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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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Dec. 29, 2024
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization BT Brands, Inc. (“BT Brands,” “we,” “us,” “our” or the “Company”) was incorporated as Hartmax of NY Inc. on January 19, 2016. Effective July 30, 2018, we acquired 100% of the ownership of BTND, LLC (“BTND”) in exchange for common stock through a Share Exchange Agreement (the “Share Exchange”). In 2020, BT Brands, Inc. was reincorporated in the State of Wyoming. Business As of December 29, 2024, the Company owned and operated twelve restaurants and owned a 39.6%, as of year-end, interest in an operator of six restaurants. During 2024, we owned and operated eight Burger Time restaurants in the North Central region of the United States. In February 2024, we closed a leased location in Sioux Falls, South Dakota. The net book value of the closed location was approximately $69,000. We own Keegan’s Seafood Grille (“Keegan’s”), a dine-in restaurant located in Florida, Pie In The Sky Coffee and Bakery (“PIE”), a casual dining coffee shop bakery located in Woods Hole, Massachusetts, Schnitzel Haus a fine dining German-themed restaurant in Hobe Sound, Florida featuring German and American menu items German and American beer, wine and cocktails, The Village Bier Garten (“VBG”), a German-themed restaurant in Cocoa, Florida operated during 2024 and closed January 3, 2025. Our Burger Time restaurants feature a variety of burgers and other affordable foods, sides, and soft drinks. Keegan’s Seafood Grille has operated in Indian Rocks Beach, Florida, for over thirty-five years, offering a variety of fresh seafood items for lunch and dinner. The menu at Keegan’s includes beer and wine. PIE features an array of freshly baked goods, freshly made sandwiches, and locally roasted coffee. Our revenues are derived from food and beverages at our restaurants, retail goods such as apparel, private-labeled “Keegan’s Hot Sauce,” and other items that account for an insignificant portion of our income. On June 2, 2022, the Company purchased 11,095,085 common shares of Bagger Dave’s Burger Tavern, Inc. (“Bagger Dave’s” or “BDVB”). Initially, our ownership represented 41.2% ownership of BDVB, and in 2024, it represented 39.6%. We acquired the shares for $1,260,000, or approximately $0.114 per share. In 2023 and 2022, representatives of BT Brands were appointed to two of the three positions on Bagger Dave’s board of directors. Bagger Dave’s specializes in locally sourced, never-frozen prime rib recipe burgers, all-natural lean turkey burgers, hand-cut fries, locally crafted beers on draft, milkshakes, salads, black bean turkey chili, and pizza. The first Bagger Dave’s opened in January 2008 in Berkley, Michigan. There are six Bagger Dave’s restaurants, including four in Michigan and single units in Ft. Wayne, Indiana, and Centerville, Ohio. Our investment in Bagger Dave’s is accounted for under the “Equity Method.” Principles of Consolidation The accompanying consolidated financial statements include the accounts of BT Brands, Inc., BTND, LLC, and its wholly owned subsidiaries 10Water Street, LLC, 1519BT, LLC, and BTNDDQ, LLC. Significant intercompany accounts and transactions were eliminated in consolidation. Use of Estimates in Preparation of Financial Statements The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (GAAP), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the period. Our significant estimates include the valuation of certain long-lived assets and valuation of equity method investments. Actual results may differ from the estimates used in preparing the consolidated financial statements. Fiscal Year The Company’s fiscal year is a 52/53-week year, ending on the Sunday closest to December 31. Most years consist of four 13-week accounting periods comprising the 52-week year. Fiscal 2024 was the 52 weeks ending December 29, 2024, and Fiscal 2023 was the 52 weeks ending December 31, 2023; all references to years in this report refer to the fiscal years described above. Fair Value of Financial Instruments Our accounting for fair value measurements of assets and liabilities that are recognized or disclosed at fair value in the statements on a recurring or nonrecurring basis adheres to the Financial Accounting Standards Board (FASB) fair value hierarchy that prioritizes the input to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are as follows:
| · | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities for which we have the ability to access the measurement date.
| · | Level 2 inputs are inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the entire term of the asset or liability.
| · | Level 3 Inputs are unobservable inputs for the asset or liability.
