UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, ~~2021~~2022

☐ 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: 000-56145

AMERGENT HOSPITALITY GROUP INC.

Delaware		84-4842958
(State or Other Jurisdiction of		(IRS Employer
Incorporation or Organization)		Identification Number)

~~Post Office Box 470695~~7529 Red Oak Lane
Charlotte, NC		~~28247~~28226
(Address of Principal Executive Offices)		(Zip Code)

(704) 366-5122

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered under Section 12(b) of the Act: None

Indicate by check mark whether the issuer (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 has 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, a 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 ☒

The number of shares outstanding of the registrant’s $0.0001 par value common stock as of August ~~5, 2021,~~[12], 2022, was ~~15,656,736~~ [15,706,736] shares.

Amergent Hospitality Group Inc. and Subsidiaries

TABLE OF CONTENTS

		Page No.

Part I	Financial Information	4

Item 1:	Financial Statements	4

	Condensed Consolidated ~~and Combined~~ Balance Sheets as of June 30, ~~2021~~2022 (Unaudited) and December 31, ~~2020~~2021	5
	Condensed Consolidated ~~and Combined~~ Statements of Operations (Unaudited) – For the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021	6
	Condensed Consolidated ~~and Combined~~ Statements of Comprehensive ~~Income (Loss)~~Loss (Unaudited) -– For the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021	7
	Condensed Consolidated ~~and Combined~~ Statements of Convertible Preferred Stock and Stockholders’ Deficit (Unaudited) – For the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021	8
	Condensed Consolidated ~~and Combined~~ Statements of Cash Flows (Unaudited) – For the ~~three and~~ six months ended June 30, ~~2021~~2022 and ~~2020~~2021	109
	Notes to Condensed Consolidated ~~and Combined~~ Financial Statements (Unaudited)	1110
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2827
Item 3:	Quantitative and Qualitative Disclosures about Market Risk	3533
Item 4:	Controls and Procedures	3534

Part II	Other Information	3635

Item 1:	Legal Proceedings	3635
Item 1A:	Risk Factors	3635
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	3935
Item 3:	Defaults Upon Senior Securities	3935
Item 4:	Mine Safety Disclosures	3935
Item 5:	Other Information	3935
Item 6:	Exhibits	3936

Signatures			4037

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by terms and phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” and “will” and similar expressions and include references to assumptions and relate to our future prospects, developments and business strategies. There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:

	●	~~the accuracy~~We have a history of operating losses, and our estimates regarding ~~expenses,~~the sufficiency of our cash resource and capital requirements and ~~need~~needs for additional ~~financing;~~financing raise substantial doubt about our ability to continue as a going concern;

	●	We may not be able to extend or repay our indebtedness owed to our secured lenders, which would have a material adverse effect on our financial condition and ability to ~~operate our business and generate profits. We have not been profitable to date on~~continue as a ~~continuous basis;~~going concern;

	●	~~decline in global financial markets~~We require additional financing to support our working capital and ~~economic downturn resulting from the coronavirus COVID-19 global pandemic,~~execute our operating plans for fiscal 2022, which may not be available or may be costly and dilutive;

	●	~~Business~~Decline in global financial markets, inflation and economic downturn;

	●	Continuing impact of business interruptions resulting from the coronavirus COVID-19 global pandemic;

	●	Our ability to remediate weaknesses we identified in our disclosure controls and procedures and our internal control over financial reporting in a timely enough manner to eliminate the risks posed by such material weaknesses in future periods;

	●	~~general risk factors affecting the restaurant industry, including current economic climate, costs of labor and food prices;~~

	●	~~intensive competition in our industry and competition with national, regional chains and independent restaurant operators;~~

	●	~~our rights to operate and franchise the Hooters-branded restaurants are dependent on the Hooters’ franchise agreements;~~

	●	~~our ability, and our dependence on the ability of our franchisees, to execute on business plans effectively;~~

	●	~~actions of our franchise partners or operating partners which could harm our business;~~

	●	~~failure to protect our intellectual property rights, including the brand image of our restaurants;~~

	●	~~changes in customer preferences and perceptions;~~

	●	~~increases in costs, including food, rent, labor and energy prices;~~

	●	~~constraints could affect our ability to maintain competitive cost structure, including, but not limited to labor constraints;~~

	●	~~work stoppages at our restaurants or supplier facilities or other interruptions of production;~~

	●	~~the~~The risks associated with leasing space subject to long-term non-cancelable leases;

	●	~~we may not attain our target development goals and aggressive development could cannibalize existing sales;~~

	●	~~negative publicity about the ingredients we use, or the potential occurrence of food-borne illnesses or other problems at our restaurants;~~

	●	~~breaches~~Breaches of security of confidential consumer information related to our electronic processing of credit and debit card transactions;

	●	~~whether~~Whether or not we will ~~be entitled to~~receive forgiveness of our Paycheck Protection Program loans;

	●	weWe may be unable to reach agreements with various taxing authorities on payment plans to pay off back taxes; ~~and~~

	●	Difficulties as acquired restaurants are integrated into our operations and failure to realize anticipated synergies;

	●	Our debt financing agreements expose us to interest rate risks, contain obligations that may limit the flexibility of our operations, and may limit our ability to raise additional ~~capital.~~capital; and

	●	Sale of common stock or derivative securities by us in private placements or public offerings as well as the conversion of existing debt securities could result in substantial dilution to our existing stockholders.

We undertake no obligation to update or revise the forward-looking statements included in this Report, whether as a result of new information, future events or otherwise, after the date of this Report. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that could cause or contribute to such differences are discussed in the section entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included herein.

Unless otherwise noted, references in this Report to the “Registrant,” “Company,” “Amergent,” “Spin-Off Entity,” “we,” “our” or “us” means Amergent Hospitality Group Inc., a Delaware corporation and our subsidiaries.

PART I

ITEM 1: FINANCIAL STATEMENTS

Amergent Hospitality Group ~~Inc~~Inc. and Subsidiaries

Unaudited Financial Statements

Table of Contents

	Page Number
Condensed Consolidated ~~and Combined~~ Balance Sheets	5
Condensed Consolidated ~~and Combined~~ Statements of Operations	6
Condensed Consolidated ~~and Combined~~ Statements of Comprehensive ~~Income (Loss)~~Loss	7
Condensed Consolidated ~~and Combined~~ Statements of Convertible Preferred Stock and Stockholders’ Deficit	8
Condensed Consolidated ~~and Combined~~ Statements of Cash Flows	109
Notes to the Condensed Consolidated ~~and Combined~~ Financial Statements	1110

Amergent Hospitality Group ~~Inc~~Inc. and Subsidiaries

Condensed Consolidated ~~and Combined~~ Balance Sheets

	June 30, 2021			December 31, 2020
							June 30, 2022			December 31, 2021
(in thousands except share and per share data)							(Unaudited)			(Note 1)
ASSETS
Current assets:
Cash	$	2,083,119		$	678,468		$	966		$	646
Restricted cash		440,557			1,250,336			—			1,672
Investments		292,809			413,268			34			50
Accounts and other receivables		156,581			314,043			904			865
Inventories		154,207			172,695			190			182
Prepaid expenses and other current assets		392,234			290,227			497			360
TOTAL CURRENT ASSETS		3,519,507			3,119,037			2,591			3,775
Property and equipment, net		2,908,066			3,702,894			3,062			3,115
Operating lease asset		8,395,200			9,529,443
Operating lease assets								7,962			8,021
Intangible assets, net		2,540,868			3,043,885			2,973			3,129
Goodwill		8,603,406			8,591,149			7,810			7,810
Investments		365,001			365,001			16			16
Deposits and other assets		267,770			295,930			353			352
TOTAL ASSETS	$	26,599,818		$	28,647,339		$	24,767		$	26,218

