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TABLE_CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________
FORM 10-Q
_______________________________________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
oTRANSITION 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)
_______________________________________________________
Delaware26-3828008
(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
______________________
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, Par Value $0.0001 Per ShareWTRHThe Nasdaq Stock Market LLC
______________________
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 x NO o
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 x NO o
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 fileroAccelerated filerx
Non-accelerated fileroSmaller reporting companyo
Emerging growth companyo
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. o


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

The number of shares of Registrant’s Common Stock outstanding as of November 9, 2022 was 207,818,373.


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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)
September 30,
2022
December 31,
2021
Unaudited
ASSETS
CURRENT ASSETS
Cash$20,118 $60,111 
Accounts receivable, net3,102 3,027 
Capitalized contract costs, current1,490 1,170 
Prepaid expenses and other current assets5,180 8,706 
TOTAL CURRENT ASSETS29,890 73,014 
Property and equipment, net2,180 3,763 
Capitalized contract costs, noncurrent3,496 3,183 
Goodwill9,536 130,624 
Intangible assets, net41,447 43,126 
Operating lease right-of-use assets3,244 4,327 
Other noncurrent assets858 1,070 
TOTAL ASSETS$90,651 $259,107 
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
CURRENT LIABILITIES
Accounts payable$4,545 $7,018 
Restaurant food liability1,661 3,327 
Accrued payroll1,370 2,988 
Short-term loans for insurance financing1,224 3,142 
Income tax payable121 74 
Operating lease liabilities1,175 1,581 
Other current liabilities18,483 19,309 
TOTAL CURRENT LIABILITIES28,579 37,439 
Long term debt - related party55,941 81,977 
Accrued medical contingency 53 
Operating lease liabilities, net of current portion2,276 3,034 
Other noncurrent liabilities20 2,115 
TOTAL LIABILITIES86,816 124,618 
Commitments and contingent liabilities (Note 11)
STOCKHOLDERS’ EQUITY:
Common stock, $0.0001 par value; 249,000,000 shares authorized and 206,420,738 and 146,094,300 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
20 15 
Additional paid in capital535,299 503,609 
Accumulated deficit(531,484)(369,135)
TOTAL STOCKHOLDERS’ EQUITY3,835 134,489 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$90,651 $259,107 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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WAITR HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
REVENUE$25,141 $43,448 $91,352 $143,545 
COSTS AND EXPENSES:
Operations and support13,457 25,043 49,719 86,654 
Sales and marketing8,263 4,965 21,489 13,481 
Research and development935 1,310 3,488 3,163 
General and administrative7,762 10,843 31,520 33,534 
Depreciation and amortization3,599 3,070 9,664 8,952 
Goodwill impairment53,898  121,088  
Intangible and other asset impairments 186  186 
(Gain) loss on disposal of assets55 11 (33)170 
TOTAL COSTS AND EXPENSES87,969 45,428 236,935 146,140 
LOSS FROM OPERATIONS(62,828)(1,980)(145,583)(2,595)
OTHER (INCOME) EXPENSES AND (GAINS) LOSSES, NET
Interest expense1,198 1,751 4,363 5,333 
Other (income) expense9,422 (16,006)12,356 (10,907)
NET INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES(73,448)12,275 (162,302)2,979 
Income tax expense14 25 47 82 
NET INCOME (LOSS) FROM CONTINUING OPERATIONS$(73,462)$12,250 $(162,349)$2,897 
INCOME (LOSS) PER SHARE:
Basic$(0.40)$0.10 $(0.98)$0.02 
Diluted$(0.40)$0.09 $(0.98)$0.02 
Weighted average shares used to compute net income (loss) per share:
Weighted average common shares outstanding – basic183,766,396 119,823,181 166,086,439 115,961,454 
Weighted average common shares outstanding – diluted183,766,396 130,167,296 166,086,439 128,279,820 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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WAITR HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended September 30,
20222021
Cash flows from operating activities:
Net (loss) income$(162,349)$2,897 
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Non-cash interest expense1,417 1,948 
Induced conversion expense related to Notes9,499  
Stock-based compensation4,588 6,100 
(Gain) loss on disposal of assets(33)170 
Depreciation and amortization9,664 8,952 
Goodwill impairment121,088  
Intangible and other asset impairments 186 
Amortization of capitalized contract costs930 686 
Change in estimate of accrued medical contingency (16,715)
Change in fair value of contingent consideration liability(551) 
Other(80)(93)
Changes in assets and liabilities:
Accounts receivable(75)583 
Capitalized contract costs(1,563)(1,749)
Prepaid expenses and other current assets3,526 16 
Other noncurrent assets229 (311)
Accounts payable(2,473)373 
Restaurant food liability(1,666)(903)
