BT Brands, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. The information required by this Item is included in Part II, Item 8 of this Annual Report, “Financial Statements and Supplementary Data,” and is presented in accordance with Article 8 of Regulation S-X applicable to smaller reporting companies. 35 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of BT Brands, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of BT Brands, Inc. and Subsidiaries (the Company) as of December 28, 2025 and December 29, 2024, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the fiscal years then ended, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 28, 2025 and December 29, 2024, and the results of its operations and its cash flows for each of the fiscal years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters. /s/ Boulay PLLP We have served as the Company’s auditor since 2015 Minneapolis, Minnesota March 30, 2026 PCAOB ID: 542 36 Table of Contents PART II, ITEM 8 BT BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 28, 2025 December 29, 2024 ASSETS CURRENT ASSETS Cash and cash equivalents $ 846,167 $ 1,951,415 Marketable securities 3,596,133 2,319,555 Receivables 54,506 69,459 Inventory 230,443 272,603 Inventory – bottled water held for resale, net 574,000 - Prepaid expenses and other current assets 22,152 117,621 Deferred transaction costs 150,450 10,000 Assets held for sale 424,123 258,751 Total current assets 5,897,974 4,999,404 PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET 2,456,718 3,343,340 OPERATING LEASE RIGHT-OF-USE ASSETS 1,267,699 1,724,052 EQUITY METHOD INVESTMENT IN UNCONSOLIDATED AFFILIATE - 304,439 INVESTMENT IN EQUITY AND NOTES RECEIVABLE FROM RELATED COMPANY - 424,000 GOODWILL 796,220 796,220 INTANGIBLE ASSETS, NET 305,270 367,799 OTHER ASSETS, NET 21,171 37,543 Total assets $ 10,745,052 $ 11,996,797 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable $ 245,226 $ 612,059 Current maturities of long-term debt 191,531 185,009 Current operating lease obligations 358,939 274,511 Accrued expenses 421,867 371,356 Total current liabilities 1,217,563 1,442,935 LONG-TERM DEBT, LESS CURRENT PORTION 1,899,592 2,091,335 NONCURRENT OPERATING LEASE OBLIGATIONS 1,209,509 1,497,300 Total liabilities 4,326,664 5,031,570 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY Preferred stock, $ 0.001 par value, 2,000,000 shares authorized, no shares outstanding at December 28, 2025 and December 29, 2024 - - Common stock, $ 0.002 par value, 50,000,000 authorized, 6,461,118 issued and 6,154,724 outstanding at December 28, 2025 and at December 29, 2024 12,309 12,309 Less cost of 306,394 common shares held in Treasury at December 28, 2025 and December 29, 2024 ( 499,718 ) ( 499,718 ) Additional paid-in capital 11,954,735 11,813,735 Accumulated deficit ( 5,048,938 ) ( 4,361,099 ) Total shareholders’ equity 6,418,388 6,965,227 Total liabilities and shareholders’ equity $ 10,745,052 $ 11,996,797 See Notes to Consolidated Financial Statements 37 Table of Contents BT BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS 52 Weeks Ended, 52 Weeks Ended, December 28, 2025 December 29, 2024 SALES $ 13,486,629 $ 14,823,472 COSTS AND EXPENSES Restaurant operating expenses Food and paper costs 4,494,449 5,605,579 Labor costs 5,111,097 6,128,574 Occupancy costs 1,282,049 1,403,204 Other operating expenses 878,125 962,287 Depreciation and amortization expenses 648,704 742,860 Impairment of restaurant and right-of-use assets 215,000 371,872 General and administrative expenses 1,464,021 1,691,404 Gain on sale of assets ( 242,231 ) ( 250,000 ) Total costs and expenses 13,851,214 16,655,780 Loss from operations ( 364,585 ) ( 1,832,308 ) UNREALIZED GAIN (LOSS) ON MARKETABLE SECURITIES 128,822 ( 93,458 ) REALIZED GAIN ON MARKETABLE SECURITIES 380,764 143,340 INTEREST AND DIVIDEND INCOME 148,666 178,279 INTEREST EXPENSE ( 81,621 ) ( 99,608 ) OTHER INCOME (EXPENSE) ( 74,728 ) 13,930 IMPAIRMENT OF RELATED PARTY INVESTMENT AND RECEIVABLES ( 520,718 ) - EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATE ( 304,439 ) ( 415,085 ) LOSS BEFORE TAXES ( 687,839 ) ( 2,105,208 ) INCOME TAX EXPENSE - 206,000 NET LOSS $ ( 687,839 ) $ ( 2,311,208 ) NET LOSS PER COMMON SHARE - Basic and Diluted $ ( 0.11 ) $ ( 0.37 ) WEIGHTED AVERAGE SHARES USED IN COMPUTING PER COMMON SHARE AMOUNTS - Basic and Diluted 6,154,724 6,194,842 See Notes to Consolidated Financial Statements 38 Table of Contents BT BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY For the 52-week periods- Common Stock Additional Paid-in Accumulated Treasury Shares Amount Capital (Deficit) Stock Total Balances, December 31, 2023 6,246,118 $ 12,492 $ 11,583,235 $ ( 2,049,891 ) $ ( 357,107 ) $ 9,188,729 Stock-based compensation - - 230,500 - - 230,500 Treasury stock purchases ( 91,394 ) ( 183 ) - ( 142,611 ) ( 142,794 ) Net loss - - - ( 2,311,208 ) - ( 2,311,208 ) Balances, December 29, 2024 6,154,724 $ 12,309 $ 11,813,735 $ ( 4,361,099 ) $ ( 499,718 ) $ 6,965,227 Stock-based compensation - - 141,000 - - 141,000 Net loss - - - ( 687,839 ) - ( 687,839 ) Balances, December 28, 2025 6,154,724 $ 12,309 $ 11,954,735 $ ( 5,048,938 ) $ ( 499,718 ) $ 6,418,388 See Notes to Consolidated Financial Statements 39 Table of Contents BT BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS 52 Weeks ended, December 28, 2025 December 29, 2024 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 687,839 ) $ ( 2,311,208 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities- Depreciation and amortization 648,704 742,860 Amortization of debt issuance costs included in interest expense 4,050 5,400 Deferred taxes - 206,000 Stock-based compensation 141,000 230,500 Unrealized loss (gain) on marketable securities ( 128,822 ) 93,458 Realized investment gain ( 380,764 ) ( 143,340 ) Loss on equity method investment 304,439 415,085 Impairment of restaurant and right-to-use assets 215,000 371,872 Gain on sale of assets ( 242,231 ) ( 250,000 ) Impairment of related party investment and water bottle inventory 520,718 - Loss on disposal of assets - 90,087 Non-cash operating lease expense 37,989 21,096 Changes in operating assets and liabilities, net of acquisitions- Receivables 14,953 ( 40,722 ) Restaurant inventory 42,160 ( 6,270 ) Prepaid expenses and other current assets 95,489 ( 70,375 ) Other asset 16,372 - Accounts payable ( 366,833 ) 40,985 Accrued expenses 50,511 ( 108,933 ) Net cash provided by (used in) operating activities 284,876 ( 713,505 ) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of net assets of Schnitzel Haus - ( 943,000 ) Proceeds from the sale of assets 550,231 250,000 Purchase of property and equipment ( 172,925 ) ( 494,064 ) Loans to a related company ( 290,636 ) ( 120,000 ) Purchase of secured note due from related company ( 359,221 ) - Purchase of marketable securities ( 4,851,623 ) ( 2,296,923 ) Repayment of loans to related company 360,000 - Proceeds from the sale of marketable securities 4,084,631 1,419,310 Purchase of water bottle inventory ( 380,861 ) - Net cash used in investing activities ( 1,060,404 ) ( 2,184,677 ) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of broker margin loan - ( 115,899 ) Principal payment on long-term debt ( 189,270 ) ( 182,156 ) Payment of deferred transaction costs ( 140,450 ) ( 10,000 ) Purchase of treasury shares - ( 142,794 ) Net cash used in financing activities ( 329,720 ) ( 450,849 ) CHANGE IN CASH AND CASH EQUIVALENTS ( 1,105,248 ) ( 3,349,031 ) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,951,415 5,300,446 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 846,167 $ 1,951,415 SUPPLEMENTAL DISCLOSURES Cash paid for interest $ 77,571 $ 93,696 Acquisition of water