BT Brands, Inc. BTBD US Equity☆

Item 1A. Risk Factors.

Risks Related to a Health Emergency

Health emergencies may adversely impact our business.

Government responses to health emergencies have significantly impacted the economy. Although our business did not experience significant adverse effects during the peak of COVID-19, its variants or another virus could negatively affect our business. Possible outcomes include declines in customer traffic at our restaurants, our inability to staff our restaurants fully, and, in more severe cases, a temporary restaurant closure, difficulty in our ability to obtain supplies, and increased commodity costs, possibly for prolonged periods of time.

The impact of health emergencies on our business, markets, supply chain, customers, and workforce is contingent upon unpredictable future developments, which may significantly influence our business operations, liquidity, financial condition, and overall performance.

Risks Related to Our Growth Strategy

Acquiring or opening new restaurants is subject to risks and challenges.

We expect to face challenges if we acquire or open new restaurants; many of these challenges pose risks that are beyond our control, including, but not limited to, our ability to acquire locations at a favorable cost, the expense and other factors involved in remodeling or updating locations, hiring managerial personnel and our lack of familiarity with local regulations. Any of these challenges, as well as others we may have yet to identify, could result in significant unanticipated costs being incurred.

As discussed throughout this Annual Report, difficulties of integration include coordinating and consolidating geographically separated systems and facilities, integrating the management and personnel of the acquired brands, maintaining employee morale and retaining key employees, implementing our management information systems and financial accounting and reporting systems, establishing and maintaining effective internal control over financial reporting, and implementing operational procedures and disciplines to control costs and increase profitability. In addition, we must have the liquidity to nurture our acquisitions financially. Given the numerous factors involved, we may not be able to identify and secure attractive restaurant acquisitions successfully, and following an acquisition, we may not be able to successfully operate the acquired business, which could have a material adverse effect on our business, financial condition, and results of operations.

If we acquire additional restaurant businesses, the integration and operation of acquisitions may place significant demands on our management, adversely affecting our ability to manage our existing restaurants. In addition, we may be required to obtain additional financing to fund future acquisitions, and there can be no assurance that we can acquire additional financing on acceptable terms or at all.

There are numerous factors involved in identifying, evaluating, and securing restaurant acquisition, including:

· competition in new markets, including competition for restaurant sites;

· obtaining licenses or permits for development projects on a timely basis;

· the proximity of potential restaurant sites to existing restaurants;

· anticipated infrastructure development near the potential restaurant site and

· availability of acceptable acquisition or lease terms and arrangements.

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The acquisition of existing restaurants is risky and could negatively impact our financial results.

We are evaluating our strategy of expanding our business by acquiring existing restaurant businesses. In the event we make restaurant acquisitions in the future, any such business may be in geographic regions in which we have not operated and may offer food concepts significantly different from our existing business. Our strategy to pursue expansion through the acquisition of existing restaurant businesses is subject to risks and uncertainties, including all the risks of our current operations as outlined in this Annual Report and other factors, including:

· the business that we acquire may be financially unstable;

· our ability to assess the management of a target business may be limited;

the target business may have unknown liabilities;

o other disadvantages compared to competitors with lower leverage.

These factors, among the many other risks and uncertainties typically associated with acquisitions of existing businesses, could negatively impact our Company, which would have a material adverse effect on our business, financial condition, and results of operations.

Acquisitions may have unanticipated consequences that could harm our business and our financial condition.

Any acquisition that we pursue, whether completed or not, involves risks, including:

· potential unknown liabilities;

· difficulties of integration and failure to realize anticipated synergies; and

Future acquisitions may be through a cash purchase transaction, the issuance of our equity securities, or a combination of both, which could result in potentially dilutive issuances of our equity securities. Alternatively, we may incur debt and assume contingent liabilities, which could harm our business and financial condition.

Failure to manage new restaurants properly could negatively impact our operations and deplete our capital resources.

Though we expect to retain key personnel of any existing restaurant group to assist with managing the restaurants, we may not be able to retain such personnel for any meaningful period. Moreover, even if we retain management from the acquired business, our executive officers may not manage the new restaurants profitably for numerous reasons, including our inability to predict consumer preferences and trends that drive the success of these types of restaurants. Any failure to effectively manage the restaurants comprising an acquired restaurant group could, among other negative effects, adversely impact our operations and deplete our capital resources, affecting our financial condition and the market price for our common stock.

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Our growth strategy requires substantial additional capital to execute, which may not be available.

Our growth depends principally on acquiring new restaurants and operating those restaurants on a profitable basis. The cost of acquiring a business will be based on several factors, including the number of restaurants comprising the group and their profitability, and we may not have the resources to fund desirable acquisitions. If we require additional capital to continue our growth plans, we may seek to raise capital through equity or debt financing. If we raise additional funds through issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. Any future debt financing secured by us could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, making it more difficult for us to obtain additional capital and pursue business opportunities, including making further attractive acquisitions or opening new restaurants. Moreover, if we issue debt securities, the debt holders would have rights senior to common stockholders to make claims on our assets. In addition, we might not be able to obtain additional financing on terms favorable to us, if at all. If we cannot obtain adequate financing on satisfactory terms, our ability to support our business growth and respond to business challenges could be significantly limited.

Rising interest rates could negatively impact our performance and acquisition plans.

Rising interest rates could significantly increase our borrowing costs or make it difficult or impossible for us to obtain financing in the future. An increased cost of borrowing would make it more expensive for us to borrow funds to acquire new businesses and negatively impact our results of operations. If we cannot obtain financing in the future, our growth could be affected.

Our growth strategy may divert management’s attention from operating our existing restaurants.

As we grow, management will be focused on the numerous complex and time-consuming activities required to acquire or open new restaurants and to integrate and operate an existing restaurant group. These activities may divert management’s attention from our existing restaurants, and our existing restaurants may suffer. Implementing our growth strategies may reduce the time available to manage our current restaurants, potentially harming our revenue, business, financial condition, and operations.

We may enter into additional long-term, non-cancellable leases.

In connection with acquired restaurants, we have entered into long-term, non-cancelable leases for the space in which such restaurants operate. Further, future acquisitions may be subject to long-term, non-cancelable leases. Under non-cancelable leases, we may be required to pay all or a portion of the real estate taxes, insurance, common area maintenance charges, and other operating costs associated with the property. In addition, non-cancelable leases may provide contingent rental payments based on sales thresholds. If acquired restaurants are subject to long-term non-cancelable leases or we enter into such leases when we acquire a restaurant and such restaurants are not profitable, and we decide to close one or more of them, we may nonetheless be committed to perform our obligations under the applicable leases including, among other things, paying the base rent and other expenses that we agreed to pay for the balance of the lease term. In addition, as leases for our restaurants expire, we may need to negotiate renewals, which could cause us to pay increased occupancy costs or close restaurants in desirable locations. These payments and costs, as well as the failure to negotiate new leases for restaurants, could have a material adverse effect on our business, financial condition, and results of operations.

Difficulties managing our growth could adversely affect operations.

If we experience rapid and substantial growth, it will strain our administrative infrastructure and our managerial and financial resources. To manage the significant growth of our operations, we will be required to:

· install enhanced management information systems; and

· hire, train, motivate, manage, and retain our employees.

We may be unable to install adequate management information and control systems efficiently and timely. Our current or planned personnel, systems, procedures, and controls may need to be revised to support our future operations. Our business could be seriously harmed if we cannot manage growth effectively.

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Risks Related to the Nature of Our Business and Operating in the Restaurant Industry

Our inability to compete effectively may affect sales and restaurant-level profit margins, adversely affecting our results of operations.

The restaurant industry is intensely competitive, with many well-established companies competing directly and indirectly with us. We compete with national, regional, locally owned, quick-service, casual, and full-service restaurants. Many of our competitors have significantly greater financial, marketing, personnel, and other resources than we do. Many of our competitors are well-established in markets where we have existing restaurants or may acquire new ones. In addition, many of our competitors have greater name recognition nationally. The failure to successfully compete with the restaurants in our markets could result in declining customer traffic and may prevent us from increasing or sustaining our revenues and profitability. Success in the restaurant industry is based on various factors, including changes in consumer tastes, nutritional and dietary trends, consumer spending, traffic patterns, and the type, number, and location of competing restaurants often affect the restaurant. Our competitors may react more efficiently and effectively to those conditions. Further, we face growing competition from the supermarket industry, with improvements in meal preparation and delivery alternatives. Additionally, there is increased competition from limited-service and fast-casual restaurants that are aggressively pursuing delivery and “to-go” programs. Meal kit delivery companies and other eat-at-home options also compete with traditional restaurants. In addition, our competitors in the past have offered and promoted price discounts on specific menu offerings, and they may continue to do so in the future. If we cannot continue to compete effectively, our traffic, sales and restaurant-level profit margins could decline, and our business, financial condition and results of operations would be adversely affected.

Our inability to raise menu prices could result in a decline in profitability.

We seek to increase menu prices to help offset costs, including the increased cost for commodities, minimum wages, employee benefits, insurance arrangements, construction, utilities, and other essential operating costs resulting from general inflation. If consumers do not accept menu price increases, resulting in reduced guest traffic, our financial results would be negatively affected.

Public attitudes regarding diet and health could result in new regulations influencing consumers.

Changes in diet attitudes, health information, or government regulations could affect consumer habits and impact our business, finances, and operations. While currently exempt from requirements, changes in laws and regulations may require us to disclose the nutritional content of our food offerings.

We may be unable to effectively respond to changes in consumer health perceptions, successfully implement the nutrient content disclosure requirements, and adapt our menu offerings to eating habits. The imposition of menu labeling laws and an inability to keep up with consumer eating habits could materially affect our business, financial condition, results of operations, and position within the restaurant industry.

Unfavorable publicity could reduce sales at our restaurants.

We may face negative publicity, including comments on social media relating to aspects of our business. Public comments may address, among others, food quality, public health concerns, restaurant facilities, customer complaints or litigation alleging illness or injury, health inspection scores, the integrity of our suppliers’ food processing and other policies, practices and procedures, employee relationships or other matters at one or more of our restaurants. Negative publicity regarding our restaurants may adversely affect us, regardless of whether the comments are valid. In addition, the negative impact of adverse publicity relating to one restaurant may extend beyond the restaurant involved to affect our other restaurants. A similar risk exists concerning food service businesses that are unrelated to us if customers mistakenly associate such businesses with our operations. Employee claims against us based on, among other things, wage and hour violations, discrimination, harassment, or wrongful termination may also create not only legal and financial liability but also negative publicity that could adversely affect us and divert our financial and management resources that would otherwise be exerted in favor of our operations. These risks are amplified because of the prevalence of social media. Adverse social media comments and negative publicity could materially adversely affect our business, financial condition, results of operations and cash flows.

Food safety concerns could harm our business by reducing demand and increasing costs.

The occurrence or reports of food-borne illnesses and food safety issues have occurred in the food industry and could occur in the future. Any report or publicity linking us to food-borne illness or other food safety issues, including food tampering or contamination, could adversely affect our brand, reputation, revenues, and profits. In addition, food-borne illness, food tampering, or food contamination at our competitors’ restaurants could result in negative publicity about the food service industry and adversely impact our sales.

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Furthermore, our reliance on external food suppliers and distributors increases the risk that factors outside our control could cause food-borne illness incidents and that multiple locations would be affected rather than a single restaurant. We cannot ensure that all food items are properly maintained during transport throughout the supply chain and that our employees will identify all products that may be spoiled or contaminated. Food-borne illnesses could result in temporary restaurant closings. Furthermore, any instances of food contamination, whether or not at our restaurants, could subject our suppliers or us to a food advisory, recall or withdrawal under the Food Safety Modernization Act.

Risks Related to Inflation, Labor and Supply Chain

Increased commodity, energy and other costs could decrease our restaurant-level profit margins.

