Table of Contents 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 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 F ...

Table of Contents 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 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 F ...

Table of Contents 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 March 27, 2022 OR 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) 9720 Wilshire Blvd., Suite 500 Beverly Hills, CA 90212 (Address of ...

Q4 2021 Highlights - System-wide sales increased by 308.1% compared to Q4 2020[5] - Same-store sales (SSS) grew by 12.4% compared to Q4 2020[7] - The company opened 30 new stores[6] - Total revenue reached $74.2 million[8] - Adjusted EBITDA was $10.4 million[10] - System-wide sales totaled $436.3 million[9] FY 2021 Highlights - System-wide sales growth was 236.4% compared to FY 2020[18] - The company opened 115 new stores[19] - Same-store sales (SSS) grew by 20.4% compared to FY 2020[20] - Total revenue reached $118.9 million[21] - Adjusted EBITDA was $21.1 million[23] - System-wide sales totaled $1051.0 million[22]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements, management's analysis, market risk disclosures, and internal controls and procedures [ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements of FAT Brands Inc. and its subsidiaries, including balance sheets, statements of operations, changes in stockholders' deficit, and cash flows, along with detailed notes explaining the company's organization, significant accounting policies, mergers and acquisitions, debt, equity, and other financial details for the periods ended September 26, 2021, and December 27, 2020 [Condensed Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) This section presents the company's financial position, detailing assets, liabilities, and stockholders' deficit at specific reporting dates Condensed Consolidated Balance Sheets (dollars in thousands) | Item | September 26, 2021 | December 27, 2020 | | :------------------------------------ | :------------------- | :------------------ | | Total Assets | $619,808 | $121,144 | | Total Liabilities | $571,817 | $163,027 | | Total Stockholders' Deficit | $(18,819) | $(41,883) | - Total assets significantly increased from **$121.1 million** in December 2020 to **$619.8 million** in September 2021, primarily driven by substantial increases in goodwill and other intangible assets due to acquisitions[13](index=13&type=chunk) - Total liabilities also saw a large increase from **$163.0 million** to **$571.8 million**, mainly due to a significant rise in long-term debt, net of current portion, from **$73.9 million** to **$485.5 million**[13](index=13&type=chunk)[15](index=15&type=chunk) - Stockholders' deficit improved from **$(41.9) million** to **$(18.8) million**, indicating a reduction in the negative equity position[15](index=15&type=chunk) [Condensed Consolidated Statements of Operations (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) This section details the company's revenues, costs, and net income or loss over specified reporting periods Condensed Consolidated Statements of Operations (dollars in thousands) | Item | Thirteen Weeks Ended Sep 26, 2021 | Thirteen Weeks Ended Sep 27, 2020 | Thirty-nine Weeks Ended Sep 26, 2021 | Thirty-nine Weeks Ended Sep 27, 2020 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :----------------------------------- | :----------------------------------- | | Total Revenue | $29,761 | $4,089 | $44,693 | $11,619 | | Total Costs and Expenses | $27,385 | $5,385 | $41,101 | $19,413 | | Income (Loss) from Operations | $2,376 | $(1,296) | $3,592 | $(7,794) | | Net Loss attributable to FAT Brands Inc. | $(3,621) | $(568) | $(11,979) | $(7,189) | | Basic and Diluted Loss per Common Share | $(0.26) | $(0.04) | $(0.85) | $(0.55) | - Total revenue for the thirty-nine weeks ended September 26, 2021, increased by **285% to $44.7 million** from **$11.6 million** in the prior year, driven by acquisitions (Johnny Rockets, GFG) and recovery from COVID-19[17](index=17&type=chunk)[201](index=201&type=chunk)[203](index=203&type=chunk) - The company reported an income from operations of **$3.6 million** for the thirty-nine weeks ended September 26, 2021, a significant improvement from a loss of **$7.8 million** in the same period of 2020[17](index=17&type=chunk)[47](index=47&type=chunk)[201](index=201&type=chunk) - Net loss attributable to FAT Brands Inc. increased to **$(12.0) million** for the thirty-nine weeks ended September 26, 2021, compared to **$(7.2) million** in the prior year, primarily due to a one-time **$6.4 million** net charge related to debt refinancing[20](index=20&type=chunk)[47](index=47&type=chunk)[209](index=209&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Deficit (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Deficit%20(Unaudited)) This section outlines the changes in the company's stockholders' deficit, reflecting equity transactions and net losses over the period - The total stockholders' deficit improved from **$(41.883) million** at December 27, 2020, to **$(18.819) million** at September 26, 2021[23](index=23&type=chunk)[31](index=31&type=chunk) - Key changes include the issuance of common stock through warrant exercises, preferred stock issuances, share-based compensation, and common stock issuance for the acquisition of LS GFG Holdings Inc[23](index=23&type=chunk)[31](index=31&type=chunk) - Dividends declared on common stock totaled **$(5.313) million** and on Series B preferred stock totaled **$(2.084) million** for the thirty-nine weeks ended September 26, 2021[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) This section presents the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (dollars in thousands) | Activity | Thirty-nine Weeks Ended Sep 26, 2021 | Thirty-nine Weeks Ended Sep 27, 2020 | | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Net cash used in operating activities | $(4,006) | $(8,506) | | Net cash used in investing activities | $(346,150) | $(33,124) | | Net cash provided by financing activities | $386,473 | $55,873 | | Net increase in cash and restricted cash | $36,317 | $14,243 | | Cash and restricted cash at end of period | $43,528 | $14,268 | - Net cash used in operating activities decreased by **$4.5 million**, from **$(8.5) million** in 2020 to **$(4.0) million** in 2021[38](index=38&type=chunk)[229](index=229&type=chunk) - Net cash used in investing activities significantly increased to **$(346.2) million** in 2021 from **$(33.1) million** in 2020, primarily due to the acquisition of GFG[38](index=38&type=chunk)[231](index=231&type=chunk) - Net cash provided by financing activities surged to **$386.5 million** in 2021 from **$55.9 million** in 2020, mainly from two securitization transactions and a preferred stock offering[40](index=40&type=chunk)[233](index=233&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed explanations and additional disclosures supporting the condensed consolidated financial statements [NOTE 1. ORGANIZATION AND RELATIONSHIPS](index=13&type=section&id=NOTE%201.