UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: ~~July 3, 2022~~April 2, 2023

☐ 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, ~~North Dakota~~ND		58078
(Address of principal executive offices)		(Zip Code)

(307) ~~223-1663~~274-3055
(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,~~stock, $0.002 per share

BTBD

The NASDAQ Stock Market LLC

Warrant to 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 a such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such a shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ☐

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

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

Indicate by check mark whether ~~the registrant is~~any of those error corrections are restatements that required a ~~shell company (as defined in Rule 12b-2~~recovery analysis of incentive-based compensation received by any of the ~~Exchange Act)~~registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ ~~Yes ☒ No~~

At ~~August 10, 2022,~~May 1, 2023, there were ~~6,461,118~~6,246,118 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 subsidiaries (together, ~~“BT Brands” or~~ the “Company”). Forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, can be identified by the use of forward-looking terminology such as “believes,” “projects,” “expects,” “may,” “estimates,” “should,” “plans,” “targets,” “intends,” “could,” “would,” “anticipates,” “potential,” “confident,” “optimistic” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, guidance, expectations, and future plans. Forward-looking statements can also be identified by the fact that these statements do not relate strictly to historical or current matters. ~~Forward-looking~~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 ~~we believe~~the Company believes the expectations reflected in forward-looking statements are reasonable, there can be no assurances that such expectations will prove to be accurate. ~~Certain factors may cause results to differ materially from those anticipated by the~~Security holders are cautioned that such forward-looking statements involve risks and uncertainties. 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;
	·	difficulties executing our growth strategy, including completing profitable acquisitions;
	·	the impact of public health matters;
	·	all risks of acquiring an existing restaurant business, including identifying a suitable target, completing comprehensive due diligence, the impact on our financial condition of any debt we may incur in acquiring the target, 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 relevant to acquisitions;
	·	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 economic conditions, including the effects on consumer confidence and discretionary spending;
	·	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 grow;
	·	changes in management, loss of key personnel, and difficulty hiring and retaining skilled personnel;
	·	labor shortages and increased labor costs;
	·	our vulnerability to increased food, commodity, and energy costs;
	·	the impact of governmental laws and regulations;
	·	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, in regions where our restaurants are located;
	·	inadequately protecting our intellectual property;
	·	breaches of security of confidential consumer information; and
	·	other factors discussed in the Company’s Annual Report on Form 10-K under “Business” and “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

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 ~~public health, which include~~the 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. Many factors discussed in this Quarterly Report on Form 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 to COVID in its various forms, the impact of governmental regulations that have been and may in the future be, imposed in response to the pandemic which potentially could have an impact on discretionary consumer spending and (2) those discussed and describedsubjects in our ~~2021 annual report on Form 10-K~~subsequent periodic reports filed with the Securities and Exchange Commission (the “SEC”) on March 17, 2022. Many of these risks and uncertainties are beyond our ability to control or predict; in many cases, the risks and uncertainties 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. We expressly disclaim any obligation or undertaking to report any updates or revisions to any such statement to reflect any change in our expectations or any change in events, conditions, or circumstances on which any such statement is based, except as required by law.Commission.

~~PART I — FINANCIAL INFORMATION~~

~~ITEM 1. FINANCIAL STATEMENTS~~

~~TABLE OF CONTENTS~~

~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION~~	16
~~ITEM 3.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK~~	25
~~ITEM 4.~~	~~CONTROLS AND PROCEDURES.~~	26

~~PART II—~~~~OTHER INFORMATION~~
~~ITEM 1.~~	~~LEGAL PROCEEDINGS~~	27
~~ITEM 1A.~~	~~RISK FACTORS~~	27
~~ITEM 2.~~	~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~	27
~~ITEM 3.~~	~~DEFAULTS UPON SENIOR SECURITIES~~	27
~~ITEM 4.~~	~~MINE SAFETY DISCLOSURES~~	27
~~ITEM 5.~~	~~OTHER INFORMATION~~	27
~~ITEM 6.~~	~~EXHIBITS.~~	28
~~SIGNATURES~~		29

Table of Contents

BT BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

July 3, 2022

(Unaudited)

January 2, 2022

ASSETS

CURRENT ASSETS

Cash

$ 8,295,952

$ 12,385,632

Marketable securities

527,750

0

Receivables

36,068

72,251

Inventory

146,892

79,510

Prepaid expenses and other current assets

53,460

27,186

Total current assets

9,060,122

12,564,579

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET

2,977,153

1,592,338

OPERATING LEASES RIGHT-OF-USE ASSETS

1,146,167

0

INVESTMENTS

1,549,828

75,000

GOODWILL

488,431

0

INTANGIBLE ASSETS

425,000

0

OTHER ASSETS, net

285,285

273,810

Total assets

$ 15,931,986

$ 14,505,727

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable

$ 498,257

$ 291,973

Current maturities of long-term debt

171,358

169,908

Current operating lease obligations

134,188

0

Accrued expenses

575,790

254,341

Income taxes payable

8,000

209,088

Total current liabilities

1,387,593

925,310

LONG-TERM DEBT, LESS CURRENT PORTION

2,750,279

2,833,064

NONCURRENT LEASE OBLIGATIONS

1,015,610

0

DEFERRED INCOME TAXES

51,510

119,000

Total liabilities

5,204,992

3,877,374

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY

Preferred stock, $0.001 par value, 2,000,000 shares authorized, no shares outstanding at July 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 July 3, 2022 and January 2, 2022, respectively

12,922

12,895

Additional paid-in capital

11,363,935

11,215,696

Accumulated deficit

(649,863 )

(600,238 )

Total shareholders' equity

10,726,994

10,628,353

Total liabilities and shareholders' equity

$ 15,931,986

$ 14,505,727

See Notes to Condensed Consolidated Financial Statements

TABLE OF CONTENTS

Table of Contents

BT BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

26 Weeks Ended

26 Weeks Ended,

13 Weeks Ended,

13 Weeks Ended,

July 3, 2022

July 4, 2021

July 3, 2022

July 4, 2021

SALES

$ 5,598,076

$ 4,323,555

$ 3,524,881

$ 2,382,683

COSTS AND EXPENSES

Restaurant operating expenses

Food and paper costs

1,786,828

1,636,053

1,311,373

908,760

Labor costs

435,920

1,186,719

1,179,118

621,227

Occupancy costs

332,181

303,654

261,282

167,106

Other operating expenses

178,701

252,081

212,314

128,872

Depreciation and amortization expenses

178,701

113,394

109,286

58,558

General and administrative expenses

746,717

220,982

455,656

110,983

Total costs and expenses

5,513,303

3,712,883

3,529,029

1,995,506

Income from operations

84,773

610,672

(4,148 )

387,177

UNREALIZED LOSS ON MARKETABLE SECURITIES

(80,238 )

0

(80,238 )

0

INTEREST AND OTHER INCOME

9,473

0

9,473

0

INTEREST EXPENSE

(54,461 )

(128,232 )

(26,190 )

(89,661 )
EQUITY IN NET LOSS OF AFFILIATE

(14,172 )

0

(14,172 )

0

INCOME (LOSS) BEFORE TAXES

(54,625 )

482,440

(115,275 )

297,516

INCOME TAX (EXPENSE) BENEFIT

5,000

(135,000 )

23,000

(85,000 )
NET INCOME (LOSS)

$ (49,625 )

$ 347,440

$ (92,275 )

$ 212,516

NET INCOME (LOSS) PER COMMON SHARE - Basic and Diluted

$ (0.01 )

$ 0.09

$
(0.01
)

$ 0.05

WEIGHTED AVERAGE SHARES USED IN COMPUTING PER COMMON SHARE AMOUNTS - Basic and Diluted

6,458,276

4,047,502

6,461,118

4,047,502

See Notes to Consolidated Condensed Financial Statements

PART I FINANCIAL INFORMATION

BT BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	Unaudited
	April 2, 2023			January 1, 2023
ASSETS
CURRENT ASSETS
Cash	$	5,494,401		$	2,150,578
Marketable securities		1,378,337			5,994,295
Receivables		14,596			76,948
Inventory		173,007			158,351
Prepaid expenses and other current assets		64,424			37,397
Assets held for sale		258,751			446,524
Total current assets		7,383,516			8,864,093

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET		3,258,759			3,294,644
OPERATING LEASES RIGHT-OF-USE ASSETS		1,946,394			2,004,673
INVESTMENTS		1,314,787			1,369,186
DEFERRED INCOME TAXES		91,000			61,000
GOODWILL		671,220			671,220
INTANGIBLE ASSETS, NET		439,260			453,978
OTHER ASSETS, NET		50,477			50,903
Total assets
	$	15,155,413		$	16,769,697
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	400,711		$	448,605
Broker margin loan		-			791,370
Current maturities of long-term debt		166,241			167,616
Current operating lease obligations		193,430			193,430
Accrued expenses		410,101			532,520
Total current liabilities		1,170,483			2,133,541

LONG-TERM DEBT, LESS CURRENT PORTION		2,416,905			2,658,477
NONCURRENT LEASE OBLIGATIONS		1,771,514			1,825,057
Total liabilities		5,358,902			6,617,075

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value, 2,000,000 shares authorized, no shares outstanding at April 2, 2023 and January 1, 2023		-			-
Common stock, $.002 par value, 50,000,000 authorized, 6,461,118 issued and 6,246,118 shares outstanding at April 2, 2023 and 6,461,118 shares issued and 6,396,118 shares outstanding at January 1, 2023		12,492			12,792
Less cost of 215,000 and 65,000 common shares held in Treasury at April 2, 2023 and January 1, 2023, respectively.		(356,807	)		(106,882	)
Additional paid-in capital		11,445,135			11,409,235
Accumulated deficit	$	(1,304,309	)		(1,162,523	)

Total shareholders' equity		9,796,511			10,152,622

Total liabilities and shareholders' equity	$	15,155,413		$	16,769,697

See Notes to Consolidated Condensed Financial Statements

Table of Contents

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

26 Weeks ended,

July 3, 2022

July 4, 2021

CASH FLOWS FROM OPERATING ACTIVITIES

Net Income (Loss)

$ (49,625 )

$ 347,440

Adjustments to reconcile net income to net cash

provided by operating activities-

Depreciation and amortization

178,701

113,394

Amortization of debt issuance premium included in interest expense

2,700

54,205

Deferred taxes

(67,490 )

28,000

Stock-based compensation

73,400

0

Unrealized loss on marketable securities

80,238

0

Loss on equity method investment

14,172

0

Changes in operating assets and liabilities, net of acquisitions -

Receivables

36,183

(12,721 )
Inventory

(33,833 )

(9,913 )
Prepaid expenses and other current assets

(26,274 )

(5,888 )
Accounts payable

206,284

127,814

Accrued expenses

284,700

(161,074 )
Income taxes payable

(201,088 )

14,994

Net cash provided by operating activities

498,068

496,251

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of net assets of Keegan's Seafood Grille

(1,150,000 )

0

Acquisition of net assets of Pie In The Sky Coffee and Bakery

(1,159,600 )

0

Investment in Bagger Dave's Burger Tavern, Inc.

(1,260,000 )

0

Purchase of property and equipment

(159,491 )

(67,003 )
Investment in related company

(229,000 )

0

Purchase of marketable securities

(607,988 )

0

Other assets

(12,500 )

0

Net cash used in investing activities

(4,578,579 )

(67,003 )
CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from long-term debt

0

3,107,100

Principal payment on long-term debt

(84,035 )

(3,077,784 )
Proceeds from exercise of common stock warrants

74,866

0

Payment of debt issuance costs

0

(49,699 )
Payment of deferred offering costs

0

(9,192 )
Net cash used in financing activities

(9,169 )

(29,575 )

CHANGE IN CASH

(4,089,680 )

399,673

CASH, BEGINNING OF PERIOD

12,385,632

1,321,244

-

CASH, END OF PERIOD

$ 8,295,952

$ 1,720,917

SUPPLEMENTAL DISCLOSURES

Cash paid for interest

$ 51,761

$ 68,700

Cash paid for income taxes

$ 209,088

$ 92,006

See Notes to Consolidated Condensed Financial Statements

BT BRANDS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	13 Weeks Ended,			13 Weeks Ended,
	April 2, 2023			April 3, 2022

SALES	$	3,070,798		$	2,073,195

COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		1,290,323			721,583
Labor costs		1,202,760			607,710
Occupancy costs		357,125			174,638
Other operating expenses		195,614			119,867
Depreciation and amortization expenses		163,507			69,415
General and administrative expenses		425,915			291062
Gain on sale of assets held for sale		(313,688	)		-
Total costs and expenses		3,321,556			1,984,274

Income (loss) from operations		(250,758	)		88,921
UNREALIZED GAIN ON MARKETABLE SECURITIES		69,856			-
INTEREST EXPENSE		(25,533	)		(28,271	)
INTEREST AND DIVIDEND INCOME		89,048			-
EQUITY IN LOSS OF AFFILIATE		(54,399	)		-
INCOME (LOSS) BEFORE TAXES		(171,786	)		60,650
INCOME TAX (EXPENSE) BENEFIT		30,000			(18,000	)
NET INCOME (LOSS)	$	(141,786		$	42,650
NET INCOME (LOSS) PER COMMON SHARE - Basic and Diluted	$	(0.02	)	$	0.01

