Exhibit 99.3
Unaudited Pro Forma Condensed Combined Financial Statements
On
October 1, 2021, the Company completed the acquisition of Twin Peaks Buyer LLC (“Twin Peaks”) for a total purchase price
of
The
following unaudited pro forma condensed combined balance sheet as of June 27, 2021 gives effect to the Acquisitions as if they had occurred
on June 27, 2021, and the following unaudited pro forma condensed combined statements of operations for the twenty-six weeks ended June
27, 2021 and for the year ended December 27, 2021 give effect to the Acquisitions as if
The following Pro Forma Financial Statements do not reflect the financial condition at the date or results of operations of the Company for the periods indicated. The assumptions used and pro forma adjustments derived from such assumptions are based on currently available information, and in many cases are based on estimates and preliminary information. The assumptions underlying the pro forma adjustments are described in the accompany notes to the unaudited pro forma combined financial statements. However, the Pro Forma Financial Statements may not be indicative of our future performance and do not necessarily reflect what our financial condition and results of operations would have been had the acquisition to which the pro forma adjustments relate occurred on the dates indicated above.
Unaudited Pro Forma Combined Balance Sheet
As of June 27, 2021
(in thousands)
| Historical Results | Historical Results | ||||||||||||||||||||||||||||||||
| Fat Brands, Inc. | GFG | GFG Transaction Accounting Adjustments (Note 5) | Pro Forma | TP | TP Transaction Accounting Adjustments (Note 5) | Pro Forma Combined | |||||||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||||||||||||
| Current assets: | |||||||||||||||||||||||||||||||||
| Cash | $ | 48,124 | $ | 5,874 | $ | (20,851 | ) | (a) | $ | 33,147 | $ | 18,458 | $ | (7,939 | ) | (h) | $ | 43,666 | |||||||||||||||
| Restricted cash | 4,096 | - | 4,605 | (b) | 8,701 | 5,000 | (1,250 | ) | (i) | 12,451 | |||||||||||||||||||||||
| Accounts Receivable | 5,583 | 5,080 | - | 10,663 | 1,684 | - | 12,347 | ||||||||||||||||||||||||||
| Trade and other notes receivable | 217 | - | - | 217 | - | - | 217 | ||||||||||||||||||||||||||
| Inventory | - | 2,002 | - | 2,002 | 1,296 | - | 3,298 | ||||||||||||||||||||||||||
| Other receivables | - | 457 | (457 | ) | (c) | - | - | - | - | ||||||||||||||||||||||||
| Assets classified as held for sale | 7,735 | 5,069 | (5,069 | ) | (d) | 7,735 | - | - | 7,735 | ||||||||||||||||||||||||
| Prepaids and other current assets | - | 910 | (910 | ) | (c) | - | 791 | - | 791 | ||||||||||||||||||||||||
| Other current assets | 2,486 | - | 1,367 | (c) | 3,853 | - | - | 3,853 | |||||||||||||||||||||||||
| Total current assets | 68,241 | 19,392 | (21,315 | ) | 66,318 | 27,229 | (9,189 | ) | 84,358 | ||||||||||||||||||||||||
| Noncurrent restricted cash | 1,800 | - | - | 1,800 | - | - | 1,800 | ||||||||||||||||||||||||||
| Notes receivable | 1,583 | - | - | 1,583 | - | - | 1,583 | ||||||||||||||||||||||||||
| Other intangible assets, net | 46,950 | 314,170 | (36,470 | ) | (d) | 324,650 | 88,675 | 99,500 | (d) | 512,825 | |||||||||||||||||||||||
| Amortizable intangible assets, net | - | 6,779 | (6,779 | ) | (c) | - | - | - | - | ||||||||||||||||||||||||
| Goodwill | 9,706 | - | 190,590 | (e) | 200,296 | 2,634 | 82,413 | (e) | 285,343 | ||||||||||||||||||||||||