%20ORGANIZATION%20AND%20RELATIONSHIPS) This note outlines the company's business, organizational structure, growth strategy, and assessment of its financial viability - FAT Brands Inc. is a multi-brand restaurant franchising company, owning **14 brands** with approximately **2,000 locations** globally as of September 26, 2021[42](index=42&type=chunk)[43](index=43&type=chunk) - The company's growth strategy focuses on expanding existing brands and acquiring new ones through a centralized management organization[45](index=45&type=chunk) - The company's financial position improved, with total liabilities exceeding total assets by **$18.8 million** as of September 26, 2021, compared to **$41.9 million** as of December 27, 2020[47](index=47&type=chunk) - Management believes the company has sufficient cash sources and will comply with debt covenants for the next twelve months, citing operating improvements and successful capital raising post-COVID-19 stabilization[51](index=51&type=chunk) [NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=14&type=section&id=NOTE%202.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details the significant accounting policies, including consolidation, fiscal year, and deferred adoption of new accounting standards - The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, with operations of Johnny Rockets, FCCG, and LS GFG Holdings, Inc. included since their respective acquisition dates[52](index=52&type=chunk) - The Company operates on a **52-week calendar**, with its fiscal year ending on the last Sunday of the calendar year, ensuring consistent weekly reporting[54](index=54&type=chunk) - The Company, as a Smaller Reporting Company (SRC), has deferred the adoption of ASU 2016-13 (Credit Losses) until fiscal periods beginning after December 15, 2022, and does not expect a material impact[59](index=59&type=chunk) [NOTE 3. MERGERS AND ACQUISITIONS](index=15&type=section&id=NOTE%203.%20MERGERS%20AND%20ACQUISITIONS) This note provides details on the company's significant merger and acquisition activities, including the GFG, FCCG, and Johnny Rockets transactions - On July 22, 2021, the Company acquired LS GFG Holdings Inc. (GFG) for **$444.5 million**, paid in cash, Series B Preferred Stock, and Common Stock, adding five franchised brands to its portfolio[61](index=61&type=chunk) - The merger with Fog Cutter Capital Group Inc. (FCCG) on December 24, 2020, simplified the corporate structure and made FCCG's net operating loss carryforwards (NOLs) directly available to the Company[66](index=66&type=chunk)[69](index=69&type=chunk) - The acquisition of Johnny Rockets on September 21, 2020, for approximately **$24.7 million** in cash, was funded by an increase in the Company's securitization facility[74](index=74&type=chunk) Proforma Revenue and Net Loss (in thousands) | Item | Thirteen Weeks Ended Sep 26, 2021 | Thirty-nine Weeks Ended Sep 26, 2021 | Thirteen Weeks Ended Sep 27, 2020 | Thirty-nine Weeks Ended Sep 27, 2020 | | :------------------------------------ | :-------------------------------- | :----------------------------------- | :-------------------------------- | :----------------------------------- | | Revenue | $36,517 | $109,997 | $36,563 | $113,942 | | Net Loss | $(3,839) | $(8,439) | $(5,550) | $(23,578) | [NOTE 4. REFRANCHISING](index=19&type=section&id=NOTE%204.%20REFRANCHISING) This note details the company's refranchising strategy, involving the acquisition and subsequent conversion or resale of operating restaurants - The Company opportunistically acquires operating restaurants to convert them to franchise locations or resells existing franchise locations[85](index=85&type=chunk) Assets Classified as Held for Sale (in thousands) | Item | September 26, 2021 | December 27, 2020 | | :------------------------------------ | :------------------- | :------------------ | | Property, plant and equipment | $776 | $1,352 | | Operating lease right of use assets | $4,815 | $9,479 | | Total | $5,591 | $10,831 | - Refranchising activities resulted in net gains of **$1.6 million** for the thirty-nine weeks ended September 26, 2021, compared to losses of **$1.9 million** in the prior year[87](index=87&type=chunk) [NOTE 5. NOTE RECEIVABLE](index=19&type=section&id=NOTE%205.%20NOTE%20RECEIVABLE) This note details the Elevation Buyer Note, including its outstanding balance and recognized interest income - The Elevation Buyer Note, funded for the 2019 Elevation Burger purchase, had a balance of **$1.7 million** as of September 26, 2021, down from **$1.8 million** at December 27, 2020[92](index=92&type=chunk) - Interest income recognized on the Elevation Buyer Note was **$151,000** for the thirty-nine weeks ended September 26, 2021[92](index=92&type=chunk) [NOTE 6. GOODWILL](index=20&type=section&id=NOTE%206.%20GOODWILL) This note provides details on the company's goodwill, its changes due to acquisitions, and any impairment charges recorded Goodwill (in thousands) | Brand | September 26, 2021 | December 27, 2020 | | :------------------------------------ | :------------------- | :------------------ | | Global Franchise Group | $176,155 | — | | Johnny Rockets | $258 | $1,461 | | Total Goodwill | $185,861 | $10,909 | - Total goodwill significantly increased to **$185.9 million** as of September 26, 2021, from **$10.9 million** at December 27, 2020, primarily due to the acquisition of Global Franchise Group[93](index=93&type=chunk) - No goodwill impairment charges were recorded for the thirty-nine weeks ended September 26, 2021, compared to **$1.5 million** in impairment charges in the prior year[93](index=93&type=chunk) [NOTE 7. OTHER INTANGIBLE ASSETS](index=21&type=section&id=NOTE%207.%20OTHER%20INTANGIBLE%20ASSETS) This note details the company's other intangible assets, including trademarks, franchise agreements, and customer relationships, along with their amortization schedule Other Intangible Assets (in thousands) | Category | September 26, 2021 | December 27, 2020 | | :------------------------------------ | :------------------- | :------------------ | | Total Trademarks | $184,868 | $35,068 | | Total Franchise Agreements | $54,305 | $12,643 | | Total Customer Relationships | $83,515 | — | | Total Other Intangible Assets | $322,688 | $47,711 | - Total other intangible assets increased substantially to **$322.7 million** as of September 26, 2021, from **$47.7 million** at December 27, 2020, largely due to the GFG acquisition[96](index=96&type=chunk) Expected Future Amortization of Franchise Agreements and Customer Relationships (in thousands) | Fiscal Year | Amount | | :------------------------------------ | :------- | | Remaining 2021 | $2,909 | | 2022 | $11,638 | | 2023 | $11,638 | | 2024 | $11,333 | | 2025 | $11,139 | | Thereafter | $89,163 | | Total | $137,820 | [NOTE 8. DEFERRED INCOME](index=22&type=section&id=NOTE%208.