NOTE 10 – CONTINGENCIES

The Company accounts for loss contingencies in accordance with ASC 450, Contingencies. A liability is recorded when it is probable that a loss has been incurred and the amount can be reasonably estimated. If a loss is reasonably possible but cannot be reasonably estimated, or if a loss is at least reasonably possible, the Company provides disclosure but does not record an accrual.

Village Bier Garten Lease Litigation

In 2023, the Company acquired assets of Village Bier Garten, including a 60-month triple-net lease for approximately 3,000 square feet of restaurant space in Cocoa, Florida, at an initial rent of approximately $8,200 per month, subject to annual escalation of 3%. On January 2, 2025, the Company ceased operations at the location and entered into an agreement to assign the lease to a third party. Following the transfer of possession, the assignee operated a restaurant on the premises and remitted rent payments directly to the landlord for several months, which the landlord accepted.

In November 2025, the landlord issued a notice of default asserting nonpayment of rent beginning in August 2025. The landlord subsequently filed a lawsuit against 1519BT, LLC and BT Brands, Inc. seeking recovery of unpaid rent and other amounts allegedly due under the lease. The landlord subsequently took possession of the premises through court proceedings.

The Company disputes the landlord’s claims and intends to defend the matter vigorously. The Company believes that the landlord’s acceptance of rent payments from the assignee following the transfer of possession, combined with the landlord’s obligation under Florida law to mitigate damages following repossession, may substantially reduce any amounts ultimately recoverable. The Company also has asserted a separate claim against the assignee for approximately $200,000 in unpaid consulting fees and believes it has contractual rights against the assignee for any amounts that may be determined payable under the lease.

As of December 28, 2025, the Company wrote off the remaining $215,000 book value of the right-of-use asset attributable to the lease. The recorded liability does not reflect any reduction for the landlord’s mitigation obligation or the Company’s potential recovery from the assignee. The ultimate outcome will be determined through litigation or negotiated settlement and may differ materially from the amount recorded. Management will continue to evaluate the matter as additional information becomes available. 

Aero Velocity Merger Termination

On September 2, 2025, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Aero Velocity Inc. (“Aero”). On May 1, 2026, the Company delivered written notice terminating the Merger Agreement pursuant to Section 7.1(b). The Company exercised its termination right because the registration statement relating to the proposed transaction had not been declared effective by the Securities and Exchange Commission, and the closing had not occurred by April 30, 2026, the applicable deadline under the Merger Agreement. The Company believes the termination was valid and effective in accordance with the terms of the Merger Agreement.

On May 4, 2026, counsel for Aero delivered a letter asserting that the termination was invalid and seeking payment of approximately $1,500,000 in damages and other amounts. The Company disputes Aero’s assertions and does not believe that any termination fee or other material payment obligation is owed. Under Section 5.8 of the Merger Agreement, each party is generally responsible for its own transaction expenses.

As of the date of this Quarterly Report, no formal legal proceedings have been initiated. The Company cannot predict whether Aero will commence litigation or the outcome of any such proceeding. In accordance with ASC 450, Contingencies, no accrual has been recorded related to this matter because the Company cannot conclude that a loss is both probable and reasonably estimable at this time. The Company will continue to monitor the matter and update its disclosures as appropriate.

Other Matters

In the ordinary course of business, the Company may be subject to claims, legal proceedings, and regulatory matters arising from its operations, including employment practices, contractual disputes, personal injury claims, food safety matters, and other matters typical of the restaurant industry. As of June 28, 2026, the Company was not a party to any material pending legal or regulatory proceedings other than the Village Bier Garten lease litigation and the Aero Velocity dispute described above. The outcome of any such matter is inherently uncertain.