002 par value, 50,000,000 authorized, 4,047,506 shares outstanding at October 3, 2021 and January 3, 2021

8,095

8,095

Additional paid-in capital

497,671

497,671

Accumulated deficit

(624,822 )

(1,208,089 )

Total shareholders' deficit

(119,056 )

(702,323 )

Total liabilities and shareholders' deficit

$ 4,141,361

$ 3,389,165

~~See Notes to Condensed Consolidated Financial Statements~~

Table of Contents

~~BT BRANDS, INC. AND SUBSIDIARIES~~

PART I — FINANCIAL INFORMATION

~~CONSOLIDATED STATEMENTS OF INCOME~~

~~(Unaudited)~~

39 Weeks Ended,

13 Weeks Ended,

October 3,
2021

September 27,
2020

October 3,
2021

September 27,
2020

SALES

$ 6,604,554

$ 6,074,222

$ 2,280,999

$ 2,374,454

COSTS AND EXPENSES

Restaurant operating expenses

Food and paper costs

2,580,224

2,299,989

944,171

863,997

Labor costs

1,794,499

1,718,703

607,780

624,696

Occupancy costs

436,196

504,142

132,542

170,109

Other operating expenses

355,024

313,101

102,943

121,827

Depreciation and amortization

173,799

140,588

60,405

49,668

Impairment of assets held for sale

0

100,000

0

0

General and administrative

295,397

371,455

74,415

188,292

Total costs and expenses

5,635,139

5,447,978

1,922,256

2,018,589

Income from operations

969,415

626,244

358,743

355,865

INTEREST EXPENSE

(161,148 )

(136,347 )

(32,916 )

(45,188 )
INTEREST INCOME

0

92,707

0

28,507

OTHER INCOME

0

466,758

0

0

INCOME BEFORE TAXES

808,267

1,049,362

325,827

339,184

PROVISION FOR INCOME TAXES

(225,000 )

(234,000 )

(90,000 )

(85,000 )

NET INCOME

$ 583,267

$ 815,362

$ 235,827

$ 254,184

NET INCOME PER COMMON SHARE -

Basic and Diluted

$ 0.14

$ 0.20

$ 0.06

$ 0.06

WEIGHTED AVERAGE NUMBER OF SHARES USED

IN COMPUTING PER COMMON SHARE AMOUNTS -

Basic and Diluted

4,047,506

4,047,506

4,047,506

4,047,506

ITEM 1. FINANCIAL STATEMENTS

BT BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	April 3, 2022			January 2, 2022
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash	$	11,073,645		$	12,385,632
Maketable securities		254,100			0
Receivables		15,830			72,251
Inventory		97,850			79,510
Prepaid expenses and other current assets		51,110			27,186

Total current assets		11,492,535			12,564,579

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET		2,411,600			1,592,338
LAND AND BUILDINGS HELD FOR SALE		258,751			258,751
OPERERATING LEASE RIGHT-OF-USE ASSET		615,701			0
INVESTMENT IN RELATED COMPANY		304,000			75,000
GOODWILL		200,000			0
OTHER ASSETS, net		131,546			15,059

Total assets	$	15,414,133		$	14,505,727

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	403,328		$	291,973
Current maturities of long-term debt		171,357			169,908
Current operating lease obligation		34,400			0
Accrued expenses		360,085			254,341
Income taxes payable		198,749			209,088

Total current liabilities		1,167,919			925,310

LONG-TERM DEBT, LESS CURRENT PORTION		2,790,728			2,833,064
NONCURRENT OPERATING LEASE OBLIGATION		582,117			0
DEFERRED INCOME TAXES		94,000			119,000
Total liabilities		4,634,764			3,877,374

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preferred stock, $0.001 par value, 2,000,000 shares authorized, no shares outstanding at April 3, 2022 and January 2, 2022		0			0
Common stock, $0.002 par value, 50,000,000 authorized, 6,461,118 and 6,447,506 shares issued and outstanding at April 3, 2022 and January 2, 2022, respectively		12,922			12,895
Additional paid-in capital		11,324,035			11,215,696
Accumulated deficit		(557,588	)		(600,238	)

Total shareholders' equity		10,779,369			10,628,353

Total liabilities and shareholders' equity	$	15,414,133		$	14,505,727

See Notes to Condensed Consolidated Financial Statements

Table of Contents

BT BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ~~SHAREHOLDERS' EQUITY (DEFICIT)~~INCOME
*(Unaudited)*

Common Stock

Additional
Paid-in

Accumulated

For the 39-week periods -

Shares

Amount

Capital

(Deficit)

Total

Balances, January 3, 2021

4,047,502

$ 8,095

$ 497,671

$ (1,208,089 )

$ (702,323 )
Shares issued for fractional holdings

4

0

0

0

0

Net income

-

0

0

583,267

583,268

Balances, October 3, 2021

4,047,506

$ 8,095

$ 497,671

$ (624,822 )

$ (119,056 )

Common Stock

Additional
Paid-in

Accumulated

Shares

Amount

Capital

(Deficit)

Total

Balances, December 29, 2019

4,047,506

$ 8,095

$ 497,671

$ (1,902,081 )

$ (1,396,315 )
Net income

-

0

0

815,362

815,362

Balances, September 27, 2020

4,047,506

$ 8,095

$ 497,671

$ (1,086,719 )

$ (580,953 )

Additional

Common Stock

Paid-in

Accumulated

For the 13-week periods -

Shares

Amount

Capital

(Deficit)

Total

Balances, July 4, 2021

4,047,506

$ 8,095

$ 497,671

$ (860,649 )

$ (354,883 )
Net income

-

0

0

237,827

235,828

Balances, October 3, 2021

4,047,506

$ 8,095

$ 497,671

$ (624,822 )

$ (119,056 )

Additional

Common Stock

Paid-in

Accumulated

Shares

Amount

Capital

(Deficit)

Total

Balances, June 28, 2020

4,047,506

$ 8,095

$ 497,671

$ (1,340,903 )

$ (835,137 )
Net income

-

0

0

254,184

254,184

Balances, September 27, 2020

4,047,506

$ 8,095

$ 497,671

$ (1,086,719 )

$ (580,953 )

	13 Weeks Ended,			13 Weeks Ended,
	April 3, 2022			April 4, 2021

SALES	$	2,073,195		$	1,940,872

COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		721,583			731,954
Labor costs		607,710			565,492
Occupancy costs		174,638			136,548
Other operating expenses		119,867			123,209
Depreciation and amortization expenses		69,415			54,836
General and administrative expenses		291,061			105,338

Total costs and expenses		1,984,274			1,717,377

Income from operations		88,921			223,495
INTEREST EXPENSE		(28,271	)		(38,571	)
INCOME BEFORE TAXES		60,650			184,924
INCOME TAXES		(18,000	)		(50,000	)
NET INCOME	$	42,650		$	134,924
NET INCOME PER COMMON SHARE - Basic and Diluted	$	0.01		$	0.03

WEIGHTED AVERAGE SHARES USED IN COMPUTING PER COMMON SHARE AMOUNTS - Basic and Diluted		6,455,434			4,047,502

See Notes to Condensed Consolidated Financial Statements

Table of Contents

BT BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~

39 Weeks
Ended

39 Weeks
Ended

October 3,
2021

September 27,
2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net Income

$ 583,267

$ 815,362

Adjustments to reconcile net income to net cash provided by operating activities-

Depreciation and amortization

173,799

140,588

Amortization of debt issuance cost included in interest expense

55,555

3,882

Deferred taxes

58,000

(10,000 )
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 )

(6,365 )
Inventory

(8,867 )

(1,186 )
Prepaid expenses and other current assets

(29,195 )

6,303

Accounts payable

148,520

70,999

Unearned vendor rebate

0

(3,668 )
Accrued expenses

(116,136 )

681

Income taxes payable

79,110

233,000

Net cash provided by operating activities

931,332

1,388,964

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment

(85,821 )

(57,736 )
Proceeds on notes due from related entity

0

104,000

Net cash provided by (used in) investing activities

(85,821 )

46,264

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from long-term debt

3,107,100

77,500

Principal payments on long-term debt

(3,113,521 )

(377,566 )
Payment of debt issuance costs

(49,699 )

0

Payment of deferred offering costs

(31,823 )

0

Net cash used in financing activities

(87,943 )

(300,066 )

CHANGE IN CASH

757,568

1,135,162

CASH, BEGINNING OF PERIOD

1,321,244

258,101

CASH, END OF PERIOD

$ 2,078,812

$ 1,393,263

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest

$ 127,800

$ 93,096

Transfer of property and equipment to assets held for sale

$ 0

$ 189,640

Cash paid for Income taxes

$ 88,006

$ 0

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

Balances, January 3, 2021		4,047,502	$	8,095	$	497,671	$	(1,208,089	)	$	(702,323	)
Net income		-		0		0		134,924			134,924
Balances, April 4, 2021		4,047,502		8,095		497,671		(1,073,165	)		(567,399	)

