wtrh-8k_20190403.htm

 

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 3, 2019

 

WAITR HOLDINGS INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware

001-37788

26-3828008

(State or Other Jurisdiction

of Incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

 

 

 

844 Ryan Street, Suite 300

Lake Charles, Louisiana

 

70601

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s Telephone Number, Including Area Code: 1-800-661-9036

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

 

 

 


 

Item 7.01 Regulation FD Disclosure.

As previously disclosed, Waitr Holdings Inc. (the “Company”) completed its acquisition of BiteSquad.com, LLC (“Bite Squad”) on January 17, 2019. The Company is filing this Current Report on Form 8-K to provide certain financial information with respect to Bite Squad.

This Current Report on Form 8-K furnishes the following information: (i) the audited financial statements of Bite Squad as of and for the years ended December 31, 2018 and 2017 and the related notes thereto, attached hereto as Exhibit 99.1; (ii) the unaudited pro forma condensed combined financial statements as of and for the year ended December 31, 2018 and the related notes thereto, attached hereto as Exhibit 99.2; and (iii) the Bite Squad Management’s Discussion and Analysis of Financial Condition and Results of Operations with respect to certain historical periods, attached hereto as Exhibit 99.3.

Information in this report (including the exhibits) is furnished pursuant to Item 7.01 and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section or deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933 or the Exchange Act, except (i) that the Company does hereby incorporate Exhibits 23.1, 99.1, 99.2 and 99.3 hereto into its Registration Statement on Form S-3 (File No. 333-228722) and its Registration Statement on Form S-8 (File No. 333-229684) and (ii) as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(a)(1) Financial Statements of Businesses Acquired.

The audited financial statements of Bite Squad as of and for the years ended December 31, 2018 and 2017 and the related notes thereto, are attached hereto as Exhibit 99.1 and incorporated by reference herein.

(b)(1) Pro Forma Financial Information.

The unaudited pro forma condensed combined financial statements of the Company as of and for the year ended December 31, 2018 and the related notes thereto, are attached hereto as Exhibit 99.2 and are incorporated by reference herein.

(d) Exhibits.

 

Exhibit

Number

 

Description

 

 

 

23.1

 

Consent of RSM US LLP

99.1

 

Audited financial statements of BiteSquad.com, LLC as of and for the years ended December 31, 2018 and 2017, and the related notes thereto

99.2

 

Unaudited pro forma condensed combined financial statements of the Company as of and for the year ended December 31, 2018

99.3

 

Bite Squad Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

Waitr Holdings Inc.

 

 

 

 

Date: April 3, 2019

 

By:

/s/ Christopher Meaux

 

 

 

Name: Christopher Meaux

 

 

 

Title: Chief Executive Officer

 

 

 

 

 

 

 

wtrh-ex231_9.htm

Exhibit 23.1

Consent of Independent Auditor

 

 

We consent to the incorporation by reference in the Registration Statements on Form S‑3 (No. 333-228722) and on Form S-8 (No. 333-229684), of Waitr Holdings Inc. of our report dated March 4, 2019, relating to the consolidated financial statements of Bitesquad.com, LLC and Subsidiaries, appearing in this Current Report on Form 8-K, filed by Waitr Holdings Inc. as of April 3, 2019.

 

 

We also consent to the reference of our firm under the heading “Experts” in such Registration Statements.

 

/s/ RSM US LLP

 

 

Minneapolis, Minnesota

April 3, 2019

 

wtrh-ex991_19.htm

 

Exhibit 99.1

 

 

BITESQUAD.COM, LLC AND SUBSIDIARIES

Minneapolis, Minnesota

 

CONSOLIDATED FINANCIAL STATEMENTS

 

Including Independent Auditor’s Report

 

As of and for the Years Ended December 31, 2018 and 2017


 

 


 

BITESQUAD.COM, LLC AND SUBSIDIARIES

 

TABLE OF CONTENTS

 

As of and for the Years Ended December 31, 2018 and 2017

 

 

 

 

Independent Auditor’s Report

 

1

 

 

 

Consolidated Financial Statements

 

 

 

 

 

Consolidated Balance Sheets

 

2

 

 

 

Consolidated Statements of Operations

 

3

 

 

 

Consolidated Statements of Members’ Equity

 

4

 

 

 

Consolidated Statements of Cash Flows

 

5

 

 

 

Notes to Consolidated Financial Statements

 

6

 

 

 

 

 


 

 

Independent Auditor’s Report

 

 

Board of Directors

Bitesquad.com, LLC and Subsidiaries

 

 

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Bitesquad.com, LLC and Subsidiaries (the Company), which comprise the consolidated balance sheets as of December 31, 2018 and 2017, the related consolidated statements of operations, changes in members’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

 

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bitesquad.com, LLC and Subsidiaries as of December 31, 2018 and 2017, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

 

Emphasis of Matter

As discussed in Note 11 to the financial statements, on December 11, 2018, the Company entered into merger agreement, resulting in a change of control. The completion of this merger occurred on January 17, 2019. The financial statements are presented as of and for the year ended December 31, 2018, prior to the change in control.

 

/s/ RSM US LLP

 

Minneapolis, Minnesota

March 4, 2019


1


 

 

BITESQUAD.COM, LLC AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

 

 

December 31, 2018

 

December 31, 2017

ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

Cash

$          17,087,619

 

$            12,275,564

Settlements due from credit card processor

2,819,189

 

1,640,514

Accounts receivable

1,169,295

 

1,036,928

Inventory

858,009

 

625,671

Prepaid expenses and other current assets

533,369

 

211,800

Total current assets

22,467,481

 

15,790,477

OTHER ASSETS:

 

 

 

Other assets

165,876

 

147,723

Loans receivable, net

1,656,120

 

877,759

Property and equipment, less accumulated depreciation

908,248

 

939,427

Goodwill

37,131,145

 

29,264,690

Total other assets

39,861,389

 

31,229,599

TOTAL ASSETS

$          62,328,870

 

$          47,020,076

LIABILITIES AND MEMBERS' EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Restaurant food liability

$            6,201,287

 

$            3,641,536

Accounts payable

807,334

 

370,983

Accrued payroll

3,792,147

 

1,884,539

Accrued sales taxes

1,110,735

 

859,758

Other accruals

3,256,671

 

1,326,273

Convertible notes, net

8,041,633

 

-

Current portion of notes payable, net

1,519,382

 

353,314

Total current liabilities

24,729,189

 

8,436,403

NONCURRENT LIABILITIES:

 

 

 

Notes payable, net

3,089,509

 

1,020,262

Contingent consideration

431,764

 

407,235

Total noncurrent liabilities

3,521,273

 

1,427,497

MEMBERS' EQUITY:

 

 

 

Total members' equity

34,078,408

 

37,156,176

TOTAL LIABILITIES AND MEMBERS' EQUITY

$          62,328,870

 

$          47,020,076

 

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

 

 

 


2


 

BITESQUAD.COM, LLC AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

Year Ended December 31

 

2018

 

2017

Revenues

$                                    83,369,446

 

$                       41,320,464

 

