BT Brands, Inc.: Form 10-Q for the period ended Sep 28, 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 September 28, 2025, including our partially owned Bagger Dave’s business, we own and operate the following sixteen restaurants:

• Six 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 offer grilled hamburgers and other affordable menu items, including 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.

Management estimates that over the 39 weeks of 2025, the average customer transaction at our Burger Time restaurants was approximately $17.90. We have implemented new initiatives for Burger Time in third-party delivery, which generally result in a higher check average. We anticipate that these initiatives will 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.

On September 2, 2025, BT Brands entered into a definitive Agreement and Plan of Merger with Aero Velocity Inc. (“Aero”), which provides for a business combination between BT Brands and Aero. For further information regarding the Agreement and Plan of Merger, the business combination with Aero, and other relevant matters, we refer investors to our Current Reports on Form 8-K, filed with the Securities and Exchange Commission, which can be found at sec.gov.

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, which is currently being held for sale. During the third quarter of 2025, we closed a Burger Time location in Minot, North Dakota and, subject to the completion of due diligence, we expect to finalized a long-term land lease for the location. For the 39 weeks in 2024, the two closed locations contributed approximately $1,380,290 in revenue and recorded an operating loss of approximately $340,448. In January 2025, we entered into an assignment of the Village Bier Garten lease to an unrelated party. We recently received notice that the tenant defaulted on payments to the landlord in July 2025. While no liability has been asserted against the Company, we are investigating and assessing the matter. The Company is currently evaluating 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.

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Material Trends and Uncertainties

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

Recent performance

The following are key highlights from the Company’s performance for the 13-week and 39-week periods ending September 28, 2025:

• Net sales for the 13 weeks were approximately $3.9 million, a 11.4% decrease from 2024, mainly due to two store closures.
• Net income for the 13 weeks improved to $914,975 from a loss of $219,479 in 2024.
• Restaurant-level EBITDA for the quarter improved to 21.3% of revenues from 10.9% in 2024.
• Labor costs for the 39 weeks fell to 35.7% of sales from 39.8% 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 39 weeks, income from operations, excluding the asset sales, improved to $125,494 from a loss of $863,695 in 2024, driven by operational efficiencies and the closing of two underperforming locations.
• The sale of the Richmond property resulted in a $288,731 gain during the third quarter, which is included in the gain on sale of assets.
• 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.

Results of Operations for the Thirteen Weeks Ended September 28, 2025, and the Thirteen Weeks Ended September 29, 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 September 28, 2025, net sales were $3.36 million, a decrease of $495,142 or 11.4% compared to $4.35 million for the same period in 2024. The decline, in part, reflects the closure of the Village Bier Garten and the Ham Lake Burger Time location in the first quarter of 2025. Total costs and expenses, excluding the impact of asset sales, decreased to $3.36 million from $4.39 million in the prior year. Income from operations improved significantly to $735,042, compared to a loss of $75,011 in 2024. After including investment gains, interest, and equity losses, including a write-down of the Company’s NGI investment of $304,000, the Company recorded net income of $914,975, a significant improvement compared to a net loss of $219,479 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 September 28, 2025, net sales were $3.85 million, a decrease of $495,142 or 11.4%, compared to $4.35 million for the same period in 2024. The decline, in part, reflects the closure of the Village Bier Garten and the Ham Lake Burger Time location in the first quarter of 2025. Total costs and expenses decreased to $3.12 million from $4.42 million in the prior year. The operating results improved significantly from a loss of $75,011 in the previous year to an operating profit of $735,042. After deducting non-operating items, including investment gains, interest, and equity losses, the Company recorded a net income of $914,975, a significant improvement compared to a net loss of $219,479 in the same period of 2024.

Net Revenues

Net sales for the thirteen weeks ended September 28, 2025, were $3,853,682, reflecting a decline from $4,348,824 in the same period of 2024. The decrease was primarily due to the closure of two locations, which recorded approximately $444,672 in revenue in 2024.

Sales at Burger Time restaurants ranged from approximately $184,000 to $332,000 per location, with an average unit sales volume of around $241,000. Seasonal factors also influenced results: Cape Cod-based PIE remains a significant contributor in the third quarter. In the third quarter, PIE sales totaled $1,591,000, a 8.4% increase year-over-year.

Costs and Expenses-

Food and Paper Costs

Food and paper costs decreased to 30.5% of sales (or $1,176,619) compared to 35.9% ($1,563,073) for the prior year. The improvement in margins reflects menu price increases, the change to hand-cut fries, which have a lower food cost, and other menu adjustments, as well as cost-cutting measures implemented at all locations. The general abatement of inflationary pressures contributed to improved food and paper costs.