WEIGHTED AVERAGE SHARES USED IN COMPUTING PER COMMON SHARE AMOUNTS - Basic and Diluted		6,280,729			6,455,434

See Notes to Consolidated Condensed Financial Statements

Table of Contents

BT BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

For the 26-week periods-

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

73,400

0

73,400

Shares issued in exercise of warrants

13,612

27

74,839

0

74,866

Net loss

-

0

0

(49,625 )

(49,625 )
Balances, July 3, 2022

6,461,118

$ 12,922

$ 11,363,935

$ (649,863 )

$ 10,726,994

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

347,440

347,440

Balances, July 4, 2021

4,047,502

$ 8,095

$ 497,671

$ (860,649 )

$ (354,883 )

For the 13-week periods-

Common Stock

Additional

Accumulated

Shares

Amount

Paid-in Capital

(Deficit)

Total

Balances, April 3, 2022

6,461,118

$ 12,922

$ 11,324,035

$ (557,588 )

$ 10,779,369

Stock-based compensation

-

0

39,900

0

39,900

Net loss

-

0

0

(92,275 )

(92,275 )
Balances, July 3, 2022

6,461,118

$ 12,922

$ 11,363,935

$ (649,863 )

$ 10,726,994

Common Stock

Additional

Accumulated

Shares

Amount

Paid-in Capital

(Deficit)

Total

Balances, April 4, 2021

4,047,502

$ 8,095

$ 497,671

$ (1,073,165 )

$ (567,399 )
Net income

-

0

0

212,516

212,516

Balances, July 4, 2021

4,047,502

$ 8,095

$ 497,671

$ (860,649 )

$ (354,883 )

BT BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

				Outstanding
				Common Stock			Additional Paid-in		Accumulated			Treasury
	Shares			Par Amount			Capital		Deficit			Stock			Total

Balances, January 1, 2022		6,447,506		$	12,895		$	11,215,696	$	(600,238	)	$	-		$	10,628,353
Net income		-			-			-		42,650			-			42,650
Stock based compensation		-			-			33,500		-			-			33,500
Shares issued for exercise of warrants		13,612			27			74,839		-			-			74,866
Balances, April 3, 2022		6,461,118		$	12,922		$	11,324,035	$	(557,588	)	$	-		$	10,779,369

				Outstanding Common Stock			Additional Paid-in		Accumulated			Treasury
	Shares			Par Amount			Capital		Deficit			Stock			Total

Balances, January 1, 2023		6,396,118		$	12,792		$	11,409,235	$	(1,162,523	)	$	(106,882	)	$	10,152,622
Net income (loss)		-			-			-		(141,786	)		-			(141,786	)
Stock based compensation		-			-			35,900		-			-			35,900
Treasury stock purchase		(150,000	)		(300	)		-		-			(249,925	)		(250,225	)
Balances, April 2, 2023		6,246,118		$	12,492		$	11,445,135	$	(1,304,309	)	$	(356,807	)	$	9,796,511

See Notes to Consolidated Condensed ~~Consolidated~~ Financial Statements

Table of Contents

BT BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	13 Weeks ended,
	April 2, 2023			April 3, 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)	$	(141,786	)	$	42,650
Adjustments to reconcile net income (loss) to net cash provided by operating activities-
Depreciation and amortization		163,507			69,415
Amortization of debt issuance costs included in interest expense		1,350			1,350
Deferred taxes		(30,000	)		(25,000	)
Stock-based compensation		35,900			33,500
Unrealized loss (gain) on marketable securities		(69,856	)		6,746
Investment gains		(29,177	)		-
Loss on equity method investment		54,399			-
Non-cash operating lease expense		4,736			-
Gain on sale of assets held for sale		(313,688	)
Changes in operating assets and liabilities, net of acquisitions -
Receivables		62,352			56,421
Inventory		(14,656	)		(8,291	)
Prepaid expenses and other current assets		(27,027	)		(23,924	)
Other assets		-			(10,000	)
Accounts payable		(47,894	)		111,355
Accrued expenses		(122,419	)		93,511
Income taxes payable		-			(10,339	)
Net cash provided by (used in) operating activities		(474,259	)		337,394

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of net assets of Keegan’s Seafood Grille		-			(1,150,000	)
Proceeds from sale of assets held for sale		496,000
Purchase of property and equipment		(107,017	)		(10,164	)
Investment in related company		-			(229,000	)
Purchase of marketable securities		(1,026,917	)		(260,846	)
Proceeds from sale of marketable securities		5,741,908			-
Other assets		-			(32,000	)
Net cash provided by (used in) investing activities		5,103,974			(1,682,010	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on margin loan to finance the purchase of marketable secutities		(791,370	)		-
Proceeds from exercise of common stock warrants		-			74,866
Principal payments on long-term debt		(244,297	)		(42,237	)
Purchase of treasury shares		(250,225	)		-
Net cash provided by (used in) financing activities		(1,285,892	)		32,629

CHANGE IN CASH		3,343,823			(1,311,987	)

CASH, BEGINNING OF PERIOD		2,150,578			12,385,632

CASH, END OF PERIOD	$	5,494,401		$	11,073,645

SUPPLEMENTAL DISCLOSURES
Cash paid for interest	$	24,183		$	26,291

See Notes to Consolidated Condensed Financial Statements

Table of Contents

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,” or “BT ~~Brands,” or “BT”~~Brands”) and have been prepared in accordance with the U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to ~~Securities and Exchange Commission (“SEC”) requirements for~~ Form 10-Q and Article 10 of Regulation S-X. All intercompany accounts and transactions have been eliminated in ~~consolidation. The financial statements~~consolidation and have been prepared on a basis consistent in all material respects with the accounting policies for the fiscal year ~~ended~~ending January ~~2, 2022.~~1, 2023. 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 ~~July 3, 2022,~~April 2, 2023, does not include all of the disclosures required by GAAP. ~~These~~Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of January ~~2, 2022,~~1, 2023, and the related notes thereto included in ~~our~~the Company’s Form 10-K for the fiscal year ended January ~~2, 2022.~~1, 2023.

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”) was incorporated as Hartmax of NY Inc. on January 19, 2016. Effective July 30, 2018, the Company acquired 100% of BTND, LLC.

~~Business~~

~~As of July 3, 2022, BT Brands owned and operated twelve restaurants, including nine Burger Time~~We operate restaurants in the ~~North Central region~~eastern two-thirds of the United States, a Dairy Queen fast-food franchised location in suburban Minneapolis, Minnesota, collectively (“BTND”). We own Keegan’s Seafood Grille (“Keegan’s”), a dine-in restaurant located in Florida, and Pie In The Sky Coffee and Bakery (“PIE”), a casual dining coffee shop and bakery located in Woods Hole, Massachusetts. Our Burger TimeStates. As of April 1, 2023, including our 41.2% owned Bagger Dave’s business, we operated seventeen restaurants ~~feature a variety of burgers and other affordable foods, sides, and soft drinks. Our Dairy Queen restaurant offers~~comprising the franchisor proscribed menu consisting of burgers, chicken, sides, ice cream, other desserts, and various beverages. Keegan’s Seafood Grille has operated in Indian Rocks Beach, Florida, for more than thirty-five years and offers a variety of traditional fresh seafood items for lunch and dinner. The menu at Keegan’s includes beer and wine. PIE features an array of fresh baked goods, freshly made sandwiches, and our locally roasted coffee. Our revenues are derived from food and beverages at our restaurants; retail goods such as apparel, private-labeled “Keegan’s Hot Sauce,” and other souvenir items account for an insignificant portion of our income.following:

On June 2, 2022, BT Brands completed the purchase of 11,095,085 common shares representing 41.2% of Bagger Dave’s Burger Tavern, Inc. (“Bagger Dave’s”). We acquired the shares from the Bagger Dave’s founder for $1,260,000, or approximately $0.114 per share. Following the investment, representatives of BT Brands were appointed to two of the three positions on Bagger Dave’s Board of Directors. Bagger Dave’s specializes in locally sourced, never-frozen prime rib recipe burgers, all-natural lean turkey burgers, hand-cut fries, locally crafted beers on draft, milkshakes, salads, black bean turkey chili, and pizza. The first Bagger Dave’s opened in January 2008 in Berkley, Michigan. There are currently six Bagger Dave’s restaurants, including four in Michigan and single units in Ft. Wayne, Indiana, and Centerville, Ohio.
·
Eight Burger Time fast-food restaurants and one Dairy Queen franchise located in the North Central region of the United States, collectively (“BTND”);
·
Bagger Dave’s Burger Tavern, Inc, a 41.2% owned affiliate, operates six Bagger Dave’s restaurants in Michigan, Ohio, and Indiana (“Bagger Dave’s”);
·
Keegan’s Seafood Grille in Indian Rocks Beach, Florida (“Keegan’s”);
·
Pie In The Sky Coffee and Bakery in Woods Hole, Massachusetts (“PIE”).
·
Village Bier Garten is a German-themed restaurant, bar, and entertainment venue in Cocoa, Florida (“VBG”).

Our Dairy Queen ~~location~~store is operated under a franchise agreement with International Dairy Queen. We pay royalty and advertising payments to the franchisor as required by the franchise agreement.

Table of Contents

Fiscal Year Period

~~BT Brand’s~~Our 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 athe 52-week year. ~~Fiscal 2022~~All references to years in this report refer to the 13-week periods in the respective fiscal year periods. The fiscal year 2023 is 52 weeks ending ~~January 1, 2023, and fiscal 2021 was a 52-weeks ending January 2, 2022.~~December 31, 2023.

Cash

~~At times, our bank deposits exceed the amount insured by the Federal Deposit Insurance Corporation. In addition, we maintain~~For purposes of reporting cash ~~deposits in brokerage accounts, including~~and cash flows, cash includes money market funds ~~above the~~and is net of outstanding checks and includes, amounts on deposit at banks and deposits in transit and excludes transfers out in transit and includes brokerage account money market funds which are not insured ~~amount. We do not believe there is a significant risk related to cash.~~deposits.

~~Investment~~

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

Fair Value of Financial Instruments

~~Our~~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~~:follows:

	·	Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that wethe 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~~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.

~~Investments in marketable equity securities are carried at fair value.~~ On ~~July 3, 2022,~~April 2, 2023, the cost of marketable securities ~~consisted of Nasdaq-listed equity securities with~~include a ~~historical~~bond fund at a cost of ~~$607,988.~~$416,570 and common stocks at a cost of $978,333 was a total cost of $1,394,903 prior to a mark-to-market reduction of $16,566. These investments are reflected in the accompanying financial statements ~~on July 3, 2022,~~at April 2, 2023, at the level-one ~~fair value~~ quoted market price in an active market of ~~$527,750.~~ $1,378,337. At January 1, 2023, the fair value of Level 1 investments included common stocks of $713,900 and a corporate bond exchange-traded fund (ETF) of $316,000, a total carrying value of $1,029,900, net of an unrealized mark-to-market loss of $86,422, as determined by quoted market prices in an active market.

Investments

Noncurrent investments at April 2, 2023, include our net equity method investment of $1,010,787 in Bagger Dave’s and our $304,000 total investment in Next Gen Ice, Inc. (NGI). In 2020, the Company received equity ownership in NGI as consideration for a loan to NGI. Upon repayment of the note, $75,000 was attributed by us to the value of the equity received, and this amount was reflected as additional interest income in 2020. The fair value determined in 2020 continues to be reflected as the value of the investment. On February 12, 2022, we invested $229,000 in Series A1 8% Cumulative Convertible Preferred Stock of NGI, including a five-year warrant to purchase 34,697 common shares of NGI at $1.65 per share. See also Note 8.

Bagger Dave’s common stock is traded on the OTC Pink market and files quarterly and annual financial reports with OTCMarkets, Inc. under the Alternative Reporting Standard. The listing with OTC Markets does not require the information to be audited. For the thirteen weeks ended March 26, 2023, Bagger Dave’s had sales of $2,014,158 and a net loss of $136,153. Our 41.2% equity share in the loss was approximately $54,399 and is included in the accompanying statement of operations.

Short-Term Investments

Marketable Securities at January 1, 2023, include $5,000,000 face value of a United States Treasury Bills maturing March 16, 2023, purchased for $4,907,378 in August 2023. At January 1, 2023, the Treasury Bills were planned to be held until maturity and had an amortized cost value of $4,964,395. The amortized cost value approximates fair value.

Table of Contents

Receivables

Receivables consist mainly of estimated rebates due from a primary vendor.

Inventory

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

Property and Equipment

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

~~Table of Contents~~

~~We review~~The Company reviews long-lived assets to determine if the carrying value of these assets is recoverable based on estimated cash flows. Assets are evaluated at the lowest level for which cash flows can be identified at the restaurant level. In determining future cash flows, estimates are made by usthe Company for ~~the~~ future operating results of each 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~~Land, building and equipment, operating right of ~~the purchase price over the estimated fair value of acquired business assets. In accordance with GAAP, Goodwill is not amortized. We periodically assess goodwill~~use assets and certain other assets, including definite-lived intangible assets are reviewed regularly for impairment and ~~have~~whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amount of the assets to the future undiscounted net cash flow expected to be generated and is determined ~~there~~at the restaurant level. If an asset is nodetermined to be impaired, the recognized impairment is measured by the amount by which the carrying amount of ~~Goodwill at July 3, 2022.~~ the asset exceeds the fair value.