 

 

 

Operations and Support

57,297,569

 

29,838,590

Sales and Marketing

15,493,797

 

10,768,800

Research and Development

2,880,226

 

4,032,910

General and Administrative

12,247,535

 

9,495,994

Depreciation and Amortization

106,455

 

31,247

Related Party Expenses

415,671

 

450,697

Operating Expenses

88,441,253

 

54,618,238

 

 

 

 

Loss from operations

(5,071,807)

 

(13,297,774)

 

 

 

 

Net interest expense/(income)

616,708

 

(14,867)

Net non-operating income

(763,790)

 

(4,300)

 

 

 

 

Loss before provision for income taxes

(4,924,725)

 

(13,278,607)

 

 

 

 

Provision for income taxes

60,890

 

7,297

 

 

 

 

Net loss

(4,985,615)

 

(13,285,904)

 

 

 

 

Less: Net income attributable to noncontrolling interests

59,601

 

46,022

 

 

 

 

Net loss attributable to Bitesquad.com LLC

$                                  (5,045,216)

 

$                 (13,331,926)

 

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

 

 

 


 

3


 

BITESQUAD.COM, LLC AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY

 

 

Voting

Non-Voting

 

Common

 

 

Total  

Non-

Total  

 

Common

Common

Preferred

Profit Interest

Incentive

Accumulated

Bitesquad

controlling

Members'

 

Units

Units

Units

Units

Units

Deficit

Equity

Interests

Equity

December 31, 2016

$ 2,000,000

$ 14,521,765  

$ 9,550,107

$ 385,192  

$              -  

$ (7,627,637)

$ 18,829,427

$(1,041,532)

$ 17,787,895

 

Acquisition of KASA Delivery LLC membership interests

                 -  

                   -  

                   -  

                         -  

                 -  

      (1,041,532)

    (1,041,532)

      1,041,532

                    -  

 

Recapitalization of outstanding equity interests

    5,311,957

                   -  

    (5,311,957)

             (385,192)

       385,192

                    -  

                   -  

                  -  

                    -  

 

Issuance of preferred units, less transaction expenses

                 -  

                   -  

    20,561,201

                         -  

                 -  

                    -  

    20,561,201

                  -  

     20,561,201

 

Recognition of noncontrolling interest in KSM Real Estate LLC

                 -  

                   -  

                   -  

                         -  

                 -  

                    -  

                   -  

         113,375

          113,375

 

Issuance of nonvoting common units

                 -  

      7,594,173

                   -  

                         -  

                 -  

                    -  

      7,594,173

                  -  

       7,594,173

 

Redemption of nonvoting common units

                 -  

       (122,800)

                   -  

                         -  

                 -  

           (27,200)

       (150,000)

                  -  

       (150,000)

 

Unit-based compensation expense

                 -  

                   -  

                   -  

                         -  

    4,535,436

                    -  

      4,535,436

                  -  

       4,535,436

 

Net (loss) / income

                 -  

                   -  

                   -  

                         -  

                 -  

    (13,331,926)

  (13,331,926)

           46,022

   (13,285,904)

 

December 31, 2017

$7,311,957

$ 21,993,138

$ 24,799,351

$                      -  

$ 4,920,628

$ (22,028,295)

$ 36,996,779

$ 159,397

$ 37,156,176

 

Issuance of nonvoting common units

-

1,323,111

-

-

-

-

1,323,111

-

1,323,111

 

Redemption of nonvoting common units

-

(366,680)

-

-

-

-

(366,680)

-

(366,680)

 

Members’ distributions

-

-

-

-

-

-

-

(77,000)

(77,000)

 

Unit-based compensation expense

-

-

-

-

1,028,416

-

1,028,416

-

1,028,416

 

Net (loss) / income

-

-

-

-

-

(5,045,216)

(5,045,216)

59,601

(4,985,615)

 

December 31, 2018

$7,311,957

$ 22,949,569

$ 24,799,351

$                      -  

$ 5,949,044

$ (27,073,511)

$ 33,936,410

$ 141,998

$ 34,078,408

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

4


 

BITESQUAD.COM, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Year Ended December 31,

 

2018

 

2017

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

Net Loss

$           (4,985,615)

 

$         (13,285,904)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

Gain on sale of business

(765,690)

 

-

Depreciation and amortization expense

106,455

 

31,248

Unit-based compensation expense

1,028,416

 

4,535,436

Non-cash interest expense on convertible notes

540,078

 

-

Forgiveness of notes payable

(113,053)

 

-

Discount on notes payable

155,986

 

26,869

Discount on loans receivable

(24,855)

 

128,246

Contingent consideration

(261,939)

 

-

Changes in operating accounts, net of acquisitions and sale of business:

 

 

 

Settlements due from credit card processor

(1,205,789)

 

(1,093,729)

Accounts receivable

(140,346)

 

12,743

Inventory

(232,338)

 

(625,671)

Prepaid expenses and other current assets

(319,703)

 

(114,531)

Other assets

(18,153)

 

(69,717)

Restaurant food liability

2,605,068

 

2,009,877

Accounts payable

444,019

 

(164,754)

Accrued payroll

1,918,472

 

1,065,248

Accrued sales taxes

271,667

 

456,994

Other accruals

1,908,841

 

1,028,798

Net Cash Flows Provided by (Used in) Operating Activities

911,521

 

(6,058,847)

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

       Proceeds from sale of business

500,000

 

-

Acquisitions

(2,339,895)

 

(3,205,845)

Net Cash Flows Used in Investing Activities

(1,839,895)

 

(3,205,845)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

Proceeds from issuance of Convertible Preferred Units

7,523,777

 

-

Proceeds from issuance of Preferred Units

-

 

20,561,201

Payment on deferred financing costs

(100,000)

 

-

Proceeds received on notes receivable

28,852

 

-

Member's distribution

(77,000)

 

-

Redemption of nonvoting common units

(80,212)

 

(150,000)

Payments on notes payable

(1,133,321)

 

(435,255)

Advances on loans receivables

(421,667)

 

(527,504)

Net Cash Flows From Financing Activities

5,740,429

 

19,448,442

Net Change in Cash

4,812,055

 

10,183,750

Cash - Beginning of Year

12,275,564

 

2,091,814

Cash - End of Year

$           17,087,619

 

$          12,275,564

 

 

 

 

NONCASH INVESTING AND FINANCING ACTIVITIES

 

 

 

Fair value of common units issued for acquisitions

$             1,323,111

 

   $           7,594,173

Noncontrolling interest in KSM Real Estate LLC

-

 

113,375

Seller-financed notes payable related to acquisitions

4,739,676

 

-

Seller-financed notes receivable related to sale of business

862,000

 

-

 

See accompanying Notes to Consolidated Financial Statements.


