UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended: January 3, 20212, 2022

For the transition period from ________ to ________

Commission file number: 333-233233

 BT BRANDS, INC.

Securities registered under Section 12(b) of the Exchange Act

Registrant’s telephone number, including area code:(701) 277-0080(307) 291-9885

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value $0.002 per share

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. ☐☒ Yes ☒☐ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☐ Yes ☒ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”,filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 17(a)(2)(B) of the Securities Act. ☐ Yes ☒ No

Indicate by check mark whether the registrant has filed a report on an attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐      

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of June 28, 2020,July 4, 2021, the last day of the registrant’s most recently completed second fiscal quarter, the registrant’s securities were not publicly traded. The aggregate market value of the voting and non-voting common equityshares held by non-affiliates was $8,056,260 computed(computed by reference to the $5 public offering price at which thefor units consisting of one common equityshare and one stock purchase warrant) was last sold was $3.00 (after giving effect to a 1-for-2 split of the outstanding shares of common stock, which became effective on January 28, 2021) as of June 28, 2020.approximately $9,709,000.

At March 11, 2021,15, 2022, there were 4,047,5026,461,118 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

TABLE OF CONTENTS

BASIS OF PRESENTATION

Our fiscal year is a 52/53-week year, ending on the Sunday closest to December 31. Most years consist of four 13-week accounting periods comprising the 52-week year. Fiscal 2021 was the 52 weeks ending on January 2, 2022, and fiscal 2020 was athe 53-week period ending January 3, 2021 and Fiscal 2019 was the 52-week period ending on December 29, 2019.2021. All references to years in this report refer to the fiscal years described above.

All outstanding common share and per share data presented in this Annual Report on Form 10-K has been retroactively adjusted to(“Annual Report”) reflect the effect of a 1-for-2 common shares reverse stock split effective as of January 25, 2021.

FORWARD-LOOKING STATEMENTS

This Annual Report, including the sections entitled “Business,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact may be forward-looking statements.

These forward-looking statements relate to future events or our future financial performance and are based on our present beliefs and assumptions, as well as the information currently available to us. They involve known and unknown risks, uncertainties, and other factors that may cause our results, activity levels, of activity, performance, cash flows, financial position, or achievements to differ materially from those expressed or implied by these statements.

Forward-looking statements may be introduced by or contain terminology such as “may,” “will,” “should,” “could,” “would,” “targets,” “goal,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or the antonyms of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, activity levels, of activity, performance, cash flows, financial position, or achievements. Accordingly, we caution you not to place undue reliance on any forward-looking statements we may make.

Factors that may affect our performance and the accuracy of any forward-looking statements include, but are not limited to, those listed below:

These risks and other factors described elsewhere in this Annual Report, as well as in other filings we make with the Securities and Exchange Commission or SEC. Due to the uncertain nature of these factors, management cannot assess the impact of each factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Any forward-looking statement speaks only as of the date on which such statement is made, and wemade. We undertake no obligation to update any of these statements to reflect events or circumstances occurring after the date of this Annual Report. New factors may emerge, and it is not possibleimpossible to predict all factors that may affectaffecting our business and prospects.

PART I

PART I

Item 1. Business.

In this Annual Report on Form 10-K, or Annual Report, and unless otherwise indicated, the terms “BT Brands,” the “Company,” “we,” “us,” “our,” “our Company,” and “our business” refer to BT Brands, Inc. together with its consolidated subsidiaries. Effective December 18, 2020 we reincorporated BT Brands from the State of Delaware to the State of Wyoming.

The following discussion should be read in conjunction with our consolidated financial statements, and related notes included elsewhere in this Annual Report. Due to rounding, figures in tables may not sum exactly.

Overview of Our Company

We own and operate fast-food restaurants in the north-central United States and are seeking to expand into other regions and other foodservice businesses. We currently own and operate nine Burger Time restaurants in Minnesota, North Dakota, and South Dakota and a Dairy Queen franchise. Our “Burger Time” restaurants feature a variety of burgers and other affordably priced foods such as chicken sandwiches, pulled pork sandwiches, side dishes and soft drinks. Our DQ restaurant serves the menu developed by DQ and sold across the country. We believe that our restaurants appeal to a broad range of consumers. We serve customers by way of a single or double drive-thru format and walk-up windows. We generally do not offer interior seating but provide outdoor seating areas and parking areas for customer use. Our Burger Time restaurants are locatedfranchise in the upper Midwest, including four restaurants in North Dakota, two in South Dakota and three inHam Lake, Minnesota. Our Dairy Queen franchiseplan is located in Minnesota.to purchase one or more existing restaurant businesses.

Our operating principles for Burger Time operating principles include: (i) offering bigger burgers and more valuea “Bigger Burger” to deliver our customers “more good food for the money;your money”; (ii) offering a limited menu to permit the maximum attention to quality and speed of preparation; (iii) providing fast service by way of the single orand double drive-thru designdesigns and a point-of-sale system at our restaurants that expedites the ordering and preparation process; and (iv) great tasting quality food made fresh to order at a fair price. We currently serve the drive-thru and take-out segment of the restaurant industry.

We operate in the fast-food drive-throughhamburger category of the quick service restaurant, or QSR, of thea restaurant industry. The QSR segment comprises fast foodindustry segment. Fast-food restaurants are characterized by limited menus, limited or no table service, and fast service. InAccording to IBISWorld, there are nearly 200,000 fast-food restaurants in the United States, and fast food generated an estimated $278.6 billion in revenue in 2021, with an estimated $126.9 billion, or approximately 45% of the QSRU.S. fast-food market, deriving from the hamburger segment. Therefore, the hamburger segment is the largest segment of the restaurant industry and has demonstrated growth over a long period of time. According to recent estimates, this segment represents approximately 80 percent of total commercial foodservice visits in the United States and every day about 50 million Americans eat fast food. In 2019, this segment generated $273 billion in revenue in the U.S., making it the largest segment of the restaurant industry. QSR market.

We are seekingOur objective is to increase value for our shareholders in the foodservice industry. We expectOur principal strategy is to pursue the acquisition ofacquire multi-unit restaurant concepts and individual restaurant properties at attractive multiples of earnings subjectmultiples. Though we do not currently plan to our ability to obtain the capital required for any such acquisition.do so, we may develop additional Burger Time locations under certain circumstances. Once acquired, we will operate the business or businessesacquired business(es) with a shared central management organization. Assuming we are successful in acquiring an operating business, following the acquisition, we expect tomay pursue expansion in the number of locations and will implement programs to increase comparable storecomparable-store sales and profits. One possible growth strategy comprises the acquisition of operating assetsprofits and a subsequent franchise rollout of the acquired business, which management may conclude is an appropriate growth plan. Management of a franchise business will expose the Company to additional risks that we do not currently face.

Our principal business plan is to grow in the foodservice industry. We may develop additional Burger Time locations through the acquisition and conversion of existing properties. However, we expect our focus will be to identify and complete acquisitions of existing restaurant units and multi-unit chains which could be operated and expanded through the addition of new locations.boost brand awareness

Our Corporate History

The Company was originally incorporated in the state of Delaware as Hartmax of NY, Inc. in January 2016 with no assets or operations, and, until2016. Prior to the Share Exchange, described below,the Company was majority-owned by affiliates of the placement agent in the 2018 Private Placement described below. Upon the closing of the 2018 Private Placement, the Company, and BTND, LLC, a Colorado limited liability company, which we refer to as BTND,“BTND,” entered into a Share Exchange Agreement whereby the members of BTND exchanged all of their membership interests in BTND were exchanged for shares of our common stock comprising 85.9% of the outstanding shares of our Company, without giving effect to the sale of any securities sold in the 2018 Private Placement (the “Share Exchange”). Two affiliates of the placement agent together held 11.7% of our common stock as of the closing of the Share Exchange, without giving effect to the sale of any securities sold in the 2018 Private Placement. After giving effect toFollowing the Share Exchange, the Company became the sole member of BTND and BTND’s managing member, Gary Copperud, became the chief executive officer of the Company. Following the Share Exchange, the Company changed its name to BT Brands, which isInc. Concurrent with the parent company of BTND, which in turn became a wholly owned operating subsidiary ofShare Exchange, Maxim Group, LLC acted as the Company.

In July 2018, we completed a private placement of our securities in which we issued and sold an aggregate ofagent for 205,002 shares of our common stock at a purchase price of $3.00 per share and warrants to purchase up to 102,503 shares of our common stock with an initial exercise price equal toof $4.00 per share, for which Maxim Group, LLC acted as the placement agent (the “2018 Private Placement”). We received approximately $615,000 in gross proceeds and $492,266 in net proceeds from the sale of the securities in the 2018 Private Placement. After deducting placement agent fees and other expenses payable by us in connection with the 2018 Private Offering, we received net proceeds of approximately $492,266.

On June 13, 2019, the Company amended and restated its certificate of incorporation to change its corporate name to “BT Brands, Inc.” to better reflect its multi-faceted growth plan,plans and to adopt certainspecific provisions in line with its status as a public company. On June 13, 2019, the Company adopted amended and restated bylaws also to reflect the Company’s status as a public company.

On June 12, 2020, the holders of 100% of our outstanding shares of common stock adopted resolutions approving the change of corporate domicile from Delaware to Wyoming. The Company affected the reincorporation by the filing of the appropriate documents with Delaware and Wyoming and asAs of December 18, 2020, the Company isbecame domiciled in Wyoming.

