QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer |
☒ | Smaller reporting company | ||||
Emerging growth company |
Page |
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2 |
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Item 1. |
Financial Statements (Unaudited) |
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Item 2. |
18 |
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Item 3. |
25 |
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Item 4. |
25 |
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27 |
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Item 1. |
27 |
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Item 1A. |
27 |
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Item 2. |
27 |
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Item 6. |
27 |
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28 |
(in thousands, except for par value and share amounts) |
March 31, 2021 ( unaudited ) |
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December 31, 2020 |
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ASSETS |
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CURRENT ASSETS |
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Cash |
$ |
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$ |
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Cash - restricted |
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Accounts receivable, net |
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Inventory |
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Deferred income taxes |
— |
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Asset held for sale |
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Other current assets |
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TOTAL CURRENT ASSETS |
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PROPERTY & EQUIPMENT, net |
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DUE FROM RELATED COMPANIES |
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GOODWILL |
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INTANGIBLE ASSETS |
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OTHER ASSETS |
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TOTAL ASSETS |
$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES |
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Accounts payable - trade |
$ |
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$ |
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Accrued expense |
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Other deposit |
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Other liabilities |
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Deferred initial franchise fees, current portion |
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Notes payable - current |
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Revolving line of credit |
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TOTAL CURRENT LIABILITIES |
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NON-CURRENT LIABILITIES |
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Deferred initial franchise fees, net of current portion |
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Warrant liability |
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Notes Payable |
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Deferred rent |
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TOTAL LIABILITIES |
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COMMITMENTS AND CONTINGENCIES - Note 10 |
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Stockholders’ equity |
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Common stock, $ and shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively |
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Additional paid-in capital |
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Accumulated deficit |
( |
) |
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( |
) | |||
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TOTAL STOCKHOLDERS’ EQUITY |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
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$ |
|||||
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Successor |
Predecessor |
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(in thousands, except for per share data) |
Three Months Ended March 31, 2021 |
Three Months Ended March 31, 2020 |
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REVENUE |
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Restaurant sales |
$ |
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|
$ |
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Royalty and other fees |
|
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Royalty - brand development and co-op |
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Franchise fees |
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TOTAL REVENUE |
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Restaurant level operating expenses: |
