10-K: BT Brands Pivots to Drones, Plans Restaurant Spin-Off

BT Brands reported improved net loss and EBITDA in fiscal 2025 while announcing a major strategic shift to unmanned aerial vehicles and a spin-off of its restaurant operations.

Summary

• Net loss improved to $687,839 in fiscal 2025 from $2,311,208 in fiscal 2024.
• Restaurant-level EBITDA significantly increased to $1,720,909 (12.4% margin) in fiscal 2025 from $723,828 (4.9% margin) in fiscal 2024.
• Net sales decreased by 7.5% to $13.5 million in fiscal 2025 from $14.8 million in fiscal 2024, primarily due to restaurant closures.
• The company entered into an agreement on September 2, 2025, for a proposed business combination with Aero Velocity Inc., an unmanned aerial vehicle manufacturer.
• If the merger is completed, existing restaurant operations will be spun off into a newly formed entity, BT Group, Inc.
• Existing BT Brands stockholders are expected to experience substantial dilution and a significant shift in voting power, retaining approximately 11% equity ownership in the merged company.
• A material weakness in internal control over financial reporting was identified, affecting the design of controls over significant, nonrecurring events and complex transactions.
• The Village Bier Garten location was closed in January 2025, and a Burger Time in Minot, North Dakota, closed in July 2025.
• An impairment charge of $304,000 was recorded for the equity investment in NGI Corporation due to recurring operating losses and insufficient capital.
• The company is involved in litigation regarding a lease dispute for the former Village Bier Garten location, with an accrued liability of $215,000.

Sentiment

Score: 5

Explanation: StockSavvy.ai views this as a neutral to slightly positive filing. While financial performance improved in key areas like net loss and restaurant-level EBITDA, the significant strategic pivot to the drone industry introduces substantial uncertainty and dilution for existing shareholders, balanced by potential growth in a new sector.

Positives

• Net loss improved significantly to $687,839 in fiscal 2025 from $2,311,208 in fiscal 2024.
• Restaurant-level EBITDA increased substantially to $1,720,909 in fiscal 2025, up from $723,828 in fiscal 2024, with margins improving from 4.9% to 12.4%.
• Food and paper costs decreased to 33.3% of restaurant sales in fiscal 2025 from 37.8% in fiscal 2024, reflecting cost control initiatives and menu price increases.
• Labor costs decreased to 37.9% of restaurant sales in fiscal 2025 from 41.3% in fiscal 2024 due to closure of unprofitable locations and better cost control.
• General and administrative expenses declined by $227,375 to $1.5 million in fiscal 2025, reflecting cost-control efforts.
• Operating cash flow improved to $284,876 in fiscal 2025, compared to net cash used in operating activities of $713,505 in fiscal 2024.
• Working capital increased to $4,680,411 as of December 28, 2025, from $3,556,469 as of December 29, 2024.
• The company recognized a gain of $250,000 on the sale of the Hot-N-Now trademark in fiscal 2024 and a $10,000 licensing payment in fiscal 2025.
• The sale of the Richmond location for $550,000 resulted in a gain of approximately $288,000 in 2025.

Negatives

• Net sales decreased by $1.3 million, or 7.5%, to $13.5 million in fiscal 2025 from $14.8 million in fiscal 2024, primarily due to restaurant closures.
• Comparable Burger Time restaurant sales declined approximately 3.9% due to reduced customer traffic.
• The Village Bier Garten location ceased operations and was permanently closed in January 2025, contributing to sales decline and resulting in a $215,000 lease litigation accrual.
• A Burger Time location in Minot, North Dakota, closed in July 2025, generating $281,000 in sales in fiscal 2025 compared to $560,000 in fiscal 2024.
• An impairment charge of $304,000 was recorded for the equity investment in NGI Corporation due to recurring operating losses and insufficient capital.
• A material weakness in internal control over financial reporting was identified, affecting the design of controls over significant, nonrecurring events and complex transactions.
• The proposed merger with Aero Velocity Inc. is expected to result in substantial dilution to existing stockholders, who will retain only approximately 11% equity ownership.
• The contemplated spin-off of BT Group, Inc. is not expected to qualify as a tax-free transaction for U.S. federal income tax purposes, potentially resulting in taxable income for stockholders.
• The company is involved in litigation related to a lease dispute for the former Village Bier Garten location, with an accrued liability of $215,000.
• The carrying value of the equity-method investment in Bagger Daves Burger Tavern, Inc. (BDVB) was reduced to zero due to cumulative losses.

