BT Brands, Inc.: Form 10-Q for the period ended Jun 29, 2025

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” “we,” “our,” or the “Company”) should be read in conjunction with the Company’s condensed consolidated financial statements and accompanying notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as with the audited consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 29, 2024.

Introduction

As of June 29, 2025, including our partially owned Bagger Dave’s business, we own and operate the following sixteen restaurants:

• Seven Burger Time fast-food restaurants (“BTND”);
• Keegan’s Seafood Grille in Indian Rocks Beach, Florida (“Keegan’s”);
• Pie In The Sky Coffee and Bakery in Woods Hole, Massachusetts (“PIE”).
• Schnitzel Haus in Stuart, Florida (“Schnitzel”).
• Unconsolidated affiliate, Bagger Dave’s Burger Tavern, Inc., 40.7% owned, operates six Bagger Dave’s restaurants in Michigan, Ohio, and Indiana (“BD”).

Burger Time opened its first restaurant in Fargo, North Dakota, in 1987. Burger Time restaurants feature grilled hamburgers and other affordable foods such as chicken sandwiches, pulled pork sandwiches, sides, and soft drinks. Burger Time’s operating principles include (i) offering bigger burgers and more value for the money; (ii) offering a limited menu to permit attention to quality and speed of preparation; (iii) providing fast service by way of single and double drive-thru designs and a point-of-sale system that expedites the ordering and preparation process, and (iv) great tasting and quality food made fresh to order at a fair price. Our primary strategy is to serve the drive-thru and take-out segment of the quick-service restaurant industry.

The average customer transaction at our Burger Time restaurants was unchanged in the first half of 2025 at approximately $15.00. We have implemented new initiatives for Burger Time in third-party delivery, which generally results in a higher check average, and we expect to contribute to future sales growth. Many factors influence our sales trends. Our business environment is challenging, as competition is intense.

We operate through a central management organization that provides continuity across our restaurant base by utilizing the efficiencies of a central management team.

Notable Recent Events

At the beginning of 2025, we closed our Village Bier Garden restaurant in Cocoa, Florida, and in February 2025, we ceased operations at our Ham Lake, Minnesota location. For the 26-week period in 2024, the two closed locations contributed approximately $935,000 in revenue and recorded an operating loss of approximately $213,000. We entered into an assignment of the Village Bier Garten lease to an unrelated party and are currently assessing alternatives for the Ham Lake location, including the sale of the property, which we believe would result in a gain on the sale of assets.

Material Trends and Uncertainties

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

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Recent performance

The following are key highlights from the Company's performance for the 13-week and 26-week periods ending June 29, 2025:

• Net sales for the 13 weeks were $3.78 million, down 8.1% from 2024 due to two store closures; Schnitzel Haus contributed $0.5 million.
• Net income for the 13 weeks improved to $55,031 from a loss of $69,952 in 2024.
• Restaurant-level EBITDA for the quarter improved to 16.9% of revenues from negative 10.6% in 2024.
• Labor costs fell to 37.0% of sales from 40.2% in 2024, reflecting improved staffing efficiency and store closures.
• Total costs and expenses decreased significantly due to disciplined cost control, offsetting a decline in sales.
• For the 26 weeks, net loss improved to $274,818 from $515,652 in 2024, driven by operational efficiencies and the closing of two underperforming locations.
• Strong focus on cost control, improved pricing strategies, and the impact of strategic closures contributed to improved margins.
• The Company plans to continue leveraging seasonal strength, cost reductions, and targeted sales initiatives for future growth.

Results of Operations for the Thirteen Weeks Ended June 29, 2025, and the Thirteen Weeks Ended June 30, 2024

Summary

The Company’s focus on operational efficiencies, disciplined expense management, and strategic closures of underperforming locations has resulted in improved margins and improved results despite lower sales volumes. Continued cost management and leveraging seasonal strengths are expected to be a central focus of management in future quarters. For the thirteen weeks ending June 29, 2025, net sales were $3.78 million, a decrease of $330,949 or 8.1% compared to $4.11 million for the same period in 2024. The decline reflects the closing of the Village Bier Garten and the Ham Lake Burger Time location in the first quarter of 2025. Total costs and expenses decreased to $3.85 million from $4.30 million in the prior year. The loss from operations narrowed significantly to $75,121, compared to a loss of $188,543 in 2024. After including investment gains, interest, and equity losses, the Company recorded net income of $55,031, a significant improvement compared to a net loss of $69,952 in the same period of 2024.

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The following table sets forth our Condensed Statements of Operations and percentages of total sales for the thirteen-week fiscal periods. The percentages below may not reconcile because of rounding.

Overview of Results

For the thirteen weeks ending June 29, 2025, net sales were $3.78 million, a decrease of $330,949 or 8.1% compared to $4.11 million for the same period in 2024. The decline reflects the closing of the Village Bier Garten and the Ham Lake Burger Time location in the first quarter of 2025. Total costs and expenses decreased to $3.85 million from $4.30 million in the prior year. The operating result improved from a loss of $188,543 in the previous year to a loss of $75,121. After nonoperating items, including investment gains, interest, and equity losses, the Company recorded net income of $55,031, a significant improvement compared to a net loss of $69,952 in the same period of 2024.

Net Revenues

Net sales for the thirteen weeks ended June 29, 2025, were $3,779,690, reflecting a decline from $4,110,639 in the same period of 2024. The decrease was primarily due to the closure of two locations, which recorded approximately $400,000 in revenue in 2024. The recently acquired Schnitzel Haus, purchased in the second quarter of 2024, contributed approximately $330,000 in sales during the 2025 quarter.

Sales at Burger Time restaurants ranged from a low of approximately $133,000 to a high of $344,000 per location, with an average unit sales volume of approximately $240,000. Seasonal factors also influenced results: Cape Cod-based PIE remains a significant contributor in the second and third quarters. In the second quarter, PIE sales totaled $1,042,000, a 4% increase year-over-year.

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Costs and Expenses-

Food and Paper Costs

Food and paper costs decreased to 33.1% of sales (or $1,249,220) compared to 38.1% ($1,565,070) for the prior year. This improvement reflects the benefits of selective menu price increases, menu adjustments at BTND (including the introduction of hand-cut fries), and cost-cutting measures at all locations, which helped offset inflationary pressures.

Labor Costs

Labor and benefits costs were 36.4% of sales ($1,374,603) in 2025, down from 37.7% ($1,551,762) in 2024. The improvement was driven by enhanced labor cost controls and the closure of Village Bier Garten, which historically had higher labor costs.

Occupancy Costs

Occupancy costs declined to 8.0% of sales ($302,021) from 8.4% ($344,356) in 2024. The reduction was due to the closure of certain underperforming units and leveraging sales volume against fixed occupancy expenses.

Other Operating Expenses

Other operating expenses increased to 6.7% of sales ($253,185), compared to 5.2% ($211,838) in the prior year, reflecting higher maintenance, utilities, and fees associated with increased use of third-party delivery.

Depreciation and Amortization

Depreciation and amortization expense decreased to 3.8% of sales ($144,725), compared to 4.2% ($171,351) in 2024, due to more assets reaching full depreciation.

General and Administrative Costs

General and administrative costs increased to $531,057 from $454,805, increasing as a percentage of sales to 14.1% from 11.1% in the prior year. The increase is, in part, attributable to consulting costs directed toward company-wide cost control initiatives.

charged to general and administrative expenses,

Operating Income (Loss)

The loss from operations improved to a loss of $75,121, compared to a $188,543 loss in the same period of 2024. This improvement reflects cost savings initiatives and better margins despite lower sales.

Other Income and Expenses

• Unrealized gain on marketable securities was $82,128 compared to a gain of $118,184 in 2024.
• Realized investment gains were $79,026 versus $29,562 in 2024.
• Interest expense was $19,550, slightly lower than $22,551 in 2024.
• Interest and dividend income was $40,367 compared to $61,896 in 2024.
• Equity in the Bagger Dave’s affiliate loss was $70,405 versus $81,000 in the prior year.
• No income tax benefit was recorded for the quarter, compared to $12,500 in the same period last year.