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Food, beverage and paper costs |
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Labor and related expenses |
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Other operating expenses |
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Occupancy and related expenses |
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General and administrative expenses |
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Share-based compensation expense |
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— |
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Depreciation and amortization expense |
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Brand development and co-op advertising expense |
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TOTAL OPERATING EXPENSES |
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|
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OPERATING (LOSS) INCOME |
( |
) |
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Other income |
|
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|
|||||||
Loss on change in value of warrant liability |
( |
) |
|
— |
||||||
Interest expense |
( |
) |
|
|
( |
) | ||||
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(Loss) Income before income taxes |
( |
) |
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|
||||||
Income tax expense |
( |
) |
|
|
— |
|||||
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|
|
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|
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Net (Loss) Income |
( |
) |
|
|
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Net Income Attributable to Non-Controlling Interests (predecessor) |
— |
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Net (Loss) I ncome Attributable to common shareholders (successor) and Controlling(predecessor) |
$ |
( |
) |
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$ |
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Weighted average common shares outstanding |
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Basic and Diluted |
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Net loss per common share |
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Basic and Diluted |
$ |
( |
) |
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Predecessor |
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(in thousands) |
Controlling Interest |
Noncontrolling Interest |
Total Members’ Equity |
|||||||||
Balance, December 31, 2019 |
$ | $ | $ | |||||||||
Net Income |
||||||||||||
Contributions |
— | — | ||||||||||
Distributions |
( |
) | — |
( |
) | |||||||
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Balance, March 31, 2020 |
$ | $ | $ |
Successor |
||||||||||||||||||||
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Total |
|||||||||||||||||
($ in thousands) |
Shares |
Amount |
||||||||||||||||||
Balance, December 31, 2020 |
$ | $ | $ |
( |
) | $ | ||||||||||||||
Share-based compensation |
— | — | — | |||||||||||||||||
Shares issued for share-based compensation |
— |
— |
||||||||||||||||||
Exchange of UPO units |
— | — | ||||||||||||||||||
Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
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Balance, March 31, 2021 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
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Successor |
Predecessor |
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(in thousands) |
Three Months Ended March 31, 2021 |
Three Months Ended March 31, 2020 |
||||||||
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES |
||||||||||
Net (loss) income |
$ |
( |
) |
$ |
||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities |
||||||||||
Provision for bad debts |
— |
|||||||||
Depreciation and amortization |
||||||||||
Gain on PPP loan forgiveness |
( |
) |
— |
|||||||
Deferred income taxes |
— |
|||||||||
Share-based compensation |
— |
|||||||||
Forfeited franchise deposits |
( |
) |
( |
) | ||||||
Change in fair value of warrant liability |
— |
|||||||||
Changes in operating assets and liabilities, net of acquisitions |
||||||||||
Accounts receivable |
( |
) |
||||||||
Inventory |
||||||||||
Other assets |
||||||||||
Accounts payable - trade |
||||||||||
Accrued expenses and other liabilities |
( |
) |
( |
) | ||||||
Deferred franchise fees |
||||||||||
Deferred Rent |
||||||||||
NET CASH PROVIDED BY OPERATING |
$ |
$ |
||||||||
NET CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||||
Purchase of property and equipment |
( |
) |
( |
) | ||||||
Trademark cost |
( |
) |
— |
|||||||
Advances to related companies |
( |
) |
( |
) | ||||||
Repayments from related companies |
— |
|||||||||
Deposit on sale |
— |
|||||||||
NET CASH USED IN INVESTING ACTIVITIES |
$ |
( |
) |
$ |
( |
) | ||||
NET CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||||
Payments on revolving line of credit |
( |
) |
( |
) | ||||||
Proceeds on revolving line of credit |
— |
|||||||||
Payments on notes payable |
( |
) |
— |
|||||||
