BT Brands, Inc. 10-K

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. Introduction We own and operate ten fast-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 affordable 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, 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 a “Bigger Burger” to deliver our customers “more good food for 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 approximately $10,000 per store at any given time (which also has the advantage of allowing for frequent deliveries of fresh food). Historically, our Burger Time investment model targeted an average total cash investment of between $325,000 and $535,000. Real estate and finance costs vary materially by location but, assuming the average investment figure applies, the amount allocated to purchasing real estate would be approximately $225,000. Our average customer transaction increased by approximately 7% in 2021 compared to 2020 and currently is approximately $12.30. This recent increase is principally because of a menu price increase implemented in the middle of 2020. Many factors influence our sales trends, 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 that may have an impact on our business. These trends principally relate to the rapidly changing technology and food delivery area. The major companies in the restaurant industry have rapidly adopted and developed applications for smartphone and mobile delivery, have aggressively expanded drive-through, take-home and delivery operations, and have developed loyalty programs and database marketing supported by a robust technology platform. We expect these trends to continue as restaurants aggressively compete for customers. Further, the major industry participants have continued to discount prices through promotions strategically. We expect these significant trends will continue. The cost of food has increased over the last two years, and we expect to see continued inflationary pressure continue and perhaps accelerate in 2022. Beef costs increased slightly in 2021, following stable prices in 2020. In 2021 beef price increased by approximately 4% per pound. Given the competitive nature of the fast-food burger restaurant industry, it may be challenging to raise menu prices to cover future cost 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 enhancements, equipment advances, and increased volumes to help offset any food cost increases due to the competitive state of the restaurant industry. 15 Table of Contents Labor is a critical factor in operating our stores. In most areas where we operate our restaurants, there historically has been a shortage of suitable labor. Recently restaurant staffing has become 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 in the restaurant industry and all retail and service industries. The Company consistently develops and maintains programs to attract and retain quality employees. Increases in the federally and state-mandated minimum wage may also impact our operations. A variety of proposals have been made to increase the federal minimum wage to $15 per 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. 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. On average, our hourly employees earn approximately $12 to $15 per hour. An increase in the minimum wage to $15 per hour would adversely impact our profit margins. Since March 2020, we have faced the effects of COVID-19 and its more recent variants as a global pandemic that has been both unpredictable and persistent. The COVID-19 pandemic has adversely affected workforces, customers, economies, and financial markets globally and has disrupted the normal flow of the U.S. economy. For the most part, our stores have remained open for drive-through business during the last year; however; many businesses experienced a disruption of normal operations. More recently, food service businesses, including ours, have faced challenges attracting and hiring workers. The labor shortages may become more acute in the busier summer months. In 2020 extending into 2021, many states and local jurisdictions, including Minnesota, mandated limited public gatherings and the wearing of masks to halt or delay the spread of disease. Under these emergency orders, certain essential services 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 generally allowed drive-through restaurant services to remain open. To date, our restaurants have remained open, although we have curtailed hours at some stores and have experienced temporary restaurant closures while locations have been cleaned and employees tested. Thus far, we have been able to reopen after two or three days after such temporary closing. Local, regional, or national governments may, at any time, implement directives that 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, we 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 We are seeking to increase value for our shareholders in the foodservice industry. Our principal strategy is to acquire multi-unit restaurant concepts and individual restaurant properties at attractive earnings multiples. Though we do not have plans to do so, we may, under certain circumstances, develop additional Burger Time locations. Other key elements of our growth strategy encompass increasing same-store sales and introducing a campaign to boost brand awareness. 