Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 29, 2020 | May 12, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | BT BRANDS, INC. | |
Entity Central Index Key | 0001718224 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Current Fiscal Year End Date | --01-03 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | true | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Mar. 29, 2020 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2020 | |
Entity Ex Transition Period | false | |
Entity Common Stock Shares Outstanding | 8,095,004 | |
Entity Interactive Data Current | Yes |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 29, 2020 | Dec. 29, 2019 |
CURRENT ASSETS | ||
Cash | $ 310,134 | $ 258,101 |
Receivables | 5,782 | 15,363 |
Inventory | 52,973 | 56,432 |
Prepaid expenses | 5,297 | 6,929 |
Total current assets | 374,186 | 336,825 |
PROPERTY AND EQUIPMENT, net | 1,605,617 | 1,650,012 |
LAND AND BUILDINGS HELD FOR SALE | 449,244 | 449,244 |
INVESTMENT IN NOTES RECEIVABLE FROM RELATED COMPANY | 207,000 | 179,000 |
OTHER ASSETS, net | 18,034 | 18,459 |
Total assets | 2,654,081 | 2,633,539 |
CURRENT LIABILITIES | ||
Current maturities of long-term debt | 243,784 | 277,666 |
Accounts payable | 483,622 | 321,855 |
Accrued expenses | 179,083 | 202,732 |
Income taxes payable | 2,898 | 2,898 |
Total current liabilities | 909,387 | 805,151 |
LONG-TERM DEBT, less current maturities | 3,254,808 | 3,221,035 |
UNEARNED VENDOR REBATE | 2,445 | 3,668 |
Total liabilities | 4,166,640 | 4,029,854 |
COMMITMENTS AND CONTINGENCIES | ||
Preferred stock, $.001 par value, 500,000 shares authorized, no shares outstanding at March 29, 2020 and December 29, 2019 | ||
Common stock, $.001 par value, 50,000,000 authorized, 8,095,004 shares outstanding at March 29, 2020 and December 29, 2019 | 8,095 | 8,095 |
Additional paid-in capital | 497,671 | 497,671 |
Accumulated deficit | (2,018,325) | (1,902,081) |
Total shareholders' deficit | (1,512,559) | (1,396,315) |
Total liabilities and shareholders' deficit | $ 2,654,081 | $ 2,633,539 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 29, 2020 | Dec. 29, 2019 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Preferred stock, shares par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 500,000 | 500,000 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, shares par value | $ .001 | $ .001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares outstanding | 8,095,004 | 8,095,004 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 29, 2020 | Mar. 31, 2019 | |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | ||
SALES | $ 1,303,430 | $ 1,377,833 |
Restaurant operating expenses | ||
Food and paper costs | 540,100 | 560,271 |
Labor costs | 483,309 | 486,245 |
Occupancy costs | 162,588 | 207,603 |
Other operating expenses | 86,174 | 64,612 |
Depreciation | 44,395 | 58,810 |
Amortization | 425 | 425 |
General and administrative | 66,216 | 127,784 |
Total costs and expenses | 1,383,207 | 1,505,750 |
Income (loss) from operations | (79,777) | (129,177) |
INTEREST EXPENSE | (36,467) | (42,573) |
INCOME (LOSS) BEFORE TAXES | (116,244) | (170,490) |
PROVISION FOR INCOME TAXES | ||
NET LOSS | $ (116,244) | $ (170,490) |
LOSS PER COMMON SHARE - Basic and Diluited | $ (0.01) | $ (0.02) |
WEIGHTED AVERAGE SHARES USED IN | ||
COMPUTING PER COMMON SHARE AMOUNTS - Basic and Diluited | 8,095,004 | 8,086,004 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (Unaudited) - USD ($) | Total | Common Stock | Additional Paid-In Capital | Accumulated (Deficit) |
Balance, shares at Dec. 30, 2018 | 8,086,004 | |||
Balance, amount at Dec. 30, 2018 | $ (1,041,238) | $ 8,086 | $ 484,180 | $ (1,533,504) |
Net (loss) | (170,490) | (170,490) | ||
Balance, shares at Mar. 31, 2019 | 8,086,004 | |||
Balance, amount at Mar. 31, 2019 | (1,211,728) | $ 8,086 | 484,180 | (1,703,994) |
Balance, shares at Dec. 29, 2019 | 8,095,004 | |||
Balance, amount at Dec. 29, 2019 | (1,396,315) | $ 8,095 | 497,671 | (1,902,081) |
Net (loss) | (116,244) | (116,244) | ||
Balance, shares at Mar. 29, 2020 | 8,095,004 | |||
Balance, amount at Mar. 29, 2020 | $ (1,512,559) | $ 8,095 | $ 497,671 | $ (2,018,325) |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 29, 2020 | Mar. 31, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Income (loss) | $ (116,244) | $ (170,490) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities- | ||
Depreciation | 44,395 | 58,810 |
Amortization of franchise agreement | 425 | 425 |
Amortization of debt issuance cost | 1,295 | 1,277 |
Changes in operating assets and liabilities | ||
Receivables | 9,581 | 7,199 |
