PART I — FINANCIAL INFORMATION PART I — FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
BT BRANDS, INC. AND SUBSIDIARYSUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | | March 29, 2020 | | | December 29, 2019 | | ASSETS | | CURRENT ASSETS | | | | | | | Cash | | $ | 310,134 | | | $ | 258,101 | | Receivables | | | 5,782 | | | | 15,363 | | Inventory | | | 52,973 | | | | 56,432 | | Prepaid expenses | | | 5,297 | | | | 6,929 | | | | | | | | | | | Total current assets | | | 374,186 | | | | 336,825 | | | | | | | | | | | PROPERTY AND EQUIPMENT, net | | | 1,605,617 | | | | 1,650,012 | | LAND AND BUILDINGS HELD FOR SALE | | | 449,244 | | | | 449,244 | | INVESTMENT IN NOTES RECEIVABLE FROM RELATED COMPANY | | | 207,000 | | | | 179,000 | | OTHER ASSETS, net | | | 18,034 | | | | 18,459 | | | | | | | | | | | Total assets | | $ | 2,654,081 | | | $ | 2,633,539 | | | | | | | | | | | LIABILITIES AND SHAREHOLDERS' DEFICIT | CURRENT LIABILITIES | | | | | | | | | Current maturities of long-term debt | | $ | 243,784 | | | $ | 277,666 | | Accounts payable | | | 483,622 | | | | 321,855 | | Accrued expenses | | | 179,083 | | | | 202,732 | | Income taxes payable | | | 2,898 | | | | 2,898 | | | | | | | | | | | Total current liabilities | | | 909,387 | | | | 805,151 | | | | | | | | | | | LONG-TERM DEBT, less current maturities | | | 3,254,808 | | | | 3,221,035 | | UNEARNED VENDOR REBATE | | | 2,445 | | | | 3,668 | | | | | | | | | | | Total liabilities | | | 4,166,640 | | | | 4,029,854 | | | | | | | | | | | COMMITMENTS AND CONTINGENCIES | | | | | | | | | | | | | | | | | | SHAREHOLDERS' DEFICIT | | | | | | | | | | | | | | | | | | Preferred stock, $.001 par value, 500,000 shares authorized, no shares outstanding at March 29, 2020 and December 29, 2019 | | | - | | | | - | | Common stock, $.001 par value, 50,000,000 authorized, 8,095,004 shares outstanding at March 29, 2020 and December 29, 2019 | | | 8,095 | | | | 8,095 | | Additional paid-in capital | | | 497,671 | | | | 497,671 | | Accumulated deficit | | | (2,018,325 | ) | | | (1,902,081 | ) | | | | | | | | | | Total shareholders' deficit | | | (1,512,559 | ) | | | (1,396,315 | ) | | | | | | | | | | Total liabilities and shareholders' deficit | | $ | 2,654,081 | | | $ | 2,633,539 | |
| | | | | | | | | (Unaudited) | | | | | | | October 1, 2023 | | | January 1, 2023 | | ASSETS | | | | | | | CURRENT ASSETS | | | | | | | Cash and cash equivalents | | $ | 5,546,874 | | | $ | 2,150,578 | | Marketable securities | | | 1,366,973 | | | | 5,994,295 | | Receivables | | | 55,200 | | | | 76,948 | | Inventory | | | 192,991 | | | | 158,351 | | Prepaid expenses and other current assets | | | 37,445 | | | | 37,397 | | Assets held for sale | | | 258,751 | | | | 446,524 | | Total current assets | | | 7,458,234 | | | | 8,864,093 | | | | | | | | | | | PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET | | | 3,238,310 | | | | 3,294,644 | | OPERATING LEASES RIGHT-OF-USE ASSETS | | | 1,834,408 | | | | 2,004,673 | | INVESTMENTS | | | 1,115,615 | | | | 1,369,186 | | DEFERRED INCOME TAXES | | | 143,000 | | | | 61,000 | | GOODWILL | | | 671,220 | | | | 671,220 | | INTANGIBLE ASSETS, NET | | | 400,766 | | | | 453,978 | | OTHER ASSETS, NET | | | 49,627 | | | | 50,903 | | Total assets | | | | | | | | | | | $ | 14,911,180 | | | $ | 16,769,697 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | CURRENT LIABILITIES | | | | | | | | | Accounts payable | | $ | 431,187 | | | $ | 448,605 | | Broker margin loan | | | - | | | | 791,370 | | Current maturities of long-term debt | | | 164,866 | | | | 167,616 | | Current operating lease obligations | | | 215,326 | | | | 193,430 | | Accrued expenses | | | 476,035 | | | | 532,520 | | Total current liabilities | | | 1,287,414 | | | | 2,133,541 | | | | | | | | | | | LONG-TERM DEBT, LESS CURRENT PORTION | | | 2,332,014 | | | | 2,658,477 | | NONCURRENT LEASE OBLIGATIONS | | | 1,650,361 | | | | 1,825,057 | | Total liabilities | | | 5,269,789 | | | | 6,617,075 | | | | | | | | | | | COMMITMENTS AND CONTINGENCIES | | | | | | | | | | | | | | | | | | SHAREHOLDERS' EQUITY | | | | | | | | | Preferred stock, $0.001 par value, 2,000,000 shares authorized, | | | | | | | | | no shares outstanding at October 1, 2023 and January 1, 2023 | | | - | | | | - | | Common stock, $0.002 par value, 50,000,000 authorized, 6,246,118 | | | | | | | | | issued and outstanding at October 1, 2023, and 6,396,118 issued | | | | | | | | | and outstanding at January 1, 2023 | | | 12,492 | | | | 12,792 | | Less cost of 215,000 and 65,000 common shares held in Treasury | | | | | | | | | at October 1, 2023 and January 1, 2023, respectively | | | (356,807 | ) | | | (106,882 | ) | Additional paid-in capital | | | 11,527,235 | | | | 11,409,235 | | Accumulated deficit | | | (1,541,529 | ) | | | (1,162,523 | ) | | | | | | | | | | Total shareholders' equity | | | 9,641,391 | | | | 10,152,622 | | | | | | | | | | | Total liabilities and shareholders' equity | | $ | 14,911,180 | | | $ | 16,769,697 | |
See Notes to Consolidated Condensed Consolidated Financial Statements (unaudited) BT BRANDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
| | 13 Weeks Ended, | | | | March 29, 2020 | | | March 31, 2019 | | | | | | | | | SALES | | $ | 1,303,430 | | | $ | 1,377,833 | | | | | | | | | | | COSTS AND EXPENSES | | | | | | | | | Restaurant operating expenses | | | | | | | | | Food and paper costs | | | 540,100 | | | | 560,271 | | Labor costs | | | 483,309 | | | | 486,245 | | Occupancy costs | | | 162,588 | | | | 207,603 | | Other operating expenses | | | 86,174 | | | | 64,612 | | Depreciation | | | 44,395 | | | | 58,810 | | Amortization | | | 425 | | | | 425 | | General and administrative | | | 66,216 | | | | 127,784 | | | | | | | | | | | Total costs and expenses | | | 1,383,207 | | | | 1,505,750 | | Income (loss) from operations | | | (79,777 | ) | | | (129,177 | ) | INTEREST EXPENSE | | | (36,467 | ) | | | (42,573 | ) | INCOME (LOSS) BEFORE TAXES | | | (116,244 | ) | | | (170,490 | ) | PROVISION FOR INCOME TAXES | | | - | | | | - | | NET LOSS | | $ | (116,244 | ) | | $ | (170,490 | ) | LOSS PER COMMON SHARE - Basic and Diluted | | $ | (0.01 | ) | | $ | (0.02 | ) | WEIGHTED AVERAGE SHARES USED IN | | | | | | | | | COMPUTING PER COMMON SHARE AMOUNTS - Basic and Diluted | | | 8,095,004 | | | | 8,086,004 | |
BT BRANDS, INC. AND SUBSIDIARIES | CONDENSED CONSOLIDATED STATEMENTS OF INCOME | (Unaudited) | | | | 39 Weeks Ended | | | 39 Weeks Ended, | | | 13 Weeks Ended, | | | 13 Weeks Ended, | | | | October 1, 2023 | | | October 2, 2022 | | | October 1, 2023 | | | October 2, 2022 | | SALES | | $ | 11,078,419 | | | $ | 9,621,996 | | | $ | 4,007,656 | | | $ | 4,023,920 | | | | | | | | | | | | | | | | | | | COSTS AND EXPENSES | | | | | | | | | | | | | | | | | Restaurant operating expenses | | | | | | | | | | | | | | | | | Food and paper costs | | | 4,348,294 | | | | 3,637,814 | | | | 1,449,796 | | | | 1,604,858 | | Labor costs | | | 4,124,857 | | | | 3,122,867 | | | | 1,509,721 | | | | 1,336,039 | | Occupancy costs | | | 845,863 | | | | 803,792 | | | | 340,002 | | | | 367,872 | | Other operating expenses | | | 603,964 | | | | 577,035 | | | | 209,721 | | | | 248,383 | | Depreciation and amortization expenses | | | 470,801 | | | | 351,084 | | | | 114,774 | | | | 168,855 | | General and administrative expenses | | | 1,288,019 | | | | 1,035,639 | | | | 343,027 | | | | 288,921 | | Gain on sale of assets | | | (313,688 | ) | | | - | | | | - | | | | - | | Total costs and expenses | | | 11,368,110 | | | | 9,528,231 | | | | 3,967,041 | | | | 4,014,928 | | Income (loss) from operations | | | (289,691 | ) | | | 93,765 | | | | 40,615 | | | | 8,992 | | | | | | | | | | | | | | | | | | | UNREALIZED GAIN (LOSS) ON MARKETABLE SECURITIES | | | 33,184 | | | | (155,220 | ) | | | 56,248 | | | | (74,982 | ) | INTEREST AND OTHER INCOME | | | 123,630 | | | | 55,836 | | | | 32,821 | | | | 46,364 | | INTEREST EXPENSE | | | (73,857 | ) | | | (88,099 | ) | | | (23,948 | ) | | | (33,638 | ) | EQUITY IN NET LOSS OF AFFILIATE | | | (254,272 | ) | | | (135,813 | ) | | | (109,222 | ) | | | (121,641 | ) | LOSS BEFORE TAXES | | | (461,006 | ) | | | (229,531 | ) | | | (3,486 | ) | | | (174,905 | ) | INCOME TAX BENEFIT | | | 82,000 | | | | 5,000 | | | | - | | | | - | | NET LOSS | | $ | (379,006 | ) | | $ | (224,531 | ) | | $ | (3,486 | ) | | $ | (174,906 | ) | NET LOSS PER COMMON SHARE - Basic and Diluted | | $ | (0.06 | ) | | $ | (0.03 | ) | | $ | (0.00 | ) | | $ | (0.04 | ) | | | | | | | | | | | | | | | | | | WEIGHTED AVERAGE SHARES USED IN COMPUTING PER COMMON SHARE AMOUNTS - Basic and Diluted | | | 6,257,652 | | | | 6,459,223 | | | | 6,246,118 | | | | 6,461,118 | |
See Notes to Consolidated Condensed Consolidated Financial Statements (Unaudited) BT BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (Unaudited)
| | | | | Common Stock | | | Additional | | | Accumulated | | | | | | | Shares | | | Amount | | | Paid-in Capital | | | (Deficit) | | | Total | | | | | | | | | | | | | | | | | | Balances, December 30, 2018 | | | 8,086,004 | | | $ | 8,086 | | | $ | 484,180 | | | $ | (1,533,504 | ) | | $ | (1,041,238 | ) | | | | | | | | | | | | | | | | | | | | | | Net (loss) | | | - | | | | - | | | | - | | | | (170,490 | ) | | | (170,490 | ) | | | | | | | | | | | | | | | | | | | | | | Balances, March 31, 2019 | | | 8,086,004 | | | $ | 8,086 | | | $ | 484,180 | | | $ | (1,703,994 | ) | | $ | (1,211,728 | ) |
