What changed in this filing

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Item 9A. Controls and Procedures

2025-03-11 compared with 2024-03-05 · 37 added, 54 removed, 145 unchanged (39% of the section changed)

10 unchanged sentences

Management has adopted the framework in “Internal Control-Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 based on the COSO framework, management has determined that the Company’s internal control over financial reporting as of December 31, 2023 was not effective.

We identified material weaknesses in our internal control over financial reporting.

The material weaknesses we identified were as follows:

Based on Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 29, 2024 based on the COSO framework, Management has determined that the Company’s internal control over financial reporting as of December 29, 2024 was not effective due to the material weaknesses discussed below.

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 a company’s annual or interim financial statements may not be prevented or detected on a timely basis.

We did not design and maintain an effective internal control environment commensurate with the financial reporting requirements of a public company.

2 unchanged sentences

As a result, we did not perform an effective risk assessment nor did we design and maintain internal controls in response to the risks of material misstatement.

These material weaknesses contributed to the following material weaknesses:

• We did not design and maintain effective controls over the period-end financial reporting process, including controls over the preparation and review of account reconciliations and journal entries, and the appropriate classification and presentation of accounts and disclosures in the consolidated financial statements.

This material weakness resulted in adjustments to accruals and within the statement of cash flows in our fiscal 2018 consolidated financial statements, which were recorded prior to the issuance of our fiscal 2018 consolidated financial statements.

• We did not design and maintain effective controls over the accounting for income taxes over the recording of deferred income taxes and the assessment of the realization of deferred tax assets.

This material weakness resulted in adjustments to the income tax benefit, deferred taxes, goodwill, and liabilities in our fiscal 2018 consolidated financial statements, which were recorded prior to issuance.

This material weakness also resulted in immaterial adjustments to the income tax benefit and deferred taxes and related disclosures in the fiscal 2017 and 2019

consolidated financial statements, which were corrected in the fiscal 2019 and 2020 consolidated financial statements, respectively.

This material weakness also resulted in adjustments to the income tax expense and deferred taxes in our fiscal 2021 consolidated financial statements, which were recorded prior to issuance and immaterial adjustments which were recorded in our fiscal 2023 consolidated financial statements.

These material weaknesses contributed to additional material weaknesses as we did not design and maintain effective controls over the period-end financial reporting process, including controls over the preparation and review of account reconciliations and journal entries, and the appropriate classification and presentation of accounts and disclosures in the consolidated financial statements.

These material weaknesses resulted in adjustments to accruals and within the statement of cash flows in our fiscal 2018 consolidated financial statements, which were recorded prior to the issuance of our fiscal 2018 consolidated financial statements;

adjustments to the income tax benefit, deferred taxes, goodwill, and liabilities in our fiscal 2018 consolidated financial statements, which were recorded prior to issuance and in immaterial adjustments to the income tax benefit and deferred taxes and related disclosures in the fiscal 2017 and 2019 consolidated financial statements, which were corrected in the fiscal 2019 and 2020 consolidated financial statements, respectively.

Additionally, each of the aforementioned material weaknesses could result in a misstatement of the consolidated financial statements that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

Our independent registered public accounting firm will not be required to opine on the effectiveness of our internal control over financial reporting until we are no longer an “emerging growth company” as defined in the JOBS Act.

Remediation Efforts

Remediation Efforts and Status of Remaining Material Weaknesses

We continue to implement measures designed to improve the Company’s internal control over financial reporting to address and remediate the previously identified material weaknesses.

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• Augmented financial reporting capabilities by staffing professionals with knowledge and experience in income tax, internal audit, information technology, and legal.

• Established various policies, including a formal delegation of authority policy defining the protocols for reviewing and authorizing commitments, contracts, invoices, and transactions as well as a comprehensive set of information technology policies to govern the Company’s information technology practices.

• Established various policies, including a formal delegation of authority policy defining the protocols for reviewing and authorizing commitments, contracts, invoices, and transactions as well as an account reconciliation policy that provides the framework to ensure the performance of consistent procedures in reconciling general ledger balances to supporting documentation.

• Formalized certain roles and reviewed responsibilities, including ensuring appropriate segregation of duties.

• Designed and implemented period-end financial reporting controls, such as controls over the preparation and review of account reconciliations, financial statement disclosures, and the consolidated financial statements, including controls around classification of cash flows and disclosure of noncash items, as well as establishing a formal management Disclosure Committee to review the draft financial statements and disclosures prior to release, including a sub-certification process from various functional groups.