Inventory | 3,459 | 4,367 |
Prepaid expenses | 1,632 | 125 |
Accounts payable | 161,767 | 104,380 |
Unearned vendor rebate | (1,223) | (815) |
Accrued expenses | (23,649) | (30,918) |
Net cash provided by (used in) operating activities | 81,438 | (25,640) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Investment in notes receivable from related entity | (28,000) | |
Net cash used in investing activities | (28,000) | |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from long-term debt | 50,000 | |
Principal payments on long-term debt | (51,405) | (63,293) |
Net cash used in financing activities | (1,405) | (63,293) |
CHANGE IN CASH | 52,033 | (88,933) |
CASH, BEGINNING OF PERIOD | 258,101 | 663,511 |
CASH, END OF PERIOD | 310,134 | 574,578 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||
Cash paid for interest | $ 35,172 | $ 41,296 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 29, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of BT Brands, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and on a basis consistent in all material respects with the accounting policies for the fiscal year ended December 29, 2019. In our opinion, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of our financial position and results of operation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year. The accompanying Condensed Consolidated Balance Sheet as of March 29, 2020 does not include all of the disclosures required by GAAP. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of December 29, 2019 and the related notes thereto included in the Company’s Form 10-K for the fiscal year ended December 29, 2019. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reverse Merger Transaction BT Brands, Inc. (the “Company”) was incorporated as Hartmax of NY Inc. on January 19, 2016 with the objective of acquiring an operating entity. Effective on July 30, 2018, the Company acquired 100% of the ownership BTND, LLC. in exchange for common stock in the Company through a Share Exchange Agreement (“Share Exchange”) with BTND, LLC (“BTND”), and its Members. Following the Share Exchange, BTND became a wholly owned subsidiary of the Company for reporting purposes under GAAP. Business The Company currently operates company-owned fast-food restaurants called Burger Time. The Company also operates one unit in Minnesota as a franchisee of International Dairy Queen. The Company operates three Burger Time locations in Minnesota, four in North Dakota, and two in South Dakota. The Company closed a store in Richmond, Indiana during the year, which is listed for sale, resulting in a total of ten operating restaurants at March 29, 2020. The Company owns a restaurant property in St. Louis, Missouri currently held for sale. The Company’s Dairy Queen store is operated pursuant to the terms of a franchise agreement with International Dairy Queen. The Company is required to pay regular royalty and advertising payments to the franchisor and to remain in compliance with the terms of the franchise agreement. Fiscal Year Period 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. All references to years in this report refer to the 13-week periods in the respective fiscal year periods. Fiscal 2020 is a 53-week year ending January 3, 2021. Cash For purposes of reporting cash and cash flows, cash is net of outstanding checks and includes, amounts on deposit at banks, a money market mutual fund holding, and deposits in transit. Receivables Receivables consists of rebates due from a primary vendor. Inventory Inventory consists of food, beverages and supplies and is stated at 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 which range from three to thirty years. The Company reviews long-lived assets to determine if the carrying value of these assets may not be recoverable based on estimated cash flows. Assets are reviewed at the lowest level for which cash flows can be identified, which is at the restaurant level. In determining future cash flows, significant estimates are made by the Company with respect to future operating results of each restaurant over its remaining life. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets. Assets Held for Sale From time-to-time the Company may sell an existing operating unit or may close an operating unit and list the property for sale. A property in the St. Louis area is currently listed for sale. Also, in September of 2018 the Company closed an operating Burger Time unit in Richmond, Indiana and the Richmond property is listed for sale. In the second quarter of fiscal 2019 it was concluded to record a charge of $93,488 for impairment of the value of the Richmond location. Income Taxes We account for income taxes using the liability method, whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. The deferred tax assets are reviewed periodically for recoverability and valuation allowances are adjusted as necessary. The Company has a net operating loss carry-forward from the prior year and incurred additional net operating losses during the periods ended March 29, 2020 and March 31, 2019. These losses resulted in an increase in the related deferred tax assets; however, full valuation allowances were made which reduced these deferred tax assets to zero; therefore, no income tax provision or benefit was recognized for the periods ending March 29, 2020 and March 31, 2019 resulting in an effective income tax rate of 0% for both periods. Per Common Share Amounts Net income (loss) per common share is computed pursuant to 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 income per share is computed by dividing net income 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 the computation of diluted net loss per share because their effect would be anti-dilutive. There were no potentially dilutive shares outstanding as of the periods ending in 2020 and 2019, as the strike price for warrants outstanding was above the fair market price of the underlying stock in both periods. Other Assets Other assets principally is the allocated fair value of the acquired Dairy Queen franchise agreement related to the Company’s location in Ham Lake, Minnesota, and is being amortized over an estimated useful life of 14 years. Liquidity and Capital Resources The consolidated financial statements have been prepared on a going concern basis. For the 13 weeks ended March 29, 2020, the Company incurred a net loss of $116,244. On March 29, 2020, the Company had $310,134 in cash and a working capital deficit of $535,201 an increase of $66,875 from the year-end deficit of $468,326. On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (‘Covid-19”) a global pandemic. Covid-19 is having a significant adverse impact on the United States economy. At this time, it is impossible to predict either the near-term effects or the ultimate impact of the Covid-19 pandemic on the Company’s operating results and financial condition as the situation is rapidly evolving. A cash flow forecast for the next 12 months prepared by management has been adjusted to reflect recent offers by banks, in the wake of the COVID-19 Pandemic, including the Company’s principal lenders, Northview Bank and Bremer Bank, to abate all loan payments for the period from March through May of 2020. In May, 2020 the Company received loans of $487,900 of that amount, $460,400 was borrowed under the Small Business Administration Payroll Protection Program and assuming certain conditions are met, these loans may be forgiven. In May, 2020, the Company also borrowed $27,500 at no interest under the Minnesota Small Business Emergency Loan Program. The Company expects to have sufficient cash assets to meet its obligations for a year from the issuance of these consolidated financial statements. No adjustments have been made relating to recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company not continue as a going concern. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Mar. 29, 2020 | |
PROPERTY AND EQUIPMENT | |
NOTE 2 - PROPERTY AND EQUIPMENT | Property and equipment consisted of the following at end of the respective fiscal years: 03/29/2020 12/29/2019 Land $ 555,885 $ 555,885 Equipment 2,390,545 2,390,545 Buildings 1,363,642 1,363,642 Total property and equipment 4,310,072 4,310,072 Accumulated depreciation (2,255,211 ) (2,210,816 ) Less - Property held for sale (449,244 ) (449,244 ) Net property and equipment $ 1,605,617 $ 1,650,012 Depreciation expense for the 13-week periods in 2020 and 2019 was $44,395 and $58,810, respectively. |
ACCRUED EXPENSES
ACCRUED EXPENSES | 3 Months Ended |
Mar. 29, 2020 | |
ACCRUED EXPENSES | |
NOTE 3 - ACCRUED EXPENSES | Accrued expenses consisted of the following at the dates: 3/29/2020 12/29/2019 Accrued real estate taxes $ 24,888 $ 66,959 Accrued payroll 38,529 69,572 Accrued payroll taxes 7,522 7,058 Accrued sales taxes payable 82,763 35,380 Accrued vacation pay 24,791 23,204 Other accrued expenses 590 559 $ 179,083 $ 202,732 |
LONG TERM DEBT
LONG TERM DEBT | 3 Months Ended |
Mar. 29, 2020 | |
LONG TERM DEBT | |