Income tax payable47 (38)
Accrued payroll(1,618)(3,389)
Accrued medical contingency(53)(218)
Other current liabilities(3,054)1,032 
Other noncurrent liabilities826 (102)
Net cash used in operating activities(21,701)(575)
Cash flows from investing activities:
Purchases of property and equipment(224)(717)
Internally developed software(6,335)(6,432)
Purchase of domain names(27) 
Acquisitions, net of cash acquired (25,435)
Proceeds from sale of property and equipment56 21 
Net cash used in investing activities(6,530)(32,563)
Cash flows from financing activities:
Proceeds from issuance of stock10,266 7,900 
Payments on long-term loan(20,000)(14,472)
Borrowings under short-term loans for insurance financing2,811 5,209 
Payments on short-term loans for insurance financing(4,729)(5,605)
Payments on acquisition loans (178)
Payments on finance lease obligation(4) 
Proceeds from exercise of stock options 12 
Taxes paid related to net settlement on stock-based compensation(106)(932)
Net cash used in financing activities(11,762)(8,066)
Net change in cash(39,993)(41,204)
Cash, beginning of period60,111 84,706 
Cash, end of period$20,118 $43,502 
Supplemental disclosures of cash flow information:
Cash paid during the period for interest$2,946 $3,385 
Supplemental disclosures of non-cash investing and financing activities:
Conversion of convertible notes to stock$16,949 $ 
Stock issued as consideration in acquisition 13,724 
Noncash impact of operating lease assets upon adoption 5,833 
Noncash impact of operating lease liabilities upon adoption 6,232 
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
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
(in thousands, except share data)
(unaudited)
Three Months Ended September 30, 2022
 Common stockAdditional
paid in
capital
Accumulated
deficit
Total
stockholders’
equity
 SharesAmount
Balances at June 30, 2022163,448,742 $16 $515,624 $(458,022)$57,618 
Net loss— — — (73,462)(73,462)
Vesting of restricted stock units1,005,327 — — —  
Taxes paid related to net settlement on stock-based compensation— — (79)— (79)
Stock-based compensation— — 1,338 — 1,338 
Stock issued for conversion of Notes27,000,000 3 15,271 — 15,274 
Issuance of common stock, net14,966,669 1 3,145 — 3,146 
Balances at September 30, 2022
206,420,738 $20 $535,299 $(531,484)$3,835 
Nine Months Ended September 30, 2022
 Common stockAdditional
paid in
capital
Accumulated
deficit
Total
stockholders’
equity
 SharesAmount
Balances at December 31, 2021
146,094,300 $15 $503,609 $(369,135)$134,489 
Net loss— — — (162,349)(162,349)
Vesting of restricted stock units1,873,279 — — —  
Taxes paid related to net settlement on stock-based compensation— — (106)— (106)
Stock-based compensation— — 4,588 — 4,588 
Stock issued for conversion of Notes31,411,500 3 16,944 — 16,947 
Issuance of common stock, net27,041,659 2 10,264 — 10,266 
Balances at September 30, 2022
206,420,738 $20 $535,299 $(531,484)$3,835 

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
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
(in thousands, except share data)
(unaudited)

Three Months Ended September 30, 2021
Common stockAdditional
paid in
capital
Accumulated
deficit
Total
stockholders’
equity
SharesAmount
Balances at June 30, 2021116,701,277 $11 $466,192 $(373,259)$92,944 
Net income— — — 12,250 12,250 
Exercise of stock options and vesting of restricted stock units667,207 1 3 — 4 
Taxes paid related to net settlement on stock-based compensation— — (115)— (115)
Stock-based compensation— — 1,635 — 1,635 
Equity issued for asset acquisitions2,564,103 — 3,179 — 3,179 
Issuance of common stock6,683,823 1 7,899 — 7,900 
Balances at September 30, 2021
126,616,410 $13 $478,793 $(361,009)$117,797 
Nine Months Ended September 30, 2021
Common stockAdditional
paid in
capital
Accumulated
deficit
Total
stockholders’
equity
SharesAmount
Balances at December 31, 2020
111,259,037 $11 $451,991 $(363,906)$88,096 
Net income— — — 2,897 2,897 
Exercise of stock options and vesting of restricted stock units2,518,780 1 11 — 12 
Taxes paid related to net settlement on stock-based compensation— — (932)— (932)
Stock-based compensation— — 6,100 — 6,100 
Equity issued for asset acquisitions6,154,770 — 13,724 — 13,724 
Issuance of common stock6,683,823 1 7,899 — 7,900 
Balances at September 30, 2021
126,616,410 $13 $478,793 $(361,009)$117,797 

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 (the “Platform”), providing delivery, carryout and dine-in options, connecting restaurants, merchants, drivers and diners in cities across the United States. The Platform uses the “deliver anything ASAP” model making it easy for consumers to order food, alcohol, convenience, grocery, flowers, auto parts and more. The Platform also includes proprietary in-stadium mobile ordering technology, providing an enhanced fan experience at sports and entertainment venues. Additionally, Waitr facilitates access to third parties that provide payment processing solutions for restaurants and other merchants, pursuant to the acquisition of the Cape Payment Companies (as defined below) on August 25, 2021 (see Note 5Business Combinations).