%20DEFERRED%20INCOME) This note details the company's deferred income, primarily from franchise fees, royalties, and vendor incentives Deferred Income (in thousands) | Item | September 26, 2021 | December 27, 2020 | | :------------------------------------ | :------------------- | :------------------ | | Deferred franchise fees | $12,328 | $10,003 | | Deferred royalties | $160 | $291 | | Deferred vendor incentives | $611 | $692 | | Total | $13,099 | $10,986 | - Total deferred income increased to **$13.1 million** as of September 26, 2021, from **$11.0 million** at December 27, 2020, primarily due to an increase in deferred franchise fees[100](index=100&type=chunk) [NOTE 9. INCOME TAXES](index=22&type=section&id=NOTE%209.%20INCOME%20TAXES) This note outlines the company's income tax benefit, effective tax rate, and changes in deferred income tax assets and liabilities Benefit for Income Taxes (in thousands) | Period | Benefit for Income Taxes | Effective Tax Rate | | :------------------------------------ | :----------------------- | :----------------- | | Thirteen Weeks Ended Sep 26, 2021 | $(1,183) | 24.6% | | Thirteen Weeks Ended Sep 27, 2020 | $(19) | 3.2% | | Thirty-nine Weeks Ended Sep 26, 2021 | $(3,303) | 21.6% | | Thirty-nine Weeks Ended Sep 27, 2020 | $(1,405) | 16.3% | - The effective tax rate for the thirty-nine weeks ended September 26, 2021, was **21.6%**, up from **16.3%** in the comparable period of 2020, primarily due to state income taxes[101](index=101&type=chunk) - The net deferred income tax asset decreased by **$15.5 million**, mainly due to a **$18.9 million** net deferred tax liability from the GFG acquisition[102](index=102&type=chunk) [NOTE 10. LEASES](index=22&type=section&id=NOTE%2010.%20LEASES) This note details the company's operating leases, including right-of-use assets, lease liabilities, and recognized lease expenses - As of September 26, 2021, the Company has **47 operating leases** for corporate offices and **36 company-owned stores**, with remaining terms ranging from **0.5 to 7.7 years**[103](index=103&type=chunk) Operating Lease Right of Use Assets and Liabilities (in thousands) | Item | September 26, 2021 | December 27, 2020 | | :------------------------------------ | :------------------- | :------------------ | | Right of use assets | $17,419 | $13,948 | | Lease liabilities | $20,548 | $14,651 | - Lease expense for the thirty-nine weeks ended September 26, 2021, was **$2.8 million**, an increase from **$1.1 million** in the prior year[103](index=103&type=chunk) [NOTE 11. DEBT](index=23&type=section&id=NOTE%2011.%20DEBT) This note details the company's debt, including securitization transactions, note issuances, and the forgiveness of Paycheck Protection Program loans - The Company completed the 2021 GFG Royalty Securitization on July 22, 2021, issuing **$350.0 million** in fixed-rate senior secured notes, with net proceeds of **$338.9 million** used primarily for the GFG acquisition[108](index=108&type=chunk)[109](index=109&type=chunk) - The 2021 FB Royalty Securitization on April 26, 2021, issued **$144.5 million** in fixed-rate senior secured notes, with net proceeds of **$140.8 million**, used to repay the 2020 Securitization Notes[113](index=113&type=chunk)[117](index=117&type=chunk) - The Company recognized a gain on extinguishment of debt of **$1.2 million** relating to the forgiveness of Paycheck Protection Program (PPP) Loans during the thirty-nine weeks ended September 26, 2021[126](index=126&type=chunk) [NOTE 12. PREFERRED STOCK](index=26&type=section&id=NOTE%2012.%20PREFERRED%20STOCK) This note details the company's preferred stock issuances, including Series B and Series A, and their related transactions and redemptions - The Company issued **460,000 shares** of **8.25% Series B Cumulative Preferred Stock** in a public offering on June 22, 2021, generating net proceeds of **$8.3 million**[133](index=133&type=chunk) - As part of the GFG acquisition, **3,089,245 shares** of Series B Preferred Stock were issued, classified as redeemable preferred stock due to a put/call agreement[134](index=134&type=chunk) - The remaining **80,000 outstanding Series A Preferred Stock** were redeemed on August 25, 2021, in exchange for Series B Preferred Stock, resulting in a **$13,000** loss on extinguishment of debt[134](index=134&type=chunk)[143](index=143&type=chunk) [NOTE 13. ACQUISITION PURCHASE PRICE PAYABLE](index=28&type=section&id=NOTE%2013.%20ACQUISITION%20PURCHASE%20PRICE%20PAYABLE) This note details the settlement of the acquisition purchase price payable for Yalla Mediterranean, including cash and common stock issuance - On June 21, 2021, the Company settled the acquisition purchase price payable for Yalla Mediterranean, paying **$1.1 million** in cash and issuing **62,500 shares** of common stock (valued at **$0.8 million**), resulting in a **$0.2 million** gain on extinguishment of debt[148](index=148&type=chunk) [NOTE 14. RELATED PARTY TRANSACTIONS](index=28&type=section&id=NOTE%2014.%20RELATED%20PARTY%20TRANSACTIONS) This note discloses related party transactions, including receivables from intercompany agreements and preferred capital investments - No reportable related party transactions occurred during the thirty-nine weeks ended September 26, 2021[149](index=149&type=chunk) - As of September 27, 2020, the Company had a receivable of **$33.4 million** under an Intercompany Revolving Credit Agreement with FCCG and a **$5.4 million** receivable from a preferred capital investment in Homestyle Dining LLC[150](index=150&type=chunk)[151](index=151&type=chunk) [NOTE 15. REDEEMABLE PREFERRED STOCK](index=29&type=section&id=NOTE%2015.%20REDEEMABLE%20PREFERRED%20STOCK) This note details the company's redeemable preferred stock, including its issuance as part of the GFG acquisition, carrying value, and declared dividends - The Company issued **3,089,245 shares** of Series B Preferred Stock as part of the GFG acquisition, valued at **$67.5 million**, and classified as redeemable preferred stock due to a put/call agreement[153](index=153&type=chunk) - As of September 26, 2021, the carrying value of redeemable preferred stock was **$66.8 million**, with **$0.7 million** in dividends declared for the thirteen and thirty-nine weeks ended September 26, 2021[154](index=154&type=chunk) [NOTE 16. STOCKHOLDERS' EQUITY](index=29&type=section&id=NOTE%2016.%20STOCKHOLDERS'%20EQUITY) This note details the company's common stock recapitalization into Class A and Class B shares, outstanding amounts, and significant changes during the period - The Company recapitalized its common stock into Class A and Class B shares on August 16, 2021, authorizing **50,000,000 Class A** and **1,600,000 Class B shares**[155](index=155&type=chunk) - As of September 26, 2021, there were **15,013,001 Class A common shares** and **1,270,683 Class B common shares** outstanding[159](index=159&type=chunk) - Significant changes in common stock during the thirty-nine weeks ended September 26, 2021, included the issuance of **1,270,683 Class B shares** as a dividend, exercise of warrants for **464,643 shares**, and issuance of **1,964,865 shares** for the GFG acquisition[160](index=160&type=chunk)[161](index=161&type=chunk)[164](index=164&type=chunk) [NOTE 17. SHARE-BASED COMPENSATION](index=30&type=section&id=NOTE%2017.