NOTE 4 - LONG TERM DEBT | The Company had the following long term debt obligations as of: 3/29/2020 12/29/2019 Note payable to bank dated October 30, 2015 due in monthly installments of $6,916 through October 30, 2030, which includes principal and interest at a fixed rate of 4.75%. This note is secured by two of the Company's Minnesota locations and the personal guaranty of a shareholder of the Company. $ 691,092 $ 699,311 Note payable to bank dated November 16, 2015 due in monthly installments of $14,846, which includes principal and interest at fixed rate of 4.75% through November 16, 2030. This note is secured by four of the Company's North Dakota locations and the personal guaranty of a shareholder of the Company. 1,482,482 1,509,435 Note payable to bank dated October 10, 2015 due in monthly installments of $4,153 through March 11, 2030, which includes principal and interest at fixed rate of 4.75%. This note is secured by the Company's Dairy Queen location and the personal guaranty of a shareholder of the Company. 409,686 414,562 Note payable to bank dated March 11, 2016 due in monthly installments of $3,692 through March 11, 2031 which includes principal and interest at a fixed rate of 4.75%. This note is secured by one of the Company's South Dakota locations and the personal guaranty of a shareholder of the Company. 377,618 384,208 Notes payable to bank dated November 10, 2016 payable in monthly installments of $1,331 which includes principal and interest at 4%, the interest rate is subject to adjustment based on 5-year Treasury Note rate 2021 and cannot be be less than 4%. This note is secured by property held for sale in Richmond Indiana and the personal guaranty of a shareholder of the Company. 148,737 151,234 Unsecured 8% notes payable to an entity controlled by shareholders of the Company dated December 26, 2017 originally due on demand after June 1, 2020. Effectice July 1, 2019 a revised note was entered into due June 1, 2021 with monthly payments of $5,000 due beginning August 1, 2019. An additional $50,000 was advanced to the Company in January 2020 and this advance is included in current maturities. 257,264 207,264 Note payable to bank dated December 28, 2018 due in monthly installments of $1,644 through December 31, 2023 which includes principal and interest at a fixed rate of 5.50%. This note is secured by the West St. Paul location and the personal guaranty of a shareholder of the Company. 189,800 192,068 3,556,679 3,558,082 Less - unamortized debt issuance costs (58,087 ) (59,381 ) Current maturities (243,784 ) (277,666 ) Total $ 3,254,808 $ 3,221,035 In the first quarter of fiscal 2020, as a result of the many uncertainties surrounding the economy during the COVID-19 response, two of the Company’s mortgage lenders agreed to suspend current payments for a period of three months. The loans will continue to accrue interest at the stated rate, which included in the principal outstanding, and the suspended payments will be treated as balloon-payments due at the end of the mortgage term. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 29, 2020 | |
RELATED PARTY TRANSACTIONS | |
NOTE 5 - RELATED PARTY TRANSACTIONS | BTND Trading BTND Trading is an entity separate from the Company owned by certain significant shareholders of the Company, from time-to-time BTND Trading has advanced funds to the Company. In 2020 no payments have been made on this note and during the first quarter BTND Trading advanced an additional $50,000 to the Company which amount has been added to the current portion long-term debt as it is anticipated this advance will be repaid before the end of the year. Next Gen Ice In 2019 the Company made a series of advances in the form of investments in Next Gen Ice, Inc. (NGI) Series C Notes totaling $179,000. In the first quarter of 2020 the Company advanced an additional $28,000 to NGI and the $28,000 advance was repaid following the end of the quarter, in April 2020. The Company’s CEO, Gary Copperud, is Chairman of NGI and the Company’s Chief Operating Officer, Kenneth Brimmer, is a member of the Board of Directors of NGI and is currently serving as Chief Financial Officer of NGI on a part-time contract basis. Mr. Copperud and limited liability companies controlled by him together own approximately 55% of the outstanding equity of NGI. The Series C Notes were originally due on March 3, 2020. On March 3, 2020, the Company and NGI entered into a Loan Modification and Extension Agreement pursuant to which the Company agreed to extend the maturity date of the NGI Notes to August 31, 2020. In consideration of the extension of the term of the NGI Notes: (i) NGI granted to the Company a security interest in all of NGI’s assets, (ii) issued to the Company a warrant entitling it to purchase 179,000 shares of common stock of NGI at a price of $1.00 per share at any time through March 31, 2023, and (iii) the founders of NGI including Mr. Copperud agreed to transfer to the Company 179,000 common shares of NGI. |