bottle inventory through related party loan foreclosure $ 409,857 $ - Purchase of property and equipment is included in accounts payable. $ - $ 15,109 See Notes to Consolidated Financial Statements 40 Table of Contents NOTE 1 – BUSINESS DESCRIPTION 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 interests of BTND, LLC (“BTND”) in exchange for shares of our common stock pursuant to a Share Exchange Agreement (the “Share Exchange”). In 2020, BT Brands Inc. was reincorporated in the State of Wyoming. Business As of December 28, 2025, the Company owned and operated nine restaurants and held a nonconsolidated 40.7% equity interest in an operator of five restaurants. During fiscal 2025, we owned and operated six Burger Time restaurants in the north-central United States. In July 2025, we closed a leased Burger Time location in Minot, North Dakota and subsequently converted the property to a land lease on which payments are expected to commence in 2026. The net book value of the closed location was approximately $ 128,000 , including land and equipment, with certain equipment relocated to other Burger Time units. We also own and operate Keegan’s Seafood Grille (“Keegan’s”), a dine-in restaurant located in Indian Rocks Beach, Florida; Pie In The Sky Coffee and Bakery (“PIE”), located in Woods Hole, Massachusetts; and Schnitzel Haus, a German-themed restaurant located in Hobe Sound, Florida. We operated The Village Bier Garten (“VBG”), a German-themed restaurant in Cocoa, Florida, during fiscal 2024 and closed the restaurant on January 3, 2025. Burger Time restaurants offer a variety of burgers and other affordable items, including sides and soft drinks. Keegan’s has operated in Indian Rocks Beach, Florida, for more than 35 years and offers a variety of fresh seafood for lunch and dinner, along with beer and wine. PIE offers freshly baked goods, sandwiches, and locally roasted coffee. Schnitzel Haus offers German and American menu items and beer, wine, and cocktails. Our revenues are derived primarily from the sale of food and beverages at our restaurants. We also generate revenue from retail items at PIE and Keegan’s, including apparel, and from other merchandise, which collectively represent an insignificant portion of total revenue. Proposed Business Combination with Aero Velocity On September 2, 2025, BT Brands entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Aero Merger Sub Inc., a Delaware corporation, and a direct, wholly owned subsidiary of BT Brands (“Merger Sub”) and Aero Velocity Inc., a Delaware corporation (“Aero”). Pursuant to the terms of the Merger Agreement, Aero will merge with and into the Merger Sub, with Aero continuing as the surviving corporation (the “Merger”), resulting in a combined entity (the “Merged Company”). The Merger Agreement contemplates a spin-off of shares of a newly formed subsidiary, BT Group, Inc., to BT Brands shareholders. BT Group, Inc., will retain all of BT Brands’ restaurant assets and liabilities, including cash and investments. Management of BT Group, Inc. plans to pursue a listing for BT Group common stock. Completion of the Merger is subject to conditions, including shareholder approval. Upon the closing of the Merger, Aero shareholders will receive Merged Company Series A-1 and Series A-2 Convertible Preferred stock, with a stated value of $ 101,100,000 , convertible into the Merged Company’s common stock at $ 1.48 per share. The Series A-1 shares will carry a 50-to-1, as converted, voting preference. The Series A-1 and A-2 together will represent 89% of the Merged Company’s ownership. BT Brands shareholders, along with its Advisor, Maxim Group, will retain an 11% ownership stake in the Merged Company. Concurrent with the closing of the Merger, Aero stockholders, or their designees, will invest $ 3 million, up to a maximum of $ 5 million, into newly authorized Series B Convertible Preferred of the Company. Additional information regarding the proposed transaction can be found at the BT Brands filings on Forms 8-K and S-4 at SEC.GOV. 41 Table of Contents NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 of revenues and expenses during the period. Our significant estimates include legal contingencies and valuation of certain long-lived assets, equity method investments, investment in and receivables from NGI Corporation and water bottle inventory. 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, which together comprise the 52-week year. Fiscal 2025 was the 52 weeks ending December 28, 2025, and Fiscal 2024 was the 52 weeks ending December 29, 2024; all references to years in this report refer to the fiscal years described above. Fair Value Measurements The Company measures certain assets and liabilities at fair value on a recurring or nonrecurring basis in accordance with Financial Accounting Standards Board (“FASB”) guidance, which establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy consists of the following three levels: · 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 and cash equivalents, receivables, accounts payable, and other current working capital items approximate fair value due to their short-term nature. Equity Method Investments Investments in entities in which the Company has the ability to exercise significant influence, but does not control, are accounted for using the equity method of accounting. Under this method, the investment is initially recorded at cost and subsequently adjusted for the Company’s proportionate share of the investee’s net income or loss and dividends received. The Company’s share of the investee’s net income or loss is recognized in the consolidated statements of operations as equity income (loss) from unconsolidated affiliate. 42 Table of Contents Investments 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 28, 2025 December 29, 2024 Fair value Carrying Amount Level 1 Fair value Carrying Amount Level 1 Common stocks $ 3,269,333 $ 3,269,333 $ 2,129,986 $ 2,129,986 Listed limited partnership units 162,500 162,500 - - Exchange-traded funds 63,220 63,220 - - Debt securities 101,080 101,080 Real estate investment trust - - 189,569 189,569 Total $ 3,596,133 $ 3,596,133 $ 2,319,555 $ 2,319,555 We hold an investment in a debt security that is classified as a trading security. Trading debt securities are recorded at quoted market price (fair value) on the consolidated balance sheets, with unrealized holding gains (losses) recognized on the statement of operations . Cash and Cash Equivalents Cash and cash equivalents include money market funds and may include United States Treasury Bills with a maturity of three months or less at the time of purchase. 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. Deferred Transaction Costs Deferred transaction costs for the year ended December 28, 2025, primarily consist of legal and accounting fees related to our proposed At-the-Market (ATM) equity offering, which 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 occurs, any deferred transaction costs will be expensed. Total costs incurred but not accounted for as a reduction in equity were $ 150,450 and $ 10,000 as of December 28, 2025, and December 29, 2024, respectively. Revenue Recognition Our revenues consist principally of cash sales of food products and 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, incentives, and 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 the lower of cost (first-in, first-out method) or net realizable value. 