| Deferred income tax asset, net | 33,555 | - | (32,278 | ) | (c) | 1,277 | - | - | 1,277 | ||||||||||||||||||||||||
| Operating lease right of use assets | 4,913 | - | 10,839 | (f) | 15,752 | - | 27,005 | (f) | 42,757 | ||||||||||||||||||||||||
| Fixed assets | - | 5,793 | 2,581 | (d) | 8,374 | 26,660 | 8,548 | (d) | 43,582 | ||||||||||||||||||||||||
| Other assets | 2,420 | 540 | - | 2,960 | 11,584 | (9,493 | ) | 5,051 | |||||||||||||||||||||||||
| Total assets | $ | 169,168 | $ | 346,674 | $ | 107,168 | $ | 623,010 | $ | 156,782 | $ | 198,784 | $ | 978,576 | |||||||||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||||
| Current liabilities: | |||||||||||||||||||||||||||||||||
| Accounts payable | $ | 8,410 | $ | 7,579 | $ | - | $ | 15,989 | $ | 6,082 | $ | - | $ | 22,071 | |||||||||||||||||||
| Accrued expenses and other liabilities | 21,235 | - | - | 21,235 | 9,361 | - | 30,596 | ||||||||||||||||||||||||||
| Accrued interest payable | 1,473 | - | - | 1,473 | - | - | 1,473 | ||||||||||||||||||||||||||
| Accrued Advertising | 1,980 | - | - | 1,980 | - | - | 1,980 | ||||||||||||||||||||||||||
| Deferred income, current portion | 1,684 | 3,252 | (2,402 | ) | (d) | 2,534 | 3,268 | (2,268 | ) | 3,534 | |||||||||||||||||||||||
| Dividend payable on preferred shares | 1,397 | - | - | 1,397 | - | - | 1,397 | ||||||||||||||||||||||||||
| Liabilities related to assets classified as held for sale | 7,131 | - | - | 7,131 | - | - | 7,131 | ||||||||||||||||||||||||||
| Current portion of operating lease liability | 929 | - | 3,755 | (f) | 4,684 | - | 4,801 | (f) | 9,485 | ||||||||||||||||||||||||
| Current portion of preferred shares, net | 7,980 | - | - | 7,980 | - | - | 7,980 | ||||||||||||||||||||||||||
| Current portion of long-term debt | 913 | 286 | (286 | ) | (g) | 913 | 1,300 | (1,300 | ) | (j) | 913 | ||||||||||||||||||||||
| Other | 18 | - | - | 18 | - | - | 18 | ||||||||||||||||||||||||||
| Total current liabilities | 53,150 | 11,117 | 1,067 | 65,334 | 20,011 | 1,233 | 86,578 | ||||||||||||||||||||||||||
| Deferred income - noncurrent | 9,691 | - | - | 9,691 | - | - | (d) | 9,691 | |||||||||||||||||||||||||
| Long-term debt, net of current portion | 146,140 | 234,264 | 104,668 | (g) | 485,072 | 63,872 | 173,062 | (j) | 722,006 | ||||||||||||||||||||||||
| Operating lease liability, net of current portion | 4,508 | - | 9,314 | (d)(f) | 13,822 | - | 19,184 | (f) | 33,006 | ||||||||||||||||||||||||
| Deferred Tax Liability | - | 32,278 | (32,278 | ) | (c) | - | - | - | - | ||||||||||||||||||||||||
| Other liabilities | 58 | 912 | - | 970 | 9,847 | (9,493 | ) | 1,324 | |||||||||||||||||||||||||
| Acquisition purchase price payable | 776 | - | - | 776 | - | 10,350 | 11,126 | ||||||||||||||||||||||||||
| Total liabilities | 214,323 | 278,571 | 82,771 | 575,665 | 93,730 | 194,336 | 863,731 | ||||||||||||||||||||||||||
| - | - | 67,500 | (a) | 67,500 | - | 67,500 | (h) | 135,000 | |||||||||||||||||||||||||
| Stockholders’ equity: | |||||||||||||||||||||||||||||||||
| Preferred stock | 29,092 | - | - | 29,092 | - | - | 29,092 | ||||||||||||||||||||||||||
| Common stock | (45,086 | ) | - | 25,000 | (a) | (20,086 | ) | - | - | (20,086 | ) | ||||||||||||||||||||||
| Accumulated deficit | (29,254 | ) | (92,667 | ) | 92,667 | (29,254 | ) | (6,816 | ) | 6,816 | (29,254 | ) | |||||||||||||||||||||
