UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DCD.C. 20549

FORM 10-Q

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

~~For the quarterly period ended:~~ ~~October 2, 2022~~

For the quarterly period ended: July 2, 2023

or

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

For the transition period from to

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

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

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

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

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

Indicate by check mark whether ~~the registrant is~~any 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 ~~November 14, 2022,~~August 16, 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"~~“Company”). Forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, can be identified by the use of forward-looking terminology such as ~~"believes," "projects," "expects," "may," "estimates," "should," "plans," "targets," "intends," "could," "would," "anticipates," "potential," "confident," "optimistic"~~“believes,” “projects,” “expects,” “may,” “estimates,” “should,” “plans,” “targets,” “intends,” “could,” “would,” “anticipates,” “potential,” “confident,” “optimistic” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, guidance, expectations, and future plans. Forward-looking statements can also be identified by the fact 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~~Security holders are cautioned that such forward-looking statements involve risks and uncertainties. You should evaluate all forward-looking statements made in this report in the context of the factors ~~may~~that could cause ~~results~~outcomes to differ materially from ~~those anticipated by the forward-looking statements in this quarterly report. Such~~our expectations. These factors ~~may~~ include, without limitation, the risks, uncertainties, and regulatory developments (1) related to public health, which include risks and uncertainties 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 described in our 2021 annual report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on March 17, 2022. Many of these risks and uncertaintiesbut are beyond our ability to control or predict; in many cases, the risks and uncertainties could cause 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.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;
	·	the 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~~

~~PART I — FINANCIAL INFORMATION~~We caution you that the factors referenced above may not contain all the important factors 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.

~~ITEM 1. FINANCIAL STATEMENTS~~From time to time, oral or written forward-looking statements are also included in our reports on Forms 10-K, 10-Q, and 8-K, our Schedule 14A, our press releases and other materials released to 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 due to inaccurate assumptions or due to 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 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.

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

TABLE OF CONTENTS

PART I— FINANCIAL INFORMATION.			5
ITEM 1.	FINANCIAL STATEMENTS.		5
ITEM 2.	~~MANAGEMENT'S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF ~~OPERATION~~OPERATION.		16	17
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET ~~RISK~~RISK.		2721
ITEM 4.	CONTROLS AND PROCEDURES.		27
		22
PART II—OTHER ~~INFORMATION~~INFORMATION.			23
ITEM 1.	LEGAL ~~PROCEEDINGS~~PROCEEDINGS.		2823
ITEM 1A.	RISK ~~FACTORS~~FACTORS.		2823
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF ~~PROCEEDS~~PROCEEDS.		2823
ITEM 3.	DEFAULTS UPON SENIOR ~~SECURITIES~~SECURITIES.		2823
ITEM 4.	MINE SAFETY ~~DISCLOSURES~~DISCLOSURES.		2823
ITEM 5.	OTHER ~~INFORMATION~~INFORMATION.		2823
ITEM 6.	EXHIBITS.		2924
~~SIGNATURES~~SIGNATURES.			3025

~~Table of Contents~~

~~BT BRANDS, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED BALANCE SHEETS~~

October 2, 2022(Unaudited)

January 2, 2022

ASSETS

CURRENT ASSETS

Cash

$ 7,165,704

$ 12,385,632

Marketable securities

653,399

-

Receivables

57,603

72,251

Inventory

150,814

79,510

Prepaid expenses and other current assets

50,375

27,186

Total current assets

8,077,895

12,564,579

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET

3,541,493

1,592,338

OPERATING LEASES RIGHT-OF-USE ASSETS

1,562,672

-

INVESTMENTS

1,428,187

75,000

GOODWILL

488,431

-

INTANGIBLE ASSETS

545,500

-

OTHER ASSETS, net

280,412

273,810

Total assets

$ 15,924,591

$ 14,505,727

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable

$ 354,486

$ 291,973

Current maturities of long-term debt

169,504

169,908

Current operating lease obligations

217,744

-

Accrued expenses

490,627

254,341

Income taxes payable

8,000

209,088

Total current liabilities

1,240,361

925,310

LONG-TERM DEBT, LESS CURRENT PORTION

2,698,030

2,833,064

NONCURRENT LEASE OBLIGATIONS

1,353,702

-

DEFERRED INCOME TAXES

51,510

119,000

Total liabilities

5,343,603

3,877,374

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY

Preferred stock, $.001 par value, 2,000,000 shares authorized, no shares outstanding at October 2, 2022 and January 2, 2022

-

-

Common stock, $.002 par value, 50,000,000 authorized, 6,461,118 shares issued and outstanding at October 2, 2022 and 6,447,506 issued and outstanding at January 2, 2022

12,922

12,895

Additional paid-in capital

11,392,835

11,215,696

Accumulated deficit

(824,769 )

(600,238 )

Total shareholders' equity

10,580,988

10,628,353

Total liabilities and shareholders' equity

$ 15,924,591

$ 14,505,727

~~See Notes to Condensed Consolidated Financial Statements~~

Table of Contents

PART I FINANCIAL INFORMATION

BT BRANDS, INC. AND SUBSIDIARIES

~~CONDENSED~~ CONSOLIDATED ~~STATEMENTS OF OPERATIONS~~

~~(Unaudited)~~BALANCE SHEETS

39 Weeks Ended

39 Weeks Ended,

13 Weeks Ended,

13 Weeks Ended,

October 2, 2022

October 3, 2021

October 2, 2022

October 3, 2021

SALES

$ 9,621,996

$ 6,604,554

$ 4,023,920

$ 2,280,999

COSTS AND EXPENSES

Restaurant operating expenses

Food and paper costs

3,637,814

2,580,224

1,604,858

944,171

Labor costs

3,122,867

1,794,499

1,336,039

607,780

Occupancy costs

803,792

436,196

367,872

132,542

Other operating expenses

577,035

355,024

248,383

102,943

Depreciation and amortization expenses

351,084

173,799

168,855

60,405

General and administrative expenses

1,035,639

295,397

288,921

74,415

Total costs and expenses

9,528,231

5,635,139

4,014,929

1,922,256

Income from operations

93,765

969,415

8,991

358,743

UNREALIZED LOSS ON MARKETABLE SECURITIES

(155,220 )

-

(74,982 )

-

INTEREST AND OTHER INCOME

55,836

-

46,364

-

INTEREST EXPENSE

(88,099 )

(161,148 )

(33,638 )

(32,916 )
EQUITY IN NET LOSS OF AFFILIATE

(135,813 )

-

(121,641 )

-

INCOME (LOSS) BEFORE TAXES

(229,531 )

808,267

(174,906 )

325,827

INCOME TAX (EXPENSE) BENEFIT

5,000

(225,000 )

-

(90,000 )
NET INCOME (LOSS)

$ (224,531 )

$ 583,267

$ (174,906 )

$ 235,827

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

$ (0.03 )

$ 0.14

$ (0.04 )

$ 0.06

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

6,459,223

4,047,506

6,461,118

4,047,506

	Unaudited
	July 2, 2023			January 1, 2023
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	5,704,879		$	2,150,578
Marketable securities		1,233,796			5,994,295
Receivables		35,412			76,948
Inventory		191,206			158,351
Prepaid expenses and other current assets		58,140			37,397
Assets held for sale		258,751			446,524
Total current assets		7,482,184			8,864,093

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET		3,276,683			3,294,644
OPERATING LEASES RIGHT-OF-USE ASSETS		1,890,044			2,004,673
INVESTMENTS		1,224,837			1,369,186
DEFERRED INCOME TAXES		143,000			61,000
GOODWILL		671,220			671,220
INTANGIBLE ASSETS, NET		411,713			453,978
OTHER ASSETS, NET		50,052			50,903
Total assets
	$	15,149,733		$	16,769,697
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	639,226		$	448,605
Broker margin loan		-			791,370
Current maturities of long-term debt		164,866			167,616
Current operating lease obligations		286,114			193,430
Accrued expenses		451,891			532,520
Total current liabilities		1,542,097			2,133,541

LONG-TERM DEBT, LESS CURRENT PORTION		2,374,705			2,658,477
NONCURRENT OPERATING LEASE OBLIGATIONS		1,628,754			1,825,057
Total liabilities		5,545,556			6,617,075

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preferred stock, $0.001 par value, 2,000,000 shares authorized,
no shares outstanding at July 2, 2023 and January 1, 2023		-			-
Common stock, $0.002 par value, 50,000,000 authorized, 6,246,118
issued and outstanding at July 2, 2023 and 6,396,118 issued
and outstanding at January 1, 2023, respectively		12,492			12,792
Less cost of 215,000 and 65,000 common shares held in Treasury
at July 2, 2023 and January 1, 2023, respectively		(356,807	)		(106,882	)
Additional paid-in capital		11,486,535			11,409,235
Accumulated deficit		(1,538,043	)		(1,162,523	)

Total shareholders' equity		9,604,177			10,152,622

Total liabilities and shareholders' equity	$	15,149,733		$	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)~~

39 Weeks ended,

October 2, 2022

October 3, 2021

CASH FLOWS FROM OPERATING ACTIVITIES

Net Income (Loss)

$ (224,531 )

$ 583,267

Adjustments to reconcile net income (loss) to net cash

provided by operating activities-

Depreciation and amortization of franchise cost

306,584

173,799

Amortization of intangible assets

44,500

-

Amortization of debt issuance costs included in interest expense

4,050

55,555

Deferred taxes

(67,490 )

58,000

Stock-based compensation

102,300

-

Unrealized loss on marketable securities

155,220

-

Loan forgiveness

(13,750
)

-

Loss on equity method investment

135,813

-

Changes in operating assets and liabilities, net of acquisitions -

Receivables

14,648

(12,721 )
Inventory

(15,755 )

(8,867 )
Prepaid expenses and other current assets

(23,189 )

(29,195 )
Accounts payable

62,512

148,520

Accrued expenses

204,680

(116,136 )
Income taxes payable

(201,088 )

79,110

Net cash provided by operating activities

484,504

931,332

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of net assets of Keegan's Seafood Grille

(1,150,000 )

-

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

(1,159,600 )

-

Acquisition of net assets of Village Bier Garten

(690,000 )

-

Investment in Bagger Dave's Burger Tavern, Inc.