On November 12, 2021, we completed a public offering of 2,400,000 units of our securities at a public offering price of $5.00 per unit, each unit comprising one share of common stock and one warrant to purchase one share of common stock at an initial exercise price of $5.50 per share. On November 12, 2021, the underwriters of the offering exercised their option to purchase 360,000 Warrants for $3,600 under the over-allotment option, and on November 16, 2021, the public offering closed. The net proceeds to the Company from the offering, including the exercise of the underwriter’s option to purchase additional warrants, were approximately $10.7 million, excluding any proceeds from the exercise of warrants, after deducting underwriting discounts and commissions and payment of estimated offering expenses of approximately $1.3 million.

The Burger Time brand originated in August 1987 with the opening of theits first restaurant in Fargo, North Dakota. Over the next five years, several additional Burger Time restaurants were opened in Minnesota, North Dakota, and South Dakota. In 2005, the restaurant assets were sold to STEN Corporation, a public company of which Kenneth Brimmer, our Chief Operating Officer, Chairman and member of the board of directors, and Gary Copperud, our Chief Executive Officer and a member of our board of directors, were officers and directors. In May 2007, BTND purchased the Burger Time assets from STEN Corporation. Gary Copperud was the managing member of BTND from the acquisition in 2007 until the closing of the Share Exchange and 2018 Private Placement.

Since 2007, BTND from time to time sold restaurant assets, including the underlying real property resulting in the closing of the stores located on the respective properties, and BTND has closed two other stores upon the expiration of the leaseholds on which they were located. In December 2018, we closed a store located in Richmond Indiana which was open for only 18 months.

Burger Time Restaurants

Menu

At our Burger Time restaurants, we seek to give our customers “moremore good food for their money”money and to deliver it “hot ‘n fresh.”

Our Burger Time restaurants feature a wide variety of juicy, flame broiledflame-broiled burgers that we refer to as “Bigger Burgers” because they are made with approximately 25% more meat and are larger in diameter than the typical quarter poundquarter-pound burger offerings served by our competitors. Our burgers are custom made to our specifications by our supplier, with no fillers, only beef and salt. Each burger is prepared to a customer’s individual order and is served hot and fresh. Burger favorites include a mushroom Swiss burger, a jalapeno burger, and a full poundfull-pound burger to satisfy the heartiest appetite. Other entrees items include chicken sandwiches, pulled pork sandwiches, and chicken chunks. Our burgers and sandwiches are served on fresh buns and are topped generously with generous helpings of top-tier condiments. We offer an array of traditional and signature sides, many of which have evolved into regional favorites, such as large cut battered onion rings, cheese curds, fried pickle spears, and chicken fries. We also offer soft drinks and other reasonably priced food and beverage items. From time to time,In addition, we offer specialty sandwiches and wraps at similar price points.points from time to time. Our limited menu is designed to deliver quality across all products, a high taste profile, and speedy delivery.

Our objective is to serve customers within 60 seconds of their arrival during the peak day parts of lunch and dinner and within 3 minutes at other times. We can achieve this based on our single and double drive-thru format and on our integrated restaurant design and equipment lay-out that allows uslayout to deliver exceptional food with fast service times. Our restaurants have a computerized point-of-sale system which displays each item ordered on a monitor viewed by food and drink preparers. This enables the preparers to begin filling an order before the order is completed and totaled, thereby increasing the speed of service to the customer and the number of sales per hour.

One of our key operating strategies is to minimizemanage inventory and storage requirements mandatingwith frequent deliveries, which ensuresensuring that our food is always fresh.

OurSubject to seasonal and local conditions, our restaurants are generally open seven days a week from 10 am to 10 pm seven days a week, for lunch, dinner, and late-night snacks and meals. We also have recently introduced on-lineonline ordering through our website with curbside delivery.

We believe that our restaurants appeal to a broad spectrum of consumers, but weconsumers., We cater to consumers who appreciate the size and variety of our burgers, the value for the money proposition offered by our bigger burgers, and the speed and efficiency offered by our single and double drive-thru windows.

Locations

The table below provides basic information about each of our restaurants.

___________

We own the real estate on which all but one of our ten operating restaurants are situated. We lease the property on which one of our Sioux Falls, South Dakota restaurants is situated.located. The Sioux Falls location is leased on a month-to-month basis, for which we pay a monthly rent of $1,600 to a third party.

All of our owned properties are subject to mortgages secured by our real and personal property. At the endOn June 27, 2021, we refinanced most of fiscal 2020,our existing mortgage debt, which bore interest at 4.75%. As of January 2, 2022, we had $3,027,971 in contractual obligations relating to amounts due under mortgages on the real property on which our stores are situated. Our monthly required payment is approximately $3.2 million in outstanding mortgage notes payable on our owned locations. Interest on most$22,700. Under the terms of the notesrefinanced mortgage debt, our nominal interest cost is 3.45% fixed at 4.75%, two of our notes have a fixed rate of 5.50%. One offor the notes has an adjustable rate based on the five-year Treasury Note rate in 2021, with a floor of 4.00%.next ten years. In addition to being secured by the restaurants and other property at the sites, each mortgage note is also personally guaranteed by Gary Copperud, our Chief Executive Officer.

Our restaurants are in commercial and mixed-use zoning districts near where our target customers work which positionsand live positioning the restaurants for lunch and dinner visits.

Burger Time Restaurant Design

Our Burger Time units are free-standing facilities with single or double drive-thru capability and walk-up service windows. The menu, store layout, and equipment are designed to work together to allow us to offer exceptional food with fastrapid service times. This integrated design allows for maximumseeks to maximize food output with minimal labor.

Burger Time stores have a highly visible, distinctive look that is intended to appeal to customers of all ages. Historically, Burger Time stores have ranged from 600 to 1000 sq. ft. Regardless of its size, each restaurant is designed for maximum financial and operational efficiency, with only four employees required to effectively staff a store.store effectively. As a result of their small size, our restaurants can be constructed on as little as 15,000 square feet of land. Because of the small size of the structure, ourOur restaurants generally require a smaller capital investment and have lower occupancy and operating costs per restaurant than traditional quick-service competitors. The size of the facility also permits somewhat greater flexibility with respect to the selection offor selecting prospective sites for restaurants.

Our Burger Time design encompasses a red and white structure and features a single or double drive thru.drive-thru. The roof overhangs to protect the drive thrudrive-thru windows from the weather. A walk-up service window is situated at the front of each restaurant. Our design and color scheme are intended to convey a message of “clean and fast” to the passing motorist. Most of ourOur restaurants do not provide an interior dining area but offer parking and a patio for outdoor eating.

Staffing

Each restaurant employs twelveeight to sixteen employees, including a manager and an assistant manager. Work shifts are staggered and vary in length of time to ensure superior customer service during our busiest times. We are focused on customer service, and we seek to staff our stores with personnel who are friendly and customer focused.customer-focused personnel.

We have enjoyed a long relationship with many of the managers of our restaurants, several of whom have been with Burger Time for more than seven years. We will seek to establish similar relationships with the managers joiningwho join us in the future.

Our highly experienced managers train new assistant managers in all facets of a restaurant’s operations. Other personnel can beare trained in a matter of days.

Our manager training stresses food quality;quality, fast, friendly customer service; restaurant cleanliness; and proper quick-service restaurant management operations of a quick service restaurant.operations. We also focus on food safety and sanitation, employment laws and regulations, and systems to control food and labor costs. All managers and assistantsassistant managers are required to obtain the required food safety (HACCP) training and obtain the Certification applicable to their location.

Our managers and assistant managers are full timefull-time employees. We support our managers by offering competitive wages, including incentive bonuses tied to unit performance. Most other staff members are part timepart-time employees.

Our future growth and success are highly dependent upondepend on our ability to attract, develop and retain qualified restaurant management and hourly staff members, which may be challenging.

Restaurant Reporting

Each restaurant has a computerized point-of-sale system monitored by the management of the restaurant.restaurant’s management. With this system, managers can monitor sales, labor, customer counts, and other pertinent information. This information allows a manager to better control labor utilization, inventories, and operating costs. Information is reported up to our corporate staff where itstaff. It is analyzed to maximize cost efficiencies in food and labor costs, and inventories and customer counts on a weekly, basis and profit and loss statements and balance sheets on a monthly basis.monthly.

The general manager of each restaurant reports directly to a Director of Operations, who in turn reports to our Chief Operating Officer, who oversees all aspects of restaurant operations, including kitchen operations, restaurant facility management, new restaurant openings, and the roll-out of key operational initiatives. All our restaurants prepare detailed monthly operating budgets and compare their actual results to their budgets.

Purchasing and Distribution

We purchase most of our food, paper, packaging, and related supplies from Sysco Corporation, the nation’s largest distributor of food products. Sysco distributes these supplies to our restaurants on a frequent and routine basis. Typically, our inventory of food and supplies is never more than $5,000usually does not exceed $10,000 at any individual restaurant. This ensuresThese procedures ensure that our food is consistently fresh and frees cash flow for other purposes. Our agreement with Sysco expires on May 30, 2021. We have customarily entered into a new agreement with Sysco every two years.2022, and will automatically be extended for additional one-year terms unless terminated by either party. Either party may terminate the agreement after the initial year with 180 days’ notice or in the event of a material breach that is not cured within 60 days. The agreementIn addition, Sysco may be terminated by Sysco interminate the event thatcontract if we fail to pay any amounts owed, or if, in Sysco’s sole judgment, either our financial position deteriorates materially, or Sysco becomes aware of circumstances that would materially impact our ability to meet our financial obligations.