Net Income (Loss)

Net income for the thirteen weeks ending June 29, 2025, was $55,031 (1.5% of sales) compared to a net loss of $69,952 (1.7% of sales) in 2024. The improved results were the result of expense reductions, disciplined cost management, and improvements in operating performance, as well as investment gains and dividends.

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Results of Operations – Twenty-Six Weeks Ended June 29, 2025 Compared to Twenty-Six Weeks Ended June 30, 2024

Overview of Results

For the twenty-six weeks ending June 29, 2025, net sales were $7.01 million, a decrease of $290,093 or 4.0% compared to $7.30 million for the same period in 2024. Total costs and expenses decreased to $7.33 million from $8.12 million in the prior year. The loss from operations improved significantly to $367,317, compared to a loss of $819,372 in 2024. The following table sets forth our Condensed Statements of Operations and percentages of total sales for the twenty-six week fiscal periods. The percentages below may not reconcile because of rounding.

Net Revenues

Net sales for the twenty-six weeks ended June 29, 2025, were $7,010,763, reflecting a decline from $7,300,786 in the same period of 2024. The decrease was principally the result of a decline in sales of approximately $900,000, resulting from the closure of two locations, offset by the inclusion of Schnitzel Haus for the entire 26-week period in 2025. Burger Time unit sales for the 26 weeks ranged in gross sales from approximately a low of $250,000 to a high of $628,000. The average sales for each Burger Time location open during the 26-week period in both years was approximately $448,000, a decline from $465,000 in 2024.

Costs and Expenses-

Food and Paper Costs

Food and paper costs decreased to 34.9% of sales (or $2,449,549) compared to 39.0% ($2,844,028) for the prior year. This decrease reflects the benefits of menu pricing strategies, improved purchasing, and cost control efforts.

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Labor Costs

Labor and benefits costs were 37.0% of sales ($2,592,500) in 2025, down from 40.2% ($2,938,448) in 2024. The improvement was due to better labor cost management, operational efficiencies, and the closure of higher-cost locations.

Occupancy Costs

Occupancy costs declined to 8.7% of sales ($611,715) from 9.3% ($680,631) in 2024. This reduction reflects the benefit associated with closing the Village Bier Garten, which had a high occupancy cost.

Other Operating Expenses

Other operating expenses decreased to 6.3% of sales ($441,105), compared to 5.7% ($415,738) in the prior year. The increase resulted from fees associated with greater utilization of third-party delivery services and higher utility costs at most restaurants.

Depreciation and Amortization

Depreciation and amortization expense decreased to 4.3% of sales ($301,120) from 4.5% ($331,893) in 2024. The decrease primarily reflects more assets reaching full depreciation.

General and Administrative Costs

General and administrative costs were steady at 14.0% of sales, an increase to $982,091 from $909,420 in 2024. The increase reflects the additional consulting costs charged to corporate expenses.

Operating Income (Loss)

The loss from operations improved to $367,317, compared to a loss of $819,372 in 2024. This improvement reflects cost-cutting measures and operational efficiencies despite lower sales.

Other Income and Expenses

• Unrealized gains on marketable securities were $82,128 compared to a gain of $232,947 in 2024.
• Realized investment gains were $174,064 versus $29,562 in 2024.
• Interest expense was $41,104, slightly lower than $50,039 in 2024.
• Interest, dividend, and other income was $126,140 compared to $136,750 in 2024.
• Equity in affiliate loss was $204,705 versus $175,500 in the prior year.
• No income tax benefit was recorded for the period, compared to $130,000 in the same period last year.

Net (Loss)

Net loss for the twenty-six weeks ended June 29, 2025, was $274,818 (3.9% of sales) compared to a net loss of $515,652 (7.1% of sales) in 2024. Significant expense reductions, disciplined cost management, and operational efficiencies drove the decrease in net loss.

