| Restatements of Previously Issued Interim Financial Statements (Unaudited) |
14. RESTATEMENTS OF PREVIOUSLY ISSUED INTERIM FINANCIAL
STATEMENTS (UNAUDITED)
The Company, while undergoing the audit of its consolidated
and combined financial statements as of December 31, 2020 and for the year then ended, re-evaluated the lease term for three restaurants
that were permanently closed in 2020 due to the pandemic and determined that the lease terms should no longer have included periods subject
to renewal options. Impairment charges had been recorded for these restaurants during the respective quarter that the restaurants were
closed, but the 2020 interim unaudited financial statements did not reflect the revised lease terms. This impacted the previously reported
amounts for operating lease assets, operating lease liabilities, and rent expense, among other line items in the condensed consolidated
and combined interim financial statements.
In addition to the above, in the third quarter of
2020 the Company and the holders of the Series 2 Preferred Stock entered into the Extension Agreement (see Note 10). This agreement provided
for the extension of the True-Up Payment date and for the inclusion of certain “spin-off” shares obtained by the holder of
the Series 2 Preferred Stock in the settlement of the Series 2 Preferred for the True-Up Payment. The derivative liability recorded as
of September 30, 2020 did not reflect this change in calculation of the True-Up Payment resulting in an overstatement of the derivative
liability by approximately $695,000 and the associated change in fair value of derivative liabilities for the three months ended September
30, 2020.
The following tables sets forth the effects of the
adjustments on affected items within the Company’s previously reported Condensed Consolidated and Combined Interim Balance Sheets
as of March 31, 2020, June 30, 2020, and September 30, 2020, had the adjustments been made in the corresponding quarters:
| |
|
March 31, 2020 |
|
| |
|
As reported |
|
|
Adjustment |
|
|
As restated |
|
| Operating lease assets |
|
$ |
11,256,497 |
|
|
$ |
(216,681 |
) |
|
$ |
11,039,816 |
|
| Long-term operating lease liabilities |
|
$ |
14,064,517 |
|
|
$ |
(440,998 |
) |
|
$ |
13,623,519 |
|
| Accumulated deficit |
|
$ |
(77,343,539 |
) |
|
$ |
149,955 |
|
|
$ |
(77,193,584 |
) |
| Non-controlling interests |
|
$ |
584,824 |
|
|
$ |
74,362 |
|
|
$ |
659,186 |
|
| |
|
June 30, 2020 |
|
| |
|
As reported |
|
|
Adjustment |
|
|
As restated |
|
| Operating lease assets |
|
$ |
11,007,038 |
|
|
$ |
(98,944 |
) |
|
$ |
10,908,094 |
|
| Long-term operating lease liabilities |
|
$ |
13,832,826 |
|
|
$ |
(458,154 |
) |
|
$ |
13,374,672 |
|
| Accumulated deficit |
|
$ |
(85,658,825 |
) |
|
$ |
284,848 |
|
|
$ |
(85,373,977 |
) |
| Non-controlling interests |
|
$ |
(310,801 |
) |
|
$ |
74,362 |
|
|
$ |
(236,439 |
) |
| |
|
September 30, 2020 |
|
| |
|
As reported |
|
|
