UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

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

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

For the transition period from ________ to _________

Commission File Number: 333-233233

BT BRANDS, INC.

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

Wyoming		~~90-1495764~~91-1495764
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

405 Main Avenue West, Suite 2D, West Fargo, NDNorth Dakota		58078
(Address of principal executive offices)		(Zip Code)

(307) ~~291-9885~~223-1663

(~~Registrant's~~Registrant’s telephone number, including area code)

NONE

(Former name former address and former fiscal year if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange

on which registered

Common Stock, $0.002 per share

BTBD

The NASDAQ Stock Market LLC

Warrant to Purchase Common Stock

BTBDW

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for a such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

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

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

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

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

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

At ~~May 16,~~August 10, 2022, there were 6,461,118 shares of common stock outstanding.

CAUTIONARY STATEMENT REGARDING RISKS

AND UNCERTAINTIES THAT MAY AFFECT FUTURE RESULTS

Forward-Looking Information

This quarterly report contains forward-looking statements about the business, financial condition, and prospects of BT Brands, Inc. and its wholly-owned subsidiaries (together, “BT Brands” or the ~~"Company"~~“Company”). Forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, can be identified by the use of forward-looking terminology such as ~~"believes," "projects," "expects," "may," "estimates," "should," "plans," "targets," "intends," "could," "would," "anticipates," "potential," "confident," "optimistic"~~“believes,” “projects,” “expects,” “may,” “estimates,” “should,” “plans,” “targets,” “intends,” “could,” “would,” “anticipates,” “potential,” “confident,” “optimistic” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, guidance, expectations, and future plans. Forward-looking statements can also be identified by the fact these statements do not relate strictly to historical or current matters. ~~Rather, forward-looking~~Forward-looking statements relate to anticipated or expected events, activities, trends, or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties.

While ~~the Company believes~~we believe the expectations reflected in forward-looking statements are reasonable, there can be no assurances such expectations will prove accurate. Certain factors may cause results to ~~be accurate. Security holders are cautioned such forward-looking statements involve risks and uncertainties. You should evaluate all~~differ materially from those anticipated by the forward-looking statements made in this ~~report~~quarterly report. Such factors may include, without limitation, the risks, uncertainties, and regulatory developments (1) related to public health, which include risks and uncertainties related to COVID in its various forms, the impact of governmental regulations that have been and may in the ~~context of~~future be, imposed in response to the ~~factors that~~pandemic which potentially could ~~cause outcomes to differ materially from our expectations. These factors include, but are not limited to:~~

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

~~Table of Contents~~

We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences we anticipate or affect us or our operations in the ways we expect. The forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law. If we update one or more forward-looking statements, no inference should be made that we will make additional updates regardinghave an impact on discretionary consumer spending and (2) those ~~or other forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.~~

~~From time to time, oral or written forward-looking statements are also included~~discussed and described in our reports on Forms 10-K, 10-Q, and 8-K, our Schedule 14A, our press releases and other materials released to the public. Although we believe that at the time made, the expectations reflected in all of these forward-looking statements are and will be reasonable, any or all of the forward-looking statements may prove to be incorrect. This may occur as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties. Many factors discussed in this Quarterly Report2021 annual report on Form 10-Q, certain of which are beyond our control, will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from forward-looking statements. In light of these and other uncertainties, you should not regard the inclusion of a forward-looking statement in this Quarterly Report on Form 10-Q or other public communications that we might make as a representation by us that our plans and objectives will be achieved, and you should not place undue reliance on such forward-looking statements.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in our subsequent periodic reports10-K filed with the Securities and Exchange ~~Commission.~~Commission (the “SEC”) on March 17, 2022. Many of these risks and uncertainties are beyond our ability to control or predict; in many cases, the risks and uncertainties could cause its actual results to differ materially from those indicated by the forward-looking statements. The forward-looking statements contained in this quarterly report speak only as of the date of this quarterly report. We expressly disclaim any obligation or undertaking to report any updates or revisions to any such statement to reflect any change in our expectations or any change in events, conditions, or circumstances on which any such statement is based, except as required by law.

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TABLE OF CONTENTS

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

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

Table of Contents

~~TABLE OF CONTENTS~~

BT BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

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

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

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

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

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

Total current liabilities		1,387,593			925,310

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

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preferred stock, $0.001 par value, 2,000,000 shares authorized, no shares outstanding at July 3, 2022 and January 2, 2022		0			0
Common stock, $0.002 par value, 50,000,000 authorized, 6,461,118 and 6,447,506 shares issued and outstanding at July 3, 2022 and January 2, 2022, respectively		12,922			12,895
Additional paid-in capital		11,363,935			11,215,696
Accumulated deficit		(649,863	)		(600,238	)

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

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

See Notes to Condensed Consolidated Financial Statements

Table of Contents

~~PART I — FINANCIAL INFORMATION~~

~~ITEM 1. FINANCIAL STATEMENTS~~

~~BT BRANDS, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED BALANCE SHEETS~~

April 3,
2022

January 2,
2022

(Unaudited)

ASSETS

CURRENT ASSETS

Cash

$ 11,073,645

$ 12,385,632

Maketable securities

254,100

0

Receivables

15,830

72,251

Inventory

97,850

79,510

Prepaid expenses and other current assets

51,110

27,186

Total current assets

11,492,535

12,564,579

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET

2,411,600

1,592,338

LAND AND BUILDINGS HELD FOR SALE

258,751

258,751

OPERERATING LEASE RIGHT-OF-USE ASSET

615,701

0

INVESTMENT IN RELATED COMPANY

304,000

75,000

GOODWILL

200,000

0

OTHER ASSETS, net

131,546

15,059

Total assets

$ 15,414,133

$ 14,505,727

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable

$ 403,328

$ 291,973

Current maturities of long-term debt

171,357

169,908

Current operating lease obligation

34,400

0

Accrued expenses

360,085

254,341

Income taxes payable

198,749

209,088

Total current liabilities

1,167,919

925,310

LONG-TERM DEBT, LESS CURRENT PORTION

2,790,728

2,833,064

NONCURRENT OPERATING LEASE OBLIGATION

582,117

0

DEFERRED INCOME TAXES

94,000

119,000

Total liabilities

4,634,764

3,877,374

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY

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

0

0

Common stock, $0.002 par value, 50,000,000 authorized, 6,461,118 and 6,447,506 shares issued and outstanding at April 3, 2022 and January 2, 2022, respectively

12,922

12,895

Additional paid-in capital

11,324,035

11,215,696

Accumulated deficit

(557,588 )

(600,238 )

Total shareholders' equity

10,779,369

10,628,353

Total liabilities and shareholders' equity

$ 15,414,133

$ 14,505,727

~~See Notes to Condensed Consolidated Financial Statements~~

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

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

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

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

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

See Notes to Consolidated Condensed Financial Statements

Table of Contents

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

13 Weeks Ended,

13 Weeks Ended,

April 3,
2022

April 4,
2021

SALES

$ 2,073,195

$ 1,940,872

COSTS AND EXPENSES

Restaurant operating expenses

Food and paper costs

721,583

731,954

Labor costs

607,710

565,492

Occupancy costs

174,638

136,548

Other operating expenses

119,867

123,209

Depreciation and amortization expenses

69,415

54,836

General and administrative expenses

291,061

105,338

Total costs and expenses

1,984,274

1,717,377

Income from operations

88,921

223,495

INTEREST EXPENSE

(28,271 )

(38,571 )
INCOME BEFORE TAXES

60,650

184,924

INCOME TAXES

(18,000 )

(50,000 )
NET INCOME

$ 42,650

$ 134,924

NET INCOME PER COMMON SHARE - Basic and Diluted

$ 0.01

$ 0.03

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

6,455,434

4,047,502

~~See Notes to Condensed Consolidated Financial Statements~~

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

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

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

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

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

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

See Notes to Consolidated Condensed Financial Statements

Table of Contents

~~BT BRANDS, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY~~

~~(Unaudited)~~

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

*For the 26-week periods-*																Common Stock		Additional		Accumulated
														Shares		Amount		Paid-in Capital		(Deficit)			Total

Balances, January 2, 2022															6,447,506	$	12,895	$	11,215,696	$	(600,238	)	$	10,628,353
Stock-based compensation															-		0		73,400		0			73,400
Shares issued in exercise of warrants															13,612		27		74,839		0			74,866
Net loss															-		0		0		(49,625	)		(49,625	)
Balances, July 3, 2022															6,461,118	$	12,922	$	11,363,935	$	(649,863	)	$	10,726,994

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

Balances, January 3, 2021		4,047,502	$	8,095	$	497,671	$	(1,208,089	)	$	(702,323	)			4,047,502	$	8,095	$	497,671	$	(1,208,089	)	$	(702,323	)
Net income		-		0		0		134,924			134,924				-		0		0		347,440			347,440
Balances, April 4, 2021		4,047,502		8,095		497,671		(1,073,165	)		(567,399	)
Balances, July 4, 2021															4,047,502	$	8,095	$	497,671	$	(860,649	)	$	(354,883	)

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

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

Balances, January 2, 2022		6,447,506	$	12,895	$	11,215,696	$	(600,238	)	$	10,628,353
Stock-based compensation		-		0		33,500		0			33,500
Exercise of common stock warrants		13,612		27		74,839		0			74,866
Balances, April 4, 2021															4,047,502	$	8,095	$	497,671	$	(1,073,165	)	$	(567,399	)
Net income		-		0		0		42,650			42,650				-		0		0		212,516			212,516
Balances, April 3, 2022		6,461,118		12,922		11,324,035		(557,588	)		10,779,369
Balances, July 4, 2021															4,047,502	$	8,095	$	497,671	$	(860,649	)	$	(354,883	)

See Notes to Condensed Consolidated Financial Statements

Table of Contents

BT BRANDS, INC. ~~AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~

13 Weeks ended,

April 3,
2022

April 4,
2021

CASH FLOWS FROM OPERATING ACTIVITIES

Net Income

$ 42,650

$ 134,924

Adjustments to reconcile net income to net cash

provided by operating activities-

Depreciation and amortization

69,415

56,301

Amortization of debt issuance premium included interest expense

1,350

0

Deferred taxes

(25,000 )

10,000

Stock-based compensation

33,500

0

Unrealized loss on available-for-sale securities

6,746

0

Changes in operating assets and liabilities, net of acquisition -

Receivables

56,421

14,483

Inventory

(8,291 )

(7,018 )
Prepaid expenses and other current assets

(23,924 )

(7,143 )
Other assets

(10,000 )

0

Accounts payable

111,355

178,716

Accrued expenses

93,511

(177,971 )
Income taxes payable

(10,339 )

40,000

Net cash provided by operating activities

337,394

242,292

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of assets of Keegan's Seafood Grille

(1,150,000 )

Purchase of property and equipment

(10,164 )

(40,709 )
Investment in related company

(229,000 )

Other assets

(32,000 )

Purchase of Maketable securities

(260,846 )

Net cash used in investing activities

(1,682,010 )

(40,709 )
CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from exercise of common stock warrants

74,866

0

Principal payments on long-term debt

(42,237 )

(62,729 )
Net cash provided by (used in) financing activities

32,629

(62,729 )

CHANGE IN CASH

(1,311,987 )

138,854

CASH, BEGINNING OF PERIOD

12,385,632

1,321,244

-

CASH, END OF PERIOD

$ 11,073,645

$ 1,460,098

SUPPLEMENTAL DISCLOSURES

Cash paid for interest

$ 26,291

$ 37,106

~~See Notes to Condensed Consolidated Financial Statements~~

~~Table of Contents~~

~~BT BRANDS, INC.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

The accompanying Condensed Consolidated Balance Sheet as of ~~April~~July 3, 2022, does not include all of the disclosures required by GAAP. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of January 2, 2022, and the related notes ~~thereto~~ included in ~~the Company's~~our Form 10-K for the fiscal year ended January 2, 2022.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and the differences could be material.

The Company

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

Business

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

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

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

Table of Contents

Fiscal Year Period

~~The Company's~~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 ~~the~~a 52-week year. ~~All references to years in this report refer to the 13-week periods in the respective fiscal year periods. The fiscal year~~Fiscal 2022 is 52 weeks ending January 1, ~~2023.~~2023, and fiscal 2021 was a 52-weeks ending January 2, 2022.

Cash

~~Table of Contents~~

~~Cash~~

~~Cash and cash flows are reported net of outstanding checks and include amounts on deposit at banks and deposits in transit.~~ At times, ~~the~~our bank deposits exceed the amount insured by the Federal Deposit Insurance Corporation. ~~The Company also maintains~~In addition, we maintain cash deposits in brokerage ~~in excess of~~accounts, including money market funds above the insured amount. ~~The Company believes~~We do not believe there is ~~not~~ a significant risk related to cash.
Investment
Our 41.2% ownership of Bagger Dave’s is accounted for using the “equity method” of accounting. Under the equity method, our share of the net income (loss) is recognized as income (loss) in our condensed consolidated statements of income and added to (subtracted from) the investment account. Dividends received, if any, are deducted from the investment. See Note 9 for information regarding our related party investment.

Fair Value of Financial Instruments

~~The Company's~~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:~~follows:

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

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

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

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

~~Equity investments~~Investments in marketable equity securities are carried at fair value. ~~At April~~On July 3, 2022, ~~the $6,745 reduction from cost to fair value was not considered material and is included in general and administrative expenses. On April 3, 2022, the cost of~~ marketable securities consisted of ~~a single~~ Nasdaq-listed ~~level-one security~~equity securities with a historical cost of ~~$260,845. This investment is~~$607,988. These investments are reflected in the accompanying financial statements ~~at April~~on July 3, 2022, at the level-one fair value quoted in an active market of ~~$254,100.~~$527,750.
Receivables

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

Inventory

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

Property and Equipment

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

9
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~~The Company reviews~~
We review long-lived assets to determine if the carrying value of these assets is recoverable based on estimated cash flows. Assets are evaluated at the lowest level for which cash flows can be identified at the restaurant level. In determining future cash flows, estimates are made by us for the ~~Company for~~ future operating results of each restaurant. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets.

Goodwill

Goodwill is the excess of the purchase price over the estimated fair value of acquired business assets. In accordance with GAAP, ~~goodwill~~Goodwill is not amortized. ~~The Company~~We periodically ~~assesses~~assess goodwill for ~~impairment. Management has estimated~~impairment and have determined there is no impairment of ~~goodwill~~Goodwill at ~~April~~July 3, ~~2022,~~2022.

10
Intangible Assets
~~Table of Contents~~

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

As of ~~April~~July 3, 2022, a property in the St. Louis area, which has a carrying value of $0, and a property in Richmond, Indiana, are held for sale. ~~The Company believes~~We believe the Richmond property will be sold at or above its current-carrying cost. The remaining book value of $258,751 is included in Other Assets in the ~~current-carrying cost of assets held for sale.~~accompanying balance sheet.

Income Taxes

~~Ths~~The Company provides for income taxes under ~~(Accounting~~Accounting Standards Codification (ASC), ~~740),~~740, Accounting for Income Taxes. ASC 740 uses an asset and liability approach in accounting for income taxes. Deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities. They are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. ~~The Company provides~~If 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 ~~April~~July 3, 2022, ~~the Company estimates~~we estimated a current tax provision at the net combined federal and state ~~statutory~~ rate of approximately 27.5%.

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

Per Common Share Amounts

Net income per common share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted net income or loss per share is calculated by dividing net income by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. Common stock equivalents are excluded from the computation of diluted per share amounts if their effect is anti-dilutive. There were no dilutive shares ~~as of~~for the periods ending in 2022 and 2021.

10
~~Other Assets~~
Other assets include intangible assets that are the allocated fair value of trademarks and other assets purchased in the acquisition of Keegan's and the acquired Dairy Queen franchise. Where appropriate, the cost of intangible assets is amortized over the estimated useful life.
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NOTE 2 – ~~ACQUISITION~~ ACQUISITIONS

Restaurant Acquisition - ~~Keegan's~~Keegan’s

On March 2, 2022, ~~the Company,~~BT Brands, through its 1519BT, LLC subsidiary ~~("1519BT")~~(“1519BT “), purchased the net assets of Keegan’s, ~~Seafood Grille,~~ a fresh seafood restaurant located in Indian Rocks Springs, ~~Florida (“Keegan’s).~~Florida. Concurrent with the purchase, ~~the Company~~we entered ~~into~~ a 131-month lease ~~for a location~~ for the approximately 2800 square foot space ~~Keegan's~~that Keegan’s has ~~operated in~~occupied for more than 35 years. ~~The Company~~We acquired ~~the Keegan's~~Keegan’s tradename as part of the purchase and will continue to operate ~~under~~ the ~~Keegan's~~business as Keegan’s Seafood ~~Grille name.~~Grille. The purchase price was approximately ~~$1.150~~$1.15 million, paid in cash at closing.

The ~~Keegan's~~Keegan’s acquisition was accounted for using the acquisition method of accounting following ASC 805 ~~"Business~~“Business Combinations."” Accordingly, the consolidated statements of operations include the results of these operations from the date of acquisition. The assets acquired were recorded at their estimated fair values. The Company recorded provisional amounts and will complete the acquisition accounting once it finalizes its valuation analysis.
As a result of the Keegan’s acquisition, we provisionally recorded $200,000 in goodwill, representing the excess of fair value over the purchase price of the identifiable assets; the allocation to purchased goodwill is expected to be deductible for income tax purposes over fifteen years.
The following table presents the preliminary estimate of the fair value of the assets acquired, and liabilities assumed in the Keegan’s transaction:
Assets acquired:

Inventory

$ 10,049

Equipment

428,000

Leasehold improvements

450,000

Trademark, website, and other intangibles

75,000

Total identifiable assets

963,049

Assumed current liabilities

(17,260 )
Net assets acquired

945,789

Goodwill

204,211

Purchase price

$ 1,150,000

Restaurant Acquisition – Pie In the Sky Coffee and Bakery
On May 11, 2022, our 10Water Street, LLC subsidiary (“10Water”) purchased the net assets of PIE, a bakery and coffee shop located in Woods Hole, Massachusetts. Concurrent with the purchase, we entered into a 60-month lease, including three additional five-year renewal options. The lease covers the approximately 3,500 square feet PIE has operated in for more than 20 years. We acquired the Pie in the Sky tradename and the piecoffee.com website URL as part of the purchase and will continue to operate as Pie in the Sky. The purchase price was approximately $1.16 million, including $1.15 million in cash paid at closing.
The acquisition of PIE was accounted for following ASC 805 “Business Combinations.” Accordingly, the consolidated statements of operations include the results of these operations from the date of acquisition. The assets acquired were recorded at their estimated fair values based on information available as of ~~April 3, 2022. The Company~~the closing date. We recorded provisional amounts ~~for the acquired assets including goodwill~~ as of ~~April 3, 2022~~the purchase date and will complete the acquisition accounting once ~~it finalizes its~~we finalize the valuation analysis.

As a result of the ~~Keegan’s~~PIE acquisition, ~~the Company~~we provisionally recorded ~~$200,000~~$270,100 in ~~Goodwill,~~goodwill, representing the excess of fair value over the purchase price of the identifiable assets, which is expected to be deductible for income tax purposes over fifteen years.