5


 

 

BITESQUAD.COM, LLC AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

Note 1 – Summary of Significant Accounting Policies

 

Nature of Operations.  Bitesquad.com, LLC (“Bitesquad”) is an on-demand restaurant delivery service that connects diners and restaurants via Bitesquad’s website and mobile application.  Diners enter their delivery address and Bitesquad displays the menus of nearby restaurant partners. Orders are placed by diners online at www.bitesquad.com or through the Bitesquad mobile application. Bitesquad charges restaurant partners a per order commission for generating the order and may also charge a delivery fee or certain other fees directly to the diner.  Bitesquad is headquartered in Minneapolis, Minnesota, and was formed on April 25, 2012 as a limited liability company in the state of Minnesota.  Bitesquad was formed to have a perpetual life and the members have limited liability for the obligations of the LLC.  

 

Principles of Consolidation.  The accompanying consolidated financial statements include the accounts of Bite Squad and all its wholly-owned subsidiaries (collectively, the “Company”).  Significant intercompany accounts and transactions have been eliminated. Bite Squad consolidates variable interest entities (“VIEs”) where it has been determined that Bite Squad is the primary beneficiary of those entities' operations.  

 

Effective January 5, 2017, Bite Squad’s Board of Governors exercised its option to acquire 100% ownership of KASA Delivery, LLC (“KASA”).  KASA provides order fulfillment, executive management, finance, information technology, accounting, back office, regulatory and other services to Bite Squad.  Bite Squad finances the operations of KASA.  KASA was formed on May 15, 2012 as a limited liability company in the state of Minnesota.  KASA was formed to have a perpetual life and the sole member has limited liability for the obligations of the LLC.  In prior years, Bite Squad consolidated KASA as a VIE because Bite Squad was the primary beneficiary of KASA’s operations.  

 

KASA rents office space and parking from KSM Real Estate, LLC, an entity related through common ownership.  KASA’s personal property was provided as collateral in KSM Real Estate’s loan, and KASA agreed to an unconditional guarantee of the loan.  Because KASA is the primary source of rental income for KSM Real Estate, LLC, and has guaranteed payments of the loan, KASA has a variable interest in KSM Real Estate, LLC.  KASA is the primary beneficiary in KSM Real Estate, LLC due to common ownership.  KSM Real Estate, LLC is a VIE and is consolidated with Bite Squad in the accompanying consolidated financial statements. See Note 7 for further disclosures regarding KSM Real Estate, LLC.  

 

Use of Estimates.  The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

Cash.  The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.  The Company has not experienced any losses in such accounts.

 

Settlements due from Credit Card Processor.  Settlements due from credit card processor relate to customer credit card sale transactions that have occurred but have not yet been funded to the Company by the credit card processor as of year-end. The Company determined that no allowance for doubtful accounts is necessary as of December 31, 2018 and 2017, based on review of outstanding settlements due and historical experience. The Company incurs expenses for uncollected credit card settlements (“chargebacks”), when a diner’s card is authorized and processed but later is reversed when a card-holder disputes the transaction directly with their credit card provider.  Chargebacks are included in operating expenses and were $601,093 and $679,423 in 2018 and 2017, respectively.  

 

Accounts Receivable.  The Company extends unsecured credit to corporate diners that the Company establishes on an individual basis.  Receivables are considered past due if any portion of the receivable balance is outstanding beyond agreed upon terms.  Accounts receivable are written off when deemed uncollectible.  The Company recorded an allowance for doubtful accounts of $7,178 as of December 31, 2018 for accounts deemed uncollectible. At December 31, 2017 the Company determined that no allowance for doubtful accounts was necessary. The Company does not accrue interest on accounts receivable.

 

Inventory.  The Company acquires uniforms, tablets, hot bags, and other delivery and advertising supplies which are capitalized and recorded as inventory and expensed as utilized.  The Company’s inventory is accounted for under the weighted-average cost method.  The cost of our inventory includes the amount we pay our suppliers to acquire inventory and freight costs incurred in connection with delivery of product to our warehouse or offices.

 

Property and equipment.  Property and equipment is primarily comprised of the office building and parking associated with KSM Real Estate LLC.  The property is depreciated using the straight-line method over the estimated useful life of 39 years.  Repair and maintenance costs are expensed as incurred.  

 

6


 

Goodwill.  The Company performs impairment testing for goodwill annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired.  As allowed, the Company makes an initial qualitative evaluation, based on the Company’s events and circumstances, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  The results of this qualitative evaluation determine whether it is necessary to perform the two-step impairment test.  The Company has one reporting unit and performed the qualitative evaluation and determined it was not necessary to perform the two-step impairment test.  There was no impairment expense recognized in the Company’s consolidated financial statements in 2018 or 2017.

 

Convertible Notes.  The Company accounts for convertible notes, net in accordance with ASC 470-20, Debt with Conversion and Other Options.  Convertible notes are classified as liabilities measured at amortized cost, net of debt discounts from the allocation of proceeds.  Interest expense is recognized using the effective interest method over the expected term of the debt instrument in accordance with ASC 835, Interest.

 

Advertising.  Advertising costs are charged to expense when incurred.  Advertising expense was $10,893,408 and $5,778,710 for the years ended 2018 and 2017, respectively.

 

Revenue Recognition.  The Company generates revenues when diners place orders on the website or mobile applications.  Restaurants pay a percentage commission on the food price of the orders processed via the Bitesquad platform for delivery or pick-up as well as a credit card processing fee, and a restaurant may also choose to contribute to the diner’s delivery fee. The Company also charges certain fees directly to the diner and may charge for beverages or utensils on catering orders. Revenues from diner orders are recognized when orders are delivered.  

 

The Company processes and collects the entire amount (“gross merchandise value”) of the diner’s transaction on the platform, which includes food, beverages, catering supplies, delivery and other fees, sales tax, and gratuities.  Gross merchandise value in 2018 and 2017 was $254,979,204 and $133,467,784, respectively.  

 

Revenues are reported net of any diner promotions, refunds to diners, the balance due to the restaurant, gratuities due to employees, and sales tax.  Costs incurred to process transactions and provide delivery services are included in operating expenses in the consolidated statements of operations.  

 

The Company sells gift cards on the platform and recognizes revenue upon gift card redemption.  Gift cards that have not been utilized are recorded on the consolidated balance sheet in other accruals.

 

Restaurant Food Liability.  Bitesquad records an amount representing the restaurant food liability for the net balance due to the restaurant after deducting the commissions and other fees charged to the restaurant.  Bitesquad remits payments to the restaurants twice a month.

 

Income Taxes.  Bitesquad and KASA are treated as limited liability companies (LLCs) for federal and state income tax purposes.  As such, the income, losses, and credits are included in the income tax returns of its members.  In 2017, KASA Delivery Corporation was formed as a corporation in Minnesota and is a wholly-owned subsidiary of Bitesquad.  KASA Delivery Corporation is treated as a taxable entity.  KASA Delivery Corporation provides services to Bitesquad under a management services agreement.  The taxable income generated in 2018 and 2017 resulted in current income tax expense and liabilities of $60,890 and $7,297, respectively, with no deferred tax impact.  

 

The Company is not currently under examination in any taxing jurisdiction.  In the event of any future tax assessments, the Company has elected to record the income taxes and related interest and penalties as income tax expense in the Company’s consolidated statement of operations.

 

Recent Accounting Pronouncements.  

 

In June 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-07, Compensation – Stock Compensation (Topic 718). The ASU is intended to simplify the accounting for stock-based payments to non-employees by aligning it with the accounting for stock-based payments to employees, with certain exceptions. The new standard is effective for the Company in fiscal year 2020. The Company is evaluating the effect of the new standard on the consolidated financial statements and related disclosures.  

 

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.  The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.  Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary.  The new standard is effective for the Company in fiscal year 2022, and early adoption is permitted.  The Company is evaluating the effect of the new standard on the consolidated financial statements and related disclosures.

 

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.  ASU No. 2016-15 adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows with the intent of reducing diversity in practice related to eight types of cash flows including contingent

7


 

consideration payments made after a business combination.  The new standard is effective for the Company in fiscal year 2019.  The Company is evaluating the effect of the new standard on the consolidated financial statements and related disclosures.

 

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.  The ASU is intended to simplify various aspects of accounting for share-based compensation arrangements.  The ASU allows an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur.  The new standard is effective for the Company in fiscal year 2018.  The Company elected to account for forfeitures as they occur, and the adoption did not have a material impact upon the consolidated financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases.  The new standard requires lessees to record assets and liabilities on the balance sheet for all leases with terms longer than 12 months. The new standard is effective for the Company in fiscal year 2020.  Upon adoption, the lessee will apply the new standard retrospectively to all periods or retrospectively using a cumulative effect adjustment in the year of adoption.  The Company is evaluating the effect that ASU No. 2016-02 will have on the consolidated financial statements and related disclosures.

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers.  ASU No. 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services.   The new standard is effective for the Company in fiscal year 2019 and permits the use of either a retrospective or a cumulative effect transition method. The Company is evaluating the adoption method and the effect of the new standard on the Company's disclosures.  The adoption is not expected to have a material impact on the Company's consolidated financial position, results of operations, and cash flows or its business processes, systems, and controls.

 

Note 2 – Acquisitions

 

The Company accounts for business acquisitions under the acquisition method of accounting.  The total cost of business acquisitions is determined based on the fair value of the consideration transferred to the seller to acquire control, while the cost allocated to the underlying net assets acquired is based on their respective estimated fair values.  The excess of the consideration transferred over the estimated fair values of the net assets acquired is recorded as goodwill.  The operating results of the acquisitions are included in the accompanying statements of operations from the date of acquisition forward.  

 

In 2018, the Company acquired certain assets and liabilities of the companies in the table below.  Consideration for the acquisitions included 65,761 Non-Voting Common Units, valued using an option pricing model based on the terms of the Company’s issuance of Preferred Units in 2017.  The goodwill recorded represents the opportunity to expand restaurant delivery services and enhance the breadth and depth of the Company’s restaurant networks.  The Company expects $8,016,455 of goodwill added in 2018 to be tax deductible; however, the tax treatment is ultimately dependent on members’ individual tax returns.  The Company incurred $15,703 of transaction expenses recorded in the Company’s consolidated statement of operations.

 

Acquisition dates and purchase consideration allocated to assets acquired based on acquisition-date fair value were as follows:

 

Date

Assets Acquired

Goodwill

FV of Units Issued

Notes Payable (net of discount)

Gift Card Liability

Net Cash Paid

March 14, 2018

City Spree

$ 881,095

$ 259,045

$ 370,726

$ 1,577

$ 249,747

March 30. 2018

Chow Cab

3,724,075

733,857

1,990,219

9,434

990,565

April 20, 2018

Boone Takeout

702,828

81,909

520,919

2,918

97,082

June 5, 2018

Arrowhead Delivery

1,152,585

98,870

723,715

6,650

323,350

Various

Various

1,555,872

149,430

718,918

8,373

679,151

 

Total

$ 8,016,455

$ 1,323,111

$ 4,324,497

$ 28,952

$ 2,339,895

 

In 2017, the Company acquired certain assets of the companies in the table below.  Consideration for the acquisitions included 377,444 Non-Voting Common Units, valued using an option pricing model based on the terms of the Company’s issuance of Preferred Units in 2017.  The goodwill recorded represents the opportunity to expand restaurant delivery services and enhance the breadth and depth of the Company’s restaurant networks. The Company incurred $114,607 of transaction expenses recorded in the Company’s consolidated statement of operations.

 


8


 

Acquisition dates and purchase consideration allocated to assets acquired based on acquisition-date fair value were as follows:

 

Date

Assets Acquired

Goodwill

FV of Units Issued

Net Cash Paid

March 21, 2017

Chef Shuttle

$2,915,590

$915,923

$1,999,667

March 30, 2017

Foodify

1,174,885

1,107,666

67,219

May 1, 2017

Columbia Carry-out & 864togo

1,381,924

1,205,570

176,354

June 22, 2017

Foodie Call, Inc.

990,652

785,042

205,610

August 15, 2017

Aloha 2 Go

2,492,319

2,092,319

400,000

Various

Various

1,844,648

1,487,653

356,995

 

Total

$10,800,018

$7,594,173

$3,205,845

 

Note 3 – Goodwill

 

The changes in the carrying amount of goodwill for the years ended December 31, 2018 and 2017 were as follows:

 

 

Goodwill

 

Accumulated Impairment Losses

 

Net Book Value

Balance as of December 31, 2016

$18,464,672

 

$  -  

 

$18,464,672

   Acquisitions

10,800,018

 

-  

 

10,800,018

Balance as of December 31, 2017

29,264,690

 

-  

 

29,264,690

Acquisitions

8,016,455

 

-  

 

8,016,455

Sale of business

(150,000)

 

-  

 

(150,000)

Balance as of December 31, 2018

$37,131,145

 

$  -  

 

$37,131,145

 

On July 31, 2018, the Company closed the sale of substantially all assets of certain catering-only businesses that were originally purchased from Make the Delivery, LLC (d/b/a Zipdish.com).  The assets were sold to a shareholder in the affiliates of Make the Delivery, LLC, and the Company was required to provide transition services for 90 days after closing.  The Company sold the assets for total consideration of $1,362,000, with $500,000 in cash, received in October 2018, and the remainder through a promissory note.  The promissory note of $862,000 requires monthly payments starting 90 days after closing, with payments due at the greater of $5,000 or 3% of monthly gross receipts of the businesses.  The Company discounted the promissory note using 5% interest rate, recording an initial discount of $446,310.  The Company recorded a gain on the sale of $765,690, recorded in net non-operating income in the consolidated statement of operations, and derecognized $150,000 of goodwill.

 

Note 4 - Related Party Transactions

 

In 2018 and 2017, the Company paid the following to related parties through common ownership. These expenses are recorded in related party expenses in the consolidated statement of operations:

 

 

KSM Holdings, LLC - $210,000 and $220,104 in 2018 and 2017, respectively for management consulting services.

 

 

KASA Stores, LLC - $2,327 and $30,917 in 2018 and 2017, respectively, for telephone and internet, advertising, tablets, office supplies, travel, and management consulting services.