Our profitability depends in part on our ability to anticipate and react to changes in the price and availability of food commodities, including, among other things, beef, poultry, grains, dairy, and produce. Prices may be affected due to market changes, increased competition, public health issues, inflation, shortages, or interruptions in supply due to weather, disease, or other conditions beyond our control, or other reasons. Other events could increase commodity prices or cause shortages that could affect the cost and quality of the items we buy or require us to raise prices or limit our menu options. These events and general economic and demographic conditions may impact our pricing and adversely affect our sales and restaurant-level profit margins. We do not enter into forward pricing arrangements with our suppliers, making us more susceptible to changes in commodity prices.

Our profitability is also adversely affected by increases in the price of utilities, such as natural gas, whether due to inflation, shortages, interruptions in supply, or otherwise. Our profitability is also affected by insurance, labor, marketing, taxes, and real estate costs, which could increase due to inflation, changes in laws, competition, or other events beyond our control. Our ability to respond to and react to such increases and other more general economic and demographic conditions will depend on various factors, including the responses of our competitors and customers. Competition and other factors may constrain our ability to respond to increasing costs by raising menu prices. All these things may be difficult to predict and beyond our control. In this manner, increased costs could adversely affect our performance.

Shortages or interruptions in the supply or delivery of fresh food products could adversely affect our operating results.

We depend on frequent deliveries of fresh food products that meet our specifications. Shortages or interruptions in the supply of fresh food products caused by problems in production or distribution, inclement weather, unanticipated demand, or other conditions could adversely affect the availability, quality, and cost of ingredients, adversely affecting our operating results.

We rely on certain suppliers and distributors for all our supplies.

During 2024, we purchased approximately 30% of our food, paper, packaging, and related supplies from Sysco Corporation, the nation’s largest distributor of food products. In July 2024, we entered into a new primary supplier relationship for BTND with Performance Food Service, a Sysco competitor. We continue to utilize Sysco in certain locations, including PIE. In addition, for BTND, we purchase beverages other than coffee, tea, or milk from PepsiCo and its affiliated bottlers. These entities are also responsible for delivering these products to us. Our reliance on these vendors exclusively provides us with our entire inventory at reasonable prices, presenting certain risks. We do not control the businesses of our vendors, and our efforts to specify and monitor the standards under which they perform may not be successful. If our current vendors are unable to support our expansion into new markets, or if we are unable to find vendors to meet our supply specifications or service needs as we expand, we could likewise encounter supply shortages and incur higher costs to secure adequate supplies, which would have a material adverse effect on our business, financial condition, and results of operations.

We rely on the services of our Chief Executive Officer and Chief Operating Officer to operate our business.

We rely on Gary Copperud, our Chief Executive Officer, and Kenneth Brimmer, our Chief Operating Officer, to make all key decisions relating to our operations and finances. The unexpected loss of Messrs. Copperud or Brimmer’s services would adversely affect our business and plans for future growth. Further, neither of these individuals devotes full-time efforts to the Company, as further described under the heading “Management.”

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The inability to attract, train and retain personnel could adversely impact our business and financial results.

Our success depends on our ability to attract, motivate, and retain qualified managers and the services of skilled personnel. Qualified individuals may be in short supply in some communities. Competition for qualified staff and improvement in regional or national economic conditions could increase the difficulty of attracting and retaining skilled individuals, resulting in higher costs. Our inability to attract and retain staff could adversely affect our business, including restaurant operating hours. We believe managers are the critical component of our business. We devote resources to recruiting and training our restaurant managers and staff. We attempt to reduce employee turnover in our restaurants. Employee turnover may hurt our operating results by increasing training costs and making it more difficult to deliver outstanding customer service, adversely affecting our financial results. Challenges in retaining or recruiting qualified employees and increased costs associated with those activities could adversely affect our business and the results of operations.

Unionization activities or labor disputes could disrupt our operations and affect our profitability.

Although none of our employees are currently covered under collective bargaining agreements, our employees may elect to be represented by labor unions in the future. If a substantial number of our employees were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements, it could adversely affect our business, financial condition, or results of operations. In addition, a labor dispute involving some or all of our employees may harm our reputation, disrupt our operations, and reduce our revenues. The resolution of disputes may increase our costs.

Also, as an employer, we may be subject to employment-related claims, such as individual or class actions or government enforcement actions relating to alleged employment discrimination, employee classification and related withholding, wage-hour, labor standards or healthcare and benefits issues. Such actions, if brought against us and successful in whole or in part, may affect our ability to compete or could adversely affect our business, financial condition, or results of operations.

Risks Related to Information Technology Systems, Cybersecurity and Data Privacy

System failures or network security breaches could interrupt our operations and adversely affect our business.

We rely on our computer systems and network infrastructure across our operations, including point-of-sale processing at our restaurants. Our operations are supported and administered by third-party vendors’ ability to protect our computer equipment and systems against damage from physical theft, fire, power loss, telecommunications failure, or other catastrophic events, as well as from internal and external security breaches, viruses, and other disruptive problems. Damage or failure of third-party provider computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on our business and subject us to litigation or actions by regulatory authorities. In addition, an increasing number of transactions are processed through our mobile application. Disruptions, failures, or other performance issues with technology systems could impair the benefits such systems provide to our business and negatively impact our relationship with our customers.

Security breaches of customer information due to cyber-attacks may adversely affect our business.

Any intentional cyber-attack or unintentional event that results in unauthorized access to systems to disrupt operations, corrupt data or steal or expose confidential information or intellectual property that compromises the information of our customers or employees could result in negative publicity, damage to our reputation, a loss of customers, disruption of our business and legal liabilities. As our reliance on technology has grown, the scope and severity of risks posed to our systems from cyber threats have increased. The techniques and sophistication used to conduct cyber-attacks and breaches of information technology systems, as well as the sources and targets of these attacks, change frequently and are only recognized once attacks are launched or have been in place for some time. We continuously monitor our information technology networks and infrastructure to prevent, detect, address, and mitigate the risk of unauthorized access, misuse, malware, and other events that could have a security impact; however, there can be no assurance that these or any measures will be effective.

Additionally, the majority of our sales are by credit or debit cards, which are processed by third-party organizations completely independent of us. In terms of credit and debit card processing, we do not retain any customer information. Other restaurants and retailers have experienced security breaches in which their customers’ credit and debit card information has been compromised. In the event of a data breach, we may become subject to lawsuits or other proceedings for purportedly fraudulent transactions arising from the actual or alleged theft of confidential or personal information and credit or debit card information. Any security breach or other material interruption in the information technology systems we rely on, particularly those required for point-of-sale payment processing in our stores, such as cybersecurity attacks, may adversely affect our business, operating results and financial condition.

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Failure to effectively manage social media could adversely impact our business.

The use of social media platforms has increased significantly. This includes blogs, chat platforms, social media websites, and other Internet-based communications, enabling individuals to reach a broad audience of consumers. The rising popularity of social media and other consumer-oriented technologies has increased the speed and accessibility of information dissemination. Many social media platforms immediately publish the content their subscribers and participants post, often without filters or checks on the accuracy of the content posted. Information posted on such platforms at any time may be adverse to our interests or inaccurate. The dissemination of information via social media could harm our business, reputation, financial condition, and results of operations, regardless of the information’s accuracy. The damage may be immediate without us having an opportunity for redress or correction.

In addition, we may use social media to communicate with our customers and the general public. Failure by us to use social media effectively or appropriately, particularly as compared to our brands’ respective competitors, could lead to a decline in brand value, customer visits and revenue. Other risks associated with the use of social media include improper disclosure of proprietary information, negative comments about our brands, exposure of personally identifiable information, fraud, hoaxes, or malicious dissemination of false information. Our customers’ or employees’ inappropriate use of social media could increase our costs, lead to litigation, or result in negative publicity that could damage our reputation and adversely affect our business.

Legal and Regulatory Risks

The display of nutritional information could affect consumer preferences and negatively impact the results of our operations.

Government regulation and changes in consumer eating habits resulting from shifting attitudes regarding diet and health or the latest information regarding changes in the health effects of consuming our menu offerings may impact our business. In general, because of our size, we have been exempted from regulations related to disclosing nutritional information. However, as we grow, parts of our business will likely be required to comply with state and local regulations relating to the disclosure of ingredients and nutritional information. We anticipate that laws and regulations requiring disclosure of our menu’s ingredients and nutritional content will continue to increase.

We cannot guarantee our ability to effectively respond to changes in consumer health perceptions, successfully implement the nutrient content disclosure requirements, or adapt our menu offerings. The imposition of menu-labeling laws could adversely affect our results of operations and financial position and the restaurant industry in general.

New information or attitudes regarding diet and health could result in changes in regulations and consumer eating habits that could adversely affect our revenues.

Regulations and consumer preferences may change because of new information or attitudes regarding diet and health. These changes may include regulations impacting menu item ingredients and nutritional content. For example, many states, counties, and cities have enacted menu-labeling laws requiring multi-unit restaurant operators to make nutritional information available to guests or restrict the sale of certain ingredients in restaurants. The success of our restaurant operations is dependent, in part, upon our ability to respond effectively to changes in consumer health and disclosure regulations and to adapt our menu offerings to trends in eating habits. If consumer health regulations or consumer eating habits change significantly, we may be required to modify or delete specific menu items. If we cannot adjust our menu offerings appropriately, regulations may adversely impact customer demand and our revenues.

We are subject to many federal, state, and local laws and compliance is costly and complex.

The restaurant industry is subject to extensive federal, state, and local laws and regulations, including those relating to the preparation and sale of food, licensing and regulation by state and local authorities relating to health, sanitation, safety, and fire standards. Our relationships with employees (including the Fair Labor Standards Act of 1938, the Immigration Reform and Control Act of 1986, and applicable requirements concerning the minimum wage, overtime, family leave, working conditions, safety standards, immigration status, unemployment tax rates, workers’ compensation rates and state and local payroll taxes) and federal and state laws which prohibit discrimination. Our ability to respond to labor cost increases by raising menu prices will depend on the responses of our competitors and customers. Higher wage costs, benefit standards, and compliance costs could also affect our distributors and suppliers, resulting in higher costs.

We are subject to the ADA, which, among other things, requires our restaurants to meet federally mandated requirements for disabled people. The ADA prohibits discrimination in employment and public accommodations based on disability. Under the ADA, we could be required to expend funds to modify our restaurants to provide service to or make reasonable accommodations for the employment of disabled persons. In addition, our employment practices are subject to the requirements of the Immigration and Naturalization Service relating to citizenship and residency. Government regulations could also affect and change the items we procure for resale.

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The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements and the consequences of litigation relating to current or future laws and regulations, or our inability to respond effectively to significant regulatory or public policy issues, could increase our compliance and other costs of doing business and, therefore, hurt our results of operations. Failure to comply with the laws and regulatory requirements of federal, state, and local authorities could result in, among other things, revocation of required licenses, administrative enforcement actions, fines, and civil and criminal liability. In addition, certain laws, including the ADA, could require us to expend significant funds.

Failure to comply with regulations could result in losing our food service licenses, harming our business.

Under various federal, state, and local government regulations, restaurants are required to obtain and maintain licenses, permits and approvals to operate their businesses. Such regulations are subject to change from time to time. We must keep these licenses, permits, and approvals for our operation. Typically, licenses must be renewed annually and may be revoked, suspended, or denied renewal for cause at any time if governmental authorities determine that our conduct violates applicable regulations. Difficulties or failures to maintain or obtain the required licenses and approvals could adversely affect our existing restaurants and delay or result in our decision to cancel the opening of new restaurants, adversely affecting our business.

Restaurant companies have been the target of allegations of violations of employment laws.

Our business is subject to the risk of litigation by employees, consumers, suppliers, stockholders or others through private actions, class actions, administrative proceedings, regulatory actions, or other litigation. The outcome of litigation, particularly class action and regulatory actions, is difficult to assess or quantify. In recent years, restaurant companies have been subject to lawsuits, including class action lawsuits, alleging violations of federal and state laws regarding workplace and employment matters, discrimination, and similar matters.