We are party to a five-year exclusive beverage service agreement under which weagreement. We have agreed for mostBurger Time locations to purchase our beverages, other than coffee, tea, orand milk, from Pepsi-Cola Bottling of Fargo.,PepsiCo, including its affiliated bottlers, through December 21, 2025. Under this agreement, PepsiPepsiCo provides to us economic incentives for being an exclusive supplier and provides beverage-dispensing equipment free of charge. Either party may terminate the agreement in the event of a material breach that is not cured within 30 days.

Beef is our largestmost significant product cost item and is expected to remain such for the foreseeable future. FluctuationsAs a result, fluctuations in supply and prices can significantly impact our financial results.

Marketing and Advertising

Our marketing efforts for Burger Time are intended to convey the principles that we believe attract our core customers – we provide our patrons with more good food for their money by offering them “a bigger burger”burger,” and we give it to them “hot ‘n fresh.”

To date, our marketing and advertising spend hashave been principally allocated to social media with limited advertisements in newspapers and radio in the geographic areas in which our restaurants are located. In addition, we have employed product discount coupons, live remote broadcasts, customer contests, and direct mailings. We also utilize marketing incentives from our suppliers whenever possible. We recently introduced an on-lineonline ordering capability and curbside delivery program through our website, and wewebsite. We expect to develop an increased emphasis onemphasize direct data basedatabase marketing supplemented by social media tools such as Facebook, to promote our brand and local stores. Collectively, however, our marketing-related expenditures have historically comprised less than 1% of our net revenues.

We believe our restaurant sales have traditionally, and generally, been derived from drive-by traffic and dedicated return visits from loyal customers. However, we recognize that as we expand our restaurant base, our marketing and advertising expenditures may need to increase. We further expect that as we open new restaurants in existing geographic areas, we will be able to take advantage of operating and marketing efficiencies resulting from the “clustering” of our restaurants.

We expect to develop and deploy a more sophisticated marketing campaign, including an expanded social media presence, intended to build consumer brand awareness of our restaurants.

Dairy Queen Franchise

In October 2015, we acquired a 99% ownership interest in a Dairy Queen franchise in Ham Lake, Minnesota. The franchise’s remaining 1% ownership interest in the franchise is ownedheld by the General Manager of the location, who possesses certainspecific Dairy Queen qualifications and whose ownership is required under the operating agreement with the franchisor.

Because we are a franchisee, we are party to a franchise agreement with Dairy Queen that, among other things, restricts our menu offerings at this location to the established Dairy Queen menu and severely limits our flexibility in the operating model we may employ at this location. Specifically,Expressly, we are prohibited from selling any Burger Timenon-Dairy Queen-approved items at this franchise location, and we may not market this restaurant as a part of our Burger Time family.Time.

We have no plans at this time to enter into any other franchise agreements with Dairy Queen or any other national chain of restaurants, as we believe our profitable future can best be realized by expanding the Burger Time brand or by acquiring eitherunrelated restaurant business assets or another restaurant chain.businesses. However, shouldwe may consider it if we become aware of anotheran attractive opportunity to assume control of a Dairy Queen or other franchise we may consider it.

restaurant.

Burger Time Restaurant Economic Model

Our Burger Time restaurant economic model is based on three principles: a low capital investment, low conversion and incremental expenses, and lean and disciplined operating efficiencies. For example, in the case of our Burger Time locations, because we do not offer interior seating, our restaurant footprint is small, generally around 650 sq. ft.,square feet, which can be situated on a parcel of real estate as small as 15,000 sq. ftft. (approximately 0.344 acres), which includes sufficient space for parking and outdoor seating. While some of our newer restaurants have been larger, enabling us to offer some limited in-store seating, our basic model remains the same andsame. As a result, our real estate costs remain relatively low whether we purchase or lease, remain relatively low.lease.

Operationally, we take several steps to maintain efficiency, including maintaining inventory of no more than approximately $5,000$10,000 per store at any given time (which also has the advantage of allowing for frequent deliveries of fresh food).

Our Burger Time restaurant investment model targets a total cash investment of between $325,000 and $535,000 or an average of $430,000. Real estate and finance costs vary materially by location but, assuming the average investment figure applies, the amount allocated to the purchase ofpurchasing real estate would be approximately $225,000.

Costs to develop a new Burger Time location can fluctuate significantly, based on the number and timing of restaurant openings and the specific expenses incurred for each restaurant.

BasedGrowth Strategy

We are seeking to increase value for our shareholders in the foodservice industry. Our strategy is to acquire restaurant concepts and individual restaurant properties at attractive earnings multiples. Though we do not currently plan to do so, we may develop additional Burger Time locations under certain circumstances by acquiring and converting existing properties. Other key elements of our growth strategy encompass increasing same-store sales and introducing a campaign to boost brand awareness.

As we develop and extend our business into new food concepts and geographic areas, we expect to pursue strategies that will leverage our multiple brands, capacity, and reach, which may include:

As a public company, we may be presented with and would evaluate any opportunities to become a reverse merger candidate in the restaurant industry, whereby a significantly larger private restaurant chain seeks to avail itself of our public company status by merging with our business.

Expansion Through Acquisitions

We intend to make strategic and opportunistic acquisitions that provide an entrance into targeted restaurant segments and geographic areas. Restaurant businesses become available for acquisition frequently. We believe that we may purchase either individual restaurant properties or multi-unit businesses at prices that provide an attractive return on our investment. We may acquire operating assets where a franchise program is the focus of the acquired foodservice business. We intend to follow a disciplined strategy of evaluating acquisition opportunities to ensure and enable the accretive and efficient acquisition and integration of additional restaurant concepts. Successful execution of our acquisition strategy will allow us to diversify our operations both into other dining concepts and geographic locations.

In evaluating potential acquisitions, we may consider the following characteristics, among others that management considers relevant to each opportunity:

Assuming we successfully acquire new businesses, we will operate the business or businesses with a shared central management organization. Following the acquisition, we expect to pursue a growth plan to expand the number of locations and increase comparable store sales and profits, as described below. We anticipate that by leveraging our management services platform, we will be able to achieve post-acquisition cost benefits by reducing the corporate overhead of the acquired business. If we acquire one or more restaurant chains or individual units near each other, we believe the concentration of operations will provide economic synergies with respect to management functions, marketing, and advertising, supply chain assistance, staff training, and operational oversight.

Future Development of Additional Burger Time Restaurants

We may, in certain circumstances, consider developing an additional Burger Time location. Conditions which might give rise to developing additional Burger Time locations include the opportunity to acquire and convert a property that previously had operated as a fast-food establishment at a highly attractive price in a location that fits naturally within Burger Time’s geographic footprint so that we may share service expenses, including advertising costs.

If we elect to open additional Burger Time restaurants, we expect that the development of these restaurants will, based on our experience, we believe that our new restaurants may require a minimum of six to nine months after opening or more, to achieve theirthe targeted restaurant-level sales and operating margin due to cost of sales and labor inefficiencies, especially with respect to restaurants that we open in new geographic areas. We have limited experience opening new restaurants; however, based upon our experience the initial 2-3 months shows a strong “honeymoon” effect as patrons try a new location. As is common in the restaurant industry, following the initial honeymoon period, we see sales stabilize at a lower level as we attract regular repeat customers with the goal of growing the base of customers reaching targeted sales levels in six to nine months and continue to grow in the future periods.margins. If we were to open restaurantsa Burger Time restaurant in new and untested markets, achieving targeted sales may take longer since the local population will not be familiar with our brand and it will take time to buildbuilding brand awareness.awareness takes time. How quickly new restaurants achieve their targeted sales and operating margin depends on many factors, including the level of consumer familiarity with our brand, as well as the availability of experienced managers and other staff. However, every restaurant has a unique opening sales pattern, and this patternwhich is difficult to predict. As a result, any number of restaurant openings in any single fiscal quarter, along with their associated opening expenses, could have a significant impact on our consolidated results of operations for that period. We believe that by a restaurant’s second full year of operations, we can achieve an annualized cash-on-cash return of approximately 30% of our investment, although there is no assurance that this target will be met. We determine the annualized cash-on-cash return based upon the free cash flow generated by the unit after all expenses including required capital improvement, compared to the net cash invested after deducting and mortgage financing secured before or after the unit is opened. This is the targeted return calculated based upon our new unit investment analysis and is based upon limited experience in opening new stores and there is no assurance the targeted returns will be achieved. “Cash-on-cash return” is calculated based on the restaurant-level earnings before interest, taxes, and depreciation and amortization (EBITDA), and is based upon the net equity investment by the Company in relation to EBITDA on an annualized basis. Our acquisition criteria seek to achieve a return in excess of the 30% target; however, as a result of the many risks and uncertainties surrounding an acquisition, there is no assurance this return will be achieved.

Growth Strategy

We are seeking to increase value for our shareholders in the foodservice industry. We expect to pursue the acquisition of multi-unit restaurant concepts and individual restaurant properties at attractive multiples of earnings. Once acquired, we will operate the business or businesses with a shared central management organization. Assuming we are successful in acquiring an operating business, following the acquisition, we expect to pursue a growth plan to both expand the number of locations and to increase comparable store sales and profits. One possible growth strategy comprises the acquisition of operating assets and a subsequent franchise rollout of the acquired business, which management may conclude is an appropriate growth plan. Management of a franchise business will expose the Company to additional risks that we do not currently face.

Our business plan is to grow through acquisitions in the foodservice industry. In addition, we may develop additional Burger Time locations through the acquisition and conversion of existing properties. We also expect to identify and complete acquisitions of existing restaurant units and multi-unit chains which could be operated and expanded through the addition of new locations.