~~Intangible~~Impairment and Disposal of Long-Lived Assets

~~Intangible assets with estimated finite lives result from business acquisitions~~We closed the Burger Time store in West St. Paul in 2022 and ~~include allocated cost of trademarks, tradenames, a covenant not to compete, websites, and social media accounts. The costs of purchased intangible assets are recorded at~~ the ~~estimated value and are amortized over 4 to 20 years.~~

~~Assets Held for Sale~~

~~As of July 3, 2022, a property in the St. Louis area, which has a carrying value of $0, and a property in~~ Richmond, Indiana, ~~are held~~store in 2018. The West St. Paul location sale was completed in February of 2023 for a gain of $313,688. The Richmond location is currently offered for sale. We believe the Richmond property will be sold at or above its ~~current-carrying cost.~~current carrying value. Following the end first quarter of 2023, we completed the disposition of the St. Louis area property in lieu of unpaid property taxes. The ~~remaining book value~~second quarter of ~~$258,751 is included in Other Assets in~~2023 will reflect a gain of approximately $180,000 for the ~~accompanying balance sheet.~~reversal of previously accrued property taxes.

Income Taxes

~~The Company provides~~We provide for income taxes under ~~Accounting~~(Accounting Standards Codification (ASC) 740), ~~740,~~ Accounting for Income Taxes. ASC 740 uses an asset and liability approach in accounting for income taxes. Deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities. They are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. ~~If necessary, we provide~~The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. The deferred tax assets are reviewed periodically for recoverability, and valuation allowances are adjusted as necessary.
As of ~~July 3, 2022, we estimated~~April 2, 2023, the Company estimates a current tax provision at the ~~net combined federal and state~~statutory rate of approximately 27.5%.

The Company has no accrued interest or penalties relating to income tax obligations. ~~There currently are~~The Company has no federal or state examinations in ~~progress. The Company~~progress, nor has ~~not~~it had any federal or state tax examinations since its inception. All periods since inception remain open for inspection.
11
Table of Contents

Per Common Share Amounts

Net income per common share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted net income ~~or loss~~ per share is 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 ~~per share~~per-share amounts if their effect is anti-dilutive. There were no dilutive shares for the periods ending in ~~2022~~2023 and ~~2021.~~2022.

10
Goodwill, Other Intangible Assets and Other Assets
Goodwill is not amortized. Goodwill is tested for impairment at least annually. The cost of other intangible assets is amortized over the expected useful life. Other assets include the allocated fair value of the acquired Dairy Queen franchise agreement related to our location in Ham Lake, Minnesota, and is amortized over an estimated useful life of 14 years
~~Table of Contents~~

NOTE 2– ~~ACQUISITIONS~~
~~Restaurant Acquisition - Keegan’s~~
On March 2, 2022, BT Brands, through its 1519BT, LLC subsidiary (“1519BT “), purchased the net assets of Keegan’s, a fresh seafood restaurant located in Indian Rocks Springs, Florida. Concurrent with the purchase, we entered a 131-month lease for the approximately 2800 square foot space that Keegan’s has occupied for more than 35 years. We acquired Keegan’s tradename as part of the purchase and will continue to operate the business as Keegan’s Seafood Grille. The purchase price was approximately $1.15 million, paid in cash at closing.
The 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. The Company recorded provisional amounts and will complete the acquisition accounting once it finalizes its valuation analysis.
As a result of the Keegan’s acquisition, we provisionally recorded $200,000 in goodwill, representing the excess of fair value over the purchase price of the identifiable assets; the allocation to purchased goodwill is expected to be deductible for income tax purposes over fifteen years.
~~The following table presents the preliminary estimate of the fair value of the assets acquired, and liabilities assumed in the Keegan’s transaction:~~
Assets acquired:

Inventory

$ 10,049

Equipment

428,000

Leasehold improvements

450,000

Trademark, website, and other intangibles

75,000

Total identifiable assets

963,049

Assumed current liabilities

(17,260 )
Net assets acquired

945,789

Goodwill

204,211

Purchase price

$ 1,150,000

~~Restaurant Acquisition – Pie In the Sky Coffee and Bakery~~
On May 11, 2022, our 10Water Street, LLC subsidiary (“10Water”) purchased the net assets of PIE, a bakery and coffee shop located in Woods Hole, Massachusetts. Concurrent with the purchase, we entered into a 60-month lease, including three additional five-year renewal options. The lease covers the approximately 3,500 square feet PIE has operated in for more than 20 years. We acquired the Pie in the Sky tradename and the piecoffee.com website URL as part of the purchase and will continue to operate as Pie in the Sky. The purchase price was approximately $1.16 million, including $1.15 million in cash paid at closing.
The acquisition of PIE was accounted for 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 of the closing date. We recorded provisional amounts as of the purchase date and will complete the acquisition accounting once we finalize the valuation analysis.
As a result of the PIE acquisition, we provisionally recorded $270,100 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.
11
~~Table of Contents~~
~~The following table presents our preliminary estimate of the fair value of the assets acquired and liabilities assumed in the PIE transaction is:~~
Assets acquired:

Inventory

$ 23,500

Equipment

400,000

Furniture and fixtures

125,000

Trademark, website, and other intangibles

50,000

Non-compete agreement

300,000

Total assets acquired

898,500

Assumed current liabilities

(23,120 )

Net assets acquired

875,380

Goodwill

284,220

Purchase price

$ 1,159,600

~~NOTE 3~~ – INTANGIBLE ASSETS

At ~~July 3, 2022, based upon our preliminary evaluation of~~April 2, 2023, the value of ~~acquired assets,~~ Intangible Assets are ~~the following:~~as follows:

Estimated
Useful Life (Years)

Amount

Covenant not to compete

4

$ 300,000

Trademarks, tradenames, websites and social media accounts

20

125,000

$ 425,000

Estimated
Useful Life
(Years)

Original Cost

Accumulated
Amortization

Net Carrying Value

Covenants not to Compete

3

$ 98,000

$ 26,528

$ 71,472

Trademarks

15

393,000

25,512

367,788

$ 491,000

$ 51,740

$ 439,260

On January 1, 2023, intangible assets comprise4 the following:

Estimated
Useful Life
(Years)

Original Cost

Accumulated
Amortization

Net
Carrying
Value

Covenants not to compete

3

$ 98,000

$ (18,361 )

$ 79,639

Tradenames

15

393,000

(18,661 )

374,339

$ 491,000

$ (37,022 )

$ 453,978

Tradename assets are being amortized over 15 years at $26,000 in amortization expense per year. The total amortization of intangible assets, including the covenants not to compete, will approximate $58,900 in 2023 and 2024 and $40,500 in 2025 and $26,200 per year thereafter for the following six years and approximately $7,500 in 2037.
Total amortization expense for the 2023 13-week period was $14,718.

NOTE 4 3 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

July 3, 2022

January 2, 2022

April 2, 2023

January 1, 2023

Land

$ 485,239

$ 485,239

$ 435,239

$ 485,239

Equipment

3,417,413

2,674,529

3,754,748

3,893,274

Buildings and leasehold improvements

1,998,516

1,322,085

2,367,557

2,402,157

Total property and equipment

5,901,168

4,481,853

6,557,544

6,780,670

Accumulated depreciation

(2,680,610 )

(2,630,764 )

(3,040,034 )

(3,039,500 )
Less - property held for sale

(258,751 )

(258,751 )

(258,751 )

(446,526 )
Net property and equipment

$ 2,961,807

$ 1,592,338

$ 3,258,759

$ 3,294,644

Depreciation expense for the ~~26-week~~13-week periods in 2023 and 2022 was $148,364 and ~~2021 was $177,676 and $113,394,~~$68,902, respectively.

12
Table of Contents

NOTE 54 - ACCRUED EXPENSES

Accrued expenses consisted of the following at:

July 3, 2022

January 2, 2022

April 2, 2023

January 1, 2023

Accrued real estate taxes

$ 88,800

$ 103,615

$ 195,093

$ 202,436

Accrued bonus compensation

59,139

7,000

59,139

59,139

Accrued payroll

228,127

44,700

Accrued payroll taxes

13,398

8,424

Accrued payroll and payroll taxes

25,286

156,245

Accrued sales taxes payable

118,468

50,414

91,172

70,270

Accrued vacation pay

17,664

17,663

17,663

17,663

Accrued gift card liability

29,295

10,036

21,748

25,965

Accrued franchise royalty

6,494

2,614

Other accrued expenses

14,405

9,875

-

802

$ 410,101

$ 532,520

$ 575,790

$ 254,341

NOTE 65 - LONG TERM DEBT

Our long-term debt is as follows:

July 3, 2022

January 2, 2022

April 2, 2023

January 1, 2023

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 covering ten BTND operating locations. The notes are guaranteed by BT Brands, Inc. and a shareholder of the Company.

$ 2,946,685

$ 3,027,971

Three notes payable to a bank dated June 28, 2021, due in monthly installments totaling $22,213, including principal and interest at a 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 ten BTND operating locations. BT Brands, Inc. and a shareholder of the Company guarantee the notes.

$ 2,621,668

$ 2,864,484

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.

19,250

22,000

2,965,935

3,049,971

Minnesota Small Business Emergency Loan dated April 29, 2020, payable in monthly installments of $458.33 beginning December 15, 2020, including principal and interest at 0%. This note is secured by the personal guarantee of a shareholder of the Company. Pursuant to the terms of the loan, $13,750 of the loan was forgiven on June 22, 2022

1,727

3,208

Total

2,623,501

2,867,692

Less - unamortized debt issuance costs

(44,298 )

(46,999 )

(40,249 )

(41,599 )
Current maturities

(171,358 )

(169,908 )

(166,241 )

(167,616 )

$ 2,750,279

$ 2,833,064

$ 2,416,905

$ 2,658,477

NOTE 76 - STOCK-BASED COMPENSATION

In 2019, ~~the Company~~we adopted the ~~2019~~ BT Brands, Inc 2019 Incentive Plan (the ~~“2019 Incentive Plan”~~“Plan”), under which itthe Company 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 ~~July 3, 2022,~~April 2, 2023, there were ~~13,400~~529,750 shares available for a grant under the ~~2019 Incentive~~ 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 half of 2022, we granted 220,750 options to employees and consultants to purchase shares at $2.50 per share.
~~Stock options granted to employees and directors 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 fair value of the options at the grant date is recognized in general and administrative expense over the applicable service period. Compensation expense for the ~~26 weeks~~first quarter of 2023 was $26,400 in ~~2022 was $73,400~~2023, and ~~was zero~~$9,500 related to the Contingent Share Award described below and $33,500 in ~~a similar period in 2021.~~2022. Based on current estimates, we project that for current grants, approximately ~~$230,000~~$180,000 in stock-based compensation expense will be recognized over the next three years at approximately $60,000 per year.
As outlined in ~~future periods.~~each agreement, stock options granted to employees and directors vest over four years in annual installments. Options expire ten years from the date of the grant. Compensation expense equal to the fair value of the options at the grant date is recognized in general and administrative expense over the applicable service period.

13
Table of Contents

We utilize 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 the grant date.

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

·
Expected life – The simplified method

·
Expected dividend – The rate of dividends expected to be paid 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.~~award

Information regarding our stock options is summarized below:

Number of

Weighted Average

Weighted Average Remaining Term

Aggregate
Intrinsic

Options

Exercise Price

(In Years)

Value

Options outstanding at January 2, 2022

15,000

$ 5.00

9.3

$ 0

Granted

220,750

2.50

$ 0

Exercised

0

0

$
0

Canceled, forfeited, or expired

(8,200 )

2.50

$
0

Options outstanding at July 3, 2022

227,550

$ 2.67

9.8

$ 0

Options exercisable at July 3, 2022

59,150

$ 3.18

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 grants during the period ended July 3, 2022:~~
Fair value of options granted during the period

$ 1.39

Expected life (in years)

4.83

Expected dividend

$ 0

Expected stock volatility

63 %
Risk-free interest rate

2 %

Number of

Weighted Average

Weighted Average Remaining Term

Aggregate
Intrinsic

Options

Exercise Price

(In Years)

Value

Options outstanding at January 1, 2023

220,250

$ 2.74

9.0

$ 0

Granted

0

0

Exercised

0

0

Canceled, forfeited, or expired

0

0

Options outstanding at April 2, 2023

220,250

$ 2.74

8.9

$ 0

Options exercisable at April 2, 2023

94,950

$ 3.18

8.9

$ 0

On February ~~9, 2022,~~27, 2023, the ~~independent members of the Board of Directors comprising its Compensation Committee approved~~Company finalized a ~~proposal wherein,~~Contingent Incentive Share Award with senior executives. The Contingent Share Awards provides that so long as the Company’s publicly traded warrants are outstanding, senior management of the Company will be ~~granted~~deemed to earn an aggregate award of 250,000 shares of common stock as an award upon the Company’s share price reaching $8.50 per share for 20 consecutive trading ~~days. Final approval~~days, provided, however, participants must be employed by the Company at the time the Incentive Shares are earned. The estimated fair value of the ~~proposal~~plan is ~~contingent upon shareholder approval~~$1.00 per share, and $250,000 of ~~an increase in~~compensation expense will be recognized over the ~~number of shares~~remaining 2.1 years available under the ~~2019~~Plan and $9,500 of stock-based compensation was recognized for this Agreement in the first quarter of 2023. We utilized a lattice model when determining the fair value of the Contingent Incentive ~~Plan, which is expected to be proposed at~~Share Awards. Assumption utilized in the ~~next meeting~~model include a risk-free rate of ~~shareholders.~~4.4% and volatility of 63%.
14
Table of Contents

NOTE 87 – LEASES

~~Concurrent with the closing of~~With the acquisition of Keegan’s net assets, we entered into a lease for approximately 2,800 square feet of restaurant space. The 131-month Keegan’s lease provides 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, we recorded an operating lease obligation and a right-of-use asset of $624,000. The present value discounted at 4%3.75% of the remaining lease obligation of ~~$607,220~~$563,546 is reflected as a liability in the accompanying financial statements.