(1,260,000 )

-

Purchase of property and equipment

(349,739 )

(85,821 )
Investment in related company

(229,000 )

-

Purchase of marketable securities

(808,619 )

-

Other assets

(6,602 )

-

Net cash used in investing activities

(5,653,560 )

(85,821 )
CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from long-term debt

-

3,107,100

Principal payment on long-term debt

(125,738
)

(3,113,521 )
Proceeds from exercise of common stock warrants

74,866

-

Payment of debt issuance costs

-

(49,699 )
Payment of deferred offering costs

-

(31,823 )
Net cash used in financing activities

(50,872
)

(87,943 )

CHANGE IN CASH

(5,219,928 )

757,568

CASH, BEGINNING OF PERIOD

12,385,632

1,321,244

-

CASH, END OF PERIOD

$ 7,165,704

$ 2,078,812

SUPPLEMENTAL DISCLOSURES

Cash paid for interest

$ 84,049

$ 127,800

Cash paid for income taxes

$ 209,088

$ 88,006

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

	26 Weeks Ended			26 Weeks Ended,			13 Weeks Ended,			13 Weeks Ended,
	July 2, 2023			July 3, 2022			July 2, 2023			July 3, 2023
SALES	$	7,070,763		$	5,598,076		$	3,999,965		$	3,524,881

COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		2,898,498			2,032,956			1,608,175			1,311,373
Labor costs		2,615,136			1,786,828			1,412,376			1,179,118
Occupancy costs		505,861			435,920			148,736			261,282
Other operating expenses		394,243			332,181			198,629			212,314
Depreciation and amortization expenses		356,027			178,701			192,520			109,286
General and administrative expenses		944,992			746,717			519,077			455,656
Gain on sale of assets		(313,688	)		-			-			-
Total costs and expenses		7,401,069			5,513,303			4,079,513			3,529,029
Income (loss) from operations		(330,306	)		84,773			(79,548	)		(4,148	)

UNREALIZED GAIN (LOSS) ON MARKETABLE SECURITIES		(23,064	)		(80,238	)		(92,919	)		(80,238	)
INTEREST AND OTHER INCOME		90,810			9,473			1,761			9,473
INTEREST EXPENSE		(49,909	)		(54,461	)		(24,376	)		(26,190	)
EQUITY IN NET LOSS OF AFFILIATE		(145,050	)		(14,172	)		(90,651	)		(14,172	)
LOSS BEFORE TAXES		(457,520	)		(54,625	)		(285,734	)		(115,275	)
INCOME TAX BENEFIT		82,000			5,000			52,000			23,000
NET LOSS	$	(375,520	)	$	(49,625	)	$	(233,734	)	$	(92,275	)
NET LOSS PER COMMON SHARE - Basic and Diluted	$	(0.06	)	$	(0.01	)	$	(0.04	)	$	(0.01	)

WEIGHTED AVERAGE SHARES USED IN COMPUTING PER COMMON SHARE AMOUNTS - Basic and Diluted		6,261,631			6,458,276			6,246,114			6,461,118

See Notes to Consolidated Condensed Financial Statements

Table of Contents

~~BT BRANDS, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY~~

~~(Unaudited)~~

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

*For the 26-week periods-*				Common Stock			Additional Paid-in		Accumulated			Treasury
	Shares			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
Stock-based compensation		-			-			77,300		-			-			77,300
Treasury stock purchase		(150,000	)		(300	)				-			(249,925	)		(250,225	)
Net loss		-			-			-		(375,520	)		-			(375,520	)
Balances, July 2, 2023		6,246,118		$	12,492		$	11,486,535	$	(1,538,043	)	$	(356,807	)	$	9,604,177

Balances, January 2, 2022		6,447,506		$	12,895		$	11,215,696	$	(600,238	)	$	-		$	10,628,353
Stock-based compensation		-			-			73,400		-			-			73,400
Shares issued in exercise of warrants		13,612			27			74,839		-			-			74,866
Net loss		-			-			-		(49,625	)		-			(49,625	)
Balances, July 3, 2022		6,461,118		$	12,922		$	11,363,935	$	(649,863	)	$	-		$	10,726,994

For the 39-week periods-

Common Stock

Additional
Paid-in

Accumulated

Shares

Amount

Capital

(Deficit)

Total

Balances, January 2, 2022

6,447,506

$ 12,895

$ 11,215,696

$ (600,238)

$ 10,628,353

Stock-based compensation

-

-

102,300

-

102,300

Shares issued in exercise of warrants

13,612

27

74,839

-

74,866

Net loss

-

-

-

(224,531)

(224,531)
Balances, October 2, 2022

6,461,118

$ 12,922

$ 11,392,835

$ (824,769)

$ 10,580,988

Common Stock

Additional
Paid-in

Accumulated

Shares

Amount

Capital

(Deficit)

Total

Balances, January 3, 2021

4,047,502

$ 8,095

$ 497,671

$ (1,208,089)

$ (702,323)
Shares issued for fractional holding

4

-

-

-

-

Net income

-

-

-

583,267

583,267

Balances, October 3, 2021

4,047,506

$ 8,095

$ 497,671

$ (624,822)

$ (119,056)

For the 13-week periods-

Common Stock

Additional
Paid-in

Accumulated

Shares

Amount

Capital

(Deficit)

Total

Balances, July 3, 2022

6,461,118

$ 12,922

$ 11,363,935

$ (649,863)

$ 10,726,994

Stock-based compensation

-

-

28,900

-

28,900

Net loss

-

-

-

(174,906)

(174,906)
Balances, October 2, 2022

6,461,118

$ 12,922

$ 11,392,835

$ (824,769)

$ 10,580,988

Common Stock

Additional
Paid-in

Accumulated

Shares

Amount

Capital

(Deficit)

Total

Balances, July 4, 2021

4,047,506

$ 8,095

$ 497,671

$ (860,649)

$ (354,883)
Net income

-

-

-

235,827

235,827

Balances, October 3, 2021

4,047,506

$ 8,095

$ 497,671

$ (624,822)

$ (119,056)

*For the 13-week periods-*			Common Stock		Additional Paid-in		Accumulated			Treasury
	Shares		Amount		Capital		(Deficit)			Stock			Total
Balances, April 2, 2023		6,246,118	$	12,492	$	11,445,135	$	(1,304,309	)	$	(356,807	)	$	9,796,511
Stock-based compensation		-		-		41,400		-			-			41,400
Net loss		-		-		-		(233,734	)		-			(233,734	)
Balances, July 2, 2023		6,246,118	$	12,492	$	11,486,535	$	(1,538,043	)	$	(356,807	)	$	9,604,177

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

Balances, April 3, 2022		6,461,118	$	12,922	$	11,324,035	$	(557,588	)	$	-	$	10,779,369
Stock-based compensation		-		-		39,900		-			-		39,900
Net loss		-		-		-		(92,275	)		-		(92,275	)
Balances, July 3, 2022		6,461,118	$	12,922	$	11,363,935	$	(649,863	)	$	-	$	10,726,994

See Notes to Consolidated Condensed Financial Statements

Table of Contents

BT BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	26 Weeks ended,
	July 2, 2023			July 3, 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(375,520	)	$	(49,625	)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities-
Depreciation and amortization		356,027			178,701
Amortization of debt issuance premium included in interest expense		2,700			2,700
Deferred taxes		(82,000	)		(67,490	)
Stock-based compensation		77,300			73,400
Unrealized loss on marketable securities		23,064			80,238
Investment gains		(29,178	)		-
Loss on equity method investment		145,050			14,172
Gain on sale of assets		(313,688	)		-
Non-cash operating lease expense		10,309			-
Property tax liability settlement		(181,339	)		-
Changes in operating assets and liabilities, net of acquisitions -
Receivables		41,536			36,183
Inventory		(32,855	)		(33,833	)
Prepaid expenses and other current assets		(20,743	)		(26,274	)
Accounts payable		166,879			206,284
Accrued expenses		100,710			284,700
Income taxes payable		-			(201,088	)
Net cash provided (used) by operating activities		(111,747	)		498,068

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of net assets of Keegan's Seafood Grille		-			(1,150,000	)
Acquisition of net assets of Pie In The Sky Coffee and Bakery		-			(1,159,600	))
Investment in Bagger Dave's Burger Tavern, Inc.		-			(1,260,000	)
Proceeds from sale of assets		496,000			-
Purchase of property and equipment		(265,747	)		(159,491	)
Investment in related company		-			(229,000	)
Purchase of marketable securities		(1,091,736	)		(607,988	)
Proceeds from the sale of marketable securities		5,858,348			-
Other assets		-			(12,500	)
Net cash provided by (used) in investing activities		4,996,865			(4,578,579	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of broker margin loan		(791,370	)		-
Principal payment on long-term debt		(289,222	)		(84,035	)
Proceeds from exercise of common stock warrants		-			74,866
Purchase of treasury shares		(250,225	)		-
Net cash used in financing activities		(1,330,817	)		(9,169	)

CHANGE IN CASH and CASH EQUIVALENTS		3,554,301			(4,089,680	)

CASH and CASH EQUIVALVENTS, BEGINNING OF PERIOD		2,150,578			12,385,632
					-
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	5,704,879		$	8,295,952

SUPPLEMENTAL DISCLOSURES
Cash paid for interest	$	47,209		$	51,761
Cash paid for income taxes	$	-		$	209,088
Purchase of property and equipment included in accounts payable	$	23,742		$	-

~~BT BRANDS, INC.~~

See Notes to Consolidated 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," "BT Brands,"~~“Company,” “we,” “our,” “us,” or ~~"BT"~~“BT Brands”) and have been prepared in accordance with the USU.S. generally accepted accounting principles ~~("GAAP"~~(“GAAP”) for interim financial information and with the instructions to ~~Securities and Exchange Commission ("SEC") requirements for~~ Form 10-Q and Article 10 of Regulation S-X. All intercompany accounts and transactions have been eliminated in ~~consolidation. The financial statements~~consolidation and have been prepared on a basis consistent in all material respects with the accounting policies for the fiscal year ending January ~~2, 2022.~~1, 2023. In our opinion, all ~~regular~~adjustments, which are normal and recurring ~~adjustments~~in nature, necessary for a fair presentation of our financial position and results of operation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.

The accompanying Condensed Consolidated Balance Sheet, as of ~~October~~July 2, ~~2022,~~2023, does not include all 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 ~~ending~~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, itthe Company acquired 100% of BTND, ~~LLC~~LLC.