%20SHARE-BASED%20COMPENSATION) This note details the company's share-based compensation plan, including available shares, outstanding stock options, and recognized compensation expense - The Company adopted the 2017 Omnibus Equity Incentive Plan, with a maximum of **1,021,250 shares** available for grant[166](index=166&type=chunk) - As of September 26, 2021, there were **658,605 stock options** outstanding with a weighted average exercise price of **$7.47 per share**[167](index=167&type=chunk) - Share-based compensation expense recognized was **$0.5 million** for the thirty-nine weeks ended September 26, 2021, with **$2.4 million** remaining for non-vested grants[170](index=170&type=chunk) [NOTE 18. WARRANTS](index=31&type=section&id=NOTE%2018.%20WARRANTS) This note details the company's warrant activity, including outstanding warrants, grants, exercises, and cancellations, and their financial impact Warrant Activity (Thirty-nine Weeks Ended September 26, 2021) | Item | Number of Shares | Weighted Average Exercise Price | | :------------------------------------ | :----------------- | :------------------------------ | | Warrants outstanding at Dec 27, 2020 | 2,273,533 | $4.60 | | Grants | 8,184 | $3.88 | | Exercised | (475,853) | $3.88 | | Cancelled | (2,849) | $3.88 | | Warrants outstanding at Sep 26, 2021 | 1,803,015 | $4.76 | - During the thirty-nine weeks ended September 26, 2021, **475,853 warrants** were exercised, generating net proceeds of **$2.2 million** for the Company[172](index=172&type=chunk) [NOTE 19. DIVIDENDS ON COMMON STOCK](index=31&type=section&id=NOTE%2019.%20DIVIDENDS%20ON%20COMMON%20STOCK) This note details the cash dividends declared on common stock by the Board of Directors during the reporting period - The Board of Directors declared three cash dividends of **$0.13 per share** of common stock during the period, totaling **$1.6 million** (May 7, 2021), **$1.6 million** (June 21, 2021), and **$2.1 million** (September 15, 2021)[173](index=173&type=chunk)[174](index=174&type=chunk) [NOTE 20. COMMITMENTS AND CONTINGENCIES](index=31&type=section&id=NOTE%2020.%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's legal proceedings, including a derivative action, an environmental lawsuit, and an indemnification claim - The Company is a nominal defendant in a derivative action alleging breach of fiduciary duty, unjust enrichment, and waste related to the December 2020 merger with Fog Cutter Capital Group, Inc[175](index=175&type=chunk) - A subsidiary is involved in an environmental contamination lawsuit with potential damages ranging from **$12 million to $22 million**, with reserves recorded on the balance sheet[177](index=177&type=chunk) - The Company is also involved in a **$0.7 million** judgment from SBN FCCG LLC, with **$0.5 million** remaining unpaid as of May 2019[178](index=178&type=chunk) [NOTE 21. GEOGRAPHIC INFORMATION AND MAJOR FRANCHISEES](index=32&type=section&id=NOTE%2021.%20GEOGRAPHIC%20INFORMATION%20AND%20MAJOR%20FRANCHISEES) This note provides a breakdown of revenue by geographic area and confirms the absence of major franchisees accounting for significant revenue Revenue by Geographic Area (in thousands) | Region | Thirteen Weeks Ended Sep 26, 2021 | Thirteen Weeks Ended Sep 27, 2020 | Thirty-nine Weeks Ended Sep 26, 2021 | Thirty-nine Weeks Ended Sep 27, 2020 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :----------------------------------- | :----------------------------------- | | United States | $26,264 | $3,500 | $37,411 | $9,773 | | Other countries | $3,497 | $589 | $7,282 | $1,846 | | Total Revenue | $29,761 | $4,089 | $44,693 | $11,619 | - All Company assets are located in the United States[180](index=180&type=chunk) - No individual franchisee accounted for more than **10%** of the Company's revenue during the thirty-nine weeks ended September 26, 2021, or September 27, 2020[181](index=181&type=chunk) [NOTE 22. SUBSEQUENT EVENTS](index=32&type=section&id=NOTE%2022.%20SUBSEQUENT%20EVENTS) This note details significant events occurring after the reporting period, including acquisitions of Twin Peaks and Fazoli's, and a preferred stock offering - On October 1, 2021, the Company acquired Twin Peaks for **$300.0 million**, comprising cash, a note payable, and Series B Cumulative Preferred Stock, with a put/call agreement for the preferred stock[184](index=184&type=chunk)[186](index=186&type=chunk) - In connection with the Twin Peaks acquisition, the Company completed the 2021 Twin Peaks Securitization, issuing **$250.0 million** in fixed-rate senior secured notes[187](index=187&type=chunk) - On November 1, 2021, the Company agreed to acquire Fazoli's, a quick-service Italian chain, for **$130.0 million** in cash, expected to close around December 15, 2021[188](index=188&type=chunk) - On November 1, 2021, the Company closed an underwritten offering of **1.0 million shares** of **8.25% Series B Cumulative Preferred Stock**, raising net proceeds of **$16.5 million**[189](index=189&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and liquidity, highlighting the impact of COVID-19, the asset-light franchisor business model, and the results of operations for the thirteen and thirty-nine weeks ended September 26, 2021, compared to the prior year. It also discusses the company's capital resources and critical accounting policies - The Company's asset-light franchisor model generates revenue from initial franchise fees and ongoing royalties, offering strong profit margins and attractive free cash flow while minimizing restaurant operating risks[194](index=194&type=chunk) - Total revenue for the thirty-nine weeks ended September 26, 2021, increased by **$33.1 million (285%)** to **$44.7 million**, driven by acquisitions (Johnny Rockets, GFG) and recovery from the COVID-19 pandemic[201](index=201&type=chunk)[203](index=203&type=chunk) - Income from operations improved to **$3.6 million** for the thirty-nine weeks ended September 26, 2021, compared to a loss of **$7.8 million** in the prior year, despite increased general and administrative expenses and acquisition costs[201](index=201&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[207](index=207&type=chunk) - Net cash provided by financing activities was **$386.5 million** year-to-date in 2021, primarily from two securitization transactions and a preferred stock offering, significantly boosting liquidity[233](index=233&type=chunk) - Management believes the Company will comply with debt covenants and has sufficient liquidity for the next twelve months, supported by capital market transactions and improved operating performance post-COVID-19[224](index=224&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that quantitative and qualitative disclosures about market risk are not required for the Company - The Company is not required to provide quantitative and qualitative disclosures about market risk[249](index=249&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) The Company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were not effective as of September 26, 2021, specifically regarding segregation of duties and the financial close process. Remediation efforts are ongoing, and the Company acknowledges the inherent limitations of internal controls - Disclosure controls and procedures were deemed ineffective as of September 26, 2021, due to deficiencies in segregation of duties and the financial close process[250](index=250&type=chunk) - The Company is actively reviewing compensating controls, implementing additional procedures, and identifying new financial accounting staff and third-party consultants to remediate identified weaknesses[251](index=251&type=chunk) - No significant changes in internal control over financial reporting occurred during the thirty-nine weeks ended September 26, 2021[252](index=252&type=chunk) [PART II. OTHER INFORMATION](index=44&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section includes disclosures on legal proceedings, risk factors, equity sales, defaults, and a comprehensive list of exhibits [ITEM 1. LEGAL PROCEEDINGS](index=44&type=section&id=Item%201.