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Item 8. Financial Statements and Supplementary Data

2024-04-01 compared with 2023-04-18 · 233 added, 209 removed, 868 unchanged (34% of the section changed)

5 unchanged sentences

We have audited the accompanying consolidated balance sheets of BT Brands, Inc.

(the “Company”) as of January 1, 2023 and January 2, 2022 and the related consolidated statements of operations, shareholders’ equity, 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 1, 2023 and January 2, 2022 and the results of its operations and its cash flows for the fiscal years then ended in conformity with accounting principles generally accepted in the United States of America.

(the “Company”) as of December 31, 2023 and January 1, 2023 and the related consolidated statements of operations, shareholders’ equity, 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 December 31, 2023 and January 1, 2023 and the results of its operations and its cash flows for the fiscal years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

20 unchanged sentences

CURRENT ASSETS

Cash and cash equivalents

Marketable securities

14 unchanged sentences

Accrued expenses

Income taxes payable

Total current liabilities

LONG-TERM DEBT, LESS CURRENT PORTION

DEFERRED INCOME TAXES

NONCURRENT LEASE OBLIGATIONS

2 unchanged sentences

SHAREHOLDERS' EQUITY

Preferred stock, $ 0.001 par value, 2,000,000 shares authorized, no shares outstanding at January 1, 2023 and January 2, 2022

Common stock, $ 0.002 par value, 50,000,000 authorized, 6,461,118 shares issued and 6,396,118 outstanding at January 1, 2023 and 6,447,506 issued and outstanding at January 2, 2022

Less cost of 65,000 common shares held in Treasury

Preferred stock, $ 0.001 par value, 2,000,000 shares authorized, no shares outstanding at December 31, 2023 and January 1, 2023

Common stock, $.002 par value, 50,000,000 authorized, 6,461,118 issued and 6,246,118 outstanding at December 31, 2023, and 6,396,118 outstanding at January 1, 2023

Less cost of 215,000 and 65,000 common shares held in Treasury

at December 31, 2023 and January 1, 2023, respectively

Additional paid-in capital

1 unchanged sentence

( 2,049,891 )

( 1,162,523 )

Total shareholders' equity

12 unchanged sentences

General and administrative expenses

Gain on sale of assets

Total costs and expenses

Income (loss) from operations

UNREALIZED LOSS ON MARKETABLE SECURITIES

Loss from operations

( 1,072,589 )

UNREALIZED GAIN (LOSS) ON MARKETABLE SECURITIES

INTEREST AND DIVIDEND INCOME

3 unchanged sentences

INCOME (LOSS) BEFORE TAXES

( 1,032,368 )

INCOME TAX (EXPENSE) BENEFIT

1 unchanged sentence

$ ( 887,368 )

$ ( 562,285 )

NET INCOME (LOSS) PER COMMON SHARE - Basic and Diluted

4 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Paid-in Capital

Treasury Stock

For the 52-week periods-

Balances, January 2, 2022

$ ( 600,238 )

$ ( 702,323 )

Common shares issued for fractional holdings

Stock-based compensation

Aggregate value of warrants purchased by underwriter

Issuance of 2,400,000 shares of common stock and 2,760,000 common stock purchase warrants, net of $1,315,422 in fees and expenses and $360,000 in excess of fair value of warrants purchased by underwriter

Shares issued in exercise of warrants

Treasury stock purchase

Balances, January 1, 2023

( 1,162,523 )

Stock-based compensation

Shares issued for exercise of warrants

Treasury stock purchase

Balances, January 1, 2023

Balances, December 31, 2023

$ ( 2,049,891 )

5 unchanged sentences

52 Weeks ended,

December 31, 2023

January 1, 2023

CASH FLOWS FROM OPERATING ACTIVITIES

Net Income (Loss)

$ ( 887,368 )

Adjustments to reconcile net income (loss) to net cash

provided by operating activities-

$ ( 562,285 )

Adjustments to reconcile net loss income to net cash provided by (used in) operating activities-

Depreciation and amortization

3 unchanged sentences

Stock-based compensation

Unrealized loss on marketable securities

Investment gains

Unrealized (gain) loss on marketable securities

Realized gain on sale of marketable securities

Loss on equity method investment

Gain on sale of property and equipment

Non-cash operating lease expense

Property tax liability settlement

Changes in operating assets and liabilities, net of acquisitions -

3 unchanged sentences

Income taxes payable

Net cash provided by operating activities

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

3 unchanged sentences

( 1,159,600 )

Acquisition of net assets of Village Bier Garten

Investment in Village Bier Garten

Investment in Bagger Dave's Burger Tavern, Inc.

( 1,259,999 )

Proceeds from sale of property and equipment

Purchase of property and equipment

2 unchanged sentences

( 25,662,523 )

Proceeds from sale of marketable securities

Net cash used in investing activities

Proceeds from the sale of marketable securities

Net cash provided by (used in) investing activities

( 11,037,547 )

CASH FLOWS FROM FINANCING ACTIVITIES

Margin loan to finance purchase of marketable secutities, net of payments

Net proceeds from sale of common stock and warrants

Broker margin loan (reduction)

Principal payment on long-term debt

Proceeds from exercise of common stock warrants

Proceeds from long-term debt

Principal payments on long-term debt

( 3,295,623 )

Purchase of treasury shares

Payment of debt issuance costs

Net cash provided by financing activities

CHANGE IN CASH

Net cash provided by (used in) financing activities

( 1,304,389 )

CASH, BEGINNING OF PERIOD

CASH, END OF PERIOD

CHANGE IN CASH snd CASH EQUIVALENTS

( 10,235,054 )

CASH and CASH EQUIVALVENTS, BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS, END OF PERIOD

SUPPLEMENTAL DISCLOSURES

Cash paid for interest

Excess of fair value of warrants purchased by underwriter

Cash paid for income taxes

7 unchanged sentences

was reincorporated in the State of Wyoming.

As of January 1, 2023, the Company owned and operated twelve restaurants and owned a 41.2% interest in an operator of six restaurants.

We own eight Burger Time restaurants in the North Central region of the United States, a Dairy Queen fast-food franchised location in suburban Minneapolis, Minnesota, collectively (“BTND”).

As of December 31, 2023, the Company owned and operated twelve restaurants and owned a 39.6%, as of year-end, interest in an operator of six restaurants.

During 2023 we collectively owned and operated eight Burger Time restaurants in the North Central region of the United States, and a Dairy Queen fast-food franchised location in suburban Minneapolis, Minnesota (“BTND”).

We closed stores in West St.

Paul in 2022 and in Richmond, Indiana, in 2018.

Paul location was sold in February of 2023 for a gain of approximately $ 313,000 , which will be recognized in the first quarter of 2023.

Paul location was sold in February of 2023 for a gain of approximately $ 313,000 .

The Richmond location is currently offered for sale.

In February, 2024, we closed a leased location in Sioux Falls, South Dakota.

The net book value of the closed location was approximately $ 69,000 .

We own Keegan’s Seafood Grille (“Keegan’s”), a dine-in restaurant located in Florida, Pie In The Sky Coffee and Bakery (“PIE”), a casual dining coffee shop bakery located in Woods Hole, Massachusetts, and the Village Bier Garten (“VBG”), a German-themed restaurant in Cocoa, Florida.

6 unchanged sentences

Our revenues are derived from food and beverages at our restaurants, retail goods such as apparel, private-labeled “Keegan’s Hot Sauce,” and other items that account for an insignificant portion of our income.

On June 2, 2022, the Company purchased 11,095,085 common shares representing 41.2 % of Bagger Dave’s Burger Tavern, Inc.

(“Bagger Dave’s”).

On June 2, 2022, the Company purchased 11,095,085 common shares at the time of the 2022 purchase our ownership represented 41.2 % ownership of Bagger Dave’s Burger Tavern, Inc.

We acquired the shares from its founder for $ 1,260,000 , or approximately $ 0.11 4 per share.

Following the investment, representatives of BT Brands were appointed to two of the three positions on Bagger Dave’s board of directors.

During 2023, Bagger Dave Following the investment, representatives of BT Brands were appointed to two of the three positions on Bagger Dave’s board of directors.

Bagger Dave’s specializes in locally sourced, never-frozen prime rib recipe burgers, all-natural lean turkey burgers, hand-cut fries, locally crafted beers on draft, milkshakes, salads, black bean turkey chili, and pizza.

2 unchanged sentences

Wayne, Indiana, and Centerville, Ohio.

Our investment in Bagger Dave’s is accounted for under the “Equity Method”.

Our investment in Bagger Dave’s is accounted for under the “Equity Method.” During the fourth quarter of 2023 BDVB, issued an additional one million shares reducing our ownership to approximately 39.6%.

Our Dairy Queen location is operated under a franchise agreement with International Dairy Queen.

We pay royalty and advertising payments to the franchisor as the franchise agreement requires.

Effective October 17, 2023, we agreed with International Dairy Queen to sell the business, which has a current book value at December 31, 2023 of approximately $ 438,500 , including remaining franchise agreement intangible asset, to an approved buyer.

Under the terms of the agreement with International Dairy Queen, we will continue to operate the location during the six-month period we plan to sell the business.

However, we may retain ownership of the physical assets, including the land and building.

Principles of Consolidation

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Most years consist of four 13-week accounting periods comprising the 52-week year.

Fiscal 2022 was the 52 weeks ending January 1, 2023, and Fiscal 2021 was the 52 weeks ending January 2, 2022, All references to years in this report refer to the fiscal years described above.

Reverse Stock Split

Our shareholders approved a 1-for-2 common shares reverse stock split effective January 25, 2021.

All outstanding common shares and per-share data presented herein reflect the effect of the reverse split.

Fiscal 2023 was the 52 weeks ending December 31, 2023, and Fiscal 2022 was the 52 weeks ending January 1, 2023;

all references to years in this report refer to the fiscal years described above.

Fair Value of Financial Instruments

7 unchanged sentences

The carrying values of cash, receivables, accounts payable and other financial working capital items approximate fair value at year-end due to the short maturity nature of these instruments.

Noncurrent investments include our net equity method investment of $ 1,065,187 in Bagger Dave’s and our $ 304,000 total investment in Next Gen Ice, Inc.

Noncurrent investments include our equity method investment of $ 688,806 in BDVB and our $ 304,000 total investment in Next Gen Ice, Inc.

In 2020, the Company received equity ownership in NGI as consideration for a loan to NGI.

Upon repayment of the note, $75,000 was attributed by us to the value of the equity received and this amount was reflected as additional interest income in 2020.

The fair value determined in 2020 continues to be reflected as the value of the investment.

On February 12, 2022, we invested $229,000 in Series A1 8% Cumulative Convertible Preferred Stock of NGI which included a five-year warrant to purchase 34,697 shares at $1.65 per share .

Bagger Dave’s files its quarterly and annual financial reports with OTCMarkets, Inc.

On February 12, 2022, we invested $229,000 in Series A1 8% Cumulative Convertible Preferred Stock of NGI, including a five-year warrant to purchase 34,697 shares at $1.65 per share .

BDVB files quarterly and annual financial reports with OTCMarkets, Inc.

The listing with OTC Markets does not require the information to be audited.

Presented below is summary information filed by Bagger Dave’s for the fiscal years ended December 25, 2022, and December 26, 2021.

Below is summary information filed by Bagger Dave’s for the fiscal years ended December 31, 2023, and December 25, 2022.

Unaudited summary financial information for Bagger Dave’s -

7 unchanged sentences

Total liabilities and stockholders’ equity

Statements of Operations information (52 weeks ended) -

Statements of Operations information -

Costs and expenses

1 unchanged sentence

( 8,867,037 )

Net income (loss)

$ ( 852,461 )

Fair Value Measurements

Following is a summary of the fair value of Level 1 investments.

As required, fair values have been determined by reference to quoted market prices in active markets as of January 1, 2023:

Fair Value Carrying Amount

The following is a summary of the fair value of Level 1 investments.

As required, fair values have been determined by reference to quoted market prices in active markets as of the indicated year-end:

December 31, 2023

January 1, 2023

Corporate bond fund

Common stocks

For purposes of reporting cash and cash flows, cash includes money market funds and is net of outstanding checks and includes, amounts on deposit at banks and deposits in transit and excludes transfers out in transit and includes brokerage account money market funds which are not insured deposits.

Cash and Cash Equivalents

Cash and cash equivalents includes United States Treasury Bills with a maturity at the time of purchase of 3 months or less.

Our bank deposits often exceed the amounts insured by the Federal Deposit Insurance Corporation.

In addition, we maintain cash deposits in brokerage accounts including money funds in excess of the amounts covered by insurance.

We do not believe there is a significant risk related to cash.

Short-Term Investments

Marketable Securities at January 1, 2023, include $ 5,000,000 face value of a United States Treasury Bills maturing March 16, 2023, purchased for $4,907,378 in August 2022 .

At January 1, 2023, the Treasury Bills were planned to be held until maturity and had an amortized cost value of $ 4,964,395 .

The amortized cost value approximates fair value.

Broker Margin Loan

The broker margin account loan of $ 791,372 bears a variable margin interest rate as set by the lending brokerage firm of 4.6 % on January 1, 2023.

The broker margin account loan of $ 115,899 at December 31, 2023 and $ 791,372 at January 1, 2023, bear a variable margin interest rate as set by the lending brokerage firm 6.8 % and 4.6 % on December 31, 2023 and January 1, 2023 respectively.

This broker margin loan is reflected as a current liability.

The margin loan is collateralized by the Treasury Bills and any other marginable securities held in the margin account and is due on demand pursuant to Federal Reserve margin account regulations and the margin account agreement.

The loan is collateralized by Treasury Bills and any other marginable securities held in the margin account and is due on demand under Federal Reserve margin account regulations and the margin account agreement.

Revenue Recognition

2 unchanged sentences

Under ASC 606, revenues are recognized when control of promised goods or services is transferred to a customer in an amount that reflects the expected consideration for those goods or services.

Our sales are recognized at the point of purchase, presented net of discounts and incentives net of applicable sales taxes.

Our sales are recognized at the point of purchase, net of discounts and incentives net of applicable sales taxes.

In these consolidated financial statements, receivables consist of rebates due from a primary vendor.

2 unchanged sentences

Property and equipment are stated at cost.

Depreciation is computed using the straight-line method over the estimated useful lives ranging from three to thirty years.

We review long-lived assets to determine if the carrying value of these assets may not be recoverable based on estimated cash flows.

Depreciation is computed using the straight-line method over the estimated useful lives or the term of the lease for leasehold improvements if less than its useful life:

We review long-lived assets to determine if their carrying value may not be recoverable based on estimated cash flows.

Assets are reviewed at the lowest level, for which cash flows can be identified at the restaurant level.

In determining future cash flows, significant estimates are made for the future operating results of each restaurant over its remaining life.

In determining future cash flows, significant estimates are made for each restaurant's future operating results over its remaining life.

If such assets are concluded to be impaired, the impairment recognized is measured by the amount by which the carrying value of the assets exceeds the carrying value of the assets.

Leasehold Improvements

Impairment and Disposal of Long-Lived Assets

Land, building and equipment, operating right of use assets and certain other assets, including definite-lived intangible assets, are reviewed regularly for impairment and whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability is measured by comparison of the carrying amount of the assets to the future undiscounted net cash flow expected to be generated and is determined at the restaurant level.

Recoverability is measured by comparing the carrying amount of the assets to the future undiscounted net cash flow expected to be generated, and it is determined at the restaurant level.

If an asset is determined to be impaired, the recognized impairment is measured by the amount by which the carrying amount of the asset exceeds the fair value.

We may sell an existing unit or close an operating unit and seek to liquidate the property.

We are in the process of abandonment of the property in the St.

