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TABLE_CONTENTS

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2021 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM                      TO                     

 

Commission File Number 001-37788

 

WAITR HOLDINGS INC.

(Exact name of Registrant as specified in its Charter)

 

 

Delaware

 

26-3828008

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer
Identification No.)

214 Jefferson Street, Suite 200

Lafayette, Louisiana

 

70501

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: 1-337-534-6881

______________________

 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

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.  

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No  

 

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, Par Value $0.0001 Per Share

 

WTRH

 

The Nasdaq Stock Market LLC

The number of shares of Registrant’s Common Stock outstanding as of May 4, 2021 was 115,390,755.

 

 


TABLE_CONTENTS

 

 

Table of Contents

 

 

 

Page

PART I

Financial Information

1

Item 1.

Condensed Consolidated Financial Statements (unaudited)

1

 

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

1

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020

2

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020

3

 

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020

4

 

Notes to Condensed Consolidated Financial Statements

5

Item 2.

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

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

29

 

 

 

PART II

Other Information

30

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3.

Defaults Upon Senior Securities

31

Item 4.

Mine Safety Disclosures

31

Item 5.

Other Information

31

Item 6.

Exhibits

32

 

 

 

 

Signatures

33

 

 

 

 


TABLE_CONTENTS

 

 

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

WAITR HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

Unaudited

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

Cash

 

$

67,863

 

 

$

84,706

 

Accounts receivable, net

 

 

4,907

 

 

 

2,954

 

Capitalized contract costs, current

 

 

868

 

 

 

737

 

Prepaid expenses and other current assets

 

 

4,955

 

 

 

6,657

 

TOTAL CURRENT ASSETS

 

 

78,593

 

 

 

95,054

 

Property and equipment, net

 

 

4,961

 

 

 

3,503

 

Capitalized contract costs, noncurrent

 

 

2,759

 

 

 

2,429

 

Goodwill

 

 

122,032

 

 

 

106,734

 

Intangible assets, net

 

 

31,514

 

 

 

23,924

 

Operating lease right-of-use assets

 

 

5,064

 

 

 

 

Other noncurrent assets

 

 

750

 

 

 

588

 

TOTAL ASSETS

 

$

245,673

 

 

$

232,232

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,039

 

 

$

4,382

 

Restaurant food liability

 

 

5,890

 

 

 

4,301

 

Accrued payroll

 

 

6,460

 

 

 

4,851

 

Short-term loans for insurance financing

 

 

1,143

 

 

 

2,726

 

Deferred revenue, current

 

 

290

 

 

 

141

 

Income tax payable

 

 

146

 

 

 

122

 

Operating lease liabilities

 

 

1,518

 

 

 

 

Other current liabilities

 

 

24,974

 

 

 

13,781

 

TOTAL CURRENT LIABILITIES

 

 

45,460

 

 

 

30,304

 

Long term debt - related party

 

 

80,508

 

 

 

94,218

 

Accrued medical contingency

 

 

16,844

 

 

 

16,987

 

Operating lease liabilities

 

 

3,885

 

 

 

 

Other noncurrent liabilities

 

 

1,740

 

 

 

2,627

 

TOTAL LIABILITIES

 

 

148,437

 

 

 

144,136

 

Commitments and contingent liabilities (Note 10)

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value; 249,000,000 shares authorized and 115,387,140

   and 111,259,037 shares issued and outstanding at March 31, 2021 and

   December 31, 2020, respectively

 

 

11

 

 

 

11

 

Additional paid in capital

 

 

464,843

 

 

 

451,991

 

Accumulated deficit

 

 

(367,618

)

 

 

(363,906

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

97,236

 

 

 

88,096

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

245,673

 

 

$

232,232

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


TABLE_CONTENTS

 

WAITR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

REVENUE

 

$

50,930

 

 

$

44,243

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

Operations and support

 

 

30,338

 

 

 

26,365

 