CONTINGENCIES
CONTINGENCIES | 3 Months Ended |
Mar. 29, 2020 | |
CONTINGENCIES | |
NOTE 6 - CONTINGENCIES | In the course of its business, the Company may be a party to claims and legal or regulatory actions arising from the conduct of its business. The Company is not aware of any significant asserted or potential claims which could impact its financial position |
Covid-19 AND EMERGENCY LOAN REL
Covid-19 AND EMERGENCY LOAN RELIEF | 3 Months Ended |
Mar. 29, 2020 | |
Covid-19 AND EMERGENCY LOAN RELIEF | |
NOTE 7 - Covid-19 AND EMERGENCY LOAN RELIEF | On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (‘Covid-19”) a global pandemic. Covid-19 has had a significant adverse impact on the United States economy. While we have experienced some product shortages and some labor shortages, we have continued to operate all of our locations on a drive-through basis only with some limited hours and closing access to both the walk-up window and any indoor seating. Indoor seating is only available in our Dairy Queen and one other location. At this time, it is impossible to predict the ultimate impact of the Covid-19 pandemic on the Company’s operating results and financial condition as the situation and regulations surrounding government response to the pandemic are constantly changing. On May 1, 2020, the Company received funding in connection with “Small Business Loans” under the federal Paycheck Protection Program provided in Section 7(a) of the Small Business Act of 1953, as amended by the Coronavirus Aid, Relief and Economic Security Act, as amended from time to time (the “PPP”). Pursuant to the terms of the Promissory Notes dated May 1, 2020, by BTND and BTNDDQ, L.L.C. in favor of Northview Bank. BTND borrowed $418,900 original principal amount, and BTNDDQ, L.L.C. borrowed $41,500 original principal amount. Both PPP loans were funded on May 1, 2020. The PPP Loans bear interest at 1% per annum and mature in two years from the date of disbursement of funds. Interest and principal payments under the PPP Loans will be deferred for a period of six months. Under certain circumstances, all or a portion of the PPP Loans may be forgiven, however, there can be no assurance that any portion of the PPP Loans will be forgiven and that BTND and BTNDDQ, L.L.C. would not be required to repay the PPP Loans in full. The PPP Loan contains certain covenants which, among other things, restrict the borrower’s use of the proceeds of the PPP Loan to the payment of payroll costs, interest on mortgage obligations, rent obligations and utility expenses, require compliance with all other loans or other agreements with any creditor of the borrower, to the extent that a default under any loan or other agreement would materially affect the borrower’s ability to repay the PPP Loan and limit the ability of the borrower to make certain changes to its ownership structure. On April 29, 2020, BTNDDQ, L.L.C. also borrowed $27,500 at no interest under the Minnesota Small Business Emergency Loan Program from Central Minnesota Development Corporation. This loan is interest free and under certain conditions up to 50% of the loan may be forgiven, BTNDDQ, L.L.C., initially, is required to make 18 monthly payments of $458.33 beginning December 15, 2020, following the initial 18 months, in the event the note does not qualify for loan forgiveness, it will be repaid in equal installments over an additional 36 months. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 29, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | The accompanying unaudited condensed consolidated financial statements include the accounts of BT Brands, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and on a basis consistent in all material respects with the accounting policies for the fiscal year ended December 29, 2019. In our opinion, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of our financial position and results of operation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year. The accompanying Condensed Consolidated Balance Sheet as of March 29, 2020 does not include all of the disclosures required by GAAP. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of December 29, 2019 and the related notes thereto included in the Company’s Form 10-K for the fiscal year ended December 29, 2019. |
