F45 Training Delays Filing Its 2022 Annual Report

F45 Training, Austin, Texas, will delay reporting its 2022 annual report, the company shared on March 17 on an extension notification form with the Securities and Exchange Commission.

F45 Training determined it wasn’t able to file its annual report, a Form 10-K (which also includes fourth quarter 2022 information), for the year as required without “unreasonable effort or expense.”

The company and its independent registered public accounting firm need more time to “complete certain items with respect to its financial statement preparation and review processes, including management’s assessment of the effectiveness of the Company’s internal controls over financial reporting for the period covered by the Annual Report,” according to the form.

The company expects to report a material weakness similar to that reported in its 2021 annual report related to the proper design of the company’s “financial closing and reporting processes, and appropriate processes to monitor, review, and record transactions in compliance with generally accepted accounting principles.”

The process to finalize review of the accounting process was hampered by recent leadership changes, in particular, an appointment of a new interim CFO, Bob Madore, in February.  

The filing states that the company expects to reflect changes in results from its 2021 annual report.

The form states: “Based on currently available information, these changes in results of operations will be the result of, among other things, increases in allowances for doubtful accounts and provisions for bad debts and impairment charges associated with certain assets previously acquired by the Company. The Company is unable to provide reasonable estimates regarding the changes in results of operations because the Company and the Company’s independent registered public accounting firm require time to complete certain items with respect to its financial statement preparation and review processes.”

In February, F45 Training received $90 million in new financing in the form of a subordinated debt facility that was provided by a consortium of existing investors led by affiliates of Kennedy Lewis Management LP, which had made an unsolicited bid in September to purchase F45 Training.

At that time, several F45 Training board members resigned, and new independent board members were elected. Gene Davis, who is chairman and CEO of consulting company PIRINATE Consulting Group LLC and who joined the board in November, was appointed chairman of the board. PIRINATE Consulting Group specializes in restructuring and governance issues, liquidation management, merger and acquisition consulting and proxy contests.

Angelo Demasi, Vanessa Douglas, and Lee Wallace left the board and were replaced by Timothy Bernlohr, Lisa Gavales, Steven Scheiwe, and Ray Wallander.

Remaining on the board with Davis are F45 investor, brand ambassador and actor Mark Wahlberg, F45 co-founder Adam Gilchrist, Elizabeth Josefsberg, Michael Raymond, as well as Ben Coates, who has been serving as interim CEO since July 2022. Coates signed an employment agreement on Sept. 20, 2022, to end on Jan. 31, 2023, but on March 7, F45 Training retroactively extended the term of his employment agreement through July 31, 2023.

The employment agreement gives Coates a base salary of $1.5 million per year with $1 million payable in cash and $500,000 paid in the form of a restricted stock units award that vest in 12 equal installments at the end of each calendar month.

F45 has experienced several issues since it went public in July 2021.

On July 26, 2022, Gilchrist stepped down as CEO, and the company laid off 110 employees, about 45 percent of its corporate staff, as part of a restructuring. It also downgraded its 2022 guidance, saying that two financing facilities that would have offered a $250 credit line for franchisees to expand would not be available, which would mean the company would open 60 percent fewer new locations than promised in its guidance two months prior.

The next day, the price of shares of F45 Training stock fell 60 percent, and the shares, which at the time of its initial public offering were trading around $16, have not traded above $4 since then.

As a result, several law firms announced they would bring class action lawsuits against F45 Training on behalf of shareholders.

F45 Training trades on the New York Stock Exchanges (NYSE) under FXLV. Shares closed on March 17 at $1.52.