BT Brands(BTBD) - 2025 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Forward-Looking Statements and Risk Factors This section outlines cautionary forward-looking statements, detailing inherent risks and uncertainties that could materially impact actual results - Forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from expectations[5][6][8] - Key risk factors include capital availability, growth strategy execution, acquisition integration, labor shortages and costs, food safety, supply chain dependence, competition, economic conditions, and regulatory compliance[6] ITEM 1. FINANCIAL STATEMENTS. This section presents the unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flows, prepared under GAAP - Financial statements are unaudited and prepared in accordance with GAAP for interim reporting, consistent with prior annual reports[16] Consolidated Condensed Balance Sheets Balance sheets show a decrease in total assets and shareholders' equity, driven by reduced cash and increased accumulated deficit Consolidated Condensed Balance Sheet Highlights | Metric | Sep 29, 2024 | Dec 31, 2023 | Change | | :---------------------------------- | :----------- | :----------- | :----- | | Total Assets | $13,680,060 | $14,609,212 | -$929,152 | | Total Liabilities | $5,175,346 | $5,420,483 | -$245,137 | | Total Shareholders' Equity | $8,504,714 | $9,188,729 | -$684,015 | | Cash and cash equivalents | $3,085,342 | $5,300,446 | -$2,215,104 | | Marketable securities | $1,969,964 | $1,392,060 | +$577,904 | | Goodwill | $796,220 | $671,220 | +$125,000 | | Accumulated deficit | $(2,785,022) | $(2,049,891) | -$735,131 | Condensed Consolidated Statements of Income For both 13 and 39-week periods, sales increased, but net loss significantly widened due to higher labor and occupancy costs Condensed Consolidated Statements of Income Highlights (39 Weeks) | Metric | Sep 29, 2024 | Oct 1, 2023 | Change | | :---------------------------------- | :----------- | :----------- | :----- | | Sales | $11,649,610 | $11,078,419 | +$571,191 | | Total costs and expenses | $12,543,993 | $11,368,110 | +$1,175,883 | | Loss from operations | $(894,383) | $(289,691) | -$604,692 | | Net Loss | $(735,131) | $(379,006) | -$356,125 | | Basic and Diluted EPS | $(0.12) | $(0.06) | -$0.06 | Condensed Consolidated Statements of Income Highlights (13 Weeks) | Metric | Sep 29, 2024 | Oct 1, 2023 | Change | | :---------------------------------- | :----------- | :----------- | :----- | | Sales | $4,348,824 | $4,007,656 | +$341,168 | | Total costs and expenses | $4,423,835 | $3,967,041 | +$456,794 | | Income (loss) from operations | $(75,011) | $40,615 | -$115,626 | | Net Loss | $(219,479) | $(3,486) | -$215,993 | | Basic and Diluted EPS | $(0.04) | $0.00 | -$0.04 | Consolidated Statements of Shareholders' Equity Shareholders' equity decreased due to net loss and treasury stock purchases, partially offset by stock-based compensation Shareholders' Equity Changes (39 Weeks Ended Sep 29, 2024) | Item | Amount | | :------------------------- | :----------- | | Balances, Dec 31, 2023 | $9,188,729 | | Stock-based compensation | $165,000 | | Treasury stock purchase | $(113,884) | | Net loss | $(735,131) | | Balances, Sep 29, 2024 | $8,504,714 | Condensed Consolidated Statements of Cash Flows Cash and cash equivalents significantly decreased, primarily due to substantial cash used in investing, operating, and financing activities Cash Flow Summary (39 Weeks) | Activity | Sep 29, 2024 | Oct 1, 2023 | Change | | :---------------------------------- | :----------- | :----------- | :----- | | Net cash used in operating activities | $(197,102) | $(74,732) | -$122,370 | | Net cash provided by (used in) investing activities | $(1,668,704) | $4,845,886 | -$6,514,590 | | Net cash used in financing activities | $(349,298) | $(1,374,858) | +$1,025,560 | | Change in cash and cash equivalents | $(2,215,104) | $3,396,296 | -$5,611,400 | | Cash and cash equivalents, end of period | $3,085,342 | $5,546,874 | -$2,461,532 | - Investing activities for 39 weeks ended Sep 29, 2024, included $943,000 for the acquisition of Schnitzel