11
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The following table presents ~~the~~our preliminary estimate of the fair value of the assets acquired and liabilities assumed in the ~~Keegan's~~PIE transaction is:

Assets acquired:

Inventory

$ 10,049

$ 23,500

Equipment

428,000

400,000

Leasehold improvements

450,000

Trademark, website and other intangibles

75,000

Total identifiable assets acquired

963,049

Furniture and fixtures

125,000

Trademark, website, and other intangibles

50,000

Non-compete agreement

300,000

Liabilities assumed:

Gift card liability

13,049

Total assets acquired

898,500

Assumed current liabilities

(23,120 )

Net assets acquired

950,000

875,380

Goodwill

200,000

284,220

Purchase price

$ 1,150,000

$ 1,159,600

NOTE 3 -– INTANGIBLE ASSETS
At July 3, 2022, based upon our preliminary evaluation of the value of acquired assets, Intangible Assets are the following:

Estimated
Useful Life (Years)

Amount

Covenant not to compete

4

$ 300,000

Trademarks, tradenames, websites and social media accounts

20

125,000

$ 425,000

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

April 3,
2022

January 2,
2022

July 3, 2022

January 2, 2022

Land

$ 485,239

$ 485,239

$ 485,239

$ 485,239

Equipment

3,082,831

2,674,529

3,417,413

2,674,529

Buildings and leasehold improvements

1,800,014

1,322,085

1,998,516

1,322,085

Total property and equipment

5,368,084

4,481,853

5,901,168

4,481,853

Accumulated depreciation

(2,697,733 )

(2,630,764 )

(2,680,610 )

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

(258,751 )

(258,751 )

(258,751 )

(258,751 )
Net property and equipment

$ 2,411,600

$ 1,592,338

$ 2,961,807

$ 1,592,338

Depreciation expense for the ~~13-week~~26-week periods in 2022 and 2021 was ~~$68,902~~$177,676 and ~~$54,269,~~$113,394, respectively.
~~NOTE 4 - ACCRUED EXPENSES~~
~~Accrued expenses consisted of the following at:~~

April 3,
2022

January 2,
2022

Accrued real estate taxes

$ 73,211

$ 103,615

Accrued bonus compensation

7,000

7,000

Accrued payroll

126,432

44,700

Accrued payroll taxes

14,599

8,424

Accrued sales taxes payable

80,714

50,414

Accrued vacation pay

17,663

17,663

Accrued gift card liability

23,622

10,036

Accrued franchise royalty

2,931

2,614

Other accrued expenses

13,913

9,875

$ 360,085

$ 254,341

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NOTE 5 - ACCRUED EXPENSES
Accrued expenses consisted of the following at:

July 3, 2022

January 2, 2022

Accrued real estate taxes

$ 88,800

$ 103,615

Accrued bonus compensation

59,139

7,000

Accrued payroll

228,127

44,700

Accrued payroll taxes

13,398

8,424

Accrued sales taxes payable

118,468

50,414

Accrued vacation pay

17,664

17,663

Accrued gift card liability

29,295

10,036

Accrued franchise royalty

6,494

2,614

Other accrued expenses

14,405

9,875

$ 575,790

$ 254,341

NOTE 6 - LONG TERM DEBT

~~The Company's~~Our long-term debt is as follows:

April 3,
2022

January 2,
2022

July 3, 2022

January 2, 2022

Three notes payable to a bank dated June 28, 2021 due in monthly installments totaling $22,213 which includes principal and interest at fixed rate of 3.45% through June 28, 2031. Beginning in July 2031, the interest rate will be equal to the greater of the "prime rate" plus .75%, or 3.45%. These notes mature on June 28, 2036. The notes are secured by mortgages on Company owned properties. The notes are guarenteed by BT Brands, Inc. and a shareholder of the Company.

$ 2,987,109

$ 3,027,971

Three notes payable to a bank dated June 28, 2021 due in monthly installments totaling $22,213 which includes principal and interest at fixed rate of 3.45% through June 28, 2031. Beginning in July 2031, the interest rate will be equal to the greater of the "prime rate" plus .75%, or 3.45% . These notes mature on June 28, 2036. The notes are secured by mortgages covering ten BTND operating locations. The notes are guaranteed by BT Brands, Inc. and a shareholder of the Company.

$ 2,946,685

$ 3,027,971

Minnesota Small Business Emergency Loan dated April 29, 2020 payable in monthly installments of $458.33 beginning December 15, 2020 which includes principal and interest at 0%. This note is secured by the personal guaranty of a shareholder of the Company.

20,625

22,000

19,250

22,000

3,007,734

3,049,971

2,965,935

3,049,971

Less - unamortized debt issuance costs

(45,649 )

(46,999 )

(44,298 )

(46,999 )
Current maturities

(171,357 )

(169,908 )

(171,358 )

(169,908 )

$ 2,750,279

$ 2,833,064

$ 2,790,728

$ 2,833,064

NOTE 67 - STOCK-BASED COMPENSATION

In 2019, the Company adopted the 2019 BT Brands Incentive Plan (the ~~"2019~~“2019 Incentive ~~Plan"~~Plan”), under which it may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units, and other stock and cash awards to eligible participants. The number of common shares reserved for issuance is 250,000. As of ~~April~~July 3, 2022, there were ~~5,000~~13,400 shares available for a grant under the 2019 Incentive Plan.

During the year ended January 2, 2022, we issued options to purchase 15,000 shares of common stock under the ~~"2019~~“2019 Incentive Plan as stock awards to three directors of the Company in connection with their joining the board of directors. The options are exercisable at $5 per share through 2031. In the first ~~quarter~~half of 2022, ~~the company~~we granted ~~215,750~~220,750 options to employees and consultants to purchase shares at $2.50 per share.

Stock options granted to employees and directors ~~generally~~ vest over two to five years, in monthly or annual installments, as outlined in each agreement. Options expire ten years from the date of grant. Compensation expense equal to the ~~grant date~~ fair value of the options at the grant date is recognized in general and administrative expense over the applicable service period. Compensation expense for the ~~first-quarter period~~26 weeks in 2022 was ~~$33,500~~$73,400 and was zero in ~~the first quarter of~~a similar period in 2021. Based on current estimates, we project that for current grants, approximately $230,000 in stock-based compensation expense will be recognized in future periods.

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~~The Company utilizes~~
We utilize the Black-Scholes option pricing model when determining the compensation cost associated with stock options issued using the following significant assumptions:

●·
Stock price – Published trading market values of the ~~Company's~~Company’s common stock as of grant date.

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

●·
Expected life – The simplified method

●·
Expected dividend – The rate of dividends ~~that the Company expects~~expected to ~~pay~~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.

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~~The Company recognized stock-based compensation expense in its consolidated statements of operations for the three and nine months ended April 3, 2022, as follows:~~
Information regarding ~~the Company's~~our stock options is summarized below:

Number of

Weighted Average

Weighted Average Remaining Contract Term

Aggregate
Intrinsic

Number of

Weighted Average

Weighted Average Remaining Term

Aggregate
Intrinsic

Options

Exercise Price

(In Years)

  Value

Options

Exercise Price

(In Years)

Value

Options outstanding at January 2, 2022

15,000

$ 5.00

9.3

$ 0

15,000

$ 5.00

9.3

$ 0

Granted

215,750

2.50

0

220,750

2.50

$ 0

Exercised

0

0

0

0

$
0

Canceled, forfeited, or expired

0

0

(8,200 )

2.50

$
0

Options outstanding at April 3, 2022

230,750

$ 2.66

9.8

$ 0

Options exercisable at April 3, 2022

58,150

$ 3.13

9.7

$ 0

Options outstanding at July 3, 2022

227,550

$ 2.67

9.8

$ 0

Options exercisable at July 3, 2022

59,150

$ 3.18

9.7

$ 0

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

Fair value of options granted during the period

$ 1.392

$ 1.39

Expected life (in years)

4.833

4.83

Expected dividend

$ —

$ 0

Expected stock volatility

63 %

63 %
Risk-free interest rate

2 %

2 %

On February 9, 2022, the independent members of the Board of Directors ~~and~~comprising its Compensation Committee approved a proposal wherein, so long as the Company’s publicly traded warrants are outstanding, senior management of the Company will be granted 250,000 shares of common stock as an award upon the ~~Company's~~Company’s share price reaching $8.50 per ~~share.~~share for 20 consecutive trading days. Final approval of the ~~plan~~proposal is contingent upon shareholder approval of an ~~expanded~~increase in the number of shares available under the 2019 Incentive ~~Stock~~ Plan, which is expected to be proposed at the next meeting of ~~shareholders of the company.~~shareholders.

NOTE 78 – LEASES

Concurrent with the closing of the acquisition of ~~Keegan's~~Keegan’s net assets, ~~the Company~~we entered into a lease for approximately 2,800 square feet of ~~space the~~ restaurant ~~occupies.~~space. The ~~terms of the~~ 131-month Keegan’s lease ~~provide~~provides for an initial rent of $5,000 per month with an annual escalation equal to the greater of 3% or the Consumer Price Index. The lease is being accounted for as an operating lease. At the inception of the lease, ~~the Company~~we recorded ~~both~~ an operating lease obligation and a right-of-use asset of $624,000. The present value discounted at 4% of the remaining lease obligation of ~~$616,517~~$607,220 is reflected as a liability in the accompanying financial statements.

~~Because our~~Keegan’s lease ~~for the Keegan location~~ does not provide an implicit interest ~~rate,~~rate; we used our incremental borrowing rate of 4% to determine the ~~lease payments'~~ present value. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the lease term. Variable lease costs consist primarily of property taxes, insurance, certain utility ~~costs~~expenses, and sales tax. ~~In addition~~
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 60-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 $554,849. The present value discounted at 5% of the remaining lease obligation of $542,578 is reflected as a liability in the accompanying financial statements. The weighted-average remaining lease term is approximately 6.9 years.
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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 ~~operating~~ lease ~~cost,~~payments on a collateralized basis over the ~~Company will incur certain variable~~lease term. Variable lease costs ~~which are expected to average approximately $3,000 per month beginning in April 2022.~~ consist primarily of property taxes, insurance, certain utility expenses, and sales tax.

Following is a schedule of the approximate minimum future lease payments on the operating ~~lease for the Keegans operating location~~leases as of ~~April~~July 3, 2022:

2022

$ 50,000

Total

Remainder 2022

$ 90,000

2023

61,650

181,350

2024

63,500

185,990

2025

67,400

190,600

2026

69,400

196,000

2027 and thereafter

459,050

495,054

Total future minimum lease payments

762,000

1,338,994

Less - interest

145,483

(189,196 )
Present value of lease payments

$
616,517

$ 1,149,798

The Company is a party to a month-to-month land lease agreement for one of its Burger Time locations. The net book value of the building ~~located~~ on this land is approximately ~~$ 18,500.~~$18,500. The monthly lease payment is $1,600 plus the cost of property taxes.

The Company also ~~rents~~pays a monthly rent, for month-to-month arrangements, for corporate and administrative office ~~space~~spaces in West Fargo, North Dakota, and Minnetonka, Minnesota, for a combined monthly rent of approximately $2,200.

