FAT Brands(FAT) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION (Unaudited) This section presents the unaudited financial statements, management's discussion, and disclosures on market risk and internal controls Item 1. Condensed Consolidated Financial Statements The condensed consolidated financial statements show a deteriorating financial position with decreased assets, increased liabilities, widening net losses, and negative operating cash flow Condensed Consolidated Balance Sheets The balance sheet as of June 29, 2025, reflects a decline in total assets and an increase in total liabilities, leading to a wider stockholders' deficit Condensed Consolidated Balance Sheets (in thousands) | Financial Metric | June 29, 2025 (in thousands) | December 29, 2024 (in thousands) | | :--- | :--- | :--- | | Total Assets | $1,247,760 | $1,289,178 | | Cash | $7,648 | $23,383 | | Total Liabilities | $1,790,960 | $1,744,890 | | Long-term debt, net | $1,218,217 | $1,208,997 | | Total Stockholders' Deficit | ($543,200) | ($455,712) | Condensed Consolidated Statements of Operations The statements of operations show increased net losses for both the quarter and year-to-date periods, driven by decreased revenue and higher expenses Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $146,836 | $152,040 | $288,855 | $304,007 | | Loss from Operations | ($15,550) | ($2,703) | ($24,116) | ($4,085) | | Net Loss Attributable to FAT Brands Inc. | ($54,188) | ($39,359) | ($100,157) | ($77,675) | | Basic and Diluted Loss per Share | ($3.17) | ($2.43) | ($5.91) | ($4.80) | Condensed Consolidated Statements of Cash Flows The cash flow statements indicate continued negative cash flow from operations and a net decrease in cash and restricted cash for the period Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Twenty-Six Weeks Ended June 29, 2025 | Twenty-Six Weeks Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($40,124) | ($42,614) | | Net cash used in investing activities | ($2,427) | ($18,176) | | Net cash provided by financing activities | $19,082 | $42,000 | | Net decrease in cash and restricted cash | ($23,469) | ($18,790) | Notes to Condensed Consolidated Financial Statements These notes provide critical details on the company's liquidity, substantial debt, ongoing legal challenges, and the recent spin-off of Twin Hospitality Group - The company faces significant liquidity challenges, with a history of net losses, an accumulated deficit of $553.6 million, negative working capital of $264.6 million, and negative cash flow from operations of $40.1 million for the first half of 2025[30] - Total securitized debt stood at a book value of $1.25 billion as of June 29, 2025, representing the vast majority of the company's long-term debt[54] - The company is subject to ongoing legal challenges, including an SEC complaint alleging violations of securities laws and multiple derivative lawsuits. A DOJ indictment against the company was dismissed without prejudice in July 2025[81][82][83] - In January 2025, the company completed the spin-off of Twin Hospitality Group Inc. FAT Brands retains a controlling ownership of approximately 98.6% of the voting power and continues to consolidate Twin Hospitality in its financial statements[97][98][101] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the decline in revenue, increase in expenses, and addresses the company's liquidity position and capital resources Results of Operations The results of operations show a decrease in total revenue and a significant increase in general and administrative expenses, leading to a wider operating loss - Total revenue decreased by 5.0% in the first half of 2025, primarily due to the closure of five underperforming Smokey Bones locations and lower same-store sales[111] - General and administrative expenses increased by 30.0% in the first half of 2025, mainly due to increased share-based compensation for Twin Hospitality Group Inc. and higher professional fees for litigation[112] - Total other expense, net, increased to $75.3 million for H1 2025 from $68.2 million in H1 2024, primarily due to higher interest expense[114] Liquidity and Capital Resources This section details the company's cash position, sources of liquidity, significant liabilities, and management's assessment of future liquidity Cash Flow Activity (in millions) | Cash Flow Activity (in millions) | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($40.1) | ($42.6) | | Net cash used in investing activities | ($2.4) | ($18.2) | | Net cash provided by financing activities | $19.1 | $42.0 | - The company has liabilities of $91.8 million relating to put options exercised on its Series B Cumulative Preferred Stock[126] - The company paused the payment of cash dividends on its Series B Cumulative Preferred Stock beginning with the April 2025 period; these dividends will now accrue[133] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not required for the company as a smaller reporting company - Disclosure about market risk is not required[137] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - Management concluded that the company's Disclosure Controls and Procedures were effective as of the end of the period covered by the report[139] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[140] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and other miscellaneous disclosures and exhibits Item 1. Legal Proceedings This section refers the reader to Note 13 of the condensed consolidated financial statements for a detailed description of the company's material pending legal proceedings - For details on material pending legal proceedings, the report refers to Note 13, Commitments and Contingencies, in the financial statements[142] Item 1A. Risk Factors The company states that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K filed on February 28, 2025 - There have been no material changes in risk factors from those discussed in the company's Annual Report on Form 10-K[143] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None reported[144] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None reported[145] Item 5. Other Information During the fiscal quarter, no director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[147] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications and Inline XBRL documents - The exhibits filed with this report include: * Certifications pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002 * Inline XBRL Instance Document and related taxonomy files[148]