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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the year ended December 31, 2022

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

For transition period from to

Commission File Number 001-36773

F45 Training Holdings Inc.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)						84-2529722 (I.R.S. Employer Identification Number)
3601 South Congress Avenue, Building E Austin, Texas 78704 (Address of principal executive offices and zip code) (737) 787-1955 (Registrant's telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class Common stock, par value $0.00005	Trading Symbol FXLV	Name of each exchange on which registered New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ◻ No ⌧

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ◻ No ⌧

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

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes No

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Note: Disclosure is not being provided under this item pursuant to guidance issued by the staff of the Securities and Exchange Commission.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o

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

The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2022 was approximately $142.4 million (based on the closing sales price of the registrant’s common stock of $3.93 per share on that date).

As of October 19, 2023, there were approximately 97,516,791 shares of the registrant's common stock outstanding.

F45 Training Holdings Inc.

Form 10-K

Table of Contents


Part I.		Page

Item 1.	Business	2
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	50
Item 2.	Properties	50
Item 3.	Legal Proceedings	50
Item 4.	Mine Safety Disclosures	50

Part II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	51
Item 6.	Selected Consolidated Financial Data	52
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	53
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	94
Item 8.	Financial Statements and Supplementary Data	95
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	154
Item 9A.	Controls and Procedures	154
Item 9B.	Other Information	157

Part III.
Item 10.	Directors, Executive Officers, and Corporate Governance	157
Item 11.	Executive Compensation	165
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	170
Item 13.	Certain Relationships and Related Transactions, and Director Independence	174
Item 14.	Principal Accountant Fees and Services	177

Part IV.
Item 15.	Exhibits, Financial Statement Schedules	178
Item 16.	Form 10-K Summary	185

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “forecast,” “predicts,” “potential,” or “continue” or the negative of these words, variations of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Such forward-looking statements are subject to certain risks, uncertainties and assumptions relating to factors that could cause actual results to differ materially from those anticipated in such statements, including, without limitation, the following:

•our history of operating losses and negative cash flow;

•our dependence on the operational and financial results of, and our relationships with, our franchisees and the success of their new and existing studios;

•our inability to sell new franchises due to our delayed financial reporting;

•our ability to protect our brand and reputation;

•our ability to identify, recruit and contract with a sufficient number of qualified franchisees;

•our ability to execute our growth strategy, including through development of new studios by new and existing franchisees;

•our ability to manage our growth and the associated strain on our resources;

•our ability to identify, source and procure components of our inventories on a timely basis and at attractive economics terms;

•our ability to raise capital, including potential effects from our delisting from the NYSE and anticipated deregistration of our common stock from the Securities and Exchange Commission;

•our ability to successfully integrate any acquisitions, or realize their anticipated benefits;

•the high level of competition in the health and fitness industry;

•economic, political and other risks associated with our international operations, including due to the Russia-Ukraine conflict;

•changes to the industry in which we operate;

•our reliance on information systems and our and our franchisees’ ability to properly maintain the confidentiality and integrity of our data;

•the occurrence of cyber incidents or a deficiency in our cybersecurity protocols;

•our and our franchisees’ ability to attract and retain members;

•our and our franchisees’ ability to identify and secure suitable sites for new franchise studios;

•risks related to franchisees generally;

•our ability to obtain third-party licenses for the use of music to supplement our workouts;

•risks related to litigation;

•certain health and safety risks to members that arise while at our studios;

•our ability to adequately protect our intellectual property;

•our ability to adequately ensure that we are not infringing on the intellectual property of others;

•risks associated with the use of social media platforms in our marketing;

•our ability to obtain and retain high-profile strategic partnership arrangements;

•our ability to comply with existing or future franchise laws and regulations;

•our ability to anticipate and satisfy consumer preferences and shifting views of health and fitness;

•our business model being susceptible to litigation; and

•additional factors discussed in our SEC filings, including those identified under the header “Risk Factors” beginning on Page 14 of this Annual Report on Form 10-K.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report on Form 10-K on historical performance, management’s current expectations and projections about future events and trends that management believes may affect our business, results of operations, financial condition and prospects in light of information currently available to us.

The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward- looking statements contained in this Annual Report on Form 10-K. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Annual Report on Form 10-K relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Annual Report on Form 10-K to reflect events or circumstances after the date of this report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report on Form 10-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

EXPLANATORY NOTE

As previously reported in F45 Training Holdings Inc.'s (the "Company") Current Report on Form 8-K filed with the SEC on July 7, 2023, the Audit Committee of the Board of Directors of the Company concluded the Company's previously issued consolidated financial statements as of and for the year ended December 31, 2021, and the previously issued condensed consolidated financial statements as of and for the first three quarters of the year ended December 31, 2022, should no longer be relied upon, which financial statements will be restated.

This Annual Report on Form 10-K for the year ended December 31, 2022 includes the restatement of the Company's consolidated financial statements as of and for the year ended December 31, 2021, along with restated interim financial statements as of and for the periods ended March 31, 2022, June 30, 2022 and September 30, 2022.

The Company does not plan to amend its Annual Report on Form 10-K for the year ended December 31, 2021, nor to amend the quarterly reports on Form 10-Q for the first three quarterly periods in the year ended December 31, 2022. We draw your attention to the restated consolidated financial statements for the year ended December 31, 2021 included in Part II, Item 8, "Financial Statements and Supplementary Data" of this filing, and the restated interim condensed consolidated financial statements in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this filing.

Internal Control Considerations

In connection with the restatement of the previously issued financial statements, management has assessed the effectiveness of our internal controls over financial reporting as of December 31, 2022. Based on this assessment, management has identified material weaknesses in our internal control over financial reporting as of December 31, 2022. As a result, the Company’s disclosure controls and procedures were not effective as of December 31, 2022. Management is in the process of taking steps to remediate the material weaknesses in our internal control over financial reporting, as described in Part II, Item 9A, “Controls and Procedures.”

Part I.

Item 1. Business

In this Annual Report on Form 10-K, unless otherwise indicated or the context otherwise requires, all references to “we,” “our,” “us,” “F45,” “the Company,” and “our Company” refer to F45 Training Holdings Inc. and its subsidiaries.

In assessing the performance of our business, we use certain key measures for determining how our business is performing. The below metrics are used throughout this Form 10-K and, unless otherwise indicated, all references to such metrics shall have the meanings ascribed to such metrics below:

•“Initial Studio Openings” refers to the number of F45 and FS8 studios that were determined to be first opened during such period. Prior to October 1, 2021, we classified an Initial Studio Opening to occur in the first month in which the studio first generates monthly revenue of at least $4,500. From October 1, 2021, we classify an Initial Studio Opening to occur in the month in which we record the initial studio opening in our internal systems, in the studio customer management platform as having generated revenue or has a recorded opening date in the franchisee management platform (“Internal Systems”). Any studios that did not have an Initial Studio Opening under the prior definition are included as of October 1, 2021. Initial Studio Openings are not adjusted downward for studios that were temporarily closed due to the COVID-19 pandemic or otherwise.

•“New Franchises Sold” means, for any specific period, the number of franchises sold during such period using the methodology set forth below for “Total Franchises Sold.”

•“Open Studios” means the number of studios that were recorded in our Internal Systems as open for business as of a certain date. A studio may be classified as an Open Studio regardless of whether or not it generated any monthly revenue. During the COVID-19 pandemic, a significant portion of our network was forced to temporarily close, which reduced the number of Open Studios. Studios reopened in accordance with state and local regulations are reflected in the Open Studios figures. A studio will continue to show as open in our Internal Systems until a franchisee notifies us of its closure or the franchise agreement is terminated.

•“Same Store Sales” means, for any reporting period, studio-level revenue generated by a comparable base of franchise studios, which we define as Open Studios that have been operating for more than 16 months. Vive is excluded from Same Store Sales figures as they are corporate-owned studios.

•System-wide Sales” are defined as all payments made to our studios and includes payment for classes, apparel and other sales for a given period. System-wide Sales include sales by franchisees that are not revenue recognized by us in accordance with generally accepted accounting principles in the United States (“GAAP”). We track System-wide Sales as an indication of the scale and growth of our franchisee network. Vive is excluded from System-wide Sales.

•“Total Franchises Sold” represents, as of any specified date, (i) the total number of signed F45 and FS8 franchise agreements in place as of such date for which an establishment fee has been paid and (ii) the total number of franchises committed in a multi-studio agreement in place as of such date for which an upfront payment has been made, in each case that have not been terminated. Each new franchise is included in the number of Total Franchises Sold from the date on which such franchise first satisfies the condition in clause (i) or (ii) above, as applicable. Total Franchises Sold includes franchise arrangements in all stages of development after signing a franchise agreement, and includes franchises with Open Studios. Franchises are removed from Total Franchises Sold upon termination of the franchise agreement or multi-studio agreement.

•“Total Studios” as of any specified date, means the total cumulative Initial Studio Openings as of that date less cumulative permanent studio closures as of that date. Permanent studio closures are studios in which we have executed a mutual termination or unilateral termination of the franchise agreements and whose operations have permanently ceased. Total Studios are not adjusted downward for studios that were temporarily closed due to the COVID-19 pandemic or are associated with franchise agreements that have not been terminated.

•“Visits” means the number of registered individual workouts for any specified period. A workout is registered when a member or trial user checks into a class.

Additionally, this annual report contains estimates, projections and other information concerning our industry, our business, our franchises and the markets for our products and services. Some data and statistical information are based on independent reports from third parties, including the International Health, Racquet & Sports Club Association (“IHRSA”). Some data and other information related to our franchisees, including estimated initial investment, EBITDA margins and average unit volumes (“AUVs”), are based on internal estimates and calculations that are derived from research we have conducted.

We are focused on creating a leading global fitness training and lifestyle brand. We primarily offer consumers functional 45-minute workouts that are effective, fun and community-driven. Our workouts combine elements of high-intensity interval, circuit and functional training to offer consumers what we believe is the world’s best functional training workout. We deliver our workouts primarily through our digitally-connected global network of studios, and we have built a differentiated, technology-enabled platform that allows us to create and distribute workouts to our global franchisee base. We offer consumers a continuously evolving fitness program in which virtually no two workouts are ever the same. Our library of functional training movements allows us to vary workout programs to keep consumers engaged with fresh content, stay at the forefront of consumer trends and drive maximum individual results.

Our in-studio experience utilizes our proprietary technologies: our fitness programming algorithm and our technology-enabled delivery platform. Our fitness programming algorithm leverages a rich, growing content database of thousands of unique functional training movements across modalities to offer new workouts each day. Our content delivery platform allows us to standardize the F45 Training experience across our global footprint and broadcast content, including workout instructions and timing, directly to our in-studio content delivery platform, or F45TV, and connected speaker systems. Our in-studio experience is further enhanced by coaches who provide guidance on proper form and movement, as well as motivate our members and foster a positive sense of community. We believe our approach helps to provide a consistent and high-quality fitness experience across our network of studios, keeping members highly engaged and helping them to achieve and sustain their fitness goals.

We operate a nearly 100% franchise model, apart from a small number of corporate-owned studios owned for franchisee transition or training purposes and three Vive studios, that offers compelling economics to us and our franchisees. We believe our franchisees generally benefit from a relatively low initial investment and low four-wall operating expenses, which allows them to generate strong profitability and returns on investment. The optimized box layout of our studios, which requires as little as approximately 1,600 square feet of training area, contributes to the relatively low initial investment and relatively low ongoing operating costs of our franchise model, and allows our studios to be located in a wide array of prospective retail locations. We estimate that a typical F45 Training franchise in a normalized operating environment requires an aggregate initial investment of between approximately $221,700 and $846,600. We believe our franchise model is attractive due to its potential for asset-light growth, strong profitability and robust cash flow generation, and has helped to facilitate our rapid growth.

Our Competitive Strengths

We believe there are several competitive strengths that form the foundation of our strategy and are key differentiating factors of our business.

The Next Generation Global Fitness Training and Lifestyle Brand Striving to Deliver the World’s Best Workout

Over the last ten years, we have focused on leveraging our differentiated approach to fitness to develop a global brand that is viewed as the gold standard in the fitness industry. We and our franchisees strive to offer our members the best functional training workout in each F45 studio on a daily basis. Our differentiated, technology-driven approach, including our proprietary fitness programming database consisting of thousands of unique functional training movements across modalities, helps us to design workouts that are fun, challenging, safe, dynamic and sustainable for members to attend day after day

and week after week. The versatility of our workouts resonates with both women and men, and across a broad range of fitness levels.

Innovative and Differentiated Technology-Enabled Delivery Platform Driving Quality and Consistency within Each Studio

A critical component to the success of our business is our technology that provides us with the ability to remotely manage each in-studio experience across our global studio network from our centralized technology systems at F45 Training headquarters. We have built an automated, centralized delivery platform that gives us the ability to control the delivery and timing of our workout content through our F45TVs in each of our studios. Our centralized delivery platform enables a seamless F45 Training experience on a consistent basis at scale across a broad geographic footprint.

Highly Scalable Commercial Delivery and Franchise Development Model

Our differentiated approach, including our fitness programming algorithm and our proprietary technology-enabled delivery platform, plays an integral role in the scalability of our business. By integrating technology into the workout experience, we have been able to develop a franchise model that is highly replicable for both new and existing franchisees across multiple geographies. In addition, our purpose-built studio design, which utilizes an open floor plan and modest physical footprint, can be built within a wide array of prospective retail locations. We offer a simplified pre-opening process by providing franchisees with a comprehensive studio opening pack, called a World Pack, which includes the key items needed to operate the studio, including fitness equipment, technology, AV equipment and more.

Compelling Franchisee Studio Economics

We believe we offer a compelling business opportunity for franchisees to generate strong returns driven by a relatively low initial investment combined with attractive AUVs and low four-wall operating expenses. We have designed our workout to take place in studio space that requires as little as 1,600 square feet, resulting in reduced rent expense, while F45TVs provide video instructions to members allowing for reduced staffing requirements. We believe that a typical F45 Training franchise in a normalized operating environment requires an aggregate initial investment of between approximately $221,700 and $846,600 in the U.S.

Predictable, Asset-Light Model Driving Rapid Growth

As a franchisor, we have employed an economic model that, other than due to the unprecedented global shutdown of our network due to the COVID-19 pandemic, has been predictable and asset light and has enabled us to open new studios at an accelerated pace compared to an owner-operator model. For the majority of franchises that we sell, we receive an upfront payment from the franchisee, which varies by geography. Once a new studio has opened, we expect to receive contractual, recurring monthly franchise fees that provide us with a high degree of revenue visibility. As our network of total studios grows, we expect recurring revenue as a percentage of total revenue to increase.

Our Growth Strategies

We believe there are several attractive opportunities to continue to drive the long-term growth of our business.

Expand Studio Footprint in the United States

We believe there is a significant opportunity to meaningfully expand our franchise studio footprint in the United States. As of December 31, 2022, we had 882 Total Studios in the United States.

Expand Studio Footprint Throughout the Rest of the World

We believe in the portability of our brand and franchise model, as evidenced by our growth outside of our core U.S. and Australian markets. We have designed our studios to be deployed successfully in both

developed and emerging markets, and to drive growth in both under penetrated and new markets. As of December 31, 2022, we had 826 Franchises Sold outside of our core markets of the United States and Australia.

We believe we can grow our international presence through our existing franchising strategy and by opportunistically pursuing master franchising agreements with experienced, local partners in order to accelerate growth in markets that we have yet to establish a presence or require additional resources to further our presence. We believe that master franchising in select international markets may help drive more rapid studio footprint expansion by leveraging the local area operating and business knowledge of experienced partners without incurring significant increases in our operating expenditures or corporate infrastructure costs. As of December 31, 2022, the Company had entered into two master franchise agreements: one in the UK and select European countries, and one in South Korea.

Generate Incremental Franchise Fee Revenue by Driving Growth in Same Store Sales and AUVs

Our franchise agreements in the United States generally provide us with contractual monthly franchise fees equal to the greater of a fixed monthly fee or a percentage of gross monthly studio revenue, generally 7%. Additionally, we are working to transition franchise agreements outside of the United States to the greater of a fixed monthly fee or a percentage of gross monthly studio revenue model. We believe this model helps to align our interests with those of our franchisees while also providing us with the opportunity to participate in revenue upside as our franchisees grow studio AUVs.

Pursue Franchise Agreements with Multi-Unit Franchise Systems

The majority of our studios are owned by franchisees who are either owner-operators or investors that have more than one studio. Going forward, we intend to continue to seek opportunities to develop multi-unit franchise systems with select financial partners. As of December 31, 2022, approximately 67% of our Franchises Sold were owned by multi-unit franchisees, which highlights the strong market demand for multi-unit franchise opportunities. As of December 31, 2022, approximately 52% of Open Studios were owned by multi-unit franchisees.

Expand Into New Channels

We believe there is an opportunity to expand into new channels, and we are actively pursuing potential opportunities to partner with major universities, hospitality operators, corporations and military facilities. In 2016, we believe we became the first external studio fitness provider to open a studio on a major U.S. university campus through our collaboration with the University of Southern California. As of December 31, 2022, we had 35 studios located on major university campuses in the United States, including Purdue University, Virginia Tech, Stanford University and the University of Texas at Austin. In 2022, we expanded our presence in the hospitality channel through the grand opening of an F45 studio inside the Hilton Hotels and Resorts’ downtown property in Austin, Texas.

Develop New Concepts to Access Broader Demographic Groups

We believe there is an opportunity to create new concepts and workout programs that enable us to target a broader range of consumer demographic groups.

We recently developed a new fitness concept called FS8, which we began marketing in Australia in March 2021. FS8 integrates three popular methods in the health and fitness industry, the remixing of Pilates, yoga and tone, to create a new workout style. This workout style is an effective method of building lean muscle and definition. FS8 offers members a premium fitness experience through F45’s platform of training systems, the FS8TV and FS8 App, and also offers franchisees a proprietary business model and large community via the franchise network. We also have a dedicated support team to assist across all business functions. As of December 31, 2022, we had sold 128 total FS8 franchises, 121 in Australia, three in the USA, two in Asia, and two in Ireland. As of December 31, 2022, we had 44 total open FS8 studios, 41 in Australia, two in Asia, and one in England. As of December 31, 2022, FS8 studios continue to operate in a test phase and as a result we have not yet commenced charging monthly franchise fees.

In the fourth quarter of 2021, we announced the acquisition of Vive Active (“Vive”), an Australian fitness company that offers reformer and mat Pilates workouts through in-studio, at-home streaming and on-demand classes. We plan to grow Vive’s footprint through franchised studios in select international markets. During 2022, we began franchising Vive, signing the first franchisee-owned studio in Singapore during the fourth quarter of 2022. As of December 31, 2022, we had three corporate-owned Vive studios in Australia.

Our Workouts

Functional Training Experience

We believe we offer the world’s best functional training workout. We combine elements of high intensity interval, circuit and functional training to offer our members an intense 45-minute workout consisting of natural real-world movements, such as lifting, squatting, jumping, twisting, kicking, rowing, cycling and other high intensity exercises. Our workouts utilize our proprietary, in-studio technology to allow members to walk through a series of exercise stations. In-studio F45TVs provide video instructions for each exercise, and our in-studio coaches, who are required to obtain a Certificate of Personal Training (CPT) and First Aid/AED certification, help guide members on proper form and movement. We believe that by designing highly innovative and effective total body workouts that minimize injury risk and allow for increased visit frequency, we provide our members with a fitness program that is well positioned to serve as the basis for achieving their long-term fitness goals.

Dynamic Fitness Programming

Our fitness program consists of cardio, resistance and hybrid branded workouts. Our branded workouts are mapped on thirteen four-week cycles, with each cycle focusing on specific disciplines, exercise modalities, team-based workouts and more. This structure helps to ensure that each member experiences a differentiated and engaging workout. As new fitness trends arise, we are able to adapt our programming and cater to changing consumer preferences through the continuous evolution of our workouts, utilizing both new and existing content, and continuously innovate our branded workouts and functional training movement library.

Once the branded workout cycle is set, we employ an automated workout programming algorithm that scans and filters our database of thousands of unique functional training movements across modalities to select exercises based on each of the branded workout’s defined key format of characteristics and configure a series of exercises within each workout. Our workout programming algorithm accounts for the following criteria, ensuring every routine is dynamic, sustainable and new:

•movement and exercise types;

•muscle groups;

•type of equipment;

•circuit rules and exercise frequency (avoiding repetition); and

•number of stations, sequencing and workout timelines.

After the algorithm builds a workout cycle, these workouts are then vetted by the F45 Athletics Department and its team of experienced training professionals to confirm quality, avoid duplication of targeted muscle groups or movements and provide for efficient transitions between stations and ultimately a progressive and balanced training program. The new cycle is finalized approximately four weeks ahead of its system-wide release after testing the new programming across several test studios for quality and ease of use by coaches and members to provide an organized and robust system.

Our Studios

Studio Layout and Design

We have designed our studios around the principles of functionality, simplicity and purpose. Each studio has an optimized footprint, with a minimum training area of as little as approximately 1,600 square feet, which enables our studios to be located in a wide array of prospective retail locations. We believe the flexible design and open floor plan layout of our studios positions us to be responsive to potential shifts in consumer preferences as new fitness trends emerge with different setup requirements.

Each studio has standardized F45 Training-branded fitness equipment and related technology, which includes F45TVs, spin bikes, dumbbells, kettlebells, sleds and more, all of which are included in our World Pack. The wall-mounted F45TVs are positioned throughout the studio to provide an illustrative, station-by-station guide for each workout and to serve as a reference point for members to visualize proper form and progress through each workout station. In-studio coaches provide additional support by helping members execute exercises with appropriate form and resistance level, while offering encouragement and motivation. To drive a welcoming, intimidation-free environment, we purposely exclude mirrors on the walls of our studios. Our standardized studio design helps ensure the consistency of the F45 Training experience across our global network of studios.

Studio Membership and Member Pricing

We provide franchisees with suggested pricing for workouts and membership options based on relevant market dynamics, but pricing is ultimately managed at the discretion of our franchisees. Franchisees typically offer multiple membership options, such as weekly memberships with unlimited workouts, monthly memberships with a limited number of workouts, workout packs that include a fixed number of workouts that can be used at any time, as well as single workout options. Franchisees may also offer other membership options, including longer-term memberships for a discounted rate and specific promotional membership plans. Many franchisees offer a limited free trial period to attract prospective new members. We do not offer multi-studio membership plans and memberships are not transferable across our studios.

Franchise Model

Franchise Agreement

For each franchise license, we enter into an agreement with the franchisee covering standard terms and conditions. We grant our franchisees an exclusive area or territory under the franchise agreement, and territories are determined as agreed with us using our internal analysis, after taking into account population density and demographics. The proposed location must be approved by us, and each franchisee is responsible for the acquisition or lease of the premises from which to operate the business within their respective territory. The franchise agreement requires that the franchisee operate the studio at a specific location.

The typical franchise agreement has an initial five-year term. We may refuse to extend the term of the agreement if the franchisee is in default under the franchise agreement or has failed to achieve minimum performance targets. More specifically, these minimum performance targets include a target that, within 12 months of opening, each franchisee must achieve an annual gross revenue of at least 70% of the average gross revenue of all franchisees who have been operating for at least 12 months. Within six months of the expiration of the initial five-year term, franchisees have the opportunity to renew for an additional five-year term, subject to the terms and conditions prevailing at the time of renewal.

The franchise agreement requires franchisees to comply with our standard methods of operation, which govern the provision of services, use of vendors and sale of merchandise. These provisions require that franchisees must generally purchase equipment from us and may only buy products, goods and materials approved by us. We may terminate the franchise agreement upon an event of default by the franchisee, and the franchisee may terminate only with our mutual consent.

Historically, franchisees have paid a fixed monthly franchise fee. Since July 2019, we transitioned our model in the United States for new franchisees to a franchise fee based on the greater of a fixed monthly franchise fee or a percentage of gross monthly studio revenue. In select markets outside of the United

States, and for renewals of existing franchisees in the United States, we are working to transition to a similar model. We believe this transition will continue to better align our growth strategy with those of our franchisees.

Industry Dynamics

Competition

We operate in a competitive and highly fragmented market, with multiple industry segments competing for the consumers’ share of wallet that is allocated to fitness and health. While we operate specifically in the studio fitness category, we consider the following key industry categories as competition:

•other studio fitness concepts;

•full-service health clubs;

•racquet, tennis, country and other athletic clubs;

•value-focused health clubs; and

•at-home fitness offerings, including digital fitness content.

The number, size and strength of our competitors vary by region. Some of our competitors have national name recognition or an established presence in local markets, and some are established in markets in which we have existing studios or intend to locate new studios.

We believe that we compete on the basis of our flexible functional training workout, our F45 Training experience, innovative and proprietary technology platform, compelling franchisee studio economics and our franchise development model. We believe we offer an attractive and flexible price point relative to personal training, while maintaining a competitive rate as compared to other studio fitness offerings.

Marketing Strategy

Our marketing strategy is focused on delivering the highest quality F45 Training experience to franchisees and members of our studios and raising awareness of our brand through a broad range of channels. These channels include influencer, experiential, social media, online search, digital media, TV and print marketing. Marketing activity is conducted both by us and by our franchisees. We utilize a multi-prong marketing strategy focused on attracting and educating prospective franchisees, driving demand with new and existing members and increasing general awareness and affinity for our brand.

Brand Marketing

We seek to drive brand awareness through marketing initiatives that highlight the differentiated F45 Training experience and community. In August 2022, we launched the F45 marketing brand fund, funded by our franchisees, within the United States which we believe will provide for continued growth in brand awareness throughout the United States. We believe the spend from our brand marketing will continue to grow as we increase Initial Studio Openings in the United States. Additionally, we anticipate launching similar marketing brand funds in other localities at some point in the future. We have created a curated training experience that is driven by technology and supported by community, which drives a powerful brand with broad demographic appeal and a highly passionate member base. Brand marketing is performed over a variety of methods, including social media marketing, earned media, local events, marketing partnerships, television, outdoor billboard, and pasting campaigns in key markets.

Franchisee Sales Marketing

Our primary methods for marketing to prospective franchisees include a mix of social, digital, search, referral and experiential marketing. We have created a scalable and sustainable marketing model through which we identify potential franchisees and pursue qualified leads utilizing our sales team.

Membership Marketing

Our membership marketing efforts, which are conducted both prior to studio opening and on an ongoing basis, focus on targeting the acquisition of new members and the retention of our existing members through local paid media, organic social, search and grassroots experiential marketing. Our membership marketing program consists of the following:

•Pre-Opening Membership Marketing Campaigns: Pre-Opening campaigns are funded by franchisees, and are a mix of paid media, organic social media and grassroots marketing initiatives that are focused on building the studio membership base prior to opening. In these campaigns, our preferred paid digital media partners, local studio coaches, managers and owners drive awareness of, and excitement about, our brand through targeted social and search advertisements, organic social media channels efforts and grassroots marketing outreach to local businesses, charitable organizations and schools in the respective community.

•Ongoing Membership Marketing Programming: Working in conjunction with selected preferred paid digital media partners for a monthly fee, we make available post-open monthly marketing campaigns that are designed to generate the leads that our franchisees can nurture over their trial period in order to convert them into new members. We seek to reach and engage with target audiences using geographic and demographic targeting across social and digital media platforms.

•One-on-One Marketing Support: In addition to the paid membership marketing programming, we provide significant value to franchisees alongside our preferred paid digital media partners, offering paid media, organic social, search and grassroots marketing support at the studio-level.

Intellectual Property

The protection of our intellectual property is an important aspect of our business. We rely upon a combination of trademarks, trade secrets, confidentiality procedures, contractual commitments and other legal rights to establish and protect our intellectual property. Our standard form of employment agreement includes confidentiality provisions and invention or work product assignment provisions with our employees to control access to, and clarify ownership of, our proprietary information.