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NOTE 89 - RELATED PARTY ~~TRANSACTIONS~~TRANSACTION

Next Gen Ice

In 2019, ~~the Company~~BT Brands made cash advances to Next Gen Ice, Inc. (NGI) in the form of Series C Notes totaling a principal amount of $179,000 ~~("Notes"~~(“Notes”). ~~The Company's~~Our CEO, Gary Copperud, is Chairman of the Board of Directors of NGI. ~~The Company's~~Our Chief Operating Officer, Kenneth Brimmer, is also a member of the Board of Directors of NGI and serves as Chief Financial Officer of ~~NGI on a part-time contract basis.~~NGI. When the loan was made, Mr. Copperud and ~~a limited liability company~~an entity controlled by him together ~~own~~owned approximately 34% of the outstanding equity of NGI. ~~The Notes were modified on March 2, 2020, and the maturity was extended to August 31, 2020.~~ As part of ~~the~~a Note modification, ~~the Company~~BT Brands received 179,000 shares of common stock in ~~Next Gen Ice~~NGI from the founders of NGI, representing approximately 2% of NGI shares outstanding. ~~The Company~~BT Brands also holds warrants expiring March 31, 2028, to purchase 358,000 shares of common stock for $1.00 per share, which were initially set to expire on March 31, 2023. Effective with the Company’s agreement to make an additional investment in February 2022, the expiration date of the 358,000 $1.00 stock purchase warrants was extended by five years to March 31, 2028.share. The common stock and ~~common stock purchase~~ warrants ~~received by the Company~~ were recorded at a value determined by ~~the Company~~BT Brands of $75,000.
The ~~Company has determined that its~~ investment in NGI does not have a readily determinable market value. Therefore, it is carried at ~~the~~a cost determined by ~~the Company when the shares and warrants were received. The Notes were repaid in August 2020 with interest.~~BT Brands. On February 2, 2022, ~~the Company made an additional investment into NGI of~~BT Brands invested $229,000 in NGI Series A1 8% Cumulative Convertible Preferred Stock, ~~including~~which included a five-year warrant to purchase 57,250 shares at $1.65 per share. The total value of ~~the Company’s~~our investment in NGI at ~~April~~July 3, 2022, is its fair value of $304,000, comprised of the $75,000 value determined by ~~the Company~~BT Brands for the initial common shares and warrants and the ~~$209,000~~$229,000 cost of the ~~February 2,~~ investment in the NGI Convertible Preferred Stock and ~~Warrants.~~warrants.

NOTE ~~9 -~~10 – 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~~We are not aware of any significant asserted or potential claims ~~which~~that could impact ~~its~~our financial position.

NOTE 1011 – SUBSEQUENT EVENT

Acquisition of Village Bier Garten Restaurant
On ~~May 11,~~August 4, 2022, BT Brands, through our 1519BT, LLC subsidiary, completed the ~~Company acquired~~purchase of the assets of an operating bakery and coffee shop located in Woods Hole, Massachusetts. The acquired assets have operated as Pie In The Sky Coffee and Bakery (“Pie Coffee”) for more than 20 years, near the Ferry Terminal in Woods Hole. Pie Coffee serves the local Woods Hole market and a significant seasonal market of visitors to Cape Cod and the ~~Ferry Terminal.~~business operating as Van Stephan Village Bier Garten, a full-service bar and restaurant in Cocoa, Florida. The ~~Pie Coffee assets were acquired for $1,173,500 of cash.~~restaurant features a German-themed menu, specialty imported European beers, and regular entertainment. The ~~Company has not yet finalized~~purchase price was $6,900,000, paid in cash at closing. Concurrent with the ~~allocation of the purchase price. At the time of~~ purchase, we entered into a five-year ~~triple-net~~ lease with three five-year renewal options for the property currently occupied by ~~Pie Coffee with three 5-year renewal options.~~the business. The terms of the triple net lease call for an initial monthly rent of ~~$10,000 per month for 24 months increases annually at 3% during the lease term and option periods.~~$8,200.

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

The following discussion of the financial condition, results of operations, liquidity and capital resources of BT Brands, Inc. and its wholly-owned subsidiaries (together, “BT Brands” or the ~~"Company"~~“Company”) should be read in conjunction with the ~~Company's~~Company’s condensed consolidated financial statements and accompanying notes included under Part I, Item 1 of this quarterly report on Form 10-Q, as well as with the audited consolidated financial statements and accompanying notes and ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the ~~Company's~~Company’s annual report on Form 10-K for the year ended January 2, 2022.

Introduction

As of ~~April 2,~~July 3, 2022, including our partially owned Bagger Dave’s business, we owned and operated ~~eleven~~eighteen restaurants, ~~including nine~~comprising the following:
·
Nine Burger Time fast-food restaurants and one Dairy Queen franchise, all of which are in the North Central region of the United States;
·
Bagger Dave’s Burger Tavern, Inc, a 41.2% owned affiliate, operates six Bagger Dave’s restaurants in Michigan, Ohio, and Indiana;
·
Keegan’s Seafood Grille in Indian Rocks Beach, Florida;
·
Pie in the Sky Coffee Shop and Bakery in Woods Hole, Massachusetts.
The first Burger Time ~~fast-food restaurants, one Dairy Queen fast-food~~ restaurant ~~and Keegan's Seafood Grille, a dine-in restaurant located~~opened in ~~Florida. Our fast-food restaurants are all located~~Fargo, North Dakota, in 1987. BTND, LLC purchased the ~~North Central region~~assets of ~~the United States. Our~~Burger Time in May 2007. Burger Time restaurants feature ~~a wide variety of burgers and other~~additional affordable foods such as chicken sandwiches, pulled pork sandwiches, sides, and soft drinks. Our Dairy Queen restaurant offers the established Dairy Queen menu consisting of burgers, chicken, sides, ice cream, other desserts, and various beverages. Keegan's Seafood Grille has operated in Indian Rocks Beach, Florida, for more than thirty-five years and offers a variety of traditional fresh seafood items for lunch and dinner. The menu at Keegan's includes beer and wine. Our revenues are derived principally from the sale of food and beverages at our restaurants and branded retail merchandise, which accounts for an insignificant portion of our income.
                ~~Our~~ Burger ~~Time~~Time’s operating principles include: (i) offering ~~a "Bigger Burger" to deliver our customers "more good food~~bigger burgers and more value for ~~your money";~~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.

Operationally, we ~~take several steps to maintain~~strive for efficiency at our Burger Time restaurants, including maintaining an inventory of ~~typically less than $20,000~~approximately $15,000 per store, ~~at any given time (which also allows~~allowing for frequent ~~deliveries~~fresh food deliveries. Historically, our Burger Time investment model targeted an average cash investment of ~~fresh food).~~between $325,000 and $535,000.

~~Our~~The average customer transaction at our Burger Time restaurants increased by approximately 4% in the first ~~three~~six months of fiscal 2022 compared to 2021 and currently is approximately ~~$12.10.~~$12.50. This recent increase is principally ~~the result~~because of a menu price increase implemented in ~~2021. Our~~2021 and a 2022 price increase of approximately 10% on our popular “Deal of the Day” offering. Many factors influence our sales ~~trends are influenced by many factors, including the COVID pandemic, which was a positive for our sales.~~trends. The business environment ~~remains~~is challenging for smaller restaurant chains as competition ~~from the major fast-food hamburger-focused business~~ is intense.

InBT Brands operates Burger Time restaurants and newly acquired businesses through a central management organization which we believe provides continuity across our restaurant base and allows for efficiencies of a central management team.
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Highlights
During the ~~fourth quarter~~first two quarters of ~~2021,~~2022, we ~~completed~~acquired two restaurants and a 41.2% interest in an operator of six restaurants with the net proceeds from our November 2021 initial public ~~offering of units~~offering. We expect to continue to consider acquisition opportunities. Our recent acquisitions have allowed us to diversify our operations into new restaurant segments and new geographic regions, which we expect will reduce our dependency on the financial performance of our ~~securities at~~Burger Time restaurants.
Keegan’s Seafood Grille, which we acquired in March 2022, has served customers in the Clearwater and St. Petersburg, Florida markets for over 35 years. The operation is primarily a ~~public~~dine-in restaurant offering ~~price~~a variety of ~~$5.00 per unit, each unit comprising~~traditional fresh seafood items for lunch and dinner and a selection of beer and wine.
In May 2022, through our 10Water Street, LLC subsidiary, we acquired the assets and business operations of the iconic Pie In The Sky Coffee Shop and Bakery “PIE,” which is adjacent to the ferry dock in Woods Hole, Massachusetts. The business has operated in the same location for over thirty years, offering a range of breakfast and lunch options, freshly roasted coffee, and branded merchandise serving locals and tourists.
In June 2022, BT Brands acquired approximately 41.2% of the stock of Bagger Dave’s Burger Tavern, Inc., which owns and operates six Bagger Dave’s restaurants, a casual restaurant, and bar concept. Bagger Dave’s provides a warm, inviting, and entertaining atmosphere specializing in locally sourced, never-frozen prime rib recipe burgers, all-natural turkey burgers, hand-cut fries, locally crafted draft beers, milkshakes, salads, black bean turkey chili, pizza, and other items. Bagger Dave’s opened its first restaurant in Berkley, Michigan, in January 2008 and operates four restaurants in Michigan, one ~~share of common stock~~restaurant in Ft. Wayne, Indiana, and one warrant to purchase one share of common stock at an exercise price of $5.50 per share. The net proceeds to the Company from the offering, including the exercise of the underwriter's option to purchase additional warrants, were approximately $10.7 million, after deducting underwriting discounts and commissions and payment of estimated offering expenses totaling approximately $1.3 million.location in Centerville, Ohio.

Material Trends and Uncertainties

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

The cost of food has increased over the last two years, and we expect to see continued inflationary pressure in the remainder of 2022. Beef costs were stable in 2020, continued to rise in 2021, and ~~since 2020~~ have recently increased by approximately ~~13.7%~~4% per pound. Given the competitive nature of the fast-food burger restaurant industry, ~~in response to recent commodity price increases, we are planning to implement a price increase in the second quarter of 2022. It~~it may be difficult to raise menu prices to cover future cost ~~increases. In~~increases fully. During 2020 and early 2021, our Burger Time business experienced a significant increase in business volume ~~contributed~~contributing to improved profit margins. Additional margin improvements may have to be ~~achieved~~made through operational enhancements, equipment advances, and increased ~~sales~~ volumes to help offset ~~any~~ food cost increases due to the competitive state of the restaurant industry.