Haus and $626,685 for marketable securities purchases[15] Notes to Condensed Consolidated Financial Statements This section details significant accounting policies and specific notes on assets, liabilities, equity, and operational events - The company operates eighteen restaurants, including Burger Time, Bagger Dave's (40% owned), Keegan's Seafood Grille, Pie In The Sky Coffee and Bakery, Schnitzel Haus, and Village Bier Garten[19][21] - Financial statements are prepared in accordance with GAAP for interim financial information and SEC requirements for Form 10-Q[16] NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the basis of financial statement presentation, management estimates, company operations, and key accounting policies - The Company operates eighteen restaurants across multiple brands: eight Burger Time, six Bagger Dave's (40% owned), Keegan's Seafood Grille, Pie In The Sky, Schnitzel Haus, and Village Bier Garten[19][21][23] - Noncurrent investments include a $427,524 equity method investment in Bagger Dave's, a $304,000 investment in NGI Corporation, and $120,000 in demand loans to NGI[26] Fair Value of Level 1 Investments | Asset | Sep 29, 2024 (Fair Value) | Dec 31, 2023 (Fair Value) | | :---------------- | :------------------------ | :------------------------ | | Corporate bond fund | $0 | $178,500 | | Common stocks | $1,969,964 | $1,213,560 | NOTE 2 – INTANGIBLE ASSETS Intangible assets, primarily covenants not to compete and tradenames, had a net carrying value of $423,205, with $83,567 amortization expense Intangible Assets (September 29, 2024) | Asset | Estimated Life (Years) | Original Cost | Accumulated Amortization | Net Carrying Value | | :-------------------- | :--------------------- | :------------ | :----------------------- | :----------------- | | Covenants not to Compete | 3 | $198,000 | $(108,705) | $89,295 | | Tradenames | 15 | $393,000 | $(59,090) | $333,910 | | Total | | $591,000 | $(167,795) | $423,205 | Amortization Expense | Period | 2024 | 2023 | | :-------------------- | :----------- | :----------- | | 13-week period | $19,625 | $12,221 | | 39-week period | $83,567 | $54,486 | NOTE 3 – PROPERTY AND EQUIPMENT Net property and equipment increased to $3.7 million due to additions, with $389,853 in depreciation expense for the 39-week period Property and Equipment, Net | Item | Sep 29, 2024 | Dec 31, 2023 | | :---------------------------------- | :----------- | :----------- | | Total property and equipment (gross) | $7,486,591 | $6,893,550 | | Accumulated depreciation | $(3,527,852) | $(3,387,786) | | Less - property held for sale | $(258,751) | $(258,751) | | Net property and equipment | $3,699,988 | $3,247,013 | Depreciation Expense | Period | 2024 | 2023 | | :-------------------- | :----------- | :----------- | | 13-week period | $121,902 | $102,553 | | 39-week period | $389,853 | $416,315 | NOTE 4 - ACCRUED EXPENSES Accrued expenses decreased to $416,841, primarily due to lower bonus compensation and sales taxes, partially offset by increased payroll Accrued Expenses | Item | Sep 29, 2024 | Dec 31, 2023 | | :-------------------------- | :----------- | :----------- | | Accrued bonus compensation | $0 | $119,139 | | Accrued payroll | $231,767 | $149,587 | | Accrued sales taxes payable | $63,313 | $81,683 | | Total accrued expenses | $416,841 | $480,289 | NOTE 5 - LONG TERM DEBT Long-term debt, net of current portion, decreased to $2.15 million, secured by mortgages on ten operating locations with a 3.45% fixed interest rate Long-Term Debt | Item | Sep 29, 2024 | Dec 31, 2023 | | :---------------------------------- | :----------- | :----------- | | Notes payable to a bank | $2,353,367 | $2,489,299 | | Less - unamortized debt issuance costs | $(32,149) | $(36,199) | | Current maturities | $(170,203) | $(183,329) | | Long-term debt, less current portion | $2,151,015 | $2,269,771 | - Long-term debt is secured by mortgages on ten BTND operating locations and guaranteed by BT Brands, Inc. and a shareholder[47] NOTE 6 - STOCK-BASED COMPENSATION Stock-based compensation expense was $70,000 for Q3 2024 and $165,000 for the 39-week period, related to options and incentive awards Stock-Based Compensation Expense | Period | 2024 | 2023 | | :-------------------- | :----------- | :----------- | | 13-week period | $70,000 | $40,700 | | 39-week period | $165,000 | $118,000 | - A Contingent Incentive Share Award for senior executives, valued at $265,000, will be earned if the share price reaches $8.50 for 20 consecutive trading days, with $95,000 recognized in 2024 (39 weeks) and $77,000 in 2023 (39 weeks)[53] Stock Options Outstanding (39 Weeks Ended Sep 29, 2024) | Item | Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Term (Years) | | :---------------------------------- | :---------------- | :------------------------------ | :-------------------------------------- | | Options outstanding at Dec 31, 2023 | 319,500 | $2.62 | 7.6 | | Granted | 15,000 | $1.61 | 9.5 | | Options outstanding at Sep 29, 2024 | 334,500 | $2.57 | 7.0 | NOTE 7 – LEASES Operating lease obligations for restaurant locations have a weighted average remaining term of 3.5 years, with $336,000 in expenses for the 39-week period Future Minimum Lease Payments (as of Sep 29, 2024) | Year | Amount | | :---------------------------------- | :----------- | | Remainder 2024 | $79,983 | | 2025 | $351,626 | | 2026 | $362,188 | | 2027 | $317,768 | | 2028 | $208,895 | | 2029 and thereafter | $823,390 | | Total future minimum lease payments | $2,143,850 | | Less - interest | $(311,948) | | Present value of lease liabilities | $1,831,902 | Operating Lease Expenses | Period | 2024 | 2023 | | :-------------------- | :----------- | :----------- | | 13-week period | $130,000 | $81,000 | | 39-week period | $336,000 | $180,000 | NOTE 8 - RELATED PARTY TRANSACTION BT Brands has a related party investment in NGI Corporation, holding common shares, warrants, and demand notes, with shared executive leadership - BT Brands' CEO and CFO also hold leadership positions at NGI Corporation, a related party[62] - BT Brands holds 336,496 common shares and warrants for 392,697 common shares of NGI, and has $120,000 in demand notes due from NGI[62] NOTE 10 – ACQUISITION On May 13, 2024, the company acquired Schnitzel Haus assets for $943,000, including $125,000 in goodwill - Acquired Schnitzel Haus assets on May 13, 2024, for $943,000, including $125,000 in goodwill[63][64] Schnitzel Haus Acquisition Assets | Asset | Amount | | :------------------------------------------------- | :----------- | | Property, including leasehold improvements and equipment | $625,000 | | Intangible covenant not to compete | $100,000 | | Inventory | $65,000 | | Vehicle and other | $28,000 | | Operating lease right-of-use asset | $182,878 | | Total assets acquired | $1,000,878 | | Operating lease liability | $(182,878) | | Net assets acquired | $818,000 | | Goodwill | $125,000 | | Net purchase price | $943,000 | NOTE 11 – CONTINGENCIES The company is unaware of any significant asserted or potential legal or regulatory claims that could materially impact its financial position - No significant legal or regulatory claims are known to be threatened or contemplated[65] NOTE 12 – SUBSEQUENT EVENT Post-quarter, the company sold the Hot-N-Now trademark for $250,000 upfront cash and potential future payments, expecting a $250,000 gain in Q4 2024 - Sold Hot-N-Now trademark for $250,000 upfront cash and up to $150,000 in future payments, expecting a $250,000 gain in Q4 2024[65] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. Management discusses financial condition, operations, liquidity, and capital resources, covering recent events, industry trends, and performance for the 13 and 39-week periods - The company operates eighteen restaurants across various brands, including Burger Time, Bagger Dave's (40% owned), Village Bier Garten, Keegan's, Pie In The Sky, and Schnitzel Haus[67] - The business environment is challenging due to intense competition, difficulties in attracting food service workers, and rapid inflation in input costs[68][70] Introduction The introduction outlines the company's restaurant portfolio and acknowledges the challenging and competitive business