LIABILITIES, REDEEMABLE SHARES, AND STOCKHOLDERS’ DEFICIT
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	8,168,244		$	8,667,268		$	6,707		$	6,844
Current maturities of long-term debt and notes payable		6,377,550			2,338,978
Current operating lease liabilities		4,411,073			4,209,389
Derivative liabilities		66,136			184,800
Current portion of long-term debt and notes payable								3,661			3,264
Current portion of operating lease liabilities								4,180			4,599
Deferred grant income								373			1,545
TOTAL CURRENT LIABILITIES		19,023,003			15,400,435			14,921			16,252

Long-term operating lease liabilities		9,415,805			10,677,862
Operating lease liabilities, net of current portion								8,604			8,644
Contract liabilities		759,276			794,989			80			757
Deferred tax liabilities		108,809			108,809			150			150
Long-term debt and notes payable, net of current maturities		2,352,130			539,734
Convertible debt, net of current maturities		—			3,814,208
Long-term debt and notes payable, net of current portion (includes debt measured at fair value of $428 and $599 at June 30, 2022 and December 31, 2021, respectively)								7,301			6,593
TOTAL LIABILITIES		31,659,023			31,336,037			31,056			32,396

Commitments and contingencies (see Note 10)
Commitments and contingencies (see Note 13)								-			-

Convertible Preferred Stock: Series 2: $1,000 stated value; authorized 1,500 shares; 100 and 787 issued and outstanding at June 30, 2021 and December 31, 2020, respectively		58,400			459,608
Convertible Preferred Stock: Series 2: $1,000 stated value; authorized 1,500 shares; 100 issued and outstanding at both June 30, 2022 and December 31, 2021								58			58

Stockholders’ Deficit:
Common stock: $0.0001 par value; authorized 50,000,000 shares; 15,656,736 and 14,282,736 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively		1,565			1,428
Common stock: $0.0001 par value; authorized 50,000,000 shares; 15,706,736 shares issued and outstanding at both June 30, 2022 and December 31, 2021								2			2
Additional paid-in-capital		92,834,415			92,433,344			93,156			92,882
Accumulated deficit		(96,869,182	)		(94,587,482	)		(98,392	)		(97,963	)
Accumulated other comprehensive loss		(10,322	)		(25,916	)
Total Amergent Hospitality Group, Inc., Stockholders’ Deficit		(4,043,524	)		(2,178,626	)
Total Amergent Hospitality Group Inc. Stockholders’ Deficit								(5,234	)		(5,079	)
Non-controlling interests		(1,074,081	)		(969,680	)		(1,113	)		(1,157	)
TOTAL STOCKHOLDERS’ DEFICIT		(5,117,605	)		(3,148,306	)		(6,347	)		(6,236	)
TOTAL LIABILITIES, REDEEMABLE SHARES AND STOCKHOLDERS’ DEFICIT	$	26,599,818		$	28,647,339
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT							$	24,767		$	26,218

See accompanying notes to the condensed consolidated ~~and combined~~ financial statements

Amergent Hospitality Group ~~Inc~~Inc. and Subsidiaries

Condensed Consolidated ~~and Combined~~ Statements of Operations (Unaudited)

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
Three Months Ended Six Months Ended
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
(Restated) (Restated)
Revenue:
Restaurant sales, net $ 4,737,867 $ 3,880,841 $ 9,182,059 $ 9,372,298
Gaming income, net 111,008 29,463 168,038 129,212
Franchise income 106,196 8,166 198,424 98,198
Management fee income — — — —
Total revenue 4,955,071 3,918,470 9,548,521 9,599,708
Expenses:
Restaurant cost of sales 1,435,192 1,162,291 2,751,114 2,960,061
Restaurant operating expenses 3,180,414 3,247,957 6,425,529 6,873,801
Restaurant pre-opening and closing expenses — — — 20,730
General and administrative expenses 1,193,973 1,460,668 2,361,100 2,635,821
Asset impairment charge — 152,470 1,287,579 152,470
Depreciation and amortization 362,350 415,778 730,005 831,609
Employee retention credit (1,473,355 ) — (1,473,355 ) —
Total expenses 4,698,574 6,439,164 12,081,972 13,474,492
Operating income (loss) 256,497 (2,520,694 ) (2,533,451 ) (3,874,784 )
Other income (expense):
Interest expense (158,690 ) (159,460 ) (315,931 ) (322,448 )
Change in fair value of derivative liabilities (66,136 ) 6,443,380 118,664 6,141,517
Change in the fair value of investment (124,166 ) (953,033 ) (120,460 ) (953,033 )
Debt extinguishment expense — (11,808,111 ) — (11,808,111 )
Other income (expense) 143,942 (70,748 ) 146,558 176,308
Gain on extinguished lease liabilities 275,164 — 318,519 —
Total other income (expense) 70,114 (6,547,972 ) 147,350 6,765,767
Income (Loss) before income taxes 326,611 (9,068,666 ) (2,386,101 ) (10,640,551 )
Income tax expense — (7,352 ) — (3,676 )
Consolidated net income (loss) 326,611 (9,076,018 ) (2,386,101 ) (10,644,227 )
Less: Net (income) loss attributable to non-controlling interests (59,884 ) 89,716 104,401 (113,689 )
Net income (loss) attributable to Amergent Hospitality Group Inc. 266,727 (8,986,302 ) (2,281,700 ) (10,757,916 )
Dividends on redeemable preferred stock — — — (28,219 )
Net income (loss) attributable to common shareholders of Amergent Hospitality Group Inc. $ 266,727 $ (8,986,302 ) $ (2,281,700 ) $ (10,786,135 )
Net income (loss) attributable to Amergent Hospitality Group, Inc. per common share, basic: $ 0.02 $ (0.63 ) $ (0.15 ) $ (0.82 )
Net income (loss) attributable to Amergent Hospitality Group, Inc. per common share, diluted: $ 0.01 $ (0.63 ) $ (0.15 ) $ (0.82 )
Weighted average shares outstanding, basic 15,321,571 14,282,736 14,904,471 13,096,212
Weighted average shares outstanding, diluted 17,280,625 14,282,736 14,904,471 13,096,212

Three months ended Six months ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

(in thousands except share and per share data) (Restated) (Restated)
Revenue:
Restaurant sales, net $ 5,323 $ 5,217 $ 10,081 $ 9,661
Gaming income, net 145 111 248 169
Franchise income 108 105 897 199
Total revenue 5,576 5,433 11,226 10,029
Expenses:
Restaurant cost of sales 1,701 1,617 3,193 2,933
Restaurant operating expenses 3,679 3,455 7,158 6,701
General and administrative expenses 1,806 1,208 3,142 2,375
Asset impairment charges — — — 1,288
Depreciation and amortization 201 227 423 459
Employee retention credit and other grant income (1,287 ) (1,473 ) (1,835 ) (1,473 )
Total expenses 6,100 5,034 12,081 12,283
Operating (loss) income (524 ) 399 (855 ) (2,254 )
Other income (expense):
Interest expense (224 ) (158 ) (411 ) (318 )
Change in fair value of derivative liabilities — (66 ) — 119
Change in fair value of investment (12 ) (124 ) (16 ) (120 )
Change in fair value of convertible promissory note 55 — 171 —
Gain on extinguished/settled lease liabilities 256 275 256 319
Gain on extinguished trade payable — — 161 —
Other income 92 171 311 174
Total other income 167 98 472 174
(Loss) income before income taxes (357 ) 497 (383 ) (2,080 )
Income tax expense — — (2 ) —
Consolidated net (loss) income (357 ) 497 (385 ) (2,080 )

Less: Net (income) loss attributable to non-controlling
interests (45 ) (60 ) (44 ) 104
Net (loss) income attributable to Amergent Hospitality Group Inc. $ (402 ) $ 437 $ (429 ) $ (1,976 )

Net (loss) income attributable to Amergent Hospitality Group Inc. per common share, basic $ (0.03 ) $ 0.01 $ (0.03 ) $ (0.13 )
Net (loss) income attributable to Amergent Hospitality Group Inc. per common share, diluted $ (0.03 ) $ 0.01 $ (0.03 ) $ (0.13 )

Weighted average shares outstanding, basic 15,706,736 15,321,571 15,706,736 14,904,471
Weighted average shares outstanding, diluted 15,706,736 17,280,625 15,706,736 14,904,471