Keegan’s lease does not provide an implicit interest rate; we used our incremental borrowing rate of 4% to determine the 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 expenses, and sales tax.

~~Concurrent with the acquisition of~~Upon acquiring PIE assets, we ~~entered into a lease for~~leased approximately 3,500 square feet of restaurant and bakery production space. The terms of the 60-month lease provide for an initial rent of $10,000 per month with an annual escalation of after 24 months of 3%5%. The PIE lease includes three five-year renewal option periods. The PIE lease is accounted for as an operating lease. At the inception of the lease, we recorded an operating lease obligation and a right-of-use asset of ~~$554,849.~~$1,055,000. The present value discounted at 5% of the remaining lease obligation of ~~$542,578~~$1,029,806 is reflected as a liability in the accompanying financial statements. ~~The weighted-average remaining lease term is approximately 6.9 years.~~
14
~~Table of Contents~~

The PIE lease did not provide an implicit interest rate; we used our estimated incremental borrowing rate of 5% to determine the present value of future lease payments. 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 expenses, and sales tax.

With the acquisition of assets of Village Bier Garten, we entered into a five-year lease with the seller for approximately 3,000 square feet of restaurant space and access to an additional 3,000 square feet of shared entertainment and seating area. The terms of the triple-net 60-month provide for an initial rent of $8,200 per month with an annual escalation of 3%. The VBG lease includes three five-year renewal option periods. The VBG lease does not provide an implicit interest rate; we used our estimated incremental borrowing rate of 5% to determine the present value of future lease payments. 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 expenses, and sales tax.
The VBG lease is accounted for as an operating lease. At the inception of the lease, we recorded an operating lease obligation and a right-of-use asset of $469,949. The present value discounted at 4.5% of the remaining lease obligation of $371,592 is reflected as a liability in the accompanying financial statements.
Following is a schedule of the approximate minimum future lease payments on the operating leases as of ~~July 3, 2022:~~April 2, 2023:

Total

Total

Remainder 2022

$ 90,000

2023

181,350

Remainder 2023

$ 211,380

2024

185,990

289,076

2025

190,600

297,745

2026

196,000

306,674

2027 and thereafter

495,054

2027

268,437

2028 and thereafter

1,039,438

Total future minimum lease payments

1,338,994

2,412,750

Less - interest

(189,196 )

(447,806 )

$ 1,149,798

$ 1,964,944

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 on this land is approximately $18,500. The monthly lease payment is ~~$1,600~~$1,800 plus the cost of property taxes.

The weighted average remaining lease term is approximately 5.9 years.
15
Table of Contents
The Company also pays a monthly rent, ~~for~~under month-to-month arrangements, for corporate and administrative office spaces in West Fargo, North Dakota, and Minnetonka, Minnesota, for a combined monthly rent of approximately $2,200.

The total operating lease expense for the 13-week period in 2023 was $93,151. Cash paid for leases during the 13-week period in 2023 totaled $97,887 and variable expenses for leased properties were $14,196.
NOTE 9 8 - RELATED PARTY TRANSACTION

Next Gen Ice

~~In 2019, BT Brands made cash advances to~~Our CEO and CFO also serve as Chairman and CFO of Next Gen Ice, Inc. (NGI) ~~in the form of~~. BT Brands owns 179,000 common shares, and 138,788 NGI Series ~~C Notes totaling a principal amount of $179,000 (“Notes”). Our CEO, Gary Copperud, is Chairman of the Board of Directors of NGI. Our Chief Operating Officer, Kenneth Brimmer, is~~A1 Preferred Shares and also ~~a member of the Board of Directors~~holds warrants to purchase 358,000 common shares at $1.00 expiring March 31, 2028, and 34,697 warrants to purchase additional shares at $1.65  of NGI ~~and serves~~ as ~~Chief Financial Officer of NGI. When the loan was made, Mr. Copperud and an entity controlled by him together owned approximately 34% of the outstanding equity of NGI. As~~ part of a Note modification, BT Brands We received 179,000 shares of common stock in NGI ~~from the founders~~as consideration for modification of ~~NGI, representing approximately 2% of NGI shares outstanding. BT Brands also holds warrants expiring March 31, 2028, to purchase 358,000 shares of common stock for $1.00 per share.~~a note that subsequently was paid. The common stock and warrants received in the note modification transaction were recorded at a value determined by BT Brands of $75,000.
The investment in NGI does not have a readily determinable market value. Therefore, it is carried at a cost determined by BT Brands. On February 2, 2022, BT Brands invested $229,000 in NGI Series A1 8% Cumulative Convertible Preferred Stock, which included a five-year warrant to purchase 57,250 shares at $1.65 per share. The total value of our investment in NGI at July 3, 2022, is its fair value of $304,000, comprised of the $75,000 value determined by BT Brands for the initial common shares and warrants and the $229,000 cost of the investment in the NGI Convertible Preferred Stock and warrants.

NOTE 10 9 – CONTINGENCIES

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. WeHowever, we are ~~not aware~~unaware of any significant asserted or potential claims that could impact our financial position.

NOTE 1110 – SUBSEQUENT EVENT

~~Acquisition of Village Bier Garten Restaurant~~
~~On August 4, 2022, BT Brands, through our 1519BT, LLC subsidiary,~~In April 2023, we completed the ~~purchase~~disposition of the ~~assets and the business operating as Van Stephan Village Bier Garten,~~St. Louis area property in lieu of unpaid property taxes, aa a ~~full-service bar and restaurant in Cocoa, Florida. The restaurant features~~result second quarter of 2023 will reflect a German-themed menu, specialty imported European beers, and regular entertainment. The purchase price was $6,900,000, paid in cash at closing. Concurrent with the purchase, we entered into a five-year lease with three five-year renewal optionsgain of approximately $180,000 for the reversal of previously accrued property ~~currently occupied by the business. The terms of the triple net lease call for an initial monthly rent of $8,200.~~taxes.

1516
Table of Contents

~~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, ~~“BT Brands” or~~ the “Company”) should be read in conjunction with the Company’s condensed consolidated financial statements and accompanying notes included under Part I, Item 1 of this quarterly report on Form 10-Q, as well as with the audited consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s annual report on Form 10-K for the year ended January ~~2, 2022.~~1, 2023.

Introduction

As of ~~July 3, 2022,~~April 2, 2023, including our partially owned Bagger Dave’s business, we owned and operated eighteen restaurants comprising the following:

·
~~Nine~~Eight Burger Time fast-food restaurants and one Dairy Queen franchise ~~all of which are in the North Central region of the United States;~~
(“BTND”);

·
~~Bagger Dave’s Burger Tavern, Inc,~~Village Bier Garten is a ~~41.2% owned affiliate, operates six Bagger Dave’s restaurants~~German-themed restaurant, bar, and entertainment venue in ~~Michigan, Ohio, and Indiana;~~
Cocoa, Florida. (“VBG”):

·
Keegan’s Seafood Grille in Indian Rocks Beach, ~~Florida;~~
Florida (“Keegan’s”);

·
Pie ~~in the~~In The Sky Coffee ~~Shop~~ and Bakery in Woods Hole, ~~Massachusetts.~~Massachusetts (“PIE”).
·
Unconsolidated affiliate Bagger Dave’s Burger Tavern, Inc, 41.2% owned, operates six Bagger Dave’s restaurants in Michigan, Ohio, and Indiana (“BD”).

~~The first~~ Burger Time opened its first restaurant ~~opened~~ in Fargo, North Dakota, in 1987. ~~BTND, LLC purchased the assets of Burger Time in May 2007.~~ Burger Time restaurants feature ~~additional~~grilled hamburgers and other affordable foods such as chicken sandwiches, pulled pork sandwiches, sides, and soft drinks. Burger Time’s operating principles ~~include:~~include (i) offering bigger burgers and more value for the money; (ii) offering a limited menu to permit attention to quality and speed of preparation; (iii) providing fast service by way of single and double drive-thru designs and a point-of-sale system that expedites the ordering and preparation process, and (iv) great tasting and 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 strive for efficiency at our Burger Time restaurants, including maintaining an inventory of approximately $15,000 per store, allowing for frequent fresh food deliveries. Historically, our Burger Time investment model targeted an average cash investment of between $325,000 and $535,000.
The average customer transaction at our Burger Time restaurants increased by approximately 4%20% in ~~the first six months of~~ fiscal ~~2022~~2023 compared to ~~2021~~2022 and currently is ~~approximately $12.50.~~about $15.60. This recent increase is principally because of athe menu price ~~increase~~increases implemented in ~~2021 and a 2022 price increase of approximately 10% on our popular “Deal of the Day” offering.~~2022. Many factors influence our sales trends. ~~The~~Our business environment is challenging ~~for smaller restaurant chains~~ as competition is intense.

~~BT Brands operates Burger Time restaurants and newly acquired businesses~~We operate through a central management organization ~~which we believe~~that provides continuity across our restaurant base ~~and allows for~~by utilizing the efficiencies of a central management team.

16
~~Table of Contents~~
~~Highlights~~Notable Recent Events

During the first two quarters of 2022, we acquired two restaurants and a 41.2% interest in an operator of six restaurants with the net proceeds from our November 2021 initial public offering. We expect to continue to consider acquisition opportunities. Our recent acquisitions have allowed us to diversify our operations into new restaurant segments and new geographic regions, ~~which we expect will reduce~~reducing our dependency on the financial performance of our Burger Time restaurants.
~~Keegan’s Seafood Grille, which~~ During the 2022 fiscal year, we acquired three operating restaurants and a 41.2% ownership interest in ~~March 2022, has served customers~~BD, an operator of six casual restaurants. We expect to consider new acquisition opportunities in the Clearwater and St. Petersburg, Florida markets for over 35 years. The operation is primarily a dine-in restaurant offering a variety of traditional fresh seafood items for lunch and dinner and a selection of beer and wine.
In May 2022, through our 10Water Street, LLC subsidiary, we acquired the assets and business operations of the iconic Pie In The Sky Coffee Shop and Bakery “PIE,” which is adjacent to the ferry dock in Woods Hole, Massachusetts. The business has operated in the same location for over thirty years, offering a range of breakfast and lunch options, freshly roasted coffee, and branded merchandise serving locals and tourists.
In June 2022, BT Brands acquired approximately 41.2% of the stock of Bagger Dave’s Burger Tavern, Inc., which owns and operates six Bagger Dave’s restaurants, a casual restaurant, and bar concept. Bagger Dave’s provides a warm, inviting, and entertaining atmosphere specializing in locally sourced, never-frozen prime rib recipe burgers, all-natural turkey burgers, hand-cut fries, locally crafted draft beers, milkshakes, salads, black bean turkey chili, pizza, and other items. Bagger Dave’s opened its first restaurant in Berkley, Michigan, in January 2008 and operates four restaurants in Michigan, one restaurant in Ft. Wayne, Indiana, and one location in Centerville, Ohio.future.

Material Trends and Uncertainties

~~There are industry~~Industry trends ~~that currently~~ have ana direct impact on our business. Current trends include difficulties attracting food service workers and rapid inflation in the cost of ~~many~~ input items. Recent trends also include the rapidly changing area of technology and food delivery. The major companies in the restaurant industry have rapidly adopted and developed smartphone and mobile delivery applications, ~~have~~ aggressively expanded drive-through operations, and developed loyalty programs and database marketing supported by a robust technology platform. We expect these trends to continue as restaurants aggressively compete for customers. Competitors ~~likely~~ will continue to discount prices through aggressive promotions.