Sales and marketing

 

 

4,016

 

 

 

2,826

 

Research and development

 

 

999

 

 

 

1,470

 

General and administrative

 

 

10,186

 

 

 

10,778

 

Depreciation and amortization

 

 

2,917

 

 

 

2,064

 

(Gain) loss on disposal of assets

 

 

(3

)

 

 

8

 

TOTAL COSTS AND EXPENSES

 

 

48,453

 

 

 

43,511

 

INCOME FROM OPERATIONS

 

 

2,477

 

 

 

732

 

OTHER EXPENSES (INCOME) AND LOSSES (GAINS), NET

 

 

 

 

 

 

 

 

Interest expense

 

 

1,901

 

 

 

2,914

 

Interest income

 

 

 

 

 

(60

)

Other expense

 

 

4,264

 

 

 

(37

)

NET LOSS BEFORE INCOME TAXES

 

 

(3,688

)

 

 

(2,085

)

Income tax expense

 

 

24

 

 

 

17

 

NET LOSS

 

$

(3,712

)

 

$

(2,102

)

LOSS PER SHARE:

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.03

)

 

$

(0.03

)

Weighted average shares used to compute net loss per share:

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic and diluted

 

 

112,334,094

 

 

 

76,884,717

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


TABLE_CONTENTS

 

WAITR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(3,712

)

 

$

(2,102

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Non-cash interest expense

 

 

772

 

 

 

2,396

 

Amortization of operating lease assets

 

 

323

 

 

 

 

Stock-based compensation

 

 

2,078

 

 

 

848

 

(Gain) loss on disposal of assets

 

 

(3

)

 

 

8

 

Depreciation and amortization

 

 

2,917

 

 

 

2,064

 

Amortization of capitalized contract costs

 

 

194

 

 

 

68

 

Other non-cash income

 

 

 

 

 

(12

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(1,624

)

 

 

(90

)

Capitalized contract costs

 

 

(655

)

 

 

(1,049

)

Prepaid expenses and other current assets

 

 

1,899

 

 

 

3,246

 

Other noncurrent assets

 

 

27

 

 

 

 

Accounts payable

 

 

20

 

 

 

698

 

Restaurant food liability

 

 

1,589

 

 

 

(591

)

Deferred revenue

 

 

140

 

 

 

(378

)

Income tax payable

 

 

24

 

 

 

17

 

Operating lease liabilities

 

 

(389

)

 

 

 

Accrued payroll

 

 

1,479

 

 

 

2,129

 

Accrued medical contingency

 

 

(143

)

 

 

(69

)

Accrued workers’ compensation liability

 

 

 

 

 

2

 

Other current liabilities

 

 

7,911

 

 

 

(157

)

Other noncurrent liabilities

 

 

(38

)

 

 

(1

)

Net cash provided by operating activities

 

 

12,809

 

 

 

7,027

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(165

)

 

 

(70

)

Internally developed software

 

 

(1,722

)

 

 

(671

)

Acquisitions

 

 

(10,927

)

 

 

(242

)

Collections on notes receivable

 

 

 

 

 

21

 

Proceeds from sale of property and equipment

 

 

9

 

 

 

3

 

Net cash used in investing activities

 

 

(12,805

)

 

 

(959

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of stock

 

 

 

 

 

6,584

 

Equity issuance costs

 

 

 

 

 

(114

)

Payments on long-term loan

 

 

(14,472

)

 

 

 

Payments on acquisition loans

 

 

(66

)

 

 

 

Payments on short-term loans for insurance financing

 

 

(1,583

)

 

 

(2,028

)

Proceeds from exercise of stock options

 

 

6

 

 

 

8

 

Taxes paid related to net settlement on stock-based compensation

 

 

(732

)

 

 

(459

)

Net cash (used in) provided by financing activities

 

 

(16,847

)

 

 

3,991

 

Net change in cash

 

 

(16,843

)

 

 

10,059

 

Cash, beginning of period

 

 

84,706

 

 

 

29,317

 

Cash, end of period

 

$

67,863

 

 

$

39,376

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

1,129

 

 

$

518

 

Supplemental disclosures of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Stock issued as consideration in acquisition

 

$

11,500

 

 

$

 

Noncash impact of operating lease assets

 

 

5,387

 

 

 

 

Noncash impact of operating lease liabilities

 

 

5,792

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

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WAITR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)

 

Three Months Ended March 31, 2021

 

 

 

Common stock

 

 

Additional

paid in

capital

 

 

Accumulated

deficit

 

 

Total

stockholders’

equity

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2020

 

 

111,259,037

 

 

$

11

 

 

$

451,991

 

 

$

(363,906

)

 

$

88,096

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(3,712

)

 

 

(3,712

)

Exercise of stock options and vesting of restricted stock units

 

 

537,436

 

 

 

 

 

 

6

 

 

 

 

 

 

6

 

Taxes paid related to net settlement on stock-based compensation

 

 

 

 

 

 

 

 

(732

)

 

 

 

 

 

(732

)

Stock-based compensation

 

 

 

 

 

 

 

 

2,078

 

 

 

 

 

 

2,078

 

Equity issued for acquisitions

 

 

3,590,667

 

 

 

 

 

 

11,500

 

 

 

 

 

 

11,500

 

Balances at March 31, 2021

 

 

115,387,140

 

 

$

11

 

 

$

464,843

 

 

$

(367,618

)

 

$

97,236

 

 

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

Additional

paid in

capital

 

 

Accumulated

deficit

 

 

Total

stockholders’

equity

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2019

 

 

76,579,175

 

 

$

8

 

 

$

385,137

 

 

$

(379,742

)

 

$

5,403

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(2,102

)

 

 

(2,102

)

Exercise of stock options and vesting of restricted stock units

 

 

35,990

 

 

 

 

 

 

8

 

 

 

 

 

 

8

 

Taxes paid related to net settlement on stock-based compensation

 

 

 

 

 

 

 

 

(459

)

 

 

 

 

 

(459

)

Stock-based compensation

 

 

 

 

 

 

 

 

848

 

 

 

 

 

 

848

 

Issuance of common stock

 

 

4,192,743

 

 

 

 

 

 

6,470

 

 

 

 

 

 

6,470

 

Balances at March 31, 2020

 

 

80,807,908

 

 

$

8

 

 

$

392,004

 

 

$

(381,844

)

 

$

10,168

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

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WAITR HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

1.   Organization

Waitr Holdings Inc., a Delaware corporation, together with its wholly owned subsidiaries (the “Company,” “Waitr,” “we,” “us” and “our”), operates an online ordering technology platform, providing delivery, carryout and dine-in options, connecting restaurants, drivers and diners in cities across the United States. The Company’s technology platform includes the Waitr and Bite Squad mobile applications, and more recently, the Delivery Dudes mobile application, collectively referred to as the “Platforms”. The Platforms allow consumers to browse local restaurants and menus, track order and delivery status, and securely store previous orders for ease of use and convenience. Restaurants benefit from the online Platforms through increased exposure to consumers for expanded business in the delivery market and carryout sales.

2.   Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The unaudited interim condensed consolidated financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) as they apply to interim financial information. Accordingly, the interim condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete annual financial statements, although the Company believes that the disclosures made are adequate to make information not misleading. References to the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) included hereafter refer to the ASC and ASUs established by the Financial Accounting Standards Board (the “FASB”) as the source of authoritative GAAP.

The unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations, contained in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”). The interim condensed consolidated financial statements are unaudited, but in the Company’s opinion, include all adjustments that are necessary for a fair presentation of the results for the periods presented. The interim results are not necessarily indicative of results that may be expected for any other interim period or the fiscal year.