See accompanying notes to the condensed consolidated ~~and combined~~ financial statements
6

Amergent Hospitality Group ~~Inc~~Inc. and Subsidiaries
Condensed Consolidated ~~and Combined~~ Statements of Comprehensive ~~Income (Loss)~~Loss (Unaudited)

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
Three Months Ended Six Months Ended
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
(Restated) (Restated)
Net income (loss) attributable to Amergent Hospitality Group $ 266,727 $ (8,986,302 ) $ (2,281,700 ) $ (10,786,135 )
Foreign currency translation gain/(loss) 6,802 (6,541 ) 15,594 (87,610 )
Comprehensive income (loss) $ 273,529 $ (8,992,843 ) $ (2,266,106 ) $ (10,873,745 )

Three months ended Six months ended
June 30, 2022 June 30, 2021
June 30, 2022
June 30, 2021
(in thousands) (Restated) (Restated)
Net (loss) income attributable to Amergent Hospitality Group Inc. $ (402 ) $ 437 $ (429 ) $ (1,976 )
Foreign currency translation gain — 7 — 16
Comprehensive (loss) income $ (402 ) $ 444 $ (429 ) $ (1,960 )

See accompanying notes to the condensed consolidated ~~and combined~~ financial statements
7

Amergent Hospitality Group ~~Inc~~Inc. and Subsidiaries
Condensed Consolidated ~~and Combined~~ Statements of Convertible Preferred Stock and Stockholders’ Deficit
Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)

Shares Amount Shares Amount Capital Deficit Income (Loss) Interest Total
(Temporary equity) Additional
Accumulated
Other
Non-
Preferred Series 2 Common Stock Paid-in Accumulated Comprehensive Controlling
Shares Amount Shares Amount Capital Deficit Income (Loss) Interest Total
Balance, December 31, 2020 787 $ 459,608 14,282,736 $ 1,428 $ 92,433,344 $ (94,587,482 ) $ (25,916 ) $ (969,680 ) $ (3,148,306 )
Conversion of preferred stock into common (125 ) (73,000 ) 250,000 25 72,975 — — — 73,000
Preferred unit dividend
Preferred unit dividend
Exercise of warrants
Exercise of warrants, Shares
Issuance of shares, net of transaction costs of $95,000
Issuance of shares, net of transaction costs of $95,000, Shares
Bifurcation of derivative liability
Beneficial conversion feature
Preferred stock deemed dividend
Conversion of Series 2 preferred to common
Conversion of Series 2 preferred to common, Shares
Reclassification of non-controlling interest
Cash contribution of merger consideration, net transaction costs of $588,255
Contribution of warrant portion of merger consideration
Foreign currency translation — — — — — — 8,792 — 8,792
Net loss — — — — — (2,548,427 ) — (164,285 ) (2,712,712 )
Balance, March 31, 2021 662 $ 386,608 14,532,736 $ 1,453 $ 92,506,319 $ (97,135,909 ) $ (17,124 ) $ (1,133,965 ) $ (5,779,226 )
Conversion of preferred stock into common (562 ) (328,208 ) 1,124,000 112 328,096 — — — 328,208
Foreign currency translation — — — — — — 6,802 — 6,802
Net income (loss) — — — — — 266,727 — 59,884 326,611
Balance, June 30, 2021 100 $ 58,400 15,656,736 $ 1,565 $ 92,834,415 $ (96,869,182 ) $ (10,322 ) $ (1,074,081 ) $ (5,117,605 )

(Temporary equity) Convertible Preferred Stock Common Stock Additional Paid-in

Accumulated Accumulated Other
Comprehensive Non-Controlling
(in thousands except share data) Shares Amount Shares Amount
Capital
Deficit
Loss

Interests
Total
Balance, January 1, 2022 100 $ 58 15,706,736 $ 2 $ 92,882 $ (97,963 ) $ — $ (1,157 ) $ (6,236 )
Share-based compensation expense — — — — 6 — — — 6
Issuance of warrants — — — — 263 — — — 263
Net loss — — — — — (27 ) — (1 ) (28 )
Balance, March 31, 2022
100 58 15,706,736 2 93,151 (97,990 ) $ — (1,158 ) (5,995 )
Share-based compensation expense — — — — 5 — — — 5
Net loss — — — — — (402 ) — 45 (357 )
Balance, June 30, 2022
100 $ 58 15,706,736 $ 2 $ 93,156 $ (98,392 ) $ — $ (1,113 ) $ (6,347 )
(Temporary equity) Convertible Preferred Stock Common Stock Additional Paid-in
Accumulated Accumulated Other Comprehensive

Non- Controlling

(in thousands except share data, restated) Shares Amount Shares Amount
Capital
Deficit Loss Interests Total
Balance, January 1, 2021 787 $ 460 14,282,736 $ 1 $ 92,433 $ (94,587 ) $ (26 ) $ (970 ) $ (3,149 )
Conversion of preferred stock into common stock (125 ) (73 ) 250,000 — 73 — — — 73
Foreign currency translation — — — — — — 9 — 9
Net loss — — — — — (2,412 ) — (165 ) (2,577 )
Balance, March 31, 2021
662 387 14,532,736 1 92,506 (96,999 ) (17 ) (1,135 ) (5,644 )
Conversion of preferred stock into common stock (562 ) (329 ) 1,124,000 1 328 — — — 329
Foreign currency translation — — — — — — 7 — 7
Net income — — — — — 437 — 60 497
Net income (loss) — — — — — 437 — 60 497
Balance, June 30, 2021
100 $ 58 15,656,736 $ 2 $ 92,834 $ (96,562 ) $ (10 ) $ (1,075 ) $ (4,811 )

See accompanying notes to the condensed consolidated ~~and combined~~ financial statements
8

Amergent Hospitality Group ~~Inc~~Inc. and Subsidiaries
Condensed Consolidated ~~and Combined~~ Statements of ~~Stockholders’ Deficit~~
~~Three and Six Months Ended June 30, 2020~~Cash Flows (Unaudited)

(Temporary equity) Additional Accumulated Other Non-
Preferred Series 2 Common Stock Paid-in Accumulated Comprehensive Controlling
Shares Amount Shares Amount Capital Deficit Loss Interest Total
Balance, December 31, 2019 — $ — 10,404,342 $ 1,041 $ 71,505,989 $ (75,068,385 ) $ (46,437 ) $ 455,781 $ (3,152,011 )
Common stock and warrants issued for:
Preferred unit dividend — — 37,518 4 19,519 (28,219 ) — — (8,696 )
Exercise of warrants — — 2,414,022 246 1,528,867 (325,366 ) — — 1,203,747
Preferred Shares - Series 2
Issuance of shares, net of transaction costs of $95,000 1,500 1,405,000 — — — — — — —
Bifurcation of derivative liability — (529,000 ) — — — — — — —
Beneficial conversion feature — (729,000 ) — — 729,000 — — — 729,000
Preferred stock deemed dividend — 729,000 — — (729,000 ) — — — (729,000 )
Conversion of Series 2 preferred to common (713 ) (416,392 ) 1,426,854 143 416,249 — — — 416,392
Foreign currency translation — — — — — — (81,069 ) — (81,069 )
Net loss — — — — — (1,771,614 ) — 203,405 (1,568,209 )
Balance, March 31, 2020 787 $ 459,608 14,282,736 $ 1,434 $ 73,470,624 $ (77,193,584 ) $ (127,506 ) $ 659,186 $ (3,189,846 )
Reclassification of non-controlling interest — — — — — 805,909 — (805,909 ) —
Cash contribution of merger consideration, net transaction costs of $588,255 — — — — 5,411,745 — — — 5,411,745
Contribution of warrant portion of merger consideration — — — — 1,628,909 — — — 1,628,909
Foreign currency translation — — — — — — (6,541 ) — (6,541 )
Net loss — — — — — (8,986,302 ) — (89,716 ) (9,076,018 )
Balance, June 30, 2020 787 $ 459,608 14,282,736 $ 1,434 $ 80,511,278 $ (85,373,977 ) $ (134,047 ) $ (236,439 ) $ (5,231,751 )