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

Balances, January 2, 2022		6,447,506	$	12,895	$	11,215,696	$	(600,238	)	$	10,628,353
Stock-based compensation		-		0		33,500		0			33,500
Exercise of common stock warrants		13,612		27		74,839		0			74,866
Net income		-		0		0		42,650			42,650
Balances, April 3, 2022		6,461,118		12,922		11,324,035		(557,588	)		10,779,369

See Notes to Condensed Consolidated Financial Statements

Table of Contents

BT BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	13 Weeks ended,
	April 3, 2022			April 4, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	42,650		$	134,924
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization		69,415			56,301
Amortization of debt issuance premium included interest expense		1,350			0
Deferred taxes		(25,000	)		10,000
Stock-based compensation		33,500			0
Unrealized loss on available-for-sale securities		6,746			0
Changes in operating assets and liabilities, net of acquisition -
Receivables		56,421			14,483
Inventory		(8,291	)		(7,018	)
Prepaid expenses and other current assets		(23,924	)		(7,143	)
Other assets		(10,000	)		0
Accounts payable		111,355			178,716
Accrued expenses		93,511			(177,971	)
Income taxes payable		(10,339	)		40,000
Net cash provided by operating activities		337,394			242,292

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of assets of Keegan's Seafood Grille		(1,150,000	)
Purchase of property and equipment		(10,164	)		(40,709	)
Investment in related company		(229,000	)
Other assets		(32,000	)
Purchase of Maketable securities		(260,846	)
Net cash used in investing activities		(1,682,010	)		(40,709	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of common stock warrants		74,866			0
Principal payments on long-term debt		(42,237	)		(62,729	)
Net cash provided by (used in) financing activities		32,629			(62,729	)

CHANGE IN CASH		(1,311,987	)		138,854

CASH, BEGINNING OF PERIOD		12,385,632			1,321,244
					-
CASH, END OF PERIOD	$	11,073,645		$	1,460,098

SUPPLEMENTAL DISCLOSURES
Cash paid for interest	$	26,291		$	37,106

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 (the ~~“Company”, “we”, “our”, “us”,~~"Company,” "we,” "our,” "us,” or ~~“BT Brands”~~"BT Brands") and have been prepared in accordance with the U.S. generally accepted accounting principles ~~(“GAAP”~~("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 and have been prepared on a basis consistent in all material respects with the accounting policies for the fiscal year ended January ~~3, 2021.~~2, 2022. 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 ~~October~~April 3, ~~2021,~~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 January ~~3, 2021,~~2, 2022, and the related notes thereto included in the ~~Company’s~~Company's Form 10-K for the fiscal year ended January ~~3, 2021.~~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, and the differences could be material.

The Company

BT Brands, Inc. (the ~~“Company”~~"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 Company acquired 100% of ~~the ownership~~ BTND, LLC.

Business

As of April 3, 2022, we owned and operated eleven restaurants, including nine Burger Time fast-food restaurants, one Dairy Queen fast-food restaurant, and Keegan's Seafood Grille ("Keegan's"), a dine-in restaurant located in ~~exchange for common stock~~Florida. Our fast-food restaurants are all located in the ~~Company through~~North Central region of the United States. Our Burger Time restaurants feature a ~~Share Exchange Agreement (“Share Exchange”) with members~~wide variety of ~~BTND, LLC (“BTND”).~~

~~Business~~burgers and other affordable 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, 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. Our revenues are derived principally from the sale of food and beverages at our restaurants, and branded retail merchandise accounts for an insignificant portion of our income.

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 2018 which is listed for sale. There were a total of ten operating restaurants on October 3, 2021.

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

Fiscal Year Period

The ~~Company’s~~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 ~~26-week~~13-week periods in the respective fiscal year periods. ~~Fiscal 2021~~The fiscal year 2022 is ~~a 52-week year~~52 weeks ending January ~~2, 2022.~~1, 2023.

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Cash

~~For purposes of reporting cash~~Cash and cash flows ~~cash is~~are reported net of outstanding checks and ~~includes,~~include amounts on deposit at banks and deposits in transit.

At times, the bank deposits exceed the amount insured by the Federal Deposit Insurance Corporation. The Company also maintains cash deposits in brokerage in excess of the insured amount. The Company believes there is not a significant risk related to cash.

~~Receivables~~Fair Value of Financial Instruments
The Company's 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 measurements).
The three levels of the fair value hierarchy are as follows:
·
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.
·
Level 2 inputs are inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the entire term of the asset or liability.
·
Level 3 Inputs are unobservable inputs for the asset or liability.
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.
Equity investments in marketable securities are carried at fair value. At April 3, 2022, the $6,745 reduction from cost to fair value was not considered material and is included in general and administrative expenses. On April 3, 2022, the cost of marketable securities consisted of a single Nasdaq-listed level-one security with a cost of $260,845. This investment is reflected in the accompanying financial statements at April 3, 2022, at the level-one fair value quoted in an active market of $254,100.
Receivables

Receivables 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~~ranging from three to thirty years.

The Company reviews long-lived assets to determine if the carrying value of these assets ~~may not be~~is recoverable based on estimated cash flows. Assets are ~~reviewed~~evaluated 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~~for 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.  The Company periodically assesses goodwill for impairment. Management has estimated there is no impairment of goodwill at April 3, 2022,
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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. The carrying value~~As of April 3, 2022, a property in the St. Louis area, ~~was fully reserved for in 2020. In September~~which has a carrying value of ~~2018 the Company closed an operating Burger Time unit~~$0, and a property in Richmond, Indiana, ~~and the Richmond property is listed~~are held 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 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~~the current-carrying cost of assets held for sale.
Income Taxes

~~Income Taxes~~
~~We provide~~Ths Company provides for income taxes under (Accounting Standards Codification (ASC), 740), Accounting for Income Taxes. ASC 740 ~~using~~uses an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the 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~~liabilities. They 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. ~~The~~
As of April 3, 2022, the Company estimates a current tax provision ~~for~~at the combined federal and state ~~income taxes at the combined~~ statutory rate of approximately 27.5%

The Company ~~currently~~ has no accrued interest or penalties relating to ~~any~~ income tax obligations. The Company currently has no federal or state examinations in progress, nor has it had any federal or state tax examinations since its ~~inception and all~~inception. All periods since inception remain open for ~~examination.~~
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inspection.

Per Common Share Amounts

Net income per common share is computed ~~pursuant to section 260-10-45 of the FASB ASC. Basic net income 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~~calculated 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 income~~per share amounts if their effect ~~would be~~is anti-dilutive. There were no ~~potentially~~ dilutive shares ~~outstanding~~ as of the periods ending in ~~2021~~2022 and ~~2020, as the strike price for warrants outstanding was above the fair market price of the underlying stock in both periods.~~2021.

Other Assets

Other assets include intangible assets that are the allocated fair value of trademarks and other assets purchased in the acquisition of Keegan's and the acquired Dairy Queen ~~franchise agreement related to~~franchise. Where appropriate, the ~~Company’s location in Ham Lake, Minnesota, which~~cost of intangible assets is ~~being~~ amortized over anthe estimated useful ~~life of 14 years.~~life.

NOTE 2 – ~~PROPERTY AND EQUIPMENT~~ACQUISITION

~~Property and equipment consisted of the following at:~~

October 3,
2021

January 3,
2021

Land

$ 485,239

$ 485,239

Equipment

2,566,295

2,497,576

Buildings

1,322,085

1,306,896

Total property and equipment

4,373,619

4,289,711

Accumulated depreciation

(2,568,830 )

(2,398,503 )
Less - property held for sale

(258,751 )

(258,751 )
Net property and equipment

$ 1,546,038

$ 1,632,457

~~Depreciation expense for the 39-week periods in 2021 and 2020 was $172,261 and $139,313, respectively.~~
~~NOTE 3 – ACCRUED EXPENSES~~Restaurant Acquisition - Keegan's

~~Accrued expenses consisted~~On March 2, 2022, the Company, through its 1519BT, LLC subsidiary ("1519BT"), purchased the assets of Keegan’s Seafood Grille, a fresh seafood restaurant located in Indian Rocks Springs, Florida (“Keegan’s). Concurrent with the purchase, the Company entered into a 131-month lease for a location for the approximately 2800 square foot space Keegan's has operated in for more than 35 years. The Company acquired the Keegan's tradename as part of the ~~following at:~~

October 3,
2021

January 3,
2021

Accrued real estate taxes

$ 103,129

$ 106,935

Accrued bonus compensation

7,000

162,000

Accrued payroll

93,217

56,139

Accrued payroll taxes

9,699

8,519

Accrued sales taxes payable

59,897

66,632

Accrued vacation pay

17,663

19,657

Other accrued expenses

13,993

852

$ 304,598

$ 420,734

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~~NOTE 4 – LONG TERM DEBT~~purchase and will continue to operate under the Keegan's Seafood Grille name. The purchase price was approximately $1.150 million, paid in cash at closing.