43 Table of Contents 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 at which cash flows can be identified, typically the restaurant level. Significant estimates are made for each restaurant’s future operating results to determine 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 fair 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 undiscounted future net cash flows expected to be generated and 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. Historically, we have closed certain operating locations and liquidated the properties. We may close units in the future. We closed stores in West St. Paul, Minnesota, in 2022 and in Richmond, Indiana, in 2018. The West St. Paul location was sold in 2023 for a gain of $ 310,182 . The Richmond location was sold in 2025 for $ 550,000 , resulting in a gain of approximately $288,000. In 2024, we closed a leased location in Sioux Falls, South Dakota, resulting in a $90,000 loss on the disposal of equipment, which is included in 2024 operating expenses. 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, in 2024, we reviewed VBG’s assets for impairment and recorded an impairment loss of $ 371,872 . A BTND location in Ham Lake, Minnesota, was closed in January 2025. We are evaluating options for the property, including its sale, the proceeds of which we estimate will exceed its net book value of $ 424,000 . Leases Three of our restaurant locations are subject to leases . We evaluate leases at commencement to determine whether they are operating or finance leases. Under FASB ASC Topic 842, we recognize operating and finance lease liabilities based on the present value of the minimum future lease payments 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 information available as of the commencement date to determine 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 not to apply the requirements of ASC 842 to short-term leases. Short-term leases are defined as leases with lease terms of twelve months or less as of the commencement date. 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 5 for additional information. Minot Ground Lease The Company closed its Burger Time restaurant location in Minot, North Dakota, in July 2025. On September 9, 2025, the Company entered into a ground lease agreement with a third party related to the Minot property. During 2025, the Company wrote-off the remaining net book value of the building, approximately $ 47,000 , which is included in the gain on sale of assets and recorded a charge for the estimated demolition cost of the existing building. Substantially all of the equipment at the location was either fully depreciated or relocated for future use. 44 Table of Contents The Minot ground lease provides for an initial base rent of $ 5,833 per month, with rent commencing on the earlier of (i) the date the tenant opens for business at the location or (ii) August 25, 2026 (the “Commencement Date”). The initial lease term is 15 years from the Commencement Date and includes six renewal options, each for five years. The lease qualifies as an operating lease under Accounting Standards Codification Topic 842, Leases (“ASC 842”). As of December 28, 2025, the Company had not recognized any lease revenue under this agreement because the commencement date had not yet occurred. The Company will recognize rental income on a straight-line basis over the lease term beginning on the Commencement Date. 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 conducts 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 appropriate, comparable market multiples are used to corroborate the results of the discounted cash flow models. In determining estimated future cash flow, the Company considers and applies certain estimates and judgments, including current and projected market income levels based on management’s plans, business trends, prospects, economic conditions, and market participant considerations. If the estimated fair value of the reporting 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 28, 2025, no impairment losses were identified. The cost of other intangible assets is amortized over the expected useful life. Advertising and Marketing Costs We record advertising and marketing costs as incurred as an expense. Advertising expenses for fiscal years 2025 and 2024 totaled $ 54,921 and $ 59,438 , respectively. Income Taxes We account for income taxes under ASC 740, Accounting for Income Taxes, using an asset and liability approach. 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 liabilities 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 (loss) per common share is computed in accordance with ASC 260, Earnings Per Share . Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is calculated by dividing net income (loss) by the weighted-average number of shares of common stock outstanding plus the effect of potentially dilutive securities outstanding during the period. Potentially dilutive securities are excluded from the computation of diluted net loss per share when their effect would be anti-dilutive For the years ended December 28, 2025, and December 29, 2024, the Company reported a net loss; therefore, all potentially dilutive securities were excluded from the computation of diluted net loss per share as their effect would have been anti-dilutive. Potentially dilutive securities include stock options, warrants, and other equity-based awards. As of December 28, 2025, the Company excluded approximately 800 potentially dilutive shares from the computation of diluted net loss per share. 45 Table of Contents The Company had 2,746,838 five-year warrants outstanding with an exercise price of $ 5.50 per share issued in connection with its initial public offering on November 12, 2021. At December 28, 2025 and December 29, 2024, the exercise price of these warrants exceeded the Company’s market price per share and, therefore, the warrants 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. St ock-Based Compensation Stock-based compensation consists of stock options and restricted stock awards granted to employees, outside directors and consultants. The Company recognizes stock-based compensation expense in its consolidated financial statements based on the grant-date fair value of equity-classified awards in accordance with ASC 718, Compensation—Stock Compensation . The grant-date fair value of stock options is estimated using the Black-Scholes option-pricing model and the simplified method for estimating expected term. Stock-based compensation expense is recognized, net of estimated forfeitures, on a straight-line basis over the requisite service period of the awards. Reclassifications Certain prior-year amounts have been reclassified to conform to the current-year presentation. These reclassifications had no effect on previously reported total assets, total liabilities, stockholders’ equity, net loss, or cash flows. Recently Adopted Accounting Guidance Segment Reporting In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-07, Improvements to Reportable Segment Disclosures , which amends ASC Topic 280, Segment Reporting . The update enhances disclosure requirements for reportable segments, including entities with a single reportable segment. The Company has determined that it operates as a single reportable segment based on the nature of its operations and the regulatory environment in which it operates. The Company’s Chief Operating Decision Maker (“CODM”) is its executive management team, consisting of the Chief Executive Officer and Chief Financial Officer. The CODM evaluates performance and allocates resources based primarily on consolidated net income and total assets, which are consistent with the amounts reported in the consolidated statements of operations and consolidated balance sheets. The Company adopted ASU 2024-07 on January 1, 2025. The adoption did not have a material impact on the Company’s consolidated financial statements. Income Taxes In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures , which amends ASC Topic 740, Income Taxes . This update enhances transparency by modifying disclosure requirements related to income taxes. The standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-09 on January 1, 2025, using the retrospective method of adoption. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements or related disclosures. 46 Table of Contents NOTE 3 – PROPERTY AND EQUIPMENT Property and equipment consisted of the following at the end of the respective fiscal year: December 28, 2025 December 29, 2024 Land $ 366,285 $ 435,239 Equipment 3,890,916 4,149,525 Buildings and leasehold improvements 2,412,371 2,915,784 Total property and equipment 6,669,572 7,500,548 Accumulated depreciation ( 3,788,731 ) ( 3,575,663 ) Net 2,880,841 3,924,885 Less - property held for sale ( 424,123 ) ( 258,751 ) Less - impairment charge - ( 322,794 ) Net property and equipment $ 2,456,718 $ 3,343,340 Depreciation expenses for 2025 and 2024 were $ 585,047 and $ 652,967 , respectively. NOTE 4 – INTANGIBLE ASSETS At year end 2025 and 2024, based on the value of acquired assets, intangible assets comprise the following: December 28, 2025- Estimated Useful life (Years) Original Cost Accumulated Amortization Net Carrying Value Covenants not to compete 3 $ 100,000 $ ( 41,542 ) $ 58,458 Tradenames 15 344,000 ( 97,188 ) 246,812 $ 444,000 $ ( 138,730 ) $ 305,270 December 29, 2024- Estimated Useful life (Years) Original Cost Accumulated Amortization Net Carrying Value Covenants not to compete 3 $ 198,000 $ ( 103,135 ) $ 94,865 Tradenames 15 393,000 ( 70,988 ) 322,012 Impairment allowance - - ( 49,078 ) $ 591,000 $ ( 174,123 ) $ 367,799 On January 2, 2025, the Company closed its Village Bier Garten location. In connection with the closure, the Company recognized an impairment of Village Bier Garten’s intangible assets in 2024. Tradename assets are amortized over 15 years. Total amortization expense for 2025 was approximately $ 64,000 . The total amortization of intangible assets, including the covenants not to compete, will approximate $ 56,300 in 2026, $ 36,800 in 2027, $ 22,900 per year through 2036, and approximately $ 5,600 in 2037. Total amortization expense of approximately $ 90,000 for intangible assets in 2024 included $ 11,660 to write off the intangible asset related to the Company’s former franchise asset upon termination of the franchise agreement. This amount was included in other assets in the 2024 consolidated balance sheet. 47 Table of Contents NOTE 5 – LEASES In connection with the acquisition of Keegan’s, the Company entered into a lease for approximately 2,800 square feet of restaurant space. The lease has a term of 131 months and provides for an initial base rent of $ 5,000 per month, with annual increases equal to the greater of 3 % or the Consumer Price Index (CPI). Current monthly base rent is $ 5,628 . Variable lease costs consist primarily of property taxes, insurance, certain utility expenses, and sales taxes. The lease is accounted for as an operating lease. At lease commencement, the Company recorded a right-of-use asset and corresponding operating lease liability of approximately $ 624,000 . The operating lease liability was $ 458,587 as of December 28, 2025, and $ 505,626 as of December 29, 2024, discounted using a rate of 3.75 %, and is reflected as operating lease liabilities in the accompanying consolidated balance sheets. Upon acquisition of the PIE assets, the Company entered into a lease for approximately 3,500 square feet of restaurant and bakery production space. The lease has an initial term of 60 months and provides for an initial base rent of $ 10,000 per month, with a 3 % annual escalation beginning after the first 24 months. Current monthly base rent is $ 10,609 . Variable lease costs consist primarily of property taxes, insurance, certain utility expenses, and sales taxes. The PIE lease includes three five-year renewal options exercisable at the Company’s option. The lease is accounted for as an operating lease. At lease commencement, the Company determined that it is reasonably certain to exercise the initial five-year renewal option and therefore included this period in the lease term. As a result, the Company recorded a right-of-use asset and corresponding operating lease liability of approximately $ 1,055,000 . The operating lease liability related to the PIE lease was $ 771,907 as of December 28, 2025 and $ 847,949 as of December 29, 2024, discounted using a rate of 4.5 %, and is reflected as operating lease liabilities in the accompanying consolidated balance sheets. In May 2025, in connection with the acquisition of Schnitzel Haus, the Company assumed the remaining 44 months of the restaurant’s approximately 4,200 -square-foot lease, with a monthly base rent of approximately $ 5,400 . The Schnitzel Haus lease is accounted for as an operating lease. At lease commencement, the Company recorded a right-of-use asset and corresponding operating lease liability of $ 182,478 . The operating lease liability related to this lease was $ 122,953 as of December 28, 2025, and $ 161,774 as of December 29, 2024, discounted using a rate of 6.5 %, and is reflected as a liability in the accompanying consolidated balance sheets. Village Bier Garten Lease – The Company’s acquisition of Village Bier Garten assets in 2023 included a 60 -month triple-net lease for approximately 3,000 square feet of restaurant space. The lease provided for initial rent of approximately $ 8,200 per month, subject to annual escalation of 3 %. On January 2, 2025, the Company ceased operations at the Village Bier Garten location in Cocoa, Florida and entered into an agreement to assign the lease to a third party. Following the transfer of possession, the assignee operated a restaurant on the premises and made rent payments directly to the landlord for several months, which the landlord accepted. In November 2025, the landlord issued a notice of default alleging nonpayment of rent beginning in August 2025. The landlord subsequently regained possession of the premises denied the Company further access and initiated legal proceedings seeking recovery of amounts allegedly due under the lease. The landlord is currently seeking a replacement tenant. As a result of the cessation of operations and loss of use of the premises, the Company evaluated the related right-of-use asset for impairment in accordance with ASC 842 and ASC 360 and recorded a full impairment charge of approximately $ 215,000 during the year ended December 28, 2025. Given the outstanding litigation seeking acceleration of the unpaid rent under the lease, as of December 28, 2025, the Company has included a net lease liability of approximately $ 215,000 representing approximately total unpaid lease payments under the full lease term including 2025 in the current amount payable. The ultimate resolution of the matter is subject to ongoing litigation and may differ from the amounts recorded. 