TABLE
OF CONTENTS
Prospectus
Supplement
Prospectus
USE
OF MARKET AND INDUSTRY DATA
This
prospectus supplement and the accompanying prospectus includes or incorporates by reference market and industry data that we have
obtained from third-party sources, including industry publications, as well as industry data prepared by our management on the basis
of its knowledge of and experience in the industries in which we operate (including our management’s estimates and assumptions
relating to such industries based on that knowledge). Management has developed its knowledge of such industries through its experience
and participation in these industries. While our management believes the third-party sources referred to or incorporated by reference
in this prospectus supplement and the accompanying prospectus are reliable, neither we nor our management have independently verified
any of the data from such sources referred to or incorporated by reference in this prospectus supplement or the accompanying prospectus
or ascertained the underlying economic assumptions relied upon by such sources. Internally prepared and third-party market forecasts,
in particular, are estimates only and may be inaccurate, especially over long periods of time. Furthermore, references in or incorporated
by reference in this prospectus supplement or the accompanying prospectus to any publications, reports, surveys or articles prepared
by third parties should not be construed as depicting the complete findings of the entire publication, report, survey or article. The
information in any such publication, report, survey or article is not incorporated by reference in this prospectus supplement or the
accompanying prospectus.
INCORPORATION
OF DOCUMENTS BY REFERENCE
The
SEC allows us to incorporate by reference the information we file with it, which means that we can disclose important information to
you by referring you to another document that we have filed separately with the SEC. We hereby incorporate by reference the following
information or documents into this prospectus supplement:
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the
following sections of our Annual Report on Form 10-K for the fiscal year ended December 27, 2020, filed with the SEC on March 29,
2021:
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Item
2. Properties
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3. Legal Proceedings
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Item
5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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Item
8. Financial Statements and Supplementary Data
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11. Executive Compensation
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13. Certain Relationships and Related Transactions, and Director Independence, and
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14. Principal Accounting Fees and Services
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Item
15. Exhibits and Financial Statement Schedules
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our
Quarterly Report on Form 10-Q for the quarterly period ended March 28, 2021, filed with the SEC on May 12, 2021, and our Quarterly
Report on Form 10-Q for the quarterly period ended June 27, 2021, filed with the SEC on August 6, 2021;
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our Definitive Proxy Statement on Schedule 14A, filed with the SEC on September 9, 2021;
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our Definitive Information Statement on Schedule 14C, filed with the SEC on July 20, 2021;
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our Definitive Information Statement on Schedule 14C, filed with the SEC on August 3, 2021;
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our
Current Reports on Form 8-K, filed with the SEC on (i) December
30, 2020, as amended by Amendment No. 1 to Form 8-K filed on March
12, 2021, (ii) January
11, 2021 (only with respect to Item 8.01), (iii) January
28, 2021, (iv) February
26, 2021, (v) March
31, 2021, as amended by Amendment No. 1 to Form 8-K filed on April
1, 2021, (vi) April
22, 2021, (vii) April
26, 2021, (viii) April
29, 2021, (ix) May
19, 2021, as amended by Amendment No. 1 to Form 8-K filed on June
30, 2021, (x) May
28, 2021, (xi) June
15, 2021; (xii) June
28, 2021 (excluding Item 7.01), (xiii) July
1, 2021, (xiv) July
6, 2021 (excluding Item 7.01), (xv) July
26, 2021 (excluding Item 7.01), as amended by Amendment No. 1 to Form 8-K filed on October
5, 2021, (xvi) July
29, 2021, (xvii) August
5, 2021 (excluding Item 7.01), (xviii) August
5, 2021, (xiv) August
19, 2021, (xx) August
25, 2021, (xxi) August
30, 2021, (xxii) September
2, 2021 (excluding Item 7.01), (xxiii) September
16, 2021 (excluding Item 7.01), (xxiv) September
29, 2021, (xxv) October
6, 2021 (excluding Item 7.01), as amended by Amendment No. 1 to Form 8-K filed on October
15, 2021, (xxvi) October
19, 2021, (xxvii) October
22, 2021, and (xxviii) October
25, 2021; and
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the description of our Series B Preferred Stock contained in our registration
statement on Form 8-A filed with the SEC
on July 7, 2020, including any amendment or report filed for the purpose of updating such descriptions.
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We
also incorporate by reference into this prospectus supplement additional documents that we may file with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”), after the
date hereof but before the completion or termination of this offering (excluding any information not deemed “filed” with
the SEC). Any statement contained in a previously filed document is deemed to be modified or superseded for purposes of this prospectus
supplement or the accompanying prospectus to the extent that a statement contained in this prospectus supplement or the accompanying
prospectus or in a subsequently filed document incorporated by reference herein modifies or supersedes the statement, and any statement
contained in this prospectus supplement or the accompanying prospectus is deemed to be modified or superseded for purposes of this prospectus
supplement or the accompanying prospectus to the extent that a statement contained in a subsequently filed document incorporated by reference
herein modifies or supersedes the statement.
Any
information in any of the foregoing documents will automatically be deemed to be modified or superseded to the extent that information
in this prospectus supplement or the accompanying prospectus or in a later filed document that is incorporated or deemed to be incorporated
herein or therein by reference modifies or replaces such information.
Upon
written or oral request, we will provide you without charge a copy of any or all of the documents that are incorporated by reference
into this prospectus supplement, including exhibits which are specifically incorporated by reference into such documents. Requests should
be directed to: FAT Brands Inc., Attention: Investor Relations, 9720 Wilshire Blvd., Suite 500, Beverly Hills, CA 90212, telephone (310)
319-1850.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus supplement and the accompanying prospectus contain forward-looking statements. All statements other than statements of historical
facts contained in this prospectus supplement or the accompanying prospectus may be forward-looking statements. Statements regarding
our future results of operations and financial position, business strategy and plans and objectives of management for future operations.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,”
“expects,” “plans,” “anticipates,” “could,” “intends,” “targets,”
“projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential”
or “continue” or the negative of these terms or other similar expressions.
Forward-looking
statements are subject to significant business, economic and competitive risks, uncertainties and contingencies, many of which are difficult
to predict and beyond our control, which could cause our actual results to differ materially from the results expressed or implied in
such forward-looking statements. These and other risks, uncertainties and contingencies are described elsewhere in this prospectus supplement
and the accompanying prospectus, including under “Risk Factors”, and in the documents incorporated by reference herein and
therein, and include the following factors:
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our
inability to generate sufficient cash to service our obligations, including our obligations under the Series B Preferred Stock;
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we
may issue additional indebtedness and series of preferred stock with rights that are senior to the Series B Preferred Stock;
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uncertainties
surrounding the severity, duration and effects of the COVID-19 pandemic;
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our
franchisees could take actions that could harm our business and may not accurately report sales;
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the
actions of our franchisees;
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our
inability to maintain good relationships with our franchisees;
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our
inability to successfully add franchisees, brands and new stores, and timely develop and expand our operations;
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our
inability to protect our brands and reputation;
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our
ability to adequately protect our intellectual property;
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success
of our advertising and marketing campaigns;
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our
inability to protect against security breaches of confidential guest information;
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our
business model being susceptible to litigation;
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competition
from other restaurants;
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shortages
or interruptions in the supply or delivery of food products;
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our
vulnerability to increased food commodity costs;
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our
failure to prevent food safety and food-borne illness incidents;
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changes
in consumer tastes and nutritional and dietary trends;
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our
dependence on key executive management;
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our
inability to identify qualified individuals for our workforce;
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our
vulnerability to labor costs;
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our
inability to comply with governmental regulation;
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violations
of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws;
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our
inability to maintain sufficient levels of cash flow, or access to capital, to meet growth expectations; and
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control
of our Company by Fog Cutter Holdings, LLC.
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These
forward-looking statements speak only as of the respective dates of this prospectus supplement and the accompanying prospectus. Except
as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this prospectus
supplement or the accompanying prospectus after we distribute this prospectus supplement, whether as a result of any new information,
future events or otherwise.
PROSPECTUS
SUPPLEMENT SUMMARY
This
summary highlights selected information contained elsewhere in this prospectus supplement and the accompanying prospectus. This summary
does not contain all of the information that you should consider before deciding to invest in our Series B Preferred Stock. You should
read this entire prospectus supplement and the accompanying prospectus carefully, including the section entitled “Risk Factors”
and the other information included elsewhere or incorporated by reference in this prospectus supplement and the accompanying prospectus,
before making an investment decision.
In
this prospectus supplement, unless the context requires otherwise, references to “FAT Brands”, our “Company”,
“we”, “us” or “our” refer collectively to FAT Brands Inc. and its subsidiaries, unless otherwise
stated.
Our
Company
FAT
Brands Inc. is a leading multi-brand restaurant company that develops, markets and acquires quick service, fast casual, casual dining,
and polished casual dining restaurant concepts around the world. We operate primarily as a franchisor of restaurants, where we generally
do not own or operate the restaurant locations but rather generate revenue by charging franchisees an initial franchise fee as well as
ongoing royalties. This “asset light” franchisor model provides us with the opportunity for strong profit margins and an
attractive free cash flow profile while minimizing restaurant operating company risk, such as long-term real estate commitments or capital
investments. For some of our brands, we also directly own and operate restaurant locations, in addition to franchising restaurants. Our
scalable management platform enables us to add new stores and restaurant concepts to our portfolio with minimal incremental corporate
overhead cost, while taking advantage of significant corporate overhead synergies. The acquisition of additional brands and restaurant
concepts as well as expansion of our existing brands are key elements of our growth strategy. In addition to our restaurant operations,
we also own and operate a manufacturing and production facility in Atlanta, Georgia, which supplies
our franchisees with cookie dough, pretzel dry mix and other ancillary products.
Our
Concepts
As
of the date of this prospectus supplement, we are the owner and franchisor of the following restaurant brands in four main categories
– Quick Service, Fast Casual, Casual Dining, and Polished Casual Dining.
Quick
Service Restaurants
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Round
Table Pizza. Round Table Pizza is the franchisor of quick service restaurants located primarily in California and the western
United States. Round Table pizzas are made with fresh dough and offered in a variety of original flavors and pizza combinations.
Customers also have the option to create their own pizzas. Round Table Pizza includes three restaurant formats – Traditional,
Clubhouse and Delivery Only.
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Marble
Slab Creamery. Marble Slab Creamery is a purveyor of hand-mixed ice cream. Founded in 1983, Marble Slab was an innovator
of the frozen slab technique where customers select a variety of items to be mixed into their ice cream or frozen yogurt on a chilled
marble slab. Marble Slab ice cream is made in small batches in franchise locations using ingredients from around the world and dairy
from local farms. Marble Slab has locations in the United States, Canada, Bahrain, Bangladesh, Guam, Kuwait, Pakistan, Puerto Rico,
and Saudi Arabia.
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Great
American Cookies. Great American Cookies (which we refer to as “GAC”) was founded in Atlanta, GA in 1977 as a
single store which relied upon a single chocolate chip cookie recipe. In 1978, GAC began its franchise operations and introduced
a complete line of cookies and brownies. Over the last 30 years, GAC further increased its presence in malls throughout the United
States and significantly expanded its product offerings. GAC is known for its signature Cookie Cakes, signature flavors and menu
of gourmet products baked fresh in store. GAC has franchised stores in the United States, Guam, Bahrain, and Saudi Arabia.
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Hot
Dog on a Stick. Hot Dog on a Stick (which we refer to as “HDOS”) is the franchisor of quick service restaurants
primarily located in regional malls in California and the western United States. HDOS founder Dave Barnham opened his first hot dog
stand in Santa Monica, California in 1946. HDOS offers its turkey frank dipped in batter and cooked in canola oil, along with fresh
squeezed lemonade, hot dog in a bun, cheese on a stick, funnel cake sticks, and french fries.
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Pretzelmaker.
Pretzelmaker and Pretzel Time are franchised concepts that specialize in offering hand-rolled soft pretzels, innovative soft
pretzel products, dipping sauces, and beverages. Retail locations are primarily located in shopping malls and other types of shopping
centers. The brands were founded independently of each other in 1991, united under common ownership in 1998, and consolidated in
2008 to become the new Pretzelmaker.
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Fast
Casual
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Fatburger.
Founded in Los Angeles, California in 1947, Fatburger (The Last Great Hamburger Stand) has, throughout its history, maintained
its reputation as an iconic, all-American, Hollywood favorite hamburger restaurant serving a variety of freshly made-to-order, customizable,
big, juicy, and tasty Fatburgers, Turkeyburgers, Chicken Sandwiches, Impossible™ Burgers, Veggieburgers, French fries, onion
rings, soft-drinks and milkshakes.
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Johnny
Rockets. Founded in 1986 on iconic Melrose Avenue in Los Angeles, Johnny Rockets is a world-renowned, international restaurant
franchise that offers high quality, innovative menu items including Certified Angus Beef® cooked-to-order hamburgers, Boca Burger®,
chicken sandwiches, crispy fries and rich, delicious hand-spun shakes and malts. This dynamic lifestyle brand offers friendly service
and upbeat music contributing to the chain’s signature atmosphere of relaxed, casual fun.
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Elevation
Burger. Established in Northern Virginia in 2002, Elevation Burger is a fast-casual burger, fries, and shakes chain that
provides its customers with healthier, “elevated” food options. Serving grass-fed beef, organic chicken, and French fries
cooked using a proprietary olive oil-based frying method, Elevation maintains environmentally friendly operating practices including
responsible sourcing of ingredients, robust recycling programs intended to reduce carbon footprint, and store décor constructed
of eco-friendly materials.
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Yalla
Mediterranean. Founded in 2014, Yalla Mediterranean is a Los Angeles-based restaurant chain specializing in authentic, healthful,
Mediterranean cuisine with an environmentally conscience and focus on sustainability. The word “yalla” which means “let’s
go” is embraced in every aspect of Yalla Mediterranean’s culture and is a key component of our concept. Yalla Mediterranean
offers a healthful Mediterranean menu of wraps, plates, and bowls in a fast-casual setting, with cuisine prepared fresh daily using,
GMO-free, local ingredients for a menu that includes vegetarian, vegan, gluten-free and dairy-free options accommodating customers
with a wide variety of dietary needs and preferences. The brand demonstrates its commitment to the environment by using responsibly
sourced proteins and utensils, bowls and serving trays made from compostable materials.
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Casual
Dining
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Buffalo’s
Cafe and Buffalo’s Express. Established in Roswell, Georgia in 1985, Buffalo’s Cafe (Where Everyone is Family)
is a family-themed casual dining concept known for its chicken wings and 13 distinctive homemade wing sauces, burgers, wraps, steaks,
salads and other classic American cuisine. Featuring a full bar and table service, Buffalo’s Cafe offers a distinctive dining
experience affording friends and family the flexibility to share an intimate dinner together or to casually watch sporting events
while enjoying extensive menu offerings. Beginning in 2011, Buffalo’s Express was developed and launched as a fast-casual,
smaller footprint variant of Buffalo’s Cafe offering a limited version of the full menu with an emphasis on chicken wings,
wraps and salads. Current Buffalo’s Express outlets are co-branded with Fatburger locations, providing our franchisees with
complementary concepts that share kitchen space and result in a higher average unit volume (compared to stand-alone Fatburger locations).
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Hurricane
Grill & Wings. Founded in Fort Pierce, Florida in 1995, Hurricane Grill & Wings is a tropical beach themed casual
dining restaurant known for its fresh, jumbo, chicken wings, 35 signature sauces, burgers, bowls, tacos, salads and sides. Featuring
a full bar and table service, Hurricane Grill & Wings’ laid-back, casual, atmosphere affords family and friends the flexibility
to enjoy dining experiences together regardless of the occasion. The acquisition of Hurricane Grill & Wings has been complementary
to FAT Brands existing portfolio chicken wing brands, Buffalo’s Cafe and Buffalo’s Express.
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Ponderosa
and Bonanza Steakhouse. Ponderosa Steakhouse, founded in 1965, and Bonanza Steakhouse, founded in 1963 (which we refer to
collectively as “Ponderosa”), offer the quintessential American steakhouse experience, for which there is strong and
growing demand in international markets, particularly in Asia and the Middle East. Ponderosa and Bonanza Steakhouses offer guests
a high-quality buffet and broad array of great tasting, affordably priced steak, chicken and seafood entrées. Buffets at Ponderosa
and Bonanza Steakhouses feature a large variety of all you can eat salads, soups, appetizers, vegetables, breads, hot main courses
and desserts. An additional variation of the brand, Bonanza Steak & BBQ, offers a full-service steakhouse with fresh farm-to-table
salad bar and a menu showcase of USDA flame-grilled steaks and house-smoked BBQ, with contemporized interpretations of traditional
American classics.
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Polished
Casual Dining
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Twin
Peaks. Founded in 2005 in Dallas, Texas, Twin Peaks is a leading sports lodge-themed restaurant chain known for its scratch
made food, 29-degree cold beer, and all-female wait staff. Each Twin Peaks restaurant features a sports viewing experience in a comfortable
mountain lodge atmosphere with a customized sports programming package provided by DirecTV. Menu items include smashed and seared
to order burgers, in-house smoked ribs, street tacos, and hand-breaded chicken wings. We currently franchise, and also directly own
and operate, Twin Peaks restaurants in various states in the United States, and we have two international franchised Twin Peaks restaurants
in Mexico City, Mexico.
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Competitive
Strengths
We
believe that our competitive strengths include:
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Management
Platform Built for Growth. We have developed a robust and comprehensive management and systems platform designed to support the
expansion of our existing brands while enabling the accretive and efficient acquisition and integration of additional restaurant
concepts. We dedicate our considerable resources and industry knowledge to promote the success of our franchisees, offering them
multiple support services such as public relations, marketing and advertising, supply chain assistance, site selection analysis,
staff training and operational oversight and support. Furthermore, our platform is scalable and adaptable, allowing us to incorporate
new concepts into the FAT Brands family with minimal incremental corporate costs. We intend to grow our existing brands as well as
make strategic and opportunistic acquisitions that complement our existing portfolio of concepts providing an entrance into targeted
restaurant segments. We believe that our platform is a key differentiator in pursuing this strategy.
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Asset
Light Business Model. We maintain an “asset light” business model for most of our operations, requiring minimal capital
expenditures by franchising our restaurant concepts to our owner / operators. The multi-brand franchisor model also enables us to
efficiently scale the number of restaurant locations with very limited incremental corporate overhead and minimal exposure to store-level
risk, such as long-term real estate commitments and increases in employee wage costs. Our multi-brand approach also gives us the
organizational depth to provide a host of services to our franchisees, which we believe enhances their financial and operational
performance. As a result, new store growth and accelerating financial performance of the FAT Brands network drive increases in our
franchise fee and royalty revenue streams while expanding profit and free cash flow margins.
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Strong
Brands Aligned with FAT Brands Vision. We have an enviable track record of delivering Fresh, Authentic, and Tasty meals across
our franchise system. Our restaurant concepts have built distinctive brand identities within their respective segments, providing
made-to-order, high-quality food at competitive prices. Maintaining alignment with the FAT Brands vision across an expanding platform,
we believe that our concepts will appeal to a broad base of domestic and global consumers.
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Experienced
and Diverse Global Franchisee Network. Our franchise development team has built an attractive pipeline of new potential franchisees,
with many experienced restaurant operators and new entrepreneurs eager to join the FAT Brands family.
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Ability
to Cross-Sell Existing Franchisees Concepts from the FAT Brands Portfolio. Our ability to easily and efficiently cross-sell our
existing franchisees new brands from our FAT Brands portfolio affords us the ability to grow more quickly and satisfy our existing
franchisees’ demands to expand their organizations. By having the ability to offer our franchisees a variety of concepts and
investment scale options from the FAT Brands portfolio, our existing franchisees are able to acquire the rights to, and develop,
their respective markets with a well-rounded portfolio of FAT Brands concept offerings, affording them the ability to strategically
satisfy their respective market demands by developing our various concepts where opportunities are available.
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Seasoned
and Passionate Management Team. Our management team and employees are critical to our success. Our senior leadership team is
highly experienced in the restaurant industry, and many have been a part of our team since our acquisition of the Fatburger brand
in 2003. In addition, through their holdings, our senior executives own a significant equity interest in our Company, ensuring long-term
commitment and alignment with our public shareholders. Our management team is complemented by an accomplished Board of Directors
that is highly involved in overseeing our strategic initiatives and implementation.
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Growth
Strategy
The
principal elements of our growth strategy include:
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Opportunistically
Acquire New Brands. Our management platform was developed to cost-effectively and seamlessly scale with new restaurant concept
acquisitions. Our strategic acquisitions during 2021 are a continuation of this growth strategy, and we have identified additional
categories for future growth. We have developed a strong and actionable pipeline of potential acquisition opportunities to achieve
our objectives. We seek concepts with established, widely recognized brands, steady cash flows, track records of long-term, good
relationships with franchisees, sustainable operating performance, geographic diversification, and growth potential, both geographically
and through co-branding initiatives across our portfolio. We approach acquisitions from a value perspective, targeting modest multiples
of franchise-level cash flow valuations to ensure that acquisitions are immediately accretive to our earnings prior to anticipated
synergies.
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Optimize
Capital Structure to Enable Profitable Growth through Acquisitions. We have financed recent acquisitions of restaurant brands
through the issuance of notes under a securitization structure and delivery of equity securities to the sellers. We believe that
future issuances of notes under this or a similar structure will enable us to continue pursuing profitable acquisitions with a reasonable
cost of capital.
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Accelerate
Same-Store Sales Growth. Same-store sales growth reflects the change in year-over-year sales for the comparable store base, which
we define as the number of stores open for at least one full fiscal year. To optimize restaurant performance, we have embraced a
multi-faceted same-store sales growth strategy. We utilize customer feedback and closely analyze sales data to introduce, test and
perfect existing and new menu items. In addition, we regularly utilize public relations and experiential marketing, which we leverage
via social media and targeted digital advertising to expand the reach of our brands and to drive traffic to our stores. Furthermore,
we have embraced emerging technology to develop our own brand-specific mobile applications, allowing guests to find restaurants,
order online, earn rewards and join our e-marketing providers. We have also partnered with third-party delivery service providers,
including UberEATS, Grub Hub, Amazon Restaurants and Postmates, which provide online and app-based delivery services and constitute
a new sales channel for our existing locations. Finally, many of our franchisees are pursuing a robust capital expenditure program
to remodel legacy restaurants and to opportunistically co-brand them with our other restaurant concepts.
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Drive
Store Growth through Co-Branding, Virtual Restaurants, and Cloud Kitchens. We franchise co-branded Fatburger / Buffalo’s
Express locations, giving franchisees the flexibility of offering multiple concepts, while sharing kitchen space, resulting in a
higher average check (compared to stand-alone Fatburger locations). Franchisees benefit by serving a broader customer base, and we
estimate that co-branding results in a 20%-30% increase in average unit volume compared to stand-alone locations with minimal incremental
cost to franchisees. Our acquisition strategy reinforces the importance of co-branding, as we expect to offer each of the complementary
brands that we acquire to our existing franchisees on a co-branded basis. In addition, we are leveraging the current industry trend
of virtual restaurants, whereby one (or more) of our brands serves its food out of the kitchen of another brand for online delivery
only, and cloud kitchens, whereby restaurants open without a customer-facing store-front solely for the purpose of servicing delivery
or virtual kitchens. Virtual restaurants and cloud kitchens allow us to introduce our brands in geographic areas where they were
previously unknown.
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Continue
Expanding FAT Brands Internationally. We have a significant global presence, with international franchised stores in 40
countries. We believe that the appeal of our Fresh, Authentic, and Tasty concepts is global, and we are targeting further penetration
of Middle Eastern and Asian markets.
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Attract
New Franchisees in Existing and Unpenetrated Markets. In addition to the large pipeline of new store commitments from current
franchisees, we believe the existing markets for our brands are far from saturated and can support a significant increase in units.
Furthermore, new franchisee relationships represent the optimal way for our brands to penetrate geographic markets where we do not
currently operate. In many cases, prospective franchisees have experience in and knowledge of markets where we are not currently
active, facilitating a smoother brand introduction than we or our existing franchisees could achieve independently. We generate franchisee
leads through various channels, including franchisee referrals, traditional and non-traditional franchise brokers and broker networks,
franchise development advertising, and franchise trade shows and conventions.