During the third quarter of 2020, the Company identified and corrected an immaterial error related to the understatement of an accrued medical contingency that affected previously issued consolidated financial statements. In order to present the impact of the updated estimated liability for the claim, previously issued financial statements have been revised. See Note 9 – Correction of Prior Period Error for additional details, including a summary of the revisions to certain previously reported financial information presented herein for comparative purposes.

Reclassifications

Certain amounts from prior periods have been reclassified to conform to the current period presentation.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and all wholly owned subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in accordance with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Significant estimates and judgments relied upon in preparing these condensed consolidated financial statements affect the following items:

 

incurred loss estimates under our insurance policies with large deductibles or retention levels;

 

loss exposure related to claims such as the Medical Contingency (see Note 9 – Correction of Prior Period Error);

 

income taxes;

 

useful lives of tangible and intangible assets;

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equity compensation;

 

contingencies;

 

goodwill and other intangible assets, including the recoverability of intangible assets with finite lives and other long-lived assets; and

 

fair value of assets acquired and liabilities assumed as part of a business combination.

The Company regularly assesses these estimates and records changes to estimates in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions believed to be reasonable under the circumstances. Changes in the economic environment, financial markets, and any other parameters used in determining these estimates could cause actual results to differ from those estimates.

Impact of COVID-19 on our Business

Waitr has thus far been able to operate during the pandemic caused by the outbreak of SARS-CoV-2 (“COVID-19”). We have taken several steps to help protect and support our restaurant partners, diners, independent contractor drivers and our employees during the COVID-19 outbreak, including offering no-contact delivery in select markets, offering no-contact grocery delivery in select markets, working with certain restaurant partners to waive diner delivery fees, deploying free marketing programs for certain restaurants and providing masks, gloves and hand sanitizer to drivers. We continue to monitor the impact of the COVID-19 outbreak, although there remains significant uncertainty related to the public health impact and the global economic situation.

Critical Accounting Policies and Estimates

See “Recent Accounting Pronouncements” below for a description of accounting principle changes adopted during the three months ended March 31, 2021 related to leases. There have been no other material changes to our critical accounting policies and estimates described in the 2020 Form 10-K. See “Revenue” below for a description of our revenue recognition policy.

Revenue

The Company generates revenue (“Transaction Fees”) primarily when diners place an order on one of the Platforms. In the case of diner subscription fees for our unlimited delivery subscription program, revenue is recognized for the receipt of the monthly fee in the applicable month for which the delivery service applies to. Revenue consists of the following for the periods indicated (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Transaction Fees

 

$

50,476

 

 

$

43,811

 

Setup and integration fees

 

 

7

 

 

 

378

 

Other

 

 

447

 

 

 

54

 

Total Revenue

 

$

50,930

 

 

$

44,243

 

 

Transaction Fees represent the revenue recognized from the Company’s obligation to process orders on the Platforms. The performance obligation is satisfied when the Company successfully processes an order placed on one of the Platforms and the restaurant receives the order at their location. The obligation to process orders on the Platforms represents a series of distinct performance obligations satisfied over time that the Company combines into a single performance obligation. Consistent with the recognition objective in ASC Topic 606, Revenue from Contracts with Customers, the variable consideration due to the Company for processing orders is recognized on a daily basis. As an agent of the restaurant in the transaction, the Company recognizes Transaction Fees earned from the restaurant on the Platform on a net basis. Transaction Fees also include a fee charged to the end user customer when they request the order be delivered to their location. Revenue is recognized for diner fees once the delivery service is completed. The contract period for substantially all restaurant contracts is one month as both the Company and the restaurant have the ability to unilaterally terminate the contract by providing notice of termination.

During the three months ended March 31, 2021 and 2020, the Company recognized revenue for non-refundable setup and integration fees for onboarding certain restaurants. In connection with modifications to the Company’s fee structure in July 2019, the Company discontinued offering fee arrangements with the upfront, one-time setup and integration fee.