48 Table of Contents Following is a schedule of the approximate minimum future lease payments on the operating leases as of January 1, 2023, including amounts assuming we exercise to extend leases where we believe that exercise of the option is likely. The following table presents future minimum lease payments under the Company’s operating leases as of December 28, 2025, including amounts related to the PIE lease, assuming exercise of the initial five-year renewal option, which the Company believes is reasonably certain: YEAR Lease Payments 2026 $ 403,939 2027 322,686 2028 219,824 2029 214,859 2030 215,034 Thereafter 347,669 Total future minimum lease payments 1,724,011 Less - interest ( 155,563 ) Present value of lease obligations $ 1,568,448 The weighted-average remaining lease term of the Company’s operating leases was approximately 5.6 years, and the weighted-average discount rate was approximately 4.50 %. The Company is unable to readily determine the interest rate implicit in its leases. Therefore, the discount rate used represents the Company’s estimated incremental borrowing rate at lease commencement for a similar term, collateralized by the leased assets. Total operating lease expense was approximately $ 326,000 and $ 408,696 for the years ended December 28, 2025, and December 29, 2024, respectively. Cash paid for amounts included in the measurement of operating lease liabilities totaled approximately $ 288,000 in 2025 and $ 330,000 in 2024. Variable lease costs were approximately $ 37,000 in 2025 and $ 57,525 in 2024. In 2025, we paid approximately $ 1,350 per month for our corporate office under a month-to-month rental arrangement. NOTE 6 – INCOME TAXES The Company accounts for income taxes in accordance with ASC 740, Income Taxes , which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for net operating loss (“NOL”) and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the periods in which temporary differences are anticipated to be reversed. The effect of changes in tax laws or rates is recognized in income in the period of enactment. Deferred Tax Assets and Valuation Allowance As of December 28, 2025, the Company had gross deferred tax assets of approximately $ 1,303,000 , primarily attributable to federal and state net operating loss carryforwards, stock-based compensation, and impairment-related temporary differences. Management evaluates the realizability of deferred tax assets quarterly, considering all available positive and negative evidence, including historical operating results, cumulative losses, projected future taxable income, the scheduled reversal of deferred tax liabilities, and tax planning strategies. If sufficient positive evidence becomes available to support the realization of deferred tax assets, the valuation allowance may be reduced or reversed in a future period. As of December 28, 2025, the Company recorded a valuation allowance of $ 933,000 (December 29, 2024 – $ 616,000 ). After consideration of deferred tax liabilities, the Company had no net deferred tax asset recorded on the balance sheet on December 28, 2025, and December 29, 2024. 49 Table of Contents Net Operating Loss Carryforwards As of December 28, 2025, the Company had federal net operating loss carryforwards of approximately $ 2.8 million and state net operating loss carryforwards of approximately $ 3.0 million. Federal NOLs generated after 2017 may be carried forward indefinitely but are generally limited to 80% of taxable income in any future year. Certain state NOLs begin to expire in 2037, while others may be carried forward indefinitely, subject to applicable state limitations. If ownership changes occur, the Company’s ability to utilize its NOL carryforwards may be limited under Internal Revenue Code Section 382. Components of Deferred Tax Assets and Liabilities The tax effects of temporary differences and carryforwards are as follows: 2025 2024 Deferred tax assets: Net operating loss carryforward $ 700,000 $ 813,000 Stock-based compensation 157,000 127,000 Impairments 179,000 - Equity method losses 261,000 144,000 Other 6,000 - Total deferred tax assets 1,303,000 1,084,000 Less: valuation allowance ( 990,000 ) ( 616,000 ) Total deferred tax assets, net 313,000 468,000 Deferred tax liabilities: Property and equipment tax depreciation difference ( 278,000 ) ( 430,000 ) Unrealized (gain) on short-term investments ( 10,000 ) ( 21,000 ) Goodwill ( 25,000 ) ( 17,000 ) Total deferred tax liabilities ( 313,000 ) ( 468,000 ) Net deferred tax asset $ - $ - The following table summarizes the components of the provision for income taxes: 2025 2024 Current income tax expense $ - $ - Deferred income tax (benefit) expense 374,000 ( 410,000 ) Change in valuation allowance ( 374,000 ) 616,000 Total income tax expense $ - $ ( 206,000 ) Total income tax expense for the years ended December 28, 2025, and December 29, 2024, differed from the amounts computed by applying the U.S. Federal statutory tax rate of 21 % to pre-tax income as follows: 2025 2024 Amount % Amount % U.S. federal statutory income tax rate $ ( 145,000 ) ( 21.0 ) $ ( 442,000 ) ( 21.0 ) State income tax benefit, net of federal tax benefit ( 26,000 ) ( 3.7 ) ( 63,000 ) ( 2.9 ) Equity method investment loss - - 87,000 4.2 Adjustments to deferred tax assets related to prior periods ( 196,000 ) ( 28.5 ) - - Other ( 7,000 ) ( 1.1 ) ( 8,000 ) 0.1 Change in valuation allowance 374,000 54.3 616,000 26.6 Change in unrecognized benefit - - - - Tax credits - - - - Income tax expense $ - 0.0 $ 206,000 8.9 50 Table of Contents There is no current income tax expense for the United States, foreign or state jurisdictions for fiscal 2025, In addition, no cash was paid for income taxes during the 2025 or 2024 fiscal years. Accounting Standards require that deferred tax assets and liabilities, along with any related valuation allowance, be classified as a noncurrent item on the balance sheet. The Company had no accrued interest or penalties relating to income tax obligations and is not currently subject to any federal or state income tax examinations. The Company has not had any federal or state income tax examinations since its inception. The Company’s federal and state income tax returns remain subject to examination by tax authorities for the three most recent tax years. With few exceptions, the Company is no longer subject to U.S. Federal and state income tax examinations by tax authorities for years before 2022. NOTE 7 – ACCRUED EXPENSES Accrued expenses consisted of the following at the end of the respective reporting periods: December 28, 2025 December 29, 2024 Accrued real estate taxes $ 44,744 $ 46,401 Accrued payroll and payroll taxes 225,866 184,126 Accrued sales taxes payable 54,231 57,706 Accrued vacation pay 30,000 17,663 Accrued gift card liability 46,779 38,425 Other accrued expenses 20,247 27,035 $ 421,867 $ 371,356 NOTE 8 – SHAREHOLDERS’ EQUITY Authorized Shares The Company is authorized to issue up to 50,000,000 shares of common stock, par value $ 0.002 per share, and up to 2,000,000 shares of preferred stock, par value $ 0.001 per share. The preferred stock is currently undesignated and may be issued from time to time in one or more series with such rights, preferences, and privileges as determined by the Company’s board of directors. As of December 28, 2025, and December 29, 2024, 6,154,724 shares of common stock were issued and outstanding, and no shares of preferred stock were issued or outstanding. Initial Public Offering and Warrants On November 12, 2021, the Company completed its initial public offering (“IPO”) of units, each consisting of one share of common stock and one five-year stock purchase warrant exercisable to purchase one share of common stock at an exercise price of $ 5.50 per share. The Company may redeem the warrants under certain conditions. In the IPO, the Company issued 2,400,000 shares of common stock and an aggregate of 2,760,000 stock purchase warrants, which included 360,000 warrants issued to the underwriters pursuant to a partial exercise of their overallotment option at $ 0.01 per warrant. The estimated fair value of the warrants at the date of issuance, net of the exercise proceeds, was $ 360,000 and was recorded as an additional cost of the offering. After deducting underwriting discounts, commissions, and other offering costs, the Company received net proceeds from the IPO of $ 10,696,575 . During 2022, holders exercised 13,612 public warrants for aggregate proceeds of $ 74,866 . As of December 28, 2025, 2,746,838 public warrants remained outstanding, each exercisable to purchase one share of common stock at an exercise price of $ 5.50 per share. All remaining public warrants expire on November 12, 2026, unless earlier exercised or redeemed in accordance with their terms. 