| | | | | Common Stock | | | Additional | | | Accumulated | | | | | | | Shares | | | Amount | | | Paid-in Capital | | | (Deficit) | | | Total | | | | | | | | | | | | | | | | | | Balances, December 29, 2019 | | | 8,095,004 | | | $ | 8,095 | | | $ | 497,671 | | | $ | (1,902,081 | ) | | $ | (1,396,315 | ) | | | | | | | | | | | | | | | | | | | | | | Net (loss) | | | - | | | | - | | | | - | | | | (116,244 | ) | | | (116,244 | ) | | | | | | | | | | | | | | | | | | | | | | Balances, March 29, 2020 | | | 8,095,004 | | | $ | 8,095 | | | $ | 497,671 | | | $ | (2,018,325 | ) | | $ | (1,512,559 | ) |
BT BRANDS, INC. AND SUBSIDIARIES | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | | | 39 Weeks ended, | | | | October 1, 2023 | | | October 2, 2022 | | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | Net Loss | | $ | (379,006 | ) | | $ | (224,531 | ) | Adjustments to reconcile net loss to net cash | | | | | | | | | provided by (used in) operating activities- | | | | | | | | | Depreciation and amortization of franchise cost | | | 417,590 | | | | 306,584 | | Amortization of intangible assets | | | 53,212 | | | | 44,500 | | Amortization of debt issuance premium included in interest expense | | | 4,050 | | | | 4,050 | | Deferred taxes | | | (82,000 | ) | | | (67,490 | ) | Stock-based compensation | | | 118,000 | | | | 102,300 | | Unrealized (gain) loss on marketable securities | | | (33,184 | ) | | | 155,220 | | Loan forgiveness | | | - | | | | (13,750 | ) | Investment gains | | | (51,603 | ) | | | - | | Loss on equity method investment | | | 253,571 | | | | 135,813 | | Gain on sale of assets | | | (313,688 | ) | | | - | | Non-cash operating lease expense | | | 17,465 | | | | - | | Property tax liability settlement | | | (181,339 | ) | | | - | | Changes in operating assets and liabilities, net of acquisitions - | | | | | | | | | Receivables | | | 21,748 | | | | 14,648 | | Inventory | | | (34,640 | ) | | | (15,755 | ) | Prepaid expenses and other current assets | | | (48 | ) | | | (23,189 | ) | Accounts payable | | | (9,714 | ) | | | 62,512 | | Accrued expenses | | | 124,854 | | | | 204,680 | | Income taxes payable | | | - | | | | (201,088 | ) | Net cash provided by (used in) operating activities | | | (74,732 | ) | | | 484,504 | | | | | | | | | | | 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 Beer Garden | | | | | | | (690,000 | ) | Investment in Bagger Dave's Burger Tavern, Inc. | | | - | | | | (1,260,000 | ) | Proceeds from sale of assets | | | 496,000 | | | | - | | Purchase of property and equipment | | | (362,223 | ) | | | (349,739 | ) | Investment in related company | | | - | | | | (229,000 | ) | Purchase of marketable securities | | | (928,739 | ) | | | (808,619 | ) | Proceeds from the sale of marketable securities | | | 5,640,848 | | | | - | | Other assets | | | - | | | | (6,602 | ) | Net cash provided by (used in) investing activities | | | 4,845,886 | | | | (5,653,560 | ) | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | Repayment of broker margin loan | | | (791,370 | ) | | | | | Principal payment on long-term debt | | | (333,263 | ) | | | (125,738 | ) | Proceeds from exercise of common stock warrants | | | - | | | | 74,866 | | Purchase of treasury shares | | | (250,225 | ) | | | - | | Net cash used in financing activities | | | (1,374,858 | ) | | | (50,872 | ) | | | | | | | | | | CHANGE IN CASH AND CASH EQUIVALENTS | | | 3,396,296 | | | | (5,219,928 | ) | | | | | | | | | | CASH and CASH EQUIVALVENTS, BEGINNING OF PERIOD | | | 2,150,578 | | | | 12,385,632 | | | | | | | | | - | | CASH AND CASH EQUIVALENTS, END OF PERIOD | | $ | 5,546,874 | | | $ | 7,165,704 | | | | | | | | | | | SUPPLEMENTAL DISCLOSURES | | | | | | | | | Cash paid for interest | | $ | 69,807 | | | $ | 84,049 | | Cash paid for income taxes | | $ | - | | | $ | 209,088 | | Purchase of property and equipment included in accounts payable | | $ | 7,704 | | | $ | - | |
See Notes to Consolidated Condensed Consolidated Financial Statements (Unaudited) BT BRANDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
BT BRANDS, INC. AND SUBSIDIARIES | CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) | | | | | | | | | | | | | | | | | | | | For the 39-week periods- | | | | | Common Stock | | | Additional Paid-in | | | Accumulated | | | Treaury | | | | | | | 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 | | | - | | | | - | | | | 118,000 | | | | - | | | | - | | | | 118,000 | | Treasury stock purchase | | | (150,000 | ) | | | (300 | ) | | | | | | | - | | | | (249,925 | ) | | | (250,225 | ) | Net loss | | | - | | | | - | | | | - | | | | (379,006 | ) | | | - | | | | (379,006 | ) | Balances, October 1, 2023 | | | 6,246,118 | | | $ | 12,492 | | | $ | 11,527,235 | | | $ | (1,541,529 | ) | | $ | (356,807 | ) | | $ | 9,641,391 | |
| | 13 Weeks Ended | | | 13 Weeks Ended | | | | March 29, 2020 | | | March 31, 2019 | | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | Net Income (loss) | | $ | (116,244 | ) | | $ | (170,490 | ) | Adjustments to reconcile net loss to net cash provided by (used in) operating activities- | | | | | | | | | Depreciation | | | 44,395 | | | | 58,810 | | Amortization of franchise agreement | | | 425 | | | | 425 | | Amortization of debt issuance cost | | | 1,295 | | | | 1,277 | | Changes in operating assets and liabilities | | | | | | | | | Receivables | | | 9,581 | | | | 7,199 | | Inventory | | | 3,459 | | | | 4,367 | | Prepaid expenses | | | 1,632 | | | | 125 | | Accounts payable | | | 161,767 | | | | 104,380 | | Unearned vendor rebate | | | (1,223 | ) | | | (815 | ) | Accrued expenses | | | (23,649 | ) | | | (30,918 | ) | Net cash provided by (used in) operating activities | | | 81,438 | | | | (25,640 | ) | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | Investment in notes receivable from related entity | | | (28,000 | ) | | | - | | Net cash used in investing activities | | | (28,000 | ) | | | - | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | Proceeds from long-term debt | | | 50,000 | | | | - | | Principal payments on long-term debt | | | (51,405 | ) | | | (63,293 | ) | Net cash used in financing activities | | | (1,405 | ) | | | (63,293 | ) | | | | | | | | | | CHANGE IN CASH | | | 52,033 | | | | (88,933 | ) | | | | | | | | | | CASH, BEGINNING OF PERIOD | | | 258,101 | | | | 663,511 | | | | | | | | | - | | CASH, END OF PERIOD | | $ | 310,134 | | | $ | 574,578 | | | | | | | | | | | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | | | | | | | | | Cash paid for interest | | $ | 35,172 | | | $ | 41,296 | |
| | | | | Common Stock | | | Additional Paid-in | | | Accumulated | | | Treaury | | | | | | | Shares | | | Amount | | | Capital | | | (Deficit) | | | Stock | | | 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 | |
For the 13-week periods- | | | | | Common Stock | | | Additional Paid-in | | | Accumulated | | | Treasury | | | | | | | Shares | | | Amount | | | Capital | | | (Deficit) | | | Stock | | | Total | | Balances, July 2, 2023 | | | 6,246,118 | | | $ | 12,492 | | | $ | 11,486,535 | | | $ | (1,538,043 | ) | | $ | (356,807 | ) | | $ | 9,604,177 | | Stock-based compensation | | | - | | | | - | | | | 40,700 | | | | - | | | | - | | | | 40,700 | | Net loss | | | - | | | | - | | | | - | | | | (3,486 | ) | | | - | | | | (3,486 | ) | Balances, October 1, 2023 | | | 6,246,118 | | | $ | 12,492 | | | $ | 11,527,235 | | | $ | (1,541,529 | ) | | $ | (356,807 | ) | | $ | 9,641,391 | |
| | | | | Common Stock | | | Additional Paid-in | | | Accumulated | | | Treasury | | | | | | | Shares | | | Amount | | | Capital | | | (Deficit) | | | Stock | | | 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 | |
See Notes to Consolidated Condensed Consolidated Financial Statements (Unaudited) BT BRANDS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 –- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of BT Brands, Inc. and its subsidiaries.subsidiaries (the "Company," "we," "our," "us," "BT Brands," or "BT") and have been prepared in accordance with the US generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Securities and Exchange Commission ("SEC") requirements for Form 10-Q and Article 10 of Regulation S-X. All intercompany accounts and transactions have been eliminated in consolidation. These interim condensed consolidatedThe financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and on a basis consistent in all material respects with the accounting policies for the fiscal year ended December 29, 2019.ending January 1, 2023. In our opinion, all adjustments, which are normalregular and recurring in nature,adjustments necessary for a fair presentation of our financial position and results of operation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year. The accompanying Condensed Consolidated Balance Sheet as of March 29, 2020October 1, 2023, does not include all of the disclosures required by GAAP. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of December 29, 2019January 1, 2023, and the related notes thereto included in the Company’sour Form 10-K for the fiscal year ended December 29, 2019.ending January 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.estimates, and the differences could be material.