A customer may file complaints or lawsuits against us alleging that we are responsible for some illness or injury they suffered at or after a visit to one of our restaurants, including actions seeking damages resulting from food-borne illness or accidents in our restaurants. We are also subject to various other claims from third parties arising in the ordinary course of our business, including contract claims. The restaurant industry has also been subject to a growing number of claims that the menus and actions of restaurant chains have led to the obesity of specific customers. The Company may also be subject to lawsuits from our employees, the U.S. Equal Employment Opportunity Commission, or others alleging violations of federal and state laws regarding workplace and employment matters, discrimination, and similar matters.

Regardless of whether any claims against us are valid or whether we are liable, claims may be expensive to defend and may divert time and money away from our operations. In addition, they may generate adverse publicity, which could reduce customer traffic and sales. Although we maintain what we believe to be adequate levels of insurance, insurance may not be available at all or in sufficient amounts to cover any liabilities with respect to these or other matters. A judgment or other liability in excess of our insurance coverage for any claims or any adverse publicity resulting from claims could adversely affect our business.

We may not be able to adequately protect our intellectual property, which could harm the value of our brands.

Our ability to successfully implement our business plan depends on our ability to build brand recognition using our existing trademarks, service marks, and other proprietary intellectual property, as well as intellectual property that we may develop in the future. We have registered or applied to register a number of our trademarks. We cannot assure you that our trademark applications will be approved. Third parties may also oppose our trademark applications or otherwise challenge our use of the trademarks. If our trademarks are successfully challenged, we could be forced to rebrand our goods and services, which could result in a loss of brand recognition and require us to devote resources to advertising and marketing. If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes, or infringes on our intellectual property, the value of our brands may be harmed, which could have an material adverse effect on our business and might prevent our brands from achieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ property rights. If third parties claim that we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, even those without merit, could be expensive and time-consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resources or require us to enter into royalty or license agreement to obtain the right to use a third party’s intellectual property.

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General Risk Factors

Economic conditions in the United States could materially affect our business, financial condition, and results of operations.

The restaurant industry depends on consumer discretionary spending. During periods of economic downturn, continuing disruptions in the overall economy, including the impacts of high unemployment and financial market volatility and unpredictability, may cause a related reduction in consumer confidence, which could negatively affect customer traffic and sales throughout our industry. These factors, as well as national, regional, and local regulatory and economic conditions, gasoline prices, and disposable consumer income, affect discretionary consumer spending. If economic conditions worsen and our customers choose to dine out less frequently or reduce the amount they spend on meals while dining out, customer traffic could be adversely impacted. If adverse economic conditions persist for a period of time or become pervasive, consumer changes to their discretionary spending behavior, including the frequency with which they dine out, could be more permanent. They will likely be affected by many national and international factors beyond our control. If sales decrease, our profitability could decline as we spread fixed costs across a lower level of sales. Prolonged negative trends in restaurant sales could cause us to, among other things, reduce the number and frequency of new restaurant openings, close restaurants, delay the remodeling of our existing restaurants, or take asset impairment charges.

We are susceptible to regional economic developments.

Our financial performance depends on restaurants in Minnesota, North Dakota, South Dakota, Michigan, and Florida, comprising all but one of our restaurants as of December 29, 2024. As a result, adverse economic conditions in any of these areas could have a material adverse effect on our overall results of operations. In addition, given our geographic concentrations, negative publicity regarding any of our restaurants in these areas could adversely affect our business, as could other regional occurrences such as local strikes, terrorist attacks, increases in energy prices, or natural or other disasters.

Damage to our reputation could negatively impact our business, financial condition, and the results of operations.

We have built our reputation on the high quality of our food, service, and staff, and we must protect and grow the value of our brands to continue to succeed. Any incident that erodes consumer affinity for our brands could significantly reduce their value and damage our business. For example, one brand’s value could suffer, and our business could be adversely affected if customers perceive a reduction in the quality of our food, service or staff, or an adverse change in our culture or ambiance, or otherwise believe we have failed to deliver a consistently positive experience.

We may be adversely affected by news reports or other negative publicity (regardless of their accuracy) regarding food quality issues, public health concerns, illness, safety, injury or government or industry findings concerning our restaurants, restaurants operated by other food service providers, or others across the food industry supply chain. The risks associated with such negative publicity may materially harm our operations and damage our brand.

Our marketing programs may not be successful.

We intend to continue investing in marketing efforts to attract and retain customers. These initiatives may not be successful, resulting in expenses incurred without the benefit of higher revenues. If these initiatives are unsuccessful, we may engage in additional promotional activities to attract and retain customers, including buy-one-get-one offers and other offers for free or discounted food. Any such additional promotional activities could adversely impact the results of our operations.

We plan to continue emphasizing mobile and other digital ordering, delivery, and pick-up orders. These efforts may fail or result in unexpected operational challenges that adversely impact our costs. We may also introduce new menu items that may not achieve the expected sales levels. Additionally, some of our competitors have greater financial resources, which enable them to spend significantly more on marketing and advertising than we can. Should our competitors increase spending on marketing and advertising, or should our advertising and promotions be less effective than our competitors, there could be a material adverse effect on our results of operations and financial condition.

Our business is subject to seasonal fluctuations due to weather and other factors.

Historically, customer spending patterns for our midwestern restaurants are lowest in the first and fourth quarters of the year due to holidays, consumer habits, and adverse weather. Likewise, our restaurants in Florida may experience declines in customer spending during the summer, when Florida has fewer tourists. Our restaurant in Woods Hole, Massachusetts, experiences reduced customer traffic outside the summer months. Therefore, our quarterly results will continue to be affected by seasonality. Because of these and other factors, our financial results for any quarter may not be indicative of the results that may be achieved for a full fiscal year.

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If we cannot offset rising labor costs with price increases, our financial performance could be adversely affected.

Increases in hourly labor costs and minimum tip credit wages, extensions of personal and other leave policies, other governmental regulations affecting labor costs and a diminishing pool of potential staff members when the unemployment rate falls and legal immigration is restricted, especially in certain localities, could increase our labor costs and make it more difficult to fully staff our restaurants, any of which could materially adversely affect our financial performance. The federal government may significantly increase the federal minimum wage and tip credit wage (or eliminate the tip credit wage) and require substantially more mandated benefits than is currently required under federal law. In addition to increasing the overall wages paid to our minimum wage and tip credit wage earners, these increases could create pressure to increase salaries and other benefits paid to other staff members who, in recognition of their tenure, performance, job responsibilities and other similar considerations, historically received a rate of pay exceeding the applicable minimum wage or minimum tip credit wage. Because we employ a large workforce, any wage increase, or expansion of benefits could significantly impact our labor costs and negatively affect our operations results. Our vendors, contractors and business partners are similarly impacted by wage and benefit cost inflation. Many have increased prices for goods and services to offset their increasing labor costs.

Failure of our internal control over financial reporting could adversely affect our business and financial results.

Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process that provides reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that we will prevent or detect a misstatement of our financial statements or fraud. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and in a timely manner or to detect and prevent fraud. The identification of a material weakness could indicate a lack of controls adequate to generate accurate financial statements that, in turn, could cause a loss of investor confidence and a decline in the market price of our common stock. We cannot assure you that we will be able to remediate any material weaknesses that may be identified in future periods in a timely manner or maintain all of the controls necessary for continued compliance. Likewise, we cannot assure you that we will be able to retain sufficiently skilled finance and accounting personnel, especially in light of the increased demand for such personnel among publicly traded companies.

Risks Related to Ownership of Our Common Stock

Our business could be negatively affected by the actions of activist stockholders.

The Company may be subject to proposals by stockholders urging us to take certain corporate action. If activist stockholder activities ensue, our business could be adversely impacted because:

Any litigation could result in substantial costs and divert management’s attention and resources, potentially harming our business.

You may be unable to resell your shares at or above the price you paid.

Volatility in the market price of our common stock may prevent you from being able to sell your shares at or above the price you paid for your shares. The stock market, in general, has been highly volatile, which may be especially true for our common stock, given our growth strategy and stage of development. As a result, the market price of our common stock is likely to be similarly volatile. You may experience a decrease, which could be substantial in the value of your stock, including decreases unrelated to our operating performance or prospects and could lose part or all of your investment. The price of our common stock could be subject to wide fluctuations in response to several factors, including those described elsewhere in this Annual Report and others, such as:

· our failure to meet analysts’ projections or guidance;

· additions and departures of key personnel;

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· changes in accounting principles;

· litigation and governmental investigations;

· terrorist acts, acts of war or periods of widespread civil unrest;

· a foodborne illness outbreak;

· severe weather, natural disasters, and other calamities; and

· changes in the general market and economic conditions.

Our articles of incorporation, bylaws and Wyoming law may discourage a change of control of our Company and depress the price of our stock.

Our articles of incorporation and by-laws include certain provisions that could have the effect of discouraging, delaying, or preventing a change of control of our company or changes in our management, including, among other things:

We have no plans to pay cash dividends on our common stock.

We likely will retain future earnings, if any, for future operations, expansion, and debt repayment, and we have no plans to pay any cash dividends in the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions, and other factors that our board of directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness our subsidiaries or we incur, including our credit facility. As a result, you may not receive any return on an investment in our common stock for a price greater than that you paid.

Raising additional equity capital may be more challenging while the warrants are outstanding.

While the warrants issued in our IPO are outstanding, the holders of such warrants will be able to profit from a rise in the market price of our common stock. However, we may find it more difficult to raise additional equity capital. At the same time, the warrants are outstanding, and we may not have the capital to fund our expansion and growth plans or for other corporate purposes.

Our board of directors is authorized to issue preferred stock without obtaining stockholder approval.

Our articles of incorporation authorize the issuance of up to 2,000,000 shares of preferred stock with designations, rights and preferences that may be determined from time to time by the board of directors. Our board of directors is empowered, without stockholder approval, to create and issue a series of preferred stock with dividend, liquidation, conversion, voting, or other rights that could adversely affect the voting power or other rights of the holders of the common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying, or preventing a change in control. Although we have no present intention to issue any shares of preferred stock, there can be no assurance that we will not do so in the future.

These provisions might discourage, delay, or prevent a change in control of our company or a change in our management. These provisions could adversely affect the voting power of holders of common stock and limit the price that investors might be willing to pay in the future for shares of our common stock.

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Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims.

Our articles of incorporation and bylaws provide that the Company will indemnify our directors and officers, in each case, to the fullest extent permitted by Wyoming law.

In addition, as permitted by the Wyoming Business Corporation Act, our bylaws and the indemnification agreements that we have entered into with our directors and officers provide that:

Reduced disclosure requirements may make our common stock less attractive to investors.

We are a “smaller reporting company.” Specifically, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings. Decreased disclosures in our SEC filings due to our status as an “emerging growth company” or “smaller reporting company” may make it harder for investors to analyze our results of operations and financial prospects.

We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive, there may be a less active trading market for our common stock, and our stock price may be more volatile.

Item 1B. Unresolved Staff Comments.

None.

Item 1C. Cybersecurity

We maintain a proactive cybersecurity program that is aligned with our business and is dedicated to managing information technologies (“IT”) risks to our Company. We have established policies, standards, processes, and practices for assessing, identifying and managing material risks from cybersecurity threats. These measures are integrated into our overall risk management program and governance structure, demonstrating our commitment to cybersecurity in a manner consistent with our business activities.

We employ an array of controls, technologies, and other processes designed to identify, protect against, detect, respond to, and mitigate cybersecurity risks. These measures are aligned with the frameworks established by the National Institute of Standards and Technology (NIST). Our IT activities are primarily outsourced for monitoring and maintenance to third parties and are subject to independent controls over IT. These controls include but are not limited to, internal reporting, monitoring and detection tools, threat intelligence, and general and role-based training. We consistently evaluate and enhance the effectiveness of our cybersecurity program, ensuring continuous evolution and improvement.