| Noncontrolling interests | 93 | - | - | 93 | - | - | 93 | ||||||||||||||||||||||||||
| Additional paid in capital | - | 160,770 | (160,770 | ) | - | 69,868 | (69,868 | ) | - | ||||||||||||||||||||||||
| Total Stockholders’ equity | (45,155 | ) | 68,103 | (43,103 | ) | (20,155 | ) | 63,052 | (63,052 | ) | (20,155 | ) | |||||||||||||||||||||
| Total liabilities, non-controlling interests and stockholders’ equity | $ | 169,168 | $ | 346,674 | $ | 107,168 | $ | 623,010 | $ | 156,782 | $ | 198,784 | $ | 978,576 | |||||||||||||||||||
Unaudited Pro Forma Combined Statement of Operations
For the Six Months Ended June 27, 2021
(in thousands, except share and per share amounts)
| Historical Results | Historical Results | |||||||||||||||||||||||||||||||||||
| Fat Brands, Inc. | GFG | GFG Transaction Accounting Adjustments (Note 5) | Pro Forma | TP | TP Transaction Accounting Adjustments (Note 5) | Pro Forma as Adjusted | ||||||||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||||||||||||
| Royalties | $ | 11,057 | $ | 15,770 | $ | - | $ | 26,827 | $ | 5,763 | $ | - | $ | 32,590 | ||||||||||||||||||||||
| Restaurant sales | 234 | - | 21,782 | (aa) | 22,016 | 47,532 | - | 69,548 | ||||||||||||||||||||||||||||
| Company store revenue | - | 21,782 | (21,782 | ) | (aa) | - | - | - | - | |||||||||||||||||||||||||||
| Factory revenue | - | 16,114 | - | 16,114.0 | - | - | 16,114 | |||||||||||||||||||||||||||||
| Advertising fees | 2,560 | - | - | 2,560.0 | 2,965 | - | 5,525 | |||||||||||||||||||||||||||||
| Franchise fees | 1,022 | 559 | - | 1,581.0 | 150 | - | 1,731 | |||||||||||||||||||||||||||||
| Licensing and other revenue | - | 381 | - | 381.2 | - | - | 381 | |||||||||||||||||||||||||||||
| Management fees and other income | 58 | - | - | 58.0 | 360 | - | 418 | |||||||||||||||||||||||||||||
| Total revenues | 14,931 | 54,606 | - | 69,537 | 56,770 | - | 126,307 | |||||||||||||||||||||||||||||
| Costs and expenses | ||||||||||||||||||||||||||||||||||||
| General and administrative expense | 10,408 | 27,727 | (1,494 | ) | (aa) | 36,641 | 4,832 | - | 41,473 | |||||||||||||||||||||||||||
| Restaurant operating expenses | 244 | - | 11,661 | (aa) | 11,905 | 40,003 | - | 51,908 | ||||||||||||||||||||||||||||
| Cost of revenues | - | 11,661 | (11,661 | ) | (aa) | - | - | - | - | |||||||||||||||||||||||||||
| Cost of sales | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Labor expenses | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Loss on asset disposal | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Advertising expense | 2,560 | - | - | 2,560 | 3,325 | - | 5,885 | |||||||||||||||||||||||||||||
| Depreciation and amortization | - | 1,705 | 3,609 | (aa)(cc) | 5,314 | 3,788 | (48 | ) | (cc) | 9,054 | ||||||||||||||||||||||||||
| Refranchising (gain) loss | (429 | ) | - | - | (429 | ) | - | - | (429 | ) | ||||||||||||||||||||||||||
| Other expense (income) | - | (710 | ) | 710 | (aa) | - | - | - | - | |||||||||||||||||||||||||||
| Total other income (expense) | 12,783 | 40,383 | 2,825 | 55,991 | 51,948 | (48 | ) | 107,891 | ||||||||||||||||||||||||||||
| Income (Loss) from operations | 2,148 | 14,223 | (2,825 | ) | 13,547 | 4,822 | 48 | 18,416 | ||||||||||||||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||||||||||
| Interest expense, net | (4,866 | ) | (11,876 | ) | (42 | ) | (bb) | (16,784 | ) | (2,831 | ) | (7,169 | ) | (ee) | (26,784 | ) | ||||||||||||||||||||
| Net loss on extinguishment of debt | (6,405 | ) | - | - | (6,405 | ) | - | - | (6,405 | ) | ||||||||||||||||||||||||||
| Interest expense related to preferred shares | (552 | ) | - | - | (552 | ) | - | - | (552 | ) | ||||||||||||||||||||||||||
| Other expense | (809 | ) | 4,565 | - | 3,756 | 10,399 | - | 14,155 | ||||||||||||||||||||||||||||
| Other income (expense) | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Total other income (expense) | (12,632 | ) | (7,311 | ) | (42 | ) | (19,985 | ) | 7,568 | (7,169 | ) | (19,586 | ) | |||||||||||||||||||||||
| (Loss) income before income tax expense | (10,484 | ) | 6,912 | (2,866 | ) | (6,438 | ) | 12,390 | (7,121 | ) | (1,169 | ) | ||||||||||||||||||||||||
| Income tax expense (benefit) | (2,121 | ) | 1,032 | (745 | ) | (dd) | (1,834 | ) | - | (1,852 | ) | (dd) | (3,686 | ) | ||||||||||||||||||||||
| Net income | (8,363 | ) | 5,880 | (2,121 | ) | (4,604 | ) | 12,390 | (5,270 | ) | 2,517 | |||||||||||||||||||||||||
| Net loss attributable to noncontrolling interest | (5 | ) | - | - | (5 | ) | - | - | (5 | ) | ||||||||||||||||||||||||||
| Net income attributable to the Company | $ | (8,358 | ) | $ | 5,880 | $ | (2,121 | ) | $ | (4,599 | ) | $ | 12,390 | $ | (5,270 | ) | $ | 2,522 | ||||||||||||||||||
| Basic and diluted loss per common share | $ | (0.69 | ) | $ | - | $ | - | $ | (0.33 | ) | $ | - | $ | 0.18 | ||||||||||||||||||||||
| Basic and diluted weighted average shares outstanding | 12,122,938 | - | - | 14,087,803 | - | 14,087,803 | ||||||||||||||||||||||||||||||
Unaudited Pro Forma Combined Condensed Statement of Operations
For the Year Ended December 27, 2020
(in thousands, except share and per share amounts)
| Historical Results | Historical Results | |||||||||||||||||||||||||||||||||||
| Fat Brands, Inc. | GFG | GFG Transaction Accounting Adjustments (Note 5) | Pro Forma | TP | TP Transaction Accounting Adjustments (Note 5) | Pro Forma as Adjusted | ||||||||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||||||||||||
| Royalties | $ | 13,420 | $ | 24,840 | $ | - | $ | 38,260 | $ | - | $ | 803 | (aa) | $ | 39,063 | |||||||||||||||||||||
| Restaurant sales | - | - | 63,729 | (aa) | 63,729 | 75,538 | - | 139,267 | ||||||||||||||||||||||||||||
| Company store revenue | - | 63,729 | (63,729 | ) | (aa) | - | - | - | - | |||||||||||||||||||||||||||
| Factory revenue | - | 24,267 | - | 24,267 | - | - | 24,267 | |||||||||||||||||||||||||||||
| Advertising fees | 3,527 | - | - | 3,527 | - | 6,084 | (aa) | 9,611 | ||||||||||||||||||||||||||||
| Marketing fees | - | - | - | - | 6,084 | (6,084 | ) | (aa) | - | |||||||||||||||||||||||||||
| Franchise fees | 1,130 | 888 | - | 2,018 | - | 8,643 | (aa) | 10,661 | ||||||||||||||||||||||||||||
| Franchise and royalty fees | - | - | - | - | 9,446 | (9,446 | ) | (aa) | - | |||||||||||||||||||||||||||
| Licensing and other revenue | - | 612 | (612 | ) | - | - | - | - | ||||||||||||||||||||||||||||
| Management fees and other income | 41 | - | 612 | 653 | 1,322 | - | 1,975 | |||||||||||||||||||||||||||||
| Total revenues | 18,118 | 114,336 | - | 132,454 | 92,390 | - | 224,844 | |||||||||||||||||||||||||||||
| Costs and expenses | ||||||||||||||||||||||||||||||||||||
| General and Adminstrative expense | 14,876 | 73,987 | 3,230 | (aa) | 92,093 | 9,958 | - | 102,051 | ||||||||||||||||||||||||||||