Reverse Merger TransactionThe Company
BT Brands, Inc. (the “Company”) was incorporated as Hartmax of NY Inc. on January 19, 2016 with the objective of acquiring an operating entity.2016. Effective on July 30, 2018, the Company acquired 100% of the ownership BTND, LLC. in exchange for common stock We operate restaurants in the Company through a Share Exchange Agreement (“Share Exchange”) with BTND, LLC (“BTND”), and its Members. Following the Share Exchange, BTND became a wholly owned subsidiaryeastern two-thirds of the Company for reporting purposes under GAAP.United States. As of October 1, 2023, including our 41.2% owned Bagger Dave’s business, we operated eighteen restaurants comprising the following: Business
| · | Eight Burger Time fast-food restaurants and one Dairy Queen franchise located in the North Central region of the United States, collectively (“BTND”); | | · | Bagger Dave’s Burger Tavern, Inc., a 41.2% owned affiliate, operates six Bagger Dave’s restaurants in Michigan, Ohio, and Indiana (“Bagger Dave’s”); | | · | Keegan’s Seafood Grille in Indian Rocks Beach, Florida (“Keegan’s”); | | · | Pie In The Sky Coffee and Bakery in Woods Hole, Massachusetts (“PIE”). | | · | Village Bier Garten is a German-themed restaurant, bar, and entertainment venue in Cocoa, Florida (“VBG”). |
The Company currently operates company-owned fast-food restaurants called Burger Time. The Company also operates one unit in Minnesota as a franchisee of International Dairy Queen. The Company operates three Burger Time locations in Minnesota, four in North Dakota, and two in South Dakota. The Company closed a store in Richmond, Indiana during the year, which is listed for sale, resulting in a total of ten operating restaurants at March 29, 2020. The Company owns a restaurant property in St. Louis, Missouri currently held for sale.
The Company’sOur Dairy Queen store is operated pursuant to the terms ofunder a franchise agreement with International Dairy Queen. The Company is required toWe pay regular royalty and advertising payments to the franchisor andas required by the franchise agreement. Effective October 17, 2023, we agreed with International Dairy Queen to remain in compliance withsell the business, which has a current book value at October 1, 2023, of $440,384, including remaining goodwill, to an approved buyer. Under the terms of the franchise agreement.agreement with International Dairy Queen, we will continue to operate under the agreement for six months, during which time we plan to sell the business.
Fiscal Year PeriodBusiness
As of October 1, 2023, BT Brands owned and operated thirteen restaurants, including eight Burger Time restaurants in the North Central region of the United States, a Dairy Queen fast-food franchised location in suburban Minneapolis, Minnesota, collectively ("BTND"). We own and operate Keegan's Seafood Grille ("Keegan's"), a dine-in restaurant located in Florida, Pie In The Company’sSky Coffee and Bakery ("PIE"), a casual dining coffee shop bakery located in Woods Hole, Massachusetts, and the Village Bier Garten (“VBG”), 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 of burgers, chicken, sides, ice cream, proprietary desserts, novelty items, and various beverages. Keegan's 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. VBG 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, which account for an insignificant portion of our income. On June 2, 2022, BT Brands purchased 11,095,085 common shares, or 41.2%, of Bagger Dave's Burger Tavern, Inc. ("Bagger Dave's"). We acquired the shares from the founder of Bagger Dave’s for $1,390,000, or approximately $.114 per share. Following the investment, two representatives of BT Brands were appointed to comprise 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 six Bagger Dave's restaurants, including four in Michigan and single units in Ft. Wayne, Indiana, and Centerville, Ohio. Our Dairy Queen location is operated under a franchise agreement with International Dairy Queen. We pay royalty and advertising payments to the franchisor as the franchise agreement requires. Following the end of the quarter, we entered into an agreement to terminate the franchise agreement with International Dairy Queen. We plan to sell the Dairy Queen business. Fiscal Year Periods BT Brand's fiscal year is a 52/53-week year, ending on the Sunday closest to December 31. Most years consist of four 13-week accounting periods comprising thea 52-week year. All references to yearsFiscal 2023 is 52 weeks ending December 31, 2023, and fiscal 2022 was a 52-weeks ending January 1, 2023. References in this report to periods refer to the 13-week39-week periods in the respective fiscal year periods. Fiscal 2020periods Cash and Cash Equivalents Cash includes United States Treasury Bills with original maturities at the time of purchase of 90 days or less. Our bank deposits often exceed the amount insured by the Federal Deposit Insurance Corporation. In addition, we maintain cash deposits in brokerage accounts, including money market funds above the insured amount. We do not believe there is a 53-week yearsignificant risk related to cash. Investments As of October 1, 2023, noncurrent investments include our net equity method investment of $811,615 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, we attributed $75,000 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. 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 39 weeks ending January 3, 2021.October 1, 2023, Bagger Dave’s had sales of $5,009,164 and a net loss of $617,164. For the 39 weeks, our 41.2% equity share in the loss was approximately $254,272 and is included in the accompanying statement of operations. See Note 8 for information regarding our related party investment. Fair Value of Financial Instruments Our accounting for fair value measurements of assets and liabilities, including available-for-sale securities, is that they are recognized or disclosed at fair value in the statements on a recurring or nonrecurring basis, adhere to the Financial Accounting Standards Board (FASB) fair value hierarchy that prioritizes the input to valuation techniques used to measure fair value. The hierarchy prioritizes unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: | · | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that we 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. | Table of Contents | · | Level 3 inputs are unobservable inputs for the asset or liability. |
The level in the fair value hierarchy within which a fair measurement in its entirety falls is based on the lowest level input that is significant to fair value measurement in its entirety. CashOn October 1, 2023, the cost of marketable securities includes a bond fund at a cost of $ 574,836 and common stocks at a cost of $792,137 for a total cost of $1,366,973 prior to a mark-to-market reduction of $110,205. 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 at October 1, 2023, at the level-one quoted market price in an active market of $1,366,973.
For purposesThe carrying values of reporting cash, receivables, accounts payable, and cash flows, cash is netother financial working capital items approximate fair value due to the short maturity nature of outstanding checks and includes, amounts on deposit at banks, a money market mutual fund holding, and deposits in transit.these instruments.
Receivables
Receivables consistsconsist 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, which rangeranging from three to thirty years. The Company reviewsWe review long-lived assets to determine if the carrying value of these assets may not beis recoverable based on estimated cash flows. Assets are reviewedevaluated at the lowest level, for which cash flows can be identified which is at the restaurant level. In determining future cash flows, significant estimates are made bywe estimate the Company with respect to future operating results of each restaurant over its remaining life.restaurant. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets.
Goodwill and other Intangible Assets and Other Assets Goodwill is not amortized. Goodwill is tested for impairment at least annually. The cost of other intangible assets is amortized over the expected useful life. Other assets includes the allocated fair value of the acquired Dairy Queen franchise agreement which is being amortized over 14 years. AssetsAsset Held for Sale
From time-to-timeWe closed the Company may sell an existing operating unit or may close an operating unit and list the property for sale. A property in the St. Louis area is currently listed for sale. Also, in September of 2018 the Company closed an operating Burger Time unitstore in Richmond, IndianaWest St. Paul in 2022 and the Richmond, propertyIndiana, 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 listedcurrently offered for sale. We believe the Richmond property will be sold at or above its current carrying value. In the second quarter of fiscal 2019 it was concluded to record a charge of $93,488 for impairment2023, we completed the disposition of the valueSt. Louis property in lieu of unpaid property taxes, eliminating approximately $180,000 of previously accrued property taxes, which was reflected as a reduction of occupancy costs during the Richmond location.second quarter of this fiscal year.
Income Taxes
We accountThe Company follows Accounting Standards Codification (ASC) 740, Accounting for Income Taxes. ASC 740 using the asset and liability approach in accounting for income taxes using the liability method, whereby deferredtaxes. Deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities andliabilities. They are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company providesIf necessary, we provide a valuation allowance if necessary, to reduce deferred tax assets to their estimated realizable value. The deferred tax assets are reviewed periodically for recoverability, and valuation allowances are adjusted as necessary.
As of October 1, 2023, we used a net combined federal and state rate of approximately 27.5% in estimating our current tax benefit. The Company has a net operating loss carry-forward from the prior year and incurred additional net operating losses during the periods ended March 29, 2020 and March 31, 2019. These losses resulted in an increase in the related deferred tax assets; however, full valuation allowances were made which reduced these deferred tax assetsno accrued interest or penalties relating to zero; therefore, no income tax provisionobligations. There currently are no federal or benefit was recognizedstate examinations in progress. The Company has not had any federal or state tax examinations since its inception. All periods since inception remain open for the periods ending March 29, 2020 and March 31, 2019 resulting in an effective income tax rate of 0% for both periods. inspection. Per Common Share Amounts
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income or (loss) per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted net income or loss per share is computedcalculated by dividing net income by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. Common stock equivalents are excluded from the computation of diluted net loss per share becauseamounts if their effect would beis anti-dilutive. There were no potentially dilutive shares outstanding as offor the periods ending in 20202023 and 2019, as2022. NOTE 2 – INTANGIBLE ASSETS At October 1, 2023, the strike price for warrants outstanding was above the fair market price of the underlying stock in both periods.
Other Assets
Other assets principally is the allocated fair value of acquired assets, Intangible Assets being amortized are the acquired Dairy Queen franchise agreement related to the Company’s location in Ham Lake, Minnesota, and isfollowing
| | Estimated Useful Life (Years) | | | Original Cost | | | Accumulated Amortization | | | Net Carrying Value | | Covenants not to Compete | | | 3 | | | $ | 98,000 | | | $ | (50,100 | ) | | $ | 47,900 | | Trademarks | | | 15 | | | | 393,000 | | | | (40,134 | ) | | | 352,866 | | | | | | | | $ | 491,000 | | | $ | (90,234 | ) | | $ | 400,766 | |
Tradename assets are being amortized over an estimated useful life15 years at $26,000 annually. The total amortization of 14 years.intangible assets, including covenants not to compete, will approximate $58,900 in 2023 and 2024, $40,500 in 2025, $26,200 per year thereafter following six years and $7,500 in 2037.
