BT Brands(BTBD) - 2024 Q4 - Annual Report

PART I Item 1. Business BT Brands, Inc. operates seventeen restaurants across various segments in the eastern two-thirds of the United States, focusing on acquisitions and increasing shareholder value - BT Brands, Inc. owns and operates seventeen restaurants, including partially owned Bagger Dave's, across various segments and geographic regions in the eastern two-thirds of the United States[21][22][180] - The company's principal strategy is acquiring restaurant properties at attractive earnings multiples to build shareholder value in the food service industry, alongside efforts to increase sales, lower costs, and boost brand awareness[23][47] - The business is subject to intense competition, seasonal fluctuations (e.g., lower Q1/Q4 revenue for Midwestern restaurants, higher summer revenue for PIE, winter travel season peak for Florida locations), and extensive federal, state, and local regulations[56][57][58] Item 1A. Risk Factors The company faces significant risks from health emergencies, acquisition challenges, intense competition, rising costs, and cybersecurity threats - Health emergencies, such as COVID-19 variants, could negatively impact the business through declines in customer traffic, staffing difficulties, temporary restaurant closures, supply chain disruptions, and increased commodity costs[68][69] - Growth through acquisitions is subject to risks including challenges in securing favorable locations, remodeling costs, hiring personnel, integrating operations, retaining key employees, and the need for substantial additional capital which may not be available on acceptable terms[70][71][78][81] - The restaurant industry is intensely competitive, with risks from changes in consumer tastes, dietary trends, economic conditions, and competition from other restaurant chains and food delivery services, potentially leading to declining sales and profit margins[86][88] - Profitability is vulnerable to increases in commodity (beef, poultry, grains, dairy), energy, labor, and other operating costs due to inflation, shortages, or market changes, which may be difficult to offset with menu price increases[95][96][130] - The company relies on its computer systems and third-party vendors for point-of-sale processing, making it vulnerable to system failures, network security breaches, and cyber-attacks that could disrupt operations, compromise data, and lead to negative publicity or legal liabilities[105][106][107] Item 1B. Unresolved Staff Comments The company reported no unresolved staff comments from the SEC Item 1C. Cybersecurity BT Brands maintains a proactive cybersecurity program overseen by the Board, with no material incidents reported to date - BT Brands maintains a proactive cybersecurity program aligned with NIST frameworks, employing controls, technologies, and processes to identify, protect against, detect, respond to, and mitigate cybersecurity risks[147][148] - The Board of Directors, with the Audit Committee and CFO, oversees cybersecurity risk management, including annual risk assessments and evaluations, often incorporating reports from third-party advisors[149] - As of the report date, the company has not experienced any cybersecurity threats or incidents that have impacted its results of operations or financial condition, though it acknowledges the potential for future unauthorized access or disruptions[150] Item 2. Properties BT Brands leases its corporate office and owns Burger Time real estate, while other restaurants operate under long-term triple-net leases - The company's principal corporate office is leased in Minnetonka, Minnesota, on a month-to-month basis[151][155] Burger Time Restaurant Properties (as of Dec 29, 2024) | Location | Open Since | Building (Approx. Sq. Ft.) | Land (Sq. Ft.) | Real Estate Owner | Restaurant Business Owner | | :------------------------ | :--------- | :------------------------- | :------------- | :---------------- | :------------------------ | | Fargo, North Dakota | 1987 | 600 | 35,000 | BTND, LLC | BTND, LLC | | Moorhead, Minnesota | 1988 | 600 | 22,680 | BTND, LLC | BTND, LLC | | Grand