Adjustment |
|
|
As restated |
|
| Operating lease assets |
|
$ |
10,117,900 |
|
|
$ |
- |
|
|
$ |
10,117,900 |
|
| Derivative liabilities |
|
$ |
1,195,724 |
|
|
$ |
(694,724 |
) |
|
$ |
501,000 |
|
| Long-term operating lease liabilities |
|
$ |
15,115,651 |
|
|
$ |
(479,855 |
) |
|
$ |
14,635,796 |
|
| Accumulated deficit |
|
$ |
(95,208,526 |
) |
|
$ |
1,048,450 |
|
|
$ |
(94,160,076 |
) |
| Non-controlling interests |
|
$ |
(764,097 |
) |
|
$ |
126,129 |
|
|
$ |
(637,968 |
) |
The following tables sets forth the effects of the
adjustments on affected items within the Company’s previously reported Condensed Consolidated and Combined Interim Statements of
Operations for the three months ended March 31, 2020, June 30, 2020, and September 30, 2020:
| |
|
Three Months Ended March 31, 2020 |
|
| |
|
As reported |
|
|
Adjustment |
|
|
As restated |
|
| Restaurant operating expenses |
|
$ |
3,625,844 |
|
|
$ |
- |
|
|
$ |
3,625,844 |
|
| Asset impairment charge |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
| Operating loss |
|
$ |
(1,354,090 |
) |
|
$ |
- |
|
|
$ |
(1,354,090 |
) |
| Other income (expense) |
|
$ |
17,876 |
|
|
$ |
224,317 |
|
|
$ |
242,193 |
|
| Consolidated and combined net loss |
|
$ |
(1,792,526 |
) |
|
$ |
224,317 |
|
|
$ |
(1,568,209 |
) |
| Net income attributable to non-controlling interests |
|
$ |
(129,043 |
) |
|
$ |
(74,362 |
) |
|
$ |
(203,405 |
) |
| Net loss attributable to Amergent Hospitality Group Inc |
|
$ |
(1,921,569 |
) |
|
$ |
149,955 |
|
|
$ |
(1,771,614 |
) |
| Net loss per common share, basic and diluted |
|
$ |
(0.16 |
) |
|
$ |
0.01 |
|
|
$ |
(0.15 |
) |
| |
|
Three Months Ended June 30, 2020 |
|
| |
|
As reported |
|
|
Adjustment |
|
|
As restated |
|
| Restaurant operating expenses |
|
$ |
3,261,393 |
|
|
$ |
(13,436 |
) |
|
$ |
3,247,957 |
|
| Asset impairment charge |
|
$ |
273,927 |
|
|
$ |
(121,457 |
) |
|
$ |
152,470 |
|
| Operating loss |
|
$ |
(2,655,587 |
) |
|
$ |
134,893 |
|
|
$ |
(2,520,694 |
) |
| Other income (expense) |
|
$ |
(70,748 |
) |
|
$ |
- |
|
|
$ |
(70,748 |
) |
| Consolidated and combined net loss |
|
$ |
(9,210,911 |
) |
|
$ |
134,893 |
|
|
$ |
(9,076,018 |
) |
| Net loss attributable to non-controlling interests |
|
$ |
89,716 |
|
|
$ |
- |
|
|
$ |
89,716 |
|
| Net loss attributable to Amergent Hospitality Group Inc |
|
$ |
(9,121,195 |
) |
|
$ |
134,893 |
|
|
$ |
(8,986,302 |
) |
| Net loss per common share, basic and diluted |
|
$ |
(0.64 |
) |
|
$ |
0.01 |
|
|
$ |
(0.63 |
) |
| |
|
Three Months Ended September 30, 2020 |
|
| |
|
As reported |
|
|
Adjustment |
|
|
As restated |
|
| Restaurant operating expenses |
|
$ |
3,462,279 |
|
|
$ |
(13,436 |
) |
|
$ |
3,448,843 |
|
| Asset impairment charge |
|
$ |
1,231,352 |
|
|
$ |
(95,223 |
) |
|
$ |
1,136,129 |
|
| Operating loss |
|
$ |
(3,024,319 |
) |
|
$ |
108,659 |
|
|
$ |
(2,915,660 |
) |
| Change in fair value of derivative liabilities |
|
$ |
(199,154 |
) |
|