Louis area in lieu of approximately $ 180,000 of unpaid property taxes.

Louis land and building were fully reserved in 2020 and real estate taxes have not been paid pending the disposition of the property including an additional $ 100,000 of accrued expense in the current year.

We are in the process of transferring the deed in lieu of payment of the taxes and anticipate the transfer will be completed in 2023 and we anticipate that the result will be a gain of approximately $180,000 reflecting the reversal of the accrued property taxes.

In the first quarter of 2023 we completed the abandonment of a property in the St.

Louis area in lieu of approximately $ 180,000 of property taxes.

and our results of operations include a gain of approximately $80,000 reflecting the reversal of the accrued property taxes and the remaining $ 100,000 is included in other income.

We closed stores in West St.

Paul in the fourth quarter of 2022 and in Richmond, Indiana, in 2018.

Paul location sale was completed in February of 2023 for a gain of $313,000, which will be recognized in the first quarter of 2023.

Paul location sale was completed in February of 2023 for a gain of $313,000 reflected in our 2023 statement of operations.

The Richmond location is currently offered for sale.

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Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse.

ASC 740 requires the nest of deferred tax assets and deferred tax liability be presented as a single amount on the balance sheet.

ASC 740 requires the net of deferred tax assets and deferred tax liability to be presented as a single amount on the balance sheet.

Per Common Share Amounts

6 unchanged sentences

These warrants were issued as a part of our November 12, 2021, initial public offering.

In addition, 102,503 private placement warrants are outstanding at an exercise price of $ 4.00 per share, and 16,401 Placement Agent warrants are outstanding at an exercise price of $ 3.30 per share.

At the end of fiscal 2023 and 2022, all outstanding warrants were exercisable at prices above the underlying stock’s market price and, therefore, were not dilutive.

6 unchanged sentences

Stock-Based Compensation

We recognize stock-based compensation as an expense in our consolidated financial statements.

In our consolidated financial statements, we recognize stock-based compensation as an expense.

Equity classified awards are measured at the grant date fair value of the award.

2 unchanged sentences

Segment Reporting

We follow the guidance of FASB Accounting Standards for reporting and disclosure on operating segments requiring segment disclosures about products and services, geographic areas, and significant customers.

We follow the guidance of FASB Accounting Standards for reporting and disclosure on operating segments, which require segment disclosures about products and services, geographic areas, and significant customers.

We have determined that we did not have separately reportable operating segments.

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Net property and equipment

(1) Reflected in Current Asset at January 1, 2023 and included in Other Assets, net on the Consolidated Balance Sheet at January 1, 2022.

Depreciation expense for 2022 and 2021 was $ 412,016 and $ 232,261 , respectively.

Depreciation expenses for 2023 and 2022 were $ 539,675 and $ 412,016 , respectively.

NOTE 3 – INTANGIBLE ASSETS

On January 1, 2023, based on the value of acquired assets, intangible assets comprise the following:

Estimated Useful Life

Original Cost

At year end 2023 and 2022 based on the value of acquired assets, intangible assets comprise the following:

December 31, 2023-

Covenants not to compete

Tradename assets are being amortized over 15 years at the rate.

Total amortization expense for 2022 was $ 37,022 .

The total amortization of intangible assets including the covenants not to compete will approximate $ 58,900 in both 2023 and 2024 and $ 40,500 in 2025 and $ 26,200 per year thereafter, for next the six years and approximately $ 7,500 in 2037.

January 1, 2023-

Covenants not to compete

Tradename assets are being amortized over 15 years.

Total amortization expense for 2023 and 2022 was $ 58,865 and $ 37,022 , respectively.

The total amortization of intangible assets including the covenants not to compete will approximate $ 58,900 in 2024, $ 40,500 in 2025 and $ 26,200 per year through 2036 and approximately $ 7,500 in 2037.

NOTE 4 – LEASES

Concurrent with acquiring Keegan’s net assets, we entered into a lease for approximately 2,800 square feet of restaurant space.

With Keegan’s acquisition, we entered into a lease for approximately 2,800 square feet of restaurant space.

The 131 -month Keegan’s lease provides for an initial rent of $ 5,000 per month with an annual escalation equal to the greater of 3 % or the Consumer Price Index.

2 unchanged sentences

At the inception of the lease, we recorded an operating lease obligation and a right-of-use asset of $ 624,000 .

The present value discounted at 3.75 % of the remaining lease obligation of $ 588,363 is reflected as a liability in the accompanying financial statements as of January 1, 2023.

The present value discounted at 3.75 % of the remaining lease obligation of $ 547,687 at December 31, 2023 $ 588,363 at the end of fiscal 2022 are reflected as a liabilities in the accompanying financial statements.

When we acquired the PIE assets, we entered into a lease for approximately 3,500 square feet of restaurant and bakery production space.

3 unchanged sentences

The PIE lease is accounted for as an operating lease.

At the inception of the lease, we concluded it was reasonably certain the initial five-year option would be exercised and recorded an operating lease obligation and a right-of-use asset of approximately $ 1,055,000 .

The present value discounted at 5 % of the remaining lease obligation of $ 995,206 is reflected as a liability in the accompanying financial statements as of January 1, 2023.

With the acquisition of VBG assets, we entered a five-year lease with the seller for approximately 3,000 square feet of restaurant space and access to an additional 3,000 square feet of shared entertainment and seating area.

At the inception of the lease, we concluded it was reasonably certain the initial five-year option would be exercised and recorded as an operating lease obligation and a right-of-use asset of approximately $ 1,055,000 .

The present value discounted at 5 % of the remaining lease obligation of $ 923,885 at December 31, 2023 and $ 995,206 at the end of fiscal 2022 are reflected as a liabilities in the accompanying financial statements.

The terms of the triple-net 60 -month lease provide for an initial rent of $ 8,200 per month with an annual escalation of 3 %.

3 unchanged sentences

At the inception of the lease, we recorded an operating lease obligation and a right-of-use asset of $ 470,000 .

The present value discounted at 4.5 % of the remaining lease obligation of $ 434,918 is reflected as a liability in the accompanying financial statements as of January 1, 2023.

Following is a schedule of the approximate minimum future lease payments on the operating leases as of January 1, 2023, including amounts assuming we exercise to extend leases where we believe that exercise of the option is likely.

2028 and thereafter

The present value discounted at 4.5 % of the remaining lease obligation of $ 344,376 as of December 31, 2023 and $ 352,100 at the end of fiscal 2022 are reflected as a liabilities in the accompanying financial statements.

The following is a schedule of the approximate minimum future lease payments on the operating leases as of December 31, 2023, including amounts assuming we exercise the option to extend leases where we believe that exercise of the option is likely.

Total future minimum lease payments

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Therefore, the discount rate represents our estimated incremental interest rate to borrow an amount approximating the aggregate lease payments collateralized by the property at the commencement of the lease.

The total operating lease expense for 2022 was $ 239,092 .

Cash paid for leases during the year totaled $ 207,000 , and variable expenses for leased properties were $ 16,584 .

We are a party to a month-to-month land lease agreement for one Burger Time location.

The net book value of the building on this land is approximately $ 18,500 .

The monthly lease payment is $ 1,600 plus the cost of property taxes.

We pay a monthly rent, for month-to-month arrangements, for corporate and administrative office spaces in West Fargo, North Dakota, and Minnetonka, Minnesota, for a combined monthly rent of approximately $ 2,200 .

The total operating lease expense for 2023 and 2022 was $ 298,567 and $ 239,092 , respectively.

Cash paid for leases was $ 282,000 in 2023 and $ 207,000 in 2022, and variable expenses for leased properties were $ 16,500 in 2023 and $ 17,000 in 2022.

We pay $ 550 per month under an annual rental agreement, for corporate and administrative office spaces in West Fargo, North Dakota, and $ 1,350 per month in Minnetonka, Minnesota, for a combined monthly rent of approximately $ 1,900 .