 

 

Auto Direct Midwest, LLC - $33,333 and $2,200 in 2018 and 2017, respectively, for management consulting services and leased property.

 

 

ADM Management, Inc. - $83,333 and $193,476 in 2018 and 2017, respectively, for management consulting services.

 

 

ADM Management, LLC - $86,677 and $0 in 2018 and 2017, respectively, for management consulting services.

 

In 2018 and 2017, respectively, the Company loaned $421,667 and $527,504 to certain former owners of Restaurant Delivery Developers, LLC, in secured, interest-free loans that were part of the former owners’ employment agreements.  In 2017, the Company forgave $120,000 of the loans related to an amendment to the employment agreements, recorded in operating expenses in the consolidated statement of operations.  Cumulative total loans as of December 31, 2018 and 2017 were $1,360,004 and $938,338, respectively, which are shown on the consolidated balance sheet net of discount of $44,455 and $60,579, respectively.

 

9


 

Note 5 – Commitments and Contingencies

 

Office Lease Commitments

 

The Company leases office space throughout the United States from unrelated parties, except for the lease with KSM Real Estate LLC described in Note 7.  Lease agreements expire at various dates through 2021.  Most lease agreements require the Company to pay operating costs, real estate taxes, and management fees.  Rent expense is recognized on a straight-line basis over the term of the lease agreement.  A deferred rent asset or liability is recognized to the extent straight-line rents differ from base rent payments made under the term of the agreement.  Rent expense was $1,162,883 and $803,357 for 2018 and 2017, respectively.

 

Approximate future minimum rental commitments (excluding operating costs) are as follows for the year ending December 31:

 

2019

$500,000

2020

200,000

2021

51,000

Total

$751,000

 

 

Vehicle Lease Commitments

 

The Company leases vehicles that expire at various dates through 2020.  The lease agreements require the Company to pay operating costs on the vehicles.  Vehicle rent expense was $902,127 and $1,053,054 for 2018 and 2017, respectively.

 

Approximate future rental commitments for vehicles (excluding operating costs) are as follows for the years ending December 31:

 

2019

$551,000

2020

131,000

Total

$682,000

 

Legal

 

From time to time, the Company is involved in various legal proceedings arising from the normal course of business activities, including labor and employment claims.  The Company records an accrual based on the reasonably estimable loss or range of loss.  When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss, and if material, disclose the estimated range of loss.  The Company does not believe these claims will have a material impact on the consolidated financial statements.

 

Note 6 – Convertible Notes, Net

 

In 2018, the Company issued a series of convertible promissory notes (“the notes”) to various investors up to $10 million, with $5,900,000 loaned on September 19, $123,777 on November 13, and $1,500,000 on November 15.  The notes are subordinate to the Preferred Unit holders’ liquidation preference.  The terms of the notes do not require payment unless and until a liquidation event occurs.  Upon a liquidation event, if the total proceeds from the liquidation event are insufficient to cover the liquidation preference in effect at the time, the principal balance converts to Common Units at $44.14 per unit.  If the total proceeds from the liquidation event are sufficient to ensure payment of the liquidation preference in effect at the time, and the liquidation event occurs on or prior to January 31, 2019, the Company will pay 110% of the principal amount of the notes.  

 

If the total proceeds from the liquidation event are sufficient to ensure payment of the liquidation preference, and the liquidation event occurs after January 31, 2019, the Company will pay the greater of: (1) a specified payment based on the anniversary date from the liquidation event date, ranging from 150% to 250% of the principal amount, or (2) the amount the noteholder would have received if the principal balance was converted into Common Units immediately prior to the liquidation event.


The Company determined the conversion and term-extending embedded features within the convertible promissory notes do not represent embedded derivatives in accordance with ASC 815, Derivatives.  The Company recorded the notes loaned on September 19, 2018, November 13, 2018, and November 15, 2018, at the cash proceeds received and recorded interest expense and accreted the notes to reach the payout of 110% of the principal value, $8,276,155, at January 31, 2019. The notes are recorded net of deferred debt issuance costs of $100,000 and the debt issuance costs are amortized over the expected life of the notes.  Because of the merger agreement described in Note 11, the Company expected the notes to be redeemed on or prior to January 31, 2019 and recorded the notes in current liabilities on the consolidated balance sheet. On January 18, 2019, as part of the agreement, the Company paid out a total of $8,276,155 to redeem the notes.

 

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Note 7 – Notes Payables

 

During the year ended December 31, 2018, the Company issued $4,739,676 of non-interest bearing promissory notes in conjunction with the 2018 acquisitions discussed within Note 2.  During the year ended December 31, 2018, portions of two loans, totaling $113,053, were forgiven by the sellers in lieu of making cash payments to the Company related to transition service agreements.  A total of 13 notes were issued in 2018 with monthly payments ranging between $1,751 to $45,833 per month.  The Company imputed discounts of $415,179 on the notes payable at 5.0 percent. The payment schedule for the notes differs for each acquisition with maturities ranging from 2018 to 2022.

 

Imputed interest expense related to the discounts on notes payable was $155,986 and $26,868 for the twelve months ended December 31, 2018 and 2017, respectively.  

 

KASA rents office space and parking from KSM Real Estate, LLC, an entity related through common ownership. The lease had a one-year term starting January 1, 2017, with annual base rent of $189,000.  The lease includes three options to renew the lease for a period of five years, with the first extension commencing January 1, 2018.  Rent expense was $189,000 and $168,000 in 2018 and 2017, respectively.  

 

KASA’s personal property and the building were provided as collateral in KSM Real Estate LLC’s loan, and KASA agreed to an unconditional guarantee of the loan.  The property’s loan matures June 24, 2038 and has a 5.45% interest rate.  The remaining principal balances of $786,426 and $810,574 at December 31, 2018 and December 31, 2017, respectively, were offset by deferred financing cost balances of $23,415 and $24,619 at December 31, 2018 and December 31, 2017, respectively.

 

Maturities on notes payables are as follows:

 

 

Notes Payable

Mortgage Payable

Total

2019

$1,630,871

$25,497

$1,656,368

2020

1,242,755

26,922

1,269,677

2021

978,096

28,427

1,006,523

2022

276,240

30,015

306,255

2023

-

31,692

31,692

Thereafter

  -

643,873

643,873

Total Maturities

$4,127,962

$786,426

  $4,914,388

Less: debt discounts

(282,082)

(23,415)

(305,498)

Total

$3,845,880

$763,011

  $4,608,891

 

Note 8 - Income Taxes

 

Bite Squad and KASA are treated as limited liability companies (LLCs) for federal and state income tax purposes.  As such, the income, losses, and credits are included in the income tax returns of its members.  In 2017, KASA Delivery Corporation was formed as a corporation in Minnesota and is a wholly-owned subsidiary of Bite Squad.  KASA Delivery Corporation is treated as a taxable entity.  KASA Delivery Corporation provides services to Bite Squad under a management services agreement.  The Company recorded income tax expense of $60,890 and $7,297 for the years ended December 31, 2018 and 2017, respectively. No deferred tax impact was recorded related to income tax expense.