Risks

• The proposed Merger with Aero Velocity may not be completed on anticipated terms or timeline, or at all, leading to substantial expenses without benefits.
• The proposed Merger will fundamentally change the nature of the business, and historical restaurant results will not be indicative of future performance in the unmanned aerial vehicle industry.
• Existing stockholders will experience substantial dilution and reduced voting power, with Aero stockholders expected to obtain control of the combined company.
• The proposed spin-off of BT Group, Inc. is not expected to qualify as a tax-free transaction and may result in taxable income to stockholders.
• Anticipated benefits of the proposed business combination may not be realized, and the merged company may face significant operational, financial, and strategic challenges.
• The proposed spin-off of BT Group, Inc. may not be completed, may be delayed, or may not achieve its intended objectives, including a public listing.
• The proposed business combination could expose the company to litigation, regulatory scrutiny, and stockholder claims.
• The combined company may face risks related to continued listing standards and market acceptance following the transaction.
• If the proposed merger or spin-off does not close, the growth strategy and business outlook may change, incurring transaction-related costs and operational disruption.
• Difficulty in integrating, operating, or improving acquired businesses, especially outside the restaurant industry.
• Acquisitions may expose the company to unknown liabilities, impairment charges, and other unanticipated consequences.
• Growth strategy may require additional capital that may not be available on acceptable terms, or at all, and rising interest rates could increase borrowing costs.
• Growth strategy may divert management's attention from existing operations.
• Long-term leases and real estate commitments may create fixed obligations that could adversely affect financial performance.
• Rapid growth may strain managerial, administrative, operational, and financial resources.
• Reliance on key executives (Gary Copperud and Kenneth Brimmer) who do not devote full-time efforts to the company.
• Evaluation of growth opportunities outside the restaurant industry may expose the company to additional risks and uncertainties due to limited experience.
• Intense competition in the restaurant industry could adversely affect sales and margins.
• Cost increases (food, labor, utilities, etc.) could adversely affect operating margins and financial performance.
• Labor shortages, wage inflation, and changes in employment laws could increase costs and disrupt operations.
• Food safety incidents or perceived food safety issues could harm the brand and operations.
• Unfavorable publicity, including through social media, could harm brands and reduce customer traffic.
• Health emergencies (e.g., COVID-19 variants) could reduce customer traffic, disrupt staffing, and increase costs.
• Technological disruptions or failures could interrupt operations and adversely affect the business.
• Cybersecurity incidents could result in operational disruption, reputational harm, and liability.
• Failure to manage social media effectively could harm reputation and operations.
• Litigation and regulatory proceedings could be costly and adversely affect the business.
• Regulatory changes and shifting consumer health preferences could require menu updates and affect demand.
• Extensive federal, state, and local regulation, with compliance being costly and complex.
• Failure to maintain required licenses and permits could harm the business.
• Inability to adequately protect intellectual property could reduce brand value.
• Economic conditions and reduced consumer discretionary spending could adversely affect the business.
• Regional economic conditions and events could adversely affect results due to geographic concentration.
• Damage to reputation could adversely affect the business and results of operations.
• Business is subject to seasonal fluctuations due to weather and other factors.
• Failure of internal control over financial reporting could adversely affect the business and financial results.
• Activist stockholders could adversely affect the business and results of operations.
• The market price of common stock may be volatile, and investors may lose all or part of their investment.
• Articles of incorporation, bylaws, and Wyoming law may discourage a change of control and depress stock price.
• No plans to pay cash dividends on common stock.
• Raising additional equity capital may be more challenging while warrants are outstanding.
• Board has broad authority to issue preferred stock, which could adversely affect common stockholders and discourage a change in control.
• Claims for indemnification by directors and officers may reduce available funds to satisfy third-party claims.
• Reduced disclosure requirements as a smaller reporting company may make common stock less attractive to investors.