$ |
694,724 |
|
|
$ |
495,570 |
|
| Other income (expense) |
|
$ |
(37,390 |
) |
|
$ |
11,986 |
|
|
$ |
(25,404 |
) |
| Consolidated and combined net loss |
|
$ |
(10,002,997 |
) |
|
$ |
815,369 |
|
|
$ |
(9,187,628 |
) |
| Net loss attributable to non-controlling interests |
|
$ |
453,296 |
|
|
$ |
(51,767 |
) |
|
$ |
401,529 |
|
| Net loss attributable to Amergent Hospitality Group Inc |
|
$ |
(9,549,701 |
) |
|
$ |
763,602 |
|
|
$ |
(8,786,099 |
) |
| Net loss per common share, basic and diluted |
|
$ |
(0.67 |
) |
|
$ |
0.05 |
|
|
$ |
(0.62 |
) |
The following tables sets forth the effects of the
adjustments on affected items within the Company’s previously reported Condensed Consolidated and Combined Interim Statements of
Operations for the six months ended June 30, 2020 and nine months ended September 30, 2020:
| |
|
Six Months Ended June 30, 2020 |
|
| |
|
As reported |
|
|
Adjustment |
|
|
As restated |
|
| Restaurant operating expenses |
|
$ |
6,887,237 |
|
|
$ |
(13,436 |
) |
|
$ |
6,873,801 |
|
| Asset impairment charge |
|
$ |
273,927 |
|
|
$ |
(121,457 |
) |
|
$ |
152,470 |
|
| Operating loss |
|
$ |
(4,009,677 |
) |
|
$ |
134.893 |
|
|
$ |
(3,874,784 |
) |
| Other income (expense) |
|
$ |
(48,009 |
) |
|
$ |
224,317 |
|
|
$ |
176,308 |
|
| Consolidated and combined net loss |
|
$ |
(11,003,437 |
) |
|
$ |
359,210 |
|
|
$ |
(10,644,227 |
) |
| Net income attributable to non-controlling interests |
|
$ |
(39,327 |
) |
|
$ |
(74,362 |
) |
|
$ |
(113,689 |
) |
| Net loss attributable to Amergent Hospitality Group Inc |
|
$ |
(11,042,764 |
) |
|
$ |
284,848 |
|
|
$ |
(10,757,916 |
) |
| Net loss per common share, basic and diluted |
|
$ |
(0.85 |
) |
|
$ |
0.03 |
|
|
$ |
(0.82 |
) |
| |
|
Nine Months Ended September 30, 2020 |
|
| |
|
As reported |
|
|
Adjustment |
|
|
As restated |
|
| Restaurant operating expenses |
|
$ |
10,349,516 |
|
|
$ |
(26,872 |
) |
|
$ |
10,322,644 |
|
| Asset impairment charge |
|
$ |
1,505,279 |
|
|
$ |
(216,680 |
) |
|
$ |
1,288,599 |
|
| Operating loss |
|
$ |
(7,033,996 |
) |
|
$ |
243,552 |
|
|
$ |
(6,790,444 |
) |
| Change in fair value of derivative liabilities |
|
$ |
(1,152,185 |
) |
|
$ |
694,724 |
|
|
$ |
(457,461 |
) |
| Other income (expense) |
|
$ |
(85,399 |
) |
|
$ |
236,303 |
|
|
$ |
150,904 |
|
| Consolidated and combined net loss |
|
$ |
(21,006,434 |
) |
|
$ |
1,174,579 |
|
|
$ |
(19,831,855 |
) |
| Net loss attributable to non-controlling interests |
|
$ |
413,969 |
|
|
$ |
(126,129 |
) |
|
$ |
287,840 |
|
| Net loss attributable to Amergent Hospitality Group Inc |
|
$ |
(20,592,465 |
) |
|
$ |
1,048,450 |
|
|
$ |
(19,544,015 |
) |
| Net loss per common share, basic and diluted |
|
$ |
(1.53 |
) |
|
$ |
0.08 |
|
|
$ |
(1.45 |
) |
There was no impact to the Company’s cash flows
from operating, investing, or financing activities for the periods ended March 31, 2020, June 30, 2020, or September 30, 2020 as a result
of these restatements.
|