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Explore
Strategic Alternatives. We may engage in strategic transactions involving our Company, restaurant brands and franchisees. For
example, we may in the future build and develop Company owned restaurants with the intention of selling and refranchising the stores,
and build the capacity to offer debt financing to our franchisees to develop additional stores. We may also manage restaurants for
our franchisees in exchange for a management fee and manage external restaurant brands that we do not own. In addition, we may at
times seek to monetize our investment in restaurant brands that we have acquired and/or developed through a sale or other strategic
transaction.
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Our
Corporate Information
FAT
Brands Inc., the issuer of the Series B Preferred Stock in this offering, was incorporated as a Delaware corporation on March 21, 2017.
Our corporate headquarters are located at 9720 Wilshire Blvd., Suite 500, Beverly Hills, California 90212. Our main telephone number
is (310) 319-1850. Our principal Internet website address is www.fatbrands.com. The information on our website is not incorporated
by reference into, or a part of, this prospectus supplement.
Implications
of Being an Emerging Growth Company
As
a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company”
as defined in the Jumpstart Our Business Startups Act of 2012 (which we refer to as the “JOBS Act”). An emerging growth company
may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies.
These provisions include the following:
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we
are required to have only two years of audited financial statements and only two years of related Management’s Discussion and
Analysis of Financial Condition and Results of Operations disclosure;
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we
are not required to engage an auditor to report on our internal controls over financial reporting pursuant to Section 404(b) of the
Sarbanes-Oxley Act of 2002 (which we refer to as the “Sarbanes-Oxley Act”);
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we
are not required to submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay”,
“say-on-frequency” and “say-on-golden parachutes”; and
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we
are not required to disclose certain executive compensation related items such as the correlation between executive compensation
and performance and comparisons of the chief executive officer’s compensation to median employee compensation.
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may take advantage of these provisions until December 25, 2022, which is the last day of our fiscal year following the fifth anniversary
of the consummation of our initial public offering, or such earlier time that we are no longer an emerging growth company. We would cease
to be an emerging growth company if we have more than $1.07 billion in annual revenue, have more than $700 million in market value of
our Common Stock held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period (as such amounts
may be adjusted from time-to-time). We may choose to take advantage of some but not all of these reduced burdens. We have elected to
adopt the reduced disclosure with respect to financial statements and the related Management’s Discussion and Analysis of Financial
Condition and Results of Operations disclosure. As a result of this election, the information that we provide stockholders may be different
than you might get from other public companies in which you hold equity.
The
JOBS Act permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised
accounting standards applicable to public companies. We are choosing to “opt out” of this provision and, as a result, we
will comply with new or revised accounting standards as required when they are adopted. This decision to opt out of the extended transition
period is irrevocable.
Controlled
Company
As
long as Fog Cutter Holdings, LLC continues to own at least 50% of the voting power of our Company, we will be a “controlled company”
as defined under NASDAQ Marketplace Rules. However, we do not currently intend to rely on the controlled company exemptions provided
under the Nasdaq Marketplace Rules. For so long as we are a controlled company under that definition, we are permitted however to elect
to rely, and may rely, on certain exemptions from corporate governance rules, including:
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an
exemption from the rule that a majority of our board of directors must be independent directors;
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an
exemption from the rule that the compensation of our chief executive officer must be determined or recommended solely by independent
directors; and
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an
exemption from the rule that our director nominees must be selected or recommended solely by independent directors.
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we elect to rely on the “controlled company” exemption, a majority of the members of our board of directors might not be
independent directors and our nominating and corporate governance and compensation committees might not consist entirely of independent
directors.
Summary
Risk Factors
We
are subject to a number of risks, including risks that may prevent us from achieving our business objectives or that may adversely affect
our business, financial condition, results of operations, cash flows and prospects. You should carefully consider the risks discussed
in the section entitled “Risk Factors”, including the following risks, before investing in our Series B Preferred Stock:
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We
may not be able to generate sufficient cash to service our obligations, including our obligations under the Series B Preferred Stock.
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We
may incur additional indebtedness and obligations to pay dividends on preferred stock, some of which may be senior to the rights
of the Series B Preferred Stock.
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Our
ability to meet our obligations under the Series B Preferred Stock depends on the earnings and cash flows of our subsidiaries and
the ability of our subsidiaries to pay dividends or advance or repay funds to us.
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The
novel coronavirus (COVID-19) pandemic has disrupted and is expected to continue to disrupt our business, which could continue to
materially affect our operations, financial condition and results of operations for an extended period of time.
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Food
safety and foodborne illness concerns may have an adverse effect on our business.
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We
may be subject to litigation which could be costly and distracting to management.
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Our
operating and financial results and growth strategies are closely tied to the success of our franchisees.
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Our
franchisees could take actions that could harm our business and may not accurately report sales.
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If
we fail to identify, recruit and contract with a sufficient number of qualified franchisees, our ability to open new franchised restaurants
and increase our revenues could be materially adversely affected.
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If
we fail to open new domestic and international franchisee-owned restaurants on a timely basis, our ability to increase our revenues
could be materially adversely affected.
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We
have significant outstanding indebtedness under our securitization facilities, which requires that we generate sufficient cash flow
to satisfy the payment and other obligations under the terms of our debt and exposes us to the risk of default and lender remedies.
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Our
growth strategy includes pursuing opportunistic acquisitions of additional brands, and we may not find suitable acquisition candidates
or successfully operate or integrate any brands that we may acquire.
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Our
business may be adversely impacted by changes in consumer discretionary spending, general economic conditions, or consumer behavior.
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Our
expansion into international markets exposes us to a number of risks that may differ in each country where we have franchised restaurants.
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We
depend on key executive management.
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The
sale of alcoholic beverages at certain of our restaurants subjects us to additional regulations and potential liability.
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Changes
in, or noncompliance with, governmental regulations may adversely affect our business operations, growth prospects or financial condition.
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We
are controlled by Fog Cutter Holdings LLC, whose interests may differ from those of our public stockholders.
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THE
OFFERING
The
following is a brief summary of certain terms of this offering. For a more complete description of the terms of the Series B Preferred
Stock, see “Description of the Series B Cumulative Preferred Stock” in this prospectus supplement.
Issuer
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FAT
Brands Inc., a Delaware corporation
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Securities
offered
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We
are offering 1,000,000 shares of 8.25% Series B Cumulative Preferred Stock.
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Price
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Each
share of Series B Preferred Stock is being offered at a price of $18.00.
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Liquidation
preference of
Series B Preferred Stock
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If
we liquidate, dissolve or wind up, or undergo a “change of control”, holders of the Series B Preferred Stock will have
the right to receive $25.00 per share, plus all accumulated, accrued and unpaid dividends (whether or not earned or declared) to
and including the date of payment, before any payments are made to the holders of our Common Stock or to the holders of equity securities
the terms of which provide that such equity securities will rank junior to the Series B Preferred Stock. The rights of holders of
Series B Preferred Stock to receive their liquidation preference also will be subject to the proportionate rights of any other class
or series of our capital stock ranking in parity with the Series B Preferred Stock as to liquidation.
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Dividends
on
Series B Preferred Stock
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Holders
of the Series B Preferred Stock are entitled to receive, when, as and if declared by our
Board of Directors, cumulative cash dividends payable monthly in an amount per share of Series
B Preferred Stock equal to $2.0625 per share each year, which is equivalent to 8.25% per
annum of the $25.00 liquidation preference per share. Dividends on the Series B Preferred
Stock are payable monthly in arrears. To the extent declared by our Board of Directors, dividends
are payable not later than twenty (20) days after the end of each calendar month. Dividends
on the Series B Preferred Stock accumulate whether or not we have earnings, whether or not
there are funds legally available for the payment of such dividends and whether or not such
dividends are declared by our Board of Directors.
If
our Company fails to make a cash dividend payment with respect to twelve (12) or more consecutive or non-consecutive monthly dividends,
the dividend rate on the Series B Preferred Stock will increase to $2.50 per share each year, which is equivalent to 10% of the $25.00
liquidation preference per share. In addition, if our Company fails to make a cash dividend payment with respect to eighteen (18)
or more consecutive or non-consecutive monthly dividends, the holders of the Series B Preferred Stock, voting as a separate class,
will be entitled to vote for the election of two additional directors to serve on our board of directors until all dividends that
are owed have been paid.
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Call
feature of
Series B Preferred Stock
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We
may, at our option, redeem the Series B Preferred Stock, in whole or in part, by paying $25.00 per share, plus any accrued and unpaid
dividends to the date of redemption and a redemption premium. The redemption premium was initially set at 10% of the $25.00 liquidation
preference per share on July 16, 2020, and decreases by 2% per year until it terminates on the five-year anniversary of the initial
issuance date (July 16, 2025).
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Information
rights
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During
any period in which we are not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and any shares of
our Series B Preferred Stock are outstanding, we will (i) transmit by mail to all holders of Series B Preferred Stock, copies of
the annual reports and quarterly reports that we would have been required to file with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act if we were subject to those sections (other than exhibits that would have been required), and (ii) promptly upon
written request, make available copies of such reports to any prospective holder of Series B Preferred Stock. We will mail the reports
to the holders of Series B Preferred Stock within 15 days after the respective dates by which we would have been required to file
the reports with the SEC if we were subject to Section 13 or 15(d) of the Exchange Act.
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The
Series B Preferred Stock is maintained in book-entry form registered in the name of the nominee of The Depository Trust Company,
except under limited circumstances where certificated shares may be issued.
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Ranking
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The
Series B Preferred Stock, with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or
winding up, ranks:
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senior
to our Common Stock and any other class of equity securities the terms of which provide that such equity securities will rank junior
to the Series B Preferred Stock;
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on
a parity (pari passu) with any equity securities the terms of which provide that such equity securities will rank without
preference or priority over the other; and
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junior
to any equity securities the terms of which provide that such equity securities will rank senior to the Series B Preferred Stock,
and to all of our existing and future debt, including, prior to conversion of such debt, any debt convertible into our equity securities.
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Voting
rights
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The
Series B Preferred Stock does not vote with the Common Stock, but has voting rights as required by law and majority consent rights
to approve (i) any merger, consolidation or share exchange that materially and adversely affects the rights, preferences or voting
power of the Series B Preferred Stock, unless the Series B Preferred Stock is converted into or exchanged for (A) cash equal to or
greater than the applicable redemption price per share, or (B) preferred shares of the surviving entity having rights, preferences
and privileges that are materially the same as those of the Series B Preferred Stock; (ii) any amendment of our Second Amended and
Restated Certificate of Incorporation or the Amended and Restated Certificate of Designation establishing the Series B Preferred
Stock to materially and adversely affect the rights of the Series B Preferred Stock; or (iii) declaring or paying any junior dividends
or repurchasing any junior securities when all dividends on the Series B Preferred Stock have not been paid in full in cash.
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Listing
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The
Series B Preferred Stock is listed on NASDAQ under the symbol “FATBP”. We cannot provide any assurance that a liquid
or established trading market for the Series B Preferred Stock will continue or be maintained.
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Use
of proceeds
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We
intend to use the net proceeds that we receive from this offering for working capital and general corporate purposes. See “Use
of Proceeds.”
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Settlement
date
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We
expect that the shares of Series B Preferred Stock to be issued in this offering will initially be ready for delivery to purchasers
on or about November 1, 2021.
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Risk
factors
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Investing
in our Series B Preferred Stock involves a number of risks. See “Risk Factors” beginning on page S-11 of this
prospectus supplement, and in the accompanying prospectus and our Annual Report on Form 10-K for the year ended December 27, 2020,
for information about important risks you should consider before making an investment decision regarding the Series B Preferred Stock.
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Transfer
Agent
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The
registrar, transfer agent and dividend and redemption price disbursing agent in respect of the Series B Preferred Stock is VStock
Transfer, LLC.
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RISK
FACTORS
Except
for the historical information contained herein or incorporated by reference, this report and the information incorporated by reference
contain forward-looking statements that involve risks and uncertainties. These statements include projections about our accounting and
finances, plans and objectives for the future, future operating and economic performance and other statements regarding future performance.
These statements are not guarantees of future performance or events. Our actual results could differ materially from those discussed
in this prospectus supplement and the accompanying prospectus. Factors that could cause or contribute to these differences include, but
are not limited to, those discussed in the following section, as well as those discussed elsewhere throughout this prospectus supplement
and the accompanying prospectus and in any documents incorporated by reference in this prospectus supplement and the accompanying prospectus.
You
should consider carefully the following risk factors and in the other information included or incorporated by reference in this prospectus
supplement and the accompanying prospectus. If any of the following risks, either alone or taken together, or other risks not presently
known to us or that we currently believe to not be significant, develop into actual events, then our business, financial condition, results
of operations or prospects could be materially adversely affected. If that happens, the market price of our common stock could decline,
and stockholders may lose all or part of their investment.
Risks
Related to the Series B Preferred Stock and this offering
We
may not be able to generate sufficient cash to service our obligations, including our obligations under the Series B Preferred Stock.
Our
ability to make dividend payments on our outstanding shares of preferred stock, including the Series B Preferred Stock, and outstanding
indebtedness, including the notes issued under our securitization facilities, will depend on our financial and operating performance,
which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control.
We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the liquidation preference,
premium, if any, and dividends on our preferred stock, including the Series B Preferred Stock, as well as principal and interest on our
outstanding indebtedness.
We
may incur additional indebtedness and obligations to pay dividends on preferred stock, some of which may be senior to the rights of the
Series B Preferred Stock.
We
and our subsidiaries may incur additional indebtedness and obligations to pay cumulative dividends on preferred stock, some of which
may be senior to the rights of the Series B Preferred Stock. The terms of the Series B Preferred Stock do not prohibit us or our subsidiaries
from incurring additional indebtedness or issuing additional series of preferred stock. Any such indebtedness will in all cases be senior
to the rights of holders of Series B Preferred Stock. We may also issue additional series of preferred stock that contain dividend rights
and liquidation preferences that are senior to the rights of holders of Series B Preferred Stock. Our subsidiaries may also incur indebtedness
that is structurally senior to the Series B Preferred Stock, and we and our subsidiaries could incur indebtedness secured by a lien on
our assets, entitling the holders of such indebtedness to be paid first from the proceeds of such assets. If we issue any additional
preferred stock that ranks senior or pari passu with the Series B Preferred Stock, the holders of those shares will be entitled
to a senior or ratable share with the holders of the Series B Preferred Stock in any proceeds distributed in connection with our insolvency,
liquidation, reorganization or dissolution. This may have the effect of reducing the amount of proceeds paid to the holders of Series
B Preferred Stock.
Our
ability to meet our obligations under the Series B Preferred Stock depends on the earnings and cash flows of our subsidiaries and the
ability of our subsidiaries to pay dividends or advance or repay funds to us.
We
conduct all of our business operations through our subsidiaries. In servicing dividend payments to be made on the Series B Preferred
Stock, we will rely on cash flows from these subsidiaries, mainly dividend payments and other distributions. The ability of these subsidiaries
to make dividend payments to us will be affected by, among other factors, the obligations of these entities to their creditors, requirements
of corporate and other law, and restrictions contained in agreements entered into by or relating to these entities.
Risks
Related to COVID-19, Health Epidemics and Food Safety
The
novel coronavirus (COVID-19) pandemic has disrupted and is expected to continue to disrupt our business, which could continue to materially
affect our operations, financial condition and results of operations for an extended period of time.
In
March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which continues to spread
throughout the United States and other countries. As a result, Company franchisees have closed, or temporarily closed, some retail locations,
reduced or modified store operating hours, adopted a “to-go” only operating model, or a combination these actions. These
actions have reduced consumer traffic, all resulting in a negative impact to Company revenues. In addition, the COVID-19 pandemic may
make it more difficult for our franchisees to staff restaurants and, in more severe cases, may cause a temporary inability to obtain
supplies, increase commodity costs or cause full and partial closures of our affected restaurants for a prolonged period of time.
As
a result of the COVID-19 pandemic, our franchisees have instituted a variety of counter-measures including (i) closing for extended periods,
(ii) reducing or modifying store operating hours, (iii) adopting a “to-go” only operating model, and/or (iv) implementing
a combination of these actions. These actions have reduced consumer traffic at our restaurants, resulting in a negative impact to revenues.
In addition, the COVID-19 pandemic has made it more difficult for our franchisees to staff restaurants, has negatively impacted their
ability to obtain supplies, and has increased food and commodity costs. The COVID-19 pandemic and the economic downturn caused by it
may also materially adversely affect our ability to implement our growth plans, including closures of existing stores if franchisees
cannot continue operating profitably, delays in opening new stores, and delays in our efforts or an inability to finance acquisitions
of additional brands and restaurant concepts.
Furthermore,
the fear of contracting viruses could cause employees or guests to avoid gathering in public places, which has had, and could further
have, longer-term adverse effects on our restaurant guest traffic or the ability to adequately staff restaurants. We could also be adversely
affected if government authorities impose longer-term restrictions on public gatherings such as reductions in restaurant capacity, operations
of restaurants or mandatory closures. Even if such measures are not implemented and the COVID-19 virus does not continue to spread significantly,
the perceived risk of infection or health risk may adversely affect our business, liquidity, financial condition and results of operations.
While
the disruption to our business from the COVID-19 pandemic is currently expected to be temporary, there is a great deal of uncertainty
around the severity and duration of the disruption, and also the longer-term effects on our business and economic growth and consumer
demand in the U.S. and worldwide. The effects of COVID-19 may materially adversely affect our business, results of operations, liquidity
and ability to service our existing debt, particularly if these effects continue in place for a significant amount of time.
Health
concerns arising from outbreaks of diseases, other than COVID-19, may have an adverse effect on our business.
In
addition to the risks to our business of COVID-19 discussed above, our business could be materially and adversely affected by the outbreak
of other widespread health epidemics or pandemics. The occurrence of such an outbreak of an epidemic illness, other than COVID-19, or
other adverse public health developments could materially disrupt our business and operations. Such events could also significantly impact
our industry and cause a temporary closure of restaurants, which would severely disrupt our operations and have a material adverse effect
on our business, financial condition and results of operations.
Furthermore,
viruses other than COVID-19 may be transmitted through human contact, and the risk of contracting viruses could cause employees or guests
to avoid gathering in public places, which could adversely affect restaurant guest traffic or the ability to adequately staff franchised
restaurants. We could also be adversely affected if jurisdictions in which our franchisees’ restaurants operate impose mandatory
closures, seek voluntary closures or impose restrictions on operations of restaurants. Even if such measures are not implemented and
a virus or other disease, other than COVID-19, does not spread significantly, the perceived risk of infection or health risk may affect
our business.
Food
safety and foodborne illness concerns may have an adverse effect on our business.
Foodborne
illnesses, such as E. coli, hepatitis A, trichinosis and salmonella, occur or may occur within our system from time to time. In addition,
food safety issues such as food tampering, contamination and adulteration occur or may occur within our system from time to time. Any
report or publicity linking one of our franchisee’s restaurants, or linking our competitors or our industry generally, to instances
of foodborne illness or food safety issues could adversely affect our brands and reputations as well as our revenues and profits, and
possibly lead to product liability claims, litigation and damages. If a customer of one of our franchisees’ restaurants becomes
ill as a result of food safety issues, restaurants in our system may be temporarily closed, which would decrease our revenues. In addition,
instances or allegations of foodborne illness or food safety issues, real or perceived, involving our franchised restaurants, restaurants
of competitors, or suppliers or distributors (regardless of whether we use or have used those suppliers or distributors), or otherwise
involving the types of food served at our franchisees’ restaurants, could result in negative publicity that could adversely affect
our revenues or the sales of our franchisees. Additionally, allegations of foodborne illness or food safety issues could result in litigation
involving us and our franchisees. The occurrence of foodborne illnesses or food safety issues could also adversely affect the price and
availability of affected ingredients, which could result in disruptions in our supply chain and/or lower revenues and margins for us
and our franchisees.
Risks
Related to Our Franchised Business Model
Our
operating and financial results and growth strategies are closely tied to the success of our franchisees.
Our
restaurants are operated by our franchisees, which makes us dependent on the financial success and cooperation of our franchisees. We
have limited control over how our franchisees’ businesses are run, and the inability of franchisees to operate successfully could
adversely affect our operating and financial results through decreased royalty payments. If our franchisees incur too much debt, if their
operating expenses or commodity prices increase or if economic or sales trends deteriorate such that they are unable to operate profitably
or repay existing debt, it could result in their financial distress, including insolvency or bankruptcy. If a significant franchisee
or a significant number of our franchisees become financially distressed, our operating and financial results could be impacted through
reduced or delayed royalty payments. Our success also depends on the willingness and ability of our franchisees to implement major initiatives,
which may include financial investment. Our franchisees may be unable to successfully implement strategies that we believe are necessary
for their further growth, which in turn may harm the growth prospects and financial condition of our Company. Additionally, the failure
of our franchisees to focus on the fundamentals of restaurant operations, such as quality service and cleanliness (even if such failures
do not rise to the level of breaching the related franchise documents), could have a negative impact on our business.
Our
franchisees could take actions that could harm our business and may not accurately report sales.
Our
franchisees are contractually obligated to operate their restaurants in accordance with the operations, safety, and health standards
set forth in our agreements with them and applicable laws. However, although we will attempt to properly train and support all our franchisees,
they are independent third parties whom we do not control. The franchisees own, operate, and oversee the daily operations of their restaurants,
and their employees are not our employees. Accordingly, their actions are outside of our control. Although we have developed criteria
to evaluate and screen prospective franchisees, we cannot be certain that our franchisees will have the business acumen or financial
resources necessary to operate successful franchises at their approved locations, and state franchise laws may limit our ability to terminate
or not renew these franchise agreements. Moreover, despite our training, support and monitoring, franchisees may not successfully operate
restaurants in a manner consistent with our standards and requirements or may not hire and adequately train qualified managers and other
restaurant personnel. The failure of our franchisees to operate their franchises in accordance with our standards or applicable law,
actions taken by their employees or a negative publicity event at one of our franchised restaurants or involving one of our franchisees
could have a material adverse effect on our reputation, our brands, our ability to attract prospective franchisees, our company-owned
restaurants, and our business, financial condition or results of operations.
Franchisees
typically use a point of sale, or POS, cash register system to record all sales transactions at the restaurant. We require franchisees
to use a specific brand or model of hardware or software components for their restaurant system. Currently, franchisees report sales
manually and electronically, but we do not have the ability to verify all sales data electronically by accessing their POS cash register
systems. We have the right under our franchise agreement to audit franchisees to verify sales information provided to us, and we have
the ability to indirectly verify sales based on purchasing information. However, franchisees may underreport sales, which would reduce
royalty income otherwise payable to us and adversely affect our operating and financial results.
If
we fail to identify, recruit and contract with a sufficient number of qualified franchisees, our ability to open new franchised restaurants
and increase our revenues could be materially adversely affected.
The
opening of additional franchised restaurants depends, in part, upon the availability of prospective franchisees who meet our criteria.
Most of our franchisees open and operate multiple restaurants, and our growth strategy requires us to identify, recruit and contract
with a significant number of new franchisees each year. We may not be able to identify, recruit or contract with suitable franchisees
in our target markets on a timely basis or at all. In addition, our franchisees may not have access to the financial or management resources
that they need to open the restaurants contemplated by their agreements with us, or they may elect to cease restaurant development for
other reasons. If we are unable to recruit suitable franchisees or if franchisees are unable or unwilling to open new restaurants as
planned, our growth may be slower than anticipated, which could materially adversely affect our ability to increase our revenues and
materially adversely affect our business, financial condition and results of operations.
If
we fail to open new domestic and international franchisee-owned restaurants on a timely basis, our ability to increase our revenues could
be materially adversely affected.
A
significant component of our growth strategy includes the opening of new domestic and international franchised restaurants. Our franchisees
face many challenges associated with opening new restaurants, including:
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identification
and availability of suitable restaurant locations with the appropriate size; visibility; traffic patterns; local residential neighborhood,
retail and business attractions; and infrastructure that will drive high levels of customer traffic and sales per restaurant;
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competition
with other restaurants and retail concepts for potential restaurant sites and anticipated commercial, residential and infrastructure
development near new or potential restaurants;
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ability
to negotiate acceptable lease arrangements;
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availability
of financing and ability to negotiate acceptable financing terms;
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recruiting,
hiring and training of qualified personnel;
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construction
and development cost management;
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completing
their construction activities on a timely basis;
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obtaining
all necessary governmental licenses, permits and approvals and complying with local, state and federal laws and regulations to open,
construct or remodel and operate our franchised restaurants;
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unforeseen
engineering or environmental problems with the leased premises;
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avoiding
the impact of adverse weather during the construction period; and
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other
unanticipated increases in costs, delays or cost overruns.
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As
a result of these challenges, our franchisees may not be able to open new restaurants as quickly as planned or at all. Our franchisees
have experienced, and expect to continue to experience, delays in restaurant openings from time to time and have abandoned plans to open
restaurants in various markets on occasion. Any delays or failures to open new restaurants by our franchisees could materially and adversely
affect our growth strategy and our results of operations.
Negative
publicity relating to one of our franchised restaurants could reduce sales at some or all of our other franchised restaurants.
Our
success is dependent in part upon our ability to maintain and enhance the value of our brands, consumers’ connection to our brands
and positive relationships with our franchisees. We may, from time to time, be faced with negative publicity relating to food quality,
public health concerns, restaurant facilities, customer complaints or litigation alleging illness or injury, health inspection scores,
integrity of our franchisees or their suppliers’ food processing, employee relationships or other matters, regardless of whether
the allegations are valid or whether or not our Company is held to be responsible. The negative impact of adverse publicity relating
to one franchised restaurant may extend far beyond that restaurant or franchisee involved to affect some or all of our other franchised
restaurants. The risk of negative publicity is particularly great with respect to our franchised restaurants because we are limited in
the manner in which we can manage and control a franchisee’s operations and messaging, especially on a real-time basis. The considerable
expansion in the use of social media over recent years can further amplify any negative publicity that could be generated by such incidents.
A similar risk exists with respect to unrelated food service businesses, if consumers associate those businesses with our own or franchised
operations. Additionally, employee claims against us based on, among other things, wage and hour violations, discrimination, harassment
or wrongful termination may also create negative publicity that could adversely affect us and divert our financial and management resources
that would otherwise be used to benefit the future performance of our operations. A significant increase in the number of these claims
or an increase in the number of successful claims would have a material adverse effect on our business, financial condition and results
of operations. Consumer demand for our products and our brands’ value could diminish significantly if any such incidents or other
matters create negative publicity or otherwise erode consumer confidence in us or our products, which would likely result in lower sales
and could have a material adverse effect on our business, financial condition and results of operations.
Our
brands’ value may be limited or diluted through franchisee and third-party activity.
Although
we monitor and regulate franchisee activities under the terms of our franchise agreements, franchisees or other third parties may refer
to or make statements about our brands that do not make proper use of our trademarks or required designations, that improperly alter
trademarks or branding, or that are critical of our brands or place our brands in a context that may tarnish our reputation. This may
result in dilution of, or harm to, our intellectual property or the value of our brands. Franchisee noncompliance with the terms and
conditions of our franchise agreements may reduce the overall goodwill of our brands, whether through the failure to meet health and
safety standards, engage in quality control or maintain product consistency, or through the participation in improper or objectionable
business practices. Moreover, unauthorized third parties may use our intellectual property to trade on the goodwill of our brands, resulting
in consumer confusion or dilution of our brands’ value. Any reduction of our brands’ goodwill, consumer confusion, or reputational
dilution is likely to impact sales, and could materially and adversely impact our business and results of operations.
Risks
Relating to Our Business and Operations
We
have significant outstanding indebtedness under our securitization facilities, which requires that we generate sufficient cash flow to
satisfy the payment and other obligations under the terms of our debt and exposes us to the risk of default and lender remedies.
The
principal balance of the indebtedness under our securitization facilities consisted of various tranches of notes issued by our three
special purpose subsidiaries. We and these special purpose subsidiaries may incur additional indebtedness for various purposes, including
to fund future acquisitions and operational needs. The terms of our outstanding indebtedness provide for significant principal and interest
payments, and subjects us and these special purpose subsidiaries to certain financial and non-financial covenants, including a debt service
coverage ratio calculation. If certain covenants are not met, the indebtedness incurred by these special purpose subsidiaries may become
partially or fully due and payable on an accelerated schedule. Our ability to meet the payment obligations under our debt depends on
our ability to generate significant cash flow in the future. We cannot assure you that our business will generate cash flow from operations,
or that other capital will be available to us, in amounts sufficient to enable us to meet our payment obligations under our loan agreements
and to fund our other liquidity needs. If we are not able to generate sufficient cash flow to service these obligations, we may need
to refinance or restructure our debt, sell unencumbered assets (if any) or seek to raise additional capital. If we are unable to implement
one or more of these options, we may not be able to meet these payment obligations, and the imposition of lender remedies could materially
and adversely affect our business, financial condition and liquidity.
Our
growth strategy includes pursuing opportunistic acquisitions of additional brands, and we may not find suitable acquisition candidates
or successfully operate or integrate any brands that we may acquire.
As
part of our growth strategy, we intend to opportunistically acquire new brands and restaurant concepts. Although we believe that opportunities
for future acquisitions may be available from time to time, competition for acquisition candidates may exist or increase in the future.
Consequently, there may be fewer acquisition opportunities available to us as well as higher acquisition prices. There can be no assurance
that we will be able to identify, acquire, manage or successfully integrate additional brands or restaurant concepts without substantial
costs, delays or operational or financial problems.
The
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
the event we are able to acquire additional brands or restaurant concepts, the integration and operation of such acquisitions may place
significant demands on our management, which could adversely affect our ability to manage our existing restaurants. In addition, we may
be required to obtain additional financing to fund future acquisitions, but there can be no assurance that we will be able to obtain
additional financing on acceptable terms or at all.
Our
success depends substantially on our corporate reputation and on the value and perception of our brands.
Our
success depends in large part upon our and our franchisees’ ability to maintain and enhance the value of our brands and our customers’
loyalty to our brands. Brand value is based in part on consumer perceptions on a variety of subjective qualities. Business incidents,
whether isolated or recurring, and whether originating from us, franchisees, competitors, suppliers or distributors, can significantly
reduce brand value and consumer trust, particularly if the incidents receive considerable publicity or result in litigation. For example,
our brands could be damaged by claims or perceptions about the quality or safety of our products or the quality or reputation of our
suppliers, distributors or franchisees, regardless of whether such claims or perceptions are true. Similarly, entities in our supply
chain may engage in conduct, including alleged human rights abuses or environmental wrongdoing, and any such conduct could damage our
or our brands’ reputations. Any such incidents (even if resulting from actions of a competitor or franchisee) could cause a decline
directly or indirectly in consumer confidence in, or the perception of, our brands and/or our products and reduce consumer demand for
our products, which would likely result in lower revenues and profits. Additionally, our corporate reputation could suffer from a real
or perceived failure of corporate governance or misconduct by a company officer, or an employee or representative of us or a franchisee.
Failure
to protect our service marks or other intellectual property could harm our business.
We
regard our service marks and trademarks related to our franchise restaurant businesses as having critical importance to our future operations
and marketing efforts. We rely on a combination of protections provided by contracts, copyrights, trademarks, service marks and other
common law rights, such as trade secret and unfair competition laws, to protect our franchised restaurants and services from infringement.
We have registered certain trademarks and service marks in the U.S. and foreign jurisdictions. However, from time to time we become aware
of names and marks identical or confusingly similar to our service marks being used by other persons. Although our policy is to oppose
any such infringement, further or unknown unauthorized uses or other misappropriation of our trademarks or service marks could diminish
the value of our brands and adversely affect our business. In addition, effective intellectual property protection may not be available
in every country in which our franchisees have, or intend to open or franchise, a restaurant. There can be no assurance that these protections
will be adequate and defending or enforcing our service marks and other intellectual property could result in the expenditure of significant
resources. We may also face claims of infringement that could interfere with the use of the proprietary knowhow, concepts, recipes, or
trade secrets used in our business. Defending against such claims may be costly, and we may be prohibited from using such proprietary
information in the future or forced to pay damages, royalties, or other fees for using such proprietary information, any of which could
negatively affect our business, reputation, financial condition, and results of operations.
If
our franchisees are unable to protect their customers’ credit card data and other personal information, our franchisees could be
exposed to data loss, litigation, and liability, and our reputation could be significantly harmed.
Privacy
protection is increasingly demanding, and the use of electronic payment methods and collection of other personal information expose our
franchisees to increased risk of privacy and/or security breaches as well as other risks. The majority of our franchisees’ restaurant
sales are by credit or debit cards. In connection with credit or debit card transactions in-restaurant, our franchisees collect and transmit
confidential information by way of secure private retail networks. Additionally, our franchisees collect and store personal information
from individuals, including their customers and employees.
If
a person is able to circumvent our franchisees’ security measures or those of third parties, he or she could destroy or steal valuable
information or disrupt our operations. Our franchisees may become subject to claims for purportedly fraudulent transactions arising out
of the actual or alleged theft of credit or debit card information, and our franchisees may also be subject to lawsuits or other proceedings
relating to these types of incidents. Any such claim or proceeding could cause our franchisees to incur significant unplanned expenses,
which could have an adverse impact on our financial condition, results of operations and cash flows. Further, adverse publicity resulting
from these allegations could significantly harm our reputation and may have a material adverse effect on us and our franchisees’
business.
We
and our franchisees rely on computer systems and Internet communications to process transactions and manage our business, and a disruption
or a failure of such systems or technology could harm our ability to effectively manage our business.
Network
and information technology systems are integral to our business. We utilize various computer and communications systems, including our
franchisee reporting system, by which our franchisees report their weekly sales and pay their corresponding royalty fees and required
advertising fund contributions. When sales are reported by a franchisee, a withdrawal for the authorized amount is initiated from the
franchisee’s bank on a set date each week based on gross sales during the week ended the prior Sunday. This system is critical
to our ability to accurately track sales and compute royalties and advertising fund contributions and receive timely payments due from
our franchisees. Our operations depend upon our 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,
worms and other disruptive problems. Any damage or failure of our computer or communications 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.
Despite
the implementation of protective measures, our systems are subject to damage and/or interruption as a result of power outages, computer
and network failures, computer viruses and other disruptive software, security breaches, cyber and ransomware attacks, catastrophic events,
and improper usage by employees. Such events could result in a material disruption in operations, a need for a costly repair, upgrade
or replacement of systems, or a decrease in, or in the collection of, royalties and advertising fund contributions paid to us by our
franchisees. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications,
or inappropriate disclosure of confidential or proprietary information, we could incur liability which could materially affect our results
of operations.
It
is also critical that we establish and maintain certain licensing and software agreements for the software we use in our day-to-day operations.
A failure to procure or maintain these licenses could have a material adverse effect on our business operations. Additionally, while
we own and operate certain elements of our cloud-based system, significant portions are operated by third parties that we do not control.
In particular, a significant portion of the cloud-based system is hosted by a third-party host, which uses multiple locations. The host
provides us with computing, database, storage and other services pursuant to an agreement that continues until terminated by either party.
While we believe that we employ best practices with regard to our cyber security management, all cloud-based systems are susceptible
to cyber-attacks.
Confidential
information used and stored by us may be breached or otherwise subjected to unauthorized access, and secure information may be stolen.
We
may store bank information and other personally-identifiable sensitive data of our customers and investors. Any accidental or willful
security breach or other unauthorized access could cause secure information to be stolen and used for criminal purposes, and our customers
and investors would be subject to increased risk of fraud or identity theft. Because techniques used to obtain unauthorized access to
or to sabotage systems change frequently and generally are not recognized until they are launched against a target, our technology resources
and those of our technology providers may be unable to anticipate these techniques or implement adequate preventative measures. Additionally,
many states have enacted laws requiring companies to notify individuals of data security breaches involving their personal data. Any
security breach, whether actual or perceived, could harm our reputation and disrupt our operations.
The
retail food industry in which we operate is highly competitive.
The
retail food industry in which we operate is highly competitive with respect to price and quality of food products, new product development,
advertising levels and promotional initiatives, customer service, reputation, restaurant location, and attractiveness and maintenance
of properties. If consumer or dietary preferences change, if our marketing efforts are unsuccessful, or if our franchisees’ restaurants
are unable to compete successfully with other retail food outlets in new and existing markets, our business could be adversely affected.
We also face growing competition as a result of convergence in grocery, convenience, deli and restaurant services, including the offering
by the grocery industry of convenient meals, including pizzas and entrees with side dishes. Competition from delivery aggregators and
other food delivery services has also increased in recent years, particularly in urbanized areas. Increased competition could have an
adverse effect on our sales, profitability or development plans, which could harm our financial condition and operating results.
Shortages
or interruptions in the availability and delivery of food and other supplies may increase costs or reduce revenues.
The
food products sold by our franchisees and raw materials used in their restaurants are sourced from a variety of domestic and international
suppliers. We, along with our franchisees, are also dependent upon third parties to make frequent deliveries of food products and supplies
that meet our specifications at competitive prices. Shortages or interruptions in the supply of food items, raw materials and other supplies
to our franchisees’ restaurants could adversely affect the availability, quality and cost of items we use and the operations of
our franchisees’ restaurants. Such shortages or disruptions could be caused by inclement weather, natural disasters, increased
demand, problems in production or distribution, restrictions on imports or exports, the inability of vendors to obtain credit, political
instability in the countries in which suppliers and distributors are located, the financial instability of suppliers and distributors,
suppliers’ or distributors’ failure to meet our standards, product quality issues, inflation, the price of gasoline, other
factors relating to the suppliers and distributors and the countries in which they are located, food safety warnings or advisories or
the prospect of such pronouncements, the cancellation of supply or distribution agreements or an inability to renew such arrangements
or to find replacements on commercially reasonable terms, or other conditions beyond our control or the control of our franchisees.
A
shortage or interruption in the availability of certain food products, raw materials or supplies could increase costs and limit the availability
of products critical to our franchisees’ restaurant operations, which in turn could lead to restaurant closures and/or a decrease
in sales and therefore a reduction in royalty fees to us. In addition, failure by a key supplier or distributor to our franchisees to
meet its service requirements could lead to a disruption of service or supply until a new supplier or distributor is engaged, and any
disruption could have an adverse effect on our franchisees and therefore our business.
Our
business may be adversely impacted by changes in consumer discretionary spending, general economic conditions, or consumer behavior.
Purchases
at our franchisees’ restaurants are generally discretionary for consumers and, therefore, our results of operations are susceptible
to economic slowdowns and recessions. Our results of operations are dependent upon discretionary spending by consumers of our franchisees’
restaurants, which may be affected by general economic conditions globally or in one or more of the markets we serve. Some of the factors
that impact discretionary consumer spending include unemployment rates, fluctuations in the level of disposable income, the price of
gasoline, stock market performance, changes in the level of consumer confidence, and long-term changes in consumer behavior related to
social distancing behaviors resulting from COVID-19 or other widespread health events. These and other macroeconomic factors could have
an adverse effect on sales at our franchisees’ restaurants, which could lead to an adverse effect on our profitability or development
plans and harm our financial condition and operating results.
Our
expansion into international markets exposes us to a number of risks that may differ in each country where we have franchised restaurants.
We
have franchised restaurants in various countries and plan to continue to grow internationally. Expansion in international markets may
be affected by local economic and market as well as geopolitical conditions. Therefore, as we expand internationally, our franchisees
may not experience the operating margins we expect, and our results of operations and growth may be materially and adversely affected.
Our financial condition and results of operations may be adversely affected if global markets in which our franchised restaurants compete
are affected by changes in political, economic or other factors. These factors, over which neither our franchisees nor we have control,
may include:
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recessionary
or expansive trends in international markets;
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changing
labor conditions and difficulties in staffing and managing our foreign operations;
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increases
in the taxes we pay and other changes in applicable tax laws;
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legal
and regulatory changes, and the burdens and costs of our compliance with a variety of foreign laws;
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changes
in inflation rates;
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changes
in exchange rates and the imposition of restrictions on currency conversion or the transfer of funds;
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difficulty
in protecting our brand, reputation and intellectual property;
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difficulty
in collecting our royalties and longer payment cycles;
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expropriation
of private enterprises;
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increases
in anti-American sentiment and the identification of our brands as American brands;
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political
and economic instability; and
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other
external factors.
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We
depend on key executive management.
We
depend on the leadership and experience of our relatively small number of key executive management personnel, in particular our Chief
Executive Officer, Andrew Wiederhorn. The loss of the services of any of our executive management members could have a material adverse
effect on our business and prospects, as we may not be able to find suitable individuals to replace such personnel on a timely basis
or without incurring increased costs, or at all. We do not maintain key man life insurance policies on any of our executive officers.
We believe that our future success will depend on our continued ability to attract and retain highly skilled and qualified personnel.
There is a high level of competition for experienced, successful personnel in our industry. Our inability to meet our executive staffing
requirements in the future could impair our growth and harm our business.
Labor
shortages or difficulty finding qualified employees could slow our growth, harm our business and reduce our profitability.
Restaurant
operations are highly service oriented, and our success depends in part upon our franchisees’ ability to attract, retain and motivate
a sufficient number of qualified employees, including restaurant managers and other crew members. The market for qualified employees
in our industry is very competitive. Any future inability to recruit and retain qualified individuals may delay the planned openings
of new restaurants by our franchisees and could adversely impact our existing franchised restaurants. Any such delays, material increases
in employee turnover rate in existing franchised restaurants or widespread employee dissatisfaction could have a material adverse effect
on our and our franchisees’ business and results of operations.
In
addition, strikes, work slowdowns or other job actions may become more common in the United States. Although none of the employees employed
by our franchisees are represented by a labor union or are covered by a collective bargaining agreement, in the event of a strike, work
slowdown or other labor unrest, the ability to adequately staff our restaurants could be impaired, which could result in reduced revenue
and customer claims, and may distract our management from focusing on our business and strategic priorities.
Changes
in labor and other operating costs could adversely affect our results of operations.
An
increase in the costs of employee wages, benefits and insurance (including workers’ compensation, general liability, property and
health) could result from government imposition of higher minimum wages or from general economic or competitive conditions. In addition,
competition for qualified employees could compel our franchisees to pay higher wages to attract or retain key crew members, which could
result in higher labor costs and decreased profitability. Any increase in labor expenses, as well as increases in general operating costs
such as rent and energy, could adversely affect our franchisees’ profit margins, their sales volumes and their ability to remain
in business, which would adversely affect our results of operations.
Risks
Related to Government Regulation and Litigation
Our
restaurant brands may not be able to obtain and maintain licenses and permits necessary to own and operate their restaurants.
The
restaurant industry is subject to various federal, state and local government regulations, including those relating to the sale of food
and alcoholic beverages, that require maintenance of licenses, permits and approvals. The failure to obtain and maintain these licenses,
permits and approvals, including food and liquor licenses, could materially and adversely affect the operating results of our franchised
restaurants and the restaurants that we own and operate. Difficulties in obtaining or the failure to obtain the required licenses and
approvals could delay, or result in our decision to cancel, the opening of new restaurants. Local authorities may revoke, suspend or
deny renewal of the food and liquor licenses if they determine that our conduct violates applicable regulations. If we or our franchisees
are unable to obtain or maintain food or liquor licenses, our operating results could be materially and adversely affected.
The
sale of alcoholic beverages at our Twin Peaks restaurants subjects us to additional regulations and potential liability.
We
franchise and also directly own and operate Twin Peaks restaurants, which sell alcoholic beverages and are therefore required to comply
with the alcohol licensing requirements of the federal government and the states and municipalities where the restaurants are located.
Alcoholic beverage control regulations require applications to state authorities and, in certain locations, county and municipal authorities
for a license and permit to sell alcoholic beverages on the premises and to provide service for extended hours and on Sundays. Typically,
the licenses are renewed annually and may be revoked or suspended for cause at any time. Alcoholic beverage control regulations relate
to numerous aspects of the daily operations of the restaurants, including minimum age of guests and employees, hours of operation, advertising,
wholesale purchasing, inventory control and handling, storage and dispensing of alcoholic beverages. If we or our franchisees fail to
comply with federal, state or local regulations, our licenses or those of our franchisees may be revoked and we or they may be forced
to terminate the sale of alcoholic beverages at one or more Twin Peaks restaurants. Any termination of the sale of alcoholic beverages
at Twin Peaks restaurants could have a material adverse effect on our revenues and net income. Similarly, a reduction in state blood
alcohol content limits on drivers, or laws relating to vehicle interlocking devices, could have a significant impact on revenue of our
Twin Peaks restaurants and our results of operations.
In
certain states in which Twin Peaks Restaurants are located, we and/or our franchisees may be subject to dram shop statutes. These statutes
generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served
alcoholic beverages to the intoxicated person. Recent litigation against restaurant chains has resulted in significant judgments and
settlements under dram shop statutes. Because these cases often seek punitive damages, which may not be covered by insurance, any such
litigation could have a material adverse impact on our Twin Peaks restaurant brand and our results of operations. Regardless of whether
any such claims are valid or result in liability, such claims are typically expensive to defend and may divert time and money away from
operations. A judgment significantly in excess of insurance coverage or not covered by insurance could have a material adverse effect
on our business, results of operations and financial condition.
We
could be party to litigation that could adversely affect us by increasing our expenses, diverting management attention or subjecting
us to significant monetary damages and other remedies.
We
may become involved in legal proceedings involving consumer, employment, real estate related, tort, intellectual property, breach of
contract, securities, derivative and other litigation. Plaintiffs in these types of lawsuits often seek recovery of very large or indeterminate
amounts, and the magnitude of the potential loss relating to such lawsuits may not be accurately estimated. Regardless of whether any
such claims have merit, or whether we are ultimately held liable or settle, such litigation may be expensive to defend and may divert
resources and management attention away from our operations and negatively impact reported earnings. With respect to insured claims,
a judgment for monetary damages in excess of any insurance coverage could adversely affect our financial condition or results of operations.
Any adverse publicity resulting from these allegations may also adversely affect our reputation, which in turn could adversely affect
our results of operations.
Our
subsidiary Fog Cutter Acquisition, LLC is a party to environmental litigation which could result in significant legal expenses whether
or not it is resolved favorably.
As
described in our Quarterly Report on Form 10-Q under “Item 2. Legal proceedings”, incorporated by reference herein, our subsidiary
Fog Cutter Capital Group Inc. (now known as Fog Cutter Acquisition, LLC), is a party to litigation entitled Stratford Holding LLC
v. Foot Locker Retail Inc. for alleged environmental contamination stemming from dry cleaning operations on a property which was
included in a lease portfolio managed by a former subsidiary of Fog Cutter. The property owners seek damages in the range of $12 million
to $22 million in the aggregate from all defendants. The Company is unable to predict the ultimate outcome of this matter, and reserves
have been recorded on the balance sheet relating to this litigation. There can be no assurance that Fog Cutter Acquisition, LLC will
be successful in defending against this action, and an unfavorable outcome in excess of the reserves could have a material adverse effect
on our financial condition and results of operations.
Changes
in, or noncompliance with, governmental regulations may adversely affect our business operations, growth prospects or financial condition.
We
and our franchisees are subject to numerous laws and regulations around the world. These laws change regularly and are increasingly complex.
For example, we and our franchisees are subject to:
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government
orders regarding the response to health and other public safety
concerns such as the various restrictions on business operations relating to the COVID-19 pandemic being experienced in 2020;
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the
Americans with Disabilities Act in the U.S. and similar state laws
that give civil rights protections to individuals with disabilities in the context of employment, public accommodations and other
areas;
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the
U.S. Fair Labor Standards Act, which governs matters such as minimum
wages, overtime and other working conditions, as well as family leave mandates and a variety of similar state laws that govern these
and other employment law matters;
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laws
and regulations in government mandated health care benefits such
as the Patient Protection and Affordable Care Act;
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laws
and regulations relating to nutritional content, nutritional labeling,
product safety, product marketing and menu labeling;
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laws
relating to state and local licensing;
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laws
relating to the relationship between franchisors and franchisees;
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laws
and regulations relating to health, sanitation, food, workplace
safety, child labor, including laws prohibiting the use of certain “hazardous equipment” by employees younger than the
age of 18 years of age, and fire safety and prevention;
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laws
and regulations relating to union organizing rights and activities;
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laws
relating to information security, privacy, cashless payments, and
consumer protection;
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laws
relating to currency conversion or exchange;
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laws
relating to international trade and sanctions;
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tax
laws and regulations;
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antibribery
and anticorruption laws;
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environmental
laws and regulations; and
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federal
and state immigration laws and regulations in the U.S.