Liquidity and Capital Resources
The consolidated financial statements have been prepared on a going concern basis. ForTotal amortization expense for the 13 weeks ended March 29, 2020,was $12,221, and for the Company incurred a net loss of $116,244. On March 29, 2020, the Company had $310,134 in cash and a working capital deficit of $535,201 an increase of $66,875 from the year-end deficit of $468,326. On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (‘Covid-19”) a global pandemic. Covid-19 is having a significant adverse impact on the United States economy. At this time, it is impossible to predict either the near-term effects or the ultimate impact of the Covid-19 pandemic on the Company’s operating results and financial condition as the situation is rapidly evolving.39 weeks ending October 1, 2023, was $54,486.
A cash flow forecast for the next 12 months prepared by management has been adjusted to reflect recent offers by banks, in the wake of the COVID-19 Pandemic, including the Company’s principal lenders, Northview Bank and Bremer Bank, to abate all loan payments for the period from March through May of 2020. In May, 2020 the Company received loans of $487,900 of that amount, $460,400 was borrowed under the Small Business Administration Payroll Protection Program and assuming certain conditions are met, these loans may be forgiven. In May, 2020, the Company also borrowed $27,500 at no interest under the Minnesota Small Business Emergency Loan Program. The Company expects to have sufficient cash assets to meet its obligations for a year from the issuance of these consolidated financial statements. No adjustments have been made relating to recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company not continue as a going concern.
NOTE 23 – PROPERTY AND EQUIPMENT Property and equipment consisted of the following at end of the respective fiscal years:following: | | 03/29/2020 | | | 12/29/2019 | | Land | | $ | 555,885 | | | $ | 555,885 | | Equipment | | | 2,390,545 | | | | 2,390,545 | | Buildings | | | 1,363,642 | | | | 1,363,642 | | | | | | | | | | | Total property and equipment | | | 4,310,072 | | | | 4,310,072 | | Accumulated depreciation | | | (2,255,211 | ) | | | (2,210,816 | ) | Less - Property held for sale | | | (449,244 | ) | | | (449,244 | ) | Net property and equipment | | $ | 1,605,617 | | | $ | 1,650,012 | |
| | October 1, 2023 | | | January 1, 2023 | | Land | | $ | 435,239 | | | $ | 485,239 | | Equipment | | | 3,875,840 | | | | 3,893,274 | | Buildings and leasehold improvements | | | 2,453,547 | | | | 2,402,157 | | | | | | | | | | | Total property and equipment | | | 6,764,626 | | | | 6,780,670 | | Accumulated depreciation | | | (3,267,565 | ) | | | 3,741,170 | | Less - property held for sale | | | (258,751 | ) | | | (446,526 | ) | Net property and equipment | | $ | 3,238,310 | | | $ | 3,294,644 | |
Depreciation expense for the 13-week39-week periods in 20202023 and 20192022 was $44,395$416,315 and $58,810,$306,584, respectively. NOTE 3 –4 - ACCRUED EXPENSES
Accrued expenses consisted of the following at the dates:at: | | 3/29/2020 | | | 12/29/2019 | | Accrued real estate taxes | | $ | 24,888 | | | $ | 66,959 | | Accrued payroll | | | 38,529 | | | | 69,572 | | Accrued payroll taxes | | | 7,522 | | | | 7,058 | | Accrued sales taxes payable | | | 82,763 | | | | 35,380 | | Accrued vacation pay | | | 24,791 | | | | 23,204 | | Other accrued expenses | | | 590 | | | | 559 | | | | | | | | | | | | | $ | 179,083 | | | $ | 202,732 | |
| | October 1, 2023 | | | January 1, 2023 | | Accrued real estate taxes | | $ | 33,487 | | | $ | 202,436 | | Accrued bonus compensation | | | 59,139 | | | | 59,139 | | Accrued payroll | | | 190,747 | | | | 143,481 | | Accrued payroll taxes | | | 12,926 | | | | 12,764 | | Accrued sales taxes payable | | | 99,330 | | | | 70,270 | | Accrued vacation pay | | | 17,663 | | | | 17,663 | | Accrued gift card liability | | | 19,705 | | | | 25,965 | | Other accrued expenses | | | 43,038 | | | | 802 | | | | $ | 476,035 | | | $ | 532,520 | |
NOTE 4 –5 - LONG TERM DEBT The Company had the following long termOur long-term debt obligationsis as of:follows:
| | 3/29/2020 | | | 12/29/2019 | | | | | | | | | Note payable to bank dated October 30, 2015 due in monthly installments | | | | | | | of $6,916 through October 30, 2030, which includes principal and interest at a | | | | | | | fixed rate of 4.75%. This note is secured by two of the Company's Minnesota | | | | | | | locations and the personal guaranty of a shareholder of the Company. | | $ | 691,092 | | | $ | 699,311 | | | | | | | | | | | Note payable to bank dated November 16, 2015 due in monthly installments | | | | | | | | | of $14,846, which includes principal and interest at fixed rate of 4.75% through | | | | | | | | | November 16, 2030. This note is secured by four of the Company's North Dakota | | | | | | | | | locations and the personal guaranty of a shareholder of the Company. | | | 1,482,482 | | | | 1,509,435 | | | | | | | | | | | Note payable to bank dated October 10, 2015 due in monthly | | | | | | | | | installments of $4,153 through March 11, 2030, which includes principal | | | | | | | | | and interest at fixed rate of 4.75%. This note is secured by the Company's | | | | | | | | | Dairy Queen location and the personal guaranty of a shareholder of the Company. | | | 409,686 | | | | 414,562 | | | | | | | | | | | Note payable to bank dated March 11, 2016 due in monthly installments | | | | | | | | | of $3,692 through March 11, 2031 which includes principal and interest at | | | | | | | | | a fixed rate of 4.75%. This note is secured by one of the Company's South Dakota | | | | | | | | | locations and the personal guaranty of a shareholder of the Company. | | | 377,618 | | | | 384,208 | | | | | | | | | | | Notes payable to bank dated November 10, 2016 payable in monthly installments | | | | | | | | | of $1,331 which includes principal and interest at 4%, the interest rate is subject | | | | | | | | | to adjustment based on 5-year Treasury Note rate 2021 and cannot be | | | | | | | | | be less than 4%. This note is secured by property held for sale in Richmond | | | | | | | | | Indiana and the personal guaranty of a shareholder of the Company. | | | 148,737 | | | | 151,234 | | | | | | | | | | | Unsecured 8% notes payable to an entity controlled by shareholders of the | | | | | | | | | Company dated December 26, 2017 originally due on demand after June 1, 2020. | | | | | | | | | Effectice July 1, 2019 a revised note was entered into due June 1, 2021 | | | | | | | | | with monthly payments of $5,000 due beginning August 1, 2019. An additional | | | | | | | | | $50,000 was advanced to the Company in January 2020 and this advance | | | | | | | | | is included in current maturities. | | | 257,264 | | | | 207,264 | | | | | | | | | | | Note payable to bank dated December 28, 2018 due in monthly | | | | | | | | | installments of $1,644 through December 31, 2023 which includes principal | | | | | | | | | and interest at a fixed rate of 5.50%. This note is secured by the West St. Paul | | | | | | | | | location and the personal guaranty of a shareholder of the Company. | | | 189,800 | | | | 192,068 | | | | | | | | | | | | | | 3,556,679 | | | | 3,558,082 | | Less - unamortized debt issuance costs | | | (58,087 | ) | | | (59,381 | ) | Current maturities | | | (243,784 | ) | | | (277,666 | ) | | | | | | | | | | Total | | $ | 3,254,808 | | | $ | 3,221,035 | |
In the first quarter of fiscal 2020, as a result of the many uncertainties surrounding the economy during the COVID-19 response, two of the Company’s mortgage lenders agreed to suspend current payments for a period of three months. The loans will continue to accrue interest at the stated rate, which included in the principal outstanding, and the suspended payments will be treated as balloon-payments due at the end of the mortgage term.
| | October 1, 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. The notes are guaranteed by BT Brands, Inc. and a shareholder of the Company. | | $ | 2,533,971 | | | $ | 2,864,484 | | | | | | | | | | | Minnesota Small Business Emergency Loan dated April 29, 2020, payable in monthly installments of $458 beginning December 15, 2020, including principal and interest at 0%. This note is secured by the personal guarantee of a shareholder of the Company. Under the terms of the loan, $13,750 of the loan was forgiven on June 22, 2022. | | | 458 | | | | 3,208 | | Total | | | 2,534,429 | | | | 2,867,692 | | Less - unamortized debt issuance costs | | | (37,549 | ) | | | (41,599 | ) | Current maturities | | | (164,866 | ) | | | (167,616 | ) | | | $ | 2,332,014 | | | $ | 2,658,477 | |
NOTE 5 – RELATED PARTY TRANSACTIONS BTND Trading
BTND Trading is an entity separate from the Company owned by certain significant shareholders of the Company, from time-to-time BTND Trading has advanced funds to the Company. In 2020 no payments have been made on this note and during the first quarter BTND Trading advanced an additional $50,000 to the Company which amount has been added to the current portion long-term debt as it is anticipated this advance will be repaid before the end of the year.
