BTBD — Q2 2026 Financial Report Analysis

Overview

BT Brands, a tiny Nasdaq-listed restaurant company that runs six Burger Time drive-ins in the upper Midwest plus three one-off restaurants in Florida and Massachusetts, reported a net income of $576,433 for the 13 weeks ended June 28, 2026, up from $55,031 a year earlier. That jump did not come from selling more food. Sales fell 6.1% to $3.55 million, and the profit came mostly from an $829,976 paper gain on the company's stock portfolio. The restaurants themselves did slightly better than break-even at the operating line, almost entirely because head-office costs were cut by about $197,000.

At a glance

• Sales: $3.55 million, down 6.1%. Fewer customers at Burger Time and one fewer restaurant (the Minot, North Dakota store closed in July 2025) shrank the top line.
• Operating income: $117,205, versus a $75,121 loss. This is the first clean read on the business itself, and the swing almost exactly equals the $197,382 drop in general and administrative (head-office) costs.
• Unrealized gain on securities: $829,976. BT Brands holds $2.83 million of mostly common stocks; a rise in their market value is booked as profit even though nothing was sold. Without it, pre-tax results would have been a loss of roughly $254,000.

The numbers

n/m = not meaningful. The prior-year restaurant count is derived from the filing: the Minot Burger Time, which closed in July 2025, was still open when that quarter ended. Restaurant-level EBITDA is the company's own non-GAAP measure: operating income before head-office costs, depreciation and amortization, a rough gauge of what the restaurants themselves earn.

For the first half (26 weeks), sales were $6.39 million, down 8.8% from $7.01 million, and the company lost $174,578 ($0.03 per share) versus a loss of $274,818 ($0.04) a year earlier. The first-half operating loss narrowed to $147,145 from $367,317.

Takeaway: The quarter's headline profit is a stock-market result, not a restaurant result. Strip out investment gains and losses and BT Brands lost more before tax than a year ago (about -$189,000 versus -$106,000), even after a $197,000 cut in overhead, because sales are shrinking and the company keeps absorbing write-downs on side ventures.

What drove the restaurant business

Sales. The filing attributes the $229,000 sales decline to "a decline in Burger Time sales during the quarter, including the closure of the Minot Burger Time location in mid-2025." BT Brands does not disclose same-store sales (sales at restaurants open in both periods, the usual way to separate real demand from openings and closures), so the filing does not let a reader split the drop between Minot's closure and weaker traffic at the remaining Burger Times. Management estimates the average Burger Time order is about $18 and "did not change significantly" from fiscal 2025, which suggests the decline is in customer count rather than in what each customer spends.

Food costs fell. Food and paper costs dropped to 31.9% of sales from 33.1%, which management credits to "menu changes, including the switch to 'hand-cut' fries at Burger Time, combined with only moderate inflationary pressures on food costs."

Labor costs fell as a share of sales, to 35.4% from 36.4%, from "a concerted effort to monitor scheduling and actual hours across all locations." Over the full half-year, though, labor was flat at 37.1% versus 37.0%, because minimum staffing levels weighed on the slower first quarter.

Fixed costs bit harder. Occupancy and other operating costs rose to 15.8% of sales from 14.7%. Rent and similar costs do not shrink when sales do, so the same dollars take a larger bite out of a smaller top line.

Net of those moves, restaurant-level EBITDA was essentially flat in dollars ($593,229 versus $600,661) but its margin improved to 16.7% from 15.9%. The restaurants earned about the same on less revenue; they did not earn more.

Head office did the heavy lifting. General and administrative costs fell to $333,675 from $531,057 (9.4% of sales from 14.1%), "the result of a concerted cost-reduction effort throughout the Company." Stock-based compensation, which sits in this line, was $59,459 for the half versus $93,735 a year earlier. The chief financial officer resigned in May 2026 and the CEO has taken over that role as well.

The portfolio

The company reports as a single segment and gives no brand-level sales or profit. Bagger Dave's is accounted for under the equity method, meaning BT Brands books only its 40.7% share of that company's profit or loss on one line. Bagger Dave's lost $84,289 in the quarter on revenue of $1.49 million, and BT Brands' share of that loss was $34,306.

