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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
 6 Months Ended
Jun. 28, 2026
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 U.S. 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 ended December 28, 2025. In our opinion, all regular and recurring adjustments necessary for a fair presentation of our financial position and results of operations 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 Financial Statements as of and for the quarter ended June 28, 2026, do 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 28, 2025, and the related notes included in our Form 10-K for the fiscal year ended December 28, 2025.
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.

 

Overview of Our Company

 

As of June 28, 2026, we owned and operated nine restaurants across multiple states in the Midwest, Massachusetts, and Florida, and held a minority ownership interest in an unconsolidated affiliate that operated an additional five restaurants, for a total of fourteen operating restaurant locations. BT Brands operating restaurants comprise the following:

 

 

●

Six Burger Time fast-food restaurants are located in the North Central region of the United States (collectively, “BTND”). Sioux Falls, South Dakota, Burger Time closed in 2024, a location in Ham Lake, Minnesota, closed at the end of 2024, and a location in Minot, North Dakota, closed in July 2025.

 

●

Keegan’s Seafood Grille is a casual seafood restaurant located in Indian Rocks Beach, Florida;

 

●

Pie In the Sky Coffee, a coffee shop and bakery located in Woods Hole, Massachusetts, and

 

●

Schnitzel Haus is a German-themed fine dining restaurant and bar in Hobe Sound, Florida (“Schnitzel”).

 

In addition, we own a 40.7% interest in Bagger Dave’s Burger Tavern, Inc. (“BDVB”), an unconsolidated affiliate operating five casual-dining restaurants in Michigan, Ohio, and Indiana. We do not own a controlling interest in BDVB, but we exercise significant influence over its operating and financial policies; we account for BDVB under the equity method.

 

Village Bier Garten, a German-themed restaurant, bar, and entertainment venue in Cocoa, Florida, ceased operations in January 2025.

 

We operate our businesses under a centralized management structure. By leveraging our shared management services platform, we aim to drive company-wide efficiencies, including reducing corporate overhead across existing and acquired operations.

 

Historically, our objective has been to create long-term shareholder value in the food service industry. Our core strategy has focused on acquiring restaurant properties and operating businesses at attractive valuation multiples, enabling diversification across restaurant concepts and geographic markets while reducing reliance on any single brand or location. Additional elements of our strategy have included driving same-store sales growth, improving cost efficiency, and enhancing brand awareness.
Segment Reporting

The Company has determined that it operates as a single reportable segment based on the nature of its operations and the regulatory environment under which it operates. The Company’s Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer. The CODM evaluates performance and allocates resources based primarily on the net income and total assets, which are consistent with the amounts reported in the consolidated statements of operations and consolidated balance sheets.
Termination of Proposed Business Combination with Aero Velocity

On September 2, 2025, BT Brands entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Aero Merger Sub Inc., a Delaware corporation and a direct, wholly owned subsidiary of BT Brands (“Merger Sub”), and Aero Velocity Inc., a Delaware corporation (“Aero”). The proposed transaction contemplated that Aero would merge with and into Merger Sub, with Aero continuing as the surviving corporation, and that the combined company would focus primarily on Aero’s unmanned aerial vehicle manufacturing and Drones-as-a-Service operations.

 

The Merger Agreement also contemplated, prior to closing, a spin-off of the Company’s existing restaurant operations and related assets and liabilities into a newly formed subsidiary, BT Group, Inc. (“BT Group”), to be distributed to pre-merger holders of BT Brands common stock. The spin-off was not expected to qualify as a tax-free transaction for U.S. federal income tax purposes.

 

On May 1, 2026, the Company delivered written notice to Aero terminating the Merger Agreement pursuant to Section 7.1(b) thereof. 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 and Aero did not request an extension of time in which to achieve effectiveness of the registration statement. Termination was effective upon delivery of the notice. Upon termination, the Merger Agreement ceased to be of further force or effect, other than certain customary surviving provisions, and all transactions contemplated thereby were abandoned. The Company does not believe any termination fee or material penalty is payable. Under Section 5.8 of the Merger Agreement, each party is responsible for its own transaction expenses. On May 4, 2026, counsel for Aero delivered a letter asserting that the Company’s termination was invalid. The Company disputes Aero’s assertions. The Company has filed a Current Report on Form 8-K with the Securities and Exchange Commission reporting the termination.