Next Gen Ice6 - STOCK-BASED COMPENSATION
In 2019, we adopted the BT Brands, Inc. 2019 Incentive Plan (the “Plan”), under which the Company mademay 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. As of October 1, 2023, there were 429,750 shares available for grant under the Plan. 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. Total equity-based compensation expenses through the third quarter of 2023 were $118,000, and $102,300 through the third quarter of 2022, including approximately $77,000 for the Contingent Share Award described below. Based on current estimates, we project that approximately $372,000 in stock-based compensation expense for current grants will be recognized over the next five years at approximately $200,000 in 2024, $95,000 in 2025, $35,000 in 2026, $28,000 in 2027 and $14,000 in 2028. As outlined in each agreement, stock options granted to employees and directors vest over four years in annual installments. Options expire ten years from the date of the grant. Compensation expense equal to the fair value of the options at the grant date is recognized in general and administrative expense over the applicable service period. We utilize the Black-Scholes option pricing model when determining the compensation cost associated with stock options issued using the following significant assumptions: | · | Stock price – Published trading market values of the Company’s common stock as of the grant date. | | · | Exercise price – The stated exercise price of the stock option. | | · | Expected life – The simplified method | | · | Expected dividend – The rate of dividends expected to be paid over the term of the stock option. | | · · | Volatility – Estimated volatility. Risk-free interest rate – The daily United States Treasury yield curve rate corresponding to the expected life of the award |
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 1, 2023 | | | 220,250 | | | $ | 2.74 | | | | 9.0 | | | $ | 0 | | Granted | | | 100,000 | | | | 2.50 | | | | 6.7 | | | | | | Exercised | | | 0 | | | | 0 | | | | | | | | | | Canceled, forfeited, or expired | | | (750 | ) | | | 0 | | | | | | | | | | Options outstanding at October 1, 2023 | | | 319,500 | | | $ | 2.74 | | | | 8.8 | | | $ | 0 | | Options exercisable at October 1, 2023 | | | 106,802 | | | $ | 3.18 | | | | 8.3 | | | $ | 0 | |
On February 27, 2023, the Company finalized a seriesContingent Incentive Share Award with senior executives. The Contingent Share Awards provides that so long as the Company’s publicly traded warrants are outstanding, senior management of advancesthe Company will be deemed to earn an aggregate award of 250,000 shares of common stock as an award upon the Company’s share price reaching $8.50 per share for 20 consecutive trading days, provided, however, participants must be employed by the Company at the time the Incentive Shares are earned. The estimated fair value of the plan is $1.00 per share, and $250,000 of compensation expense will be recognized over the remaining 2.1 years available under the Plan. $77,000 of stock-based compensation was recognized for this Agreement for the 39 weeks of 2023. We utilized a lattice model when determining the fair value of the Contingent Incentive Share Awards. Assumptions utilized in the formmodel include a risk-free rate of investments in Next Gen Ice, Inc. (NGI) Series C Notes totaling $179,000. In4.4% and volatility of 63%. NOTE 7 – LEASES Concurrent with the first quarter of 2020 the Company advanced an additional $28,000 to NGI and the $28,000 advance was repaid following the endclosing of the quarter, in April 2020. The Company’s CEO, Gary Copperud, is Chairmanacquisition of NGI and the Company’s Chief Operating Officer, Kenneth Brimmer, is a member of the Board of Directors of NGI and is currently serving as Chief Financial Officer of NGI on a part-time contract basis. Mr. Copperud and limited liability companies controlled by him together own approximately 55% of the outstanding equity of NGI. The Series C Notes were originally due on March 3, 2020. On March 3, 2020, the Company and NGIKeegan's net assets, we entered into a Loan Modification and Extension Agreement pursuantlease for approximately 2,800 square feet of restaurant space. The 131-month Keegan's lease provides for an initial rent of $5,000 per month with an annual escalation equal to which the Company agreed to extendgreater of 3% or the maturity dateConsumer Price Index. The lease is being accounted for as an operating lease. At the inception of the NGI Notes to August 31, 2020. In considerationlease, we recorded an operating lease obligation and a right-of-use asset of $624,000. The present value discounted at 4% of the extensionremaining lease obligation of $558,571 is reflected as a liability in the accompanying financial statements as of October 1, 2023. 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 terminterest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the lease term. Variable lease costs consist primarily of property taxes, insurance, certain utility expenses, and sales tax. Concurrent with the acquisition of PIE assets, we entered into a lease for approximately 3,500 square feet of restaurant and bakery production space. The terms of the NGI Notes: (i) NGI granted60-month lease provide for an initial rent of $10,000 per month with an annual escalation after 24 months of 3%. 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 $1,055,000. The present value discounted at 5% of the remaining lease obligation of $933,235 is reflected as a liability in the accompanying financial statements as of October 1, 2023. 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 Companylease payments on a securitycollateralized basis over the lease term. Variable lease costs consist primarily of property taxes, insurance, certain utility expenses, and sales tax. Concurrent with the acquisition of 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 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 in allrate; we used our estimated incremental borrowing rate of NGI’s assets, (ii) issued5% 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% of the remaining lease obligation of $452,871 is reflected as a liability in the accompanying financial statements as of October 1, 2023. The weighted average remaining lease term is approximately 5.0 years. Following is a schedule of the approximate minimum future lease payments on the operating leases as of October 1, 2023: | | Total | | Remainder 2023 | | $ | 70,788 | | 2024 | | | 289,076 | | 2025 | | | 297,745 | | 2026 | | | 306,674 | | 2027 | | | 268,437 | | 2028 and thereafter | | | 1,039,438 | | Total future minimum lease payments | | | 2,272,158 | | Less - interest | | | (406,471 | ) | | | $ | 1,865,687 | |
The Company is a warrant entitling itparty 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 plus the cost of property taxes. The total operating lease expense for the 39-week and 13-week period in 2023 was $81,000 and $26,333, respectively, and cash paid for leases during the 39 weeks in 2023 totaled $76,000 and variable expenses for lease properties were approximately $26,000. The weighted average remaining lease term is approximately 5.3 years. The Company also pays a monthly rent 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. NOTE 8 - RELATED PARTY TRANSACTION NGI Corporation Our CEO and CFO also serve as Chairman and CFO, respectively, of NGI Corporation (NGI). BT Brands owns 330,418 common shares and holds warrants to purchase 358,000 common shares at $1.00, expiring March 31, 2028, and 34,697 warrants to purchase additional shares at $1.65 of NGI. We received 179,000 shares of common stock ofin NGI as consideration for modifying a note that was subsequently paid. The common stock and warrants received in the note modification transaction were recorded at a pricevalue determined by BT Brands of $1.00 per share$75,000. The investment in NGI does not have a readily determinable market value. Therefore, it is carried at any time through March 31, 2023, and (iii) the founders of NGI including Mr. Copperud agreed to transfer to the Company 179,000 common shares of NGI.a cost determined by BT Brands. NOTE 69 – 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. The Company is not awareWe are unaware of any significant asserted or potential claims whichthat could impact itsour financial position NOTE 7 – Covid-19 AND EMERGENCY LOAN RELIEF
On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (‘Covid-19”) a global pandemic. Covid-19 has had a significant adverse impact on the United States economy. While we have experienced some product shortages and some labor shortages, we have continued to operate all of our locations on a drive-through basis only with some limited hours and closing access to both the walk-up window and any indoor seating. Indoor seating is only available in our Dairy Queen and one other location. At this time, it is impossible to predict the ultimate impact of the Covid-19 pandemic on the Company’s operating results and financial condition as the situation and regulations surrounding government response to the pandemic are constantly changing.
On May 1, 2020, the Company received funding in connection with “Small Business Loans” under the federal Paycheck Protection Program provided in Section 7(a) of the Small Business Act of 1953, as amended by the Coronavirus Aid, Relief and Economic Security Act, as amended from time to time (the “PPP”). Pursuant to the terms of the Promissory Notes dated May 1, 2020, by BTND and BTNDDQ, L.L.C. in favor of Northview Bank. BTND borrowed $418,900 original principal amount, and BTNDDQ, L.L.C. borrowed $41,500 original principal amount. Both PPP loans were funded on May 1, 2020. The PPP Loans bear interest at 1% per annum and mature in two years from the date of disbursement of funds. Interest and principal payments under the PPP Loans will be deferred for a period of six months. Under certain circumstances, all or a portion of the PPP Loans may be forgiven, however, there can be no assurance that any portion of the PPP Loans will be forgiven and that BTND and BTNDDQ, L.L.C. would not be required to repay the PPP Loans in full. The PPP Loan contains certain covenants which, among other things, restrict the borrower’s use of the proceeds of the PPP Loan to the payment of payroll costs, interest on mortgage obligations, rent obligations and utility expenses, require compliance with all other loans or other agreements with any creditor of the borrower, to the extent that a default under any loan or other agreement would materially affect the borrower’s ability to repay the PPP Loan and limit the ability of the borrower to make certain changes to its ownership structure.
On April 29, 2020, BTNDDQ, L.L.C. also borrowed $27,500 at no interest under the Minnesota Small Business Emergency Loan Program from Central Minnesota Development Corporation. This loan is interest free and under certain conditions up to 50% of the loan may be forgiven, BTNDDQ, L.L.C., initially, is required to make 18 monthly payments of $458.33 beginning December 15, 2020, following the initial 18 months, in the event the note does not qualify for loan forgiveness, it will be repaid in equal installments over an additional 36 months.position.
ITEM 2. MANAGEMENT’SMANAGEMENT'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’sCompany's condensed consolidated financial statements and accompanying notes included under Part I, Item 1 of this quarterly reportQuarterly Report on Form 10-Q, as well as with the audited consolidated financial statements and accompanying notes and Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s annual reportCompany's Annual Report on Form 10-K for the year ended December 29, 2019.January 2, 2023. OverviewIntroduction
We ownAs of October 1, 2023, including our partially owned Bagger Dave’s business, we owned and operate ten fast foodoperated eighteen restaurants including nine comprising the following:
| · | Eight Burger Time fast-food restaurants and one Dairy Queen franchise (“BTND”); | | · | Village Bier Garten is a German-themed restaurant, bar, and entertainment venue in Cocoa, 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”). |
Burger Time restaurants and one Dairy Queenopened its first restaurant all of which are in theFargo, North Central region of the United States. OurDakota, in 1987. Burger Time restaurants feature a wide variety of burgersgrilled hamburgers and other affordably pricedaffordable foods such as chicken sandwiches, pulled pork sandwiches, sides, and soft drinks. Our Dairy Queen restaurant offers the established Dairy Queen menu consisting of burgers, chicken, sides, ice cream and other desserts, and a wide array of beverages. Our revenues are derived from the sale of food and beverages at our restaurants. Our Burger TimeTime’s operating principles include:include (i) offering bigger burgers and more value for the money; (ii) offering a limited menu to permit attention to quality and speed of preparation; (iii) providing fast service by way of single and double drive-thru designs and a point-of-sale system that expedites the ordering and preparation process;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.
Business Trends - EffectsThe average customer transaction at our Burger Time restaurants increased by approximately 20% in fiscal 2023 compared to 2022 and currently is approximately $15.60. This recent increase is principally the result of COVID-19menu price increases implemented in 2022. Many factors influence our sales trends. Our business environment is challenging as competition is intense.