Members’ distributions |
— |
( |
) | |||||||
NET CASH (USED IN) PROVIDED BY ACTIVITIES |
$ |
( |
) |
$ |
||||||
NET (DECREASE) INCREASE IN CASH |
( |
) |
||||||||
CASH, beginning of period |
||||||||||
CASH, end of period |
$ |
$ |
||||||||
Three Months Ended March 31, 2021 |
Year Ended December 31, 2020 |
|||||||
Franchised stores, beginning of the period |
||||||||
Stores opened during the period |
||||||||
Stores transferred/sold to the Company |
— |
( |
) | |||||
Stores closed during the period |
( |
) | ( |
) | ||||
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|
|||||
Franchised stores, end of the period |
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|
Three Months Ended March 31, 2021 |
Year Ended December 31, 2020 |
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Corporate owned stores, beginning of the period |
||||||||
Stores opened during the period |
||||||||
Stores transferred/sold to the Company |
— |
|||||||
Stores closed during the period |
— |
— |
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|
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Corporate owned stores, end of the period |
||||||||
|
|
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|
Three Months Ended March 31, 2021 |
||||
Net loss attributable to common shareholders |
$ | ( |
) | |
Weighted average common shares outstanding, basic and dilu te d |
||||
Basic and diluted net loss per common share |
$ | ( |
) |
March 31, 2021 |
December 31, 2020 |
|||||||
PPP amount held in escrow |
$ |
$ |
||||||
Cash proceeds from Business Combination held back for working capital adjustment |
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|
|
|
|
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Total Restricted Cash |
$ |
$ |
||||||
|
|
|
|
March 31, 2021 |
December 31 , 2020 |
|||||||
Leasehold improvements |
$ |
$ |
||||||
Machinery & equipment |
||||||||
Computer equipment |
||||||||
Furniture & fixtures |
||||||||
Vehicles |
||||||||
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|
|||||
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|
|
|
|||||
Less: Accumulated depreciation |
( |
) |
( |
) | ||||
|
|
|
|
|||||
Property and equipment – net |
$ |
$ |
||||||
|
|
|
|
March 31, 2021 |
December 31, 2020 |
|||||||||||||||||||||||
Intangible Assets (in thousands) |
Amount |
Accumulated Amortization |
Net Value |
Amount |
Accumulated Amortization |
Net Value |
||||||||||||||||||
Franchise agreements |
$ | $ |
$ | $ | $ | $ | ||||||||||||||||||
Trade names / trademarks |
||||||||||||||||||||||||
Liquor license |
— | — | ||||||||||||||||||||||
Reef Kitchens license agreement |
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VegeFi product |
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$ | $ | $ | $ | $ | $ | |||||||||||||||||||
|
|
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|
( in thousands ) |
||||
Remainder of 2021 |
$ |
|||
2022 |
||||
2023 |
||||
2024 |
||||
2025 |
||||
2026 and thereafter |
||||
Total |
$ |
|||
(in thousands) |
||||
Goodwill as of December 31, 2020 |
$ | |||
Adjustments |
||||
Goodwill as of March 31, 2021 |
$ | |||
March 31, 2021 |
December 31, 2020 |
|||||||
Lease Acquisition Costs, net of accumulated amortization |
$ |
$ |
||||||
Deposits and other non-current assets |
||||||||
Other assets |
$ |
$ |
||||||
Remainder of 2021 |
$ | |||
2022 |
||||
2023 |
||||
2024 |
||||
2025 |
||||
2026 and thereafter |
March 31, 2021 |
December 31, 2020 |
|||||||
Paycheck Protection Program (“PPP”) |
$ | $ | ||||||
Installment note payable |
||||||||
Other notes payable No recourse to the general credit of the Company |
||||||||
|
|
|
|
|||||
Total notes payable |
||||||||
|
|
|
|
|||||
Less: current portion |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total notes payable - long |
$ | $ | ||||||
|
|
|
|
• |
• |
(in thousands) |
Level 3 (Black Scholes) |
|||
Liability at December 31, 2020 |
$ | |||
Loss during the three months ended March 31, 2021 |
||||
Liability at March 31, 2021 |
$ | |||
2021 |
2020 |
|||||||
Risk-free interest rate |
% | % | ||||||
Expected life in years |
||||||||
Expected volatility |
% | % | ||||||
Expected dividend yield |
% | % |
Number of Restricted Stock Units |
Weighted Average Grant Date Fair Value |
|||||||
Non-vested at December 31, 2020 |
$ | |||||||
Granted |
||||||||
Vested |
— |
— |
||||||
Forfeited |
— | — | ||||||
|
|
|
|
|||||
Non-vested at March 31, 2021 |
$ | |||||||
|
|
|
|
2021 |
2020 |
|||||||
Risk-free interest rate |
% | % | ||||||
Expected life in years |
||||||||
Expected volatility |
% | % | ||||||
Expected dividend yield (a) |
% | % |
(a) | The Monte Carlo method assumes a reinvestment of dividends. |
Performance Condition |
Service Condition |
Market Condition |
||||||||||||||||||||||
Shares |
Weighted Average Grant Date Fair Value |
Shares |
Weighted Average Grant Date Fair Value |
Shares |
Weighted Average Grant Date Fair Value |
|||||||||||||||||||
Non-vested at December 31, 2020 |
$ | $ | $ | |||||||||||||||||||||
Granted |
||||||||||||||||||||||||
Vested |
— | — | — |
— | — |