%20Legal%20Proceedings) This section details ongoing legal proceedings, including a derivative action related to the Fog Cutter Capital Group merger, an environmental contamination lawsuit, and an indemnification claim. The Company disputes the allegations and intends to defend vigorously, acknowledging potential financial impacts and the inherent uncertainties of litigation - The Company is a nominal defendant in a derivative action alleging breach of fiduciary duty, unjust enrichment, and waste arising from the December 2020 merger with Fog Cutter Capital Group, Inc[255](index=255&type=chunk) - A subsidiary is involved in an environmental contamination lawsuit with potential damages between **$12 million and $22 million**, with the matter scheduled for trial in November 2021[256](index=256&type=chunk) - The Company faces an indemnification claim from SBN FCCG LLC, with a final judgment of **$0.7 million**, of which **$0.5 million** remains unpaid[257](index=257&type=chunk) [ITEM 1A. RISK FACTORS](index=44&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the comprehensive discussion of risk factors in the Company's Annual Report on Form 10-K filed on March 29, 2021, noting no material changes to these factors - Readers should consider risk factors discussed in the Annual Report on Form 10-K filed on March 29, 2021[259](index=259&type=chunk) - No material changes to the previously discussed risk factors have occurred[259](index=259&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the unregistered sales of equity securities, specifically the issuance of Common Stock (reclassified as Class A) and Series B Cumulative Preferred Stock as part of the GFG acquisition, which were exempt from registration under Section 4(a)(2) of the Securities Act of 1933 - On July 22, 2021, the Company issued **1,964,865 shares** of Common Stock (reclassified as Class A) and **3,089,245 shares** of Series B Cumulative Preferred Stock as part of the GFG acquisition[261](index=261&type=chunk) - An additional **294,729 shares** of Class A Common Stock were issued to GFG sellers on August 23, 2021[261](index=261&type=chunk) - These issuances were exempt from registration under Section 4(a)(2) of the Securities Act of 1933 and Rule 506 of Regulation D[261](index=261&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=45&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities - There were no defaults upon senior securities[262](index=262&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[263](index=263&type=chunk) [ITEM 5. OTHER INFORMATION](index=45&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report - No other information is reported in this section[264](index=264&type=chunk) [ITEM 6. EXHIBITS](index=45&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including various agreements, certificates of incorporation, bylaws, indentures, and certifications, providing transparency into the Company's corporate governance and financial arrangements - The exhibits include Stock Purchase Agreements, Unit Purchase Agreements, Amended and Restated Certificates of Incorporation, Certificates of Amendment, Certificates of Increase/Elimination of Preferred Stock, Amended and Restated Bylaws, Base Indentures, Guarantee and Collateral Agreements, Management Agreements, Put/Call Agreements, Preferred Stock Exchange Agreements, Put Option Agreements, and certifications[265](index=265&type=chunk)[268](index=268&type=chunk) [SIGNATURES](index=47&type=section&id=SIGNATURES) This section confirms the official signing of the report by the Chief Financial Officer of FAT Brands Inc - The report was signed on November 8, 2021, by Kenneth J. Kuick, Chief Financial Officer (Principal Financial and Accounting Officer) of FAT Brands Inc[273](index=273&type=chunk)

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Financials reflect acquisition-driven changes, with strong Q2 revenue growth but an H1 2021 net loss [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets rose to $169.2 million from a cash increase, while higher liabilities widened the stockholders' deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 27, 2021 | December 27, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $48,124 | $3,944 | | Total current assets | $68,241 | $24,423 | | Total assets | $169,168 | $121,144 | | **Liabilities & Stockholders' Deficit** | | | | Total current liabilities | $53,150 | $73,177 | | Long-term debt, net of current portion | $146,140 | $73,852 | | Total liabilities | $214,323 | $163,027 | | Total stockholders' deficit | ($45,155) | ($41,883) | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 revenue grew 166.6%, but a significant debt extinguishment loss drove a net loss of $5.9 million Statement of Operations Summary (in thousands) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Royalties | $6,161 | $2,213 | $11,057 | $5,522 | | Total Revenue | $8,282 | $3,107 | $14,931 | $7,530 | | Income (Loss) from Operations | $2,044 | ($5,790) | $2,148 | ($6,368) | | Net Loss on Extinguishment of Debt | ($6,405) | - | ($6,405) | - | | Net Loss | ($5,931) | ($4,251) | ($8,363) | ($6,621) | | Basic and Diluted Loss per Share | ($0.48) | ($0.36) | ($0.69) | ($0.56) | - The company declared a cash dividend of **$0.26 per common share** in the first half of 2021, whereas no dividend was declared in the same period of 2020[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Financing activities provided $51.5 million in H1 2021, boosting the end-of-period cash balance to $54.0 million Cash Flow Summary for the Twenty-six Weeks Ended (in thousands) | Cash Flow Activity | June 27, 2021 | June 28, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($4,932) | ($3,994) | | Net cash provided by (used in) investing activities | $221 | ($6,326) | | Net cash provided by financing activities | $51,520 | $13,783 | | **Net increase in cash and restricted cash** | **$46,809** | **$3,463** | - Financing activities in H1 2021 were dominated by proceeds from borrowings of **$140.8 million** and repayments of **$92.6 million**, along with an **$8.3 million** preferred share issuance[28](index=28&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Notes detail key acquisitions, a $144.5 million securitization, and significant legal proceedings - The company owns and franchises nine restaurant brands with approximately **700 locations** as of June 27, 2021[31](index=31&type=chunk) - In April 2021, the company completed a **$144.5 million securitization offering**, using proceeds to repay prior notes, resulting in a **$7.8 million net loss on debt extinguishment**[89](index=89&type=chunk)[93](index=93&type=chunk) - In June 2021, a public offering of Series B Preferred Stock raised net proceeds of **$8.3 million**[115](index=115&type=chunk) - Subsequent to the quarter, the company acquired Global Franchise Group (GFG) for **$442.5 million**, financed through cash, stock, and a new securitization[156](index=156&type=chunk)[157](index=157&type=chunk) - The company is a defendant in a derivative lawsuit filed in June 2021 related to the **merger with Fog Cutter Capital Group, Inc**[148](index=148&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes H1 2021 revenue growth to acquisitions and pandemic recovery, with liquidity bolstered by recent financing Results of Operations Comparison (H1 2021 vs H1 2020, in thousands) | Metric | H1 2021 | H1 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $14,931 | $7,530 | +98.3% | | General & Administrative Expense | $10,408 | $7,636 | +36.3% | | Income (Loss) from Operations | $2,148 | ($6,368) | N/A | | Other Expense, net | ($12,632) | ($1,639) | +670.7% | | Net Loss | ($8,363) | ($6,621) | +26.3% | - The increase in 'Other Expense' was primarily driven by a **$6.4 million net loss on the extinguishment of debt** and **$5.4 million in net interest expense** in H1 2021[175](index=175&type=chunk) - The company's liquidity was significantly bolstered by the April 2021 securitization offering, which provided net proceeds of approximately **$57 million**[188](index=188&type=chunk) - The company's growth strategy focuses on an **asset-light franchisor model**, expanding existing brands, and acquiring new concepts[163](index=163&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not required for smaller reporting companies - The company has indicated that Quantitative and Qualitative Disclosures About Market Risk are not required[206](index=206&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of June 27, 2021, due to identified deficiencies - The CEO and CFO concluded that the company's **disclosure controls and procedures were not effective** as of June 27, 2021[207](index=207&type=chunk) - Identified deficiencies relate to the **segregation of duties and the financial close process**, with remediation efforts ongoing[207](index=207&type=chunk)[209](index=209&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a derivative action, an environmental lawsuit, and an unpaid settlement - A derivative lawsuit filed on June 10, 2021, alleges **breach of fiduciary duty** related to the merger with Fog Cutter Capital Group, Inc[212](index=212&type=chunk) - A subsidiary is involved in a lawsuit regarding alleged environmental contamination, with plaintiffs seeking damages between **$12 million and $22 million**[213](index=213&type=chunk) - The company has an outstanding settlement balance of **$0.5 million** related to a lawsuit against a subsidiary[215](index=215&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors have occurred since the last annual report filing - The company states there have been **no material changes** in risk factors from those discussed in its Annual Report on Form 10-K[217](index=217&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued 62,500 unregistered shares of common stock as partial payment for an acquisition - The company agreed to issue **62,500 unregistered shares of common stock** on June 21, 2021, to partially satisfy an acquisition purchase price[218](index=218&type=chunk) [Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - No defaults were reported during the period[219](index=219&type=chunk) [Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company's operations[220](index=220&type=chunk) [Other Information](index=36&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item - No other material information was reported for the period[221](index=221&type=chunk) [Exhibits](index=37&type=section&id=Item%206.%20Exhibits) The report lists key filed exhibits, including acquisition agreements, debt indentures, and officer certifications - Key exhibits include the **Stock Purchase Agreement for Global Franchise Group**, the amended Base Indenture for the 2021 securitization, and officer certifications[223](index=223&type=chunk)

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Presents unaudited consolidated financial statements, MD&A, market risk disclosures, and internal controls and procedures [Item 1. Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents unaudited consolidated financial statements for FAT Brands Inc. as of March 28, 2021, detailing financial position, performance, and cash flows, with explanatory notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of March 28, 2021, total liabilities exceeded total assets, resulting in a **$45.6 million** stockholders' deficit, a deterioration from fiscal 2020 Consolidated Balance Sheet Summary (in thousands) | Balance Sheet Item | March 28, 2021 | December 27, 2020 | | :--- | :--- | :--- | | Total Current Assets | $21,730 | $24,423 | | **Total Assets** | **$118,093** | **$121,144** | | Total Current Liabilities | $75,899 | $73,177 | | **Total Liabilities** | **$163,669** | **$163,027** | | **Total Stockholders' Deficit** | **($45,576)** | **($41,883)** | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2021 total revenue increased **50.3%** to **$6.6 million** due to acquisition, with net loss remaining **$2.4 million** due to higher expenses Q1 2021 vs Q1 2020 Statement of Operations (in thousands, except per share data) | Metric | Q1 2021 (13 weeks ended Mar 28) | Q1 2020 (13 weeks ended Mar 29) | Change (YoY) | | :--- | :--- | :--- | :--- | | Total Revenue | $6,649 | $4,423 | +50.3% | | Income (loss) from operations | $104 | ($578) | Improved | | Net Loss | ($2,432) | ($2,370) | +2.6% | | Basic and diluted loss per common share | ($0.20) | ($0.20) | No Change | - The significant increase in revenue was primarily due to the inclusion of results from the Johnny Rockets acquisition, which was completed in September 2020[207](index=207&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Q1 2021 net cash used in operating activities improved to **$1.2 million**, with total cash and restricted cash decreasing by **$2.3 million** Q1 2021 vs Q1 2020 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2021 (13 weeks ended Mar 28) | Q1 2020 (13 weeks ended Mar 29) | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,246) | ($3,371) | | Net cash used in investing activities | ($573) | ($3,413) | | Net cash (used in) provided by financing activities | ($477) | $12,473 | | **Net (decrease) increase in cash and restricted cash** | **($2,296)** | **$5,689** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Details significant corporate events, accounting policies, debt structure, and subsequent events like the new securitization and PPP loan forgiveness - In December 2020, the company merged with its parent, Fog Cutter