51 Table of Contents Share Repurchase Authorization On June 6, 2024, the Company’s board of directors authorized a share repurchase program pursuant to which the Company may repurchase up to 625,000 shares of its common stock, representing approximately 10.0% of the Company’s outstanding shares at the time of authorization (the “Repurchase Program”). There is no predetermined overall limit on the aggregate purchase price of shares that may be repurchased under the Repurchase Program. As of December 28, 2025, the Company had repurchased an aggregate of 306,394 shares, including 91,394 shares under the Repurchase Program, all of which were repurchased during fiscal 2024. As a result, the Company may repurchase up to an additional 533,606 shares under the Repurchase Program . The Company expects to fund repurchases with available cash. Repurchases may be made from time to time in open market purchases, privately negotiated transactions, or otherwise, subject to market conditions, applicable legal requirements, and other considerations. The Repurchase Program does not obligate the Company to repurchase any specific number of shares and may be suspended, modified, or terminated at any time without prior notice. The Repurchase Program does not have an expiration date. Shares repurchased under the Repurchase Program are recorded as treasury stock and accounted for under the cost method. At-the-Market Offering Program On December 13, 2024, as amended on November 21, 2025, the Company entered into an Equity Distribution Agreement (the “Distribution Agreement”) with Maxim Group LLC (“Maxim”), pursuant to which the Company may sell shares of its common stock, par value $ 0.002 per share, from time to time through an “at-the-market” offering program, with Maxim acting as sales agent. Pursuant to the applicable prospectus supplement, the Company may offer and sell shares of common stock with aggregate gross sales proceeds of up to $ 3,565,880 under the Distribution Agreement. The shares offered pursuant to the Distribution Agreement are included within the $ 25,000,000 of securities that may be offered, issued, and sold under the Company’s shelf registration statement. Under the Distribution Agreement, the Company specifies the parameters for any sales, including the number of shares to be sold, the timing of sales, any limitation on daily sales volume, and minimum acceptable prices. Sales may be made by any method deemed to be an “at-the-market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended. Pursuant to General Instruction I.B.6 of Form S-3, for so long as the aggregate market value of the Company’s outstanding common stock held by non-affiliates is less than $ 75 million, the Company may not sell securities in a primary offering with a value exceeding one-third of such aggregate market value during any 12-month period. Under the terms of the Distribution Agreement, the Company pays Maxim a commission equal to 3.0% of the aggregate gross proceeds from each sale of shares and reimburses certain expenses, including legal fees. The Distribution Agreement contains customary representations, warranties, covenants, indemnification, and contribution provisions. Maxim is not obligated to purchase any shares as principal. Either party may terminate the Distribution Agreement upon notice in accordance with its terms. NOTE 9 – STOCK-BASED COMPENSATION In 2019, we adopted the BT Brands, Inc. 2019 Incentive Plan (the “Plan”), under which the Company, as of December 28, 2025, may grant up to 1,000,000 stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units, and other stock and cash awards to eligible participants. Stockholders have authorized the 1,000,000 shares available for grant under the 2019 Plan. As of December 28, 2025, there were 718,250 shares available for a grant under the 2019 Plan. In July 2025, the Board approved a grant of 62,500 options with an exercise price of $1.50 per share. This grant included 22,500 fully vested one-year options and 40,000 options, which vested 20% on the grant date and an additional 20% on each of the following four anniversary dates . 52 Table of Contents In 2024, we issued 15,000 ten-year options to the then-existing outside members of our Board of Directors to purchase shares at $1.61 per share, and we also granted 5,000 fully vested options to a new Board member to purchase shares at $1.70 per share . In 2023, outside of the 2019 Plan, we issued a consultant a warrant to purchase 100,000 shares at $2.50 per share, valid for seven years, with the warrants vesting monthly for over five years , provided the consultant remains in this capacity. Assuming the consulting agreement continues for its full term, we project we will recognize approximately $80,000 in stock-based compensation, including $32,000 in 2026 and 2027 and $16,000 in 2028 . As outlined in each agreement, stock options granted to employees and directors vest and expire as determined at the date of grant. Compensation expense equal to the fair value of the options at the grant date is recognized in general and administrative costs over the applicable service period. Stock-based compensation expense for 2025 was $141,000. Based on current estimates, we project approximately $121,000 in stock-based compensation expense related to options and consultant warrants over the next four years, including approximately $49,000 in 2026, $43,000 in 2027, $24,000 in 2028, and $5,000 in 2029 . On February 27, 2023, the board of directors’ Compensation Committee approved an “Incentive Shares” proposal wherein, so long as the Company’s publicly traded warrants are outstanding, senior management will be granted 250,000 shares of common stock as an award upon our share price reaching $ 8.50 per share for twenty consecutive trading days. The total estimated grant-date fair value of the award was determined using a lattice model with assumptions similar to those used for the stock option calculation. The total of this award was determined to be $ 265,000 . For 2025, stock-based compensation expenses for this award totaled approximately $ 36,000 . We utilize the Simplified Method and the Black-Scholes option pricing model at the date of grant when determining the compensation cost associated with stock options issued using the following significant assumptions: · Stock price – Published trading market values of our common stock as of the grant date; · Exercise price – The stated exercise price of the stock option; · Expected life – The simplified method; · Expected dividend – The rate of dividends expected to be paid over the term of the stock option; · Volatility – Estimated volatility; · Risk-free interest rate – The daily US Treasury yield corresponding to the expected life of the award. Information regarding our stock options, including consultant warrants, is summarized below: Number of Options Weighted Average Exercise Price Weighted Average Remaining Term (In Years) Aggregate Intrinsic Value Options outstanding at December 31, 2023 319,250 $ 2.62 7.6 $ - Granted 20,000 1.64 9.3 - Exercised - - - - Canceled, forfeited, or expired - - - - Options outstanding at December 29, 2024 339,250 $ 2.53 7.4 $ - Options exercisable on December 29, 2024 169,554 2.65 6.8 $ - Granted 62,500 1.50 9.3 - Exercised - - - - Canceled, forfeited, or expired ( 20,000 ) 2.5 - - Options outstanding at December 28, 2025 381,750 $ 2.40 6.6 $ - Options exercisable on December 28, 2025 251,889 $ 2.47 5.8 $ - The Black-Scholes option-pricing model was used to estimate the fair value of stock options at the grant date, with the following weighted-average assumptions applied to grants during the year ended December 28, 2025. 