The level in the fair value hierarchy within which a fair 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 equivalents, receivables, accounts payable and other financial working capital items approximate fair value at year-end due to the short maturity nature of these instruments. Carrying value of debt approximate fair value due to its variable interest rate. Equity Method Investments in companies in which the Company has the ability to exercise significant influence, but not control, are accounted for using the equity method. This method recognizes the Company's share of the investee's net income or loss, and dividends received, as adjustments to the investment carrying amount. The Company's share of the investee's net income or loss is recognized in the income statement, while dividends received reduce the investment carrying amount. Investments Bagger Dave’s- Our investments include our net investment of $304,439 in Bagger Dave’s as determined under the “Equity Method” of accounting, net of recording our equity share in Bagger Dave’s losses. NGI related party investment- Our CEO, Gary Copperud, is Chairman of the board of directors of NGI. Our COO, Kenneth Brimmer, is also an NGI board member and serves as its CFO. Our total investment in equity and loans to NGI Corporation (“NGI”) is $424,000, which includes $120,000 in demand loans to NGI during 2024; the notes bear interest at 15% with interest payable-in-kind, the balance on NGI notes is convertible into NGI Series B preferred shares and warrants at any time at the option of the holder, and $6,600 in accrued interest has not been recognized as the conversion option is evaluated. The Company also has made $304,000 in prior equity investments in NGI. A portion of the NGI investment includes equity in the form of 179,000 common shares received in 2020 as consideration for extending the maturity of a note receivable repaid in August 2020. Under the Note modification terms, we acquired 179,000 NGI common shares from its founders. We also received warrants expiring on March 31, 2029, to purchase 358,000 shares of common stock for $1.00 per share. We attributed $75,000 to the value of the equity received. This amount was reflected as interest income in 2020. On February 12, 2022, we invested $229,000 in 138,788 shares of NGI Series A1 8% Cumulative Convertible Preferred Stock, convertible share for share into NGI common shares. This investment is reflected at the cost of $229,000. The preferred investment included a five-year warrant to purchase 34,697 shares at $1.65. The investment in NGI does not have a readily determinable market value, and it is carried at the historic cost determined by BT Brands, which the Company believes is reasonable relative to recent stock sales by NGI. BDVB files quarterly and annual financial reports with OTCMarkets, Inc. The listing with OTC Markets does not require the information to be audited. Below is a summary of information filed by Bagger Dave’s for the fiscal years ending December 29, 2024, and December 31, 2023. In February 2025, the Bagger Dave’s location in Chesterfield, Michigan, was closed because of poor performance. The sale of all six of Bagger Dave’s locations is currently being negotiated at a value over the carrying value. While the sale of the restaurant assets is being pursued, there is no assurance the sale will ultimately occur. Unaudited summary financial information for Bagger Dave’s -
Balance Sheet Information - |  | December 29, 2024 |  |  | December 31, 2023 |
Total current assets |  | $ | 1,012,529 |  |  | $ | 1,606,842 |
Total noncurrent assets |  |  | 2,154,049 |  |  |  | 3,158,659 |
Total assets |  |  | 3,166,578 |  |  |  | 4,765,501 |
Total current liabilities |  |  | 711,014 |  |  |  | 640,092 |
Total noncurrent liabilities |  |  | 1,408,091 |  |  |  | 2,030,286 |
Total liabilities |  |  | 2,119,105 |  |  |  | 2,670,378 |
Stockholders’ equity |  |  | 1,047,473 |  |  |  | 2,095,123 |
Total liabilities and stockholders’ equity |  | $ | 3,166,578 |  |  | $ | 4,765,501 |
Statements of Operations information - |  | December 29, 2024 |  |  | December 31, 2023 |
Revenue |  | $ | 7,176,536 |  |  | $ | 7,964,854 |
Depreciation and amortization |  |  | (527,274 | ) |  |  | (656,067 | )
Other costs and expenses |  |  | (7,696,912 | ) |  |  | (8,161,248 | )
Net loss |  | $ | (1,047,650 | ) |  | $ | (852,461 | )
Fair Value Measurements The following is a summary of the fair value of Level 1 investments. As required, fair values have been determined by reference to quoted market prices in active markets as of the year-end indicated:
|  | December 29, 2024 |  |  | December 31, 2023 |
|  | Fair value Carrying Amount |  |  | Level 1 |  |  | Fair value Carrying Amount |  |  | Level 1 |
Corporate bond fund |  | $ | - |  |  | $ | - |  |  | $ | 178,500 |  |  | $ | 178,500 |
Common stocks |  |  | 2,129,986 |  |  |  | 2,129,986 |  |  |  | 1,213,560 |  |  |  | 1,213,560 |
Real estate investment trust |  |  | 189,569 |  |  |  | 189,569 |  |  |  | - |  |  |  | - |
Total |  | $ | 2,319,555 |  |  | $ | 2,319,555 |  |  | $ | 1,392,060 |  |  | $ | 1,392,060 |