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, 2021 (the “2021 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.
Segments
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker (the “CODM”) in making decisions regarding resource allocation and assessing performance. The Company has determined that its Chief Executive Officer is the CODM of the Company.
Our operations revolve around two primary areas of service: (i) delivery services, which include operations related to the Company’s technology platform for online ordering and delivery (“Delivery Services”), and (ii) third-party payment processing referral services, which include operations related to facilitating access to third parties that provide payment processing solutions for restaurants and other merchants (“Third-Party Payment Processing Referral Services”). Prior to the three months ended September 30, 2022, the Company concluded that we had one operating segment as the operations of Third-Party Payment Processing Referral Services were not material to the Company’s consolidated operations. The CODM monitored performance of the Company on a consolidated basis during such time, with financial data related to Third-Party Payment Processing Referral Services being reviewed primarily for purposes of monitoring the achievement of an earnout provision associated with the acquisition of the Cape Payment Companies (see Note 5 - Business Combinations).
During the three months ended September 30, 2022, as the Third-Party Payment Processing Referral Services area became more significant to the operations of the Company, primarily on a percentage of revenue basis, our CODM began to manage operations and assess the Company’s performance based on the operations of the Delivery Services and Third-Party Payment Processing Referral Services areas separately. We quantitatively and qualitatively reassessed our segment reporting and determined the Third-Party Payment Processing Referral Services Segment is material to the group and now
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have two operating segments. See Note 15 – Segment Information for additional information on the Company’s segments and Note 4 - Revenue for additional information on revenue derived by segments.
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;
determination of agent vs. principal classification for revenue recognition purposes;
income taxes;
useful lives of tangible and intangible assets;
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, liabilities assumed and contingent consideration 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.
Significant Accounting Policies
See “Recent Accounting Pronouncements” below for a description of accounting principle changes adopted during the nine months ended September 30, 2022. There have been no material changes to our significant accounting policies described in the 2021 Form 10-K.
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.
Recently Adopted 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.
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ASU 2020-06 was effective for and adopted by the Company on January 1, 2022. The adoption of ASU 2020-06 did not have a material impact on the Company’s disclosures or consolidated financial statements.
Pending Accounting Standards
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which creates an exception to the general recognition and measurement principle in ASC 805 by requiring companies to apply ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. The guidance additionally clarifies that companies should apply the definition of a performance obligation in ASC 606 when recognizing contract liabilities assumed in a business combination. ASU 2021-08 is effective for the Company on January 1, 2023. The Company does not expect ASU 2021-08 will have a material impact on the Company’s disclosures or consolidated financial statements.
3. Going Concern
Pursuant to the requirements of ASC 205-40, Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will sufficiently mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.
The Company has had recurring losses from operations and declines in cash positions. As reflected in the accompanying unaudited condensed consolidated financial statements, the Company has an accumulated deficit of $531,484 as of September 30, 2022. The Company has had a trend of negative cash flow from operations during each quarter of 2022. For the nine months ended September 30, 2022, the Company had negative cash flow from operations of $21,701. Additionally, the Company’s cash position was impacted by the utilization of $20,000 in cash to pay down debt in May 2022. The Company’s cash position has declined from $60,111 at December 31, 2021 to $20,118 as of September 30, 2022. In an effort to alleviate these conditions, management is implementing certain initiatives with the goal to improve revenue and its cash position, including a comprehensive rebranding, consolidation of the Company’s technology platforms into a single application and cost reductions. The initiatives include (i) collaborations with convenience stores, (ii) delivery from retailers in a variety of industries, (iii) the entry into new markets, (iv) the development of a proprietary stadium ordering application and (v) the entry into sponsorship agreements to serve as the exclusive mobile ordering platform at certain stadiums and arenas. Additionally, management evaluated its existing cost structure and implemented cost saving initiatives to reduce operating costs and plans to continue to implement further cost saving initiatives where appropriate. Management also plans to raise additional capital through equity raises, including under the ATM Program (see Note 13 – Stockholders’ Equity).
The Company’s plans are designed to provide the Company with adequate liquidity to meet its obligations for at least the twelve-month period following the date these financial statements are issued; however, the plans are dependent on conditions and factors, many of which are outside of the Company’s control. There can be no assurance that we will be able to generate positive cash flow from operations in any future period. Additionally, we may be unable to raise additional equity capital or enter into any financing arrangements when needed on favorable terms or at all. Accordingly, management could not conclude that it was probable that the plans will sufficiently mitigate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern. As such, the Company has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least twelve months from the date of issuance of these financial statements.
The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business for the twelve-month period following the date the financial statements are issued. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset
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amounts or the amounts and classification of liabilities that might result should the Company be unable to continue as a going concern.