~~Business~~

~~As of October 2, 2022, BT Brands owned and operated thirteen 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"). Following~~States. As of July 2, 2023, including our 41.2% owned Bagger Dave’s business, we operated eighteen restaurants comprising the end of the third quarter on November 6, 2022, the Burger Time in West St. Paul, Minnesota was permanently closed. The Company is considering alternate uses for the site. We own Keegan's Seafood Grille ("Keegan's"), a dine-in restaurant located in Florida, Pie In The Sky Coffee and Bakery ("PIE"), a casual dining coffee shop bakery located in Woods Hole, Massachusetts, and the Village Bier Garten, a German-themed restaurant in Cocoa, Florida. Our Burger Time restaurants feature a variety of burgers and other affordable foods, sides, and soft drinks. Our Dairy Queen restaurant offers a proscribed menu consisting of burgers, chicken, sides, ice cream, other desserts, and various beverages. Keegan's Seafood Grille has operated in Indian Rocks Beach, Florida, for more than thirty-five years and offers a variety of traditional fresh seafood items for lunch and dinner. The menu at Keegan's includes beer and wine. PIE features an array of fresh baked goods, freshly made sandwiches, and our locally roasted coffee. The Village Bier Garten is a full-service restaurant and bar featuring a German-themed menu, specialty imported European beers, and regular entertainment. Our revenues are derived from food and beverages at our restaurants; retail goods such as apparel, private-labeled "Keegan's Hot Sauce," and other souvenir items account for an insignificant portion of our income.

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


8 ·	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”);
~~Table of Contents~~	·	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 requires.~~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 ~~a 52-week year~~52 weeks ending ~~January 1, 2023, and fiscal 2021 was a 52-week year ending January 2, 2022.~~December 31, 2023.

Cash and Cash Equivalents

~~Our bank deposits often 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 and cash equivalents 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 ~~October~~July 2, ~~2022,~~2023, the cost of marketable securities ~~consisted of exchange-listed equity securities with~~includes a ~~historical~~bond fund at a cost of ~~$808,619.~~$416,570 and common stocks at a cost of $978,040 for a total cost of $1,394,610 prior to a mark-to-market reduction of $160,814. 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. These investments are reflected in the accompanying financial statements ~~on October~~at July 2, ~~2022,~~2023, at the level-one ~~fair value~~ quoted market price in an active market of ~~$653,399.~~$1,233,796.

Investments

Noncurrent investments at July 2, 2023, include our net equity method investment of $920,837 in Bagger Dave’s and our $304,000 total investment in NGI Corporation. (NGI). In 2020, the Company received equity ownership in NGI as consideration for a loan to NGI. Upon repayment of the loan to NGI, $75,000 was attributed by us to the value of the equity received, which 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 Sheets 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 June 25, 2023, Bagger Dave’s had sales of $1,966,644 and a net loss of $230,844 and for the 26 weeks in 2023 Bagger Dave's sales were approximately $3,981,000 and the year to date loss was $352,000. For the 26-week period, our 41.2% equity share in the loss was approximately $145,050 and is included in the accompanying statement of operations.

Investments also includes 1,421,647 shares of Noble Roman's, Inc. with a cost and market value of approximately $300,000 representing approximately 6.4% ownership of Noble Roman's. During the third quarter the company was unsuccessful in its effect to have its CEO, Gary Copperud elected to the Noble Roman's board of directors.

910

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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.

~~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 ~~no goodwill~~determined to be impaired, the recognized impairment ~~at October 2, 2022.~~ is measured by the amount by which the carrying amount of 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~~ the allocated cost of trademarks, tradenames, a covenant not to compete, websites, and social media accounts. The costs of purchased intangible assets are recorded at the estimated value and are amortized over 4 to 20 years.

~~Assets Held for Sale~~

~~As of October 2, 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. The remaining book value~~current carrying value. In the second quarter of ~~$258,751~~2023, we completed the disposition of the St. Louis property in lieu of unpaid property taxes resulting in an elimination of approximately $180,000 of previously accrued property taxes which is ~~included in Other Assets in the accompanying balance sheet.~~reflected as a reduction of occupancy costs.

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 ~~October~~July 2, ~~2022, we estimated~~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.

~~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.

~~NOTE 2 – ACQUISITIONS~~

~~Restaurant Acquisition - Keegan's~~

On March 2, 2022, we purchased the net assets of Keegan's, a fresh seafood restaurant located in Indian Rocks Springs, Florida. Concurrent with the purchase, we entered a 131-month lease for the approximately 2800 square foot space that Keegan's has occupied for more than 35 years. We acquired Keegan's tradename as part of the 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 acquisition of Keegan's 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.

For the Keegan's acquisition, we provisionally recorded $204,211 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 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

11
Table of Contents

~~Restaurant Acquisition – Pie In the Sky Coffee~~Goodwill, Other Intangible Assets and ~~Bakery~~Other Assets

~~On May 11, 2022, we purchased~~Goodwill is not amortized. Goodwill is tested for impairment at least annually. The cost of other intangible assets is amortized over the ~~net~~expected useful life. Other 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 $284,220 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.
~~The following table presents our preliminary estimate of the~~allocated fair value of the ~~assets~~ acquired ~~and liabilities assumed~~Dairy Queen franchise agreement related to our location 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

~~Restaurant Acquisition - Village Bier Garten Restaurant~~Ham Lake, Minnesota, which is amortized over an estimated useful life of 14 years.

~~On August 4, 2022, we completed~~NOTE 2 – INTANGIBLE ASSETS
At July 2, 2023, the ~~purchase~~value of Intangible Assets are as follows:

Estimated
Useful Life
(Years)

Original Cost

Accumulated
Amortization

Net Carrying Value

Covenants not to Compete

3

$ 98,000

$ (41,110 )

$ 56,890

Trademarks

15

393,000

(38,177 )

354,823

$ 491,000

$ (79,287 )

$ 411,713

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, $40,500 in 2025, $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, and for the 26-week period ended July 2, 2023 was $42,265
NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the assets and the business operating as Van Stephan Village Bier Garten ("VBG"), a full-service bar and restaurant in Cocoa, Florida. The restaurant features a German-themed menu, specialty imported European beers, and regular entertainment. The purchase price was $690,000, paid in cash at closing. Concurrent with the purchase, we entered into a five-year lease with three five-year renewal optionsfollowing:

July 2,
2023

January 1,
2023

Land

$ 435,239

$ 485,239

Equipment

3,842,834

3,893,274

Buildings and leasehold improvements

2,421,521

2,402,157

Total property and equipment

6,699,594

6,780,670

Accumulated depreciation

(3,164,160 )

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

(258,751 )

(446,526 )
Net property and equipment

$ 3,276,683

$ 3,294,644

Depreciation expense for the ~~property currently occupied by~~13-week periods in 2023 and 2022 was $192,520 and $109,286, respectively; for the ~~business. The terms of the triple net lease call for an initial monthly rent of $8,200.~~
~~The following table presents our preliminary estimate of the fair value of the assets acquired~~26-week periods in 2023 and ~~liabilities assumed in the VBG transaction is:~~2022 was $312,911 and $177,676, respectively.
Assets acquired:

Inventory

$ 22,000

Equipment

230,000

Leasehold improvements

273,000

Trademark, website, and other intangibles

15,000

Non-compete agreement

150,000

Purchase price

$ 690,000

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Table of Contents
~~NOTE 3 – INTANGIBLE ASSETS~~
~~At October 2, 2022, based upon our preliminary evaluation of the value of acquired assets, intangible assets are the following:~~

Estimated Useful Life
(Years)

Original Cost

Accumulated
Amortization

Net Carrying Value

Covenants not to compete

2-4

$ 450,000

$ (37,500 )

$ 412,500

Trademarks, tradenames, websites and social media sites

5-20

140,000

(7,000 )

133,000

$ 590,000

$ (44,500 )

$ 545,500

NOTE 4 ~~– PROPERTY AND EQUIPMENT~~
~~Property and equipment consisted of the following at:~~

October 2, 2022

January 2, 2022

Land

$ 485,239

$ 485,239

Equipment

3,901,165

2,674,529

Buildings and leasehold improvements

2,351,188

1,322,085

Total property and equipment

6,737,592

4,481,853

Accumulated depreciation

(2,937,348 )

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

(258,751 )

(258,751 )
Net property and equipment

$ 3,541,493

$ 1,592,338

~~Depreciation expense for the 39-week periods in 2022 and 2021 was $306,584 and $172,261, respectively.~~
~~NOTE 5~~ - ACCRUED EXPENSES

Accrued expenses consisted of the following at:

October 2, 2022

January 2, 2022

Accrued real estate taxes

$ 105,972

$ 103,615

Accrued bonus compensation

59,139

7,000

Accrued payroll

155,395

44,700

Accrued payroll taxes

11,884

8,424

Accrued sales taxes payable

89,150

50,414

Accrued vacation pay

17,663

17,663

Accrued gift card liability

26,239

10,036

Accrued franchise royalty

6,681

2,614

Other accrued expenses

18,504

9,875

$ 490,627

$ 254,341

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July 2,
2023

January 1,
2023

Accrued real estate taxes

$ 29,747

$ 202,436

Accrued bonus compensation

67,472

59,139

Accrued payroll and payroll taxes

199,674

156,245

Accrued sales taxes payable

125,921

70,270

Accrued vacation pay

17,663

17,663

Accrued gift card liability

11,414

25,965

Other accrued expenses

-

802

$ 451,891

$ 532,520

NOTE 65 - LONG TERM DEBT

Our long-term debt is as follows:

October 2, 2022

January 2, 2022

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. The notes are guaranteed by BT Brands, Inc. and a shareholder of the Company.

$ 2,905,900

$ 3,027,971

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 guaranty of a shareholder of the Company. Pursuant to the terms of the loan, $13,750 of the loan was forgiven on June 22, 2022.

4,583

22,000

2,910,483

3,049,971

Less - unamortized debt issuance costs

(42,949 )

(46,999 )
Current maturities

(169,504 )

(169,908 )

$ 2,698,030

$ 2,833,064

Our long-term debt is as follows:

July 2,
2023

January 1,
2023

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.

$ 2,578,011

$ 2,864,484

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

458

3,208

Total

2,578,469

2,867,692

Less - unamortized debt issuance costs

(38,899 )

(41,599 )
Current maturities

(164,866 )

(167,616 )

$ 2,374,705

$ 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 ~~October~~July 2, ~~2022,~~2023, there were ~~13,400~~529,750 shares available for a grant under the ~~2019 Incentive~~ Plan.