• Enhanced access restrictions for certain users over general ledger journal entries and designed new processes to further segregate journal entry creation from journal entry approval authority.

• Designed and implemented controls over the accounting for income taxes to ensure the appropriate recording of deferred income taxes, income taxes and related disclosures.

While the material weaknesses disclosed have not yet been remediated as of December 31, 2023, management is devoting substantial resources to the ongoing remediation efforts.

• Enhanced access restrictions for certain users over general ledger journal entries and designed new processes to further automate journal entries and segregate journal entry creation from journal entry approval authority.

While the material weaknesses have not been remediated as of December 29, 2024, Management is devoting substantial resources to the ongoing remediation efforts.

As we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address control deficiencies, or we may modify certain of the remediation measures described above.

The material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and Management has concluded, through testing, that these controls are designed and operating effectively.

Remediation of Prior Material Weakness in Internal Control Over Financial Reporting

As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 25, 2022, the following control deficiencies constituted a material weakness in our internal control over financial reporting:

• We did not design and maintain effective controls over information technology general controls for information systems and applications that are relevant to the preparation of the consolidated financial statements.

Specifically, we did not design and maintain:

sufficient user access controls to ensure appropriate segregation of duties and adequately restrict user and privileged access to financial applications, programs and data to appropriate Company personnel;

program change management controls to ensure that information technology program and data changes affecting financial information technology applications and underlying accounting records are identified, tested, authorized and implemented appropriately;

computer operations controls to ensure that critical batch jobs are monitored, privileges are appropriately granted, and data backups are authorized and monitored;

and testing and approval controls for program development to ensure that new software development is aligned with business and information technology requirements.

The deficiencies, when aggregated, could impact our ability to maintain effective segregation of duties, as well as the effectiveness of information technology-dependent controls (such as

automated controls that address the risk of material misstatement to one or more assertions, along with the information technology controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

Therefore, we concluded the information technology deficiencies resulted in a material weakness.

However, these information technology deficiencies did not result in any misstatements to the consolidated financial statements.

The Company has designed and implemented the following measures to remediate the previously identified material weakness related to information technology general controls:

• Hired a seasoned information technology leader with public company experience to enhance information technology services and solutions.

• Designed and implemented user access controls to ensure appropriate segregation of duties and adequately restrict user and privileged access to financial applications, programs and data to appropriate Company personnel.

• Designed and implemented change management controls to ensure that information technology program and data changes affecting financial information technology applications and underlying accounting records are identified, tested, authorized, and implemented appropriately.

• Designed and implemented testing and approval controls for program development to ensure that new software is aligned with business and information technology requirements.

• Designed and implemented computer operation controls to ensure critical jobs are monitored and privileges are appropriately granted.

Implemented a new backup and recovery platform to monitor data backups for all relevant systems in accordance with the applicable policy as well as manage a test recovery process.

As of December 31, 2023, the remediation measures described above have been completed, and the newly designed and enhanced controls have been implemented and operated for a sufficient time to demonstrate the material weakness has been remediated.

Based on the testing performed by management, the controls have been determined to be appropriately designed and operating effectively as of December 31, 2023 and as such, the material weakness related to information technology general controls for information systems and applications that are relevant to the preparation of the consolidated financial statements has been remediated.

Remediation of Previously Identified Material Weakness

As previously disclosed in our December 31, 2023 Annual Report on Form 10-K, Management identified a material weakness in accounting for income taxes related to the recording of deferred income taxes and the assessment of the realization of deferred tax assets.

The Company completed the following measures to remediate the previously identified material weakness related to accounting for income taxes:

• Staffed our internal tax department with the appropriate tax technical and public company expertise in accounting for income taxes.

• Designed and implemented key controls, and enhanced the design of existing controls, for the interim and year-end income tax provision processes.

• Increased the frequency of detailed income tax provision reviews from annually to quarterly.

• Enhanced the process for sourcing and validating data used in the preparation of the provision for income taxes to ensure completeness and accuracy.

• Implemented an interactive work management and collaboration tool that facilitates Management’s provision review steps and maintains the appropriate evidence of review.

As a result of these measures and based on testing of the design and operating effectiveness of the newly designed and enhanced controls, Management concluded the controls have been in place and have operated effectively for a sufficient period of time to demonstrate the material weakness related to accounting for income taxes has been remediated as of December 29, 2024.