Future Outlook

The company's future outlook is dominated by the proposed business combination with Aero Velocity Inc., which will fundamentally shift its focus from restaurant operations to unmanned aerial vehicle manufacturing and Drones-as-a-Service. If completed, the restaurant operations will be spun off into a new entity, BT Group, Inc., which will operate independently and seek a public listing. The company anticipates continued efforts to increase same-store sales, enhance brand awareness, and improve operating margins within the restaurant segment (BT Group). However, significant uncertainties remain regarding the completion of both the merger and spin-off, their terms, and the ability of the combined entity and BT Group to achieve their respective strategic objectives and financial performance. The company expects capital expenditures in fiscal 2026 to focus on maintenance, equipment replacement, and operational enhancements for the restaurant business, with no significant expansionary capital expenditures currently anticipated.

Management Comments

• "Historically, our objective has been to create long-term shareholder value in the food service industry. Our core strategy has focused on acquiring restaurant properties and operating businesses at attractive valuation multiples, enabling diversification across restaurant concepts and geographic markets while reducing reliance on any single brand or location."
• "In 2025, we began actively evaluating business opportunities outside the food service sector."
• "If the proposed transaction is completed, we currently expect to spin off our restaurant operations and related assets into a newly formed entity, BT Group, Inc., following the merger closing."
• "The proposed business combination and related spin-off remain subject to numerous conditions, including stockholder and regulatory approvals, and there can be no assurance that either transaction will be completed on the anticipated terms, timeline, or at all."
• "Our operating environment remains highly competitive, and numerous factors, including consumer demand, pricing sensitivity, competition, and broader economic conditions influence sales trends."
• "While restaurants remain our primary operating focus, we believe that certain non-restaurant businesses with strong fundamentals and scalable operating models may complement our existing structure."
• "We believe this matter [Village Bier Garten lease litigation] is a contractual dispute that will be resolved through negotiation or litigation."
• "Management is actively pursuing third-party sales of the Bottle Inventory; however, the amount and timing of any proceeds cannot be predicted with certainty."
• "We believe our current employee relations are good."
• "We do not believe there is a significant risk related to cash."
• "The Company does not currently expect this matter [Village Bier Garten lease litigation] to have a material adverse impact on its overall liquidity position."

Industry Context

StockSavvy.ai notes that BT Brands' strategic pivot away from its historical restaurant operations into the unmanned aerial vehicle (UAV) manufacturing and Drones-as-a-Service sector represents a significant departure from current industry trends in the restaurant space. While the restaurant industry continues to face challenges such as labor shortages, wage inflation, and volatile commodity costs, many competitors are focusing on digital transformation, delivery platforms, and operational efficiencies within the food service sector. BT Brands' move into aerospace suggests a belief that higher growth and shareholder value can be found in emerging technology sectors, potentially seeking to capitalize on the expanding drone market for commercial and defense applications. This shift contrasts with peers who are either consolidating within the restaurant industry or refining existing concepts to adapt to changing consumer preferences and economic pressures. The planned spin-off of the restaurant assets into BT Group, Inc. indicates a desire to create two distinct entities, allowing each to pursue specialized growth strategies, a common tactic for companies seeking to unlock value from disparate business units.

Management Changes

Corporate Governance

Legal Proceedings

• The company is a party to litigation related to a lease dispute for its former Village Bier Garten location in Cocoa, Florida. The landlord has asserted claims for unpaid rent and other amounts, and the company disputes these claims, intending to defend the matter. An accrued liability of $215,000 was recorded as of December 28, 2025, representing estimated unpaid lease payments.
• The company has asserted a separate claim against the assignee of the Village Bier Garten lease for approximately $200,000 in unpaid consulting fees.

