| 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 31, 2023, the Company owned and operated twelve restaurants and owned a 39.6%, as of year-end, interest in an operator of six restaurants. During 2023 we collectively owned and operated eight Burger Time restaurants in the North Central region of the United States, and a Dairy Queen fast-food franchised location in suburban Minneapolis, Minnesota (“BTND”). We closed stores in West St. Paul in 2022 and in Richmond, Indiana, in 2018. The West St. Paul location was sold in February of 2023 for a gain of approximately $313,000. The Richmond location is currently offered for sale. 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, and the Village Bier Garten (“VBG”), a German-themed restaurant in Cocoa, Florida. Our Burger Time restaurants feature a variety of burgers and other affordable foods, sides, and soft drinks. Our Dairy Queen restaurant offers a proscribed menu consisting of burgers, chicken, sides, ice cream, other desserts, and various beverages. 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 fresh baked goods, freshly made sandwiches, and locally roasted coffee. VBG is a full-service restaurant and bar featuring a German-themed menu, specialty imported European beers, and regular entertainment. 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 at the time of the 2022 purchase our ownership represented 41.2% ownership of Bagger Dave’s Burger Tavern, Inc. (“BDVB”). We acquired the shares from its founder for $1,260,000, or approximately $0.114 per share. During 2023, Bagger Dave Following the investment, 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.” During the fourth quarter of 2023 BDVB, issued an additional one million shares reducing our ownership to approximately 39.6%. Our Dairy Queen location is operated under a franchise agreement with International Dairy Queen. We pay royalty and advertising payments to the franchisor as the franchise agreement requires. Effective October 17, 2023, we agreed with International Dairy Queen to sell the business, which has a current book value at December 31, 2023 of approximately $438,500, including remaining franchise agreement intangible asset, to an approved buyer. Under the terms of the agreement with International Dairy Queen, we will continue to operate the location during the six-month period we plan to sell the business. However, we may retain ownership of the physical assets, including the land and building. 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 deferred tax assets and liabilities, valuation of long-lived assets in acquisitions, amortization period for intangible assets, valuation of equity-based compensation, and valuation of equity method and fair value 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 2023 was the 52 weeks ending December 31, 2023, and Fiscal 2022 was the 52 weeks ending January 1, 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 that 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, receivables, accounts payable and other financial working capital items approximate fair value at year-end due to the short maturity nature of these instruments. Investments Noncurrent investments include our equity method investment of $688,806 in BDVB and our $304,000 total investment in Next Gen Ice, Inc. (NGI). In 2020, the Company received equity ownership in NGI as consideration for a loan to NGI. Upon repayment of the note, $75,000 was attributed by us to the value of the equity received and this amount was reflected as additional interest income in 2020. On February 12, 2022, we invested $229,000 in Series A1 8% Cumulative Convertible Preferred Stock of NGI, including a five-year warrant to purchase 34,697 shares at $1.65 per share. See Note 11. 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 summary information filed by Bagger Dave’s for the fiscal years ended December 31, 2023, and December 25, 2022. Unaudited summary financial information for Bagger Dave’s - Balance Sheet Information - December 31, 2023 December 25, 2022 Total current assets $ 1,606,842 $ 1,751,396 Total noncurrent assets 3,158,659 4,006,043 Total assets $ 4,765,501 5,757,439 Total current liabilities $ 640,092 $ 739,644 Total noncurrent liabilities 2,030,286 2,160,211 Total liabilities 2,670,378 2,899,855 Stockholders’ equity 2,095,123 2,857,584 Total liabilities and stockholders’ equity $ 4,765,501 $ 5,757,439 Statements of Operations information - December 31, 2023 (53 WKS) December 25, 2022 (52 WKS) Revenue $ 7,964,854 $ 7,979,411 Costs and expenses (8,817,315 ) (8,867,037 ) Net loss $ (852,461 ) $ (887,626 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 indicated year-end: December 31, 2023 January 1, 2023 Fair value Carrying Amount Level 1 Fair value Carrying Amount Level 1 Corporate bond fund $ 178,500 $ 178,500 $ 316,000 $ 316,000 Common stocks 1,213,560 1,213,560 713,900 713,900 Total $ 1,392,060 $ 1,392,060 $ 1,029,900 $ 1,029,900 Cash and Cash Equivalents Cash and cash equivalents includes United States Treasury Bills with a maturity at the time of purchase of 3 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. Short-Term Investments Marketable Securities at January 1, 2023, include $5,000,000 face value of a United States Treasury Bills maturing March 16, 2023, purchased for $4,907,378 in August 2022. The amortized cost value approximates fair value. Broker Margin Loan The broker margin account loan of $115,899 at December 31, 2023 and $791,372 at January 1, 2023, bear a variable margin interest rate as set by the lending brokerage firm 6.8% and 4.6% on December 31, 2023 and January 1, 2023 respectively. This broker margin loan is reflected as a current liability. The loan is collateralized by Treasury Bills and any other marginable securities held in the margin account and is due on demand under Federal Reserve margin account regulations and the margin account agreement. 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 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 reviewed at the lowest level, for which cash flows can be identified at the restaurant level. In determining future cash flows, significant estimates are made for each restaurant's future operating results over its remaining life. 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 and 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. In the first quarter of 2023 we completed the abandonment of a property in the St. Louis area in lieu of approximately $180,000 of property taxes. and our results of operations include a gain of approximately $80,000 reflecting the reversal of the accrued property taxes and the remaining $100,000 is included in other income. We closed stores in West St. Paul in the fourth quarter of 2022 and in Richmond, Indiana, in 2018. The West St. Paul location sale was completed in February of 2023 for a gain of $313,000 reflected in our 2023 statement of operations. The Richmond location is currently offered for sale. We believe the Richmond property will be sold at or above its current carrying value. Leases Three of our restaurant locations are subject to leases . Goodwill, Other Intangible Assets and Other Assets Goodwill is not amortized, but instead, Goodwill is tested for impairment at least annually. The cost of other intangible assets is amortized over the expected useful life. Other assets include the allocated fair value of the acquired Dairy Queen franchise agreement related to our location in Ham Lake, Minnesota, and amortized over an estimated useful life of 14 years. Amortization for each of the next five years is estimated to be $2,000 per year. Accumulated amortization was approximately $11,000 and $9,000 at the end of 2023 and 2022, respectively. Advertising and Marketing Costs We expense advertising and marketing costs as incurred. Advertising expenses for fiscal 2023 and 2022 totaled $81,594 and $76,701, 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. ASC 740 requires the net of deferred tax assets and deferred tax liability to be presented as a single amount on the balance sheet. 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 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 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 ending in 2023 and 2022. 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 2023 and 2022, 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. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles accepted in the United States of America 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, and the differences could be significant. Stock-Based Compensation 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. Segment Reporting 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. |