NOTE 5 – INCOME TAXES

Principally as a result of bonus tax depreciation allowing for depreciation of assets acquired in a business acquisition, the 2022 loss for tax purposes is approximately $ 1.4 million net operating loss carryforward that we believe will be fully realized in future periods.

Combined with other timing differences a net deferred tax asset of $ 61,000 is reflected in the accompanying balance sheet.

Deferred tax assets are recognized for temporary deductible differences, and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for temporary taxable differences.

Principally, due to bonus tax depreciation, which allows for the depreciation of assets acquired in a business acquisition, the 2023 and 2022 losses for tax purposes resulted an estimated net operating loss carryforward of approximately $ 1.7 million in 2022 and a total of $ 2.0 million at December 31, 2023.

We believe will be fully realized in future periods.

Combined with other timing differences, there is a net deferred tax asset of $ 206,000 and $ 61,000 for fiscal 2023 and 2022 respectively.

Deferred tax assets are recognized for temporary deductible differences, operating loss and tax credit carryforwards and deferred tax liabilities are recognized for temporary taxable differences.

Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis.

1 unchanged sentence

Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

We continually review the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies.

We continually review the realizability of its deferred tax assets, including analyzing factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies.

We assessed whether a valuation allowance should be recorded against its deferred tax assets based on consideration of all available evidence using a “more likely than not” standard.

1 unchanged sentence

In making such an assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses.

Future sources of taxable income were also considered in determining the amount of the recorded valuation allowance.

Future sources of taxable income were also considered when determining the amount of the recorded valuation allowance.

Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

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Net operating loss carryforward

Net deferred tax (liability) benefit

$ ( 119,000 )

Net deferred tax benefit

The following table summarizes the components of the provision for income taxes:

3 unchanged sentences

$ ( 145,000 )

Total income tax expense for the years ended January 1, 2023, and January 2, 2022, differed from the amounts computed by applying the U.S.

$ ( 180,000 )

Total income tax expense for the years ended December 31, 2023, and January 1, 2023, differed from the amounts computed by applying the U.S.

Federal statutory tax rate of 21 % to pre-tax income as follows:

1 unchanged sentence

$ ( 216,000 )

$ ( 160,000 )

State income tax (benefit), net of federal tax benefit

Equity in loss of unconsolidated subsidiary

Provision for income taxes (benefit)

Income taxes benefit

$ ( 145,000 )

$ ( 180,000 )

Accounting Standards require that deferred tax assets and liabilities, along with any related valuation allowance, be classified as a noncurrent item on the balance sheet.

6 unchanged sentences

Accrued real estate taxes

Accrued bonus compensation

Accrued bonus compensation and consulting fees

Accrued payroll

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In addition, upon closing the private offering, the placement agent was issued an aggregate of 16,401 five-year stock purchase warrants to purchase shares at $ 3.30 per share, which are also outstanding at year-end.

At December 31, 2023 and January 1, 2022, respectively, there were 215,000 and 65,000 common shares held as treasury shares for potential future issuance.

NOTE 8 – STOCK-BASED COMPENSATION

In 2019 we adopted the BT Brands, Inc 2019 Incentive Plan (the "Plan") 2019 Plan, under which the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units, and other stock and cash awards to eligible participants.

At the Annual Stockholders Meeting held in December 2022, the stockholders authorized the increase of shares available for grant under the 2019 Plan from 250,000 shares to 1,000,000 shares.

In 2019, we adopted the BT Brands, Inc.

2019 Incentive Plan (the "Plan") 2019 Plan, under which the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units, and other stock and cash awards to eligible participants.

In December 2022, the stockholders authorized the increase of shares available for grant under the 2019 Plan from 250,000 to 1,000,000 shares.

As of January 1, 2023, there were 779,750 shares available for a grant under the 2019 Plan.

1 unchanged sentence

The options are exercisable at $ 5 per share through 2031.

In 2022, we granted 216,000 options, including 175,000 options to company officers and 41,000 options to employees and a consultant all to purchase shares at $ 2.58 per share.

Stock options granted to employees and directors vest over four years in annual installments, as outlined in each agreement.

In 2022, we granted 216,000 options, including 175,000 options to company officers and 41,000 options to employees and a consultant to purchase shares at $ 2.58 per share.

In 2023 we granted a consultant warrants to purchase 100,000 shares at $2.50 per share for seven years with the option vesting warrants vesting monthly over five years so long as the consultant continues in this capacity.

Assuming the consulting agreement continues to full term, we project that approximately $144,000 in stock based compensation will recognized at the rate of $32,000 per year in each of the four years and $16,000 in 2028 .

As outlined in each agreement, stock options granted to employees and directors vest over four years in annual installments.

Options expire ten years from the date of the grant.

1 unchanged sentence

Compensation expense for 2023 was $ 174,000 in 2023 and $ 118,700 in 2022.

Based on current estimates, we project that for current grants, approximately $ 180,000 in stock-based compensation expense will be recognized over the next three years at approximately $ 60,000 per year.

Based on current estimates, we project that approximately $ 120,000 in stock-based compensation expense will be recognized over the next three years including approximately $ 57,000 in 2024, $ 57,000 in 2025, $ 6,000 in 2026.

On February 27, 2023, the board of directors Compensation Committee approved an “Incentive Shares” proposal wherein, so long as the Company’s publicly traded warrants are outstanding, senior management will be granted 250,000 shares of common stock as an award upon our share price reaching $ 8.50 per share for twenty consecutive trading days.

The total estimated expense of the award was determined using a lattice model with assumptions similar to the stock option calculation.

The total estimated expense of this award was determined to be $265,000.

For 2023, Stock based compensation included $ 105,000 of expense for the award.

We project approximately $160,000 of stock-based compensation will be recognized over the next two years including approximately $ 126,000 in 2024 and $ 36,000 in 2025.

We utilize the Black-Scholes option pricing model when determining the compensation cost associated with stock options issued using the following significant assumptions:

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Exercise Price

Options outstanding at January 2, 2022

Options outstandingat January 2, 2022

Canceled, forfeited, or expired

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Options exercisable at January 1, 2023

The Black-Scholes option-pricing model was used to estimate the fair value of the stock options with the following weighted-average assumptions for grants during the year ended January 1, 2023:

The fair value of options granted during the period

Options outstanding on January 1, 2023

Canceled, forfeited, or expired

Options outstanding at December 31, 2023

Options exercisable at December 31, 2023

The Black-Scholes option-pricing model was used to estimate the fair value of the stock options with the following weighted-average assumptions for grants during the year ended January 1, 2023 there were no options granted during the year ended December 31, 2023:

The fair value of options and warrants granted during the period

Expected life (in years)

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Risk-free interest rate

On February 27, 2023, the independent members of the board of directors Compensation Committee approved a proposal wherein, so long as the Company’s publicly traded warrants are outstanding, senior management will be granted 250,000 shares of common stock as an award upon our share price reaching $ 8.50 per share for twenty consecutive trading days, which triggers our ability to redeem the warrants issued in our initial public offering.

NOTE 9 – LONG-TERM DEBT

We had the following long-term debt obligations:

Three notes payable to a bank dated June 28, 2021 due in monthly installments totaling $22,213 which includes principal and interest at fixed rate of 3.45% through June 28, 2031.

Beginning in July 2031, the interest rate will be equal to the greater of the "prime rate" plus .75%, or 3.45% .

Three notes payable to a bank dated June 28, 2021 due in monthly installments totaling $22,213, including principal and interest at a fixed rate of 3.45% through June 28, 2031.

Beginning in July 2031, the interest rate will equal the greater of the "prime rate" plus .75%, or 3.45%.

These notes mature on June 28, 2036.

The notes are secured by mortgages covering ten BTND operating locations.

The notes are guaranteed by BT Brands, Inc.

and a shareholder of the Company.

Minnesota Small Business Emergency Loan dated April 29, 2020

The notes are guaranteed by BT Brands, Inc., and a shareholder of the Company.

