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 consolidated financial statements have been prepared on a basis consistent in all material respects with the accounting policies for the fiscal year ending December 29, 2024. 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.

The accompanying Condensed Consolidated Balance Sheet as of June 29, 2025, 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 December 29, 2024, and the related notes included in our Form 10-K for the fiscal year ending December 29, 2024.

Reclassifications

Certain reclassifications have been made to prior year amounts to conform to current period presentations. These changes have had no impact on the Company’s total assets, liabilities, stockholders’ equity or net loss.

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

We operate restaurants in the eastern two-thirds of the United States. Including our 40.7% owned Bagger Dave’s business, we operate fifteen restaurants comprising the following:

See Note 9 for information regarding our related party transactions, including our investment in and loans to NGI Corporation.

Business

Our restaurants cover a broad range of concepts. 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 in Woods Hole, Massachusetts: and, Schnitzel Haus (“Schnitzel”), a German-themed restaurant in Hobe Sound, Florida, purchased in May, 2024. Our Burger Time restaurants offer a variety of burgers and other affordable foods, sides, and soft drinks. Keegan’s has operated in Indian Rocks Beach, Florida, for over thirty-five years, offering 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 freshly prepared baked goods, sandwiches, and our locally roasted coffee. Schnitzel is a full-service restaurant and bar featuring a German-themed menu and specialty imported European beers. Our revenues are derived from food and beverages at our restaurants, retail goods such as apparel, private-labeled “Keegan’s Hot Sauce,” and other souvenir items. “Souvenir” items account for an insignificant portion of our income.

On June 2, 2022, BT Brands purchased 11,095,085 common shares of Bagger Dave’s, currently representing 40.7% of Bagger. We acquired ownership from the founder of Bagger Dave’s for $1,390,000, or approximately $0.114 per share. Two representatives of BT Brands comprise two members of the three-member Board of Directors of Bagger. The Bagger concept offers a variety of burgers, including turkey burgers, hand-cut fries, craft beers, milkshakes, salads, black bean turkey chili, and pizza. The first Bagger Dave’s opened in January 2008 in Berkley, Michigan. There are currently five Bagger Dave’s operating restaurants, including three in Michigan and single units in Fort Wayne, Indiana, and Centerville, Ohio. In August 2025, Bagger Dave’s announced that it is currently negotiating with potential purchasers for the store locations and would evaluate alternative options for the public company.

As detailed in Note 9 regarding Related Party transactions for the quarter, the Company agreed with NGI Corporation (“NGI”) to purchase and process bottled water featuring characters licensed from The Walt Disney Company. The Company’s inventory at June 29, 2025, includes $292,372 of inventory related to licensed bottled water, which the Company expects to sell in the second half of 2025.

Fiscal Year Periods

BT Brand’s fiscal year is 52/53 weeks, ending on the Sunday closest to December 31. Most years consist of four 13-week accounting periods comprising a 52-week year. Fiscal 2024 was 52 weeks ending December 29, 2024, and Fiscal 2025 is 52 weeks ending December 28, 2025. References in this report to periods refer to the 13 and 26-week fiscal periods.

Cash and Cash Equivalents

Cash and cash equivalents may include money market mutual funds and United States Treasury Bills with original maturities at the time of purchase of three months 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.

Investments

Our equity investment in an unconsolidated subsidiary of $99,734 and $304,439 is our investment in Bagger Dave’s as of June 29, 2025, and December 29, 2024, respectively, and is determined under the “Equity Method” of accounting.

Investment in equity and notes receivable from a related company is $996,357. This amount includes a $359,221 in the form of a senior secured promissory note, and other loans to NGI Corporation. (“NGI”). BT Brands has also acquired $292,372 of Disney-licensed water bottles, which are expected to be sold in the second half of 2025. See Note 9 for further details regarding the NGI investment. See Note 9 for further details regarding our NGI investment.

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 financial information to be audited. For the 26 weeks ending June 29, 2025, Bagger Dave’s had sales of $2,636,973 and a net loss of $502,959. For the 26 weeks, our 40.7% equity share in the loss was approximately $204,705, which is included in the accompanying statement of operations.

The Company classifies its investments in debt securities, such as convertible notes receivable, as available-for-sale when they are not classified as either held-to-maturity or trading securities. These securities are carried at fair value, with unrealized gains and losses, net of deferred taxes, reported as a component of accumulated other comprehensive income in stockholders' equity. The fair value of available-for-sale debt securities is determined using quoted market prices when available. In the absence of quoted market prices, fair value is determined using observable inputs such as interest rates and yield curves. Realized gains and losses on the sale of available-for-sale debt securities are determined using the specific identification method and are recognized in earnings. Interest income on available-for-sale debt securities is recognized when earned and is included in interest income on the Consolidated Statements of Operations. The Company evaluates available-for-sale debt securities for impairment in accordance with ASC 326-30 to determine whether an allowance for credit losses is needed. The Company considers various factors in assessing potential credit losses, such as the severity and duration of the impairment, the issuer's financial condition, and whether it has the intent to sell the security or it is more likely than not that it will be required to sell the security before its anticipated recovery.

Fair Value of Financial Instruments

Our accounting for fair value measurements of assets and liabilities is that they are recognized or disclosed at fair value in the statements on a recurring or nonrecurring basis, and 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:

The carrying values of cash equivalents, receivables, accounts payable, and other financial working capital items approximate fair value due to their short maturity. The following is a summary of the fair value of  investments. 

Receivables

Receivables consist of estimated rebates due from primary vendors.

Inventory

Inventory consists of food, beverages, and supplies. It is stated at the lower cost or market (first-in, first-out method) or net realizable value. Inventory includes $292,372 of Disney-licensed water in refillable cans related to the Company’s investment in NGI, see Note 9 to Consolidated Condensed Financial Statements.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over their estimated useful lives, which range 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, we estimate the future operating results of each restaurant. If such assets are considered impaired, the impairment is the amount by which the assets’ carrying value exceeds the assets’ fair value.

Goodwill and Intangible Assets and Other Assets

Goodwill is not amortized and is tested for impairment at least annually. The cost of other intangible assets is amortized over their expected useful lives.

Assets Held for Sale

The Company closed its Ham Lake, Minnesota, location in February 2025. A Burger Time location in Richmond, Indiana, closed on 2018, and on June 29, 2025, was under contract for sale. The sale of Richmond assets was completed on August 13, 2025. The Ham Lake and Richmond properties meet the held for sale criteria and are reflected in the accompanying financial statements as offered for sale.

Income Taxes

The Company follows Accounting Standards Codification (ASC 740), Accounting for Income Taxes. ASC 740 using the asset and liability approach in accounting for income taxes. Deferred tax assets and liability balances are determined based on differences between 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 be reversed. 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 required.

As of June 29, 2025, we used a net combined federal and state rate of approximately 27.5% in estimating our current tax benefit. Given the recent losses, the Company has determined that sufficient uncertainty exists regarding the future realization of the deferred tax assets. Accordingly, a valuation allowance of approximately $633,000 has been recorded as of June 29, 2025, reducing the net deferred tax asset balance to zero. The Company will continue to assess the need for a valuation allowance in future periods. Should circumstances change and sufficient positive evidence emerge to support the realization of deferred tax assets, all or a portion of the valuation allowance may be reversed. The Company has approximately $3.1 million of federal operating tax loss carryforwards. The Company tax results will be more accurately determined based on its annual results. For the 26 weeks ending June 29, 2025, the Company estimated that there was no significant impact on its NOL carryforwards.  

The Company has no accrued interest or penalties relating to income tax obligations. There are currently 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 2025 and 2024.