We operate through a central management organization that provides continuity across our restaurant base by utilizing the efficiencies of a central management team. Notable Recent Events In March 2020,Our recent acquisitions have allowed us to diversify our operations into new restaurant segments and new geographic regions, reducing our dependency on the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic. This contagious virus, which has continued to spread, has adversely affected workforces, customers, economies and financial markets globally. It has also disrupted the normal operations of many businesses, including ours. In response to this outbreak, many state and local authorities have mandated the temporary closure of non-essential businesses and dine-in restaurant activity. While we have experienced some product shortages, for now, we have continued to operate allperformance of our locationsBurger Time restaurants. During 2022, we acquired three operating restaurants and a 41.2% ownership interest in BD, an operator of six casual restaurants. We expect to consider new acquisition opportunities in the 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, aggressively expanded drive-through operations, and developed loyalty programs and database marketing supported by a drive-through basis only eliminating accessrobust technology platform. We expect these trends to continue as restaurants aggressively compete for customers. Competitors will continue to discount prices through aggressive promotions. Food costs have increased over the walk-up service windowlast two years, and any indoor seating which is only available at our Dairy Queen locationwe expect to see some moderating inflationary pressure during the remainder of 2023. Beef and one other location. Also, most of our locationsegg costs have outdoor picnic table seating for usetrended down slightly in nicer summer weather, and in, most cases, these dining areas have been closed. At this time, it is impossible to predict2023. Given the near-term effects or the ultimate impactcompetitive nature of the Covid-19 pandemic on the Company’s operating results and financial condition as the situation and regulations surrounding government responserestaurant industry, it may be challenging to the pandemic are constantly changing.raise menu prices to cover cost increases fully. As a result, of the many uncertainties potentially threatening our ability to continue as a going concern. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law on March 27, 2020, providing provisions aid small businesses through programs administered by the Small Business Administration (“SBA”). The CARES Act includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. We are currently evaluating the impact of the provisions of the CARES Act. The CARES Act also established a Paycheck Protection Program (“PPP”), whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs. The loanfuture margin improvements may be forgiven if the funds are used for payrolldifficult to achieve. Margin improvement will be achieved through operational enhancements, equipment advances, and other qualified expenses. Given the absence of any funding alternatives, the Company applied for and was granted loans totaling $460,400 under the United States Small Business Administration’s Payroll Protection Program. The Company expects to use these funds to meet payroll expenses. The Company’s BTNDDQ, L.L.C. subsidiary also received a $27,500 loan from a State of Minnesota Small Business Emergency Loan Program.increased volumes offsetting food cost increases.
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. To succeed, we must identify, develop and retain quality employees. Growth Strategy and Outlook
We are seeking to increase value for our shareholders in the foodservice industry. We expect to pursue the acquisition of multi-unit restaurant concepts and individual restaurant properties at attractive multiples of earnings. Once acquired, we will operate the business or businesses with a shared central management organization. Assuming we are successful in acquiring an operating business, following the acquisition, we expect to pursue growth strategies to both expand the number of locations and to increase comparable store sales and profits.
Our business plan is to grow through acquisitions in the foodservice industry. In addition, we may develop additional Burger Time locations through the acquisition and conversion of existing properties. We also expect to identify and complete acquisitions of existing restaurant units and multi-unit chains which could be operated and expanded through the addition of new locations. Our growth strategy is predicated upon (i) building or acquiring new restaurants, (ii) growing comparable restaurant sales and profits, and (iii) quickly and cost-effectively scaling our growth while leveraging our corporate services.
We believe that we will have opportunities to acquire new restaurant businesses. We intend to follow a disciplined strategy of evaluating acquisition opportunities to determine the operations are in markets meeting our demographic, real estate and investment criteria. Our ability to successfully evaluate an acquisition opportunity and to understand the competitive landscape of a new market will be critical in making a successful acquisition. Additionally, our ability to identify, recruit and hire both salaried and hourly staff will impact our ability to expand as will changes in the legal environment, including increases to the minimum wage, which could impact our ability to expand into certain areas. Further, we believe that there has been an oversaturation of restaurants in certain areas which could decrease the number of markets that we believe will be attractive to expand into. Even if we can acquire restaurants, the new restaurants, and our Company, will be subject to various risks, some of which, including factors impacting our customers, such as declining economic conditions, are entirely out of our control. We will seek to quickly and cost-effectively scale our growth by leveraging our general and administrative costs.
Results of Operations for the Thirteen Weeks Ended October 1, 2023, and the Thirteen Weeks Ended October 2, 2022 The following table sets forth for the fiscal periods indicated, our Condensed Statements of Operations expressed as percentageand percentages of total revenues. Percentagesrevenues for the thirteen-week fiscal periods. The percentages below may not reconcile because of rounding. | | 13 Weeks Ended, | | | | March 29, 2020 | | | March 31, 2019 | | | | | | | | | SALES | | | 100.0 | % | | | 100.0 | % | | | | | | | | | | COSTS AND EXPENSES | | | | | | | | | Restaurant operating expenses | | | | | | | | | Food and paper costs | | | 41.4 | | | | 40.7 | | Labor costs | | | 37.1 | | | | 35.3 | | Occupancy costs | | | 12.5 | | | | 15.1 | | Other operating expenses | | | 6.6 | | | | 4.7 | | Depreciation | | | 3.4 | | | | 4.3 | | Amortization | | | 0.0 | | | | 0.0 | | General and administrative | | | 5.1 | | | | 9.3 | | | | | | | | | | | Total costs and expenses | | | 106.1 | | | | 109.3 | | Loss from operations | | | (6.1 | ) | | | (9.3 | ) | INTEREST EXPENSE | | | (2.8 | ) | | | (3.1 | ) | NET LOSS | | | (8.9 | )% | | | (12.4 | )% |
13 Week Period Ended March 29 (Fiscal 2020) compared to the 13 Week Period Ended March 31, (Fiscal 2019)
| | 13 weeks ended, October 1, 2023 | | | 13 weeks ended, October 2, 2022 | | | | Amount | | | % | | | Amount | | | % | | SALES | | $ | 4,007,656 | | | | 100.0 | % | | $ | 4,023,920 | | | | 100.0 | % | COSTS AND EXPENSES | | | | | | | | | | | | | | | | | Restaurant operating expenses | | | | | | | | | | | | | | | | | Food and paper costs | | | 1,449,796 | | | | 36.2 | | | | 1,604,858 | | | | 39.9 | | Labor costs | | | 1,509,721 | | | | 37.7 | | | | 1,336,039 | | | | 33.2 | | Occupancy costs | | | 340,002 | | | | 8.5 | | | | 367,872 | | | | 9.1 | | Other operating expenses | | | 209,721 | | | | 5.2 | | | | 248,383 | | | | 6.2 | | Depreciation and amortization | | | 114,774 | | | | 2.9 | | | | 168,855 | | | | 4.2 | | General and administrative | | | 343,027 | | | | 8.6 | | | | 288,922 | | | | 7.2 | | Total costs and expenses | | | 3,967,041 | | | | 99.1 | | | | 4,014,929 | | | | 99.8 | | Income from operations | | | 40,615 | | | | 1.0 | | | | 8,991 | | | | 0.2 | | INTEREST EXPENSE | | | (23,948 | ) | | | (.6 | ) | | | (33,638 | ) | | | (0.8 | ) | OTHER | | | 89,069 | | | | 2.2 | | | | (28,618 | ) | | | (0.7 | ) | EQUITY IN LOSS FROM AFFILIATE | | | (109,222 | ) | | | (2.7 | ) | | | (121,641 | ) | | | (3.0 | ) | NET INCOME (LOSS) | | $ | (3,486 | ) | | | (.1 | )% | | $ | (174,906 | ) | | | (4.3 | )% |
Net Revenues: Net sales for Fiscal 2020the third fiscal quarter of 2023 decreased $74,403 or 5.4%$16,264 to $1,303,430$4,007,656 from $1,377,833$4,023,920 in Fiscal 2019. The decrease in sales was principallyfiscal 2022. Reflecting the resultclosing of the West St. Paul location being closed for approximately seven weeks as a resultat the end of a fire2022. Including West St. Paul in the location,prior year, sales at the Burger Time locations declined approximately 4.6% as customer purchasing patterns continued a return to pre-pandemic levels. Staffing challenges adversely impacted Burger Time, which resulted in limited hours and the effects of weather conditionsdaily store closures during the period.quarter. Restaurant unit sales for Burger Time for the period13 weeks ranged from a low of $99,384 (excluding West St. Paul)approximately $140,000 to a high of $185,500 andapproximately $337,000. The average sales for each Burger Time unit duringwere approximately $228,000 in 2023, approximately $20,000 above the same period was approximately $146,000 in 2020 declining2022. Our various restaurants all experience unique seasonal sales patterns. The third quarter, which includes the summer months, is particularly strong at PIE; for the quarter, PIE had sales of $1,292,740, an increase of 2.9% from $154,000 in 2019.the same quarter a year ago, particularly at PIE where eggs, butter and pork were all at lower costs than one year ago. Costs of Sales - food and paper: Cost of sales - food and paper for Fiscal 2020 increasedthe fiscal 2023 period decreased as a percentage of sales slightlydeclined to $540,100 (41.4%36.2% of restaurant sales)sales from $560,271 (40.7%39.9% of restaurant sales)sales in Fiscal 2019.the third quarter of fiscal 2022. This increasedecrease was mainly due to an increasethe net result of moderating inflationary pressures where several key inputs declined in average beef prices of approximately 18% to an average of $2.51 per pound in 2020.price from a year ago. 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 costsexpenses and depreciation and amortization) as a percentpercentage of restaurant sales increased slightlydecreased to 97.6%88.6% of sales in 2020the third fiscal quarter of 2023 from 95.8%88.4% in Fiscal 2019.the similar period of fiscal 2022. This decrease was due primarily tothe result of declining and stabilizing commodity costs, particularly at PIE and the matters discussed in the “Cost"Cost of Sales,” “Labor - food and paper," "Labor Costs,” “Occupancy" and "Occupancy and Other Operating Cost”Costs" sections below.