| Cost of revenues | - | 23,099 | - | 23,099 | - | - | 23,099 | |||||||||||||||||||||||||||||
| Advertising expense | 5,218 | - | - | 5,218 | - | - | 5,218 | |||||||||||||||||||||||||||||
| Restaurant operating expenses | - | - | - | - | 25,391 | 49,946 | (aa) | 75,337 | ||||||||||||||||||||||||||||
| Cost of sales | - | - | - | - | 20,810 | (20,810 | ) | (aa) | - | |||||||||||||||||||||||||||
| Labor expenses | - | - | - | - | 29,136 | (29,136 | ) | (aa) | - | |||||||||||||||||||||||||||
| Refranchising (gain) loss | 3,827 | - | - | 3,827 | - | - | 3,827 | |||||||||||||||||||||||||||||
| Depreciation and amortization | - | 4,074 | 6,819 | (aa)(cc) | 10,893 | 8,232 | (253 | ) | (cc) | 18,872 | ||||||||||||||||||||||||||
| Impairment of assets | 9,295 | 24,476 | - | 33,771 | - | - | 33,771 | |||||||||||||||||||||||||||||
| Other expense (income) | - | 4,402 | (4,402 | ) | (aa) | - | - | - | - | |||||||||||||||||||||||||||
| Total costs and expenses | 33,216 | 130,038 | 5,647 | 168,901 | 93,527 | (253 | ) | 262,175 | ||||||||||||||||||||||||||||
| Income (Loss) from operations | (15,098 | ) | (15,702 | ) | (5,647 | ) | (36,447 | ) | (1,137 | ) | 253 | (37,331 | ) | |||||||||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||||||||||
| Interest expense, net | (3,375 | ) | (20,911 | ) | (2,924 | ) | (bb) | (27,210 | ) | (6,892 | ) | (13,108 | ) | (ee) | (47,210 | ) | ||||||||||||||||||||
| Interest expense related to preferred shares | (1,544 | ) | - | - | (1,544 | ) | - | - | (1,544 | ) | ||||||||||||||||||||||||||
| Change in fair value of derivative liability | 887 | - | - | 887 | (344 | ) | - | 543 | ||||||||||||||||||||||||||||
| Gain on contingent consideration payable adjustment | 1,680 | - | - | 1,680 | - | - | 1,680 | |||||||||||||||||||||||||||||
| Earnout liability adjustment | - | - | - | - | 5,200 | - | 5,200 | |||||||||||||||||||||||||||||
| Net loss on extinguishment of debt | (88 | ) | - | - | (88 | ) | - | - | (88 | ) | ||||||||||||||||||||||||||
| Loss on disposal of assets | - | - | - | - | (3,051 | ) | - | (3,051 | ) | |||||||||||||||||||||||||||
| Other expense | (1,011 | ) | (94 | ) | - | (1,105 | ) | (4,051 | ) | - | (5,156 | ) | ||||||||||||||||||||||||
| Total other income (expense) | (3,451 | ) | (21,005 | ) | (2,924 | ) | (27,380 | ) | (9,138 | ) | (13,108 | ) | (49,626 | ) | ||||||||||||||||||||||
| Income (Loss) before income tax expense | (18,549 | ) | (36,707 | ) | (8,571 | ) | (63,827 | ) | (10,275 | ) | (12,855 | ) | (86,957 | ) | ||||||||||||||||||||||
| Income tax expense (benefit) | (3,689 | ) | (8,375 | ) | (2,228 | ) | (dd) | (14,292 | ) | - | (3,342 | ) | (17,635 | ) | ||||||||||||||||||||||
| Net income | $ | (14,860 | ) | $ | (28,332 | ) | $ | (6,343 | ) | $ | (49,535 | ) | $ | (10,275 | ) | $ | (9,512 | ) | $ | (69,322 | ) | |||||||||||||||
| Basic and diluted loss per common share | $ | (1.25 | ) | $ | - | $ | - | $ | (3.57 | ) | $ | - | $ | - | $ | (5.00 | ) | |||||||||||||||||||
| Basic and diluted weighted average shares outstanding | 11,897,952 | - | - | 13,862,817 | - | - | 13,862,817 | |||||||||||||||||||||||||||||
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
NOTE 1 – BASIS OF PRESENTATION
