UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: October 1, 2023 or ☐ 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 name of registrant as specified in its charter) Wyoming (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) 405 Main Avenue West, Suite 2D, West Fargo, 58078 (Address of principal executive offices) (Zip Code) (307) 223-1663 (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 such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such a shorter period that the registrant was required to submit such files). ☒ Yes ☐ No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. ☐ Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☒ If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ At November CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE RESULTS Forward-Looking Information This quarterly report contains forward-looking statements about the business, financial condition, and prospects of BT Brands, Inc. and its wholly-owned subsidiaries (together, "BT Brands" or the "Company"). Forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, can be identified by the use of forward-looking terminology such as "believes," "projects," "expects," "may," "estimates," "should," "plans," "targets," "intends," "could," "would," "anticipates," "potential," "confident," "optimistic" or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, guidance, expectations, and future plans. Forward-looking statements can also be identified by the fact these statements do not relate strictly to historical or current matters. Forward-looking statements relate to anticipated or expected events, activities, trends, or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. While we believe the expectations reflected in forward-looking statements are reasonable, there can be no assurances such expectations will prove accurate. Certain factors may cause results to differ materially from those anticipated by the forward-looking statements in this quarterly report. Such factors may include, without limitation, the risks and uncertainties relating to (i) the adverse impact of current and future economic conditions, including inflation; (ii) our ability to attract and retain food service employees; (iii) an increase in food, beverage and supply costs; (iv) increases in wages and benefit costs; and (v) regulatory developments TABLE OF CONTENTS PART I — FINANCIAL INFORMATION 3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 24 PART I FINANCIAL INFORMATION BT BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) October 2, 2022(Unaudited) January 2, 2022 October 1, 2023 January 1, 2023 ASSETS CURRENT ASSETS Cash Cash and cash equivalents Marketable securities Receivables Inventory Prepaid expenses and other current assets Assets held for sale Total current assets PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET OPERATING LEASES RIGHT-OF-USE ASSETS INVESTMENTS DEFERRED INCOME TAXES GOODWILL INTANGIBLE ASSETS OTHER ASSETS, net INTANGIBLE ASSETS, NET OTHER ASSETS, NET Total assets LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable Broker margin loan Current maturities of long-term debt Current operating lease obligations Accrued expenses Income taxes payable Total current liabilities LONG-TERM DEBT, LESS CURRENT PORTION NONCURRENT LEASE OBLIGATIONS DEFERRED INCOME TAXES Total liabilities COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred stock, $.001 par value, 2,000,000 shares authorized, no shares outstanding at October 2, 2022 and January 2, 2022 Common stock, $.002 par value, 50,000,000 authorized, 6,461,118 shares issued and outstanding at October 2, 2022 and 6,447,506 issued and outstanding at January 2, 2022 Preferred stock, $0.001 par value, 2,000,000 shares authorized, no shares outstanding at October 1, 2023 and January 1, 2023 Common stock, $0.002 par value, 50,000,000 authorized, 6,246,118 issued and outstanding at October 1, 2023, and 6,396,118 issued and outstanding at January 1, 2023 Less cost of 215,000 and 65,000 common shares held in Treasury at October 1, 2023 and January 1, 2023, respectively Additional paid-in capital Accumulated deficit Total shareholders' equity Total liabilities and shareholders' equity See Notes to Consolidated Condensed BT BRANDS, INC. AND SUBSIDIARIES BT BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Unaudited) 39 Weeks Ended 39 Weeks Ended, 13 Weeks Ended, 13 Weeks Ended, 39 Weeks Ended 39 Weeks Ended, 13 Weeks Ended, 13 Weeks Ended, October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021 October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022 SALES COSTS AND EXPENSES Restaurant operating expenses Food and paper costs Labor costs Occupancy costs Other operating expenses Depreciation and amortization expenses General and administrative expenses Gain on sale of assets Total costs and expenses Income from operations Income (loss) from operations UNREALIZED LOSS ON MARKETABLE SECURITIES UNREALIZED GAIN (LOSS) ON MARKETABLE SECURITIES INTEREST AND OTHER INCOME INTEREST EXPENSE EQUITY IN NET LOSS OF AFFILIATE INCOME (LOSS) BEFORE TAXES INCOME TAX (EXPENSE) BENEFIT NET INCOME (LOSS) NET INCOME (LOSS) PER COMMON SHARE - Basic and Diluted LOSS BEFORE TAXES INCOME TAX BENEFIT NET LOSS NET LOSS PER COMMON SHARE - Basic and Diluted WEIGHTED AVERAGE SHARES USED IN COMPUTING PER COMMON SHARE AMOUNTS - Basic and Diluted See Notes to Consolidated Condensed Financial Statements BT BRANDS, INC. AND SUBSIDIARIES BT BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 39 Weeks ended, 39 Weeks ended, October 2, 2022 October 3, 2021 October 1, 2023 October 2, 2022 CASH FLOWS FROM OPERATING ACTIVITIES Net Income (Loss) Adjustments to reconcile net income (loss) to net cash provided by operating activities- Net Loss Adjustments to reconcile net loss to net cash provided by (used in) operating activities- Depreciation and amortization of franchise cost Amortization of intangible assets Amortization of debt issuance costs included in interest expense Amortization of debt issuance premium included in interest expense Deferred taxes Stock-based compensation Unrealized loss on marketable securities Unrealized (gain) loss on marketable securities Loan forgiveness (13,750 ) - Investment gains Loss on equity method investment Gain on sale of assets Non-cash operating lease expense Property tax liability settlement Changes in operating assets and liabilities, net of acquisitions - Receivables Inventory Prepaid expenses and other current assets Accounts payable Accrued expenses Income taxes payable Net cash provided by operating activities Net cash provided by (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of net assets of Keegan's Seafood Grille Acquisition of net assets of Pie In The Sky Coffee and Bakery Acquisition of net assets of Village Bier Garten Acquisition of net assets of Village Beer Garden Investment in Bagger Dave's Burger Tavern, Inc. Proceeds from sale of assets Purchase of property and equipment Investment in related company Purchase of marketable securities Proceeds from the sale of marketable securities Other assets Net cash used in investing activities Net cash provided by (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt Repayment of broker margin loan Principal payment on long-term debt ) Proceeds from exercise of common stock warrants Payment of debt issuance costs Payment of deferred offering costs Purchase of treasury shares Net cash used in financing activities ) CHANGE IN CASH CHANGE IN CASH AND CASH EQUIVALENTS CASH, BEGINNING OF PERIOD CASH and CASH EQUIVALVENTS, BEGINNING OF PERIOD CASH, END OF PERIOD CASH AND CASH EQUIVALENTS, END OF PERIOD SUPPLEMENTAL DISCLOSURES Cash paid for interest Cash paid for income taxes Purchase of property and equipment included in accounts payable See Notes to Consolidated Condensed Financial Statements BT BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) For the 39-week periods- Common Stock Additional Paid-in Accumulated Treaury Shares Amount Capital (Deficit) Stock Total Balances, January 1, 2023 Stock-based compensation Treasury stock purchase Net loss Balances, October 1, 2023 For the 39-week periods- Common Stock Additional Paid-in Accumulated Shares Amount Capital (Deficit) Total Balances, January 2, 2022 Stock-based compensation Shares issued in exercise of warrants Net loss Balances, October 2, 2022 Common Stock Additional Paid-in Accumulated Shares Amount Capital (Deficit) Total Balances, January 3, 2021 Shares issued for fractional holding Net income Balances, October 3, 2021 For the 13-week periods- Common Stock Additional Paid-in Accumulated Shares Amount Capital (Deficit) Total Balances, July 3, 2022 Stock-based compensation Net loss Balances, October 2, 2022 Common Stock Additional Paid-in Accumulated Shares Amount Capital (Deficit) Total Balances, July 4, 2021 Net income Balances, October 3, 2021 Common Stock Additional Paid-in Accumulated Treaury Shares Amount Capital (Deficit) Stock Total Balances, January 2, 2022 Stock-based compensation Shares issued in exercise of warrants Net loss Balances, October 2, 2022 For the 13-week periods- Common Stock Additional Paid-in Accumulated Treasury Shares Amount Capital (Deficit) Stock Total Balances, July 2, 2023 Stock-based compensation Net loss Balances, October 1, 2023 Common Stock Additional Paid-in Accumulated Treasury Shares Amount Capital (Deficit) Stock Total Balances, July 3, 2022 Stock-based compensation Net loss Balances, October 2, 2022 See Notes to Consolidated Condensed Financial Statements BT BRANDS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of BT Brands, Inc. and its subsidiaries (the "Company," "we," "our," "us," "BT Brands," or "BT") and have been prepared in accordance with the US generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Securities and Exchange Commission ("SEC") requirements for Form 10-Q and Article 10 of Regulation S-X. All intercompany accounts and transactions have been eliminated in consolidation. The financial statements have been prepared on a basis consistent in all material respects with the accounting policies for the fiscal year ending January The accompanying Condensed Consolidated Balance Sheet as of October Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and the differences could be material. The Company BT Brands, Inc. (the “Company”) was incorporated as Hartmax of NY Inc. on January 19, 2016. Effective July 30, 2018, We operate restaurants in the eastern two-thirds of the United States. As of October 1, 2023, including our 41.2% owned Bagger Dave’s business, we operated eighteen restaurants comprising the following: · Eight Burger Time fast-food restaurants and one Dairy Queen franchise located in the North Central region of the United States, collectively (“BTND”); · Bagger Dave’s Burger Tavern, Inc., a 41.2% owned affiliate, operates six Bagger Dave’s restaurants in Michigan, Ohio, and Indiana (“Bagger Dave’s”); · Keegan’s Seafood Grille in Indian Rocks Beach, Florida (“Keegan’s”); · Pie In The Sky Coffee and Bakery in Woods Hole, Massachusetts (“PIE”). · Village Bier Garten is a German-themed restaurant, bar, and entertainment venue in Cocoa, Florida (“VBG”). Our Dairy Queen store is operated under a franchise agreement with International Dairy Queen. We pay royalty and advertising payments to the franchisor as required by the franchise agreement. Effective October 17, 2023, we agreed with International Dairy Queen to sell the business, which has a current book value at October 1, 2023, of $440,384, including remaining goodwill, to an approved buyer. Under the terms of the agreement with International Dairy Queen, we will continue to operate under the agreement for six months, during which time we plan to sell the business. Business As of October On June 2, 2022, BT Brands purchased 11,095,085 common shares, Our Dairy Queen location is operated under a franchise agreement with International Dairy Queen. We pay royalty and advertising payments