16
Labor is a critical factor in operating our stores. In most areas where we operate our restaurants, there historically has been a shortage of suitable labor, and recently, securing staff has become more challenging. 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. We must develop and retain quality employees.
~~Table of Contents~~

~~The general state~~Since March 2020, we have faced the effects of COVID and its variants. COVID infections have adversely affected workforces, customers, economies, and financial markets globally and have disrupted the normal flow of the ~~economy influences~~U.S. economy. Our stores have, with only a few exceptions, remained open for drive-through business during the last two years; however, many businesses experienced a disruption of normal operations. More recently, food service businesses, including ours, have faced challenges in attracting and hiring workers. Labor shortages may continue and become more acute as market participants compete to attract employees.
We can’t predict the duration or magnitude of the effects of COVID and the impact on our business or the results of operations. The response to public health matters may influence restaurant customer traffic and our ability to staff our restaurants, receive deliveries on a timely basis or perform functions at the corporate level. Further, such conditions could impact the availability of the menu items we offer and the ability of suppliers to deliver such products. We also may be adversely affected ~~if jurisdictions in which we have restaurants are ordered to close, or we may be forced to implement temporary~~by mandatory closures, seek voluntary closures, or impose restrictions on operations. Even if such measures are not implemented, the perceived risk of infection or significant health risk may adversely affect our business.
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We continue to monitor public health issues and their impact on our customer base and throughout the country. It is difficult to predict the future in light of many factors, including the spread of new variants of the original coronavirus disease among the U.S. population and the efficacy of existing treatments and vaccines.
Our strategy to acquire additional restaurant properties presents numerous risks and uncertainties to our operations, including our management’s ability to:
·
identify suitable targets;
·
complete comprehensive due diligence as to targets,
·
integrate a target’s operations with our existing operations,
·
retain management and key employees of the target;
·
operate new restaurant concepts in new geographic areas outside of our traditional Burger Time platform;
·
develop and implement appropriate and effective sales and marketing strategies for our new restaurants individually and our restaurant group as a whole;
·
maintain and grow revenue at our new properties;
·
identify and retain experienced managerial personnel to effectively administer our operations;
·
improve existing, and implement new operational, financial, and management controls;
·
install enhanced management information systems; and
·
create a corporate brand identifying our restaurants as BT Brands’ properties.
Our failure to manage any of these aspects of our growth could adversely impact our business and our results of operations.
Future conditions may influence restaurant customer traffic and our ability to adequately staff our restaurants, receive deliveries on a ~~shortage~~timely basis or perform functions at the corporate level. Further, such conditions could impact the availability of ~~available workers.~~the menu items we offer and the ability of suppliers to deliver such products. We also may be adversely affected if jurisdictions impose mandatory closures, seek voluntary closures, or impose restrictions on operations. Even if such measures are not implemented, the perceived risk of infection or significant health risk may adversely affect our business.

Growth Strategy and Outlook

We are seeking to increase value for our shareholders in the food service industry. Our principal strategy ~~is to acquire~~comprises acquiring individual and multi-unit restaurant ~~concepts and individual~~ properties at attractive earnings multiples. Though we do not ~~have plans~~plan to do so, we may ~~under certain circumstances,~~ develop additional Burger Time ~~locations.~~locations by acquiring and converting existing properties under certain circumstances. Other ~~critical~~key elements of our growth strategy ~~encompass~~include increasing same-store sales and introducing a campaign to boost brand awareness.

Expansion Through Acquisitions

We intend to continue to make strategic and opportunistic acquisitions that provide an entrance into targeted restaurant segments and geographic areas. Restaurant businesses become available for acquisition ~~frequently. We~~frequently, and we believe that we may be able to purchase either individual restaurant properties or multi-unit businesses at prices ~~that provide~~providing an attractive return on our investment. ~~Alternatively, we~~We may acquire operating assets where a franchise program of the acquired foodservice business is ~~concluded by management to be~~ the most appropriate growth plan. We intend to follow a disciplined strategy of evaluating acquisition opportunities to ensure and enable the accretive and efficient acquisition and integration of additional restaurant concepts. Successful execution of our acquisition strategy will allow us to diversify our operations ~~both~~ into other dining concepts and geographic locations.

In evaluating potential acquisitions, we may consider the following characteristics, among others, that management considers relevant to each opportunity:

·
the value proposition offered by acquisition targets when comparing the purchase price to the potential return on our investment;

·
established, recognized brands within their geographic footprint;

·
steady cash flow;

·
track records of long-term operating performance;

·
sustainable operating results;

·
geographic diversification; and

·
growth potential.

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Table of Contents
Assuming we ~~successfully acquire~~are successful in acquiring new businesses, we will operate the business or businesses with a shared central management organization. Following the acquisition, we expect to pursue a growth plan to expand the number of locations and increase comparable store sales and profits, as described below. We anticipate that by leveraging our management services platform, we will ~~be able to~~ achieve post-acquisition cost benefits by reducing the corporate overhead of the acquired business. If we acquire one or more restaurant chains or individual units near each other, we believe the concentration of operations will provide economic synergies for management functions, marketing, and advertising, supply chain assistance, staff training, and operational oversight.

17
~~Table of Contents~~
~~Future Development of Additional Burger Time Restaurants~~
We may consider developing additional Burger Time locations. Conditions that might give rise to developing additional Burger Time locations include the opportunity to acquire and convert a property that previously had operated as a fast-food establishment at an attractive price in a location that fits within Burger Time's geographic footprint so that we may share service expenses, including advertising costs.
If we elect to open additional Burger Time restaurants, we expect that the development of these restaurants will, based on our experience, require a minimum of six to nine months after opening to achieve the targeted restaurant-level sales and operating margins. When we open a restaurant in new and untested markets, achieving targeted sales may take longer since the local population will not be familiar with our brand. Building brand awareness takes time in a new and untested market. How quickly new restaurants achieve their targeted sales and operating margin depends on many factors, including consumer familiarity with our brand and the availability of experienced managers and other staff. However, every restaurant has a unique opening sales pattern, which is difficult to predict.
Increase Same-Store Sales

Same-store sales growth reflects the change in year-over-year sales for the comparable store ~~base.~~base and is a benchmark for the performance of our restaurants. We ~~intend to deploy~~use a multi-faceted same-store sales growth strategy to optimize restaurant performance. We ~~will apply~~use techniques proven in the restaurant industry to increase same-store ~~sales at our Burger Time restaurants and our acquired properties and develop new approaches that reflect our corporate character and restaurant composition.~~sales. We ~~expect to~~ utilize customer feedback and analyze sales data to ~~introduce,~~ test and ~~hone~~improve existing and new menu items. In addition, we ~~will investigate using~~may use social media and public relations, and experiential marketing to engage customers. ~~We expect our~~Our strategies to increase same-store sales will evolve as we acquire new restaurant concepts in new markets.

Increase Brand Awareness

~~We appreciate that increasing~~Increasing brand awareness is essential to the growth of our Company. We ~~will~~intend to develop and implement forward-looking branding ~~strategies for Burger Time and any acquired businesses.~~strategies. We will seek to leverage social media and employ targeted digital advertising to expand the reach of our brands and drive traffic to our stores. In addition, we intend to develop mobile applications that will allow consumers to find restaurants, order online and earn rewards. We expect to deploy internet advertising to match specific menu items targeted to demographic groups. We will deploy cross-over ads with radio and social ~~media interaction. We expect our~~media. Our branding initiatives towill evolve as we ~~consummate acquisitions of~~acquire restaurant concepts that appeal to distinct consumer markets in differing geographic areas.

~~Our ability to acquire or open new restaurants is predicated on~~Results of Operations for the ~~availability of capital for such purposes. We cannot be certain that capital will be available to us on acceptable terms, if at all.~~
~~First Quarter Highlights~~Thirteen Weeks Ended July 3, 2022, and the Thirteen Weeks Ended July 4, 2021

~~On March 2, 2022, we consummated~~The following table sets forth our Condensed Statements of Income and percentages of total revenues for the ~~acquisition~~thirteen-week-fiscal periods. Percentages below may not reconcile because of substantially all of the assets of Keegan's Seafood Grille, Inc., an operating restaurant located in Indian Rocks Beach, Florida. We acquired the assets for a purchase price of $1,150,000. The acquired assets have operated as Keegan's Seafood Grille for more than 35 years, primarily serving the Clearwater and St. Petersburg, Florida markets. As part of the purchase, we acquired the "Keegan's Seafood Grille" tradename, and we plan to continue to operate the property under the Keegan's Seafood Grille name.rounding.

  13 weeks ended,
July 3, 2022

13 weeks ended,
July 4, 2021

Amount

%

Amount

%

SALES

$ 3,524,881

100.0 %

$ 2,382,683

100.0 %
COSTS AND EXPENSES

Restaurant operating expenses

Food and paper costs

1,311,373

37.2

908,760

38.1

Labor costs

1,179,118

33.5

621,227

26.1

Occupancy costs

261.282

7.4

167,106

7.0

Other operating expenses

212,314

6.0

128.872

5.4

Depreciation and amortization

109,286

3.1

58.558

2.5

General and administrative

455,656

12.9

110,983

4.7

Total costs and expenses

3,529,029

100.1

1,995,506

83.8

Income (loss) from operations

(4,148 )

(.1 )

387,177

16.2

INTEREST EXPENSE

(26,190 )

(.7 )

(89,661 )

(3.8 )
INTEREST AND OTHER INCOME

9,473

.3

‒

‒

UNREALIZED LOSS AND LOSS FROM AFFILIATE

(94,410 )

(2.7 )

‒

‒

INCOME TAX BENEFIT (EXPENSE)

23,000

.6

(85,000 )

(3.5 )
NET INCOME (LOSS)

$ (92,275 )

(2.6 )%

$ 212,516

8.9 %
Net Revenues:

~~Key Performance Indicators~~
~~We use comparable~~Net sales for the second fiscal quarter of 2022 increased $1,142,198 to $3,524,881 from $2,382,683 in fiscal 2021. The increase during the period resulted from sales from the recently acquired businesses contributing $1,639,588 in revenue. Revenues at the Burger Time locations declined approximately 20.1% as customer purchasing patterns returned to pre-pandemic levels. Burger Time was also adversely impacted by weather and staffing challenges, which resulted in limited hours and store sales metrics as indicators of sales growth to evaluate how our established stores have performed over time. We use comparable guest traffic to determine how established stores have performed over time, excluding growth achieved through menu price and sales mix change. Finally, we use average checks per guest to identify trends in guest preferences andclosures during the effectiveness of menu changes. We believe these performance indicators are useful for investors by providing a consistent comparison of sales results and trends across comparable periods within our core, established store base, unaffected by results of store openings, closings, and other transitional changes.quarter.