The ~~Company’s long-term debt is~~Keegan's acquisition was accounted for using 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 values based on information available as ~~follows:~~of April 3, 2022. The Company recorded provisional amounts for the acquired assets including goodwill as of April 3, 2022 and will complete the acquisition accounting once it finalizes its valuation analysis.

October 3,
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 Company shareholder. 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 totaling $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.

3,076,200

0

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. This note was paid in full on April 6, 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 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.

133,318

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.

23,375

27,500

3,232,893

3,238,494

Less - unamortized debt issuance costs

(48,349 )

(54,205 )
Current maturities

(178,611 )

(245,306 )
Total

$ 3,005,933

$ 2,938,983

As a result of the Keegan’s acquisition, the Company provisionally recorded $200,000 in Goodwill, representing the excess of fair value over the purchase price of the identifiable assets, which is expected to be deductible for income tax purposes over fifteen years.

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The following table presents the preliminary estimate of the fair value of the assets acquired and liabilities assumed in the Keegan's transaction is:
Assets acquired:

Inventory

$ 10,049

Equipment

428,000

Leasehold improvements

450,000

Trademark, website and other intangibles

75,000

Total identifiable assets acquired

963,049

Liabilities assumed:

Gift card liability

13,049

Net assets acquired

950,000

Goodwill

200,000

Purchase price

$ 1,150,000

NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:

April 3,
2022

January 2,
2022

Land

$ 485,239

$ 485,239

Equipment

3,082,831

2,674,529

Buildings and leasehold improvements

1,800,014

1,322,085

Total property and equipment

5,368,084

4,481,853

Accumulated depreciation

(2,697,733 )

(2,630,764 )
Less - property held for sale

(258,751 )

(258,751 )
Net property and equipment

$ 2,411,600

$ 1,592,338

Depreciation expense for the 13-week periods in 2022 and 2021 was $68,902 and $54,269, respectively.
NOTE 4 - ACCRUED EXPENSES
Accrued expenses consisted of the following at:

April 3,
2022

January 2,
2022

Accrued real estate taxes

$ 73,211

$ 103,615

Accrued bonus compensation

7,000

7,000

Accrued payroll

126,432

44,700

Accrued payroll taxes

14,599

8,424

Accrued sales taxes payable

80,714

50,414

Accrued vacation pay

17,663

17,663

Accrued gift card liability

23,622

10,036

Accrued franchise royalty

2,931

2,614

Other accrued expenses

13,913

9,875

$ 360,085

$ 254,341

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NOTE 5 - LONG TERM DEBT
The Company's long-term debt is as follows:

April 3,
2022

January 2,
2022

Three notes payable to a bank dated June 28, 2021 due in monthly installments totaling $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 on Company owned properties. The notes are guarenteed by BT Brands, Inc. and a shareholder of the Company.

$ 2,987,109

$ 3,027,971

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.

20,625

22,000

3,007,734

3,049,971

Less - unamortized debt issuance costs

(45,649 )

(46,999 )
Current maturities

(171,357 )

(169,908 )

$ 2,790,728

$ 2,833,064

NOTE 6 - STOCK-BASED COMPENSATION
In 2019, the Company adopted the 2019 BT Brands Incentive Plan (the "2019 Incentive Plan"), under which it may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units and other stock and cash awards to eligible participants. The number of common shares reserved for issuance is 250,000. As of April 3, 2022, there were 5,000 shares available for a grant under the 2019 Plan.
During the year ended January 2, 2022, we issued options to purchase 15,000 shares of common stock under the "2019 Incentive Plan as stock awards to three directors of the Company in connection with their joining the board of directors. The options are exercisable at $5 per share through 2031. In the first quarter of 2022, the company granted 215,750 options to employees and consultants to purchase shares at $2.50 per share.
Stock options granted to employees and directors generally vest over two to five years, in monthly or annual installments, as outlined in each agreement. Options expire ten years from the date of grant. Compensation expense equal to the grant date fair value of the options is recognized in general and administrative expense over the applicable service period. Compensation expense for the first-quarter period in 2022 was $33,500 and was zero in the first quarter of 2021.
The Company utilizes the Black-Scholes option pricing model when determining the compensation cost associated with stock options issued using the following significant assumptions:
●
Stock price – Published trading market values of the Company's common stock as of grant date.
●
Exercise price – The stated exercise price of the stock option.
●
Expected life – The simplified method
●
Expected dividend – The rate of dividends that the Company expects to pay over the term of the stock option.
●
Volatility – Estimated volatility.
●
Risk-free interest rate – The daily United States Treasury yield curve rate corresponding to the expected life of the award.
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The Company recognized stock-based compensation expense in its consolidated statements of operations for the three and nine months ended April 3, 2022, as follows:
Information regarding the Company's stock options is summarized below:

Number of

Weighted Average

Weighted Average Remaining Contract Term

Aggregate
Intrinsic

Options

Exercise Price

(In Years)

  Value

Options outstanding at January 2, 2022

15,000

$ 5.00

9.3

$ 0

Granted

215,750

2.50

0

Exercised

0

0

Canceled, forfeited, or expired

0

0

Options outstanding at April 3, 2022

230,750

$ 2.66

9.8

$ 0

Options exercisable at April 3, 2022

58,150

$ 3.13

9.7

$ 0

The Black-Scholes option-pricing model was used to estimate the fair value of the stock options with the following weighted-average assumptions for the period ended April 3, 2022:
Fair value of options granted during the period

$ 1.392

Expected life (in years)

4.833

Expected dividend

$ —

Expected stock volatility

63 %
Risk-free interest rate

2 %
On February 9, 2022, the Board of Directors and its Compensation Committee approved a proposal wherein senior management of the Company will be granted 250,000 shares of common stock as an award upon the Company's share price reaching $8.50 per share. Final approval of the plan is contingent upon shareholder approval of an expanded Incentive Stock Plan which is expected to be proposed at the next meeting of shareholders of the company.
NOTE 7 – LEASES
Concurrent with the acquisition of Keegan's assets, the Company entered into a lease for approximately 2,800 square feet of space the restaurant occupies. The terms of the 131-month lease provide for an initial rent of $5,000 per month with an annual escalation equal to the greater of 3% or the Consumer Price Index. The lease is being accounted for as an operating lease. At the inception of the lease, the Company recorded both an operating lease obligation and a right-of-use asset of $624,000. The present value discounted at 4% of the remaining lease obligation of $616,517 is reflected as a liability in the accompanying financial statements.
Because our lease for the Keegan location does not provide an implicit interest rate, we used our incremental borrowing rate of 4% to determine the lease payments' present value. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the lease term. Variable lease costs consist primarily of property taxes, insurance, certain utility costs and sales tax. In addition to the operating lease cost, the Company will incur certain variable lease costs, which are expected to average approximately $3,000 per month beginning in April 2022.
Following is a schedule of the approximate minimum future lease payments on the operating lease for the Keegans operating location as of April 3, 2022:
2022

$ 50,000

2023

61,650

2024

63,500

2025

67,400

2026

69,400

2027 and thereafter

459,050

Total future minimum lease payments

762,000

Less - interest

145,483

Present value of lease payments

$
616,517

The Company is a party to a month-to-month land lease agreement for one of its Burger Time locations. The net book value of the building located on this land is approximately $ 18,500. The monthly lease payment is $1,600 plus the cost of property taxes.
The Company also rents corporate office space in West Fargo, North Dakota, and Minnetonka, Minnesota, for a monthly rent of approximately $2,200.
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NOTE 8 - RELATED PARTY TRANSACTIONS

Next Gen Ice

In 2019, the Company made cash advances to Next Gen Ice, Inc. (NGI) in the form of Series C Notes totaling a principal amount of $179,000 ~~(“Notes”~~("Notes"). The ~~Company’s~~Company's CEO, Gary Copperud, is Chairman of the Board of Directors of ~~NGI and the Company’s~~NGI. The Company's Chief Operating Officer, Kenneth Brimmer, is also a member of the Board of Directors of NGI and serves as Chief Financial Officer of NGI on a part-time contract basis. Mr. Copperud and a limited liability company controlled by him together own approximately 34% of the outstanding equity of NGI. OnThe Notes were modified on March 2, 2020, ~~the Notes, were modified~~ and the maturity was extended to August 31, 2020. As part of the Note modification, the Company received 179,000 shares of common stock in Next Gen Ice from the founders of NGI, representing approximately 2% of NGI shares outstanding. The Company also holds warrants to purchase 358,000 shares of common stock ~~at a price of~~for $1.00 per share, ~~through~~which were initially set to expire on March 31, 2023. Effective with the Company’s agreement to make an additional investment in February 2022, the expiration date of the 358,000 $1.00 stock purchase warrants was extended by five years to March 31, 2028. The common stock and common stock purchase warrants received by the 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 does not have a readily determinable market ~~value and therefore~~value. Therefore, it is carried at the cost determined by the Company ~~at the time~~when the shares and warrants were received. The Notes were repaid in August 2020 with ~~interest, and currently there are no outstanding amounts due to~~interest. On February 2, 2022, the Company ~~from NGI.~~made an additional investment into NGI of $229,000 in NGI Series A1 8% Cumulative Convertible Preferred Stock, including a five-year warrant to purchase 57,250 shares at $1.65 per share. The total value of the Company’s investment in NGI at April 3, 2022, is $304,000, comprised of the $75,000 value determined by the Company for the initial common shares and warrants and the $209,000 cost of the February 2, investment in the NGI Convertible Preferred Stock and Warrants.