~~During~~Compensation expense equal to 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~~fair value of the ~~Company~~options at the grant date is recognized in ~~connection with their joining~~general and administrative expense over the ~~board~~applicable service period. Total equity-based compensation expense through the second quarter of ~~directors. The options are exercisable at $5 per share~~2023 was $77,300 and $73,400 through ~~2031. In~~ the ~~first nine months~~second quarter of 2022, and $41,300 and $9,500, respectively, related to the Contingent Share Award described below. Based on current estimates, we ~~granted 220,750 options to employees and consultants to purchase shares~~project that approximately $180,000 in stock-based compensation expense for current grants will be recognized over the next three years at ~~$2.50~~approximately $60,000 per ~~share.~~year.

~~Stock~~As outlined in each agreement, stock options granted to employees and directors vest over ~~two to five~~four years in ~~monthly or~~ annual ~~installments, as outlined in each agreement.~~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. Compensation expense for the 39 weeks in 2022 was $102,300 and was zero in a similar period in 2021. Based on current estimates, we project that for current grants, approximately $200,000 in stock-based compensation expense will be recognized over the next three years.
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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~~Company’s common stock as of the grant date.

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

·
Expected life – The simplified ~~method.~~method

·
Expected dividend – The rate of dividends expected to be paid over the term of the stock option.

·
·
Volatility – Estimated ~~volatility based on a sample~~volatility.
Risk-free interest rate – The daily United States Treasury yield curve rate corresponding to the expected life of ~~comparable companies.~~the award
14
~~Table of Contents~~

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

Canceled, forfeited, or expired

(8,200 )

2.50

Options outstanding at October 2, 2022

227,550

$ 2.67

9.8

0

Options exercisable at October 2, 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 October 2, 2022:~~
Fair value of options granted during the period

$ 1.39

Expected life (in years)

4.83

Expected dividend

$ -

Expected stock volatility

63 %
Risk-free interest rate

2 %

Number of Options

Weighted Average
Exercise Price

Weighted Average Remaining Term
(In Years)

Aggregate
Intrinsic
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 July 2, 2023

220,250

$ 2.74

8.5

$ 0

Options exercisable at July 2, 2023

94,950

$ 3.18

8.5

$ 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~~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~~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 $41,300 of stock-based compensation was recognized for this Agreement for the 26-week period 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. Assumptions utilized in the ~~next meeting~~model include a risk-free rate of ~~shareholders.~~4.4% and volatility of 63%.

NOTE 87 – LEASES

~~Concurrent with acquiring Keegan's~~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~~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% of the remaining lease obligation of ~~$597,836~~$539,919 is reflected as a liability in the accompanying financial ~~statements as of October 2, 2022.~~statements.

~~Keegan's~~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.

~~With the acquisition of~~Upon acquiring PIE assets, we ~~entered 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 ~~$519,040~~$951,227 is reflected as a liability in the accompanying financial ~~statements as of October 2, 2022. The weighted-average remaining lease term is approximately 6.9 years.~~statements.

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.

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Table of Contents

With the acquisition of assets of Village Bier Garten, ~~assets,~~ 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 ~~lease~~ 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%4.5% 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 5%4.5% of the remaining lease obligation of ~~$454,510~~$423,722, is reflected as a liability in the accompanying financial ~~statements as of October 2, 2022.~~statements.

Following is a schedule of the approximate minimum future lease payments on the operating leases as of ~~October~~July 2, ~~2022:~~ 2023:

Total

Remainder 2022

$ 69,600

2023

281,676

2024

289,236

2025

297,909

2039

306,838

2027 and thereafter

531,553

Total future minimum lease payments

1,776,812

Less - interest

(205,366 )

$ 1,571,446

~~The weighted-average remaining lease term is approximately 5.9 years.~~

Total

Remainder 2023

$ 141,576

2024

289,076

2025

297,745

2026

306,674

2027

268,437

2028 and thereafter

1,039,438

Total future minimum lease payments

2,342,966

Less - interest

(428,098 )

$ 1,914,868

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 5.6 years.
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 26-week and 13-week period in 2023 was $223,589 and $97,887 respectively Cash paid for leases during the 26-week period in 2023 totaled $141,426, and variable expenses for leased properties were approximately $28,500.
NOTE 98 - RELATED PARTY TRANSACTION

~~Next Gen Ice~~NGI Corporation

~~In 2019,~~Our CEO and CFO also serve as Chairman and CFO, respectively, of NGI Corporation (NGI). BT Brands ~~made cash advances~~owns 330,418 common shares and holds warrants to ~~Next Gen Ice, Inc. (NGI), totaling a principal amount of $179,000. Our CEO, Gary Copperud, is Chairman of the Board of Directors~~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. Our Chief Operating Officer, Kenneth Brimmer, is also a member of the Board of Directors 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 BrandsWe received 179,000 shares of common stock in NGI ~~from the founders 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~~as consideration for ~~$1.00 per share.~~modifying a note that was subsequently 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 October 2, 2022, is its fair value of $304,000, comprised of the $75,000 value determined by BT Brands

NOTE 109 – 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 unaware of any significant asserted or potential claims that could impact our financial position.

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

Introduction

As of ~~October~~July 2, ~~2022,~~2023, including our partially owned Bagger ~~Dave's~~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, a 41.2% owned affiliate, operates six Bagger Dave's restaurants in Michigan, Ohio, and Indiana;~~
·
~~Keegan's Seafood Grille in Indian Rocks Beach, Florida;~~
·
~~Pie in the Sky Coffee Shop and Bakery in Woods Hole, Massachusetts.~~
·
Village Bier Garten is a German-themed restaurant, bar, and entertainment venue in Cocoa, ~~Florida.~~Florida (“VBG”):
·
Keegan’s Seafood Grille in Indian Rocks Beach, Florida (“Keegan’s”);
·
Pie In The Sky Coffee and Bakery in Woods Hole, 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 ~~a traditional~~ grilled ~~hamburger~~hamburgers and other affordable foods such as chicken sandwiches, pulled pork sandwiches, sides, and soft drinks. Burger ~~Time's~~Time’s operating principles include (i) offering bigger burgers and more value for the money; (ii) offering a limited menu to permit attention to quality and speed of preparation; (iii) providing fast service by way of single and double drive-thru designs and a point-of-sale system that expedites the ordering and preparation process, and (iv) great tasting 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, with 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 price at our Burger Time restaurants increased by approximately 4%20% in ~~the first nine months of~~ fiscal ~~2022~~2023 compared to ~~2021~~2022 and currently is about ~~$12.60.~~$15.60. This recent increase is principally ~~because~~the result of a menu price ~~increase~~increases implemented in ~~2021 and a 2022 price increase of approximately 10% on our popular "Deal of the Day" offering. We most recently increased menu prices in September of~~ 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.

Notable Recent Events

During the 39 weeks ending October 2, 2022, we acquired three operating restaurants and a 41.2% ownership 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 will reduce~~reducing our dependency on the financial performance of our Burger Time restaurants.
17
~~Table of Contents~~
~~Keegan's Seafood Grille,~~ 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, we acquired the assets and business operations of the iconic Pie In The Sky Coffee Shop and Bakery "PIE." The store 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 August 2022, we purchased the assets and business operating as Van Stephan Village Bier Garten, a full-service bar and restaurant in Cocoa, Florida. The restaurant features a German-themed menu, specialty imported European beers, and regular entertainment.
In June 2022, we acquired shares representing 41.2% ownership 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

Industry trends have a direct impact on our business. Current trends include difficulties attracting food service workers and rapid inflation in the cost of 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 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~~some moderating inflationary pressure induring the remainder of ~~2022.~~2023. Beef and egg costs ~~rose~~have trended down slightly in ~~2021, continued to increase in 2021, and have recently risen by approximately 7% 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, as the pandemic peaked, our Burger Time business experienced~~As a ~~significant increase in volume, contributing to improved profit margins. Future~~result, future margin improvements may be difficult to ~~achieve and~~achieve. Margin improvement will be achieved through operational enhancements, equipment advances, and increased volumes offsetting food cost increases.
16
Table of Contents

Labor is a critical factor in operating our stores. Securing staff to run our locations at full capacity has become more challenging in most areas where we operate our 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.

~~Although moderating recently, since March 2020, COVID~~Result of operations for the 13 weeks ending July 2, 2023, compared to the 13 weeks ending July 3, 2022.
The following table sets forth, for the periods indicated, our Consolidated Statements of Operations expressed as a percentage of total revenues. The percentages may not reconcile because of rounding.

  13 weeks ended,
July 2, 2023

13 weeks ended,
July 3, 2022

Amount

          %

Amount

%

SALES

$ 3,999,965

100.0 %

$ 3,524,881

100.0 %
COSTS AND EXPENSES

Restaurant operating expenses

Food and paper costs

1,608,175

40.2

1,311,373

37.2

Labor costs

1,412,376

35.3

1,179,118

33.5

Occupancy costs

148,736

3.7

261,282

7.4

Other operating expenses

198,629

5.0

212,314

6.0

Depreciation and amortization

192,520

4.8

109,286

3.1

General and administrative

519,077

13.0

455,656

12.9

Total costs and expenses

4,079,513

102.0

3,529,029

100.1

Income (loss) from operations

(79,548 )

(2.0 )

(4,148 )

(0.1 )
UNREALIZED GAIN ON MARKETABLE SECURITIES

(92,920 )

(2.3 )

(80,238 )

(2.3 )
INTEREST AND OTHER INCOME

1,761

0

9,473

.3

INTEREST EXPENSE

(24,376 )

(0.6 )

(26,190 )

(.7 )
EQUITY IN AFFILIATE LOSS

(90,651 )

(2.3 )

(14,172 )

(.4 )
INCOME TAX BENEFIT

52,000

1.3

23,000

.6

NET (LOSS)

$ (233,734 )

(5.8 )%

$ (92,275 )