4. Revenue
The following table presents our revenue disaggregated by offering. Revenue consists of the following for the periods indicated (in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Delivery Services Segment:
Delivery Transaction Fees$21,806 $41,411 $81,138 $140,138 
Other revenue491 1,028 2,077 2,398 
Total Delivery Services Segment22,297 42,439 83,215 142,536 
Third-Party Payment Processing Referral Services Segment(1)
2,844 1,009 8,137 1,009 
Total Revenue$25,141 $43,448 $91,352 $143,545 
(1) Amounts for the three and nine months ended September 30, 2021 include revenue from the Cape Payment Companies beginning on the acquisition date of August 25, 2021, through September 30, 2021.

Revenue from Contracts with Customers
Delivery Services Segment
The Delivery Services Segment includes operations related to the Company’s technology platform for online ordering and delivery. While food ordering and delivery is the primary component of the Delivery Services Segment, the Company recently added online ordering and delivery of various other products such as flowers, auto parts, alcohol and luxury goods. The Company generates revenue (“Delivery Transaction Fees”) in the Delivery Services Segment primarily when diners or customers place an order on the Platform.
Delivery Transaction Fees represent the revenue recognized from the Company’s obligation to process orders on the Platform. The performance obligation is satisfied when the Company successfully processes an order placed on the Platform and the restaurant receives the order at their location. The obligation to process orders on the Platform 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 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 Delivery Transaction Fees earned from the restaurant on the Platform on a net basis. Delivery 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.
In addition to Delivery Transaction Fees, revenue in the Delivery Services Segment includes other revenue sources such as paid placement revenue for prominent positioning of a restaurant on the Platform and revenue related to fees received for the early distribution of earnings to independent contractor drivers.
Third-Party Payment Processing Referral Services Segment
The Company generates revenue from Third-Party Payment Processing Referral Services by facilitating access to third-party payment processing solution providers. Revenue from such services primarily consists of residual payments received from third-party payment processing solution providers, based on the volume of transactions a payment processing solution provider performs for the merchant. The Company also occasionally receives a bonus up-front fee from third-party payment processing solution providers, paid at the time of a merchant’s initial transaction with a payment processing solution provider, based on a price specified in the agreement between the merchant and the payment processing solution provider.
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Third-party payment processing referral fees represent revenue recognized from the Company’s offering of referral services, connecting a merchant with a third-party payment processing service. The Company’s performance obligation in its contracts with payment processors is for an unknown or unspecified quantity of transactions and the consideration received is contingent upon the number of transactions submitted by the merchant and processed by the payment processor. Accordingly, the total transaction price is variable. The performance obligation is satisfied when the third-party payment processor finalizes the processing of a transaction through the payment system and transaction volume is available from the payment processor to the Company. Consistent with the recognition objective in ASC 606, the variable consideration due to the Company for serving as the facilitator of the arrangement between the third-party payment processor and merchant is recognized on a daily basis. The Company is the agent in these arrangements as it establishes the relationship between the third-party payment processor and merchant, and thus, recognizes revenue on a net basis. The third-party payment processor is considered the customer of the Company as no direct contract exists between the merchant and the Company.
Accounts Receivable
The Company records a receivable when it has an unconditional right to the consideration. See Note 6 – Accounts Receivable, Net for additional details on the Company’s accounts receivable.
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 $3,142 and $2,968 as of September 30, 2022 and December 31, 2021, respectively, out of which $986 and $818, respectively, was classified as current. Amortization of expense for the costs to obtain a contract were $234 and $192 for the three months ended September 30, 2022 and 2021, respectively, and $663 and $514 for the nine months ended September 30, 2022 and 2021, 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 onboarding restaurants onto the Platform 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 $1,844 and $1,385 as of September 30, 2022 and December 31, 2021, respectively, out of which $504 and $352, respectively, was classified as current. Amortization of expense for the costs to fulfill a contract were $121 and $71 for the three months ended September 30, 2022 and 2021, respectively, and $325 and $172 for the nine months ended September 30, 2022 and 2021, respectively.
5. Business Combinations
2021 Acquisitions
Cape Payment Acquisition
On August 25, 2021, the Company completed the acquisition of certain assets and properties of ProMerchant LLC, Cape Cod Merchant Services LLC and Flow Payments LLC (collectively referred to herein as the “Cape Payment Companies”) (the “Cape Payment Acquisition”). The Cape Payment Companies facilitate merchant access to third-party payment processing solution providers and receive residual payments from the payment providers. The purchase price for the Cape Payment Companies consisted of $12,032 in cash and an aggregate of 2,564,103 shares of the Company’s common stock valued at $1.24 per share (the closing price of the Company’s common stock on August 24, 2021). The Cape Payment Acquisition included an earnout provision which provided for a one-time payment to the sellers if the Cape
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Payment Companies exceed certain future revenue targets. The earnout provision, if any, is payable no later than March 30, 2023, and was valued at $1,686 as of the acquisition date. As of September 30, 2022 and December 31, 2021, the earnout provision was valued at $1,388 and $1,939, respectively (see Note 14 - Fair Value Measurements).