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Compliance
with new or existing laws and regulations could impact our operations. The compliance costs associated with these laws and regulations
could be substantial. Any failure or alleged failure to comply with these laws or regulations by our franchisees or indirectly by us
could adversely affect our reputation, international expansion efforts, growth prospects and financial results or result in, among other
things, litigation, revocation of required licenses, internal investigations, governmental investigations or proceedings, administrative
enforcement actions, fines and civil and criminal liability. Publicity relating to any such noncompliance could also harm our reputation
and adversely affect our revenues.
In
addition, if any governmental authority were to adopt and implement a broader standard for determining when two or more otherwise unrelated
employers may be found to be a joint employer of the same employees under laws such as the National Labor Relations Act in a manner that
is applied generally to franchise relationships (which broader standards in the past have been adopted by U.S. governmental agencies
such as the National Labor Relations Board), this could cause us to be liable or held responsible for unfair labor practices and other
violations of our franchisees. Further, a California law enacted in 2019 adopted an employment classification test to be used when determining
employee or independent contractor status which establishes a high threshold to obtain independent contractor status. These laws and
any similar laws enacted at the federal, state or local level, could increase our and our franchisees’ labor costs and decrease
profitability or could cause employees of our franchisees to be deemed to be our employees.
Failure
to comply with antibribery or anticorruption laws could adversely affect our business operations.
The
U.S. Foreign Corrupt Practices Act and other similar applicable laws prohibiting bribery of government officials and other corrupt practices
are the subject of increasing emphasis and enforcement around the world. Although we have implemented policies and procedures designed
to promote compliance with these laws, there can be no assurance that our employees, contractors, agents, franchisees or other third
parties will not take actions in violation of our policies or applicable law, particularly as we expand our operations in emerging markets
and elsewhere. Any such violations or suspected violations could subject us to civil or criminal penalties, including substantial fines
and significant investigation costs, and could also materially damage our reputation, brands, international expansion efforts and growth
prospects, business and operating results. Publicity relating to any noncompliance or alleged noncompliance could also harm our reputation
and adversely affect our revenues and results of operations.
Risks
Related to Our Common Stock and Organizational Structure
We
are controlled by Fog Cutter Holdings LLC, whose interests may differ from those of our public stockholders.
Fog
Cutter Holdings LLC controls approximately 55.2% of the total voting power of our Common Stock, has significant influence over our corporate
management and affairs, and is able to control virtually all matters requiring stockholder approval. It is possible that the interests
of Fog Cutter Holdings LLC may, in some circumstances, conflict with our interests and the interests of our other stockholders.
Our
anti-takeover provisions could prevent or delay a change in control of our Company, even if such change in control would be beneficial
to our stockholders.
Provisions
of our second amended and restated certificate of incorporation and bylaws as well as provisions of Delaware law could discourage, delay
or prevent a merger, acquisition or other change in control of our Company, even if such change in control would be beneficial to our
stockholders. These provisions include:
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net
operating loss protective provisions, which require that any person wishing to become a “5% shareholder” (as defined
in our certificate of incorporation) must first obtain a waiver from our board of directors, and any person that is already a “5%
shareholder” of ours cannot make any additional purchases of our stock without a waiver from our board of directors;
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authorizing
the issuance of “blank check” preferred stock that could be issued by our Board of Directors to increase the number of
outstanding shares and thwart a takeover attempt;
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limiting
the ability of stockholders to call special meetings or amend our bylaws;
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providing
for a classified board of directors with staggered, three-year terms;
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requiring
all stockholder actions to be taken at a meeting of our stockholders; and
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establishing
advance notice and duration of ownership requirements for nominations for election to the board of directors or for proposing matters
that can be acted upon by stockholders at stockholder meetings.
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These
provisions could also discourage proxy contests and make it more difficult for minority stockholders to elect directors of their choosing
and cause us to take other corporate actions they desire. In addition, because our Board of Directors is responsible for appointing the
members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our
management team.
In
addition, the Delaware General Corporation Law (which we refer to as the “DGCL”), to which we are subject, prohibits us,
except under specified circumstances, from engaging in any mergers, significant sales of stock or assets or business combinations with
any stockholder or group of stockholders who owns at least 15% of our common stock.
The
provision of our second amended and restated certificate of incorporation requiring exclusive venue in the Court of Chancery in the State
of Delaware for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers.
Our
second amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that (i) any derivative action
or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers
or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the
DGCL or our second amended and restated certificate of incorporation or the bylaws or (iv) any action asserting a claim against us governed
by the internal affairs doctrine will have to be brought only in the Court of Chancery in the State of Delaware. Although we believe
this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it
applies, the provision may have the effect of discouraging lawsuits against our directors and officers.
If
our operating and financial performance in any given period does not meet the guidance that we provide to the public, our stock price
may decline.
We
may provide public guidance on our expected operating and financial results for future periods. Any such guidance will be comprised of
forward-looking statements subject to the risks and uncertainties described in our public filings and public statements. Our actual results
may not always be in line with or exceed any guidance we have provided, especially in times of economic uncertainty. If our operating
or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts or if we
reduce our guidance for future periods, the market price of our Series B Preferred Stock may decline as well.
USE
OF PROCEEDS
Our
estimated net proceeds from this offering are approximately $16,490,000, after deducting underwriting discounts, underwriting
fees, and estimated expenses of the offering.
We
intend to use the net proceeds that we receive from this offering for working capital and general corporate purposes. Our management
will have broad discretion in the application of the net proceeds and investors will be relying on the judgment of our management regarding
the application of the proceeds of this offering.
Pending
allocation to specific uses, we intend to invest the proceeds in short-term interest-bearing investment grade securities.
CAPITALIZATION
The
following table sets forth our cash and capitalization as of June 27, 2021:
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on
an actual basis;
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on
a pro forma basis to give effect to adjustments as a result of our acquisitions of (i) LS GFG Holdings Inc., as more fully described
in our Current Report on Form 8-K filed with the SEC on July 26, 2021, as amended by the Amendment No. 1 to Form 8-K filed with the
SEC on October 5, 2021, and (ii) Twin Peaks Buyer, LLC, as more fully described in our Current Report on Form 8-K filed with the
SEC on October 6, 2021, as amended by the Amendment No. 1 to Form 8-K filed with the SEC on October 15, 2021 (each of which is incorporated
by reference herein); and
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on
a pro forma, as adjusted basis, to give effect to this offering and application of the net proceeds therefrom.
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You
should read this table in conjunction with the information contained in “Use of Proceeds” included elsewhere in this prospectus
supplement, as well as our consolidated financial statements and the related notes incorporated by reference in this prospectus
supplement and the accompanying prospectus.
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As
of June 27, 2021(1)
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(in
thousands, except share data)
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Actual
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Pro
forma
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Pro forma,
as
adjusted
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|
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Cash and restricted
cash
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$
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52,220
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|
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$
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56,117
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$
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72,607
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Liabilities
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|
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Current portion of long term
debt
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913
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|
|
|
913
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|
|
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913
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Preferred share, net
|
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7,980
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|
|
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7,980
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|
|
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7,980
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Long term debt, net of current
portion
|
|
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146,140
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|
|
|
722,006
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|
|
722,006
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|
|
|
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|
|
|
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|
|
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Redeemable preferred stock
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-
|
|
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135,000
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|
|
|
135,000
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|
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|
|
|
|
|
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|
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Stockholders’
deficit
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|
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|
|
|
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|
|
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8.25% Preferred stock, $.0001 par value; 5,000,000
shares authorized; 1,643,272 shares issued and outstanding at June 27, 2021; Liquidation preference $25 per share
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29,092
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|
|
|
29,092
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|
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45,882
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Common stock, $.0001 par value;
25,000,000 shares authorized; 12,491,528 issued and outstanding at June 27, 2021
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(45,086
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)
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|
|
(20,086
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)
|
|
|
(20,086
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)
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Noncontrolling interests
|
|
|
93
|
|
|
|
93
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|
|
|
93
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Accumulated
deficit
|
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(29,254
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)
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|
|
(29,254
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)
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(29,254
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)
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Total
stockholders’ deficit
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(45,155
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)
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(20,155
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)
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(3,365
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)
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Total
Capitalization
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$
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109,878
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$
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845,744
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$
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865,534
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(i)
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1,021,250
shares of Common Stock available for issuance under our 2017 Omnibus Equity Incentive Plan, of which options to purchase 656,105
shares of Common Stock were outstanding as of June 27, 2021 with a weighted average exercise price of $9.34 per share, of which options
to purchase 453,566 shares of Common Stock had vested as of June 27, 2021;
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(ii)
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1,973,096
shares of Common Stock issuable upon exercise of outstanding warrants
as of June 27, 2021; and
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(iii)
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391,476
shares of Common Stock issuable upon conversion of a convertible
subordinated promissory note issued to the sellers of Elevation Burger, which conversion right is exercisable at $12.00 per share
and is subject to certain adjustments and restrictions.
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DESCRIPTION
OF THE SERIES B CUMULATIVE PREFERRED STOCK
The
following summary of the terms and provisions of the Series B Preferred Stock does not purport to be complete and is qualified in its
entirety by reference to our Second Amended and Restated Certificate of Incorporation, as amended (which we refer to as our “Certificate
of Incorporation”), and the Amended and Restated Certificate of Designation establishing the Series B Preferred Stock, as amended,
each of which is included as an exhibit to the registration statement of which the accompanying prospectus is a part, and is incorporated
by reference herein.
Series
B Cumulative Preferred Stock
Authorization.
Our Certificate of Incorporation authorizes the issuance of up to 15,000,000 shares of preferred stock, par value $0.0001 per share,
of which we are authorized to issue up to 11,500,000 shares of Series B Preferred Stock. As of the date of this prospectus supplement
and prior to the issuance of any shares in this offering, there were issued and outstanding a total of 8,058,109 shares of Series
B Preferred Stock.
Dividends.
Holders of the Series B Preferred Stock are entitled to receive, when, as and if declared by our Board of Directors, cumulative cash
dividends payable monthly in an amount per share of Series B Preferred Stock equal to $2.0625 per share each year, which is equivalent
to 8.25% per annum of the $25.00 liquidation preference per share. Dividends on the Series B Preferred Stock are payable monthly in arrears.
To the extent declared by our Board of Directors, dividends are payable not later than twenty (20) days after the end of each calendar
month. Dividends on the Series B Preferred Stock accumulate whether or not we have earnings, whether or not there are funds legally available
for the payment of such dividends and whether or not such dividends are declared by our Board of Directors.
If
our Company fails to make a cash dividend payment with respect to twelve (12) or more consecutive or non-consecutive monthly dividends,
the dividend rate on the Series B Preferred Stock will increase to $2.50 per share each year, which is equivalent to 10% of the $25.00
liquidation preference per share.
Right
to Elect Two Directors Upon Nonpayment. If our Company fails to make a cash dividend payment with respect to eighteen (18) or more
consecutive or non-consecutive monthly dividends (which we refer to as a “Dividend Nonpayment”), the holders of the Series
B Preferred Stock, voting as a separate class, are entitled to vote for the election of two additional directors to serve on our Board
of Directors until all dividends that are owed have been paid. Under these provisions, the authorized number of directors on our Board
of Directors shall, at the next annual meeting of stockholders or at a special meeting of stockholders as provided below, automatically
be increased by two and holders of shares of Series B Preferred Stock, voting together as a single class, shall be entitled, at our next
annual meeting of stockholders or at a special meeting of stockholders, to vote for the election of a total of two additional members
of the Board of Directors (which we refer to as the “Preferred Stock Directors”); provided that the election of any
such Preferred Stock Directors will not cause our Company to violate the corporate governance requirements of NASDAQ (or any other exchange
or automated quotation system on which our securities may be listed or quoted) that requires listed or quoted companies to have a majority
of independent directors; and provided further that such Preferred Stock Directors may not be subject to any “Bad Actor”
disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (which we refer to as a “Disqualifying Event”),
except for a Disqualifying Event covered by Rule 506(d)(2) or (d)(3). In the event of a Dividend Nonpayment, the holders of at least
25% of the shares of Series B Preferred Stock may request that a special meeting of stockholders be called to elect such Preferred Stock
Directors; provided, however, to the extent permitted by our bylaws, if the next annual or a special meeting of stockholders is
scheduled to be held within 90 days of the receipt of such request, the election of such Preferred Stock Directors shall be included
in the agenda for, and shall be held at, such scheduled annual or special meeting of stockholders. The Preferred Stock Directors shall
stand for reelection annually, at each subsequent annual meeting of the stockholders, so long as the holders continue to have such voting
rights. At any meeting at which the holders are entitled to elect Preferred Stock Directors, the holders of record of at least one-third
of the then outstanding shares of Series B Preferred Stock, present in person or represented by proxy, shall constitute a quorum and
the vote of the holders of record of a majority of such shares of Series B Preferred Stock so present or represented by proxy at any
such meeting at which there shall be a quorum shall be sufficient to elect the Preferred Stock Directors. If and when all accumulated
and unpaid dividends on Series B Preferred Stock have been paid in full (which we refer to as a “Nonpayment Remedy”), the
holders shall immediately and, without any further action by us, be divested of the voting rights described in this section, subject
to the revesting of such rights in the event of each subsequent Nonpayment. If such voting rights for the holders shall have terminated,
the term of office of each Preferred Stock Director so elected shall terminate at such time and the authorized number of directors on
the Board of Directors shall automatically decrease by two. Any Preferred Stock Director may be removed at any time, with or without
cause, by the holders of a majority in voting power of the outstanding shares of Series B Preferred Stock then outstanding when they
have the voting rights described in this section. In the event that a Dividend Nonpayment shall have occurred and there shall not have
been a Nonpayment Remedy, any vacancy in the office of a Preferred Stock Director (other than prior to the initial election of Preferred
Stock Directors after a Dividend Nonpayment) may be filled by the written consent of the Preferred Stock Director remaining in office,
except in the event that such vacancy is created as a result of such Preferred Stock Director being removed or if no Preferred Stock
Director remains in office, such vacancy may be filled by a vote of the holders of a majority in voting power of the outstanding shares
of Series B Preferred Stock then outstanding when they have the voting rights described above; provided that the election of any
such Preferred Stock Directors to fill such vacancy will not cause our Company to violate the corporate governance requirements of NASDAQ
(or any other exchange or automated quotation system on which our securities may be listed or quoted) that requires listed or quoted
companies to have a majority of independent directors. The Preferred Stock Directors shall each be entitled to one vote per director
on any matter that shall come before the Board of Directors for a vote.
Voting
Rights. In addition to the voting rights discussed above, so long as any shares of Series B Preferred Stock are outstanding and remain
unredeemed, our Company may not, without the vote or consent of the holders of a majority of the Series B Preferred Stock: (i) engage
in a merger, consolidation or share exchange that materially and adversely affects the rights, preferences or voting power of the Series
B Preferred Stock, unless shares of Series B Preferred Stock are converted into or exchanged for (A) cash equal to or greater than the
applicable redemption price per share or (B) preferred shares of the surviving entity having rights, preferences and privileges that
are materially the same as those of the Series B Preferred Stock; (ii) amend our Certificate of Incorporation or the Amended and Restated
Certificate of Designation establishing the Series B Preferred Stock to materially and adversely affect the rights, preferences or voting
power of Series B Preferred Stock; or (iii) declare or pay any junior dividends or repurchase any junior securities during any time that
all dividends on the Series B Preferred Stock have not been paid in full in cash.
Call
Feature. We may, at our option, redeem the Series B Preferred Stock, in whole or in part, by paying $25.00 per share, plus any accrued
and unpaid dividends to the date of redemption and a redemption premium. The redemption premium was initially set at 10% of the $25.00
liquidation preference per share on July 16, 2020, and decreases by 2% per year until it terminates on the five-year anniversary of the
initial issuance date (July 16, 2025).
Liquidation
Preference of Series B Preferred Stock. If we liquidate, dissolve or wind up, or undergo a “change of control” (as defined
below), holders of the Series B Preferred Stock will have the right to receive $25.00 per share, plus all accumulated, accrued and unpaid
dividends (whether or not earned or declared) to and including the date of payment, before any payments are made to the holders of our
Common Stock or to the holders of equity securities the terms of which provide that such equity securities will rank junior to the Series
B Preferred Stock. The rights of holders of Series B Preferred Stock to receive their liquidation preference are subject to the proportionate
rights of any class or series of our capital stock ranking in parity with the Series B Preferred Stock as to liquidation. For purposes
of these provisions, a “change of control” shall mean: (i) any sale, lease, or transfer, exclusive license or other dispositions
(or series of sales, leases, transfers, exclusive licenses or other dispositions) of all or substantially all of the assets of our Company
and its subsidiaries; (ii) any sale, transfer or issuance (or series of sales, transfers or issuances) of capital stock by our Company
or the holders of Common Stock (or other voting stock of our Company) that results in the inability of the beneficial holders of Common
Stock (or other voting stock of our Company) immediately prior to such sale, transfer or issuance to designate or elect a majority of
the Board of Directors (or its equivalent) of our Company; or (iii) any merger, consolidation, recapitalization or reorganization of
our Company with or into another Person (whether or not our Company is the surviving corporation) that results in the inability of the
beneficial holders of Common Stock (or other voting stock of our Company) immediately prior to such merger, consolidation, recapitalization
or reorganization to designate or elect a majority of the Board of Directors (or its equivalent) of the resulting entity or its parent
company; provided, that a “change of control” shall not include a change in the beneficial or record holders of Common
Stock or voting rights in our Company resulting or arising from one or more transactions by which the owners of any entity that is a
stockholder of our Company directly receive or are issued Common Stock of our Company in lieu of their ownership in such entity, whether
upon dissolution, liquidation or reorganization of such entity, or by merger, acquisition or other business combination transaction involving
such entity and our Company or any of its subsidiaries.
Ranking.
The Series B Preferred Stock, with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution
or winding up, ranks:
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senior
to our Common Stock and any other class of equity securities the terms of which provide that such equity securities will rank junior
to the Series B Preferred Stock;
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junior
to any equity securities the terms of which provide that such equity securities will rank senior to the Series B Preferred Stock,
and to all of our existing and future debt, including, prior to conversion of such debt, any debt convertible into our equity securities;
and
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on
a parity with any equity securities the terms of which provide that such equity securities will rank without preference or priority
over the other.
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Exchange
Listing. The Series B Preferred Stock is listed for trading on NASDAQ under the symbol “FATBP”. We cannot provide any
assurance that a liquid or established trading market for the Series B Preferred Stock will continue or be maintained.
Information
Rights. During any period in which we are not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and
any shares of our Series B Preferred Stock are outstanding, we will (i) transmit by mail to all holders of the Series B Preferred Stock,
copies of the annual reports and quarterly reports that we would have been required to file with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act if we were subject to those sections (other than any exhibits that would have been required) and (ii) promptly upon
written request, make available copies of such reports to any prospective holder of Series B Preferred Stock. We will mail the reports
to the holders of Series B Preferred Stock within 15 days after the respective dates by which we would have been required to file the
reports with the SEC if we were subject to Section 13 or 15(d) of the Exchange Act.
Transfer
and Dividend Paying Agent. VStock Transfer, LLC acts as the transfer and dividend payment agent and registrar in respect of the Series
B Preferred Stock.
MATERIAL
U.S. FEDERAL TAX CONSIDERATIONS FOR HOLDERS OF
SERIES
B PREFERRED STOCK
The
following discussion describes the material U.S. federal income tax consequences of the acquisition, ownership, disposition and conversion
of our Series B Preferred Stock acquired in this offering. This discussion is based on the current provisions of the Internal Revenue
Code of 1986, as amended (which we refer to as the “Code”), existing and proposed U.S. Treasury regulations promulgated thereunder,
and administrative rulings and court decisions in effect as of the date hereof, all of which are subject to change at any time, possibly
with retroactive effect. No ruling has been or will be sought from the Internal Revenue Service (which we refer to as the “IRS”)
with respect to the matters discussed below, and there can be no assurance the IRS will not take a contrary position regarding the tax
consequences of the acquisition, ownership or disposition of our Series B Preferred Stock or that any such contrary position would not
be sustained by a court.
We
assume in this discussion that the shares of our Series B Preferred Stock will be held as capital assets (generally, property held for
investment). This discussion does not address all aspects of U.S. federal income taxes, does not discuss the potential application of
the Medicare contribution tax or the alternative minimum tax and does not address state or local taxes or U.S. federal gift and estate
tax laws, except as specifically provided below with respect to non-U.S. holders, or any non-U.S. tax consequences that may be relevant
to holders in light of their particular circumstances. This discussion also does not address the special tax rules applicable to particular
holders, such as financial institutions, brokers or dealers in securities, tax-exempt organizations, pension plans, regulated investment
companies, owners that hold our Series B Preferred Stock as part of a straddle, hedge, conversion transaction, synthetic security or
other integrated investment, insurance companies, controlled foreign corporations, passive foreign investment companies, or corporations
that accumulate earnings to avoid U.S. federal income tax, and certain U.S. expatriates.
In
addition, this discussion does not address the tax treatment of partnerships or other pass-through entities or persons who hold our Series
B Preferred Stock through partnerships or other entities which are pass-through entities for U.S. federal income tax purposes. A partner
in a partnership or other pass-through entity that will hold our Series B Preferred Stock should consult his, her or its own tax advisor
regarding the tax consequences of the ownership and disposition of our Series B Preferred Stock through a partnership or other pass-through
entity, as applicable.
This
discussion of U.S. federal income tax considerations is for general information purposes only and is not tax advice. Prospective investors
should consult their own tax advisors regarding the U.S. federal, state, local and non-U.S. income and other tax considerations of acquiring,
holding and disposing of our securities.
For
the purposes of this discussion, a “U.S. Holder” means a beneficial owner of our Series B Preferred Stock that is for U.S.
federal income tax purposes (a) an individual citizen or resident of the United States, (b) a corporation (or other entity taxable as
a corporation for U.S. federal income tax purposes), created or organized in or under the laws of the United States, any state thereof
or the District of Columbia, (c) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or
(d) a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons (within
the meaning of Section 7701(a)(30) of the Code) has the authority to control all substantial decisions of the trust or (2) has a valid
election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. A “Non-U.S. Holder” is, for
U.S. federal income tax purposes, a beneficial owner of Series B Preferred Stock that is not a U.S. Holder or a partnership for U.S.
federal income tax purposes.
Tax
Cuts and Jobs Act
Under
tax legislation signed into law in December 2017 commonly known as the Tax Cuts and Jobs Act of 2017, U.S. Holders that use an accrual
method of accounting for tax purposes and have certain financial statements generally will be required to include certain amounts in
income no later than the time such amounts are taken into account as revenue in such financial statements. The application of this rule
thus may require the accrual of income earlier than would be the case under the general tax rules described below, although the precise
application of this rule is unclear at this time. U.S. Holders that use an accrual method of accounting should consult with their tax
advisors regarding the potential applicability of this legislation to their particular situation.
Tax
Considerations Applicable to U.S. Holders
Distributions
Distributions
paid on our Series B Preferred Stock to a U.S. Holder generally will constitute dividends for U.S. tax purposes to the extent paid out
of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Distributions in excess
of our current and accumulated earnings and profits will constitute a return of capital that is applied against and reduces, but not
below zero, a U.S. Holder’s adjusted tax basis in our Series B Preferred Stock. Any remaining excess will be treated as gain realized
on the sale or exchange of our Series B Preferred Stock as described below under the section titled “—Disposition of Our
Series B Preferred Stock”.