As of December 31, 2022, we held 57 registered trademarks in the United States, including our logo and logo components, and had 11 U.S. trademark applications pending. As of December 31, 2022, we also held 309 registered trademarks in foreign jurisdictions and had 77 trademark applications pending in foreign jurisdictions. We continually review our development efforts to assess the existence of and ability to patent new intellectual property. We intend to continue to file additional patent applications with respect to our technology.

We license the use of our marks to franchisees, third-party vendors and others through franchise agreements, vendor agreements and licensing agreements. These agreements generally restrict third parties’ activities with respect to use of the marks and impose brand standards requirements. We generally require licensees to inform us of any potential infringement of the marks.

We register some of our copyrighted material and otherwise rely on legal and contractual protections of our copyrighted works that have been fixed in a tangible medium or otherwise qualify for copyright protection. Such copyrighted materials are not material to our business.

Information Technology & Systems

All studios use a computerized, third-party hosted store management system to process new in-store memberships, bill members, update member information, check-in members and process point of sale transactions. Our websites are hosted by third parties, and we also rely on third-party vendors for related functions such as our system for processing and integrating new online memberships, updating member information and making online payments. We use these third-party vendors to gather data from our

franchisees, including information on franchisee performance and operations. We believe these systems are scalable to support our growth plans.

Our back-office computer systems are comprised of a variety of software designed to assist in the management and analysis of our franchisee revenue and key operational metrics as well as support the daily operations of our headquarters. These include third-party hosted systems that assist with onboarding franchisees in accordance with F45 standards, a third-party hosted financial system for reporting, advanced analysis and which helps to facilitate financial analysis and forecasting and a third-party hosted payroll system.

We also provide our franchisees access to a web-based, third-party hosted custom franchise management system to receive informational notices, operational resources and updates, training materials and other franchisee communications.

In relation to our workouts, we utilize a fitness programming algorithm that intelligently selects exercises from a database of thousands of unique functional training movements across modalities. This algorithm produces potential workout plans which are then centrally reviewed and staged by our head coaches before ultimately being distributed to studios.

Government Regulation

We and our franchisees are subject to various federal, state, provincial and local laws and regulations affecting our business including those that concern franchise operations, payment processing, consumer protection, information and data privacy and other laws regarding unfair or deceptive trade practices.

We are subject to the Federal Trade Commission (“FTC”) Franchise Rule promulgated by the FTC that regulates the offer and sale of franchises in the United States and its territories (including Puerto Rico, the U.S. Virgin Islands and Guam) and requires us to provide to all prospective franchisees certain mandatory disclosures in a Franchise Disclosure Document (“FDD”). In addition, we are subject to state franchise sales laws in approximately 14 states that regulate the offer and sale of franchises by requiring us to make filings and obtain franchise registration prior to our making any offer or sale of a franchise in those states and to provide an FDD to prospective franchisees in accordance with applicable franchise laws and regulations. We are also subject to franchise relationship laws in approximately 18 states that regulate several aspects of the franchisor-franchisee relationship, including renewals and terminations of franchise agreements, franchise transfers, the applicable law and venue in which franchise disputes must be resolved, discrimination, franchisees’ right to associate and sourcing, among others.

We are subject to franchise disclosure laws in six provinces in Canada (Alberta, British Columbia, Manitoba, New Brunswick, Ontario and Prince Edward Island) that regulate the offer and sale of franchises by requiring us to provide an FDD in a format prescribed by such laws to prospective franchisees in accordance with such laws, and that may regulate certain aspects of the franchise relationship.

We are subject to franchise disclosure and relationship laws in Australia that regulate the offer and sale of franchises by requiring us to provide an FDD in a format prescribed by such laws to prospective franchisees and that regulate certain aspects of the franchisor-franchisee relationship, including renewals and terminations of franchise agreements, franchise transfers, the venue in which franchise disputes must be resolved, franchisees’ right to associate and the use of marketing funds.

In addition, we and our franchisees may also be subject to laws in other foreign countries where we or they do business, including franchise disclosure, registration and relationship (and similar) laws and regulations. For example, we are also subject to franchise registration and disclosure laws in other countries in which we operate, including but not limited to Australia, Canada, China, France, French Polynesia, Indonesia, Malaysia, Mexico, New Caledonia, Russia, South Africa, South Korea, Spain, Thailand, Taiwan and the United States, that regulate the offer and sale of franchises by requiring us, unless otherwise exempt, to register an FDD in a prescribed format and to provide that FDD to prospective franchisees, in accordance with such laws, and that regulate certain aspects of the franchise relationship.

We and our franchisees are also subject to the U.S. Fair Labor Standards Act of 1938, as amended, similar state laws in certain jurisdictions, and various other laws in the United States, Canada, Australia and other foreign jurisdictions governing such matters as minimum-wage requirements, overtime and other working conditions.

Our and our franchisees’ operations and properties are subject to extensive federal, international, state, provincial and local laws and regulations, including those relating to environmental, building and zoning requirements. Our and our franchisees’ development of properties depends to a significant extent on the selection and acquisition of suitable sites, which are subject to zoning, land use, environmental, traffic and other regulations and requirements.

We and our franchisees are responsible at the studios we each operate for compliance with state laws that regulate the relationship between health clubs and their members. Nearly all states have consumer protection regulations that limit the collection of monthly membership dues prior to opening, require certain disclosures of pricing information, mandate the maximum length of contracts and “cooling off” periods for members (after the purchase of a membership), set escrow and bond requirements for health clubs, govern member rights in the event of a member relocation or disability, provide for specific member rights when a health club closes or relocates, or preclude automatic membership renewals. We and our franchisees primarily accept payments for our memberships through electronic fund transfers from members’ bank accounts, and, therefore, we and our franchisees are subject to both federal and state legislation and certification requirements, including the Electronic Funds Transfer Act. Some states, such as New York, Massachusetts and Tennessee, and countries, such as Australia, have passed or have considered legislation requiring health clubs to offer a prepaid membership option at all times and/or limit the duration for which health club memberships can auto-renew through EFT payments, if at all. Our business relies heavily on the fact that our memberships continue on a month to month basis after the completion of any initial term requirements, and compliance with these laws, regulations and similar requirements may be onerous and expensive, and variances and inconsistencies from jurisdiction to jurisdiction may further increase the cost of compliance and doing business. States that have such health club statutes provide harsh penalties for violations, including membership contracts being void or voidable.

Additionally, the collection, maintenance, use, disclosure and disposal of individually identifiable data by our, or our franchisees’, businesses are regulated at the federal, state and provincial levels as well as by certain financial industry groups, such as the Payment Card Industry, Security Standards Council, the National Automated Clearing House Association, and the Canadian Payments Association. Federal, state and financial industry groups may also consider from time to time new privacy and security requirements that may apply to our businesses and may impose further restrictions on our collection, disclosure and use of individually identifiable information that are housed in one or more of our databases.

Employees and Human Capital Resources

On July 26, 2022, as a result of ongoing macroeconomic uncertainty and in order to best position the Company to achieve sustained growth over the near and long-term, we announced the initiation of a reduction in force of approximately 110 employees.

As of December 31, 2022, after the reduction in force, we employed 17 employees in Australia, 95 employees in the United States and 1 employee in the United Kingdom. We also leverage external service providers to support U.S. operations. None of our employees are represented by labor unions.

F45 Training franchises are independently owned and operated businesses. As such, employees of our franchisees are not our employees.

We believe that an engaged, diverse, and inclusive culture is essential for the success of our business, and we consider our employees to be the foundation for our growth and success. As such, our future success depends in large part on our ability to attract, train, retain, and motivate qualified personnel. The growth and development of our workforce is an integral part of our success. Another critical component of maintaining our engaged and inclusive culture is making investments in our team members at all levels

with our training programs. We are also committed to developing and fostering a culture of diversity and inclusion and know that a company’s ultimate success is directly linked to its ability to identify and hire talented individuals from all backgrounds and perspectives.

Facilities

We do not own any real property. We are headquartered in Austin, Texas. We occupy an office space of approximately 44,000 square feet in our global headquarters. Our lease for our headquarters expires June 2029. We have one option to extend the lease for five additional years. We also have approximately 22,500 square feet of office and warehouse space in West Palm Beach, Florida that the company is working to sublease. The lease for this space expires February 2033.

Suppliers

We source substantially all of the gym equipment provided in our World Pack from a single supplier in China who manufactures products in its own facilities. Our vendor typically manufactures and holds the inventory until franchisees’ orders are fulfilled. Beginning in the fourth quarter of 2021, the Company began storing inventory at third-party storage facilities based on expected customer demand. We also source additional equipment and products from suppliers in the United States and Canada and use local distributors for certain gym equipment. Franchisees generally purchase equipment through our approved suppliers or must seek written approval for non-approved suppliers. Approved suppliers are those who demonstrate the ability to meet our standards, who possess adequate quality controls and the capacity to supply franchisees’ needs promptly and reliably, whom we have approved in writing and whom we have not later disapproved. We may change the number of approved suppliers at any time and may designate ourselves, an affiliate, or a third party as the exclusive source for any particular item.

Corporate

Our corporate headquarters address is 3601 South Congress Avenue, Building E, Austin, Texas, 78704. The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are available free of charge at the Company’s website at www.f45training.com as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the Securities Exchange Commission. Information included or referred to on, or otherwise accessible through, our website is not deemed to form a part of, or be incorporated by reference into, this Annual Report on Form 10-K.

Legal Proceedings

We are currently, and from time to time may become, involved in legal or regulatory proceedings arising in the ordinary course of our business, including personal injury claims, employment disputes and commercial contract disputes. Although the outcome of these and other claims cannot be predicted with certainty and except for those matters discussed below, we are not currently a party to any litigation or regulatory proceeding that would reasonably be expected to have a material adverse effect on our business, results of operations, financial condition or cash flows.

In December 2022, plaintiff Kenzie Geor filed a purported class action complaint in the United States District Court for the Western District of Texas against us, Chris Payne, Adam Gilchrist, Michael Raymond, Darren Richman, and Mark Wahlberg. The complaint purported to allege securities class action claims under Sections 11 and 15 of the Securities Act of 1933, and challenged as misleading statements regarding our business model in our registration statement issued in connection with our initial public offering in July 2021. In February 2023, Judge Robert Pitman appointed Pledge Capital to act as lead plaintiff and its counsel, Labaton Sucharow LLP, to act as lead counsel. In May 2023, lead plaintiff and an additional named plaintiff filed an amended complaint adding as defendants investors Kennedy Lewis Management LLC (“KLIM”) and MWIG LLC (“MWIG”). The amended complaint again challenges as false or misleading statements about F45’s business model in the registration statement. It also adds claims under Section 12(a) of the Securities Act against the underwriters for F45’s IPO. Finally, the amended complaint adds claims under Section 10(b) of the Exchange Act against F45, and Messrs. Gilchrist and

Payne and under Section 20(a) of the Exchange Act against Messrs. Gilchrist, Payne, Raymond, Richman, and Wahlberg, KLIM, and MWIG as control persons. The Exchange Act claims challenge the same statements in the IPO registration statement and also challenge later statements to investors regarding the Company’s business model, plans, and results. The purported class period is from July 15, 2021 through July 22, 2022. On August 7, 2023, defendants filed a motion to dismiss the complaint. Pursuant to the briefing schedule that motion is expected to be fully briefed in November 2023. The Company intends to zealously defend against the allegations.

On October 19, 2022, DB Ventures Limited and ABG-Shark LLC filed a complaint (Case No. 22STCV33846) in the Superior Court of the State of California for the County of Los Angeles, against F45 Training Holdings, Inc., alleging breach of contract in connection with certain promotional agreements with David Beckham and Greg Norman, respectively, and seeking damages of no less than $20 million. In April 2023, ABG-Shark LLC refiled its claim as a separate matter from DB Ventures Limited in the Superior Court of the State of California for the County of Los Angeles (Case No. 22StCV33846) alleging breach of contract in connection with a promotional agreement with Greg Norman and seeking damages of no less than $1.75 million. DB Ventures Limited vs. F45 Training, Inc. was removed from the Superior Court of the State of California for the County of Los Angeles to the United States District Court Central District of California in May 2023 (Case No. 2:23-cv-03460-MEFM) alleging breach of contract in connection with a promotional agreement with David Beckham and seeking damages of no less than $18.85 million. The Company disputes these claims and intends to vigorously defend itself. The litigation is preliminary in nature and involves substantial uncertainties. Therefore, there can be no assurance that such legal proceedings will not have a material adverse effect on our business, results of operations, financial condition, or cash flows.

On July 1, 2019, we received a letter from Universal Music Group, or UMG, alleging copyright infringement and licensing violations in connection with our distribution of music to our franchisees. On March 8, 2023, the Company resolved this matter, which included receiving mutual releases of the parties.

In December 2020, plaintiff Kerttu Karon filed a purported class action complaint (Case No. 20STCV49535) in the Superior Court of the State of California for the County of Los Angeles against F45 Training Incorporated. The complaint purported to allege claims relating to violations of certain wage and employment laws in connection with the use of models for half and full day photo shoots and is seeking compensatory damages, restitution, liquidated damages, punitive damages, specific performance, penalties and interest. In April 2021, plaintiff amended this complaint to allege violations under the Private Attorneys General Act of 2004 (PAGA). In August 2021, plaintiff amended this complaint to include Karim Benzakour as a plaintiff. The company disputes these claims and intends to vigorously defend itself. The litigation is in the discovery phase and involves substantial uncertainties. Therefore, there can be no assurance that such legal proceeding will not have a material adverse effect on our business, results of operations, financial conditions or cash flows.

In October 2022, the company was notified by the State of Michigan Department of the Attorney General regarding an investigation concerning alleged violations of the Michigan Franchise Investment Law. In August 2023, the company entered into a Settlement Agreement with the Michigan Department of Attorney General in connection with an investigation of certain violations of the Michigan Franchise Investment Law. The company did not admit to any liability and agreed to pay a penalty of $95,000 and offer rescission to eight franchisees who purchased a franchise in the State of Michigan.

In September 2021, the company was notified by the California Department of Financial Protection and Innovation regarding an investigation concerning alleged violations of the Franchise Investment Law. In October 2023, the company entered into a Consent Order with the State of California Commission of Financial Protection and Innovation in connection with an investigation of certain violations of the Franchise Investment Law. The company did not admit to any liability and agreed to pay a penalty of $152,500 and offer rescission to 35 franchisees in the State of California who purchased a franchise in the State of California on or before September 2019.

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K, before deciding whether to invest in shares of our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks, events and uncertainties that we are unaware of or that we deem immaterial may also become material factors that adversely affect our business. If any of the following risks actually occur, our business, results of operations and financial condition could be materially and adversely affected. In that event, the trading price of our common stock could decline and you might lose part or all of your investment in our common stock.

Summary of Risk Factors

Risks Related to Operating in the Health Club and Fitness Industry

•If we are unable to anticipate and satisfy consumer preferences and shifting views of health and fitness and successfully develop and introduce new, innovative and updated fitness services, our business may be adversely affected.

•The high level of competition in the health club and fitness industry, including on-demand fitness, could materially and adversely affect our business.

•We rely on consumer discretionary spending, which may be adversely affected by economic downturns and other macroeconomic conditions or trends.

Risks Related to Our Franchisee Business Model and Strategy

•Our financial results are affected by the number of Franchises Sold and studios we open and by the operating and financial results of such studios

•If we fail to identify, recruit and contract with qualified franchisees, our ability to open new franchised studios and increase our revenue could be materially adversely affected.

•If we are unable to renew our franchise agreements with our existing franchisees, our business, results of operations and financial condition would be materially and adversely affected.

•The success of our business strategy depends on our ability to effectively manage and support our franchise system.

•If we fail to successfully implement our growth strategy, which includes new studio development by existing and new franchisees, our brand and ability to increase our revenue and operating profits could be materially and adversely affected.

•If we and our franchisees are unable to identify and secure suitable sites for new franchise studios, our revenue growth rate and operating profits may be negatively impacted.

•Our franchisees may incur rising costs related to construction of new studios and maintenance of existing studios, which could materially and adversely affect the attractiveness of our franchise model, and in turn our business, results of operations and financial condition.

•If we are unable to sustain pricing levels for our establishment fees, World Pack and franchise fees, our business could be adversely affected.

•Our business is subject to various franchise laws and regulations, and changes in such laws and regulations, or failure to comply with existing or future laws and regulations and other legal developments that impact franchising, could materially and adversely affect our business.

•Our investments to enhance the customer experience, including through technology, may not generate the expected results.

•Uncertainty in the law with respect to the assignment of liabilities in the franchise business model could adversely impact our profitability.

Risks Related to Our Brand and Strategy

•Our success depends substantially on the value of our brand. Failure to preserve the value and relevance of our brand could have an adverse impact on our financial results.

•Our marketing strategy relies on the use of social media platforms and any negative publicity on such social media platforms may adversely affect the public perception of our brand which in turn could have a material and adverse effect on our business, results of operations and financial

condition and the market price of shares of our common stock. In addition, our use of social media could subject us to fines or other penalties.

•Our ability to continue to expand our ancillary product offerings is uncertain and the new business lines are subject to risks.

•Our investments in new business strategies, including new brand launches, may have adverse effects on our operating results.

•The ongoing novel coronavirus COVID-19 pandemic, or another pandemic or epidemic, and related governmental restrictions intended to prevent its spread have had, and in the future may continue to have, a material and adverse effect on our business, financial condition and results of operations.

Risks Related to Intellectual Property

•We depend upon third-party licenses for the use of music to supplement our workouts and workout tutorials. An adverse change to, loss of, or claim that we or our franchisees do not hold necessary music licenses may have an adverse effect on our business, results of operations and financial condition and may lead to third party claims or lawsuits.

•We may not be able to adequately protect our intellectual property or adequately ensure that we are not infringing the intellectual property of others, which could harm the value of the F45 brand and our business.

Risks Related to Technology and Privacy

•We and our franchisees rely heavily on information systems, and any material failure, interruption or weakness in these systems may prevent us from effectively operating our business and damage our reputation.

•The occurrence of cyber incidents, or a deficiency in cyber security, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of confidential information, and/or damage to our employee and business relationships and reputation, all of which could harm our brand and our business.

•We are subject to payment processing risk.

Risks Related to Our Suppliers and Supply Chain

•Our dependence on a limited number of suppliers for equipment and certain products and services could result in disruptions to our business and could materially and adversely affect our revenue and gross profit.

•Increases in tariffs and trade restrictions on equipment we source from China could have an adverse impact on our business, results of operations and financial condition.

Risks Related to Our Indebtedness, History of Losses and Negative Cash Flow

•We may be unable to generate sufficient cash flow, or income to satisfy our debt service obligations and financial covenants, which would adversely affect our results of operations and financial condition.

•The terms of our indebtedness could adversely affect our business.

•Our obligations to the holders of our Senior Credit Agreement and Subordinated Credit Agreement are secured by a security interest in substantially all of our assets. If we default on those obligations, the holders of such indebtedness could foreclose on our assets.

Risks Related to Our Common Stock

•The liquidity of our shares of common stock will likely be adversely affected by our delisting from the NYSE and our anticipated deregistration from the Securities and Exchange Commission and our ability to raise capital could be significantly impaired.

•Our current major stockholders have significant control over our company, which could limit your ability to influence the outcome of matters subject to stockholder approval, including a change of control.

Risks Related to Our Global Operations

•Economic, political and other risks associated with our international operations could adversely affect our profitability and international growth prospects.

•Fluctuations in currency exchange rates could negatively impact our business.

•Failure to comply with anti-corruption and anti-money laundering laws, including the Foreign Corrupt Practices Act and similar laws associated with our activities outside of the United States, could subject us to penalties and other adverse consequences.

General Risks

•We have identified certain material weaknesses in our internal control over financial reporting and if our remediation of such material weaknesses is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.

•Our business faces various risks related to health epidemics, pandemics and similar outbreaks, which may materially and adversely affect our business, financial position, results of operations and cash flows.

•Our management team has experienced significant turnover and we may not be able to retain an experienced management team.

•If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.

Risks Related to Our Business

Risks Related to Operating in the Health Club and Fitness Industry

If we are unable to anticipate and satisfy consumer preferences and shifting views of health and fitness and successfully develop and introduce new, innovative and updated fitness services, our business may be adversely affected.

The fitness industry is highly susceptible to changes in consumer preferences. Our success depends on our ability to identify and originate trends as well as to anticipate and react to changing consumer demands in a timely manner. If we are unable to introduce new services and products in a timely manner, or before our competitors do, or our new services and products are not accepted by our customers, our growth and profitability could be negatively affected. Failure to anticipate and respond in a timely manner to changing consumer preferences could lead to, among other things, lower membership and utilization rates. Even if we are successful in anticipating consumer preferences, our ability to adequately react to and address those preferences will in part depend upon our continued ability to develop and introduce innovative, high-quality health and fitness services. Our failure to effectively introduce new health and fitness services that are accepted by consumers could result in a decrease in revenue. In addition, developments or shifts in research or public opinion on the types of workouts and products we provide could negatively impact our business. Failure to predict and respond to changes in public opinion, public research and consumer preferences could materially and adversely impact our business.

The high level of competition in the health club and fitness industry could materially and adversely affect our business.

We operate in a highly competitive market, with multiple industry segments competing for consumers’ share of the wallet allocated to fitness spend. While we operate specifically within the studio fitness category, we consider companies in the following key industry segments as potential competition: other studio fitness concepts; full-service health clubs; racquet, tennis, country and other athletic clubs; value-focused health clubs; and at-home fitness offerings, including digital fitness content. We also compete for qualified franchisees, management, fitness training professionals and other personnel. Our franchisees also compete for qualified fitness coaches. We may not be able to compete effectively in the regions in which we currently operate or those in which we may operate in the future. Competitors may attempt to copy our business model, or portions thereof, which could erode our market share and brand recognition and impair our growth rate and profitability. Competitors, including companies that are larger and have greater resources than us, may compete with us to attract members and qualified fitness coaches in our regions. Other studio fitness concepts may lower their prices or create lower-priced brand alternatives within our markets. Furthermore, due to the increased number of low-cost studio fitness alternatives, we

may face increased competition if our membership pricing increases or if discretionary spending declines. In addition, as we expand into new markets, we may face competitive challenges penetrating those markets due to, among other factors, competitors who may already have a significant presence in those markets, consumer unfamiliarity with our brand and our own unfamiliarity with the health and fitness market in such regions. Current and future competition may limit our and our franchisees’ ability to attract new members and retain existing members, may limit our ability to attract and retain new and existing franchisees and may hinder our franchisees’ ability to attract and retain qualified fitness coaches, which in each case could materially and adversely affect our business, results of operations and financial condition.

The continued growth of on-demand fitness classes could adversely affect our business, results of operations and financial condition.

At home on-demand fitness classes offer the benefit of a user-selected workout at home where users have the ability to vary the types of workouts they do on a daily basis, if desired. Many on-demand fitness classes can also be live streamed, allowing real-time interactions, including coaching cues from the class instructor. As the availability and variety of on-demand fitness classes (including live streaming classes) continue to grow, our members’ preferences may shift away from the in-studio experience, which is central to our business model, to at-home on-demand classes. Millennials, who represent one of the largest, most active demographic groups, in particular, may exhibit a shift in preference to on-demand fitness classes as they enter new life phases, such as parenthood, and, as a result, find new constraints placed on their free time. As such, on-demand workouts may become better suited for their lifestyles. In addition, the COVID-19 pandemic accelerated the growth of and demand for at-home fitness classes, which may extend beyond the pandemic. If we fail to timely identify and effectively respond to any such shift in consumer preference, our business, results of operations and financial condition could be adversely affected.

We rely on consumer discretionary spending, which may be adversely affected by economic downturns and other macroeconomic conditions or trends.

Our business and results of operations are subject to global economic conditions and their impact on consumer discretionary spending. Some of the factors that may negatively influence consumer spending include high levels of unemployment, higher consumer debt levels, reductions in net worth, declines in asset values and related market uncertainty, home foreclosures and reductions in home values, fluctuating interest rates and credit availability, fluctuating fuel and other energy costs, fluctuating commodity prices, and general uncertainty regarding the overall future of the political and economic environment. Consumer purchases of discretionary items, such as memberships and workout packs at our studios, generally decline during periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence. If consumer purchases of memberships and workout packs at our studios decline, our franchise fee revenue may be adversely affected. In addition, during an economic downturn, existing franchisees may elect not to renew their franchise agreements with us, and prospective franchisees may opt not to enter into a franchise agreement with us, each of which could have a material and adverse effect on our business, results of operations and financial condition.

We and our franchisees may be unable to attract and retain members, which would materially and adversely affect our business, results of operations and financial condition.

The success of our business depends on our and our franchisees’ ability to attract and retain members. Our and our franchisees’ marketing efforts may not be successful in attracting members to studios, and membership levels may materially decline over time, especially at studios in operation for an extended period of time. Members may cancel their memberships at any time after giving proper advance written notice, subject to an initial minimum term applicable to certain memberships. Our franchisees may also cancel or suspend memberships if a member fails to provide payment for an extended period of time. In addition, we experience attrition and we and our franchisees must continually engage existing members and attract new members in order to maintain membership levels. It is possible that a portion of our member base may not regularly use our studios and may cancel their memberships. Some of the factors that could lead to a decline in membership levels include, among other factors:

•changing desires and behaviors of consumers or their perception of our brand;

•government shutdowns, social distancing requirements, stay at home orders and advisories or any other restrictions or suggestions adopted my governmental authorities;

•changes in discretionary spending trends;

•market maturity or saturation;

•a decline in our ability to deliver quality service at a competitive price;

•a failure to introduce new features, products or services that members find engaging;

•the introduction of new products or services, or changes to existing products and services, that are not favorably received;

•technical or other problems that affect the member experience;

•an increase in monthly membership dues due to inflation;

•direct and indirect competition in our industry;

•a decline in the public’s interest in health and fitness; and

•a general deterioration of economic conditions or a change in consumer spending preferences or buying trends.

In order to increase membership levels, our franchisees may from time to time offer promotions or lower monthly dues or annual fees. If our franchisees are not successful in optimizing pricing or finding other ways to add memberships in new and existing studios, our membership levels may decrease, and in turn growth in monthly membership dues or annual fees may suffer, which will have an increasing impact on our financial results as we continue to move to a percentage of gross monthly studio revenue based franchise fee model. Any decrease in our average dues or fees or higher membership costs may materially and adversely impact our results of operations and financial condition. Additionally, further expansion into international markets may create new challenges in attracting and retaining members that we may not successfully address, as these markets carry unique risks as discussed below. As a result of these factors, we cannot be certain that our membership levels will be adequate to maintain or permit the expansion of our operations. A decline in membership levels would have an adverse effect on our business, results of operations and financial condition.

Risks Related to Our Franchisee Business Model and Strategy

Our financial results are affected by the number of Franchises Sold and studios we open and by the operating and financial results of such studios, which impact will become more significant as we continue to implement a variable franchise fee structure.

Under the terms of our franchise agreements, each of our franchisees is required to pay us an establishment fee upon signing a new franchise agreement, and monthly franchise and related fees throughout the term of the franchise agreement. A substantial portion of our revenue comes from such fees. For the years ended December 31, 2022 and 2021, we derived 69.7% and 58.9% of our revenue, respectively, from Franchise revenue. As a result, our financial results depend on the number of Franchises Sold and number of studios. If we are unable to sell new franchises that eventually open studios, or renew existing franchise agreements, our financial results would be adversely affected.

Prior to July 2019, our monthly franchise fees were generally a flat monthly fee. Since then, we have transitioned our model in the United States for new franchisees to a franchise fee based on the greater of a fixed monthly franchise fee or a percentage of gross monthly studio revenue. In select markets outside of the United States, and for renewals of existing franchisees in the United States, we are in the process of developing a strategy for transitioning to a similar model. There can be no assurance that we will be successful in implementing this model with new franchisees or in transitioning existing franchisees to this model in our markets. We anticipate that monthly franchise fee payments by our franchisees, whether in the form of a flat fee or variable fee, will continue to represent a substantial portion of our revenue in the future. Accordingly, we are reliant on the performance of our franchisees in successfully operating their studios and generating sufficient revenue to enable them to pay monthly franchise fees and other fees to us on a timely basis. If our franchisees are not successful in operating their studios, they may not be able to pay required monthly franchise fees to us, which could harm our operating results through reduced franchise fee revenue. As we continue to implement the variable franchise fee structure, our financial

results will become even more dependent on the operational and financial results of our franchisees. Further, such shift in franchise fee structure will likely result in greater variability in our results from year to year and from quarter to quarter because our franchise fee revenue will be directly impacted by the sales performance of our franchisees. As a result, as this structure continues to be implemented, we expect period-to-period comparisons of our operating results to be less reliable as an indication of our performance for any future period.

If we fail to identify, recruit and contract with qualified franchisees, our ability to open new franchised studios and increase our revenue could be materially and adversely affected.

The opening of additional franchised studios depends, in part, upon the availability of prospective franchisees who meet our criteria. We may not be able to identify, recruit or contract with suitable franchisees in our target markets on a timely basis or at all. Although we have developed criteria to evaluate and screen prospective franchisees, our franchisees may not ultimately have the business acumen or be able to access the financial or management resources that they need to open and successfully operate the studios contemplated by their franchise agreements with us. Franchisees may elect to cease studio development for other reasons, including applicable franchise laws that may limit our ability to terminate or modify these franchise agreements. If we are unable to recruit suitable franchisees or if franchisees are unable or unwilling to open new studios as planned, our growth may be slower than anticipated, which could materially and adversely affect our ability to increase our revenue and materially and adversely affect our business, results of operations and financial condition. In addition, we have begun entering into long-term multi-unit studio agreements with individual parties. These agreements provide for a large number of studios to be open on a set schedule and be operated by a single party. If that party does not perform or is unable to open and operate the studios as anticipated, it could materially and adversely affect our planned openings of new studios and expected revenue from the studios.

If we are unable to renew our franchise agreements with our existing franchisees, our business, results of operations and financial condition would be materially and adversely affected.

Our business and results of operations depend on maintaining franchise agreements with our existing franchisees. Our typical franchise agreement has an initial five-year term. Upon the expiration of the initial term, we or the franchisee may, or may not, elect to renew the franchise agreement. Whether or not a franchise agreement is renewed is contingent on:

•the franchisee’s execution of the then-current form of franchise agreement, which may include increased or different franchise fee revenue, marketing fees and other fees and costs;

•the satisfaction of certain conditions, including re-equipment and remodeling of the studio and other requirements;

•the payment of a renewal fee; and

•other conditions which are outside our control, including those that impact our franchisees, such as economic conditions, their financial situation, the success of their studio, their other commitments and their ability to renew their studio lease on acceptable terms or to find a suitable alternative location.

Our franchisees’ ability to negotiate favorable terms on an expiring lease or to negotiate favorable terms on leases with renewal options, or conversely for a suitable alternative location, could depend on conditions in the real estate market, competition for desirable properties and our franchisees’ relationships with current and prospective landlords or may depend on other factors that are not within our or our franchisees’ control. As of December 31, 2022, the initial franchise term in 381 franchise studios will expire during 2023 and 591 franchise studios are operating under expired franchise agreements. In addition, as of December 31, 2022 approximately 288 franchisees’ studios were not operating, but had not terminated their franchise agreements. If we are unable to renew our franchise agreements in respect of such studios or a significant portion thereof, our business, results of operations and financial condition would be materially and adversely affected.

The timing of the opening of Franchises Sold may differ materially from historical experience, and the number of new franchised studios that actually open in the future may differ materially from

the number of signed commitments we currently have or anticipate from existing and new franchisees.

As of December 31, 2022, a significant number of Franchises Sold did not yet have operating studios. The timing of the opening of each new studio is subject to many factors outside of our control, including those discussed below in “We have grown rapidly in recent years and have limited operating experience at our current scale of operations. If we fail to successfully implement our growth strategy, which includes new studio development by existing and new franchisees, our brand and ability to increase our revenue and operating profits could be materially and adversely affected,” and accordingly the timing of the opening of new studios may differ materially from historical experience. Further, as we continue to expand our business into new international markets, the risks our franchisees may face in such markets, such as political and economic instability, local laws and regulations and inadequate brand infrastructure, may result in longer periods for opening new studios.

A portion of our Franchises Sold may not ultimately open as new franchised studios. Approximately 0.8% and 1.0% of the Franchises Sold at the beginning of the period in the years ended December 31, 2022 and December 31, 2021, respectively, were subsequently terminated. Additionally, approximately 530 Franchises Sold during the year ended December 31, 2022 were subsequently terminated during the year ended December 31, 2022. The historic conversion rate of signed commitments to new franchised studios may not be indicative of the conversion rates we will experience in the future and the total number of new studios actually opened in the future may differ materially from the number of signed commitments disclosed at any point in time. Additionally, Total Franchises Sold includes 913 franchises sold under development agreements which have development schedule timelines providing for openings of studios through 2028. Failure of the franchisees to adhere to the timeline of required development schedules provided within the development agreements may result in many of these studios not ultimately opening. At December 31, 2022, three development agreements, representing approximately 518 or 14% of Total Franchises Sold, were not in compliance with their development schedule timelines. To the extent our franchisees, including those under development agreements, are unable to open new studios as we anticipate, we will not realize the revenue growth that we expect. Our failure to add a significant number of new studios would adversely affect our ability to increase our revenue and income from operations.

We have limited control with respect to the operations of our franchisees, which could have a negative impact on our business, and our franchisees are impacted by factors that are beyond our control.

Franchisees are independent business operators and are not our employees, and we do not exercise control over the day-to-day operations of their studios. We provide training and support to franchisees, and set and monitor operational standards, but the quality of franchised studios may be diminished by any number of factors beyond our control. Franchisees may not successfully operate studios in a manner consistent with our standards and requirements, including those relating to our marketing strategy, applicable laws or regulations, or may not hire and train qualified coaches and other personnel. Further, we cannot be certain that our franchisees will have the business acumen or financial resources necessary to operate successful franchises in their approved locations. Applicable state franchise laws may limit our ability to terminate or modify franchise agreements with non-complying or unsuccessful franchisees. If franchisees do not operate to our expectations or if consumers have negative perceptions or experiences with our franchised studios, our image and reputation, and the image and reputation of other franchisees, may suffer materially and system-wide membership could decline significantly, which could reduce our franchise fees and other revenue.

As small business owners, some of our franchisees may be negatively and disproportionately impacted by capital requirements, negative economic conditions, including pandemics, recession, inflation and increased unemployment levels, or other issues. Furthermore, franchisees’ business obligations may not be limited to the operation of our studios, making them subject to business and financial risks unrelated to the operation of our studios. These unrelated risks, and the effect of decreased consumer confidence or changes in consumer behavior, could materially harm our franchisees’ financial condition, which would cause our franchise fees and other revenue to decline and materially and adversely affect our business, results of operations and financial condition as a result.

Moreover, disputes with franchisees could damage our brand image and reputation and our relationships with our franchisees, generally.

The success of our business strategy depends on our ability to effectively manage and support our franchise system.

We operate a nearly 100% franchise model. As such, the success of our business strategy depends on our franchise network, which requires ongoing support and oversight from us, including comprehensive training on membership marketing and day-to-day operations, business support systems, marketing support, management information systems and support with other systems and procedures. Failure to provide our franchisees with adequate training, support and resources could materially and adversely affect both our new and existing franchisees, as well as cause disputes between us and our franchisees. Any of the foregoing could materially and adversely affect our business, results of operations and financial condition.

We have grown rapidly in recent years and have limited operating experience at our current scale of operations. If we fail to successfully implement our growth strategy, which includes new studio development by existing and new franchisees, our brand and ability to increase our revenue and operating profits could be materially and adversely affected.

We have expanded our operations rapidly and have limited operating experience at our current size. In less than ten years, we have scaled our global footprint to 3,663 Total Franchises Sold in 74 countries, including 2,100 Total Studios as of December 31, 2022. Our growth strategy relies substantially upon new studio openings by existing and new franchisees, and we are continuously seeking to identify target markets where we can enter or expand, taking into account numerous factors such as the location of our current studios, demographics and traffic patterns. Our franchisees face many challenges in opening new studios, including:

•availability and cost of financing;

•selection and availability of suitable studio locations;

•competition for studio sites;

•negotiation of acceptable lease and financing terms;

•availability of financing, including the impact of rising interest rates;

•securing required domestic or foreign governmental permits and approvals, including zoning approvals;

•health and fitness trends in new geographic regions and acceptance of our offerings;

•employment, training and retention of qualified personnel in local markets;

•ability to open new studios during the timeframes we and our franchisees expect;

•the general legal and regulatory landscape in which their studios operate;

•actual or perceived threats to public health due to the COVID-19 pandemic;

•determining and setting appropriate membership fees to ensure the success of their studios; and

•general economic and business conditions.

In particular, because new studio development is funded entirely by franchisee investment, our growth strategy is dependent on our franchisees’ (or prospective franchisees’) ability to access funds to finance such development. Franchisees of new studios may have difficulty securing adequate financing, particularly in new markets, where there may be a lack of adequate history and brand familiarity. If our franchisees or prospective franchisees are not able to obtain financing at commercially reasonable rates, or at all, they may be unwilling or unable to invest in the development of new studios, and our future growth could be materially and adversely affected. For example, in May 2022, the Company entered into a $150 million credit agreement (the “New Facility”) with Fortress Credit Group for the purpose of providing financing to franchisees. However, the New Facility was terminated on August 14, 2022, prior to providing any financing to franchisees as a result of the Company no longer maintaining compliance with covenants requiring minimum market capitalization thresholds.

In addition, our franchisees’ ability to successfully open and operate new studios in new or existing markets may be adversely affected by a lack of awareness or acceptance of our brand, as well as a lack

of existing marketing efforts and operational execution in these new markets. To the extent that we are unable to implement effective marketing and promotional programs and foster recognition and affinity for our brand in new markets, our franchisees’ new studios may not perform as expected, and our growth may be significantly delayed or impaired. In addition, new studios may not be successful or our average studio membership sales may not increase at historical rates, which could materially and adversely affect our business, results of operations and financial condition.

If we and our franchisees are unable to identify and secure suitable sites for new franchise studios, our revenue growth rate and operating profits may be negatively impacted.

To successfully expand our business, we, along with our franchisees, must identify and secure sites for new franchise studios that meet our established criteria. In addition to finding sites with the right demographic and other measures we employ in our selection process, we also evaluate the penetration of our competitors in the market. We and our franchisees face significant competition for sites that meet our criteria, and as a result we and our franchisees may lose those sites, our competitors could copy our format or our franchisees could be forced to pay significantly higher lease payments for those sites. If we and our franchisees are unable to identify and secure sites for new studios in suitable locations, our revenue growth rate and operating profits may be negatively impacted. Additionally, if our or our franchisees’ analysis of the suitability of a studio site is incorrect, our franchisees may not be able to recover the capital investment in developing and building the new studio and in turn may not be able to pay required royalties to us.

As we increase our number of studios, our franchisees may also open studios in higher-cost geographies, which could entail greater lease payments and construction costs, among others. The higher level of invested capital at these studios may require higher operating margins and higher net income per studio to produce the level of return our franchisees and potential franchisees expect. Failure to provide this level of return could materially and adversely affect our business, results of operations and financial condition.

Opening new studios in close proximity may negatively impact our existing studios’ revenue and profitability.

As of December 31, 2022, we had 3,663 Total Franchises Sold in 74 countries, and we plan to open many new studios in the future, some of which will be in existing markets. We intend to continue opening new franchise studios in our existing markets as part of our growth strategy, some of which may be located in close proximity to studios already in those markets. Opening new studios in close proximity to existing studios may attract some memberships away from those existing studios, which may lead to diminished revenue and profitability for us and our franchisees rather than increased market share, especially as we continue to move to a percentage of gross monthly studio revenue-based franchise fee model. In addition, as a result of new studios opening in existing markets and because older studios will represent an increasing proportion of our studio base over time, our Same Store Sales increases may be lower in future periods than they have been historically.

Our franchisees may incur rising costs related to construction of new studios and maintenance of existing studios, which could materially and adversely affect the attractiveness of our franchise model, and in turn our business, results of operations and financial condition.

Our studios require both upfront and ongoing investments, including periodic remodeling and equipment replacement. If our franchisees’ costs are greater than expected, franchisees may not achieve their expected targeted return. In addition, increased costs may result in lower profits to the franchisees, which may cause them to terminate their franchise agreement or make it harder for us to attract new franchisees, which in turn could materially and adversely affect our business, results of operations and financial condition.

In addition, if a franchisee is unwilling or unable to acquire the necessary financing to invest in the maintenance and upkeep of its studios, including periodic remodeling and replacement of equipment, the quality of its studios could deteriorate, which may have a negative impact on our brand image and our

ability to attract and maintain members, which in turn may have a negative impact on our business, results of operations and financial condition.

If we are unable to sustain pricing levels for our establishment fees, World Pack and franchise fees, our business could be adversely affected.

If we are unable to sustain pricing levels for our establishment fees, World Pack and franchise fees, whether due to competitive pressure or otherwise, our revenue and operating profit could be significantly reduced. Further, our decisions around the development of new ancillary products and services are grounded in assumptions about eventual pricing levels. During the fourth quarter of 2022, the Company provided limited time offers of World Packs at reduced prices as compared to initially agreed upon contractual terms. If these limited time offers are made in the future, or if there is price compression in the market after these decisions are made, it could have a negative effect on our business.

If our relations with existing or potential franchisees deteriorate, our business could be adversely affected.

Our growth depends on maintaining good relations with our franchisees. Franchisees, as independent business operators, may from time to time disagree with us and our strategies regarding the business or our interpretation of our respective rights and obligations under our franchise agreements, including with respect to alleged breaches of contract or wrongful termination under the franchise arrangements. Disagreement may lead to disputes with our franchisees, and we expect such disputes to occur from time to time. Disputes between us and our franchisees, whether in court or otherwise, could relate to either party’s violation of its contractual obligations. We may also engage in litigation with franchisees to enforce the terms of our franchise agreements and compliance with our brand standards as we determine necessary to protect our brand, the consistency of our studios and the customer experience or to enforce our contractual indemnification rights if we are brought into a matter involving a third party due to the franchisee’s alleged acts or omissions. In addition, we may be subject to claims by our franchisees relating to our FDD, including claims based on financial information contained in our FDD.

Furthermore, existing and future franchise-related legislation could subject us to additional litigation risk in the event we terminate or fail to renew a franchise relationship. Unfavorable judgments or settlements relating to franchisee disputes could result in monetary or injunctive relief against us, including the voiding of non-compete, territorial exclusivity or other development-related provisions upon which we rely. Any negative outcome in such disputes could materially and adversely affect our results of operations as well as our ability to expand our franchise system and may damage our reputation and brand. To the extent that we have disputes with our franchisees, the attention, time and financial resources of our management and our franchisees will be diverted from the operation of our business, which could have a material adverse effect on our business, results of operations, financial condition and cash flows. Even our success in franchisee disputes could damage our franchisees’ finances or operations, or our relationships with them or our ability to attract new franchisees.

Our business is subject to various franchise laws and regulations, and changes in such laws and regulations, or failure to comply with existing or future laws and regulations, and other legal developments that impact franchising could materially and adversely affect our business.

As a franchised business, we are subject to the FTC Franchise Rule, which is a trade regulation imposed on franchising promulgated by the FTC that regulates the offer and sale of franchises in the United States and that requires us to provide to all prospective franchisees certain mandatory disclosure in an FDD. In addition, we are subject to state franchise registration and disclosure laws in a number of states that regulate the offer and sale of franchises by requiring us, unless otherwise exempt, to register our franchise offering in those states prior to our making any offer or sale of a franchise in those states and to provide an FDD to prospective franchisees in accordance with such laws. States requiring franchise registration include, but are not limited to, California, New York, Illinois, Michigan, Hawaii and Washington. We are also subject to franchise registration and disclosure laws in other countries in which we operate, including Australia, Canada, China, France, French Polynesia, Indonesia, Malaysia, Mexico, New Caledonia, Russia, South Africa, South Korea, Spain, Taiwan and the United States, that regulate the offer and sale of franchises by requiring us, unless otherwise exempt, to register a franchise disclosure

document in a prescribed format and to provide that franchise disclosure document to prospective franchisees, in accordance with such laws, and that regulate certain aspects of the franchise relationship.

Further, FTC Franchise Rule requires the FDD to include updated audited financial statements for the previous completed fiscal year to be compliant. As a result of the delay in our ability to provide audited financial statements as of and for the year ended December 31, 2022, we have not been able to update our FDDs for sales purposes during 2023. Therefore, we have not been able to sell any franchises in the United States in 2023 since April 2023 and will not be able to commence sales until the filing of our 2023 FDDs.

We are currently subject to similar laws in other countries in which we currently offer franchises, and we may also become subject to laws in additional countries in the future. We are not currently, and in the past we have not been, in compliance with certain applicable franchise registration and disclosure laws in certain jurisdictions. Further, as we expand into new markets outside of our more significant markets of Australia, New Zealand, Canada, the United States, the United Kingdom and Singapore, we may have limited knowledge of local franchise laws and regulations and may take time to apprise ourselves of such laws and regulations. Failure to comply with applicable franchise registration and disclosure laws may result in being prohibited from selling in that geography, a franchisee’s right to rescind its franchise agreement and damages, pursuant to the terms of its franchise agreement, and may result in investigations or actions from federal, state or local franchise authorities, civil fines or penalties and stop orders, among other remedies.

We are also subject to franchise relationship laws in a number of jurisdictions that regulate many aspects of the franchise relationship including, depending upon the jurisdiction, renewals and terminations of franchise agreements, franchise transfers, the applicable law and venue in which franchise disputes may be resolved, discrimination and franchisees’ right to associate, among others. Our failure to comply with such franchise relationship laws could result in fines, damages and our inability to enforce franchise agreements where we have violated such laws. Any non-compliance on our part could result in liability to franchisees and regulatory authorities, inability to enforce our franchise agreements and a reduction in our anticipated franchise fee revenue, which in turn may materially and adversely affect our business and results of operations.

We and our franchisees are also subject to the U.S. Fair Labor Standards Act of 1938, as amended, and various other laws in the United States, Canada, Australia and other foreign jurisdictions governing such matters as minimum-wage requirements, overtime and other working conditions. A number of our franchisees’ employees may be paid at rates related to the U.S. federal or state minimum wage, and the U.S. federal and/or state minimum wage may increase. Any increases in labor costs might result in our franchisees inadequately staffing studios. In addition, such increases in labor costs and other changes in labor laws could affect studio performance and quality of service, decrease franchise fee revenue and adversely affect our brand.

We and our franchisees’ operations and properties are subject to extensive federal, international, state, provincial and local laws and regulations, including those relating to environmental, building and zoning requirements. Failure to comply with these legal requirements could result in, among other things, revocation of required licenses, administrative enforcement actions, fines and civil and criminal liability, which could materially and adversely affect our business.

We and our franchisees are responsible for compliance with applicable laws that regulate the relationship between studios and their members. Many jurisdictions have consumer protection regulations that may limit the collection of membership dues or fees prior to opening, require certain disclosures of pricing information, mandate the maximum length of contracts and “cooling off” periods for members (after the purchase of a membership), set escrow and bond requirements for studios, govern member rights in the event of a member relocation or disability, provide for specific member rights when a studio closes or relocates, or preclude automatic membership renewals. Our franchisees’ failure to comply fully with these rules or requirements may subject us or our franchisees to fines, penalties, damages and civil liability, or result in membership contracts being void or voidable. In addition, any changes to such laws or in their interpretation could individually or in the aggregate cause us to change or limit our business practices, which may make our business model less attractive to our franchisees or our members.

Our investments to enhance the customer experience, including through technology, may not generate the expected results.

Our long-term business objectives depend on the successful system-wide execution of our strategies. We continue to build upon our investments in technology and modernization in order to transform the customer experience, including modernization of our mobile applications, introduction of new equipment within our studios, and addition of new group based training formats. As part of these investments, we are continuing to place emphasis on improving our franchise model and strengthening relationships with both franchisee and customers which may not generate the expected results. If these initiatives are not well executed, or if we do not fully realize the intended benefits of these significant investments, our business results may suffer.

Uncertainty in the law with respect to the assignment of liabilities in the franchise business model could adversely impact our profitability.

One of the legal foundations fundamental to the franchise business model has been that, absent special circumstances, a franchisor is generally not responsible for the acts, omissions, or liabilities of its franchisees, whether with respect to the franchisees’ employees or otherwise. In the last several years, this principle has been the subject of differing and inconsistent interpretations at the National Labor Relations Board and in the courts, and the question of whether a franchisor can be held liable for the actions or liabilities of a franchisee under a vicarious liability theory, sometimes called “joint employer,” has become highly fact dependent and generally uncertain. A determination that we are a “joint employer” with our franchisees or that our franchisees are part of one unified system subject to joint and several liability could subject us and/or our franchisees to liability for employment-related and other liabilities of our franchisees and could cause us to incur other costs that have a material adverse effect on our results of operations. Additionally, in certain jurisdictions, including Australia, we may be liable if our franchisees fail to comply with employment and work health safety legislation. Any finding that we are liable for such non-compliance could adversely affect our business, results of operations and financial condition.

We are subject to a variety of additional risks associated with our franchisees.

Our franchise business model subjects us to all of the risks described above and a number of other risks, any one of which may impact our franchise fee revenue collected from our franchisees, may harm the goodwill associated with our brand and may materially and adversely impact our business and results of operations. Additional risks include the following:

Franchisee litigation; effects of regulatory efforts

We and our franchisees are subject to a variety of litigation risks, including, but not limited to, member claims, personal injury or wrongful death claims, vicarious liability claims, litigation with or involving our relationship with franchisees, litigation alleging that the franchisees are our employees or that we are the co-employer of our franchisees’ employees, employee allegations against the franchisee or us of improper termination, sexual harassment or hostile work environment allegations, discrimination or employee classification, landlord/tenant disputes and intellectual property claims, among others. Each of these claims may increase costs, reduce the execution of new franchise agreements and affect the scope and terms of insurance or indemnifications we and our franchisees may have.

In addition, we and our franchisees are subject to various regulatory efforts to enforce employment laws, such as efforts to categorize franchisors as the co-employers of their franchisees’ employees, legislation to categorize individual franchised businesses as large employers for the purposes of various employment benefits, and other legislation or regulations that may have a disproportionate impact on franchisors and/or franchised businesses. Any of these changes could impose greater costs and regulatory burdens on franchising and negatively affect our ability to sell new franchises.

Franchisee insurance

Our franchise agreements require each franchisee to maintain certain insurance types and levels of coverage. Losses arising from certain extraordinary hazards, however, may not be covered, and insurance may not be available (or may be available only at prohibitively expensive rates) with respect to many other risks, or franchisees may fail to procure the required insurance. Moreover, any loss incurred could exceed policy limits and policy payments made to franchisees may not be made on a timely basis. Any such loss or delay in payment could have a material adverse effect on a franchisee’s ability to satisfy its obligations under its franchise agreement or other contractual obligations, which could cause a franchisee to terminate its franchise agreement and, in turn, negatively affect our operating and financial results.

Franchise agreements and franchisee relationships

Our franchisees develop and operate their studios under terms set forth in our franchise agreements. These agreements give rise to long-term relationships that involve a complex set of mutual obligations and mutual cooperation. We have a standard agreement that we typically use with our franchisees, but various franchisees have negotiated specific terms in these agreements. Furthermore, we may from time to time negotiate terms of our franchise agreements with individual franchisees or groups of franchisees. We seek to have positive relationships with our franchisees, based in part on our common understanding of our mutual rights and obligations under our agreements, to enable both the franchisees’ business and our business to be successful. However, we and our franchisees may not always maintain a positive relationship or always interpret our agreements in the same way. Our failure to have positive relationships with our franchisees could individually or in the aggregate (including as a result of franchisees forming an independent association of franchisees) cause us to change or limit our business practices, which may make our business model less attractive to our franchisees or our members.

While revenue from franchisees are not concentrated among one party or a small number of parties, the success of our business does depend in large part on our ability to maintain contractual relationships with franchisees in profitable studios. A typical franchise agreement has a five-year term. As of December 31, 2022, our largest franchisee group accounted for approximately 9.5% of our Total Franchisees Sold. If we fail to maintain or renew our contractual relationships on acceptable terms, or if one or more of these significant franchisees were to become insolvent or otherwise were unwilling to pay amounts due to us, our business, reputation, results of operations and financial condition could be materially and adversely affected.

Franchise agreement termination

Each franchise agreement is subject to termination by us, as the franchisor, in the event of a default, generally after expiration of applicable cure periods, although, under certain circumstances, a franchise agreement may be terminated by us upon notice without an opportunity to cure. The default provisions under the franchise agreements are drafted broadly to provide that we may terminate the agreement in the event of a breach. Such breach may include, among other things, any failure by the franchisee to meet operating standards and franchisee actions that may threaten the licensed intellectual property. In some regions in which we operate, a franchisee may have a right to terminate its franchise agreement under certain circumstances.

Franchisee turnover

There can be no guarantee of the retention in the future of any franchisees, including the top performing franchisees, or that we will maintain the ability to attract, retain and motivate sufficient numbers of franchisees of the same caliber. The quality of existing franchisee operations may be diminished by factors beyond our control, including franchisees’ failure or inability to hire or retain qualified managers and other personnel, increased competition, rising operating costs, supply chain interruptions, increasing regulatory and legal complexity, and other factors. The training of managers and other personnel may be inadequate. These and other such negative factors could materially and adversely affect our business.

Bankruptcy of franchisees

A franchisee bankruptcy could have a substantial negative impact on our ability to collect payments due under such franchisee’s franchise agreement(s). In a franchisee bankruptcy, the bankruptcy trustee may reject its franchise agreement(s), development area(s) and/or franchisee lease/sublease pursuant to Section 365 under the U.S. bankruptcy code or similar laws in other countries, in which case there would be no further franchise fee payments from such franchisee, and we may not ultimately recover those payments in a bankruptcy proceeding of such franchisee in connection with a damage claim resulting from such rejection.

Franchisee changes in control

Our franchises are operated by independent business owners. Although we have the right to approve franchise owners, and any transferees, it can be difficult to predict in advance whether a particular franchise owner will be successful. If an individual franchise owner is unable to successfully establish, manage and operate the studio, the performance and quality of service of the studio could be adversely affected, which could reduce memberships and negatively affect our franchise fee revenue and brand image. Although our agreements prohibit “changes in control” of a franchisee without our prior consent as the franchisor, a franchise owner may desire to transfer a studio to a transferee franchisee. In addition, our franchise agreements in several regions, including the United States, provide that in the event of the death or disability of a franchisee (if a natural person) or a principal of a franchisee entity, the executors and representatives of the franchisee are required to transfer the relevant franchise agreements to a successor franchisee approved by the franchisor. In any transfer situation, the transferee may not be able to perform the former franchisee’s obligations under the franchise agreement and successfully operate the applicable studio. In such a case, the performance and quality of service of such studio could be adversely affected, which could also reduce memberships and negatively affect our franchise fee revenue and brand image.

Some of our franchisees are operating entities

Franchisees may be natural persons or legal entities. Our franchisees that are operating companies (as opposed to limited purpose entities) are subject to business, credit, financial and other risks, which may be unrelated to the operation of their studios. These unrelated risks could materially and adversely affect a franchisee that is an operating company and its ability to service its members and maintain studio operations while making franchise fee payments, which in turn may materially and adversely affect our business and results of operations.

Risks Related to our Brand and Strategy

Our success depends substantially on the value of our brand. Failure to preserve the value and relevance of our brand could have an adverse impact on our financial results.

Our success is dependent in large part upon our ability to maintain and enhance the value of our brand, including our studio members’ connection to our brand. Brand value can be severely damaged even by isolated incidents, particularly if the incidents receive considerable negative publicity or result in litigation. Our reliance on social media as a marketing strategy makes us particularly susceptible to widespread negative publicity.