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Labor Costs

Labor and benefits costs were 33.5% of sales ($1,290,108) in 2025, down from 39.0% ($1,698,150) 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 8.6% of sales ($332,964) from 8.7% ($377,398) in 2024. The reduction was due to the closure of underperforming units, including Village Bier Garten, which had higher-than-average operating costs.

Other Operating Expenses

Other operating expenses increased to 6.0% of sales ($231,761), compared to 5.5% ($238,031) in the prior year, reflecting higher utilities and fees associated with increased use of third-party delivery.

Depreciation and Amortization

Depreciation and amortization expense increased to 3.9% of sales ($151,010) from 3.3% ($141,527) in 2024, reflecting lower total sales and the addition of new equipment net of the full depreciation of certain existing assets.

General and Administrative Costs

General and administrative costs decreased to $178,389 from $375,451, decreasing as a percentage of sales to 4.6% from 8.6% in the prior year. The decrease is attributed to the timing of certain expenses and company-wide cost control initiatives.

Operating Income (Loss)

Income from operations improved to income of $735,042, compared to a $75,011 loss in the same period of 2024. This improvement reflects cost-saving initiatives, better margins despite lower sales, and a net gain of $242,231 from the sale of assets, net of costs associated with closed units held for sale.

Other Income and Expenses

• Unrealized gain on marketable securities was $462,020 compared to an unrealized loss of $69,933 in 2024.
• Realized investment gains were $138,890 versus a realized loss of $343 in 2024.
• Interest expense was $16,385, slightly lower than $22,552 in 2024 as a result of principal reduction.
• Interest and dividend income was $31,866 compared to $50,142 in 2024.
• Equity in the Bagger Dave’s affiliate loss was $99,734 versus $115.782 in the prior year.
• An impairment charge of $304,000 was recorded to write down the Company’s investment in NGI
• No income tax expense was recorded for the quarter, compared to a $14,000 tax benefit in the same period last year.

Net Income (Loss)

Net income for the thirteen weeks ending September 28, 2025, was $914,976 (23.7% of sales) compared to a net loss of $219,479 (5.0% of sales) in 2024. The improved results were the result of expense reductions, disciplined cost management, and improvements in operating performance, as well as the sale of property, non-operating investment gains, and dividends.

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Results of Operations – Thirty-nine Weeks Ended September 28, 2025 Compared to Thirty-nine Weeks Ended September 29, 2024

Overview of Results

For the thirty-nine weeks ending September 28, 2025, net sales were $10.86 million, a decrease of $785,165 or 6.7% compared to $11.65 million for the same period in 2024. Total costs and expenses decreased to $10.50 million from $12.54 million in the prior year. Income from operations improved significantly to $367,725, compared to a loss of $894,383 in 2024. The following table presents our Condensed Statements of Operations and the percentages of total sales for the thirty-nine-week fiscal periods. The percentages below may not reconcile because of rounding.

Net Revenues

Net sales for the thirty-nine weeks ending September 28, 2025, were $10.86 million, a decline from $11.65 million in the same period of 2024. The decrease was principally the result of a decline in sales of approximately $1,308,500, resulting from the closure of two locations, offset by the inclusion of Schnitzel Haus for the entire 39-week period in 2025. Burger Time unit sales for the 39 weeks ranged from approximately $553,000 to $972,000. For units open at the end of the period, the average sales per Burger Time location over the 39 weeks in both years were approximately $712,000, down from $716,000 in 2024.

Costs and Expenses-

Food and Paper Costs

Food and paper costs decreased to 33.4% of sales ($3,626,168) from 37.8% ($4,407,101) in the prior year. This decrease reflects the benefits of menu pricing strategies, improved purchasing practices, and cost-control efforts.

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Labor Costs

Labor and benefits costs were 35.7% of sales ($3,882,608) in 2025, down from 39.8% ($4,636,598) 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 ($944,699) from 9.1% ($1,058,029) in 2024. This reduction reflects the benefits associated with closing the Village Bier Garten, which had a high occupancy cost.

Other Operating Expenses

Other operating expenses increased to 6.2% of sales ($672,866), compared to 5.6% ($653,769) 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 increased slightly to 4.2% of sales ($452,130) from 4.1% ($473,420) in 2024. The increase primarily reflects lower sales volume measured against fixed depreciation expenses.

General and Administrative Costs

General and administrative costs decreased as a percentage of sales to 10.7% (1,160,480) of sales, down from 11.1% ($1,284,871) in 2024. The decrease reflects the cost reductions net of additional consulting costs charged to corporate expenses.

Operating Income (Loss)

Operating income improved to $367,725, from a loss of $894,383 in 2024. The improvement reflects a $242,231 net gain from asset sales, as well as continued cost-cutting and operational efficiencies despite lower sales.