(2.6 )%
Net Revenues:
Net sales for the second quarter of 2023 increased $475,084 or 13.5% to $3,999,965 from $3,524,881 in 2022. The sales increase resulted from acquiring three restaurants in 2022, contributing $2,025,000 in revenue during the quarter. Sales also reflect the closing of the West St Paul Burger Time location in the fourth quarter of 2022.
For BTND locations open at quarter-end, second-quarter restaurant sales ranged from a low of $113,000 to a high of $333,000. The average sales for each Burger Time unit open at quarter-end were approximately $225,000 in 2023, an increase of approximately 2.94% from $219,000 in 2022.
Restaurant Operating Costs:
During 2023, restaurant operating costs (which refer to all the costs associated with operating our restaurants but do not include general and administrative expenses and depreciation and amortization and the gain on the sale of property and equipment) increased to 84.2% in restaurant sales in 2023 from 84.1% in 2022. For all of our locations, we continued to see price inflation on input costs, including food and labor, and the matters discussed in the “Cost of Sales,” “Labor Costs,” and “Occupancy and Other Operating Costs” sections below.
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Table of Contents
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 July 3, 2022

$ 2,964,087

Increase in food and paper costs

296,802

Increase in labor costs

233,258

Decrease in occupancy and operating cost

(126,231
)
Restaurant operating costs for the periods ended July 2, 2023

$ 3,367,916

Costs of Sales - food and paper:
Cost of sales - food and paper - for 2023 increased to 40.2% of restaurant sales from 37.2% of restaurant sales in 2022. For all of our locations, we continued to see price inflation on input costs, including food costs, where ground beef costs are approximately 40% higher compared to the second quarter of 2022. The increase also results from including Keegan’s, which operates at a higher food cost than our remaining stores. This overall increase is offset by results from PIE which, because of its ~~variants have adversely affected workforces, customers, economies,~~coffee-focused menu, has significantly lower food and ~~financial markets globally~~paper costs than BTND, Keegan’s and ~~disrupted~~Village Bier Garten.
Labor Costs:
In 2023, labor and benefits cost increased to 35.3% of restaurant sales from 33.5% in 2022. The increase is the ~~US economy's normal flow. Our stores have, with some exceptions, generally remained open for drive-through business. However, many businesses have experienced a disruption~~net result of ~~operations. More recently, food service businesses, including ours, have faced challenges~~higher BTND activity in ~~attracting~~2023 and ~~hiring workers. Labor~~higher wages because of labor shortages ~~have resulted~~ in some ~~store curtailment~~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 when there is a decrease in restaurant sales.
Occupancy and Other Operating Costs:
For 2023, occupancy and other costs decreased to 8.7% of sales or $347,365 compared to $473,596, or 13.4% of restaurant sales in 2022, principally because of a reversal in previously accrued property taxes related to a property in St. Louis, Missouri. The property was deeded to the taxing authority in lieu of payment and any further liability. These costs were also impacted by three new leased restaurant locations added in 2022, which operate at a higher occupancy cost than our BTND locations, where we own most of the real estate.
Depreciation and Amortization Costs:
For 2023, depreciation and amortization costs increased by $83,234 to $192,520 (4.8% of sales) from $109,286 (3.1% of sales) in 2022. Depreciation and amortization costs increased principally due to the 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 equipment reaching a fully depreciated status.
General and Administrative Costs
General and administrative costs in 2023 increased 0.1% of sales, or $63,421, to $519,077 (13.0%) from $455,656 (12.9% of sales) in 2022. The dollar amount increase was due to our acquiring three businesses during 2022 and the ongoing costs of operating ~~hours which may become more acute~~ as ~~market participants compete to attract employees.~~a public company, including administrative salaries and audit expenses.

~~We can't predict~~Income (loss) from Operations:
The loss from operations was $79,548 in 2023 compared to a loss of $4,148 in 2022. The change in income from operations in 2023 compared to 2022 was primarily due to the ~~effects of public health~~decline in BTND sales and poor margins at Keegan’s, together with other matters discussed in the “Net Revenues,” “General and ~~their impact on our business. The response to public health matters may influence restaurant customer traffic~~Administrative Costs,” 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. We continue to monitor public health issues and their impact. It is difficult to predict the future considering the many factors, including the spread of new variants of the original coronavirus disease.“Restaurant Operating Costs,” sections above.

18
Table of Contents

~~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~~
·
~~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 aspects of our growth could adversely impact our business and our results of operations~~Interest expense:

~~Future conditions may influence~~In 2023, our interest expense decreased by $1,814 to $24,376 (0.6% of restaurant ~~customer traffic~~sales) from $26,190 (1.4% of restaurant sales) in 2022. The decrease in the percentage of sales is due to the sales from the newly acquired businesses in 2022. The actual dollar value only decreased slightly.
Interest, Dividends and ~~our ability~~Other Income:
Interest and dividend income was $1,761 in 2023, resulting from income earned on the Company’s available cash balance.
Net Income (loss):
The net loss was $285,734 in 2023, compared to ~~adequately staff our restaurants, receive deliveries on~~ a ~~timely basis or perform functions at~~net loss of $115,275 in 2022. The change in 2023 from 2022 was primarily attributable to the ~~corporate level. Further, such conditions could impact~~matters discussed in the ~~availability of the menu items we offer~~“Net Revenues,” “Restaurant Operating Costs,” “General 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.Administrative Costs,” and “Other Income” sections.

~~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 critical elements of our growth strategy include increasing same-store sales and introducing a campaign to boost brand awareness.
~~Expansion Through Acquisitions~~
We intend 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 a franchise program of the acquired foodservice business is the most appropriate growth plan. We intend to follow a disciplined strategy of evaluating acquisition opportunities to ensure and enable the accretive and efficient acquisition and integration of additional restaurant concepts. Successful execution of our acquisition strategy will allow us to diversify our operations into other dining concepts and geographic locations.
~~In evaluating potential acquisitions, we may consider the following characteristics, among others, that management considers relevant to each opportunity:~~
·
~~the value proposition offered by acquisition targets and 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.~~
19
~~Table of Contents~~
Assuming we acquire new businesses, we will operate the business or businesses with a shared central management organization. Following the acquisition, we expect to pursue a growth plan to expand 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 concentrationResult of operations ~~will provide economic synergies for management functions, marketing, advertising, supply chain assistance, staff training, and operational oversight.~~
~~Increase Same-Store Sales~~
~~Same-store sales growth reflects the change in year-over-year sales~~ for the comparable store base and is a benchmark for the performance of our restaurants. We use a multi-faceted same-store sales growth strategy to optimize 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~~
~~Increasing brand awareness is essential~~26 weeks ending July 2, 2023, compared to the growth of our Company. We intend to develop and implement forward-looking branding strategies. We will seek to leverage social media and employ targeted digital advertising to expand the reach of our brands and drive traffic to our stores. In addition, we intend to develop mobile applications that will allow consumers to find restaurants, order online and earn rewards. We 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.
20
~~Table of Contents~~
~~Results of Operations for the Thirteen Weeks Ended October 2, 2022, and the Thirteen Weeks Ended October~~26 weeks ending July 3, ~~2021~~2022.

The following table sets forth, for the periods indicated, our ~~consolidated condensed statements~~Consolidated Statements of ~~income and percentages~~Operations expressed as a percentage of total ~~revenues for the thirteen-week fiscal periods.~~revenues. The percentages ~~below~~ may not ~~reconcile~~add because of rounding.

13 weeks ended,
October 2, 2022

13 weeks ended,
October 3, 2021

  26 weeks ended,
July 2, 2023

26 weeks ended,
July 3, 2022

Amount

%

Amount

%

Amount

            %

Amount

%

SALES

$ 4,023,920

100.0 %

$ 2,280,999

100.0 %

$ 7,070,763

100.0 %

$ 5,598,076

100.0 %
COSTS AND EXPENSES

Restaurant operating expenses

Food and paper costs

1,604,858

39.9

944,177

41.4

2,898,498

41.0

2,032,956

36.3

Labor costs

1,336,039

33.2

607,780

26.6

2,615,136

37.0

1,786,828

31.9

Occupancy costs

367,872

9.1

132,542

5.8

505,861

7.2

435,920

7.8

Other operating expenses

248,383

6.2

102,943

4.5

394,243

5.6

332,181

5.9

Depreciation and amortization

168,855

4.2

60,405

2.6

356,027

5.0

178,701

3.2

Gain on sale of assets held for sale

(313,688 )

(4.4 )

-

-

General and administrative

288,922

7.2

74,415

3.3

944,992

13.4

746,717

13.3

Total costs and expenses

4,014,929

99.8

1,922,256

84.3

7,401,069

104.7

5,513,303

98.5

Income from operations

8,991

.2

358,743

15.7

Income (loss) from operations

(330,406 )

(4.7 )

84,773

1.5

UNREALIZED LOSS ON MARKETABLE SECURITIES

(23,064 )

(.3
)

(80,238 )

(1.7 )
INTEREST AND OTHER INCOME

90,809

1.3

9,473

.2

INTEREST EXPENSE

(33,638 )

(.8 )

(32,916 )

(1.5 )

(49,909 )

(.7 )

(54,461 )

(1.0 )
INTEREST INCOME AND OTHER

(28,618 )

(.7 )

‒

‒

EQUITY IN AFFILIATE LOSS

(121,641 )

(3.0 )

‒

‒

(145,050 )

(2.1 )

(14,172
)

-

INCOME TAX (EXPENSE)

‒

‒

(90,000 )

(3.9 )
NET INCOME (LOSS)

$ (174,906 )

(4.3 )%

$ 235,827

10.3 %
INCOME TAX (EXPENSE) BENEFIT

82,000

1.2

5,000

.1

NET (LOSS)

$ (375,520 )

(5.3 )%

$ (49,625 )

(0.9 )%

Net Revenues:

Net sales for ~~the third fiscal quarter of 2022 increased $1,742,921 to $4,023,920 from $2,280,999 in fiscal 2021. The increase during the~~26-week period resulted from sales from the recently acquired businesses contributing $1,938,508 in revenue. Sales at the Burger Time locations declined approximately 14% as customer purchasing patterns returned to pre-pandemic levels. Staffing challenges also adversely impacted Burger Time, resulting in limited hours and isolated daily store closures during the quarter.
Restaurant unit sales for Burger Time for the 13 weeks ranged from a low of approximately $115,000 to a high of approximately $311,000. The average sales for each Burger Time unit were approximately $208,000 in 2022, approximately $24,500 below the same period in 2021.
~~Costs of Sales - food and paper:~~
Cost of sales - food and paper decreased for the fiscal 2022 period as a percentage of sales to 39.9% of sales from 41.4% of restaurant sales in the third quarter of fiscal 2021. This decrease was the net result of generally a higher cost of sales for Keegan's, inflationary pressures offset by menu price increases and the acquisition of PIE which operates at a significantly lower food cost than our Burger Time business.
~~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 88.4% of sales in the third fiscal quarter of 2022 from 78.4% in the similar period of fiscal 2021. This increase was because of higher labor and occupancy cost, including lease costs associated with our recently acquired locations and the matters discussed in the "Cost of Sales," "Labor Costs," and "Occupancy and Other Operating Costs" sections below.
21
~~Table of Contents~~
~~Labor Costs~~
~~For the third quarter of fiscal 2022, labor and benefits cost increased as a percentage of sales to 33.2% of restaurant sales from 26.6%~~in fiscal 2021. The increase in the percentage cost resulted from tighter labor markets leading to higher hourly wage costs offset by leveraging existing staffing and higher labor costs associated with the PIE acquisition. Payroll costs are semi-variable, meaning they do not change proportionally to changes in revenue.
~~Occupancy and Other Operating Expenses~~
For the third fiscal quarter of 2022, occupancy and other expenses increased to 15.3% of sales from 10.3% in 2021. This increase results from higher occupancy costs, including lease costs associated with our three new locations.
~~Depreciation and Amortization Expense:~~
For the third fiscal quarter of 2022, depreciation and amortization increased to $168,855 (4.2% of sales) from $60,405 (2.6% of sales) in the third 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 $214,506 from $74,415 to $288,921; the increase is associated with expenses related to the Company's transition to a public company in November 2021, including the costs related to long-term management agreements, incentive stock options and legal and accounting relating to our status as a public company. For these reasons, third-quarter general and administrative expenses were 7.2% of sales, a significant increase from 3.3% in the earlier year.
~~Income from Operations~~
The income from operations for the third quarter of fiscal 2022 was $8,991 compared to income from operations of $358,743 in the same period in 2021; the percentage of income from operations as a percentage of sales declined to .2% from 15.7%, reflecting a decline in profit margin is the result of costs associated with transitioning the acquired businesses, higher general and administrative expenses and the matters discussed in the "Net Revenues" and "Restaurant Operating Costs" sections above.
~~Restaurant-level EBITDA~~
To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company uses restaurant-level EBITDA, which is not a measure defined by GAAP. This non-GAAP operating measure is useful to both management and, we believe, 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 or superior to operating income calculated under GAAP. The reconciliations to operating income set forth below should be carefully evaluated.
We define restaurant-level EBITDA as operating income before pre-opening costs, if any, general and administrative costs, 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 unrelated to ongoing operations' health.

13 weeks ended,

October 2, 2022

October 3, 2021

Revenues

$ 4,023,920

$ 2,280,999

Reconciliation:

Income from operations

8,991

358,743

Depreciation and amortization

168,855

60,405

General and administrative, corporate-level expenses

288,922

74,415

Restaurant-level EBITDA

$ 466,768

$ 493,563

Restaurant-level EBITDA margin

11.6 %

21.6 %
22
~~Table of Contents~~
~~Our Results of Operations for the Thirty-nine Weeks Ended October 2, 2022, and the Thirty-nine Weeks Ended October 3, 2021~~
The following table sets forth our consolidated condensed statements of income and percentages of total revenues for the thirty-nine-week fiscal period. The percentages below may not reconcile because of rounding.

  39 weeks ended,
October 2, 2022

39 weeks ended,
October 3, 2021

Amount

%

Amount

%

SALES

$ 9,621,996

100.0 %

$ 6,604,554

100.0 %
COSTS AND EXPENSES

Restaurant operating expenses

Food and paper costs

3,637,814

37.8

2,580,224

39.1

Labor costs

3,122,867

32.5

1,794,499

27.2

Occupancy costs

803,792

8.4

436,196

6.6

Other operating expenses

577,035

6.0

355,024

5.4

Depreciation and amortization

351,084

3.6

173,799

2.6

General and administrative

1,035,639

10.8

295,397

4.5

Total costs and expenses

9,528,231

99.0

5,635,139

85.3

Income from operations

93,765

1.0

969,415

14.7

INTEREST EXPENSE

(88,099 )

(.9 )

(161,148 )

(2.4 )
INTEREST INCOME AND OTHER

(99,384 )

(1.0 )

‒

‒

EQUITY IN AFFILIATE LOSS

(135,813 )

(1.4 )

‒

‒

INCOME TAX BENEFIT (EXPENSE)

5,000

‒

(225,000 )

(3.4 )
NET INCOME (LOSS)

$ (224,531 )

(2.3 )%

$ 583,267

8.9 %
~~Net Revenues:~~
~~Net sales for the 39 weeks~~ representing the first ~~three-quarters~~half of fiscal ~~2022~~2023 increased ~~$3,017,442~~$1,472,687 or ~~45.7%~~26.3% to ~~$9,621,996~~$7,070,763 from ~~$6,604,554~~$5,598,076 in fiscal ~~2021.~~2022. The increase in sales was principally the result of a favorable impact in the 3926 weeks of three acquired restaurants which contributed for a partial period in 2022 and contributed a total of approximately ~~$3.8~~$3.7 million in ~~sales, offsetting~~2023 offset by a decline in sales at BTND of ~~approximately $700,000 or 11%~~$164,000 excluding the West St. Paul location closed date in ~~BTND revenues.~~2022.

Burger Time unit sales for the 3926 weeks ranged from a low of approximately ~~$345,000~~$207,000 to a high of approximately ~~$861,000.~~$587,000. Average sales for each Burger Time unit were approximately ~~$599,000~~$398,000 in ~~2022,~~2023, a decline from approximately ~~$671,400~~$404,200 in the same ~~39-week~~26-week period in ~~2021.~~2022. The sales decline in the ~~2022 period is the combined result~~first half of 2023 resulted from 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.

19
Table of Contents
Costs of Sales - food and paper:

Cost of sales - food and paper for the ~~39-week period~~first half of fiscal ~~2022 decreased as a percentage of sales~~2023 increased to ~~37.8%~~41.0% from ~~39.1%~~36.3% of restaurant sales in the same period in ~~2021.~~2022. This ~~decrease~~increase resulted from increased food costs overall; for example, the ~~seasonally strong performance at PIE which operates at lower food and paper costs than our traditional business and Keegan's.~~price of eggs increased tremendously in 2023.

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 ~~84.6% of sales~~90.7% in ~~the first 39 weeks of 2022~~2023 from ~~78.2% in the same period~~82.0% in fiscal ~~2021.~~2022. This increase was due to the ~~rise~~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 Costs" sections below.

Labor Costs:

For the ~~39-week period in~~first half of fiscal ~~2022,~~2023, labor and benefits cost increased to ~~32.5%~~37.0% of restaurant sales from ~~27.2%~~31.9% in ~~the~~ fiscal ~~2021 period.~~2022. 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 ~~change~~decrease proportionally to ~~changes~~decreases in revenue. Thus, they increase as a percentage of restaurant sales when there is a decrease.
23
~~Table of Contents~~

Occupancy and Other Operating Expenses:

For the first 3926 weeks of fiscal ~~2022,~~2023, occupancy and other expenses ~~increased~~decreased to ~~14.4%~~12.8% of sales from ~~12.0%~~13.7% in ~~2021.~~2022 principally because of a reversal in previously accused property taxes related to a property in St. Louis, Missouri. Many of these costs are fixed, and the percentage reflects lower maintenance costs offset by higher lease occupancy costs at our new ~~locations.~~locations

Depreciation and Amortization Expense:

Depreciation and amortization expenses ~~for~~in the ~~39 weeks~~first half of fiscal ~~2022 ending October 2, 2022,~~2023 increased by ~~$173,757~~$177,326 to ~~$351,084 (3.6%~~$356,027 (5.0% of sales) from ~~$177,285 (2.6%~~$178,701 (3.2% of sales) in the ~~similar period~~first half of ~~2021~~fiscal 2022 and are the result of the purchase of three new restaurants and capital ~~improvements, including significant parking lot repairs,~~additions at several of our locations.

General and Administrative Costs:

General and administrative costs increased ~~250.6%,~~26.6% or ~~$740,242,~~$198,275 to ~~$1,035,639,~~$944,992, from ~~$295,397 (11.4%~~$746,717 (13.3% of sales) in the ~~39 weeks~~first half of fiscal ~~2022. The increase results from~~2022 due to acquiring these businesses during 2022 and the ~~transition to~~ongoing costs of operating as a public ~~reporting company, stock-based compensation costs, and the expense associated with long-term management employment agreements.~~company.

Income from Operations:

Operating ~~income~~loss was ~~$93,765~~$330,306 in the ~~39 weeks~~first half of fiscal ~~2022~~2023 compared to ~~$969,415~~income of $84,773 in the ~~same period in~~first half of fiscal ~~2021.~~2022. The change in income from operations in the first half of fiscal ~~2022 period~~2023 compared to fiscal ~~2021~~2022 was due primarily to the increase in general and administrative expenses, ~~including stock-based compensation,~~ which included higher costs associated with the transition to a public company near the end of 2021, including the ~~items noted in~~ "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 (earnings before interest, taxes, depreciation, and amortization), which is not a measure defined by GAAP. This non-GAAP operating measure is ~~helpful~~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.

We define restaurant-level EBITDA as operating income before 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 related to the continuing health of the business.

39 weeks ended,

October 2, 2022

October 3, 2021

Revenues

$ 9,621,996

$ 6,604,554

Reconciliation:

Income from operations

93,765

949,415

Depreciation and amortization

351,084

173,799

General and administrative, corporate-level expenses

1,035,639

295,397

Restaurant-level EBITDA

$ 1,480,488

$ 1,438,611

Restaurant-level EBITDA margin

15.4 %

21.8 %

2420
Table of Contents

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

26 Weeks ended,

July 2,
2023

July 3,
2022

Revenues

$ 7,070,763

$ 5,598,076

Reconciliation:

Income (loss) from operations

(330,306 )

84,773

Depreciation and amortization

356,027

178,701

General and administrative, corporate-level expenses

944,992

746,717

Restaurant-level EBITDA

$ 970,713

$ 1,010,191

Restaurant-level EBITDA margin

13.7 %

18.0 %
Liquidity and Capital Resources

~~In its peak period,~~For the ~~public response~~26 weeks ending July 2, 2023, the Company earned an after-tax loss of $375,520 due 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 experiencedpoorer-than-expected results at the ~~height~~Company’s two Florida locations and generally lower-than-expected sales in the second quarter combined with the equity in the loss of ~~COVID restrictions. For~~ the ~~39 weeks that ended October~~unconsolidated Bagger Dave’s business of $145,050. At July 2, ~~2022, operations reflected an operating profit of $93,765. On October 2, 2022, we~~2023, the Company had ~~$7.2 million~~$5,704,879 in cash and cash equivalents and a working capital of $6.8 million, a decrease of $4.8 million from January 2, 2022; the decline is the result of the purchase of three restaurants for a total of $2.3 million and investment of $1.3 million in shares of Bagger Dave's.
In the future, public health matters may again impact the 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 resulting from matters related to public health. $5,940,087.