The Company records a receivable when it has an unconditional right to the consideration. The balance of accounts receivable, net was $4,907 and $2,954 as of March 31, 2021 and December 31, 2020, respectively, comprised primarily of credit card receivables due from the credit card processor.

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Costs to Obtain a Contract with a Customer

The Company recognizes an asset for the incremental costs of obtaining a contract with a restaurant and recognizes the expense over the course of the period when the Company expects to recover those costs. The Company has determined that certain internal sales incentives earned at the time when an initial contract is executed meet these requirements. Capitalized sales incentives are amortized to sales and marketing expense on a straight-line basis over the period of benefit, which the Company has determined to be five years. The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less.

Deferred costs related to obtaining contracts with restaurants were $2,734 and $2,424 as of March 31, 2021 and December 31, 2020, respectively, out of which $659 and $567, respectively, was classified as current. Amortization of expense for the costs to obtain a contract were $149 and $53 for the three months ended March 31, 2021 and 2020, respectively.

Costs to Fulfill a Contract with a Customer

The Company also recognizes an asset for the costs to fulfill a contract with a restaurant when they are specifically identifiable, generate or enhance resources used to satisfy future performance obligations, and are expected to be recovered. The Company has determined that certain costs related to setup and integration activities meet the capitalization criteria under ASC Topic 340-40, Other Assets and Deferred Costs. Costs related to these implementation activities are deferred and then amortized to operations and support expense on a straight-line basis over the period of benefit, which the Company has determined to be five years.

Deferred costs related to fulfilling contracts with restaurants were $893 and $742 as of March 31, 2021 and December 31, 2020, respectively, out of which $209 and $170, respectively, was classified as current. Amortization of expense for the costs to fulfill a contract were $45 and $15 for the three months ended March 31, 2021 and 2020, respectively.

Recent Accounting Pronouncements

The Company considered the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on these unaudited condensed consolidated financial statements. Throughout fiscal year 2020, the Company qualified as an “emerging growth company” pursuant to the provisions of the JOBS Act. As an emerging growth company, the Company elected to use the extended transition period for complying with certain new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Effective January 1, 2021, the Company is no longer an emerging growth company.

Recently Adopted Accounting Standards

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The principal objective of ASU 2016-02 is to increase transparency and comparability among organizations by recognizing “right-of-use” lease assets and lease liabilities on the consolidated balance sheet. ASU 2016-02 continues to retain a distinction between finance and operating leases but requires lessees to recognize a right-of-use asset representing its right to use the underlying asset for the lease term and a corresponding lease liability on the balance sheet for all leases with terms greater than twelve months. ASU 2016-02 was effective for and adopted by the Company on January 1, 2021. The Company applied the modified retrospective transition approach, with no adjustment to prior comparative periods. Accordingly, financial information is not adjusted and the disclosures required under ASU 2016-02 are not provided for periods prior to January 1, 2021.

The Company determines if an arrangement is a lease at inception of a contract. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company elected the optional practical expedient package, which includes retaining the current classification of leases, and is utilizing the practical expedient which allows the use of hindsight in determining the lease term and in assessing impairment of its operating lease right-of-use assets. Additionally, the Company has elected to treat lease and non-lease components as a single lease component for all assets. The Company has elected to apply the short-term scope exception for leases with original terms of twelve months or less, and accordingly, recognizes the lease payments for such leases in the statement of operations on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

Under ASU 2016-02, the Company recorded in the unaudited condensed consolidated balance sheet as of January 1, 2021, lease liabilities for operating leases entered into prior to December 31, 2020 of $4,993, representing the present value of its future operating lease payments, and corresponding right-of-use assets of $4,681, based upon the operating lease liabilities adjusted for deferred rent. As most of the Company’s leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date,

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which is estimated to be 5.0%. The adoption of ASU 2016-02 did not result in a cumulative-effect adjustment on retained earnings. See Note 10 – Commitments and Contingencies for additional details.