to the franchisor as the franchise agreement requires. Following the end of the quarter, we entered into an agreement to terminate the franchise agreement with International Dairy Queen. We plan to sell the Dairy Queen business. Fiscal Year 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 a 52-week year. Fiscal 2023 is 52 weeks ending December 31, 2023, and fiscal 2022 Cash and Cash Equivalents Cash includes United States Treasury Bills with original maturities at the time of purchase of 90 days or less. Our bank deposits often exceed the amount insured by the Federal Deposit Insurance Corporation. In addition, we maintain cash deposits in brokerage accounts, including money market funds above the insured amount. We do not believe there is a significant risk related to cash. Bagger Dave’s common stock is traded on the OTC Pink Sheets market and files quarterly and annual financial reports with OTCMarkets, Inc. under the Alternative Reporting Standard. The listing with OTC Markets does not require the information to be audited. For the 39 weeks ending October 1, 2023, Bagger Dave’s had sales of $5,009,164 and a net See Note Fair Value of Financial Instruments Our accounting for fair value measurements of assets and liabilities, including available-for-sale securities, is that they are recognized or disclosed at fair value in the statements on a recurring or nonrecurring basis, adhere to the Financial Accounting Standards Board (FASB) fair value hierarchy that prioritizes the input to valuation techniques used to measure fair value. The hierarchy prioritizes unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: · Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that we can access at the measurement date. · Level 2 inputs are inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the entire term of the asset or liability. · Level 3 inputs are unobservable inputs for the asset or liability. The level in the fair value hierarchy within which a fair measurement in its entirety falls is based on the lowest level input that is significant to fair value measurement in its entirety. On October 1, 2023, the cost of marketable securities includes a bond fund at a cost of $ 574,836 and common stocks at a cost of $792,137 for a total cost of $1,366,973 prior to a mark-to-market reduction of $110,205. At January 1, 2023, the fair value of Level 1 investments included common stocks of $713,900 and a corporate bond exchange-traded fund (ETF) of $316,000, a total carrying value of $1,029,900, net of an unrealized mark-to-market loss of $86,422. These investments are reflected in the accompanying financial statements at October 1, 2023, at the level-one quoted market price in an active market of $1,366,973. 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. Receivables Receivables consist of estimated rebates due from a primary vendor. Inventory Inventory consists of food, beverages, and supplies and is stated at a lower of cost (first-in, first-out method) or net realizable value. Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives, ranging from three to thirty years. We review 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, Goodwill and other Intangible Assets and Other Assets Goodwill is Income Taxes The Company As of October The Company has no accrued interest or penalties relating to income tax obligations. There currently are no federal or state examinations in progress. The Company has not 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 for the periods ending in N Estimated Useful Life (Years) Original Cost Accumulated Amortization Net Carrying Value Covenants not to Compete 3 Trademarks 15 Tradename assets are being amortized over 15 years at $26,000 annually. The total amortization of Total amortization expense for the Assets acquired: Inventory Equipment Leasehold improvements Trademark, website, and other intangibles Total identifiable assets Assumed current liabilities Net assets acquired Goodwill Purchase price October 1, 2023 January 1, 2023 Land Equipment Buildings and leasehold improvements Total property and equipment Accumulated depreciation Less - property held for sale Net property and equipment Depreciation expense for the 39-week periods in 2023 and Accrued expenses consisted of the Assets acquired: Inventory Equipment Furniture and fixtures Trademark, website, and other intangibles Non-compete agreement Total assets acquired Assumed current liabilities Net assets acquired Goodwill Purchase price Assets acquired: Inventory Equipment Leasehold improvements Trademark, website, and other intangibles Non-compete agreement Purchase price October 1, 2023 January 1, 2023 Accrued real estate taxes Accrued bonus compensation Accrued payroll Accrued payroll taxes Accrued sales taxes payable Accrued vacation pay Accrued gift card liability Other accrued expenses Estimated Useful Life (Years) Original Cost Accumulated Amortization Net Carrying Value Covenants not to compete 2-4 Trademarks, tradenames, websites and social media sites 5-20 October 2, 2022 January 2, 2022 Land Equipment Buildings and leasehold improvements Total property and equipment Accumulated depreciation Less - property held for sale Net property and equipment NOTE 5 October 2, 2022 January 2, 2022 Accrued real estate taxes Accrued bonus compensation Accrued payroll Accrued payroll taxes Accrued sales taxes payable Accrued vacation pay Accrued gift card liability Accrued franchise royalty Other accrued expenses Our long-term debt is as follows: October 2, 2022 January 2, 2022 Three notes payable to a bank dated June 28, 2021, due in monthly installments totaling $22,213, including principal and interest at a fixed rate of 3.45% through June 28, 2031. Beginning in July 2031, the interest rate will be equal to the greater of the "prime rate" plus .75%, or 3.45%. These notes mature on June 28, 2036. The notes are secured by mortgages covering ten BTND operating locations. The notes are guaranteed by BT Brands, Inc. and a shareholder of the Company. Minnesota Small Business Emergency Loan dated April 29, 2020, payable in monthly installments of $458.33 beginning December 15, 2020, including principal and interest at 0%. This note is secured by the personal guaranty of a shareholder of the Company. Pursuant to the terms of the loan, $13,750 of the loan was forgiven on June 22, 2022. Less - unamortized debt issuance costs Current maturities Our long-term debt is as follows: October 1, 2023 January 1, 2023 Three notes payable to a bank dated June 28, 2021, due in monthly installments totaling $22,213, including principal and interest at a fixed rate of 3.45% through June 28, 2031. Beginning in July 2031, the interest rate will be equal to the greater of the "prime rate" plus .75%, or 3.45%. These notes mature on June 28, 2036. The notes are secured by mortgages covering ten BTND operating locations. The notes are guaranteed by BT Brands, Inc. and a shareholder of the Company. Minnesota Small Business Emergency Loan dated April 29, 2020, payable in monthly installments of $458 beginning December 15, 2020, including principal and interest at 0%. This note is secured by the personal guarantee of a shareholder of the Company. Under the terms of the loan, $13,750 of the loan was forgiven on June 22, 2022. Total Less - unamortized debt issuance costs Current maturities NOTE In 2019, 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 · Exercise price – The stated exercise price of the stock option. · Expected life – The simplified · Expected dividend – The rate of dividends expected to be paid over the term of the stock option. · · Volatility – Estimated Risk-free interest rate – The daily United States Treasury yield curve rate corresponding to the expected life of Information regarding our stock options is summarized below: Number of Weighted Average Weighted Average Remaining Term Aggregate Intrinsic Options Exercise Price (In Years) Value Options outstanding at January 2, 2022 Granted Exercised Canceled, forfeited, or expired Options outstanding at October 2, 2022 Options exercisable at October 2, 2022 Fair value of options granted during the period Expected life (in years) Expected dividend Expected stock volatility Risk-free interest rate Number of Weighted Average Weighted Average Remaining Term Aggregate Intrinsic Options Exercise Price (In Years) Value Options outstanding at January 1, 2023 Granted Exercised Canceled, forfeited, or expired ) Options outstanding at October 1, 2023 Options exercisable at October 1, 2023 On February NOTE Concurrent with Keegan's lease does not provide an implicit interest rate; we used our incremental borrowing rate of 4% to determine the present value. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the lease term. Variable lease costs consist primarily of property taxes, insurance, certain utility expenses, and sales tax. The PIE lease did not provide an implicit interest rate; we used our estimated incremental borrowing rate of 5% to determine the present value of future lease payments. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the lease term. Variable lease costs consist primarily of property taxes, insurance, certain utility expenses, and sales tax. The VBG lease is accounted for as an operating lease. At the inception of the lease, we recorded an operating lease obligation and a right-of-use asset of $469,949. The present value discounted at 5% of the remaining lease obligation of The weighted average remaining lease term is approximately 5.0 years. Following is a schedule of the approximate minimum future lease payments on the operating leases as of October Total Remainder 2022 2023 2024 2025 2039 2027 and thereafter Total future minimum lease payments Less - interest Total Remainder 2023 2024 2025 2026 2027 2028 and thereafter Total future minimum lease payments Less - interest The Company is a party to a month-to-month land lease agreement for one of its Burger Time locations. The net book value of the building on this land is approximately $18,500. The monthly lease payment is $1,600 plus the cost of property taxes. The total operating lease expense for the 39-week and 13-week period in 2023 was $81,000 and $26,333, respectively, and cash paid for leases during the 39 weeks in 2023 totaled $76,000 and variable expenses for lease properties were approximately $26,000. The weighted average remaining lease term is approximately 5.3 years. The Company also pays a monthly rent NOTE The investment in NGI does not have a readily determinable market value. Therefore, it is carried at a cost determined by BT Brands. NOTE 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. We are unaware of any significant asserted or potential claims that could impact our financial position. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The following discussion of the financial condition, results of operations, liquidity, and capital resources of BT Brands, Inc. and its wholly-owned subsidiaries (together, "BT Brands" or the "Company") should be read in conjunction with the Company's condensed consolidated financial statements and accompanying notes included under Part I, Item 1 of this Introduction As of October · Eight Burger Time fast-food restaurants and one Dairy Queen franchise · · Keegan’s Seafood Grille in Indian Rocks Beach, Florida (“Keegan’s”); · Pie In The Sky Coffee and Bakery in Woods Hole, Massachusetts (“PIE”). · Unconsolidated affiliate Bagger Dave’s Burger Tavern, Inc., 41.2% owned, operates six Bagger Dave’s restaurants in Michigan, Ohio, and Indiana (“BD”). The average customer transaction at our Burger Time restaurants increased by approximately Notable Recent Events Material Trends and Uncertainties Industry trends have a direct impact on our business. Current trends include difficulties attracting food service workers and rapid inflation in the cost of input items. Recent trends also include the rapidly changing area of technology and food delivery. The major companies in the restaurant industry have rapidly adopted and developed smartphone and mobile delivery applications, Labor is a critical factor in operating our stores. Securing staff to run our locations at full capacity has become more challenging in most areas where we operate our restaurants. The current labor market has resulted in higher wages as the competition for employees intensifies, not only in the restaurant industry but in practically all retail and service industries. Results of Operations for the Thirteen Weeks Ended October The following table sets forth our 13 weeks ended, October 2, 2022 13 weeks ended, October 3, 2021 13 weeks ended, October 1, 2023 13 weeks ended, October 2, 2022 Amount % Amount % Amount % Amount % SALES COSTS AND EXPENSES Restaurant operating expenses Food and paper costs Labor costs Occupancy costs Other operating expenses Depreciation and amortization General and administrative Total costs and expenses Income from operations 358,743 INTEREST EXPENSE INTEREST INCOME AND OTHER ‒ ‒ EQUITY IN AFFILIATE LOSS ‒ ‒ INCOME TAX (EXPENSE) ‒ ‒ OTHER EQUITY IN LOSS FROM AFFILIATE NET INCOME (LOSS) Net Revenues: Net sales for the third fiscal quarter of Restaurant unit sales for Burger Time for the 13 weeks ranged from a low of approximately Our various restaurants all experience unique seasonal sales patterns. The third quarter, which includes the summer months, is particularly strong at PIE; for the quarter, PIE had sales of $1,292,740, an increase of 2.9% from the same quarter a year ago, particularly at PIE where eggs, butter and pork were all at lower costs than one year ago. Costs of Sales - food and paper: Cost of sales - food and paper 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 Labor Costs For the third quarter of fiscal Occupancy and Other Operating Expenses For the third fiscal quarter of Depreciation and Amortization Expense: For the third fiscal quarter of General and Administrative Costs General and administrative costs increased by Income from Operations The income from operations for the third quarter of fiscal Restaurant-level EBITDA To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with 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 13 weeks ended, October 2, 2022 October 3, 2021 Revenues Reconciliation: Income from operations Depreciation and amortization General and administrative, corporate-level expenses Restaurant-level EBITDA Restaurant-level EBITDA margin 13 weeks ended, October 1, 2023 October 2, 2022 Revenues Reconciliation: Income from operations Depreciation and amortization General and administrative, corporate-level expenses Restaurant-level EBITDA Restaurant-level EBITDA margin Our Results of Operations for the Thirty-nine Weeks Ended October 1, 2023, and the Thirty-nine Weeks Ended October 2, 2022 The following table sets forth our Condensed Statements of Income and percentages of total revenues for the 39-week fiscal periods. The percentages below may not reconcile because of rounding. 39 weeks ended, October 1, 2023 39 weeks ended, October 2, 2022 Amount % Amount % SALES COSTS AND EXPENSES Restaurant operating expenses Food and paper costs Labor costs Occupancy costs Other operating expenses Depreciation and amortization Gain on sale of assets General and administrative Total costs and expenses Income from operations INTEREST EXPENSE OTHER EQUITY IN LOSS FROM AFFILIATE INCOME TAX BENEFIT NET INCOME (LOSS) 39 weeks ended, October 2, 2022 39 weeks ended, October 3, 2021 Amount % Amount % SALES COSTS AND EXPENSES Restaurant operating expenses Food and paper costs Labor costs Occupancy costs Other operating expenses Depreciation and amortization General and administrative Total costs and expenses Income from operations INTEREST EXPENSE INTEREST INCOME AND OTHER ‒ ‒ EQUITY IN AFFILIATE LOSS ‒ ‒ INCOME TAX BENEFIT (EXPENSE) ‒ NET INCOME (LOSS) Net Revenues: Net sales for the 39 weeks Burger Time unit sales for the 39 weeks ranged from a low of approximately Costs of Sales - food and paper: Cost of sales - food and paper for the 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 Labor Costs: For the 39-week period Occupancy and Other Operating Expenses: For the first 39 weeks of fiscal Depreciation and Amortization Expense: Depreciation and amortization expenses General and Administrative Costs: General and administrative costs during the first three quarters of fiscal 2023 increased Income from Operations: Operating Restaurant-level EBITDA: To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use restaurant-level EBITDA, which is not a measure defined by GAAP. This non-GAAP operating measure is helpful to both management and, we believe, investors because it represents one means of gauging the overall profitability of our recurring and controllable core restaurant operations. This measure is not indicative of our overall results, nor does restaurant-level profit accrue directly to the benefit of stockholders, primarily due to the exclusion of corporate-level expenses. Restaurant-level EBITDA should not be considered a substitute or superior to operating income calculated under GAAP. The reconciliations to operating income set forth below should be carefully evaluated. We define restaurant-level EBITDA as operating income before general and administrative costs, depreciation and amortization, and impairment charges. General and administrative expenses are excluded as they are generally not specifically identifiable as restaurant-specific costs. Depreciation, amortization, and impairment charges are excluded because they are not ongoing controllable cash expenses and are not related to the 39 weeks ended, October 2, 2022 October 3, 2021 Revenues Reconciliation: Income from operations Depreciation and amortization General and administrative, corporate-level expenses Restaurant-level EBITDA Restaurant-level EBITDA margin 39 weeks ended, October 1, 2023 October 2, 2022 Revenues $ 11,078,419 $ 9,621,996 Reconciliation: Income (loss) from operations (289,691 ) 93,765 Depreciation and amortization 470,801 351,084 General and administrative, corporate-level expenses 1,288,019 1,035,639 Restaurant-level EBITDA $ 1,469,129 $ 1,480,488 Restaurant-level EBITDA margin 13.3 % 15.4 % Liquidity and Capital Resources In its peak period, the public response to In the future, Our primary requirements for liquidity Summary of Cash Flows Cash Flows Provided by Operating Activities Operating cash flow for the 39 weeks ending October Cash Flows Used in Investing Activities During fiscal Cash Flows Used in Financing Activities A significant portion of our cash flow used in financing activities is allocated to service our debt. Contractual Obligations As of October ITEM 4. CONTROLS AND 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 Exchange Act is recorded, processed, summarized, and reported within the periods specified by the SEC's rules and forms. Disclosure controls are also designed to ensure that this information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. As of October (2) Changes in Internal Control over Financial Reporting The Company disclosed a material weakness for lack of segregation of duties and not performing an adequate risk assessment on monitoring of internal controls over financial reporting in its Form 10-K for the fiscal year ended January PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are no pending legal proceedings to which the Company is a party or as to which any of its property is subject, and no such proceedings are known to be threatened or contemplated against it. ITEM 1A. RISK FACTORS We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS On February 9, 2022, the independent members of the Board of Directors and the Compensation Committee of the board of Directors approved a grant of 250,000 shares of common stock to each of Gary Copperud and Kenneth Brimmer, the Company's chief executive officer and chief financial officer, respectively, if, so long as the Company's publicly traded warrants are outstanding, the Company's common stock trades at $8.50 per share for 20 consecutive trading days. Final approval of the awards is contingent upon shareholder approval of an increase in the number of shares available for grant under the 2019 Incentive Plan, which is expected to be proposed at the next annual shareholders’ meeting. The award of the shares is tied directly to the price at which the common stock purchase warrants issued in the Company's initial public offering completed in November 2021 are redeemable by the Company. The warrants initially are exercisable at $5.50 per share (subject to adjustment under certain circumstances). The Company expects that if and when the warrants become redeemable, holders will exercise their warrants, and the Company will receive additional capital to fund acquisitions and growth. On July 5, 2023, the Company granted a seven-year option to purchase 100,000 shares of its common stock at $2.50 per share to a consultant. These options granted to the consultant vest monthly over a 60-month period so long as the consulting relationship continues. Other than as set forth above, since the date on which the Company filed its Annual Report on Form 10-K and through the date of this quarterly report, 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 for general working capital purposes and to acquire (i) the restaurant assets of Keegan's Seafood Grille ($1,150,000) and Pie in the Sky Bakery and Coffee Shop ($1,160,000) and (ii) a 41.2% of the outstanding shares of common stock of Bagger Dave's ($1,390,000) and (iii) the Village Bier Garten, all as more fully described under Management's Discussion and Analysis of Financial Condition and Results of Operations. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS. Exhibit Description 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). Inline XBRL Taxonomy Extension Schema Document. Inline XBRL Taxonomy Extension Calculation Linkbase Document. Inline XBRL Taxonomy Extension Definition Linkbase Document. Inline XBRL Taxonomy Extension Labels Linkbase Document. Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BT BRANDS, INC. Date: November 15, By: /s/ Kenneth Brimmer Name: Kenneth Brimmer Title: Chief Operating Officer and Principal Financial Officer For the quarterly period ended: October 2, 202291-149576490-1495764North DakotaND Yes ☒ No14, 2022,11, 2023, there were 6,461,1186,246,118 shares of common stock outstanding. (1)(vi) related to public health, which include risks and uncertainties related to COVID in its various forms, the impact of governmental regulations that have been and may in the future be, imposed in response to the pandemic which potentially could have an impact on discretionary consumer spending and (2) those(vii) the other risks and uncertainties discussed and described in our 20212022 annual report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on March 17, 2022.April 18, 2023. Many of these risks and uncertainties are beyond our ability to control or predict; in many cases, the risks and uncertainties could cause actual results to differ materially from those indicated by the forward-looking statements. The forward-looking statements contained in this quarterly report speak only as of the date of this quarterly report. We expressly disclaim any obligation or undertaking to report any updates or revisions to any such statement to reflect any change in our expectations or any change in events, conditions, or circumstances on which any such statement is based, except as required by law. 2 Table of ContentsPART I — FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS1715272721282228222822282228222822292330 3 Table of Contents $ 7,165,704 $ 12,385,632 $ 5,546,874 $ 2,150,578 653,399 - 1,366,973 5,994,295 57,603 72,251 55,200 76,948 150,814 79,510 192,991 158,351 50,375 27,186 37,445 37,397 258,751 446,524 8,077,895 12,564,579 7,458,234 8,864,093 3,541,493 1,592,338 3,238,310 3,294,644 