 

The Company is not currently under examination in any taxing jurisdiction.  In the event of any future tax assessments, the Company has elected to record the income taxes and related interest and penalties as income tax expense in the Company’s consolidated statement of operations.

 

Note 9 – Members’ Equity

 

On January 6, 2017, Bite Squad recapitalized the outstanding equity interests and amended its operating agreement.  Existing membership units were initially exchanged for new classes of units.  The amended operating agreement established four classes of membership units: Voting Common Units, Non-Voting Common Units, Preferred Units, and Incentive Units.  All units are generally restricted in their transferability.

 

Voting Common Units.  Holders of Voting Common Units have one vote per unit, except for the two founders’ Voting Common Units, each of which is entitled 10 votes per unit.  

 

The 2,000,000 Founding Common Units outstanding as of December 31, 2016 were exchanged for 399,858 Preferred Units and 1,600,142 Voting Common Units.   There were 1,998,570 authorized and issued Voting Common Units as of December 31, 2018 and December 31, 2017.

 

11


 

Non-Voting Common Units.  Holders of Non-Voting Common Units have no voting rights. The 1,182,554 Non-Voting Common Units outstanding as of December 31, 2016 were exchanged for the same amount of Non-Voting Common Units under the amended operating agreement.

 

During the twelve months ended December 31, 2018, the Company issued 65,761 Non-Voting Common Units as acquisition consideration (Note 2), and all these units are outstanding as of December 31, 2018. There were 1,598,601 and 1,549,998 outstanding Non-Voting Common Units as of December 31, 2018 and 2017, respectively. On November 1, 2018 and December 3, 2018, the Company redeemed a total of 2,920 units, in exchange for cash of $80,212, held by certain former owners of Restaurant Delivery Developers, LLC, as part of the former owners’ employment agreements. In December 2018, the Company also received 14,238 units back from Foodie Call, Inc., a 2017 acquisition, due to certain revenue levels not being maintained.

 

Preferred Units.  Holders of Preferred Units have one vote on an as-converted basis (the number of Common Units into which Preferred Units could be converted).  All Preferred Units will automatically be converted into Common Units upon a public offering or in the event the Company is taxed as a corporation for U.S. federal tax purposes.  Investor members, as defined in the operating agreement, may redeem their units for cash at any time on or after the six-year anniversary of the amended operating agreement.  

 

The 687,956 Convertible Preferred Units outstanding as of December 31, 2016 were exchanged for 289,528 Preferred Units and 398,428 Voting Common Units.  After the recapitalization, holders of the Preferred Units sold 325,384 Preferred Units for $8,938,799 and the Company sold 766,650 Preferred Units for $21,061,201 during 2017.  Transaction expenses of $500,000 were recorded as a reduction of the proceeds, and the Company received the remaining $20,561,201 of net proceeds. At December 31, 2018 and December 31, 2017, 1,456,036 Preferred Units were outstanding.

 

Incentive Units.  The Incentive Units consist of Series B Incentive Units and Special Incentive Units.  The 182,924 Common Profit Interest Units outstanding as of December 31, 2016 were exchanged for the same amount of Series B Incentive Units, and this amount remained outstanding as of December 31, 2017.  In 2018, 17,514 units were forfeited, and 165,410 units remain outstanding as of December 31, 2018.  During the years ended December 31, 2018 and 2017, the Company recognized compensation costs of $331,139 and $2,611,736, respectively, based on each unit agreement’s required service period and performance condition.  As of December 31, 2018, there was no unrecognized compensation expense.

 

The Company authorized and issued 441,309 Special Incentive Units to the founders of Bite Squad.  At their discretion, the founders can issue the units to members of management.  The founders issued 189,452 Special Incentive Units as of December 31, 2017. An additional 22,930 Special Incentive Units were issued in 2018, and 17,142 units were forfeited.  Incentive Units have no voting rights, except for the two founders’ Special Incentive Units, each of which is entitled 10 votes per unit.  Compensation costs during the years ended December 31, 2018 and 2017 were $697,277 and $1,923,700, respectively. As of December 31, 2018, there was $1,285,273 of total unrecognized compensation expense, which is expected to be recognized over a weighted average period of 1.77 years.  

 

The Special Incentive Units’ vesting accelerates on a liquidation event, including the agreement described in Note 11, and the Company anticipates the incentive unit compensation to be paid out six months after the closing date.  

 

Note 10 – Fair Value Measurements

 

Fair value measurements are reported in one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

 

The Company’s contingent consideration (Level 3) is measured at fair value on a recurring basis and represents the estimated value (using a probability-weighted approach) of future payments to be made to previous owners of an acquired business (see Note 2).

 

The Company has recorded a contingent consideration liability related to the Takeout Taxi acquisition, due to the previous owners of the acquired business, if certain defined targets are achieved in a liquidity event. As of December 31, 2018, the Company recorded the contingent consideration liability equal to the final amount agreed to with Takeout Taxi.  The changes in the Company’s contingent consideration liability were as follows:

 

 

Balance as of December 31, 2016

$407,235

Amounts recorded related to new acquisitions

-

Net fair value adjustments

-

Settlements of contingent consideration liabilities

-

Balance as of December 31, 2017

$407,235

Amounts recorded related to new acquisitions

-

Net fair value adjustments

24,529

Settlements of contingent consideration liabilities

  -

Balance as of December 31, 2018

$431,764

 

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Note 11 – Subsequent Events

 

On December 11, 2018, the Company entered into a merger agreement (the “Merger”) with Waitr Holdings Inc. (“Waitr”) and Wingtip Merger Sub, Inc., a wholly-owned subsidiary of Waitr Holdings Inc.  On completion of the Merger on January 17, 2019, Wingtip Merger Sub, Inc. merged with and into the Company, with the Company surviving as a wholly-owned, indirect subsidiary of Waitr.  The aggregate consideration for the business combination consisted of (1) $192.9 million cash, and (2) 10.6 million shares of Waitr Holdings Inc. common stock, subject to final closing balance sheet adjustments.  As part of the closing of the merger, the KSM Real Estate loan was paid in full, removing KASA’s unconditional guarantee of the loan.  

Management has evaluated subsequent events occurring through March 4, 2019, the date the consolidated financial statements were available to be issued, for events requiring recording or disclosure in the Company’s consolidated financial statements.

13

wtrh-ex992_6.htm

Exhibit 99.2

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

Unless the context otherwise requires, the “Company” refers to Waitr Holdings Inc. and its subsidiaries after the closing of the business combination between Waitr Incorporated (“Waitr”) and Landcadia Holdings, Inc. (“Landcadia”) (the “Landcadia business combination”) and Landcadia prior to the closing of the Landcadia business combination.

