BT Brands(BTBD) - 2022 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements BT Brands, Inc. presents its unaudited condensed consolidated financial statements for the period ended October 3, 2021, including balance sheets, income, equity, and cash flow statements, noting a subsequent $10.67 million net proceeds offering Consolidated Balance Sheet Highlights (Unaudited) | Account | October 3, 2021 ($) | January 3, 2021 ($) | | :--- | :--- | :--- | | Total Current Assets | 2,246,372 | 1,406,198 | | Total Assets | 4,141,361 | 3,389,165 | | Total Current Liabilities | 1,079,304 | 1,034,505 | | Total Liabilities | 4,260,417 | 4,091,488 | | Total Shareholders' Deficit | (119,056) | (702,323) | Consolidated Statements of Income Highlights (Unaudited) | Metric | 13 Weeks Ended Oct 3, 2021 ($) | 13 Weeks Ended Sep 27, 2020 ($) | 39 Weeks Ended Oct 3, 2021 ($) | 39 Weeks Ended Sep 27, 2020 ($) | | :--- | :--- | :--- | :--- | :--- | | Sales | 2,280,999 | 2,374,454 | 6,604,554 | 6,074,222 | | Income from Operations | 358,743 | 355,865 | 969,415 | 626,244 | | Net Income | 235,827 | 254,184 | 583,267 | 815,362 | | EPS (Basic and Diluted) | 0.06 | 0.06 | 0.14 | 0.20 | Consolidated Statements of Cash Flows (Unaudited, 39 Weeks Ended) | Cash Flow Category | October 3, 2021 ($) | September 27, 2020 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | 931,332 | 1,388,964 | | Net cash provided by (used in) investing activities | (85,821) | 46,264 | | Net cash used in financing activities | (87,943) | (300,066) | | Change in Cash | 757,568 | 1,135,162 | - The company operates ten fast-food restaurants: nine company-owned 'Burger Time' locations and one 'International Dairy Queen' franchise[28] - Subsequent to the quarter end, on November 12, 2021, the company entered into an underwriting agreement to sell 2.4 million units, expecting net proceeds of approximately $10.67 million[55][56] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's performance, noting sales growth driven by drive-thru demand, challenges from food cost inflation and competition, and improved liquidity from operating cash flow and debt refinancing Overview and Strategy The company operates ten fast-food restaurants, focusing on a drive-thru model, facing industry trends like technology adoption and 13.7% beef cost inflation, with a growth strategy centered on acquiring multi-unit concepts - The company's primary strategy is to serve the drive-thru and take-out segment of the quick-service restaurant industry[60] - The company is facing material trends including intense competition, the need for technology adoption (mobile delivery, loyalty programs), and food cost inflation. Beef costs have recently increased by approximately 13.7%[63][64] - The company's principal growth strategy is to acquire multi-unit restaurant concepts and individual restaurant properties at attractive multiples of earnings[67] Results of Operations for the Thirteen Weeks Ended October 3, 2021 Q3 2021 net sales slightly decreased to $2.28 million, while income from operations remained stable, despite food and paper costs rising to 41.4% of sales due to inflation, leading to a restaurant-level EBITDA margin decline to 21.6% Q3 2021 vs Q3 2020 Performance | Metric | Q3 2021 ($) | Q3 2020 ($) | | :--- | :--- | :--- | | Net Sales | 2,280,999 | 2,374,454 | | Income from Operations | 358,743 | 355,865 | | Food & Paper Costs (% of Sales) | 41.4% | 36.4% | | G&A Costs | 74,415 | 188,292 | - The increase in food and paper costs was driven by inflationary pressures, though partially mitigated by a favorable fixed-price arrangement on ground beef for part of the period[83] - Restaurant-level EBITDA, a non-GAAP measure, decreased to $493,563 (21.6% margin) from $593,825 (25.0% margin) in the prior-year period[97] Results of Operations for the Thirty-Nine Weeks Ended October 3, 2021 For the first three quarters of 2021, net sales grew 8.7% to $6.60 million, driving income from operations to $969,415 and improving restaurant-level EBITDA margin to 21.8% due to better labor leverage and higher sales volumes 39-Week 2021 vs 2020 Performance | Metric | 39 Weeks 2021 ($) | 39 Weeks 2020 ($) | | :--- | :--- | :--- | | Net Sales | 6,604,554 | 6,074,222 | | Income from Operations | 969,415 | 626,244 | | Food & Paper Costs (% of Sales) | 39.1% | 37.9% | | Restaurant-level EBITDA Margin | 21.8% | 18.7% | - The 8.7% increase in sales was principally the result of a favorable consumer response to the pandemic, leading more consumers to choose Burger Time's drive-thru model[98] - General and administrative costs decreased by 25.7% or $76,058, partly due to lower management headcount[107] Liquidity and Capital Resources The company's liquidity significantly strengthened with cash at $2.08 million and working capital at $1.18 million, driven by $931,322 in operating cash flow and a mortgage debt refinancing that lowered the interest rate from 4.75% to 3.45% - As of October 3, 2021, the company had $2,078,812 in cash and working capital of $1,176,068, an increase of $765,794 from January 3, 2021[112] - The company generated $931,322 in pre-tax cash flow from operations in the 39-week period ending October 3, 2021[116] - The company refinanced most of its outstanding mortgage debt, lowering its nominal interest cost from 4.75% to 3.45%, fixed for the next ten years[120] Quantitative and Qualitative Disclosure about Market Risk As a smaller reporting company, BT Brands is exempt from detailed market risk disclosure but identifies commodity price risk, particularly a 10% increase in beef costs adding $150,000 to annual expenses, and revenue seasonality as key exposures - The company is a smaller reporting company and is not required to provide the information under this item[134] - The company is subject to volatility in food costs, especially beef. A ten percent increase in the cost of beef would result in approximately $150,000 of additional annual food costs[121] - The company's revenue is subject to seasonality, typically being lower in the first and fourth quarters due to weather and holiday closures[123] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of October 3, 2021, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period[135] - There have been no changes in the company's internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[137] PART II — OTHER INFORMATION Legal Proceedings The company reports no pending legal proceedings to which it is a party or to which its property is subject - There are presently no pending legal proceedings to which the Company is a party[139] Risk Factors As a smaller reporting company, BT Brands is not required to provide risk factor disclosures in its quarterly report on Form 10-Q - The company is a smaller reporting company and is not required to provide the information required under this item[140] Unregistered Sales of Equity Securities and Use of Proceeds The company confirms no unregistered equity securities were sold during the quarter ended October 3, 2021 - During the quarter ended October 3, 2021, the Company did not sell any securities[142] Other Information A significant subsequent event on November 12, 2021, involved an Underwriting Agreement to sell 2.4 million units, expecting approximately $10.67 million in net proceeds to fund growth and acquisition strategy - Effective November 12, 2021, the Company entered into an Underwriting Agreement to sell 2,400,000 units, each comprising one share of common stock and one five-year warrant to purchase a share at $5.50[145] - The company estimates net proceeds from the offering will be approximately $10,665,000, or $12,321,000 if the underwriters' over-allotment option is fully exercised[145] Other Items (Defaults, Mine Safety, Exhibits) This section consolidates minor disclosures, reporting no defaults on senior securities, confirming mine safety disclosures are not applicable, and providing a list of exhibits filed with the 10-Q report - Item 3: The company reports no defaults upon senior securities[143] - Item 4: Mine safety disclosures are not applicable[144] - Item 6: A list of exhibits filed with the report is provided, including officer certifications and XBRL data[147]