1,562,672 - 1,834,408 2,004,673 1,428,187 75,000 1,115,615 1,369,186 143,000 61,000 488,431 - 671,220 671,220 545,500 - 280,412 273,810 400,766 453,978 49,627 50,903 $ 15,924,591 $ 14,505,727 $ 14,911,180 $ 16,769,697 $ 354,486 $ 291,973 $ 431,187 $ 448,605 - 791,370 169,504 169,908 164,866 167,616 217,744 - 215,326 193,430 490,627 254,341 476,035 532,520 8,000 209,088 1,240,361 925,310 1,287,414 2,133,541 2,698,030 2,833,064 2,332,014 2,658,477 1,353,702 - 1,650,361 1,825,057 51,510 119,000 5,343,603 3,877,374 5,269,789 6,617,075 - - 12,922 12,895 - - 12,492 12,792 (356,807 ) (106,882 ) 11,392,835 11,215,696 11,527,235 11,409,235 (824,769 ) (600,238 ) (1,541,529 ) (1,162,523 ) 10,580,988 10,628,353 9,641,391 10,152,622 $ 15,924,591 $ 14,505,727 $ 14,911,180 $ 16,769,697 Consolidated Financial Statements 4 Table of Contents BT BRANDS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)$ 9,621,996 $ 6,604,554 $ 4,023,920 $ 2,280,999 $ 11,078,419 $ 9,621,996 $ 4,007,656 $ 4,023,920 3,637,814 2,580,224 1,604,858 944,171 4,348,294 3,637,814 1,449,796 1,604,858 3,122,867 1,794,499 1,336,039 607,780 4,124,857 3,122,867 1,509,721 1,336,039 803,792 436,196 367,872 132,542 845,863 803,792 340,002 367,872 577,035 355,024 248,383 102,943 603,964 577,035 209,721 248,383 351,084 173,799 168,855 60,405 470,801 351,084 114,774 168,855 1,035,639 295,397 288,921 74,415 1,288,019 1,035,639 343,027 288,921 (313,688 ) - - - 9,528,231 5,635,139 4,014,929 1,922,256 11,368,110 9,528,231 3,967,041 4,014,928 93,765 969,415 8,991 358,743 (289,691 ) 93,765 40,615 8,992 (155,220 ) - (74,982 ) - 33,184 (155,220 ) 56,248 (74,982 ) 55,836 - 46,364 - 123,630 55,836 32,821 46,364 (88,099 ) (161,148 ) (33,638 ) (32,916 ) (73,857 ) (88,099 ) (23,948 ) (33,638 ) (135,813 ) - (121,641 ) - (254,272 ) (135,813 ) (109,222 ) (121,641 ) (229,531 ) 808,267 (174,906 ) 325,827 5,000 (225,000 ) - (90,000 ) $ (224,531 ) $ 583,267 $ (174,906 ) $ 235,827 $ (0.03 ) $ 0.14 $ (0.04 ) $ 0.06 (461,006 ) (229,531 ) (3,486 ) (174,905 ) 82,000 5,000 - - $ (379,006 ) $ (224,531 ) $ (3,486 ) $ (174,906 ) $ (0.06 ) $ (0.03 ) $ (0.00 ) $ (0.04 ) 6,459,223 4,047,506 6,461,118 4,047,506 6,257,652 6,459,223 6,246,118 6,461,118 5 Table of Contents BT BRANDS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)$ (224,531 ) $ 583,267 $ (379,006 ) $ (224,531 ) 306,584 173,799 417,590 306,584 44,500 - 53,212 44,500 4,050 55,555 4,050 4,050 (67,490 ) 58,000 (82,000 ) (67,490 ) 102,300 - 118,000 102,300 155,220 - (33,184 ) 155,220 - (13,750 ) (51,603 ) - 135,813 - 253,571 135,813 (313,688 ) - 17,465 - (181,339 ) - 14,648 (12,721 ) 21,748 14,648 (15,755 ) (8,867 ) (34,640 ) (15,755 ) (23,189 ) (29,195 ) (48 ) (23,189 ) 62,512 148,520 (9,714 ) 62,512 204,680 (116,136 ) 124,854 204,680 (201,088 ) 79,110 - (201,088 ) 484,504 931,332 (74,732 ) 484,504 (1,150,000 ) - - (1,150,000 ) (1,159,600 ) - - (1,159,600 ) (690,000 ) - (690,000 ) (1,260,000 ) - - (1,260,000 ) 496,000 - (349,739 ) (85,821 ) (362,223 ) (349,739 ) (229,000 ) - - (229,000 ) (808,619 ) - (928,739 ) (808,619 ) 5,640,848 - (6,602 ) - - (6,602 ) (5,653,560 ) (85,821 ) 4,845,886 (5,653,560 ) - 3,107,100 (791,370 ) (125,738 (3,113,521 ) (333,263 ) (125,738 ) 74,866 - - 74,866 - (49,699 ) - (31,823 ) (250,225 ) - (50,872 (87,943 ) (1,374,858 ) (50,872 ) (5,219,928 ) 757,568 3,396,296 (5,219,928 ) 12,385,632 1,321,244 2,150,578 12,385,632 - - $ 7,165,704 $ 2,078,812 $ 5,546,874 $ 7,165,704 $ 84,049 $ 127,800 $ 69,807 $ 84,049 $ 209,088 $ 88,006 $ - $ 209,088 $ 7,704 $ - 6 Table of Contents BT BRANDS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(Unaudited)6,396,118 $ 12,792 $ 11,409,235 $ (1,162,523 ) $ (106,882 ) $ 10,152,622 - - 118,000 - - 118,000 (150,000 ) (300 ) - (249,925 ) (250,225 ) - - - (379,006 ) - (379,006 ) 6,246,118 $ 12,492 $ 11,527,235 $ (1,541,529 ) $ (356,807 ) $ 9,641,391 6,447,506 $ 12,895 $ 11,215,696 $ (600,238) $ 10,628,353 - - 102,300 - 102,300 13,612 27 74,839 - 74,866 - - - (224,531) (224,531) 6,461,118 $ 12,922 $ 11,392,835 $ (824,769) $ 10,580,988 4,047,502 $ 8,095 $ 497,671 $ (1,208,089) $ (702,323) 4 - - - - - - - 583,267 583,267 4,047,506 $ 8,095 $ 497,671 $ (624,822) $ (119,056) 6,461,118 $ 12,922 $ 11,363,935 $ (649,863) $ 10,726,994 - - 28,900 - 28,900 - - - (174,906) (174,906) 6,461,118 $ 12,922 $ 11,392,835 $ (824,769) $ 10,580,988 4,047,506 $ 8,095 $ 497,671 $ (860,649) $ (354,883) - - - 235,827 235,827 4,047,506 $ 8,095 $ 497,671 $ (624,822) $ (119,056) 6,447,506 $ 12,895 $ 11,215,696 $ (600,238 ) $ - $ 10,628,353 - - 102,300 - - 102,300 13,612 27 74,839 - - 74,866 - - - (224,531 ) - (224,531 ) 6,461,118 $ 12,922 $ 11,392,835 $ (824,769 ) $ - $ 10,580,988 6,246,118 $ 12,492 $ 11,486,535 $ (1,538,043 ) $ (356,807 ) $ 9,604,177 - - 40,700 - - 40,700 - - - (3,486 ) - (3,486 ) 6,246,118 $ 12,492 $ 11,527,235 $ (1,541,529 ) $ (356,807 ) $ 9,641,391 6,461,118 $ 12,922 $ 11,363,935 $ (649,863 ) $ - $ 10,726,994 - - 28,900 - - 28,900 - - - (174,906 ) - (174,906 ) 6,461,118 $ 12,922 $ 11,392,835 $ (824,769 ) $ - $ 10,580,988 7 Table of Contents 2, 2022.1, 2023. In our opinion, all regular and recurring adjustments necessary for a fair presentation of our financial position and results of operation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.2, 2022,1, 2023, does not include all 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, 2022,1, 2023, and the related notes included in our Form 10-K for the fiscal year ending January 2, 2022.1, 2023.itthe Company acquired 100% of BTND, LLCLLC.8 Table of Contents 2, 2022,1, 2023, BT Brands owned and operated thirteen restaurants, including nineeight Burger Time restaurants in the North Central region of the United States, a Dairy Queen fast-food franchised location in suburban Minneapolis, Minnesota, collectively ("BTND"). Following the end of the third quarter on November 6, 2022, the Burger Time in West St. Paul, Minnesota was permanently closed. The Company is considering alternate uses for the site. We own and operate Keegan's Seafood Grille ("Keegan's"), a dine-in restaurant located in Florida, Pie In The Sky Coffee and Bakery ("PIE"), a casual dining coffee shop bakery located in Woods Hole, Massachusetts, and the Village Bier Garten (“VBG”), a German-themed restaurant in Cocoa, Florida. Our Burger Time restaurants feature a variety of burgers and other affordable foods, sides, and soft drinks. Our Dairy Queen restaurant offers a proscribed menu consisting of burgers, chicken, sides, ice cream, otherproprietary desserts, novelty items, and various beverages. Keegan's Seafood Grille has operated in Indian Rocks Beach, Florida, for more than thirty-five years and offers a variety of traditional fresh seafood items for lunch and dinner. The menu at Keegan's includes beer and wine. PIE features an array of fresh baked goods, freshly made sandwiches, and our locally roasted coffee. The Village Bier GartenVBG is a full-service restaurant and bar featuring a German-themed menu, specialty imported European beers, and regular entertainment. Our revenues are derived from food and beverages at our restaurants;restaurants, retail goods such as apparel, private-labeled "Keegan's Hot Sauce," and other souvenir items, which account for an insignificant portion of our income.representingor 41.2%, of Bagger Dave's Burger Tavern, Inc. ("Bagger Dave's"). We acquired the shares from itsthe founder of Bagger Dave’s for $1,260,000,$1,390,000, or approximately $0.114$.114 per share. Following the investment, two representatives of BT Brands were appointed to two of the three positions oncomprise Bagger Dave's Board of Directors. Bagger Dave's specializes in locally sourced, never-frozen prime rib recipe burgers, all-natural lean turkey burgers, hand-cut fries, locally crafted beers on draft, milkshakes, salads, black bean turkey chili, and pizza. The first Bagger Dave's opened in January 2008 in Berkley, Michigan. There are currently six Bagger Dave's restaurants, including four in Michigan and single units in Ft. Wayne, Indiana, and Centerville, Ohio.8Table of ContentsPeriodPeriodsiswas a 52-week year52-weeks ending January 1, 2023, and2023. References in this report to periods refer to the 39-week periods in the respective fiscal 2021 was a 52-week year ending January 2, 2022.periodsInvestmentInvestmentsOur 41.2%As of October 1, 2023, noncurrent investments include our net equity method investment of $811,615 in Bagger Dave’s and our $304,000 total investment in NGI Corporation. (NGI). In 2020, the Company received equity ownership in NGI as consideration for a loan to NGI. Upon repayment of Bagger Dave's is accounted for using the "equity method"loan to NGI, we attributed $75,000 to the value of accounting. Under the equity method, our sharereceived, which was reflected as additional interest income in 2020. The fair value determined in 2020 continues to be reflected as the value of the investment. On February 12, 2022, we invested $229,000 in Series A1 8% Cumulative Convertible Preferred Stock of NGI, including a five-year warrant to purchase 34,697 common shares of NGI at $1.65 per share.income (loss)loss of $617,164. For the 39 weeks, our 41.2% equity share in the loss was approximately $254,272 and is recognized as income (loss)included in our condensed consolidated statementsthe accompanying statement of income and added to (subtracted from) the investment account. Dividends received, if any, are deducted from the investment. operations.98 for information regarding our related party investment.9 Table of Contents Investments in marketable equity securities are carried at fair value. On October 2, 2022, marketable securities consisted of exchange-listed equity securities with a historical cost of $808,619. These investments are reflected in the accompanying financial statements on October 2, 2022, at the level-one fair value quoted in an active market of $653,399.9Table of Contentsestimates are made by us forwe estimate the future operating results of each restaurant. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets.the excessnot amortized. Goodwill is tested for impairment at least annually. The cost of the purchase priceother intangible assets is amortized over the estimatedexpected useful life. Other assets includes the allocated fair value of the acquired business assets. In accordance with GAAP, goodwillDairy Queen franchise agreement which is not amortized. We periodically assess goodwill for impairment and have determined there is no goodwill impairment at October 2, 2022. Intangible AssetsIntangible assets with estimated finite lives result from business acquisitions and include the allocated cost of trademarks, tradenames, a covenant not to compete, websites, and social media accounts. The costs of purchased intangible assets are recorded at the estimated value and arebeing amortized over 4 to 2014 years.10 Table of Contents AssetsAsset Held for SaleAs of October 2,We closed the Burger Time store in West St. Paul in 2022 a property inand the St. Louis area, which has a carrying value of $0, and a property in Richmond, Indiana, are heldstore in 2018. The West St. Paul location sale was completed in February of 2023 for a gain of $313,688. The Richmond location is currently offered for sale. We believe the Richmond property will be sold at or above its current-carrying cost. The remaining book valuecurrent carrying value. In the second quarter of $258,751 is included2023, we completed the disposition of the St. Louis property in Other Assets inlieu of unpaid property taxes, eliminating approximately $180,000 of previously accrued property taxes, which was reflected as a reduction of occupancy costs during the accompanying balance sheet.second quarter of this fiscal year.provides for income taxes underfollows Accounting Standards Codification (ASC), 740, Accounting for Income Taxes. ASC 740 uses anusing the asset and liability approach in accounting for income taxes. Deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities. They are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. If necessary, we provide a valuation allowance to reduce deferred tax assets to their estimated realizable value. The deferred tax assets are reviewed periodically for recoverability, and valuation allowances are adjusted as necessary.2, 2022,1, 2023, we estimatedused a current tax provision at the net combined federal and state rate of approximately 27.5%. in estimating our current tax benefit.10Table of Contents20222023 and 2021.2022. NOTEOTE 2 – ACQUISITIONSINTANGIBLE ASSETSRestaurant Acquisition - Keegan'sOn March 2, 2022, we purchasedAt October 1, 2023, the netvalue of acquired assets, Intangible Assets being amortized are the following$ 98,000 $ (50,100 ) $ 47,900 393,000 (40,134 ) 352,866 $ 491,000 $ (90,234 ) $ 400,766 Keegan's, a fresh seafood restaurant locatedintangible assets, including covenants not to compete, will approximate $58,900 in Indian Rocks Springs, Florida. Concurrent with the purchase, we entered a 131-month lease2023 and 2024, $40,500 in 2025, $26,200 per year thereafter following six years and $7,500 in 2037.approximately 2800 square foot space that Keegan's has occupied13 weeks was $12,221, and for more than 35 years. We acquired Keegan's tradename as part of the purchase and will continue to operate the business as Keegan's Seafood Grille. The purchase price39 weeks ending October 1, 2023, was approximately $1.15 million, paid in cash at closing.