The following unaudited pro forma condensed combined balance sheet as of December 31, 2018 gives pro forma effect to the acquisition of BiteSquad.com, LLC (“Bite Squad”), Amendment No. 1 to Credit and Guaranty Agreement, dated as of January 17, 2019, by and among Waitr Inc., as borrower, Waitr Intermediate Holdings, LLC, the various lenders party thereto and Luxor Capital Group, LP, as administrative agent and collateral agent (the “Credit and Guaranty Agreement Amendment”), pursuant to which Waitr Inc. borrowed $42.1 million of term loans (the “Additional Term Loans”) and the issuance of 325,000 shares of common stock of the Company to the lenders under the Credit and Guaranty Agreement Amendment in a private placement in connection with entering into the Credit and Guaranty Agreement Amendment (the “Credit Agreement Amendment Shares”), as if they had been completed on December 31, 2018. The Landcadia business combination was completed prior to December 31, 2018, and as a result it is already reflected in the Company’s historical consolidated balance sheet as of such date. The unaudited pro forma condensed combined statement of operations for the twelve months ended December 31, 2018 gives pro forma effect to the Landcadia business combination, the acquisition of Bite Squad, the Credit and Guaranty Agreement, dated November 15, 2018, by and among Waitr Inc., as borrower, Waitr Intermediate Holdings, LLC, the various lenders party thereto and Luxor Capital Group, LP, as administrative agent and collateral agent (the “Credit and Guaranty Agreement”), pursuant to which Waitr Inc. borrowed $25.0 million in term loans (the “Original Term Loans,” together with the Additional Term Loans, the “Term Loans”), the issuance of warrants exercisable for 384,615 shares of common stock of the Company to lenders under the Credit and Guaranty Agreement in connection with entering into the Credit and Guaranty Agreement (the “Warrant Issuance”), the Credit and Guaranty Agreement Amendment, the Credit Agreement Amendment Shares, the Credit Agreement, dated November 15, 2018, by and among the Company, the lenders party thereto and Luxor Capital Group, LP, as administrative agent (the “Convertible Notes Agreement”), pursuant to which the Company issued $60.0 million of unsecured convertible promissory notes (the “Notes”) and Amendment No. 1 to Credit Agreement, dated as of January 17, 2019, among the Company, the lenders party thereto and Luxor Capital Group, LP, as administrative agent (the “Convertible Notes Amendment” and together with the Credit and Guaranty Agreement, the Warrant Issuance, the Credit and Guaranty Agreement Amendment, the Credit Agreement Amendment Shares and the Convertible Notes Agreement, the “Debt Financings”) as if they had been completed on January 1, 2018.

The pro forma condensed combined financial statements are prepared in conformity with the Securities and Exchange Commission (“SEC”), Regulation S-X: Article 3, Rule 3-05, Financial Statements of Businesses Acquired or to be Acquired and Article 11, Pro forma Financial Information. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures provided herein are adequate to make the information presented not misleading. The pro forma condensed combined financial statements do not necessarily reflect what the post-combination company’s financial condition or results of operations would have been had the Landcadia business combination, the acquisition of Bite Squad and the Debt Financings occurred on the dates indicated. The pro forma condensed combined financial information also may not be useful in predicting the future financial condition and results of operations of the Company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

The historical financial information of the Company was derived from, and should be read in conjunction with, the audited financial statements of the Company as of and for the twelve months ended December 31, 2018 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 15, 2019 (the “2018 Form 10-K”), which are incorporated by reference herein. The historical financial information of Bite Squad was derived from, and should be read in conjunction with, the audited consolidated financial statements of Bite Squad as of and for the twelve months ended December 31, 2018 attached as Exhibit 99.1 to the Company’s Current Report on Form 8-K to which this Exhibit is attached (this “Form 8-K”), which are incorporated by reference herein. This

1

 


information should be read together with the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the Company’s 2018 Form 10-K, which is incorporated by reference herein, and “Bite Squad Management’s Discussion and Analysis of Financial Condition and Results of Operations,” attached as Exhibit 99.3 to this Form 8-K, which is incorporated by reference herein.

 

The Landcadia business combination was accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, Landcadia has been treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Landcadia business combination was treated as the equivalent of Waitr issuing stock for the net assets of Landcadia, accompanied by a recapitalization. The net assets of Landcadia were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Landcadia business combination are those of Waitr.

Waitr was determined to be the accounting acquirer based on an evaluation of the following facts and circumstances:

 

the post-combination company’s board of directors consisted of seven directors. Waitr had control of the Chairmanship and appointed four of the seven Board members;

 

 

 

Waitr held C-suite management roles for the post-combination company;

 

 

 

from a revenue and business operation standpoint, Waitr was the larger entity in terms of relative size;

 

 

 

Waitr’s then-current Lake Charles, LA headquarters became the headquarters of the post-combination company;

 

 

 

the post-combination company assumed Waitr’s name;

 

 

 

the Company’s shares of common stock and warrants began trading on Nasdaq under the symbols “WTRH” and “WTRHW,” respectively;

 

 

 

the intended strategy of the post-combination entity was Waitr’s then-current strategy of partnering with local independent restaurants and regional and national chains in underserved markets; and

 

 

 

other factors were considered, including the fact that the Landcadia stockholder group had the greatest voting interest. However, Waitr holding the C-suite management roles for the post-combination company, in addition to its ability to appoint 4 of the 7 Board members significantly decreased the ability of Landcadia stockholders to control on voting interest alone. Additionally, the Landcadia stockholder group held only a slight majority with 57.8% of the voting interest.

 

 

Following the Landcadia business combination, the Company completed the acquisition of Bite Squad pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”), dated as of December 11, 2018, by and among the Company, Bite Squad and Wingtip Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company. The acquisition of Bite Squad was considered a business combination in accordance with ASC 805, and will be accounted for using the acquisition method. The Company will record the fair value of assets acquired and liabilities assumed from Bite Squad.  Any consideration paid in excess of fair value of assets acquired and liabilities assumed will be attributed to goodwill.

Description of the Bite Squad acquisition

The consideration for the acquisition of Bite Squad consisted of (i) an aggregate of $192.9 million payable in cash, subject to adjustments, and (ii) an aggregate of 10,591,968 shares of the Company’s common stock, par value $0.0001 per share. The following represents the aggregate consideration:

2

 


(in thousands)

 

As of December 31, 2018

 

Shares transferred at Closing

 

 

10,592

 

Value per share (1)

 

$

10.00

 

Total Share Consideration

 

$

105,920

 

Plus: Cash Transferred to Bite Squad members

 

 

192,949

 

Total Cash and Share Consideration - at Closing

 

$

298,869

 

 

(1)

Value represents the Reference Price as defined in the Merger Agreement. The closing share price on the date of the consummation of the transaction was $11.95. As the acquisition of Bite Squad was accounted for as a business combination, total consideration reflected in the unaudited pro forma condensed combined balance sheet was calculated using the share price on the date of closing of the acquisition of Bite Squad. For additional information, see footnote (B) to Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet.