Other

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles for income taxes and also improves consistent application by clarifying and amending existing guidance. ASU 2019-12 was effective for and adopted by the Company on January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on the Company’s disclosures or consolidated financial statements.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of ASU 2017-11 addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced based on the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of ASU 2017-11 addresses the difficulty of navigating ASC Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in ASC 480. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. Part II of ASU 2017-11 does not have an accounting effect. ASU 2017-11 was effective for and adopted by the Company on January 1, 2021. The adoption of ASU 2017-11 did not have a material impact on the Company’s disclosures or consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, to replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 uses a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments and expands disclosure requirements. ASU 2016-13 was effective for and adopted by the Company on January 1, 2021. The adoption of ASU 2016-13 did not have a material impact on the Company’s disclosures or consolidated financial statements

Pending Accounting Standards

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt, resulting in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation. ASU 2020-06 is effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impacts of the provisions of ASU 2020-06 on its consolidated financial statements and related disclosures.

3.   Business Combinations

2021 Acquisition

On March 11, 2021, the Company completed the acquisition of certain assets and properties from Dude Holdings LLC (“Delivery Dudes”), a third-party delivery business primarily serving the South Florida market, for $11,500 in cash, subject to certain purchase price adjustments, and 3,562,577 shares of the Company’s common stock (the “Delivery Dudes Acquisition”). The share consideration was valued at $3.23 per share, representing the average volume weighted average price of the Company’s common stock for the five consecutive trading days prior to March 9, 2021. The acquisition expands the Company’s market presence in the on-demand delivery service sector. The following represents the preliminary estimated purchase consideration:

 

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(in thousands, except per share amount)

 

 

 

 

Shares transferred at closing

 

 

3,562

 

Value per share

 

$

3.23

 

Total share consideration

 

 

11,500

 

Plus: cash transferred to Delivery Dudes members

 

 

10,927

 

Plus: net working capital deficit assumed

 

 

573

 

Total estimated consideration

 

$

23,000

 

 

The Delivery Dudes Acquisition was considered a business combination in accordance with ASC 805, and was accounted for using the acquisition method. Under the acquisition method of accounting, acquired assets and assumed liabilities are recorded based on their respective fair values on the acquisition date, with the excess of the consideration transferred in the acquisition over the fair value of the assets and liabilities acquired recorded as goodwill. The preliminary estimated fair value of assets acquired and liabilities assumed consists of the following (in thousands):

 

Cash and cash equivalents

 

$

573

 

Accounts receivable

 

 

330

 

Prepaid expenses and other current assets

 

 

130

 

Intangible assets

 

 

7,700

 

Other noncurrent assets

 

 

33

 

Accrued expenses and other current liabilities

 

 

(1,035

)

Other noncurrent liabilities

 

 

(29

)

Total assets acquired, net of liabilities assumed

 

 

7,702

 

Goodwill

 

 

15,298

 

Total estimated consideration

 

$

23,000

 

 

The Company engaged a third-party specialist to assist management in estimating the fair value of the assets and liabilities. Goodwill is attributable to the future anticipated economic benefits from combining operations of the Company and Delivery Dudes, including future growth into new markets, future customer relationships and the workforce in place. All of the goodwill is expected to be deductible for U.S. federal income tax purposes. While the Company has substantially completed the determination of the fair values of the assets acquired and liabilities assumed, the Company is still finalizing the calculation of the purchase price adjustments pursuant to the asset purchase agreement for the Delivery Dudes Acquisition, which could affect the final fair value analysis. The Company anticipates finalizing the determination of the fair values by the second quarter of 2021.