$54,486.The acquisition of Keegan's was accounted for using the acquisition method of accounting following ASC 805 "Business Combinations." Accordingly, the consolidated statements of operations include the results of these operations from the date of acquisition. The assets acquired were recorded at their estimated fair values. The Company recorded provisional amounts and will complete the acquisition accounting once it finalizes its valuation analysis.For the Keegan's acquisition, we provisionally recorded $204,211 in goodwill, representing the excess of fair value over the purchase price of the identifiable assets; the allocation to purchased goodwill is expected to be deductible for income tax purposes over fifteen years.The following table presents the preliminary estimate of the fair value of the assets acquired and liabilities assumed in the transaction:$ 10,049 428,000 450,000 75,000 963,049 (17,260 ) 945,789 204,211 $ 1,150,000 11 Table of Contents Restaurant AcquisitionNOTE 3 – Pie In the Sky Coffee and BakeryPROPERTY AND EQUIPMENTOn May 11, 2022, we purchased the net assets of PIE, a bakeryProperty 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 partequipment consisted of the purchasefollowing:$ 435,239 $ 485,239 3,875,840 3,893,274 2,453,547 2,402,157 6,764,626 6,780,670 (3,267,565 ) 3,741,170 (258,751 ) (446,526 ) $ 3,238,310 $ 3,294,644 will continue to operate as Pie in the Sky. The purchase price2022 was approximately $1.16 million, including $1.15 million in cash paid at closing.$416,315 and $306,584, respectively.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 asNOTE 4 - ACCRUED EXPENSESclosing date. We recorded provisional amounts as of the purchase date and will complete the acquisition accounting once we finalize the valuation analysis.following at: As a result of the PIE acquisition, we provisionally recorded $284,220 in goodwill, representing the excess of fair value over the purchase price of the identifiable assets, which is expected to be deductible for income tax purposes over fifteen years.The following table presents our preliminary estimate of the fair value of the assets acquired and liabilities assumed in the PIE transaction is:$ 23,500 400,000 125,000 50,000 300,000 898,500 (23,120 ) 875,380 284,220 $ 1,159,600 Restaurant Acquisition - Village Bier Garten RestaurantOn August 4, 2022, we completed the purchase of the assets and the business operating as Van Stephan Village Bier Garten ("VBG"), a full-service bar and restaurant in Cocoa, Florida. The restaurant features a German-themed menu, specialty imported European beers, and regular entertainment. The purchase price was $690,000, paid in cash at closing. Concurrent with the purchase, we entered into a five-year lease with three five-year renewal options for the property currently occupied by the business. The terms of the triple net lease call for an initial monthly rent of $8,200.The following table presents our preliminary estimate of the fair value of the assets acquired and liabilities assumed in the VBG transaction is:$ 22,000 230,000 273,000 15,000 150,000 $ 690,000 $ 33,487 $ 202,436 59,139 59,139 190,747 143,481 12,926 12,764 99,330 70,270 17,663 17,663 19,705 25,965 43,038 802 $ 476,035 $ 532,520 12 Table of Contents NOTE 3 – INTANGIBLE ASSETSAt October 2, 2022, based upon our preliminary evaluation of the value of acquired assets, intangible assets are the following:$ 450,000 $ (37,500 ) $ 412,500 140,000 (7,000 ) 133,000 $ 590,000 $ (44,500 ) $ 545,500 NOTE 4 – PROPERTY AND EQUIPMENTProperty and equipment consisted of the following at:$ 485,239 $ 485,239 3,901,165 2,674,529 2,351,188 1,322,085 6,737,592 4,481,853 (2,937,348 ) (2,630,764 ) (258,751 ) (258,751 ) $ 3,541,493 $ 1,592,338 Depreciation expense for the 39-week periods in 2022 and 2021 was $306,584 and $172,261, respectively. - ACCRUED EXPENSESAccrued expenses consisted of the following at:$ 105,972 $ 103,615 59,139 7,000 155,395 44,700 11,884 8,424 89,150 50,414 17,663 17,663 26,239 10,036 6,681 2,614 18,504 9,875 $ 490,627 $ 254,341 13Table of ContentsNOTE 6 - LONG TERM DEBT$ 2,905,900 $ 3,027,971 4,583 22,000 2,910,483 3,049,971 (42,949 ) (46,999 ) (169,504 ) (169,908 ) $ 2,698,030 $ 2,833,064 $ 2,533,971 $ 2,864,484 458 3,208 2,534,429 2,867,692 (37,549 ) (41,599 ) (164,866 ) (167,616 ) $ 2,332,014 $ 2,658,477 76 - STOCK-BASED COMPENSATIONthe Companywe adopted the 2019 BT Brands, Inc. 2019 Incentive Plan (the "2019 Incentive Plan"“Plan”), under which itthe Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units, and other stock and cash awards to eligible participants. The number of common shares reserved for issuance is 250,000. As of October 2, 2022,1, 2023, there were 13,400429,750 shares available for a grant under the 2019 Incentive Plan.DuringCompensation expense equal to the year ended January 2, 2022, we issued options to purchase 15,000 shares of common stock under the 2019 Incentive Plan as stock awards to three directorsfair value of the Companyoptions at the grant date is recognized in connection with their joininggeneral and administrative expense over the boardapplicable service period. Total equity-based compensation expenses through the third quarter of directors. The options are exercisable at $5 per share2023 were $118,000, and $102,300 through 2031. In the first nine monthsthird quarter of 2022, including approximately $77,000 for the Contingent Share Award described below. Based on current estimates, we granted 220,750 options to employeesproject that approximately $372,000 in stock-based compensation expense for current grants will be recognized over the next five years at approximately $200,000 in 2024, $95,000 in 2025, $35,000 in 2026, $28,000 in 2027 and consultants to purchase shares at $2.50 per share.$14,000 in 2028.StockAs outlined in each agreement, stock options granted to employees and directors vest over two to fivefour years in monthly or annual installments, as outlined in each agreement.installments. Options expire ten years from the date of the grant. Compensation expense equal to the fair value of the options at the grant date is recognized in general and administrative expense over the applicable service period. Compensation expense for the 39 weeks in 2022 was $102,300 and was zero in a similar period in 2021. Based on current estimates, we project that for current grants, approximately $200,000 in stock-based compensation expense will be recognized over the next three years.Company'sCompany’s common stock as of the grant date.method.methodvolatility based on a samplevolatility.comparable companies.the award14Table of Contents15,000 $ 5.00 9.3 $ 0 220,750 2.50 0 0 0 (8,200 ) 2.50 227,550 $ 2.67 9.8 0 59,150 $ 3.18 9.7 $ 0 The Black-Scholes option-pricing model was used to estimate the fair value of the stock options with the following weighted-average assumptions for grants during the period ended October 2, 2022:$ 1.39 4.83 $ - 63 % 2 % 220,250 $ 2.74 9.0 $ 0 100,000 2.50 6.7 0 0 (750 0 319,500 $ 2.74 8.8 $ 0 106,802 $ 3.18 8.3 $ 0 9, 2022,27, 2023, the independent members of the Board of Directors comprising its Compensation Committee approvedCompany finalized a proposal wherein,Contingent Incentive Share Award with senior executives. The Contingent Share Awards provides that so long as the Company'sCompany’s publicly traded warrants are outstanding, senior management of the Company will be granteddeemed to earn an aggregate award of 250,000 shares of common stock as an award upon the Company'sCompany’s share price reaching $8.50 per share for 20 consecutive trading days. Final approvaldays, provided, however, participants must be employed by the Company at the time the Incentive Shares are earned. The estimated fair value of the proposalplan is contingent upon shareholder approval$1.00 per share, and $250,000 of an increase incompensation expense will be recognized over the number of sharesremaining 2.1 years available under the 2019Plan. $77,000 of stock-based compensation was recognized for this Agreement for the 39 weeks of 2023. We utilized a lattice model when determining the fair value of the Contingent Incentive Plan, which is expected to be proposed atShare Awards. Assumptions utilized in the next meetingmodel include a risk-free rate of shareholders.4.4% and volatility of 63%.87 – LEASESacquiringthe closing of the acquisition of Keegan's net assets, we entered into a lease for approximately 2,800 square feet of restaurant space. The 131-month Keegan's lease provides for an initial rent of $5,000 per month with an annual escalation equal to the greater of 3% or the Consumer Price Index. The lease is being accounted for as an operating lease. At the inception of the lease, we recorded an operating lease obligation and a right-of-use asset of $624,000. The present value discounted at 4% of the remaining lease obligation of $597,836$558,571 is reflected as a liability in the accompanying financial statements as of October 2, 2022.1, 2023.WithConcurrent 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.$1,055,000. The present value discounted at 5% of the remaining lease obligation of $519,040$933,235 is reflected as a liability in the accompanying financial statements as of October 2, 2022. The weighted-average remaining lease term is approximately 6.9 years.1, 2023.15Table of ContentsWithConcurrent with the acquisition of Village Bier Garten assets, we entered into a five-year lease with the seller for approximately 3,000 square feet of restaurant space and access to an additional 3,000 square feet of shared entertainment and seating area. The terms of the triple-net 60-month lease provide for an initial rent of $8,200 per month with an annual escalation of 3%. The VBG lease includes three five-year renewal option periods. The VBG lease does not provide an implicit interest rate; we used our estimated incremental borrowing rate of 5% to determine the present value of future lease payments. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the lease term. Variable lease costs consist primarily of property taxes, insurance, certain utility expenses, and sales tax.13 Table of Contents $454,510$452,871 is reflected as a liability in the accompanying financial statements as of October 2, 2022.1, 2023.2, 2022: 1, 2023:$ 69,600 281,676 289,236 297,909 306,838 531,553 1,776,812 (205,366 ) $ 1,571,446 The weighted-average remaining lease term is approximately 5.9 years.