Capital Group Inc. (FCCG), to simplify its corporate structure and gain direct access to FCCG's net operating loss carryforwards (NOLs)[60](index=60&type=chunk)[61](index=61&type=chunk)[64](index=64&type=chunk) - The company acquired Johnny Rockets in September 2020 for approximately **$24.7 million**, funded by an increase in its securitization facility, adding **$2.26 million** in Q1 2021 revenue[71](index=71&type=chunk)[73](index=73&type=chunk) - Subsequent to quarter end, in April 2021, a new securitization offering raised approximately **$144.5 million**, with **$57 million** net proceeds used to repay debt, alleviating going concern doubts[31](index=31&type=chunk)[184](index=184&type=chunk)[187](index=187&type=chunk) - In April 2021, the company received confirmation that the entire balance of its Paycheck Protection Program (PPP) loans, plus accrued interest, had been forgiven[191](index=191&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2021 revenue growth from the Johnny Rockets acquisition, stable net loss due to higher G&A, and improved post-quarter liquidity from a new securitization Q1 2021 vs Q1 2020 Results Summary (in thousands) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Total Revenues | $6,649 | $4,423 | | General and administrative expenses | $4,926 | $3,531 | | Income (loss) from operations | $104 | ($578) | | Net Loss | ($2,432) | ($2,370) | - The **$2.2 million** increase in revenue reflects the inclusion of revenues from the Johnny Rockets acquisition, completed in September 2020[207](index=207&type=chunk) - General and administrative expenses increased by **$1.4 million**, primarily due to a **$587,000** increase in compensation expense and **$489,000** in higher legal fees[209](index=209&type=chunk) - A new securitization offering in April 2021 resulted in net proceeds of approximately **$57 million**, used to repay debt and alleviate going concern doubts[217](index=217&type=chunk)[218](index=218&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company has indicated that this section is not required for smaller reporting companies - As a smaller reporting company, FAT Brands is not required to provide these disclosures[260](index=260&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were ineffective as of March 28, 2021, due to deficiencies, and is implementing remediation steps - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 28, 2021[262](index=262&type=chunk) - Identified deficiencies relate to the segregation of duties and the financial close process[262](index=262&type=chunk) - The company is reviewing controls and implementing additional procedures, including identifying additional financial staff and consultants, to remedy the weaknesses[263](index=263&type=chunk) [PART II. OTHER INFORMATION](index=45&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, unregistered equity sales, other information, and exhibits [Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in two notable legal cases, including environmental contamination and an indemnification claim, with **$5.68 million** accrued for legal matters - In the Stratford Holding LLC case, property owners seek damages of **$12 million** to **$22 million** for alleged environmental contamination, with trial scheduled for November 2021[267](index=267&type=chunk) - In the SBN FCCG LLC case, the company has an unpaid settlement balance of **$480,000**[268](index=268&type=chunk) - The company has accrued a total of **$5.68 million** for these specific matters and other ordinary course legal proceedings as of March 28, 2021[269](index=269&type=chunk) [Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors have occurred since the company's most recent Annual Report on Form 10-K - The company states there have been no material changes in risk factors from its most recent Annual Report[270](index=270&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None reported for the period[271](index=271&type=chunk) [Other Information](index=45&type=section&id=Item%205.%20Other%20Information) Subsequent to quarter end, the 2020 Series B Offering Warrants exercise price was adjusted downward due to a cash dividend - On May 3, 2021, the exercise price of the 2020 Series B Offering Warrants was reduced from **$5.00** to **$4.8867** per share due to a cash dividend on common stock[274](index=274&type=chunk) [Exhibits](index=46&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including new securitization agreements and CEO/CFO certifications [Signatures](index=47&type=section&id=SIGNATURES) This section contains the required signatures for the Form 10-Q filing

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.0001 per share FAT 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 Common Stock FATBW The Nasdaq Stock Market LLC FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the f ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.0001 per share FAT 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 Common Stock FATBW The Nasdaq Stock Market LLC FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For th ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) Financial statements reflect a net loss of $6.6 million and a stockholders' deficit of $3.6 million due to the COVID-19 pandemic's impact [Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=Consolidated%20Balance%20Sheets%20(Unaudited)) Total assets grew to $90.9 million while a rise in debt led to a stockholders' deficit of $3.6 million Consolidated Balance Sheet Highlights (in thousands) | Account | June 28, 2020 | December 29, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash & Restricted Cash | $3,488 | $25 | | Total Current Assets | $10,130 | $10,488 | | Goodwill | $9,450 | $10,912 | | Total Assets | **$90,890** | **$82,550** | | **Liabilities & Equity** | | | | Total Current Liabilities | $21,151 | $45,611 | | Long-term Debt, net | $43,925 | $5,216 | | Total Liabilities | **$94,478** | **$77,172** | | Total Stockholders' Equity (Deficit) | **($3,588)** | **$5,378** | [Consolidated Statements of Operations (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20(Unaudited)) Revenues fell to $7.5 million, resulting in a net loss of $6.6 million due to asset impairments and COVID-19 impacts Statement of Operations Summary (in thousands, except per share data) | Metric | Twenty-six weeks ended June 28, 2020 | Twenty-six weeks ended June 30, 2019 | | :--- | :--- | :--- | | Total Revenue | $7,530 | $10,768 | | Total Costs and Expenses | $13,898 | $7,879 | | Impairment of Assets | $3,174 | $0 | | (Loss) Income from Operations | ($6,368) | $2,889 | | Net Loss | **($6,621)** | **($1,218)** | | Basic and Diluted Loss per Share | **($0.56)** | **($0.10)** | [Consolidated Statements of Stockholders' Equity (Unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity%20(Unaudited)) Stockholders' equity declined to a deficit of $3.6 million, driven by a net loss and derivative liability adjustments - Stockholders' equity fell into a **deficit of ($3,588,000)** at June 28, 2020, from an equity position of $5,378,000 at December 29, 2019[15](index=15&type=chunk) - The main drivers