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Overseeing the assessment and management of our exposure to various risks, including cybersecurity, is a key oversight responsibility for the Board of Directors. These risks are identified, measured, monitored, and managed across key risk categories, which include the consideration of cybersecurity risks. Our chief financial officer (CFO) facilitates the Company’s oversight, which includes an assessment of our risk environment at least once per year. The review incorporates risk assessment and evaluation. The Audit Committee assists the Board with its oversight of cybersecurity risk. Our CFO reviews the oversight program with the Audit Committee, including reviewing existing risks and significant emerging risks across the Company’s key risk categories. In reviewing specific threats and risks with the Board, senior management may incorporate reports from consultants and other third-party advisors.

To date, we have not experienced a cybersecurity threat or incident; therefore, there has been no cybersecurity impact on our results of operations or financial condition. However, unauthorized access to our information and systems and other disruptions to our business operations could occur in the future.

Item 2. Properties.

Corporate Offices

Our principal office is in leased office space in Minnetonka, Minnesota, and is rented on a month-to-month basis for $1,300 per month.

Burger Time Properties

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

Grand Forks, North Dakota 1989 650 29,580 BTND, LLC BTND, LLC

Sioux Falls, South Dakota 1991 650 17,688 BTND, LLC BTND, LLC

Richmond, Indiana (2) held for sale 1,062 23,086 BTND IN, LLC (4) (5) (2)

Until January 2025, we leased executive offices, consisting of approximately 1,000 square feet, located at 405 West Main Street, West Fargo, North Dakota, under a one-year rental agreement at the cost of $550 per month. In addition, effective January 2, 2022, we agreed to reimburse Brimmer Company, LLC, an affiliate of the Company, for the monthly rent of $1,300 on approximately 1100 square feet in Minnetonka, Minnesota, at 10501 Wayzata Blvd Ave S, Suite 102, where administrative activities are performed. Our office space is adequate for its intended purposes and our near-term expansion plans.

On June 28, 2021, we refinanced our BTND mortgage debt to mortgages bearing interest at 3.45%. As of December 29, 2024, we had $2,276,344 in contractual obligations relating to mortgages on the real property on which our Burger Time restaurants are situated. Our monthly required payment is approximately $22,000. We are also obligated under operating lease agreements to future payments totaling approximately $1,772,000, requiring monthly rental payments of approximately $25,000.

Keegan’s Seafood Grille

Upon the acquisition of Keegan’s assets in March 2022, we entered into a 132-month triple-net lease with an unrelated landlord for the property occupied by Keegan. The lease terms provide for an initial rent of $5,000 per month, increasing annually at the greater of 3% or the increase in the Consumer Price Index over that period. The location comprises approximately 2,900 square feet of dining, kitchen, and storage space and typical features for a full-service restaurant.

Pie In The Sky Coffee and Bakery

With our purchase of PIE assets in May 2022, we entered into a five-year triple-net lease for the property occupied by PIE with the seller of the assets that provides us with three five-year extensions at our option. The lease terms provide for an initial rent of $10,000 per month, increasing annually to approximately $11,000 per month during the first five-year term. The location comprises approximately 3,500 square feet of dining, kitchen, and storage space on two levels, with a production kitchen and storage and office space on the lower level; there is also approximately 1,500 square feet of outdoor dining, which is serviced by an outdoor service bar. The landlord granted us a right of first refusal to purchase the property on terms it receives from a third party during the entire term and any lease extension.

Schnitzel Haus

Concurrently with the May 13, 2024, purchase of Schnitzel Haus assets, we agreed to assume the remaining term of the former owners’ existing lease obligation on approximately 4,200 square feet. The Schnitzel lease expires January 1, 2028. Monthly lease payments are approximately $4,700 per month plus common area charges and is subject to annual escalation based on the Consumer Price Index of inflation.

Village Bier Garten

Our purchase of Village Bier Garten’s assets included a five-year lease for 3,000 square feet of restaurant space. The terms of the triple-net 60-month lease provided for an initial rent of $8,200 per month with an annual escalation of 3%. The lease includes three five-year renewal option periods. Following the end of the fiscal year of 2024, on January 2, 2025, we closed the VBG location and entered into an agreement to assign the lease.

Item 3. Legal Proceedings.

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition or cash flows. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 4. Mine Safety Disclosures.

Not applicable.

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PART II

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

Market Information

Our common stock began trading on the Nasdaq Stock Market under the symbol “BTBD” on November 12, 2021, and our warrants issued as part of the units we sold in the IPO commenced trading on the Nasdaq Stock Market under the symbol “BTBDW” on November 12, 2021.

Stockholders

As of March 1, 2025, approximately 40 stockholders of record held 6,246,118 shares issued and outstanding shares of common stock. The number of record holders is based on the actual number of holders registered on the books of our transfer agent and does not reflect holders of share held in “street name” or person, partnerships, associations, corporations, or other entities identified in security position listings maintained by depository trust companies.

Dividends

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

Recent Sales of Unregistered Securities

We did not sell any equity securities during the year ended December 29, 2024.

Securities Authorized for Issuance under Equity Compensation Plans

In October 2019, our board of directors and stockholders adopted the 2019 Incentive Stock Plan (the “Plan”). At the Annual Stockholders Meeting held in December 2022, the stockholders authorized the increase of shares available for grant under the Plan from 250,000 shares to 1,000,000 shares. The plan is a comprehensive incentive compensation plan under which we can grant equity-based and other incentive awards to officers, employees, directors, consultants, and advisers to BT Brands and its subsidiaries. The plan aims to help attract, motivate, and retain qualified personnel and enhance stockholder value. Awards that lapse or are forfeited become available again for grant.

As of December 29, 2024, the Company had granted options to purchase 340,000 shares of common stock, including 194,250 options granted to employees, 110,000 to consultants, and 35,000 to non-employee directors. The initial grant of options to non-employee directors was immediately vested, and future grants to directors and grants to employees are subject to a four-year vesting requirement, with 20% vested upon the grant and an additional 20% vested annually in the succeeding four vesting years. The 110,000 options for consultants include warrants to purchase 100,000 shares under a consulting agreement. These consultant warrants vest monthly over 60 months.

Effective February 27, 2023, our board of directors approved a total grant of 250,000 shares of common stock to two officers (the “Grant Shares”). The Grant Shares vest when our common stock trades for $8.50 per share for 20 consecutive trading days. This requirement triggers the Company’s right to redeem the common stock warrant issued in our IPO.

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Equity compensation plans approved by security holders 239,250 $ 2.56 760,750

Equity compensation plans not approved by security holders. 100,000 $ 2.50 -

Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

Share Repurchase Program

On June 6, 2024, we authorized a stock repurchase program, under which we may repurchase up to 625,000 shares, or approximately 10.0%, of our currently issued and outstanding common stock (the “2024 Share Repurchase Program”). We have not established any maximum aggregate price to be paid for shares that we repurchase. As of December 29, 2024, we repurchased an aggregate of 306,394 including 91,394 shares under the 2024 Share Repurchase Program. We may purchase up to an additional 533,606 shares under the 2024 Share Repurchase Program. We are purchasing the shares with available cash and may repurchase shares of our common stock from time to time, in amounts, at prices, and at such times as we deem appropriate, subject to market conditions, legal requirements and other considerations. Our repurchases may be executed using open market purchases, unsolicited or solicited privately negotiated transactions or other transactions. The 2024 Share Repurchase Program does not obligate us to repurchase any specific number of shares and may be suspended, modified or terminated at any time without prior notice. The 2024 Share Repurchase Program does not contain a time limitation during which repurchases are permitted to occur.

The Company purchased 65,000 shares of its common stock in a single transaction in 2022, and in 2023, we initiated a share repurchase program. Under the repurchase program, 150,000 shares were purchased in 2023 and 91,394 in 2024, as summarized below

(1) Calculated inclusive of commissions.

Report of Offering of Securities and Use of Proceeds Therefrom.

On November 12, 2021, we completed our IPO of 2,400,000 units with a public offering price of $5.00 per unit, each containing one share of common stock and one warrant to purchase one share of Common Stock at an exercise price of $5.50 per share under our Registration Statement on Form S-1 (as amended) (File No. 333-250957). Maxim Group LLC and Joseph Gunnar & Co., LLC served as the representatives of several underwriters in the underwritten public offering. The net proceeds from the offering were approximately $10.68 million after deducting underwriting discounts, commissions, and offering expenses.

There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus, dated November 16, 2021, filed with the SEC on November 16, 2021, pursuant to Rule 424(b) under the Securities Act.

No payments were made by us to directors, officers, or persons owning ten percent or more of our common stock or to their associates or our affiliates other than payments in the ordinary course of business to officers for salaries. Including our three restaurant business acquisitions and our purchase of Bagger Dave’s shares for $1,260,000, we have invested the net proceeds in money market funds and equity securities, including the purchase from time to time of an aggregate of 1,398,110 shares of common stock of Noble Roman’s Inc. for an aggregate cost of $333,256 as of December 29, 2024. Noble Roman’s, Inc., is a public company based in Indianapolis, Indiana, operating pizza-focused food services, including nine full-service locations. In 2023, we engaged in an unsuccessful proxy solicitation to elect a representative to the Noble Roman’s board of directors.

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Item 6. Reserved

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

Our fiscal year is 52/53 weeks long, ending on the Sunday closest to December 31. The 52-week fiscal year 2024 ended on December 29, 2024, and the 52-week fiscal year 2023 ended on December 31, 2023.

Introduction

As of December 29, 2024, including our partially owned Bagger Dave’s business, we owned and operated seventeen restaurants comprising the following:

· Keegan’s Seafood Grille in Indian Rocks Beach, Florida (“Keegan’s”);

· Pie In The Sky Coffee and Bakery in Woods Hole, Massachusetts (“PIE”);

· Schnitzel Haus in Hobe Sound, Florida (Schnitzel”); and

Burger Time opened its first restaurant in Fargo, North Dakota, in 1987. Burger Time restaurants feature traditional grilled hamburgers, other affordable foods, and soft drinks. Burger Time’s operating principles include (i) offering bigger burgers and more value for the 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 and quality food made fresh to order at a fair price

The average customer transaction at Burger Time restaurants in the year decreased slightly in 2024 compared to 2023 and is currently about $14.50. We are constantly reviewing menu prices to maintain gross margins during recent periods of accelerating inflation. Many factors influence our sales trends. Our business environment is challenging as competition is intense.

We operate through a central management organization that provides continuity across our restaurant base by utilizing the efficiencies of a central management team.

Recent Events

Our acquisitions have allowed us to diversify our operations into new restaurant segments and new geographic regions, reducing our dependency on the financial performance of our Burger Time restaurants. In 2024, we acquired the Schnitzel Haus restaurant, and in 2022, we purchased three operating restaurants and now own a 39.6% interest in BDVB, an operator of six casual restaurants. In May of 2024, we purchased the Schnitzel Hause restaurant. We may consider and evaluate additional acquisition opportunities in the future. Due to the underperformance of our Village Bier Garten restaurant relative to our expectations, we made the decision early in 2025 to close the business. We own 39.6% of the publicly held Dave’s Burger Tavern, Inc., the owner and operator of six Bagger Dave’s restaurants, a casual restaurant and bar concept. Bagger Dave’s provides an inviting, entertaining atmosphere specializing in burgers, hand-cut fries, craft beer, milkshakes, salads, pizza, and other items. Bagger Dave’s opened its first restaurant in Berkley, Michigan, in January 2008 and operates four restaurants in Michigan, one restaurant in Ft. Wayne, Indiana, and one location in Centerville, Ohio. In January 2025, Bagger Dave’s closed a unit in Chesterfield, Michigan. We are currently exploring the sale of all of Bagger Dave’s restaurant locations.

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Material Trends and Uncertainties

Industry trends have a direct impact on our business. Current trends include difficulties attracting food service workers and rapid inflation in the cost of input items. Recent trends also include the rapidly changing areas of technology and food delivery. The major companies in the restaurant industry have rapidly adopted and developed smartphone and mobile delivery applications, have aggressively expanded drive-through operations, and developed loyalty programs and database marketing supported by a robust technology platform. We expect these trends to continue as restaurants aggressively compete for customers. Competitors will continue to discount prices through aggressive promotions.