$ 70,788 289,076 297,745 306,674 268,437 1,039,438 2,272,158 (406,471 ) $ 1,865,687 forunder month-to-month arrangements for corporate and administrative office spaces in West Fargo, North Dakota, and Minnetonka, Minnesota, for a combined monthly rent of approximately $2,200.98 - RELATED PARTY TRANSACTIONNext Gen IceNGI CorporationIn 2019,Our CEO and CFO also serve as Chairman and CFO, respectively, of NGI Corporation (NGI). BT Brands made cash advancesowns 330,418 common shares and holds warrants to Next Gen Ice, Inc. (NGI), totaling a principal amount of $179,000. Our CEO, Gary Copperud, is Chairman of the Board of Directorspurchase 358,000 common shares at $1.00, expiring March 31, 2028, and 34,697 warrants to purchase additional shares at $1.65 of NGI. Our Chief Operating Officer, Kenneth Brimmer, is also a member of the Board of Directors of NGI and serves as Chief Financial Officer of NGI. When the loan was made, Mr. Copperud and an entity controlled by him together owned approximately 34% of the outstanding equity of NGI. As part of a Note modification, BT BrandsWe received 179,000 shares of common stock in NGI from the founders of NGI, representing approximately 2% of NGI shares outstanding. BT Brands also holds warrants expiring March 31, 2028, to purchase 358,000 shares of common stockas consideration for $1.00 per share.modifying a note that was subsequently paid. The common stock and warrants received in the note modification transaction were recorded at a value determined by BT Brands of $75,000. On February 2, 2022, BT Brands invested $229,000 in NGI Series A1 8% Cumulative Convertible Preferred Stock, which included a five-year warrant to purchase 57,250 shares at $1.65 per share. The total value of our investment in NGI at October 2, 2022, is its fair value of $304,000, comprised of the $75,000 value determined by BT Brands 109 – CONTINGENCIES 1614Table of Contents quarterlyQuarterly Report on Form 10-Q, as well as with the audited consolidated financial statements and accompanying notes and Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Annual Report on Form 10-K for the year ended January 2, 2022.2023.2, 2022,1, 2023, including our partially owned Bagger Dave'sDave’s business, we owned and operated eighteen restaurants comprising the following:Nineall of which are in the North Central region of the United States;(“BTND”);Bagger Dave's Burger Tavern, Inc, a 41.2% owned affiliate, operates six Bagger Dave's restaurants in Michigan, Ohio, and Indiana;·Keegan's Seafood Grille in Indian Rocks Beach, Florida;·Pie in the Sky Coffee Shop and Bakery in Woods Hole, Massachusetts.·Village Bier Garten is a German-themed restaurant, bar, and entertainment venue in Cocoa, Florida. (“VBG”): The first Burger Time opened its first restaurant opened in Fargo, North Dakota, in 1987. BTND, LLC purchased the assets of Burger Time in May 2007. Burger Time restaurants feature a traditional grilled hamburgerhamburgers and other affordable foods such as chicken sandwiches, pulled pork sandwiches, sides, and soft drinks. Burger Time'sTime’s operating principles include (i) offering bigger burgers and more value for the money; (ii) offering a limited menu to permit attention to quality and speed of preparation; (iii) providing fast service by way of single and double drive-thru designs and a point-of-sale system that expedites the ordering and preparation process, and (iv) great tasting and quality food made fresh to order at a fair price. Our primary strategy is to serve the drive-thru and take-out segment of the quick-service restaurant industry.Operationally, we strive for efficiency at our Burger Time restaurants, including maintaining an inventory of approximately $15,000 per store, with frequent fresh food deliveries. Historically, our Burger Time investment model targeted an average cash investment of between $325,000 and $535,000.4%20% in the first nine months of fiscal 20222023 compared to 20212022 and currently is about $12.60.approximately $15.60. This recent increase is principally becausethe result of a menu price increaseincreases implemented in 2021 and a 2022 price increase of approximately 10% on our popular "Deal of the Day" offering. We most recently increased menu prices in September of 2022. Many factors influence our sales trends. TheOur business environment is challenging for smaller restaurant chains as competition is intense.BT Brands operates Burger Time restaurants and newly acquired businessesWe operate through a central management organization which we believethat provides continuity across our restaurant base and allows forby utilizing the efficiencies of a central management team.During the 39 weeks ending October 2, 2022, we acquired three operating restaurants and a 41.2% ownership interest in an operator of six restaurants with the net proceeds from our November 2021 initial public offering. We expect to continue to consider acquisition opportunities. Our recent acquisitions have allowed us to diversify our operations into new restaurant segments and new geographic regions, which will reducereducing our dependency on the financial performance of our Burger Time restaurants.17Table of ContentsKeegan's Seafood Grille, acquired in March 2022, has served customers in the Clearwater and St. Petersburg, Florida markets for over 35 years. The operation is primarily a dine-in restaurant offering a variety of traditional fresh seafood items for lunch and dinner and a selection of beer and wine.In May During 2022, we acquired the assetsthree operating restaurants and business operationsa 41.2% ownership interest in BD, an operator of the iconic Pie In The Sky Coffee Shop and Bakery "PIE." The store is adjacentsix casual restaurants. We expect to the ferry dock in Woods Hole, Massachusetts. The business has operatedconsider new acquisition opportunities in the same location for over thirty years, offering a range of breakfast and lunch options, freshly roasted coffee, and branded merchandise serving locals and tourists.In August 2022, we purchased the assets and business operating as Van Stephan Village Bier Garten, a full-service bar and restaurant in Cocoa, Florida. The restaurant features a German-themed menu, specialty imported European beers, and regular entertainment.In June 2022, we acquired shares representing 41.2% ownership of Bagger Dave's Burger Tavern, Inc., which owns and operates six Bagger Dave's restaurants, a casual restaurant and bar concept. Bagger Dave's provides a warm, inviting, and entertaining atmosphere specializing in locally sourced, never-frozen prime rib recipe burgers, all-natural turkey burgers, hand-cut fries, locally crafted draft beers, milkshakes, salads, black bean turkey chili, pizza, and other items. Bagger Dave's opened its first restaurant in Berkley, Michigan, in January 2008 and operates four restaurants in Michigan, one restaurant in Ft. Wayne, Indiana, and one location in Centerville, Ohio.future. have aggressively expanded drive-through operations, and developed loyalty programs and database marketing supported by a robust technology platform. We expect these trends to continue as restaurants aggressively compete for customers. Competitors will continue to discount prices through aggressive promotions.The cost of food hasFood costs have increased over the last two years, and we expect to see continuedsome moderating inflationary pressure induring the remainder of 2022.2023. Beef and egg costs rosehave trended down slightly in 2021, continued to increase in 2021, and have recently risen by approximately 7% per pound.2023. Given the competitive nature of the fast-food burger restaurant industry, it may be difficultchallenging to raise menu prices to cover future cost increases fully. During 2020 and early 2021, as the pandemic peaked, our Burger Time business experiencedAs a significant increase in volume, contributing to improved profit margins. Futureresult, future margin improvements may be difficult to achieve andachieve. Margin improvement will be achieved through operational enhancements, equipment advances, and increased volumes offsetting food cost increases.15 Table of Contents WeTo succeed, we must identify, develop and retain quality employees.Although moderating recently, since March 2020, COVID and its variants have adversely affected workforces, customers, economies, and financial markets globally and disrupted the US economy's normal flow. Our stores have, with some exceptions, generally remained open for drive-through business. However, many businesses have experienced a disruption of operations. More recently, food service businesses, including ours, have faced challenges in attracting and hiring workers. Labor shortages have resulted in some store curtailment of operating hours which may become more acute as market participants compete to attract employees.We can't predict the effects of public health matters and their impact on our business. The response to public health matters may influence restaurant customer traffic and our ability to staff our restaurants, receive deliveries on a timely basis or perform functions at the corporate level. Further, such conditions could impact the availability of the menu items we offer and the ability of suppliers to deliver such products. We also may be adversely affected by mandatory closures, seek voluntary closures, or impose restrictions on operations. Even if such measures are not implemented, the perceived risk of infection or significant health risk may adversely affect our business. We continue to monitor public health issues and their impact. It is difficult to predict the future considering the many factors, including the spread of new variants of the original coronavirus disease.18Table of ContentsOur strategy to acquire additional restaurant properties presents numerous risks and uncertainties to our operations, including our management's ability to:·identify suitable targets;·complete comprehensive due diligence as to targets,·integrate a target's operations with our existing operations,·retain management and key employees of the target;·operate new restaurant concepts in new geographic areas outside of our traditional Burger Time platform;·develop and implement appropriate and effective sales and marketing strategies·maintain and grow revenue at our new properties;·identify and retain experienced managerial personnel to effectively administer our operations;·improve existing, and implement new operational, financial, and management controls;·install enhanced management information systems; and·create a corporate brand identifying our restaurants as BT Brands' properties.Our failure to manage any aspects of our growth could adversely impact our business and our results of operationsFuture conditions may influence restaurant customer traffic and our ability to adequately staff our restaurants, receive deliveries on a timely basis or perform functions at the corporate level. Further, such conditions could impact the availability of the menu items we offer and the ability of suppliers to deliver such products. We also may be adversely affected if jurisdictions impose mandatory closures, seek voluntary closures, or impose restrictions on operations. Even if such measures are not implemented, the perceived risk of infection or significant health risk may adversely affect our business.Growth Strategy and OutlookWe are seeking to increase value for our shareholders in the food service industry. Our principal strategy comprises acquiring individual and multi-unit restaurant properties at attractive earnings multiples. Though we do not plan to do so, we may develop additional Burger Time locations by acquiring and converting existing properties under certain circumstances. Other critical elements of our growth strategy include increasing same-store sales and introducing a campaign to boost brand awareness.Expansion Through AcquisitionsWe intend to continue to make strategic and opportunistic acquisitions that provide an entrance into targeted restaurant segments and geographic