— | ||||||||||||||||||
Forfeited |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Non-vested at March 31, 2021 |
$ | $ | $ | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands except for percentage data) |
Three Months Ended March 31, 2021 |
|||
Systemwide Restaurant Sales |
$ | 39,820 | ||
Systemwide Restaurant Sales Growth |
19 | % | ||
Systemwide Restaurant Same Store Sales Growth |
4 | % | ||
Corporate Restaurant Sales |
$ | 8,143 | ||
Corporate Restaurant Sales Growth |
41 | % | ||
Corporate Restaurant Same Store Sales Growth |
11 | % | ||
Digital Channel Systemwide Sales |
$ | 13,014 | ||
Digital Channel Sales Growth |
98 | % | ||
Digital Channel Orders |
519 | |||
Digital Channel Orders % of Systemwide Sales |
33 | % |
Successor |
Predecessor |
|||||||||
(in thousands) |
Three Months Ended March 31, 2021 |
Three Months Ended March 31, 2020 |
||||||||
REVENUE |
||||||||||
Restaurant sales |
$ |
8,506 |
$ |
6,123 |
||||||
Royalty and other fees |
1,910 |
1,696 |
||||||||
Royalty - brand development and co-op |
511 |
417 |
||||||||
Franchise fees |
108 |
101 |
||||||||
|
|
|
|
|||||||
TOTAL REVENUE |
11,035 |
8,337 |
||||||||
Restaurant level operating expenses: |
||||||||||
Food, beverage and paper costs |
2,432 |
1,844 |
||||||||
Labor and related expenses |
2,290 |
1,895 |
||||||||
Other operating expenses |
1,841 |
981 |
||||||||
Occupancy and related expenses |
792 |
569 |
||||||||
General and administrative expenses |
2,985 |
1,586 |
||||||||
Share-based compensation expense |
522 |
— |
||||||||
Depreciation and amortization expense |
2,108 |
244 |
||||||||
Brand development and co-op advertising expense |
722 |
470 |
||||||||
|
|
|
|
|||||||
TOTAL OPERATING EXPENSES |
13,692 |
7,589 |
||||||||
|
|
|
|
|||||||
OPERATING (LOSS) INCOME |
(2,657 |
) |
748 |
|||||||
Other income |
114 |
59 |
||||||||
Loss on change in value of warrant liability |
(4,946 |
) |
— |
|||||||
Interest expense |
(8 |
) |
(30 |
) | ||||||
|
|
|
|
|||||||
(Loss) Income before income taxes |
(7,497 |
) |
777 |
|||||||
Income tax expense |
(713 |
) |
— |
|||||||
|
|
|
|
|||||||
Net (Loss) Income |
(8,210 |
) |
777 |
|||||||
Net Income Attributable to Non-Controlling Interests (predecessor) |
— |
5 |
||||||||
|
|
|
|
|||||||
Net (Loss) Income Attributable to common shareholders (successor) and Controlling Interests (predecessor) |
$ |
(8,210 |
) |
$ |
772 |
|||||
|
|
|
|
Successor |
Predecessor |
|||||||||||
Three Months Ended March 31, 2021 |
Three Months Ended March 31, 2020 |
|||||||||||
Net cash provided by (used in) |
||||||||||||
Operating activities |
$ | 1,026 | $ | 1,616 | ||||||||
Investing activities |
(1,609 | ) | (1,141 | ) | ||||||||
Financing activities |
(3,022 | ) | 318 | |||||||||
Net (decrease) increase in cash |
$ | (3,605 | ) | $ | 793 |
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. |
CONTROLS AND PROCEDURES |
• | we hired a new Chief Financial Officer effective May 3, 2021; |
• | we are actively recruiting additional personnel to address the segregation of duties issues and the application of accounting standards in our financial closing and reporting process; |
• | we have engaged external advisors to provide financial accounting and reporting assistance; and |
• | we plan to engage external advisors to evaluate and document the design and operating effectiveness of our internal control over financial reporting and assist with the remediation and implementation of our internal control function. |
ITEM 1. |
LEGAL PROCEEDINGS |
ITEM 1A. |
RISK FACTORS |
ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ITEM 6. |
EXHIBITS |
Exhibit No. | Description | |
10.1+ | Employment Agreement between the Company and Michael Rabinovitch (Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed by the registrant on March 3, 2021). | |
10.2+ | Employment Agreement between the Company and Ross Goldstein (Incorporated by reference to Exhibit 10.15 to the registrant’s Annual Report on Form 10-K filed by the registrant on April 29, 2021). | |
31.1* | Certifications required by Section 302(a) of the Sarbanes-Oxley Act of 2002. | |
31.2* | Certifications required by Section 302(a) of the Sarbanes-Oxley Act of 2002. | |
32.1** | Certifications required by Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2** | Certifications required by Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the | |
Inline XBRL document. | ||
101.SCH | Inline XBRL Taxonomy Extension Schema | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | |
104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2021 has been formatted in Inline XBRL. | |
* | Filed herewith. | |
** | Furnished herewith. | |
+ | Indicates a management contract or a compensatory plan or agreement. |
BURGERFI INTERNATIONAL, INC. | ||||||
Date: May 19, 2021 | ||||||
By: | /s/ JULIO RAMIREZ | |||||
Julio Ramirez | ||||||
Chief Executive Officer | ||||||
(Principal Executive Officer) | ||||||
By: | /s/ MICHAEL RABINOVITCH | |||||
Michael Rabinovitch | ||||||
Chief Financial Officer | ||||||
(Principal Financial and Accounting Officer) |