Incidents which could damage our brand may relate to our policies, the way we manage our relationships with our franchisees, our growth strategies, our development efforts or the ordinary course of our or our franchisees’ businesses. Other incidents that could be damaging to our brand may arise from events that are or may be beyond our control, such as:

•actions taken (or not taken) by one or more franchisees or their employees relating to health (including responses to pandemics and endemics), safety, welfare or otherwise;

•data security breaches or fraudulent activities associated with our and our franchisees’ electronic payment systems;

•litigation and legal claims;

•third-party misappropriation, dilution or infringement or other violation of our intellectual property;

•illegal activity targeted at us or others; or

•conduct by individuals affiliated with us which could violate ethical standards or otherwise harm the reputation of our brand.

Consumer demand for our studios and our brand’s value could diminish significantly if any such incidents or other matters erode consumer confidence in us or our studios, which would likely result in fewer memberships sold or renewed. If studio memberships decline, prospective franchisees may not open new studios, existing franchisees may not renew their franchise agreements and studio sales may decline, all of which would lower franchise fee revenue, which in turn could materially and adversely affect our business, results of operations and financial condition.

Our marketing strategy relies on the use of social media platforms and any negative publicity on such social media platforms may adversely affect the public perception of our brand which in turn could have a material and adverse effect on our business, results of operations and financial condition and the market price of shares of our common stock. In addition, our use of social media could subject us to fines or other penalties.

We rely on social media marketing, through Instagram, YouTube and Facebook, as a means to engage with our existing members as well as attract new members. Existing and new members alike interact with the brand both organically, through posts by the F45 Training community, as well as through dedicated F45 Training social media accounts. While the use of social media platforms allows us access to a broad audience of consumers and other interested persons, our use of, and reliance on, social media as a key marketing tool exposes us to significant risk of widespread negative publicity. Social media users generally have the ability to post information to social media platforms without filters or checks on accuracy of the content posted. Information concerning us or our brand may be posted on such platforms at any time. Such information may be adverse to our interests or may be inaccurate, each of which can harm our reputation and the value of our brand. The harm may be immediate without affording us an opportunity for redress or correction.

In addition, social media platforms provide users with access to such a broad audience that collective action against our studios, such as boycotts, can be more easily organized. If such actions were organized, we could suffer reputational damage as well as physical damage to our studios. Social media platforms may be used to attack us, our information security systems and our reputation, including through use of spam, spyware, ransomware, phishing and social engineering, viruses, worms, malware, distributed denial of service attacks, password attacks, “Man in the Middle” attacks, cybersquatting, impersonation of employees or officers, abuse of comments and message boards, fake reviews, doxing and swatting. As such, the dissemination of information on social media platforms and other online platforms could materially and adversely affect our business, results of operations and financial condition, regardless of the information’s accuracy.

In addition, our use of social media platforms as a marketing tool could also subject us to fines or other penalties. As laws and regulations, including those from the FTC, and enforcement rapidly evolve to govern the use of these platforms, the failure by us, our employees, our franchisees or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms could materially and adversely impact our and our franchisees’ business, results of operations and financial condition or subject us to fines or other penalties.

Our ability to continue to expand our ancillary product offerings is uncertain and new business lines are subject to risks.

We currently plan to continue the long-term growth of our business by, in part, capitalizing on member engagement by enhancing our offering of health and fitness related-related products, such as footwear and apparel, prepared meal plans, nutrition and supplements, and wearables, such as the LionHeart Heart Rate Monitor, across our global network of studios. Because all of these offerings are currently in the planning stages or relatively new, it is difficult for us to anticipate the level of sales they may generate.

Further, the market for such products is highly saturated and subject to consumer preferences, which may change from time to time. Certain product offerings, like prepared meals, nutrition and supplements, are also subject to unique risks like contamination and food-borne illnesses and require certain food safety programs and compliance with food and health regulatory regimes. Such risks and added compliance could have a material impact on our business. There is no guarantee that our members will embrace our expanded ancillary product offerings or that we will be able to execute this growth strategy.

Our investments in new business strategies, including new brand launches, may have adverse effects on our operating results.

We have invested, and in the future may invest, in new business strategies, including new modalities and channels such as FS8 and Vive. Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations, greater-than-expected liabilities and expenses, economic, political, legal and regulatory challenges associated with operating in new businesses, regions or countries, inadequate return on capital, potential impairment of tangible and intangible assets, and significant write-offs. New ventures are inherently risky and may not be successful, as was the case with our Malibu Crew and Avalon House concepts. The failure of any significant investment could adversely affect our business, reputation, results of operations and financial condition. During the year ended December 31, 2022, the Company began the wind down of Malibu Crew and Avalon House concepts which the Company is no longer pursuing.

The ongoing novel coronavirus COVID-19 pandemic, or another pandemic or epidemic, and related governmental restrictions intended to prevent its spread have had, and in the future may continue to have, a material and adverse effect on our business, financial condition and results of operations.

On March 11, 2020, the World Health Organization designated the global outbreak of a new strain of coronavirus, COVID-19, a pandemic. The global and domestic response to the COVID-19 pandemic by both governments and businesses has been unprecedented and may continue to evolve. Many countries,

including the United States and Australia, declared national emergencies and implemented preventive measures.

Our business has been materially adversely affected by the COVID-19 pandemic and the global response and may continue to be affected by the COVID-19 pandemic and changes in consumer and business behaviors related to the COVID-19 pandemic. At the initial and in subsequent peaks of the pandemic, nearly all of our studios closed due to COVID-19. Subsequent to studio re-openings, in some locations resurgences of the pandemic led some state and local governments to return to stricter regulations on businesses, resulting in certain studios that reopened to re-close and additional studios may again be closed in the future, pursuant to such local regulations. These restrictions had a material adverse effect on the number of studios open as well as pending and future sales to franchisees. Additionally, shutdowns resulted in an increase to studio build-out time delaying certain studio opening timelines. Certain governments required, and may in the future require, stringent guidelines with respect to the operation of fitness studios, including a reduced number of class participants, increased spacing requirements between participants and restrictions on sharing gym equipment. These requirements and any associated compliance costs have had and may in the future have an adverse impact on our operations, including our franchisees’ ability to retain members. Additionally, the COVID-19 pandemic and the restrictions have had significant impacts on consumer and business behavior.

COVID-19 has subjected our business, operations and financial condition to a number of risks, including, but not limited to, the following:

Risks Related to Revenue

COVID-19 has adversely impacted our revenue in a number of respects. Throughout the pandemic, some franchisees were unable to pay the required monthly franchise fees due to the temporary closure of studios, and as a result, our franchise fee revenue was negatively impacted. In addition, due to temporary

studio closures, we did not realize the anticipated benefits from our variable franchise fee structure due to the operational and financial results of our franchisees being adversely impacted by the pandemic.

Risks Related to Operations

The COVID-19 pandemic and related shelter-in-place restrictions and other containment efforts have had a significant impact on our operations, including mandated studio closures, stringent guidelines with respect to the operation of our studios, including reduced number of class participants, increased spacing requirements between participants and restrictions on sharing gym equipment. Many of our studios are located within central business districts which have been impacted by changes to return to office requirements as a result of the growth in telework. These requirements and any associated compliance costs have had and may continue to have an adverse impact on our operations, including our franchisees’ ability to retain members.

Risks Related to Growth

Our growth has been and may continue to be harmed by COVID-19. A number of franchisees may elect to cease studio development due to the COVID-19 pandemic. In addition, due to COVID-19, our studios experienced membership declines.

Risks Related to Consumer and Business Behavior

The COVID-19 pandemic and related restrictions have had and may continue to have a significant impact on both consumer and business behavior. We believe that these changes to consumer and business

behavior may continue to be impacted by the COVID-19 pandemic, ongoing restrictions and government mandates. In particular, we cannot predict if and when workers will return to working full-time in offices in major urban areas.

Risks Related to Intellectual Property

We depend upon third-party licenses for the use of music to supplement our workouts and workout tutorials. An adverse change to, loss of, or claim that we or our franchisees do not hold necessary licenses may have an adverse effect on our business, results of operations and financial condition.

We use music to supplement our workouts. To secure the rights to use music to supplement our workouts and workout tutorials, we or our franchisees generally must obtain licenses from rights holders such as record labels, music publishers, performing rights organizations, collecting societies, artists and other copyright owners or their agents.

The process of obtaining licenses involves identifying and negotiating with many rights holders, some of whom are unknown or difficult to identify, and implicates a myriad of complex and evolving legal issues across many jurisdictions, including open questions of law as to when and whether particular licenses are needed and by whom. Rights holders also may attempt to take advantage of their market power to seek onerous financial terms from us. Our relationship with certain rights holders may deteriorate. Artists and/or artist groups may object and may exert public or private pressure on rights holders to discontinue or to modify license terms. Additionally, there is a risk that aspiring rights holders, their agents, or legislative or regulatory bodies will create or attempt to create new rights that could require us to enter into new license agreements with, and pay royalties to, newly defined groups of rights holders, some of which may be difficult or impossible to identify.

We require our franchisees to secure certain music licenses to use music in our studios and to supplement our workouts. Any failure to secure such licenses or to comply with the terms and

conditions of such licenses may lead to third party claims or lawsuits and/or have an adverse effect on our business.

We or our franchisees generally need to obtain public performance licenses for the use of musical compositions in our studios and to supplement our workouts. In the United States, public performance rights for musical compositions are secured from music publishers, individual artists, or, more typically, through intermediaries known as performing rights organizations (“PROs”) which (a) issue blanket licenses to copyright users for the public performance of compositions in their repertory, (b) collect royalties under those licenses, and (c) distribute such royalties to copyright owners. We require our franchisees to enter into and maintain requisite licenses for their use of musical compositions with our workouts from the appropriate PROs. We currently do not maintain such licenses. The royalty rates available from PROs today may not be available in the future. Licenses provided by two PROs, ASCAP and BMI, currently are governed by consent decrees, which were agreements between each of the two PROs, on the one hand, and by the U.S. Department of Justice, on the other hand, in an effort to curb anti-competitive conduct. Removal of, or changes to the terms or interpretation of, these agreements, could affect our franchisees’ ability to obtain licenses from these PROs on current and/or otherwise favorable terms, which could harm our business, results of operations and financial condition.

Additionally, licenses with PROs and collecting societies may not provide full coverage for performance of all of the musical compositions which we use in our studios in the countries in which we operate or which we may operate in the future. Some publishers, songwriters and other rights holders choose not to be represented by PROs or collecting societies, adversely affecting our ability to secure licensing arrangements for musical compositions that such rights holders own or control.

In addition to public performance licenses, we generally may need to obtain additional music licenses in connection with the musical ‘daily mixes’ that we share with our franchisees. Any failure to obtain such licenses or to comply with the terms and conditions of such licenses may lead to third party claims or lawsuits and/or have an adverse effect on our business.

In addition to the licenses secured by our franchisees, we generally may need to obtain additional licenses from rights holders of musical compositions and sound recordings, which may include individual artists, record labels, PROs and/or music publishers and administrators. We note that we cannot compel any such rights holders to license their music to us, and the licenses we are able to obtain may not cover every right that we need. We also note that identifying all rights holders for a given musical work can be challenging and, given the high level of content concentration in the music industry, the market power of a few licensors and the lack of transparent ownership information for compositions and sound recordings, we may be unable to license a large amount of music or the music of certain popular artists, which could harm our business, results of operations and financial condition.

For example, we have previously received demands alleging possible infringement of certain compositions and recordings from owners of certain music rights. In addition, we had previously received demands from global performance rights organizations.

Although we seek to comply with the statutory, regulatory and judicial frameworks with respect to the use of music in our studios and to supplement our workouts and workout tutorials, we cannot guarantee that we or our franchisees currently hold, or will always hold, every necessary right to use all of the music that is used in connection with our workouts and workout tutorials, and we cannot assure you that neither we nor our franchisees are infringing or violating any third-party intellectual property rights or that we or our franchisees will not do so in the future.

These challenges, and others concerning the use of music in connection with our workouts and workout tutorials, may subject us to significant music royalty payments and significant liability for copyright infringement, breach of contract or other claims, which may materially and adversely affect our business.

Our intellectual property rights, trademarks and trade names may be infringed, misappropriated or challenged by others.

Our brand and related intellectual property are important to our continued success, which depends on our ability to use our existing trademarks in order to increase brand awareness and further develop our branded products in both domestic and international markets. We rely on a combination of trademarks and trade names to protect our brand. We seek to protect our trademarks, trade names, copyrights and other intellectual property by exercising our rights under applicable state, provincial, federal and international laws. Policing unauthorized use and other violations of our intellectual property rights is difficult and the steps we take may not prevent misappropriation, infringement or other violations of our intellectual property. If we are unable to successfully protect our intellectual property rights for any reason, or if any third party misappropriates, dilutes or infringes our intellectual property, the value of our brand may be harmed, which could have an adverse effect on our business, results of operations and financial condition. Any damage to our reputation could cause membership levels to decline or make it more difficult to attract new members.

We may also from time to time be required to initiate litigation to enforce our trademarks, service marks and other intellectual property. Third parties may also assert that we have infringed, misappropriated or otherwise violated their intellectual property rights, which could lead to litigation against us. Litigation is inherently uncertain and could divert the attention of management, result in substantial costs and diversion of resources and negatively affect our membership sales and profitability regardless of whether we are able to successfully enforce or defend our rights.

We may not be able to adequately protect our intellectual property or adequately ensure that we are not infringing the intellectual property of others, which could harm the value of the F45 brand and our business.

It may be costly and time consuming to protect our intellectual property, and the steps we have taken to do so may not be adequate. In addition, the steps we have taken may not adequately ensure that we do not infringe the intellectual property of others, and third parties may claim infringement by us in the future. In particular, we may be involved in intellectual property claims, including often aggressive or opportunistic attempts to enforce patents used in information technology systems, which might affect our operations and results. Any claim of infringement, whether or not it has merit, could be time-consuming, result in costly litigation and harm our business.

We cannot ensure that franchisees and other third parties who hold licenses to our intellectual property will not take actions that hurt the value of our intellectual property.

We face risks, such as unforeseen costs and potential liability in connection with content we produce, license and distribute through our content delivery platform.

As a producer and distributor of content, we face potential liability for negligence, copyright and trademark infringement, or other claims based on the nature and content of materials that we produce, license and distribute. We also may face potential liability for content used in promoting our studios and workouts, including marketing materials. We may decide to remove content from our workouts, not to place certain content in our studios, or to discontinue or alter our production of certain types of content if we believe such content might not be well received by our members or could be damaging to our brand and business.

To the extent we do not accurately anticipate costs or mitigate risks, including for content that we obtain but ultimately does not appear on or is removed from our studios, or if we become liable for content we produce, license or distribute, our business may suffer. Litigation to defend these claims could be costly and the expenses and damages arising from any liability could harm our results of operations. We may not be indemnified against claims or costs of these types, and we may not have insurance coverage for these types of claims, which may materially and adversely affect our business.

Risks Related to Technology and Privacy

We and our franchisees rely heavily on information systems, and any material failure, interruption or weakness may prevent us from effectively operating our business and damage our reputation.

We and our franchisees increasingly rely on information systems, including our technology-enabled platform through which we distribute workouts to our global franchisee base, point-of-sale processing systems and other information systems managed by third parties, to interact with our franchisees and members, book workouts and collect, maintain and store member information, billing information and other personally identifiable information, including for the operation of studios, collection of cash, legal and regulatory compliance, management of our supply chain, accounting, staffing, payment of obligations, ACH transactions, credit and debit card transactions and other processes and procedures. Our and our franchisees’ ability to efficiently and effectively manage our respective businesses depends significantly on the reliability and capacity of these systems, and any potential failure of third parties to provide quality uninterrupted service is beyond our control.

Our and our franchisees’ operations depend upon our ability, and the ability of our franchisees and third-party service providers (as well as their third-party service providers), 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, denial-of-service attacks and other disruptions. The failure of these systems to operate effectively, stemming from maintenance problems, upgrading or transitioning to new platforms, expanding our systems as we grow, a breach in security or other unanticipated problems, could result in interruptions to or delays in our business and member service and reduce efficiency in our operations. In addition, the implementation of technology changes and upgrades to maintain current and integrate new systems may also cause service interruptions, operational delays due to the learning curve associated with using a new system, transaction processing errors and system conversion delays and may cause us to fail to comply with applicable laws. If our information systems, or those of our franchisees and third-party service providers (as well as their third-party service providers), fail and our or our partners’ third-party back-up or disaster recovery plans are not adequate to address such failures, our revenue and profits could be reduced, and the reputation of our brand and our business could be materially and adversely affected.

If we or our franchisees fail to properly maintain the confidentiality and integrity of our data, our reputation and business could be materially and adversely affected.

In the ordinary course of business, we and our franchisees transmit and collect studio member and employee data, including home address, gender, dates of birth and other highly sensitive personally identifiable information in information systems that we maintain and in those maintained by franchisees and third parties with whom we contract to provide services. We also collect personal member information through the use of our LionHeart heart rate monitors. Some of these data are sensitive and could be an attractive target of a criminal attack by malicious third parties with a wide range of motives and expertise, including lone wolves, organized criminal groups, “hacktivists,” disgruntled current or former employees and others. The integrity and protection of member and employee data are critical to us.

Despite the security measures we have in place to comply with applicable laws and rules, our facilities and systems, and those of our franchisees and third-party service providers (as well as their

third-party service providers), may be vulnerable to security breaches, acts of cyber terrorism or sabotage, vandalism or theft, computer viruses, loss or corruption of data or programming or human errors or other similar events. Furthermore, the size and complexity of our information systems, and those of our franchisees and our third-party vendors (as well as their third-party service providers), make such systems potentially vulnerable to security breaches from inadvertent or intentional actions by our employees, franchisees or vendors, or from attacks by malicious third parties. Because such attacks are increasing in sophistication and change frequently in nature, we, our franchisees and our third-party service providers may be unable to anticipate these attacks or implement adequate preventative measures, and any compromise of our systems, or those of our franchisees and third-party vendors (as well as their third-party service providers), may not be discovered and remediated promptly. Changes in consumer behavior following a security breach or perceived security breach, act of cyber terrorism or sabotage, vandalism or theft, computer virus, loss or corruption of data or programming or human error or

other similar event affecting a competitor, large retailer or financial institution may materially and adversely affect our business.

Additionally, the handling of personally identifiable information by our or our franchisees’ businesses is regulated at the federal, state and international levels. Federal, state and international agencies may also consider and implement from time to time new privacy and security requirements that apply to our businesses. Compliance with contractual obligations and evolving privacy and security laws, requirements and regulations may result in cost increases due to necessary systems changes, new limitations or constraints on our business models and the development of new administrative processes. They also may impose further restrictions on our handling of personally identifiable information that are housed in one or more of our or our franchisees’ databases, or those of our third-party service providers. Actual or perceived noncompliance with privacy laws or an actual or perceived security breach involving the misappropriation, loss or other unauthorized disclosure of personal, sensitive or confidential information, whether by us or by one of our franchisees or vendors, could have material adverse effects on our and our franchisees’ business, operations, brand, reputation and financial condition, including decreased revenue, material fines and penalties, litigation, increased financial processing fees, compensatory, statutory, punitive or other damages, adverse actions against our licenses to do business and injunctive relief by court or consent order. Despite our efforts, the handling of personally identifiable information may not be in compliance with applicable law, or this information could be disclosed or lost due to a hacking event or unauthorized access to our information system, or through publication or improper disclosure, any of which could affect the value of our brand.

The occurrence of cyber incidents, or a deficiency in cyber security, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of confidential information, and/or damage to our employee and business relationships and reputation, all of which could harm our brand and our business.

We could be subject to a cyber-incident or other adverse event that threatens the confidentiality, integrity or availability of information resources, including intentional attacks or unintentional events where parties gain unauthorized access to systems to disrupt operations, corrupt data or steal confidential information about customers, franchisees, vendors and employees. A number of retailers and other companies have recently experienced serious cyber incidents and breaches of their information technology systems. As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced. The three primary risks that could directly result from the occurrence of a cyber-incident include operational interruption, damage to the relationship with members and franchisees and private data exposure, which each in turn could create additional risks and exposure.

In the ordinary course of business, we and our franchisees transmit and collect personally identifiable data regarding our members. We also maintain important internal company data, such as personally identifiable information about our employees and franchisees and information relating to our operations. Our use of personally identifiable information is regulated by foreign, federal and state laws, as well as by certain third-party agreements. As privacy and information security laws and regulations and contractual obligations with third parties evolve, we may incur additional costs to ensure that we remain in compliance with those laws and regulations and contractual obligations. If our security and information systems are compromised or if our employees or franchisees fail to comply with these laws, regulations, or contract terms, and this information is obtained by unauthorized persons or used inappropriately, it could materially and adversely affect our reputation and could disrupt our operations and result in costly litigation, judgments, or penalties arising from violations of federal and state laws and payment card industry regulations.

Under certain laws, regulations and contractual obligations, a cyber-incident could also require us to notify customers, employees or other groups of the incident or could result in adverse publicity, loss of sales and profits, or an increase in fees payable to third parties. We could also incur penalties or remediation and other costs that could materially and adversely affect the operation of our business and results of operations. We currently do not maintain any cyber security insurance coverages.

We are subject to payment processing risk.

We and our franchisees use third parties to process payments from our members for our products and services. In addition, we use third parties to process payments from our franchisees. To the extent there are disruptions in the payment processing systems that we and our franchisees use, such as delays in receiving payments from payment processors, or changes to rules or regulations concerning payment processing, our revenue and results of operations could be adversely impacted. Further, if the third party processors we and our franchisees use become unwilling or unable to continue processing payments on our or their behalf, we and our franchisees would have to find alternative methods of collecting payments, which could adversely impact member retention. In addition, from time to time, we encounter fraudulent use of payment methods, which could impact our results of operation and, if not adequately controlled and managed, could create negative consumer perceptions of our service.

Some of our products and services contain open-source software, which may pose particular risks to our proprietary software, technologies, products and services in a manner that could harm our business.

We use open-source software in our products and services and anticipate using open-source software in the future. Some open-source software licenses require those who distribute open-source software as part of their own software product to publicly disclose all or part of the source code to such software product or to make available any derivative works of the open-source code on unfavorable terms or at no cost. The terms of many open-source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that open-source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products or services. Additionally, we could face claims from third parties claiming ownership of, or demanding release of, the open-source software or derivative works that we developed using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open-source license. These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license, or cease offering the implicated products or services unless and until we can re-engineer them to avoid infringement. This re-engineering process could require us to expend significant additional research and development resources, and we cannot guarantee that we will be successful.

Additionally, the use of certain open-source software can lead to greater risks than use of third-party commercial software, as open-source licensors generally do not provide warranties or controls on the origin of software. There is typically no support available for open-source software, and we cannot ensure that the authors of such open-source software will implement or push updates to address security risks or will not abandon further development and maintenance. Many of the risks associated with the use of open-source software, such as the lack of warranties or assurances of title or performance, cannot be eliminated, and could, if not properly addressed, negatively affect our business. We have processes to help alleviate these risks, including a review process for screening requests from our developers for the use of open-source software, but we cannot be sure that all open-source software is identified or submitted for approval prior to use in our products and services. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have an adverse effect on our business, results of operations and financial condition.

Risks Related to Our Suppliers and Supply Chain Management

Our dependence on a limited number of suppliers for equipment and certain products and services could result in disruptions to our business and could materially and adversely affect our revenue and gross profit.

Equipment and certain products and services used in our studios, including our exercise equipment, components of our tech packs and point-of-sale software and hardware, are sourced from and stored by third-party suppliers. We purchase substantially all of our gym equipment from a single supplier in China and we use a single logistics company to coordinate the storage of all equipment. In addition, we rely on third-party suppliers to manage and maintain our websites and online membership processes. Although we believe that adequate substitutes are currently available, we depend on these third-party suppliers to

operate our business efficiently and consistently meet our business requirements. The ability of these third-party suppliers and logistics providers to successfully provide reliable and high-quality supplies and services is subject to technical and operational uncertainties that are beyond our control, including, for our overseas suppliers, vessel availability, port delays or congestion, and access to warehousing. Any disruption to our suppliers’ operations could impact our supply chain and our ability to service our existing studios, ship our products and open new studios on time or at all and thereby generate revenue. If we lose such suppliers or logistic providers or these parties encounter financial hardships unrelated to the demand for our equipment or other products or services, we may not be able to identify or enter into agreements with alternative suppliers on a timely basis on acceptable terms, if at all, or access equipment stored in warehouses. Transitioning to new suppliers would be time consuming and expensive and may result in interruptions in our operations. If we should encounter delays or difficulties in securing the quantity of equipment we or our franchisees require to open new and refurbish existing studios, our suppliers encounter difficulties meeting our and our franchisees’ demands for products or services, our websites experience delays or become impaired due to errors in the third-party technology or there is a deficiency, lack or poor quality of products or services provided, or there is damage to the value of one or more of our vendors’ brands, our ability to serve our members and grow our brand would be interrupted. If any of these events occurs, it could have a material adverse effect on our business and operating results.

Increases in tariffs and trade restrictions on equipment we source from China could have an adverse impact on our business, results of operations and financial condition.

We purchase substantially all of our gym equipment from a single supplier in China. Since the beginning of 2018, there has been increasing rhetoric, in some cases coupled with legislative or executive action, from several U.S. and foreign leaders regarding tariffs against foreign imports of certain goods and materials. For example, in 2018 and 2019, the United States imposed significant tariffs on various products imported from China, including certain products we source from China. These tariffs are currently being reviewed by the Office of the United States Trade Representative as part of the standard four-year review process. The United States has also stated that further tariffs may be imposed on additional products imported from China if a trade agreement is not reached. On January 15, 2020, a “phase one” trade deal was signed between the United States and China and was accompanied by a decision from the United States to cancel a plan to increase tariffs on an additional list of products from China. However, given the limited scope of the phase one agreement, concerns over the stability of bilateral trade relations remain. At this time, there is no assurance that a broader trade agreement will be successfully negotiated between the United States and China to reduce or eliminate the existing tariffs. If additional tariffs are imposed on our gym equipment and equipment included in our World Packs, or other retaliatory trade measures are taken, our costs could increase and we may be required to raise our prices, which could materially and adversely affect our results. Increases in the cost of our gym equipment, including that included in our World Packs, could have a material effect on our gross margins as we may not be able to pass such costs onto our franchisees. In addition, if trade tensions between the United States and China continue to escalate, we may experience delays or disruptions in the delivery of our gym equipment to our franchisees, which could adversely impact our business, results of operations and financial condition.

We have limited control over our suppliers, manufacturers and logistics partners, which may subject us to significant risks, including the potential inability to produce or obtain quality products on a timely basis or in sufficient quantity.

We have limited control over our suppliers, manufacturers and logistics partners, which subjects us to risks, such as the following:

•inability to satisfy demand for our World Pack products or other products or services that we currently offer in studios or may offer in the future;

•reduced control over delivery timing, as well as product reliability;

•reduced ability to monitor the manufacturing process and components used in our World Pack products and other products;

•limited ability to develop comprehensive manufacturing specifications that take into account any materials shortages or substitutions;

•variance in the manufacturing capability of our third-party manufacturers;

•price increases;

•failure of a significant supplier, manufacturer, or logistics partner to perform its obligations to us for technical, market or other reasons;

•difficulties in establishing additional supplier, manufacturer, or logistics partner relationships if we experience difficulties with our existing suppliers, manufacturers or logistics partners;

•shortages of materials or components;

•misappropriation of our intellectual property;

•exposure to natural catastrophes, political unrest, terrorism, labor disputes and economic instability resulting in the disruption of trade from foreign countries in which our World Pack products and other products are manufactured or the components thereof are sourced;

•changes in local economic conditions in the jurisdictions where our suppliers, manufacturers and logistics partners are located;

•the imposition of new laws and regulations, including those relating to labor conditions, quality and safety standards, imports, duties, tariffs, taxes and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds; and

•insufficient warranties and indemnities on components supplied to our manufacturers or performance by our partners.