The Cape Payment Acquisition was considered a business combination in accordance with ASC 805 and was accounted for using the acquisition method. The results of operations of the Cape Payment Companies are included in our condensed consolidated financial statements beginning on the acquisition date, August 25, 2021, and were immaterial at such time. Pro forma results were also deemed immaterial to the Company.
During the three months ended September 30, 2022, our operations related to the business acquired from the Cape Payment Companies became more significant to the operations of the Company. See Note 2 - Basis of Presentation and Summary of Significant Accounting Policies and Note 15 - Segment Information for additional details.
Delivery Dudes 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 and 3,562,577 shares of the Company’s common stock valued at $2.96 per share (the closing price of the Company’s common stock on March 11, 2021) (the “Delivery Dudes Acquisition”).
The Delivery Dudes Acquisition was considered a business combination in accordance with ASC 805 and was accounted for using the acquisition method. The results of operations of Delivery Dudes are included in our unaudited condensed consolidated financial statements beginning on the acquisition date, March 11, 2021.
Additional Information
Included in general and administrative expenses in the consolidated statement of operations in certain periods are direct and incremental costs, consisting of legal and professional fees, related to business combinations and asset acquisitions. During the three and nine months ended September 30, 2021, the Company incurred direct and incremental costs of $171 and $840, respectively, related to the Delivery Dudes Acquisition.
Pro-Forma Financial Information
The supplemental condensed consolidated results of the Company for the nine months ended September 30, 2021 on an unaudited pro forma basis as if the Delivery Dudes Acquisition had been consummated on January 1, 2021 are included in the table below (in thousands).
Nine months ended September 30, 2021
Net revenue$146,021 
Net income$3,261 
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 period 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.
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6. Accounts Receivable, Net
Accounts receivable consist of the following (in thousands):
September 30,
2022
December 31,
2021
Credit card receivables$1,159 $1,354 
Residual commissions receivable1,445 1,342 
Receivables from restaurants and customers778 660 
Accounts receivable3,382 3,356 
Less: allowance for doubtful accounts and chargebacks(280)(329)
Accounts receivable, net$3,102 $3,027 
7. 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 and customer relationships. The Company has determined that the trademark intangible asset and domain names related to the rebranding initiative are indefinite-lived assets and therefore are not subject to amortization but are evaluated annually for impairment. The Bite Squad, Delivery Dudes and Cape Payment Companies trade name intangible assets, however, are being amortized over their estimated useful lives.
Intangible assets are stated at cost or acquisition-date fair value less accumulated amortization and consist of the following (in thousands):
As of September 30, 2022
Gross Carrying
Amount
Accumulated
Amortization
Accumulated
Impairment
Intangible
Assets, Net
Intangible assets subject to amortization:
Software$42,021 $(14,017)$(11,779)$16,225 
Trademarks/Trade name/Patents6,549 (5,948)— 601 
Customer Relationships96,510 (17,549)(57,378)21,583 
Total intangible assets subject to amortization145,080 (37,514)(69,157)38,409 
Trademarks, not subject to amortization3,038 — — 3,038 
Total$148,118 $(37,514)$(69,157)$41,447 
As of December 31, 2021
Gross Carrying
Amount
Accumulated
Amortization
Accumulated
Impairment
Intangible
Assets, Net
Intangible assets subject to amortization:
Software$35,686 $(9,632)$(11,779)$14,275 
Trademarks/Trade name/Patents6,549 (5,585)— 964 
Customer Relationships96,510 (14,256)(57,378)24,876 
Total intangible assets subject to amortization138,745 (29,473)(69,157)40,115 
Trademarks, not subject to amortization3,011 — — 3,011 
Total$141,756 $(29,473)$(69,157)$43,126 
During the nine months ended September 30, 2022, the Company capitalized approximately $6,335 of software costs related to the development of the Platform.
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See “Impairments” below for details of impairment testing for intangible assets during the nine months ended September 30, 2022. The Company recorded amortization expense of $3,091 and $2,354 for the three months ended September 30, 2022 and 2021, respectively, and $8,041 and $6,419 for the nine months ended September 30, 2022 and 2021, respectively. Estimated future amortization expense of intangible assets subject to amortization as of September 30, 2022 is as follows (in thousands):
Amortization
The remainder of 2022
$1,948 
202311,871 
202410,006 
20257,420 
20263,469 
Thereafter3,695 
Total future amortization$38,409 
Goodwill
Prior to the three months ended September 30, 2022, we concluded that we had one reporting unit for purposes of goodwill impairment testing. During the three months ended September 30, 2022, we quantitatively and qualitatively reassessed our segment reporting and determined the Third-Party Payment Processing Referral Services Segment is material to the group and now have two reporting units for purposes of goodwill impairment testing. See Note 2 - Basis of Presentation and Summary of Significant Accounting Policies for additional information.
The following table presents changes in the carrying value of goodwill for the Company’s single reporting unit prior to the allocation of goodwill to segments (in thousands). See “Impairments” below for a discussion of goodwill impairment testing for the reporting unit.