Changes in Internal Control over Financial Reporting

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Other Information

Insider Adoption or Termination of Trading Arrangements

During the fiscal quarter ended December 29, 2024, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

4 unchanged sentences

The remaining information required by this item is incorporated herein by reference to the sections entitled “Proposal 1:

Director Election Proposal,” “Information Regarding the board of directors and Corporate Governance,” and “Executive Officers” in our definitive Proxy Statement for the Annual Meeting of Stockholders expected to be held on May 22, 2024 (the “Proxy Statement”).

Director Election Proposal,” “Information Regarding the board of directors and Corporate Governance,” “Executive Officers,” and “Insider Trading Policies and Procedures” in our definitive Proxy Statement for the Annual Meeting of Stockholders expected to be held on May 21, 2025 (the “Proxy Statement”).

We will provide disclosure of delinquent Section 16(a) reports, if any, in our Proxy Statement, and such disclosure, if any, is incorporated herein by reference.

Executive Compensation

The information required by this item is incorporated by reference to the sections entitled “Executive Compensation,” “Outstanding Equity Awards at Fiscal Year-End,” and “Director Compensation” in the Proxy Statement.

The information required by this item is incorporated by reference to the sections entitled “Executive Compensation,” “Outstanding Equity Awards at Fiscal Year-End,” “Director Compensation,” and “Compensation Committee Interlocks and Insider Participation,” in the Proxy Statement.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

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October 6, 2021 Form 8-K, Exhibit 3.1

3.2 Certificate of Amendment of the Amended and Restated Certificate of Incorporation of First Watch Restaurant Group, Inc.

Filed herewith

3.3 Amended and Restated Bylaws of First Watch Restaurant Group, Inc.

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January 8, 2024, Form 8-K, Exhibit 10.1

10.2(a) Credit Agreement, dated as of August 21, 2017, between FWR Holding Corporation as Borrower, the lenders party thereto, and Golub Capital Markets LLC, as administrative agent

September 7, 2021, Form S-1, Exhibit 10.1(a)

First Amendment to Credit Agreement, dated as of February 28, 2019, between FWR Holding Corporation as Borrower, the lenders party thereto, and Golub Capital Markets LLC, as administrative agent

September 7, 2021, Form S-1, Exhibit 10.1(b)

10.2(c) Second Amendment to Credit Agreement, dated as of December 20, 2019, between FWR Holding Corporation as Borrower, the lenders party thereto, and Golub Capital Markets LLC, as administrative agent

September 7, 2021, Form S-1, Exhibit 10.1(c)

10.2(d) Third Amendment to Credit Agreement, dated as of April 27, 2020, between FWR Holding Corporation as Borrower, the lenders party thereto, and Golub Capital Markets LLC, as administrative agent

September 7, 2021, Form S-1, Exhibit 10.1(d)

10.2(e) Fourth Amendment to Credit Agreement, dated as of August 14, 2020, between FWR Holding Corporation as Borrower, the lenders party thereto, and Golub Capital Markets LLC, as Administrative Agent

September 7, 2021, Form S-1, Exhibit 10.1(e)

10.2* Employment Agreement, dated March 9, 2022, by and between First Watch Restaurants, Inc.

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10.10* Form of 2024 Restricted Stock Unit Award Agreement

Filed herewith

March 5, 2024, Form 10-K, Exhibit 10.12

10.11* Form of 2024 Restricted Stock Unit Award Agreement (Special Recognition Grant)

Filed herewith

March 5, 2024, Form 10-K, Exhibit 10.13

10.12* Form of Director and Officer Indemnification Agreement

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January 8, 2024, Form 8-K, Exhibit 2.1

10.15*** Asset Purchase Agreement dated as of November 8, 2024, by and among Good Morning Carolinas, LLC, its owners, and First Watch Restaurants, Inc.

November 12, 2024, Form 8-K, Exhibit 2.1

10.16* Executive Severance Plan

Filed herewith

19.1 Insider Trading and Regulation FD Policy

Filed herewith

21.1 List of subsidiaries

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97.1 Incentive-Based Compensation Recovery Policy

Filed herewith

March 5, 2024, Form 10-K, Exhibit 97.1

101 The financial information from First Watch Restaurant Group, Inc.

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Ralph Alvarez

/s/ Julie M.B.

Bradley Director March 5, 2024

/s/ Irene Chang Britt Director March 11, 2025

Irene Chang Britt

/s/ Michael Fleisher Director March 11, 2025

Michael Fleisher

/s/ Tricia Glynn Director March 11, 2025

/s/ Charles Jemley Director March 11, 2025

Charles Jemley

/s/ William Kussell Director March 11, 2025

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures