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Mark Wahlberg-backed fitness franchise F45 will have to restate its financial accounts dating to the 2021 financial year due to revenue reporting errors that mean losses were significantly higher than reported.
In a filing to the US Securities Exchange Commission (SEC) over the weekend, F45 confirmed that the accounting issues which have prevented it from lodging any financial accounts this year will also trigger material changes to the 2021 financial year accounts and all the financial accounts for 2022.
F45 founder Adam Gilchrist, right, and major shareholder Mark Wahlberg on the floor of the New York Stock Exchange for the company’s IPO in July 2021.Credit: Getty
F45 has referred to the financial reporting periods that are under a cloud as “non-reliance periods”, which stretch from the fourth quarter report for the 2021 financial year to the March quarter financial report for this year.
“The extent of the errors and any resulting adjustments is not yet known as the company’s analysis has not been completed; however, the company expects that its net loss for the non-reliance periods will increase materially as a result of these changes,” F45 said.
F45 reported a loss of $US182.7 million ($274 million) for the 2021 financial year.
“The company is unable at this time to estimate the amount and effect of any required restatements of the financial statements for the non-reliance periods,” it says.
The announcement was made the day after interim chief financial officer Robert Madore departed. He joined F45 in February. Last month Madore announced he would step down in 30 days.
The company, which listed on the New York Stock Exchange in July 2021 at $US16 a share, and dropped below the US50¢ mark last month, is being investigated by US law firms for potential class actions over its disastrous performance.
The financial reporting errors date back to when its Australian co-founder, Adam Gilchrist (not the cricketer), was involved with the business.
Gilchrist stepped down as chief executive in July 2022, just after it nearly collapsed with the company revealing it was at the mercy of its banks for continued financing. This news brought its plans for global domination – which underpinned its share price – to a screeching halt.
Gilchrist was paid more than $US7 million ($10 million) in cash under the terms of his contract for stepping down as CEO. Another 110 employees – about 45 per cent of the company’s workforce – lost their jobs as the company tried to preserve cash and accelerate plans to break even.
Gilchrist left the board in April this year just after the New York Stock Exchange-listed group said it would not be able to file its 2022 annual results due to issues with its auditor.
The group has failed to file any accounts since then.
F45 started with one gym in Australia in 2013. It developed the global franchise on the back of 45-minute functional high-intensity interval and circuit training classes, which attracted Wahlberg as a franchisee and investor in 2019.
“You want to be in there with the energy of people working out with you, alongside you, inspiring you, pushing you and supporting you,” Wahlberg told CNBC just ahead of F45’s market debut in 2021.
After a recent board purge, Wahlberg is one of the few directors who have survived.
F45 said its board and management had begun implementing measures to address what it describes as material weaknesses in its accounting processes and controls.
“Management continues to assess the effect of any restatements on the company’s internal controls over financial reporting and its disclosure controls and procedures. The company expects to report one or more material weaknesses following the completion of its analysis discussed above,” it said.
F45’s lenders have agreed to waive any conditions relating to the late filing of its financial accounts until August 31. In its accounts lodged for the September quarter last year F45 reported total liabilities of $US183 million.
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