~~The cost of food has~~Food costs have increased over the last two years, and we expect to see continued inflationary pressure ~~in the remainder of 2022.~~during 2023. Beef and egg costs ~~were stable in 2020,~~ continued to ~~rise~~increase in ~~2021, and have recently increased by approximately 4% per pound.~~2023. Given the competitive nature of the ~~fast-food burger~~ restaurant industry, it may be ~~difficult~~challenging to raise menu prices to cover ~~future~~ cost increases fully. ~~During 2020 and early 2021, our Burger Time business experienced~~As a ~~significant increase in business volume contributing to improved profit margins. Additional~~result, future margin improvements may ~~have~~be difficult to achieve. Margin improvement will be ~~made~~achieved through operational enhancements, equipment advances, and increased volumes ~~to help offset~~offsetting food cost ~~increases due to the competitive state of the restaurant industry.~~increases.
17
Table of Contents

Labor is a critical factor in operating our stores. InSecuring staff to run our locations at full capacity has become more challenging in most areas where we operate our ~~restaurants, there historically has been a shortage of suitable labor, and recently, securing staff has become more challenging.~~restaurants. The current labor market has resulted in higher wages as the competition for employees intensifies, not only in the restaurant industry but in practically all retail and service industries. WeTo succeed, we must identify, develop and retain quality employees.
Since March 2020, we have faced the effects of COVID and its variants. COVID infections have adversely affected workforces, customers, economies, and financial markets globally and have disrupted the normal flow of the U.S. economy. Our stores have, with only a few exceptions, remained open for drive-through business during the last two years; however, many businesses experienced a disruption of normal operations. More recently, food service businesses, including ours, have faced challenges in attracting and hiring workers. Labor shortages may continue and become more acute as market participants compete to attract employees.
We can’t predict the duration or magnitude of the effects of COVID and the impact on our business or the results of operations. The response to public health matters may influence restaurant customer traffic and 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 by mandatory closures, seek voluntary closures, or impose restrictions on operations. Even if such measures are not implemented, the perceived risk of infection or significant health risk may adversely affect our business.
17
~~Table of Contents~~
We continue to monitor public health issues and their impact on our customer base and throughout the country. It is difficult to predict the future in light of many factors, including the spread of new variants of the original coronavirus disease among the U.S. population and the efficacy of existing treatments and vaccines.
~~Our strategy to acquire additional restaurant properties presents numerous risks and uncertainties to our operations, including our management’s ability to:~~
·
~~identify suitable targets;~~
·
~~complete comprehensive due diligence as to targets,~~
·
~~integrate a target’s operations with our existing operations,~~
·
~~retain management and key employees of the target;~~
·
~~operate new restaurant concepts in new geographic areas outside of our traditional Burger Time platform;~~
·
~~develop and implement appropriate and effective sales and marketing strategies for our new restaurants individually and our restaurant group as a whole;~~
·
~~maintain and grow revenue at our new properties;~~
·
~~identify and retain experienced managerial personnel to effectively administer our operations;~~
·
~~improve existing, and implement new operational, financial, and management controls;~~
·
~~install enhanced management information systems; and~~
·
~~create a corporate brand identifying our restaurants as BT Brands’ properties.~~
~~Our failure to manage any of these aspects of our growth could adversely impact our business and our results of operations.~~
Future conditions may influence restaurant customer traffic and our ability to adequately staff our restaurants, receive deliveries on a timely basis or perform functions at the corporate level. Further, such conditions could impact the availability of the menu items we offer and the ability of suppliers to deliver such products. We also may be adversely affected if jurisdictions impose mandatory closures, seek voluntary closures, or impose restrictions on operations. Even if such measures are not implemented, the perceived risk of infection or significant health risk may adversely affect our business.
~~Growth Strategy and Outlook~~
We are seeking to increase value for our shareholders in the food service industry. Our principal strategy comprises acquiring individual and multi-unit restaurant properties at attractive earnings multiples. Though we do not plan to do so, we may develop additional Burger Time locations by acquiring and converting existing properties under certain circumstances. Other key elements of our growth strategy include increasing same-store sales and introducing a campaign to boost brand awareness.

~~Expansion Through Acquisitions~~Result of operations for the 13 weeks ending April 2, 2023, compared to the 13 weeks ending April 3, 2022.

~~We intend~~The following table sets forth, for the periods indicated, our Consolidated Statements of Operations expressed as a percentage of total revenues. The percentages amounts below may not reconcile because of rounding.

  13 weeks ended,
April 2, 2023

13 weeks ended,
April 3, 2022

Amount

            %

Amount

%

SALES

$ 3,070,798

100.0 %

$ 2,073,195

100.0 %
COSTS AND EXPENSES

Restaurant operating expenses

Food and paper costs

1,290,323

42.0

721,583

34.8

Labor costs

1,202,760

39.2

607,710

29.3

Occupancy costs

357,125

11.6

174,638

8.4

Other operating expenses

195,614

6.4

119,867

5.8

Depreciation and amortization

163,507

5.3

69,415

3.3

Gain on sale of assets held for sale

(313,688 )

(10.2 )

0

0

General and administrative

425,915

13.9

291,061

14.0

Total costs and expenses

3,321,556

108.2

1,984,275

95.7

Income (loss) from operations

(250,758 )

(8.2 )

88,921

4.3

UNREALIZED GAIN ON MARKETABLE SECURITIES

69,856

2.3

-

-

INTEREST AND DIVIDEND INCOME

89,048

2.9

INTEREST EXPENSE

(25,533 )

(0.8 )

(28,271 )

(1.4 )
EQUITY IN AFFILIATE LOSS

(54,399 )

(1.8 )

-

-

INCOME TAX (EXPENSE) BENEFIT

30,000

1.0

(18,000 )

(0.9 )
NET INCOME (LOSS)

$ (141,786 )

(4.6 )%

$ 42,650

2.0 %
Net Revenues:
Net sales for the first quarter of 2023 increased $997,603 or 48.1% to continue to make strategic and opportunistic acquisitions that provide an entrance into targeted restaurant segments and geographic areas. Restaurant businesses become available for acquisition frequently, and we believe that we may be able to purchase either individual restaurant properties or multi-unit businesses at prices providing an attractive return on our investment. We may acquire operating assets where$3,070,798 from $2,073,195 in 2022. The sales increase resulted from acquiring three restaurants in 2022 contributing $1,307,000 in revenue during the quarter. In addition, the BTND business experienced a ~~franchise program~~sales decrease of approximately $195,000 as the unusually harsh winter weather impacted sales. Sales also reflect the closing of the ~~acquired foodservice business is~~West St Paul Burger Time location in the ~~most appropriate growth plan. We intend~~fourth quarter of 2022.
For BTND locations open at quarter-end, first-quarter restaurant sales ranged from a low of $93,000 to ~~follow~~ a ~~disciplined strategy~~high of ~~evaluating acquisition opportunities~~$232,000. The average sales for each Burger Time unit open at quarter-end were approximately $157,000 in 2023, a decline of approximately 13.2% from $181,000 in 2022.
Restaurant Operating Costs:
During 2023, restaurant operating costs (which refer to ~~ensure~~all the costs associated with operating our restaurants but do not include general and ~~enable~~administrative expenses and depreciation and amortization and the ~~accretive~~gain on the sale of property and ~~efficient acquisition~~equipment) increased to 99.2% in restaurant sales in 2023 from 78.3% in 2022. This increase was due primarily to the inclusion of three new restaurants for the entire first quarter of 2023. In addition, Keegan’s was purchased on March 2, 2022, and ~~integration~~therefore only one month of ~~additional restaurant concepts. Successful execution~~results was included in 2022. For all of our ~~acquisition strategy will allow us~~locations, we continued to ~~diversify our operations into other dining concepts~~see price inflation on input costs, including food and ~~geographic locations.~~
~~In evaluating potential acquisitions, we may consider~~labor, and the ~~following characteristics, among others, that management considers relevant to each opportunity:~~matters discussed in the “Cost of Sales,” “Labor Costs,” and “Occupancy and Other Operating Costs” sections below.
·
~~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.~~

18
Table of Contents

~~Assuming~~The impact of cost increases and the addition of three non-BTND restaurants during the year may be detailed as follows:
Restaurant operating costs for the period ended April 3, 2022

$ 1,623,798

Increase in food and paper costs

568,740

Increase in labor costs

595,050

Increase in occupancy and operating cost

258,234

Restaurant operating costs for the periods ended April 2, 2023

$ 3,045,822

Costs of Sales - food and paper:
Cost of sales - food and paper - for 2023 increased to 39.2% of restaurant sales from 34.8% of restaurant sales in 2022. As previously noted, Keegan’s was purchased on March 2, 2022, and only one month of results was included in 2022. For all of our locations, we continued to see price inflation on input costs, including food costs, where ground beef costs are ~~successful in acquiring new businesses, we will operate~~approximately 40% higher compared to the ~~business or businesses with~~first quarter of 2022. The increase results from including Keegan’s and VBG, which operates at a ~~shared central management organization. Following~~higher food cost than BTND, PIE because of its coffee-focused menu, has significantly lower food and paper costs than BTND, Keegan’s and Village Bier Garten. However, the ~~acquisition, we expect to pursue a growth plan to expand~~first quarter is seasonally the number of locations and increase comparable store sales and profits, as described below. We anticipate that by leveraging our management services platform, we will 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 near each other, we believe the concentration of operations will provide economic synergiesslowest quarter for ~~management functions, marketing, and advertising, supply chain assistance, staff training, and operational oversight.~~PIE.

~~Increase Same-Store Sales~~Labor Costs:

~~Same-store~~In 2023, labor and benefits cost increased to 39.6% of restaurant sales ~~growth reflects~~from 29.3% in 2022. The increase is the ~~change~~net result of lower BTND activity in ~~year-over-year~~2023 and higher wages because of labor shortages in some of our markets, contributing to an unfavorable utilization of the fixed portion of labor costs. PIE and Keegan’s businesses run at higher labor costs than BTND. We benefit from minimal turnover in unit restaurant management. Payroll costs are semi-variable, meaning that they do not decrease proportionally to decreases in revenue; thus, they increase as a percentage of restaurant sales ~~for the comparable store base and~~when there is a ~~benchmark for the performance of our restaurants. We use a multi-faceted same-store sales growth strategy to optimize~~decrease in restaurant ~~performance. We use techniques proven in the restaurant industry to increase same-store~~ sales. We utilize customer feedback and analyze sales data to test and improve existing and new menu items. In addition, we may use social media and public relations, and experiential marketing to engage customers. Our strategies to increase same-store sales will evolve as we acquire new restaurant concepts in new markets.

~~Increase Brand Awareness~~Occupancy and Other Operating Costs:

~~Increasing brand awareness is essential~~For 2023, occupancy and other costs increased to 18.0% of sales or $552,739 compared to $294,505, or 14.2% of restaurant sales in 2022, principally because of the impact on these costs of three leased restaurant locations added in 2022, all of which operate at a higher occupancy cost than our BTND locations where we own the majority of the real estate.
Depreciation and Amortization Costs:
For 2023, depreciation and amortization costs increased by $94,092 to $163,507 (5.3% of sales) from $69,415 (3.3% of sales) in 2022. Depreciation and amortization costs increased principally due to the ~~growth~~purchase of three restaurants during 2022 for approximately $2.4 million and capital additions in the last two years, including major parking lot repairs and significant replacement of HVAC equipment at several locations. These capital additions offset the decrease in depreciation and amortization resulting from a significant amount of our ~~Company. We intend~~equipment reaching a fully depreciated status.
General and Administrative Costs
General and administrative costs in 2023 increased 46.3%, or $134,853, to ~~develop and implement forward-looking branding strategies. We will seek to leverage social media and employ targeted digital advertising to expand~~$425,915 (13.9% of sales) from $291,062 (14.0% of sales) in 2022. The dollar amount increase was principally the ~~reach~~result 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 expect to deploy internet advertising to match specific menu items targeted to demographic groups. We will deploy cross-over ads with radio and social media. Our branding initiatives will evolve as we acquire restaurant concepts that appeal to distinct consumer markets in differing geographic areas.
~~Results of Operations for the Thirteen Weeks Ended July 3,~~acquiring three businesses during 2022 and the ~~Thirteen Weeks Ended July 4, 2021~~ongoing costs of operating as a public company, including administrative salaries and audit expenses.
Income (loss) from Operations:

The ~~following table sets forth our Condensed Statements~~loss from operations was $250,758 in 2023 compared to an operating income of ~~Income~~$88,921 in 2022. The change in income from operations in 2023 compared to 2022 was primarily due to the decline in BTND sales, seasonally slow sales at PIE and ~~percentages~~poor margins at Keegan’s offset by the $313,618 gain on the sale of ~~total revenues for~~West St. Paul property, together with other matters discussed in the ~~thirteen-week-fiscal periods. Percentages below may not reconcile because of rounding.~~

  13 weeks ended,
July 3, 2022

13 weeks ended,
July 4, 2021

Amount

%

Amount

%

SALES

$ 3,524,881

100.0 %

$ 2,382,683

100.0 %
COSTS AND EXPENSES

Restaurant operating expenses

Food and paper costs

1,311,373

37.2

908,760

38.1

Labor costs

1,179,118

33.5

621,227

26.1

Occupancy costs

261.282

7.4

167,106

7.0

Other operating expenses

212,314

6.0

128.872

5.4

Depreciation and amortization

109,286

3.1

58.558

2.5

General and administrative

455,656

12.9

110,983

4.7

Total costs and expenses

3,529,029

100.1

1,995,506

83.8

Income (loss) from operations

(4,148 )

(.1 )

387,177

16.2

INTEREST EXPENSE

(26,190 )

(.7 )

(89,661 )

(3.8 )
INTEREST AND OTHER INCOME

9,473

.3

‒

‒

UNREALIZED LOSS AND LOSS FROM AFFILIATE

(94,410 )

(2.7 )

‒

‒

INCOME TAX BENEFIT (EXPENSE)

23,000

.6

(85,000 )

(3.5 )
NET INCOME (LOSS)

$ (92,275 )

(2.6 )%

$ 212,516

8.9 %
~~Net Revenues:~~
Net sales for the second fiscal quarter of 2022 increased $1,142,198 to $3,524,881 from $2,382,683 in fiscal 2021. The increase during the period resulted from sales from the recently acquired businesses contributing $1,639,588 in revenue.“Net Revenues, ~~at the Burger Time locations declined approximately 20.1% as customer purchasing patterns returned to pre-pandemic levels. Burger Time was also adversely impacted by weather~~” “General and ~~staffing challenges, which resulted in limited hours~~Administrative Costs” and ~~store closures during the quarter.~~“Restaurant Operating Costs,” sections above.