NOTE ~~6 –~~9 - CONTINGENCIES

~~During~~In the course of its business, 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 710 – SUBSEQUENT EVENT

~~Effective November 12, 2021,~~On May 11, 2022, the Company acquired the assets of an operating bakery and coffee shop located in Woods Hole, Massachusetts. The acquired assets have operated as Pie In The Sky Coffee and Bakery (“Pie Coffee”) for more than 20 years, near the Ferry Terminal in Woods Hole. Pie Coffee serves the local Woods Hole market and a significant seasonal market of visitors to Cape Cod and the Ferry Terminal. The Pie Coffee assets were acquired for $1,173,500 of cash. The Company has not yet finalized the allocation of the purchase price. At the time of purchase, we entered into ~~an Underwriting Agreement~~a five-year triple-net lease for the property occupied by Pie Coffee with ~~Maxim Group LLC.~~three 5-year renewal options. The initial rent of $10,000 per month for 24 months increases annually at 3% during the lease term and Joseph Gunnar & Company, LLC as representatives of an Underwriting Group to purchase 2,400,000 units, each unit consisting of one share of Common Stock and one five-year stock purchase warrant to purchase an additional share at $5.50 per share. Under the Underwriting Agreement, the gross proceeds to the Company are approximately $4.55 per share after deducting underwriting discounts and expenses. The Company also granted to the Underwriters an “overallotment option” wherein the Underwriters were granted the option to purchase an additional 300,000 units for 30 days following the offering. We estimate that the net proceeds from the sale of the units, after deducting underwriting discounts and commissions and estimated offering expenses incurred by us, will be approximately $10,665,000. If the underwriters fully exercise the over-allotment option, the net proceeds will be approximately $12,321,000.periods.

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

The following discussion of the financial condition, results of operations, liquidity and capital resources of BT Brands, Inc. and its wholly-owned subsidiaries (together, the ~~“Company”~~"Company") should be read in conjunction with the ~~Company’s~~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~~Management's Discussion and Analysis of Financial Condition and Results of Operations included in the ~~Company’s~~Company's annual report on Form 10-K for the year ended January ~~3, 2021.~~2, 2022.

~~Overview~~Introduction

~~We own~~As of April 2, 2022, we owned and ~~operate ten fast food~~operated eleven restaurants, including nine Burger Time fast-food restaurants, ~~and~~ one Dairy Queen fast-food restaurant, and Keegan's Seafood Grille, a dine-in restaurant located in Florida. Our fast-food restaurants are all ~~of which are~~located in the North Central region of the United States. Our Burger Time restaurants feature a wide variety of burgers and other ~~affordably priced~~affordable 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 various beverages. Keegan's Seafood Grille has operated in Indian Rocks Beach, Florida, for more than thirty-five years and offers a ~~wide array~~variety of ~~beverages.~~traditional fresh seafood items for lunch and dinner. The menu at Keegan's includes beer and wine. Our revenues are derived principally from the sale of food and beverages at our ~~restaurants.~~restaurants and branded retail merchandise, which accounts for an insignificant portion of our income.

Our Burger Time operating principles include: (i) offering a ~~“Bigger Burger”~~"Bigger Burger" to deliver our customers ~~“more~~"more good food for your ~~money”~~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 at our restaurants, including maintaining an inventory of ~~$5,000 to $15,000~~typically less than $20,000 per store at any given time (which also ~~has the advantage of allowing~~allows for frequent deliveries of fresh food)...

Our average customer transaction at Burger Time increased by 4% in the first ~~nine~~three months of fiscal ~~2021~~2022 compared to ~~2020~~2021 and currently is approximately ~~$11.90.~~$12.10. This recent increase is principally ~~because~~the result of a menu price increase ~~implemented~~ in ~~the middle of 2020.~~2021. Our sales trends are influenced by many factors, including the COVID pandemic, which ~~had been~~was a positive for our ~~sales, however, the~~sales. The environment isremains challenging for smaller restaurant chains as competition from the major fast-food hamburger-focused business is intense.

In the fourth quarter of 2021, we completed an initial public offering of units of our securities at a public offering price of $5.00 per unit, each unit comprising one share of common stock and one warrant to purchase one share of common stock at an exercise price of $5.50 per share. The net proceeds to the Company from the offering, including the exercise of the underwriter's option to purchase additional warrants, were approximately $10.7 million, after deducting underwriting discounts and commissions and payment of estimated offering expenses totaling approximately $1.3 million.
Material Trends and Uncertainties

There are industry trends ~~which~~that may have an impact on our business. These trends principally relate to the rapidly changing ~~area of~~ technology and food ~~delivery.~~delivery area. The major companies in the restaurant industry have rapidly adopted and developed applications for the ~~smart phone~~smartphone and mobile delivery, have aggressively expanded drive-through operations and have developed loyalty programs and ~~data base~~database marketing supported by a robust technology platform. We expect these trends to continue as restaurants aggressively ~~complete~~compete for customers. Further, the major industry participants have continued to strategically discount prices through promotions such as a ~~“dollar~~"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.~~2022. Beef costs were stable in 2020 and ~~recently~~since 2020 have increased by approximately 13.7% per ~~pound following an increase of approximately 5% in 2019.~~pound. Given the competitive nature of the fast-food burger restaurant industry, in response to recent commodity price increases, we are planning to implement a price increase in the ~~fourth~~second quarter of ~~2021, however, it~~2022. It may be difficult to raise menu prices to ~~fully~~ cover future cost increases. ~~During~~In 2020 and ~~continuing into~~ 2021, a significant increase in business volume contributed to improved profit margins. Additional margin improvements may have to be achieved through operational ~~improvements,~~enhancements, equipment advances and increased sales volumes to help offset any food cost increases due to the competitive state of the restaurant industry.
16
Table of Contents

The general state of the economy influences restaurant customer traffic, our ability to 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 ~~sre~~are ordered to close, or we may be forced to implement temporary voluntary closures or impose restrictions on operations ~~as a result of~~due to a shortage inof available workers. Even if such measures are not implemented, the perceived risk of infection or significant health risk may adversely affect our business.

13
~~Table of Contents~~
Growth Strategy and Outlook

We are seeking to increase value for our shareholders in the ~~foodservice~~food service industry. Our principal strategy is to acquire multi-unit restaurant concepts and individual ~~restaurant~~ properties at attractive ~~multiples of earnings.~~earnings multiples. Though we do not ~~currently plan~~have plans to do so, we may, under certain circumstances, ~~we may~~ develop additional Burger Time ~~locations through the acquisition and conversion of existing properties.~~locations. Other ~~key~~critical elements of our growth strategy encompass increasing ~~same store~~same-store sales and ~~boosting~~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~~frequently. We believe that we may be able to purchase either individual restaurant properties or multi-unit businesses at prices ~~providing~~that provide an attractive return on our investment. Alternatively, we may acquire 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 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 acquiring~~successfully acquire new businesses, we will operate the business or businesses with a shared central management organization. Following the acquisition, we expect to pursue a growth plan to ~~both~~ expand the number of 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~~near each other, we believe the concentration of operations will provide economic synergies ~~with respect to~~for management functions, marketing, and advertising, supply chain assistance, staff training, and operational oversight.
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Table of Contents

Future Development of Additional Burger Time Restaurants

We may consider developing additional Burger Time ~~location.~~locations. Conditions ~~which~~that 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~~an attractive price in a location that fits ~~naturally~~ within Burger ~~Time’s~~Time's geographic footprint so that we may share service expenses, including advertising costs.

If we elect to open additional Burger Time restaurants, we expect that the development of these restaurants will, based on our experience, require a minimum of six to nine months after opening to achieve the targeted restaurant-level sales and operating margins. ~~In a case where~~When we open a restaurant in new and untested markets, achieving targeted sales may take longer since the local population will not be familiar with our ~~brand and building~~brand. Building brand awareness takes time in a new anand untested market. How quickly new restaurants achieve their targeted sales and operating margin depends on many factors, including ~~the level of~~ consumer familiarity with our brand ~~as well as~~and the availability of experienced managers and other staff. However, every restaurant has a unique opening sales pattern, ~~and this pattern~~which is difficult to predict.
14
~~Table of Contents~~

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 apply techniques proven in the restaurant industry to increase ~~same store~~same-store sales at our 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~~using public relations and experiential marketing to engage customers. We expect ~~that~~ our strategies to increase same-store sales will evolve as we acquire new restaurant concepts in new markets.