Six months ended
June 30, 2022 June 30, 2021
(in thousands) (Restated)
Cash flows from operating activities:
Net loss $ (385 ) $ (2,080 )
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization 423 459
Amortization of operating lease assets 666 429
Asset impairment charges — 1,288
Gain on extinguished/settled lease liabilities (256 ) (319 )
Gain on extinguished trade payable (161 ) —
Share-based compensation 11 —
Change in fair value of investment 16 120
Change in fair value of convertible promissory note (171 ) —
Amortization of debt discount 91 90
Change in fair value of derivative liabilities — (119 )
Change in operating assets and liabilities:
Accounts and other receivables (39 ) 153
Inventories (8 ) 10
Prepaid expenses and other assets (138 ) (72 )
Accounts payable and accrued expenses 220 (348 )
Deferred grant income (1,172 ) —
Operating lease liabilities (1,066 ) (742 )
Contract liabilities (677 ) (36 )
Net cash flows used in operating activities (2,646 ) (1,167 )

Cash flows from investing activities:
Purchase of property and equipment (154 ) (15 )
Net cash flows used in investing activities (154 ) (15 )

Cash flows from financing activities:
Proceeds from long-term debt and notes payable 1,647 2,000
Payments of long-term debt and notes payable (190 ) (53 )
Payment of financing costs (9 ) —
Net cash flows provided by financing activities 1,448 1,947
Effect of exchange rate changes on cash — 9
Net (decrease) increase in cash and restricted cash (1,352 ) 774
Cash and restricted cash, beginning of period 2,318 1,929
Cash and restricted cash, end of period $ 966 $ 2,703

Supplemental cash flow information:
Cash paid for interest and income taxes
Interest $ 268 $ 294
Income taxes $ 28 $ —

Non-cash operating, investing and financing activities:
Conversion of Preferred Series 2 stock to common stock $ — $ 402
Change in operating lease assets and liabilities due to amended leases $ 607 $ —
Issuance of warrants in connection with convertible promissory notes $ 263 $ —
Purchases of property and equipment included in accounts payable and accrued expenses $ 60 $ —
Settled lease liabilities included in accounts payable and accrued expenses $ 256 $ —

Details of end of period cash and restricted cash:
Cash $ 966 $ 2,262
Restricted cash — 441
Total cash and restricted cash $ 966 $ 2,703

See accompanying notes to the condensed consolidated ~~and combined~~ financial statements
9

Amergent Hospitality Group ~~Inc and Subsidiaries~~
~~Condensed Consolidated and Combined Statements of Cash Flows~~
June 30, 2021 June 30, 2020
Six months ended
June 30, 2021 June 30, 2020
(Restated)

Net loss $ (2,386,101 ) $ (10,644,227 )
Cash flows from operating activities:
Adjustments to reconcile net loss to net cash flows from operations
Depreciation and amortization 730,005 831,609
Amortization of operating lease assets 429,121 629,010
Asset impairment charges 1,287,579 273,927
Gain from extinguished lease liabilities (318,519 ) —
Loss on investments 120,460 933,147
Amortization of debt discount 89,658 35,137
Loss on extinguishment of Series 1 Preferred — 161,899
Loss on debt extinguishment — 11,808,111
Derivative liabilities revaluation (118,664 ) (6,142,517 )
Change in assets and liabilities
Accounts and other receivables 157,556 182,587
Prepaid expenses and other assets (71,842 ) (393,321 )
Inventories 18,825 9,787
Accounts payable and accrued expenses (506,907 ) 220,904
Operating lease liabilities (741,854 ) (1,123,689 )
Contract liabilities (35,713 ) (48,806 )
Net cash flows from operating activities (1,346,396 ) (3,265,722 )

Cash flows from investing activities:
Purchase of property and equipment (14,899 ) (27,740 )
Net cash flows used in investing activities (14,899 ) (27,740 )

Cash flows from financing activities:
Loan proceeds 2,000,000 2,689,540
Loan repayments (52,898 ) (2,482,474 )
Proceeds from Series 2 Preferred — 1,405,000
Proceeds from warrant exercises — 885,046
Redemption of Series 1 Preferred — (880,289 )
Merger — 5,411,745
Net cash flows provided by financing activities 1,947,102 7,028,478
Effect of exchange rate of on cash 9,065 (34,628 )
Net increase in cash and restricted cash 594,872 3,700,388
Cash and restricted cash, beginning of period 1,928,804 501,017
Cash and restricted cash, end of period $ 2,523,676 $ 4,201,205

Supplemental cash flow information:
Cash paid for interest and income taxes
Interest $ 293,610 $ 164,388
Income taxes $ — $ —

Non-cash investing and financing activities
Conversion of Preferred stock - Series 2 to common stock $ 401,208 $ 416,392
Preferred stock dividends paid through issuance of common stock $ — $ 19,523
Accrued interest paid through warrant exercise $ — $ 318,700
Bifurcation of derivative liability from Preferred Stock - Series 2 $ — $ 529,000
Warrant portion of merger consideration $ — $ 1,628,909
~~See accompanying notes to the condensed consolidated and combined financial statements~~
10
~~Amergent Hospitality Group, Inc~~Inc. and Subsidiaries
Notes to the Condensed Consolidated ~~and Combined~~ Financial Statements (Unaudited)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
~~BASIS OF PRESENTATION~~Nature of Business

Amergent Hospitality Group Inc. (“Amergent”) was incorporated on February 18, 2020 as a wholly-owned subsidiary of Chanticleer Holdings, Inc. (“Chanticleer”) for the purpose of conducting the business of Chanticleer and its subsidiaries after completion of the ~~Spin-Off~~spin-off of Amergent to the shareholders of Chanticleer (Spin-Off”). The Spin-Off transaction was completed on April 1, 2020 in connection with ~~the~~Chanticleer’s completion of its merger transaction (the “Merger”) ~~of Chanticleer~~ with Sonnet BioTherapeutics, Inc. (“Sonnet”) ~~on that date.~~. Amergent is in the business of owning, operating and franchising fast casual dining ~~concepts domestically and internationally.~~concepts.

On March 31, 2020, Chanticleer contributed all its assets and liabilities, including the stock interest in all its subsidiaries (other than Amergent), to Amergent. Based on this being a transaction between entities under common control the carryover basisBasis of accounting was used to record the assets and liabilities contributed to Amergent. Further, as a common control transaction the condensed consolidated and combined financial statements of Amergent reflect the transaction as if the contribution had occurred as of the earliest period presented herein.Presentation
~~As such, the~~The accompanying condensed consolidated ~~and combined~~ financial statements include the accounts of Amergent ~~and its subsidiaries along with Chanticleer~~ and its subsidiaries (collectively “we,” “us,” “our,” or the “Company”). All intercompany and inter-entity balances have been eliminated in ~~consolidation~~consolidation.
The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles of the United States (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and ~~combination.~~Accounting Standards Updates (“ASU”) promulgated by the Financial Accounting Standards Board (“FASB”).
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates include the valuation of options, warrants and convertible notes payable using Black-Scholes and Monte Carlo models, and analysis of the recoverability of goodwill and long-lived assets. Actual results could differ from those estimates, particularly given the significant social and economic disruptions and uncertainties associated with the ongoing COVID-19 pandemic and the COVID-19 control responses.
Certain prior year amounts have been updated to conform to the current period presentation. The Company has opted to present the financial information on the condensed consolidated balance sheets and condensed consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders’ deficit and cash flows in thousands.

~~GENERAL~~General

The accompanying condensed consolidated ~~and combined~~ financial statements included in this ~~report~~Report have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting and include all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation. These condensed consolidated ~~and combined~~ financial statements have not been audited. The condensed consolidated ~~and combined~~ balance sheet as of December 31, ~~2020~~2021 has been derived from the audited consolidated ~~and combined~~ financial statements as of December 31, ~~2020~~2021 and for the year then ended included in Amergent’s ~~annual report~~Annual Report on Form 10-K filed with the SEC on April 15, ~~2021.~~2022. The results of operations for the three and six-month ~~period~~periods ended June 30, ~~2021~~2022 are not necessarily indicative of the operating results for the full year ending December 31, ~~2021.~~2022.