environment - The company operates eighteen restaurants across six brands, with Bagger Dave's being a 40% owned affiliate[67] - The business faces intense competition and operates through a central management organization[68] Notable Recent Events Recent acquisitions, including Schnitzel Haus, have diversified operations and reduced Burger Time dependency, with ongoing pursuit of new opportunities - Recent acquisitions, including Schnitzel Haus in Q2 2024, have diversified operations and reduced reliance on Burger Time restaurants[69] - The company continues to explore new acquisition opportunities[69] Material Trends and Uncertainties The company faces significant industry challenges from labor shortages, rising costs, inflation, and competitive pricing pressures, alongside evolving technology and delivery trends - Key industry challenges include labor shortages, increasing wage rates, and rapid inflation in food and input costs[70][71][72] - The competitive restaurant industry makes it challenging to fully offset cost increases through menu price adjustments, impacting future margin improvements[71] - Technology and mobile delivery applications are rapidly changing the restaurant industry, requiring aggressive competition for customers[70] Results of Operations for the Thirteen Weeks Ended September 29, 2024, and the Thirteen Weeks Ended October 1, 2023 Q3 2024 net sales increased by 7.8% to $4.35 million, but an operating loss of $75,011 occurred due to higher labor and occupancy costs 13-Week Period Financial Performance | Metric | Sep 29, 2024 | Oct 1, 2023 | Change | | :---------------------------------- | :----------- | :----------- | :----- | | Net Sales | $4,348,824 | $4,007,656 | +$341,168 (7.8%) | | Food and paper costs (% of sales) | 35.9% | 36.2% | -0.3% | | Labor costs (% of sales) | 39.0% | 37.7% | +1.3% | | Occupancy and other expenses (% of sales) | 14.2% | 13.7% | +0.5% | | Income (loss) from operations | $(75,011) | $40,615 | -$115,626 | Net Sales Q3 2024 net sales increased by 7.8% to $4.35 million, driven by improved Burger Time and Pie in the Sky sales, and the Schnitzel Haus acquisition Net Sales (13 Weeks) | Metric | Sep 29, 2024 | Oct 1, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Net Sales | $4,348,824 | $4,007,656 | +7.8% | - Sales increase driven by improved Burger Time performance (average unit sales up $25,000 to $251,000), 12% sales increase at Pie in the Sky, and the addition of Schnitzel Haus[73][74] - Average customer transaction at Burger Time increased by approximately 10% due to significant menu price increases, with an average check of about $18.00[74] Costs of Sales - food and paper Food and paper costs as a percentage of sales decreased to 35.9% in Q3 2024, due to moderating inflation and menu price increases Food and Paper Costs (% of Sales) | Period | Sep 29, 2024 | Oct 1, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Food and paper costs | 35.9% | 36.2% | -0.3% | - Decrease in percentage due to moderating inflationary pressures and menu price increases, especially for Burger Time's "Deal of the Day"[75] Restaurant Operating Costs Restaurant operating costs as a percentage of sales increased to 89.1% in Q3 2024, driven by higher labor and occupancy costs Restaurant Operating Costs (% of Sales) | Period | Sep 29, 2024 | Oct 1, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Restaurant operating expenses | 89.1% | 87.5% | +1.6% | - Increase driven by higher labor costs, additional occupancy costs, and stabilizing commodity costs[76] Labor Costs Labor and benefits costs increased to 39.0% of sales in Q3 2024, reflecting tight labor markets, higher training, and wage pressure Labor Costs (% of Sales) | Period | Sep 29, 2024 | Oct 1, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Labor costs | 39.0% | 37.7% | +1.3% | - Increase due to tight labor markets, higher training costs, and competitive hourly wage pressure, partially mitigated by menu price increases and staffing leverage from Schnitzel Haus[77] Occupancy and Other Operating Expenses Occupancy and other expenses increased to 14.2% of