Increase Brand Awareness

We appreciate that increasing brand awareness is ~~important~~essential to the growth of our Company. We will develop and implement forward-looking branding strategies ~~both~~ for ~~our~~ Burger Time ~~concept~~ and ~~for~~ any ~~businesses that we acquire.~~acquired businesses. We will seek to leverage social media and employ targeted digital advertising to expand the reach of our brands and drive traffic to our stores. In addition, we intend to develop mobile applications that will allow consumers to find restaurants, order online and 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.~~interaction. We expect ~~that~~ our branding initiatives ~~will~~to 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.

15
First Quarter Highlights
~~Table of Contents~~

On March 2, 2022, we consummated the acquisition of substantially all of the assets of Keegan's Seafood Grille, Inc., an operating restaurant located in Indian Rocks Beach, Florida. We acquired the assets for a purchase price of $1,150,000. The acquired assets have operated as Keegan's Seafood Grille for more than 35 years, primarily serving the Clearwater and St. Petersburg, Florida markets. As part of the purchase, we acquired the "Keegan's Seafood Grille" tradename, and we plan to continue to operate the property under the Keegan's Seafood Grille name.

~~Results of Operations for the Thirteen Weeks Ended October 3, 2021, and the Thirteen Weeks Ended September 27, 2020~~Key Performance Indicators

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

13 Weeks Ended,

October 3,
2021

September 27,
2020

SALES

100.0 %

100.0 %

COSTS AND EXPENSES

Restaurant operating expenses

Food and paper costs

41.4

36.4

Labor costs

26.6

26.3

Occupancy cost

5.8

7.2

Other operating expenses

4.5

5.1

Depreciation and amortization

2.6

2.1

General and administrative

3.3

7.9

Total costs and expenses

84.2

85.0

Income from operations

15.8

15.0

INTEREST EXPENSE

(1.4 )

(1.9 )
INTEREST INCOME

-

1.2

INCOME TAXES

(3.9 )

(3.6 )
NET INCOME

10.5 %

10.7 %
~~Net Revenues:~~
Net sales for fiscal third quarter of 2021 decreased $93,455 to $2,280,999 from $2,374,454 in fiscal 2020. Sales in 2021 have continued to be strong relative to the 2019 the pre-pandemic level. We have maintained the majority of the gains realized during the period of significant dining restrictions at the height of the pandemic which contributed to a continuing favorable impact on drive-through locations. This trend has led to an increase in consumers choosing Burger Time as a meal alternative.
Restaurant gross unit sales at the Company’s nine Burger Time locations for the 13-week period ranged from a low of approximately $147,000 to a high of approximately $298,000 and average sales for each Burger Time unit during the period was approximately $227,000 in 2021 a decline of approximately $10,000 from the same period in 2020.
~~Costs of Sales - food and paper:~~
~~Cost~~indicators of sales ~~- food~~growth to evaluate how our established stores have performed over time. We use comparable guest traffic to determine how established stores have performed over time, excluding growth achieved through menu price and ~~paper~~sales mix change. Finally, we use average checks per guest to identify trends in guest preferences and the effectiveness of menu changes. We believe these performance indicators are useful for ~~third quarter of fiscal 2021 increased as~~investors by providing a ~~percentage~~consistent comparison of sales to 41.4% of restaurant sales from 36.4% of restaurant sales in the third 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 $2.95 per pound, increases in cost have been mitigatedresults and trends across comparable periods within our core, established store base, unaffected by the impact of a price increase taken at the end of second quarter in 2020 fully realized in 2021 we are planning to implement a menu price increase in the fourth quarter of 2021 to, in part, offset increasing costs.
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~~Table of Contents~~
~~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 decreased to 36.9% of sales in the third fiscal quarter of 2021 from 38.6% in similar period of fiscal 2020. This was due to the net effect of improved utilizationresults of store labor, offset by by higher cost incurred for personal protection equipment, a tighter labor markets and the matters discussed in the “Cost of Sales,” “Labor Costs,” “Occupancy and Other Operating Cost” sections below all of which were offset by the midyear 2020 price increase.
~~Labor Costs:~~
~~For the third quarter of fiscal 2021, labor and benefits costs increased slightly as a percentage of sales to 26.6% of restaurant sales from 26.3%~~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 third fiscal quarter of 2021, occupancy~~openings, closings, and other ~~expenses decreased slightly to $235,485 (10.3% of sales) from $291,936 (12.3% of sales) in 2020. The decrease is the result of a reduction in one time maintenance charges incurred in 2020.~~
~~Depreciation and Amortization Expense:~~
~~For third fiscal quarter of 2021, depreciation and amortization increased $10,737 to $60,405 (2.6% of sales) from $49,668 (2.1% of sales) in the third quarter of fiscal 2020.~~
~~General and Administrative Costs~~
General and administrative costs decreased $113,887 from $188,292 (7.9% of sales) to $74,415 (3.3% of sales) in the third fiscal quarter of 2021. The decline is, in part, the result of a decrease in corporate staff during the 2021 period. The Company expects to fill a vacant position during the fourth quarter.
~~Income from Operations~~
The income from operations for the 13-week period was $358,743 in fiscal 2021 compared to an income from operations of $355,865 in the similar period in 2020. The increase in the percentage of income from operations to 15.8% in fiscal 2021 from 15.0% in fiscal 2020 was the result of higher input costs resulting from inflationary pressures in the marketplace offset by a significant decline in General and Administrative costs.
~~Restaurant-level EBITDA~~:
To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles, (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.
17
~~Table of Contents~~
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-Week Period

October 3,
2021

September 27,
2020

Revenues

$ 2,280,999

$ 2,374,454

Reconciliation:

Income from operations

358,743

355,865

Depreciation and amortization

60,405

49,668

General and administrative, corporate level expenses

74,415

188,292

Restaurant-level EBITDA

493,563

593,825

Restaurant-level EBITDA margin

21.6 %

25.0 %
~~Results of Operations for the Thirty-Nine Weeks Ended October 3, 2021, and the Thirty-Nine Weeks Ended September 27, 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.

39 Weeks Ended,

October 3,
2021

September 27,
2020

SALES

100.0 %

100.0 %

COSTS AND EXPENSES

Restaurant operating expenses

Food and paper costs

39.1

37.9

Labor costs

27.2

28.3

Occupancy costs

6.6

8.3

Other operating expenses

5.4

5.2

Depreciation and amortization

2.6

2.3

Impairment of assets held for sale

-

1.6

General and administrative

4.5

6.1

Total costs and expenses

85.3

89.7

Income from operations

14.7

10.3

INTEREST EXPENSE

(2.4 )

(2.2 )
INTEREST INCOME

-

1.5

OTHER INCOME (PAYROLL PROTECTION GRANT)

-

7.7

INCOME TAXES

(3.4 )

(3.9 )
NET INCOME

8.8 %

13.4 %
~~Net Revenues:~~
Net sales for the 39-week period representing the first three quarters of fiscal 2021 increased $530,332 or 8.7% to $6,604,554 from $6,074,222 in fiscal 2020. The increase in sales was principally the result of moderating but still favorable impact in the first half of the 39-week period of the consumer response to the pandemic resulting in consumers choosing Burger Time as a meal alternative combined with generally favorable weather conditions during the period.transitional changes.

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Table of Contents

~~Gross restaurant~~Results of Operations for the Thirteen Weeks Ended April 3, 2022, and the Thirteen Weeks Ended April 4, 2021
The following table sets forth our Condensed Statements of Operations for the fiscal periods indicated as a percentage of total revenues. Percentages below may not reconcile because of rounding.

13 Weeks Ended,

April 3,
2022

April 4,
2021

SALES

100.0
%

100.0
%
COSTS AND EXPENSES

Food and paper costs

34.8

37.7

Labor costs

29.3

29.1

Occupancy costs

8.4

7.0

Other operating expenses

5.8

6.3

Depreciation and amortization

3.3

2.8

General and administrative

14.0

5.4

Total costs and expenses

95.7

88.5

Income from operations

4.3

11.5

INTEREST EXPENSE

(1.4 )

(2.0 )
INCOME BEFORE TAXES

2.9

9.5

PROVISION FOR INCOME TAXES

(0.9 )

(2.6 )
NET INCOME

2.0
%

6.9
%
Net Revenues:
Net sales for the ~~39-week period for our nine~~fiscal first quarter of 2022 increased $132,323 or 6.8% to $2,073,195 from $1,940,872 in the first quarter of fiscal 2021. A decline in sales at Burger Time locations ~~ranged from a low~~was attributable principally to the labor issues resulting in some curtailment of restaurant operating hours and poorer weather conditions than in the year-earlier period. These negative effects were offset by the contribution to sales of approximately ~~$418,000 to high of~~one-month for Keegan's Seafood Grille, which was acquired on March 2, 2022, and contributed approximately ~~$886,000 and average~~$345,000 in sales ~~for each Burger Time unit~~ during the ~~period was approximately $617,000 in 2021 an increase from approximately $556,000 in same 39-week period in 2020.~~quarter.

Costs of Sales - food and paper:

Cost of sales - food and paper for the ~~39-week period representing the~~ first ~~three quarters~~quarter of fiscal ~~2021 increased~~2022 decreased as a percentage of sales to ~~39.1%~~34.8% of restaurant sales from ~~37.9%~~37.7% of restaurant sales in the ~~similar period in 2020.~~first quarter of fiscal 2021. This decrease resulted from a menu price increase ~~was mainly due to inflationary pressures~~ in the ~~general economy increasing product cost . Average~~second half of 2021 and relatively favorable pricing negotiated with the Company's ground beef prices paid by the Company were approximately of $2.51 per pound in 2021 which was unchanged from 2020. Although, near the end of the period beef prices increased 13.7% per pound which we expect will impact fourth quarter results to some degree.supplier.

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,~~expenses and depreciation and amortization) as a percent of restaurant sales ~~declined to 39.2%~~were relatively stable at 79.7% of sales in the ~~2021 period from 41.8%~~first fiscal quarter of 2022 compared to 80.2% in the same period of fiscal ~~2020 period.~~2021. This was due primarily to ~~the~~an increase in sales ~~activity~~which favorably impacted both fixed and ~~its impact as further~~semi-fixed costs and the matters discussed in the ~~“Cost~~"Cost of Sales,” ~~“Labor~~"Labor Costs,” ~~“Occupancy~~"Occupancy,” and ~~Other~~“Other Operating ~~Cost”~~Cost" sections below.

Labor ~~Costs~~Costs:

For the ~~39-week period representing the~~ first ~~three quarters~~quarter of fiscal ~~2021,~~2022, labor and benefits cost increased by $42,218 to $607,710, and labor costs ~~decreased~~as a percentage of sales increased to ~~27.2%~~29.3% of restaurant sales from ~~28.3%~~29.1% of restaurant sales the in fiscal 2021 first quarter. The increase in the ~~fiscal 2020 period. The Company was able to favorably leverage~~rate resulted from an increase in new-hire wage rates offset by leveraging existing staffing levels ~~against~~as sales increased significantly from the ~~significant increase in volume during the second half of the period. While the hiring markets have become more challenging in terms of filling open positions, the~~previous year. The Company continued to benefit from ~~limited~~minimal 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~~change proportionally to ~~decreases~~changes in revenue, thus they may increase as a percentage of restaurant sales when there is a decrease in restaurant sales conversely in tight labor markets occasionally the labor percentage cost decreases significantly as managers help fill spot shortages in staff.
~~Occupancy and Other Operating Expenses~~
For the first 39 weeks of fiscal 2021, occupancy and other expenses increased $28,225 to $791,220 (12.0% of sales) from $817,243 (13.5% of restaurant sales) in 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 high volume at our stores impacting our major systems such as HVAC and refrigeration.
~~Depreciation and Amortization Expense:~~
Depreciation and amortization expense in the first three quarters of fiscal 2021 increased by $33,211 to $173,799 (2.6% of sales) from $140,588 (2.3% of sales) in the fiscal 2020 period and is the result of capital additions at several of our locations.
~~General and Administrative Costs~~
General and administrative costs decreased 25.7%, or $76,058, from $371,455 (6.1% of sales) in the first three quarters of fiscal 2020 to $295,397 (4.5% of sales) for the fiscal 2021 period. In part from the result of lower management headcountrevenue.

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Table of Contents

Occupancy and Other Operating Expenses
For the first fiscal quarter of 2022, occupancy and other expenses increased by $34,748. As a percentage of sales, these costs increased to 14.2% of restaurant sales compared with 13.3% in a similar period in 2021. This increase is primarily the result of winter conditions increasing heating costs and snow removal expenses compared to the milder weather a year ago.
Depreciation and Amortization Expense:
For the first fiscal quarter of 2022, depreciation and amortization increased by $14,579 to $69,415 (3.3% of sales) from $54,836 (2.8% of sales) in the same period in fiscal of 2021. The company continues to reinvest in its properties to maintain and upgrade items such as point-of-sale equipment and HVAC equipment.
General and Administrative Costs
General and administrative costs increased 176.3% or $185,724 from $105,338 (5.4% of sales) in the first fiscal quarter of 2022 to $291,062 (14.0% of sales) in the first quarter of 2021. The increase in general and administrative costs is primarily the result of the transition to a public company following the Company's IPO in November 2021. Following the recent stock offering, the Company increased officer compensation over the year-earlier level and increased staff.
Income from Operations

Income from operations for the first fiscal quarter of 2022 was ~~$969,415~~$88,921 compared to income from operations of $223,495 in the ~~39-week period of fiscal~~ 2021 ~~compared to $626,244 in the fiscal 2020~~ period. The change in income from operations in ~~the~~ fiscal ~~2021 period~~2022 compared to fiscal ~~2020~~2021 was due ~~primarily~~ to the ~~impact of~~significant increase in General and Administrative Expenses following the ~~2020 impairment charge, continued robust sales activity~~Company's initial public offering and the matters discussed in the ~~“Net Revenues”~~"Net Revenues" and ~~“Restaurant~~"Restaurant Operating ~~Costs”~~Costs" sections above.

Restaurant-level EBITDA:

To supplement the condensed consolidated financial statements, ~~which are~~ prepared and presented ~~in accordance with~~according to 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~~However, 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.

We define restaurant-level EBITDA as operating income before pre-opening costs, ~~if any,~~ general and administrative costs, and depreciation and ~~amortization and impairment charges.~~amortization. General and administrative costs are excluded as they are generally not specifically identifiable ~~to restaurant specific~~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.

39-Week Period

13-Week Period

October 3,
2021

September 27,
2020

April 3,
2022

April 4,
2021

Revenues

$ 6,604,554

$ 6,074,222

$ 2,073,195

$ 1,940,872

Reconciliation:

Income from operations

969,415

626,244

95,667

223,495

Depreciation and amortization

173,799

140,588

69,415

54.836

General and administrative, corporate level expenses

295,397

371,455

General and administrative, corporate-level expenses

284,315

105,338

Restaurant-level EBITDA

1,438,611

1,138,287

449,397

383,689

Restaurant-level EBITDA margin

21.8 %

18.7 %

21.6 %

19.8 %
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Table of Contents

Liquidity and Capital Resources

~~Since March of 2020, the Covid-19 pandemic has had a positive impact of the Company’s sales and liquidity.~~ For the 3913 weeks ended ~~October~~April 3, ~~2021,~~2022, the Company earned an after-tax profit of ~~$583,268. On October~~$42,650. Principally, as a result of the Company's public offering of common stock and warrants in November 2021, on April 3, ~~2021,~~2022, the Company had ~~$2,078,812~~$11,073,645 in cash and working capital of $1,1760,68 an increase of $765,794 from January 3, 2021. The increase 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 which was included in the long-term refinancing. In the 39-week period ending October 3, 2021, the Company continued to benefit from excellent results and positive operating cash flow even as government restrictions on inside dining were eased.
Covid-19, and its variants, the various variants, likely will to continue to have a significant impact on the United States economy. It is difficult to predict either the ultimate impact of the 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 evolving.$9,905,672.

In May 2020, the Company received pandemic-related loans totaling ~~$487,900. Included in that amount~~$487,900; $460,400 was ~~$460,400~~ borrowed under the Small Business ~~Administration’s~~Administration's Paycheck Protection Program ~~(“PPP”~~("PPP"). The Company accounted for the loan's proceeds as a government grant under International Accounting Standard 20 ("IAS 20"), Accounting for Government Grants, and Disclosure of Government Assistance. Under IAS 20, the ~~terms of~~loan is initially recorded as deferred income on the ~~program,~~balance sheet. Forgiveness income is recognized systematically over the qualifying expenses incurred when the Company determines that the forgiveness is reasonably assured. The loans were forgiven in 2021. ~~The SBA’s~~As a result of the forgiveness of the PPP ~~is accounted for as a “grant” and $466,400~~advances, the loan forgiveness was reflected as ~~“Other Income”~~"Other Income" in ~~the second quarter of~~ 2020. Also, in May 2020, the Company borrowed $27,500 at no interest under the Minnesota Small Business Emergency Loan ~~Program which under certain circumstance, may become a grant.~~Program. Under the loan terms, the Company will seek loan forgiveness in 2022.
20
~~Table of Contents~~

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 ~~able~~may operate with negative working capital. ~~We anticipate that working capital deficits may be incurred in the future.~~ 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,~~efficiently, 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,~~purchase or within a few days from our credit card ~~processor, and in general,~~processor. Generally, payments to our vendors are not due for thirty days.