Certain information and footnote disclosures normally included in ~~unaudited condensed~~ consolidated ~~and combined~~ financial statements prepared in accordance with generally accepted accounting principles of the United States (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations for interim reporting. The Company believes that the disclosures contained herein are adequate to make the information presented not misleading. However, these financial statements should be read in conjunction with the audited consolidated ~~and combined~~ financial statements and notes thereto included in Amergent’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (“2021 Form 10-K”) previously filed with the SEC.

~~LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN~~There have been no changes to our significant accounting policies described in our 2021 Form 10-K that would have had a significant impact on these unaudited condensed consolidated financial statements and related notes.

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Liquidity, Capital Resources and Going Concern

As of June 30, ~~2021,~~2022, the Company’s cash balance was $~~2,523,676, of which $440,557~~1.0 ~~was restricted cash,~~million, its working capital deficiency was $~~15,503,496~~ 12.3 million and it had significant near-term commitments and contractual obligations. The level of additional cash needed to fund operations and our ability to conduct business for the next 12 months will be influenced primarily by the following factors:

● our ability to access the capital and debt markets to satisfy current obligations and operate the business;

● our ability to qualify for and access financial stimulus programs available through federal and state government programs;

● our ability to refinance or otherwise extend maturities of current debt obligations;

● our ability to manage our operating expenses and maintain gross margins;

● popularity of and demand for our fast-casual dining concepts; and

● general economic conditions and changes in consumer discretionary income.

~~Amergent Hospitality Group, Inc and Subsidiaries~~
~~Notes to the Condensed Consolidated and Combined Financial Statements~~
We have typically funded our operating costs, acquisition activities, working capital requirements and capital expenditures with proceeds from the issuances of our common stock ~~government tax credits~~ and other financing arrangements, including convertible debt, lines of credit, notes payable, capital leases, government stimulus funds and other forms of external financing.

The Company ~~plans~~expects to have to seek additional ~~capital in the future through~~debt or equity ~~and/or debt financings or other sources in order~~funding to ~~sustain operations. We may seek to work with vendors~~support operations and ~~suppliers on payment plans, settle certain obligations~~there can be no assurances that such funding would be available at ~~a discount, seek forgiveness of Paycheck Protection Program loans and look for other government stimulus programs. Additionally, the Company has significant debt due within~~commercially reasonable terms, if at all.
As Amergent executes its business plan over the next ~~twelve~~12 months, ~~that will need~~it intends to ~~be refinanced and/or settled.~~carefully monitor its working capital needs and cash balances relative to the availability of cost-effective debt and equity financing. In the event that capital is not available, Amergent may then have to scale back or freeze its growth plans, sell assets on less than favorable terms, reduce expenses, and/or curtail future acquisition plans to manage its liquidity and capital resources.

OnIn early March ~~10,~~ 2020, the ~~World~~COVID-19 pandemic was declared to be a National Public Health ~~Organization characterized~~Emergency. The global COVID-19 pandemic continues to adversely impact the ~~novel~~economies in which we operate. As a result of rising case rates toward the end of 2020 and certain jurisdictions implementing restrictions that reduced dining room capacity or mandated the closure of dining rooms, the Company began fiscal 2021 with significant limitations on its operations which, throughout the fiscal year, varied widely from time to time, state to state and city to city, however, nonetheless negatively impacted sales. Once COVID-19 ~~virus as a global pandemic. The COVID-19 outbreak~~vaccines were approved and moved into wider distribution in the United States ~~has resulted~~ in ~~a significant impact throughout~~early to mid-2021, public health conditions improved and almost all of the ~~hospitality industry that have continued through June 30, 2021. The Company has been impacted due to~~COVID-19 restrictions placed by state and local governments that caused temporary restaurant closures or significantly reduced the Company’s ability to operate. It is difficult to estimate the length or severity of this outbreak; however, the Company has made operational changes, as needed, to reduce the impact.on businesses eased.

While cases continue to decline and staffing continues to improve, overall consumer and business activity remains muted in certain markets as consumer behaviors have changed due to the COVID-19 pandemic and some businesses have yet to bring employees back into their offices. The Company’s ~~history~~restaurant operations have been, and could again in the future, be disrupted by team member staffing issues because of illness, exclusion, fear of contracting COVID-19 or caring for family members due to COVID-19, legal requirements for employee vaccinations or COVID testing, lack of labor supply, competitive labor pressures, or for other reasons. Furthermore, inflation has been and is elevated across the Company’s business, including food costs, due in part to the supply chain impacts of the pandemic. The Company remains in regular contact with its major suppliers and while, to date, it has not experienced significant disruptions in its supply chain due to the COVID-19 pandemic, the Company could see significant future disruptions should the impacts of the pandemic continue. Currently, national, state and local jurisdictions have removed their capacity restrictions on businesses and, therefore, the Company’s restaurants are serving customers in its dining rooms without social distancing requirements. However, it is possible additional outbreaks could lead to restrictive measures that could impact the Company’s guest demand and dining room capacity.
For further information regarding the COVID-19 pandemic, see the discussion included in our 2021 Form 10-K.
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The Company’s current operating losses, combined with its working capital deficit, ~~which includes substantial near term debt repayment obligations and uncertainties regarding the impact of COVID-19,~~ raise substantial doubt about ~~our~~its ability to continue as a going concern.
The accompanying condensed consolidated ~~and combined~~ financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2. ~~SIGNIFICANT~~RECENTLY ISSUED ACCOUNTING ~~POLICIES~~PRONOUNCEMENTS
~~There~~In May 2021, the FASB issued ASU 2021-04, Earnings per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges or Freestanding Equity-Classified Written Call Options. The pronouncement outlines how an entity should account for modifications made to equity-classified written call options, including stock options and warrants to purchase the entity’s own common stock. The guidance in the ASU requires an entity to treat a modification of an equity classified option that does not cause the option to become liability-classified as an exchange of the original option for a new option. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the equity-classified written call option or as termination of the original option and issuance of a new option. The guidance is effective prospectively for fiscal years beginning after December 15, 2021. The Company adopted this guidance on January 1, 2022, and it did not have a material effect on the condensed consolidated financial statements.
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic ASC 832): Disclosures by Business Entities about Government Assistance. This standard requires disclosures about transactions with a government that have been ~~no changes~~accounted for by analogizing to ~~our significant~~a grant or contribution accounting ~~policies described in~~model to increase transparency about the ~~annual report~~types of transactions, the accounting for the ~~year ended~~transactions, and the effect of the transactions on an entity’s financial statements. The new standard is effective for annual periods beginning after December ~~31, 2020 filed with~~15, 2021. The Company early adopted this guidance on January 1, 2022, and it did not have a material effect on the ~~SEC on April 15, 2021,~~condensed consolidated financial statements.
We reviewed all other recently issued accounting pronouncements and concluded that ~~would~~they were either not applicable or not expected to have ~~had~~ a significant impact ~~on these unaudited~~to the condensed consolidated ~~and combined~~ financial ~~statements and related notes.~~statements.