In addition, our ability to identify, source and procure components of our inventories which we sell to customers may continue to be harmed by COVID-19 and supply chain disruptions.

Risks Related to Our Indebtedness, History of Losses and Negative Cash Flow

We may be unable to generate sufficient cash flow or income to satisfy our debt service and other obligations, which would adversely affect our results of operations and financial condition.

We have historically generated material losses and negative cash flow. Our ability to make scheduled payments on, or to refinance our obligations under, our indebtedness will depend on our subsidiaries’ and our franchisees’ future operating performance and on economic, financial, competitive, legislative, regulatory and other factors. Many of these factors are beyond our control. We can provide no assurance that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to satisfy our obligations under our indebtedness or to fund our other needs. The Company’s forecast for the twelve months from the date of the financial statements included in this Annual Report on Form 10-K could result in the possibility of insufficient resources to meet our ongoing obligations and maintain compliance with the minimum liquidity requirement of $10.0 million under the terms of our indebtedness. The Company has determined that these circumstances represent conditions about the Company’s ability to continue as a going concern

before consideration of management’s plans. As such, in order for us to satisfy our obligations under our indebtedness and to fund our other needs, we must continue to execute our business strategy. If we are unable to do so, we may not be able to operate as a going concern and may need to refinance all or a portion of our indebtedness on or before maturity. We can provide no assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.

The terms of our indebtedness could adversely affect our business.

We are party to a senior secured Amended and Restated Credit Agreement, dated August 13, 2021, (the “Senior Credit Agreement”), with JPMorgan Chase Bank, N.A., as Administrative Agent, Australian Security Trustee, Lender, Swingline Lender and Issuing Bank, consisting of a $90 million revolving credit facility. Subsequent to year end, we entered into a Third Amendment to the terms of the Senior Credit Agreement. This amendment reduced amounts available under the Senior Credit Agreement to $70 million, comprised of a $68 million term loan and a $2 million revolving credit facility, with a two-year term. The Senior Credit Agreement contains restrictive covenants that, among others, limit our ability to:

•incur indebtedness;

•incur liens;

•make investments;

•sell assets;

•engage in sale-leaseback transactions;

•enter into swap agreements;

•pay dividends and make distributions and repurchase stock;

•engage in transactions with affiliates; and

•maintain or contribute to a defined employee benefit plan or arrangement that is not subject to the laws of the U.S.

The Senior Credit Agreement contains certain financial covenants, including a minimum liquidity requirement. In addition we are a party to a Subordinated Credit Agreement, dated as of February 14, 2023 with Alter Domus, as Administrative Agent, and certain lenders, including Kennedy Lewis Capital Partners Master Funds II and III LP, consisting of a $90 million term loan. The terms of the Subordinated Credit Agreement contains certain restrictive and financial covenants. Events beyond our control, including changes in general economic and business conditions, may affect our ability to meet these financial covenants. We cannot assure you that we will meet these financial covenants in the future, or that the lenders will waive any failure to meet these financial covenants.

Our obligations to the holders of our Senior Credit Agreement and Subordinated Credit Agreement are secured by a security interest in substantially all of our assets. If we default on those obligations, the holders of such indebtedness could foreclose on our assets.

Our obligations under the Senior Credit Agreement and the related transaction documents are secured on a first lien basis by a security interest in substantially all of our assets. Our obligations under the Subordinated Credit Agreement and the related transaction documents are secured on a second lien basis by a security interest in substantially all of our assets. As a result, if we default on our obligations under the Senior Credit Agreement or the Subordinated Credit Agreement, the collateral agent on behalf of the lenders (subject to the intercreditor agreement) could foreclose on the security interests and liquidate some or all of our assets, which would harm our business, financial condition and results of operations and could require us to reduce or cease operations and you may lose all or part of your investment.

Risks Related to Our Common Stock

The liquidity of our shares of common stock will likely be adversely affected by our delisting from the NYSE and anticipated deregistration from the Securities and Exchange Commission.

Effective September 5, 2023, the NYSE delisted the Company’s common stock from the NYSE because, in the opinion of the NYSE, the Company’s common stock was no longer suitable for listing based on its “abnormally low” price levels. The Company’s common stock is now quoted on the “Expert Market” tier operated by OTC Markets. Quotes on the Expert Market are restricted from public viewing and the Company’s common stock is not eligible for proprietary broker-dealer quotations. All quotes in the Company’s common stock reflect unsolicited customer orders. Unsolicited-Only stocks have a higher risk of wider spreads, increased volatility, and price dislocations. Investors may have difficulty selling our stock. An initial review by a broker-dealer under SEC Rule15c2-11 is required for brokers to publish competing quotes and provide continuous market making.

We can provide no assurance that trading in our common stock will continue. Because our stock now trades on the OTC Markets rather than being listed on a national securities exchange, we do not expect to attract the extensive analyst coverage that accompanies companies listed on national exchange, which may affect the liquidity of our common stock. Moreover, even if our trading in our common stock continues, our common stock is and will likely become more illiquid (especially following deregistration), which could negatively impact market prices for our stock and make it more difficult for stockholders to sell their shares.

As previously disclosed by the Company, after the Company has made all necessary SEC filings and is otherwise able to do so, the Company intends to file with the Commission a Form 15 to voluntarily deregister the Company’s common stock under Section 12(g) of the Exchange Act and suspend its reporting obligations under Section 15(d) of the Exchange Act. Following the termination of the registration, the Company’s obligations to file periodic reports, such as annual reports on Form 10-K,

quarterly reports on Form 10-Q and current reports on Form 8-K, would be suspended immediately upon the filing of the Form 15 with the SEC. Following deregistration, we would not expect to publish periodic financial information or furnish such information to our stockholders except as may be required by applicable laws or stock exchange rules. As a result of the foregoing factors, deregistration may result in less disclosure about us and may negatively affect the liquidity and trading prices of our common shares. We would expect securities and industry analysts to likely cease coverage of us at such time.

Further, no assurances can be given that our common stock will ever actively trade, especially after the planned termination of the registration of our common stock under Section 12(g) of the Exchange Act and suspension of our reporting obligations under Section 15(d) of the Exchange Act. In any of these events, there will likely remain a highly illiquid market for the Company’s common stock and you may be unable to dispose of your common stock at desirable prices or at all.

We may require additional capital and our ability to raise capital is limited and will likely be significantly impaired.

The Company currently funds its operations primarily from cash on hand, credit facilities and operating cash flow. The Company has historically incurred losses and negative cash flows from operations. The Company’s forecast for the twelve months from the date of the financial statements included in this Annual Report on Form 10-K could result in the possibility of insufficient resources to meet its ongoing obligations and maintain compliance with the minimum liquidity requirement of $10.0 million in its credit agreement. The Company has determined that these circumstances represent conditions about the Company’s ability to continue as a going concern before consideration of management’s plans. As such, in the future, we may need to raise additional funds to support our obligations and operations through the issuance of new equity securities, debt or a combination of both. Additional financing, however, may not be available on favorable terms, or at all. Further, any sale or perception of a possible sale by our stockholders, and any related decline in the market price of our common stock, could impair our ability to raise capital. If adequate funds are not available on acceptable terms, we may be unable to service our debt or fund our capital requirements and operations.

If we issue new debt securities, the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock. If we issue additional equity securities, existing stockholders will experience dilution, and the new equity securities could have rights senior to those of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.

Further, as a result of the delayed filing with the Commission of our Annual Report on Form 10-K for the year ended December 31, 2022 and subsequent quarterly reports on Form 10-Q, we are not eligible to register the offer and sale of our securities using a registration statement under the Exchange Act and do not expect to be eligible at any time in the future to as we expect to deregister our common stock as soon as we are able to. As a result, we will not be able to access the public markets to raise capital, which will further limit our ability to raise capital, which in turn could materially adversely affect our business, results of operations, financial condition and stock price.

In addition, the trading of our common stock on the OTC Markets may materially adversely affect our access to the capital markets and the limited liquidity and potentially reduced price of our common stock could materially adversely affect our ability to raise capital through alternative financing sources or on terms acceptable to us or to complete acquisitions.

The trading price of our common stock has been very low recently, may continue to be very low, and may be subject to volatility and have limited market liquidity. As a result, you could lose all or part of your investment.

Since April 20, 2023, the trading price of our common stock has generally been below $1.00 per share. Our “abnormally low” trading price resulted in the NYSE delisting our common stock from the exchange. Our common stock is now quoted on the OTC Markets. The OTC Markets is a significantly more limited

market than the NYSE or Nasdaq. The quotation of our shares on the OTC Markets may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future, any of which could result in a loss of all or part of your investment.

The trading price of our common stock has also historically been and is likely to continue to be highly volatile, as well as illiquid, and could be subject to fluctuations in response to various factors, some of which are beyond our control. These fluctuations could cause you to lose all or part of your investment in our common stock. Factors that could cause fluctuations in the trading price of our common stock include:

•market conditions in the broader stock market;

•illiquidity and lack of marketability by being an OTC traded stock;

•challenges associated with timely SEC filings (which is expected to continue until we deregister our common stock);

•actual or anticipated fluctuations in our quarterly financial and operating results;

•introduction of new products or services by us or our competitors;

•issuance of new or changed securities analysts’ reports or recommendations;

•results of operations that vary from expectations of securities analysis and investors;

•guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance;

•strategic actions by us or our competitors;

•announcement by us, our competitors or our vendors of significant contracts or acquisitions;

•sales, or anticipated sales, of large blocks of our stock;

•additions or departures of key personnel;

•regulatory, legal or political developments;

•public response to press releases or other public announcements by us or third parties, including our filings with the SEC;

•litigation and governmental investigations;

•changing economic conditions;

•changes in accounting principles;

•default under agreements governing our indebtedness;

•exchange rate fluctuations; and

•other events or factors, including those from natural disasters, war, actors of terrorism or responses to these events.

In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. Such a class action lawsuit was filed against us in December 2022 in the United States District Court for the Western District of Texas. The complaint purported to allege securities class action claims under Sections 11 and 15 of the Securities Act of 1933, and challenged misleading statements regarding our business model in our registration statement issued in connection with our initial public offering in July 2021. The claims were later amended to include claims under Section 10 of the Exchange Action of 1934 and to challenge statements in our initial public offering registration statement and later statements to investors regarding the company’s business model plans, and results. See Part I, Item 1, “Business - Legal Proceedings” in this Form 10-K for additional details. We may incur substantial costs substantial costs defending such lawsuit and any future lawsuits that stockholders may bring against us. Such lawsuit could also divert time and attention of our management from our business, which could significantly harm our profitability and reputation.

Our current major stockholders have significant control over our company, which could limit your ability to influence the outcome of matters subject to stockholder approval, including a change of control. These stockholders, including certain of our directors, beneficially own approximately 79.9% of our outstanding common stock. As a result, such stockholders, if they act together, will be able to influence or control

matters subject to stockholder approval, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions, and would have the ability to control the management and affairs of our company. They may have interests that differ from yours and may vote in a way with which you disagree and that may be adverse to your interests. For example, affiliates of Kennedy Lewis Investment Management LP (“KLIM”) beneficially own [14.8%] of our common stock, but are also lenders under the company’s subordinated credit agreement. As such, KLIM and its affiliates may have interests different than yours. Our concentration of ownership may also have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their shares of our common stock as part of a sale of our company and could affect the market price of our common stock.

We are an “emerging growth company” and as a result of the reduced disclosure requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. As an emerging growth company, we may follow reduced disclosure requirements and do not have to make all of the disclosures that public companies that are not emerging growth companies. We will remain an emerging growth company until the earlier of (a) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more; (b) the last day of the fiscal year following the fifth anniversary of the date of the completion of the initial public offering; (c) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (d) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission, or SEC, which means the market value of our voting and non-voting common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th (and we have been a public company for at least 12 months and have filed at least one annual report on Form 10-K). For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies.

These exemptions include:

•presenting 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;

•reduced disclosure about our executive compensation arrangements;

•exemption from the requirements to hold non-binding stockholder advisory votes on executive compensation or golden parachute arrangements;

•extended transition periods for complying with new or revised accounting standards;

•exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; and

•exemption from complying with any requirement that may be adopted by the PCAOB, regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis).

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards; and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

We may choose to take advantage of some, but not all, of the available exemptions for emerging growth companies. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. Moreover, once we complete the deregistration of our common stock under the Exchange Act, we will no longer be required to file periodic and other reports with the SEC. As a consequence, there will be less public information available about our business, operations, financial condition, results of operations or other matters. If some investors find our common stock less attractive

as a result, there may be a less active trading market for our common stock and our shares price may be more volatile.

Your percentage ownership in us may be diluted by future issuances of capital stock, which could reduce your influence over matters on which stockholders vote.

Pursuant to our certificate of incorporation and bylaws, our board of directors has the authority, without action or vote of our stockholders, to issue all or any part of our authorized but unissued shares of common stock, including shares issuable upon the exercise of options, or shares of our authorized but unissued preferred stock. Issuances of common stock or voting preferred stock would reduce your influence over matters on which our stockholders vote and, in the case of issuances of preferred stock, would likely result in your interest in us being subject to the prior rights of holders of that preferred stock.

Future sales of our common stock could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.

Since we have no current plans to pay regular cash dividends on our common stock, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.

We have never declared or paid cash dividends on our capital stock, and we do not anticipate paying any regular cash dividends on our common stock. Any decision to declare and pay dividends in the future will be made at the discretion of our board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our board may deem relevant. In addition, our ability to pay dividends is, and may be, limited by covenants of existing and any future outstanding indebtedness we or our subsidiaries incur. Therefore, any return on investment in our common stock is solely dependent upon the appreciation of the price of our common stock on the open market, which may not occur.

We are a holding company and depend on the cash flow of our subsidiaries.

We are a holding company with no material assets other than the equity interests of our subsidiaries. Our subsidiaries conduct substantially all of our operations and own substantially all of our assets and intellectual property. Consequently, our cash flow and our ability to meet our obligations and pay any future dividends to our stockholders depends upon the cash flow of our subsidiaries and their ability to make payments, directly or indirectly, to us in the form of dividends, distributions and other payments. Any inability on the part of our subsidiaries to make payments to us could have a material adverse effect on our business, results of operations and financial condition.

Risks Related to Provisions in Our Charter Documents

Provisions of our organizational documents could make an acquisition of our business more difficult and may prevent attempts by our stockholders to replace or remove our current management, even if beneficial to our stockholders.

Our certificate of incorporation and bylaws contain provisions that could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our stockholders. These provisions include:

•a classified board of directors, with members of each class serving staggered three-year terms, and the ability of stockholders to remove directors only for cause;

•advance notice requirements for stockholder proposals and director nominations;

•the ability of the board of directors to establish the number of directors and fill any vacancies and newly created directorships;

•no cumulative voting in the election of directors;

•limitations on the ability of stockholders to call special meetings and to take action by written consent; and

•super majority vote for stockholders to amend our certificate of incorporation or bylaws.

Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt to replace current members of our management team. As a result, you may lose your ability to sell your stock for a price in excess of the prevailing market price due to these protective measures, and efforts by stockholders to change the direction or our management may be unsuccessful.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum, to the fullest extent permitted by law, for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty by any of our directors, officers, employees or agents or our stockholders; (iii) any action asserting a claim arising pursuant to any provision of the DGCL; (iv) any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or bylaws; or (v) any action asserting a claim governed by the internal affairs doctrine, shall be the Court of Chancery of the State of Delaware (or another state court or the federal court located within the State of Delaware if the Court of Chancery does not have or declines to accept jurisdiction), in all cases subject to the court’s having jurisdiction over indispensable parties named as defendants.

In addition, our certificate of incorporation provides that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act but that the forum selection provision will not apply to claims brought to enforce a duty or liability created by the Exchange Act. Although we believe these provisions benefit us by providing increased consistency in the application of Delaware law for the specified types of actions and proceedings, the provisions may have the effect of discouraging lawsuits against us or our directors and officers. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation and amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition, and operating results. For example, under the Securities Act, federal courts have concurrent jurisdiction over all suits brought to enforce any duty or liability created by the Securities Act, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Any person or entity purchasing or otherwise acquiring any interest in our shares of capital stock shall be deemed to have notice of and consented to this exclusive forum provision but will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.

Risks Related to Our Global Operations

Economic, political and other risks associated with our international operations could adversely affect our profitability and international growth prospects.

As of December 31, 2022, we had ### Total Franchises Sold in 74 countries around the world. Our international operations are subject to a number of risks inherent to operating in foreign countries, and any expansion of our international operations will increase the impact of these risks. These risks include, among others:

•inadequate brand infrastructure within foreign countries to support our international activities;

•inconsistent regulation or sudden policy changes by foreign agencies or governments;

•the collection of royalties from foreign franchisees;

•difficulty of enforcing contractual obligations of foreign franchisees;

•increased costs in maintaining international franchise and marketing efforts;

•problems entering international markets with different cultural bases and consumer preferences;

•political and economic instability of foreign markets, including due to the Russia-Ukraine conflict;

•compliance with laws and regulations applicable to international operations, such as the Foreign Corrupt Practices Act and regulations promulgated by the Office of Foreign Asset Control;

•actual or perceived threats to public health due to any health pandemic or epidemic;

•fluctuations in foreign currency exchange rates; and

•operating in new, developing or other markets in which there are significant uncertainties regarding the interpretation, application and enforceability of laws and regulations relating to contract and intellectual property rights.

As a result, new studios facing these risks in international markets may be less successful than studios in our existing markets. Further, effectively managing growth can be challenging, particularly as we continue to expand into new international markets where we must balance the need for flexibility and a degree of autonomy for local management against the need for consistency with our mission and standards.

Fluctuations in currency exchange rates could negatively impact our business.

We transact business in various currencies other than the U.S. dollar and have significant royalties and expenses denominated in currencies other than the U.S. dollar, subjecting us to currency exchange rate risks. A substantial portion of our international royalties and expenses are denominated in local currencies, including Australian dollars, euros, British pounds, Canadian dollar and Singaporean dollar, which fluctuate against the U.S. dollar. Since we derive significant royalties from our international operations, but incur the majority of our costs in the United States, the impact of foreign currency fluctuations, particularly the strengthening of the U.S. dollar, may have an asymmetric and disproportional impact on our business.

We are subject to governmental export and import controls and economic sanctions laws that could subject us to liability and impair our ability to compete in international markets.

The United States and various foreign governments have imposed controls, export license requirements and restrictions on the import or export of certain technologies. Our products may be subject to U.S. export controls, which may require submission of a product classification and annual or semi-annual reports. Compliance with applicable regulatory requirements regarding the export of our products and services may create delays in the introduction of our products and services in international markets, prevent our international members from accessing our products and services, and, in some cases, prevent the export of our products and services to some countries altogether.

Furthermore, U.S. export control laws and economic sanctions prohibit the provision of products and services to countries, governments and persons targeted by U.S. sanctions. Even though we take precautions to prevent our products from being provided to targets of U.S. sanctions, our products and services, including our firmware updates, could be provided to those targets or provided by our members. Any such provision could have negative consequences, including government investigations, penalties, reputational harm. Our failure to obtain required import or export approval for our products could harm our international and domestic sales and adversely affect our revenue.

We could be subject to future enforcement action with respect to compliance with governmental export and import controls and economic sanctions laws that result in penalties, costs and restrictions on export privileges that could have an adverse effect on our business, results of operations and financial condition.

Failure to comply with anti-corruption and anti-money laundering laws, including the Foreign Corrupt Practices Act and similar laws associated with our activities outside of the United States, could subject us to penalties and other adverse consequences.

We operate a global business and may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We are subject to the Foreign Corrupt Practices Act, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act and possibly other anti-bribery and anti- money laundering laws in countries in which we conduct activities. These laws that prohibit companies and their employees and third-party intermediaries from corruptly promising, authorizing, offering, or providing, directly or indirectly, improper payments or anything of value to foreign government officials, political parties and private-sector recipients for the purpose of obtaining or retaining business, directing business to any person, or securing any advantage. In addition, U.S. public companies are required to maintain records that accurately and fairly represent their transactions and have an adequate system of internal accounting controls. In many foreign countries, including countries in which we may conduct business, it may be a local custom that businesses engage in practices that are prohibited by the FCPA or other applicable laws and regulations. We face significant risks if we or any of our directors, officers, employees, agents or other partners or representatives fail to comply with these laws and governmental authorities in the United States and elsewhere could seek to impose substantial civil and/or criminal fines and penalties which could have a material adverse effect on our business, reputation, results of operations and financial condition.

Our employees, contractors and agents, and companies to which we outsource certain of our business operations, may take actions in violation of our policies or applicable law. Any such violation

could have an adverse effect on our reputation, business, operating results and prospects. Any violation of the FCPA, other applicable anti-corruption laws, or anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions and, in the case of the FCPA, suspension or debarment from U.S. government contracts, any of which could have a materially adverse effect on our reputation, business, results of operations and prospects. In addition, responding to any enforcement action may result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees.

General Risks

We have identified certain material weaknesses in our internal control over financial reporting and if our remediation of such material weaknesses is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.

In the course of preparing our financial statements, we identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses related to a failure to properly design and maintain effective controls over the review of non-routine revenue and purchase related contracts and their compliance with generally accepted accounting principles on a timely basis.

We believe we have taken the necessary actions to substantially address the material weaknesses discussed above, and we plan to take additional steps to improve our accounting function. However, we may not be able to fully remediate the material weakness until it can be confirmed that such remedial measures have been operating effectively for a sufficient period of time. Further, we cannot assure you that any such actions will be sufficient to remediate the control deficiencies that led to our material weakness in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure

controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our operating results, has caused and in the future could cause us to fail to meet our reporting obligations, and has resulted and may in the future result in a restatement of our financial statements for prior periods.

Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that are filed with the SEC.

We are currently required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and report the results in our Annual Report on Form 10-K, although these obligations are expected to cease upon our planned deregistration under the Exchange Act. There is no requirement for audit of our internal control over financial reporting. We are also required to maintain effective disclosure controls and procedures, although these obligations are expected to cease upon our planned deregistration under the Exchange Act. To the extent applicable, if material weaknesses arise and they are not remedied, we will be unable to assert that our internal controls are effective. Any failure to have effective internal control over financial reporting or disclosure controls and procedures could cause investors to lose confidence in the accuracy and completeness of our financial reports (to the extent we provide them or alternative reports), limit our ability to raise financing or lead to regulatory sanctions, if applicable, any of which could result in a material adverse effect on our business or decline in the market price of our common stock.

We have not held regular annual meetings in the past, and if we are required by the Delaware Court of Chancery to hold an annual meeting pursuant to Section 211(c) of the Delaware General Corporation Law, or the DGCL, it could result in the unanticipated expenditure of funds, time and other Company resources.

Section 2.1 of our bylaws provides that an annual meeting shall be held on a date and at a time designated by our board of directors, and Section 211(b) of the DGCL provides for an annual meeting of stockholders to be held for the election of directors. Section 211(c) of the DGCL provides that if there is a failure to hold the annual meeting for a period of 13 months after the latest to occur of the organization of the corporation, its last annual meeting or last action by written consent to elect directors in lieu of an annual meeting, the Delaware Court of Chancery may order a meeting to be held upon the application of any stockholder or director. Section 211(c) also provides that the failure to hold an annual meeting shall not affect otherwise valid corporate acts or result in a forfeiture or dissolution of the corporation.

It has been longer than 13 months since we have held an annual meeting. To our knowledge, no stockholder or director has requested our Company’s management to hold such an annual meeting and no stockholder or director has applied to the Delaware Court of Chancery seeking an order directing our company to hold a meeting. However, if one or more stockholders or directors were to apply to the Delaware Court of Chancery seeking such an order, and if the Delaware Court of Chancery were to order an annual meeting before we are prepared to hold one, the preparation for the annual meeting and the meeting itself could result in the unanticipated expenditure of funds, time, and other Company resources.

Our planned growth could place strains on our management, employees, information systems and internal controls, which may materially and adversely impact our business.

Over the past several years, we have experienced significant growth in our business activities and operations, including an increase in the number of system-wide studios. Our past expansion has placed, and our planned future expansion may place, significant demands on our administrative, operational,

financial and other resources. Any failure to manage growth effectively could seriously harm our business. To be successful, we will need to continue to implement and improve our management information systems and our operating, administrative, financial and accounting systems and controls. We will also need to train new employees and maintain close coordination among our executive, accounting, finance, legal, human resources, risk management, marketing, technology, sales and operations functions. These processes are time-consuming and expensive, increase management responsibilities and divert management attention, and we may not realize a return on our investment. In addition, we believe the culture we foster at our studios is an important contributor to our success. However, as we expand, we may have difficulty maintaining our culture or adapting it sufficiently to meet the needs of our expanded operations. These risks may be heightened as our business continues to scale. Our failure to successfully keep pace with our planned expansion of studios could materially and adversely impact our business.

We and our franchisees could be subject to claims related to health and safety risks to members that arise at our studios.

Use of our studios poses potential health and safety risks to members or guests through physical exertion and use of our services and facilities, including exercise equipment. Certain of such risks were exacerbated as a result of COVID-19. Claims have been and in the future might be asserted against our franchisees and us for injuries suffered by or death of members or guests while exercising and using the facilities at a studio. We may not be able to successfully defend such claims, and any such claims could materially damage our brand and the public perception of our brand. We also may not be able to maintain our general liability insurance on acceptable terms in the future or maintain a level of insurance that would provide adequate coverage against such potential claims. In the past, we may not have maintained the level of general liability insurance coverage appropriate for a business of our scale, and historical claims may be brought against us. Depending upon the outcome of any such claims, whether historical or not, these matters may have a material adverse effect on our business, results of operations and financial condition.

Changes in accounting standards or the recognition of impairment or other charges may adversely affect our future operations and results.

New accounting standards or changes in financial reporting requirements, accounting principles or practices, including with respect to our critical accounting estimates, could adversely affect our future results. We may also be affected by the nature and timing of decisions about underperforming markets or assets, including decisions that result in impairment or other charges that reduce our earnings.

In assessing the recoverability of our long-lived assets, we consider changes in economic conditions and make assumptions regarding estimated future cash flows and other factors. These estimates are highly subjective and can be significantly impacted by many factors such as global and local business and economic conditions, operating costs, inflation, competition, consumer and demographic trends and our restructuring activities. If our estimates or underlying assumptions change in the future, we may be required to record impairment charges. If we experience any such changes, they could have a significant adverse effect on our reported results for the affected periods.

We depend on our senior management team and other key employees, and the loss of one or more key personnel or an inability to attract, hire, integrate and retain highly skilled personnel could have an adverse effect on our business, results of operations and financial condition.

Our success depends largely upon the continued services of our senior management team and other key employees. We rely on our executives in setting our strategic direction, operating our business, identifying, recruiting and training key personnel, identifying growth opportunities and leading general and administrative functions. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt our business. For example, in the past 15 months, we have experienced significant turnover in our management team, which has disrupted our business operations, including our ability to file our SEC reports and filed our 2023 FDD. Our training professionals and sports scientists in our F45 Athletics Department are also imperative to our success, and we rely on them to develop safe, effective and fun workouts for our members based on our algorithm.

If we are unable to attract or retain creative and experienced training professionals and sports scientists, we may not be able to generate workout content on a scale or of a quality sufficient to retain or grow our membership base. The loss of one or more of our executive officers or other key employees, including any of our training professionals or scientists, could have a serious adverse effect on our business. The replacement of one or more of our executive officers or other key employees would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives.

To continue to execute our growth strategy, we also must identify, hire and retain highly skilled personnel. We might not be successful in maintaining our corporate culture and continuing to attract and retain qualified personnel. Failure to identify, hire and retain necessary key personnel could have a material adverse effect on our business, results of operations and financial condition.

We have a limited operating history with which to evaluate and predict membership retention rates.