sales in Q3 2024, driven by higher maintenance, utility costs, and Schnitzel Haus lease expenses Occupancy and Other Operating Expenses (% of Sales) | Period | Sep 29, 2024 | Oct 1, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Occupancy costs | 8.7% | 8.5% | +0.2% | | Other operating expenses | 5.5% | 5.2% | +0.3% | | Total | 14.2% | 13.7% | +0.5% | - Increase attributed to higher maintenance expenses, inflationary utility costs, and lease expense from the Schnitzel Haus acquisition[78] Depreciation and Amortization Expense Depreciation and amortization expenses increased to $141,527 in Q3 2024, primarily due to the Schnitzel Haus acquisition Depreciation and Amortization Expense | Period | Sep 29, 2024 | Oct 1, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Amount | $141,527 | $114,774 | +$26,753 | | % of Sales | 3.3% | 2.9% | +0.4% | - Increase mainly due to depreciation from the Schnitzel Haus acquisition[78] General and Administrative Costs General and administrative costs increased to $375,451 in Q3 2024, remaining consistent at 8.6% of sales General and Administrative Costs | Period | Sep 29, 2024 | Oct 1, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Amount | $375,451 | $343,027 | +$32,424 | | % of Sales | 8.6% | 8.6% | 0.0% | Income from Operations Q3 2024 saw an operating loss of $75,011, a decline from prior year profit, driven by higher labor and operating costs Income (Loss) from Operations | Period | Sep 29, 2024 | Oct 1, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Amount | $(75,011) | $40,615 | -$115,626 | | % of Sales | (1.7)% | 1.0% | -2.7% | - Shift from profit to loss driven by higher hourly pay rates and manager wages, and other increased restaurant operating costs[79] Restaurant-level EBITDA Restaurant-level EBITDA decreased to $441,967 in Q3 2024, with a lower margin of 10.2%, reflecting core restaurant profitability Restaurant-level EBITDA (13 Weeks) | Metric | Sep 29, 2024 | Oct 1, 2023 | Change | | :---------------------------------- | :----------- | :----------- | :----- | | Revenues | $4,348,824 | $4,007,656 | +$341,168 | | Income (Loss) from operations | $(75,011) | $40,615 | -$115,626 | | Depreciation and amortization | $141,527 | $114,774 | +$26,753 | | General and administrative, corporate-level expenses | $375,451 | $343,027 | +$32,424 | | Restaurant-level EBITDA | $441,967 | $498,416 | -$56,449 | | Restaurant-level EBITDA margin | 10.2% | 12.4% | -2.2% | - Restaurant-level EBITDA is a non-GAAP measure used to assess the profitability of core restaurant operations, excluding corporate-level expenses, depreciation, amortization, and impairment charges[80][81] Results of operations for the 39 weeks ending September 29, 2024, compared to the 39 weeks ending October 1, 2023. For the 39 weeks, net sales increased by 5.2% to $11.65 million, but operating loss widened significantly due to higher labor and occupancy costs 39-Week Period Financial Performance | Metric | Sep 29, 2024 | Oct 1, 2023 | Change | | :---------------------------------- | :----------- | :----------- | :----- | | Sales | $11,649,610 | $11,078,419 | +$571,191 (5.2%) | | Food and paper costs (% of sales) | 37.8% | 39.3% | -1.5% | | Labor costs (% of sales) | 39.8% | 37.2% | +2.6% | | Occupancy and other expenses (% of sales) | 14.7% | 13.1% | +1.6% | | Loss from operations | $(894,383) | $(289,691) | -$604,692 | Net Revenues Net sales for the 39 weeks increased by 5.2% to $11.65 million, driven by improved Burger Time and Pie in the Sky sales, and the Schnitzel Haus acquisition Net Sales (39 Weeks) | Metric | Sep 29, 2024 | Oct 1, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Net Sales | $11,649,610 | $11,078,419 | +5.2% | - Sales increase attributed to improved Burger Time performance (average unit sales up $95,000 to $716,000), 10% sales increase at Pie in the Sky, and the Schnitzel Haus acquisition[86][87] - Average customer transaction at Burger Time increased by approximately 10% due to menu price increases, with an average check of about $18.00[86] Costs of Sales - food and paper Food and paper costs as a percentage of sales