BT Brands(BTBD) - 2021 Q4 - Annual Report

PART I Item 1. Business BT Brands, Inc. operates Burger Time and Dairy Queen restaurants in the upper Midwest, focusing on value-priced food and growth through acquisitions - The company owns and operates nine Burger Time restaurants and one Dairy Queen franchise, with locations in North Dakota, South Dakota, and Minnesota[24] - The primary business plan is to grow within the foodservice industry through the acquisition of existing restaurant units and multi-unit chains[29][74][76] - The Burger Time restaurant economic model targets a total cash investment between $325,000 and $535,000 per new location, aiming for an annualized cash-on-cash return of approximately 30% by the second year of operation[70][72] - The company relies heavily on Sysco Corporation as its primary distributor for food, paper, and supplies, with their agreement expiring on May 30, 2021[57] - As of January 3, 2021, the company employed approximately 107 people, with 17 full-time and 90 part-time employees[90] Item 1A. Risk Factors As a smaller reporting company, BT Brands, Inc. is not required to provide risk factor disclosures - The company is not required to provide risk factor information as it qualifies as a smaller reporting company and has chosen to use scaled disclosure[92] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[94] Item 2. Properties The company owns nine of ten restaurant properties with $3.2 million in mortgages, while one restaurant and executive offices are leased month-to-month - The company owns the properties for all but two of its restaurant locations[98] - As of January 3, 2021, the total outstanding mortgage debt on its properties was approximately $3.2 million[98] - One restaurant location in Sioux Falls, South Dakota is on leased land with a month-to-month rent of $1,600[99] - Executive offices in West Fargo, North Dakota are leased on a month-to-month basis for $500 per month[97] Item 3. Legal Proceedings The company is not currently involved in any material litigation or aware of any threatened litigation - The company is not presently a party to any material litigation[107] Item 4. Mine Safety Disclosures This item is not applicable to the company's business operations - Not applicable[109] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities There is no public trading market for the company's common stock, with 4,047,502 shares outstanding, and no dividends are anticipated - There is no public trading market for the company's common stock[112] - As of March 10, 2021, there were 4,047,502 shares of common stock outstanding and 53 record holders[113] - The company has never declared or paid cash dividends and does not anticipate paying any in the foreseeable future[114] Item 6. Selected Financial Data As a smaller reporting company, BT Brands, Inc. is not required to provide selected financial data - The company is not required to provide selected financial data as it is a "smaller reporting company"[120] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal 2020 saw net sales increase by 25.9% to $8.16 million, leading to a net income of $791,992, bolstered by a PPP loan forgiveness and improved liquidity Results of Operations Fiscal 2020 net sales increased 25.9% to $8.16 million, driven by pandemic-related drive-thru demand, leading to improved margins and a net income of $791,992 Fiscal 2020 vs. Fiscal 2019 Performance | Metric | Fiscal 2020 (53 weeks) | Fiscal 2019 (52 weeks) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $8,159,796 | $6,480,564 | +25.9% | | Income (Loss) from Operations | $529,368 | ($373,548) | - | | Net Income (Loss) | $791,992 | ($466,577) | - | | Restaurant-level EBITDA | $1,596,774 | $699,611 | +128.2% | - The significant increase in sales was principally the result of the COVID-19 pandemic and the temporary shutdown of many restaurant alternatives, leading customers to choose drive-through options[145] - Other income of $466,758 in Fiscal 2020 was primarily due to the forgiveness of a $460,400 Paycheck Protection Program (PPP) loan[159] - General and administrative costs increased by 22.6% in Fiscal 2020, mainly due to higher executive bonus compensation tied to strong financial performance[153] Liquidity and Capital Resources Fiscal 2020 saw significant liquidity improvement, with cash increasing to $1.32 million and working capital turning positive, driven by strong operations and pandemic-related loans Liquidity Position (Year-End) | Metric | Jan 3, 2021 | Dec 29, 2019 | | :--- | :--- | :--- | | Cash | $1,321,244 | $258,101 | | Working Capital | $371,693 | ($471,995) | - In May 2020, the company received pandemic-related loans totaling $487,900, which included a $460,400 PPP loan (forgiven in 2021) and a $27,500 Minnesota Small Business Emergency Loan[167] - Two mortgage lenders allowed the company to defer payments totaling $93,602 for three months during 2020[167] Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, BT Brands, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is not required to provide this information as it is a "smaller reporting company"[179] Item 8. Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for FY2020 and FY2019, including balance sheets, income statements, cash flows, and detailed notes Consolidated Financial Statements Audited financial statements show total assets increased to $3.39 million, net income reached $791,992, and net cash from operations was $1.40 million in FY2020 Key Financial Statement Data | Metric | Jan 3, 2021 | Dec 29, 2019 | | :--- | :--- | :--- | | Balance Sheet | | | | Total Assets | $3,389,165 | $2,633,539 | | Total Liabilities | $4,091,488 | $4,127,854 | | Total Shareholders' Deficit | ($702,323) | ($1,494,315) | | Income Statement | FY 2020 | FY 2019 | | Sales | $8,159,796 | $6,480,564 | | Net Income (Loss) | $791,992 | ($466,577) | | EPS (Basic & Diluted) | $0.20 | ($0.12) | | Cash Flow | FY 2020 | FY 2019 | | Net Cash from Operations | $1,397,449 | $50,489 | Notes to Consolidated Financial Statements Notes detail the revision of 2019 financials for a deferred tax error, accounting for the $460,400 PPP loan, $3.24 million in long-term debt, and related party transactions - The 2019 financial statements were revised to correct a deferred tax liability calculation related to the 2018 Share Exchange, resulting in a $98,000 increase to the 2019 net loss[201] - The company received a $460,400 PPP loan in May 2020, which was forgiven in 2021 and recognized as "Other Income" in the 2020 financial statements[239] - As of January 3, 2021, total long-term debt was $3.24 million, secured primarily by the company's real estate locations and personally guaranteed by a shareholder[250] - In 2019, the company advanced $179,000 to Next Gen Ice, Inc. (NGI), a related party. The notes were repaid in full with interest in August 2020[254] - Approximately 83% of the company's purchases in both fiscal 2020 and 2019 were from a single vendor (Sysco)[255] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - None reported[261] Item 9A. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective due to material weaknesses, including inadequate segregation of duties and risk assessment, leading to a 2019 financial statement revision - Management concluded that disclosure controls and procedures were not effective as of January 3, 2021[265] - Material weaknesses were identified, including a lack of segregation of duties and an ineffective risk assessment process[269][270] - A material weakness resulted in errors in accounting for the 2018 Share Exchange, which required a revision of the consolidated financial statements for the year ended December 29, 2019[274] Item 9B. Other Information There is no information to report under this item - None[279] PART III Item 10. Directors, Executive Officers and Corporate Governance The company's board comprises three non-independent directors, including CEO Gary Copperud and COO Kenneth Brimmer, with the full board handling committee functions Executive Officers and Directors | Name | Age | Position | | :--- | :--- | :--- | | Gary Copperud | 62 | Chief Executive Officer and Director | | Kenneth Brimmer | 65 | Chief Operating Officer and Chairman | | Jeffrey A. Zinnecker | 63 | Director | - The Board of Directors consists of three members, none of whom qualify as independent directors[292] - The company does not have any committees of the board; the functions of audit, compensation, and nominating committees are undertaken by the full board of directors[297] Item 11. Executive Compensation In FY2020, CEO Gary Copperud received $250,000 total compensation, COO Kenneth Brimmer received $104,000, and the company adopted a 2019 Incentive Plan for 500,000 shares Summary Compensation Table (Fiscal 2020) | Name and Principal Position | Salary ($) | Bonus ($) | All other Compensation ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | Gary Copperud, CEO | 150,000 | 100,000 | 0 | 250,000 | | Kenneth W. Brimmer, COO | 0 | 50,000 | 54,000 | 104,000 | - In October 2019, the company adopted the 2019 Incentive Plan, reserving 500,000 shares of common stock for future awards[318] Item 13. Certain Relationships and Related Transactions, and Director Independence This section details related party transactions, including CEO Gary Copperud's loan guarantees and the repayment of loans with affiliate BTND Trading, LLC and Next Gen Ice, Inc - CEO Gary Copperud has personally guaranteed all promissory notes for loans on the company's real properties[330] - A loan from affiliate BTND Trading, LLC, which amounted to $207,729 at the end of fiscal 2019, was repaid in full in August 2020[333] - In 2019, the company loaned $179,000 to Next Gen Ice, Inc. (NGI), an entity where the company's CEO and COO serve as directors. The notes were repaid in full with interest in August 2020[335] Item 14. Principal Accounting Fees and Services Boulay, PLLP billed total accounting fees of $53,576 in FY2020 and $51,706 in FY2019, primarily for audit services, all pre-approved by the Board Accounting Fees Paid to Boulay, PLLP | Fee Category | 2020 | 2019 | | :--- | :--- | :--- | | Audit Fees | $50,450 | $41,900 | | Audit-Related Fees | - | $940 | | Tax Fees | - | - | | All Other Fees | $3,126 | $8,126 | | Total Fees | $53,576 | $51,706 | PART IV Item 15. Exhibits, Financial Statement Schedules This section confirms financial statements are in Item 8, no schedules are provided, and lists exhibits including corporate governance documents and certifications - The financial statements are included in Item 8 of Part II[342] - A list of 21 exhibits filed with the 10-K is provided, including corporate governance documents, material contracts, and Sarbanes-Oxley certifications[345] Item 16. Form 10–K Summary The company did not provide a summary under this optional item - None provided[348]