Disposition
of Our Series B Preferred Stock
Upon
a sale or other taxable disposition (other than a redemption treated as a distribution, which will be taxed as described above under
“Distributions”) of our Series B Preferred Stock, a U.S. Holder generally will recognize capital gain or loss in an amount
equal to the difference between the amount realized and the U.S. Holder’s adjusted tax basis in the Series B Preferred Stock. Capital
gain or loss will constitute long-term capital gain or loss if the U.S. Holder’s holding period for the Series B Preferred Stock
exceeds one year. The deductibility of capital losses is subject to certain limitations. U.S. Holders who recognize losses with respect
to a disposition of our Series B Preferred Stock should consult their own tax advisors regarding the tax treatment of such losses.
Information
Reporting and Backup Reporting
Information
reporting requirements generally will apply to payments of dividends (including constructive dividends) on the Series B Preferred Stock
and to the proceeds of a sale or other disposition of Series B Preferred Stock paid by us to a U.S. Holder unless such U.S. Holder is
an exempt recipient, such as a corporation. Backup withholding will apply to those payments if the U.S. Holder fails to provide the holder’s
taxpayer identification number, or certification of exempt status, or if the holder otherwise fails to comply with applicable requirements
to establish an exemption.
Backup
withholding is not an additional tax. Rather, any amounts withheld under the backup withholding rules will be allowed as a refund or
a credit against the U.S. Holder’s U.S. federal income tax liability provided the required information is timely furnished to the
IRS. U.S. Holders should consult their own tax advisors regarding their qualification for exemption from information reporting and backup
withholding and the procedure for obtaining such exemption.
Tax
Considerations Applicable to Non-U.S. Holders
Distributions
Distributions
on our Series B Preferred Stock to a Non-U.S. Holder will constitute dividends for U.S. federal income tax purposes as described in “—U.S.
Holders—Distributions”. Any distribution (including constructive distributions) on our Series B Preferred Stock that is treated
as a dividend paid to a Non-U.S. Holder that is not effectively connected with the holder’s conduct of a trade or business in the
United States will generally be subject to withholding tax at a 30% rate or such lower rate as may be specified by an applicable income
tax treaty between the United States and the Non-U.S. Holder’s country of residence. To obtain a reduced rate of withholding under
a treaty, a Non-U.S. Holder generally will be required to provide the applicable withholding agent with a properly executed IRS Form
W-8BEN, IRS Form W-8BEN-E or other appropriate form, certifying the Non-U.S. Holder’s entitlement to benefits under that treaty.
Such form must be provided prior to the payment of dividends and must be updated periodically. If a Non-U.S. Holder holds stock through
a financial institution or other agent acting on the holder’s behalf, the holder will be required to provide appropriate documentation
to such agent. The holder’s agent may then be required to provide certification to the applicable withholding agent, either directly
or through other intermediaries. If you are eligible for a reduced rate of U.S. withholding tax under an income tax treaty, you should
consult with your own tax advisor to determine if you are able to obtain a refund or credit of any excess amounts withheld by timely
filing an appropriate claim for a refund with the IRS.
We
generally are not required to withhold tax on dividends paid (or constructive dividends deemed paid) to a Non-U.S. Holder that are effectively
connected with the holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax
treaty, are attributable to a permanent establishment or fixed base that the holder maintains in the United States) if a properly executed
IRS Form W-8ECI, stating that the dividends are so connected, is furnished to us (or, if stock is held through a financial institution
or other agent, to the applicable withholding agent). In general, such effectively connected dividends will be subject to U.S. federal
income tax on a net income basis at the regular tax rates applicable to U.S. persons. A corporate Non-U.S. Holder receiving effectively
connected dividends may also be subject to an additional “branch profits tax”, which is imposed, under certain circumstances,
at a rate of 30% (or such lower rate as may be specified by an applicable treaty) on the corporate Non-U.S. Holder’s effectively
connected earnings and profits, subject to certain adjustments.
See
also the sections below titled “—Backup Withholding and Information Reporting” and “—Foreign Accounts”
for additional withholding rules that may apply to dividends paid to certain foreign financial institutions or non-financial foreign
entities.
Disposition
of Our Series B Preferred Stock
Subject
to the discussions below under the sections titled “—Backup Withholding and Information Reporting” and “—Foreign
Accounts”, a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax with respect to gain, if any,
recognized on a sale, conversion or other disposition (other than a redemption treated as a distribution, which will be taxed as described
above under “Distributions”) of our Series B Preferred Stock unless:
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the
gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States, and if an applicable
income tax treaty so provides, the gain is attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder
in the United States; in these cases, the Non-U.S. Holder will be taxed on a net income basis at the regular tax rates and in the
manner applicable to U.S. persons, and if the Non-U.S. Holder is a corporation, an additional branch profits tax at a rate of 30%,
or a lower rate as may be specified by an applicable income tax treaty, may also apply; or
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the
Non-U.S. Holder is a nonresident alien present in the United States for 183 days or more in the taxable year of the disposition and
certain other requirements are met, in which case the Non-U.S. Holder will be subject to a 30% tax (or such lower rate as may be
specified by an applicable income tax treaty between the United States and such holder’s country of residence) on the net gain
derived from the disposition, which may be offset by certain U.S.-source capital losses of the Non-U.S. Holder, if any.
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See
the sections titled “—Backup Withholding and Information Reporting” and “—Foreign Accounts” for additional
information regarding withholding rules that may apply to proceeds of a disposition of our Series B Preferred Stock paid to foreign financial
institutions or non-financial foreign entities.
Backup
Withholding and Information Reporting
We
must report annually to the IRS and to each Non-U.S. Holder the gross amount of the distributions (including constructive distributions)
on our Series B Preferred Stock paid to such holder and the tax withheld, if any, with respect to such distributions. Non-U.S. Holders
may have to comply with specific certification procedures to establish that the holder is not a U.S. person (as defined in the Code)
in order to avoid backup withholding at the applicable rate, currently 24%, with respect to dividends (or constructive dividends) on
our Series B Preferred Stock. Generally, a holder will comply with such procedures if it provides a properly executed IRS Form W-8BEN
(or other applicable Form W-8) or otherwise meets documentary evidence requirements for establishing that it is a Non-U.S. Holder, or
otherwise establishes an exemption. Dividends paid to Non-U.S. Holders subject to withholding of U.S. federal income tax, as described
above under the heading “Dividends”, will generally be exempt from U.S. backup withholding.
Information
reporting and backup withholding generally will apply to the proceeds of a disposition of our Series B Preferred Stock by a Non-U.S.
Holder effected by or through the U.S. office of any broker, U.S. or foreign, unless the holder certifies its status as a Non-U.S. Holder
and satisfies certain other requirements, or otherwise establishes an exemption. Generally, information reporting and backup withholding
will not apply to a payment of disposition proceeds to a Non-U.S. Holder where the transaction is effected outside the United States
through a non-U.S. office of a broker. However, for information reporting purposes, dispositions effected through a non-U.S. office of
a broker with substantial U.S. ownership or operations generally will be treated in a manner similar to dispositions effected through
a U.S. office of a broker. Non-U.S. Holders should consult their own tax advisors regarding the application of the information reporting
and backup withholding rules to them.
Copies
of information returns may be made available to the tax authorities of the country in which the Non-U.S. Holder resides or is incorporated
under the provisions of a specific treaty or agreement.
Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder can
be refunded or credited against the Non-U.S. Holder’s U.S. federal income tax liability, if any, provided that an appropriate claim
is timely filed with the IRS.
Foreign
Accounts
The
Foreign Account Tax Compliance Act, or FATCA, generally imposes a 30% withholding tax on dividends (including constructive dividends)
on, and gross proceeds from the sale or other disposition of, our Series B Preferred Stock if paid to a non-U.S. entity unless (i) if
the non-U.S. entity is a “foreign financial institution,” the non-U.S. entity undertakes certain due diligence, reporting,
withholding, and certification obligations, (ii) if the non-U.S. entity is not a “foreign financial institution,” the non-U.S.
entity identifies certain of its U.S. investors, if any, or (iii) the non-U.S. entity is otherwise exempt under FATCA.
Withholding
under FATCA generally will apply to payments of dividends (including constructive dividends) on our Series B Preferred Stock. While withholding
under FATCA may apply to payments of gross proceeds from a sale or other disposition of our Series B Preferred Stock, under recently
proposed U.S. Treasury Regulations withholding on payments of gross proceeds is not required. Although such regulations are not final,
applicable withholding agents may rely on the proposed regulations until final regulations are issued.
An
intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this
section. Under certain circumstances, a holder may be eligible for refunds or credits of the tax. Holders should consult their own tax
advisors regarding the possible implications of FATCA on their investment in our Series B Preferred Stock.
Federal
Estate Tax
Series
B Preferred Stock owned or treated as owned by an individual who is not a citizen or resident of the United States (as specially defined
for U.S. federal estate tax purposes) at the time of death will be included in the individual’s gross estate for U.S. federal estate
tax purposes and, therefore, may be subject to U.S. federal estate tax, unless an applicable estate tax or other treaty provides otherwise.
A Non-U.S. Holder should consult his, her, or its own tax advisor regarding the U.S. federal estate tax consequences of the ownership
or disposition of shares of our Series B Preferred Stock.
The
preceding discussion of material U.S. federal tax considerations is for information only. It is not tax advice. Prospective investors
should consult their own tax advisors regarding the particular U.S. federal, state, local and non-U.S. tax consequences of purchasing,
holding and disposing of our Series B Preferred Stock, including the consequences of any proposed changes in applicable laws.
UNDERWRITING
ThinkEquity
LLC is acting as representative of the underwriters. Subject to the terms and conditions of an underwriting agreement between us and
the representative, we have agreed to sell to each underwriter named below, and each underwriter named below has severally agreed to
purchase the
number of shares of Series B Preferred Stock listed next to its name in the following table:
Underwriters
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Number
of Shares
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ThinkEquity
LLC
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1,000,000
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Total
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1,000,000
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The
underwriting agreement provides that the obligations of the underwriters to pay for and accept delivery of the shares of Series B Preferred
Stock offered by this prospectus supplement are subject to various conditions and representations and warranties, including the approval
of certain legal matters by their counsel and other conditions specified in the underwriting agreement. The shares of Series B Preferred
Stock are offered by the underwriters, subject to prior sale, when, as and if issued to and accepted by them. The underwriters reserve
the right to withdraw, cancel or modify the offer to the public and to reject orders in whole or in part. The underwriters are obligated
to take and pay for all of the shares of Series B Preferred Stock offered by this prospectus supplement if any such shares of Series
B Preferred Stock are taken.
We
have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute
to payments the underwriters may be required to make in respect thereof.
Discounts
and Fees
The
underwriters propose initially to offer the shares of Series B Preferred Stock to the public at the public offering price set forth on
the cover page of this prospectus supplement and to dealers at those prices less a concession not in excess of $0.675 per share
of Series B Preferred Stock. If all of the shares of Series B Preferred Stock offered by us are not sold at the public offering price,
the underwriters may change the offering price and other selling terms by means of a further supplement to this prospectus supplement.
In
addition, with respect to $2,000,000 of the shares of Series B Preferred Stock to be purchased by the representative, the representative
will purchase such shares at the public offering price set forth on the cover page of this prospectus supplement, and we will pay the
representative a fixed underwriting fee of $10,000 with respect to such shares.
The
following table shows the public offering price, underwriting discounts, underwriting fees, and proceeds before expenses to us.
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Per
Share
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Total
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Public
offering price
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$
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18.00
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$
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18,000,000
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Underwriting
discount (7.5%) with respect to $16,000,000 of the shares to be purchased by the underwriters
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$
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1.35
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$
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1,200,000
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Underwriting
fees with respect to $2,000,000 of the shares to be purchased by the underwriters
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-
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$
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10,000
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Proceeds,
before expenses, to us
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-
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$
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16,790,000
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We
have paid an expense deposit of $10,000 to the representative, which will be applied against the out-of-pocket accountable expenses that
will be paid by us to the underwriters in connection with this offering, and will be reimbursed to us to the extent not actually incurred
in compliance with FINRA Rule 5110(g)(4)(A).
We
have also agreed to pay certain of the representative’s expenses relating to the offering, including (a) filing fees associated
with the review of the offering by FINRA; (b) all fees and expenses relating to the listing of such public securities on the NASDAQ Capital
Market, including any fees charges by The Depository Trust for new securities; (c) all fees, expenses and disbursements relating to the
registration or qualification of the public securities under the “blue sky” securities laws of such states and other jurisdictions
as the Representative may reasonably designate (including, without limitation, all filing and registration fees); (d) all fees, expenses
and disbursements relating to the registration, qualification or exemption of the public securities under the securities laws of such
foreign jurisdictions as the Representative may reasonably designate; (e) the costs associated with post-Closing advertising the offering
in the national editions of the Wall Street Journal and New York Times; (f) the costs associated with bound volumes of the public offering
materials as well as commemorative mementos and lucite tombstones, each of which our Company or our designee shall provide within a reasonable
time after the Closing Date in such quantities as the Representative may reasonably request, not to exceed $3,000; (g) the fees and expenses
of our Company’s accountants; (h) fees and expenses of the Representative’s legal counsel not to exceed $75,000; (i) a $11,500
cost associated with the Underwriter’s use of Ipreo’s book-building, prospectus tracking and compliance software for the
Offering; and (j) up to $14,500 of the Underwriters’ actual accountable “road show” expenses for the offering. For
avoidance of doubt, the expenses of the representative reimbursable by us shall not exceed $29,000 (including the $10,000 expense deposit
previously paid by us to the representative).
We
have also engaged Digital Offering, LLC as a financial advisor to the Company. As compensation for such services, Digital Offering, LLC
will be compensated by the representative at the closing of the Offering and will receive twenty percent (20%) of the discounts received
by the representative of the underwriters in the offering, net of unreimbursed offering expenses and all selling concessions paid.
Our
total estimated expenses of the offering, including registration, filing and listing fees, printing fees and legal and accounting expenses,
but excluding underwriting discounts and underwriting fees, are approximately $300,000.
Lock-Up
Agreements
Pursuant
to “lock-up” agreements, we, our executive officers and directors, and certain stockholders, have agreed, without the prior
written consent of the representative not to directly or indirectly, offer to sell, sell, pledge or otherwise transfer or dispose of
any of shares of (or enter into any transaction or device that is designed to, or could be expected to, result in the transfer or disposition
by any person at any time in the future of) Series B Preferred Stock, enter into any swap or other derivatives transaction that transfers
to another, in whole or in part, any of the economic benefits or risks of ownership of shares of Series B Preferred Stock, make any demand
for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration
of any shares of Series B Preferred Stock or securities convertible into or exercisable or exchangeable for Series B Preferred Stock
or publicly disclose the intention to do any of the foregoing, subject to certain exceptions, for a period of three months after the
date of this prospectus supplement in the case of our Company, and for a period of one month after the date of this prospectus supplement
in the case of our executive officers, directors and certain stockholders.
Determination
of Offering Price
The
public offering price of the securities we are offering was negotiated between us and the underwriters. Factors considered in determining
the public offering price of the shares include the history and prospects of our Company, the stage of development of our business, our
business plans for the future and the extent to which they have been implemented, an assessment of our management, general conditions
of the securities markets at the time of the offering and such other factors as were deemed relevant.
Other
From
time to time, certain of the underwriters and/or their affiliates may in the future provide, various investment banking and other financial
services for us for which they may receive customary fees. In the course of their businesses, the underwriters and their affiliates may
actively trade our securities or loans for their own account or for the accounts of customers, and, accordingly, the underwriters and
their affiliates may at any time hold long or short positions in such securities or loans. Except for services provided in connection
with this offering, no underwriter has provided any investment banking or other financial services to us during the 180-day period preceding
the date of this prospectus supplement and we do not expect to retain any underwriter to perform any investment banking or other financial
services for at least 90 days after the date of this prospectus supplement.
Stabilization
In
connection with this offering, the underwriters may engage in stabilizing transactions, syndicate-covering
transactions, penalty bids and purchases to cover positions created by short sales.
Stabilizing
transactions permit bids to purchase securities so long as the stabilizing bids do not exceed a specified maximum, and are engaged in
for the purpose of preventing or retarding a decline in the market price of the securities while the offering is in progress.
Syndicate
covering transactions involve purchases of securities in the open market after the distribution has been completed in order to cover
syndicate short positions. If the underwriters have a short position, the position can be closed out by buying securities in
the open market. A short position is more likely to be created if the underwriters are concerned that after pricing there could
be downward pressure on the price of the securities in the open market that could adversely affect investors who purchase in the offering.
Penalty
bids permit the representative to reclaim a selling concession from a syndicate member when the securities originally sold by that syndicate
member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.
These
stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price
of our securities or preventing or retarding a decline in the market price of our securities. As a result, the price of our securities
in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make
any representation or prediction as to the effect that the transactions described above may have on the price of our securities.
Indemnification
We
have agreed to indemnify the underwriters against liabilities relating to this offering arising under the Securities Act and the Exchange
Act, liabilities arising from breaches of some or all of the representations and warranties contained in the underwriting agreement,
and to contribute to payments that the underwriters may be required to make for these liabilities.
Electronic
Distribution
This
prospectus supplement and accompanying prospectus in electronic format may be made available on websites or through other online services
maintained by one or more of the underwriters, or by their affiliates. Other than this prospectus supplement and accompanying prospectus
in electronic format, the information on any underwriter’s website and any information contained in any other website maintained
by an underwriter is not part of this prospectus supplement or accompanying prospectus or the registration statement of which the accompanying
prospectus forms a part, has not been approved and/or endorsed by us or any underwriter in its capacity as underwriter, and should not
be relied upon by investors.
Selling
Restrictions
Other
than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered
by this prospectus supplement and accompanying prospectus in any jurisdiction where action for that purpose is required. The securities
offered by this prospectus supplement and the accompanying prospectus may not be offered or sold, directly or indirectly, nor may this
prospectus supplement and accompanying prospectus or any other offering material or advertisements in connection with the offer and sale
of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with
the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus supplement or accompanying prospectus
comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus
supplement and accompanying prospectus. This prospectus supplement and accompanying prospectus do not constitute an offer to sell or
a solicitation of an offer to buy any securities offered by this prospectus supplement and accompanying prospectus in any jurisdiction
in which such an offer or a solicitation is unlawful.
Australia
This
prospectus supplement and accompanying prospectus are not disclosure documents under Chapter 6D of the Australian Corporations Act, has
not been lodged with the Australian Securities and Investments Commission and does not purport to include the information required of
a disclosure document under Chapter 6D of the Australian Corporations Act. Accordingly, (i) the offer of the securities under this prospectus
supplement and accompanying prospectus is only made to persons to whom it is lawful to offer the securities without disclosure under
Chapter 6D of the Australian Corporations Act under one or more exemptions set out in section 708 of the Australian Corporations Act,
(ii) this prospectus supplement and accompanying prospectus is made available in Australia only to those persons as set forth in clause
(i) above, and (iii) the offeree must be sent a notice stating in substance that by accepting this offer, the offeree represents that
the offeree is such a person as set forth in clause (i) above, and, unless permitted under the Australian Corporations Act, agrees not
to sell or offer for sale within Australia any of the securities sold to the offeree within 12 months after its transfer to the offeree
under this prospectus supplement.
China
The
information in this document does not constitute a public offer of the securities, whether by way of sale or subscription, in the People’s
Republic of China (excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region
and Taiwan). The securities may not be offered or sold directly or indirectly in the PRC to legal or natural persons other than directly
to “qualified domestic institutional investors”.
European
Economic Area—Belgium, Germany, Luxembourg and Netherlands
The
information in this document has been prepared on the basis that all offers of securities will be made pursuant to an exemption under
the Directive 2003/71/EC (which we refer to as the “Prospectus Directive”), as implemented in Member States of the European
Economic Area, or each, a Relevant Member State, from the requirement to produce a prospectus for offers of securities.
An
offer to the public of securities has not been made, and may not be made, in a Relevant Member State except pursuant to one of the following
exemptions under the Prospectus Directive as implemented in that Relevant Member State:
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to
legal entities that are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose
corporate purpose is solely to invest in securities;
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to
any legal entity that has two or more of (i) an average of at least 250 employees during its last fiscal year; (ii) a total balance
sheet of more than €43,000,000 (as shown on its last annual unconsolidated or consolidated financial statements) and (iii) an
annual net turnover of more than €50,000,000 (as shown on its last annual unconsolidated or consolidated financial statements);
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to
fewer than 100 natural or legal persons (other than qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive)
subject to obtaining the prior consent of our Company or any underwriter for any such offer; or
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in
any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of securities shall
result in a requirement for the publication by our Company of a prospectus pursuant to Article 3 of the Prospectus Directive.
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France
This
document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers)
in France within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code Monétaire et Financier) and Articles
211-1 et seq. of the General Regulation of the French Autorité des Marchés Financiers, or AMF. The securities have not
been offered or sold and will not be offered or sold, directly or indirectly, to the public in France.
This
document and any other offering material relating to the securities have not been, and will not be, submitted to the AMF for approval
in France and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in France.
Such
offers, sales and distributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés)
acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-1 to D.411-3, D.744-1, D.754-1;
and D.764-1 of the French Monetary and Financial Code and any implementing regulation and/or (ii) a restricted number of non-qualified
investors (cercle restreint d’investisseurs) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2°
and D.411-4, D.744-1, D.754-1; and D.764-1 of the French Monetary and Financial Code and any implementing regulation.
Pursuant
to Article 211-3 of the General Regulation of the AMF, investors in France are informed that the securities cannot be distributed (directly
or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3
of the French Monetary and Financial Code.
Ireland
The
information in this document does not constitute a prospectus under any Irish laws or regulations and this document has not been filed
with or approved by any Irish regulatory authority as the information has not been prepared in the context of a public offering of securities
in Ireland within the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (which we refer to as the “Prospectus
Regulations”). The securities have not been offered or sold, and will not be offered, sold or delivered directly or indirectly
in Ireland by way of a public offering, except to (i) qualified investors as defined in Regulation 2(l) of the Prospectus Regulations
and (ii) fewer than 100 natural or legal persons who are not qualified investors.
Israel
The
securities offered by this prospectus supplement and accompanying prospectus has not been approved or disapproved by the Israeli Securities
Authority, or ISA, nor have such securities been registered for sale in Israel. The shares may not be offered or sold, directly or indirectly,
to the public in Israel, absent the publication of a prospectus supplement and accompanying prospectus. The ISA has not issued permits,
approvals or licenses in connection with the offering or publishing the prospectus supplement and accompanying prospectus; nor has it
authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality of the
securities being offered. Any resale in Israel, directly or indirectly, to the public of the securities offered by this prospectus supplement
and accompanying prospectus is subject to restrictions on transferability and must be effected only in compliance with the Israeli securities
laws and regulations.
Italy
The
offering of the securities in the Republic of Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione
Nazionale per le Societ—$$—Aga e la Borsa, “CONSOB” pursuant to the Italian securities legislation and, accordingly,
no offering material relating to the securities may be distributed in Italy and such securities may not be offered or sold in Italy in
a public offer within the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998, or Decree No. 58, other than:
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to
Italian qualified investors, as defined in Article 100 of Decree no.58 by reference to Article 34-ter of CONSOB Regulation no. 11971
of 14 May 1999, or Regulation no. 1197l as amended, or Qualified Investors; and
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in
other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of
Regulation No. 11971 as amended.
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Any
offer, sale or delivery of the securities or distribution of any offer document relating to the securities in Italy (excluding placements
where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be:
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made
by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative
Decree No. 385 of 1 September 1993 (as amended), Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and any other applicable
laws; and
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in
compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws.
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Any
subsequent distribution of the securities in Italy must be made in compliance with the public offer and prospectus requirement rules
provided under Decree No. 58 and the Regulation No. 11971 as amended, unless an exception from those rules applies. Failure to comply
with such rules may result in the sale of such securities being declared null and void and in the liability of the entity transferring
the securities for any damages suffered by the investors.