 

For additional information regarding the proposed Merger and subsequent termination, see our Reports on Form 8-K filed on May 7, 2026, and on December 1, 2025, available at www.sec.gov.
Fiscal Year Period

BT Brands' 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 2025 was 52 weeks ended December 28, 2025, and Fiscal 2026 is 53 weeks ending January 3, 2027. References in this report for periods refer to the 26-week and 13-week periods in the respective fiscal periods.
Cash and Cash Equivalents

Cash and cash equivalents may include money market mutual funds and United States Treasury Bills with original maturities of three months or less at the time of purchase. 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, which exceed the amount insured. We do not believe there is a significant risk related to cash. 
Equity Method Investments

Investments in entities in which the Company has the ability to exercise significant influence, but does not control, are accounted for using the equity method of accounting. Under this method, the investment is initially recorded at cost and subsequently adjusted for the Company’s proportionate share of the investee’s net income or loss and dividends received. The Company’s share of the investee’s net income or loss is recognized in the consolidated statements of operations as equity income (loss) from unconsolidated affiliate.
Fair Value Measurements

The Company follows ASC 820, Fair Value Measurement, which establishes a three-level hierarchy for measuring fair value based on the observability of inputs used in valuation techniques. The three levels are defined as follows:

 

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices, such as quoted prices for similar assets or liabilities in active markets, or inputs that are observable either directly or indirectly.

Level 3 — Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the asset or liability.

 

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to fair value measurement in its entirety.

 

The carrying values of cash and cash equivalents, receivables, accounts payable, and other current working capital items approximate fair value due to their short-term nature.

 

Marketable Securities

 

The summary of fair value measurements of marketable securities as of the respective dates is as follows:

 

 

 

June 28, 2026

 

 

December 28, 2025

 

 

 

Fair Value

 

 

 

 

 

Fair Value

 

 

 

 

 

 

Carrying Amount

 

 

Level 1

 

 

Carrying Amount

 

 

Level 1

 

Common stocks

 

$2,473,887

 

 

$2,473,887

 

 

$3,269,333

 

 

$3,269,333

 

Listed limited partnership units

 

 

100,990

 

 

 

100,990

 

 

 

162,500

 

 

 

162,500

 

Exchange-traded funds

 

 

44,479

 

 

 

44,479

 

 

 

63,220

 

 

 

63,220

 

Debt securities

 

 

213,904

 

 

 

213,904

 

 

 

101,080

 

 

 

101,080

 

Total

 

$2,833,260

 

 

$2,833,260

 

 

$3,596,133

 

 

$3,596,133

 

 

We hold debt securities classified as trading securities. Trading debt securities are recorded at quoted market price (fair value) on the consolidated balance sheets, with unrealized holding gains or losses recognized on the statement of operations.
Receivables

Receivables consist of estimated rebates due from vendors.
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. 
Deferred Transaction Costs

Deferred transaction costs consist primarily of legal, accounting, and other direct costs incurred in connection with the Company’s At-the-Market (“ATM”) equity offering program. These costs are capitalized as incurred and will be recorded as a reduction of additional paid-in capital upon the issuance of shares under the ATM program. The deferred transaction costs are periodically evaluated for recoverability based on the Company’s expectation of completing future equity issuances. If it is determined that the related equity offering is no longer probable, the deferred costs will be expensed in the period in which such a determination is made.

 

Costs incurred in connection with the now-terminated proposed business combination with Aero Velocity Inc., including legal, advisory, and other transaction-related expenses, were recorded as expenses as incurred and included in general and administrative expenses in the accompanying condensed consolidated statements of operations.

 

As of June 28, 2026, and December 28, 2025, deferred transaction costs totaled $168,630 and $150,450, respectively.
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 whether their carrying values are recoverable based on estimated cash flows. Assets are evaluated at the lowest level at which cash flows can be identified, the restaurant level. To determine future cash flow, we estimate each restaurant’s future operating results. 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.
Asset Held for Sale

In 2025, we closed a Burger Time store in Ham Lake, Minnesota. The Ham Lake property is currently offered for sale; management expects to sell the property for an amount in excess of its current book value.
Income Taxes

The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740 – Income Taxes (“ASC 740”). ASC 740 requires the use of 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 required.

 

As of June 28, 2026, we used a net combined federal and state rate of approximately 25% 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 $1,040,000 has been recorded as of June 28, 2026, 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. As of December 28, 2025, the Company has approximately $2.8 million in federal operating tax loss 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 or loss 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 2026 and 2025.