Food costs have increased over the last two years, and we expect to see continued inflationary pressure during 2024. Beef and egg costs continued to increase in 2024, and we expect costs to continue to be volatile in 2024. Given the competitive nature of the restaurant industry, it may be challenging to raise menu prices to fully cover cost increases. Future margin improvements may be difficult to achieve. Margin improvement will be achieved through operational enhancements, equipment advances, and increased volumes offsetting food cost increases.

Labor is a critical factor in operating our stores. Securing staff to run our locations has been more challenging in most areas where we operate our restaurants. The current labor market has resulted in higher wages as the competition for employees intensifies, not only in the restaurant industry but in practically all retail and service industries. We must develop and retain quality employees.

We cannot determine the future effects of any public health matters on our operations and financial results. We have and could continue to experience the impact of recent events, including but not limited to commodity inflation, disruption in our supply chain, and labor availability challenges at certain shops. We have increased and plan to continue raising prices to offset additional costs due to a higher inflationary economic environment in the U.S. These price increases may not be sufficient to mitigate higher costs, and further increases may negatively impact consumer behavior.

Results of operations for the 52 weeks ending December 29, 2024, compared to the 52 weeks ending December 31, 2024.

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.

Amount % Amount %

COSTS AND EXPENSES

Restaurant operating expenses

UNREALIZED GAIN (LOSS) ON MARKETABLE SECURITIES (93,458 ) (.6 ) 80,139 .6

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Net Revenues:

Net sales for 2024 increased $746,819, or 5.3%, to $14,823,472 from $14,076,653 in 2023. Schnitzel Haus, acquired in May 2024, contributed $710,000 in sales to the overall increase in revenue. Also contributing to the overall sales increase was an increase of approximately 7% at BTND locations, offsetting the effects of closing a location in Sioux Falls, South Dakota, early in the year and the conversion of the Ham Lake franchise unit to Burger Time, resulted in two-month closure of the location. PIE also contributed to the sales increase during the year, with a 19% increase in sales in 2024.

For BTND locations open at year-end, 2024 restaurant sales ranged from a low of $567,000 to a high of $1,176,000. The average sales for each Burger Time unit open at year-end were approximately $926,000 in 2024, an increase of approximately 12.8% from $821,000 in 2023.

Restaurant Operating Costs:

In 2024, restaurant operating costs (which refer to all the costs associated with operating our restaurants but do not include general and administrative expenses and depreciation, amortization, and restaurant impairment charges) increased to 95.1% of restaurant sales from 93.9% in 2023. This increase was due primarily to continued 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 impact of cost increases and the addition, including non-BTND restaurants during the year, may be detailed as follows:

Restaurant operating costs for the period ended December 31, 2023 $ 13,210,129

Increase in food and paper costs 8,412

Increase in labor costs 670,223

Increase in occupancy and operating cost 210,880

Restaurant operating costs for the period ended December 29, 2024 $ 14,099,644

Costs of Sales - food and paper:

The cost of food and paper sales for 2024 decreased to 37.8% of restaurant sales from 39.8% in 2023. The decrease is the net result of menu price increases at all locations during the year, offset by a moderate inflationary cost environment, where we saw a slight rise in beef and paper and lower costs for some other items. Because of its coffee-focused menu, PIE has significantly lower food and paper costs than our other restaurants.

Labor Costs:

In 2024, labor and benefits costs increased to 41.3% of restaurant sales from 38.8% in 2023. The increase results from higher wages for hourly employees and managers in all of our markets and an unfavorable utilization of the fixed portion of labor costs. Also, PIE and Keegan’s businesses run higher labor costs than BTND. In addition, we added a senior culinary person at PIE to focus on new menu development. 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.

Occupancy and Other Operating Costs:

For 2024, occupancy and other costs increased to 16.0% of sales, or $2,355,806, compared to $2,154,611, or 15.3% of restaurant sales in 2023, principally as a result of the addition of Schnitzel Haus as a leased location during the year.

Depreciation and Amortization Costs:

For 2024, depreciation and amortization costs increased 24.1%, or $144,320, to $742,860 (5.0% of sales) from $598,540 (4.3% of sales) in 2023. Depreciation and amortization costs increased as a result of significant capital additions during the year, including the purchase of Schnitzel and the replacement of some hurricane-damaged property at Keegan’s.

General and Administrative Costs

General and administrative costs in 2024 declined as a percentage of sales with an overall increase of 2.5%, or $40,649, to $1,691,404 (11.4% of sales) from $1,650,755 (11.7% of sales) in 2023.

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Income (loss) from Operations:

The loss from operations was $1,832,108 in 2024 compared to a loss from operations of $1,072,589 in 2023. A significant portion of the increase in the loss was the result of the impairment charge related to the continuing poor results at VBG, leading to the decision to close the location in 2025 as a result of recording an impairment charge of $371,872, which is included in costs and expenses. PIE profitability declined because costs increased faster than menu prices. PIE also invested in additional staffing and culinary leadership, focusing on broadening the menu to increase business in the afternoons and evenings. The change in income from operations in 2024 compared to 2023 reflects a $250,000 gain on the sale of a trademark asset and was also due to the matters discussed in the “Net Revenues,” “General and Administrative Costs,” and “Restaurant Operating Costs” sections above.

Interest expense:

In 2024, our interest expense increased $2,298 to $99,906 (0.7% of restaurant sales) from $97,608 (0.7% of restaurant sales) in 2023 due to additional margin interest costs offset by schedule amortization reducing loan balances, resulting in a lower interest cost.

Interest and Dividends and Other Income:

Interest and dividend income was $178,279 in 2024, a decline from $300,923 in 2023, due to a lower average cash and investment balance in 2024, when more short-term assets were invested in non-dividend or interest-earning investments.

Net Income (loss):

Net Loss

The net loss was $2,311,208 in 2024 compared to a loss of $887,368 in 2023. The increase in the net loss in 2024 from 2023 reflects the impact of an increase in the share of loss from Bagger Dave’s to $415,085 from $347,081 in 2023. The impact of fully reserving for deferred tax benefits resulted in a $206,000 income tax provision in the year. The increase in the loss from 2023 also reflects the $371,872 impairment charge related to VBG. The net loss was also attributable to the matters discussed in the “Net Revenues,” “Restaurant Operating Costs,” “General and Administrative Costs,” and “Other Income” sections.

Restaurant-level EBITDA:

To supplement the consolidated financial statements, which are prepared and presented in accordance with GAAP, we use restaurant-level EBITDA (earnings before interest, taxes, depreciation, and amortization), 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. General and administrative expenses are excluded as they are generally unrelated to restaurant-specific costs. Depreciation and amortization are excluded because they are not ongoing controllable cash expenses and are unrelated to ongoing operations’ health.

Year

Reconciliation:

Impairment of restaurant asset 371,872 -

General and administrative, corporate-level expenses 1,691,404 1,650,755

Restaurant-level EBITDA margin 4.9 % 6.2 %

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Liquidity and Capital Resources

For the 52 weeks ending December 29, 2024, we recorded an after-tax loss of $2,311,208. At December 29, 2024, we had $4,270,970 in cash and marketable securities and a net working capital of $3,556,469.

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 as, generally, restaurants operate with negative working capital. Working capital deficits may be incurred in the future. Our liquidity and cash flow sources are cash and cash equivalents and marketable securities on hand. We have used available cash to make acquisitions, service debt, and maintain our stores. 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

The operating cash flow in 2024 was negative $723,505 compared to negative $258,787 in 2023, representing a decline in cash flow from operations of $464,719 in 2024.

Cash Flows Used in Investing Activities

In 2024, we acquired the Schnitzel Haus restaurant for $943,000. In 2023, on a net basis, we sold marketable securities. The Company used cash of approximately $495,000 in capital improvements at its restaurants. Proceeds from the sale of trademark assets were $250,000, and we lent $120,000 to NGI Corporation, a related party, in 2024.

Cash Flows from Financing Activities

Cash flow from financing activities reflects a reduction of $440,849. In 2024, broker margin borrowing of $115,899 was repaid. Additionally, we spent $142,794 purchasing treasury shares, and $182,156 was used for long-term debt principal payments.

Contractual Obligations

As of December 29, 2024, we had $4,048,155 in contractual obligations, including long-term debt and future lease liabilities. Our monthly required payments total approximately $50,000.

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, we have elected to comply with certain scaled disclosure reporting obligations and are not required to provide the information required by this item.

Item 8. Financial Statements and Supplementary Data.

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

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Item 8. Financial Statements and Supplementary Data.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of BT Brands, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of BT Brands, Inc. (the Company) as of December 29, 2024, and December 31, 2023, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the fiscal years then ended (collectively referred to as the “consolidated” financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2024, and December 31, 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

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.

/s/ Boulay PLLP

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

Minneapolis, Minnesota

March 31, 2025

PCAOB ID: 542

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PART I FINANCIAL INFORMATION

BT BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

CURRENT ASSETS

Prepaid expenses and other current assets 127,621 47,246

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET 3,343,340 3,247,013

EQUITY INVESTMENT IN UNCONSOLIDATED SUBSIDIARY 304,439 718,806

INVESTMENT IN EQUITY AND NOTES RECEIVABLE FROM RELATED COMPANY 424,000 304,000

DEFERRED INCOME TAXES - 206,000

Total assets

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY

See Notes to Consolidated Financial Statements

BT BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

52 Weeks Ended 52 Weeks Ended,

COSTS AND EXPENSES

Restaurant operating expenses

Restaurant asset impairment charge 371,872 -

UNREALIZED GAIN (LOSS) ON MARKETABLE SECURITIES (93,458 ) 80,139

NET LOSS PER COMMON SHARE - Basic and Diluted $ (0.37 ) $ (0.14 )

See Notes to Consolidated Financial Statements

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BT BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the 52-week periods- Common Stock AdditionalPaid-in Accumulated Treasury

Shares Amount Capital (Deficit) Stock Total

See Notes to Consolidated Financial Statements

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BT BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

52 Weeks ended,

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net loss to net cash used in operating activities-

Amortization of debt issuance premium included in interest expense 5,400 5,400

Unrealized loss (gain) on marketable securities 93,458 (80,139 )

Charge for impairment of restaurant assets 371,872

Loss on disposal of assets 90,087 -

Property tax liability settlement - (181,339 )

Changes in operating assets and liabilities, net of acquisitions -

Prepaid expenses and other current assets (80,375 ) (9,849 )

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of net assets of Schnitzel Haus (943,000 ) -

Loans to related company (120,000 ) -

Net cash provided (used by) investing activities (2,184,677 ) 4,713,044

CASH FLOWS FROM FINANCING ACTIVITIES

SUPPLEMENTAL DISCLOSURES

Purchase of property and equipment included in accounts payable $ 15,109 $ -

See Notes to Consolidated Financial Statements

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

BT Brands, Inc. (“BT Brands,” “we,” “us,” “our” or the “Company”) was incorporated as Hartmax of NY Inc. on January 19, 2016. Effective July 30, 2018, we acquired 100% of the ownership of BTND, LLC (“BTND”) in exchange for common stock through a Share Exchange Agreement (the “Share Exchange”). In 2020, BT Brands, Inc. was reincorporated in the State of Wyoming.