The financing we received from the 2018 Private Placement did not provide sufficient capital to undertake the development of new Burger Time locations or complete a significant restaurant acquisition. Recently, we have been reviewing potential acquisitions that will allow us to leverage our existing infrastructure with established profitable locations as we seek a high return on our invested capital; however, we do not have any specific acquisitions planned. Any such acquisition likely will require raising additional capital to complete the purchase and to grow the business.

We will seek to acquire one or more existing restaurants and/or restaurant chains, including concepts that feature menu options that differ from the menu items we offer at Burger Time. Restaurant businesses become available for acquisition frequently and we believe that we may be able to purchase either individual properties or multi-unit businesses at prices providing an attractive return on our investment. Successful execution of our acquisition strategy will allow us to diversify our operations both into other dining concepts and geographic locations. This strategy may include one or more restaurants that lease locations from a third party as opposed to owning the real property on which the stores are located. This approach would result in a change to our historical core business model which was to own the real estate on which our restaurants operate. This approach may prove to be riskier to our business and less appealing to investors and potential sources of funding.

In all cases, implementation of our growth strategy is contingent upon the availability of adequate financing to fund both the acquisition and our expansion, of which we cannot be assured.

Expand Our Restaurant Base Through Acquisitions

The acquisition of an existing restaurant chain or individual restaurants combined with new restaurant development is expected to be the key driver of our growth strategy. We believe that there are numerous opportunities to acquire and open new restaurants in existing and new geographic areas. Initially, we plan to develop new restaurants in some of our existing markets to take advantage of operational and financial efficiencies. This approach can provide specific economic benefits including lower supply and distribution costs, improved marketing efficiencies and increased brand awareness.

From time to time, we may close restaurants based on operating metrics or other factors. We have closed only one restaurant since 2011 (Richmond, Indiana opened in 2017 and closed in 2018) and do not anticipate closing any restaurants in 2020 or in the foreseeable future thereafter. There is no guarantee that we will be able to increase the overall number of our restaurants. We may be unsuccessful in expanding within our existing markets or into new markets for a variety of reasons, including competition for customers, sites, employees, licenses and financing.

Increase Comparable RestaurantSame-Store Sales

Same-store sales growth reflects the change in year-over-year sales for the comparable store base. We believe that acquisitions of restaurants relativeintend to our comparable restaurant base will be our primary driver ofdeploy a multi-faceted same-store sales growth and increased revenue. However, we are considering waysstrategy to improve sales andoptimize restaurant performance. We will apply techniques proven in the restaurant industry to increase same-store sales at our Burger Time restaurants and our acquired properties and develop new approaches that reflect our corporate character and restaurant composition. We expect to develop a more aggressive on-line presence including a mobile app which could be downloaded by customersutilize customer feedback and usedanalyze sales data to drive immediate customer visits to our locations.introduce, test, and hone existing and new menu items. In addition, we will continueinvestigate using public relations and experiential marketing to create and offer seasonal and limited-time specialtiesengage customers. We expect our strategies to keep our menu fresh and our customers interested. We may require additional capital for such purposes, andincrease same-store sales will evolve as we cannot be certain that such capital will be available on terms acceptable to us or at all.acquire new restaurant concepts in new markets.

Increase Brand Awareness

Our loyal customer baseIncreasing brand awareness is important to the growth of our Company. We will develop and following is now entering a third generation ofimplement forward-looking branding strategies for our Burger Time devotees.concept and any acquired businesses. We will seek to leverage social media and employ targeted digital advertising to expand the reach of our brands and drive traffic to our stores. In order to develop and enhance brand awareness,addition, we intend to updatedevelop mobile applications that will allow consumers to find restaurants, order online and expand our web presence. We expect to create a complete web-based program designed around mobile usage, including introducing a web- based loyalty program. We will deploy internet advertising to match specific menu items targeted to specific demographic groups.receive special offers. We will deploy cross-over ads with radio and social media interacting with each other. We intendexpect our branding initiatives to develop social media campaignsevolve as we consummate acquisitions of restaurant concepts that appeal to distinct consumer markets in other markets. We may require additional capital for such purposes, and we cannot be certain that such capital will be available on terms acceptable to us or at all.differing geographic areas.

Trademarks and Service Marks

We have registered our trademarks “It’s Burger Time” and “Hot ‘n Now” with the United States Patent and Trademark Office. We believe that ourOur trademarks and service marks have valueare valuable to us and are importantessential to our marketing efforts. We may develop additional markstrademarks in the future. Our policy is to pursue registration of our marks whenever possible and to oppose vigorously any infringement of its marks.

Competition

The restaurant industry is highly competitive and is dominated by majorsignificant chains that possess substantially greater financial and other resources than we have. The industry is affected by changes in geographic competition changes inchanges; the public’s eating habits and preferences, local and national economic conditions affectingthat impact consumer spending, habits, population trends, and local traffic patterns. KeyThe industry’s critical elements of competition in our industry are the price, quality, and value of food products offered; quality and speed of service; advertising effectiveness; brand name awareness; restaurant convenience; and attractiveness of facilities. We compete primarily based on the value of food (portion size), price, food quality, and speed of service. A significant change in pricing or other marketing strategies by one or more of our competitors could have an adverseadversely impact on our sales, earnings, and growth. Our competition includes a variety of national and regional fast-food chains and locally ownedlocally-owned restaurants that offer carry-out, dine-in, delivery, and catering services, many of which have achieved significant brand and product recognition and engage in extensive advertising and promotional programs. Our competition in the geographic areas in which we operate includes McDonalds,McDonald’s, Burger King, Carl’s Jr., and Wendy’s.

Seasonality

Seasonal factors and the timing of holidays cause our revenue to fluctuate from quarter to quarter. Our revenue per restaurantBurger Time is typically slightly lower in the first and fourth quarters due to the impact of cold weather at our upper Midwest locations. Adverse weather conditions may also affect customer traffic, especially in the first and fourth quarters, when customers do not use our outdoor seating areas, which impacts the use of these areas and may adversely affect our revenue. Future acquisitions may have a different seasonal pattern than our Burger Time restaurants.

Employees

As of January 3, 2021,2, 2022, the Company had three members of its senior corporate personnel. Each of the Burger Time restaurants and the Dairy Queen franchise has both a manager, who is a full-time, salaried employee, and an assistant manager or supervisor, and a varying number of restaurant staff, all of whom are hourly employees. As of January 3, 2021,2, 2022, we had approximately 107 employees, of which 17 were full timefull-time, and 90 were part time.part-time. None of our employees are unionized or covered by collective bargaining agreements, and we consider our current employee relations to be good.

Marketable Securities

We have, from time to time, purchased publicly tradedpublicly-traded marketable securities. Historically, these securities consisted of investments in exchange-listed common stocks with published prices per share readily available.

Item 1A. Risk Factors.

As a smaller reporting company, as defined by Rule 12b-2 of the ExchangeSecurities Act of 1934, as amended, (the “Exchange Act”) and Item 10(f)(1) of Regulation S-K, the Company has elected to comply with certain scaled disclosure reporting obligations and therefore is not required to provide the information required by this item.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

A description of our restaurant properties appears above under the heading “BUSINESS—Locations.” We lease our executive offices, consisting of approximately 1,000 square feet located at 405 West Main Street, West Fargo, North Dakota, on a month-to-month basis at athe cost of $500 per month. In addition, effective January 2, 2022, we have agreed to reimburse Brimmer Company, LLC for the monthly rent of approximately $1,300 on approximately 1100 square feet in Minnetonka, Minnesota, where certain administrative activities are performed. We believe our current office space is suitable and adequate for its intended purposes and our near-term expansion plans.

Mortgages

We currently have mortgages on eachOn June 28, 2021, we refinanced most of our restaurant locations except two.existing mortgage debt, which bore interest at 4.75%. As of January 3, 2021,2, 2022, we had $3,049,971 in contractual obligations principally for amounts due under mortgages on the total amountreal property on which our stores are situated. Our monthly required payment is approximately $22,700. Under the terms of the loansrefinanced mortgage debt, we owe on those properties is approximately $3,200,000. Our monthly payments on these mortgages total $31,128. During 2020, two oflowered the Company’s mortgage lenders suspended and deferred current paymentsnominal interest cost from 4.75% to 3.45% fixed for a period of three months. A total of $93,602 in payments were deferred under these arrangements and the deferred amount was added to the final payments due under the mortgages.

next ten years.

Rental Properties

We currently lease the land for one of our Sioux Falls, South Dakota locations on a month-to-month basis, and the monthly rent weis $1,600. We also pay is $1,600.a combined total of approximately $1,800 for office space in West Fargo, North Dakota and Minnetonka, Minnesota. Both corporate locations are paid for and utilized on a month-to-month basis.

Regulation and Compliance

Our operations are subject to a wide range of federal, state, and local government regulations, including those relating to, among others, public health and safety, zoning and fire codes, labor, and franchising. Our failure to obtain or retain food or other licenses and registrations or exemptions wouldcould adversely affect the operations of our restaurants. We operate each of our restaurants in accordance with standards and procedures designed to comply with applicable laws, codes, and regulations. To date, we have not experienced and do not anticipate any significant problems in obtaining required licenses, permits, or approvals,approvals; however, any difficulties, delays, or failures in obtaining such licenses, permits, registrations, exemptions, or approvals in the future could delay or prevent the opening of, or adversely impact the viability of, a restaurant.