19
Table of Contents

~~Restaurant unit~~Interest expense:
In 2023, our interest expense decreased by $2,738 to $25,533 (0.8% of restaurant sales) from $28,271 (1.4% of restaurant sales) in 2022. The decrease in the percentage of sales ~~for Burger Time for~~is due to the ~~13 weeks ranged~~sales from ~~a low of approximately $139,000 to a high of approximately $272,000.~~the newly acquired businesses in 2022. The ~~average sales for each Burger Time unit during the period was approximately $208,000 in 2022, approximately $29,200 below the same period in 2021.~~actual dollar value only decreased slightly.

~~Costs of Sales - food~~Interest and ~~paper:~~Dividends:

~~Cost of sales - food~~Interest and ~~paper for~~dividend income was $89,048 in 2023, resulting from income earned on the fiscal 2022 period decreased as a percentage of sales declined to 37.2% of restaurant sales from 38.1% of restaurant sales in the second quarter of fiscal 2021. This decrease was the net result of inflationary pressures of certain items, offset by the inclusion of results of PIE which operates at a significantly lower food and labor cost than our Burger Time business.Company’s available cash balance.

~~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 expenses and depreciation and amortization) as a percent of restaurant sales increased to 78.2% of sales in the second fiscal quarter of 2022 from 76.6% in the similar period of fiscal 2021. This increase was because of higher labor and occupancy cost, including lease costs associated with our two recently acquired locations and the matters discussed in the “Cost of Sales,” “Labor Costs,” and “Occupancy and Other Operating Cost” sections below.
~~Labor Costs~~
~~For the second quarter of fiscal 2022, labor and benefits cost increased as a percentage of sales to 33.5% of restaurant sales from 26.1%~~in fiscal 2021. The increase in the percentage resulted from tighter labor markets leading to higher hourly wage costs offset by leveraging existing staffing. Payroll costs are semi-variable, meaning they do not decrease proportionally to decreases in revenue.
~~Occupancy and Other Operating Expenses~~
For the second fiscal quarter of 2022, occupancy and other expenses increased to 13.4% of sales from 12.4% in 2021. This increase results from higher occupancy costs, including lease costs associated with our two new locations.
~~Depreciation and Amortization Expense:~~
For the second fiscal quarter of 2022, depreciation and amortization increased to $109,286 (3.1% of sales) from $58,558 (2.5% of sales) in the second quarter of fiscal 2021. The increase results from depreciation and amortization associated with our recent acquisitions.
~~General and Administrative Costs~~
General and administrative costs increased by $344,673 from $110,983 to $455,656; the increase is associated with the Company’s transition to a public company in November 2021, including the costs related to long-term management agreements. Second quarter general and administrative expenses were 12.9% of sales, a significant increase from 4.7% in the earlier year.
Net Income ~~(Loss) from Operations~~(loss):

The net loss ~~from operations for the second quarter~~was $141,786 in 2023, compared to net income of ~~fiscal~~$42,650 in 2022. The change in 2023 from 2022 was ~~$4,148 compared~~primarily attributable to a profit from operations of $387,177 in the same period in 2021; the percentage of income from operations as a percentage of sales declined to negative .1% from 16.0%, reflecting a decline in profit margin at Burger Time, higher general and administrative expenses and the matters discussed in the “Net ~~Revenues” and~~Revenues,” “Restaurant Operating ~~Costs” sections above.~~Costs,” “General and Administrative Costs,” and “Other Income” sections.

Restaurant-level EBITDA:

To supplement the ~~condensed~~ consolidated financial statements, which are prepared and presented in accordance with GAAP, ~~the Company uses~~we use restaurant-level EBITDA (earnings before interest, taxes, depreciation, and amortization), which is not a measure defined by GAAP. This non-GAAP operating measure is useful to both management and ~~we believe,~~ 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 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~~Accordingly, restaurant-level EBITDA should not be considered a substitute for or superior to operating income, which is calculated ~~under GAAP. The~~in accordance with GAAP, and the reconciliations to operating income set forth below should be carefully evaluated.
20
~~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.~~amortization. General and administrative expenses are excluded as they are generally ~~not specifically identifiable as~~unrelated to restaurant-specific costs. Depreciation ~~amortization,~~ and ~~impairment charges~~amortization are excluded because they are not ongoing controllable cash expenses and are ~~not related~~unrelated to ~~the health of~~ ongoing ~~operations.~~ operations’ health.

13 weeks ended,

July 3, 2022

July 4, 2021

Revenues

$ 3,524,881

$ 2,382,683

Reconciliation:

Income (loss) from operations

(4,148 )

387,177

Depreciation and amortization

109,286

58,558

General and administrative, corporate level expenses

455,656

110,983

Restaurant-level EBITDA

$ 560,795

$ 556,716

Restaurant-level EBITDA margin

15.9 %

23.4 %
~~Our Results of Operations for the Twenty-Six Weeks Ended July 3, 2022, and the Twenty-Six Weeks Ended July 4, 2021~~
~~The following table sets forth our Condensed Statements of Income and percentages of total revenues for the twenty-six-week fiscal periods. Percentages below may not reconcile because of rounding.~~

  26 weeks ended,
July 3, 2022

26 weeks ended,
July 4, 2021

Amount

%

Amount

%

SALES

$ 5,598,076

100.0 %

$ 4,323,555

100.0 %
COSTS AND EXPENSES

Restaurant operating expenses

Food and paper costs

2,032,956

36.3

1,636,053

37.8

Labor costs

1,786,828

31.9

1,186,719

27.4

Occupancy costs

435,920

7.8

261,282

6.0

Other operating expenses

332,181

5.9

303,654

7.0

Depreciation and amortization

178,701

3.2

113,394

2.6

General and administrative

746,717

13.3

220,982

5.1

Total costs and expenses

5,513,303

98.5

3,712,883

85.9

Income from operations

84,773

1.5

610,672

14.1

INTEREST EXPENSE

(54,461 )

(1.0 )

(128,232 )

(3.0 )
INTEREST AND OTHER INCOME

9,473

.2

‒

‒

UNREALIZED LOSS AND LOSS FROM AFFILIATE

(94,410 )

(1.7 )

‒

‒

INCOME TAX BENEFIT (EXPENSE)

5,000

.1

(135,000 )

(3.1 )
NET INCOME (LOSS)

$ (49,625 )

(.9 )%

$ 347,440

8.0 %
~~Net Revenues:~~
Net sales for 26-week period representing the first half of fiscal 2022 increased $1,274,521 or 29.5% to $5,598,076 from $4,323,555 in fiscal 2021. The increase in sales was principally the result of a favorable impact in the 26 weeks of two acquired restaurants which contributed approximately $1,775,247 in sales, offsetting a decline of approximately $500,726 or 11.6% in Burger Time revenues.
Burger Time unit sales for the 26 weeks ranged from a low of approximately $226,000 to a high of approximately $509,000. Average sales for each Burger Time unit were approximately $389,000 in 2022, a decline from approximately $438,200 in the same 26-week period in 2021. The sales decline in the first half of 2022 is the combined result of a return to pre-covid customer purchasing patterns as competitive dining options returned to normal, labor challenges resulting in some contraction of hours, and poorer weather conditions relative to the year-earlier period.
21
~~Table of Contents~~
~~Costs of Sales - food and paper:~~
Cost of sales - food and paper for the first half of fiscal 2022 decreased as a percentage of sales to 36.3% from 37.8% of restaurant sales in the same period in 2021. This decrease resulted from a strong performance at our PIE business which operates at lower food and paper costs than our traditional business and Keegan’s location.
~~Restaurant Operating Costs:~~
Restaurant operating costs, which are associated with operations, not including general and administrative expenses, and depreciation and amortization, increased as a percentage of restaurant sales to 81.9% of sales in 2021 from 77.0% in fiscal 2021. This increase was due to the increase in sales activity from new locations and its impact, as further discussed in the “Cost of Sales,” “Labor Costs,” and “Occupancy and Other Operating Cost” sections below.
~~Labor Costs:~~
For the first half of fiscal 2022, labor and benefits cost increased to 31.9% of restaurant sales from 27.4% in the fiscal 2021 period. Shortages in staffing levels combined with higher hourly wage rates at all locations increased the overall labor percentage. The hiring markets have become more challenging in terms of filling open positions. Payroll costs are semi-variable, meaning they do not decrease proportionally to decreases in revenue. Thus, they increase as a percentage of restaurant sales when there is a decrease.
~~Occupancy and Other Operating Expenses:~~
For the first 26 weeks of fiscal 2022, occupancy and other expenses increased to 13.7% of sales from 13.0% in 2021. Many of these costs are fixed, and the percentage reflects lower maintenance costs offset by higher lease occupancy costs at our new locations.
~~Depreciation and Amortization Expense:~~
Depreciation and amortization expenses in the first half of fiscal 2022 increased by $65,307 to $178,701 (3.2% of sales) from $113,394 (2.6% of sales) in the first half of fiscal 2021 and are the result of the purchase of two new restaurants and capital additions at several of our locations.
~~General and Administrative Costs:~~
General and administrative costs increased 238.4%, or $526,735 to $746,717, from $220,982 (5.1% of sales) in the first half of fiscal 2021. The increase results from the transition to a public reporting company, stock-based compensation costs, and the expense associated with long-term management employment agreements.
~~Income from Operations:~~
Operating income was $84,773 in the first half of fiscal 2022 compared to $610,672 in the first half of fiscal 2021. The change in income from operations in the first half of fiscal 2022 compared to fiscal 2021 was due primarily to the increase in general and administrative expenses, which included higher costs associated with the transition to a public company near the end of 2021, including the “Net Revenues” and “Restaurant Operating Costs” sections above.
~~Restaurant-level EBITDA~~:
To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use restaurant-level EBITDA, which is not a measure defined by GAAP. This non-GAAP operating measure is useful to both management and, we believe, investors because it represents one means of gauging the overall profitability of our recurring and controllable core restaurant operations. This measure is not 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, calculated under GAAP. The reconciliations to operating income set forth below should be carefully evaluated.
22
~~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 expenses are excluded as they are generally not specifically identifiable as restaurant-specific costs. Depreciation, amortization, and impairment charges are excluded because they are not ongoing controllable cash expenses and are not related to the health of ongoing operations.

26 weeks ended,

13 Weeks ended,

July 3, 2022

July 3, 2021

April 2, 2023

April 3, 2022

Revenues

$ 5,598,076

$ 4,323,555

$ 3,070,798

$ 2,073,195

Reconciliation:

Income from operations

84,773

653,044

Income (loss) from operations

(250,788 )

88,921

Depreciation and amortization

178,701

113,394

163,507

69,415

General and administrative, corporate level expenses

746,717

220,982

General and administrative, corporate-level expenses

425,915

291,062

Restaurant-level EBITDA

$ 1,010,191

$ 987,420

$ 338,664

$ 449,398

Restaurant-level EBITDA margin

18.0 %

22.8 %

11.0 %

21.7 %

Liquidity and Capital Resources

Initially, the public response to COVID positively impacted our sales and liquidity. More recently, as customer activities have returned to normal patterns, our Burger Time business has experienced a decline from the peak level we experienced during the height of COVID restrictions. For the 2613 weeks ~~ended July 3, 2022, operations reflected a net~~ending April 2, 2023, the Company earned an after-tax loss of ~~$49,625. On July 3, 2022, we~~$41,786 due to lower than expected sales in the first quarter. At April 2, 2023, the Company had ~~$8,295,952~~$5,494,401 in cash and a working capital of ~~$7.7 million, a decrease of $3.9 million from January 2, 2022, resulting from the purchase of two restaurants for $2.3 million and investment of $1.3 million in shares of Bagger Dave’s.~~
In the future, COVID and its variants may continue to impact the United States economy. It is difficult to predict the ultimate impact on the United States economy in general, the impact on the quick service drive-through segment of the food service industry, and our operating results and financial condition. $6,213,033.

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.~~businesses that are synergistic with our business. Our operations do not require significant working capital, and, like many restaurant companies, we ~~generally~~may operate with negative working capital. ~~We anticipate that working capital deficits may be incurred in the future and possibly increase.~~ Our primary liquidity and cash flow sources are operating cash flows and cash on hand. We use this to service debt, maintain our stores to operate efficiently, and 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 purchase or within a few days from our credit card ~~processor; generally,~~processor. Generally, payments to our vendors are not due for thirty days.