Business

As of December 29, 2024, the Company owned and operated twelve restaurants and owned a 39.6%, as of year-end, interest in an operator of six restaurants. During 2024, we owned and operated eight Burger Time restaurants in the North Central region of the United States. 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, Schnitzel Haus a fine dining German-themed restaurant in Hobe Sound, Florida featuring German and American menu items German and American beer, wine and cocktails, The Village Bier Garten (“VBG”), a German-themed restaurant in Cocoa, Florida operated during 2024 and closed January 3, 2025. Our Burger Time restaurants feature a variety of burgers and other affordable foods, sides, and soft drinks. Keegan’s Seafood Grille has operated in Indian Rocks Beach, Florida, for over thirty-five years, offering a variety of fresh seafood items for lunch and dinner. The menu at Keegan’s includes beer and wine. PIE features an array of freshly baked goods, freshly made sandwiches, and locally roasted coffee. 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 of Bagger Dave’s Burger Tavern, Inc. (“Bagger Dave’s” or “BDVB”). Initially, our ownership represented 41.2% ownership of BDVB, and in 2024, it represented 39.6%. We acquired the shares for $1,260,000, or approximately $0.114 per share. In 2023 and 2022, 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. The first Bagger Dave’s opened in January 2008 in Berkley, Michigan. There are six Bagger Dave’s restaurants, including four in Michigan and single units in Ft. Wayne, Indiana, and Centerville, Ohio. Our investment in Bagger Dave’s is accounted for under the “Equity Method.”

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of BT Brands, Inc., BTND, LLC, and its wholly owned subsidiaries 10Water Street, LLC, 1519BT, LLC, and BTNDDQ, LLC. Significant intercompany accounts and transactions were eliminated in consolidation.

Use of Estimates in Preparation of Financial Statements

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (GAAP), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the period. Our significant estimates include the valuation of certain long-lived assets and valuation of equity method investments. Actual results may differ from the estimates used in preparing the consolidated financial statements.

Fiscal Year

The Company’s fiscal year is a 52/53-week year, ending on the Sunday closest to December 31. Most years consist of four 13-week accounting periods comprising the 52-week year. Fiscal 2024 was the 52 weeks ending December 29, 2024, and Fiscal 2023 was the 52 weeks ending December 31, 2023; all references to years in this report refer to the fiscal years described above.

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Fair Value of Financial Instruments

Our accounting for fair value measurements of assets and liabilities that are recognized or disclosed at fair value in the statements on a recurring or nonrecurring basis adheres to the Financial Accounting Standards Board (FASB) fair value hierarchy that prioritizes the input to valuation techniques used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements).

The three levels of fair value hierarchy are as follows:

· Level 3 Inputs are unobservable inputs for the asset or liability.

The level in the fair value hierarchy within which a fair measurement in its entirety falls is based on the lowest level input that is significant to fair value measurement in its entirety.

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

Equity Method

Investments in companies in which the Company has the ability to exercise significant influence, but not control, are accounted for using the equity method. This method recognizes the Company's share of the investee's net income or loss, and dividends received, as adjustments to the investment carrying amount. The Company's share of the investee's net income or loss is recognized in the income statement, while dividends received reduce the investment carrying amount.

Investments

Bagger Dave’s-

Our investments include our net investment of $304,439 in Bagger Dave’s as determined under the “Equity Method” of accounting, net of recording our equity share in Bagger Dave’s losses.

NGI related party investment-

Our CEO, Gary Copperud, is Chairman of the board of directors of NGI. Our COO, Kenneth Brimmer, is also an NGI board member and serves as its CFO. Our total investment in equity and loans to NGI Corporation (“NGI”) is $424,000, which includes $120,000 in demand loans to NGI during 2024; the notes bear interest at 15% with interest payable-in-kind, the balance on NGI notes is convertible into NGI Series B preferred shares and warrants at any time at the option of the holder, and $6,600 in accrued interest has not been recognized as the conversion option is evaluated. The Company also has made $304,000 in prior equity investments in NGI. A portion of the NGI investment includes equity in the form of 179,000 common shares received in 2020 as consideration for extending the maturity of a note receivable repaid in August 2020. Under the Note modification terms, we acquired 179,000 NGI common shares from its founders. We also received warrants expiring on March 31, 2029, to purchase 358,000 shares of common stock for $1.00 per share. We attributed $75,000 to the value of the equity received. This amount was reflected as interest income in 2020. On February 12, 2022, we invested $229,000 in 138,788 shares of NGI Series A1 8% Cumulative Convertible Preferred Stock, convertible share for share into NGI common shares. This investment is reflected at the cost of $229,000. The preferred investment included a five-year warrant to purchase 34,697 shares at $1.65. The investment in NGI does not have a readily determinable market value, and it is carried at the historic cost determined by BT Brands, which the Company believes is reasonable relative to recent stock sales by NGI.

BDVB files quarterly and annual financial reports with OTCMarkets, Inc. The listing with OTC Markets does not require the information to be audited. Below is a summary of information filed by Bagger Dave’s for the fiscal years ending December 29, 2024, and December 31, 2023. In February 2025, the Bagger Dave’s location in Chesterfield, Michigan, was closed because of poor performance. The sale of all six of Bagger Dave’s locations is currently being negotiated at a value over the carrying value. While the sale of the restaurant assets is being pursued, there is no assurance the sale will ultimately occur.

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Unaudited summary financial information for Bagger Dave’s -

Balance Sheet Information - December 29,2024 December 31,2023

Statements of Operations information - December 29,2024 December 31,2023

Fair Value Measurements

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 year-end indicated:

Fair value Carrying Amount Level 1 Fair value Carrying Amount Level 1

Cash and Cash Equivalents

Cash and cash equivalents may include United States Treasury Bills with a maturity at the time of purchase of three 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.

Broker Margin Loan

At December 31, 2023, we had a broker margin loan outstanding of $115,899 which was repaid during 2024. The broker margin loans carried variable margin interest rate as set by the lending brokerage firm and was 6.8% at December 31, 2023; there was no amount due to brokers at December 29, 2024. Any broker margin loan is collateralized by marginable securities held in the margin account and is due on demand under Federal Reserve margin account regulations and the margin account agreement.

Deferred Transaction Costs

Deferred transaction costs for the year ended December 31, 2024, primarily consist of legal fees that were capitalized as incurred and will be offset against the proceeds from future ATM offerings. The deferred transaction costs will be reviewed periodically to assess the probability that future securities will be offered. In the event that no future offering will occur, any deferred transaction costs will be expensed. Total costs incurred, but not accounted for as a reduction in equity, were $10,000 as of December 31, 2024.

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Revenue Recognition

Our revenues consist principally of selling food products for cash or bank-issued credit and debit card transactions at our restaurants. We follow Accounting Standards Update (ASU) 2014-09 (ASC 606). 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, net of discounts and incentives and net of applicable sales taxes.

Receivables

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

Inventory

Inventory consists of food, beverages, supplies, and merchandise for resale and is stated at a lower of cost (first-in, first-out method) or net realizable value.

Property and Equipment

Property and equipment are stated at cost. 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 evaluated at the lowest level, for which cash flows can be identified at the restaurant level. Significant estimates are made for each restaurant’s future operating results over its remaining life in determining future cash flows. 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.

Estimated Useful lifeIn years

Equipment 3-7

Leasehold Improvements 5-10

Impairment and Disposal of Long-Lived Assets

Land, building, 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 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 closed stores in West St. Paul in 2022 and Richmond, Indiana, in 2018. The West St. Paul location was sold in 2023 for a gain of $310,182. The Richmond location is currently offered for sale, and we believe the Richmond property will be sold above its carrying value of approximately $258,000. In 2024, we closed a leased location in Sioux Falls, South Dakota, resulting in a loss on the disposal of equipment of approximately $90,000, which is included in operating expenses. Following the end of our 2024 fiscal year on January 2, 2025, we closed the Village Bier Garten, sold certain equipment for $34,500 and assigned the remaining lease to an unrelated party. As a result, we reviewed VBG’s assets for impairment, resulting in recording an impairment loss of 371,872 in 2024. The Ham Lake, Minnesota, location was closed in January 2025. We are currently assessing alternatives for the property that we believe have value above its net book value of $424,000.

Sale of Hot-N-Now Trademark

Effective October 9, 2024, we completed the sale of a trademark property. The Hot-N-Now trademark, with no cost basis, was sold for an upfront cash payment of $250,000 and potential future payments of up to $150,000 based upon $10,000 per unit for each Hot-N-Now unit opened by the purchaser. A gain on the sale of an asset of $250,000 was recognized in 2024.

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Leases

Three of our restaurant locations are subject to leases. We evaluate leases at commencement to determine their operating or finance lease classification. Under FASB ASC Topic 842 requirements, we recognize operating and finance lease liabilities based on the present value of the minimum future lease payment over the expected lease term and recognize a corresponding right-of-use asset. We recognize lease expense related to operating leases on a straight-line basis. As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of the lease payments. For lease agreements that contain both lease and non-lease components, the Company has elected to account for the lease and non-lease components as a single lease component. The Company has elected to not apply the requirements of ASC 842 for short-term leases. Short-term leases are defined as leases that, at the commencement date, have lease terms of twelve months or less. At lease inception, we determine the likelihood of exercising any future lease option periods. Where we are reasonably certain to exercise our renewal option, we include that option period in calculating the present value of future lease payments. See Note 4 for additional information.

Goodwill, Other Intangible Assets, and Other Assets

Goodwill is not amortized. Goodwill is tested for impairment annually or more frequently if the conditions indicate additional review is necessary. The Company assesses qualitative factors to determine if it is more likely than not that the fair value is less than its carrying amount and if it is necessary to perform the qualitative goodwill impairment test. The Company has one reporting unit. If the Company performs the quantitative test, it compares the carrying value of the reporting unit to an estimate of the reporting unit’s fair value to identify potential impairment. The fair value of the reporting unit is estimated using a discounted cash flow model. Where available, and as appropriate, comparable market multiples are also used to corroborate the results of the discounted cash flow models. In determining the estimated future cash flow, the Company considers and applies certain estimates and judgments, including current and market projected future levels of income based on management’s plans, business trends, prospects and economic conditions and market-participant considerations. If the estimated fair value of the reporting to unit is less than the carrying value, a goodwill impairment loss is recorded for the difference, up to the amount of the total goodwill. During the year ended December 29, 2024, no impairment losses were identified. The cost of other intangible assets is amortized over the expected useful life.

Advertising and Marketing Costs

We expense advertising and marketing costs as incurred. Advertising expenses for fiscal years 2024 and 2023 totaled $59,438 and $81,594, respectively.

Income Taxes

We provide for income taxes under ASC 740, Accounting for Income Taxes, using an asset and liability approach in accounting for income taxes. 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. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. ASC 740 requires the net of deferred tax assets and deferred tax liability to be presented as a single amount on the balance sheet. It is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense (benefit).

Per Common Share Amounts

Net income per common share is computed as required by section 260-10-45 of the FASB Accounting Standards Codification. Basic net income or (loss) per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. Common stock equivalents are excluded from diluted net income (loss) computation per share because their effect is anti-dilutive. As a result, no common stock equivalents were dilutive as of the years ended in 2024 and 2023. There are currently 2,746,838 five-year warrants exercisable at $5.50 per share outstanding. These warrants were issued as a part of our November 12, 2021, initial public offering. At the end of fiscal 2024 and 2023, all outstanding warrants were exercisable at prices above the underlying stock’s market price and, therefore, were not dilutive.

Restaurant Pre-opening expenses

Restaurant pre-opening and other development expenses are non-capital expenditures and are expensed as incurred as part of other operating expenses. Restaurant pre-opening expenses may include the costs of hiring and training the initial hourly workforce for each new restaurant, travel, the cost of food and supplies used in training, grand opening promotional expenses, the cost of the initial stocking of operating supplies, and other direct costs related to the opening of a restaurant, including rent during the construction and in-restaurant training period.

Stock-Based Compensation

Stock-based compensation relates to the issuance of stock options and restricted stock.

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. We estimated the grant date fair value using the Black-Scholes option-pricing model. We recognize a compensation expense, net of estimated forfeitures, on a straight-line basis over the employee service periods for awards granted.

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Reclassifications

In 2024, the Company made certain reclassifications to its consolidated balance sheet and statement of operations presentation to enhance financial reporting consistency. These reclassifications involved adjusting certain 2023 comparative amounts to conform to the current year’s presentation. The reclassifications did not impact previously reported total assets, total liabilities, stockholders’ equity, or net income for the year ending December 31, 2023. These adjustments were made solely for presentation purposes and did not affect the Company’s overall financial position, results of operations, or cash flows.