Balance as of December 31, 2021$130,624 
March 15, 2022 impairment(67,190)
Balance prior to segment allocation63,434 
September 30, 2022 impairment(51,991)
Remaining goodwill to be allocated to segments$11,443 
During the three months ended September 30, 2022, the Company reallocated its goodwill from a single reporting unit to the Delivery Services Segment and the Third-Party Payment Processing Referral Services Segment based on a relative fair value analysis using several probability weighted scenarios. The following table presents changes in the carrying value of goodwill for the Company’s segments (in thousands). See “Impairments” below for a discussion of goodwill impairment for the segments.
Delivery Services SegmentThird-Party Payment Processing Referral Services SegmentTotal
Goodwill allocation to segments$1,907 $9,536 $11,443 
September 30, 2022 impairment(1,907) (1,907)
Balance as of September 30, 2022$ $9,536 $9,536 
Impairments
The Company has historically conducted its goodwill and intangible asset impairment test annually in October, or more frequently if indicators of impairment exist. The Company conducts the impairment test in accordance with FASB ASC Topic 360, Impairment and Disposal of Long-Lived Assets (“ASC 360”) for certain long-lived assets, including capitalized contract costs, developed technology, customer relationships, and trade names, and in accordance with FASB ASC Topic 350, Intangibles – Goodwill and Other (“ASC 350”) for the reporting unit’s goodwill.
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ASC 360 requires long-lived assets to be tested for impairment using a three-step impairment test. Step 1 of the test is giving consideration to whether indicators of impairment of long-lived assets are present. If indicators are present, the Company proceeds to Step 2 to determine whether an impairment loss should be recognized. As a part of Step 2, the Company performs a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to the long-lived assets in question to their carrying amounts. ASC 350 requires goodwill and other indefinite lived assets to be tested for impairment at the reporting unit level. See the discussion below of impairment testing conducted as of March 15, 2022 and September 30, 2022. Determining the fair value of a reporting unit and intangible assets requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. It is reasonably possible that the judgments and estimates could change in future periods. There can be no assurance that additional goodwill or intangible assets will not be impaired in future periods.
March 15, 2022 Impairment Analysis
As a result of a significant decline in the Company’s share price and market capitalization in mid-March 2022, as well as other macroeconomic and industry related conditions during the first quarter of 2022, the Company conducted an impairment test as of the valuation date of March 15, 2022. For purposes of testing for goodwill impairment, the Company had one reporting unit at such time. The Company engaged a third-party to assist management in estimating the fair values of long-lived assets and the reporting unit for purposes of impairment testing under ASC 360 and ASC 350.
Given the results of the qualitative assessment and indications of possible impairment, the Company proceeded to Step 2 to determine whether an impairment loss should be recognized. The Company’s primary long-lived assets, customer relationships and developed technology, were tested for impairment under the guidance in ASC 360. The undiscounted cash flows for the long-lived assets were above the carrying amounts and the Company determined that the long-lived asset group was recoverable, and no impairment existed as of March 15, 2022. The customer relationships intangible asset and developed technology assets were valued using an undiscounted cash flow model. The analysis for each of the long-lived assets represents a Level 3 measurement as it was based on unobservable inputs reflecting the Company’s assumptions used in developing a fair value estimate. These inputs required significant judgments and estimates at the time of the valuation.
For ASC 350 testing purposes, the Company compared the fair value of the reporting unit with its carrying amount. The fair value of the reporting unit was estimated giving consideration to the Income Approach, including the discounted cash flow method, and the Market Approach, including the similar transactions method and guideline public company method. Significant inputs and assumptions in the ASC 350 analysis included forecasts (e.g., revenue, operating costs and capital expenditures), discount rate, long-term growth rate and tax rates for the reporting unit under the Income Approach and market-based enterprise value to revenue multiples under the Market Approach. As a result of the ASC 350 analysis, the Company recognized a non-cash pre-tax impairment loss of $67,190 during the three months ended March 31, 2022 to write down the carrying value of goodwill to its implied fair value. There was no goodwill impairment charge recognized during the three months ended June 30, 2022.
September 30, 2022 Impairment Analysis
As a result of continued declines in the Company’s share price and market capitalization during the second and third quarters of 2022, the Company conducted an additional impairment test as of the valuation date of September 30, 2022. The Company engaged a third-party to assist management in estimating the fair values of long-lived assets and the reporting units for purposes of impairment testing under ASC 360 and ASC 350.
Impairment Analysis on Single Reporting Unit Prior to Allocation of Goodwill to Segments
Given the results of the qualitative assessment and indications of possible impairment, the Company proceeded to Step 2 to determine whether an impairment loss should be recognized for the single reporting unit prior to the allocation of goodwill to segments. The Company’s primary long-lived assets, customer relationships and developed technology, were tested for impairment under the guidance in ASC 360. The undiscounted cash flows for the long-lived assets were above the carrying amounts and the Company determined that the long-lived asset group was recoverable, and no impairment existed as of September 30, 2022. The customer relationships intangible asset and developed technology assets were valued using methods in a manner similar to the March 15, 2022 impairment analysis, and represent Level 3 measurements as both were based on unobservable inputs reflecting the Company’s assumptions used in developing a fair value estimate. These inputs required significant judgments and estimates at the time of the valuation.