The Pro Forma Financial Statements are based on historical financial statements of the entities, as adjusted to give effect to the Acquisitions. The pro forma condensed combined balance sheet as of June 27, 2021 gives effect to the Acquisitions as if they had occurred on June 27, 2021. The pro forma condensed combined statements of operations for the twenty-six weeks ended June 27, 2021 and for the year ended December 27, 2020 give effect to the Acquisitions as if they had occurred on December 30, 2019 (the beginning of the Company’s 2020 fiscal year). In addition to the historical financial statements included as exhibits to this Form 8-K/A, the Pro Forma Financial Statements should be read in conjunction with the Company’s Form 10-K as of December 27, 2020, the Form 10-Q as of June 27, 2021, the Form 8-K filed with the SEC on July 26, 2021, the Form 8-K/A filed with the SEC on October 5, 2021 and the Form 8-K filed with the SEC on October 6, 2021.
NOTE 2 – PRELIMINARY PURCHASE PRICE ALLOCATION
The
Pro Forma Financial Statements include various assumptions, including those related to the preliminary purchase price allocations of
the assets acquired and liabilities assumed of GFG and Twin Peaks on preliminary estimates of fair value by management and third-party
The preliminary assessment of the fair value of the net assets and liabilities acquired by the Company through the GFG Acquisition was estimated at $447.7 million. The preliminary allocation of the consideration to the net tangible and intangible assets acquired is presented in the table below (in millions):
| Cash | $ | 5.9 | ||
| Accounts receivable | 5.1 | |||
| Inventory | 2.0 | |||
| Other receivables | 0.5 | |||
| Prepaids and other current assets | 0.9 | |||
| Other intangible assets | 277.7 | |||
| Goodwill | 190.6 | |||
| Other assets | 0.5 | |||
| Fixed assets | 8.4 | |||
| Accounts payable | (7.6 | ) | ||
| Above market leases | (2.2 | ) | ||
| Deferred income, current portion | (0.9 | ) | ||
| Deferred tax liability | (32.3 | ) | ||
| Other liabilities | (0.9 | ) | ||
| Total net identifiable assets | $ | 447.7 |
The preliminary assessment of the fair value of the net assets and liabilities acquired by the Company through the Twin Peaks Acquisition was estimated at $310.3 million. The preliminary allocation of the consideration to the net tangible and intangible assets acquired is presented in the table below (in millions):
| Cash | $ | 9.8 | ||
| Accounts receivable | 1.7 | |||
| Inventory | 1.3 | |||
| Prepaids and other current assets | 0.8 | |||
| Goodwill | ||||
| Other intangible assets, net | ||||
| Below market leases | 3.0 | |||
| Other assets | 2.1 | |||
| Fixed assets | 35.2 | |||
| Accounts payable | ) | |||
| Accrued expenses and other liabilities | ) | |||
| Deferred income | (1.0 | ) | ||
| Other liabilities | ) | |||
| Total net identifiable assets | $ | 310.3 |
NOTE 3 – IDENTIFIABLE INTANGIBLE ASSETS
Our preliminary valuation estimates of the identifiable intangible assets acquired in connection with the GFG Acquisition are based on initial valuations performed by management and third-party experts. However, these estimates are preliminary, as we have not completed our analysis of all the facts surrounding the business acquired and therefore have not finalized the accounting for these transactions. Our preliminary estimate of identifiable intangible assets total $277.7 million, comprised of $149.8 million in trademarks, $84.6 million in customer relationships and $43.3 million in franchise agreements.