Our primary requirements for liquidity ~~funds~~are to fund our working capital needs, capital expenditures, and general corporate needs, ~~and investments~~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 may operate with negative working capital. Our primary liquidity and cash flow sources are operating cash flows and cash on hand. We use ~~available cash~~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 (used) by Operating Activities

The 2023 26-week period resulted in cash flow used of $111,747 compared to cash flow from operations of $498,068 in the prior year. The winter months have historically been seasonally the slowest part of the Company’s business, and the first quarter of 2023 was impacted by harsh winter weather.
Cash Flows Provided by ~~Operating~~Investing Activities

~~Operating~~In the 26-week period, cash ~~flow for 39 weeks ending October 2,~~from investing activities was $4,996,865, primarily the result of proceeds at maturity of $5 million in Treasury Bills held at the end of 2022 ~~was $484,504.~~and proceeds from the sale of the West St. Paul location in 2022. The ~~cash flow from operations was impacted negatively by a decline in BTND revenue, increased expenses associated with the transition~~Company continues to ~~a public company, our recent acquisitions and payment of 2021 income tax liabilities. We expect operating cash flow in future periods to be significantly affected by our recent acquisitions.~~focus on identifying potential acquisition opportunities.

~~Cash Flows Used in Investing Activities~~
During fiscal 2022, we have focused on identifying acquisitions in the food service and related industries, purchasing three operating restaurants, and acquiring a 41.2% interest in a publicly traded casual dining business.
Cash Flows Used in Financing Activities

A significant portion of ~~our~~the Company’s cash flow ~~used in financing activities~~ is allocated to service ~~our debt.~~the Company’s debt and purchase of Treasury shares.

Contractual Obligations

As of ~~October~~July 2, ~~2022,~~2023, we had ~~$4.4~~approximately $2.6 million in contractual obligations relating to amounts due under mortgages on the real property ~~and $1.5 million in capitalized lease obligations.~~on which stores are situated. Our monthly required payment is approximately $32,000 and $2,343,000 of future lease payments ~~on lease and mortgage obligations are~~requiring a total minimum monthly payment of approximately ~~$47,000. In the third 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.~~$25,000.

~~Qualitative and Quantitative Disclosure about Market Risk~~
~~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 sometimes limited 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.~~
25
~~Table of Contents~~
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 third and third fiscal quarters at this location will be materially more significant than during the first and fourth fiscal quarters.
Our two Florida restaurants 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 in Florida will increase seasonally.
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 better manage the risk of rising prices.
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 about the effect that regulatory environment changes may have on our Company.
~~Off-Balance Sheet Arrangements~~
The Company did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.
~~Recent Accounting Pronouncements~~
There has been no impact on our financial statements and our results of operations and financial condition as the result of the adoption of Recent Accounting Pronouncements; see "Part I, Item 1, Note 1. Summary of Significant Accounting Policies" of the Notes to Condensed Consolidated Financial Statements included in this quarterly report. The Company follows ASC 842, covering accounting for leases, and has recorded Right to Use Assets and related lease liabilities for the lease contracts.
~~Critical Accounting Policies and Estimates~~
Our discussion and analysis of operating results and financial condition are based upon our condensed consolidated financial statements. The preparation of our condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosures of contingent assets and liabilities. We base our estimates on experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.
Our critical accounting policies are those that materially affect our financial statements and involve subjective or complex judgments by management. Although these estimates are based on management's best knowledge of current events and actions that may impact us in the future, actual results may be materially different from the estimates. 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.
26
~~Table of Contents~~
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.

21
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~~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 ~~October~~July 2, ~~2022,~~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 ~~October~~July 2, ~~2022,~~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 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.

2722

Table of Contents

PART ~~II -~~ II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

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

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

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

~~ITEM 3. DEFAULTS UPON SENIOR SECURITIES~~

~~None.~~

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None

2823

Table of Contents

ITEM 6. EXHIBITS.

Exhibit		Description

31.1		Certification of the ~~Company's~~Company’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the ~~registrant's~~registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~October~~July 2, ~~2022.~~2023.
31.2		Certification of the ~~Company's~~Company’s Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the ~~registrant's~~registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~October~~July 2, ~~2022.~~2023.
32.1*		Certification of the ~~Company's~~Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 ~~USC~~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~~Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 ~~USC~~U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
~~101. INS.~~101.INS		~~Inline~~ XBRL Instance Document ~~(the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).~~
~~101. SCH.~~101.SCH		~~Inline~~ XBRL Taxonomy Extension Schema ~~Document.~~Document
~~101. CAL.~~101.CAL		~~Inline~~ XBRL Taxonomy Extension Calculation Linkbase ~~Document.~~Document
~~101. DEF.~~101.DEF		~~Inline~~ XBRL Taxonomy Extension Definition Linkbase ~~Document.~~Document
~~101. LAB.~~101.LAB		~~Inline~~ XBRL Taxonomy Extension ~~Labels~~Label Linkbase ~~Document.~~Document
~~101. PRE.~~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

2924

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: ~~November 15, 2022~~August 16, 2023	By:	/s/ Kenneth Brimmer
	Name:	Kenneth Brimmer
	Title:	Chief Operating Officer and Principal Financial Officer

3025

	October 2, 2022(Unaudited)			January 2, 2022
ASSETS
CURRENT ASSETS
Cash	$	7,165,704		$	12,385,632
Marketable securities		653,399			-
Receivables		57,603			72,251
Inventory		150,814			79,510
Prepaid expenses and other current assets		50,375			27,186

Total current assets		8,077,895			12,564,579

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET		3,541,493			1,592,338
OPERATING LEASES RIGHT-OF-USE ASSETS		1,562,672			-
INVESTMENTS		1,428,187			75,000
GOODWILL		488,431			-
INTANGIBLE ASSETS		545,500			-
OTHER ASSETS, net		280,412			273,810

Total assets	$	15,924,591		$	14,505,727

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	354,486		$	291,973
Current maturities of long-term debt		169,504			169,908
Current operating lease obligations		217,744			-
Accrued expenses		490,627			254,341
Income taxes payable		8,000			209,088

Total current liabilities		1,240,361			925,310

LONG-TERM DEBT, LESS CURRENT PORTION		2,698,030			2,833,064
NONCURRENT LEASE OBLIGATIONS		1,353,702			-
DEFERRED INCOME TAXES		51,510			119,000
Total liabilities		5,343,603			3,877,374

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value, 2,000,000 shares authorized, no shares outstanding at October 2, 2022 and January 2, 2022		-			-
Common stock, $.002 par value, 50,000,000 authorized, 6,461,118 shares issued and outstanding at October 2, 2022 and 6,447,506 issued and outstanding at January 2, 2022		12,922			12,895
Additional paid-in capital		11,392,835			11,215,696
Accumulated deficit		(824,769	)		(600,238	)

Total shareholders' equity		10,580,988			10,628,353

Total liabilities and shareholders' equity	$	15,924,591		$	14,505,727

	39 Weeks Ended			39 Weeks Ended,			13 Weeks Ended,			13 Weeks Ended,
	October 2, 2022			October 3, 2021			October 2, 2022			October 3, 2021
SALES	$	9,621,996		$	6,604,554		$	4,023,920		$	2,280,999

COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		3,637,814			2,580,224			1,604,858			944,171
Labor costs		3,122,867			1,794,499			1,336,039			607,780
Occupancy costs		803,792			436,196			367,872			132,542
Other operating expenses		577,035			355,024			248,383			102,943
Depreciation and amortization expenses		351,084			173,799			168,855			60,405
General and administrative expenses		1,035,639			295,397			288,921			74,415
Total costs and expenses		9,528,231			5,635,139			4,014,929			1,922,256
Income from operations		93,765			969,415			8,991			358,743

UNREALIZED LOSS ON MARKETABLE SECURITIES		(155,220	)		-			(74,982	)		-
INTEREST AND OTHER INCOME		55,836			-			46,364			-
INTEREST EXPENSE		(88,099	)		(161,148	)		(33,638	)		(32,916	)
EQUITY IN NET LOSS OF AFFILIATE		(135,813	)		-			(121,641	)		-
INCOME (LOSS) BEFORE TAXES		(229,531	)		808,267			(174,906	)		325,827
INCOME TAX (EXPENSE) BENEFIT		5,000			(225,000	)		-			(90,000	)
NET INCOME (LOSS)	$	(224,531	)	$	583,267		$	(174,906	)	$	235,827
NET INCOME (LOSS) PER COMMON SHARE - Basic and Diluted	$	(0.03	)	$	0.14		$	(0.04	)	$	0.06

WEIGHTED AVERAGE SHARES USED IN COMPUTING PER COMMON SHARE AMOUNTS - Basic and Diluted		6,459,223			4,047,506			6,461,118			4,047,506

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

Balances, January 2, 2022		6,447,506	$	12,895	$	11,215,696	$	(600,238)	$	10,628,353
Stock-based compensation		-		-		102,300		-		102,300
Shares issued in exercise of warrants		13,612		27		74,839		-		74,866
Net loss		-		-		-		(224,531)		(224,531)
Balances, October 2, 2022		6,461,118	$	12,922	$	11,392,835	$	(824,769)	$	10,580,988

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

Balances, January 3, 2021		4,047,502	$	8,095	$	497,671	$	(1,208,089)	$	(702,323)
Shares issued for fractional holding		4		-		-		-		-
Net income		-		-		-		583,267		583,267
Balances, October 3, 2021		4,047,506	$	8,095	$	497,671	$	(624,822)	$	(119,056)

*For the 13-week periods-*	Common Stock				Additional Paid-in		Accumulated
	Shares		Amount		Capital		(Deficit)		Total
Balances, July 3, 2022		6,461,118	$	12,922	$	11,363,935	$	(649,863)	$	10,726,994
Stock-based compensation		-		-		28,900		-		28,900
Net loss		-		-		-		(174,906)		(174,906)
Balances, October 2, 2022		6,461,118	$	12,922	$	11,392,835	$	(824,769)	$	10,580,988