areas. Restaurant businesses become available for acquisition frequently, and we believe that we may be able to purchase either individual restaurant properties or multi-unit businesses at prices providing an attractive return on our investment. We may acquire operating assets where a franchise program of the acquired foodservice business is the most appropriate growth plan. We intend to follow a disciplined strategy of evaluating acquisition opportunities to ensure and enable the accretive and efficient acquisition and integration of additional restaurant concepts. Successful execution of our acquisition strategy will allow us to diversify our operations into other dining concepts and geographic locations.In evaluating potential acquisitions, we may consider the following characteristics, among others, that management considers relevant to each opportunity:·the value proposition offered by acquisition targets and the potential return on our investment;·established, recognized brands within their geographic footprint;·steady cash flow;·track records of long-term operating performance;·sustainable operating results;·geographic diversification; and·growth potential.19Table of ContentsAssuming we acquire new businesses, we will operate the business or businesses with a shared central management organization. Following the acquisition, we expect to pursue a growth plan to expand the number of locations and increase comparable store sales and profits, as described below. We anticipate that by leveraging our management services platform, we will achieve post-acquisition cost benefits by reducing the corporate overhead of the acquired business. If we acquire one or more restaurant chains or individual units near each other, we believe the concentration of operations will provide economic synergies for management functions, marketing, advertising, supply chain assistance, staff training, and operational oversight.Increase Same-Store SalesSame-store sales growth reflects the change in year-over-year sales for the comparable store base and is a benchmark for the performance of our restaurants. We use a multi-faceted same-store sales growth strategy to optimize restaurant performance. We use techniques proven in the restaurant industry to increase same-store sales. We utilize customer feedback and analyze sales data to test and improve existing and new menu items. In addition, we may use social media and public relations, and experiential marketing to engage customers. Our strategies to increase same-store sales will evolve as we acquire new restaurant concepts in new markets.Increase Brand AwarenessIncreasing brand awareness is essential to the growth of our Company. We intend to develop and implement forward-looking branding strategies. We will seek to leverage social media and employ targeted digital advertising to expand the reach of our brands and drive traffic to our stores. In addition, we intend to develop mobile applications that will allow consumers to find restaurants, order online and earn rewards. We expect to deploy internet advertising to match specific menu items targeted to demographic groups. We will deploy cross-over ads with radio and social media. Our branding initiatives will evolve as we acquire restaurant concepts that appeal to distinct consumer markets in differing geographic areas.20Table of Contents2, 2022,1, 2023, and the Thirteen Weeks Ended October 3, 20212, 2022consolidated condensed statementsCondensed Statements of incomeOperations and percentages of total revenues for the thirteen-week fiscal periods. The percentages below may not reconcile because of rounding.$ 4,023,920 100.0 % $ 2,280,999 100.0 % $ 4,007,656 100.0 % $ 4,023,920 100.0 % 1,604,858 39.9 944,177 41.4 1,449,796 36.2 1,604,858 39.9 1,336,039 33.2 607,780 26.6 1,509,721 37.7 1,336,039 33.2 367,872 9.1 132,542 5.8 340,002 8.5 367,872 9.1 248,383 6.2 102,943 4.5 209,721 5.2 248,383 6.2 168,855 4.2 60,405 2.6 114,774 2.9 168,855 4.2 288,922 7.2 74,415 3.3 343,027 8.6 288,922 7.2 4,014,929 99.8 1,922,256 84.3 3,967,041 99.1 4,014,929 99.8 8,991 .2 15.7 40,615 1.0 8,991 0.2 (33,638 ) (.8 ) (32,916 ) (1.5 ) (23,948 ) (.6 ) (33,638 ) (0.8 ) (28,618 ) (.7 ) (121,641 ) (3.0 ) (90,000 ) (3.9 ) 89,069 2.2 (28,618 ) (0.7 ) (109,222 ) (2.7 ) (121,641 ) (3.0 ) $ (174,906 ) (4.3 )% $ 235,827 10.3 % $ (3,486 ) (.1 )% $ (174,906 ) (4.3 )% 2022 increased $1,742,9212023 decreased $16,264 to $4,023,920$4,007,656 from $2,280,999$4,023,920 in fiscal 2021. The increase during2022. Reflecting the period resulted fromclosing of the West St. Paul location at the end of 2022. Including West St. Paul in the prior year, sales from the recently acquired businesses contributing $1,938,508 in revenue. Sales at the Burger Time locations declined approximately 14%4.6% as customer purchasing patterns returnedcontinued a return to pre-pandemic levels. Staffing challenges also adversely impacted Burger Time, resultingwhich resulted in limited hours and isolated daily store closures during the quarter. $115,000$140,000 to a high of approximately $311,000.$337,000. The average sales for each Burger Time unit were approximately $208,000$228,000 in 2022,2023, approximately $24,500 below$20,000 above the same period in 2021.2022.decreased for the fiscal 20222023 period decreased as a percentage of sales declined to 39.9%36.2% of restaurant sales from 41.4%39.9% of restaurant sales in the third quarter of fiscal 2021.2022. This decrease was the net result of generally a higher cost of sales for Keegan's,moderating inflationary pressures offset by menuwhere several key inputs declined in price increases and the acquisition of PIE which operates atfrom a significantly lower food cost than our Burger Time business.year ago.16 Table of Contents percentpercentage of restaurant sales increaseddecreased to 88.4%88.6% of sales in the third fiscal quarter of 20222023 from 78.4%88.4% in the similar period of fiscal 2021.2022. This increasedecrease was becausethe result of higher labordeclining and occupancy cost, including leasestabilizing commodity costs, associated with our recently acquired locationsparticularly at PIE and the matters discussed in the "Cost of Sales, - food and paper," "Labor Costs," and "Occupancy and Other Operating Costs" sections below.21Table of Contents2022,2023, labor and benefits cost increased as a percentage of sales to 33.2%37.7% of restaurant sales from 26.6%33.2% in fiscal 2021.2022. The increase in the percentage cost resulted from tighter labor markets, leading toresulting in higher hourly wage costs offset by leveraging existing staffing and higher labor costs associated with the PIE acquisition. Payroll costs are semi-variable, meaning they do not changedecrease proportionally to changesdecreases in revenue.2022,2023, occupancy and other expenses increaseddecreased to 15.3%8.5% of sales from 10.3%9.1% in 2021. This increase results from higher occupancy costs, including lease costs associated with our three new locations.2022; the impact of the closure of the West St. Paul at the end of 2022 was offset by rent and utility cost increases.2022,2023, depreciation and amortization increasedexpense decreased to $168,855 (4.2%$114,774 (2.9% of sales) from $60,405 (2.6%$168,855 (4.2% of sales) in the third quarter of fiscal 2021.2022. The increasedecrease results from reduced depreciation and amortization associated with our recent acquisitions.$214,506$54,105 in the third fiscal quarter of 2023 from $74,415$288,922 to $288,921;$343,027; the increase is associated with expenses related to the Company's transition to a public company in November 2021, including the costs related to long-term management agreements, incentive stock options and legal and accounting relating to our status as a public company.company and approximately $100,000 in legal expenses for a proxy solicitation contest related to one of the Company’s investments. For these reasons, third-quarter general and administrative expenses were 7.2%8.6% of sales, a significantan increase from 3.3%7.2% in the earlier year.20222023 was $8,991$40,615 compared to an income from operations of $358,743$8,991 in the same period in 2021; the2022. The percentage of income from operations as a percentage of sales declined toimproved by 1.0% from .2% from 15.7%, reflecting a decline inan improved profit margin is the result of costs associated with transitioning the acquired businesses,due to moderating inflation, higher general and administrative expenses and the matters discussed in the "Net Revenues" and "Restaurant Operating Costs" sections above. GAAP, theGAAP. The Company uses restaurant-level EBITDA, which is not a measure defined by GAAP. This non-GAAP operating measure is useful to both management and, we believe, investors because it represents one means of gauging the overall profitability of our recurring and controllable core restaurant operations. This measure is not indicative of our overall results, nor does restaurant-level profit accrue directly to the benefit of stockholders, primarily due to the exclusion of corporate-level expenses. Restaurant-level EBITDA should not be considered a substitute or superior to operating income calculated under GAAP. The reconciliations to operating income set forth below should be carefully evaluated.17 Table of Contents unrelatednot related to the health of ongoing operations' health.operations. $ 4,023,920 $ 2,280,999 8,991 358,743 168,855 60,405 288,922 74,415 $ 466,768 $ 493,563 11.6 % 21.6 % $ 4,007,656 $ 4,023,920 40,615 8,991 114,774 168,855 343,027 288,922 $ 498,416 $ 466,768 12.4 % 11.6 % $ 11,078,419 100.0 % $ 9,621,996 100.0 % 4,348,294 39.3 3,637,814 37.8 4,124,857 37.2 3,122,867 32.5 845,863 7.6 803,792 8.4 603,964 5.5 577,035 6.0 470,801 4.2 351,084 3.6 (313,688 ) (2.8 ) - - 1,288,019 11.6 1,035,639 10.8 11,368,110 102.6 9,528,231 99.1 (289,691 ) (2.6 ) 93,765 1.0 (73,857 ) (0.7 ) (88,099 ) (0.9 ) 156,814 1.4 (99,384 ) 1.0 (254,272 ) (2.3 ) (135,813 ) (1.4 ) 82,000 .7 5,000 - $ (379,006 ) (3.5 )% $ (224,531 ) (2.3 )% 2218Table of Contents Our Results of Operations for the Thirty-nine Weeks Ended October 2, 2022, and the Thirty-nine Weeks Ended October 3, 2021The following table sets forth our consolidated condensed statements of income and percentages of total revenues for the thirty-nine-week fiscal period. The percentages below may not reconcile because of rounding.$ 9,621,996 100.0 % $ 6,604,554 100.0 % 3,637,814 37.8 2,580,224 39.1 3,122,867 32.5 1,794,499 27.2 803,792 8.4 436,196 6.6 577,035 6.0 355,024 5.4 351,084 3.6 173,799 2.6 1,035,639 10.8 295,397 4.5 9,528,231 99.0 5,635,139 85.3 93,765 1.0 969,415 14.7 (88,099 ) (.9 ) (161,148 ) (2.4 ) (99,384 ) (1.0 ) (135,813 ) (1.4 ) 5,000 (225,000 ) (3.4 ) $ (224,531 ) (2.3 )% $ 583,267 8.9 % representing the first three-quarters of fiscal 20222023 increased $3,017,442$1,456,423 or 45.7%15.1% to $9,621,996$11,078,419 from $6,604,554$9,621,996 in fiscal 2021.2022. The increase in sales was principally the result of a favorable impact in the 39 weeks of acquired restaurants, which contributed approximately $3.8$1.9 million in incremental sales in 2023, offsetting a 4.5% decline of approximately $700,000 or 11% in BTND revenues.revenue.$345,000$347,000 to a high of approximately $861,000.