Minnesota Small Business Emergency Loan paid in full, June 2023

Total long-term debt

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Current maturities

Long-term debt, less current protion

Long-term debt, less current portion

Scheduled maturities of long-term debt, excluding amortization of debt issuance costs, are as follows:

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The purchase price was approximately $ 1.15 million, paid in cash at closing.

For the Keegan’s acquisition, based on an appraisal of asset values, we recorded $ 547,900 in goodwill, representing the excess of fair value over the purchase price of the identifiable assets;

For Keegan’s acquisition, based on an appraisal of asset values, we recorded $ 547,900 in goodwill, representing the excess of fair value over the purchase price of the identifiable assets;

the allocation to purchased goodwill is expected to be deductible for income tax purposes over fifteen years.

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On August 4, 2022, through our 1519BT, LLC subsidiary, we purchased the assets and the business operating as Van Stephan Village Bier Garten, now rebranded as the Village Bier Garten (“VBG”), a full-service bar and restaurant in Cocoa, Florida.

The restaurant features a German-themed menu, specialty imported European beers, and regular entertainment.

The restaurant features a German-themed menu;

specialty imported European beers and regular entertainment.

The purchase price was $690,0000, paid in cash at closing.

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Copperud controlled approximately 34 % of the outstanding equity of NGI.

As consideration for a loan maturity extension, we received 179,000 shares of NGI common stock and warrants to purchase 358,000 shares at $ 1.00 per share through March 23, 2028 .

As consideration for a loan maturity extension in 2020, we received 179,000 shares of NGI common stock and warrants to purchase 358,000 shares at $ 1.00 per share through March 23, 2028 .

The Company invested $ 229,000 in NGI Series A1 8 % Cumulative Convertible Preferred Stock on February 2, 2022, including a five-year warrant to purchase 34,697 shares at $ 1.65 per share.

All outstanding preferred share were converted to common stock during 2023 and we received 157,496 common shares of NGI in exchange for the preferred shares and accrued dividends.

The NGI common stock and common stock purchase warrants received in March 2020 were recorded in 2020 at a value determined by us of $ 75,000 .

The investment in NGI does not have readily determinable market value.

The investment in NGI does not have a readily determinable market value.

The NGI investment is carried at the cost we determined when the shares and warrants were received.

NOTE 12 – MAJOR VENDOR

For the year ended January 1, 2023, approximately 60 % of our food and paper cost of goods sold is represented by product purchases from one vendor.

On January 1, 2023, the amount due to the major vendor totaled $ 272,657 .

For the year ended December 31, 2023, approximately 60 % of our food and paper cost of goods sold is represented by product purchases from one vendor.

On December 31, 2023, the amount due to the major vendor totaled $ 268,849 .

In fiscal 2022, approximately 60 % of our purchases were from the same vendor.

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We are not aware of any significant asserted or potential claims which could impact its financial position.

NOTE 14 – SUBSEQUENT EVENTS

The sale of the West St.

Paul location sale was completed in February 2023 for a gain of $ 313,000 , which will be recognized in the first quarter of 2023.

In the first quarter of 2023 we initiated the process of deeding the St.

Louis property held for resale to the taxing authority in lieu of payment of accrued property taxes, we expect this administrative process to be completed in the second quarter of 2023 which we anticipate will result in the company recording a gain of approximately $ 180,000 as previously accrued property taxes, including $ 100,000 of expense accrued in 2022 are reversed.

Changes in and Disagreements with on Accounting and Financial Disclosure.

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The Company maintains disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

As of January 1, 2023, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of our disclosure controls and procedures as such term is defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934.

Based on the evaluation of our disclosure controls and procedures, our President and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of January 1, 2023, due to the material weaknesses in our internal control over financial reporting described below.

No matter how well conceived and operated, a control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

As of December 31, 2023, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934.

Based on the evaluation of our disclosure controls and procedures, our President and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2023, due to the material weaknesses in our internal control over financial reporting described below.

In light of this fact, our management has performed additional analysis and has concluded that, notwithstanding this material weaknesses in our internal controls over financial reporting, the consolidated financial statements for the periods covered by and including this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S.

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The Company assesses the effectiveness of internal controls based on the criteria set forth in the 2013 Internal Control - Integrated Framework developed by the Committee of Sponsoring Organizations of the Treadway Commission.

As a result of this evaluation, management has concluded that, as of January 1, 2023, our internal control over financial reporting was not effective due to the material weaknesses in internal control over financial reporting described below.

As a result of this evaluation, management has concluded that, as of December 31, 2023, our internal control over financial reporting was not effective due to the material weaknesses in internal control over financial reporting described below.

As of January 1, 2023, the company identified a material weakness in its design of controls over accounting and reporting of significant, non-recurring events, and complex transactions.

This material weakness could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.

As of December 31, 2023, the company identified a material weakness which originated in fiscal 2022 and continues in its design of controls over accounting and reporting of significant, non-recurring events and complex transactions.

This material weakness could result in a misstatement of account balances or disclosures that would result in a material misstatement of the annual or interim financial statements, which would not be prevented or detected.

(d) REMEDIATION PLAN

The Company has a remediation plan for the identified material weakness and in fiscal 2023 will engage an accounting expert to assist with the accounting for significant, non-recurring events and complex transactions.

The remediation actions are subject to ongoing senior management review, as well as Audit Committee oversight.

The Company has an ongoing improvement and remediation plan for the identified material weakness.

In fiscal 2024, for transactions it considers complex, the Company may engage an accounting expert to assist with the accounting for significant, non-recurring events and complex transactions.

The remediation actions are subject to ongoing senior management review and Audit Committee oversight.

The Company will not be able to conclude whether the steps to be taken will fully remediate the material weaknesses in internal controls over financial reporting until remediation efforts are completed, tested, and evaluated for effectiveness.

(e) CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

In addition to the matters discussed previously, the Company engaged consultants as an extension of management to assist in the accounting for acquisitions that occurred during the fiscal year ended January 1, 2023.

Except for the items described above, there were no other changes in the Company’s internal control over financial reporting that occurred during our most recently completed fiscal quarter ended January 1, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

In addition to the matters discussed previously, the Company identified consultants as an extension of management to assist in the accounting for acquisitions during the fiscal year ending December 31, 2023.

For fiscal 2023 the Company did not make any new acquisitions.

Except for the items described above, there were no other changes in the Company’s internal control over financial reporting that occurred during our most recently completed fiscal quarter, which ended December 31, 2023, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Other Information.

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Gary Copperud has served as the Chief Executive Officer and a director of the Company since July 31, 2018, when we completed the Share Exchange.

He was a founding member of the predecessor to BT Brands in 2007 and served as its managing manager and Chief Financial Officer from its inception until the completion of the Share Exchange.

Copperud was a founding shareholder of Next Gen Ice, Inc., a provider of automated ice delivery systems to convenience stores and other markets and since July 2019, has served as the chairman of its board of directors.

He was a founding member of the predecessor to BT Brands in 2007.

He served as its managing manager and Chief Financial Officer from its inception until the completion of the Share Exchange.

Copperud was a founding shareholder of Next Gen Ice, Inc., now NGI Corporation, a provider of automated ice delivery systems to convenience stores and other markets.

Since July 2019, he has served as the chairman of its board of directors.

Copperud has served as CEO of Bagger Dave’s Burger Tavern since June, 2022.

Before that, Mr.

Copperud was self-employed in real estate investment and development.

Copperud is self-employed in real estate investment and development.

We believe Mr.

Copperud’s tenure with Burger Time, as well as his prior experience as a member of the board of directors of a public company, qualifies him to serve on our board of directors.

Copperud’s tenure with Burger Time and prior experience as a member of the board of directors of a public company qualifies him to serve on our board of directors.

Kenneth Brimmer has served as the Chief Operating Officer, Chairman of our board of directors, and Principal Accounting Officer since July 31, 2018.

Since October 2019, Mr.

Brimmer has been a member of the board of directors of Next Gen Ice, Inc.

Brimmer has been a member of the board of directors of NGI Corporation (formerly Next Gen Ice, Inc.).

and currently serves as its Chief Financial Officer.