3. ~~BASIS OF PRESENTATION~~EMPLOYEE RETENTION CREDIT AND RESTAURANT REVITALIZATION FUND
The accompanying condensed consolidated and combined financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) promulgated by the Financial Accounting Standards Board (“FASB”).
~~USE OF ESTIMATES~~Employee Retention Credit

The ~~preparation~~Employee Retention Credit (“ERC”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) is a refundable tax credit which encouraged businesses to keep employees on the payroll during the COVID-19 pandemic. Although the program ended on January 1, 2022, the Company performed an analysis during the current period and determined that it was eligible for additional credits related to 2021 wages. As of ~~financial statements~~each of June 30, 2022 and December 31, 2021, approximately $0.8 million of ERC is included in ~~conformity with U.S. GAAP requires management to make estimates~~accounts and ~~assumptions that affect the amounts reported~~other receivables in the ~~financial~~condensed consolidated balance sheets. For the three and six months ended June 30, 2022 and 2021, the Company recognized $0.7 million and $1.5 million, respectively, of ERC as a contra-expense included in employee retention credit and other grant income in the condensed consolidated statements of operations.
In addition to the ERC, the Company received credits under other government/government agency programs of approximately $68,000and ~~accompanying notes. Significant estimates include analysis~~$128,000 for the three and six months ended June 30, 2021, respectively, of which approximately $27,000 and $41,000 and $85,000 and $44,000 were recorded as an offset to restaurant operating expenses and as other income, respectively, in the condensed consolidated statements of operations.
Restaurant Revitalization Fund
The American Rescue Plan Act established the Restaurant Revitalization Fund (“RRF”) to provide funding to help restaurants and other eligible businesses keep their doors open. This program provided restaurants with funding equal to their pandemic-related revenue loss up to $10.0 million per business and no more than $5.0 million per physical location. Recipients are not required to repay the funding as long as funds are used for eligible uses no later than March 11, 2023. In 2021 and prior to its acquisition by the Company in August 2021, Pie Squared Holdings (see Note 9) received a grant under the U.S. Small Business Administration’s (“U.S. SBA”) RRF for approximately $10.0 million. The proceeds received were mainly used to repay existing debt and to also pay operating expenses. The unused funds received under the RRF at closing of the ~~recoverability~~acquisition were $2.0 million, and these funds were placed into escrow for the benefit of ~~goodwill~~the Company for working capital to be used solely in the operations of the acquired business. Restricted cash and ~~long-lived assets. Actual results could differ~~a deferred grant income liability were recorded for the unused proceeds from ~~those estimates, particularly given~~ the ~~significant social~~RRF, and ~~economic disruptions~~grant income is being recognized as the Company expends the funds on eligible costs incurred under the RRF post acquisition. As of June 30, 2022 and ~~uncertainties associated with~~December 31, 2021, the ~~ongoing COVID-19 pandemic~~Company had restricted cash of nil and $1.7 million, respectively, related to the ~~COVID-19 control responses.~~unused proceeds from the RRF. For the three and six months ended June 30, 2022, the Company recognized $0.6 million and $1.1 million, respectively, related to the RRF as a contra-expense included in employee retention credit and other grant income and in the condensed consolidated statements of operations.

12

The Company periodically submits to the escrow agent for the acquisition the planned uses of these funds, and the sellers have the right to review the planned uses to determine whether, in the sellers’ opinion, the planned uses meet the criteria of “eligible uses” under the RRF. If determined to not meet such criteria, then the escrow agent will not distribute that portion of the request. Any unused funds on March 11, 2023, or if applicable, the awardee permanently closed before using all funds on authorized purposes, are repayable to the U.S. SBA. As the Company acquired all the outstanding membership interests in Pie Squared Holdings, the Company is now responsible that the grant proceeds were, in fact, properly obtained and disbursed for “eligible uses.” If it is determined that Pie Squared Holdings obtained the grant improperly or that disbursements of such grant monies were not “eligible uses,” then the Company would be responsible for the ramifications of such actions, including repayment of the approximately $10.0 million of grant monies, among other items. Management completed its analysis of this contingency and concluded that, through the date at which the condensed consolidated financial statements were available to be issued, a liability does not need to be recorded for this contingency. In connection with the acquisition, the Company obtained an indemnification from the sellers which is inclusive of any matters related to the RRF.
4. REVENUE

~~Amergent Hospitality Group, Inc and Subsidiaries~~
~~Notes to the Condensed Consolidated and Combined Financial Statements~~Contract Liabilities

Contract liabilities consist of deferred revenue resulting from initial and renewal franchise license fees paid by franchisees, which are generally recognized on a straight-line basis over the term of the underlying franchise agreement, as well as upfront development fees paid by franchisees, which are generally recognized on a straight-line basis over the term of the underlying franchise agreement once it is executed. The recognition of initial and renewal license fees is accelerated if the franchise or development agreement is terminated. During the six months ended June 30, 2022, the Company recognized $0.7 million of franchise income as a result of the cancellation of its international Master Franchise Agreements. There were no franchise or development agreement terminations during the three months ended June 30, 2022 and 2021 or the six months ended June 30, 2021.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company measures and records certain financial assets and liabilities at fair value on a recurring basis. U.S. GAAP provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority, referred to as Level 1, to quoted prices in active markets for identical assets and liabilities. The next priority, referred to as Level 2, is given to quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active; that is, markets in which there are few transactions for the asset or liability. The lowest priority, referred to as Level 3, is given to unobservable inputs. The table below reflects the level of the inputs used in the Company’s fair value calculations:
SCHEDULE OF FAIR VALUE ~~OF FINANCIAL INSTRUMENTS~~MEASUREMENTS, RECURRING AND NONRECURRING

Quoted Prices in Active Markets
(Level 1)
Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value
June 30, 2021
Assets (Note 3)
Common stock of Sonnet $ 292,809 — $ — $ 292,809
Liabilities (Note 9)
True-up provision of Convertible Preferred Series 2 $ — $ — $ 66,136 $ 66,136

(in thousands) Quoted Prices in Active Markets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair
Value
June 30, 2022
Assets (Note 6)
Common stock of Sonnet $ 34 $ — $ — $ 34
Liabilities (Note 9)
Convertible note payable $ — $ — $ 928 $ 928

Quoted Prices in Active Markets
(Level 1)
Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value
December 31, 2020
Assets (Note 3)
Common stock of Sonnet $ 413,268 — $ — $ 413,268
Liabilities (Note 9)
True-up provision of Convertible Preferred Series 2 $ — $ — $ 184,800 $ 184,800
~~Inputs used in the Company’s Level 3 calculation of fair value are discussed in Note 9.~~

(in thousands) Quoted Prices in Active Markets
(Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair
Value
December 31, 2021
Assets (Note 6)
Common stock of Sonnet $ 50 $ — $ — $ 50
Liabilities (Note 9)
Convertible note payable $ — $ — $ 1,099 $ 1,099

The Company is required to disclose fair value information about financial instruments when it is practicable to estimate that value. The carrying amounts of the Company’s cash, restricted cash, accounts receivable, other receivables, accounts payable, other current liabilities, convertible notes payable (other than the convertible note payable discussed below) and notes payable approximate fair value due to the short-term maturities of these financial instruments and/or because related interest rates offered to the Company approximate current rates.

~~CASH~~
Cash consists of deposits held at financial institutions and is stated at fair value. The Company limits its credit risk associated with cash by maintaining its bank accounts at major financial institutions. At June 30, 2021, the Company held cash of $~~307,090~~ ~~in excess of insured limits in these banks.~~
~~RESTRICTED CASH~~
~~As of June 30, 2021 and December 31, 2020, the Company maintained restricted cash of $440,557~~ ~~and $1,250,336, respectively. The restricted cash is maintained in a segregated bank account.~~
~~PROPERTY AND EQUIPMENT~~
Property and equipment are stated at cost, less accumulated depreciation. Depreciation and amortization, which includes amortization of assets held under capital leases, are recorded generally using the straight-line method over the estimated useful lives of the respective assets or, if shorter, the term of the lease for certain assets held under a capital lease. Leasehold improvements are amortized over the lesser of the expected lease term or the estimated useful
13

~~Amergent Hospitality Group, Inc and Subsidiaries~~
~~Notes to the Condensed Consolidated and Combined Financial Statements~~

~~lives~~The Company evaluated the convertible note payable issued in connection with the acquisition of Pie Squared Holdings (see Note 9) in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion price discount creates a derivative. This derivative was not clearly and closely related ~~assets using~~to the ~~straight-line method. Maintenance~~debt host and ~~repairs that do not improve or extend~~was required to be separated and accounted for as a derivative instrument. The Company elected to initially and subsequently measure the ~~useful lives of the assets are not considered assets and are charged to expense when incurred.~~convertible note payable at fair value, with changes in fair value recognized in operations.