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

Balances, July 4, 2021		4,047,506	$	8,095	$	497,671	$	(860,649)	$	(354,883)
Net income		-		-		-		235,827		235,827
Balances, October 3, 2021		4,047,506	$	8,095	$	497,671	$	(624,822)	$	(119,056)

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)		Original Cost		Accumulated Amortization			Net Carrying Value
Covenants not to Compete		3	$	98,000	$	(41,110	)	$	56,890
Trademarks		15		393,000		(38,177	)		354,823
			$	491,000	$	(79,287	)	$	411,713

	July 2, 2023			January 1, 2023
Land	$	435,239		$	485,239
Equipment		3,842,834			3,893,274
Buildings and leasehold improvements		2,421,521			2,402,157

Total property and equipment		6,699,594			6,780,670
Accumulated depreciation		(3,164,160	)		(3,039,500	)
Less - property held for sale		(258,751	)		(446,526	)
Net property and equipment	$	3,276,683		$	3,294,644

Assets acquired:
Inventory	$	22,000
Equipment		230,000
Leasehold improvements		273,000
Trademark, website, and other intangibles		15,000
Non-compete agreement		150,000
Purchase price	$	690,000

	Estimated Useful Life (Years)		Original Cost		Accumulated Amortization			Net Carrying Value
Covenants not to compete		2-4	$	450,000	$	(37,500	)	$	412,500
Trademarks, tradenames, websites and social media sites		5-20		140,000		(7,000	)		133,000
			$	590,000	$	(44,500	)	$	545,500

	October 2, 2022		January 2, 2022
Accrued real estate taxes	$	105,972	$	103,615
Accrued bonus compensation		59,139		7,000
Accrued payroll		155,395		44,700
Accrued payroll taxes		11,884		8,424
Accrued sales taxes payable		89,150		50,414
Accrued vacation pay		17,663		17,663
Accrued gift card liability		26,239		10,036
Accrued franchise royalty		6,681		2,614
Other accrued expenses		18,504		9,875
	$	490,627	$	254,341

Our long-term debt is as follows:	October 2, 2022			January 2, 2022

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. The notes are guaranteed by BT Brands, Inc. and a shareholder of the Company.	$	2,905,900		$	3,027,971

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 guaranty of a shareholder of the Company. Pursuant to the terms of the loan, $13,750 of the loan was forgiven on June 22, 2022.		4,583			22,000
		2,910,483			3,049,971
Less - unamortized debt issuance costs		(42,949	)		(46,999	)
Current maturities		(169,504	)		(169,908	)
	$	2,698,030		$	2,833,064

	·	Stock price – Published trading market values of the ~~Company's~~Company’s common stock as of the grant date.
	·	Exercise price – The stated exercise price of the stock option.
	·	Expected life – The simplified ~~method.~~method
	·	Expected dividend – The rate of dividends expected to be paid over the term of the stock option.
	· ·	Volatility – Estimated ~~volatility based on a sample~~volatility. Risk-free interest rate – The daily United States Treasury yield curve rate corresponding to the expected life of ~~comparable companies.~~the 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
Canceled, forfeited, or expired		(8,200	)		2.50
Options outstanding at October 2, 2022		227,550		$	2.67		9.8		0
Options exercisable at October 2, 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	$	-
Expected stock volatility		63	%
Risk-free interest rate		2	%

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Term (In Years)		Aggregate Intrinsic 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 July 2, 2023		220,250	$	2.74		8.5	$	0
Options exercisable at July 2, 2023		94,950	$	3.18		8.5	$	0

	Total
Remainder 2022	$	69,600
2023		281,676
2024		289,236
2025		297,909
2039		306,838
2027 and thereafter		531,553
Total future minimum lease payments		1,776,812
Less - interest		(205,366	)
	$	1,571,446

	Total
Remainder 2023	$	141,576
2024		289,076
2025		297,745
2026		306,674
2027		268,437
2028 and thereafter		1,039,438
Total future minimum lease payments		2,342,966
Less - interest		(428,098	)
	$	1,914,868

	·	~~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, a 41.2% owned affiliate, operates six Bagger Dave's restaurants in Michigan, Ohio, and Indiana;~~
	·	~~Keegan's Seafood Grille in Indian Rocks Beach, Florida;~~
	·	~~Pie in the Sky Coffee Shop and Bakery in Woods Hole, Massachusetts.~~
	·	Village Bier Garten is a German-themed restaurant, bar, and entertainment venue in Cocoa, ~~Florida.~~Florida (“VBG”):
	·	Keegan’s Seafood Grille in Indian Rocks Beach, Florida (“Keegan’s”);
	·	Pie In The Sky Coffee and Bakery in Woods Hole, 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”).

	13 weeks ended, July 2, 2023						13 weeks ended, July 3, 2022
	Amount			%			Amount			%
SALES	$	3,999,965			100.0	%	$	3,524,881			100.0	%
COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		1,608,175			40.2			1,311,373			37.2
Labor costs		1,412,376			35.3			1,179,118			33.5
Occupancy costs		148,736			3.7			261,282			7.4
Other operating expenses		198,629			5.0			212,314			6.0
Depreciation and amortization		192,520			4.8			109,286			3.1
General and administrative		519,077			13.0			455,656			12.9
Total costs and expenses		4,079,513			102.0			3,529,029			100.1
Income (loss) from operations		(79,548	)		(2.0	)		(4,148	)		(0.1	)
UNREALIZED GAIN ON MARKETABLE SECURITIES		(92,920	)		(2.3	)		(80,238	)		(2.3	)
INTEREST AND OTHER INCOME		1,761			0			9,473			.3
INTEREST EXPENSE		(24,376	)		(0.6	)		(26,190	)		(.7	)
EQUITY IN AFFILIATE LOSS		(90,651	)		(2.3	)		(14,172	)		(.4	)
INCOME TAX BENEFIT		52,000			1.3			23,000			.6
NET (LOSS)	$	(233,734	)		(5.8	)%	$	(92,275	)		(2.6	)%

Restaurant operating costs for the period ended July 3, 2022	$	2,964,087
Increase in food and paper costs		296,802
Increase in labor costs		233,258
Decrease in occupancy and operating cost		(126,231	)
Restaurant operating costs for the periods ended July 2, 2023	$	3,367,916

	·	~~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~~
	·	~~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.~~

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

	13 weeks ended, October 2, 2022						13 weeks ended, October 3, 2021						26 weeks ended, July 2, 2023						26 weeks ended, July 3, 2022
	Amount			%			Amount			%			Amount			%			Amount			%
SALES	$	4,023,920			100.0	%	$	2,280,999			100.0	%	$	7,070,763			100.0	%	$	5,598,076			100.0	%
COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		1,604,858			39.9			944,177			41.4			2,898,498			41.0			2,032,956			36.3
Labor costs		1,336,039			33.2			607,780			26.6			2,615,136			37.0			1,786,828			31.9
Occupancy costs		367,872			9.1			132,542			5.8			505,861			7.2			435,920			7.8
Other operating expenses		248,383			6.2			102,943			4.5			394,243			5.6			332,181			5.9
Depreciation and amortization		168,855			4.2			60,405			2.6			356,027			5.0			178,701			3.2
Gain on sale of assets held for sale														(313,688	)		(4.4	)		-			-
General and administrative		288,922			7.2			74,415			3.3			944,992			13.4			746,717			13.3
Total costs and expenses		4,014,929			99.8			1,922,256			84.3			7,401,069			104.7			5,513,303			98.5
Income from operations		8,991			.2			358,743			15.7
Income (loss) from operations														(330,406	)		(4.7	)		84,773			1.5
UNREALIZED LOSS ON MARKETABLE SECURITIES														(23,064	)		(.3	)		(80,238	)		(1.7	)
INTEREST AND OTHER INCOME														90,809			1.3			9,473			.2
INTEREST EXPENSE		(33,638	)		(.8	)		(32,916	)		(1.5	)		(49,909	)		(.7	)		(54,461	)		(1.0	)
INTEREST INCOME AND OTHER		(28,618	)		(.7	)	‒			‒
EQUITY IN AFFILIATE LOSS		(121,641	)		(3.0	)	‒			‒				(145,050	)		(2.1	)		(14,172	)		-
INCOME TAX (EXPENSE)	‒			‒				(90,000	)		(3.9	)
NET INCOME (LOSS)	$	(174,906	)		(4.3	)%	$	235,827			10.3	%
INCOME TAX (EXPENSE) BENEFIT														82,000			1.2			5,000			.1
NET (LOSS)													$	(375,520	)		(5.3	)%	$	(49,625	)		(0.9	)%

	39 weeks ended, October 2, 2022						39 weeks ended, October 3, 2021
	Amount			%			Amount			%
SALES	$	9,621,996			100.0	%	$	6,604,554			100.0	%
COSTS AND EXPENSES
Restaurant operating expenses
Food and paper costs		3,637,814			37.8			2,580,224			39.1
Labor costs		3,122,867			32.5			1,794,499			27.2
Occupancy costs		803,792			8.4			436,196			6.6
Other operating expenses		577,035			6.0			355,024			5.4
Depreciation and amortization		351,084			3.6			173,799			2.6
General and administrative		1,035,639			10.8			295,397			4.5
Total costs and expenses		9,528,231			99.0			5,635,139			85.3
Income from operations		93,765			1.0			969,415			14.7
INTEREST EXPENSE		(88,099	)		(.9	)		(161,148	)		(2.4	)
INTEREST INCOME AND OTHER		(99,384	)		(1.0	)	‒			‒
EQUITY IN AFFILIATE LOSS		(135,813	)		(1.4	)	‒			‒
INCOME TAX BENEFIT (EXPENSE)		5,000			‒			(225,000	)		(3.4	)
NET INCOME (LOSS)	$	(224,531	)		(2.3	)%	$	583,267			8.9	%

	26 Weeks ended,
	July 2, 2023			July 3, 2022
Revenues	$	7,070,763		$	5,598,076
Reconciliation:
Income (loss) from operations		(330,306	)		84,773
Depreciation and amortization		356,027			178,701
General and administrative, corporate-level expenses		944,992			746,717
Restaurant-level EBITDA	$	970,713		$	1,010,191
Restaurant-level EBITDA margin		13.7	%		18.0	%