Brimmer has a wide range of experience, including several early-stage and rapidly growing businesses, serving at various times as President, Chief Executive Officer, director, and Audit Committee Chairman of several public and private companies.

Sinc June, 2022, Mr.

Brimmer has served as also Chairman, COO, and Chief Financial Officer of Bagger Dave’s Burger Tavern , Inc.

Brimmer has a wide range of experience with several early-stage and rapidly growing businesses, serving at various times as President, Chief Executive Officer, director, and Audit Committee Chairman of several public and private companies.

Brimmer previously was the Chief Executive Officer of Hypertension Diagnostic, Inc.

He served on the board of HDI since 1998 and was its CEO from September 2012 until May 2020.

Brimmer is the CEO of privately-held Brimmer Company, LLC, which has provided consulting management services to BT Brands and Next Gen Ice, Inc.

Brimmer is the CEO of privately-held Brimmer Company, LLC, which has provided consulting management services to BT Brands and NGI Corporation, Inc.

Brimmer was a Director of Landry’s Restaurants from June 2004 until April 2017 and served on the Audit and Compliance Committee of its Golden Nugget – New Jersey Casino.

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During the time Mr.

Brimmer served as Treasurer of Rainforest Cafe, Rainforest raised over $200 million in a combination of private and public stock offerings.

Brimmer served as Treasurer of Rainforest Cafe, it raised over $200 million through a combination of private and public stock offerings.

Prior to Rainforest, Mr.

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We believe Mr.

Brimmer’s long and varied career as a business executive, particularly his service as the chief operating officer of a major restaurant chain, qualifies him to serve on and chair our board of directors.

Brimmer’s extensive career as a business executive, particularly his service as the chief operating officer of a major restaurant chain, qualifies him to serve on and chair our board of directors.

Allan Anderson joined our board of directors as an independent director and has served as the chairman of our audit committee since our common stock and warrants were listed on The Nasdaq Stock Market.

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We believe Mr is qualified to serve on our board of directors and as the chair of our audit committee because of his education, experience in accounting and audit work, and experience working at several companies as the chief financial officer.

Terri Tochihara-Dirks joined our board of directors as an independent director and serves as the chair of our compensation committee and a member of the audit committee commencing on the date our common stock and warrants were listed on The Nasdaq Stock Market.

Terri Tochihara-Dirks joined our board of directors as an independent director, serves as the chair of our compensation committee, and is a member of the audit committee, commencing on the date our common stock and warrants were listed on The Nasdaq Stock Market.

Since 2008, Ms.

Tochihara-Dirks has been the co-owner, with her husband, of The Oberon Assisted Living, a privately held healthcare community in Arvada, Colorado.

Her day-to-day responsibilities include Operations and Infection Prevention.

From 1986 to 2006, she held various positions with AT&T retiring in 2006 as the Mountain States Region Vice President of Sales for AT&T.

Her responsibilities include operations and infection prevention.

From 1986 to 2006, she held various positions with AT&T retiring in 2006 as the Mountain States Region Vice President of Sales.

Tochihara-Dirks has served on several not-for-profit Boards of Directors, including the Denver Chamber of Commerce and Denver Junior Achievement.

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Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, executive officers and ten percent stockholders to file initial reports of ownership and announcements of changes in ownership of our common stock with the Commission.

Directors, executive officers and ten percent of stockholders are also required to furnish us with copies of all Section 16(a) forms that they file.

Based upon a review of these filings, we believe all required Section 16(a) reports were made during 2022, though several reports were filed late as the incoming independent directors obtained their Edgar filer codes.

Section 16(a) of the Exchange Act requires our directors, executive officers, and ten percent stockholders to file initial reports of ownership and announcements of changes in ownership of our common stock with the SEC.

Directors, executive officers, and ten percent of stockholders must also furnish us with copies of all Section 16(a) forms they file.

Based upon a review of these filings, we believe all required Section 16(a) reports were made during 2023.

Board Composition

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Rule 5605 of the NASDAQ Listing Rules requires a majority of a listed Company’s board of directors to be comprised of “independent directors,” as defined in such rule, subject to specified exceptions.

In addition, the NASDAQ Listing Rules require that, subject to limited exceptions:

each member of a listed company’s audit, compensation and nominating committees be independent as defined under the NASDAQ Listing Rules;

In addition, the NASDAQ Listing Rules require that, subject to limited exceptions, each member of a listed company’s audit, compensation and nominating committees be independent as defined under the NASDAQ Listing Rules;

audit committee members also satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act;

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If a listed company does not have a nominating committee, as permissible under NASDAQ Listing Rules, director nominees must either be selected or recommended for the board’s selection by independent directors constituting a majority of the board’s independent directors in a vote in which only independent directors participate.

Our board of directors have evaluated the independence of its members based upon the rules of the NASDAQ Stock Market and the SEC.

Our board of directors has evaluated the independence of its members based on the rules of the NASDAQ Stock Market and the SEC.

Applying these standards, our board of directors determined that Mr.

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Leadership Structure of the Board

Our bylaws provide our board of directors with the flexibility to combine or separate the positions of Chairman of our board of directors and Chief Executive Officer in accordance with its determination that utilizing one or the other structure would be in the best interests of the Company.

The board of directors currently separates the roles of Chief Executive Officer and Chairman of the board of directors to recognize the differences between the two roles.

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During fiscal 2023, our board of directors held four in-person or telephonic meetings.

Each director attended at least 75% of the aggregate number of meetings of the board of directors and meetings of the committees of the board of directors on which he or she serves.

Each director attended at least 75% of the aggregate number of meetings of the board of directors and meetings of the committees of the board of directors on which they serve.

In addition, our board of directors acted unanimously with written consent on five occasions.

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Members will serve on committees until their resignation or otherwise determined by our board of directors.

The following table sets forth the members of each board committee as of January 1, 2023, and the number of meetings held by the board and committees during our fiscal year ended January 1, 2023:

The following table sets forth the members of each board committee as of December 31, 2023, and the number of meetings held by the board and committees during our fiscal year ended December 31, 2023:

Board of Directors

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Anderson qualifies as an “audit committee financial expert” within the meaning of applicable SEC regulations and meets the financial sophistication requirements of the Nasdaq Marketplace Rules.

Our independent registered public accounting firm and management periodically met privately with our audit committee once during 2022.

Our independent registered public accounting firm and management periodically met privately with our audit committee four times during 2023.

Our audit committee assists our board of directors in its oversight of our accounting and financial reporting process and the audits of our financial statements.

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Pursuant to Nasdaq’s Board Diversity Rule 5605(f), approved by the SEC on August 6, 2021, we have taken steps to meet the diversity objective set out in this rule within the applicable transition period.

The following is our Board Diversity Matrix as of April 1, 2023:

Board Diversity Matrix (As of April 1, 2023)

The following is our Board Diversity Matrix as of March 15, 2024:

Board Diversity Matrix (As of March 15, 2024)

Total Number of Directors:

Did Not Disclose

Gender Identity

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We also intend to post any amendments to our Code of Ethics and Business Conduct or waivers of its requirements on our website, www.itsburgertime.com.

Insider Trading Policy

On March 14, 2024 we adopted an Insider Trading Policy that sets forth restrictions on trading in our securities and prohibits all of our directors, officers and certain employees, as well as any other person having access or potential access to material information, from entering into any purchases, sales, giving away or otherwise trading the Company’s securities while in possession of material nonpublic information about the Company or providing that information to others outside the Company, entering into hedging or monetization transactions or similar arrangements with respect to the Company’s securities;

and puts, calls or other derivative securities on the Company’s securities, unless advance approval is obtained from the Company’s Chief Operating Officer.

Additionally, a director, officer, or certain employee may not hold Company securities in a margin account or pledge Company securities as collateral for a loan, unless advance approval is obtained from the Company’s Chief Operating Officer.

This policy also applies to the foregoing persons’ family members and friends.