The development and construction of additional restaurants will be subject to compliance with applicable zoning, land use, and environmental regulations. We believe federal and state environmental regulations have not had a material effect on operations, but more stringent and varied requirements of local government bodies with respect to zoning, land use, and environmental factors could delay construction and increase development costs for new restaurants.

We are also subject to the Fair Labor Standards Act, the Immigration Reform and Control Act of 1986, and various federal and state laws governing such matters as minimum wages, overtime, unemployment tax rates, workers’ compensation rates, citizenship requirements, and other working conditions. A significant portion of the hourly staff is paid at rates consistent with the applicable federal or state minimum wage and, accordingly,wage. Accordingly, increases in the minimum wage will increase labor costs. We are also subject to various laws and regulations relating to any future franchise operations. We are also subject to the Americans with Disabilities Act, which prohibits discrimination based on disability in public accommodations and employment, which may require us to design or modify our restaurants to make reasonable accommodations for disabled persons.

Many states, counties, and cities have enacted menu labeling laws requiring multi-unit restaurant operators to disclose to consumers certain nutritional information or have enacted legislation restricting the use of certain types of ingredients in restaurants. Many of these requirements are inconsistent or interpreted differently from one jurisdiction to another. These requirements may be different or inconsistent with requirements that we are subject to under the ACA, which establishes a uniform, federal requirement for certain restaurants to post nutritional information on their menus. Specifically, the ACA requires chain restaurants with 20 or more locations in the United States operating under the same name and offering substantially the same menus to publish the total number of calories of standard menu items on menus and menu boards, along with a statement that puts this calorie information in the context of a total daily calorie intake. The ACA also requires covered restaurants to provide to consumers, upon request, a written summary of detailed nutritional information for each standard menu item and to provide a statement on menus and menu boards about the availability of this information upon request. While our ability to adapt to consumer preferences is a strength of our concepts, the effect of such labeling requirements on consumer choices, if any, is unclear at this time.

Currently, the Company is not engaged in the business as a “franchisor” and operates a Dairy Queen unit as a “franchisee“franchisee” of Dairy Queen. Franchise operations will be governed by state laws that regulate the offer and sale of franchises and the franchisor – franchiseefranchisor-franchisee relationship. Such laws generally require registration of the franchise offering with state authorities and regulate the franchise relationship by, for example, requiring the franchisor to deal with its franchisees in good faith, prohibiting interference with the right of free association among franchisees, limiting the imposition of standards of performance on a franchisee and regulating discrimination against franchisees in charges, royalties or fees. In addition, such laws may restrict a franchisor in the termination of a franchise agreement by, for example, requiring “good cause” to exist as a basis for the termination, advance notice to the franchisee of the termination, an opportunity to cure a default and a repurchase of inventory or other compensation.

Environmental Matters

Our operations are subject to extensive federal, state, and local laws and regulations relating to environmental protection, including regulation of discharges into the air and water, storage and disposal of waste, and clean-up of contaminated soil and groundwater. Under various federal, state, and local laws, an owner or operator of real estate may be liable for the costs of removal or remediation of hazardous or toxic substances on, in, or emanating from such property. Such liability may be imposed without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances.

We have not conducted a comprehensive environmental review of our properties or operations. No assurance can be given that we have identified potential environmental liabilities at our properties or that such liabilities willcosts would not have a material adverse effect on our financial condition.condition if assessed.

Item 3. Legal Proceedings.

We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us that may materially affect us.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

There is currently no public trading market for ourOur common stock and no such market may ever develop. In May 2019, our common stock was approved for quotationbegan trading on Nasdaq under the OTC Pink, but nosymbol “BTBD” on November 12, 2021. Our warrants issued as part of the units we sold in the initial public offering began trading has occurred to date.

We can provide no assurance that our common stock ever will be traded on any exchange or quotation medium or, if traded, that a public market will materialize.Nasdaq under the symbol “BTBDW” on November 12, 2021.

Holders

As of March 10, 2021, we had 5315, 2022, there were approximately 54 stockholders of record holders and 4,047,502of 6,461,118 shares of common stock issued and outstanding and one holder of record of 2,746,388 warrants issued and outstanding. A significant number of beneficial owners of our common stock and listed warrants hold their securities in street name.

Dividends

We have never declared or paid cash dividends on our capital stock. We do not anticipate paying cash dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings for use into support our operations and finance the operationgrowth and expansiondevelopment of our business. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects, the requirements of current or then-existing debt instruments and do not anticipate paying any cash dividends in the foreseeable future.other factors our board of directors may deem relevant.

Recent Sales of Unregistered Securities

During the fiscal year ended January 3, 2021, we did not issue any securities.

During the fiscal year ended December 29, 2019,2, 2022, we issued the following securities:

On October 11, 2019, we issued an aggregate of 4,500options to purchase 15,000 shares of common stock under the 2019 BT Brands, Inc. Incentive Plan (the “2019 Incentive Plan”) as stock awards to 30 employeesthree directors of the Company.Company in connection with their joining the board of directors. The options are exercisable at $5 per share at any time through 2031. The issuances of the securities under the 2019 Incentive Plan were exempt from registration under the Securities Act under Rule 701 promulgated under Section 3(b) of the Securities Act of 1933, as amended (the “Securities Act”) in that the transactions were under a compensatory benefit plan as provided under Rule 701. These shares were subsequently registered on Form S-8 under the Securities Act filed with the Securities and Exchange Commission on December 6, 2019.

Securities Authorized for Issuance under Equity Compensation Plans

In October 2019, the boardThe following information is as of directors of the Company and the holders of a majority of the outstanding shares of common stock adopted the 2019 Incentive Plan. Under the 2019 Incentive Plan, the Company reserved up to 500,000 shares of common stock for issuance to officers, directors, employees and consultants. A discussion of the 2019 Incentive Plan may be found under Item 11. Executive Compensation—Compensation Plans.January 2, 2022.

Item 6. Selected Financial Data.

As a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act and Item 10 (f)(1) of Regulation S-K, the Company has elected to comply with certain scaled disclosure reporting obligations and is not required to provide the information required by this Item.item.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of our financial condition and results of operation should be read in conjunction with the financial statements and related notes that appear elsewhere in this Annual Report. This discussion contains forward-looking statements and information relating to our business that reflect our current views and assumptions with respect to future events and are subject to risks and uncertainties that may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Fiscal Year

The Company’s fiscal year is a 52/53-week year, ending on the Sunday closest to December 31. The 52-week fiscal 2021 ended on January 2, 2022, and the 53-week fiscal 2020 year ended on January 3, 2021 and the 52-week fiscal 2019 year ended on December 29, 2019.2021.

Introduction

We own and operate ten fast foodfast-food restaurants, including nine Burger Time restaurants and one Dairy Queen restaurant, all of which are in the North Central region of the United States. Our Burger Time restaurants feature a wide variety of burgers and other affordably pricedaffordable foods such as chicken sandwiches, pulled pork sandwiches, sides, and soft drinks. Our Dairy Queen restaurant offers the established Dairy Queen menu consisting of burgers, chicken, sides, ice cream, and other desserts, and a wide array of beverages. Our revenues are derived from the sale of food and beverages at our restaurants.

Our Burger Time operating principles include: (i) offering bigger burgers and more valuea “Bigger Burger” to deliver our customers “more good food for the money;your money”; (ii) offering a limited menu to permit attention to quality and speed of preparation; (iii) providing fast service by way of single and double drive-thru designs and a point-of-sale system that expedites the ordering and preparation process; and (iv) great tasting quality food made fresh to order at a fair price. Our primary strategy is to serve the drive-thru and take-out segment of the quick-service restaurant industry.

Operationally, we take several steps to maintain efficiency, including maintaining inventory of no more than approximately $5,000$10,000 per store at any given time (which also has the advantage of allowing for frequent deliveries of fresh food).

Our Historically, our Burger Time investment model targetstargeted an average total cash investment of between $325,000 and $535,000. Real estate and finance costs may vary materially by location but, assuming the average investment figure applies, the amount allocated to the purchase ofpurchasing real estate would be approximately $225,000. These costs can fluctuate significantly, based on the number and timing of restaurant openings and the specific expenses incurred for each restaurant.

Our average customer transaction increased by approximately 4%7% in the fiscal 20202021 compared to 20192020 and currently is approximately $12.30. This recent increase is principally the resultbecause of a menu price increase implemented in the middle of 2020. OurMany factors influence our sales trends, are influenced by many factors and the environment remains challenging for smaller restaurant chains as competition from the major fast-food hamburger-focused business is intense.

In the fourth quarter of 2021, we completed an initial public offering of units of our securities at a public offering price of $5.00 per unit, each unit comprising one share of common stock and one warrant to purchase one share of common stock at an exercise price of $5.50 per share. The net proceeds to the Company from the offering, including the exercise of the underwriter’s option to purchase additional warrants, were approximately $10.7 million, after deducting underwriting discounts and commissions and payment of estimated offering expenses totaling approximately $1.3 million.

Material Trends and Uncertainties

There are industry trends whichthat may have a significant adverse effectan impact on our business. These trends principally relate to the rapidly changing area of technology and food delivery.delivery area. The major companies in the restaurant industry have rapidly adopted and developed applications for the smart phonesmartphone and mobile delivery, have aggressively expanded drive-through, take-home and delivery operations, and have developed loyalty programs and data basedatabase marketing supported by a robust technology platform. We expect these trends to continue as restaurants aggressively completecompete for customers. Further, the major QSR’sindustry participants have been increasingly willingcontinued to strategically discount prices through promotions such as a “dollar menu”.strategically. We expect these significant trends will continue.