16 Table of Contents 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. Expansion through the Development 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 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 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 intend 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 utilize customer feedback and analyze 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 concepts in new markets. We intend to retain seasoned restaurant personnel to develop and implement programs appropriate for each concept. Increase Brand Awareness: Increasing brand awareness is critical to our company’s growth. We expect to develop and implement forward-looking branding strategies for our Burger Time concept and any acquired businesses. We intend to leverage social media and employ targeted digital advertising to expand the reach of our 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 deploy cross-over ads with radio and social media interacting with each other. We expect our branding initiatives to evolve as we consummate acquisitions of restaurant concepts that appeal to distinct consumer markets in differing geographic areas. 17 Table of Contents Results of Operations. The following table sets forth, for the years indicated, our Consolidated Statements of Operations expressed as a percentage of total revenues. The percentages below may not reconcile because of rounding. FISCAL YEAR 2021 2020 52 WEEKS 53 WEEKS SALES 100.0 % 100.0 % COSTS AND EXPENSES Restaurant operating expenses Food and paper costs 38.9 % 37.9 % Labor costs 28.2 % 28.6 % Occupancy costs 8.1 % 8.7 % Other operating expenses 5.6 % 5.2 % Depreciation and amortization 2.8 % 2.3 % Impairment of assets held for sale 0.0 % 2.3 % General and administrative 4.9 % 8.4 % Total costs and expenses 88.4 % 93.5 % Income from operations 11.6 % 6.5 % INTEREST INCOME 0.0 % 1.3 % OTHER INCOME 0.0 % 5.7 % INTEREST EXPENSE -2.0 % -2.2 % INCOME BEFORE TAXES 9.6 % 11.3 % INCOME TAX PROVISION -2.4 % -1.6 % NET INCOME 7.2 % 9.7 % 52 Week Period Ended January 2, 2022 (Fiscal 2021) compared to the 53 weeks Ended January 3, 2021 (Fiscal 2020) Net Revenues: Net sales for 2021 increased $292,074 or 3.5% to $8,451,870 from $8,159,796 in 2020. The increase continued a trend beginning in March 2020 and was driven by the COVID-19 pandemic and the curtailment of many restaurant alternatives. The result was customers choosing drive-through alternatives, including Burger Time. Restaurant sales for 2021 ranged from a low of $518,000 to a high of $1,124,000, and average sales for each Burger Time unit during the period was approximately $858,700 in 2021, an increase of approximately 2.3% from $839,000 in 2020. Costs of Sales - food and paper: Cost of sales - food and paper for 2021 increased to 38.9% of restaurant sales from 37.9% of restaurant sales in 2020. This increase resulted from an inflationary price environment that included increases in beef and paper costs, two of our principal cost items. 18 Table of Contents Restaurant Operating Costs: 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 expenses, depreciation and amortization, and impairment charges) as a percent of restaurant sales increased slightly to 80.8% in 2021 from 80.4% in 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 2020 to 2021 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: Restaurant operating costs for the period ended January 3, 2021 $ 6,563,022 Increase in food and paper costs 194,936 Increase in labor costs 47,257 Increase in occupancy and operating cost 15,125 Restaurant operating costs for the period ended January 2, 2022 $ 6,820,340 Labor Costs: In 2021, labor and benefits cost decreased to 28.2% of restaurant sales from 28.6% in 2020. The decrease resulted from the increased activity levels beginning in 2020, which resulted in a favorable utilization of the fixed portion of labor 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, meaning that they do not decrease proportionally to decreases in revenue; thus, they increase as a percentage of restaurant sales when there is a decrease in restaurant sales. Occupancy and Other Operating Costs: For 2021, occupancy and other costs declined as a percentage of sales to 13.7% or $1,151,382 compared to 13.9% of restaurant sales of $1,136,257 in 2020, a significant portion of these costs are fixed in nature and decline as a percentage as revenues increase. Depreciation and Amortization Costs: For 2021, depreciation and amortization costs increased 23.6% or $44,638 to $234,027 (2.8% of sales) from $189,389 (2.3 % of sales) in 2020. Depreciation costs increased due to capital additions in the last two years, including four stores having replaced point of sale equipment and 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. General and Administrative Costs General and administrative costs in 2021 decreased 39.4%, or $270,733, to $416,791 (4.9% of sales) from $687,254 (8.4% of sales) in 2020. The decrease resulted from a decline in executive compensation, including bonus compensation and the temporary reduction of one corporate position. Income from Operations: The income from operations was $980,712 in 2021 compared to an operating income of $529,368 in 2020. The change in income from operations in 2021 compared to 2020 was due to the matters discussed in the “Net Revenues” and “Restaurant Operating Costs” sections above and the impact of $190,493 in asset impairment charges in 2020. Interest Expense: In 2021 our interest expense decreased $4,896 to $172,861 (2.0% of restaurant sales) from $177,757 (2.2% restaurant sales) in 2020, resulting from costs associated with the June 2021 mortgage refinancing offset by a lower nominal interest rate. 19 Table of Contents Interest Income: In 2021 the Company did not invest excess cash balances in interest-bearing accounts. The 