This policy was adopted to promote compliance with federal securities laws and applicable Nasdaq requirements.

Our Insider Trading Policy allows for purchases or sales of Company securities made in compliance with a written plan that meets the requirements of Rule 10b5-1 of the Exchange Act, and sets forth the applicable trading window periods where directors and designated employees can trade in the Company’s securities.

Clawback Policy

In March 2024, our Board adopted a Clawback Policy that applies to all of our current and former executive officers.

Under the Clawback Policy, if we are required to prepare an accounting restatement, we are required to recover from any current or former executive officers incentive-based compensation that was erroneously awarded during the three years preceding the date such a restatement was required.

Incentive compensation includes any annual bonuses and other short- and long-term cash incentives;

stock options;

stock appreciation rights;

restricted stock;

restricted stock units and performance shares;

provided that, such compensation is granted, earned, or vested based wholly or in part on the attainment of a financial reporting measure.

The recoverable amount is the amount of incentive-based compensation received in excess of the amount that otherwise would have been received had it been determined based on the restated financial measure.

The Board will determine the method for recouping incentive compensation hereunder which may include, requiring reimbursement of cash incentive compensation previously paid;

seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any equity-based awards;

cancelling outstanding vested or unvested equity awards;

and/or taking any other remedial and recovery action permitted by law, as determined by the Board.

Certain Legal Proceedings

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No other officer or employee of the Company received total compensation for either 2022 or 2023, as determined in accordance with Item 402 of Regulation S-K, which exceeded $100,000:

Name and Principal Position

Option Awards

Qualified Deferred Compensation Earnings

Other Compensation ($)

Gary Copperud,

Chief Executive Officer 1, 2

Brimmer, Chief Operating Officer 2, 3

Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal years ended January 1, 2023, and January 2, 2022, in accordance with ASC 710 of awards pursuant to the Stock Option Plan.

Assumptions for calculating this amount for the fiscal year ended January 1, 2023, are included in Note 7 to our audited consolidated financial statements for the fiscal year ended January 1, 2023, included in Part IV of this Annual Report.

Officer Compensation

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Brimmer in July 2022, as described below under the heading “ Employment Agreements.

” During fiscal 2021, we paid Brimmer Company, LLC.

a total of $66,00, at $5,500 per month.

In addition, the Audit Committee approved a $50,000 bonus based on our financial performance and a $50,000 payment for services rendered in connection with our successful public stock offering.

Employment Agreements

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Copperud receives an annual base salary of $250,000, which shall be reviewed at least annually by the board.

Copperud is eligible to receive an annual bonus subject to the discretion of the Compensation Committee of the board.

Copperud is eligible to receive an annual bonus subject to the discretion of the board's Compensation Committee.

The employment agreement is for a term of three years subject to automatic extension for successive one-year periods unless terminated by either party.

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Brimmer receives an annual base salary of $200,000 which shall be reviewed at least annually by the board.

Brimmer is eligible to receive an annual bonus subject to the discretion of the Compensation Committee of the board.

Brimmer is eligible to receive an annual bonus subject to the discretion of the board's Compensation Committee.

The employment agreement is for a term of three years subject to automatic extension for successive one-year periods unless terminated by either party.

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Brimmer will be entitled to receive (i) all accrued but unpaid base salary, (ii) accrued but unused vacation, (iii) a lump sum payment equal to 2 times the sum of his base salary and bonus for the year in which the termination occurs, and (iv) (A) all outstanding unvested stock options will fully vest and become immediately exercisable for the remainder of their full term, (B) all outstanding equity-based compensation awards other than stock options that do not vest based on the attainment of performance goals will fully vest and any restrictions thereon will lapse, and (C) all outstanding equity-based compensation awards other than stock options that vest based on the attainment of performance goals shall remain outstanding and shall vest or be forfeited in accordance with the terms of the applicable award agreements, if the applicable performance goals are satisfied.

Upon his appointment as chief operating officer, Mr.

Brimmer received a $50,000 signing bonus.

Compensation Plans

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The principal features of the 2019 Incentive Plan (the “2019 Plan”), as amended by the stockholders at the 2022 annual meeting, are summarized below.

The following summary of the 2019 Plan does not purport to be a complete description of all of the provisions of the 2019 Plan.

The following summary does not purport to be a complete description of all of the provisions of the 2019 Plan.

It is qualified in its entirety by referencing the full text of the 2019 Plan, as amended.

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Subject to the terms of the 2019 Plan, the compensation committee has the authority to (i) grant and amend equity awards, (ii) interpret any provision of the 2019 Plan, any equity award, or any award agreement and (ii) make all determinations and decisions necessary for the administration of the 2019 Plan.

All determinations and decisions by the compensation committee under the 2019 Plan are in its sole discretion and are binding.

However, the board has retained the right to exercise the authority of the compensation committee to the extent consistent with applicable law and the applicable requirements of any stock exchange.

All determinations and decisions by the compensation committee under the 2019 Plan are at the sole discretion of the Compensation Committee and are binding.

However, the board has retained the right to exercise the compensation committee's authority to the extent consistent with applicable law and the applicable stock exchange requirements.

Number of Authorized Shares

The 2019 Plan allows for the issuance of 1,000,000 shares of common stock upon awards granted.

The 2019 Plan allows the issuing of 1,000,000 shares of common stock upon awards granted.

Common stock covered by any unexercised portions of terminated or forfeited options granted under the 2019 Plan (including canceled options), restricted stock or restricted stock units forfeited, other stock-based awards terminated or forfeited as provided under the 2019 Plan, and common stock subject to any awards that are otherwise surrendered may again be subject to new awards under the 2019 Plan.

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Stock Options .

The Plan Administrator may grant to a participant options to purchase our common stock that qualifies as incentive stock options for purposes of Section 422 of the Internal Revenue Code (“incentive stock options”), options that do not qualify as incentive stock options (“non-qualified stock options”) or a combination thereof.

The Plan Administrator may grant a participant options to purchase our common stock that qualifies as incentive stock options for purposes of Section 422 of the Internal Revenue Code (“incentive stock options”).

These options do not qualify as incentive stock options (“non-qualified stock options”) or a combination thereof.

The terms and conditions of stock option grants, including the quantity, price, vesting periods, and other conditions on exercise, will be determined by the Plan administrator.

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The Plan Administrator may grant to a participant an award of SARs, which entitles the participant to receive, upon its exercise, a payment equal to (i) the excess of the fair market value of a share of common stock on the exercise date over the SAR exercise price, times (ii) the number of shares of common stock with respect to which the SAR is exercised.

The Plan Administrator will determine the exercise price for a SAR at its discretion, provided, however, that in no event shall the exercise price be less than the fair market value of our common stock on the date of grant.

The Plan Administrator will determine the exercise price for a SAR at its discretion, provided that in no event shall the exercise price be less than the fair market value of our common stock on the date of grant.

Restricted Shares and Restricted Units .

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The Plan Administrator may grant performance awards to participants under such terms and conditions as the Plan Administrator deems appropriate.

A performance award entitles a participant to receive a payment from us based on the attainment of predetermined performance targets over a specified award period.

A performance award entitles a participant to receive a payment from us based on attaining predetermined performance targets over a specified award period.

Performance awards may be paid in cash, shares of common stock, or a combination thereof, as determined by the Plan administrator.

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Cash-Based Awards .

The Plan Administrator may grant cash-based incentive compensation awards, which would include performance-based annual cash incentive compensation to be paid to covered employees subject to Section 162(m) of the Code.

The Plan Administrator may grant cash-based incentive compensation awards, including performance-based annual cash incentive compensation, to covered employees subject to Section 162(m) of the Code.

The Plan Administrator will determine the terms and conditions of each cash-based award.

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Unexercisable (1)

Number of Shares of Stock that have not Vested

Number of Shares of Stock not Vested

Gary Copperud,

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We expect that the compensation of our directors will be designed to attract and retain committed and qualified directors and to align their compensation with the long-term interests of our stockholders.