The cost of food has increased over the last two years; however,years, and we expect prices to remain stable or decreasesee continued inflationary pressure continue and perhaps accelerate in 2021.2022. Beef costs wereincreased slightly in 2021, following stable prices in 2020 following an increase of2020. In 2021 beef price increased by approximately 5% in 2019.4% per pound. Given the competitive nature of the fast-food burger restaurant industry, it may be difficultchallenging to raise menu prices to fully cover future cost increases.increases fully. During 2020 and continuing in 2021, a significant increase in business volume contributed to improved profit margins. Additional margin improvements may have to be made through operational improvements,enhancements, equipment advances, and increased volumes to help offset any food cost increases due to the competitive state of the restaurant industry.

Labor will continue to beis a critical factor in the foreseeable future.operating our stores. In most areas where we operate our restaurants, there historically has been a shortage of suitable labor. ThisRecently restaurant staffing has resultedbecome more challenging, occasionally resulting in short hours and store closures. As a result of these challenges, we face higher wages as the competition for employees intensifies not only in the restaurant industry but in practicallyand all retail and service industries. It is crucial for theThe Company to developconsistently develops and maintainmaintains programs to attract and retain quality employees.

Increases in the federally and state mandatedstate-mandated minimum wage may also impact our operations. While detailsA variety of proposals have not been determined the initial proposal by the Biden Administration includes a proposalmade to increase the federal minimum wage to $15 per hour.hour, and state and local governments have, in some cases, implemented minimum wage rates. In North Dakota, the minimum wage is set at the federally mandated minimum wage of $7.25 per hour and thehour. The rates are annually adjusted to reflect any increase in the cost of living. South Dakota has established a minimum wage of $9.10 per hour, which is annually adjusted to increase with the cost of living. Minnesota’s minimum-wage rate for small employers, such as us, is $8.04 per hour. OurOn average, our hourly employees earn a wage of on average of approximately $12 to $15 per hour. An increase in the minimum wage to $15 per hour would adversely impact our profit margins.

InSince March 2020, we have faced the World Health Organization declared coronaviruseffects of COVID-19 and its more recent variants as a global pandemic. A health pandemic is a disease outbreak that spreads rapidlyhas been both unpredictable and widely by infection and affects many individuals in an area or population at the same time. This contagious disease outbreak, which increases and decreases in intensity and any related adverse public health developments,persistent. The COVID-19 pandemic has adversely affected workforces, customers, economies, and financial markets globally potentially leading to an economic downturn. Whileand has disrupted the normal flow of the U.S. economy. For the most part, our stores have remained open for drive-through business. The response to COVID-19 has disruptedbusiness during the normal operations oflast year; however; many businesses experienced a disruption of normal operations. More recently, food service businesses, including ours.ours, have faced challenges attracting and hiring workers. The labor shortages may become more acute in the busier summer months.

MostIn 2020 extending into 2021, many states and local jurisdictions, including Minnesota, and North Dakota, havemandated limited or banned public gatherings and the wearing of masks to halt or delay the spread of disease. Under these emergency orders, certain essential services have remained open, including, but not limited to gas stations, pharmacies, grocery stores, food banks, convenience stores, take-out and delivery restaurants, banks, hospitals, and laundromats. Under the directions limiting public gatherings, regulators have generally allowed drive-through restaurant services to remain open. To date, our restaurants have remained open, although we have curtailed hours at some hoursstores and have experiencesexperienced temporary restaurant closures while locations have been cleaned and employees tested. Thus far, we have been able to reopen after two or three days.days after such temporary closing. Local, regional, or national governments may, at any time, implement directives that further limit or order our business to close or take other measures intended to mitigate the spread of disease. Further, some customers may choose to remain in self-imposed isolation and avoid public gathering places.

While a program to vaccinate a majority of Americans is currently in progress, it is not possible for us towe can’t predict the duration or magnitude of the effects of the outbreak and its impact on our business or the results of operations at this time. The conditions may influence restaurant customer traffic and our ability to adequately staff our restaurants, receive deliveries on a timely basis or perform functions at the corporate level. Further, such conditions could impact the availability of the menu items we offer and the ability of suppliers to deliver such products. We also may be adversely affected if jurisdictions in which we have restaurants impose mandatory closures, seek voluntary closures, or impose restrictions on operations. Even if such measures are not implemented, the perceived risk of infection or significant health risk may adversely affect our business. We expect to continue to navigate an unprecedented time for our company and industry.

As the restrictions on behavior eased with approved vaccines being distributed and administered, all the states in which we operate have lifted mandatory mask mandates, and we expect that, in most respects, restaurant industry operations will return to pre-pandemic norms. As a result, our restaurants may revert to more typical pre-pandemic operations and revenues, resulting in a decline in sales from recent levels. We may be subject to additional competition, as many restaurants initiated take-home and delivery services during the pandemic. Customers may have grown accustomed to a broader range of take-out foods beyond quick-service restaurant (QSR) options, which may negatively impact our revenue.

We continue to monitor the course of the pandemic and its impact on our customer base and the country. We can’t predict the future course of the pandemic in light of a multitude of factors, including the spread of new variants of the original coronavirus disease among the U.S. population and the efficacy of existing treatments and vaccines.

Growth Strategy and Outlook

As disclosed elsewhere in this Annual Report, we are focused on growing our business and building value for our shareholders. We are seeking to increase value for our shareholders in the foodservice industry. We expectOur principal strategy is to pursue the acquisition ofacquire multi-unit restaurant concepts and individual restaurant properties at attractive multiplesearnings multiples. Though we do not have plans to do so, we may, under certain circumstances, develop additional Burger Time locations. Other key elements of earnings. Onceour growth strategy encompass increasing same-store sales and introducing a campaign to boost brand awareness.

Expansion Through Acquisitions: We intend to make strategic and opportunistic acquisitions that provide an entrance into targeted restaurant segments and geographic areas. Restaurant businesses become available for acquisition frequently. We believe that we may purchase either individual restaurant properties or multi-unit businesses at prices that provide an attractive return on our investment. We may acquire operating assets where a franchise program is the focus of the acquired foodservice business. We intend to follow a disciplined strategy of evaluating acquisition opportunities to ensure and enable the accretive and efficient acquisition and integration of additional restaurant concepts. Successful execution of our acquisition strategy will allow us to diversify our operations both into other dining concepts and geographic locations. Assuming we successfully acquire new businesses, we will operate the business or businesses with a shared central management organization. Assuming we are successful in acquiring an operating business, following the acquisition, we expect to pursue growth strategies to both expand the number of locations and to increase comparable store sales and profits.

Our business plan is to growExpansion through acquisitions in the foodservice industry. In addition, weDevelopment of Additional Burger Time Restaurants: We may develop additional Burger Time restaurants under limited circumstances. Conditions which might give rise to developing additional Burger Time locations throughinclude the acquisitionopportunity to acquire and conversion of existing properties.convert a property that previously had operated as a fast-food establishment at a highly attractive price in a location that fits naturally within Burger Time’s geographic footprint so that we may share service expenses, including advertising and marketing costs.

Increase Same-Store Sales: Same-store sales growth reflects the change in year-over-year sales for the comparable store base. We alsointend to deploy a multi-faceted same-store sales growth strategy to optimize restaurant performance. We will apply techniques proven in the restaurant industry to increase same-store sales at our Burger Time restaurants and our acquired properties and develop new approaches that reflect our corporate character and restaurant composition. We expect to identifyutilize customer feedback and complete acquisitions ofanalyze sales data to introduce, test, and hone existing and new menu items. In addition, we will explore using public relations and experiential marketing to engage customers. We expect our strategies to increase same-store sales will evolve as we acquire new restaurant unitsconcepts in new markets. We intend to retain seasoned restaurant personnel to develop and multi-unit chains which could be operated and expanded through the addition of new locations.implement programs appropriate for each concept.

Our growth strategyIncrease Brand Awareness: Increasing brand awareness is predicated upon (i) building or acquiring new restaurants, (ii) growing comparable restaurant salescritical to our company’s growth. We expect to develop and profits,implement forward-looking branding strategies for our Burger Time concept and (iii) quickly and cost-effectively scaling our growth while leveraging our corporate services.

We believe that we will have opportunities to acquire new restaurantany acquired businesses. We intend to follow a disciplined strategy of evaluating acquisition opportunities to determine the operations are in markets meeting our demographic, real estateleverage social media and investment criteria. Our ability to successfully evaluate an acquisition opportunity and to understand the competitive landscape of a new market will be critical in making a successful acquisition. Additionally, our ability to identify, recruit and hire both salaried and hourly staff will impact our abilityemploy targeted digital advertising to expand as will changes in the legal environment, including increases to the minimum wage, which could impact our ability to expand into certain areas. Further, we believe that there has been an oversaturation of restaurants in certain areas which could decrease the number of markets that we believe will be attractive to expand into. Even if we can acquire restaurants, the new restaurants, and our Company, will be subject to various risks, some of which, including factors impacting our customers, such as declining economic conditions, are entirely outreach of our control.brands and drive traffic to our stores. We recently introduced a mobile app that allows consumers to find restaurants, order online, and receive special offers. We plan to deploy internet advertising. We will seekdeploy cross-over ads with radio and social media interacting with each other. We expect our branding initiatives to quickly and cost-effectively scale our growth by leveraging our general and administrative costs.