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~~Results of Operations~~Restaurant unit sales for Burger Time for the ~~Thirteen Weeks Ended~~ ~~April 3, 2022, and the Thirteen Weeks Ended April 4, 2021~~
13 weeks ranged from a low of approximately $139,000 to a high of approximately $272,000. The ~~following table sets forth our Condensed Statements of Operations for the fiscal periods indicated as a percentage of total revenues. Percentages below may not reconcile because of rounding.~~

13 Weeks Ended,

April 3,
2022

April 4,
2021

SALES

100.0
%

100.0
%
COSTS AND EXPENSES

Food and paper costs

34.8

37.7

Labor costs

29.3

29.1

Occupancy costs

8.4

7.0

Other operating expenses

5.8

6.3

Depreciation and amortization

3.3

2.8

General and administrative

14.0

5.4

Total costs and expenses

95.7

88.5

Income from operations

4.3

11.5

INTEREST EXPENSE

(1.4 )

(2.0 )
INCOME BEFORE TAXES

2.9

9.5

PROVISION FOR INCOME TAXES

(0.9 )

(2.6 )
NET INCOME

2.0
%

6.9
%
~~Net Revenues:~~
~~Net~~average sales for ~~the fiscal first quarter of 2022 increased $132,323 or 6.8% to $2,073,195 from $1,940,872 in the first quarter of fiscal 2021. A decline in sales at~~each Burger Time locations was attributable principally to the labor issues resulting in some curtailment of restaurant operating hours and poorer weather conditions than in the year-earlier period. These negative effects were offset by the contribution to sales of approximately one-month for Keegan's Seafood Grille, which was acquired on March 2, 2022, and contributed approximately $345,000 in salesunit during the ~~quarter.~~period was approximately $208,000 in 2022, approximately $29,200 below the same period in 2021.

Costs of Sales - food and paper:

Cost of sales - food and paper for the ~~first quarter of~~ fiscal 2022 period decreased as a percentage of sales declined to ~~34.8%~~37.2% of restaurant sales from ~~37.7%~~38.1% of restaurant sales in the ~~first~~second quarter of fiscal 2021. This decrease ~~resulted from~~was the net result of inflationary pressures of certain items, offset by the inclusion of results of PIE which operates at a ~~menu price increase in the second half of 2021~~significantly lower food and ~~relatively favorable pricing negotiated with the Company's ground beef supplier.~~labor cost than our Burger Time business.

Restaurant Operating Costs:

Restaurant operating costs (which refer to all the costs associated with the operation of our restaurants but do not include general and administrative expenses and depreciation and amortization) as a percent of restaurant sales ~~were relatively stable at 79.7%~~increased to 78.2% of sales in the ~~first~~second fiscal quarter of 2022 ~~compared to 80.2%~~from 76.6% in the ~~same~~similar period of fiscal 2021. This increase was ~~due primarily to an increase in sales which favorably impacted both fixed~~because of higher labor and ~~semi-fixed~~occupancy cost, including lease costs associated with our two recently acquired locations and the matters discussed in the ~~"Cost~~“Cost of Sales,” ~~"Labor~~“Labor Costs,” ~~"Occupancy,”~~ and ~~“Other~~“Occupancy and Other Operating ~~Cost"~~Cost” sections below.

Labor ~~Costs:~~Costs

For the ~~first~~second quarter of fiscal 2022, labor and benefits cost increased ~~by $42,218 to $607,710, and labor costs~~ as a percentage of sales ~~increased~~ to ~~29.3%~~33.5% of restaurant sales from ~~29.1% of restaurant sales the~~ 26.1%in fiscal ~~2021 first quarter.~~2021. The increase in the ~~rate~~percentage resulted from ~~an increase in new-hire~~tighter labor markets leading to higher hourly wage ~~rates~~costs offset by leveraging existing staffing levels as sales increased significantly from the previous year. The Company continued to benefit from minimal turnover in its unit restaurant management, which tends to cause unfavorable variations in labor costs.staffing. Payroll costs are semi-variable, meaning ~~that~~ they do not ~~change~~decrease proportionally to ~~changes~~decreases in revenue.
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~~Table of Contents~~

Occupancy and Other Operating Expenses

For the ~~first~~second fiscal quarter of 2022, occupancy and other expenses increased ~~by $34,748. As a percentage~~to 13.4% of sales ~~these costs increased to 14.2% of restaurant sales compared with 13.3% in a similar period~~from 12.4% in 2021. This increase ~~is primarily the result of winter conditions increasing heating~~results from higher occupancy costs, ~~and snow removal expenses compared to the milder weather a year ago.~~including lease costs associated with our two new locations.

Depreciation and Amortization Expense:

For the ~~first~~second fiscal quarter of 2022, depreciation and amortization increased ~~by $14,579~~ to ~~$69,415 (3.3%~~$109,286 (3.1% of sales) from ~~$54,836 (2.8%~~$58,558 (2.5% of sales) in the ~~same period in~~second quarter of fiscal of 2021. The ~~company continues to reinvest in its properties to maintain~~increase results from depreciation and ~~upgrade items such as point-of-sale equipment and HVAC equipment.~~amortization associated with our recent acquisitions.

General and Administrative Costs

General and administrative costs increased ~~176.3% or $185,724~~by $344,673 from ~~$105,338 (5.4% of sales) in~~$110,983 to $455,656; the ~~first fiscal quarter of 2022 to $291,062 (14.0% of sales) in~~increase is associated with the ~~first quarter of 2021. The increase in general and administrative costs is primarily the result of the~~Company’s transition to a public company ~~following the Company's IPO~~ in November ~~2021. Following~~2021, including the ~~recent stock offering,~~costs related to long-term management agreements. Second quarter general and administrative expenses were 12.9% of sales, a significant increase from 4.7% in the ~~Company increased officer compensation over the year-earlier level and increased staff.~~earlier year.

Income (Loss) from Operations

~~Income~~The loss from operations for the ~~first fiscal~~second quarter of fiscal 2022 was ~~$88,921~~$4,148 compared to a profit from operations of $387,177 in the same period in 2021; the percentage of income from operations as a percentage of ~~$223,495~~sales declined to negative .1% from 16.0%, reflecting a decline in ~~the 2021 period. The change in income from operations in fiscal 2022 compared to fiscal 2021 was due to the significant increase in General~~profit margin at Burger Time, higher general and ~~Administrative Expenses following the Company's initial public offering~~administrative 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 ~~according to~~in accordance with GAAP, the Company uses restaurant-level EBITDA, which is not a measure defined by GAAP. This non-GAAP operating measure is useful to both management and, we believe, investors because it represents one means of gauging the overall profitability of our recurring and controllable core restaurant operations. ~~However, this~~This measure is not indicative of our overall results, nor does restaurant-level profit accrue directly to the benefit of stockholders, primarily due to the exclusion of corporate-level expenses. Restaurant-level EBITDA should not be considered a substitute for or superior to operating income, ~~which is~~ calculated ~~in accordance with GAAP, and the~~under GAAP. The reconciliations to operating income set forth below should be carefully evaluated.

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Table of Contents
We define restaurant-level EBITDA as operating income before pre-opening costs, if any, general and administrative costs, ~~and~~ depreciation and ~~amortization.~~amortization, and impairment charges. General and administrative ~~costs~~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 weeks ended,

July 3, 2022

July 4, 2021

Revenues

$ 3,524,881

$ 2,382,683

Reconciliation:

Income (loss) from operations

(4,148 )

387,177

Depreciation and amortization

109,286

58,558

General and administrative, corporate level expenses

455,656

110,983

Restaurant-level EBITDA

$ 560,795

$ 556,716

Restaurant-level EBITDA margin

15.9 %

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

  26 weeks ended,
July 3, 2022

26 weeks ended,
July 4, 2021

Amount

%

Amount

%

SALES

$ 5,598,076

100.0 %

$ 4,323,555

100.0 %
COSTS AND EXPENSES

Restaurant operating expenses

Food and paper costs

2,032,956

36.3

1,636,053

37.8

Labor costs

1,786,828

31.9

1,186,719

27.4

Occupancy costs

435,920

7.8

261,282

6.0

Other operating expenses

332,181

5.9

303,654

7.0

Depreciation and amortization

178,701

3.2

113,394

2.6

General and administrative

746,717

13.3

220,982

5.1

Total costs and expenses

5,513,303

98.5

3,712,883

85.9

Income from operations

84,773

1.5

610,672

14.1

INTEREST EXPENSE

(54,461 )

(1.0 )

(128,232 )

(3.0 )
INTEREST AND OTHER INCOME

9,473

.2

‒

‒

UNREALIZED LOSS AND LOSS FROM AFFILIATE

(94,410 )

(1.7 )

‒

‒

INCOME TAX BENEFIT (EXPENSE)

5,000

.1

(135,000 )

(3.1 )
NET INCOME (LOSS)

$ (49,625 )