The estimated ~~useful lives used to compute depreciation~~fair value of the convertible note payable was determined using a Monte Carlo simulation and ~~amortization are~~the following assumptions as ~~follows:~~of June 30, 2022:
SCHEDULE OF ~~PROPERTY AND EQUIPMENT USEFUL LIVES~~ESTIMATED FAIR VALUE ASSUMPTIONS
~~Leasehold improvements~~ 5-15 ~~years~~
~~Restaurant furnishings and equipment~~ 3-10 ~~years~~
~~Furniture and fixtures~~ 3-10 ~~years~~
~~Office and computer equipment~~ 3-7 ~~years~~
~~INTANGIBLE ASSETS~~
~~Trade Name/Trademark~~
Volatility 105.00 %
Risk free rate 1.5% - 2.82 %
Stock price $ 0.26
Credit spread 26.28 %

The reconciliation of the convertible note payable measured at fair value of trade name/trademarks are estimated and compared to the carrying value. The Company estimates the fair value of trademarks using the relief-from-royalty method, which requires assumptions related to projected sales from its annual long-range plan; assumed royalty rates that could be payable if the Company did not own the trademarks; and a discount rate. Certain of the Company’s trade name/trademarks have been determined to have a definite-lived life and are being amortized on a ~~straight-line~~recurring basis ~~over estimated useful lives of~~ 10 ~~years. The amortization expense of these definite-lived intangibles~~using significant unobservable inputs (Level 3) is included in depreciation and amortization in the Company’s condensed consolidated and combined statements of operations and comprehensive income (loss). Certain of the Company’s trade name/trademarks have been classified as ~~indefinite-lived intangible assets and are not amortized, but instead are reviewed for impairment at least annually or more frequently if indicators of impairment exist.~~follows:
SCHEDULE OF FAIR VALUE LIABILITIES MEASURED ON RECURRING BASIS
(in thousands)
Six months ended
June 30, 2022

Balance at January 1, 2022 $ 1,099
Change in fair value (171 )
Balance at June 30, 2022 $ 928

6. ~~LONG-LIVED ASSETS~~INVESTMENTS

Long-lived assets, such as property and equipment, operating lease assets, and purchased intangible assets subject to depreciation and amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SomeInvestments consist of the ~~events or changes in circumstances that would trigger an impairment test include, but are not limited to:~~following:
SCHEDULE OF INVESTMENT

(in thousands) June 30, 2022 December 31, 2021
Common stock of Sonnet, at fair value ^(a) $ 34 $ 50
Chanticleer Investors, LLC, at cost ^(b) 16 16
Total $ 50 $ 66

●(a) ~~significant under-performance relative to expected and/or historical results (negative comparable sales growth or operating cash flows for two consecutive years);~~Represents the fair value of the common stock of Sonnet held by the Company after its exercise of warrants received in connection with the Merger. As of June 30, 2022, 122,064 shares of Sonnet were held.
● ~~significant negative industry or economic trends;~~
●(b) ~~knowledge of transactions involving the sale of similar property at amounts below~~Represents the Company’s ~~carrying value; or~~
● investment in Chanticleer Investors, LLC, which holds an interest in Hooters of America, the operator and franchisor of the Hooters Brand worldwide. As of the dates presented, the Company’s ~~expectation to dispose~~effective economic interest in Hooters of ~~long-lived assets before~~America was less than 1%. In March 2022, the ~~end~~Company received a dividend from its investment in Hooters of ~~their estimated useful lives, even though~~America of approximately $0.1 million, which is included in other income for the ~~assets do not meet the criteria to be classified as “Held for Sale.”~~six months ended June 30, 2022 in our condensed consolidated statement of operations.
If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.
During the third quarter of 2019 and continuing in 2020 and 2021, the Company determined that triggering events occurred some of which were related to the COVID-19 outbreak requiring management to review the certain long-lived assets for impairment. Due to the continued impact of this pandemic on the Company’s business, management has performed an impairment analysis of its long-lived assets at each quarter end in 2020 and through June 30, 2021 and determined that the carrying value of the Company’s trade name/trademark intangible asset, property and equipment and operating lease assets (see Notes 4, 5, and 10 for further discussion) were impaired. The determination was based on the best judgment of management for the future of the asset and on information known at the time of the assessment.

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7. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:
~~Amergent Hospitality Group, Inc~~SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

(in thousands) June 30, 2022 December 31, 2021
Leasehold improvements $ 5,385 $ 5,511
Restaurant furniture and equipment 2,717 2,768
Construction in progress 45 20
Office and computer equipment 37 33
Office furniture and fixtures — 57
Property,plant and equipment, gross 8,184 8,389
Accumulated depreciation and amortization (5,122 ) (5,274 )
Property, plant and equipment, net $ 3,062 $ 3,115
As of June 30, 2021, we performed an analysis of the recoverability of the carrying value of our property and ~~Subsidiaries~~equipment. Based on the analysis, an impairment charge of approximately $0.3 million was recorded for the six months ended June 30, 2021, which is included in asset impairment charges in our condensed consolidated statements of operations. The impairment recognized during the six months ended June 30, 2021 was primarily the result of the impact of the COVID-19 outbreak in the United States, which had a significant impact throughout the hospitality industry. The impact varied by state/geographical area within the United States at various intervals during the pandemic and, therefore, the operating results and cash flows at the store level varied significantly. There were no indicators of impairment related to our property and equipment during the six months ended June 30, 2022.
We recognized depreciation expense of $0.2 million and $0.3 million during the three and six months ended June 30, 2022, respectively, and $0.1 million and $0.3 million during the three and six months ended June 30, 2021, respectively.
~~Notes to the Condensed Consolidated and Combined Financial Statements~~8. INTANGIBLE ASSETS, NET

~~GOODWILL~~Goodwill

~~Goodwill, which~~A rollforward of goodwill is ~~not subject to amortization, is evaluated for impairment annually~~ as of the end of the Company’s year-end, or more frequently if an event occurs or circumstances change, such as material deterioration in performance or a significant number of store closures, that would indicate an impairment may exist. Goodwill is tested for impairment at a level of reporting referred to as a reporting unit. Management determined that the Company has one reporting unit.follows:
SCHEDULE OF GOODWILL

(in thousands)
Six Months Ended
June 30, 2022

Year Ended
December 31, 2021

Beginning balance $ 7,810 $ 8,591
Acquisition of Pie Squared Holdings — 51
Sale of Hooters UK — (820 )
Foreign currency translation loss — (12 )
Ending balance $ 7,810 $ 7,810

Due to the continued impact of the COVID-19 pandemic on the Company’s business, management has performed an impairment analysis of goodwill as of beginning in the first quarter of 2020 and quarterly thereafter through June 2021.
When evaluating goodwill for impairment, the Company may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. If the Company does not perform a qualitative assessment or determines that it is not more likely than not that the fair value of the reporting unit exceeds its carrying amount, a quantitative assessment is performed to calculate the estimated fair value of the reporting unit. If the carrying amount of the reporting unit exceeds the estimated fair value, an impairment charge is recorded to reduce the carrying value to the estimated fair value. The Company’s decision to perform a qualitative impairment assessment is influenced by a number of factors, including the significance of the excess of the reporting unit’s estimated fair value over carrying value at the last quantitative assessment date, the amount of time in between quantitative fair value assessments, and the price of our common stock.
~~Step one of the impairment test is based upon a comparison of the carrying value of net assets, including goodwill balances, to the fair value of net assets.~~ The Company performed a ~~quantitative~~qualitative assessment at June 30, ~~2021 and determined that goodwill was not impaired due to the excess fair value of the reporting unit over its carrying value~~2022 based on the best ~~judgement~~judgment of management for the future of the reporting unit and on information known at the time of the ~~assessment.~~assessment, and determined that it was more likely than not that the fair value of its reporting unit exceeded the carrying amount and, therefore, a quantitative assessment was not deemed necessary and no impairment was recorded to goodwill.
15