Related Party Transactions

• NGI Corporation Equity Investment and Impairment: Prior to 2023, BT Brands made equity investments in NGI Corporation, resulting in a minority ownership interest with an aggregate carrying value of $304,000. This investment was fully impaired in fiscal 2025 due to NGI's recurring operating losses and insufficient capital. Gary Copperud (CEO) served as Chairman of NGI's board until April 1, 2025, and Kenneth Brimmer (COO/CFO) is a board member and CFO of NGI.
• NGI Loan Agreements, Foreclosure, and Inventory Acquisition: The company provided loans and advances to NGI, totaling $670,718 in fiscal 2025, and purchased inventory from NGI. Effective December 26, 2025, the company foreclosed on collateral (Disney-licensed aluminum water bottles) securing these loans, taking ownership of bottle inventory with a gross carrying value of $790,718. A write-down of $216,718 was recorded, reducing the carrying value to $574,000.
• Bagger Daves Burger Tavern, Inc. (BDVB): The company owns a 40.7% interest in BDVB, an unconsolidated affiliate. Officers of BT Brands also serve as officers and directors of BDVB. The carrying value of this investment was reduced to zero in fiscal 2025 due to cumulative losses, and BT Brands is not obligated to fund additional losses.
• Corporate Office Lease: The company reimburses Brimmer Company, LLC, an affiliate of Kenneth Brimmer (COO/CFO), $1,350 per month for leased office space in Minnetonka, Minnesota.
• Mortgage Guarantees: Gary Copperud (CEO) personally guaranteed the company's mortgage debt in June 2021.
• Related Party Employment: Blake Copperud, son of Gary Copperud, is employed as a full-time Operations Specialist. Total compensation for fiscal 2025 was approximately $100,000, including a $40,000 discretionary bonus, and he was granted options to purchase 20,000 shares at $1.50 per share.

Stakeholder Impact

• Shareholders: Will experience substantial dilution and a significant shift in voting power and control if the Aero Velocity merger is completed. The spin-off of BT Group, Inc. is not expected to be tax-free, potentially resulting in taxable income. The market price of common stock may be volatile due to the strategic shift and associated risks.
• Employees: The strategic shift to the drone industry and spin-off of restaurant operations could create uncertainty regarding job roles and future opportunities within the respective entities. The company's reliance on key executives and potential labor shortages in the restaurant sector remain factors.
• Customers: Restaurant customers may see continued efforts to enhance menu offerings and service quality within the BT Group entity. The closure of underperforming locations may affect customer access in those areas.
• Suppliers: The company's primary vendor relationship for Burger Time changed in July 2024, indicating ongoing management of supply chain relationships.
• Creditors: The company has $3.7 million in contractual obligations, including long-term debt and lease liabilities. The personal guarantee by the CEO on mortgage debt provides additional security for some creditors. The ongoing lease litigation for Village Bier Garten introduces uncertainty regarding potential liabilities.

Next Steps

• Complete the proposed business combination with Aero Velocity Inc., subject to stockholder and regulatory approvals.
• Spin off existing restaurant operations and related assets into a newly formed entity, BT Group, Inc., following the merger closing.
• BT Group, Inc. management plans to pursue a listing for BT Group common stock on a national securities exchange.
• Continue evaluating and refining marketing strategies for restaurant operations, including expanded digital and social media presence.
• Evaluate menu offerings and promotional strategies for restaurant operations, informed by customer feedback and market data.
• Capital expenditures in fiscal 2026 are expected to consist primarily of maintenance capital, equipment replacement, and operational enhancements for the restaurant business.
• Remediate the identified material weakness in internal control over financial reporting, potentially by engaging experts for complex transactions.
• Resolve the ongoing lease litigation for the former Village Bier Garten location through negotiation or litigation.
• Actively pursue third-party sales of the NGI bottle inventory.
• BDVB expects to recognize a gain of approximately $350,000 related to the sale of its Chesterfield, Michigan, leasehold interest in the first quarter of fiscal 2026.

Key Dates

Keywords

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