Forks, North Dakota | 1989 | 650 | 29,580 | BTND, LLC | BTND, LLC | | Waite Park, Minnesota | 1989 | 700 | 17,575 | BTND, LLC | BTND, LLC | | Bismarck, North Dakota | 1989 | 600 | 30,750 | BTND, LLC | BTND, LLC | | Sioux Falls, South Dakota | 1991 | 650 | 17,688 | BTND, LLC | BTND, LLC | | Minot, North Dakota | 1992 | 800 | 33,600 | BTND, LLC | BTND, LLC | | Ham Lake, Minnesota | Closed | 1,664 | 31,723 | BTND LLC | (1) (3) | | Richmond, Indiana | held for sale | 1,062 | 23,086 | (4) (5) BTND IN, LLC | (2) | - Keegan's Seafood Grille, Pie In The Sky Coffee and Bakery, and Schnitzel Haus operate under long-term triple-net leases with varying terms and annual escalations. The Village Bier Garten location was closed in January 2025, and its lease was assigned[157][158][159][160] Item 3. Legal Proceedings BT Brands is not currently involved in any legal proceedings expected to have a material adverse effect on its business - The company is not currently involved in any legal proceedings that are expected to have a material adverse effect on its business, results of operations, financial condition, or cash flows[161] - Litigation, even without merit, can be expensive to defend, divert management attention, and generate negative publicity, potentially impacting customer traffic and sales[161] Item 4. Mine Safety Disclosures This item is not applicable to BT Brands, Inc PART II Item 5. Market for Registrant's Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities BT Brands' common stock and warrants trade on Nasdaq, with no cash dividends paid, and a share repurchase program in place - BT Brands' common stock (BTBD) and warrants (BTBDW) have been trading on the Nasdaq Stock Market since November 12, 2021[164] - As of March 1, 2025, there were 6,246,118 shares of common stock outstanding, held by approximately 40 stockholders of record[166] - The company has never declared or paid cash dividends and does not anticipate doing so, intending to retain all available funds for operations, expansion, and debt repayment[167] Share Repurchase Program Activity | Period | Total number of shares purchased | Average price paid per share ($) | Shares purchased as part of publicly announced program | Maximum of shares that may yet be purchased under the program | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------------------------------- | :---------------------------------------------------------- | | January 1 – December 31, 2023 | 150,000 | $1.668 | 150,000 | 600,000 | | January 1, 2024 – December 29, 2024 | 91,394 | $1.561 | 91,394 | 508,606 | - The net proceeds from the November 2021 IPO, approximately $10.68 million, have been invested in restaurant business acquisitions, Bagger Dave's shares, and marketable equity securities, including Noble Roman's Inc[175][177] Item 6. Reserved This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations BT Brands reported a significant net loss in fiscal year 2024 due to impairment, increased affiliate loss, and tax provision, despite revenue growth Consolidated Statements of Operations Summary (2024 vs. 2023) | Metric | 2024 Amount | 2024 % of Sales | 2023 Amount | 2023 % of Sales | | :------------------------------------------ | :------------ | :-------------- | :------------ | :-------------- | | SALES | $14,823,472 | 100.0% | $14,076,653 | 100.0% | | Food and paper costs | $5,605,579 | 37.8% | $5,597,167 | 39.8% | | Labor costs | $6,128,574 | 41.3% | $5,458,351 | 38.8% | | Occupancy costs | $1,403,204 | 9.5% | $1,312,717 | 9.3% | | Other operating expenses | $962,287 | 6.5% | $841,894 | 6.0% | | Depreciation and amortization | $742,860 | 5.0% | $598,540 | 4.3% | | Impairment of assets | $371,872 | 2.5% | — | — | | General and administrative | $1,691,404 | 11.4% | $1,650,755 | 11.7% | | Gain on sale of asset | $(250,000) | (1.7%) | $(310,182) | (2.2%) | | Total costs and expenses | $16,655,780 | 112.3% | $15,149,242 | 107.6% | | Loss from operations | $(1,832,308) | (12.3%) | $(1,072,589) | (7.6%) | | Net Loss | $(2,311,208) | (15.5%) | $(887,368) | (6.3%) | - Net sales increased by $746,819 (5.3%) to $14,823,472 in 2024, primarily driven by the acquisition of Schnitzel Haus ($710,000 in sales) and sales increases at BTND (7%) and PIE (19%)[193] - Restaurant operating costs increased to 95.1% of sales in 2024 (from 93.9% in 2023) due to continued price inflation in food and labor, and higher labor costs at PIE and Keegan's[195][199] - The net loss increased significantly in 2024 to $2,311,208 (from $887,368 in 2023), largely due to a $371,872 impairment charge for Village Bier Garten, an increased equity in loss of affiliate (Bagger Dave's) to $415,085, and a $206,000 income tax provision[203][206] Restaurant-level EBITDA (2024 vs. 2023) | Metric | 2024 | 2023 | | :------------------------------------ | :----------- | :----------- | | Revenues | $14,832,108 | $14,076,653 | | Loss from operations | $(1,832,308) | $(1,072,589) | | Depreciation and amortization | $742,860 | $598,540 | | Gain on sale of assets | $(250,000) | $(310,182) | | Impairment of restaurant asset | $371,872 | - | | General and administrative, corporate-level expenses | $1,691,404 | $1,650,755 | | Restaurant-level EBITDA | $723,828 | $866,524 | | Restaurant-level EBITDA margin | 4.9% | 6.2% | - As of December 29, 2024, the company had $4,270,970 in cash and marketable securities and a net working capital of $3,556,469, with primary liquidity needs for working capital, capital expenditures, and business acquisitions[211][212] Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, BT Brands is exempt from providing quantitative and qualitative market risk disclosures - BT Brands, as a smaller reporting company, is exempt from providing quantitative and qualitative disclosures about market risk[218] Item 8. Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for fiscal years 2024 and 2023, with an unqualified opinion from Boulay PLLP - The consolidated financial statements for fiscal years 2024 and 2023 were audited by Boulay PLLP, who issued an unqualified opinion, stating the financial position, results of operations, and cash flows are presented fairly in all material respects[223][228] Consolidated Balance Sheet Summary | ASSETS | December 29, 2024 | December 31, 2023 | | :-------------------------------------------------- | :------------------ | :------------------ | | Cash and cash equivalents | $1,951,415 | $5,300,446 | | Marketable securities | $2,319,555 | $1,392,060 | | Total current assets | $4,999,404 | $7,228,573 | | Total assets | $11,996,797 | $14,609,212 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Total current liabilities | $1,442,935 | $1,550,090 | | Total liabilities | $5,031,570 | $5,420,483 | | Total shareholders' equity | $6,965,227 | $9,188,729 | | Total liabilities and shareholders' equity | $11,996,797 | $14,609,212 | Consolidated Statements of Cash Flows Summary | Cash Flow Activity | 2024 | 2023 | | :------------------------------------ | :------------- | :------------- | | Net cash used in operating activities | $(723,505) | $(258,787) | | Net cash provided (used by) investing activities | $(2,184,677) | $4,713,044 | | Net cash used in financing activities | $(440,849) | $(1,304,389) | | CHANGE IN CASH AND CASH EQUIVALENTS | $(3,349,031) | $3,149,868 | | CASH AND CASH EQUIVALENTS, END OF PERIOD | $1,951,415 | $5,300,446 | - The company's investment in Bagger Dave's Burger Tavern, Inc. (39.6% ownership) is accounted for under the equity method, resulting in a net investment of $304,439 as of December 29, 2024, after recording its share of losses[242][250] - BT Brands acquired Schnitzel Haus in May 2024 for $943,000, including property, intangible covenant not to compete, inventory, and a utility vehicle, and assumed a lease obligation[319] Item 9. Changes in and Disagreements with on Accounting and Financial Disclosure BT Brands reported no changes in or disagreements with accountants on accounting and financial disclosure matters - There were no changes in or disagreements with accountants on accounting and financial disclosure[326] Item 9A. Evaluation of Disclosure Controls and Procedures Management concluded disclosure controls were ineffective due to a material weakness in accounting for complex transactions, despite fair financial