for the decrease in equity were the **net loss of $6,621,000** and a **fair value adjustment of derivative liability of $2,406,000**[15](index=15&type=chunk) [Consolidated Statements of Cash Flows (Unaudited)](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Financing activities provided $13.8 million in cash, offsetting operational and investing outflows for a net cash increase Cash Flow Summary (in thousands) | Cash Flow Activity | Twenty-six weeks ended June 28, 2020 | Twenty-six weeks ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($3,994) | ($984) | | Net cash used in investing activities | ($6,326) | ($5,587) | | Net cash provided by financing activities | $13,783 | $6,458 | | **Net increase (decrease) in cash** | **$3,463** | **($113)** | [Notes to Consolidated Financial Statements (Unaudited)](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) Notes detail the COVID-19 impact, a $40 million debt securitization, a PPP loan, and subsequent equity financing - The COVID-19 pandemic has negatively impacted the company, causing franchisees to close or modify operations, resulting in reduced revenues[26](index=26&type=chunk) - In March 2020, the company completed a **$40 million whole-business securitization**, using the net proceeds of $37.3 million to repay existing debt and for working capital[28](index=28&type=chunk) - Subsequent to quarter-end, in July 2020, the company raised **net proceeds of $8.2 million** from a public offering of Series B Preferred Stock and warrants[32](index=32&type=chunk)[197](index=197&type=chunk) - Due to the adverse effects of COVID-19, the company recorded **goodwill impairment charges of $1,462,000** and **tradename impairment charges of $1,712,000**[88](index=88&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Performance declined due to COVID-19, prompting asset impairments and new financing to ensure liquidity - The COVID-19 pandemic has **materially and adversely affected business operations and revenues** due to franchisee store closures and reduced consumer traffic[206](index=206&type=chunk) - The company's asset-light franchisor model focuses on generating revenue from franchise fees and royalties, with a growth strategy centered on acquisitions[210](index=210&type=chunk) - A significant increase in G&A expenses was primarily due to a **$1.16 million provision for bad debts** related to the effects of the COVID-19 pandemic[222](index=222&type=chunk) - The company believes that working capital from its recent Securitization, Series B Preferred Stock Offering, and PPP loan will be **sufficient to meet liquidity needs** for the next year[242](index=242&type=chunk) [Results of Operations](index=38&type=section&id=MD&A_Results_of_Operations) Revenues decreased by $3.2 million while expenses surged, leading to a $6.4 million operating loss Comparison of Results for the Twenty-six Weeks Ended (in thousands) | Metric | June 28, 2020 | June 30, 2019 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $7,530 | $10,768 | ($3,238) | | General & Administrative Expenses | $7,636 | $5,820 | $1,816 | | Impairment of Assets | $3,174 | $0 | $3,174 | | (Loss) Income from Operations | ($6,368) | $2,889 | ($9,257) | | Net Loss | ($6,621) | ($1,218) | ($5,403) | - The decrease in revenue was attributed to the negative effects of the COVID-19 pandemic on restaurant sales and a change in accounting for franchise fees[220](index=220&type=chunk) - The company recorded **goodwill impairment charges of $1,462,000** and **tradename impairment charges of $1,712,000** for the Ponderosa and Bonanza brands[224](index=224&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=MD&A_Liquidity_and_Capital_Resources) Liquidity was bolstered by a $37.3 million securitization and a $1.5 million PPP loan, ensuring sufficient capital - In March 2020, the company completed a whole-business securitization, issuing **$40 million in notes** and receiving net proceeds of $37.3 million[240](index=240&type=chunk)[254](index=254&type=chunk) - The company received a **$1,532,000 loan** under the Paycheck Protection Program (PPP) during the quarter[241](index=241&type=chunk) Cash Flow Comparison for the Twenty-six Weeks Ended (in thousands) | Cash Flow Activity | June 28, 2020 | June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($3,994) | ($984) | | Net cash used in investing activities | ($6,326) | ($5,587) | | Net cash provided by financing activities | $13,783 | $6,458 | [Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not required for the reporting period - Not Required[282](index=282&type=chunk) [Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed effective with no significant changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the Company's **disclosure controls and procedures were effective** as of June 28, 2020[283](index=283&type=chunk) - **No significant changes** were made to the internal control over financial reporting during the thirteen weeks ended June 28, 2020[285](index=285&type=chunk) [PART II. OTHER INFORMATION](index=48&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending two securities class action lawsuits, one of which has an agreement in principle to settle - The company is involved in two putative securities class action lawsuits: *Rojany v. FAT Brands, Inc.* and *Vignola v. FAT Brands, Inc.*[287](index=287&type=chunk)[289](index=289&type=chunk) - On July 16, 2020, the parties in the *Vignola* case reached an **agreement in principle to settle for $75,000**[289](index=289&type=chunk) - In the *Rojany* case, a hearing on the Plaintiffs' Motion for Class Certification is set for September 10, 2020[288](index=288&type=chunk) [Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's Annual Report - There have been **no material changes** in risk factors from those discussed in the Annual Report on Form 10-K filed on April 28, 2020[293](index=293&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued 18,236 shares of common stock to non-employee directors as compensation for accrued fees - On May 12, 2020, the Company issued **18,236 shares of common stock** at $3.29 per share to non-employee directors for accrued fees[294](index=294&type=chunk) - The issuance was exempt from registration under **Section 4(a)(2)** of the Securities Act[295](index=295&type=chunk) [Defaults Upon Senior Securities](index=49&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) None reported - None[296](index=296&type=chunk) [Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable - Not applicable[297](index=297&type=chunk) [Other Information](index=49&type=section&id=Item%205.%20Other%20Information) None reported - None[298](index=298&type=chunk) [Exhibits](index=50&type=section&id=Item%206.%20Exhibits) Filed exhibits include CEO/CFO certifications, XBRL data, and an intercompany credit agreement - Exhibits filed include **CEO and CFO certifications** (31.1, 31.2, 32.1) and XBRL data (101 series)[300](index=300&type=chunk)[301](index=301&type=chunk) - The Intercompany Revolving Credit Agreement with Fog Cutter Capital Group, Inc. dated April 24, 2020, was incorporated by reference[300](index=300&type=chunk)