What the headline numbers hide

• Investment gains decided the bottom line. In the quarter, the $829,976 unrealized gain was partly offset by a $64,649 realized loss on securities sold. Taking out both, the company would have reported a pre-tax loss of about $189,000. On the same basis a year ago, the loss was about $106,000. Management itself says that, excluding investment gains and losses and the write-down below, results "improved compared to the prior year period", which is true at the operating line but not after the other items below.
• A second write-down on bottled water. BT Brands ended up holding aluminum-bottled water after foreclosing in December 2025 on loans it had made to NGI Corporation, a related party (its former CFO was also NGI's CFO). It wrote that inventory down by about $217,000 at year-end and by another $174,000 this quarter, to $400,000. The company says the timing and amount of any sale proceeds "are uncertain." The write-down is the main reason "other income (expense)" swung to -$270,994 from +$18,586.
• More money going to Bagger Dave's. BT Brands lent the affiliate about $227,000 in the first half (of up to $297,000 approved, at 12% interest) after its investment had already been written down to zero, and booked a $50,000 allowance against that loan, meaning it does not expect to collect all of it. Bagger Dave's is "exploring strategic alternatives, including the potential sale of all Bagger Dave's restaurant locations."
• Cash conversion is thin. Operating cash flow for the half was $117,490 against a net loss of $174,578, a gap explained mainly by non-cash depreciation, the water write-down and the loss on the affiliate, offset by the unrealized gains. After $92,975 of equipment purchases, about $24,500 was left, which did not cover the $227,088 lent to Bagger Dave's. Cash rose to $1.59 million from $846,167 mainly because the company sold about $1.02 million more securities than it bought.
• Two unaccrued or partly accrued disputes. Aero Velocity, the drone company BT Brands agreed to merge with in September 2025 and dropped on May 1, 2026, has claimed the termination was invalid and is seeking about $1.5 million. No lawsuit had been filed as of the report and the company has accrued nothing, saying it cannot conclude a loss is probable. Separately, the landlord of the closed Village Bier Garten in Cocoa, Florida, is suing for unpaid rent; BT Brands carries a $209,000 liability for it.
• Reporting controls. The CEO, now also the principal financial officer, concluded disclosure controls were "not effective" as of June 28, 2026, citing a material weakness disclosed in the 2025 annual report. The company filed late-filing notices (Form NT 10-Q) before both its Q1 and Q2 2026 reports.
• No going-concern warning. Liquidity is adequate for a company this size: $4.4 million in cash and marketable securities, $4.5 million of working capital and $2.0 million of mortgage debt at a fixed 3.45% rate. About $2.47 million of the securities are common stocks, so that cushion moves with the stock market.
• Taxes and buybacks played no role. There was no income tax charge or benefit in either period (a valuation allowance of about $1.04 million offsets the deferred tax asset), and the share count rose slightly, by 30,000 shares from option exercises, with no buybacks.

Outlook

BT Brands gives no financial guidance. The filing points to a few things that will shape the second half:

• Seasonality helps next quarter. Pie in the Sky in Woods Hole depends on Cape Cod summer tourism, and in 2025 about 40% of the company's sales came in the third quarter. Fiscal 2026 also has 53 weeks (ending January 3, 2027), so the fourth quarter carries an extra week.
• Strategy is unsettled. With the Aero Velocity merger dropped, management says it is "evaluating potential growth opportunities outside the restaurant industry," and its risk list names a possible reverse merger or other transaction "which could result in substantial dilution." The company ended its at-the-market share sale agreement with Maxim on May 14, 2026, but says it "intends to sell shares in the future through its existing at-the-market offering program," and it carries $168,630 of deferred offering costs on the balance sheet.
• Assets to turn into cash. The closed Ham Lake, Minnesota Burger Time property is held for sale at $424,123, which management expects to exceed, and the $400,000 of bottled water inventory is being marketed.

Our read: the restaurants are running at roughly the same profit on less revenue, and the overhead cut is real and has turned the operating line positive for the quarter. But the company's reported earnings will keep being driven by its stock portfolio, and the side bets (NGI, Bagger Dave's, the aborted drone merger) continue to cost money. The next 10-Q, covering the quarter ending in late September 2026, is worth watching for whether Burger Time sales stabilize once Minot is out of the comparison, and whether Aero Velocity turns its claim into a lawsuit.