Japan
The
securities have not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan
(Law No. 25 of 1948), as amended (which we refer to as the “FIEL”), pursuant to an exemption from the registration requirements
applicable to a private placement of securities to Qualified Institutional Investors (as defined in and in accordance with Article 2,
paragraph 3 of the FIEL and the regulations promulgated thereunder). Accordingly, the securities may not be offered or sold, directly
or indirectly, in Japan or to, or for the benefit of, any resident of Japan other than Qualified Institutional Investors. Any Qualified
Institutional Investor who acquires securities may not resell them to any person in Japan that is not a Qualified Institutional Investor,
and acquisition by any such person of securities is conditional upon the execution of an agreement to that effect.
Portugal
This
document is not being distributed in the context of a public offer of financial securities (oferta pública de valores mobiliários)
in Portugal, within the meaning of Article 109 of the Portuguese Securities Code (Código dos Valores Mobiliários). The
securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal. This document
and any other offering material relating to the securities have not been, and will not be, submitted to the Portuguese Securities Market
Commission (Comissăo do Mercado de Valores Mobiliários) for approval in Portugal and, accordingly, may not be distributed
or caused to distributed, directly or indirectly, to the public in Portugal, other than under circumstances that are deemed not to qualify
as a public offer under the Portuguese Securities Code. Such offers, sales and distributions of securities in Portugal are limited to
persons who are “qualified investors” (as defined in the Portuguese Securities Code). Only such investors may receive this
document and they may not distribute it or the information contained in it to any other person.
Sweden
This
document has not been, and will not be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority).
Accordingly, this document may not be made available, nor may the securities be offered for sale in Sweden, other than under circumstances
that are deemed not to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel
med finansiella instrument). Any offering of securities in Sweden is limited to persons who are “qualified investors” (as
defined in the Financial Instruments Trading Act). Only such investors may receive this document and they may not distribute it or the
information contained in it to any other person.
Switzerland
The
securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX or on any other stock
exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for
issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses
under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland.
Neither this document nor any other offering material relating to the securities may be publicly distributed or otherwise made publicly
available in Switzerland.
Neither
this document nor any other offering material relating to the securities have been or will be filed with or approved by any Swiss regulatory
authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial
Market Supervisory Authority (FINMA).
This
document is personal to the recipient only and not for general circulation in Switzerland.
United
Kingdom
Neither
the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Services
Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as
amended, or FSMA, has been published or is intended to be published in respect of the securities. This document is issued on a confidential
basis to “qualified investors” (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the securities may
not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in circumstances
which do not require the publication of a prospectus pursuant to section 86(1) FSMA. This document should not be distributed, published
or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other person in the United Kingdom.
Any
invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) received in connection with the
issue or sale of the securities has only been communicated or caused to be communicated and will only be communicated or caused to be
communicated in the United Kingdom in circumstances in which section 21(1) of FSMA does not apply to our Company.
In
the United Kingdom, this document is being distributed only to, and is directed at, persons (i) who have professional experience in matters
relating to investments falling within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial
Promotions) Order 2005 (which we refer to as the “FPO”), (ii) who fall within the categories of persons referred to in Article
49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully
communicated (together “relevant persons”). The investments to which this document relates are available only to, and any
invitation, offer or agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should
not act or rely on this document or any of its contents.
Canada
The
securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors,
as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted
clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale
of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements
of applicable securities laws. Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies
for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies
for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s
province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s
province or territory for particulars of these rights or consult with a legal advisor. Pursuant to section 3A.3 of National Instrument
33-105 Underwriting Conflicts (NI 33-105), the underwriter are not required to comply with the disclosure requirements of NI33-105 regarding
underwriter conflicts of interest in connection with this offering.
LEGAL
MATTERS
Certain
legal matters with respect to the shares of Series B Preferred Stock offered hereby will be passed upon by Greenberg Traurig, LLP, Los
Angeles, California. Hunter Taubman Fischer & Li LLC, New York, New York is acting as counsel to the underwriters.
EXPERTS
Baker
Tilly US, LLP, our independent registered public accounting firm, has audited our consolidated financial statements included in our Annual
Report on Form 10-K for the years ended December 27, 2020 and December 29, 2019 as set forth in their report, which is incorporated by
reference in this prospectus supplement and accompanying prospectus. Our consolidated financial statements are incorporated by reference
in reliance on the report of Baker Tilly US, LLP given on their authority as experts in accounting and auditing.
The
consolidated financial statements of GFG Holding, Inc. and its subsidiaries as of December 31, 2020 and 2019 and for the two
years ended December 31, 2020 incorporated by reference in this prospectus
supplement have been so incorporated in reliance on the report of BDO USA, LLP, independent certified public accountants,
incorporated herein by reference, given on their authority of said firm as experts in accounting and auditing.
The
consolidated financial statements of Twin Restaurant Holding, LLC as of December 27, 2020 and December 29, 2019 and for the year
ended December 27, 2020 and for the period from March 29, 2019 (inception) to December 29, 2019 incorporated by reference in this prospectus supplement have been so incorporated in reliance on the report of BDO USA,
LLP, independent certified public accountants, incorporated herein by reference, given on the authority of said firm as experts in
auditing and accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed with the SEC a registration statement on Form S-3 under the Securities Act with respect to the shares of Series B Preferred
Stock offered hereby. This prospectus supplement and the accompanying prospectus, which constitute a part of the registration statement,
does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further
information about us, the Series B Preferred Stock offered hereby, we refer you to the registration statement and the exhibits and schedules
filed thereto. Statements contained in this prospectus supplement or the accompanying prospectus regarding the contents of any contract
or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement
is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration
statement. We file periodic reports, proxy statements, and other information with the SEC pursuant to the Exchange Act. The SEC maintains
an Internet website that contains reports, proxy statements and other information about registrants, like us, that file electronically
with the SEC. The address of that site is www.sec.gov.
PROSPECTUS
FAT
Brands Inc.
Common
Stock
Preferred
Stock
Debt
Securities
Warrants
Subscription
Rights
Units
From
time to time, we may offer and sell our common stock, preferred stock, debt securities, warrants, subscription rights and units (which
we refer to collectively as “securities”) in amounts, at prices and on terms described in one or more supplements to this
prospectus. The aggregate amount of the securities offered by us under this prospectus will not exceed $500,000,000.
This
prospectus provides you with a general description of the securities that may be offered in one or more offerings. Each time we offer
securities, we will provide a supplement to this prospectus that will contain more specific information about the terms of that offering.
We may also add, update or change in the prospectus supplement any of the information contained in this prospectus. This prospectus may
not be used to consummate sales of our securities unless it is accompanied by a prospectus supplement.
You
should read both this prospectus and the applicable prospectus supplement, as well as any documents incorporated by reference in this
prospectus and/or the applicable prospectus supplement, before you make your investment decision.
Investing
in our securities involves risks. You should carefully consider the risk factors beginning on page 4 of this prospectus and set forth
in the documents incorporated by reference herein before making any decision to invest in our securities.
The
securities may be sold by us or through underwriters or dealers, directly to purchasers or through agents designated from time to time.
For additional information on the methods of sale, you should refer to the section entitled “Plan of Distribution” in this
prospectus. If any underwriters are involved in the sale of any securities with respect to which this prospectus is being delivered,
the names of such underwriters and any applicable discounts or commissions and over-allotment options will be set forth in a prospectus
supplement. The price to the public of such securities and the net proceeds we expect to receive from such sale will also be set forth
in a prospectus supplement.
Our
common stock is listed under the symbol “FAT” and our 8.25% Series B Cumulative Preferred Stock is listed under the symbol
“FATBP” on the NASDAQ Capital Market.
Neither
the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is June 21,
2021.
TABLE
OF CONTENTS
You
should rely only on the information set forth or incorporated by reference in this prospectus or any supplement. No dealer, salesperson
or other person is authorized to provide you with information different from that which is set forth or incorporated by reference in
this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the securities
it describes, and only under circumstances and in jurisdictions where it is lawful to do so. The information contained in each of this
prospectus and the applicable prospectus supplement is accurate only as of the date on its respective cover, regardless of the time of
delivery of this prospectus or the applicable prospectus supplement or any sale of a security, and any information incorporated by reference
in this prospectus or the applicable prospectus supplement is accurate only as of the date of the document incorporated by reference,
unless we indicate otherwise. Our business, financial condition, results of operations and prospects may have changed since those dates.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the U.S. Securities and Exchange Commission (which we refer to as the
“SEC”) using a “shelf” registration process. Under this shelf registration statement, we may sell:
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common
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preferred
stock;
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debt
securities;
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warrants;
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subscription
rights; and
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units.
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This
prospectus provides you with a general description of the common stock, preferred stock, debt securities, warrants, subscription rights
and units. Each time we sell such instruments, we will provide a prospectus supplement (and, if applicable, a pricing supplement) that
will contain specific information about the terms of that offering. The prospectus supplement (and any pricing supplement) may also add,
update or change information in this prospectus. If there is any inconsistency between the information in this prospectus (including
the information incorporated by reference herein) and any prospectus supplement (or pricing supplement), you should rely on the information
in that prospectus supplement (or pricing supplement). You should read both this prospectus and any prospectus supplement together with
the additional information described under the headings “Information Incorporated by Reference” and “Where You Can
Find More Information”.
The
registration statement that contains this prospectus (including the exhibits to the registration statement) has additional information
about us and the securities offered under this prospectus. The registration statement can be read at the SEC web site or at the SEC offices
mentioned under the headings “Information Incorporated by Reference” and “Where You Can Find More Information”.
Unless
otherwise stated, the words “FAT”, our “Company”, “we”, “our”, and “us” refer
to FAT Brands Inc. and its subsidiaries, except that such terms refer to FAT Brands Inc. only and not to its subsidiaries in the sections
entitled “Description of Common Stock”, “Description of Preferred Stock”, “Description of Debt Securities”,
“Description of Warrants”, “Description of Subscription Rights”, and “Description of Units.”
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements contained in this prospectus that are not statements of historical fact constitute forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 (which we refer to as the “Act”), notwithstanding that such statements
are not specifically identified as such. In addition, certain statements may be contained in our future filings with the SEC, in press
releases, and in oral and written statements made by us or with our approval that are not statements of historical fact and constitute
forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i)
projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure
and other financial items; (ii) statements of our plans, objectives and expectations or those of our management or board of directors,
including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions
underlying such statements. Forward-looking statements include information concerning our possible or assumed future results of operations
and statements preceded by, followed by or that include the words “believes,” “expects,” “feels,”
“anticipates,” “intends,” “plans,” “estimates,” “predicts,” “projects,”
“potential,” “outlook,” “could,” “will,” “may” or similar expressions.
Forward-looking
statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions. Actual results may differ
materially from those expressed in or implied by these forward-looking statements. Factors that could cause actual results to differ
from these forward-looking statements include, but are not limited to, the following, as well as those discussed elsewhere in this prospectus,
any accompanying prospectus supplement and in the documents incorporated by reference herein:
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uncertainties
surrounding the severity, duration and effects of the COVID-19 pandemic;
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our
inability to manage our growth;
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our
franchisees could take actions that could harm our business and may not accurately report
sales;
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our
inability to maintain good relationships with our franchisees;
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our
inability to successfully add franchisees, brands and new stores, and timely develop and expand our operations;
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our
inability to protect our brands and reputation;
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our
ability to adequately protect our intellectual property;
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success
of our advertising and marketing campaigns;
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our
inability to protect against security breaches of confidential guest information;
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our
business model being susceptible to litigation;
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competition
from other restaurants;
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shortages
or interruptions in the supply or delivery of food products;
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our
vulnerability to increased food commodity costs;
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failure to prevent food safety and food-borne illness incidents;
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changes
in consumer tastes and nutritional and dietary trends;
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our
dependence on key executive management;
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our
inability to identify qualified individuals for our workforce;
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our
vulnerability to labor costs;
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our
inability to comply with governmental regulation;
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violations
of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws;
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our
inability to maintain sufficient levels of cash flow, or access to capital, to meet growth expectations; and
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control
of our Company by Fog Cutter Holdings, LLC.
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should not put undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date they are made,
and we undertake no obligation to update them in light of new information or future events except to the extent required by applicable
law. Please see the sections entitled “Risk Factors” in this prospectus and any accompanying prospectus supplement, and other
risks and uncertainties detailed in our other reports and filings with the SEC. If a change occurs, our business, financial condition,
liquidity, cash flows and results of operations may vary materially from those expressed in or implied by our forward-looking statements.
New risks and uncertainties arise over time, and it is not possible for us to predict the occurrence of those events or the manner in
which they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
DESCRIPTION
OF FAT BRANDS INC.
Our
Company
FAT
Brands Inc. is a leading multi-brand restaurant franchising company that develops, markets, and acquires primarily quick-service, fast
casual and casual dining restaurant concepts around the world. As a franchisor, we generally do not own or operate restaurant locations,
but rather generate revenue by charging franchisees an initial franchise fee as well as ongoing royalties. We believe that this “asset
light” franchisor model provides the opportunity for strong profit margins and an attractive free cash flow profile while minimizing
restaurant operating company risk, such as long-term real estate commitments or capital investments. Our scalable management platform
enables us to add new stores and restaurant concepts to our portfolio with minimal incremental corporate overhead cost, while taking
advantage of significant corporate overhead synergies. The acquisition of additional brands and restaurant concepts as well as expansion
of our existing brands are key elements of our growth strategy.
Our
Concepts
As
of March 28, 2021, we were the owner and franchisor of the following restaurant brands:
Fatburger.
Founded in Los Angeles, California in 1947, Fatburger (The Last Great Hamburger Stand) has, throughout its history, maintained its reputation
as an iconic, all-American, Hollywood favorite hamburger restaurant serving a variety of freshly made-to-order, customizable, big, juicy,
and tasty Fatburgers, Turkeyburgers, Chicken Sandwiches, Impossible™ Burgers, Veggieburgers, French fries, onion rings, soft-drinks
and milkshakes. With a legacy spanning over 70 years, Fatburger’s dedication to superior quality inspires robust loyalty amongst
its customer base and has long appealed to American cultural and social leaders. We have counted many celebrities and athletes as past
franchisees and customers, and we believe this prestige has been a principal driver of the brand’s strong growth. Fatburger offers
a premier dining experience, demonstrating the same dedication to serving gourmet, homemade, custom-built burgers as it has since 1947.
As of March 28, 2021, there were 180 franchised and sub-franchised Fatburger locations globally.
Johnny
Rockets. Founded in 1986 on iconic Melrose Avenue in Los Angeles, Johnny Rockets is a world-renowned, international restaurant
franchise that offers high quality, innovative menu items including Certified Angus Beef® cooked-to-order hamburgers, Boca Burger®,
chicken sandwiches, crispy fries and rich, delicious hand-spun shakes and malts. This dynamic lifestyle brand offers friendly service
and upbeat music contributing to the chain’s signature atmosphere of relaxed, casual fun. We acquired the Johnny Rockets brand
on September 21, 2020 and began consolidating Johnny Rockets’ financial results on that date. As of March 28, 2021, there were
315 franchised and nine corporate-owned Johnny Rockets locations globally. The corporate-owned locations are part of our Company’s
refranchising program.
Buffalo’s
Cafe and Buffalo’s Express. Established in Roswell,
Georgia in 1985, Buffalo’s Cafe (Where Everyone is Family) is a family-themed casual dining concept known for its chicken wings
and 13 distinctive homemade wing sauces, burgers, wraps, steaks, salads and other classic American cuisine. Featuring a full bar and
table service, Buffalo’s Cafe offers a distinctive dining experience affording friends and family the flexibility to share an intimate
dinner together or to casually watch sporting events while enjoying extensive menu offerings. Beginning in 2011, Buffalo’s Express
was developed and launched as a fast-casual, smaller footprint variant of Buffalo’s Cafe offering a limited version of the full
menu with an emphasis on chicken wings, wraps and salads. Current Buffalo’s Express outlets are co-branded with Fatburger locations,
providing our franchisees with complementary concepts that share kitchen space and result in a higher average unit volume (compared to
stand-alone Fatburger locations). As of March 28, 2021, there were 13 franchised Buffalo’s Cafe and 117 co-branded Fatburger /
Buffalo’s Express locations globally.
Ponderosa
and Bonanza Steakhouse. Ponderosa Steakhouse, founded in 1965, and Bonanza Steakhouse, founded in 1963 (which we refer
to collectively as “Ponderosa”), offer the quintessential American steakhouse experience, for which there is strong and growing
demand in international markets, particularly in Asia and the Middle East. Ponderosa and Bonanza Steakhouses offer guests a high-quality
buffet and broad array of great tasting, affordably priced steak, chicken and seafood entrées. Buffets at Ponderosa and Bonanza
Steakhouses feature a large variety of all you can eat salads, soups, appetizers, vegetables, breads, hot main courses and desserts.
An additional variation of the brand, Bonanza Steak & BBQ, offers a full-service steakhouse with fresh farm-to-table salad bar and
a menu showcase of USDA flame-grilled steaks and house-smoked BBQ, with contemporized interpretations of traditional American classics.
As of March 28, 2021, there were 48 Ponderosa and Bonanza franchised locations globally.
Hurricane
Grill & Wings. Founded in Fort Pierce, Florida in 1995, Hurricane Grill & Wings is a tropical beach themed casual dining
restaurant known for its fresh, jumbo, chicken wings, 35 signature sauces, burgers, bowls, tacos, salads and sides. Featuring a full
bar and table service, Hurricane Grill & Wings’ laid-back, casual, atmosphere affords family and friends the flexibility to
enjoy dining experiences together regardless of the occasion. The acquisition of Hurricane Grill & Wings has been complementary to
FAT Brands existing portfolio chicken wing brands, Buffalo’s Cafe and Buffalo’s Express. As of March 28, 2021, there were
49 franchised Hurricane Grill & Wings and one franchised Hurricane BTWs (Hurricane’s fast-casual burgers, tacos & wings
concept) locations in the United States.
Yalla
Mediterranean. Founded in 2014, Yalla Mediterranean is a Los Angeles-based restaurant chain specializing in authentic, healthful,
Mediterranean cuisine with an environmentally conscience and focus on sustainability. The word “yalla” which means “let’s
go” is embraced in every aspect of Yalla Mediterranean’s culture and is a key component of our concept. Yalla Mediterranean
offers a healthful Mediterranean menu of wraps, plates, and bowls in a fast-casual setting, with cuisine prepared fresh daily using,
GMO-free, local ingredients for a menu that includes vegetarian, vegan, gluten-free and dairy-free options accommodating customers with
a wide variety of dietary needs and preferences. The brand demonstrates its commitment to the environment by using responsibly sourced
proteins and utensils, bowls and serving trays made from compostable materials. Each of Yalla’s three locations in California also
feature on-tap selections of craft beers and fine wines. We intend to expand the business through additional franchising.
Elevation
Burger. Established in Northern Virginia in 2002, Elevation Burger is a fast-casual burger, fries, and shakes chain that provides
its customers with healthier, “elevated” food options. Serving grass-fed beef, organic chicken, and French fries cooked using
a proprietary olive oil-based frying method, Elevation maintains environmentally friendly operating practices including responsible sourcing
of ingredients, robust recycling programs intended to reduce carbon footprint, and store décor constructed of eco-friendly materials.
The acquisition of Elevation Burger in June 2019 aligns with our corporate mission of providing fresh, authentic and tasty products to
the customers of our franchisees and complements our existing burger brand, Fatburger. Our Company acquired the Elevation Burger brand
on June 19, 2019 and began consolidating Elevation Burger’s financial results effective with that date. As of March 28, 2021, there
were 43 franchised Elevation Burger locations globally.
Beyond
our current brand portfolio, we intend to acquire other restaurant franchise concepts that will allow us to offer additional food categories
and expand our geographic footprint. In evaluating potential acquisitions, we specifically seek concepts with the following characteristics:
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established,
widely recognized brands;
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steady
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track
records of long-term, sustainable operating performance;
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good
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sustainable
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geographic
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growth
potential, both geographically and through co-branding initiatives across our portfolio.
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Leveraging
our scalable management platform, we expect to achieve cost synergies post-acquisition by reducing the corporate overhead of the acquired
company – most notably in the legal, accounting and finance functions. We also plan to grow the top line revenues of newly acquired
brands through support from our management and systems platform, including public relations, marketing and advertising, supply chain
assistance, site selection analysis, staff training and operational oversight and support.
Our
franchisee base consisted of 326 franchisees as of March 28, 2021. Of these franchisees, 87 own multiple restaurant locations. System
wide, our franchisees operated 679 restaurants as of March 28, 2021 with store level sales in excess of $312 million in 2020. As of March
28, 2021, we had 34 units under construction and a development pipeline of over 200 new units which remain to be completed.
The
FAT Brands Difference – Fresh. Authentic. Tasty.
Our
name represents the values that we embrace as a company and the food that we provide to customers – Fresh. Authentic.
Tasty. The success of our franchisor model is tied to consistent delivery by our restaurant operators of freshly prepared, made-to-order
food that our customers desire. With the input of our customers and franchisees, we continually strive to keep a fresh perspective on
our brands by enhancing our existing menu offerings and introducing appealing new menu items. When enhancing our offerings, we ensure
that any changes are consistent with the core identity and attributes of our brands, although we do not intend to adapt our brands to
be all things to all people. In conjunction with our restaurant operators (which means the individuals who manage and/or own our franchised
restaurants), we are committed to delivering authentic, consistent brand experiences that have strong brand identity with customers.
Ultimately, we understand that we are only as good as the last meal served, and we are dedicated to having our franchisees consistently
deliver tasty, high-quality food and positive guest experiences in their restaurants.
In
pursuing acquisitions and entering new restaurant brands, we are committed to instilling our FAT Brands values into new restaurant concepts.
As our restaurant portfolio continues to grow, we believe that both our franchisees and diners will recognize and value this ongoing
commitment as they enjoy a wider concept offering.
For
a further description of our business, financial condition, results of operations and other important information regarding us, please
see our filings with the SEC incorporated by reference in this prospectus. For instructions on how to find copies of the filings incorporated
by reference in this prospectus, please see the sections entitled “Information Incorporated by Reference” and “Where
You Can Find More Information”.
Corporate
Information
Our
principal executive offices are located at 9720 Wilshire Blvd., Suite 500, Beverly Hills, California 90212. Our main telephone number
is (310) 319-1850. Our principal Internet website address is www.fatbrands.com. The information on our website is not incorporated by
reference into, or a part of, this prospectus.
RISK
FACTORS
Investing
in our securities involves risk. You should carefully consider the specific risks discussed or incorporated by reference in the applicable
prospectus supplement, together with all the other information contained in the prospectus supplement or incorporated by reference in
this prospectus and the applicable prospectus supplement. You should also consider the risks, uncertainties and assumptions discussed
under the caption “Item 1A. Risk Factors” in Part 1 of our Annual Report on Form 10-K for the fiscal year ended December
27, 2020, which is incorporated by reference in this prospectus. Such discussion may be amended, supplemented or superseded from time
to time by other reports we file with the SEC in the future. Our business, financial condition and results of operations could be materially
and adversely affected by any of these risks. Additional risks not presently known to us or that we currently deem immaterial may also
impair our business operations. The occurrence of any of these risks may cause you to lose all or part of your investment in the offered
securities.
USE
OF PROCEEDS
Unless
indicated otherwise in the applicable prospectus supplement, we expect to use the net proceeds from the sale of the securities by us
for general corporate purposes. Pending such use, we may temporarily invest the proceeds or use them to reduce short-term indebtedness.
Additional
information on the use of proceeds from the sale of the securities offered by this prospectus may be set forth in the applicable prospectus
supplement.
DESCRIPTION
OF COMMON STOCK
General
The
Amended and Restated Certificate of Incorporation of our Company (which we refer to as our “Certificate of Incorporation”)
authorizes the issuance of up to 30,000,000 shares of common stock, par value $0.0001 per share. As of the date of this prospectus, there
were 12,229,479 shares of common stock issued and outstanding. Our common stock is listed on the NASDAQ Capital Market under the symbol
“FAT”.
Voting
Rights
Holders
of our common stock are entitled to cast one vote per share. Holders of our common stock are not entitled to cumulate their votes in
the election of directors. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election
of directors, by a plurality) of the votes entitled to be cast by all stockholders present in person or represented by proxy, voting
together as a single class. Except as otherwise provided by law, amendments to our Certificate of Incorporation must be approved by a
majority or, in some cases, a super-majority of the combined voting power of all shares entitled to vote, voting together as a single
class.