Segment Reporting - Recently Adopted Accounting Guidance:

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.

In November 2023, the FASB issued ASU 2023-07: Improvements to Reportable Segment Disclosures. This ASU, which amends Topic 280: Segment Reporting, improves disclosure requirements for reportable segments and enhances disclosures for companies with single reportable segments. The Company has concluded it has a single reportable segment based on the nature of its operations and the regulatory environment under which it operates. The business’s nature and the segment’s accounting policies are the same as described in Note 1 - Business. The Company’s Chief Operating Decision Maker (“CODM”) is its executive team made up of its CEO and Chief Financial Officer. The CODM assesses the reportable segment’s performance and allocates resources for the reportable segment based on the net income and total assets, which are the same amounts in all material respects as those reported on the consolidated statements of operations and consolidated balance sheets. The Company adopted the standard on January 1, 2024. The adoption did not have an impact on the Company’s consolidated financial statements.

NOTE 2 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at the end of the respective fiscal year:

Less - impairment charge (322,794 ) —

Depreciation expenses for 2024 and 2023 were $652,967 and $539,675, respectively.

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NOTE 3 – INTANGIBLE ASSETS

At year-end 2024 and 2023, based on the value of acquired assets, intangible assets comprise the following:

Impairment charge (49,078 )

Following the end of 2024, on January 2, 2025, the Company closed its Village Bier Garten location. In connection with the closure, the Company recognized the impairment of Village Bier Garten assets and has recorded an allowance to fully reserve for the remaining carrying value of intangible assets associated with the location.

Tradename assets are amortized over 15 years. Total amortization expense for 2024 was approximately $90,000. The total amortization of intangible assets, including the covenants not to compete will approximate $62,600 in 2025, $56,300 in 2026, $36,800 in 2027 and $26,200 per year through 2036 and approximately $5,600 in 2037.

Total amortization expense of intangible assets in 2024 includes $11,660 of expense to write off the intangible asset related to the Company’s former franchise asset upon termination of the franchise agreement. This amount was included in other assets in the 2023 consolidated balance sheet.

NOTE 4 – LEASES

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. Variable lease costs consist primarily of property taxes, insurance, certain utility expenses, and sales tax. The lease is being accounted for as an operating lease. 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 $505,626 at December 29, 2024 and $547,687 at the end of 2023 are reflected as 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. Variable lease costs consist primarily of property taxes, insurance, certain utility expenses, and sales tax. The terms of the 60-month lease provide for an initial rent of $10,000 per month with an annual escalation of 3% after 24 months. The PIE lease includes three five-year renewal option periods at our option. 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 as an operating lease obligation and a right-of-use asset of approximately $1,055,000. The present value discounted at 4.5% of the remaining lease obligation of $847,949 on December 29, 2024, and $923,885 at the end of 2023 are reflected as liabilities in the accompanying financial statements.

With the acquisition of VBG assets, we assumed a five-year lease from the seller for approximately 3,000 square feet of restaurant space and access to an additional 3,000 square feet of shared entertainment seating area. 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%. The VBG lease includes three five-year renewal periods at our option. Variable lease costs consist primarily of property taxes, insurance, certain utility expenses, and sales tax. The VBG lease is accounted for as an operating lease. 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 $256,462 as of December 29, 2024, and $352,100 at December 31, 2023 are reflected as liabilities in the accompanying consolidated financial statements.

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In May 2024, with the acquisition of Schnitzel Haus, we assumed the remaining 44 months on the restaurant’s lease obligation for approximately $5,400 per month for approximately 4,200 square feet. The Schnitzel Haus lease is accounted for as an operating lease. At its inception, we recorded an operating lease obligation and a right-of-use asset of $182,878. The present value, discounted at 6.5% of the remaining lease obligation of $161,774, is reflected as a liability in the accompanying consolidated balance sheet at December 29, 2024.

The following is a schedule of the approximate minimum future lease payments on the operating leases as of December 29, 2024, including amounts assuming we exercise the option to extend leases where we believe that exercise of the option is likely.

Total

Total future minimum lease payments 2,074,198

Present value of lease obligations $ 1,771,811

The weighted average remaining lease term is approximately 6.6 years, and the weighted average discount rate is approximately 4.79%. We cannot determine the interest rate implicit in our leases. Therefore, the discount rate represents our estimated incremental interest rate to borrow an amount approximating the aggregate lease payments collateralized by the property over a similar term at the commencement of the lease.

The total operating lease expense for 2024 and 2023 were $408,696 and $298,567, respectively. Cash paid for leases was approximately $330,000 in 2024 and $282,000 in 2023. Variable expenses for leased properties were $57,525 in 2024 and $16,500 in 2023.

Through January 2025, we paid $550 per month under an annual rental agreement for corporate and administrative office spaces in West Fargo, North Dakota, which was terminated in January 2025, and we paid $1,350 per month in Minnetonka, Minnesota, for a combined monthly rent of approximately $1,900 in 2024.

NOTE 5 – INCOME TAXES

Income taxes are accounted for in accordance with ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in the financial statements or tax returns.

As of December 29, 2024, the Company has recorded total deferred tax assets of $616,000, primarily attributable to net operating loss carryforwards (NOLs) offset by temporary differences related to property and equipment. Management assesses the realizability of deferred tax assets annually and considers all available positive and negative evidence, including historical operating performance, taxable income projections, and reversal of deferred tax liabilities. Based on this evaluation, the Company has determined that sufficient uncertainty exists regarding the future realization of these deferred tax assets. Accordingly, a valuation allowance of $616,000 has been recorded as of December 29, 2024, reducing the net deferred tax asset balance to zero. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company will continue to assess the need for a valuation allowance in future periods. Should circumstances change and sufficient positive evidence emerge to support the realization of deferred tax assets, all or a portion of the valuation allowance may be reversed.

Principally, due to accelerated tax depreciation in prior years, which allowed for the depreciation of assets acquired in a business acquisition, and the operating results in the current year, the losses for tax purposes resulted in a total estimated net operating federal loss carryforward of approximately $3.3 million at year-end 2024 and $1.9 million on December 31, 2023. These carryforwards are available for future utilization subject to taxable income limitations and under Internal Revenue Code Section 382 due to ownership changes. The Company has various state net operating loss carryforwards of $3.1 million, a portion of which will expire after 15 years beginning in 2037 and a portion of which has indefinite life subject to limitation consistent with federal tax rules.

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The 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. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The tax effect of the temporary differences and carryforwards are as follows for the respective fiscal years:

Deferred tax assets:

Future tax benefit of impairment allowances 144,000 49,000

Accrued compensation - 22,000

Unrealized gain on short-term investments - 2,000

Less: valuation allowance (616,000 ) -

Deferred tax liabilities:

Property and equipment tax depreciation difference (430,000 ) (349,000 )

Unrealized loss (gain) on short-term investments (21,000 ) -

Net deferred tax asset $ - $ 206,000

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

Current income tax expense (benefit) $ - $ -

Change in valuation allowance 616,000 -

Total income tax expense for the years ended December 29, 2024, and December 31, 2023, differed from the amounts computed by applying the U.S. Federal statutory tax rate of 21% to pre-tax income as follows:

State income tax (benefit), net of federal tax benefit (63,000 ) (36,000 )

Equity in loss of unconsolidated subsidiary 87,000 85,000

Change in valuation allowance 616,000 -

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.

The Company had no accrued interest or penalties relating to income tax obligations and currently has no federal or state examinations in progress, nor has it had any federal or state tax examinations since its inception. The last three years are subject to federal and state tax examinations. With few exceptions, the Company is no longer subject to U.S. Federal and state income tax examinations by tax authorities for years before 2021.

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NOTE 6 – ACCRUED EXPENSES

Accrued expenses consisted of the following at the end of the respective reporting periods:

Accrued bonus compensation and consulting fees - 119,139

NOTE 7 – SHAREHOLDERS’ EQUITY

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. We issued 2,400,000 common shares in the offering and 2,760,000 stock purchase warrants, which included 360,000 warrants to purchase an aggregate of 360,000 shares of common stock purchase pursuant to a partial exercise of the over-allotment option granted to underwriters for $.01 per warrant, totaling $3,600. The estimated fair value of the warrants at the date of issuance, net of the exercise proceeds, was $360,000, which is reflected as an additional cost of the offering. After deducting all fees and expenses, the net proceeds from the offering were $10,696,575. In 2018, we issued 3,708,000 common shares as part of the Share Exchange. Upon closing a related private offering, 205,002 additional common shares and 102,503 common stock warrants to purchase shares at $4.00 through July 31, 2024, were issued to investors for a net amount of approximately $492,266. During 2022, 13,612 public warrants were exercised for $74,866. The remaining warrants were outstanding as of the end of 2024. 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 2024.

On June 6, 2024, we authorized a stock repurchase program, under which we may repurchase up to 625,000 shares, or approximately 10.0%, of our currently issued and outstanding common stock (the “2024 Share Repurchase Program”). We have not established any maximum aggregate price to be paid for shares that we repurchase. As of December 29, 2024, we repurchased an aggregate of 306,394 including 91,394 shares under the 2024 Share Repurchase Program. We may purchase up to an additional 533,606 shares under the 2024 Share Repurchase Program. We are purchasing the shares with available cash and may repurchase shares of our common stock from time to time, in amounts, at prices, and at such times as we deem appropriate, subject to market conditions, legal requirements and other considerations. Our repurchases may be executed using open market purchases, unsolicited or solicited privately negotiated transactions or other transactions. The 2024 Share Repurchase Program does not obligate us to repurchase any specific number of shares and may be suspended, modified or terminated at any time without prior notice. The 2024 Share Repurchase Program does not contain a time limitation during which repurchases are permitted to occur.

Potential Sale and Issuance of Stock

On December 13, 2024, BT Brands, Inc. (the “Company”) entered into an Equity Distribution Agreement (the “Distribution Agreement ”) with Maxim Group LLC (“Maxim”) to sell shares of the Company's common stock, par value $0.002 per share (the “Common Stock”), subject to the maximum aggregate sales proceeds of up to $3,005,000 pursuant to the applicable prospectus supplement, from time to time, through an “at the market offering” program under which Maxim will act as sales agent.

Under the Distribution Agreement, the Company will set the parameters for the sale of shares, including the number of shares to be issued, the time period during which sales are requested to be made, any limitation on the number of shares that may be sold in any one day and any minimum price below which sales may not be made. Pursuant to General Instruction I.B.6 of Form S-3, the Company may not sell the shelf securities in a public primary offering with a value exceeding more than one-third of the aggregate market value of its voting and non-voting ordinary shares held by non-affiliates in any 12-month period as long as the aggregate market value of the Company's outstanding ordinary shares held by non-affiliates is less than $75 million. The $3,005,000 of shares of Common Stock that may be offered, issued and sold under the offering prospectus is included in the $25,000,000 of securities that may be offered, issued and sold by the Company under the base prospectus.

Subject to the terms and conditions of the Distribution Agreement, Maxim may sell the shares by any method deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended. Maxim agreed to use commercially reasonable efforts in conducting such sales activities consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules of The Nasdaq Stock Market LLC. The Distribution Agreement may be terminated by the Company or Maxim upon notice to the other party in accordance with the terms of the Distribution Agreement. The offering of the shares of Common Stock pursuant to the Distribution Agreement will terminate upon the termination of the Distribution Agreement in accordance with its terms.

The shares of Common Stock will be issued pursuant to the Company's shelf registration statement on Form S-3 (File No. 333-283830), filed with the Securities and Exchange Commission (the “SEC”) on December 13, 2024 (the “Registration Statement”). The Registration Statement was declared effective by the SEC on December 20, 2024. The Company will file a final prospectus supplement with the SEC following the effectiveness of the Registration Statement relating to the offer and sale of the shares of Common Stock pursuant to the Distribution Agreement.