The following summarizes the pro forma common shares outstanding as of December 31, 2018:

 

 

Shares

 

 

%

 

Waitr Holdings Inc. Common Stock at December 31, 2018

 

 

54,035,538

 

 

 

83

%

Credit Agreement Amendment Shares

 

 

325,000

 

 

 

1

%

Bite Squad Merger Consideration shares

 

 

10,591,968

 

 

 

16

%

Pro Forma Common Stock at December 31, 2018

 

 

64,952,506

 

 

 

100

%

 

The following unaudited pro forma condensed combined balance sheet as of December 31, 2018 and the unaudited pro forma condensed combined statement of operations for the twelve months ended December 31, 2018 are based on the historical financial statements of the Company included in the Company’s 2018 Form 10-K and incorporated by reference herein and the historical financial statements of Bite Squad attached as Exhibit 99.1 to this Form 8-K and incorporated by reference herein. The unaudited pro forma adjustments are based on information currently available, assumptions, and estimates underlying the unaudited pro forma adjustments that are described in the accompanying notes. Actual results may differ materially from the assumptions used to present the accompanying unaudited pro forma condensed combined financial information.


3

 


UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(in thousands)

 

 

 

As of December 31, 2018

 

 

 

 

 

 

 

 

 

 

As of December 31, 2018

 

 

 

Waitr

(Historical)

 

 

Bitesquad

(Historical) (E)

 

 

Debt Financing Adjustments

 

 

Bitesquad Transaction Adjustments

 

 

Pro Forma

Combined

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

209,340

 

 

$

17,088

 

 

$

41,705

 

(A)

$

(192,949

)

(B)

$

54,982

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,705

)

(G)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,497

)

(H)

 

 

 

Accounts receivable, net

 

 

3,687

 

 

 

3,988

 

 

 

 

 

 

 

 

 

 

 

7,675

 

Capitalized contract costs, current

 

 

1,869

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

1,869

 

Prepaid expenses and other current assets

 

 

4,548

 

 

 

1,391

 

 

 

 

 

 

 

 

 

 

 

5,939

 

TOTAL CURRENT ASSETS

 

 

219,444

 

 

 

22,467

 

 

 

41,705

 

 

 

(213,151

)

 

 

70,465

 

Property and equipment, net

 

 

4,551

 

 

 

909

 

 

 

 

 

 

 

(909

)

(I)

 

4,551

 

Capitalized contract costs, current

 

 

827

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

827

 

Goodwill

 

 

1,408

 

 

 

37,131

 

 

 

 

 

 

 

180,008

 

(C)

 

218,547

 

Intangible assets, net

 

 

261

 

 

 

-

 

 

 

 

 

 

 

107,000

 

(D)

 

107,261

 

Other noncurrent assets

 

 

61

 

 

 

1,822

 

 

 

 

 

 

 

(1,416

)

(I)

 

467

 

TOTAL ASSETS

 

$

226,552

 

 

$

62,329

 

 

$

41,705

 

 

$

71,532

 

 

$

402,118

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,827

 

 

$

807

 

 

 

 

 

 

 

 

 

 

$

2,634

 

Gratuities payable

 

 

790

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

790

 

Accrued payroll

 

 

2,265

 

 

 

3,792

 

 

 

 

 

 

 

 

 

 

 

6,057

 

Short-term loan

 

 

658

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

658

 

Deferred revenue, current

 

 

3,314

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

3,314

 

Income tax payable

 

 

25

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

25

 

Other current liabilities

 

 

4,716

 

 

 

20,130

 

 

 

 

 

 

 

(9,536

)

(G)

 

19,285

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,000

 

(H)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25

)

(I)

 

 

 

TOTAL CURRENT LIABILITIES

 

 

13,595

 

 

 

24,729

 

 

 

-

 

 

 

(5,561

)

 

 

32,763

 

Long-term debt

 

 

80,985

 

 

 

 

 

 

 

37,821

 

(A)

 

 

 

 

 

118,806

 

Accrued workers' compensation liability

 

 

908

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

908

 

Deferred revenue, noncurrent

 

 

1,356

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

1,356

 

Other noncurrent liabilities

 

 

217

 

 

 

3,522

 

 

 

 

 

 

 

(2,784

)

(G)

 

217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(738

)

(I)

 

 

 

TOTAL LIABILITIES

 

 

97,061

 

 

 

28,251

 

 

 

37,821

 

 

 

(9,083

)

 

 

154,050

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value

 

 

5

 

 

 

-

 

 

 

 

 

 

 

1

 

(B)

 

6

 

Additional paid in capital

 

 

200,417

 

 

 

34,078

 

 

 

3,884

 

(A)

 

(34,078

)

(F)

 

330,875

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

126,574

 

(B)

 

 

 

Accumulated deficit

 

 

(70,931

)

 

 

-

 

 

 

 

 

 

 

(385

)

(G)

 

(82,813

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,497

)

(H)

 

 

 

TOTAL STOCKHOLDERS' EQUITY

 

 

129,491

 

 

 

34,078

 

 

 

3,884

 

 

 

80,615

 

 

 

248,068

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

226,552

 

 

$

62,329

 

 

$

41,705

 

 

$

71,532

 

 

$

402,118

 

 

See accompanying notes to unaudited pro forma condensed combined financial information.


4

 


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(in thousands, except share and per share data)

 

 

 

Twelve Months Ended December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended December 31, 2018

 

 

 

Waitr

(Historical)

 

 

Bitesquad (Historical)

 

 

Pro Forma

Adjustments

 

 

Debt Financing Adjustments

 

 

Bitesquad Transaction Adjustments

 

 

Pro Forma

Combined

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE

 

$

69,273

 

 

$

83,369

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

152,642

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operations and support

 

 

51,428

 

 

 

57,298

 

 

 

64

 

(HH)

 

 

 

 

 

 

 

 

 

108,730

 

 

 

 

 

 

 

 

 

 

 

 

(60

)

(FF)

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

15,695

 

 

 

15,494

 

 

 

26

 

(II)

 

 

 

 

 

 

 

 

 

29,897

 

 

 

 

 

 

 

 

 

 

 

 

(1,318

)

(FF)

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

3,913

 

 

 

2,880

 

 

 

44

 

(HH)

 

 

 

 

 

 

 

 

 

6,009

 

 

 

 

 

 

 

 

 

 

 

 

(828

)

(FF)

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

31,148

 

 

 

12,248

 

 

 

691

 

(EE)

 

 

 

 

 

 

 

 

 

31,576

 

 

 

 

 

 

 

 

 

 

 

 

(13,217

)

(FF)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

(HH)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

697

 

(JJ)

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,223

 

 

 

106

 

 

 

-

 

 

 

 

 

 

 

18,175

 

(GG)

 

19,504

 

Related party expenses

 

 

-

 

 

 

415

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

415

 

Loss on disposal of assets

 

 

9

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

9

 

TOTAL COSTS AND EXPENSES

 

 

103,416

 

 

 

88,441

 

 

 

(13,892

)

 

 

-

 

 

 

18,175

 

 

 

196,140

 

LOSS FROM OPERATIONS

 

 

(34,143

)

 

 

(5,072

)

 

 

13,892

 

 

 

-

 

 

 

(18,175

)

 

 

(43,498

)

OTHER EXPENSES (INCOME) AND (GAINS), NET

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense (income), net

 

 

1,416

 

 

 

617

 

 

 

(1,365

)

(BB)