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For ASC 350 testing purposes, the Company estimated the fair value of the single reporting unit giving consideration to the Income Approach and the Market Approach in a manner similar to the March 15, 2022 impairment analysis discussed above. As a result of the ASC 350 analysis, the Company recognized a non-cash pre-tax impairment loss of $51,991 during the three months ended September 30, 2022 to write down the carrying value of goodwill in the reporting unit to its implied fair value.
Impairment Analysis on Segments
In conjunction with the reallocation of goodwill, the Company tested the goodwill at its Delivery Services Segment and Third-Party Payment Processing Referral Services Segment as of September 30, 2022.
The Company’s long-lived assets in each of the segments, including customer relationships and developed technology, were tested for impairment under the guidance in ASC 360. The undiscounted cash flows for the long-lived assets were above the carrying amounts for each segment and the Company determined that the long-lived asset groups were recoverable, and no impairment existed as of September 30, 2022. The customer relationships intangible assets and developed technology assets were valued using methods in a manner similar to the March 15, 2022 impairment analysis discussed above, and represent Level 3 measurements as both were based on unobservable inputs reflecting the Company’s assumptions used in developing a fair value estimate. These inputs required significant judgments and estimates at the time of the valuation.
For ASC 350 testing purposes, the Company estimated the fair value of the Delivery Services Segment and the Third-Party Payment Processing Referral Services Segment giving consideration to the Income Approach and the Market Approach in a manner similar to the March 15, 2022 impairment analysis discussed above. The impairment assessment indicated that the fair value of the Third-Party Payment Processing Referral Services Segment exceeded its carrying value, and therefore did not result in a goodwill impairment. The fair value of the Delivery Services Segment was less than its carrying value, and as a result, the Company recognized a non-cash pre-tax impairment loss of $1,907 during the three months ended September 30, 2022 to write down the carrying value of goodwill in the Delivery Services Segment to its implied fair value.
The non-cash impairment losses discussed above are included in the unaudited condensed consolidated statement of operations under the caption “goodwill impairment” and totaled $53,898 and $121,088 for the three and nine months ended September 30, 2022, respectively.
8. Other Current Liabilities
Other current liabilities consist of the following (in thousands):
September 30,
2022
December 31,
2021
Accrued insurance expenses$6,125 $3,932 
Accrued estimated workers’ compensation expenses305 644 
Accrued medical contingency366 370 
Accrued legal contingency1,250 1,250 
Accrued sales tax payable121 175 
Accrued cash incentives160 3,130 
Other accrued expenses3,151 3,685 
Contingent consideration liability1,388  
Unclaimed property2,710 2,372 
Other current liabilities2,907 3,751 
Total other current liabilities$18,483 $19,309 
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9. Debt
The Company’s outstanding debt obligations are as follows (in thousands):
Coupon Rate
Range in 2021
through 3Q22
Effective
Interest Rate at
September 30, 2022
MaturitySeptember 30,
2022
December 31,
2021
Term Loan
5.125% - 7.125%
13.51%May 2024$15,280 $35,007 
Notes
4.0% - 6.0%
6.37%May 202442,339 49,504 
$57,619 $84,511 
Less: unamortized debt issuance costs on Term Loan(1,433)(2,099)
Less: unamortized debt issuance costs on Notes(245)(435)
Long term debt - related party$55,941 $81,977 
Short-term loans for insurance financing
3.99% - 4.85%
n/aAugust 2022 - March 20231,224 3,142 
Total outstanding debt$57,165 $85,119 
Interest expense related to the Company’s outstanding debt totaled $1,198 and $1,751 for the three months ended September 30, 2022 and 2021, respectively, and $4,363 and $5,333 for the nine months ended September 30, 2022 and 2021, respectively. Interest expense includes interest on outstanding borrowings and amortization of debt issuance costs and debt discount. See Note 17 – Related Party Transactions for additional information regarding the Company’s related party long-term debt.
Term Loan
The Company maintains an agreement with Luxor Capital Group, LP (“Luxor Capital”) (as amended or otherwise modified from time to time, the “Credit Agreement”). The Credit Agreement provides for a senior secured first priority term loan (the “Term Loan”) which is guaranteed by certain subsidiaries of the Company. In connection with the Term Loan, the Company issued to Luxor Capital warrants which are exercisable for 624,989 shares of the Company’s common stock at September 30, 2022 (see Note 13 – Stockholders’ Equity). See Amendments to Loan Agreements below for additional details on the Term Loan and Credit Agreement.