statement presentation - As of December 29, 2024, the CEO and CFO concluded that the company's disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting[329] - The identified material weakness, originating in fiscal year 2022, pertains to the design of controls over the accounting and reporting of significant, non-recurring events and complex transactions[334] - Despite the material weakness, management asserts that the consolidated financial statements for the periods presented fairly represent the company's financial position, results of operations, and cash flows in conformity with U.S. GAAP[330] - The company has an ongoing remediation plan, which includes potentially engaging experts to assist with accounting for complex transactions, with oversight from senior management and the Audit Committee[336][337][338] Item 9B. Other Information BT Brands reported no other information required by this item - No other information was reported under Item 9B[339] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to BT Brands, Inc PART III Item 10. Directors, Executive Officers, and Corporate Governance BT Brands' board consists of five members, including three independent directors, overseeing risk management and adhering to a Code of Ethics and other corporate policies Executive Officers and Directors | Name | Age | Position | | :-------------------- | :-- | :----------------------------------- | | Gary Copperud | 67 | Chief Executive Officer and Director | | Kenneth Brimmer | 69 | Chief Operating Officer and Chairman | | Allan Anderson | 71 | Director | | Terri Tochihara-Dirks | 63 | Director | | Fred Croci | 77 | Director | - The board comprises five members, with Allan Anderson, Terri Tochihara-Dirks, and Fred Croci identified as independent directors under NASDAQ Listing Rules[350][353] - The company separates the roles of Chief Executive Officer (Gary Copperud) and Chairman of the Board (Kenneth Brimmer) to distinguish strategic direction from board oversight[355] - The board oversees risk management through its Audit and Compensation Committees, which review financial risk, compensation-related risk, and compliance with the Code of Ethics[356][357] - BT Brands has adopted a Code of Ethics and Business Conduct, an Insider Trading Policy (March 2024), and a Clawback Policy (March 2024) for executive officers, requiring recovery of erroneously awarded incentive-based compensation in case of accounting restatements[364][365][366] Item 11. Executive Compensation Executive compensation for 2024 included salaries for CEO Gary Copperud and COO/CFO Kenneth Brimmer, with employment agreements and an Incentive Plan for equity awards Summary Compensation Table (2024 vs. 2023) | Name and Principal Position | Year | Salary ($) | Stock Awards ($) | Option Awards ($) | Total ($) | | :-------------------------------- | :--- | :--------- | :--------------- | :---------------- | :-------- | | Gary Copperud, Chief Executive Officer | 2024 | $250,000 | | | $250,000 | | | 2023 | $250,000 | | $127,840 | $377,840 | | Kenneth W. Brimmer, Chief Operating and Financial Officer | 2024 | $150,000 | | | $150,000 | | | 2023 | $150,000 | | $95,880 | $245,880 | - CEO Gary Copperud and COO/CFO Kenneth Brimmer have three-year employment agreements, automatically extending, with annual base salaries of $250,000 and $150,000, respectively, and eligibility for annual bonuses[372][374][375] - The 2019 Incentive Plan authorizes the issuance of 1,000,000 shares of common stock for various equity awards, including stock options, SARs, restricted shares, and performance awards, to eligible participants[379][381] Director Compensation (2024) | Name | Fees Earned or Paid in Cash | Stock Awards (1) | Total ($) | | :-------------------- | :-------------------------- | :--------------- | :-------- | | Allan Anderson | $2,750 | $1,897 | $4,647 | | Terri Tochihara-Dirks | $2,250 | $1,897 | $4,147 | | Steve Schussler | $2,250 | $8,050 | $10,300 | | Fred Croci | $500 | $5,940 | $6,440 | | Total: | $7,750 | $17,784 | $25,534 | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 15, 2025, officers and directors collectively owned 