Labor Costs For Fiscal 2020,the third quarter of fiscal 2023, labor and benefits costs decreased slightly by $2,936cost increased as a percentage of sales to $483,309 (increasing to 37.1%37.7% of restaurant sales)sales from $486,245 (35.3% of restaurant sales) 33.2%in Fiscal 2019.fiscal 2022. The increase in the percentage wascost resulted from tighter labor markets, resulting in higher hourly wage costs offset by leveraging existing staffing and higher labor costs associated with the result minimum staffing level required as sales declined. The Company continued to benefit from virtually no turnover in its unit restaurant management which tends to cause unfavorable variations in labor costs.PIE acquisition. Payroll costs are semi-variable, in nature, meaning that they do not decrease proportionally to decreases in revenue, thus they increase as a percentage of restaurant sales when there is a decrease in restaurant sales.revenue. Occupancy and Other Operating Expenses For Fiscal 2020,the third fiscal quarter of 2023, occupancy and other expenses decreased $23,453 to 19.1%8.5% of sales or $248,762 from $272,215 (19.8%9.1% in 2022; the impact of restaurant sales) in Fiscal 2019.the closure of the West St. Paul at the end of 2022 was offset by rent and utility cost increases. Depreciation and Amortization Expense: For Fiscal 2020,the third fiscal quarter of 2023, depreciation and amortization expense decreased 24.5% or $14,415 to $46,115 (3.5%$114,774 (2.9% of sales) from $60,512 (4.4%$168,855 (4.2% of sales) in Fiscal 2019.the third quarter of fiscal 2022. The decrease results from reduced depreciation and amortization associated with our recent acquisitions. General and Administrative Costs General and administrative costs decreased 51.8% or $61,568increased by $54,105 in the third fiscal quarter of 2023 from $127,784 (9.3%$288,922 to $343,027; 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 and approximately $100,000 in legal expenses for a proxy solicitation contest related to one of sales) in Fiscal 2019 to $66,216 (5.1% of sales) in Fiscal 2020. The increase inthe Company’s investments. For these reasons, third-quarter general and administrative costs is primarily attributable to a reductionexpenses were 8.6% of sales, an increase from 7.2% in officer salary of approximately $37,500 during the period and the elimination of a general manager position.earlier year. Income (loss) from Operations The lossincome from operations for the third quarter of fiscal 2023 was $79,777 in Fiscal 2020$40,615 compared to a lossan income from operations of $129,177$8,991 in Fiscal 2019.the same period in 2022. The change inpercentage of income from operations in Fiscal 2020 comparedas a percentage of sales improved by 1.0% from .2%, reflecting an improved profit margin due to Fiscal 20120 was due primarily to the matters reduction in Generalmoderating inflation, higher general and Administrative Expenseadministrative expenses and the matters discussed in the “Net Revenues”"Net Revenues" and “Restaurant"Restaurant Operating Costs”Costs" sections above. Restaurant-level EBITDA: To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, theGAAP. The Company uses restaurant-level EBITDA, which is not a measure defined by GAAP. This non-GAAP operating measure is useful to both management and, we believe, to investors because it represents one means of gauging the overall profitability of our recurring and controllable core restaurant operations. This measure is not however, indicative of our overall results, nor does restaurant-level profit accrue directly to the benefit of stockholders, primarily due to the exclusion of corporate-level expenses. Restaurant-level EBITDA should not be considered a substitute for, or superior to operating income which is calculated in accordance with GAAP, and theunder 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 costsexpenses are excluded as they are generally not specifically identifiable to restaurant specificas restaurant-specific costs. Depreciation, and amortization, and impairment charges are excluded because they are not ongoing controllable cash expenses and are not related to the health of ongoing operations. | | 13 weeks ended, | | | | October 1, 2023 | | | October 2, 2022 | | Revenues | | $ | 4,007,656 | | | $ | 4,023,920 | | Reconciliation: | | | | | | | | | Income from operations | | | 40,615 | | | | 8,991 | | Depreciation and amortization | | | 114,774 | | | | 168,855 | | General and administrative, corporate-level expenses | | | 343,027 | | | | 288,922 | | Restaurant-level EBITDA | | $ | 498,416 | | | $ | 466,768 | | Restaurant-level EBITDA margin | | | 12.4 | % | | | 11.6 | % |
Our Results of Operations for the Thirty-nine Weeks Ended October 1, 2023, and the Thirty-nine Weeks Ended October 2, 2022 The following table sets forth our Condensed Statements of Income and percentages of total revenues for the 39-week fiscal periods. The percentages below may not reconcile because of rounding. | | 39 weeks ended, October 1, 2023 | | | 39 weeks ended, October 2, 2022 | | | | Amount | | | % | | | Amount | | | % | | SALES | | $ | 11,078,419 | | | | 100.0 | % | | $ | 9,621,996 | | | | 100.0 | % | COSTS AND EXPENSES | | | | | | | | | | | | | | | | | Restaurant operating expenses | | | | | | | | | | | | | | | | | Food and paper costs | | | 4,348,294 | | | | 39.3 | | | | 3,637,814 | | | | 37.8 | | Labor costs | | | 4,124,857 | | | | 37.2 | | | | 3,122,867 | | | | 32.5 | | Occupancy costs | | | 845,863 | | | | 7.6 | | | | 803,792 | | | | 8.4 | | Other operating expenses | | | 603,964 | | | | 5.5 | | | | 577,035 | | | | 6.0 | | Depreciation and amortization | | | 470,801 | | | | 4.2 | | | | 351,084 | | | | 3.6 | | Gain on sale of assets | | | (313,688 | ) | | | (2.8 | ) | | | - | | | | - | | General and administrative | | | 1,288,019 | | | | 11.6 | | | | 1,035,639 | | | | 10.8 | | Total costs and expenses | | | 11,368,110 | | | | 102.6 | | | | 9,528,231 | | | | 99.1 | | Income from operations | | | (289,691 | ) | | | (2.6 | ) | | | 93,765 | | | | 1.0 | | INTEREST EXPENSE | | | (73,857 | ) | | | (0.7 | ) | | | (88,099 | ) | | | (0.9 | ) | OTHER | | | 156,814 | | | | 1.4 | | | | (99,384 | ) | | | 1.0 | | EQUITY IN LOSS FROM AFFILIATE | | | (254,272 | ) | | | (2.3 | ) | | | (135,813 | ) | | | (1.4 | ) | INCOME TAX BENEFIT | | | 82,000 | | | | .7 | | | | 5,000 | | | | - | | NET INCOME (LOSS) | | $ | (379,006 | ) | | | (3.5 | )% | | $ | (224,531 | ) | | | (2.3 | )% |
Net Revenues: Net sales for the 39 weeks of fiscal 2023 increased $1,456,423 or 15.1% to $11,078,419 from $9,621,996 in fiscal 2022. The increase in sales was principally the result of a favorable impact in the 39 weeks of acquired restaurants, which contributed approximately $1.9 million in incremental sales in 2023, offsetting a 4.5% decline in BTND revenue. Burger Time unit sales for the 39 weeks ranged from a low of approximately $347,000 to a high of approximately $925,000. Average sales for each Burger Time unit were approximately $625,000 in 2023, a decline from approximately $626,000 in the same 39-week period in 2022. The sales decline in the 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. Costs of Sales - food and paper: Cost of sales - food and paper for the 2023 period increased as a percentage of sales to 39.3% from 37.8% of restaurant sales in the same period in 2022. This increase resulted from inflation early in the year, especially for Keegan's fresh seafood and the cost of meat which resulted in higher costs at Burger Time. 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 89.6% in 2023 from 84.6% in fiscal 2022. This increase was due to the rise in both hourly wages and commodity food costs, 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 of fiscal 2023, labor and benefits costs increased to 37.2% of restaurant sales from 32.5% in fiscal 2022. Significantly higher hourly wage rates at all locations increased the overall labor percentage. The hiring markets have become more challenging in terms of filling open positions. Payroll costs are semi-variable, meaning they do not decrease proportionally to decreases in revenue. Thus, they increase as a percentage of restaurant sales when there is a decrease. Occupancy and Other Operating Expenses: For the first 39 weeks of fiscal 2023, occupancy and other expenses fell to 7.6% of sales from 8.4% in 2022, principally as a result of reversing previously accrued property taxes. Aside from the real state tax matter, many of these costs are fixed, and the percentage reflects lower maintenance costs offset by higher lease occupancy costs at our new locations. Depreciation and Amortization Expense: Depreciation and amortization expenses in the third quarter of fiscal 2023 increased by $119,717 to $470,801 (4.2% of sales) from $351,084 (3.6% of sales) in 2022 and are the result of the purchase of three new restaurants and capital improvements, including significant parking lot repairs, at several of our locations. General and Administrative Costs: General and administrative costs during the first three quarters of fiscal 2023 increased $252,380 to $1,2,88,019 from $1,035,639 (10.8% of sales) during the fiscal 2022 period. The increase results from approximately $100,000 in legal and other costs associated with the Noble Roman’s Inc. proxy solicitation effort and other expenses generally associated with public reporting, stock-based compensation costs, and the expenses associated with long-term management employment agreements. Income from Operations: Operating loss was $289,691 in the 39 weeks of fiscal 2023 compared to a profit of $93,765 in the same period in fiscal 2022. The change in income from operations in 2023 compared to 2022 was due primarily to the increase in general and administrative expenses, which included higher costs associated with public company expenses, including the reasons described 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, we use restaurant-level EBITDA, which is not a measure defined by GAAP. This non-GAAP operating measure is helpful 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 general and administrative costs, depreciation and amortization, and impairment charges. General and administrative expenses are excluded as they are generally not specifically identifiable as restaurant-specific costs. Depreciation, amortization, and impairment charges are excluded because they are not ongoing controllable cash expenses and are not related to the health of ongoing operations. | | 13-Week Period | | | | 2020 | | | 2019 | | Revenues | | $ | 1,303,430 | | | $ | 1,377,833 | | Reconciliation: | | | | | | | | | (Loss) from operations | | | (79,777 | ) | | | (129,177 | ) | Depreciation and amortization | | | 44,820 | | | | 59,235 | | General and administrative, corporate level expenses | | | 66,216 | | | | 127,784 | | Restaurant-level EBITDA | | | (1,598 | ) | | | 59,119 | | Restaurant-level EBITDA margin | | | 0.0 | % | | | 4.2 | % |
| | 39 weeks ended, | | | | October 1, 2023 | | | October 2, 2022 | | Revenues | | $ | 11,078,419 | | | $ | 9,621,996 | | Reconciliation: | | | | | | | | | Income (loss) from operations | | | (289,691 | ) | | | 93,765 | | Depreciation and amortization | | | 470,801 | | | | 351,084 | | General and administrative, corporate-level expenses | | | 1,288,019 | | | | 1,035,639 | | Restaurant-level EBITDA | | $ | 1,469,129 | | | $ | 1,480,488 | | Restaurant-level EBITDA margin | | | 13.3 | % | | | 15.4 | % |
Liquidity and Capital Resources The condensed consolidated financial statementsIn its peak period, the public response to COVID-19 positively impacted our sales and liquidity. More recently, as customer activities have been prepared onreturned to normal patterns, our Burger Time business has experienced a going concern basis. Fordecline from the period ending March 29,2020,peak level at the Company incurred a net lossheight of $116,244. Cash flow provided by operating activities increased to $81,438 in 2020 from a negative $25,640 in fiscal 2019 principally as a result of increases in vendor accounts payable.COVID restrictions. On March 29, 2020, the CompanyOctober 1, 2023, we had $310,134$6.9 million in cash and cash equivalents and marketable securities and net working capital deficit of $535,201 an increase$6.2 million, a decrease of $65,875$.6 million from the year-end deficit of $468,326.January 1, 2023.