$925,000. Average sales for each Burger Time unit were approximately $599,000$625,000 in 2022,2023, a decline from approximately $671,400$626,000 in the same 39-week period in 2021.2022. The sales decline in the 2022 period is the combined resultfirst half of 2023 resulted from a return to pre-covidpre-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.39-week2023 period of fiscal 2022 decreasedincreased as a percentage of sales to 37.8%39.3% from 39.1%37.8% of restaurant sales in the same period in 2021.2022. This decreaseincrease resulted from inflation early in the seasonally strong performanceyear, especially for Keegan's fresh seafood and the cost of meat which resulted in higher costs at PIE which operates at lower food and paper costs than our traditional business and Keegan's.Burger Time.84.6% of sales89.6% in the first 39 weeks of 20222023 from 78.2% in the same period84.6% in fiscal 2021.2022. This increase was due to the rise in sales activity from new locationsboth hourly wages and its impact,commodity food costs, as further discussed in the "Cost of Sales," "Labor Costs," and "Occupancy and Other Operating Costs" sections below.inof fiscal 2022,2023, labor and benefits costcosts increased to 32.5%37.2% of restaurant sales from 27.2%32.5% in the fiscal 2021 period. Shortages in staffing levels combined with2022. Significantly higher hourly wage rates at all locations increased the overall labor percentage. The hiring markets have become more challenging in terms of filling open positions. Payroll costs are semi-variable, meaning they do not changedecrease proportionally to changesdecreases in revenue. Thus, they increase as a percentage of restaurant sales when there is a decrease.23Table of Contents2022,2023, occupancy and other expenses increasedfell to 14.4%7.6% of sales from 12.0%8.4% in 2021. Many2022, principally as a result of reversing previously accrued property taxes. Aside from the real state tax matter, many of these costs are fixed, and the percentage reflects lower maintenance costs offset by higher lease occupancy costs at our new locations.forin the 39 weeksthird quarter of fiscal 2022 ending October 2, 2022,2023 increased by $173,757$119,717 to $470,801 (4.2% of sales) from $351,084 (3.6% of sales) from $177,285 (2.6% of sales) in the similar period of 20212022 and are the result of the purchase of three new restaurants and capital improvements, including significant parking lot repairs, at several of our locations.250.6%, or $740,242,$252,380 to $1,2,88,019 from $1,035,639 from $295,397 (11.4%(10.8% of sales) induring the 39 weeks of fiscal 2022.2022 period. The increase results from approximately $100,000 in legal and other costs associated with the transition to aNoble Roman’s Inc. proxy solicitation effort and other expenses generally associated with public reporting, company, stock-based compensation costs, and the expenseexpenses associated with long-term management employment agreements.incomeloss was $93,765$289,691 in the 39 weeks of fiscal 20222023 compared to $969,415a profit of $93,765 in the same period in fiscal 2021.2022. The change in income from operations in the fiscal 2022 period2023 compared to fiscal 20212022 was due primarily to the increase in general and administrative expenses, including stock-based compensation, which included higher costs associated with the transition to a public company near the end of 2021,expenses, including the items notedreasons described in the "Net Revenues" and "Restaurant Operating Costs" sections above. 19 Table of Contents continuing health of the business.ongoing operations.$ 9,621,996 $ 6,604,554 93,765 949,415 351,084 173,799 1,035,639 295,397 $ 1,480,488 $ 1,438,611 15.4 % 21.8 % 24Table of ContentsCOVIDCOVID-19 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 experienced at the height of COVID restrictions. For the 39 weeks that ended October 2, 2022, operations reflected an operating profit of $93,765. On October 2, 2022,1, 2023, we had $7.2$6.9 million in cash and cash equivalents and marketable securities and net working capital of $6.8$6.2 million, a decrease of $4.8$.6 million from January 2, 2022; the decline is the result of the purchase of three restaurants for a total of $2.3 million and investment of $1.3 million in shares of Bagger Dave's.1, 2023.public health mattersCOVID and its variants may againcontinue to impact the United States economy. It is difficult to predict the ultimate impact on the United States economy in general, the impact on the quick service drive-through segment of the food service industry, and our operating results and financial condition resulting from matters related to public health.condition. fundsare to fund our working capital needs, capital expenditures, and general corporate needs, and investmentsas well as to invest in or acquire businesses. Our operations do not require significant working capital, and, like many restaurant companies, we generally operate with negative working capital. We anticipate that working capital deficits may be incurred in the future and possibly increase. Our primary liquidity and cash flow sources are operating cash flows and cash on hand. We use available cashthis to service debt, maintain our stores to operate efficiently and increase our working capital. Our working capital position benefits from the fact that we collect cash from sales from our customers at the point of purchase or within a few days from our credit card processor; generally, payments to our vendors are not due for thirty days.2, 2022,1, 2023, was $484,504.a negative $74,732. The cash flow from operations was impacted negatively by a decline in BTND revenue, increasedthe ongoing costs related to our public company expenses, including stock-based compensation programs and costs associated with the transition to a public company,contested proxy solicitation for our recent acquisitions and payment of 2021 income tax liabilities.Noble Roman investment. We expect operating cash flow in future periods to be significantly affected by our recent acquisitions.20 Table of Contents 2022,2023, we have focused on identifyingcontinued to seek acquisitions in the food service and related industries, purchasing threetwo operating restaurants and acquiringpurchasing a 41.2% interest in a publicly traded casual dining business.2, 2022,1, 2023, we had $4.4 million in contractual obligations relating to amounts due under mortgages on the real property and $1.5where our stores are situated, including $1.9 million in capitalized lease obligations.obligations related to our recent acquisitions. Our monthly required payments on lease and mortgage obligations are approximately $47,000. In the third quarter of fiscal 2021, we refinanced most of our outstanding mortgage debt with a new lender lowering our nominal interest cost from 4.75% to 3.45% fixed for the next ten years.Qualitative and Quantitative Disclosure about Market RiskCommodity Price RiskWe are subject to volatility in food costs due to market risk associated with commodity prices. Our ability to recover increased costs through higher pricing is sometimes limited by the competitive environment in which we operate. Generally, we do not have pricing agreements with our suppliers to manage these risks. Beef is our largest single food purchase, and the price we pay for beef fluctuates weekly based on beef commodity prices. We do not currently manage this risk with commodity future and option contracts.Seasonality and InflationMany of our restaurants experience significant seasonal fluctuations in activity and revenue. 25Table of ContentsSeasonal factors and the timing of holidays cause our revenue at our Burger Time locations to fluctuate from quarter to quarter. Our revenue per Burger Time restaurant is typically slightly lower in the first and fourth quarters due to holiday closures and the impact of cold weather at all our locations. Adverse weather conditions may also affect customer traffic, especially in the first and fourth quarters, when customers do not use our outdoor seating areas, which impacts the use of these areas and may adversely affect our revenue. PIE benefits from robust tourism on Cape Cod in the late spring through early fall months. The results of operations during the third and third fiscal quarters at this location will be materially more significant than during the first and fourth fiscal quarters.Our two Florida restaurants will benefit from additional customer traffic in Florida during the colder months in the northern part of the country; as tourists and seasonal residents seek to escape to warmer climates, daily customer counts in Florida will increase seasonally.Inflation has had a material effect on our business as food, labor, and other operating costs have adversely affected operations. Generally, we have been able to increase menu prices or modify our operating procedures to offset increases in operating costs substantially. As inflation continues, we may not be able to raise prices to keep pace with increasing costs, particularly when compared to larger competitors that may better manage the risk of rising prices.Our business is subject to a wide range of federal, state, and local regulations, which are subject to change in ways we cannot now anticipate. We are uncertain about the effect that regulatory environment changes may have on our Company.Off-Balance Sheet ArrangementsThe Company did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.Recent Accounting PronouncementsThere has been no impact on our financial statements and our results of operations and financial condition as the result of the adoption of Recent Accounting Pronouncements; see "Part I, Item 1, Note 1. Summary of Significant Accounting Policies" of the Notes to Condensed Consolidated Financial Statements included in this quarterly report. The Company follows ASC 842, covering accounting for leases, and has recorded Right to Use Assets and related lease liabilities for the lease contracts.Critical Accounting Policies and EstimatesOur discussion and analysis of operating results and financial condition are based upon our condensed consolidated financial statements. The preparation of our condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosures of contingent assets and liabilities. We base our estimates on experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.Our critical accounting policies are those that materially affect our financial statements and involve subjective or complex judgments by management. Although these estimates are based on management's best knowledge of current events and actions that may impact us in the future, actual results may be materially different from the estimates. Our significant accounting policies are disclosed in our annual report Form 10-K for the fiscal year ended January 2, 2022.Jumpstart Our Business Startups Act of 2012We qualify as an "emerging growth company" as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period. As a result, we will adopt new or revised accounting standards on the relevant dates on which such standards are required for other public companies are adopted.26Table of ContentsSubject to certain conditions set forth in the JOBS Act, we are also eligible for and intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We may take advantage of these exemptions until we are no longer an emerging growth company. We will continue to be an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which we had total annual gross revenue of $1 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the completion of our initial public offering. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We are not required to provide the information under this item.2, 2022,1, 2023, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures 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, 2021,1, 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of October 2, 2022,1, 2023, our disclosure controls and procedures were not effective at a reasonable assurance level in ensuring that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules, regulations, and forms of the 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.3, 2022.1, 2023. While we are addressing these deficiencies, there has been no significant change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during our most recent fiscal quarter that 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. 2721Table of Contents None.Unregistered Sales of Equity Securities 2822Table of Contents 101. INS.101.INS.101. SCH.101.SCH.101. CAL.101.CAL.101. DEF.101.DEF.101. LAB.101.LAB.101. PRE.101.PRE. 2923Table of Contents 20222023 3024