Other Income and Expenses

• Unrealized gains on marketable securities were $500,124 compared $163,014 in 2024.
• Realized investment gains were $312,954 versus $29,219 in 2024.
• Interest expense was $57,489, lower than $72,591 in 2024.
• Interest, dividends, and other income were $112,833, compared to $186,892 in 2024.
• Equity in affiliate loss was $304,439 versus $291,282 in the prior year.
• No income tax expense was recorded for the period, compared to a benefit of $144,000 in the same period last year.

Net Income (Loss)

Net income for the thirty-nine weeks ended September 28, 2025, was $640,157 (5.9% of sales) compared to a net loss of $735,131 (6.3% of sales) in 2024. Non-operating income, combined with significant expense reductions, disciplined cost management, and operational efficiencies, drove profitability in the period.

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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. Restaurant-level EBITDA for the thirteen weeks ending September 28, 2025, was $822,760 (21.3% of revenues), compared to $472,172 (10.9% 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.

Restaurant-level EBITDA for both the 13-week and the 39-week periods ended September 28, 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 39 weeks ended September 28, 2025, was $1,738,104.

Summary

During the thirty-nine weeks of fiscal 2025, the Company has made significant strides in reducing expenses through closing unprofitable locations, 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.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could differ from those estimates. The accounting areas that require the most significant judgment include the valuation of equity-method investments, the collectability of related-party notes receivable, and the assessment of inventory realizability.

Our investment in Bagger Dave’s Burger Tavern, Inc. is accounted for under the equity method. We evaluate this investment for impairment when indicators of a loss in value are present. During the third quarter of 2025, our investment balance was reduced to zero as our cumulative share of losses exceeded our recorded investment. We have suspended recognition of additional losses unless further financial support is provided.

We also assess the recoverability of loans and notes receivable from NGI Corporation based on the borrower’s financial condition, collateral value, and repayment capacity. The valuation of our Disney-licensed inventory similarly requires estimates regarding future sales and market demand.

Management believes these estimates are reasonable and consistent with current conditions; however, changes in underlying assumptions or market factors could materially affect our results of operations and financial position.

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Liquidity and Capital Resources

As of September 28, 2025, we had approximately $4.7 million in cash, cash equivalents, and marketable securities, along with net working capital of approximately $5.7 million, representing an increase of approximately $2.0 million from December 29, 2024.

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 39 weeks ended September 28, 2025, restaurant EBITDA improved significantly from the 2024 level, driven by the closure of 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. In 2025, our equity investment in Bagger Dave’s was reduced to zero as our cumulative share of losses exceeded our recorded investment. While this adjustment did not directly impact cash flows, it reflects the continuing operating challenges of Bagger Dave’s. Any future recognition of income would depend on Bagger Dave’s success in completing the announced sale of assets. Management believes that current cash and investment balances will be adequate to meet operating and investing requirements for the foreseeable future.

Our exposure to NGI Corporation represents a significant use of liquidity. As of September 28, 2025, we held $744,858 in notes receivable from NGI, including a $359,221 senior secured promissory note, which was repaid in October 2025. We continue to monitor NGI’s financial position and evaluate the recoverability of these amounts based on collateral and expected cash flows. Repayments from NGI, or proceeds from sales of NGI-related products, could provide additional liquidity in future periods.

We have also invested in Disney-licensed water-bottle inventory totaling $339,511, which is expected to be sold during the second half of 2025. These sales are anticipated to generate cash flow and improve working capital; however, timing and margin realization depend on retail demand and market conditions.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “may,” “should,” and similar expressions are intended to identify forward-looking statements.

These statements include, but are not limited to, expectations regarding the performance of our investments, the collectability of related-party notes, anticipated sales of inventory, and our ability to meet future liquidity needs. Actual outcomes may differ materially due to factors such as changes in economic conditions, operating performance of equity affiliates, collectability of loans, inventory demand, supply-chain disruptions, access to financing, and other risks described in our filings with the Securities and Exchange Commission.

Readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Summary of Cash Flows

Cash Flows Provided by Operating Activities

Operating cash flow for the 39 weeks ending September 28, 2025, was $402,800. 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.

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Cash Flows Used in Investing Activities

We have continued to make improvements in our existing businesses and to seek acquisitions. During the 39 weeks ending September 28, 2025, we advanced $624,858 to NGI Corporation and directly purchased $339,511 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 September 28, 2025, we had $3.7 million in contractual obligations, including $2.1 million relating to amounts due under mortgages on the real property where our stores are situated, including $1.6 million in operating lease obligations for our location, including the closed VBG location. Our monthly required payments on lease and mortgage obligations are approximately $45,000.

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 September 28, 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 September 28, 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 September 28, 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.