~~Summary of Cash Flows~~
~~Cash Flows Provided by Operating Activities~~
Operating cash flow in the first half of 2022 was $498,068. The cash flow from operations was impacted positively by our recent acquisitions. We expect operating cash flow in future periods to be significantly impacted by our recent acquisitions.
~~Cash Flows Used in Investing Activities~~
During fiscal 2022, we have focused on identifying acquisitions in the food service and related industries, purchasing two operating restaurants, and purchasing a 41.2% interest in a publicly traded casual dining business.
~~Cash Flows Used in Financing Activities~~
~~A significant portion of our cash flow used in financing activities is allocated to service our debt.~~
~~Contractual Obligations~~
As of July 3, 2022, we had $4.1 million in contractual obligations relating to amounts due under mortgages on the real property where stores are situated, including $2.9 million in capitalized lease obligations related to our recent acquisitions. Our monthly required payment is approximately $39,000. In the second quarter of fiscal 2021, we refinanced most of our outstanding mortgage debt with a new lender lowering our nominal interest cost from 4.75% to 3.45% fixed for the next ten years.

2320
Table of Contents

~~Qualitative and Quantitative Disclosure about Market Risk~~Summary of Cash Flows

~~Commodity Price Risk~~
~~We are subject to volatility in food costs due to market risk associated with commodity prices. Our ability to recover increased costs through higher pricing is, at times, limited~~Cash Flows Provided by the competitive environment in which we operate. Generally, we do not have pricing agreements with our suppliers to manage these risks. Beef is our largest single food purchase, and the price we pay for beef fluctuates weekly based on beef commodity prices. We do not currently manage this risk with commodity future and option contracts.
~~Seasonality and Inflation~~
~~Many of our restaurants experience significant seasonal fluctuations in activity and revenue.~~
Seasonal factors and the timing of holidays cause our revenue at our Burger Time locations to fluctuate from quarter to quarter. Our revenue per Burger Time 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. PIE benefits from robust tourism on Cape Cod in the late spring through early fall months. The results of operations during the second and third fiscal quarters at this location will be materially more significant than during the first and fourth fiscal quarters.
Keegan’s will benefit from additional customer traffic in Florida during the colder months in the northern part of the country; as tourists and seasonal residents seek to escape to warmer climates, daily customer counts increase at Keegan’s.
Inflation has had a material effect on our business as food, labor, and other operating costs have adversely affected operations. Generally, we have been able to increase menu prices or modify our operating procedures to offset increases in operating costs substantially. As inflation continues, we may not be able to raise prices to keep pace with increasing costs, particularly when compared to larger competitors that may be able to manage the risk of rising prices better.
Inflation has had a material effect on our business as food, labor, and other operating costs have adversely affected operations. However, we generally have been able to increase menu prices or modify its operating procedures to offset increases in its operating costs substantially.
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 that changes in the regulatory environment may have on our Company.
~~Off-Balance Sheet Arrangements~~Operating Activities

The ~~Company did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined~~first quarter cash flow used in operations in 2023 was $474,259 compared to cash flow from operations of $337,394 in the ~~rules and regulations~~prior year. The winter months have historically been seasonally the slowest part of the ~~Securities~~Company’s business, and ~~Exchange Commission.~~the first quarter of 2023 was impacted by harsh winter weather.

~~Recent Accounting Pronouncements~~Cash Flows provided by Investing Activities

~~There has been no impact to our financial statements and our results of operations and financial condition as~~In the first quarter, cash from investing activities was $5,103,974 which was primarily the result of payment at maturity of $5 million in Treasury Bills held at the ~~adoption~~end of ~~Recent Accounting Pronouncements, see “Part I, Item 1, Note 1. Summary of Significant Accounting Policies”~~2022 and proceeds from the sale of the ~~Notes to Condensed Consolidated Financial Statements included in this quarterly report. The~~West St. Paul location. In 2022, the Company ~~follows ASC 842, covering accounting for leases, and has recorded Right to Use Assets and related lease liabilities for the lease contracts.~~focused on identifying potential acquisition opportunities.

~~Critical Accounting Policies and Estimates~~Cash Flows Used in Financing Activities

A significant portion of the Company’s cash flow is allocated to service the Company’s debt and purchase of Treasury shares.
Contractual Obligations
As of April 2, 2023, we had $2.6 million in contractual obligations relating principally to amounts due under mortgages on the real property on which stores are situated. Our discussion and analysis of operating results and financial condition are based upon our condensed consolidated financial statements. The preparation of our condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosures of contingent assets and liabilities. We base our estimates on experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.monthly required payment is approximately $32,000.

2421
Table of Contents

Our critical accounting policies are those that materially affect our financial statements and involve subjective or complex judgments by management. Although these estimates are based on management’s best knowledge of current events and actions that may impact us in the future, actual results may be materially different from the estimates. Our significant accounting policies are disclosed in our annual report Form 10-K for the fiscal year ended January 2, 2022.
~~Jumpstart Our Business Startups Act of 2012~~
We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period. As a result, we will adopt new or revised accounting standards on the relevant dates on which such standards are required for other public companies are adopted.
Subject to certain conditions set forth in the JOBS Act, we are also eligible for and intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We may take advantage of these exemptions until we are no longer an emerging growth company. We will continue to be an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which we had total annual gross revenue of $1 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the completion of our initial public offering.
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 ~~as amended (the “Exchange Act”). We~~and are not required to provide the information under this item.

25
~~Table of Contents~~
ITEM 4. CONTROLS AND ~~PROCEDURES.~~PROCEDURES

Disclosure Controls and Procedures

~~(1)~~ Evaluation of Disclosure Controls and Procedures

We maintain ~~a set of~~ disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports we filed under the Securities Exchange Act is recorded, processed, summarized, and reported within the 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 management, including our chief executive officer and 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 ~~July 3, 2022,~~April 2, 2023, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures ~~pursuant to~~under Rule 13a-15(b) promulgated under the Exchange Act. Based upon that evaluation, ~~and the material weakness in our internal control over financial reporting as disclosed in the Company’s Form 10-K for the fiscal year ended January 3, 2021,~~ our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~July 3, 2022,~~April 2, 2023, our disclosure controls and procedures were not effective at a reasonable assurance level in ensuring that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules, regulations, and formsas of the ~~SEC, including ensuring that such material information is accumulated~~end of the period covered by ~~and communicated~~this report because we lack the necessary corporate accounting resources to ~~our management, including our Chief Executive Officer, Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.~~
~~(2) Changes in Internal Control over Financial Reporting~~
~~The Company disclosed a material weakness for lack of~~maintain adequate segregation of ~~duties and~~duties. We did not ~~performing~~perform an ~~adequate~~effective risk assessment ~~on monitoring of~~or monitor internal controls over financial ~~reporting~~reporting. Management is developing and implementing a series of accounting systems, procedure changes, and internal controls intended to provide adequate controls over financial reporting.
Changes in ~~its Form 10-K for the fiscal year ended January 3, 2022. While we are addressing these deficiencies, there has~~internal control over financial reporting
There have been no significant ~~change~~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 has materially affected or is reasonably likely to materially affect, our internal control over financial reporting. As a result of recent restaurant acquisitions, we are integrating our controls and procedures into the acquired businesses. We will include the internal controls for the acquired businesses in our assessment of the effectiveness of our internal controls over financial reporting as of the end of our current fiscal year. Other than the recent acquisitions, during the period covered by this report, there were no changes in the Company’s internal controls over financial reporting which materially affected or are reasonably expected to impact our internal financial reporting controls.

2622
Table of Contents

PART ~~II -~~ II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

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

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

~~Unregistered Sales of Equity Securities~~
On February 9, 2022, the independent members of the Board of Directors and the Compensation Committee of the board of Directors approved a grant of 250,000 shares of common stock to each of Gary Copperud and Kenneth Brimmer, the Company’s chief executive officer and chief financial officer, respectively, if, so long as the Company’s publicly traded warrants are outstanding, the Company’s common stock trades at $8.50 per share for 20 consecutive trading days. Final approval of the awards is contingent upon shareholder approval of an increase in the number of shares available for grant under the 2019 Incentive Plan, which is expected to be proposed at the next annual meeting of shareholders. The award of the shares is tied directly to the price at which the common stock purchase warrants issued in the Company’s initial public offering completed in November 2021 are redeemable by the Company. The warrants initially are exercisable at $5.50 per share (subject to adjustment under certain circumstances). The Company expects that if and when the warrants become redeemable, holders will exercise their warrants, and the Company will receive additional capital to fund acquisitions and growth.
~~Other than as set forth above, since~~Since the date on which the Company filed its annual report on Form 10-K and through the date of this quarterly report, wethe Company did not sell any securities.
~~Use of Proceeds~~
Since the closing of the Company’s initial public offering in November 2021, the Company has used the proceeds received from the sale of securities to acquire (i) the restaurant assets of Keegan’s Seafood Grille ($1,150,000) and Pie in the Sky Bakery and Coffee Shop ($1,160,000) and (ii) a 41.2% of the outstanding shares of common stock of Bagger Dave’s ($1,260,000), all as more fully described under Management’s Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None

2723
Table of Contents

ITEM 6. EXHIBITS.

Exhibit
Description
31.1
Certification of the Company’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~July 3, 2022.~~April 2, 2023.
31.2
Certification of the Company’s Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~July 3, 2022.~~April 2, 2023.
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).~~Document

2824
Table of Contents

SIGNATURES

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

BT BRANDS, INC.

Date: ~~August~~May 16, ~~2022~~2023
By:
/s/ Kenneth Brimmer

Name:
Kenneth Brimmer

Title:
Chief Operating Officer and Principal Financial Officer

29
25

PART I— FINANCIAL INFORMATION.		5
ITEM 1.	FINANCIAL STATEMENTS.	5
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.	17
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.	22
ITEM 4.	CONTROLS AND PROCEDURES.	22
PART II—OTHER INFORMATION.		23
ITEM 1.	LEGAL PROCEEDINGS.	23
ITEM 1A.	RISK FACTORS.	23
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	23
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES.	23
ITEM 4.	MINE SAFETY DISCLOSURES.	23
ITEM 5.	OTHER INFORMATION.	23
ITEM 6.	EXHIBITS.	24
SIGNATURES.		25

BT BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	July 3, 2022
	(Unaudited)			January 2, 2022
ASSETS
CURRENT ASSETS
Cash	$	8,295,952		$	12,385,632
Marketable securities		527,750			0
Receivables		36,068			72,251
Inventory		146,892			79,510
Prepaid expenses and other current assets		53,460			27,186

Total current assets		9,060,122			12,564,579

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET		2,977,153			1,592,338
OPERATING LEASES RIGHT-OF-USE ASSETS		1,146,167			0
INVESTMENTS		1,549,828			75,000
GOODWILL		488,431			0
INTANGIBLE ASSETS		425,000			0
OTHER ASSETS, net		285,285			273,810

Total assets	$	15,931,986		$	14,505,727

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	498,257		$	291,973
Current maturities of long-term debt		171,358			169,908
Current operating lease obligations		134,188			0
Accrued expenses		575,790			254,341
Income taxes payable		8,000			209,088

Total current liabilities		1,387,593			925,310

LONG-TERM DEBT, LESS CURRENT PORTION		2,750,279			2,833,064
NONCURRENT LEASE OBLIGATIONS		1,015,610			0
DEFERRED INCOME TAXES		51,510			119,000
Total liabilities		5,204,992			3,877,374

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preferred stock, $0.001 par value, 2,000,000 shares authorized, no shares outstanding at July 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 July 3, 2022 and January 2, 2022, respectively		12,922			12,895
Additional paid-in capital		11,363,935			11,215,696
Accumulated deficit		(649,863	)		(600,238	)

Total shareholders' equity		10,726,994			10,628,353

Total liabilities and shareholders' equity	$	15,931,986		$	14,505,727

See Notes to Condensed Consolidated Financial Statements

BT BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
*(Unaudited)*

	26 Weeks Ended			26 Weeks Ended,			13 Weeks Ended,			13 Weeks Ended,
	July 3, 2022			July 4, 2021			July 3, 2022			July 4, 2021
SALES	$	5,598,076		$	4,323,555		$	3,524,881		$	2,382,683

COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		1,786,828			1,636,053			1,311,373			908,760
Labor costs		435,920			1,186,719			1,179,118			621,227
Occupancy costs		332,181			303,654			261,282			167,106
Other operating expenses		178,701			252,081			212,314			128,872
Depreciation and amortization expenses		178,701			113,394			109,286			58,558
General and administrative expenses		746,717			220,982			455,656			110,983
Total costs and expenses		5,513,303			3,712,883			3,529,029			1,995,506
Income from operations		84,773			610,672			(4,148	)		387,177