declined to 37.8% for the 39 weeks, primarily due to menu price increases and improved margins Food and Paper Costs (% of Sales) | Period | Sep 29, 2024 | Oct 1, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Food and paper costs | 37.8% | 39.3% | -1.5% | - Decline in percentage due to menu price increases, especially at Burger Time, leading to improved margins[87] Restaurant Operating Costs Restaurant operating costs as a percentage of sales increased to 92.3% for the 39 weeks, driven by new locations and higher labor and occupancy costs Restaurant Operating Costs (% of Sales) | Period | Sep 29, 2024 | Oct 1, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Restaurant operating expenses | 92.3% | 86.8% | +5.5% | - Increase driven by higher sales activity from new locations and increased labor and occupancy costs[88] Labor Costs Labor and benefits costs increased to 39.8% of sales for the 39 weeks, due to staffing shortages, higher wages, and additional management labor Labor Costs (% of Sales) | Period | Sep 29, 2024 | Oct 1, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Labor costs | 39.8% | 37.2% | +2.6% | - Increase due to staffing shortages, higher hourly wage rates, and additional management labor at PIE[89] Occupancy and Other Operating Expenses Occupancy and other expenses increased to 14.7% of sales for the 39 weeks, partly due to higher repair costs and a prior year property tax reversal Occupancy and Other Operating Expenses (% of Sales) | Period | Sep 29, 2024 | Oct 1, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Occupancy costs | 9.1% | 7.6% | +1.5% | | Other operating expenses | 5.6% | 5.5% | +0.1% | | Total | 14.7% | 13.1% | +1.6% | - Increase partly due to higher repair and maintenance costs and the impact of a 2023 reversal of property tax accrual for a St. Louis property[90] Depreciation and Amortization Expense Depreciation and amortization expenses slightly increased to $473,420 for the 39-week period, driven by new restaurant purchases and capital additions Depreciation and Amortization Expense | Period | Sep 29, 2024 | Oct 1, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Amount | $473,420 | $470,801 | +$2,619 | | % of Sales | 4.1% | 4.2% | -0.1% | - Slight increase due to new restaurant purchase and capital additions[91] General and Administrative Costs General and administrative costs for the 39 weeks slightly decreased to $1.28 million, remaining consistent at 11.1% of sales General and Administrative Costs | Period | Sep 29, 2024 | Oct 1, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Amount | $1,284,871 | $1,288,019 | -$3,148 | | % of Sales | 11.1% | 11.6% | -0.5% | Income from Operations Operating loss for the first nine months widened to $894,383, primarily due to increased labor and occupancy costs, despite a prior year asset sale gain Income (Loss) from Operations | Period | Sep 29, 2024 | Oct 1, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Amount | $(894,383) | $(289,691) | -$604,692 | | % of Sales | (7.7)% | (2.6)% | -5.1% | - Widened operating loss primarily due to increased labor and occupancy costs; prior year benefited from a $313,688 gain on asset sale[92] Restaurant-level EBITDA Restaurant-level EBITDA decreased to $863,908 for the 39 weeks, providing insight into core restaurant profitability by excluding corporate expenses Restaurant-level EBITDA (39 Weeks) | Metric | Sep 29, 2024 | Oct 2, 2023 | Change | | :---------------------------------- | :----------- | :----------- | :----- | | Revenues | $11,649,610 | $11,078,419 | +$571,191 | | Income (loss) from operations | $(894,383) | $(289,691) | -$604,692 | | Gain on sale of assets | $0 | $(313,688) | +$313,688 | | Depreciation and amortization | $473,420 | $470,801 | +$2,619 | | General and administrative, corporate-level expenses | $1,284,871 | $1,288,019 | -$3,148 | | Restaurant-level EBITDA | $863,908 | $1,155,441 | -$291,533 | - Restaurant-level EBITDA is a non-GAAP measure used to assess the profitability of core restaurant operations, excluding corporate-level expenses, depreciation, and amortization[93][94] Liquidity and Capital Resources As of September 29, 2024, the company held $5.1 million in liquid assets, with net working capital at $4.3 million, and authorized a stock repurchase program Liquidity Snapshot | Metric | Sep 29, 2024 | Dec 31, 2023 | Change | | :---------------------------------- | :----------- | :----------- | :----- | | Cash, cash equivalents, marketable securities | $5.1 million | N/A | N/A | | Net working capital | $4.3 million | $5.7 million | -$1.4 million | - The company authorized a stock repurchase program for up to 625,000 shares (approx. 