The coronavirus (“Covid-19”) global pandemic is significantly harmingIn the future, COVID and its variants may continue to impact the United States economy. Many businesses have closed, and many citizens are subjectIt is difficult to “shelter at home” governmental orders. At this time, all of our units continue to operate, however, it is impossible to predict either the near-term effects or the ultimate impact on the United States economy in general, the impact on the quick service drive-through segment of the Covid-19 pandemic on the Company’sfood service industry, and our operating results and financial conditioncondition.
Our primary requirements for liquidity are to fund our working capital needs, capital expenditures, and general corporate needs, as well as to invest in or acquire businesses. Our operations do not require significant working capital, and, like many restaurant companies, we generally operate with negative working capital. We anticipate that working capital deficits may be incurred in the situation is rapidly evolving. Afuture and possibly increase. Our primary liquidity and cash flow forecastsources are operating cash flows and cash on hand. We use this to service debt, maintain our stores to operate efficiently and increase our working capital. Our working capital position benefits from the fact that we collect cash from sales from our customers at the point of purchase or within a few days from our credit card processor; generally, payments to our vendors are not due for thirty days. Summary of Cash Flows Cash Flows Provided by Operating Activities Operating cash flow for the next 12 months prepared by management has been adjusted to reflect recent offers by banks, in the wake of the COVID-19 Pandemic, including the Company’s principal lenders, Northview Bank and Bremer Bank, to abate all loan payments for the next three months.39 weeks ending October 1, 2023, was a negative $74,732. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”)cash flow from operations was signed into law on March 27, 2020, and additional avenues of relief may be available to small businesses through programs administeredimpacted negatively by the Small Business Administration (“SBA”). The CARES Act includes, among other things, provisions relatingongoing costs related to payroll tax creditsour public company expenses, including stock-based compensation programs and deferrals, netcosts associated with contested proxy solicitation for our Noble Roman investment. We expect operating loss carrybackcash flow in future periods alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. Given the absence of any funding alternatives, the Company applied for and was granted loans totaling $460,400 under the Small Business Administration Payroll Protection Program. The Company expects to use these funds to meet payroll expenses. The Company’s BTNDDQ, L.L.C. subsidiary also received a $27,500 no-interest loan from a State of Minnesota Small Business Emergency loan program. As a result, the Company expects to have sufficient cash assets to meet its obligations for the next twelve months. No adjustments have been made relating to recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company not continue as a going concern.significantly affected by our recent acquisitions.
Cash Flows Used in Investing Activities During fiscal 2023, we have continued to seek acquisitions in the food service and related industries, purchasing two operating restaurants and purchasing a 41.2% interest in a publicly traded casual dining business. Cash Flows Used in Financing Activities A significant portion of our cash flow used in financing activities is allocated to service our debt. Contractual Obligations As of October 1, 2023, we had $4.4 million in contractual obligations relating to amounts due under mortgages on the real property where our stores are situated, including $1.9 million in capitalized lease obligations related to our recent acquisitions. Our monthly required payments on lease and mortgage obligations are approximately $47,000. Qualitative and Quantitative Disclosure about Market Risk
Commodity Price Risk
We are subject to volatility in food costs as a result of market risk associated with commodity prices. Our ability to recover increased costs through higher pricing is, at times, limited by the competitive environment in which we operate. We do not enter into pricing agreements with any of our suppliers to manage these risks. Beef is our largest single food purchase and the price we pay for beef fluctuates weekly based on beef commodity prices. We do not currently manage this risk with commodity future and option contracts. A ten percent increase in the cost of beef would result in approximately $98,000 of additional food costs for the Company annually.
Seasonality and Inflation
Seasonal factors and the timing of holidays cause our revenue to fluctuate from quarter to quarter. Our revenue per restaurant is typically slightly lower in the first and fourth quarters due to holiday closures and the impact of cold weather at all our locations. Adverse weather conditions may also affect customer traffic, especially in the first and fourth quarters, when customers do not use our outdoor seating areas, which impacts the use of these areas and may adversely affect our revenue.
Management does not believe that inflation has had a material effect on income during the 2019 or 2018 fiscal years. Increases in food, labor or other operating costs could adversely affect the Company’s operations. In the past, however, the Company generally has been able to increase menu prices or modify its operating procedures to substantially offset increases in its operating costs.
The cost of construction has also increased in recent history. We expect that costs to construct new restaurants in our existing and contiguous markets will be more expensive than several years ago, but we expect to achieve higher restaurant sales volumes and/or margin improvements to offset these or addition construction cost increases. Construction cost increases could have an adverse effect on our business and operations, particularly for new restaurant development.
Our business is subject to a wide range of federal, state and local regulations, which are subject to change in ways we cannot now anticipate. We are uncertain as to the effect, if any, that changes in the regulatory environment may have on our Company.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.
Recent Accounting Pronouncements
There has been no impact to our financial statements and our results of operations and financial condition as the result of the adoption of Recent Accounting Pronouncements, see “Part I, Item 1, Note 1. Summary of Significant Accounting Policies” of the Notes to Condensed Consolidated Financial Statements included in this quarterly report.
Critical Accounting Policies and Estimates
Our discussion and analysis of operating results and financial condition are based upon our financial statements. The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses and related disclosures of contingent assets and liabilities. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.
Our critical accounting policies are those that materially affect our financial statements and involve subjective or complex judgments by management. Although these estimates are based on management’s best knowledge of current events and actions that may impact us in the future, actual results may be materially different from the estimates.
Jumpstart Our Business Startups Act of 2012
We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.
Subject to certain conditions set forth in the JOBS Act, we are also eligible for and intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We may take advantage of these exemptions until we are no longer an emerging growth company. We will continue to be an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which we had total annual gross revenue of $1 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the completion of our initial public offering.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES. Disclosure Controls and Procedures Our management carried out an evaluation,(1) Evaluation of Disclosure Controls and Procedures
We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports we filed under the supervisionExchange Act is recorded, processed, summarized, and withreported within the participation ofperiods specified by the SEC's rules and forms. Disclosure controls are also designed to ensure that this information is accumulated and communicated to our principalmanagement, including our chief executive officer and principalchief financial officer, as appropriate, to allow timely decisions regarding required disclosure. As of October 1, 2023, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined inpursuant to Rule 13a-15(e) of13a-15(b) promulgated under the Exchange Act)Act. Based upon that evaluation and the material weakness in our internal control over financial reporting as disclosed in the Company's Form 10-K for the fiscal year ended January 1, 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this quarterly report. Based on this evaluation, our principal executive officer and principal financial officer concluded thatOctober 1, 2023, our disclosure controls and procedures were not effective asat a reasonable assurance level in ensuring that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules, regulations, and forms of the end of the period coveredSEC, including ensuring that such material information is accumulated by this quarterly report. The design of any system of control is based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all future events, no matter how remote, or that the degree of compliance with the policies or procedures may not deteriorate. Because of its inherent limitations, disclosure controls and procedures may not prevent or detect all misstatements. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and thatcommunicated to our management, isincluding our Chief Executive Officer, Chief Financial Officer, as appropriate to allow timely decisions regarding required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.disclosure.
(2) Changes in Internal Control over Financial Reporting There haveThe Company disclosed a material weakness for lack of segregation of duties and not performing an adequate risk assessment on monitoring of internal controls over financial reporting in its Form 10-K for the fiscal year ended January 1, 2023. While we are addressing these deficiencies, there has been no changessignificant change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during our most recent fiscal quarter that havehas materially affected or areis 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. 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.
PART II—II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are presently no pending legal proceedings to which the Company is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it. ITEM 1A. RISK FACTORS We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information required under this item. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SinceUnregistered Sales of Equity Securities
On February 9, 2022, the independent members of the Board of Directors and the Compensation Committee of the board of Directors approved a grant of 250,000 shares of common stock to each of Gary Copperud and Kenneth Brimmer, the Company's chief executive officer and chief financial officer, respectively, if, so long as the Company's publicly traded warrants are outstanding, the Company's common stock trades at $8.50 per share for 20 consecutive trading days. Final approval of the awards is contingent upon shareholder approval of an increase in the number of shares available for grant under the 2019 Incentive Plan, which is expected to be proposed at the next annual shareholders’ meeting. The award of the shares is tied directly to the price at which the common stock purchase warrants issued in the Company's initial public offering completed in November 2021 are redeemable by the Company. The warrants initially are exercisable at $5.50 per share (subject to adjustment under certain circumstances). The Company expects that if and when the warrants become redeemable, holders will exercise their warrants, and the Company will receive additional capital to fund acquisitions and growth. On July 5, 2023, the Company granted a seven-year option to purchase 100,000 shares of its common stock at $2.50 per share to a consultant. These options granted to the consultant vest monthly over a 60-month period so long as the consulting relationship continues. Other than as set forth above, since the date on which the Company filed its annual reportAnnual Report on Form 10-K and through the date of this quarterly report, the Companywe did not sell any securities. Use of Proceeds Since the closing of the Company's initial public offering in November 2021, the Company has used the proceeds received from the sale of securities for general working capital purposes and to acquire (i) the restaurant assets of Keegan's Seafood Grille ($1,150,000) and Pie in the Sky Bakery and Coffee Shop ($1,160,000) and (ii) a 41.2% of the outstanding shares of common stock of Bagger Dave's ($1,390,000) and (iii) the Village Bier Garten, all as more fully described under Management's Discussion and Analysis of Financial Condition and Results of Operations. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. | BT BRANDS, INC. | | | |
| | | Date: May 12, 2020 | By:
| /s/ Gary Copperud
| | | Name:
| Gary Copperud
| | | Title:
| Chief Executive Officer
| | | |
| | Date: May 12, 2020November 15, 2023
| By: | /s/ Kenneth Brimmer | | | Name: | Kenneth Brimmer | | | Title: | Chief Operating Officer and Principal Financial Officer | |
|