NOTE 1. ORGANIZATION AND RELATIONSHIPS Organization and Nature of Business FAT Brands Inc. (the Company) was formed on March 21, 2017 as a wholly owned subsidiary of Fog Cutter Capital Group Inc. (FCCG). On October 20, 2017, the Company completed an initial public offering and issued additional shares of common stock representing 20 percent of its ownership (the Offering). The Companys common stock trades on the Nasdaq Capital Market under the symbol FAT. As of December 29, 2019, FCCG continues to control a significant voting majority of the Company. The Company is a multi-brand franchisor specializing in fast casual and casual dining restaurant concepts around the world. As of December 29, 2019, the Company owns and franchises eight restaurant brands through various wholly owned subsidiaries: Fatburger, Buffalos Cafe, Buffalos Express, Hurricane Grill &amp; Wings, Ponderosa Steakhouses, Bonanza Steakhouses, Yalla Mediterranean and Elevation Burger. Combined, these brands have over 370 locations open and more than 200 under development. Liquidity The Company recognized income from operations of $6,703,000 and $4,236,000 during the fiscal years ended December 29, 2019 and December 30, 2018, respectively. Net cash provided by operating activities totaled $3,070,000 and $1,837,000 for the fiscal years ended December 29, 2019 and December 30, 2018, respectively. Despite the profitability of the brands and their operations, the Company recognized net losses of $1,018,000 and $1,798,000 during fiscal years ended December 29, 2019 and December 30, 2018, respectively. These net losses were primarily due to (i) higher net interest expense during 2019 as compared to the prior year related to higher debt balances related to its Loan and Security Agreement (See Note 11) and (ii) higher net interest expense during 2019 compared to the prior year related to Series A Fixed Rate Cumulative Preferred Stock and Series A-1 Fixed Rate Cumulative Preferred Stock being outstanding for a full year in 2019 compared to a partial year in 2018 (See Note 13). Subsequent to December 29, 2019, on March 6, 2020, the Company completed a whole business securitization (the Securitization) through the creation of a bankruptcy-remote issuing entity, FAT Brands Royalty I, LLC (FAT Royalty) in which FAT Royalty issued new notes pursuant to an asset-backed securitization (the Securitization Notes) and indenture (the Indenture). Net proceeds from the issuance of the Securitization Notes were $37,314,000, which consists of the combined face amount of $40,000,000, net of discounts of $246,000 and debt offering costs of $2,440,000 (See Note 22). A portion of the proceeds from the Securitization was used to repay the remaining $26,771,000 in outstanding balance under the Loan and Security Agreement. The remaining proceeds from the Securitization will be used for working capital. Further, 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 temporarily closed some retail locations, reduced or modified store operating hours, adopted a to-go only operating model, or a combination of these actions. These actions have reduced consumer traffic, all resulting in a negative impact to Company revenues. While the disruption is currently expected to be temporary, there is uncertainty around the duration and long-term changes in consumer behavior related to social distancing resulting from COVID-19 and the ultimate impact on our franchisees. While the Company expects COVID-19 to negatively impact its business, results of operations, and financial position, the related financial impact cannot be reasonably estimated at this time. However, the Company believes that the working capital from the Securitization combined with receipts collected from the limited operations of its franchisees, and disciplined management of the Company operating expenses will be sufficient for the twelve months of operations following the issuance of this Form 10-K.