UNREALIZED LOSS ON MARKETABLE SECURITIES		(80,238	)		0			(80,238	)		0
INTEREST AND OTHER INCOME		9,473			0			9,473			0
INTEREST EXPENSE		(54,461	)		(128,232	)		(26,190	)		(89,661	)
EQUITY IN NET LOSS OF AFFILIATE		(14,172	)		0			(14,172	)		0
INCOME (LOSS) BEFORE TAXES		(54,625	)		482,440			(115,275	)		297,516
INCOME TAX (EXPENSE) BENEFIT		5,000			(135,000	)		23,000			(85,000	)
NET INCOME (LOSS)	$	(49,625	)	$	347,440		$	(92,275	)	$	212,516
NET INCOME (LOSS) PER COMMON SHARE - Basic and Diluted	$	(0.01	)	$	0.09		$	(0.01	)	$	0.05

WEIGHTED AVERAGE SHARES USED IN COMPUTING PER COMMON SHARE AMOUNTS - Basic and Diluted		6,458,276			4,047,502			6,461,118			4,047,502

See Notes to Consolidated Condensed Financial Statements

BT BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
*(Unaudited)*

	26 Weeks ended,
	July 3, 2022			July 4, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)	$	(49,625	)	$	347,440
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization		178,701			113,394
Amortization of debt issuance premium included in interest expense		2,700			54,205
Deferred taxes		(67,490	)		28,000
Stock-based compensation		73,400			0
Unrealized loss on marketable securities		80,238			0
Loss on equity method investment		14,172			0
Changes in operating assets and liabilities, net of acquisitions -
Receivables		36,183			(12,721	)
Inventory		(33,833	)		(9,913	)
Prepaid expenses and other current assets		(26,274	)		(5,888	)
Accounts payable		206,284			127,814
Accrued expenses		284,700			(161,074	)
Income taxes payable		(201,088	)		14,994
Net cash provided by operating activities		498,068			496,251

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of net assets of Keegan's Seafood Grille		(1,150,000	)		0
Acquisition of net assets of Pie In The Sky Coffee and Bakery		(1,159,600	)		0
Investment in Bagger Dave's Burger Tavern, Inc.		(1,260,000	)		0
Purchase of property and equipment		(159,491	)		(67,003	)
Investment in related company		(229,000	)		0
Purchase of marketable securities		(607,988	)		0
Other assets		(12,500	)		0
Net cash used in investing activities		(4,578,579	)		(67,003	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt		0			3,107,100
Principal payment on long-term debt		(84,035	)		(3,077,784	)
Proceeds from exercise of common stock warrants		74,866			0
Payment of debt issuance costs		0			(49,699	)
Payment of deferred offering costs		0			(9,192	)
Net cash used in financing activities		(9,169	)		(29,575	)

CHANGE IN CASH		(4,089,680	)		399,673

CASH, BEGINNING OF PERIOD		12,385,632			1,321,244
					-
CASH, END OF PERIOD	$	8,295,952		$	1,720,917

SUPPLEMENTAL DISCLOSURES
Cash paid for interest	$	51,761		$	68,700
Cash paid for income taxes	$	209,088		$	92,006

See Notes to Consolidated Condensed Financial Statements

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

*For the 26-week periods-*			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		73,400		0			73,400
Shares issued in exercise of warrants		13,612		27		74,839		0			74,866
Net loss		-		0		0		(49,625	)		(49,625	)
Balances, July 3, 2022		6,461,118	$	12,922	$	11,363,935	$	(649,863	)	$	10,726,994

			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		347,440			347,440
Balances, July 4, 2021		4,047,502	$	8,095	$	497,671	$	(860,649	)	$	(354,883	)

*For the 13-week periods-*			Common Stock		Additional		Accumulated
	Shares		Amount		Paid-in Capital		(Deficit)			Total
Balances, April 3, 2022		6,461,118	$	12,922	$	11,324,035	$	(557,588	)	$	10,779,369
Stock-based compensation		-		0		39,900		0			39,900
Net loss		-		0		0		(92,275	)		(92,275	)
Balances, July 3, 2022		6,461,118	$	12,922	$	11,363,935	$	(649,863	)	$	10,726,994

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

Balances, April 4, 2021		4,047,502	$	8,095	$	497,671	$	(1,073,165	)	$	(567,399	)
Net income		-		0		0		212,516			212,516
Balances, July 4, 2021		4,047,502	$	8,095	$	497,671	$	(860,649	)	$	(354,883	)

	·	Eight Burger Time fast-food restaurants and one Dairy Queen franchise located in the North Central region of the United States, collectively (“BTND”);
	·	Bagger Dave’s Burger Tavern, Inc, a 41.2% owned affiliate, operates six Bagger Dave’s restaurants in Michigan, Ohio, and Indiana (“Bagger Dave’s”);
	·	Keegan’s Seafood Grille in Indian Rocks Beach, Florida (“Keegan’s”);
	·	Pie In The Sky Coffee and Bakery in Woods Hole, Massachusetts (“PIE”).
	·	Village Bier Garten is a German-themed restaurant, bar, and entertainment venue in Cocoa, Florida (“VBG”).

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

Total identifiable assets		963,049
Assumed current liabilities		(17,260	)
Net assets acquired		945,789
Goodwill		204,211
Purchase price	$	1,150,000

Assets acquired:
Inventory	$	23,500
Equipment		400,000
Furniture and fixtures		125,000
Trademark, website, and other intangibles		50,000
Non-compete agreement		300,000

Total assets acquired		898,500

Assumed current liabilities		(23,120	)

Net assets acquired		875,380
Goodwill		284,220
Purchase price	$	1,159,600

	Estimated Useful Life (Years)		Amount

Covenant not to compete		4	$	300,000
Trademarks, tradenames, websites and social media accounts		20		125,000
			$	425,000

	Estimated Useful Life (Years)		Original Cost		Accumulated Amortization		Net Carrying Value
Covenants not to Compete		3	$	98,000	$	26,528	$	71,472
Trademarks		15		393,000		25,512		367,788
			$	491,000	$	51,740	$	439,260

	·	Stock price – Published trading market values of the Company’s common stock as of the grant date.
	·	Exercise price – The stated exercise price of the stock option.
	·	Expected life – The simplified method
	·	Expected dividend – The rate of dividends expected to be paid 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.~~award

	Number of			Weighted Average		Weighted Average Remaining Term		Aggregate Intrinsic
	Options			Exercise Price		(In Years)		Value
Options outstanding at January 2, 2022		15,000		$	5.00		9.3	$	0
Granted		220,750			2.50			$	0
Exercised		0			0			$	0
Canceled, forfeited, or expired		(8,200	)		2.50			$	0
Options outstanding at July 3, 2022		227,550		$	2.67		9.8	$	0
Options exercisable at July 3, 2022		59,150		$	3.18		9.7	$	0

Fair value of options granted during the period	$	1.39
Expected life (in years)		4.83
Expected dividend	$	0
Expected stock volatility		63	%
Risk-free interest rate		2	%

	Total			Total
Remainder 2022	$	90,000
2023		181,350
Remainder 2023				$	211,380
2024		185,990			289,076
2025		190,600			297,745
2026		196,000			306,674
2027 and thereafter		495,054
2027					268,437
2028 and thereafter					1,039,438
Total future minimum lease payments		1,338,994			2,412,750
Less - interest		(189,196	)		(447,806	)
	$	1,149,798		$	1,964,944

	·	~~Nine~~Eight Burger Time fast-food restaurants and one Dairy Queen franchise ~~all of which are in the North Central region of the United States;~~
		(“BTND”);
	·	~~Bagger Dave’s Burger Tavern, Inc,~~Village Bier Garten is a ~~41.2% owned affiliate, operates six Bagger Dave’s restaurants~~German-themed restaurant, bar, and entertainment venue in ~~Michigan, Ohio, and Indiana;~~
		Cocoa, Florida. (“VBG”):
	·	Keegan’s Seafood Grille in Indian Rocks Beach, ~~Florida;~~
		Florida (“Keegan’s”);
	·	Pie ~~in the~~In The Sky Coffee ~~Shop~~ and Bakery in Woods Hole, ~~Massachusetts.~~Massachusetts (“PIE”).
	·	Unconsolidated affiliate Bagger Dave’s Burger Tavern, Inc, 41.2% owned, operates six Bagger Dave’s restaurants in Michigan, Ohio, and Indiana (“BD”).

	·	~~identify suitable targets;~~
	·	~~complete comprehensive due diligence as to targets,~~
	·	~~integrate a target’s operations with our existing operations,~~
	·	~~retain management and key employees of the target;~~
	·	~~operate new restaurant concepts in new geographic areas outside of our traditional Burger Time platform;~~
	·	~~develop and implement appropriate and effective sales and marketing strategies for our new restaurants individually and our restaurant group as a whole;~~
	·	~~maintain and grow revenue at our new properties;~~
	·	~~identify and retain experienced managerial personnel to effectively administer our operations;~~
	·	~~improve existing, and implement new operational, financial, and management controls;~~
	·	~~install enhanced management information systems; and~~
	·	~~create a corporate brand identifying our restaurants as BT Brands’ properties.~~

	13 weeks ended, April 2, 2023						13 weeks ended, April 3, 2022
	Amount			%			Amount			%
SALES	$	3,070,798			100.0	%	$	2,073,195			100.0	%
COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		1,290,323			42.0			721,583			34.8
Labor costs		1,202,760			39.2			607,710			29.3
Occupancy costs		357,125			11.6			174,638			8.4
Other operating expenses		195,614			6.4			119,867			5.8
Depreciation and amortization		163,507			5.3			69,415			3.3
Gain on sale of assets held for sale		(313,688	)		(10.2	)		0			0
General and administrative		425,915			13.9			291,061			14.0
Total costs and expenses		3,321,556			108.2			1,984,275			95.7
Income (loss) from operations		(250,758	)		(8.2	)		88,921			4.3
UNREALIZED GAIN ON MARKETABLE SECURITIES		69,856			2.3			-			-
INTEREST AND DIVIDEND INCOME		89,048			2.9
INTEREST EXPENSE		(25,533	)		(0.8	)		(28,271	)		(1.4	)
EQUITY IN AFFILIATE LOSS		(54,399	)		(1.8	)		-			-
INCOME TAX (EXPENSE) BENEFIT		30,000			1.0			(18,000	)		(0.9	)
NET INCOME (LOSS)	$	(141,786	)		(4.6	)%	$	42,650			2.0	%

	·	~~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.~~

Restaurant operating costs for the period ended April 3, 2022	$	1,623,798
Increase in food and paper costs		568,740
Increase in labor costs		595,050
Increase in occupancy and operating cost		258,234
Restaurant operating costs for the periods ended April 2, 2023	$	3,045,822

	13 weeks ended, July 3, 2022						13 weeks ended, July 4, 2021
	Amount			%			Amount			%
SALES	$	3,524,881			100.0	%	$	2,382,683			100.0	%
COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		1,311,373			37.2			908,760			38.1
Labor costs		1,179,118			33.5			621,227			26.1
Occupancy costs		261.282			7.4			167,106			7.0
Other operating expenses		212,314			6.0			128.872			5.4
Depreciation and amortization		109,286			3.1			58.558			2.5
General and administrative		455,656			12.9			110,983			4.7
Total costs and expenses		3,529,029			100.1			1,995,506			83.8
Income (loss) from operations		(4,148	)		(.1	)		387,177			16.2
INTEREST EXPENSE		(26,190	)		(.7	)		(89,661	)		(3.8	)
INTEREST AND OTHER INCOME		9,473			.3		‒			‒
UNREALIZED LOSS AND LOSS FROM AFFILIATE		(94,410	)		(2.7	)	‒			‒
INCOME TAX BENEFIT (EXPENSE)		23,000			.6			(85,000	)		(3.5	)
NET INCOME (LOSS)	$	(92,275	)		(2.6	)%	$	212,516			8.9	%

	26 weeks ended, July 3, 2022						26 weeks ended, July 4, 2021
	Amount			%			Amount			%
SALES	$	5,598,076			100.0	%	$	4,323,555			100.0	%
COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		2,032,956			36.3			1,636,053			37.8
Labor costs		1,786,828			31.9			1,186,719			27.4
Occupancy costs		435,920			7.8			261,282			6.0
Other operating expenses		332,181			5.9			303,654			7.0
Depreciation and amortization		178,701			3.2			113,394			2.6
General and administrative		746,717			13.3			220,982			5.1
Total costs and expenses		5,513,303			98.5			3,712,883			85.9
Income from operations		84,773			1.5			610,672			14.1
INTEREST EXPENSE		(54,461	)		(1.0	)		(128,232	)		(3.0	)
INTEREST AND OTHER INCOME		9,473			.2		‒			‒
UNREALIZED LOSS AND LOSS FROM AFFILIATE		(94,410	)		(1.7	)	‒			‒
INCOME TAX BENEFIT (EXPENSE)		5,000			.1			(135,000	)		(3.1	)
NET INCOME (LOSS)	$	(49,625	)		(.9	)%	$	347,440			8.0	%

Exhibit		Description

31.1		Certification of the Company’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~July 3, 2022.~~April 2, 2023.
31.2		Certification of the Company’s Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~July 3, 2022.~~April 2, 2023.
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).~~Document

	BT BRANDS, INC.

Date: ~~August~~May 16, ~~2022~~2023	By:	/s/ Kenneth Brimmer
	Name:	Kenneth Brimmer
	Title:	Chief Operating Officer and Principal Financial Officer