Cash and Cash Equivalents Cash and cash equivalents may include United States Treasury Bills with a maturity at the time of purchase of three months or less. Our bank deposits often exceed the amounts insured by the Federal Deposit Insurance Corporation. In addition, we maintain cash deposits in brokerage accounts, including money funds in excess of the amounts covered by insurance. We do not believe there is a significant risk related to cash. Broker Margin Loan At December 31, 2023, we had a broker margin loan outstanding of $115,899 which was repaid during 2024. The broker margin loans carried variable margin interest rate as set by the lending brokerage firm and was 6.8% at December 31, 2023; there was no amount due to brokers at December 29, 2024. Any broker margin loan is collateralized by marginable securities held in the margin account and is due on demand under Federal Reserve margin account regulations and the margin account agreement. Deferred Transaction Costs Deferred transaction costs for the year ended December 31, 2024, primarily consist of legal fees that were capitalized as incurred and will be offset against the proceeds from future ATM offerings. The deferred transaction costs will be reviewed periodically to assess the probability that future securities will be offered. In the event that no future offering will occur, any deferred transaction costs will be expensed. Total costs incurred, but not accounted for as a reduction in equity, were $10,000 as of December 31, 2024. Revenue Recognition Our revenues consist principally of selling food products for cash or bank-issued credit and debit card transactions at our restaurants. We follow Accounting Standards Update (ASU) 2014-09 (ASC 606). Under ASC 606, revenues are recognized when control of promised goods or services is transferred to a customer in an amount that reflects the expected consideration for those goods or services. Our sales are recognized at the point of purchase, net of discounts and incentives and net of applicable sales taxes. Receivables In these consolidated financial statements, receivables consist of rebates due from a primary vendor. Inventory Inventory consists of food, beverages, supplies, and merchandise for resale and is stated at a lower of cost (first-in, first-out method) or net realizable value. Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives or the term of the lease for leasehold improvements if less than its useful life: We review long-lived assets to determine if their carrying value may not be recoverable based on estimated cash flows. Assets are evaluated at the lowest level, for which cash flows can be identified at the restaurant level. Significant estimates are made for each restaurant’s future operating results over its remaining life in determining future cash flows. If such assets are concluded to be impaired, the impairment recognized is measured by the amount by which the carrying value of the assets exceeds the carrying value of the assets.
| Estimated Useful life In years
Equipment | 3-7
Leasehold Improvements | 5-10
Building | 15-25
Impairment and Disposal of Long-Lived Assets Land, building, equipment, operating right-of-use assets, and certain other assets, including definite-lived intangible assets, are reviewed regularly for impairment and whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amount of the assets to the future undiscounted net cash flow expected to be generated, and it is determined at the restaurant level. If an asset is determined to be impaired, the recognized impairment is measured by the amount by which the carrying amount of the asset exceeds the fair value. We may sell an existing unit or close an operating unit and seek to liquidate the property. We closed stores in West St. Paul in 2022 and Richmond, Indiana, in 2018. The West St. Paul location was sold in 2023 for a gain of $310,182. The Richmond location is currently offered for sale, and we believe the Richmond property will be sold above its carrying value of approximately $258,000. In 2024, we closed a leased location in Sioux Falls, South Dakota, resulting in a loss on the disposal of equipment of approximately $90,000, which is included in operating expenses. Following the end of our 2024 fiscal year on January 2, 2025, we closed the Village Bier Garten, sold certain equipment for $34,500 and assigned the remaining lease to an unrelated party. As a result, we reviewed VBG’s assets for impairment, resulting in recording an impairment loss of 371,872 in 2024. The Ham Lake, Minnesota, location was closed in January 2025. We are currently assessing alternatives for the property that we believe have value above its net book value of $424,000. Sale of Hot-N-Now Trademark Effective October 9, 2024, we completed the sale of a trademark property. The Hot-N-Now trademark, with no cost basis, was sold for an upfront cash payment of $250,000 and potential future payments of up to $150,000 based upon $10,000 per unit for each Hot-N-Now unit opened by the purchaser. A gain on the sale of an asset of $250,000 was recognized in 2024. Leases Three of our restaurant locations are subject to leases. We evaluate leases at commencement to determine their operating or finance lease classification. Under FASB ASC Topic 842 requirements, we recognize operating and finance lease liabilities based on the present value of the minimum future lease payment over the expected lease term and recognize a corresponding right-of-use asset. We recognize lease expense related to operating leases on a straight-line basis. As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of the lease payments. For lease agreements that contain both lease and non-lease components, the Company has elected to account for the lease and non-lease components as a single lease component. The Company has elected to not apply the requirements of ASC 842 for short-term leases. Short-term leases are defined as leases that, at the commencement date, have lease terms of twelve months or less. At lease inception, we determine the likelihood of exercising any future lease option periods. Where we are reasonably certain to exercise our renewal option, we include that option period in calculating the present value of future lease payments. See Note 4 for additional information. Goodwill, Other Intangible Assets, and Other Assets Goodwill is not amortized. Goodwill is tested for impairment annually or more frequently if the conditions indicate additional review is necessary. The Company assesses qualitative factors to determine if it is more likely