Summary of Cash Flows

Cash Flows Provided by Operating Activities

~~Operating~~Primarily as a result of a positive one-month contribution from the operations Keegan's in March 2022, we generated positive cash flow in ~~2020 included $466,758 of Paycheck Protection loan forgiveness “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 continued strong sales over the prior year, we generated $931,322 in pre-tax cash flow from operations in the 39-week period~~13 weeks ending ~~October~~April 3, ~~2021.~~2022. 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.~~Company's business.

Cash Flows Used in Investing Activities

In ~~2020 through the third quarter of 2021~~2022 the Company has focused on identifying potential acquisition opportunities, including its ~~primary business and building its working capital reserves.~~purchase of Keegans on March 2, 2022.

Cash Flows Used in Financing Activities

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

Contractual Obligations

As of ~~October~~April 3, ~~2021,~~2022, we had ~~approximately $3,210,000~~$3 million in contractual obligations relating principally to amounts due under mortgages on the real property on which ~~are~~ stores are situated. Our monthly required payment is approximately $24,000. At the end the second quarter of fiscal 2021, the Company refinanced most of its outstanding mortgage debt with a new lender lowering its nominal interest cost from 4.75% to 3.45% fixed for the next ten years.$32,000.

Qualitative and Quantitative Disclosure about Market Risk

Commodity Price Risk

We are subject to volatility in food costs ~~as a result of~~due to 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. WeTo manage these risks, we do not enter into pricing agreements with ~~any of~~ our ~~suppliers to manage these risks.~~suppliers. 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. ~~Assuming there was no corresponding menu price increase, a~~A ten percent increase in the cost of beef would result in approximately ~~$150,000~~$175,000 of additional food costs for the Company annually.

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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~~believes that inflation has had a material effect on income ~~during the~~in recent ~~years. Increases~~periods. A continuation of current cost trends in food, labor, orand other operating costs could adversely affect the ~~Company’s~~Company's operations. ~~In the past, however, the~~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 margin improvements to offset these or additional 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.

Off-Balance Sheet Arrangements

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

Recent Accounting Pronouncements

There has been no impact toon our financial statements and our results of operations and financial condition as the result of the adoption of Recent Accounting Pronouncements, see ~~“Part~~"Part I, Item 1, Note 1. Summary of Significant Accounting ~~Policies”~~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~~conditions are based ~~upon~~on our ~~condensed consolidated~~ financial statements. ~~The preparation of~~Under GAAP, our ~~condensed consolidated~~ financial statements ~~in accordance with GAAP requires~~require 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~~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. ~~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~~"emerging growth ~~company”~~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~~to comply with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of ~~certain~~specific 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~~period. 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.

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Subject to certain conditions ~~set forth~~outlined 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.

22
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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,~~Evaluation of Disclosure Controls and Procedures
We maintain 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 ~~with~~reported within the ~~participation of~~periods specified by the SEC's rules and forms. Disclosure Controls are also designed to ensure 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. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of April 3, 2022, 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~~under Rule ~~13a-15(e) of~~13a-15(b) promulgated under the Exchange ~~Act)~~Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of April 3, 2022, our disclosure controls and procedures were not effective at a reasonable assurance as of the end of the period covered by this ~~quarterly report. Based on this evaluation, our principal executive officer~~report because we lack the necessary corporate accounting resources to maintain adequate segregation of duties. We did not perform an effective risk assessment or monitor internal controls over financial reporting. Management is developing and ~~principal~~implementing a series of accounting systems and procedure changes and internal controls intended to provide adequate controls over financial ~~officer concluded that our disclosure controls and procedures were effective as of the end of the period covered 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 that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.reporting.

Changes in ~~Internal Control~~internal control over ~~Financial Reporting~~financial reporting

There have been no significant changes 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.

23
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PART 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

~~During~~Since the ~~quarter ended October 3, 2021,~~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~~INFORMATION~~

Effective November 12, 2021, the Company entered into an Underwriting Agreement with Maxim Group LLC and Joseph Gunnar & Company, LLC to purchase 2,400,000 units, each unit consisting of one share of common stock and one five-year warrant to purchase a share of common stock at an exercise price of $5.50 per share. Pursuant to the Underwriting Agreement, the gross proceeds to the Company will be approximately $4.55 per share after deducting underwriting discounts and expenses. The Company also granted to the underwriters an option to purchase an additional 360,000 units for 30 days following the closing of the offering. We estimate that the net proceeds from the sale of the units, after deducting underwriting discounts and commissions and estimated offering expenses incurred by us, will be approximately $10,665,000. If the underwriters fully exercise the over-allotment option, the net proceeds will be approximately $12,321,000. We expect the offering to close on November 16, 2021.None

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ITEM 6. ~~EXHIBITS~~EXHIBITS.

Exhibit
Description
31.1
Certification of the ~~Company’s~~Company's Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the ~~registrant’s~~registrant's Quarterly Report on Form 10-Q for the quarter ended ~~October~~April 3, ~~2021.~~2022.
31.2
Certification of the ~~Company’s~~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 ~~October~~April 3, ~~2021.~~2022.
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*
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

~~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 Linkbase ~~Document.~~Document
101.DEF

~~Inline~~ XBRL Taxonomy Extension Definition Linkbase ~~Document.~~Document
101.LAB

~~Inline~~ XBRL Taxonomy Extension ~~Labels~~Label Linkbase ~~Document.~~Document
101.PRE

~~Inline~~ XBRL Taxonomy Extension Presentation Linkbase ~~Document.~~
~~104~~
~~Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).~~
*
In accordance with Item 601 of Regulation S-K, this Exhibit is hereby furnished to the SEC as an accompanying document and is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933.Document

25
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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: ~~November 16, 2021~~
May 18, 2022
By:
/s/ Kenneth Brimmer

Name:
Kenneth Brimmer
Title:
Chief Operating Officer
and Principal Financial Officer

26

	October 3, 2021 (Unaudited)			January 3, 2021
ASSETS
CURRENT ASSETS
Cash	$	2,078,812		$	1,321,244
Receivables		31,751			19,030
Inventory		69,443			60,576
Prepaid expenses and other current assets		66,366			5,348

Total current assets		2,246,372			1,406,198

PROPERTY AND EQUIPMENT, net		1,546,038			1,632,457
LAND AND BUILDINGS HELD FOR SALE		258,751			258,751
INVESTMENT IN RELATED COMPANY		75,000			75,000
OTHER ASSETS, net		15,200			16,759

Total assets	$	4,141,361		$	3,389,165

LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Current maturities of long-term debt	$	178,611		$	245,306
Accounts payable		419,007			270,487
Accrued expenses		304,598			420,734
Income taxes payable		177,088			97,978

Total current liabilities		1,079,304			1,034,505

LONG-TERM DEBT, less current maturities		3,005,113			2,938,983
DEFERRED INCOME TAXES		176,000			118,000
Total liabilities		4,260,417			4,091,488

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' DEFICIT
Preferred stock, $.001 par value, 2,000,000 shares authorized, no shares outstanding at October 3, 2021 and January 3, 2021		0			0
Common stock, $.002 par value, 50,000,000 authorized, 4,047,506 shares outstanding at October 3, 2021 and January 3, 2021		8,095			8,095
Additional paid-in capital		497,671			497,671
Accumulated deficit		(624,822	)		(1,208,089	)

Total shareholders' deficit		(119,056	)		(702,323	)

Total liabilities and shareholders' deficit	$	4,141,361		$	3,389,165

	39 Weeks Ended,						13 Weeks Ended,
	October 3, 2021			September 27, 2020			October 3, 2021			September 27, 2020

SALES	$	6,604,554		$	6,074,222		$	2,280,999		$	2,374,454

COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		2,580,224			2,299,989			944,171			863,997
Labor costs		1,794,499			1,718,703			607,780			624,696
Occupancy costs		436,196			504,142			132,542			170,109
Other operating expenses		355,024			313,101			102,943			121,827
Depreciation and amortization		173,799			140,588			60,405			49,668
Impairment of assets held for sale		0			100,000			0			0
General and administrative		295,397			371,455			74,415			188,292

Total costs and expenses		5,635,139			5,447,978			1,922,256			2,018,589

Income from operations		969,415			626,244			358,743			355,865

INTEREST EXPENSE		(161,148	)		(136,347	)		(32,916	)		(45,188	)
INTEREST INCOME		0			92,707			0			28,507
OTHER INCOME		0			466,758			0			0

INCOME BEFORE TAXES		808,267			1,049,362			325,827			339,184

PROVISION FOR INCOME TAXES		(225,000	)		(234,000	)		(90,000	)		(85,000	)