The majority of our members may cancel their subscriptions at any time. We have limited historical data with respect to rates of member membership renewals, so we may be unable to accurately predict customer renewal rates. Additionally, prior renewal rates may not accurately predict future member renewal rates for a variety of reasons, such as members’ dissatisfaction with our offerings and the cost of our subscriptions, macroeconomic conditions, or new offering introductions by us or our competitors. If our members do not renew their memberships, our revenue may decline and our business will suffer.

Furthermore, in the future, we may replace or modify current membership models, which could result in additional costs. It is unknown how our members will react to new membership models and whether the costs or logistics of implementing these models will adversely impact our business. If the adoption of new membership models adversely impacts our member relationships, then member retention, member growth, our business, results of operations and financial condition could be harmed.

Changes in legislation in U.S. and foreign taxation of international business activities or the adoption of other tax reform policies, as well as the application of such laws, could adversely impact our business, results of operations and financial condition.

Recent or future changes to U.S., UK, Australian and other foreign tax laws could impact the tax treatment of our foreign earnings. We generally conduct our international operations through wholly owned subsidiaries, branches, or representative offices and report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. Further, we are in the process of implementing an international structure that aligns with our financial and operational objectives as evaluated based on our international markets, expansion plans and operational needs for headcount and physical infrastructure outside the United States. The intercompany relationships between our legal entities are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. Although we believe we are compliant with applicable transfer pricing and other tax laws in the United States, the United Kingdom and other relevant countries, due to changes in such laws and rules, we may have to modify our international structure in the future, which will incur costs, may increase our worldwide effective tax rate, and may adversely affect our results of operations and financial condition. In addition, significant judgment is required in evaluating our tax positions and determining our provision (benefit) for income taxes.

During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in foreign currency exchange rates, or by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations. As we operate in numerous taxing jurisdictions, the application of tax laws can be subject to diverging and sometimes conflicting interpretations by tax authorities of these jurisdictions. It is not uncommon for taxing authorities in different countries to have conflicting views with respect to, among other things, the manner in which the arm’s-length standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual property.

If U.S., UK, Australian or other foreign tax laws further change, if our current or future structures and arrangements are challenged by a taxing authority, or if we are unable to appropriately adapt the manner in which we operate our business, we may have to undertake further costly modifications to our international structure and our tax liabilities and operating results may be adversely affected.

We are subject to obligations to collect and remit sales tax and other taxes, and we may be subject to additional obligations in other jurisdictions or to tax liability for past sales, which could adversely harm our business.

State and local jurisdictions have differing rules and regulations governing sales, use, value added and other taxes, and these rules and regulations are subject to varying interpretations that may change over time. In particular, the applicability of such taxes to our trainings in various jurisdictions is unclear. While we do not believe we are currently required to collect and remit sales or similar taxes on our equipment in any jurisdiction in which we are not already collecting such tax, we could face the possibility of tax assessments and audits. A successful assertion that we should be collecting sales, use, value added or other taxes on our equipment in those jurisdictions where we do not do so or have not historically done so, or that we have not collected the correct amount with respect to past taxes, could result in substantial tax liabilities and related penalties for past sales, discourage customers from purchasing our services or otherwise harm our business, results of operations and financial condition.

Our business is subject to the risk of hurricanes, earthquakes, fire, power outages, floods and other catastrophic events, and to interruption by man-made problems such as terrorism.

Our headquarters is in Austin, Texas. Our business is vulnerable to damage or interruption from hurricanes, earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks, acts of war, human errors, break-ins and similar events. The third-party systems and operations and manufacturers we rely on are subject to similar risks. For example, a significant natural disaster, such as a hurricane, earthquake, fire, or flood, could have an adverse effect on our business, results of operations and financial condition, and our insurance coverage may be insufficient to compensate us for losses that may occur. Acts of terrorism, which may be targeted at metropolitan areas that have higher population density than rural areas, could also cause disruptions in our or our suppliers’ and manufacturers’ businesses or the economy as a whole. We may not have sufficient protection or recovery plans in some circumstances, such as natural disasters affecting locations that store significant inventory for us, including equipment and World Pack offerings, that house our servers, or from which we generate content. These disruptions could negatively impact our ability to run our business and either directly or indirectly disrupt suppliers’ and manufacturers’ businesses, which could have an adverse effect on our business, results of operations and financial condition.

Our business faces various risks related to health epidemics, pandemics and similar outbreaks, which may materially and adversely affect our business, financial position, results of operations and cash flows.

Our business and financial results have been, and could be in the future, adversely affected by health epidemics, pandemics, and similar outbreaks impacting the markets and communities in which we and our customers, suppliers and franchisees operate. Despite our efforts to manage these matters, their ultimate effects also depend on factors beyond our knowledge or control, including the duration, severity, and recurrence of any outbreak and actions taken to contain its spread and mitigate its public health effects.

Our management team has limited experience managing a public company.

Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage us as a public company and we will be subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors.

Public company obligations and constituents require significant attention from our senior management, as will the processes involved with our planned deregistration of our common stock under the Exchange Act, each of which could divert management’s attention away from the day-to-day management of our business, which could adversely affect our business, results of operations and financial condition.

If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and stockholders’ equity/deficit, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue related reserves, fair value measurements including common stock valuations, useful lives of property plant and equipment, product warranty, goodwill and finite-lived intangible assets, accounting for income taxes, stock-based compensation expense and commitments and contingencies. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in the price of our common stock.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We are headquartered in Austin, Texas, where we lease approximately 44,000 square feet of office space. This lease expires in June 2029. We have one option to extend the lease for five additional years. On September 22, 2023, the Company entered into an agreement with Kouto Inc. to sublease a portion of the office space. In addition to the office in Austin, Texas, the Company has 22,500 square feet of office and warehouse space leased space in Palm Beach, Florida and the Company leases eight corporate-owned concept studios in Australia, and the United States. We lease all of our facilities and do not own any real property. As of December 31, 2022, our franchisees operated 2,100 total studios, with the real estate of each being either leased or owned by the respective franchisee. We believe that these facilities are sufficient to meet the Company’s current needs.

Franchisees own or directly lease studio space for each franchise location. We have not historically owned or entered into leases for our franchisees and generally do not guarantee franchisees’ lease agreements, although we have done so in a few certain instances and may do so from time to time.

Item 3. Legal Proceedings

See Item 1 of Part I, “Business – Legal Proceedings” and Item 8 of Part II, “Financial Statements and Supplementary Data – Note 18—Commitments and contingencies – Litigation.”

Item 4. Mine Safety Disclosures

Not applicable.

Part II.

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

Market information

From our IPO on July 15, 2021 to our delisting from the NYSE on September 5, 2023, our common stock traded on the New York Stock Exchange (“NYSE”) under the symbol “FXLV.”

As of the date of this report, our common stock trades on the “Expert Market” tier operated by OTC Markets under the symbol “FXLV.” Quotes on the Expert Market are restricted from public viewing. The Company’s common stock is not eligible for proprietary broker-dealer quotations. All quotes in the Company’s common stock reflect unsolicited customer orders. Unsolicited-Only stocks have a higher risk of wider spreads, increased volatility, and price dislocations. Investors may have difficulty selling the stock. An initial review by a broker-dealer under SEC Rule15c2-11 is required for brokers to publish competing quotes and provide continuous market making.

Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions. Although our stock is quoted on OTC Markets, the existence of limited or sporadic quotations should not of itself be deemed to constitute an established public trading market. There is no established public trading market for our shares.

Holders

As of October 19, 2023, there were 20 stockholders of record. This number does not represent the actual number of beneficial owners of our common stock because shares are often held in “street name” by securities dealers, brokers, institutions and others for the benefit of individual owners who have the right to vote their shares. We are unable to estimate the total number of beneficial owners represented by these record holders.

Dividend Policy

We have never declared nor paid any cash dividends on our common stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our Board of Directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, debt covenants, general business conditions, and other factors that our Board of Directors may deem relevant.

Recent sales of unregistered securities

On May 13, 2022, the Company issued in a private placement immediately exercisable warrants to purchase an aggregate of up to 1,211,210 shares of the Company’s common stock to certain affiliates of Fortress Credit Corp, in connection with the Fortress Credit Agreement (as defined in “Note 3—Summary of significant accounting policies”. Each holder of the warrants also had the right to put back the warrants to the Company (the “Put Option”).

On May 17, 2022, the holders of the immediately exercisable warrants exercised the Put Option via a net share settlement, resulting in the issuance of 346,192 shares of common stock. The issuance of warrants and common stock was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof as a transaction by an issuer not involving any public offering. In August 2022 the company terminated the Fortress Credit Agreement and in September 2023, the Company deregistered all remaining shares of the Company’s common stock issuable upon exercise of the warrants.

Issuer purchases of equity securities

None.

Stock Performance Graph

The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, or otherwise subject to the liabilities under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.

The following graph depicts the total cumulative stockholder return on our common stock from July 15, 2021, the first day of trading of our common stock on the NYSE, through December 31, 2022, relative to performance of the S&P 500, S&P Small Cap 600 and Russell 2000. The Company has selected the Small Cap 600 index in place of the S&P 500 index because it includes companies whose equity securities are of more comparable market capitalization. The graph and table shown below assume that $100 was invested on July 15, 2021 and that all dividends were reinvested. Moreover, the performance shown in the graph below is not intended to forecast or be indicative of future stock price performance.


	July 15, 2021		December 31, 2021		December 31, 2022
F45 Training Holdings, Inc. (FXLV)	$	100.00	$	67.22	$	17.59
iShares Core S&P Small-Cap ETF (IJR)	100.00		106.97		89.64
Russell 2000 Index	100.00		102.51		80.41

Item 6. [Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis in conjunction with our consolidated financial statements and the related notes thereto contained in Part II, Item 8 of this report. Certain statements in this report, including statements regarding our business strategies, operations, financial condition, and prospects are forward-looking statements. Use of the words “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” “will likely continue,” “will likely result” and similar expressions that contemplate future events may identify forward-looking statements.

The information contained in this section is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC, which are available on the SEC’s website at http://www.sec.gov. The section entitled “Risk Factors” set forth in Part I, Item 1A of this report, and similar discussions in our other SEC filings, describe the material factors, risks and uncertainties that may affect our business, results of operations and financial condition and could cause actual results to differ materially from those expressed or implied by these or any other forward-looking statements made by us or on our behalf. You are cautioned not to place undue reliance on these forward-looking statements, which are based on current expectations and reflect management’s opinions only as of the date thereof. We do not assume any obligation to revise or update forward-looking statements. Finally, our historic results should not be viewed as indicative of future performance.

Overview

We are focused on creating a leading global fitness training and lifestyle brand. We primarily offer consumers functional 45-minute workouts that are effective, fun and community-driven. Our workouts combine elements of high-intensity interval, circuit and functional training to offer consumers what we believe is the world’s best functional training workout. We deliver our workouts primarily through our digitally connected global network of studios, and we have built a differentiated, technology-enabled platform that allows us to create and distribute workouts to our global franchisee base. Our platform enables the scalability of our model and helps to promote the success of our franchisees. We offer consumers a continuously evolving fitness program in which virtually no two workouts are ever the same. We believe our library of functional training movements allows us to vary workout programs to keep consumers engaged with fresh content, stay at the forefront of consumer trends and drive maximum individual results, while helping our members achieve their fitness goals.

Our Segments

We operate and manage our business based on geographic regions and our strategy to become a leading global fitness and lifestyle brand. We have three reportable segments: United States (which for segment reporting purposes includes our operations in the United States and South America), Australia and Rest of World. We refer to “United States” as the operations in the United States and South America. We refer to “Australia” as our operations in Australia, New Zealand and the immediately surrounding island nations. Our Australia segment also includes operations under our FS8 and Vive Active, Avalon House (which operations were wound down in 2023), and the wind down of operations performed during 2022 of our Malibu Crew brand. We refer to “Rest of World” or “ROW” as our operations in locations other than those in the United States and Australian segments. We evaluate the performance of our segments and allocate resources to them based on revenue and gross profit. Revenue and gross profit for all operating segments include only transactions with external customers and do not include inter-segment transactions. The tables on the following pages summarize the financial information for our segments for the years ended December 31, 2022 and 2021. In all other sections of this filing when we present geographic data, we are presenting such data for the named region on a stand-alone basis.

Highlights for Fiscal Year 2022

•Total revenue decreased from the prior year period by 17% to $104.4 million.

•Same Store Sales increased from the prior year 8.2% globally and 17.9% in the United States.

•System-wide sales increased from the prior year 26% globally to $518.5 million, and by 42% in the United States to $237.6 million.

•System-wide Visits increased from the prior year 10% globally to $29.6 million, and by 20% in the United States to $12.9 million.

•Net Franchises Sold totaled 362, resulting in system-wide Total Franchises Sold of 3,663.

•Net Initial Studio Openings totaled 351, resulting in system-wide Total Studios of 2,100.

•Reported impairment charges of $27.3 million.

•Reported net loss of $178.8 million.

Restatement

The accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations gives effect to the restatement adjustments made to the previously reported consolidated financial statements for the fiscal year ended December 31, 2021. For additional information and a detailed discussion of the restatement, see Note 2—Restatement of Previously Issued Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, Financial Statements and Supplementary Data. We have also restated our previously reported condensed consolidated financial statements for the quarterly periods ended March 31, 2022, June 30,2022 and September 30, 2022. For additional information related to the quarterly restatement, see Restatement of Unaudited Interim Condensed Consolidated Financial Statements included within Management’s Discussion and Analysis of Financial Condition and Results of Operations below.

System-wide Sales

We define System-wide Sales as all payments made to our studios and includes payment for classes, apparel and other sales for a given period. We track System-wide Sales as an indication of the strength of our franchisee network.

For the year ended December 31, 2022, our System-wide Sales were approximately $518.5 million, which compares favorably to approximately $411.2 million for the year ended December 31, 2021, as presented in the table below:


	Year Ended December 31,
	2022		2021 (As Restated)
	(in thousands)
United States	$	237,633	$	167,174
Australia	171,698		177,260
ROW	109,190		66,741
Total	$	518,521	$	411,175

System-wide Sales year-over-year growth of 42% in our U.S. segment and 64% in our ROW segment was driven by initial studio openings in the U.S. segment and ROW segment of 228 and 94, respectively, during the period. System-wide Sales year-over-year decreased by 3% for our Australian segment, primarily driven by increased market competition and a greater percentage of studios impacted by government mandated closures during the first quarter of 2022, partially offset by net studio openings of 29 during the year.

System-wide Visits

We define System-wide Visits as the number of registered individual workouts for any specified period. A workout is registered when the consumer checks into a class.

Our long-term growth will depend in part on our continued ability to attract and retain consumers to visit our studios for individual workouts. Our franchisees must continue to provide an experience that both attracts new consumers and retains existing consumers.

For the year ended December 31, 2022, our System-wide Visits were approximately $29.6 million, which compares favorably to approximately $26.8 million for the year ended December 31, 2021, as presented in the table below:


	Year Ended December 31,
	2022	2021 (As Restated)
	(in thousands)
United States	12,912	10,777
Australia	9,955	11,680
ROW	6,684	4,332
Total	29,551	26,789

System-wide Visits year-over-year growth of 20% in our U.S. segment and 54% in our ROW segment were driven by both initial studio openings during the period and a greater percentage of total studios which were not impacted by COVID-19 restrictions or temporary closures during the year. System-wide Visits year-over-year decreased by 15% for our Australian segment, primarily driven by increased market competition and a greater percentage of studios impacted by government mandated closures during the first quarter of 2022.

New Franchises Sold

New Franchises Sold refers to the number of franchises sold during any specific period. We classify Total Franchises Sold, as of any specified date, as (i) the total number of signed franchise agreements in place as of such date for which an establishment fee has been paid and (ii) the total number of franchises committed in a multi-studio agreement in place as of such date for which an upfront payment has been made, in each case that have not been terminated. Each new franchise is included in the number of franchises sold from the date in which we enter into a signed franchise agreement related to each such new franchise. Total Franchises Sold includes franchise arrangements in all stages of development after signing a franchise agreement, and includes franchises with open studios. Franchises are removed from Total Franchises Sold upon termination of the franchise agreement.


	Year Ended December 31, 2022				Year Ended December 31, 2021
	U.S.	Australia	ROW	Total	U.S.	Australia	ROW	Total
Total Franchises Sold, beginning of period	1,710	803	788	3,301	931	679	634	2,244
New Franchises Sold, net(a)	328	(4)	38	362	779	124	154	1,057
Total Franchises Sold, end of period	2,038	799	826	3,663	1,710	803	788	3,301

(a) New Franchises Sold are shown net of franchises that were signed but subsequently terminated prior to the initial studio opening.

Negative New Franchises Sold, net, represents periods in which terminations were in excess of new franchises sold. The decrease in New Franchises Sold, net, compared to the prior year is primarily due to a decrease in multi-unit franchise agreement and development agreements. During the year ended December 31, 2022, we sold 199 new franchises under multi-unit or development agreements as compared to 716 during the year ended December 31, 2021. Of these multi-unit and development agreements, approximately 887 are not open as of December 31, 2022. Additionally, at December 31,

2022, two development agreements, representing approximately 518 Total Franchises Sold, were not in compliance with their development schedule timelines.

New Franchises Sold, net, does not include any required openings under the terms of master franchise agreements.

Initial Studio Openings and Total Studios

Initial Studio Openings refers to the number of studios that were determined to be first opened during such period. Prior to October 1, 2021, we classified an Initial Studio Opening to occur in the first month in which the studio first generates monthly revenue of at least $4,500. Starting on October 1, 2021, we classify an Initial Studio Opening to occur in the month in which we record the Initial Studio Opening in our internal systems. Any studios that did not have an Initial Studio Opening under the prior definition are included as of October 1, 2021. We classify Total Studios, as of any specified date, as the total cumulative Initial Studio Openings as of that date less cumulative permanent studio closures as of that date. Neither Initial Studio Openings nor Total Studios are adjusted downward for studios that were closed due to the COVID-19 pandemic or otherwise.

Our long-term growth will depend in part on our continued ability to open new studios. We believe that we will experience continued expansion of new studio openings in the United States and ROW. However, if delays or difficulties are encountered and new studio openings do not occur as quickly as we would like, our operating results may be adversely affected.


	Year Ended December 31, 2022				Year Ended December 31, 2021
	U.S.	Australia	ROW	Total	U.S.	Australia	ROW	Total
Total Studios, beginning of period	654	653	442	1,749	486	616	335	1,437
Initial Studio Openings, net(a)	228	29	94	351	168	37	107	312
Total Studios, end of period	882	682	536	2,100	654	653	442	1,749

(a) Initial Studio Openings are shown net of studios that have permanently closed which had a recorded initial studio opening.

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, and Same Store Sales Growth

We use a variety of non-GAAP measures, including EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, and Same Store Sales growth.

EBITDA is defined as net income or loss before interest, taxes, depreciation and amortization. We define Adjusted EBITDA as net income or loss before interest, taxes, depreciation and amortization and adjusted to exclude the impact of sales tax liability, transaction expenses, loss on derivative liabilities, certain legal costs and settlements, stock-based compensation expense, COVID concessions, relocation costs, charitable donations, and certain other items identified as affecting comparability, when applicable. Adjusted EBITDA margin means Adjusted EBITDA divided by total revenue.

EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin have been included in this Annual Report on Form 10-K because they are important metrics used by management as one of the means by which it assesses our financial performance. EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. These measures, when used in conjunction with related GAAP financial measures, provide investors with an additional financial analytical framework that may be useful in assessing our company and its results of operations.


	Year Ended December 31,
	2022			2021 (As Restated)
Other Data:	(in thousands)
Net loss	$	(178,799)		$	(193,465)
Net loss margin	(171.2)		%	(154.5)		%
EBITDA	$	(131,262)		$	(137,961)
Adjusted EBITDA	$	(2,140)		$	37,125
Adjusted EBITDA margin(1)	(2.0)		%	29.6		%
Same Store Sales growth(2)	8.2		%	12.1		%

(1)Management believes that EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin are useful to

investors as they eliminate certain items identified as affecting the period-over-period comparability of our operating results. EBITDA, Adjusted EBITDA and Adjusted EBITDA margin eliminate, among other items, non-cash depreciation and amortization expense that results from our capital investments and intangible assets, as well as income taxes, which may not be comparable with other companies based on our tax structure.

Other companies may define Adjusted EBITDA and Adjusted EBITDA margin differently, and as a result, our measures of Adjusted EBITDA and Adjusted EBITDA margin may not be directly comparable to those of other companies. Although we use EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin as financial measures to assess the performance of our business, such use is limited because these measures do not include certain material costs necessary to operate our business. EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance. Our presentation of EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin should not be construed as an indication that our future results will be unaffected by unusual or nonrecurring items. EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

Some of these limitations are:

•they do not reflect every cash expenditure, future requirements for capital expenditures or

contractual commitments;

•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and EBITDA, Adjusted EBITDA and Adjusted EBITDA margin do not reflect any cash requirement for such replacements or improvements; and

•they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows.

Because of these limitations, EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are not intended as alternatives to net income or as indicators of our operating performance and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations. We compensate for these limitations by using EBITDA, Adjusted EBITDA and Adjusted EBITDA margin along with other comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Our GAAP-based measures can be found in our consolidated financial statements and related notes included elsewhere in this filing.

The following table reconciles net loss to EBITDA and Adjusted EBITDA:


	Year Ended December 31,
	2022		2021 (As Restated)
	(in thousands)
Net loss	$	(178,799)	$	(193,465)
Interest expense, net	14,983		59,353
Provision (benefit) for income taxes	22,356		(9,543)
Depreciation and amortization	5,933		3,149
Amortization of deferred costs	4,265		2,545
EBITDA	$	(131,262)	$	(137,961)
Sales tax reserve(a)	1,867		(265)
Transaction fees(b)	1,700		10,790
Loss on derivative liabilities(c)	—		48,603
Certain legal costs and settlements(d)	11,849		7,949
Stock-based compensation(e)	21,324		88,231
Recruitment(f)	762		131
COVID concessions(g)	8,283		8,282
Relocation(h)	408		3,930
Development costs(i)	3,953		5,395
Charitable donation(j)	—		2,046
Restructuring costs(k)	14,919		—
Impairment(l)	25,157		—
Write-off of debt issuance costs(m)	11,546		—
Write-off of development deals(n)	27,262		—
Loss (gain) on disposal of long-lived assets(o)	2,360		(6)
Goodwill impairment(p)	2,189		—
Gain on warrant liabilities(q)	(4,457)		—
Adjusted EBITDA	$	(2,140)	$	37,125

(a) Represents the impact of sales tax liability arising from a timing change in the ability to enforce certain contractual terms in arrangements with franchisees.

(b) Represents transaction costs incurred as a part of a reorganization, acquisition-related costs in a business combination, and the issuance of preferred and common shares, including legal, tax, accounting and other professional services.

(d) Represents certain legal costs, primarily related to litigation activities and legal settlements.

(e) Represents stock-based compensation of our employees, non-employees and directors.

(f) Represents recruitment expense of executive leadership and essential public-company roles.

(g) Represents concessions made to studios impacted by COVID, including one time COVID-19 related write-offs.

(h) Represents costs incurred as a part of the relocation of certain employees.

(i) Represents costs incurred with launch of new brands.

(j) Represents one-time charitable donation intended to be made in the amount of total PPP loan forgiveness pursuant to the use of proceeds discussed in our IPO prospectus.

(k) Represents costs incurred related to the restructuring performed in July 2022 (see Note 4—Restructuring to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K).

(l) Represents impairment charges incurred in the fourth quarter regarding the abandonment of the Flywheel CRM and charges incurred within the Malibu Crew and Avalon House asset groups.

(m) Represents a one-time write-off of debt issuance costs incurred on the Fortress Credit Agreement.

(n) Represents a one-time write-off of certain development deals.

(o) Represents the loss associated with the disposal of a trademark.

(p) Represents an impairment to goodwill.

(q) Represents a gain on the fair value change of the warrant liabilities related to the termination of the Fortress Credit Agreement.

(2)“Same Store Sales” means, for any reporting period, studio-level revenue generated by a comparable base of franchise studios, which we define as Total Studios that have been operating for more than 16 months. As of December 31, 2022 and 2021, there were 1,532 and 1,234 studios, respectively, in our comparable base of franchise studios.

Same Store Sales

We view Same Store Sales as a helpful measure to assess performance of our franchise studios.

Several factors impact our Same Store Sales in any given period, including the following:

•the number of studios that have been in operation for more than 16 months;

•the mix of recurring membership and workout pack revenue per studio;

•growth in total memberships and workout pack visits per studio;

•consumer recognition of our brand and our ability to respond to changing consumer preferences;

•our and our franchisees’ ability to operate studios effectively and efficiently to meet consumer expectations;

•marketing and promotional efforts;

•local competition;

•trade area dynamics;

•inflationary pressures;

•opening of new studios in the vicinity of existing locations; and

•overall economic trends, particularly those related to consumer spending.

Same Store Sales of our international studios are calculated on a constant currency basis on a studio level, meaning that we translate the current year’s Same Store Sales of our international studios at the same exchange rates used in the prior year. Vive is excluded from Same Store Sales figures.

Fourth Quarter Fiscal 2022 Update and Recent Developments

European Master Franchise Agreement

Effective as of September 30, 2023, the Company entered into a Master Franchise Agreement (“MFA”) with Club Sports Group, LLC (“Club Sports”), an affiliate of KLIM, pursuant to which the Company granted Club Sports the master franchise rights for F45 in Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. In exchange, the Company will receive certain fees and royalties, including a percentage of the revenue generated by Club Sports. In accordance with the agreement, F45 will assign existing franchise agreement rights to approximately 174 studios previously signed by the Company. Following December 31, 2022, the Company and Club Sports have engaged in discussions regarding a first amendment to the MFA that, among other things, may extend the transition time period during which Club Sports is required to assume franchisor and administrative duties.

Departure of Chief Financial Officer and Appointment of Interim Chief Financial Officer

On November 15, 2022, Chris Payne, Chief Financial Officer and a member of the Board, notified the Company that he was resigning from his positions as Chief Financial Officer and director, effective immediately, to address immediate personal and family matters in Australia. At the time of his resignation, Mr. Payne did not serve on any committees of the Board. Mr. Payne’s resignation was not the result of any disagreement with the Company relating to its operations, policies or practices or with its Board or management. Mr. Payne continued to support the Company in 2022, following his resignation, in an advisory capacity.

On February 13, 2023, the Board appointed Robert Madore as Interim Chief Financial Officer, to serve while the Board conducted a formal search for a permanent Chief Financial Officer. On June 9, 2023, Robert Madore, Interim Chief Financial Officer of the Company, notified the Company that he would be resigning from his position as Interim Chief Financial Officer and would continue in his capacity as Interim Chief Financial Officer to assist the Company during a transition period of 30 days. On July 13, 2023, the Board appointed Patrick Grosso as Interim Chief Financial Officer.

Departure of Interim Chief Executive Officer and Appointment of Chief Executive Officer

On March 29, 2023, the Company announced that Ben Coates would be stepping down from his role as President and Chief Executive Officer of the Company, effective as of March 30, 2023. Mr. Coates subsequently resigned from his position as a member of the Company’s Board on April 27, 2023.

On March 29, 2023, the Board appointed Tom Dowd as President and Chief Executive Officer of the Company, effective as of March 30, 2023.

Appointment of Chief Brand Officer

On March 29, 2023, the Board appointed Mark Wahlberg as Chief Brand Officer of the Company, and Mr. Wahlberg continues to serve as a director of the Company.

New Credit Agreement

On February 14, 2023, the Company entered into a credit agreement (as amended, the “New Credit Agreement”) with certain subsidiaries of the Company party thereto as guarantors (the “Guarantors”), Alter Domus (US) LLC, as administrative Agent and Australian security trustee, and the lenders party thereto. The lender group consists of existing stockholders of the Company led by affiliates of Kennedy Lewis Investment Management LP (“KLIM”), the investment manager to significant stockholders of the Company and party to the Company’s Third Amended and Restated Stockholders’ Agreement. The New Credit Agreement provides for a $90 million, five-and-a-half-year term loan facility (the “Term Loan”) at an original issue discount of 3.00% payable in kind. The proceeds from the Term Loan were used by the Company to pay down $20.1 million of existing indebtedness and accrued interest and fees on its existing credit facility with JPMorgan Chase Bank, N.A., and to pay down other liabilities of the Company and for general corporate purposes. The obligations under the New Credit Agreement are secured by substantially all of the assets of the Company and the Guarantors.