The following table sets forth the components of estimated identifiable intangible assets acquired from Delivery Dudes (in thousands) and their estimated useful lives as of the acquisition date:

 

 

 

Amortizable

Life (in years)

 

 

Value

 

Customer relationships

 

 

7.5

 

 

$

4,700

 

Franchise relationships

 

 

1.0

 

 

 

250

 

Trade name

 

 

3.0

 

 

 

800

 

Developed technology

 

 

2.0

 

 

 

1,900

 

In-process research and development

 

 

2.0

 

 

 

50

 

Total

 

 

 

 

 

$

7,700

 

 

The acquired identifiable intangible assets are amortized on a straight-line basis to reflect the pattern in which the economic benefits of the intangible assets are consumed. The acquired customer relationships were valued using the income approach, specifically, the multi-period excess earnings method, which measures the after-tax cash flows attributable to the existing customer relationships after deducting the operating costs and contributory asset charges associated with economic rents associated with supporting the existing customer relationships. The franchise relationships were also valued using the multi-period excess earnings method. The acquired trade name was valued using the income approach, specifically, the relief from royalty rate method, which measures the cash flow streams attributable to the trade name in the form of royalty payments that would be paid to the owner of the trade name in return for the rights to use the trade name. Developed technology was valued based on the cost approach, specifically the “with & without” methodology which considers the direct replacement and opportunity costs associated with the underlying technology, and in-process research and development assets were valued using the replacement cost method. These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. These inputs required significant judgments and estimates at the time of the valuation.

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The results of operations of Delivery Dudes are included in our unaudited condensed consolidated financial statements beginning on the acquisition date, March 11, 2021. Revenue and net loss of Delivery Dudes included in the unaudited condensed consolidated statement of operations in the three months ended March 31, 2021 totaled approximately $831 and $21, respectively.

In connection with the Delivery Dudes Acquisition, the Company incurred direct and incremental costs of $606 consisting of legal and professional fees, which are included in general and administrative expenses in the unaudited condensed consolidated statement of operations in the three months ended March 31, 2021.

Pro-Forma Financial Information (Unaudited)

The supplemental condensed consolidated results of the Company on an unaudited pro forma basis as if the Delivery Dudes Acquisitions had been consummated on January 1, 2020 are as follows (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Net revenue

 

$

53,406

 

 

$

46,450

 

Net income (loss)

 

$

652

 

 

$

(1,993

)

 

These pro forma results were based on estimates and assumptions, which the Company believes are reasonable. They are not the results that would have been realized had the Company been a consolidated company during the periods presented and are not indicative of consolidated results of operations in future periods. Acquisition costs and other non-recurring charges incurred are included in the period presented.

4.   Accounts Receivable, Net

 

Accounts receivable consist of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Credit card receivables

 

$

4,807

 

 

$

3,013

 

Receivables from restaurants and customers

 

 

592

 

 

 

334

 

Accounts receivable

 

$

5,399

 

 

$

3,347

 

Less: allowance for doubtful accounts and chargebacks

 

 

(492

)

 

 

(393

)

Accounts receivable, net

 

$

4,907

 

 

$

2,954

 

 

5.   Intangibles Assets and Goodwill

Intangible Assets

Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful lives and include internally developed software, as well as software to be otherwise marketed, and trademarks/trade name/patents, customer relationships and franchise relationships. The Company has determined that the Waitr trademark intangible asset is an indefinite-lived asset and therefore is not subject to amortization but is evaluated annually for impairment. The Bite Squad and Delivery Dudes trade name intangible assets, however, are being amortized over their estimated useful lives.

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Intangible assets are stated at cost or acquisition-date fair value less accumulated amortization and consist of the following (in thousands):

 

 

As of March 31, 2021

 

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Accumulated

Impairment

 

 

Intangible

Assets, Net

 

Software

 

$

28,876

 

 

$

(6,744

)

 

$

(11,825

)

 

$

10,307

 

Trademarks/Trade name/Patents

 

 

6,205

 

 

 

(3,998

)

 

 

 

 

 

2,207

 

Customer Relationships

 

 

87,545