NET INCOME	$	583,267		$	815,362		$	235,827		$	254,184

NET INCOME PER COMMON SHARE -
Basic and Diluted	$	0.14		$	0.20		$	0.06		$	0.06

WEIGHTED AVERAGE NUMBER OF SHARES USED
IN COMPUTING PER COMMON SHARE AMOUNTS -
Basic and Diluted		4,047,506			4,047,506			4,047,506			4,047,506

	Common Stock				Additional Paid-in		Accumulated
For the 39-week periods -	Shares		Amount		Capital		(Deficit)			Total

Balances, January 3, 2021		4,047,502	$	8,095	$	497,671	$	(1,208,089	)	$	(702,323	)
Shares issued for fractional holdings		4		0		0		0			0
Net income		-		0		0		583,267			583,268

Balances, October 3, 2021		4,047,506	$	8,095	$	497,671	$	(624,822	)	$	(119,056	)

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

Balances, July 4, 2021		4,047,506	$	8,095	$	497,671	$	(860,649	)	$	(354,883	)
Net income		-		0		0		237,827			235,828

Balances, October 3, 2021		4,047,506	$	8,095	$	497,671	$	(624,822	)	$	(119,056	)

	39 Weeks Ended			39 Weeks Ended
	October 3, 2021			September 27, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	583,267		$	815,362
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization		173,799			140,588
Amortization of debt issuance cost included in interest expense		55,555			3,882
Deferred taxes		58,000			(10,000	)
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	)		(6,365	)
Inventory		(8,867	)		(1,186	)
Prepaid expenses and other current assets		(29,195	)		6,303
Accounts payable		148,520			70,999
Unearned vendor rebate		0			(3,668	)
Accrued expenses		(116,136	)		681
Income taxes payable		79,110			233,000
Net cash provided by operating activities		931,332			1,388,964

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(85,821	)		(57,736	)
Proceeds on notes due from related entity		0			104,000
Net cash provided by (used in) investing activities		(85,821	)		46,264
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt		3,107,100			77,500
Principal payments on long-term debt		(3,113,521	)		(377,566	)
Payment of debt issuance costs		(49,699	)		0
Payment of deferred offering costs		(31,823	)		0
Net cash used in financing activities		(87,943	)		(300,066	)

CHANGE IN CASH		757,568			1,135,162

CASH, BEGINNING OF PERIOD		1,321,244			258,101

CASH, END OF PERIOD	$	2,078,812		$	1,393,263

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	$	127,800		$	93,096
Transfer of property and equipment to assets held for sale	$	0		$	189,640
Cash paid for Income taxes	$	88,006		$	0

	·	Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.

	·	Level 2 inputs are inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the entire term of the asset or liability.

	·	Level 3 Inputs are unobservable inputs for the asset or liability.

	October 3, 2021			January 3, 2021
Land	$	485,239		$	485,239
Equipment		2,566,295			2,497,576
Buildings		1,322,085			1,306,896

Total property and equipment		4,373,619			4,289,711
Accumulated depreciation		(2,568,830	)		(2,398,503	)
Less - property held for sale		(258,751	)		(258,751	)
Net property and equipment	$	1,546,038		$	1,632,457

	October 3, 2021		January 3, 2021
Accrued real estate taxes	$	103,129	$	106,935
Accrued bonus compensation		7,000		162,000
Accrued payroll		93,217		56,139
Accrued payroll taxes		9,699		8,519
Accrued sales taxes payable		59,897		66,632
Accrued vacation pay		17,663		19,657
Other accrued expenses		13,993		852

	$	304,598	$	420,734

	October 3, 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 Company shareholder. 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 totaling $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.		3,076,200			0

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. This note was paid in full on April 6, 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 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.		133,318			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.		23,375			27,500
		3,232,893			3,238,494
Less - unamortized debt issuance costs		(48,349	)		(54,205	)
Current maturities		(178,611	)		(245,306	)
Total	$	3,005,933		$	2,938,983

Assets acquired:
Inventory	$	10,049
Equipment		428,000
Leasehold improvements		450,000
Trademark, website and other intangibles		75,000
Total identifiable assets acquired		963,049

Liabilities assumed:
Gift card liability		13,049
Net assets acquired		950,000
Goodwill		200,000
Purchase price	$	1,150,000

	April 3, 2022			January 2, 2022

Three notes payable to a bank dated June 28, 2021 due in monthly installments totaling $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 on Company owned properties. The notes are guarenteed by BT Brands, Inc. and a shareholder of the Company.	$	2,987,109		$	3,027,971

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.		20,625			22,000
		3,007,734			3,049,971
Less - unamortized debt issuance costs		(45,649	)		(46,999	)
Current maturities		(171,357	)		(169,908	)

	$	2,790,728		$	2,833,064

	●	Stock price – Published trading market values of the Company's common stock as of grant date.
	●	Exercise price – The stated exercise price of the stock option.
	●	Expected life – The simplified method
	●	Expected dividend – The rate of dividends that the Company expects to pay over the term of the stock option.
	●	Volatility – Estimated volatility.
	●	Risk-free interest rate – The daily United States Treasury yield curve rate corresponding to the expected life of the award.

	Number of		Weighted Average		Weighted Average Remaining Contract Term		Aggregate Intrinsic
	Options		Exercise Price		(In Years)		Value
Options outstanding at January 2, 2022		15,000	$	5.00		9.3	$	0
Granted		215,750		2.50				0
Exercised		0		0
Canceled, forfeited, or expired		0		0
Options outstanding at April 3, 2022		230,750	$	2.66		9.8	$	0
Options exercisable at April 3, 2022		58,150	$	3.13		9.7	$	0

Fair value of options granted during the period	$	1.392
Expected life (in years)		4.833
Expected dividend	$	—
Expected stock volatility		63	%
Risk-free interest rate		2	%

2022	$	50,000
2023		61,650
2024		63,500
2025		67,400
2026		69,400
2027 and thereafter		459,050

Total future minimum lease payments		762,000
Less - interest		145,483
Present value of lease payments	$	616,517

	·	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.

	13-Week Period
	October 3, 2021			September 27, 2020
Revenues	$	2,280,999		$	2,374,454
Reconciliation:
Income from operations		358,743			355,865
Depreciation and amortization		60,405			49,668
General and administrative, corporate level expenses		74,415			188,292
Restaurant-level EBITDA		493,563			593,825
Restaurant-level EBITDA margin		21.6	%		25.0	%

	39 Weeks Ended,
	October 3, 2021			September 27, 2020

SALES		100.0	%		100.0	%

COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		39.1			37.9
Labor costs		27.2			28.3
Occupancy costs		6.6			8.3
Other operating expenses		5.4			5.2
Depreciation and amortization		2.6			2.3
Impairment of assets held for sale		-			1.6
General and administrative		4.5			6.1
Total costs and expenses		85.3			89.7
Income from operations		14.7			10.3
INTEREST EXPENSE		(2.4	)		(2.2	)
INTEREST INCOME		-			1.5
OTHER INCOME (PAYROLL PROTECTION GRANT)		-			7.7
INCOME TAXES		(3.4	)		(3.9	)
NET INCOME		8.8	%		13.4	%

	39-Week Period						13-Week Period
	October 3, 2021			September 27, 2020			April 3, 2022			April 4, 2021
Revenues	$	6,604,554		$	6,074,222		$	2,073,195		$	1,940,872
Reconciliation:
Income from operations		969,415			626,244			95,667			223,495
Depreciation and amortization		173,799			140,588			69,415			54.836
General and administrative, corporate level expenses		295,397			371,455
General and administrative, corporate-level expenses								284,315			105,338
Restaurant-level EBITDA		1,438,611			1,138,287			449,397			383,689
Restaurant-level EBITDA margin		21.8	%		18.7	%		21.6	%		19.8	%

Exhibit		Description

31.1		Certification of the ~~Company’s~~Company's Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the ~~registrant’s~~registrant's Quarterly Report on Form 10-Q for the quarter ended ~~October~~April 3, ~~2021.~~2022.

31.2		Certification of the ~~Company’s~~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 ~~October~~April 3, ~~2021.~~2022.

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*		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		~~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 Linkbase ~~Document.~~Document
101.DEF		~~Inline~~ XBRL Taxonomy Extension Definition Linkbase ~~Document.~~Document
101.LAB		~~Inline~~ XBRL Taxonomy Extension ~~Labels~~Label Linkbase ~~Document.~~Document
101.PRE		~~Inline~~ XBRL Taxonomy Extension Presentation Linkbase ~~Document.~~
~~104~~		~~Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).~~

	BT BRANDS, INC.

Date: ~~November 16, 2021~~ May 18, 2022	By:	/s/ Kenneth Brimmer
	Name:	Kenneth Brimmer
	Title:	Chief Operating Officer and Principal Financial Officer