Use of Estimates | The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Reverse Merger Transaction | BT Brands, Inc. (the “Company”) was incorporated as Hartmax of NY Inc. on January 19, 2016 with the objective of acquiring an operating entity. Effective on July 30, 2018, the Company acquired 100% of the ownership BTND, LLC. in exchange for common stock in the Company through a Share Exchange Agreement (“Share Exchange”) with BTND, LLC (“BTND”), and its Members. Following the Share Exchange, BTND became a wholly owned subsidiary of the Company for reporting purposes under GAAP. |
Business | The Company currently operates company-owned fast-food restaurants called Burger Time. The Company also operates one unit in Minnesota as a franchisee of International Dairy Queen. The Company operates three Burger Time locations in Minnesota, four in North Dakota, and two in South Dakota. The Company closed a store in Richmond, Indiana during the year, which is listed for sale, resulting in a total of ten operating restaurants at March 29, 2020. The Company owns a restaurant property in St. Louis, Missouri currently held for sale. The Company’s Dairy Queen store is operated pursuant to the terms of a franchise agreement with International Dairy Queen. The Company is required to pay regular royalty and advertising payments to the franchisor and to remain in compliance with the terms of the franchise agreement. |
Fiscal Year Period | 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. All references to years in this report refer to the 13-week periods in the respective fiscal year periods. Fiscal 2020 is a 53-week year ending January 3, 2021. |
Cash | For purposes of reporting cash and cash flows, cash is net of outstanding checks and includes, amounts on deposit at banks, a money market mutual fund holding, and deposits in transit. |
Receivables | Receivables consists of rebates due from a primary vendor. |
Inventory | Inventory consists of food, beverages and supplies and is stated at 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 which range from three to thirty years. The Company reviews long-lived assets to determine if the carrying value of these assets may not be recoverable based on estimated cash flows. Assets are reviewed at the lowest level for which cash flows can be identified, which is at the restaurant level. In determining future cash flows, significant estimates are made by the Company with respect to future operating results of each restaurant over its remaining life. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets. |
Assets Held for Sale | From time-to-time the Company may sell an existing operating unit or may close an operating unit and list the property for sale. A property in the St. Louis area is currently listed for sale. Also, in September of 2018 the Company closed an operating Burger Time unit in Richmond, Indiana and the Richmond property is listed for sale. In the second quarter of fiscal 2019 it was concluded to record a charge of $93,488 for impairment of the value of the Richmond location. |
Income Taxes | We account for income taxes using the liability method, whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. The deferred tax assets are reviewed periodically for recoverability and valuation allowances are adjusted as necessary. The Company has a net operating loss carry-forward from the prior year and incurred additional net operating losses during the periods ended March 29, 2020 and March 31, 2019. These losses resulted in an increase in the related deferred tax assets; however, full valuation allowances were made which reduced these deferred tax assets to zero; therefore, no income tax provision or benefit was recognized for the periods ending March 29, 2020 and March 31, 2019 resulting in an effective income tax rate of 0% for both periods. |
Per Common Share Amounts | Net income (loss) per common share is computed pursuant to 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 income per share is computed by dividing net income 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 the computation of diluted net loss per share because their effect would be anti-dilutive. There were no potentially dilutive shares outstanding as of the periods ending in 2020 and 2019, as the strike price for warrants outstanding was above the fair market price of the underlying stock in both periods. |
Other Assets | Other assets principally is the allocated fair value of the acquired Dairy Queen franchise agreement related to the Company’s location in Ham Lake, Minnesota, and is being amortized over an estimated useful life of 14 years. |