2025 2024 The average fair value of options granted during the period $ 0.83 $ 1.14 Expected average life (in years) 2.5 6.0 Expected dividend - - Expected stock volatility 65 % 63 % Risk-free interest rate 4.19 % 3.75 % 53 Table of Contents NOTE 10 – LONG-TERM DEBT We had the following long-term debt obligations at: December 28, 2025 December 29, 2024 Three notes payable to a bank dated June 28, 2021, due in monthly installments totaling $22,213, including principal and interest at a fixed rate of 3.45% through June 28, 2031. Beginning in July 2031, the interest rate will equal the greater of the “prime rate” plus .75%, or 3.45%. These notes mature on June 28, 2036. The notes are secured by mortgages covering seven BTND properties. BT Brands, Inc., and a shareholder of the Company guarantee the notes. $ 2,116,522 $ 2,307,143 Less - unamortized debt issuance costs ( 25,399 ) ( 30,799 ) Current maturities ( 191,531 ) ( 185,009 ) Long-term debt, less current portion $ 1,899,592 $ 2,091,335 Scheduled maturities of long-term debt, excluding amortization of debt issuance costs, are as follows at December 28, 2025: Fiscal year ending-- 1/3/27 $ 191,531 1/2/28 198,207 12/31/28 205,270 12/30/29 212,507 12/29/30 219,007 Thereafter 1,107,836 $ 2,134,358 NOTE 11 – ACQUISITION On May 13, 2024, our 1519 BT, LLC subsidiary completed the purchase of certain assets from LC Food Concepts. The acquired assets comprised a business operating as a high-end German-themed restaurant with approximately 175 seats located in Hobe Sound, Florida, doing business as “Schnitzel Haus. The aggregate purchase price was $ 943,000 , including $ 850,000 paid at closing as payment for certain assets, separate payments of $ 65,000 for inventory on hand at closing, and $ 28,000 for the purchase of a utility vehicle and other items used in the business. With the acquisition, we assumed the seller’s remaining lease obligation of $ 5,400 monthly for 44 months. Aside from the lease obligation, no liabilities of the seller were assumed in the purchase of assets. A summary of the assets acquired is approximately as follows: Property, including leasehold improvements and equipment $ 625,000 Intangible covenant not to compete 100,000 Inventory 65,000 Vehicle and other 28,000 Operating lease right-of-use asset 182,878 Total identifiable assets acquired 1,000,878 Operating lease liability ( 182,878 ) Net identifiable assets acquired 818,000 Goodwill 125,000 Purchase price $ 943,000 54 Table of Contents NOTE 12 – RELATED PARTY TRANSACTIONS NGI Corporation Equity Investment and Impairment - Before 2023, BT Brands, Inc. (“BT Brands” or the “Company”) made a series of equity investments in NGI Corporation (“NGI”), resulting in a minority ownership interest with an aggregate carrying value of $ 304,000 . As of September 28, 2025, the Company evaluated the recoverability of its investment and concluded that impairment indicators were present, including recurring operating losses at NGI and insufficient capital to sustain operations without continued external financing. In addition, there were no observable market transactions or other valuation inputs to support the investment’s carrying value. Based on this assessment, the Company determined that its equity investment in NGI was impaired and recorded an impairment charge of 304,000 as of September 28, 2025, fully writing down the carrying value of its equity investment. NGI Loan Agreements, Foreclosure, and Inventory Acquisition and Allowance - The Company also provided loans to NGI and purchased inventory from NGI in the ordinary course of business. During fiscal 2025, the Company advanced additional loans to NGI and funded certain costs related to aluminum water bottles inventory totaling $ 670,718 . In connection with these transactions, the Company took ownership of bottle inventory with a carrying value of $ 380,861 . Effective December 26, 2025, the Company exercised its rights under loan agreements with NGI that provided the Company with a senior secured interest in substantially all of NGI’s assets. investment in and receivables from NGI Corporation. As a result of the foreclosure and prior purchases, the Company held Bottle Inventory with a gross carrying value of $ 790,718 as of December 28, 2025, representing approximately 850,000 bottles. The Bottle Inventory is recorded within current assets at the lower of cost or net realizable value. Based on management’s evaluation of expected selling prices and estimated costs to sell, the Company recorded a write-down of $ 216,718 , reducing the carrying value of the Bottle Inventory to its estimated net realizable value of $ 574,000 as of December 28, 2025. Management is actively pursuing third-party sales of the Bottle Inventory; however, the amount and timing of any proceeds cannot be predicted with certainty. As of December 28, 2025, and to reflect the foreclosure of the remaining loans to NGI, physical control of the bottle inventory is as follows: Investment in NGI Loan Activity Bottle Inventory Balance, December 31, 2023 $ 304,000 $ $ - 2024 Activity - 120,000 - Balance, December 29, 2024 304,000 120,000 - Loans to NGI 290,636 - Water bottle inventory payments 380,861 Acquisition of NGI secured promissory note 359,221 - Allowance for impairment ( 304,000 ) - - Loan repayment, June 2025 ( 360,000 ) Foreclosure on the bottle inventory collateral ( 409,857 ) 409,857 Allowance to reduce the value of bottles to the estimated net realizable value - ( 216,718 ) Balance, December 28, 2025, reflected as inventory — bottled water available for sale $ 0 $ 0 $ 574,000 NGI R elated Party Matters- Kenneth Brimmer, the Company’s Chief Operating Officer, serves as a member of NGI’s board of directors and as Chief Financial Officer. Effective April 1, 2025, Gary Copperud resigned from NGI’s board of directors. 55 Table of Contents Bagger Dave’s Burger Tavern, Inc.- On June 2, 2022, the Company purchased 11,095,085 shares of common stock of Bagger Dave’s Burger Tavern, Inc. (“Bagger Dave’s” or “BDVB”), representing approximately a 40.7% ownership interest at the time of purchase, for an aggregate purchase price of $ 1,260,000 . The Company accounts for its investment in BDVB under the equity method of accounting because it has the ability to exercise significant influence over BDVB’s operating and financial policies but does not control the entity. Bagger Dave’s operates five casual dining restaurants and bar locations, including three locations in Michigan and one location each in Fort Wayne, Indiana and Centerville, Ohio. BDVB’s common stock is quoted on the OTC Pink market, and BDVB files quarterly and annual financial information with OTC Markets Group, Inc. under the Alternative Reporting Standard. Financial information reported by BDVB is not required to be audited. During the first fiscal quarter of 2026, BDVB sold its closed Chesterfield, Michigan, leasehold interest for approximately $ 400,000 in a combination of notes and cash. BDVB expects to recognize a gain of approximately $ 350,000 related to this sale. As of December 28, 2025, and December 29, 2024, the carrying value of the Company’s investment in BDVB was $ 0 and $ 304,439 , respectively. During fiscal 2025, the Company’s cumulative share of BDVB’s net