than not that the fair value is less than its carrying amount and if it is necessary to perform the qualitative goodwill impairment test. The Company has one reporting unit. If the Company performs the quantitative test, it compares the carrying value of the reporting unit to an estimate of the reporting unit’s fair value to identify potential impairment. The fair value of the reporting unit is estimated using a discounted cash flow model. Where available, and as appropriate, comparable market multiples are also used to corroborate the results of the discounted cash flow models. In determining the estimated future cash flow, the Company considers and applies certain estimates and judgments, including current and market projected future levels of income based on management’s plans, business trends, prospects and economic conditions and market-participant considerations. If the estimated fair value of the reporting to unit is less than the carrying value, a goodwill impairment loss is recorded for the difference, up to the amount of the total goodwill. During the year ended December 29, 2024, no impairment losses were identified. The cost of other intangible assets is amortized over the expected useful life. Advertising and Marketing Costs We expense advertising and marketing costs as incurred. Advertising expenses for fiscal years 2024 and 2023 totaled $59,438 and $81,594, respectively. Income Taxes We provide for income taxes under ASC 740, Accounting for Income Taxes, using an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. ASC 740 requires the net of deferred tax assets and deferred tax liability to be presented as a single amount on the balance sheet. It is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense (benefit). Per Common Share Amounts Net income per common share is computed as required by section 260-10-45 of the FASB Accounting Standards Codification. Basic net income or (loss) per 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 loss per share is computed by dividing net loss 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 diluted net income (loss) computation per share because their effect is anti-dilutive. As a result, no common stock equivalents were dilutive as of the years ended in 2024 and 2023. There are currently 2,746,838 five-year warrants exercisable at $5.50 per share outstanding. These warrants were issued as a part of our November 12, 2021, initial public offering. At the end of fiscal 2024 and 2023, all outstanding warrants were exercisable at prices above the underlying stock’s market price and, therefore, were not dilutive. Restaurant Pre-opening expenses Restaurant pre-opening and other development expenses are non-capital expenditures and are expensed as incurred as part of other operating expenses. Restaurant pre-opening expenses may include the costs of hiring and training the initial hourly workforce for each new restaurant, travel, the cost of food and supplies used in training, grand opening promotional expenses, the cost of the initial stocking of operating supplies, and other direct costs related to the opening of a restaurant, including rent during the construction and in-restaurant training period. Stock-Based Compensation Stock-based compensation relates to the issuance of stock options and restricted stock. In our consolidated financial statements, we recognize stock-based compensation as an expense. Equity-classified awards are measured at the grant date fair value of the award. We estimated the grant date fair value using the Black-Scholes option-pricing model. We recognize a compensation expense, net of estimated forfeitures, on a straight-line basis over the employee service periods for awards granted. Reclassifications In 2024, the Company made certain reclassifications to its consolidated balance sheet and statement of operations presentation to enhance financial reporting consistency. These reclassifications involved adjusting certain 2023 comparative amounts to conform to the current year’s presentation. The reclassifications did not impact previously reported total assets, total liabilities, stockholders’ equity, or net income for the year ending December 31, 2023. These adjustments were made solely for presentation purposes and did not affect the Company’s overall financial position, results of operations, or cash flows. Segment Reporting - Recently Adopted Accounting Guidance: We follow the guidance of FASB Accounting Standards for reporting and disclosure on operating segments, which require segment disclosures about products and services, geographic areas, and significant customers. We have determined that we did not have separately reportable operating segments. In November 2023, the FASB issued ASU 2023-07: Improvements to Reportable Segment Disclosures. This ASU, which amends Topic 280: Segment Reporting, improves disclosure requirements for reportable segments and enhances disclosures for companies with single reportable segments. The Company has concluded it has a single reportable segment based on the nature of its operations and the regulatory environment under which it operates. The business’s nature and the segment’s accounting policies are the same as described in Note 1 - Business. The Company’s Chief Operating Decision Maker (“CODM”) is its executive team made up of its CEO and Chief Financial Officer. The CODM assesses the reportable segment’s performance and allocates resources for the reportable segment based on the net income and total assets, which are the same amounts in all material respects as those reported on the consolidated statements of operations and consolidated balance sheets. The Company adopted the standard on January 1, 2024. The adoption did not have an impact on the Company’s consolidated financial statements.

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