Liquidity and Capital Resources | The consolidated financial statements have been prepared on a going concern basis. For the 13 weeks ended March 29, 2020, the Company incurred a net loss of $116,244. On March 29, 2020, the Company had $310,134 in cash and a working capital deficit of $535,201 an increase of $66,875 from the year-end deficit of $468,326. On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (‘Covid-19”) a global pandemic. Covid-19 is having a significant adverse impact on the United States economy. At this time, it is impossible to predict either the near-term effects or the ultimate impact of the Covid-19 pandemic on the Company’s operating results and financial condition as the situation is rapidly evolving. A cash flow forecast for the next 12 months prepared by management has been adjusted to reflect recent offers by banks, in the wake of the COVID-19 Pandemic, including the Company’s principal lenders, Northview Bank and Bremer Bank, to abate all loan payments for the period from March through May of 2020. In May, 2020 the Company received loans of $487,900 of that amount, $460,400 was borrowed under the Small Business Administration Payroll Protection Program and assuming certain conditions are met, these loans may be forgiven. In May, 2020, the Company also borrowed $27,500 at no interest under the Minnesota Small Business Emergency Loan Program. The Company expects to have sufficient cash assets to meet its obligations for a year from the issuance of these consolidated financial statements. No adjustments have been made relating to recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company not continue as a going concern. |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Mar. 29, 2020 | |
PROPERTY AND EQUIPMENT | |
Schedule of property and equipment | 03/29/2020 12/29/2019 Land $ 555,885 $ 555,885 Equipment 2,390,545 2,390,545 Buildings 1,363,642 1,363,642 Total property and equipment 4,310,072 4,310,072 Accumulated depreciation (2,255,211 ) (2,210,816 ) Less - Property held for sale (449,244 ) (449,244 ) Net property and equipment $ 1,605,617 $ 1,650,012 |
ACCRUED EXPENSES (Tables)
ACCRUED EXPENSES (Tables) | 3 Months Ended |
Mar. 29, 2020 | |
ACCRUED EXPENSES | |
Schedule of accrued expenses | 3/29/2020 12/29/2019 Accrued real estate taxes $ 24,888 $ 66,959 Accrued payroll 38,529 69,572 Accrued payroll taxes 7,522 7,058 Accrued sales taxes payable 82,763 35,380 Accrued vacation pay 24,791 23,204 Other accrued expenses 590 559 $ 179,083 $ 202,732 |
LONG TERM DEBT (Tables)
LONG TERM DEBT (Tables) | 3 Months Ended |
Mar. 29, 2020 | |
LONG TERM DEBT | |
Schedule of maturities of long-term debt | 3/29/2020 12/29/2019 Note payable to bank dated October 30, 2015 due in monthly installments of $6,916 through October 30, 2030, which includes principal and interest at a fixed rate of 4.75%. This note is secured by two of the Company's Minnesota locations and the personal guaranty of a shareholder of the Company. $ 691,092 $ 699,311 Note payable to bank dated November 16, 2015 due in monthly installments of $14,846, which includes principal and interest at fixed rate of 4.75% through November 16, 2030. This note is secured by four of the Company's North Dakota locations and the personal guaranty of a shareholder of the Company. 1,482,482 1,509,435 Note payable to bank dated October 10, 2015 due in monthly installments of $4,153 through March 11, 2030, which includes principal and interest at fixed rate of 4.75%. This note is secured by the Company's Dairy Queen location and the personal guaranty of a shareholder of the Company. 409,686 414,562 Note payable to bank dated March 11, 2016 due in monthly installments of $3,692 through March 11, 2031 which includes principal and interest at a fixed rate of 4.75%. This note is secured by one of the Company's South Dakota locations and the personal guaranty of a shareholder of the Company. 377,618 384,208 Notes payable to bank dated November 10, 2016 payable in monthly installments of $1,331 which includes principal and interest at 4%, the interest rate is subject to adjustment based on 5-year Treasury Note rate 2021 and cannot be be less than 4%. This note is secured by property held for sale in Richmond Indiana and the personal guaranty of a shareholder of the Company. 148,737 151,234 Unsecured 8% notes payable to an entity controlled by shareholders of the Company dated December 26, 2017 originally due on demand after June 1, 2020. Effectice July 1, 2019 a revised note was entered into due June 1, 2021 with monthly payments of $5,000 due beginning August 1, 2019. An additional $50,000 was advanced to the Company in January 2020 and this advance is included in current maturities. 257,264 207,264 Note payable to bank dated December 28, 2018 due in monthly installments of $1,644 through December 31, 2023 which includes principal and interest at a fixed rate of 5.50%. This note is secured by the West St. Paul location and the personal guaranty of a shareholder of the Company. 189,800 192,068 3,556,679 3,558,082 Less - unamortized debt issuance costs (58,087 ) (59,381 ) Current maturities (243,784 ) (277,666 ) Total $ 3,254,808 $ 3,221,035 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | |||||