Amounts outstanding under the New Credit Agreement accrue interest at a rate of 12.00% per annum, payable in kind. Upon repayment or acceleration of the Term Loan (including in connection with a change of control), the Company is required to pay an exit fee equal to: (i) 35% of the then-current principal balance of the Term Loan during the first 12 months following closing of the Term Loan; (ii) 25% of the then-current principal balance of the Term Loan during the next 12 months; and (iii) 10% of the then-current principal balance of the Term Loan thereafter.

Third Amendment to Existing Credit Agreement

In connection with the entry into the New Credit Agreement, on February 14, 2023, the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and Australian Security Trustee, entered into a third amendment (the “Third Amendment”) to the amended and restated credit agreement, dated as of August 13, 2021 (as amended, the “Existing Credit Agreement”). Pursuant to the Third Amendment, certain amendments were made to the terms of the Existing Credit Agreement to permit the execution of the New Credit Agreement. The Third Amendment provides for a $70.0 million senior secured facility, comprised of a $68.0 million term loan and a $2.0 million revolving credit facility, with an interest rate of the Secured Overnight Financing Rate plus 550 basis points per annum, and a two-year term.

Waivers Under Credit Agreements

In connection with the delay by the Company to provide its audited financial statements for the year ended December 31, 2022 and its unaudited financial statements for the first and second quarters of 2023, the Company received waivers under both its New Credit Agreement and Existing Credit

Agreement extending the deadline for its 2022 financial statements to October 20, 2023 and extending the deadline to provide the unaudited financial statements for the quarter ended March 31, 2023 and June 30, 2023 to November 8, 2023. The Company believes it will be in a position to file its quarterly reports for the quarters ended March 31, 2023 and June 30, 2023 by November 8, 2023. If the Company is unable to file its quarterly reports by such dates, it believes that it will be able to obtain a further waiver under the terms of the New Credit Agreement and the Existing Credit Agreement.

Amendment of Letter Agreement

In connection with the entry into the New Credit Agreement, the Company and affiliates of KLIM entered into a letter agreement, dated as of February 14, 2023 (the “Side Letter”), with respect to certain governance matters, including changes to the Company’s Board of Directors and the timing for the appointment of a new Chief Financial Officer. In addition, the Letter Agreement included certain mutual releases between the Company and the lenders under the New Credit Agreement. On April 14, 2023 and subsequently on July 13, 2023, the Company and affiliates of KLIM entered into an Amendment to the Side Letter to extend the time period provided to the Company to identify a permanent Chief Financial Officer candidate.

Amendment to Subordinated Credit Agreement

On October 20, 2023 in connection with the Subordinated Credit Agreement, dated as of February 14, 2023, we entered into an Amendment to the Subordinated Credit Agreement. Pursuant to the amendment, the lenders have agreed to extend credit in the form of an incremental loan in an original aggregate principal amount equal to $41.2 million, upon the same terms as the original loan amount. Approximately $5.0 million of the proceeds will be used to pay down a portion of the loan outstanding under the First Lien Credit Agreement. In addition, the lenders have provided the Company with a delayed draw facility of up to $10.0 million.

Delisting from the NYSE and Anticipated Deregistration from the Exchange Act

On April 3, 2023, the Company received notice from the NYSE indicating the Company was not in compliance with Section 802.01E of the NYSE Listed Company Manual due to the Company’s failure to timely file its Annual Report on Form 10-K for the year ended December 31, 2022 with the SEC. On May 16, 2023, the Company received a notice from the NYSE that, as of May 15, 2023, it was not in compliance with the continued listing standard set forth in Section 802.01C of the NYSE Listed Company Manual because the average closing price of the Company’s common stock was less than $1.00 per share over a consecutive 30 trading-day period.

In response to such notices and the low trading price of the Company’s common stock, the Company evaluated whether to remain listed or go dark. On August 10, 2023, the Company determined that going dark would be in the best interest of stockholders due to the expected substantial cost savings and the Company’s inability to realize the traditional benefits of public company status. Accordingly, on August 10, 2023, the Board approved the voluntary delisting of the Company’s common stock from the NYSE, the deregistration of the Company’s common stock under Section 12(b) and Section 12(g) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and the suspension of the Company’s reporting obligations under Section 15(d) of the Exchange Act. Effective September 5, 2023, (prior to the Company completing the voluntary delisting process), the NYSE delisted the Company’s common stock from the NYSE because, in the opinion of the NYSE, the Company’s stock was no longer suitable for listing based on its “abnormally low” price levels. After the Company has made all necessary SEC filings and is otherwise able to do so, the Company intends to file with the SEC a Form 15 to voluntarily deregister the Company’s common stock under Section 12(g) of the Exchange Act and suspend its reporting obligations under Sections 15(d) of the Exchange Act.

Key Non-GAAP Financial and Operating Metrics

In addition to our consolidated financial statements prepared in accordance with GAAP, we regularly review the following key metrics to measure performance, identify trends, formulate financial projections, compensate our employees, and monitor our business.

Our financial condition and results of operations have been, and will continue to be, affected by a number of important factors, including new Franchises Sold, new studio openings and the number of visits.

The following table sets forth our key performance indicators for the years ended December 31, 2022 and 2021 (dollars in thousands except, net loss per share):


	Year Ended December 31,
	2022			2021 (As Restated)
Net loss	$	(178,799)		$	(193,465)
Net loss margin	(171.2)		%	(154.5)		%
Net loss per share	$	(1.86)		$	(3.21)
System-wide Sales	$	518,521		$	411,175
System-wide Visits	29,551			26,789
Same Store Sales growth	8.2		%	12.1		%
New Franchises Sold, net	362			1,057
Total Franchises Sold, end of period	3,663			3,301
Initial Studio Openings, net	351			312
Total Studios, end of period	2,100			1,749
EBITDA	$	(131,262)		$	(137,961)
Adjusted EBITDA	$	(2,140)		$	37,125
Adjusted EBITDA margin	(2.0)		%	29.6		%

Components of Our Results of Operations

Revenue

We generate revenue from the following sources:

•Franchise revenue: Consists primarily of upfront establishment fees, monthly franchise fees, and other franchise-related fees, including fees related to our brand fund, marketing and other recurring fixed fees paid by franchisees on a monthly basis for various services we provide, such as the use of intranet, email and the studio’s website. Franchise agreements generally consist of an obligation to grant exclusive rights over a defined territory and may include options to renew the agreement, generally for two additional five year terms, as well as the license for certain trademarks and systems to operate that studio.

Monthly franchise fees generally become payable six to twelve months after we and a franchisee execute a franchise agreement, irrespective of whether the franchise has opened their studio. Monthly franchise fees are generally structured as the greater of i) fixed payments of $1,000-$3,000 per month per studio or ii) 7% of monthly gross sales per studio. However, franchises sold earlier in the company’s operations, such as in Australia, primarily have a royalty structure that is a fixed amount per month.

Where charged, brand fund fees generally become payable at opening of the studio. Brand fund fees are generally structured as the greater of i) fixed payments of $200 per month per studio or ii) 2-3% of monthly gross sales per studio.

•Equipment and merchandise revenue: Consists of fees charged by us in exchange for (i) World Packs for new F45 Training studios, which are comprehensive opening packs containing the standardized set of F45-branded fitness equipment and related technology required to operate an F45 Training studio and (ii) subsequent additional and/or replacement equipment and merchandise sales to franchisees including technology, apparel and other fitness-related products. Typically, a portion of the World Pack fee is required to be paid upon the execution of a franchise agreement, with the balance due upon the earlier of: (i) the date the franchisee orders the World Pack; or (ii) six months from the effective date of the franchise agreement. During 2022, the Company began providing short-term financing to select franchisees with payment due upon the earlier of: (i) the opening of the studio; or (ii) twelve months from the date of the order. The franchise agreement mandates all franchisees to order and update new equipment on an annual basis.

Expenses

We primarily incur the following expenses directly related to our cost of revenues:

•Cost of franchise revenue: Consists of direct costs associated with franchise sales, lead generation and the provision of marketing services to our franchisees, including direct marketing costs related to the brand fund. Our Cost of franchise revenue changes primarily based on the number of Total Franchises Sold and Total Studios.

•Cost of equipment and merchandise revenue: Primarily includes the direct costs associated with World Pack equipment as well as additional and replacement equipment and merchandise sales to new and existing franchisees. World Pack costs consist of the cost of the components included in opening packs sold to franchisees, including: (i) gym equipment; (ii) our tech pack (e.g., TVs, F45TV adapters / dongles, heart monitors); and (iii) uniforms and merchandise. Our Cost of equipment and merchandise changes primarily based on the World Pack equipment sales, which is driven by changes in Studios Open. Cost of equipment revenue is reduced by consideration (e.g., rebates) payable by the equipment supplier to the Company, in which the amount is recognized in the consolidated statements of operations and comprehensive loss generally upon delivery of the equipment.

•Selling, general, and administrative expenses: Primarily consists of costs associated with wages and salaries, stock-based compensation expense, depreciation and amortization expenses, bad debt write-offs, and ongoing administrative and franchisee support functions related to our existing franchisees. Wages and salaries and costs related to ongoing administrative and franchisee support functions are primarily associated with brand marketing, fitness programming development and testing, onboarding, technology costs related to development and maintenance of our technology-enabled centralized delivery platform, marketing and promotional activities for the F45 Training brand, and professional expenses.

•Impairment of fixed and long-lived assets: Our impairment of fixed and long-lived assets relates to non-cash impairment charges to long-lived assets. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the assets within the asset group. In instances in which the recoverability test is not met, an impairment charge is recognized equivalent to the carrying amount of the asset group in excess of its fair value.

•Loss on derivative liabilities, net: Our loss on derivative liabilities, net, relates to a non-cash change in the derivative liabilities’ fair value based on the probability of the IPO event from when the Company entered into the subordinated convertible debt agreement prior to the consummation of the IPO on July 15, 2021.

•Change in fair value - warrant liabilities: Our change in fair value - warrant liabilities relates to change in the fair value of outstanding warrant liabilities as a result of fluctuations in the Company’s stock price and subsequent termination of the Fortress Credit Agreement.

•Other expense (income), net: Our other expense (income), net, primarily relates to fees incurred with the termination of the Fortress Credit Agreement, gain recognized on the termination of lease agreements, and realized and unrealized gains and losses on foreign currency transactions.

Provision (Benefit) for Income Taxes

Our effective income tax rate differed from the U.S. statutory tax rate of 21% primarily due to the effect of certain nondeductible expenses, permanent differences, foreign jurisdiction earnings taxed at different rates, withholding taxes, and a valuation allowance against certain domestic deferred tax assets that are not more likely than not to be realized.

Results of Operations

The following tables summarize key components of our results of operations for the periods indicated:


	Year Ended December 31,
	(dollars in thousands)
	2022		2021 (As Restated)
Revenues:
Franchise (Related party: $9,314 and $5,221 for the years ended December 31, 2022 and 2021, respectively)	$	72,762	$	73,707
Equipment and merchandise (Related party: $3,476 and $11,601 for the years ended December 31, 2022 and 2021, respectively)	31,661		51,513
Total revenues	104,423		125,220
Costs and operating expenses:
Cost of franchise revenue	5,926		5,639
Cost of equipment and merchandise (Related party: $7,362 and $20,019 for the years ended December 31, 2022 and 2021, respectively)	26,649		34,452
Selling, general, and administrative expenses	191,376		180,911
Impairment of fixed and long-lived assets	27,346		—
Total costs and operating expenses	251,297		221,002
Loss from operations	(146,874)		(95,782)
Loss on derivative liabilities, net	—		48,603
Change in fair value - warrant liabilities	(4,457)		—
Interest expense, net	14,983		59,353
Other income, net	(957)		(730)
Loss before income taxes	(156,443)		(203,008)
Provision (benefit) for income taxes	22,356		(9,543)
Net loss	$	(178,799)	$	(193,465)

Comparison of the years ended December 31, 2022 and 2021

Revenue

Franchise revenue


	Year Ended December 31,				Change
	2022		2021 (As Restated)		$		%
	(dollars in thousands)
Franchise
USA	$	46,239	$	44,628	$	1,611	4	%
Australia	12,779		12,877		(98)		(1)
ROW	13,744		16,202		(2,458)		(15)
Total franchise revenue	$	72,762	$	73,707	$	(945)	(1)	%


	Year Ended December 31, 2022				Year Ended December 31, 2021
	U.S.	Australia	ROW	Total	U.S.	Australia	ROW	Total
Total Franchises Sold, beginning of period	1,710	803	788	3,301	931	679	634	2,244
New Franchises Sold, net(a)	328	(4)	38	362	779	124	154	1,057
Total Franchises Sold, end of period	2,038	799	826	3,663	1,710	803	788	3,301

(a) New Franchises Sold are shown net of franchises that were signed but subsequently terminated prior to the initial studio opening.


	Year Ended December 31, 2022				Year Ended December 31, 2021
	U.S.	Australia	ROW	Total	U.S.	Australia	ROW	Total
Total Studios, beginning of period	654	653	442	1,749	486	616	335	1,437
Initial Studio Openings, net(a)	228	29	94	351	168	37	107	312
Total Studios, end of period	882	682	536	2,100	654	653	442	1,749

(a) Initial Studio Openings are shown net of studios that have permanently closed which had a recorded initial studio opening.

Total Franchise revenue of $72.8 million for the year ended December 31, 2022 represented a decrease of $0.9 million, or 1%, from $73.7 million for the year ended December 31, 2021. Total Franchises Sold increased by 362, or 11%, from 3,301 as of December 31, 2021 to 3,663 as of December 31, 2022. Total Studios increased by 351, or 20%, from 1,749 as of December 31, 2021 to 2,100 as of December 31, 2022.

The $1.6 million, or 4%, increase in Franchise revenue in the United States for the year ended December 31, 2022 as compared to the same period in 2021 was primarily attributable to the increase in the number of franchise sales, increase in studio openings in the United States, and a $1.7 million increase in Franchise revenues related to the launch of the marketing brand fund during August 2022. The amount of Total Franchises Sold in the United States increased by 328, or 19%, from 1,710 Total Franchises Sold as of December 31, 2021 to 2,038 Total Franchises Sold as of December 31, 2022. In addition, the number of Total Studios in the United States increased by 228, or 35%, from 654 Total Studios as of December 31, 2021 to 882 studios as of December 31, 2022.

The $0.1 million, or 1%, decrease in Franchise revenue in Australia for the year ended December 31, 2022 as compared to the same period in 2021 was primarily attributable to $0.7 million of unfavorable foreign currency translation adjustments as a result of weakening of the Australian dollar against the U.S. dollar. The Total Franchises Sold in Australia decreased by four, or less than 1%, as a result of non-renewals and termination of franchise agreements, from 803 Total Franchises Sold as of December 31, 2021 to 799 Total Franchises Sold as of December 31, 2022. The decrease was partially offset an increase in Initial Studio Openings of 29 during the year ended December 31, 2022.

The $2.5 million, or 15%, decrease in Franchise revenue in ROW for the year ended December 31, 2022 as compared to the same period in 2021 was primarily attributable to the impact of one-time adjustments related to limited time promotional deals of $1.2 million as described in Note 3—Summary of significant

accounting policies, to the consolidated financial statements included in this Report, unfavorable foreign currency translation adjustment as a result of the weakening of the euro, British pound, Singapore dollar, and Canadian dollar against the U.S. dollar of $0.7 million, and the acceleration of recognition of billing credits previously provided during COVID shutdowns for approximately 93 studios for which collection was no longer considered probable of approximately $0.8 million compared to the prior year. The number of New Franchises Sold in ROW decreased by 116, or 75%, from 154 Franchises Sold as of December 31, 2021 to 38 Franchises Sold as of December 31, 2022. In addition, the number of Initial Studio Openings in ROW decreased by 13, or 12%, from 107 studios as of December 31, 2021 to 94 studios as of December 31, 2022.

Equipment and merchandise revenue


	Year Ended December 31,				Change
	2022		2021 (As Restated)		$		%
	(dollars in thousands)
Equipment and merchandise
USA	$	19,176	$	35,911	$	(16,735)	(47)	%
Australia	3,342		6,630		(3,288)		(50)
ROW	9,143		8,972		171		2
Total equipment and merchandise revenue	$	31,661	$	51,513	$	(19,852)	(39)	%

The $16.7 million, or 47%, decrease in Equipment and merchandise revenue in the United States for the year ended December 31, 2022 as compared to the same period in 2021 was primarily attributable to the decrease in equipment and merchandise deliveries, the majority of which related to the contractual obligations of franchisees under the limited-time promotional offer and multi-unit franchise groups which occurred during 2021, partially offset by purchases from franchisees under development agreements during 2022. The total deliveries of equipment and merchandise decreased by 46, or 14%, from 329 deliveries during the year ended December 31, 2021, to 283 deliveries during the year ended December 31, 2022.

The $3.3 million, or 50%, decrease in Equipment and merchandise revenue in Australia for the year ended December 31, 2022 as compared to the same period in 2021 in Australia was primarily attributable to the decrease in equipment deliveries. The total deliveries of equipment decreased by 14, or 32%, from 44 deliveries during the year ended December 31, 2021, to 30 deliveries during the year ended December 31, 2022.

The $0.2 million, or 2%, increase in Equipment and merchandise revenue in ROW for the year ended December 31, 2022 as compared to the same period in 2021 was primarily attributable to an increase of $0.8 million in World Pack deliveries. The increase in Equipment and merchandise revenue in ROW was offset by a $0.8 million decrease in the delivery of top-up equipment in the year ended December 31, 2022. The total deliveries of equipment and merchandise increased by 49, or 47%, from 105 deliveries during the year ended December 31, 2021, to 154 deliveries during the year ended December 31, 2022. The increase was offset by unfavorable foreign currency translation adjustment as a result of weakening of the euro, British pound, Singapore dollar, and Canadian dollar against the U.S. dollar.

Cost of revenue

Cost of franchise revenue


	Year Ended December 31,						Change
	2022			2021 (As Restated)			$		%
	(dollars in thousands)
Franchise
USA	$	4,769		$	4,415		$	354	8	%
Australia	747			756			(9)		(1)	%
ROW	410			468			(58)		(12)	%
Total cost of franchise revenue	$	5,926		$	5,639		$	287	5	%
Percentage of franchise revenue	8		%	8		%

The $0.4 million, or 8%, increase in Cost of franchise revenue in the United States for the year ended December 31, 2022 as compared to the same period in 2021, was primarily attributable to an increase in pre-open and post-open advertising campaign expenses reflective of an increase in net Initial Studio Openings during the year ended December 31, 2022 of 228 compared to 168 net Initial Studio Openings during the year ended December 31, 2021.

The less than $0.1 million, or 1%, decrease in Cost of franchise revenue in Australia during the year ended December 31, 2022 as compared to the same period in 2021 was attributable to the decrease in pre-open marketing expense in the year ended December 31, 2022 as a result of a decrease in net Initial Studio Openings during the year ended December 31, 2022 of 29 compared to 37 net Initial Studio Openings during the year ended December 31, 2021.

The $0.1 million, or 12%, decrease in Cost of franchise revenue in ROW during the year ended December 31, 2022 as compared to the same period in 2021 was primarily attributable to the decrease in marketing expense in the year ended December 31, 2022 as a result of a decrease in net Initial Studio Openings during the year ended December 31, 2022 of 94 compared to 107 net Initial Studio Openings during the year ended December 31, 2021.

Cost of equipment and merchandise revenue


	Year Ended December 31,						Change
	2022			2021 (As Restated)			$		%
	(dollars in thousands)
Equipment and merchandise
USA	$	14,122		$	22,101		$	(7,979)	(36)	%
Australia	4,009			5,124			(1,115)		(22)	%
ROW	8,518			7,227			1,291		18	%
Total equipment and merchandise cost of revenue	$	26,649		$	34,452		$	(7,803)	(23)	%
Percentage of equipment and merchandise revenue	84		%	67		%

The $8.0 million, or 36%, decrease in Cost of equipment and merchandise revenue in the United States for the year ended December 31, 2022 as compared to the same period in 2021 was primarily attributable to the decrease in equipment and merchandise deliveries.

The $1.1 million, or 22%, decrease in Cost of equipment and merchandise revenue in Australia for the year ended December 31, 2022 as compared to the same period in 2021 was primarily due to the decrease in equipment and merchandise deliveries.

The $1.3 million, or 18%, increase in the Cost of equipment and merchandise revenue in ROW for the year ended December 31, 2022 as compared to the same period in 2021 was primarily attributable to the increase in equipment and merchandise deliveries.

Selling, general, and administrative expenses


	Year Ended December 31,						Change
	2022			2021 (As Restated)			$		%
	(dollars in thousands)
Selling, general, and administrative expenses	$	191,376		$	180,911		$	10,465	6	%
Percentage of revenue	183		%	144		%

The $10.5 million, or 6%, increase in Selling, general, and administrative expenses during the year ended December 31, 2022 as compared to the same period in 2021 was primarily attributable to a $18.3 million increase in bad debt write-offs associated with financed World Pack purchases made by franchisees and developers during the fourth quarter of 2021 and first quarter of 2022. The increase in Selling, general, and administrative expenses was also attributable to a $27.7 million increase of payroll related to additional headcount prior to the restructuring performed by the Company during July 2022. The $27.7 million payroll increase includes $9.8 million of associated severance costs incurred for employees impacted by the restructuring and also a $1.0 million impairment of deferred cost due to increased capitalized commissions and payroll costs from the addition of new franchisees. Other contributing factors to the increase in Selling, general, and administrative expenses include a $13.9 million increase in legal and professional fees associated with ongoing legal proceedings, litigation accruals, and fees incurred with third party advisors for general corporate services, a $4.6 million increase in marketing expenses due to ongoing brand awareness, localized brand events, and promoter related expenditures, a $2.4 million increase from the disposal of a trademark, a $2.9 million increase in rent due to the move of our corporate headquarters to Austin, Texas as well as additional rent expense incurred associated with the acquisition of Vive and corporate owned studio space, a $2.6 million increase in state and local taxes, a $1.9 million increase in depreciation and amortization expense mainly related to the amortization of intangible assets resulting from the acquisitions of Flywheel and Vive during July 2021 and October 2021, respectively, a $1.0 million increase in storage costs due to development agreements of which studios have not opened, and a $1.7 million increase in insurance expense as a result of director and officer insurance expenses subsequent to our initial public offering. These costs were offset by a decrease of $66.9 million in stock-based compensation as a result of the acceleration of vesting of certain awards issued in conjunction with our initial public offering in July 2021 issued to brand ambassadors, directors, and certain employees.

Impairment of fixed and long-lived assets


	Year Ended December 31,				Change
	2022		2021 (As Restated)		$		%
	(dollars in thousands)
Impairment of fixed and long-lived assets	$	27,346	$	—	$	27,346	100%

Impairment of fixed and long-lived assets includes $27.3 million of asset write-downs and write-offs during the year ended December 31, 2022. We recognized an impairment loss of $19.8 million on assets

acquired from the Flywheel indoor cycling studio business as part of the strategic reassessment of our long-term customer relationship management needs in light of headcount changes and the technical capabilities of existing technology vendors, $4.2 million related to the abandonment of our Boynton Beach lease due to the strategic decision to not pursue as a corporate owned studio space, $2.2 million related to a goodwill impairment of Vive, and $1.0 million related to Vive and the Malibu Crew and Avalon House concepts. No impairments were recorded during the year ended December 31, 2021.

Loss on derivative liabilities


	Year Ended December 31,				Change
	2022		2021 (As Restated)		$		%
	(dollars in thousands)
Loss on derivative liabilities, net	$	—	$	48,603	$	(48,603)	(100)%

On October 6, 2020, we entered into a subordinated convertible debt agreement, or the Convertible Notes, whereby we issued $100.0 million of Convertible Notes to certain holders maturing on September 30, 2025. The Convertible Notes contained embedded derivatives that required bifurcation and recognition as liabilities in the consolidated balance sheets. The liabilities for these embedded derivatives were measured at fair value as of October 6, 2020.

The $48.6 million loss on derivative liabilities during the year ended December 31, 2021, was attributable to the change in the derivative liabilities’ fair value resulting from the Company’s growing equity value and increasing probability of the IPO event from when the Company entered into the subordinated convertible debt agreement in October 2020 to the consummation of the IPO on July 15, 2021. The embedded derivatives were extinguished in connection with the repayment of the debt upon the IPO.

Change in fair value - warrant liabilities


	Year Ended December 31,				Change
	2022		2021 (As Restated)		$		%
	(dollars in thousands)
Change in fair value - warrant liabilities	$	(4,457)	$	—	$	(4,457)	—%

The $4.5 million decrease in Change in fair value - warrant liabilities during the year ended December 31, 2022 as compared to the same period in 2021 was attributable to the change in the warrant liabilities’ fair value resulting from the decrease in the Company’s share price subsequent to the issuance of the Warrants on May 13, 2022 and the termination of the Fortress Credit Agreement on August 14, 2022. As a result of the termination of the Fortress Credit Agreement, the outstanding warrants were considered terminated as of August 14, 2022, resulting in an extinguishment of the warrant liability.

Interest expense, net


	Year Ended December 31,				Change
	2022		2021 (As Restated)		$		%
	(dollars in thousands)
Interest expense, net	$	14,983	$	59,353	$	(44,370)	(75)%

The $44.4 million, or 75%, decrease in Interest expense, net for the year ended December 31, 2022 compared to the same period in 2021 was primarily attributable to the write off of debt discounts and penalties as a result of the early repayments of indebtedness in connection with the IPO, offset by the write-off of debt issuance costs associated with the Fortress Credit Agreement. The following table reflects the write off of debt discounts and penalties incurred during the year ended December 31, 2022 and 2021 that are included in Interest expense (in thousands):


	Year Ended December 31,
	2022		2021 (As Restated)
Fortress Credit Agreement	$	11,546	$	—
Subordinated Convertible Debt	—		23,740
Subordinated Second Lien Loan	—		17,497
First Lien Loan	—		241
Total	$	11,546	$	41,478

Other expense (income), net


	Year Ended December 31,				Change
	2022		2021 (As Restated)		$		%
	(dollars in thousands)
Other income, net	$	(957)	$	(730)	$	(227)	31	%

The $0.2 million, or 31%, increase in Other income, net represents realized and unrealized gains and losses on foreign currency transactions during the year ended December 31, 2022. This increase during the year ended December 31, 2022 was primarily attributed to a gain on the termination of the Company’s Boynton office lease of $3.5 million in conjunction with the restructuring performed by the Company in July 2022, partially offset by a $2.5 million costs incurred with the termination of the Fortress Credit Agreement.

Provision (benefit) for income taxes


	Year Ended December 31,				Change
	2022		2021 (As Restated)		$		%
	(dollars in thousands)
Provision (benefit) for income taxes	$	22,356	$	(9,543)	$	31,899	(334)	%

The $31.9 million, or 334%, increase in Provision (benefit) for income taxes was primarily driven by the implementation of a full valuation allowance over our domestic and foreign deferred tax assets during the year ended December 31, 2022.

Liquidity and Capital Resources

Overview

As of December 31, 2022, we held $5.3 million of Cash, cash equivalents, and Restricted cash relating to cash held in term deposits, of which $3.2 million was held by our foreign subsidiaries outside of the United States. In the event that we repatriate these funds from our foreign subsidiaries, we would need to accrue

and pay applicable United Sates taxes and withholding taxes payable to various countries. As of December 31, 2022, the Company maintained an indefinite reinvestment assertion on any undistributed earnings and profits related to the foreign subsidiaries outside of the United States noting that its foreign operations remain in an E&P deficit.