(.9 )%

$ 347,440

8.0 %
Net Revenues:
Net sales for 26-week period representing the first half of fiscal 2022 increased $1,274,521 or 29.5% to $5,598,076 from $4,323,555 in fiscal 2021. The increase in sales was principally the result of a favorable impact in the 26 weeks of two acquired restaurants which contributed approximately $1,775,247 in sales, offsetting a decline of approximately $500,726 or 11.6% in Burger Time revenues.
Burger Time unit sales for the 26 weeks ranged from a low of approximately $226,000 to a high of approximately $509,000. Average sales for each Burger Time unit were approximately $389,000 in 2022, a decline from approximately $438,200 in the same 26-week period in 2021. The sales decline in the first half of 2022 is the combined result of a return to pre-covid customer purchasing patterns as competitive dining options returned to normal, labor challenges resulting in some contraction of hours, and poorer weather conditions relative to the year-earlier period.
21
Table of Contents
Costs of Sales - food and paper:
Cost of sales - food and paper for the first half of fiscal 2022 decreased as a percentage of sales to 36.3% from 37.8% of restaurant sales in the same period in 2021. This decrease resulted from a strong performance at our PIE business which operates at lower food and paper costs than our traditional business and Keegan’s location.
Restaurant Operating Costs:
Restaurant operating costs, which are associated with operations, not including general and administrative expenses, and depreciation and amortization, increased as a percentage of restaurant sales to 81.9% of sales in 2021 from 77.0% in fiscal 2021. This increase was due to the increase in sales activity from new locations and its impact, as further discussed in the “Cost of Sales,” “Labor Costs,” and “Occupancy and Other Operating Cost” sections below.
Labor Costs:
For the first half of fiscal 2022, labor and benefits cost increased to 31.9% of restaurant sales from 27.4% in the fiscal 2021 period. Shortages in staffing levels combined with higher hourly wage rates at all locations increased the overall labor percentage. The hiring markets have become more challenging in terms of filling open positions. Payroll costs are semi-variable, meaning they do not decrease proportionally to decreases in revenue. Thus, they increase as a percentage of restaurant sales when there is a decrease.
Occupancy and Other Operating Expenses:
For the first 26 weeks of fiscal 2022, occupancy and other expenses increased to 13.7% of sales from 13.0% in 2021. Many of these costs are fixed, and the percentage reflects lower maintenance costs offset by higher lease occupancy costs at our new locations.
Depreciation and Amortization Expense:
Depreciation and amortization expenses in the first half of fiscal 2022 increased by $65,307 to $178,701 (3.2% of sales) from $113,394 (2.6% of sales) in the first half of fiscal 2021 and are the result of the purchase of two new restaurants and capital additions at several of our locations.
General and Administrative Costs:
General and administrative costs increased 238.4%, or $526,735 to $746,717, from $220,982 (5.1% of sales) in the first half of fiscal 2021. The increase results from the transition to a public reporting company, stock-based compensation costs, and the expense associated with long-term management employment agreements.
Income from Operations:
Operating income was $84,773 in the first half of fiscal 2022 compared to $610,672 in the first half of fiscal 2021. The change in income from operations in the first half of fiscal 2022 compared to fiscal 2021 was due primarily to the increase in general and administrative expenses, which included higher costs associated with the transition to a public company near the end of 2021, including the “Net Revenues” and “Restaurant Operating Costs” sections above.
Restaurant-level EBITDA:
To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use restaurant-level EBITDA, which is not a measure defined by GAAP. This non-GAAP operating measure is useful to both management and, we believe, investors because it represents one means of gauging the overall profitability of our recurring and controllable core restaurant operations. This measure is not indicative of our overall results, nor does restaurant-level profit accrue directly to the benefit of stockholders, primarily due to the exclusion of corporate-level expenses. Restaurant-level EBITDA should not be considered a substitute for or superior to operating income, calculated under GAAP. The reconciliations to operating income set forth below should be carefully evaluated.
22
Table of Contents
We define restaurant-level EBITDA as operating income before pre-opening costs, if any, general and administrative costs, depreciation and amortization, and impairment charges. General and administrative expenses are excluded as they are generally not specifically identifiable as restaurant-specific costs. Depreciation, amortization, and impairment charges are excluded because they are not ongoing controllable cash expenses and are not related to the health of ongoing operations.

13-Week Period

April 3,
2022

April 4,
2021

Revenues

$ 2,073,195

$ 1,940,872

Reconciliation:

Income from operations

95,667

223,495

Depreciation and amortization

69,415

54.836

General and administrative, corporate-level expenses

284,315

105,338

Restaurant-level EBITDA

449,397

383,689

Restaurant-level EBITDA margin

21.6 %

19.8 %
20
~~Table of Contents~~

26 weeks ended,

July 3, 2022

July 3, 2021

Revenues

$ 5,598,076

$ 4,323,555

Reconciliation:

Income from operations

84,773

653,044

Depreciation and amortization

178,701

113,394

General and administrative, corporate level expenses

746,717

220,982

Restaurant-level EBITDA

$ 1,010,191

$ 987,420

Restaurant-level EBITDA margin

18.0 %

22.8 %

Liquidity and Capital Resources

Initially, the public response to COVID positively impacted our sales and liquidity. More recently, as customer activities have returned to normal patterns, our Burger Time business has experienced a decline from the peak level we experienced during the height of COVID restrictions. For the 1326 weeks ended ~~April~~July 3, 2022, ~~the Company earned an after-tax profit~~operations reflected a net loss of ~~$42,650. Principally, as a result of the Company's public offering of common stock and warrants in November 2021, on April~~$49,625. On July 3, 2022, ~~the Company~~we had ~~$11,073,645~~$8,295,952 in cash and working capital of ~~$9,905,672.~~$7.7 million, a decrease of $3.9 million from January 2, 2022, resulting from the purchase of two restaurants for $2.3 million and investment of $1.3 million in shares of Bagger Dave’s.

In ~~May 2020,~~ the ~~Company received pandemic-related loans totaling $487,900; $460,400 was borrowed under~~future, COVID and its variants may continue to impact the ~~Small Business Administration's Paycheck Protection Program ("PPP"). The Company accounted for~~United States economy. It is difficult to predict the loan's proceeds as a government grant under International Accounting Standard 20 ("IAS 20"), Accounting for Government Grants, and Disclosure of Government Assistance. Under IAS 20, the loan is initially recorded as deferred incomeultimate impact on the ~~balance sheet. Forgiveness income is recognized systematically over~~United States economy in general, the ~~qualifying expenses incurred when~~impact on the ~~Company determines that the forgiveness is reasonably assured. The loans were forgiven in 2021. As a result~~quick service drive-through segment of the forgiveness of the PPP advances, the loan forgiveness was reflected as "Other Income" in 2020. Also, in May 2020, the Company borrowed $27,500 at no interest under the Minnesota Small Business Emergency Loan Program. Under the loan terms, the Company will seek loan forgiveness in 2022.food service industry, and our operating results and financial condition.

Our primary requirements for liquidity are to fund our working capital needs, capital expenditures, and general corporate needs, as well as to invest in or acquire ~~businesses that are synergistic with our business.~~businesses. Our operations do not require significant working capital, and, like many restaurant companies, we ~~may~~generally operate with negative working capital. We anticipate that working capital deficits may be incurred in the future and possibly increase. Our primary ~~sources of~~ liquidity and cash ~~flows~~flow sources are operating cash flows and cash on hand. We use this to service debt, maintain our stores to operate efficiently, and increase our working capital. Our working capital position benefits from the fact that we collect cash from sales from our customers at the point of purchase or within a few days from our credit card ~~processor. Generally,~~processor; generally, payments to our vendors are not due for thirty days.

Summary of Cash Flows

Cash Flows Provided by Operating Activities

~~Primarily as a result of a positive one-month contribution from the operations Keegan's in March 2022, we generated positive~~Operating cash flow in the ~~13 weeks ending April 3, 2022.~~first half of 2022 was $498,068. The ~~winter months have historically been seasonally the slowest part of the Company's business.~~cash flow from operations was impacted positively by our recent acquisitions. We expect operating cash flow in future periods to be significantly impacted by our recent acquisitions.

Cash Flows Used in Investing Activities

InDuring fiscal 2022, ~~the Company has~~we have focused on identifying ~~potential acquisition opportunities, including its purchase of Keegans on March 2, 2022.~~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 ~~the Company's~~our cash flow used in financing activities is allocated to service ~~the Company's~~our debt.

Contractual Obligations

As of ~~April~~July 3, 2022, we had $3$4.1 million in contractual obligations relating ~~principally~~ to amounts due under mortgages on the real property ~~on which~~where stores are ~~situated.~~situated, including $2.9 million in capitalized lease obligations related to our recent acquisitions. Our monthly required payment is approximately ~~$32,000.~~ $39,000. In the second quarter of fiscal 2021, we refinanced most of our outstanding mortgage debt with a new lender lowering our nominal interest cost from 4.75% to 3.45% fixed for the next ten years.
23
Table of Contents

Qualitative and Quantitative Disclosure about Market Risk

Commodity Price Risk

We are subject to volatility in food costs due to market risk associated with commodity prices. Our ability to recover increased costs through higher pricing is, at times, limited by the competitive environment in which we operate. ~~To manage these risks,~~Generally, we do not ~~enter into~~have pricing agreements with our ~~suppliers.~~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 $175,000 of additional food costs for the Company annually.~~

21
~~Table of Contents~~
Seasonality and Inflation
Many of our restaurants experience significant seasonal fluctuations in activity and revenue.

Seasonal factors and the timing of holidays cause our revenue at our Burger Time locations to fluctuate from quarter to quarter. Our revenue per Burger Time restaurant is typically slightly lower in the first and fourth quarters due to holiday closures and the impact of cold weather at all our locations. Adverse weather conditions may also affect customer traffic, especially in the first and fourth quarters, when customers do not use our outdoor seating areas, which impacts the use of these areas and may adversely affect our revenue. PIE benefits from robust tourism on Cape Cod in the late spring through early fall months. The results of operations during the second and third fiscal quarters at this location will be materially more significant than during the first and fourth fiscal quarters.

~~Management believes that inflation~~Keegan’s will benefit from additional customer traffic in Florida during the colder months in the northern part of the country; as tourists and seasonal residents seek to escape to warmer climates, daily customer counts increase at Keegan’s.
Inflation has had a material effect on ~~income in recent periods. A continuation of current cost trends in~~our business as food, labor, and other operating costs ~~could~~have adversely ~~affect~~affected operations. Generally, we have been able to increase menu prices or modify our operating procedures to offset increases in operating costs substantially. As inflation continues, we may not be able to raise prices to keep pace with increasing costs, particularly when compared to larger competitors that may be able to manage the ~~Company's~~risk of rising prices better.
Inflation has had a material effect on our business as food, labor, and other operating costs have adversely affected operations. ~~The Company~~However, we generally ~~has~~have been able to increase menu prices or modify its operating procedures to offset increases in its operating ~~costs.~~
~~The cost of construction has also increased in recent history. We expect that~~ costs to construct new restaurants in our existing and contiguous markets will be more expensive than several years ago, but we expect to achieve higher restaurant sales volumes and margin improvements to offset these or additional construction cost increases. Construction cost increases could have an adverse effect on our business and operations, particularly for new restaurant development.substantially.