Such compensation may consist of cash for meetings attended and options or other awards to purchase our common stock at the fair market value per share of common stock on the grant date, both upon joining the board and for each year of service on the board.

Such awards will be subject to vesting as determined by the Compensation Committee of the board.

Such awards will be subject to vesting as determined by the board's Compensation Committee.

directors who are also executive officers will not be entitled to compensation for their service as a director, committee member, or chair of our board of directors or any committee of our board of directors.

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These include reasonable transportation and lodging costs incurred for attendance at any board of directors meeting.

Upon the closing of our IPO and our listing on The Nasdaq Stock Market in the fourth quarter of 2021, Allan Anderson, Teri Tochihara-Dirks, and Steven Schussler joined our board as non-employee directors.

Upon closing our IPO and listing on The Nasdaq Stock Market in the fourth quarter of 2021, Allan Anderson, Teri Tochihara-Dirks, and Steven Schussler joined our board as non-employee directors.

We agreed to pay each employee director $500 for each board meeting attended, and $250 for each committee meeting attended.

In addition, we issued to each such person fully vested options to purchase 5,000 shares of common stock under the 2019 Plan, which are exercisable at $5.00 per share and expire ten years after the date of the grant we also have agreed to issue to each such person options to purchase 2,000 shares of common stock during each year that such person serves on the board of directors.

The following table sets forth all of the compensation awarded to, earned by, or paid to our directors for the year ended January 1, 2023.

The following table sets forth all compensation awarded to, earned by, or paid to our directors for the year ended December 31, 2023.

Please note that Mr.

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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth the number of shares of and percent of our common stock beneficially owned as of April 1, 2023, by (i) each person (or group of affiliated persons) who is known by us to own more than five percent (5%) of the outstanding shares of our common stock, (ii) each director and executive officer, and (iii) all of our directors and executive officers as a group.

The percentage of shares beneficially owned is computed based on 6,461,118 shares of our common stock outstanding as of April 1, 2023.

The following table sets forth the number of shares of and percent of our common stock beneficially owned as of March 29, 2024, by (i) each person (or group of affiliated persons) whom we know to own more than five percent (5%) of the outstanding shares of our common stock, (ii) each director and executive officer, and (iii) all of our directors and executive officers as a group.

The percentage of shares beneficially owned is computed based on 6,461,118 shares of our common stock outstanding as of March 29, 2024.

We have determined beneficial ownership in accordance with the rules of the SEC.

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In addition, pursuant to such rules, we deemed outstanding shares of common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of March 29, 2024.

We did not deem such shares outstanding, however, for the purpose of computing the percentage ownership of any other person.

However, we did not deem such shares outstanding for computing the percentage ownership of any other person.

Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the beneficial owners named in the table below have sole voting and investment power with respect to all shares of our common stock that they beneficially own, subject to applicable community property laws.

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Transactions with Related Parties

Below we describe transactions and any series of related transactions to which we were a party or may be a party, and which we have entered into since January 3, 2021, or is currently proposed, in which the amounts involved exceeds or will exceed the lesser of $120,000 or 1% of the average of our total assets as of the end of the last two completed fiscal years and any of our directors, executive officers or holders of more than five percent of our capital stock, or an affiliate or immediate family member or such persons, had or will have a direct or indirect material interest.

Below we describe transactions and any series of related transactions to which we were a party or may be a party and which we have entered into since January 3, 2021, or is currently proposed, in which the amounts involved exceed or will exceed the lesser of $120,000 or 1% of the average of our total assets as of the end of the last two completed fiscal years and any of our directors, executive officers or holders of more than five percent of our capital stock, or an affiliate or immediate family member or such persons, had or will have a direct or indirect material interest.

In connection with the refinancing of our mortgage debt in June 2021, Gary Copperud personally guaranteed each of the promissory notes evidencing loans on the real properties owned by the Company.

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For further information, see “Executive Compensation—Limitations of Liability and Indemnification Matters.”

To the best of our knowledge, during the past two fiscal years, other than as set forth above, there were no material transactions, or series of similar transactions, or any currently proposed transactions, or series of similar transactions, to which we were or are to be a party, in which the amount involved exceeds the lesser of (A) $120,000 or (B) one percent of our average total assets at year-end for the last two completed fiscal years, and in which any director or executive officer, or any security holder who is known by us to own of record or beneficially more than 5% of any class of our common stock, or any member of the immediate family of any of the foregoing persons, has an interest (other than compensation to our officers and directors in the ordinary course of business).

To the best of our knowledge, during the past two fiscal years, other than as set forth above, there were no material transactions, or series of similar transactions, or any currently proposed transactions, or series of similar transactions to which we were or are to be a party, in which the amount involved exceeds the lesser of (A) $120,000 or (B) one percent of our average total assets at year-end for the last two completed fiscal years, and in which any director or executive officer, or any security holder whom we know to own of record or beneficially more than 5% of any class of our common stock, or any member of the immediate family of any of the foregoing persons, has an interest (other than compensation to our officers and directors in the ordinary course of business).

Principal Accounting Fees and Services.

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Pursuant to its charter, the Audit Committee is directly responsible for the appointment, retention, compensation, and oversight of our independent registered public accounting firm.

In addition to assuring the regular rotation of the lead audit partner as required by law, the Audit Committee participates in the evaluation of the lead audit partner and considers whether there should be regular rotation of the independent registered public accounting firm.

In addition to assuring the regular rotation of the lead audit partner as required by law, the Audit Committee participates in evaluating the lead audit partner and considers whether the firm should be regularly rotated.

The Audit Committee is also required to review and pre-approve all of the audit and non-audit services to be performed by our independent registered public accounting firm, including the firm’s engagement letter for the annual audit of the consolidated financial statements and internal controls over financial reporting of the Company, the proposed fees in connection with such audit services, and any additional services that management chooses to hire the independent auditors to perform.

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Boulay and its affiliates provided services consisting of the audit of the annual consolidated financial statements and review of the quarterly financial statements of the Company, accounting consultations and consents, and other services related to SEC filings by the Company and its subsidiaries and other pertinent matters and other permitted services to the Company.

The following is a summary of the fees billed to us by Boulay for professional services rendered for the fiscal years ended January 1, 2023 (fiscal 2022) and January 2, 2022 (fiscal 2021):

The following is a summary of the fees billed to us by Boulay for professional services rendered for the fiscal years ended December 31, 2023 (fiscal 2023) and January 1, 2023 (fiscal 2022):

Audit fees (1)

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All other fees

Audit fees consist of aggregate fees billed for professional services rendered for the audit of the Company’s annual consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports or services that are typically provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements during the fiscal years ended January 1, 2023, and January 2, 2022, respectively.

Audit fees consist of aggregate fees billed for professional services rendered for the audit of the Company’s annual consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports or services that are typically provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements during the fiscal years ended December 31, 2023, and January 1, 2023, respectively.

Exhibits, Financial Statement Schedules.

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Purchase Agreement dated May 11, 2022, by and between BT Brands, Inc., Pie in the Sky and Erik Gura, the owner of the assets.

Lease Agreement dated May 11, 2022, by and between BT Brands, Inc.

and Martha Ertmann LLC, with respect to the real property located at 10 Water Street, Woods Hole, Massachusetts.

Lease Agreement dated May 11, 2022, by and between BT Brands, Inc., and Martha Ertmann LLC, with respect to the real property located at 10 Water Street, Woods Hole, Massachusetts.

Employment Agreement dated as of July 7, 2022, by and between Gary Copperud and the Registrant

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Incorporated by reference from the Company’s registration statement on Form S-1 filed with the Securities and Exchange Commission on August 13, 2019.

Incorporated by reference from Company’s registration statement on Form S-1 filed with the Securities and Exchange Commission on October 18, 2019.

Incorporated by reference from the Company’s registration statement on Form S-1 filed with the Securities and Exchange Commission on October 18, 2019.

Incorporated by reference from the Company’s registration statement on Form S-1 filed with the Securities and Exchange Commission on September 17, 2021.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data