Dividend
Rights
Holders
of common stock are entitled share ratably (based on the number of shares of common stock held) if and when any dividend is declared
by our board of directors (which we refer to as our “Board”) out of funds legally available therefor, subject to any statutory
or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any
outstanding preferred stock.
Liquidation
Rights
On
our liquidation, dissolution or winding up, each holder of common stock will be entitled to a pro rata distribution of any assets available
for distribution to common stockholders.
Other
Matters
No
shares of common stock are subject to redemption or have preemptive rights to purchase additional shares of common stock. The rights,
preferences and privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders
of shares of any series of our preferred stock, including our non-voting 8.25% Series B Cumulative Preferred Stock (which we refer to
as our “Series B Preferred Stock”) and any series of preferred stock which we may designate in the future. There are no redemption
or sinking fund provisions applicable to our common stock. All outstanding shares of our common stock are, and the shares of our common
stock to be issued in the offering will be, fully paid and nonassessable.
DESCRIPTION
OF PREFERRED STOCK
Our
Certificate of Incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock, par value $0.0001 per share. As of
the date of this prospectus, there were 1,183,272 shares of our Series B Preferred Stock issued and outstanding.
General
This
section describes the general terms and provisions of the preferred stock offered by this prospectus, other than pricing and related
terms disclosed for a particular issuance in an applicable prospectus supplement. You should read the particular terms of any series
of preferred stock we offer in any prospectus supplement relating to such series, together with the more detailed provisions of our Certificate
of Incorporation and the certificate of designations with respect to each particular series of preferred stock, which will be filed as
an exhibit to a document incorporated by reference into this prospectus. The prospectus supplement also will state whether any of the
terms summarized below do not apply to the series of preferred stock being offered.
Shares
of preferred stock may be issued in one or more series from time to time as determined by our Board. Our Board is expressly authorized,
without stockholder approval, to fix by resolution the designations, the powers, preferences and rights, and the qualifications, limitations
and restrictions, of the shares of each series of preferred stock. Our Board’s ability to authorize, without stockholder approval,
the issuance of preferred stock with conversion and other rights may adversely affect the rights of holders of our common stock or other
series of preferred stock that may be outstanding.
In
authorizing any series of preferred stock, our Board may determine the following:
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the
voting powers, if any, of the holders of stock of such series in addition to any voting rights affirmatively required by law;
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the
rights of shareholders in respect of dividends, including, without limitation, the rate or rates per annum and the time or times
at which (or the formula or other method pursuant to which such rate or rates and such time or times may be determined) and conditions
upon which the holders of stock of such series will be entitled to receive dividends and other distributions, and whether any such
dividends will be cumulative or noncumulative and, if cumulative, the terms upon which such dividends will be cumulative;
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whether
the stock of each such series shall be redeemable by us at our option or the holder of the stock, and, if redeemable, the terms and
conditions upon which the stock of such series may be redeemed;
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the
amount payable and the rights or preferences to which the holders of the stock of such series will be entitled upon any voluntary
or involuntary liquidation, dissolution or winding-up;
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the
terms, if any, upon which shares of stock of such series will be convertible into, or exchangeable for, shares of stock of any other
class or classes or of any other series of the same or any other class or classes, including the price or prices or the rate or rates
of conversion or exchange and the terms of adjustment, if any; and
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Any
other designations, preferences, and relative, participating, optional or other special rights, and qualifications, limitations or
restrictions thereof, so far as they are not inconsistent with the provisions of our Certificate of Incorporation, and to the full
extent now or hereafter permitted by the laws of the State of Delaware.
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Prior
to the issuance of any series of preferred stock, our Board will adopt resolutions creating and designating the series as a series of
preferred stock and a certificate of designations setting forth the preferences, rights, limitations and other terms of such series will
be filed with the Secretary of State of Delaware.
The
preferred stock will have the dividend, liquidation, redemption and voting rights stated in this section unless the applicable prospectus
supplement indicates otherwise. You should read the applicable prospectus supplement relating to the particular series of the preferred
stock being offered for specific terms, including:
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the
title, stated value and liquidation preferences of the preferred stock and the number of shares offered;
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the
initial public offering price at which the preferred stock will be issued;
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the
dividend rate(s) (or method of calculation), the dividend periods, the dates on which dividends shall be payable and whether these
dividends will be cumulative or noncumulative and, if cumulative, the dates at which the dividends shall begin to cumulate;
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any
redemption or sinking fund provisions; and
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any
additional dividend, liquidation, redemption, sinking fund and other rights, preferences, privileges, limitations and restrictions.
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When
we issue shares of preferred stock, the shares will be fully paid and nonassessable, which means the full purchase price of the shares
will have been paid and holders of the shares will not be assessed any additional monies for the shares. Unless the applicable prospectus
supplement indicates otherwise, each series of the preferred stock will rank equally with any outstanding shares of our preferred stock
and each other series of the preferred stock. Unless the applicable prospectus supplement states otherwise, the preferred stock will
have no preemptive rights to subscribe for any additional securities which are issued by us, meaning, the holders of shares of preferred
stock will have no right to buy any portion of the issued securities.
In
addition, unless the applicable prospectus indicates otherwise, we will have the right to “reopen” a previous issue of a
series of preferred stock by issuing additional preferred stock of such series.
The
transfer agent, registrar, dividend disbursing agent and redemption agent for shares of each series of preferred stock will be named
in the prospectus supplement relating to such series.
Voting
Rights
The
holders of shares of preferred stock will have no voting rights, except:
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as
otherwise stated in the applicable prospectus supplement;
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as
otherwise stated in the certificate of designations with respect to shares establishing such series; or
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as
required by applicable law.
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Dividend
Rights
The
holders of the preferred stock of each series will be entitled to receive cash dividends out of funds legally available, when, as and
if, declared by our Board or a duly authorized committee of our Board, at the rates and on the dates stated in the applicable prospectus
supplement. These rates may be fixed, or variable, or both. If the dividend rate is variable, the applicable prospectus supplement will
describe the formula used to determine the dividend rate for each dividend period. We will pay dividends to the holders of record as
they appear on our stock books on the record dates determined by our Board or authorized committee. Unless the applicable prospectus
supplement indicates otherwise, dividends on any series of preferred stock will be cumulative.
Our
Board will not declare and pay a dividend on any of our stock ranking as to dividends, equal with or junior to the preferred stock unless
full dividends on the preferred stock have been declared and paid (or declared and sufficient money was set aside for payment).
Until
dividends are paid in full or declared and set aside for payment on any series of preferred stock ranking equal with the preferred stock
as to dividends:
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we
will declare all dividends pro rata among the preferred stock of each series, so that the amount of dividends declared per share
on each series will have the same relationship to each other that accrued dividends per share on each series of preferred stock and
other preferred stock bear to each other;
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other
than the pro rata dividends, we will not declare or pay or set aside for payment dividends, or declare or make any other distribution
on any security ranking junior to or equal with the preferred stock offered under this prospectus as to dividends or at liquidation
(except dividends or distributions paid for in shares of, or options, warrants or rights to subscribe or purchase shares of securities
ranking junior to or equal with the preferred stock as to dividends and at liquidation);
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we
will not redeem, purchase or otherwise acquire for any consideration (or have any monies paid to or set aside in a sinking fund)
any securities ranking junior to or equal with the preferred stock as to dividends or at liquidation (except by conversion into or
exchange for our stock which ranks junior to the preferred stock as to dividends and at liquidation); and
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we
will not pay interest, or money in lieu of interest, for any dividend payments on any series of the preferred stock that are in arrears.
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Redemption
Rights
A
series of the preferred stock may be redeemable, in whole or in part, at our option, and may be subject to mandatory redemption under
a sinking fund or otherwise as described in the applicable prospectus supplement. The preferred stock that we redeem will be restored
to the status of authorized but unissued shares of preferred stock which we may issue in the future.
If
a series of preferred stock is subject to mandatory redemption, the applicable prospectus supplement will specify the number of shares
that we will redeem in each year and the redemption price per share together with an amount equal to all accrued and unpaid dividends
on those shares to the redemption date. The applicable prospectus supplement will state whether the redemption price can be paid in cash
or other property. If the redemption price is to be paid only from the net proceeds of issuing our capital stock, the terms of the series
of preferred stock may provide that, if the capital stock has not been issued or if the net proceeds are not sufficient to pay the full
redemption price then due, the shares relating to series of the preferred stock shall automatically and mandatorily be converted into
shares of our capital stock under the conversion provisions of the applicable prospectus supplement.
If
fewer than all of the outstanding shares of any series of the preferred stock are to be redeemed, the redemption will be made in a manner
that our Board decides is equitable.
Unless
we default in the payment of the redemption price, dividends will cease to accrue after the redemption date on shares of preferred stock
called for redemption and all rights of holders of such shares will terminate except for the right to receive the redemption price.
Conversion
and Exchange Rights
If
any series of offered preferred stock is convertible into or exchangeable for any other class or series of our capital stock, the applicable
prospectus supplement relating to that series will describe the terms and conditions governing the conversions and exchanges.
Liquidation
Rights
If
we voluntarily or involuntarily liquidate, dissolve or wind up our business, the holders of shares of each series of preferred stock
and any other securities that have rights equal to that series of preferred stock under these circumstances, will be entitled to receive
out of our assets that are available for distribution to stockholders:
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liquidation
distributions in the amount stated in the applicable prospectus supplement; and
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all
accrued and unpaid dividends (whether or not earned or declared), before any distribution to holders of common stock or of any securities
ranking junior to the series of preferred stock.
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Neither
the sale of all or any part of our property and business, nor our merger into or consolidation with any other corporation, nor the merger
or consolidation of any other corporation with or into us, will be deemed to be a dissolution, liquidation or winding up.
If
our assets are insufficient to pay all amounts to which holders of preferred stock are entitled, we will make no distribution on the
preferred stock or on any other securities ranking equal to the preferred stock unless we make a pro rata distribution to those holders.
After we pay the full amount of the liquidation distribution to which the holders are entitled, the holders will have no right or claim
to any of our remaining assets.
DESCRIPTION
OF DEBT SECURITIES
We
may issue debt securities under an indenture between us and a U.S. banking institution, as the indenture trustee. Each indenture will
be subject to, and governed by, the Trust Indenture Act of 1939, as amended (which we refer to as the “Trust Indenture Act”),
and we may supplement the indenture from time to time after we execute them.
This
prospectus summarizes the material provisions of the indenture and the debt securities that we may issue under an indenture. This summary
may not describe all of the provisions of the indenture or of any of the debt securities that might be important to you. For additional
information, you should carefully read the forms of indenture that are incorporated by reference as an exhibit to the registration statement
of which this prospectus forms a part.
When
we offer to sell a particular series of debt securities, we will describe the specific terms of those debt securities in a supplement
to this prospectus. We will also indicate in the supplement whether the general terms in this prospectus apply to a particular series
of debt securities. Accordingly, for a description of the terms of a particular issue of debt securities, you should carefully read this
prospectus and the applicable supplement.
Terms
The
prospectus supplement will describe the debt securities and the price or prices at which we will offer the debt securities. The description
will include:
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the
title and form of the debt securities;
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any
limit on the aggregate principal amount of the debt securities or the series of which they are a part;
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the
person to whom any interest on a debt security of the series will be paid;
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the
date or dates on which we must repay the principal;
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the
rate or rates at which the debt securities will bear interest;
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the
date or dates from which interest will accrue, and the dates on which we must pay interest;
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the
place or places where we must pay the principal and any premium or interest on the debt securities;
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the
terms and conditions on which we may redeem any debt security, if at all;
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any
obligation to redeem or purchase any debt securities, and the terms and conditions on which we must do so;
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the
denominations in which we may issue the debt securities;
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the
manner in which we will determine the amount of principal of or any premium or interest on the debt securities;
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the
currency in which we will pay the principal of and any premium or interest on the debt securities;
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the
principal amount of the debt securities that we will pay upon declaration of acceleration of their maturity;
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the
amount that will be deemed to be the principal amount for any purpose, including the principal amount that will be due and payable
upon any maturity or that will be deemed to be outstanding as of any date;
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if
applicable, that the debt securities are defeasible and the terms of such defeasance;
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if
applicable, the terms of any right to convert debt securities into, or exchange debt securities for, shares of our debt securities,
common stock, or other securities or property;
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whether
we will issue the debt securities in the form of one or more global securities and, if so, the respective depositaries for the global
securities and the terms of the global securities;
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the
subordination provisions that will apply to any subordinated debt securities;
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any
addition to or change in the events of default applicable to the debt securities and any change in the right of the trustee or the
holders to declare the principal amount of any of the debt securities due and payable;
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any
addition to or change in the covenants in the indentures; and
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any
other terms of the debt securities not inconsistent with the applicable indentures.
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We
may sell the debt securities at a substantial discount below their stated principal amount. We will describe U.S. federal income tax
considerations, if any, applicable to debt securities sold at an original issue discount in the prospectus supplement. An “original
issue discount security” is any debt security sold for less than its face value, and which provides that the holder cannot receive
the full face value if maturity is accelerated. The prospectus supplement relating to any original issue discount securities will describe
the particular provisions relating to acceleration of the maturity upon the occurrence of an event of default. In addition, we will describe
U.S. federal income tax or other considerations applicable to any debt securities that are denominated in a currency or unit other than
U.S. dollars in the prospectus supplement.
Conversion
and Exchange Rights
The
prospectus supplement will describe, if applicable, the terms on which you may convert debt securities into or exchange them for debt
securities, common stock, or other securities or property. The conversion or exchange may be mandatory or may be at your option. The
prospectus supplement will describe how the amount of debt securities, number of shares of common stock, or other securities or property
to be received upon conversion or exchange would be calculated.
Senior
Debt Securities
Payment
of the principal, premium, if any, and interest on senior debt securities will rank with all of our other unsecured and unsubordinated
debt securities.
Subordinated
Debt Securities
Payment
of the principal, premium, if any, and interest on subordinated debt securities will be junior in right of payment to the prior payment
in full of all of our unsubordinated debt. We will set forth in the applicable prospectus supplement relating to any subordinated debt
securities the subordination terms of such securities as well as the aggregate amount of outstanding debt, as of the most recent practicable
date, that by its terms would be senior to the subordinated debt securities. We will also set forth in such prospectus supplement limitations,
if any, on issuance of additional senior debt.
Form,
Exchange, and Transfer
We
will issue debt securities only in fully registered form, without coupons, and only in denominations of $1,000 and integral multiples
thereof, unless the prospectus supplement provides otherwise. The holder of a debt security may elect, subject to the terms of the indentures
and the limitations applicable to global securities, to exchange them for other debt securities of the same series of any authorized
denomination and of similar terms and aggregate principal amount.
Holders
of debt securities may present them for exchange as provided above or for registration of transfer, duly endorsed or with the form of
transfer duly executed, at the office of the transfer agent we designate for that purpose. We will not impose a service charge for any
registration of transfer or exchange of debt securities, but we may require a payment sufficient to cover any tax or other governmental
charge payable in connection with the transfer or exchange. We will name the transfer agent in the prospectus supplement. We may designate
additional transfer agents or rescind the designation of any transfer agent or approve a change in the office through which any transfer
agent acts, but we must maintain a transfer agent in each place where we will make payment on debt securities.
If
we redeem the debt securities, we will not be required to issue, register the transfer of or exchange any debt security during a specified
period prior to mailing a notice of redemption. We are not required to register the transfer or exchange of any debt security selected
for redemption, except the unredeemed portion of the debt security being redeemed.
Global
Securities
The
debt securities may be represented, in whole or in part, by one or more global securities that will have an aggregate principal amount
equal to that of all debt securities of that series. Each global security will be registered in the name of a depositary identified in
the prospectus supplement. We will deposit the global security with the depositary or a custodian, and the global security will bear
a legend regarding the restrictions on exchanges and registration of transfer.
No
global security may be exchanged in whole or in part for debt securities registered, and no transfer of a global security in whole or
in part may be registered, in the name of any person other than the depositary or any nominee or successor of the depositary unless:
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the
depositary is unwilling or unable to continue as depositary; or
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the
depositary is no longer in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation.
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The
depositary will determine how all securities issued in exchange for a global security will be registered.
As
long as the depositary or its nominee is the registered holder of a global security, we will consider the depositary or the nominee to
be the sole owner and holder of the global security and the underlying debt securities. Except as stated above, owners of beneficial
interests in a global security will not be entitled to have the global security or any debt security registered in their names, will
not receive physical delivery of certificated debt securities and will not be considered to be the owners or holders of the global security
or underlying debt securities. We will make all payments of principal, premium and interest on a global security to the depositary or
its nominee. The laws of some jurisdictions require that some purchasers of securities take physical delivery of such securities in definitive
form. These laws may prevent you from transferring your beneficial interests in a global security.
Only
institutions that have accounts with the depositary or its nominee and persons that hold beneficial interests through the depositary
or its nominee may own beneficial interests in a global security. The depositary will credit, on its book-entry registration and transfer
system, the respective principal amounts of debt securities represented by the global security to the accounts of its participants. Ownership
of beneficial interests in a global security will be shown only on, and the transfer of those ownership interests will be effected only
through, records maintained by the depositary or any such participant.
The
policies and procedures of the depositary may govern payments, transfers, exchanges and others matters relating to beneficial interests
in a global security. We and the trustee will assume no responsibility or liability for any aspect of the depositary’s or any participant’s
records relating to, or for payments made on account of, beneficial interests in a global security.
Payment
and Paying Agents
We
will pay principal and any premium or interest on a debt security to the person in whose name the debt security is registered at the
close of business on the regular record date for such interest.
We
will pay principal and any premium or interest on the debt securities at the office of our designated paying agent. Unless the prospectus
supplement indicates otherwise, the corporate trust office of the trustee will be the paying agent for the debt securities.
Any
other paying agents we designate for the debt securities of a particular series will be named in the prospectus supplement. We may designate
additional paying agents, rescind the designation of any paying agent or approve a change in the office through which any paying agent
acts, but we must maintain a paying agent in each place of payment for the debt securities.
The
paying agent will return to us all money we pay to it for the payment of the principal, premium or interest on any debt security that
remains unclaimed for a specified period. Thereafter, the holder may look only to us for payment, as an unsecured general creditor.
Consolidation,
Merger, and Sale of Assets
Under
the terms of the indentures, so long as any securities remain outstanding, we may not consolidate or enter into a share exchange with
or merge into any other person, in a transaction in which we are not the surviving corporation, or sell, convey, transfer or lease our
properties and assets substantially as an entirety to any person, unless:
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the
successor assumes our obligations under the debt securities and the indentures; and
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we
meet the other conditions described in the indentures.
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Events
of Default
Each
of the following will constitute an event of default under each indenture:
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failure
to pay the principal of or any premium on any debt security when due;
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failure
to pay any interest on any debt security when due, for more than a specified number of days past the due date;
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failure
to deposit any sinking fund payment when due;
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failure
to perform any covenant or agreement in the indenture that continues for a specified number of days after written notice has been
given by the trustee or the holders of a specified percentage in aggregate principal amount of the debt securities of that series;
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events
of bankruptcy, insolvency or reorganization; and
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any
other event of default specified in the prospectus supplement.
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Additional
or different events of default applicable to a series of debt securities may be described in a prospectus supplement. An event of default
of one series of debt securities is not necessarily an event of default for any other series of debt securities.
If
an event of default occurs and continues, both the trustee and holders of a specified percentage in aggregate principal amount of the
outstanding securities of that series may declare the principal amount of the debt securities of that series to be immediately due and
payable. The holders of a majority in aggregate principal amount of the outstanding securities of that series may rescind and annul the
acceleration if all events of default, other than the nonpayment of accelerated principal, have been cured or waived.
Except
for its duties in case of an event of default, the trustee will not be obligated to exercise any of its rights or powers at the request
or direction of any of the holders, unless the holders have offered the trustee reasonable indemnity. If they provide this indemnification
and subject to conditions specified in the applicable indenture, the holders of a majority in aggregate principal amount of the outstanding
securities of any series may direct the time, method and place of conducting any proceeding for any remedy available to the trustee or
exercising any trust or power conferred on the trustee with respect to the debt securities of that series.
No
holder of a debt security of any series may institute any proceeding with respect to the indentures, or for the appointment of a receiver
or a trustee, or for any other remedy, unless:
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holder has previously given the trustee written notice of a continuing event of default;
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the
holders of a specified percentage in aggregate principal amount of the outstanding securities of that series have made a written
request upon the trustee, and have offered reasonable indemnity to the trustee, to institute the proceeding;
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the
trustee has failed to institute the proceeding for a specified period of time after its receipt of the notification; and
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the
trustee has not received a direction inconsistent with the request within a specified number of days from the holders of a specified
percentage in aggregate principal amount of the outstanding securities of that series.
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Modification
and Waiver
We
and the trustee may change an indenture without the consent of any holders with respect to specific matters, including:
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to
fix any ambiguity, defect or inconsistency in the indenture; and
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to
change anything that does not materially adversely affect the interests of any holder of debt securities of any series.
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In
addition, under the indentures, the rights of holders of a series of debt securities may be changed by us and the trustee with the written
consent of the holders of at least a majority in aggregate principal amount of the outstanding debt securities of each series that is
affected. However, we and the trustee may only make the following changes with the consent of the holder of any outstanding debt securities
affected:
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extending
the fixed maturity of the series of debt securities;
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reducing
the principal amount, reducing the rate of or extending the time of payment of interest, or any premium payable upon the redemption,
of any debt securities; or
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reducing
the percentage of debt securities the holders of which are required to consent to any amendment.
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The
holders of a majority in principal amount of the outstanding debt securities of any series may waive any past default under the indenture
with respect to debt securities of that series, except a default in the payment of principal, premium or interest on any debt security
of that series or in respect of a covenant or provision of the indenture that cannot be amended without each holder’s consent.
Except
in limited circumstances, we may set any day as a record date for the purpose of determining the holders of outstanding debt securities
of any series entitled to give or take any direction, notice, consent, waiver or other action under the indentures. In limited circumstances,
the trustee may set a record date. To be effective, the action must be taken by holders of the requisite principal amount of such debt
securities within a specified period following the record date.
Defeasance
To
the extent stated in the prospectus supplement, we may elect to apply the provisions in the indentures relating to defeasance and discharge
of indebtedness, or to defeasance of restrictive covenants, to the debt securities of any series. The indentures provide that, upon satisfaction
of the requirements described below, we may terminate all of our obligations under the debt securities of any series and the applicable
indenture, known as legal defeasance, other than our obligation:
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to
maintain a registrar and paying agents and hold monies for payment in trust;
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to
register the transfer or exchange of the debt securities; and
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to
replace mutilated, destroyed, lost or stolen debt securities.
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In
addition, we may terminate our obligation to comply with any restrictive covenants under the debt securities of any series or the applicable
indenture, known as covenant defeasance.
We
may exercise our legal defeasance option even if we have previously exercised our covenant defeasance option. If we exercise either defeasance
option, payment of the debt securities may not be accelerated because of the occurrence of events of default.
To
exercise either defeasance option as to debt securities of any series, we must irrevocably deposit in trust with the trustee money and/or
obligations backed by the full faith and credit of the United States that will provide money in an amount sufficient in the written opinion
of a nationally recognized firm of independent public accountants to pay the principal of, premium, if any, and each installment of interest
on the debt securities. We may only establish this trust if, among other things:
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no
event of default shall have occurred or be continuing;
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in
the case of legal defeasance, we have delivered to the trustee an opinion of counsel to the effect that we have received from, or
there has been published by, the Internal Revenue Service a ruling or there has been a change in law, which in the opinion of our
counsel, provides that holders of the debt securities will not recognize gain or loss for federal income tax purposes as a result
of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount, in the same manner and at
the same times as would have been the case if such deposit, defeasance and discharge had not occurred;
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in
the case of covenant defeasance, we have delivered to the trustee an opinion of counsel to the effect that the holders of the debt
securities will not recognize gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge
and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case
if such deposit, defeasance and discharge had not occurred; and
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we
satisfy other customary conditions precedent described in the applicable indenture.