Due to a lack of liquidity to support our ongoing business, on February 14, 2023, we entered into a new credit agreement (the “New Credit Agreement”) which provided for a $90.0 million, five and a half year term loan facility at an original issue discount of 3.00% payable in kind. Approximately $20.0 million of proceeds of the New Credit Agreement were used to pay down a portion of our existing debt owed and outstanding as of December 31, 2022.

Due to our continued lack of liquidity, on October 20, 2023 in connection with the Subordinated Credit Agreement, dated as of February 14, 2023, we entered into an Amendment to the Subordinated Credit Agreement. Pursuant to the amendment, the lenders have agreed, subject to the satisfaction of the certain conditions precedent, to extend credit in the form of an incremental loan in an original aggregate principal amount equal to $40.0 million, upon the same terms as the original loan amount. Approximately $5.0 million of the proceeds will be used to pay down a portion of the loan outstanding under the First Lien Credit Agreement. In addition, the lenders have agreed, subject to the satisfaction of certain conditions precedent, to provide the Company with a delayed draw facility of up to $10.0 million.

As of December 31, 2022, our material cash requirements include contractual obligations from debt and lease obligations. Refer to Note 12—Debt and Note 18—Commitments and contingencies to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for more information regarding these material cash requirements.

We believe that our operating cash flows, proceeds resulting from our New Credit Agreement entered into on February 14, 2023 and October 20, 2023, assuming it becomes effective, and cash on hand will be adequate to meet our operating, investing and financing needs for the next 12 months. However, changes in our forecasted cash flow (including delays in updating our FDD which prevents us from selling new franchises and renewing existing franchise agreements), management planned costs reductions (including our inability to deregister from the SEC) and available funds could have a further negative impact on our future liquidity. To the extent additional funds are necessary to meet our liquidity needs we may seek to sell inventory, enter into new borrowing facility with one or more lenders, increase the borrowings under our existing facilities or reduce our operating expenditures, legal fees, and promotional and professional advisory contracts. However, it is uncertain whether such financing or reductions may be available on favorable terms, or at all. Our ability to meet our operating, investing, and financing needs depends to a significant extent on our future financial performance, which will be subject in part to general economic, competitive, financial, regulatory and other factors that are beyond our control, including those described in “Risk Factors". In addition to these general economic and industry factors, the principal factors in determining whether our cash flows will be sufficient to meet our liquidity requirements will be our ability to globally expand our franchisee footprint. Accordingly, we cannot provide assurance that our business will generate sufficient cash flow from operating or that future borrowings will be available from additional indebtedness or otherwise to meet our liquidity needs.

Cash flow


	Year Ended December 31,
	2022		2021 (As Restated)
	(dollars in thousands)
Net cash used in operating activities	$	(98,031)	$	(38,024)
Net cash used in investing activities	(10,692)		(35,371)
Net cash provided by financing activities	73,108		85,378
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(1,055)		1,054
Net change in cash, cash equivalents, and restricted cash	$	(36,670)	$	13,037

Net cash used in operating activities

Net cash used in operating activities for the year ended December 31, 2022 was $98.0 million, which resulted from a net loss of $178.8 million and a net decrease in cash related to changes in operating assets and liabilities of $38.6 million, partially offset for non-cash charges of $119.3 million. The net cash outflow from changes in operating assets and liabilities were primarily the result of a $31.8 million increase in Inventories, a $8.8 million increase in Accounts receivable which increased due to timing of collections from our customers and orders on equipment which we have provided payment terms of up to twelve months, a $4.3 million decrease in Deferred revenue, a $7.7 million increase in Other long-term assets (contract assets), $4.1 decrease in Other long-term liabilities, and a $3.3 million increase in Deferred costs due to increased capitalized commission and payroll costs from the additions of new franchisees, partially offset by a $6.5 million decrease in Other current assets as a result of the change in unbilled receivables, a $12.1 million increase in Accounts payable and accrued expenses, a $1.2 million decrease in Lease liabilities and a $4.6 million decrease in Prepaid expenses. Non-cash charges primarily consisted of a $27.1 million provision for bad debt, $22.4 million for deferred income taxes, $27.3 million for impairment charges, $21.3 million for stock-based compensation expenses, $11.5 million loss on the termination of the Fortress Credit Agreement, $10.2 million for depreciation and amortization expense and $2.4 million for losses on the disposal of long-lived assets, partially offset by a $4.5 million gain on the Change in fair value related to warrant liabilities and $— million gain on the termination of the Company’s Boynton Beach office lease.

Net cash used in operating activities of $38.0 million for the year ended December 31, 2021 was primarily due to net loss of $193.5 million and a net decrease in Cash related to changes in operating assets and liabilities of $37.9 million, offset by non-cash adjustments of $193.4 million. Changes in cash flow related to operating assets and liabilities primarily consisted of $20.4 million increase in Accounts receivable, $16.6 million increase in Other long-term assets (contract assets), $9.9 million increase in Prepaid expenses, and $6.1 million increase in Inventories, $8.5 million increase in Other current assets, $3.6 million increase in Deferred costs, primarily offset by an $8.7 million increase in Deferred revenue, $16.3 million increase in Accounts payable and accrued expenses, $1.2 million increase in Income taxes payable, and $0.9 million increase in Other long-term liabilities. The increase in our accounts receivable was primarily driven by the increase in sales volume as our network began recovering from the COVID-19 pandemic and equipment sales and related rebates receivable in 2022. The corresponding increase in Other long-term assets (contract assets) was a result of a reduction in our invoicing and billing to franchisees whose studios were impacted by the pandemic during the year ended December 31, 2021. The increase in Prepaid expenses was primarily due to the $4.0 million of prepayment for marketing services under the promotional agreement and $2.9 million of prepayment on an insurance premium during the year ended December 31, 2021. We increased our inventory in response to the increase in franchisee signings and in anticipation of the supply chain issue arising from the COVID-19 pandemic. The increase in our Deferred costs was driven by our success in continuing to sign new franchisees during the period. The increase in Accounts payable and accrued expenses was primarily driven by the increase in inventory purchases and recognition of $4.2 million of liability-based stock awards in connection with the IPO that was paid during the three months ended March 31, 2022. The increase in Other long-term liabilities was primarily due to the $4.7 million of deferred rent associated with the lease

on our corporate headquarters offset by a $4.2 million reclassification of stock-based compensation expenses from Other long-term liabilities to Accounts payable and accrued expenses. Non-cash adjustments primarily consisted of stock-based compensation of $88.2 million, loss on derivative liabilities of $48.6 million, a $8.7 million provision for bad debt, accretion and write off of debt discount of $31.6 million, in which $28.4 million relates to early repayments of indebtedness in connection with the IPO, and prepayment penalty included in interest of $13.0 million.

Net cash used in investing activities

Net cash used in investing activities for the year ended December 31, 2022 of $10.7 million resulted primarily from purchases of property and equipment of $6.5 million, primarily related to our Austin headquarters and build-out of corporate studio space, purchases of intangible assets of $4.2 million primarily related to internal-use software development costs and trademark protection costs.

Net cash used in investing activities for the year ended December 31, 2021 of $35.4 million, consisted of asset purchases of Flywheel CRM software and Flywheel brand names of $25.0 million, acquisition of Vive of $3.7 million, net purchases of property and equipment of $3.5 million primarily related to leasehold improvements made to the new headquarter office in Austin, Texas, and purchases of intangible assets of $3.2 million primarily related to the implementation of the new Enterprise Resource Planning, or ERP, system and patent and trademark registrations.

Net cash provided by financing activities

Net cash provided by financing activities of $73.1 million for the year ended December 31, 2022 was primarily due to borrowings under our Revolving Facility of $88.1 million to provide cash to fund purchases and deposits placed on equipment and working capital. The net change in cash provided by financing activities was partially offset by $11.8 million of tax withholding on Restricted Stock Unit (RSU) settlements, and $3.2 million in deferred financing costs paid related to the Fortress Credit Agreement which was terminated during the third quarter of 2022.

Net cash provided by financing activities of $85.4 million for the year ended December 31, 2021 primarily consisted of proceeds from issuance of common stock of $277.8 million, net of offering costs, during the IPO, offset by repayments of debt facilities of $184.4 million in connection with the IPO, $7.0 million of repayment on the Term Facility prior to the settlement upon the consummation of the IPO, and $1.0 million of payments on debt issuance costs in connection with the modification of the Revolving Facility.

Contractual obligations and commitments

Contractual obligations and commitments as of December 31, 2022, consisted of debt, letters of credit, and lease obligations. Refer to Note 12—Debt and Note 18—Commitments and contingencies to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for discussion of the contractual obligations related to our debt and operating leases, respectively.

Off-Balance Sheet Arrangements

As of December 31, 2022, our off-balance sheet arrangements consisted of guaranties provided by the Company for leases for office space by unconsolidated organizations and standby letters of credit. See Note 18—Commitments and contingencies to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for more information regarding these guaranties.

Restatement of Unaudited Interim Condensed Consolidated Financial Statements

As further described in Note 2—Restatement of Previously Issued Consolidated Financial Statements to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K, the Company restated its consolidated financial statements as of and for the year ended December 31, 2021. The restatement adjustments similarly impact the unaudited interim condensed consolidated financial statements for each of the interim periods within the year ended December 31, 2022. In lieu of filing amended quarterly reports on Form 10-Q for the three months ended March 31, 2022 (restated), the three and six months ended June 30, 2022 (restated) and the three and nine months ended September 30, 2022 (restated), quarterly financial data as restated for these periods is included in this Annual Report on Form 10-K in the tables that follow. This information has been prepared on the same basis as the consolidated financial statements. The related adjustments to the unaudited quarterly financial information resulting from similar adjustments discussed in Note 2 are also presented below.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share amounts and share data)


	As Restated
	March 31, 2022		June 30, 2022		September 30, 2022
Assets
Current assets:
Cash and cash equivalents	$	13,992	$	8,476	$	16,676
Restricted cash	—		2,582		66
Accounts receivable, net	33,794		26,243		20,021
Due from related parties	2,739		3,029		1,058
Inventories	19,689		32,398		42,914
Deferred costs	1,985		1,957		1,826
Prepaid expenses	32,705		19,716		9,620
Other current assets	8,629		9,248		8,535
Total current assets	113,533		103,649		100,716
Property and equipment, net	8,870		10,805		10,546
Deferred tax assets, net	21,372		3,179		2,717
Goodwill	4,614		4,386		4,133
Intangible assets, net	28,921		28,636		28,342
Deferred costs, net of current	12,148		11,784		10,647
Other long-term assets	34,911		46,293		36,332
Total assets	$	224,369	$	208,732	$	193,433

Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses	$	49,595	$	52,667	$	55,931
Deferred revenue	17,828		15,635		16,615
Interest payable	174		287		382
Current portion of long-term debt	—		—		37
Income taxes payable	7,704		7,993		7,177
Total current liabilities	75,301		76,582		80,142
Deferred revenue, net of current	3,865		3,437		1,908
Long-term debt	31,600		61,600		88,351
Warrant liabilities	—		3,192		—
Other long-term liabilities	14,370		11,355		9,553
Total liabilities	125,136		156,166		179,954
Stockholders’ equity
Common stock, $0.00005 par value as of March 31, 2022, June 30, 2022 and September 30, 2022 and 95,682,833, 96,491,418, and 97,315,803 shares issued and outstanding as of March 31, 2022, June 30, 2022 and September 30, 2022, respectively.	6		6		6
Additional paid-in capital	655,405		663,599		672,898
Accumulated other comprehensive (loss) income	2,167		(1,032)		(3,126)
Accumulated deficit	(383,625)		(435,287)		(481,579)
Less: Treasury stock	(174,720)		(174,720)		(174,720)
Total stockholders' equity	99,233		52,566		13,479
Total liabilities and stockholders' equity	$	224,369	$	208,732	$	193,433

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

(in thousands, except share amounts and share data)


	As Restated
	Three Months Ended March 31, 2022		Three Months Ended June 30, 2022		Three Months Ended September 30, 2022		Six Months Ended June 30, 2022		Nine Months Ended September 30, 2022
Revenues:
Franchise	$	19,860	$	19,109	$	18,642	$	38,969	$	57,611
Equipment and merchandise	9,528		8,592		9,272		18,120		27,392
Total revenues	29,388		27,701		27,914		57,089		85,003
Costs and operating expenses:
Cost of franchise revenue	1,307		1,743		1,533		3,050		4,583
Cost of equipment and merchandise	7,113		9,092		7,213		16,205		23,418
Selling, general and administrative expenses	32,116		51,926		53,608		84,042		137,650
Total costs and operating expenses	40,536		62,761		62,354		103,297		165,651
Loss from operations	(11,148)		(35,060)		(34,440)		(46,208)		(80,648)
Change in fair value - warrant liabilities	—		(1,265)		(3,192)		(1,265)		(4,457)
Interest expense, net	126		696		12,620		822		13,442
Other expense (income), net	622		(1,291)		2,412		(669)		1,743
Loss before income taxes	(11,896)		(33,200)		(46,280)		(45,096)		(91,376)
Provision for income taxes	2,418		18,462		12		20,880		20,892
Net loss	$	(14,314)	$	(51,662)	$	(46,292)	$	(65,976)	$	(112,268)

Other comprehensive loss
Foreign currency translation adjustment, net of tax	1,016		(3,199)		$	(2,094)	(2,183)		(4,277)
Comprehensive loss	$	(13,298)	$	(54,861)	$	(48,386)	$	(68,159)	$	(116,545)

Per share data:
Net loss per share
Basic and diluted	$	(0.15)	$	(0.54)	$	(0.48)	$	(0.69)	$	(1.17)

Shares used in computing net loss per share
Basic and diluted	95,709,671		95,917,556		97,100,453		95,814,188		96,245,149

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	As Restated
	Three Months Ended March 31, 2022		Six Months Ended June 30, 2022		Nine Months Ended September 30, 2022
Cash flows from operating activities
Net loss	$	(14,314)	$	(65,976)	$	(112,268)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	286		602		912
Amortization of intangible assets	888		1,834		2,895
Amortization of deferred costs	626		1,682		3,032
Accretion and write-off of debt discount	—		329		263
Bad debt expense	1,464		6,680		11,308
Stock-based compensation	2,073		4,221		11,504
In-kind marketing	57		—		—
Provision for inventories	(52)		(73)		(79)
Deferred income taxes	—		17,722		21,279
Loss (gain) on disposal of property and equipment	—		—		565
Change in fair value - warrant liabilities	—		(1,265)		(4,457)
Loss on termination of Fortress financing facility	—		—		14,046
Unrealized foreign currency transaction (losses) gains	360		(957)		(1,461)
Other	—		—		38
Impairment expense	—		—		131
Changes in operating assets and liabilities:
Due from related parties	(294)		(592)		(626)
Accounts receivable, net	(12,498)		(12,006)		(9,437)
Inventories	(9,262)		(22,238)		(32,904)
Prepaid expenses	(20,085)		(7,128)		2,886
Other current assets	(6,197)		(7,425)		(4,650)
Deferred costs	(806)		(1,752)		(2,279)
Other long-term assets	(5,375)		(3,642)		(5,711)
Accounts payable and accrued expenses	10,278		14,296		17,761
Deferred revenue	(774)		(2,832)		(2,760)
Interest payable	(104)		—		—
Income taxes payable	2,490		2,603		(1,358)
Other long-term liabilities	5,405		2,025		1,130
Net cash used in operating activities	(45,834)		(73,892)		(90,240)
Cash flows from investing activities
Purchases of property and equipment	(2,117)		(4,728)		(6,079)
Purchases of intangible assets	(1,296)		(1,923)		(2,995)
Net cash used in investing activities	(3,413)		(6,651)		(9,074)
Cash flows from financing activities
Borrowings under revolving facility	31,600		61,600		87,946
Taxes paid related to net share settlement of equity awards	(10,991)		(10,991)		(11,423)
Deferred financing costs	—		(454)		(3,176)
Net cash provided by financing activities	20,609		50,155		73,347
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	626		(558)		705
Net increase (decrease) in cash, cash equivalents, and restricted cash	(28,012)		(30,946)		(25,262)
Cash and cash equivalents at beginning of period			42,004		42,004
Cash, cash equivalents, and restricted cash at beginning of period	42,004		42,004		42,004
Cash and cash equivalents at end of period	13,992		8,476		16,676
Restricted cash at end of period	—		2,582		66
Cash, cash equivalents, and restricted cash at end of period	$	13,992	$	11,058	$	16,742

The following tables present the restatement adjustments as further described in Note 2—Restatement of Previously Issued Consolidated Financial Statements to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K, to correct errors in the Company’s previously issued unaudited interim condensed consolidated financial statements for each of the interim periods within the year ended December 31, 2022. In lieu of filing amended quarterly reports on Form 10-Q for the three months ended March 31, 2022 (restated), the three and six months ended June 30, 2022 (restated) and the three and nine months ended September 30, 2022 (restated), quarterly financial data as restated for these periods is included in this Annual Report on Form 10-K in the tables that follow.

CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)

(in thousands, except share amounts and share data)


	March 31, 2022
	As Previously Reported		Restatement Adjustments		As Restated
Assets
Current assets:
Cash and cash equivalents	$	13,992	$	—	$	13,992
Accounts receivable, net	45,200		(11,406)		33,794
Due from related parties	2,739		—		2,739
Inventories	16,622		3,067		19,689
Deferred costs	2,021		(36)		1,985
Prepaid expenses	32,724		(19)		32,705
Other current assets	18,442		(9,813)		8,629
Total current assets	131,740		(18,207)		113,533
Property and equipment, net	8,870		—		8,870
Deferred tax assets, net	22,755		(1,383)		21,372
Goodwill	4,614		—		4,614
Intangible assets, net	28,921		—		28,921
Deferred costs, net of current	12,476		(328)		12,148
Other long-term assets	27,246		7,665		34,911
Total assets	$	236,622	$	(12,253)	$	224,369

Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses	$	38,519	$	11,076	$	49,595
Deferred revenue	10,452		7,376		17,828
Interest payable	174		—		174

Income taxes payable	12,144		(4,440)		7,704
Total current liabilities	61,289		14,012		75,301
Deferred revenue, net of current	3,865		—		3,865
Long-term debt, net of current	31,600		—		31,600
Other long-term liabilities	13,717		653		14,370
Total liabilities	110,471		14,665		125,136
Stockholders’ equity
Common stock, $0.00005 par value; 95,682,833 shares issued and outstanding as of March 31, 2022	6		—		6
Additional paid-in capital	655,405		—		655,405
Accumulated other comprehensive income	1,509		658		2,167
Accumulated deficit	(356,049)		(27,576)		(383,625)
Less: Treasury stock	(174,720)		—		(174,720)
Total stockholders' equity	126,151		(26,918)		99,233
Total liabilities and stockholders' equity	$	236,622	$	(12,253)	$	224,369

CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)

(in thousands, except share amounts and share data)


	June 30, 2022
	As Previously Reported		Restatement Adjustments		As Restated
Assets
Current assets:
Cash and cash equivalents	$	8,476	$	—	$	8,476
Restricted cash	2,582		—		2,582
Accounts receivable, net	40,376		(14,133)		26,243
Due from related parties	3,029		—		3,029
Inventories	36,251		(3,853)		32,398
Deferred costs	1,992		(35)		1,957
Prepaid expenses	19,716		—		19,716
Other current assets	19,061		(9,813)		9,248
Total current assets	131,483		(27,834)		103,649
Property and equipment, net	10,805		—		10,805
Deferred tax assets, net	22,066		(18,887)		3,179
Goodwill	4,386		—		4,386
Intangible assets, net	28,636		—		28,636
Deferred costs, net of current	12,097		(313)		11,784
Other long-term assets	36,588		9,705		46,293
Total assets	$	246,061	$	(37,329)	$	208,732

Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses	$	48,190	$	4,477	$	52,667
Deferred revenue	7,544		8,091		15,635
Interest payable	287		—		287
Income taxes payable	14,990		(6,997)		7,993
Total current liabilities	71,011		5,571		76,582
Deferred revenue, net of current	3,437		—		3,437
Long-term debt	61,600		—		61,600
Warrant liabilities	3,192		—		3,192
Other long-term liabilities	10,947		408		11,355
Total liabilities	150,187		5,979		156,166
Stockholders’ equity
Common stock, $0.00005 par value; 96,491,418 shares issued and outstanding as of June 30, 2022	6		—		6
Additional paid-in capital	663,599		—		663,599
Accumulated other comprehensive (loss) income	(2,036)		1,004		(1,032)
Accumulated deficit	(390,975)		(44,312)		(435,287)
Less: Treasury stock	(174,720)		—		(174,720)
Total stockholders' equity	95,874		(43,308)		52,566
Total liabilities and stockholders' equity	$	246,061	$	(37,329)	$	208,732

CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)

(in thousands, except share amounts and share data)


	September 30, 2022
	As Previously Reported		Restatement Adjustments		As Restated
Assets
Current assets:
Cash and cash equivalents	$	16,676	$	—	$	16,676
Restricted cash	66		—		66
Accounts receivable, net	33,937		(13,916)		20,021
Due from related parties	1,058		—		1,058
Inventories	53,745		(10,831)		42,914
Deferred costs	1,861		(35)		1,826
Prepaid expenses	9,620		—		9,620
Other current assets	18,348		(9,813)		8,535
Total current assets	135,311		(34,595)		100,716
Property and equipment, net	10,546		—		10,546
Deferred tax assets, net	10,145		(7,428)		2,717
Goodwill	4,405		(272)		4,133
Intangible assets, net	28,342		—		28,342
Deferred costs, net of current	10,946		(299)		10,647
Other long-term assets	26,330		10,002		36,332
Total assets	$	226,025	$	(32,592)	$	193,433

Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses	$	60,189	$	(4,258)	$	55,931
Deferred revenue	6,828		9,787		16,615
Interest payable	382		—		382
Current portion of long-term debt	37		—		37
Income taxes payable	16,712		(9,535)		7,177
Total current liabilities	84,148		(4,006)		80,142
Deferred revenue, net of current	1,908		—		1,908
Long-term debt	88,351		—		88,351
Other long-term liabilities	9,191		362		9,553
Total liabilities	183,598		(3,644)		179,954
Stockholders’ equity
Common stock, $0.00005 par value, 97,315,803 shares issued and outstanding as of September 30, 2022	6		—		6
Additional paid-in capital	672,898		—		672,898
Accumulated other comprehensive (loss) income	(4,772)		1,646		(3,126)
Accumulated deficit	(450,985)		(30,594)		(481,579)
Less: Treasury stock	(174,720)		—		(174,720)
Total stockholders' equity	42,427		(28,948)		13,479
Total liabilities and stockholders' equity	$	226,025	$	(32,592)	$	193,433

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

(in thousands, except share amounts and share data)


	Three Months Ended March 31, 2022
	As Previously Reported		Restatement Adjustments		As Restated
Revenues:
Franchise	$	19,860	$	—	$	19,860
Equipment and merchandise	30,148		(20,620)		9,528
Total revenues	50,008		(20,620)		29,388
Costs and operating expenses:
Cost of franchise revenue	1,231		76		1,307
Cost of equipment and merchandise	10,943		(3,830)		7,113
Selling, general and administrative expenses	32,090		26		32,116
Total costs and operating expenses	44,264		(3,728)		40,536
Loss from operations	5,744		(16,892)		(11,148)
Loss on derivative liabilities, net	—		—		—
Interest expense, net	126		—		126
Other expense, net	570		52		622
Income (loss) before income taxes	5,048		(16,944)		(11,896)
Provision for income taxes	2,536		(118)		2,418
Net income (loss)	$	2,512	$	(16,826)	$	(14,314)

Other comprehensive income (loss)
Foreign currency translation adjustment, net of tax	906		110		1,016
Comprehensive income (loss)	$	3,418	$	(16,716)	$	(13,298)

Per share data:
Earnings (loss) per share
Basic and diluted	$	0.03	$	(0.18)	$	(0.15)


Shares used in computing earnings per share
Basic	95,709,671		—		95,709,671
Diluted	96,687,283		(977,612)		95,709,671

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

(in thousands, except share amounts and share data)


	Three Months Ended June 30, 2022
	As Previously Reported		Restatement Adjustments		As Restated
Revenues:
Franchise	$	19,109	$	—	$	19,109
Equipment and merchandise	10,924		(2,332)		8,592
Total revenues	30,033		(2,332)		27,701
Costs and operating expenses:
Cost of franchise revenue	1,690		53		1,743
Cost of equipment and merchandise	8,679		413		9,092
Selling, general and administrative expenses	52,828		(902)		51,926
Total costs and operating expenses	63,197		(436)		62,761
Loss from operations	(33,164)		(1,896)		(35,060)
Change in fair value - warrant liabilities	(1,265)		—		(1,265)
Interest expense, net	696		—		696
Other income, net	(1,184)		(107)		(1,291)
Loss before income taxes	(31,411)		(1,789)		(33,200)
Provision for income taxes	3,515		14,947		18,462
Net loss	$	(34,926)	$	(16,736)	$	(51,662)

Other comprehensive loss
Foreign currency translation adjustment, net of tax	(3,545)		346		(3,199)
Comprehensive loss	$	(38,471)	$	(16,390)	$	(54,861)

Per share data:
Net loss per share
Basic and diluted	$	(0.36)	$	(0.18)	$	(0.54)

Shares used in computing net loss per share
Basic and diluted	95,917,556		—		95,917,556

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

(in thousands, except share amounts and share data)


	Three Months Ended September 30, 2022
	As Previously Reported		Restatement Adjustments		As Restated
Revenues:
Franchise	$	18,565	$	77	$	18,642
Equipment and merchandise	10,762		(1,490)		9,272
Total revenues	29,327		(1,413)		27,914
Costs and operating expenses:
Cost of franchise revenue	1,469		64		1,533
Cost of equipment and merchandise	7,950		(737)		7,213
Selling, general and administrative expenses	53,913		(305)		53,608
Total costs and operating expenses	63,332		(978)		62,354
Loss from operations	(34,005)		(435)		(34,440)
Change in fair value - warrant liabilities	(3,192)		—		(3,192)
Interest expense, net	12,620		—		12,620
Other expense (income), net	2,567		(155)		2,412
Loss before income taxes	(46,000)		(280)		(46,280)
Provision for income taxes	14,010		(13,998)		12
Net loss	$	(60,010)	$	13,718	$	(46,292)

Other comprehensive loss
Unrealized loss on equipment, net of tax	—		—		—
Foreign currency translation adjustment, net of tax	(2,736)		642		(2,094)
Comprehensive loss	$	(62,746)	$	14,360	$	(48,386)

Per share data:
Net loss per share
Basic and diluted	$	(0.62)	$	0.14	$	(0.48)

Shares used in computing net loss per share
Basic and diluted	97,100,453		—		97,100,453

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

(in thousands, except share amounts and share data)


	Six Months Ended June 30, 2022
	As Previously Reported		Restatement Adjustments		As Restated
Revenues:
Franchise	$	38,969	$	—	$	38,969
Equipment and merchandise	41,072		(22,952)		18,120
Total revenues	80,041		(22,952)		57,089
Costs and operating expenses:
Cost of franchise revenue	2,921		129		3,050
Cost of equipment and merchandise	19,622		(3,417)		16,205
Selling, general and administrative expenses	84,918		(876)		84,042
Total costs and operating expenses	107,461		(4,164)		103,297
Loss from operations	(27,420)		(18,788)		(46,208)
Change in fair value - warrant liabilities	(1,265)		—		(1,265)
Interest expense, net	822		—		822
Other income, net	(614)		(55)		(669)
Loss before income taxes	(26,363)		(18,733)		(45,096)
Provision for income taxes	6,051		14,829		20,880
Net loss	$	(32,414)	$	(33,562)	$	(65,976)

Other comprehensive loss
Foreign currency translation adjustment, net of tax	(2,639)		456		(2,183)
Comprehensive loss	$	(35,053)	$

F45 Training Holdings Inc. 10-K