The Distribution Agreement contains representations, warranties and covenants that are customary for transactions of this type. Under the terms of the Distribution Agreement, the Company will pay Maxim a commission in an amount equal to 3.0% of the aggregate gross proceeds from each sale of shares of Common Stock made under the Distribution Agreement and reimburse Maxim's expenses, including certain legal fees. The Company has no obligation to sell any shares of Common Stock under the Distribution Agreement and may at any time suspend solicitation and offers under the Distribution Agreement. The Company has also provided Maxim with customary indemnification and contribution rights. Maxim is not under any obligation to purchase any of the shares of Common Stock on a principal basis pursuant to the Distribution Agreement. Maxim's obligations to sell the shares of Common Stock under the Distribution Agreement are subject to the satisfaction of certain conditions, including customary closing conditions.

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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.

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, 2024, there were 660,750 shares available for a grant under the 2019 Plan.

In 2024, we issued 15,000 ten-year options to the then-existing outside members of our Board of Directors to purchase shares at $1.61 per share; we also granted 5,000 fully-vested options to purchase shares at $1.70 per share to a new member of the Board. 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 issued a consultant warrant to purchase 100,000 shares at $2.50 per share for seven years, with the warrants vesting monthly for over five years as long as the consultant continues in this capacity. Assuming the consulting agreement continues to full term, we project that we will recognize approximately $112,000 in stock-based compensation at $32,000 annually through 2027 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. Compensation expense equal to the fair value of the options at the grant date is recognized in general and administrative expenses over the applicable service period. Compensation expense for 2024 was approximately $72,500 and will be approximately $59,000 in 2025 and $9,000 in 2026. Based on current estimates, we project that we will recognize approximately $183,000 in stock-based compensation expense related to options and consultant warrants over the next four years, including approximately $91,000 in 2025, $41,000 in 2026, $35,000 in 2028, and $16,000 in 2029.

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 grant date fair value of the award was determined using a lattice model with assumptions similar to the stock option calculation. The total of this award was determined to be $265,000. For 2024, stock-based compensation included approximately $126,000 in expenses for the award. We project the remainder of approximately $36,000 of stock-based compensation will be recognized in 2025

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

· Exercise price – The stated exercise price of the stock option;

· Expected life – The simplified method;

· Volatility – Estimated volatility;

Information regarding our stock options, including consultant warrants, is summarized below:

Exercised - - - -

Canceled, forfeited, or expired (1,000 ) 2.58 - -

Exercised - - - -

Canceled, forfeited, or expired - - - -

The Black-Scholes option-pricing model was used to estimate the fair value of the stock options at the date of grant with the following weighted-average assumptions for grants during the year ended December 29, 2024.

Expected life (in years) 6.0 6.0

Expected dividend - -

Expected stock volatility 63 % 63 %

Risk-free interest rate 3.75 % 3.75 %

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NOTE 9 – LONG-TERM DEBT

Less - unamortized debt issuance costs (30,799 ) (36,199 )

Scheduled maturities of long-term debt, excluding amortization of debt issuance costs, are as follows at December 29, 2024:

Fiscal year ending--

NOTE 10 – ACQUISITION

On May 13, 2024, our 1519BT, LLC subsidiary completed the purchase of certain assets from LC Food Concepts. The acquired assets comprised a business operating as a high-end German-themed restaurant with approximately 175 seats located in Hobe Sound, Florida, doing business as “Schnitzel Haus. The aggregate purchase price was $943,000, including $850,000 paid at closing as payment for certain assets, separate payments of $65,000 for inventory on hand at closing, and $28,000 for the purchase of a utility vehicle and other items used in the business. With the acquisition, we assumed the seller’s remaining lease obligation of $5,400 monthly for 44 months. Aside from the lease obligation, no liabilities of the seller were assumed in the purchase of assets. A summary of the assets acquired is approximately as follows:

Property, including leasehold improvements and equipment $ 625,000

Intangible covenant not to compete 100,000

Operating lease right-of-use asset 182,878

Total identifiable assets acquired 1,000,878

Operating lease liability (182,878 )

Net identifiable assets acquired 818,000

NOTE 11 – RELATED PARTY TRANSACTIONS

Next Gen Ice

Officers of BT Brands, Inc. also serve as officers and directors of NGI Corporation. Our total investment in equity and loans to NGI Corporation (“NGI”) is $424,000, which includes $120,000 in demand loans to NGI during 2024, the notes bear interest at 15% with interest payable-in-kind, and the balance on NGI notes is convertible into NGI Series B preferred shares and warrants at any time at the option of the holder, $6,600 in accrued interest has not been recognized as the conversion option is evaluated. The Company also has made $304,000 in prior equity investments in NGI. A portion of the NGI investment includes equity in the form of 179,000 common shares received in 2020 as consideration for extending the maturity of a note receivable repaid in August 2020. Under the Note modification terms, we acquired 179,000 NGI common shares from its founders. We also received warrants expiring on March 31, 2029, to purchase 358,000 shares of common stock for $1.00 per share. We attributed $75,000 to the value of the equity received. This amount was reflected as interest income in 2020. The fair value of this investment remains consistent with its 2020 valuation. On February 12, 2022, we invested $229,000 in 138,788 shares of NGI Series A1 8% Cumulative Convertible Preferred Stock, convertible share for share into NGI common shares. This investment is reflected at the cost of $229,000. The preferred investment included a five-year warrant to purchase 34,697 shares at $1.65. Our CEO, Gary Copperud, is Chairman of the board of directors of NGI. Our COO, Kenneth Brimmer, is also an NGI board member and serves as its CFO. The investment in NGI does not have a readily determinable market value, and it is carried at the historic cost determined by BT Brands, which the Company believes is reasonable relative to recent stock sales by NGI.

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Bagger Dave’s Burger Tavern

Officers of BT Brands, Inc. also serve as officers and directors of Bagger Dave’s Burger Tavern, Inc. BT Brands owns approximately 39.6% of the outstanding shares of Bagger Dave’s. The investment is accounted for on the equity method. BT Brands Officer received no compensation from Bagger Dave’s in 2024 and there were no intercompany related party transactions.

NOTE 12 – MAJOR VENDORS

For the year ended December 29, 2024, approximately 30% of our food and paper cost of goods sold is represented by product purchases from one vendor. On December 29, 2024, the amount due to the major vendor totaled $35,686. In fiscal 2023, approximately 30% of our purchases were from the same vendor. In July 2024, we commenced purchasing the majority of BTND food items from a different primary vendor, which also accounted for approximately 21% of 2024 food purchases. The amount due to this new vendor at December 31, 2024 was $257,268. On December 31, 2023, the amount due to the former primary vendor was $272,657.

NOTE 13 – CONTINGENCIES

In the course of its business, the Company may be a party to claims and legal or regulatory actions arising from its business. We are not aware of any significant asserted or potential claims which could impact its financial position.

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Item 9. Changes in and Disagreements with on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

(a) DISCLOSURE CONTROLS AND PROCEDURES

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 as amended (the “Exchange Act”) 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. 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 29, 2024, our Chief Executive Officer and Chief Financial Officer who are our principal executive officer and principal financial officer, respectively, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act.

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 29, 2024, 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. GAAP.

(b) REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(e) and 15d-15(f) of the Exchange Act. The Company has designed internal controls to provide reasonable, but not absolute, assurance that financial statements are prepared in accordance with U.S. GAAP. 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 December 29, 2024, our internal control over financial reporting was not effective due to the material weaknesses in internal control over financial reporting described below.

(c) MATERIAL WEAKNESS IN INTERNAL CONTROL OVER FINANCIAL REPORTING

As of December 29, 2024, management identified a material weakness that originated in fiscal year 2022 and is continuing in its effort to enhance its design of controls over the 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 an ongoing improvement and remediation plan for the identified material weakness. In the future, transactions that are considered complex may result in the Company engaging experts 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.

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(e) CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

In addition to the matters discussed previously, the Company has considered utilizing consultants as an extension of management to assist in the accounting for acquisitions during the fiscal year ending December 29, 2024. Except for the items described above, there were no other changes in the Company’s internal control over financial reporting during our fiscal quarter ended December 29, 2024, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Item 9B. Other Information.

None

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

Item 10. Directors, Executive Officers, and Corporate Governance.

The following table sets forth information regarding our executive officers and directors as of the date of this Annual Report:

Name Age Position

Executive Officers and Directors:

Gary Copperud 67 Chief Executive Officer and Director

Kenneth Brimmer 69 Chief Operating Officer and Chairman

Allan Anderson 71 Director

Terri Tochihara-Dirks 63 Director

Fred Croci 77 Director

Background Information about our Officers and Directors

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. He served as its managing manager and Chief Financial Officer from its inception until the completion of the Share Exchange. Mr. 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. Mr. Copperud has served as CEO of Bagger Dave’s Burger Tavern since June, 2022. Mr. Copperud is self-employed in real estate investment and development. We believe Mr. 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 NGI Corporation (formerly Next Gen Ice, Inc.). and currently serves as its Chief Financial Officer. Sinc June, 2022, Mr. Brimmer has served as also Chairman, COO, and Chief Financial Officer of Bagger Dave’s Burger Tavern , Inc. Mr. 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. Mr. Brimmer previously was the Chief Executive Officer of Hypertension Diagnostic, Inc. (“HDI”). He served on the board of HDI since 1998 and was its CEO from September 2012 until May 2020. Mr. Brimmer is the CEO of privately-held Brimmer Company, LLC, which has provided consulting management services to BT Brands and NGI Corporation, Inc. Mr. 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. Previously, he was President of Rainforest Cafe, Inc., which grew from start-up to over 6,000 employees from April 1997 until April 2000, and he was Treasurer from its inception in 1995 until April 2000. During the time Mr. 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. Brimmer was employed by Berman Consulting, LLC, a financial and investment management company, from 1990 until April 1997. Mr. Brimmer has a degree in accounting and worked as a certified public accountant (inactive) in the audit division of Arthur Andersen & Co. from 1977 through 1981. We believe Mr. 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.

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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. In 2021, Mr. Anderson founded privately held ReliaFund Inc., for which he has served in various executive capacities. ReliaFund provides electronic payment processing and reporting services for small businesses. From 1975 to 1984, Mr. Anderson was employed as an Audit Manager in the Audit Division of Arthur Andersen & Co. Mr. Anderson has served as a chief financial officer (or equivalent) for several private companies. He previously served as an independent member of the board of directors of publicly the STEN Corporation, including serving as Chairman of its Audit Committee. STEN Corporation is the entity from which the Company purchased its restaurant assets in 2007. Messrs. Copperud and Brimmer were also directors of STEN. Mr. Anderson holds a Bachelor of Arts degree in accounting from Southwest State University and was formerly licensed as a certified public accountant, which is now inactive. We believe Mr Anderson 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, 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 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. Ms. Tochihara-Dirks has served on several not-for-profit Boards of Directors, including the Denver Chamber of Commerce and Denver Junior Achievement. Ms. Tochihara-Dirks is qualified to serve on our board, as the chair of the compensation committee, and as a member of our audit committee because of her broad business experience both operating her own business and as an executive of a multi-national corporation.

Fred Croci has been a director and member of our Audit Committee and Compensation Committee since October 25, 2024. He has worked in the real estate industry for more than 50 years and has owned and operated seven restaurants. Mr. Croci holds or has held real estate licenses in Iowa, Illinois, Colorado and Wyoming and has owned and managed commercial real estate brokerage firms in all of these states. While owning and operating commercial real estate brokerage firms, he has also been involved in project development, construction, management, property rehabilitations and commercial remodels, single-family and multifamily housing projects, self-storage and commercial new construction, property management and maintenance, fee-based client consulting and investment counseling. Over the last twelve years, Mr. Croci has owned and managed Wheeler Commercial Property Services, LLC, a real estate brokerage firm located in Fort Collins, Colorado. Since 2017 Mr. Croci has been the principal of Commercial Broker’s Alliance, LLC, a development consulting firm, and he is also managing broker of Commercial Broker’s Alliance NOCO, LLC, a commercial brokerage firm. We believe that Mr. Croci is qualified to serve on our board, given his decades of real estate experience and his successful ownership and management of food and beverage operations.

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