Restaurant-Level EBITDA

To supplement the consolidated financial statements, which are prepared and presented in accordance with GAAP, we use restaurant-level EBITDA (earnings before interest, taxes, depreciation, and amortization), which is not a measure defined by GAAP. This non-GAAP operating measure is useful to both management and investors because it represents one means of gauging the overall profitability of our recurring and controllable core restaurant operations. However, this measure is not indicative of our overall results, nor does the restaurant-level profit accrue directly to the benefit of stockholders, primarily due to the exclusion of corporate-level expenses. Depreciation and amortization are excluded because they are not ongoing. Restaurant-level EBITDA for the thirteen weeks ending June 29, 2025, was $600,661 (15.0% of revenues), compared to $437,613 (10.6% of revenues) in 2024. This non-GAAP metric reflects a significant improvement in controllable restaurant-level profitability, driven by better labor and cost controls, selective menu price increases, and efficiency improvements across operating units.

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Restaurant-level EBITDA for both the 13-week and the 26-week periods ended June 29, 2025, showed significant improvement over the prior year. This non-GAAP metric reflects stronger operational performance and improved cost controls, demonstrating continued progress in the Company’s core restaurant operations. Restaurant-level EBITDA for the 26 weeks ended June 29, 2025, was $915,894.

Summary

During the first half of fiscal 2025, the Company has made significant strides in reducing operating losses through effective cost management and operational efficiencies. Although sales declined due to the closure of underperforming locations, profitability metrics have improved markedly. Continued cost discipline and sales initiatives will remain a focus for the remainder of the year. Our focus on operational efficiencies, disciplined expense management, and strategic closures of underperforming locations has resulted in significantly improved Store EBITDA margins. Continued cost management and leveraging seasonal strengths will be a central focus of management in future quarters.

Liquidity and Capital Resources

On June 29, 2025, we had $3.5 million in cash, cash equivalents and marketable securities and net working capital of $4.4 million, an increase of $627,000 from December 29, 2024. Reflecting, in part, the $424,000 increase in assets held for sale, classified as a current asset.

Liquidity is needed to support working capital, capital expenditures, general corporate activities, and potential investments or acquisitions. Our operations do not require significant working capital, and, like many restaurant companies, we generally operate with negative working capital requirements. For the 26 weeks ended June 29, 2025, restaurant EBITDA improved significantly from the 2024 amount as a result of closing underperforming locations. Loans to NGI Corporation and the purchase of inventory, as described in Note 9 to the financial statements accompanying this report, have reduced cash and investments on hand.

Unforeseen public health matters may impact the United States at any time, and increased tariffs may impact the economy in the future. It is difficult to predict 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.

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Summary of Cash Flows

Cash Flows Provided by Operating Activities

Operating cash flow for the 26 weeks ending June 29, 2025, was $77,623. The source of cash is the result of improved operating income and seasonal patterns in our business, which significantly affect the Company’s cash flow.

Cash Flows Used in Investing Activities

We have continued to make improvements in our existing businesses and to seek acquisitions. During the 13 weeks ending June 29, 2025, we advanced $572,357 to NGI Corporation and directly purchased $292,372 of inventory related to the NGI Corporation’s Disney water bottle program.

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 June 29, 2025, we had $3.6 million in contractual obligations, including $2.2 million relating to amounts due under mortgages on the real property where our stores are situated, including $1.4 million in operating lease obligations related to our recent acquisitions. Our monthly required payments on lease and mortgage obligations are approximately $36,000.

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and Item 10(f)(1) of Regulation S-K, we have elected to comply with certain scaled disclosure reporting obligations. We are not required to provide the information required by this item.

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 June 29, 2025, 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 December 29, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 29, 2025, 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.

(2) Changes in Internal Control over Financial Reporting

During the second quarter, the Company engaged a third-party accounting services organization to manage the accounts payable and payroll activities and to prepare preliminary financial statements for review, providing for an enhanced segregation of duties. In addition to the matters discussed previously, the Company is considering utilizing outside consultants as an extension of management, potentially to assist in the accounting for significant acquisitions. So far in fiscal 2025, the Company has not completed any acquisitions. Except for the items described above, there were no other changes in the Company’s internal control over financial reporting during our most recently completed fiscal quarter, which ended June 29, 2025, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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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.