20.78% of BT Brands' common stock, with Gary Copperud holding the largest individual stake Beneficial Ownership of Common Stock (as of March 15, 2025) | Name of Beneficial Owner | Number of Shares | Percentage | | :-------------------------------- | :--------------- | :--------- | | Officers and Directors: | | | | Gary Copperud | 1,114,225 | 18.10% | | Kenneth Brimmer | 140,000 | 2.42% | | Allan Anderson | 10,000 | * | | Terri Tochihara-Dirks | 10,000 | * | | Fred Croci | 9,000 | * | | Total for all Officers and Directors | 1,279,225 | 20.78% | | 5% Stockholders: | | | | Sally Copperud | 600,000 | 9.75% | | Jeffrey A. Zinnecker | 600,000 | 9.75% | | Samuel Vandeputte | 346,290 | 5.63% | | Trost Family Trust | 346,290 | 5.63% | - Beneficial ownership is calculated based on 6,154,724 shares of common stock outstanding as of March 15, 2025, including shares subject to options or warrants exercisable within 60 days[398][399] Item 13. Certain Relationships and Related Transactions, and Director Independence BT Brands has a Related-Party Transaction Policy and engages in transactions with related parties, including CEO Gary Copperud's personal guarantee on debt - BT Brands has a 'Related-Party Transaction Policy' requiring review and approval by the audit committee for transactions exceeding $120,000 or 1% of average total assets involving related parties[403][405] - Related party transactions include CEO Gary Copperud personally guaranteeing mortgage debt and the company's $424,000 investment in NGI Corporation, where both Mr. Copperud (Chairman) and COO Kenneth Brimmer (board member, CFO) hold positions[408][409][320] - The company's articles of incorporation and bylaws provide for indemnification of directors and officers to the fullest extent permitted by Wyoming law, and the company maintains directors' and officers' liability insurance[409][369] Item 14. Principal Accounting Fees and Services Boulay, PLLP has served as BT Brands' principal accountant since 2015, with the Audit Committee overseeing their appointment and pre-approving all services - Boulay, PLLP has been the principal accountant for BT Brands since 2015[412] - The Audit Committee is directly responsible for the appointment, retention, compensation, and oversight of the independent registered public accounting firm, including pre-approving all audit and non-audit services[412][413] Fees Billed by Boulay, PLLP (2024 vs. 2023) | Fee Category | 2024 | 2023 | | :----------------- | :--------- | :--------- | | Audit fees | $196,920 | $165,830 | | Audit-related Fees | - | - | | Tax fees | - | - | | All other fees | $24,245 | - | | Total fees | $221,165 | $165,830 | - The increase in total fees from 2023 to 2024 was primarily due to audit services and fees related to the company's shelf registration statement and share distribution agreement[419] PART IV Item 15. Exhibits, Financial Statement Schedules This section lists the exhibits and financial statement schedules included in the 10-K report, with financial statements presented in Item 8 - The financial statements required under this item are included in Item 8 of Part II[418] - No separate financial statement schedules are provided as the information is either not required or is already presented in the financial statements or their notes[421] - A comprehensive list of exhibits is provided, including the Equity Distribution Agreement, Articles of Incorporation, Bylaws, specimen stock certificates, warrant agreements, purchase agreements for acquisitions (Keegan's, Pie In The Sky, Schnitzel Haus), employment agreements, and corporate policies (Code of Ethics, Insider Trading Policy, Clawback Policy)[420] Item 16. Form 10–K Summary BT Brands reported that no Form 10-K Summary is provided - No Form 10-K Summary is provided[422] SIGNATURES The Form 10-K report was duly signed on March 31, 2025, by the registrant's Chief Executive Officer and other authorized directors - The report was signed on March 31, 2025, by Gary Copperud (CEO and Director), Kenneth Brimmer (COO, CFO, and Chairman), Allan Anderson (Director), Fred Croci (Director), and Terri Tochihara-Dirks (Director)[426][427]