Our business is subject to a wide range of federal, state, and local regulations, which are subject to change in ways we cannot now anticipate. We are uncertain as to the effect that changes in the regulatory environment may have on our Company.

Off-Balance Sheet Arrangements

WeThe Company did not have ~~any off-balance sheet arrangements~~ 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 onto our financial statements and our results of operations and financial condition as the result of the adoption of Recent Accounting Pronouncements, see ~~"Part~~“Part I, Item 1, Note 1. Summary of Significant Accounting ~~Policies"~~Policies” of the Notes to Condensed Consolidated Financial Statements included in this quarterly report. The Company follows ASC 842, covering accounting for leases, and has recorded Right to Use Assets and related lease liabilities for the lease contracts.

Critical Accounting Policies and Estimates

Our discussion and analysis of operating results and financial ~~conditions~~condition are based onupon our condensed consolidated financial statements. ~~Under GAAP,~~The preparation of our condensed consolidated financial statements ~~require~~in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosures of contingent assets and liabilities. We base our estimates on experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.

24
Table of Contents
Our critical accounting policies are those that materially affect our financial statements and involve subjective or complex judgments by management. Although these estimates are based on ~~management's~~management’s best knowledge of current events and actions that may impact us in the future, actual results may be materially different from the estimates. Our significant accounting policies are disclosed in our annual report Form 10-K for the fiscal year ended January 2, 2022.

Jumpstart Our Business Startups Act of 2012

We qualify as an ~~"emerging~~“emerging growth ~~company"~~company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act ~~to comply~~for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of ~~specific~~certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period. As a result, we will adopt new or revised accounting standards on the relevant dates on which ~~adoption of~~ such standards isare required for other public ~~companies.~~companies are adopted.
22
~~Table of Contents~~

Subject to certain conditions ~~outlined~~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~~as amended (the “Exchange Act”). We are not required to provide the information under this item.

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

Disclosure Controls and Procedures

(1) Evaluation of Disclosure Controls and Procedures

We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports we filed under the ~~Securities~~ Exchange Act is recorded, processed, summarized, and reported within the periods specified by the ~~SEC's~~SEC’s rules and forms. Disclosure ~~Controls~~controls are also designed to ensure that this information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of ~~April~~July 3, 2022, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures ~~under~~pursuant to Rule 13a-15(b) promulgated under the Exchange Act. Based upon that evaluation and the material weakness in our internal control over financial reporting as disclosed in the Company’s Form 10-K for the fiscal year ended January 3, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~April~~July 3, 2022, our disclosure controls and procedures were not effective at a reasonable assurance aslevel in ensuring that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules, regulations, and forms of the ~~end~~SEC, including ensuring that such material information is accumulated by and communicated to our management, including our Chief Executive Officer, Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
(2) Changes in Internal Control over Financial Reporting
The Company disclosed a material weakness for lack of ~~the period covered by this report because we lack the necessary corporate accounting resources to maintain adequate~~ segregation of ~~duties. We did~~duties and not ~~perform~~performing an ~~effective~~adequate risk assessment ~~or monitor~~on monitoring of internal controls over financial ~~reporting. Management is developing and implementing a series of accounting systems and procedure changes and internal controls intended to provide adequate controls over financial reporting.~~
~~Changes~~reporting in ~~internal control over financial reporting~~
~~There have~~its Form 10-K for the fiscal year ended January 3, 2022. While we are addressing these deficiencies, there has been no significant ~~changes~~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 ~~Securities~~ Exchange Act ~~of 1934~~ that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting. As a result of recent restaurant acquisitions, we are integrating our controls and procedures into the acquired businesses. We will include the internal controls for the acquired businesses in our assessment of the effectiveness of our internal controls over financial reporting as of the end of our current fiscal year. Other than the recent acquisitions, during the period covered by this report, there were no changes in the Company’s internal controls over financial reporting which materially affected or are reasonably expected to impact our internal financial reporting controls.

2326
Table of Contents

PART ~~II—~~II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

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

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

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None

2427
Table of Contents

ITEM 6. EXHIBITS.

Exhibit
Description
~~31.1~~

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

Certification of the ~~Company's~~Company’s Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~April~~July 3, 2022.
32.1*

Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
32.2*

Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
101.INS

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH

Inline XBRL Taxonomy Extension Schema ~~Document~~Document.
101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document.
101.DEF

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

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

Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

2528
Table of Contents

SIGNATURES

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

BT BRANDS, INC.
Date: ~~May 18,~~August 16, 2022
By:
/s/ Kenneth Brimmer

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

2629

~~PART I—~~ ~~FINANCIAL INFORMATION.~~		5
~~ITEM 1.~~	~~FINANCIAL STATEMENTS.~~	5
~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.~~	16
~~ITEM 3.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.~~	23
~~ITEM 4.~~	~~CONTROLS AND PROCEDURES.~~	23
~~PART II—~~~~OTHER INFORMATION.~~		24
~~ITEM 1.~~	~~LEGAL PROCEEDINGS.~~	24
~~ITEM 1A.~~	~~RISK FACTORS.~~	24
~~ITEM 2.~~	~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.~~	24
~~ITEM 3.~~	~~DEFAULTS UPON SENIOR SECURITIES.~~	24
~~ITEM 4.~~	~~MINE SAFETY DISCLOSURES.~~	24
~~ITEM 5.~~	~~OTHER INFORMATION.~~	24
~~ITEM 6.~~	~~EXHIBITS.~~	25
~~SIGNATURES.~~		26

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

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

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

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

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

Total current liabilities		1,167,919			925,310

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

COMMITMENTS AND CONTINGENCIES

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

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

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

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

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

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

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

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

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

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

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

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

	Estimated Useful Life (Years)		Amount

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

	April 3, 2022		January 2, 2022
Accrued real estate taxes	$	73,211	$	103,615
Accrued bonus compensation		7,000		7,000
Accrued payroll		126,432		44,700
Accrued payroll taxes		14,599		8,424
Accrued sales taxes payable		80,714		50,414
Accrued vacation pay		17,663		17,663
Accrued gift card liability		23,622		10,036
Accrued franchise royalty		2,931		2,614
Other accrued expenses		13,913		9,875

	$	360,085	$	254,341

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

	Number of		Weighted Average		Weighted Average Remaining Contract Term		Aggregate Intrinsic		Number of			Weighted Average		Weighted Average Remaining Term		Aggregate Intrinsic
	Options		Exercise Price		(In Years)		Value		Options			Exercise Price		(In Years)		Value
Options outstanding at January 2, 2022		15,000	$	5.00		9.3	$	0		15,000		$	5.00		9.3	$	0
Granted		215,750		2.50				0		220,750			2.50			$	0
Exercised		0		0						0			0			$	0
Canceled, forfeited, or expired		0		0						(8,200	)		2.50			$	0
Options outstanding at April 3, 2022		230,750	$	2.66		9.8	$	0
Options exercisable at April 3, 2022		58,150	$	3.13		9.7	$	0
Options outstanding at July 3, 2022										227,550		$	2.67		9.8	$	0
Options exercisable at July 3, 2022										59,150		$	3.18		9.7	$	0

Fair value of options granted during the period	$	1.392		$	1.39
Expected life (in years)		4.833			4.83
Expected dividend	$	—		$	0
Expected stock volatility		63	%		63	%
Risk-free interest rate		2	%		2	%

2022	$	50,000
			Total
Remainder 2022			$	90,000
2023		61,650		181,350
2024		63,500		185,990
2025		67,400		190,600
2026		69,400		196,000
2027 and thereafter		459,050		495,054

Total future minimum lease payments		762,000		1,338,994
Less - interest		145,483		(189,196	)
Present value of lease payments	$	616,517
			$	1,149,798

	·	Nine Burger Time fast-food restaurants and one Dairy Queen franchise, all of which are in the North Central region of the United States;

	·	Bagger Dave’s Burger Tavern, Inc, a 41.2% owned affiliate, operates six Bagger Dave’s restaurants in Michigan, Ohio, and Indiana;

	·	Keegan’s Seafood Grille in Indian Rocks Beach, Florida;

	·	Pie in the Sky Coffee Shop and Bakery in Woods Hole, Massachusetts.

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

	·	the value proposition offered by acquisition targets when comparing the purchase price to the potential return on our investment;

	·	established, recognized brands within their geographic footprint;

	·	steady cash flow;

	·	track records of long-term operating performance;

	·	sustainable operating results;

	·	geographic diversification; and

	·	growth potential.

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

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

	13-Week Period
	April 3, 2022			April 4, 2021
Revenues	$	2,073,195		$	1,940,872
Reconciliation:
Income from operations		95,667			223,495
Depreciation and amortization		69,415			54.836
General and administrative, corporate-level expenses		284,315			105,338
Restaurant-level EBITDA		449,397			383,689
Restaurant-level EBITDA margin		21.6	%		19.8	%

	26 weeks ended,
	July 3, 2022			July 3, 2021
Revenues	$	5,598,076		$	4,323,555
Reconciliation:
Income from operations		84,773			653,044
Depreciation and amortization		178,701			113,394
General and administrative, corporate level expenses		746,717			220,982
Restaurant-level EBITDA	$	1,010,191		$	987,420
Restaurant-level EBITDA margin		18.0	%		22.8	%

Exhibit	Description
~~31.1~~
31.1	Certification of the ~~Company's~~Company’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the ~~registrant's~~registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~April~~July 3, 2022.
31.2		Certification of the ~~Company's~~Company’s Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~April~~July 3, 2022.
32.1*		Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
32.2*		Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH	Inline XBRL Taxonomy Extension Schema ~~Document~~Document.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase ~~Document~~Document.
101.LAB	Inline XBRL Taxonomy Extension ~~Label~~Labels Linkbase ~~Document~~Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

	BT BRANDS, INC.

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