Interest on the Term Loan is payable quarterly, in cash or, at the election of the Company, as a payment-in-kind, with interest paid in-kind being added to the aggregate principal balance. The Company elected to pay the interest payment of $273 due on September 30, 2022 in-kind, resulting in such amount being added to the principal balance of the Term Loan. The Credit Agreement includes a number of customary covenants that, among other things, limit or restrict the ability of the Company and its subsidiaries to incur additional debt, incur liens on assets, engage in mergers or consolidations, dispose of assets, pay dividends or repurchase capital stock and repay certain junior indebtedness. The Credit Agreement also includes customary affirmative covenants, representations and warranties and events of default.
Notes
Additionally, the Company issued unsecured convertible promissory notes (the “Notes”) to Luxor Capital Partners, LP, Luxor Capital Partners Offshore Master Fund, LP, Luxor Wavefront, LP and Lugard Road Capital Master Fund, LP (the “Luxor Entities”) pursuant to an agreement, herein referred to as the “Convertible Notes Agreement”. The net carrying value of the Notes as of September 30, 2022 and December 31, 2021 totaled $42,094 and $49,069, respectively. See Amendments to Loan Agreements and Conversion Agreements below for additional details on the Notes.
Interest on the Notes is payable quarterly, in cash or, at the Company’s election, up to one-half of the dollar amount of an interest payment due can be paid-in-kind. Interest paid-in-kind is added to the aggregate principal balance. The Company elected to pay one-half of the $669 interest payment due on September 30, 2022 in-kind, resulting in
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approximately $335 being added to the principal balance of the Notes. Interest expense related to the Notes was comprised of the following for the three and nine months ended September 30, 2022 and 2021 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Contractual interest expense$669 $666 $2,157 $1,662 
Amortization of debt discount37 147 138 735 
$706 $813 $2,295 $2,397 
The Notes include customary anti-dilution protection, including broad-based weighted average adjustments for issuances of additional shares. Upon maturity, the outstanding Notes (and any accrued but unpaid interest) will be repaid in cash or converted into shares of common stock, at the holder’s election. The Notes are convertible at the holder’s election into shares of the Company’s common stock at a rate of $8.00 per share at September 30, 2022, subject to certain “blocker” limitations limiting the amount of shares into which the Notes can be converted.
The Company’s payment obligations on the Notes are not guaranteed. The Convertible Notes Agreement contains negative covenants, affirmative covenants, representations and warranties and events of default that are substantially similar to those that are set forth in the Credit Agreement (except those that relate to collateral and related security interests, which are not contained in the Convertible Notes Agreement or otherwise applicable to the Notes).
Amendments to Loan Agreements
On May 9, 2022, the Company entered into an amendment to the Credit Agreement and an amendment to the Convertible Notes Agreement (together, the “May 9, 2022 Amended Loan Agreements”). The May 9, 2022 Amended Loan Agreements provide, among other things, (i) that going forward on a quarterly basis, 50% of the proceeds of any at-the-market public common stock issuances by the Company will be applied to the prepayment of the Term Loan and (ii) a six-month extension of the maturity date of the Credit Agreement and Convertible Notes Agreement until May 15, 2024. Additionally, pursuant to the amendment to the Credit Agreement, the Company made a $20,000 prepayment on the Term Loan on May 9, 2022. See Note 18 - Subsequent Events for details on a Term Loan prepayment made in October 2022.
The Company evaluated the amendments in the May 9, 2022 Amended Loan Agreements under ASC 470-50, “Debt Modification and Extinguishment”, and concluded that the amendments did not meet the characteristics of debt extinguishments under ASC 470-50. Accordingly, the amendments were treated as a debt modification, and thus, no gain or loss was recorded. A new effective interest rate for each of the Term Loan and Notes that equates the revised cash flows to the carrying amount of the original debt is computed and applied prospectively.
On May 12, 2022, the Company entered into an additional amendment to the Convertible Notes Agreement (the “May 12, 2022 Amended Convertible Notes Agreement”) which provides that subsequent to the payment in full of the Term Loan outstanding under the existing Credit Agreement, on a quarterly basis, 50% of the proceeds of any future at-the-market public common stock issuances received by the Company will be applied to prepayment of the Notes under the Convertible Notes Agreement. The provisions of the May 12, 2022 Amended Convertible Notes Agreement did not contain changes to the Convertible Notes Agreement that warranted an evaluation of debt modification or extinguishment.
Conversion Agreements
On May 13, 2022, the Company entered into a conversion agreement (the “May 2022 Conversion Agreement”), pursuant to which the lenders under the Convertible Notes Agreement were permitted to convert $750 of the outstanding principal amount of the Notes into shares of Company common stock at a conversion rate of 5,882 shares of Company common stock per one thousand dollars of principal amount of the Notes (calculated based on a per share price of $0.17 of Company common stock on Nasdaq), notwithstanding the conversion rate then in effect pursuant to the terms of the Notes.
On July 22, 2022, the Company entered into a conversion agreement (the “J