Our abilityevolve as we consummate acquisitions of restaurant concepts that appeal to acquire or open new restaurants is predicated on the availability of capital for such purposes. We cannot be certain that capital will be available to us on acceptable terms if at all.distinct consumer markets in differing geographic areas.

Results of Operations.

The following table sets forth, for the fiscal years indicated, our Consolidated Statements of IncomeOperations expressed as a percentage of total revenues. PercentagesThe percentages below may not reconcile because of rounding.

5352 Week Period Ended January 2, 2022 (Fiscal 2021) compared to the 53 weeks Ended January 3, 2021 (Fiscal 2020) compared to the 52 Week Period Ended December 29, 2019 (Fiscal 2019)

Net Revenues:

Net sales for Fiscal 20202021 increased $1,679,232$292,074 or 25.9%3.5% to $8,451,870 from $8,159,796 from $6,480,564 in Fiscal 2019.2020. The significant increase which occurredcontinued a trend beginning in March of 2020 and was principally the result ofdriven by the COVID-19 pandemic and the temporary shutdowncurtailment of many restaurant alternatives. The result of limiting indoor seating at restaurants was customers choosing drive-through alternatives, including Burger Time.

Restaurant sales for Fiscal 20202021 ranged from a low of $536,000$518,000 to a high of $1,043,500$1,124,000, and average sales for each Burger Time unit during the period was approximately $839,000$858,700 in 20202021, an increase of approximately 25%2.3% from $669,000$839,000 in 2019.2020.

Costs of Sales - food and paper:

Cost of sales - food and paper for Fiscal 2020 decreased2021 increased to 38.9% of restaurant sales from 37.9% of restaurant sales in 2020. This increase resulted from 39.7%an inflationary price environment that included increases in beef and paper costs, two of restaurant sales in Fiscal 2019. This decrease was mainly due to a price increase taken in the middle of 2020 during a relatively stableour principal cost environment.items.

Restaurant Operating Costs:

Despite increases in general restaurant operating costs during Fiscal 2020,During 2021, restaurant operating costs (which refer to all the costs associated with the operation of our restaurants but do not include general and administrative costs,expenses, depreciation and amortization, and impairment charges including the write-down of goodwill)charges) as a percent of restaurant sales decreasedincreased slightly to 80.8% in 2021 from 80.4% in 2020 from 89.2% in Fiscal 2019.2020. This increase was due primarily to price inflation on input costs, including food and labor, and the matters discussed in the “Cost of Sales,” “Labor Costs,” and “Occupancy and Other Operating Cost” sections below. The changes in restaurant-level costs from Fiscal 20192020 to Fiscal 2020 are principally the result of2021 were also impacted by a significant increase in restaurant sales volume in 2020 continuing into early 2021 combined with a 2021 menu price increase and may be detailed as follows:

Labor Costs:

For Fiscal 2020,In 2021, labor and benefits costscost decreased to 28.6% of restaurant sale from 33.0%28.2% of restaurant sales from 28.6% in Fiscal 2019.2020. The decrease wasresulted from the result of the significant increaseincreased activity levels beginning in business activity and the latter three quarters of 2020, which resulted in a favorable utilization of the fixed portion of labor costs.costs and the difficulty in hiring hourly labor, which resulted in in-store managers providing more coverage. The Company continues to benefit from minimal turnover in its unit restaurant management. Payroll costs are semi-variable, in nature, meaning that they do not decrease proportionally to decreases in revenue,revenue; thus, they decreaseincrease as a percentage of restaurant sales when there is a increasedecrease in restaurant sales volume.sales.

Occupancy and Other Operating Costs:

For Fiscal 2020,2021, occupancy and other costs declined as a percentage of sales to 13.7% or $1,151,382 compared to 13.9% of sales, or $1,136,257, compared to 16.5% of restaurant sales or $1,072,407,of $1,136,257 in Fiscal 2019 principally2020, a significant portion of these costs are fixed in nature and decline as a result of the significant increase in restaurant volume.percentage as revenues increase.

Depreciation and Amortization Costs:

For Fiscal 2020,2021, depreciation and amortization costs decreased 11.0%,increased 23.6% or $23,398,$44,638 to $189,389 (2.3%$234,027 (2.8% of sales) from $212,787 (3.3$189,389 (2.3 % of sales) in Fiscal 2019.2020. Depreciation costs have been declining asincreased due to capital additions in the Company’slast two years, including four stores having replaced point of sale equipment reachesand significant replacement of HVAC equipment at several locations. These capital additions offset the decrease resulting in a significant amount of the company’s equipment reaching a fully depreciated status and in 2020 decreased as percentage of sales because of the significant sales increase during 2020.status.

General and Administrative Costs

General and administrative costs increased 22.6%in 2021 decreased 39.4%, or $126,639,$270,733, to $416,791 (4.9% of sales) from $560,885 (6.9%$687,254 (8.4% of sales) in Fiscal 2019 to $687,524 (9.4% of sales) in Fiscal 2020. The increase was principally the result of increaseddecrease resulted from a decline in executive compensation, including bonus compensation based on the strong financial performance in 2020.

Impairment of Assets Held for Sale and Goodwill

In 2019, the Company recorded a $93,488 charge to provide for a loss resulting from the closing of its Richmond, Indiana location and the planned saletemporary reduction of the property. In 2020, an additional $100,000 impairment charge was recognized for related to the Richmond property and a $90,493 charge was recorded to recognize impairment of the majority of costs associated with property in St. Louis, Missouri which the company had originally acquired for development. Additionally, in 2019, there was a $248,500 charge to write-off goodwill arising from the 2018 Share Exchange.

one corporate position.

Income (loss) from Operations:

The income from operations was $980,712 in 2021 compared to an operating income of $529,368 in Fiscal 2020 compared to a loss from operations of $373,548 in Fiscal 2019.2020. The change in income from operations in Fiscal 20202021 compared to Fiscal 20192020 was due to the matters discussed in the “Net Revenues”, and “Restaurant Operating Costs” sections above and “Impairment and Goodwill Write-down Charges” sections above.the impact of $190,493 in asset impairment charges in 2020.

Interest expense:Expense:

In Fiscal 2020,2021 our interest expense decreased $30,084$4,896 to $177,757 (2.2%$172,861 (2.0% of restaurant sales) from $207,841 (3.2%$177,757 (2.2% restaurant sales) in Fiscal 2019.2020, resulting from costs associated with the June 2021 mortgage refinancing offset by a lower nominal interest rate.

Interest Income:

In 2021 the Company did not invest excess cash balances in interest-bearing accounts. The $103,623 increase in interest income in 2020 was the result of interest earned on the Company’s advances to Next Gen Ice, Inc. (NGI), a related company, and includesincluded $75,000 of interest income related to the value of equity received by the Company as part of a modification of the notes receivable.

Other Income:

The $466,758 of other income in Fiscal 2020 is the result of the Company having borrowedresulted primarily from borrowing $460,400 under the Paycheck Protection Program (PPP)(PPP”). The Company was informed by its lender in 2021 that the entire amount of PPP advances beenwas forgiven and therefore the anticipated loan forgiveness is reflected as “Other Income”. In accordance withIncome.” Under recent Federalfederal stimulus legislation, the PPP loan has beenwas treated as an SBA Grant during 2020 and2020. As a result, the funds advanced under the program have beenwere treated as non-taxable for federal income tax purposes in determining the provision for income taxes.

Net Income (loss):Income:

The net income $791,992was $607,851 for Fiscal 2020,2021, compared to a loss of $466,577$791,992 in Fiscal 2019.2020. The change in 2021 from Fiscal 2020 from Fiscal 2019 was primarily attributable to the matters discussed in the “Net Revenues,” “Restaurant Operating Costs,” “General and Administrative Costs,” and “Other Income” sections above due toand the matters discussed above.impact of the PPP grant income included in other income and partially offset by impairment charges in 2020.

Restaurant-level EBITDA:

To supplement the consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company uses restaurant-level EBITDA, which is not a measure defined by GAAP. This non-GAAP operating measure is useful to both management and, we believe, to investors because it represents one means of gauging the overall profitability of our recurring and controllable core restaurant operations. ThisHowever, this measure is not however, indicative of our overall results, nor does restaurant-level profit accrue directly to the benefit of stockholders, primarily due to the exclusion of corporate-level expenses. Restaurant-level EBITDA should not be considered a substitute for or superior to operating income, which is calculated in accordance with GAAP, and the reconciliations to operating income set forth below should be carefully evaluated.

We define restaurant-level EBITDA as operating income before pre-opening costs, if any, general and administrative costs, depreciation and amortization, and impairment charges. General and administrative costsexpenses are excluded as they are generally not specifically identifiablespecific to restaurant specificrestaurant-specific costs. Depreciation and amortization, and impairment charges are excluded because they are not ongoing controllable cash expenses and they are not related to the health of ongoing operations.

Liquidity and Capital ResourceResources

Since March of 2020, the COVID-19 pandemic has had a positive impact of the Company’s sales and liquidity. For the 5352 weeks ended January 3, 2021,2, 2022, the Company earned an after-tax profit of $791,992. On$607,851, and principally as a result of the Company’s public offering of common stock and warrants in November 2021, on January 3, 2021,2, 2022, the Company had $1,321,244$12,385,632 in cash and working capital of $371,693, an increase of $843,688 from the prior year-end deficit of $471,995.$11,639,269.