Mar. 29, 2020 | Mar. 29, 2020 | Jun. 30, 2019 | Mar. 31, 2019 | Mar. 31, 2019 | Dec. 29, 2019 | Jul. 30, 2018 | |
Date of incorporation | Jan. 19, 2016 | ||||||
Increase in working capital deficit | $ (66,875) | ||||||
Working capital deficit | $ (535,201) | (535,201) | $ (468,326) | ||||
Cash | 310,134 | 310,134 | $ 258,101 | ||||
Net Income (loss) | $ (116,244) | $ (170,490) | $ (170,490) | ||||
Estimated useful life of the acquired Dairy Queen | 14 years | ||||||
Impairment of asset held for sale | $ 93,488 | ||||||
Loan received | 487,900 | ||||||
Share Exchange Agreement [Member] | BTND, LLC. [Member] | |||||||
Equity method investment, ownership percentage | 100.00% | ||||||
Minnesota Small Business Emergency Loan Program [Member] | |||||||
Loan received | 27,500 | ||||||
Small Business Administration Payroll Protection Program [Member] | |||||||
Loan received | $ 460,400 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Mar. 29, 2020 | Dec. 29, 2019 |
LONG TERM DEBT | ||
Land | $ 555,885 | $ 555,885 |
Equipment | 2,390,545 | 2,390,545 |
Buildings | 1,363,642 | 1,363,642 |
Total property and equipment | 4,310,072 | 4,310,072 |
Accumulated depreciation | (2,255,211) | (2,210,816) |
Less - property held for sale | (449,244) | (449,244) |
Net property and equipment | $ 1,605,617 | $ 1,650,012 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 29, 2020 | Mar. 31, 2019 | |
LONG TERM DEBT | ||
Depreciation | $ 44,395 | $ 58,810 |
ACCRUED EXPENSES (Details)
ACCRUED EXPENSES (Details) - USD ($) | Mar. 29, 2020 | Dec. 29, 2019 |
LONG TERM DEBT | ||
Accrued real estate taxes | $ 24,888 | $ 66,959 |
Accrued payroll | 38,529 | 69,572 |
Accrued payroll taxes | 7,522 | 7,058 |
Accrued sales taxes payable | 82,763 | 35,380 |
Accrued vacation pay | 24,791 | 23,204 |
Other accrued expenses | 590 | 559 |
Accrued expenses | $ 179,083 | $ 202,732 |
LONG TERM DEBT (Details)
LONG TERM DEBT (Details) - USD ($) | Mar. 29, 2020 | Dec. 29, 2019 |
Notes payable to bank | $ 3,556,679 | $ 3,558,082 |
Less - unamortized debt issuance costs | (58,087) | (59,381) |
Current maturities | (243,784) | (277,666) |
Notes payable to bank, Total | 3,254,808 | 3,221,035 |
October 30, 2015 [Member] | Long Term Debt [Member] | ||
Notes payable to bank, Total | 691,092 | 699,311 |
November 16, 2015 [Member] | Long Term Debt [Member] | ||
Notes payable to bank, Total | 1,482,482 | 1,509,435 |
October 10, 2015 [Member] | Long Term Debt [Member] | ||
Notes payable to bank, Total | 409,686 | 414,562 |
March 11, 2016 [Member] | Long Term Debt [Member] | ||
Notes payable to bank, Total | 377,618 | 384,208 |
November 10, 2016 [Member] | Long Term Debt [Member] | ||
Notes payable to bank, Total | 148,737 | 151,234 |
December 26, 2017 [Member] | Long Term Debt [Member] | Shareholders [Member] | ||
Unsecured notes payable | 257,264 | 207,264 |
December 28, 2018 [Member] | Long Term Debt [Member] | ||
Notes payable to bank, Total | $ 189,800 | $ 192,068 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Mar. 03, 2020 | Mar. 29, 2020 |
BTND, LLC. [Member] | ||
Advance from related party | $ 50,000 | |
Next Gen Ice, Inc. [Member] | Loan Modification and Extension Agreement [Member] | Subsequent Event [Member] | ||
Issuance of warrants | 179,000 | |
Exercise Price | $ 1 | |
Class of Warrant or Right, Date from which Warrants or Rights Exercisable | Mar. 31, 2023 | |
Ownership percentage | 55.00% | |
Notes Due from Related Party | $ 179,000 | |
Transfer of shares | 179,000 | |
Advance to related party | $ 28,000 |
Covid-19 AND EMERGENCY LOAN R_2
Covid-19 AND EMERGENCY LOAN RELIEF (Details Narrative) - Subsequent Event [Member] - USD ($) | May 01, 2020 | Apr. 20, 2020 |
Loan received | $ 418,900 | |
Interest rate | 1.00% | |
Maturitiy term | 2 years | |
BTNDDQ, L.L.C. [Member] | ||
Loan received | $ 41,500 | $ 27,500 |
Debt description | This loan is interest free and under certain conditions up to 50% of the loan may be forgiven, BTNDDQ, L.L.C., initially, is required to make 18 monthly payments of $458.33 beginning December 15, 2020, following the initial 18 months, in the event the note does not qualify for loan forgiveness, it will be repaid in equal installments over an additional 36 months. |