10% of outstanding common stock), funded by operating cash flows[97] - Primary liquidity sources are operating cash flows and existing cash/marketable securities, used for working capital, capital expenditures, debt service, and acquisitions[98] Summary of Cash Flows For the 39 weeks, cash flows were negative across operating, investing, and financing activities, with total contractual obligations at $4.2 million Cash Flow Summary (39 Weeks) | Activity | Sep 29, 2024 | | :---------------------------------- | :----------- | | Net cash used in operating activities | $(197,102) | | Net cash used in investing activities | $(1,668,704) | | Net cash used in financing activities | $(349,298) | - Contractual obligations totaled $4.2 million as of September 29, 2024, primarily for mortgages and capitalized lease obligations[100] Cash Flows Provided by Operating Activities Operating cash flow for the 39 weeks was negative $197,102, influenced by seasonal patterns and increased labor and maintenance expenses Net Cash Used in Operating Activities | Period | Sep 29, 2024 | Oct 1, 2023 | | :---------------------------------- | :----------- | :----------- | | Net cash used in operating activities | $(197,102) | $(74,732) | - Negative operating cash flow influenced by seasonal patterns and increased labor/maintenance costs[99] Cash Flows Used in Investing Activities Investing activities used $1.67 million for the 39 weeks, primarily for the Schnitzel Haus acquisition, property, and marketable securities Net Cash Used in Investing Activities | Period | Sep 29, 2024 | Oct 1, 2023 | | :---------------------------------- | :----------- | :----------- | | Net cash used in investing activities | $(1,668,704) | $4,845,886 | - Significant investing cash outflow due to Schnitzel Haus acquisition, property/equipment purchases, and marketable securities investments[15][99] Cash Flows Used in Financing Activities Financing activities used $349,298 for the 39 weeks, mainly for debt service and treasury share repurchases Net Cash Used in Financing Activities | Period | Sep 29, 2024 | Oct 1, 2023 | | :---------------------------------- | :----------- | :----------- | | Net cash used in financing activities | $(349,298) | $(1,374,858) | - Financing cash outflow driven by debt service and share repurchases[100] Contractual Obligations Contractual obligations totaled $4.2 million as of September 29, 2024, primarily for mortgages and capitalized lease obligations, with monthly payments of $47,000 Contractual Obligations | Item | Amount (as of Sep 29, 2024) | | :---------------------------------- | :-------------------------- | | Total contractual obligations | $4.2 million | | Monthly required payments (lease & mortgage) | ~$47,000 | - Obligations primarily consist of mortgages and capitalized lease obligations[100] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. As a smaller reporting company, BT Brands, Inc. is exempt from detailed quantitative and qualitative market risk disclosures - The company is exempt from providing detailed market risk disclosures due to its status as a smaller reporting company[101] ITEM 4. CONTROLS AND PROCEDURES. Disclosure controls and procedures were deemed ineffective as of September 29, 2024, due to a material weakness in internal control over financial reporting - Disclosure controls and procedures were deemed ineffective as of September 29, 2024, due to a material weakness in internal control over financial reporting[102] Evaluation of Disclosure Controls and Procedures CEO and CFO concluded disclosure