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Notices
We
will mail notices to holders of debt securities as indicated in the prospectus supplement.
Title
We
may treat the person in whose name a debt security is registered as the absolute owner, whether or not such debt security may be overdue,
for the purpose of making payment and for all other purposes.
Governing
Law
The
indentures and the debt securities will be governed by and construed in accordance with the laws of the State of New York.
Regarding
the Trustee
The
trustee will have all the duties and responsibilities of an indenture trustee specified in the Trust Indenture Act. The trustee is not
required to expend or risk its own funds or otherwise incur financial liability in performing its duties or exercising its rights and
powers if it reasonably believes that it is not reasonably assured of repayment or adequate indemnity.
DESCRIPTION
OF WARRANTS
We
may issue warrants for the purchase of common stock or preferred stock (which we refer to in this section as the “applicable capital
stock”). Warrants may be issued separately or together with common stock, preferred stock or debt securities, and may be attached
to or separate from such common stock, preferred stock or debt securities. Each series of warrants will be issued under a separate warrant
agreement to be entered into between us and a bank or trust corporation, as warrant agent, all as set forth in the prospectus supplement
relating to the particular issue of offered warrants. The warrant agent will act solely as our agent in connection with the warrants
and will not assume any obligation or relationship of agency or trust for or with any holders of warrants or beneficial owners of warrants.
Copies of the forms of warrant agreements, including the forms of warrant certificates representing the warrants, will be filed as exhibits
to a document incorporated by reference into this prospectus.
This
section describes the general terms and provisions of the warrants offered hereby. The applicable prospectus supplement will describe
the specific terms of any issuance of warrants. You should read the particular terms of any warrants we offer in any prospectus supplement,
together with the more detailed form of warrant agreement and the form of warrant certificate. The prospectus supplement also will state
whether any of the terms summarized below do not apply to the warrants being offered.
General
The
applicable prospectus supplement will describe the terms of the warrants, including the following where applicable:
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the
title of the warrants;
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the
offering price of the warrants, if any;
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the
aggregate number of warrants;
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the
designation and terms of the applicable capital stock that is purchasable upon exercise of the warrants;
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the
designation and terms of the securities with which the warrants are issued, and the number of warrants issued with each such security;
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the
date after which the warrants and any securities issued with the warrants will be separately transferable;
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the
number of shares of applicable capital stock purchasable upon exercise of a warrant and the purchase price;
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the
dates on which the right to exercise the warrants begins and expires;
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the
minimum or maximum number of warrants that may be exercised at any one time;
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the
currency, currencies or currency units in which the offering price, if any, and the exercise price are payable;
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a
discussion of certain United States federal income tax considerations;
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any
antidilution provisions of the warrants;
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any
redemption or call provisions applicable to the warrants; and
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any
additional terms of the warrants, including terms, procedures and limitations relating to the exchange and exercise of the warrants.
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Warrant
certificates may be exchanged for new warrant certificates of different denominations, may be presented for registration of transfer,
and may be exercised at the corporate trust office of the warrant agent or any other office indicated in the applicable prospectus supplement.
Prior to the exercise of any warrants to purchase shares of applicable capital stock, holders of such warrants will not have any rights
of holders of the underlying shares of applicable capital stock purchasable upon such exercise, including the right to receive payments
of dividends, if any, on the shares of applicable capital stock purchasable upon such exercise or to exercise any applicable right to
vote.
Exercise
of Warrants
Each
warrant will entitle the holder thereof to purchase such number of shares of applicable capital stock at such exercise price as shall
in each case be set forth in, or calculable from, the prospectus supplement relating to the offered warrants. After the close of business
on the expiration date of the warrants (or such later date to which such expiration date may be extended by us), unexercised warrants
will become void.
Warrants
may be exercised by delivering to the warrant agent payment as provided in the applicable prospectus supplement of the amount required
to purchase the shares of applicable capital stock purchasable upon such exercise together with certain information set forth on the
reverse side of the warrant certificate. Warrants will be deemed to have been exercised upon receipt of payment of the exercise price,
subject to the receipt, within five business days, of the warrant certificate evidencing such warrants. Upon receipt of such payment
and the warrant certificate properly completed and duly executed at the corporate trust office of the warrant agent or any other office
indicated in the applicable prospectus supplement, we will, as soon as practicable, issue and deliver the shares of applicable capital
stock purchasable upon such exercise. If fewer than all of the warrants represented by the warrant certificate are exercised, a new warrant
certificate will be issued for the remaining number of warrants.
Amendments
and Supplements to Warrant Agreements
We
and the relevant warrant agent may, with the consent of the holders of at least a majority in number of the outstanding unexercised warrants
affected, modify or amend the warrant agreement and the terms of the warrants. However, the warrant agreements may be amended or supplemented
without the consent of the holders of the warrants issued thereunder to effect changes that are not inconsistent with the provisions
of the warrants and that do not adversely affect the interests of the holders of the warrants. Notwithstanding the foregoing, no such
modification or amendment may, without the consent of the holders of each warrant affected:
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reduce
the amount receivable upon exercise, cancellation or expiration;
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shorten
the period of time during which the warrants may be exercised;
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otherwise
materially and adversely affect the exercise rights of the beneficial owners of the warrants; or
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reduce
the percentage of outstanding warrants whose holders must consent to modification or amendment of the applicable warrant agreement
or the terms of the warrants.
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Antidilution
and Other Adjustments
Unless
otherwise indicated in the applicable prospectus supplement, the exercise price of, and the number of shares of applicable capital stock
covered by a warrant, are subject to adjustment in certain events, including:
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the
issuance of shares of applicable capital stock as a dividend or distribution on the shares of applicable capital stock;
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subdivisions
and combinations of the applicable capital stock;
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the
issuance to all holders of shares of applicable capital stock of rights entitling them to subscribe for or purchase shares of applicable
capital stock within 45 days after the date fixed for the determination of the stockholders entitled to receive such capital stock
rights, at less than the current market price; and
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the
distribution to all holders of shares of applicable capital stock of evidences of our indebtedness or assets (excluding certain cash
dividends and distributions described below) or rights or warrants (excluding those referred to above).
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We
may, in lieu of making any adjustment in the exercise price of, and the number of shares of applicable capital stock covered by, a warrant,
make proper provision so that each holder of such warrant who exercises such warrant (or any portion thereof):
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before
the record date for such distribution of separate certificates, shall be entitled to receive upon such exercise shares of applicable
capital stock issued with capital stock rights; and
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after
such record date and prior to the expiration, redemption or termination of such capital stock rights, shall be entitled to receive
upon such exercise, in addition to the shares of applicable capital stock issuable upon such exercise, the same number of such capital
stock rights as would a holder of the number of shares of applicable capital stock that such warrants so exercised would have entitled
the holder thereof to acquire in accordance with the terms and provisions applicable to the capital stock rights if such warrant
was exercised immediately prior to the record date for such distribution.
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Shares
of applicable capital stock owned by or held for our account or for the account of any of our majority owned subsidiaries will not be
deemed outstanding for the purpose of any adjustment.
No
adjustment in the exercise price of, and the number of shares of applicable capital stock covered by, a warrant will be made for regular
quarterly or other periodic or recurring cash dividends or distributions of cash dividends or distributions to the extent paid from retained
earnings. Except as stated above, the exercise price of, and the number of shares of applicable capital stock covered by, a warrant will
not be adjusted for the issuance of shares of applicable capital stock or any securities convertible into or exchangeable for shares
of applicable capital stock, or securities carrying the right to purchase any of the foregoing.
In
the case of a reclassification or change of the applicable capital stock, a consolidation or merger involving us or sale or conveyance
to another corporation of our property and assets as an entirety or substantially as an entirety, in each case as a result of which holders
of shares of applicable capital stock shall be entitled to receive stock, securities, other property or assets (including cash) with
respect to or in exchange for such shares of applicable capital stock, the holders of the warrants then outstanding will be entitled
thereafter to convert such warrants into the kind and number of shares of stock and amount of other securities or property which they
would have received upon such reclassification, change, consolidation, merger, sale or conveyance had such warrants been exercised immediately
prior to such reclassification, change, consolidation, merger, sale or conveyance.
DESCRIPTION
OF SUBSCRIPTION RIGHTS
The
following summary describes the general terms and provisions of the subscription rights to purchase our common stock or other securities
that we may offer to our shareholders. Subscription rights may be issued independently or together with any other offered security and
may or may not be transferable by the person purchasing or receiving the subscription rights. Unless we are prohibited from doing so
by the applicable rules and regulations of the SEC (including the General Instructions to Form S-3) based on the aggregate market value
of our outstanding common equity held by non-affiliates, in connection with any subscription rights offering to our shareholders, we
may enter into a standby underwriting or other arrangement with one or more underwriters or other persons pursuant to which such underwriters
or other persons would purchase any offered securities remaining unsubscribed for after such subscription rights offering. Each series
of subscription rights will be issued under a separate subscription rights agent agreement to be entered into between us and a bank or
trust company, as subscription rights agent, that we will name in the applicable prospectus supplement. The subscription rights agent
will act solely as our agent in connection with the certificates relating to the subscription rights and will not assume any obligation
or relationship of agency or trust for or with any holders of subscription rights certificates or beneficial owners of subscription rights.
The
prospectus supplement relating to any subscription rights we offer will include specific terms relating to the offering, including, among
others:
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the
securities for which the subscription rights are exercisable;
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the
exercise price for such subscription rights;
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the
number of such subscription rights issued to each shareholder;
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the
number of shares of common stock or amount of any other securities purchasable upon exercise of such subscription rights;
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the
extent, if any, to which such subscription rights are transferable;
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a
discussion of the material U.S. federal income tax considerations applicable to the issuance or exercise of such subscription rights;
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the
date on which the right to exercise such subscription rights shall commence, and the date on which such rights shall expire (subject
to any extension);
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the
extent to which such subscription rights include an over-subscription privilege with respect to unsubscribed securities;
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if
applicable, the material terms of any standby underwriting or other purchase arrangement that we may enter into in connection with
the subscription rights offering; and
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any
other terms of such subscription rights, including terms, procedures and limitations relating to the exercise of such subscription
rights.
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Each
subscription right will entitle the holder of the subscription right to purchase for cash the number of shares of our common stock or
other securities at an exercise price set forth in, or determinable as set forth in, the applicable prospectus supplement. Subscription
rights may be exercised at any time up to the close of business on the expiration date for the subscription rights provided in the applicable
prospectus supplement. After the close of business on the expiration date, all unexercised subscription rights will become void and of
no further force or effect.
Holders
may exercise subscription rights as described in the applicable prospectus supplement. Upon receipt of payment and the subscription rights
certificate properly completed and duly executed at the corporate trust office of the subscription rights agent or any other office indicated
in the prospectus supplement, we will, as soon as practicable, issue the shares of common stock or other security purchasable upon exercise
of the subscription rights. Unless we are prohibited from doing so by the applicable rules and regulations of the SEC (including the
General Instructions to Form S-3) based on the aggregate market value of our outstanding common equity held by non-affiliates, if less
than all of the subscription rights issued in any subscription rights offering are exercised, we may offer any unsubscribed securities
directly to persons other than shareholders, to or through agents, underwriters or dealers or through a combination of such methods,
including pursuant to standby arrangements, as described in the applicable prospectus supplement.
The
description in the applicable prospectus supplement and other offering material of any subscription rights we offer will not necessarily
be complete and will be qualified in its entirety by reference to the applicable subscription rights certificate, the form of which will
be filed with the SEC if we offer subscription rights. We urge you to read the form of subscription rights certificate, prospectus supplement
and other offering material in their entirety.
DESCRIPTION
OF UNITS
We
may issue units comprised of one or more of the other classes of securities described in this prospectus in any combination. Each unit
will be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will
have the rights and obligations of a holder of each included security. The units may be issued under unit agreements to be entered into
between us and a unit agent, as detailed in the prospectus supplement relating to the units being offered. The prospectus supplement
will describe:
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the
designation and terms of the units and of the securities comprising the units, including whether and under what circumstances the
securities comprising the units may be held or transferred separately;
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a
description of the terms of any unit agreement governing the units;
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a
description of the provisions for the payment, settlement, transfer or exchange of the units;
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a
discussion of material federal income tax considerations, if applicable; and
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whether
the units if issued as a separate security will be issued in fully registered or global form.
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The
descriptions of the units in this prospectus and in any prospectus supplement are summaries of the material provisions of the applicable
agreements. These descriptions do not restate those agreements in their entirety and may not contain all the information that you may
find useful. We urge you to read the applicable agreements because they, and not the summaries, define your rights as holders of the
units. For more information, please review the forms of the relevant agreements, which will be filed with the SEC and will be available
as described under the headings “Information Incorporated by Reference” and “Where You Can Find More Information”.
PLAN
OF DISTRIBUTION
We
may offer and sell the securities in any one or more of the following ways:
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to
or through underwriters, brokers or dealers;
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directly
to one or more other purchasers;
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upon
the exercise of rights distributed or issued to our security holders;
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through
a block trade in which the broker or dealer engaged to handle the block trade will attempt to sell the securities as agent, but may
position and resell a portion of the block as principal to facilitate the transaction;
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through
agents on a best-efforts basis; or
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otherwise
through a combination of any of the above methods of sale.
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We
may sell the securities being offered by this prospectus by any other method permitted by law, including sales deemed to be an “at
the market” offering as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended (which we refer to as the “Securities
Act”), including without limitation sales made directly on the NASDAQ Capital Market, on any other existing trading market for
our securities or to or through a market maker.
In
addition, we may enter into option, share lending or other types of transactions that require us to deliver the securities to an underwriter,
broker or dealer, who will then resell or transfer the securities under this prospectus. We may also enter into hedging transactions
with respect to our securities. For example, we may:
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enter
into transactions involving short sales of the securities by underwriters, brokers or dealers;
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sell
securities short and deliver the shares to close out short positions;
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enter
into option or other types of transactions that require us to deliver the securities to an underwriter, broker or dealer, who will
then resell or transfer the securities under this prospectus; or
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loan
or pledge the securities to an underwriter, broker or dealer, who may sell the loaned securities or, in the event of default, sell
the pledged securities.
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We
may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately
negotiated transactions. If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may
sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions. If so, the
third party may use securities pledged by us, or borrowed from us or others to settle those sales or to close out any related open borrowings
of stock, and may use securities received from us in settlement of those derivatives to close out any related open borrowings of stock.
The third party in such sale transactions will be an underwriter and, if not identified in this prospectus, will be identified in the
applicable prospectus supplement (or a post-effective amendment). In addition, we may otherwise loan or pledge securities to a financial
institution or other third party that in turn may sell the securities short using this prospectus. Such financial institution or other
third party may transfer its economic short position to investors in our securities, or in connection with a concurrent offering of other
securities.
Each
time we sell securities, we will provide a prospectus supplement that will name any underwriter, dealer or agent involved in the offer
and sale of the securities. The prospectus supplement will also set forth the terms of the offering, including:
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the
purchase price of the securities and the proceeds we will receive from the sale of the securities;
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any
underwriting discounts and other items constituting underwriters’ compensation;
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any
public offering or purchase price and any discounts or commissions allowed or re-allowed or paid to dealers;
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any
commissions allowed or paid to agents;
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any
other offering expenses;
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any
securities exchanges on which the securities may be listed;
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the
method of distribution of the securities;
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the
terms of any agreement, arrangement or understanding entered into with the underwriters, brokers or dealers; and
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any
other information we think is important.
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If
underwriters or dealers are used in the sale, the securities will be acquired by the underwriters or dealers for their own account. The
securities may be sold from time to time by us in one or more transactions:
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at
a fixed price or prices, which may be changed;
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at
market prices prevailing at the time of sale;
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at
prices related to such prevailing market prices;
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at
varying prices determined at the time of sale; or
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at
negotiated prices.
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Such
sales may be effected:
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in
transactions on any national securities exchange or quotation service on which the securities may be listed or quoted at the time
of sale;
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in
transactions in the over-the-counter market;
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in
block transactions in which the broker or dealer so engaged will attempt to sell the securities as agent but may position and resell
a portion of the block as principal to facilitate the transaction, or in crosses, in which the same broker acts as an agent on both
sides of the trade;
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through
the writing of options; or
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through
other types of transactions.
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The
securities may be offered to the public either through underwriting syndicates represented by one or more managing underwriters or directly
by one or more of such firms. Unless otherwise set forth in the prospectus supplement, the obligations of underwriters or dealers to
purchase the securities offered will be subject to certain conditions precedent and the underwriters or dealers will be obligated to
purchase all the offered securities if any are purchased. Any public offering price and any discount or concession allowed or reallowed
or paid by underwriters or dealers to other dealers may be changed from time to time.
In
addition, any securities covered by this prospectus that qualify for sale pursuant to Rule 144 under the Securities Act may be sold under
Rule 144 rather than pursuant to this prospectus.
The
securities may be sold directly by us or through agents designated by us, from time to time. Any agent involved in the offer or sale
of the securities in respect of which this prospectus is delivered will be named, and any commissions payable by us to such agent will
be set forth in, the prospectus supplement. Unless otherwise indicated in the prospectus supplement, any such agent will be acting on
a best efforts basis for the period of its appointment.
Offers
to purchase the securities offered by this prospectus may be solicited, and sales of the securities may be made by us directly to institutional
investors or others, who may be deemed to be underwriters within the meaning of the Securities Act with respect to any resale of the
securities. The terms of any offer made in this manner will be included in the prospectus supplement relating to the offer.
If
indicated in the applicable prospectus supplement, underwriters, dealers or agents will be authorized to solicit offers by certain institutional
investors to purchase securities from us pursuant to contracts providing for payment and delivery at a future date. Institutional investors
with which these contracts may be made include, among others:
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commercial
and savings banks;
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insurance
companies;
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pension
funds;
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investment
companies; and
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educational
and charitable institutions.
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In
all cases, these purchasers must be approved by us. Unless otherwise set forth in the applicable prospectus supplement, the obligations
of any purchaser under any of these contracts will not be subject to any conditions except that (a) the purchase of the securities must
not at the time of delivery be prohibited under the laws of any jurisdiction to which that purchaser is subject, and (b) if the securities
are also being sold to underwriters, we must have sold to these underwriters the securities not subject to delayed delivery. Underwriters
and other agents will not have any responsibility in respect of the validity or performance of these contracts.
Some
of the underwriters, dealers or agents used by us in any offering of securities under this prospectus may be customers of, engage in
transactions with, and perform services for us, or affiliates of ours and/or theirs, as applicable, in the ordinary course of business.
Underwriters, dealers, agents and other persons may be entitled under agreements which may be entered into with us to indemnification
against and contribution toward certain civil liabilities, including liabilities under the Securities Act, and to be reimbursed by us
for certain expenses.
Subject
to any restrictions relating to debt securities in bearer form, any securities initially sold outside the United States may be resold
in the United States through underwriters, dealers or otherwise.
Any
underwriters to which offered securities are sold by us for public offering and sale may make a market in such securities, but those
underwriters will not be obligated to do so and may discontinue any market making at any time.
The
anticipated date of delivery of the securities offered by this prospectus will be described in the applicable prospectus supplement relating
to the offering.
In
compliance with the guidelines of the Financial Industry Regulatory Authority (which we refer to as “FINRA”), the aggregate
maximum discount, commission, agency fees or other items constituting underwriting compensation to be received by any FINRA member or
independent broker-dealer will not exceed 8% of the offering proceeds from any offering pursuant to this prospectus and any applicable
prospectus supplement.
No
FINRA member may participate in any offering of securities made under this prospectus if such member has a conflict of interest under
FINRA Rule 5121, including if 5% or more of the net proceeds, not including underwriting compensation, of any offering of securities
made under this prospectus will be received by a FINRA member participating in the offering or affiliates or associated persons of such
FINRA members, unless a qualified independent underwriter has participated in the offering or the offering otherwise complies with FINRA
Rule 5121.
To
comply with the securities laws of some states, if applicable, the securities may be sold in these jurisdictions only through registered
or licensed brokers or dealers. In addition, in some states the securities may not be sold unless they have been registered or qualified
for sale or an exemption from registration or qualification requirements is available and is complied with.
LEGAL
MATTERS
Unless
otherwise indicated in the applicable prospectus supplement, the validity of the securities offered by us pursuant to this prospectus
will be passed upon for us by Greenberg Traurig, LLP, Los Angeles, California. If the validity of the securities will be passed upon
by counsel for any underwriters, dealers or agents, such counsel will be named in the applicable prospectus supplement.
EXPERTS
The
consolidated financial statements of FAT Brands Inc. incorporated by reference from our Annual Report on Form 10-K the fiscal year ended
December 27, 2020 have been audited by Baker Tilly US, LLP, independent public accounting firm, as set forth in their report thereon
included therein. Such financial statements incorporated by reference in this prospectus have been so incorporated in reliance on the
reports of Baker Tilly US, LLP, given on their authority as experts in auditing and accounting.
INFORMATION
INCORPORATED BY REFERENCE
The
SEC allows us to “incorporate by reference” information that we file with the SEC into this prospectus, which means we can
disclose important information to you by referring you to another document. The information incorporated by reference is considered to
be part of this prospectus from the date on which we file that document. Any reports filed by us with the SEC (i) on or after the date
of filing of the registration statement of which this prospectus forms a part, and (ii) on or after the date of this prospectus and before
the termination of the offering of the securities by means of this prospectus, will automatically update and, where applicable, supersede
information contained in this prospectus or incorporated by reference into this prospectus. We incorporate by reference the following
documents:
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Our
Annual Report on Form 10-K for the fiscal year ended December 27, 2020, filed with the SEC on March 29, 2021;
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Our
Quarterly Report on Form 10-Q for the quarterly period ended March 28, 2021, filed with the SEC on May 12, 2021;
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Our
Current Reports on Form 8-K filed with the SEC on (i) December 30, 2020, as amended by Amendment No. 1 to Form 8-K filed on March
12, 2021, (ii) January
11, 2021 (only with respect to Item 8.01), (iii) January
28, 2021, (iv) February
26, 2021, (v) March
31, 2021, as amended by Amendment No. 1 to Form 8-K filed on April
1, 2021, (vi) April
22, 2021, (vii) April
26, 2021, (viii) April
29, 2021, and (ix) May
19, 2021;
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The
description of our common stock contained in our registration statement on Form 8-A filed with the SEC on October
19, 2017, including any amendment or report filed for the purpose of updating such descriptions;
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The
description of our Series B Preferred Stock contained in our registration statement on Form 8-A filed with the SEC on July
7, 2020, including any amendment or report filed for the purpose of updating such descriptions; and
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Any
documents we file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended
(which we refer to as the “Exchange Act”) after the date of this prospectus and before the termination of the offering
of the securities offered hereby.
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You
may request a copy of these filings, at no cost, by writing or calling us at the following address:
FAT
Brands Inc.
9720 Wilshire Blvd., Suite 500
Beverly
Hills, California 90212
(310)
319-1850
Attn:
Investor Relations
WHERE
YOU CAN FIND MORE INFORMATION
We
are subject to the information requirements of the Exchange Act. Accordingly, we file annual, quarterly and current reports, proxy statements
and other information with the SEC, and filed a registration statement on Form S-3 under the Securities Act relating to the securities
offered by this prospectus. This prospectus, which forms part of the registration statement, does not contain all of the information
included in the registration statement. For further information, you should refer to the registration statement and its exhibits.
You
can also review our filings by accessing the website maintained by the SEC at http://www.sec.gov. The site contains reports, proxy and
information statements and other information regarding issuers that file electronically with the SEC. In addition, to the foregoing,
we maintain a website at http://www.fatbrands.com. Our website content is made available for informational purposes only. It should neither
be relied upon for investment purposes nor is it incorporated by reference into this prospectus. We make available on our website copies
of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to such document as
soon as practicable after we electronically file such material with or furnish such documents to the SEC.
1,000,000
shares of 8.25% Series B Cumulative
Preferred Stock
(Liquidation
Preference $25.00 Per Share)
FAT
Brands Inc.
PROSPECTUS
SUPPLEMENT
ThinkEquity
October
27, 2021
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