fat-20230625

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 25, 2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-38250

FAT Brands Inc.

(Exact name of registrant as specified in its charter)


Delaware						82-1302696
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

9720 Wilshire Blvd., Suite 500

Beverly Hills, CA 90212

(Address of principal executive offices, including zip code)

(310) 319-1850

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

FAT

The Nasdaq Stock Market LLC

Class B Common Stock, par value $0.0001 per share

FATBB

The Nasdaq Stock Market LLC

Series B Cumulative Preferred Stock, par value $0.0001 per share

FATBP

The Nasdaq Stock Market LLC

Warrants to purchase Class A Common Stock

FATBW

The Nasdaq Stock Market LLC

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

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

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


Large accelerated filer	o	Accelerated filer	o

Non-accelerated filer	x	Smaller reporting company	x

Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

As of July 28, 2023, there were 15,424,709 shares of Class A common stock and 1,270,805 shares of Class B common stock outstanding.

Table of Contents

FAT BRANDS INC.

QUARTERLY REPORT ON FORM 10-Q

June 25, 2023

TABLE OF CONTENTS


PART I.	FINANCIAL INFORMATION	3
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3

	FAT Brands Inc. and Subsidiaries:
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Operations (Unaudited)	5
	Condensed Consolidated Statements of Changes in Stockholders’ Deficit (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27

PART II.	OTHER INFORMATION	27
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	28

SIGNATURE		28

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

FAT BRANDS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)


	June 25, 2023		December 25, 2022
			Audited
Assets
Current assets
Cash	$	30,569	$	28,668
Restricted cash	26,564		25,375
Accounts receivable, net of allowances of $11,814 and $24,207 as of June 25, 2023 and December 25, 2022, respectively	29,006		23,880
Inventory	6,254		6,925
Assets classified as held-for-sale	3,887		4,767
Other current assets	8,004		6,086
Total current assets	104,284		95,701
Non-current restricted cash	14,743		14,720
Operating lease right-of-use assets	101,587		101,114
Goodwill	293,282		293,282
Other intangible assets, net	617,755		625,294
Property and equipment, net	79,577		79,189
Other assets	4,613		4,003
Total assets	$	1,215,841	$	1,213,303

Liabilities and Stockholders’ Deficit
Liabilities
Current liabilities
Accounts payable	$	16,303	$	18,328
Accrued expenses and other liabilities	51,156		52,800
Deferred income, current portion	1,862		2,019
Accrued advertising	14,032		14,819
Accrued interest payable	16,722		13,241
Dividend payable on preferred shares	1,278		1,467
Liabilities related to assets classified as held-for-sale	3,479		4,084
Operating lease liability, current portion	14,904		14,815
Redeemable preferred stock	91,836		91,836
Long-term debt, current portion	35,848		49,611
Acquisition purchase price payable	4,000		4,000
Total current liabilities	251,420		267,020

Deferred income, net of current portion	22,529		21,698
Deferred income tax liabilities, net	29,147		27,181
Operating lease liability, net of current portion	95,815		95,620
Long-term debt, net of current portion	1,018,494		958,630
Other liabilities	1,631		2,332
Total liabilities	1,419,036		1,372,481

Table of Contents


Commitments and contingencies (Note 13)

Stockholders’ deficit
Preferred stock, $0.0001 par value; 15,000,000 shares authorized; 3,338,573 shares issued and outstanding at June 25, 2023 and 3,252,154 shares issued and outstanding at December 25, 2022; liquidation preference $25 per share	43,566		45,504
Class A common stock and Class B common stock and additional paid-in capital as of June 25, 2023: $0.0001 par value per share; 51,600,000 shares authorized (Class A 50,000,000, Class B 1,600,000); 16,611,175 shares issued and outstanding (Class A 15,340,370, Class B 1,270,805). Common stock and additional paid-in capital as of December 25, 2022: $0.0001 par value; 51,600,000 shares authorized; 16,571,675 shares issued and outstanding (Class A 15,300,870, Class B 1,270,805)	(28,877)		(26,015)
Accumulated deficit	(217,884)		(178,667)
Total stockholders’ deficit	(203,195)		(159,178)
Total liabilities and stockholders’ deficit	$	1,215,841	$	1,213,303

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

FAT BRANDS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except share data)


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022

Revenue
Royalties	$	22,751	$	21,665	$	45,236	$	42,563
Restaurant sales	62,778		60,044		125,379		118,121
Advertising fees	9,668		9,568		19,019		18,929
Factory revenues	9,686		8,570		18,851		16,749
Franchise fees	763		1,295		1,565		2,009
Other revenue	1,118		1,643		2,405		1,817
Total revenue	106,764		102,785		212,455		200,188

Costs and expenses
General and administrative expense	9,947		20,841		38,362		45,437
Cost of restaurant and factory revenues	59,502		49,846		118,589		104,644
Depreciation and amortization	7,061		6,711		14,177		13,181
Refranchising loss	179		453		338		1,001
Acquisition costs	—		135		—		383
Advertising fees	11,610		11,596		22,137		21,853
Total costs and expenses	88,299		89,582		193,603		186,499

Income from operations	18,465		13,203		18,852		13,689

Other (expense) income, net
Interest expense	(20,008)		(18,998)		(45,098)		(38,026)
Interest expense related to preferred shares	(4,311)		(4,715)		(9,354)		(6,714)
Other income, net	109		2,071		265		3,381
Total other expense, net	(24,210)		(21,642)		(54,187)		(41,359)

Loss before income tax provision (benefit)	(5,745)		(8,439)		(35,335)		(27,670)

Income tax provision (benefit)	1,346		(251)		3,882		4,273

Net loss	$	(7,091)	$	(8,188)	$	(39,217)	$	(31,943)

Net loss	$	(7,091)	$	(8,188)	$	(39,217)	$	(31,943)
Dividends on preferred shares	(1,615)		(1,661)		(3,381)		(3,314)
	$	(8,706)	$	(9,849)	$	(42,598)	$	(35,257)

Basic and diluted loss per common share	$	(0.53)	$	(0.60)	$	(2.58)	$	(2.15)
Basic and diluted weighted average shares outstanding	16,522,379		16,405,108		16,521,590		16,396,896
Cash dividends declared per common share	$	0.14	$	0.13	$	0.28	$	0.26

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

FAT BRANDS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(dollars in thousands)

For the Twenty-Six Weeks Ended June 25, 2023


	Common Stock										Preferred Stock
	Class A Shares	Class B Shares	Class A Par Value		Class B Par Value		Additional Paid-In Capital		Total Common Stock		Shares	Par Value		Additional Paid-In Capital		Total Preferred Stock		Accumulated Deficit		Total

Balance at December 25, 2022	15,300,870	1,270,805	$	2	$	—	$	(26,017)	$	(26,015)	3,252,154	$	—	$	45,504	$	45,504	$	(178,667)	$	(159,178)
Net loss	—	—	—		—		—		—		—	—		—		—		(39,217)		(39,217)
Issuance of common and preferred stock	39,500	—	—		—		209		209		86,419	—		1,443		1,443		—		1,652
Share-based compensation	—	—	—		—		1,572		1,572		—	—		—		—		—		1,572
Dividends paid on common stock	—	—	—		—		(4,643)		(4,643)		—	—		—		—		—		(4,643)

Dividends paid on Series B preferred stock	—	—	—		—		—		—		—	—		(3,381)<

SEC Form 10-Q filed by FAT Brands Inc.