The installment note payable relates to a note payable to an individual, issued in connection with the
Companys April 2020 acquisition of a franchised restaurant, monthly payments of $9,000 over a seven-year amortization including 7% interest, with a maturity date of June 1, 2024.
13. Supplemental Disclosure of Noncash Activities
As
noted in Note 6, during the three months ended March 31, 2021, the Company recorded certain adjustments to goodwill in
the amount of $413,000 to
update the estimates to provisional amounts recorded as of the Business Combination.
During the three months ended March 31, 2021, the Company
received forgiveness of one of its PPP loans in the amount of $114,000.
14. Income Taxes
The Company is a corporation subject to federal income tax at a statutory rate of 21% of pretax earnings, and state income taxes at a blended statutory rate of
3.8% net of federal benefit. The Company has an annual effective income tax rate of 0% under ASC 740-270-30-36(a) due to a full valuation allowance.
At
March 31, 2021, based on the facts and circumstances in accordance with the guidance of ASC 740, management determined, based on its assessment of positive and negative evidence, both objective and subjective, that it is more likely than
not that the Company will not realize its deferred tax assets. Therefore, at March 31, 2021, a full valuation allowance of $1.2 million was recorded against the Companys net deferred tax assets, including $0.7 million related to
net deferred tax assets as of December 31, 2020.
The net tax expense for the three months ended March 31, 2021 was $0.7 million, resulting in an
effective tax rate of approximately 9.5%. The primary difference from the federal statutory rate of 21% is related to the valuation allowance.
Prior to
the Business Combination, the Predecessor had elected to be taxed as a partnership under the provisions of the Internal Revenue Code and similar state provisions. Therefore, there was no income tax recorded by the Company for the comparable
Predecessor period from January 1, 2020 to March 31, 2020.
15. Stockholders Equity
Common Stock
The Company is authorized to
issue 100,000,000 shares of common stock with a par value of $0.0001 per share. Holders of the Companys common stock are entitled to one vote for each share. At March 31, 2021 and December 31, 2020, there were
17,830,507 shares and 17,541,838 shares of common stock outstanding, respectively.
Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and
preferences as may be determined from time to time by the Companys Board of Directors. At March 31, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.
Warrants and Options
As of March 31, 2021, the
Company had the following warrants and options outstanding:
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15,095,000 warrants outstanding, each exercisable for one share of common stock at an exercise
price of $11.50 including 11,500,000 in Public Warrants, 3,000,000 in Private Placement Warrants, 445,000 in Private Warrants and 150,000 in Working Capital Warrants. The Public warrants expire in December 2025.
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75,000 Unit Purchase Option UPO units that are exercisable for one share of common stock at
an exercise price of $10.00 and warrants exercisable for one share of common stock at an exercise price of $11.50
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In February
2021, the Company exchanged 675,000 UPO units for 283,669 common shares in a cashless exercise.
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