controls were ineffective due to a material weakness in internal control over financial reporting - CEO and CFO concluded that disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting[102] Changes in Internal Control over Financial Reporting A consultant was identified for acquisition accounting, with no other material changes to internal control over financial reporting during the quarter - A consultant was identified to assist with acquisition accounting, but no other material changes to internal control over financial reporting occurred during the quarter[103] PART II—OTHER INFORMATION. ITEM 1. LEGAL PROCEEDINGS The company is not a party to any material pending or threatened legal proceedings - No material pending or threatened legal proceedings against the company[104] ITEM 1A. RISK FACTORS As a smaller reporting company, BT Brands, Inc. is exempt from providing detailed risk factor disclosures - The company is exempt from providing detailed risk factor disclosures due to its status as a smaller reporting company[105] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. This section details the share repurchase program, including 289,181 shares repurchased, and grants of contingent incentive share awards and stock options - The company repurchased 289,181 shares for $470,843 under its 2024 Share Repurchase Program, with 335,819 shares remaining available for repurchase[106] - Contingent incentive share awards of 250,000 common shares were approved for senior executives, tied to the stock price reaching $8.50 for 20 consecutive trading days[108] - Stock options were granted to a consultant (100,000 shares at $2.50) and independent directors (15,000 shares at $1.61)[108] Share Repurchase Program The company authorized a 2024 Share Repurchase Program for up to 625,000 shares, with 289,181 shares repurchased as of September 29, 2024 - Authorized a 2024 Share Repurchase Program for up to 625,000 shares (approx. 10% of outstanding common stock)[106] Share Repurchase Activity (Quarter Ended Sep 29, 2024) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet be Purchased under the Program | | :---------------------------------- | :------------------------------- | :--------------------------- | :-------------------------------------------------------------------- | | July 1 – July 31, 2024 | 13,328 | $1.55 | $255,000 | | August 1 – August 31, 2024 | 3,075 | $1.54 | $250,000 | | September 1 – September 29, 2024 | 7,342 | $1.70 | $260,000 | - As of September 29, 2024, 289,181 shares were repurchased for $470,843, with 335,819 shares remaining[106] Unregistered Sales of Equity Securities Contingent incentive share awards for senior executives and stock options for a consultant and independent directors were approved - Contingent incentive share award of 250,000 common shares for senior executives, tied to stock price performance ($8.50 for 20 consecutive trading days)[108] - Granted a seven-year option to a consultant to purchase 100,000 shares at $2.50, vesting monthly over five years[108] - Granted options to independent directors for an aggregate of 15,000 shares at $1.61, with 20% vesting upon grant and the remainder annually over four years[108] ITEM 3. DEFAULTS UPON SENIOR SECURITIES The company reported no defaults upon senior securities - No defaults upon senior securities[109] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company - Not applicable[109] ITEM 5. OTHER INFORMATION No other information to report - No other information to report[109] ITEM 6. EXHIBITS This section lists exhibits filed with Form 10-Q, including SOX certifications and Inline XBRL documents - Exhibits include certifications under Sarbanes-Oxley Act Sections 302 and 906 from the CEO and CFO[109] - Inline XBRL documents (Instance, Schema, Calculation, Definition, Labels, Presentation Linkbase Documents) are filed[109] SIGNATURES. The report is signed by Kenneth Brimmer, Chief Operating Officer and Principal Financial Officer, on November 13, 2024 - Report signed by Kenneth Brimmer, Chief Operating Officer and Principal Financial Officer, on November 13, 2024[110]