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 included $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 2020 resulted primarily from borrowing $460,400 under the Paycheck Protection Program (PPP”). The entire amount of PPP advances was forgiven and reflected as “Other Income.” Under recent federal stimulus legislation, the PPP loan was treated as an SBA Grant during 2020. As a result, the funds advanced under the program were treated as non-taxable for federal income tax purposes in determining the provision for income taxes. Net Income: The net income was $607,851 for 2021, compared to $791,992 in 2020. The change in 2021 from 2020 was primarily attributable to the matters discussed in the “Net Revenues,” “Restaurant Operating Costs,” “General and Administrative Costs,” and “Other Income” sections and the 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, investors because it represents one means of gauging the overall profitability of our recurring and controllable core restaurant operations. However, this measure is not 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 expenses are excluded as they are generally not specific to restaurant-specific costs. Depreciation and amortization, and impairment charges are excluded because they are not ongoing controllable cash expenses and are not related to the health of ongoing operations. Fiscal Year 2021 2020 Revenues $ 8,451,870 $ 8,159,796 Reconciliation: Income from operations 980,711 529,368 Depreciation and amortization 234,027 189,389 Impairment charges - 190,493 General and administrative, corporate-level expenses 416,792 687,524 Restaurant-level EBITDA $ 1,631,530 $ 1,596,774 Restaurant-level EBITDA margin 19.3 % 19.6 % Liquidity and Capital Resources For the 52 weeks ended January 2, 2022, the Company earned an after-tax profit of $607,851, and principally as a result of the Company’s public offering of common stock and warrants in November 2021, on January 2, 2022, the Company had $12,385,632 in cash and working capital of $11,639,269. Covid-19 continues to have a significant impact on the United States economy. However, as the situation is rapidly changing, it is challenging to predict the effect of the Covid-19 pandemic or its impact of governmental responses on the United States economy in general, and specifically the impact on the quick service drive-through segment of the foodservice industry and Company’s operating results and financial condition. 20 Table of Contents In May 2020, the Company received pandemic-related loans totaling $487,900; of that amount, $460,400 was 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 loan is initially recorded as deferred income on the balance sheet. Forgiveness income is recognized systematically over the qualifying expenses incurred when the Company determines that the forgiveness is reasonably assured. The loans were forgiven in 2021. As a result of the forgiveness of the PPP advances, the loan forgiveness was reflected as “Other Income” in 2020. Also, in May 2020, the Company borrowed $27,500 at no interest under the Minnesota Small Business Emergency Loan Program. Under the loan terms, the Company will seek loan forgiveness in 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 businesses that are synergistic with our business. Our operations do not require significant working capital, and, like many restaurant companies, we may operate with negative working capital. Our primary sources of liquidity and cash flows are 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 the fact that we collect cash from sales from our customers 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 from $1,397,519 in 2020. Cash Flows Used in Investing Activities In 2021 the Company focused on its primary business, completing its initial public offering and building its working capital reserves. Cash Flows from Financing Activities On November 12, 2021, the Company completed a public offering of Units consisting of one share of common stock and one five-year stock purchase warrant to purchase one common share at $5.50. The Company has the right to redeem the warrants under certain conditions. The Company issued 2,400,000 common shares in the offering 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 real properties on which are stores are situated. Our monthly required payment is approximately $22,700. On June 28, 2021, the Company refinanced most of its outstanding mortgage debt with a new lender lowering its nominal interest cost from 4.75% to 3.45% fixed for the next ten years. Qualitative and Quantitative Disclosure about Market Risk Commodity Price Risk We are subject to volatility in food costs due 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 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 $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. 21 Table of Contents Management does not believe that inflation has had a material effect on income in 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 offset increases in its operating 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. As a result, we are uncertain about the effect 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. Recent Accounting Pronouncements There has been no impact on our financial statements and our results of operations and 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 in accordance with GAAP requires us to make estimates and assumptions that affect the reported 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 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 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. 22 Table of Contents