BT Brands(BTBD) - 2021 Q1 - Quarterly Report

Part I — Financial Information Item 1. Financial Statements For Q1 2020, the company reported an improved net loss and positive operating cash flow, with increased assets and liabilities, and a growing shareholders' deficit Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 29, 2020 ($) | December 29, 2019 ($) | | :--- | :--- | :--- | | Total current assets | $374,186 | $336,825 | | Total assets | $2,654,081 | $2,633,539 | | Total current liabilities | $909,387 | $805,151 | | Total liabilities | $4,166,640 | $4,029,854 | | Total shareholders' deficit | $(1,512,559) | $(1,396,315) | Condensed Consolidated Statement of Income Highlights (Unaudited) | Account | 13 Weeks Ended Mar 29, 2020 ($) | 13 Weeks Ended Mar 31, 2019 ($) | | :--- | :--- | :--- | | Sales | $1,303,430 | $1,377,833 | | Income (loss) from operations | $(79,777) | $(129,177) | | Net Loss | $(116,244) | $(170,490) | | Loss Per Common Share | $(0.01) | $(0.02) | Condensed Consolidated Statement of Cash Flows Highlights (Unaudited) | Account | 13 Weeks Ended Mar 29, 2020 ($) | 13 Weeks Ended Mar 31, 2019 ($) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $81,438 | $(25,640) | | Net cash used in investing activities | $(28,000) | $0 | | Net cash used in financing activities | $(1,405) | $(63,293) | | Change in Cash | $52,033 | $(88,933) | | Cash, End of Period | $310,134 | $574,578 | - The company operates nine company-owned Burger Time fast-food restaurants and one International Dairy Queen franchisee, totaling ten operating restaurants as of March 29, 2020[22] - The company's financial statements are prepared on a going concern basis, despite a net loss of $116,244 and a working capital deficit of $535,201, with management expecting sufficient cash for the next 12 months due to PPP loans and emergency relief[37][38] - Subsequent to quarter-end in May 2020, the company received $460,400 in PPP loans and a $27,500 interest-free loan from the Minnesota Small Business Emergency Loan Program to mitigate COVID-19 impacts[51][52] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation Q1 2020 net sales decreased, but operating loss improved due to reduced G&A expenses, with the company pursuing acquisitions and securing government loans to address COVID-19 impacts Business Trends and Growth Strategy COVID-19 led to operational adjustments and CARES Act loan applications, while the company's growth strategy focuses on acquiring multi-unit restaurant concepts to expand and boost comparable store sales - In response to COVID-19, all locations continued to operate on a drive-through basis only, with walk-up windows and indoor/outdoor seating closed[57] - The company applied for and received loans totaling $460,400 under the Paycheck Protection Program (PPP) and a $27,500 loan from a Minnesota state program to fund payroll and other expenses[58] - The company's growth strategy is to acquire multi-unit restaurant concepts and individual properties, then expand the number of locations and increase comparable store sales and profits[60][61] Results of Operations Q1 2020 net sales decreased by 5.4% due to a store closure, but operating loss improved significantly due to a 51.8% reduction in G&A costs, despite increased food costs and a negative restaurant-level EBITDA Q1 2020 vs Q1 2019 Performance | Metric | Q1 2020 ($) | Q1 2019 ($) | | :--- | :--- | :--- | | Net Sales | $1,303,430 | $1,377,833 | | % Change | -5.4% | N/A | | Loss from Operations | $(79,777) | $(129,177) | | G&A Costs | $66,216 | $127,784 | | Restaurant-level EBITDA | $(1,598) | $59,119 | - The decrease in sales was principally the result of the West St Paul location being closed for approximately seven weeks due to a fire[66] - Food and paper costs increased as a percentage of sales (41.4% vs 40.7%) mainly due to an 18% increase in average beef prices[69] - General and administrative costs decreased by 51.8%, primarily due to a $37,500 reduction in officer salary and the elimination of a general manager position[74] Liquidity and Capital Resources As of March 29, 2020, the company had a working capital deficit and $310,134 in cash, but positive operating cash flow and $460,400 in PPP loans are expected to provide sufficient liquidity for the next twelve months - The company had a working capital deficit of $535,201 as of March 29, 2020, an increase from the year-end deficit of $468,326[80] - Cash flow from operating activities was a positive $81,438 in Q1 2020, compared to a negative $25,640 in Q1 2019, mainly due to increased vendor accounts payable[80] - The company's principal lenders agreed to abate all loan payments for three months (March-May 2020) in response to the COVID-19 pandemic[81] - The company secured loans totaling $460,400 under the PPP and a $27,500 no-interest loan from a Minnesota state program, which are expected to provide sufficient cash for the next twelve months[81] Item 3. Quantitative and Qualitative Disclosure About Market Risk As a smaller reporting company, BT Brands, Inc. is exempt from this disclosure, but notes market risks related to commodity prices, especially beef, and revenue seasonality - The company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item[96] - The company is subject to volatility in food costs, especially beef, where a ten percent increase would result in approximately $98,000 of additional annual food costs[84] - The company's revenue is subject to seasonality, with typically lower revenue in the first and fourth quarters due to holiday closures and cold weather impacting outdoor seating[85] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of quarter-end, with no material changes to internal control over financial reporting during the period - Based on an evaluation as of the end of the reporting period, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[97] - No changes in internal control over financial reporting occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[99] Part II — Other Information Item 1. Legal Proceedings The company reports no pending or threatened legal proceedings to which it or its property is subject - There are presently no pending legal proceedings to which the Company is a party or as to which any of its property is subject[102] Item 1A. Risk Factors As a smaller reporting company, BT Brands, Inc. is not required to provide risk factor disclosures under this item - As a smaller reporting company, BT Brands, Inc. is not required to provide the information required under Item 1A Risk Factors[103] Other Items (2-6) The company reported no unregistered equity sales, no defaults on senior securities, and no other material information, with relevant exhibits filed - Item 2: The Company did not sell any securities since its last annual report[104] - Item 3: There were no defaults upon senior securities[105] - Item 5: There is no other information to report[107]