Our preliminary valuation estimates of the identifiable intangible assets acquired in connection with the Twin Peaks Acquisition are based on initial valuations performed by management and third-party experts. However, these estimates are preliminary, as we have not completed our analysis of all the facts surrounding the business acquired and therefore have not finalized the accounting for these transactions. Our preliminary estimate of identifiable intangible assets total $188.2 million, comprised of $161.8 million in trademarks, $26.0 million in franchise agreements and $0.4 million in liquor licenses.
NOTE 4 – GOODWILL
Our
preliminary valuation estimates of goodwill in the amount of $190.6 related to the GFG Acquisition and
NOTE 5 – PRO FORMA ADJUSTMENTS
The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the Pro Forma Financial Statements:
Balance Sheet Pro Forma Adjustments
(a)
|
Consideration of $447.7 million for the GFG Acquisition was in the form of $355.2 million in cash, 3,089,245 shares of the Company’s Series B Cumulative Preferred Stock ($67.5 million) and 1,964,865 shares of the Company’s Common Stock ($25.0 million). | |
| (b) | Represents $4.6 million of restricted cash consisting of funds required to be held in trust in connection with the issuance of the GFG Notes (see (g) below). | |
| (c) | Represents reclassifications that have been made to the historical presentation to conform to the financial statement presentation of the Company. | |
| (d) | Reflects the adjustment of historical tangible and intangible assets acquired by the Company to their estimated fair values. The estimates of fair value may differ from amounts the Company will calculate after completing a detailed valuation analysis, and the difference could have a material effect on the accompanying unaudited pro forma condensed combined financial statements. | |
| (e) | Reflects adjustment to record goodwill resulting from the Acquisitions. | |
| (f) | As non-public companies, GFG and Twin Peaks were not yet required to adopt ASU 2016-02, Leases (Topic 842), requiring a lessee to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases with a term of more than twelve months. However, as a part of the Company’s consolidated group, GFG and Twin Peaks adopted ASU 2016-02 as of the dates of the Acquisitions. Accordingly, the Pro Forma Financial Statements have been adjusted to record an operating lease right of use asset and an operating lease liability. GFG has certain operating leases for corporate offices and for certain restaurant properties that are in the process of being refranchised. Twin Peaks has certain operating leases for corporate offices and for company-owned restaurant properties. | |
| (g) | The net increase to debt reflects the issuance of new debt of $350.0 million of fixed rate asset backed notes comprised of aggregate principal amounts of $209.0 million of Class A-2 notes bearing interest at 6.00%, $84.0 million of Class B-2 notes bearing interest at 7.00% and $57.0 million of Class M-2 notes bearing interest at 9.50% (net proceeds of $338.9 million), collectively, the “GFG Notes.” GFG’s outstanding debt was also extinguished upon consummation of the GFG Acquisition. | |
(h)
|
Consideration
of | |
(i)
|
Represents $3.8 million of restricted cash consisting of funds required to be held in trust in connection with the issuance of the TP Notes (see (j) below). | |
(j)
|
The net increase to debt reflects the issuance of new debt of $250.0 million of fixed rate asset backed notes comprised of aggregate principal amounts of $150.0 million of Class A-2 notes bearing interest at 7.00%, $50.0 million of Class B-2 notes bearing interest at 9.00% and $50.0 million of Class M-2 notes bearing interest at 10.00% (net proceeds of $236.9 million), collectively, the “Twin Peaks Notes.” Twin Peak’s outstanding debt was also extinguished upon consummation of the Twin Peaks Acquisition. |
Statement of Operations Pro Forma Adjustments
| (aa) | Represents reclassifications that have been made to the historical presentation of GFG and Twin Peaks to conform to the financial statement presentation of the Company and the presentation of depreciation and amortization expense separately due to its materiality. | |
(bb)
|
Represents the net increase to interest expense resulting from interest on the GFG Notes to finance the GFG Acquisition. | |
| (cc) | Represents the adjustment to reflect the amortization related to amortizing intangible assets (see (d) above). | |
| (dd) | Represents the income tax expense effect based on a statutory income tax rate of 26%. | |
| (ee) | Represents the net increase to interest expense resulting from interest on the Twin Peaks Notes to finance the Twin Peaks Acquisition. |