COVID-19 has had, and likely will to continueCovid-19 continues to have a significant adverse impact on the United States economy. ItHowever, as the situation is difficultrapidly changing, it is challenging to predict either the ultimate impacteffect of the COVID-19Covid-19 pandemic or theits impact of governmental responses on the United States economy in general, and specifically the impact on the quick service drive-through segment of the food servicefoodservice industry and on Company’s operating results and financial condition as the situation is evolving.condition.

In May 2020, the Company received pandemic-related loans totaling $487,900. Included in$487,900; of that amount, $460,400 was $460,400 borrowed under the Small Business Administration’s Paycheck Protection Program (“PPP”). The Company accounted for the loan’s proceeds as a government grant under International Accounting Standard 20 (“IAS 20”), Accounting for Government Grants, and Disclosure of Government Assistance. Under IAS 20, the terms ofloan is initially recorded as deferred income on the program,balance sheet. Forgiveness income is recognized systematically over the qualifying expenses incurred when the Company applied fordetermines that the forgiveness of the loans in 2020, anticipating its application qualified the loans for forgiveness. Following application by the Company, theis reasonably assured. The loans were forgiven in full 2021. As a result of the forgiveness of the PPP advances, the loan forgiveness iswas reflected as “Other Income” in 2020. In accordance with federal stimulus legislation, the PPP loans have been treated as SBA Grants and the funds advanced under the program have been treated as non-taxable for federal income tax purposes in determining the provision for income taxes. Also, in May 2020, the Company also borrowed $27,500 at no interest under the Minnesota Small Business Emergency Loan Program, andProgram. Under the loan terms, the Company will seek loan forgiveness in addition, two of the Company’s mortgage lenders suspended and deferred current payments for a period of three months during the first half of 2020. A total of $93,602 in payments were deferred under these programs. The Company expects to have sufficient cash assets to meet its obligations for more than a year from the date of this Annual Report.2022.

Our primary requirements for liquidity are to fund our working capital needs, capital expenditures, and general corporate needs, as well as to invest in or acquire companiesbusinesses that are synergistic with or complimentary to our business. Our operations do not require significant working capital, and, like many restaurant companies, we generallymay operate with negative working capital. We anticipate that working capital deficits may be incurred in the future and possibly increase.

Our restaurant sales are primarily received in cash or by credit card and our restaurant operations do not require significant inventories or receivables. In addition, we receive trade credit for the purchaseprimary sources of food, beverages and supplies, reducing the need for incremental working capital to support growth. Based on current information, we believe that we will have enough capital to meet our long-term debt obligations, working capital and recurring capital expenditure needs in fiscal 2021; however, our projections of future cash needsliquidity and cash flows may differare operating cash flows and cash on hand. We use this to service debt, maintain our stores to operate efficiently and increase our working capital. Our working capital position benefits from actual results, and the difference could be material. Iffact that we collect cash that may be generatedfrom sales from our businesscustomers at the point of sale or within a few days from our credit card processor, and in general, payments to our vendors are not due for thirty days.

Summary of Cash Flows

Cash Flows Provided by Operating Activities

Operating cash flow in 2021 was $813,955, which did not include a PPP advance that was not available in 2021, contributing to a decline in cash flow from operations is insufficient to continue to operate our business, we may be required to obtain more working capital. We may seek to obtain additional working capital through sales of our equity securities or through bank credit facilities or public or private debt from various financial institutions where possible. We cannot be certain that additional funding will be available on acceptable terms, or at all. Our plans indicate that$1,397,519 in 2020.

Cash Flows Used in Investing Activities

In 2021 the Company can meetfocused on its primary business, completing its initial public offering and building its working capital needs through 2022. If we identify sources for additional funding,reserves.

Cash Flows from Financing Activities

On November 12, 2021, the saleCompany completeda public offering of additional equity securities or convertible debt could result in dilutionUnits consisting of one share of common stock and one five-year stock purchase warrant to our shareholders. Additionally,purchase one common share at $5.50. The Company has the sale of equity securities or issuance of debt securities may be subjectright to redeem the warrants under certain security holder approvals or may resultconditions. The Company issued 2,400,000 common shares in the downward adjustmentoffering and 2,760,000 common stock purchase warrants. After deducting all fees and expenses, net proceeds from the offering were $10,696,575. 

Contractual Obligations

As of January 2, 2022, we had $3,49,9711 in contractual obligations relating to amounts due under mortgages on the exercise or conversion pricereal properties on which are stores are situated. Our monthly required payment is approximately $22,700. On June 28, 2021, the Company refinanced most of ourits outstanding securities. We can give no assurance that we will generate sufficient cash flows inmortgage debt with a new lender lowering its nominal interest cost from 4.75% to 3.45% fixed for the future to satisfy our liquidity requirements or sustain future operations, or that other sources of funding, such as sales of equity or debt, would be available or would be approved by our security holders, if needed, on favorable terms or at all. If we fail to obtain additional working capital as and when needed, such failure could have a material adverse impact on our business, results of operations and financial condition. Furthermore, such lack of funds may inhibit our ability to respond to competitive pressures or unanticipated capital needs, or may force us to reduce operating expenses, which would significantly harm the business and development of operations.next ten years.

Qualitative and Quantitative Disclosure about Market Risk

Commodity Price Risk

We are subject to volatility in food costs as a result ofdue to market risk associated with commodity prices. Our ability to recover increased costs through higher pricing is, at times, limited by the competitive environment in which we operate. We do not enter into pricing agreements with any of our suppliers to manage these risks. Beef is our largest single food purchase, and the price we pay for beef fluctuates weekly based on beef commodity prices. We do not currently manage this risk with commodity future and option contracts. A ten percent increase in the cost of beef would result in approximately $98,000$175,000 of additional food costs for the Company annually.

Seasonality and Inflation

Seasonal factors and the timing of holidays cause our revenue to fluctuate from quarter to quarter. Our revenue per restaurant is typically slightly lower in the first and fourth quarters due to holiday closures and the impact of cold weather at all our locations. Adverse weather conditions may also affect customer traffic, especially in the first and fourth quarters, when customers do not use our outdoor seating areas, which impacts the use of these areas and may adversely affect our revenue.

Management does not believe that inflation has had a material effect on income during the 2020 or 2019 fiscalin recent years. Increases in food, labor or other operating costs could adversely affect the Company’s operations. In the past, however, the Company generally has been able to increase menu prices or modify its operating procedures to substantially offset increases in its operating costs.costs substantially.

The cost of construction has also increased in recent years. We expect that costs to construct new or potential remodel restaurants will be more expensive than several years ago, but we expect to achieve higher restaurant sales volumes and margin improvements to offset these or additional construction cost increases. Construction cost increases could hurt our business and operations, particularly for new restaurant development.

Our business is subject to a wide range of federal, state and local regulations, which are subject to change in ways we cannot now anticipate. WeAs a result, we are uncertain as toabout the effect if any, that changes in the regulatory environment may have on our Company.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

Recently Issued and AdoptedRecent Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentiallyThere has been no impact on our financial positionstatements and our results of operations is disclosed in Note 1 toand financial condition as the result of the adoption of Recent Accounting Pronouncements.

Critical Accounting Policies and Estimates

Our discussion and analysis of operating results and financial conditions are based on our consolidated financial statements. The preparation of our consolidated financial statements appearing atin accordance with GAAP requires us to make estimates and assumptions that affect the endreported amounts of assets, liabilities, sales, expenses and related disclosures of contingent assets and liabilities. We base our estimates on experience, and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.

Our critical accounting policies are those that materially affect our financial statements and involve subjective or complex judgments by management. Although these estimates are based on management’s best knowledge of current events and actions that may impact us in the future, actual results may be materially different from the estimates. All of our significant accounting policies are disclosed in our Form 10-K for the fiscal year ended January 2, 2022.

Jumpstart Our Business Startups Act of 2012

We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this Annual Report.extended transition period. As a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

Subject to certain conditions set forth in the JOBS Act, we are also eligible for and intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We may take advantage of these exemptions until we are no longer an emerging growth company. We will continue to be an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30 of that year, (ii) the last day of the year in which we had total annual gross revenue of $1 billion or more during such year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the year following the fifth anniversary of the date of the completion of our initial public offering. 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

As a “smallersmaller reporting company”company, as defined by Rule 12b-2 of the Exchange Act and Item 1010(f)(1) of Regulation S-K, the Company has elected to comply with certain scaled disclosure reporting obligations and is not required to provide the information required by this Item.item.

Item 8. Financial Statements and Supplementary Data.

BT BRANDS, INC.

CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 3, 2021 AND DECEMBER 29, 2019

TOGETHER WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S REPORT

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Shareholders of BT Brands, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of BT Brands, Inc. (the “Company”) as of January 2, 2022 and January 3, 2021 and December 29, 2019 and the related consolidated statements of income, shareholders’ deficit,equity (deficit), and cash flows for the fiscal years then ended (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of January 2, 2022 and January 3, 2021 and December 29, 2019 and the results of theirits operations and theirits cash flows for 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’sCompany's management. Our responsibility is to express an opinion on the Company’sCompany's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”("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 and in accordance with auditing standards generally accepted in the United States of America. 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 audits, 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.

Boulay PLLP

We have served as the Company’s auditor since 2015.

PCAOB ID 542

Minneapolis, Minnesota

March 10, 202116, 2022

7500 Flying Cloud Drive Suite 800 Minneapolis, MN 55344   (t) 952.893.9320    |    2180 Immokalee Road    Suite 308    Naples, FL 34110   (t) 239.325.1100

BoulayGroup.com

     Member of Prime Global, An Association of Independent Accounting Firms

See Notes to Consolidated Financial Statements