losses exceeded the carrying value of its investment, resulting in a reduction of the investment balance to zero. In accordance with applicable accounting guidance, the Company ceased recognizing additional equity losses after the carrying value of the investment was reduced to zero, as the Company has not committed to providing additional financial support to BDVB and has not guaranteed any of its obligations. The Company’s proportionate 40.7 % share of BDVB’s net loss for the period was $ 386,559 , of which $ 304,439 was recognized as equity in loss of unconsolidated affiliate in the Company’s consolidated statements of operations, reducing the carrying value of the investment to zero. The remaining portion of the Company’s share of BDVB’s losses was not recognized. The Company discontinued recognizing additional losses after the investment balance reached zero. The Company will resume recognizing its share of BDVB’s earnings, if any, only after its equity in cumulative unrecognized losses have been recovered. The following tables present unaudited summary financial information of BDVB as of and for the periods indicated, as reported by BDVB: Balance Sheet Information - December 28, 2025 December 29, 2024 Total current assets $ 173,665 $ 1,012,529 Total noncurrent assets, net 1,650,620 2,154,049 Total assets 1,824,335 3,166,578 Total current liabilities 615,819 711,014 Total noncurrent liabilities 1,136,980 1,048,091 Total liabilities 1,752,799 2,119,105 Stockholders’ equity 71,536 1,047,473 Total liabilities and stockholders’ equity $ 1,824,335 $ 3,166,578 Statements of Operations information - December 28, 2025 December 29, 2024 Revenue $ 5,078,924 $ 7,176,536 Depreciation and amortization ( 323,268 ) ( 527,274 ) Other costs and expenses ( 5,698,417 ) ( 7,696,912 ) Net loss $ ( 942,771 ) $ ( 1,047,650 ) Officers of BT Brands, Inc. also serve as officers and directors of Bagger Dave’s Burger Tavern, Inc. BT Brands owns approximately 40.7% of the outstanding shares of Bagger Dave’s. The investment is accounted for on the equity method. The BT Brands Officers received no compensation from Bagger Dave’s in 2025, and there were no additional related party transactions. Related Party Employment Blake Copperud, son of the Company’s Chief Executive Officer, is employed by the Company as a full-time Operations Specialist. Total compensation for the year ended December 28, 2025, was approximately $ 100,000 , including a $ 40,000 discretionary bonus earned and accrued during the year. In addition, the Company granted Blake Copperud options to purchase 20,000 shares at $ 1.50 per share. As of the grant date, the fair value of the option grant was approximately $ 24,000 . The options vest over four years, with 4,000 options immediately vested. Total compensation for a partial year of employment in 2024 was approximately $ 24,000 , consisting of salary. The terms of employment, including compensation, were established by management. 56 Table of Contents NOTE 13 – MAJOR VENDORS We purchase products from a variety of vendors. The food supply business is highly competitive, and the Company has several alternative suppliers available. In July 2024, BTND changed its primary supplier relationship. For the year ended December 28, 2025, approximately 38.7 % of our food and paper cost of goods sold was attributable to product purchases from a single vendor. On December 28, 2025, the amount due to the major vendor totaled approximately $ 14,000 . On December 29, 2024, the amount due to the former primary vendor was $ 257,268 . NOTE 14 – CONTINGENCIES Village Bier Garten Lease Litigation The Company’s acquisition of Village Bier Garten assets in 2023 included a 60 -month triple-net lease for approximately 3,000 square feet of restaurant space. The lease provided for initial rent of approximately $ 8,200 per month, subject to annual escalation of 3 %. On January 2, 2025, the Company ceased operations at the Village Bier Garten location in Cocoa, Florida and entered into an agreement to assign the lease to a third party. Following the transfer of possession, the assignee operated a restaurant on the premises and made rent payments directly to the landlord for several months, which the landlord accepted. In November 2025, the landlord issued a notice of default asserting nonpayment of rent beginning in August 2025. The landlord subsequently filed a lawsuit against 1519BT, LLC and BT Brands, Inc., seeking recovery of unpaid rent and other amounts allegedly due under the lease. The lease agreement was not formally terminated, however, under the terms of the lease the landlord took full possession of the premises through court proceedings and the landlord is currently seeking a replacement tenant. The Company disputes the landlord’s claims and intends to defend the matter. The Company believes that the landlord’s acceptance of rent payments from the assignee following the transfer of possession, as well as the landlord’s obligation under Florida law to mitigate damages following repossession of the premises, may affect the amount of any adjudicated damages, if any, that could ultimately be recoverable. The Company also believes it has contractual rights against the assignee for any amounts that may be determined to be payable under the lease and has asserted a separate claim for approximately $ 200,000 in unpaid consulting fees. As of December 28, 2025, the Company fully wrote down the remaining book value of the right-to-use asset of approximately $ 215,000 , representing approximating the remaining contractual lease payments associated with unpaid rent under the original lease agreement. The recorded amount does not reflect any reduction for the landlord’s obligation to mitigate damages or the Company’s potential recovery from the assignee. The ultimate outcome of the matter will be determined through litigation or negotiated settlement and may differ from the amount recorded. Management will continue to evaluate the matter and adjust the recorded liability as additional information becomes available. Other Matters In the ordinary course of business, the Company may be subject to claims, legal proceedings, and regulatory matters arising from its operations, including employment practices, contractual disputes, personal injury claims, food safety matters, and other matters typical of the restaurant industry. As of December 28, 2025, the Company was not a party to any material pending legal or regulatory proceedings other than the lease-related matter described above. The outcome of any such matters is inherently uncertain. The Company accounts for loss contingencies in accordance with ASC 450, Contingencies. A liability is recorded when it is both probable that a loss has been incurred and the amount can be reasonably estimated. If a loss is reasonably possible or cannot be reasonably estimated, the Company provides disclosure but does not record an accrual. 57 Table of Contents NOTE 15 – SUBSEQUENT EVENT Bagger Dave’s Burger Tavern, Inc. During the first quarter 2026, Bagger Dave’s Burger Tavern, Inc. (“BDVB”), an unconsolidated equity method investee of the Company, completed the sale of its former Chesterfield, Michigan, leasehold interest for aggregate consideration of approximately $ 400,000 , consisting of cash and promissory notes. BDVB expects to recognize a gain on the transaction in the first quarter of fiscal 2026. This transaction did not affect the carrying value of the Company’s investment in BDVB as of December 28, 2025, and has not resulted in the recognition of any equity income by the Company. 58 Table of Contents Item 9. Changes in and Disagreements with Accounting and Financial Disclosure. None.