~~FOREIGN CURRENCY TRANSLATION~~Other Intangible Assets

~~Assets~~Franchise and ~~liabilities denominated in local currency are translated to U.S. dollars using~~trademark/tradename intangible assets consist of the exchange rates as in effect at the balance sheet date. Results of operations are translated using average exchange rates prevailing throughout the period. Adjustments resulting from the process of translating foreign currency financial statements from functional currency into U.S. dollars are included in accumulated other comprehensive loss within stockholders’ equity. Foreign currency transaction gains and losses are included in current earnings. The Company has determined that local currency is the functional currency for its foreign operations.following:

~~LEASES~~SCHEDULE OF FINITE - LIVED INTANGIBLE ASSETS
(in thousands) June 30, 2022 December 31, 2021
Trademark, Tradenames:
American Roadside Burger 10 years $ 561 $ 561
BGR: The Burger Joint Indefinite 739 739
Little Big Burger Indefinite 1,550 1,550
PizzaRev 5 years 410 410
3,260 3,260
Acquired Franchise Rights:
BGR: The Burger Joint 7 years 828 828
PizzaRev 5 years 410 410
1,238 1,238
Total intangibles at cost 4,498 4,498
Accumulated amortization (1,525 ) (1,369 )
Intangible assets, net $ 2,973 $ 3,129
As of June 30, 2021, we performed an analysis of the recoverability of the carrying value of our intangible assets. Based on the analysis, an impairment charge of approximately $0.3 million was recorded to trademark/tradenames for ABC: American Burger Company for the six months ended June 30, 2021, and is included in asset impairment charges in our condensed consolidated statements of operations. There were no indicators of impairment related to our intangible assets during the six months ended June 30, 2022.

We ~~determine if a contract contains a lease at inception. Our material operating leases consist~~recognized amortization expense of ~~restaurant locations~~$0.1 million and ~~office space. Our leases generally have remaining terms of~~ $1-200.2 ~~years and most~~ ~~include options to extend the leases for additional 5-year periods.~~ ~~Generally, the lease term is the minimum of the non-cancelable period of the lease or the lease term inclusive of reasonably certain renewal periods up to a term of~~ 20 ~~years. If the estimate of our reasonably certain lease term was changed, our depreciation and rent expense could differ materially.~~
Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, we estimate incremental borrowing rates corresponding to the reasonably certain lease term. We estimated this rate based on prevailing financial market conditions, comparable company and credit analysis, and management judgment. If the estimate of our incremental borrowing rate was changed, our operating lease assets and liabilities could differ materially.
~~Amergent Hospitality Group, Inc and Subsidiaries~~
~~Notes to the Condensed Consolidated and Combined Financial Statements~~
~~EMPLOYEE RETENTION AND OTHER CREDITS~~
~~The Employee Retention Credit (“ERC”) under the CARES Act is a refundable tax credit which encourages businesses to keep employees on the payroll~~million during ~~the COVID-19 pandemic. Eligible employers can qualify for up to $7,000 of~~ credit for each employee based on qualified wages paid after December 31, 2020 and before January 1, 2022. Qualified wages are the wages paid to an employee during an economic hardship, specifically, either (1) a full or partial suspension of operations by order of a governmental authority due to COVID-19, or (2) a significant decline in gross receipts. The Company recognized $1,473,355 of ERC as a contra-expense in the condensed consolidated and combined statements of operations for the three and six months ended June 30, ~~2021.~~
~~In addition to the ERC, the Company received credits under other government/government agency programs of $67,918~~2022, respectively, and $~~128,364~~0.1 ~~for~~million and $0.2 million during the three and six months ended June 30, 2021, ~~of which $~~respectively.
~~26,518~~ ~~and $~~
~~41,400~~ ~~and $84,798~~ ~~and $43,566~~ ~~were recorded~~Amortization expense for the next five years is as ~~an offset to restaurant operating expenses and as other income, respectively, in the condensed consolidated and combined statements of operations.~~follows (in thousands):
SCHEDULE OF AMORTIZATION OF INTANGIBLE ASSETS
Year ending December 31:
2022 (remaining six months) $ 82
2023 164
2024 164
2025 164
2026 110
Amortization Expense, net $ 684
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9. ~~INCOME TAXES~~LONG-TERM DEBT AND NOTES PAYABLE

~~Deferred income taxes~~Long-term debt and notes payable are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.summarized as follows:

SCHEDULE OF DEBT AND NOTES PAYABLE
(in thousands) June 30, 2022 December 31, 2021
10% convertible debt (a) $ 4,038 $ 4,038
8% convertible debt (b) 1,350 —
Convertible promissory note (measured at fair value) (c) 928 1,099
PPP loans (d) 4,109 4,109
EIDL loans (e) 300 300
Contractor note (f) 348 348
Notes payable (g) 133 —
Total Debt 11,206 9,894
Less: discount on convertible debt (a), (b) (244 ) (37 )
Total Debt, net of discount $ 10,962 $ 9,857

Current portion of long-term debt and notes payable $ 3,661 $ 3,264
Long-term debt and notes payable, less current portion $ 7,301 $ 6,593
(a) In connection with and prior to the Spin-Off and Merger, on April 1, 2020, pursuant to an agreement among Chanticleer, Oz Rey, LLC (“Oz Rey”) and certain original holders of the 8% non-convertible debentures that were satisfied during 2020, the Company issued a 10% secured convertible debenture (the “10% Convertible Debt”) to Oz Rey in exchange for the 8% non-convertible debentures. The principal amount of the 10% Convertible Debt is $4.0 million and is payable in full on April 1, 2024, subject to extension by the holders in two-year intervals for up to 10 years from the issuance date upon Amergent meeting certain conditions. Interest is payable quarterly in cash. In connection with the exchange of the debentures, Amergent issued warrants to Oz Rey and the original 8% non-convertible debenture holders to purchase 2,925,200 shares of common stock. The exercise price is $0.125 for 2,462,600 warrants and $0.50 for 462,500 warrants. The warrants can be exercised on a cashless basis and expire 10 years from the issuance date.
The 10% Convertible Debt was previously amended to fix the conversion rate into common stock at $0.10 per share. There is also a limitation on Oz Rey’s ability to convert the debenture into common stock such that only the portion of the balance for which the Company has sufficient available shares, considering all other outstanding instruments at the time of conversion on a fully diluted basis, can be converted. Oz Rey may, however, upon reasonable notice to the Company, require the Company to include in its proxy materials, for any annual meeting of stockholders being held by the Company, a proposal to amend the Company’s certificate of incorporation to increase the Company’s authorized shares to a number sufficient to allow for conversion of all shares underlying the debenture, on a fully diluted basis. Oz Rey also agreed that the Company would not be required under any circumstances to make a cash payment to settle the conversion feature not exercisable due to the authorized share cap or in an event that the Company was unable to deliver shares under the conversion feature. As of June 30, 2022, $2.4 million of the 10% Convertible Debt was convertible into approximately 23,500,000 shares of common stock.
The Company recorded a debt discount of approximately $0.4 million for the difference between the face value of the 10% Convertible Debt and the estimated fair value at the April 1, 2020 issuance date and amortized this discount over the two-year term of the notes.
In connection with the 8% Convertible Debt transaction described in (b) below, the maturity date of the 10% Convertible Debt was extended to April 1, 2024 and Oz Rey agreed to subordinate payment of its 10% Convertible Debt to payment of the 8% Convertible Debt, which has been accounted for as a loan modification. In addition, Oz Rey received a fee equal to 2.0% of the principal amount of the 8% Convertible Debt issued in the transaction, which has been recorded as a debt discount and is being amortized over the two-year term of the related debt.
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(b) In March 2022, the Company commenced a private placement of up to $3.0 million of 8% senior unsecured convertible debentures (the “8% Convertible Debt”) and 3,000,000 common stock warrants. Pursuant to the Securities Purchase Agreement, the Company issued $1.35 million of 8% Convertible Debt and warrants to purchase the number of shares of the Company’s common stock equal to the principal amount of 8% Convertible Debt issued.
The 8% Convertible Debt matures 18 months after issuance and is subject to acceleration in the event of customary events of default. Interest is payable quarterly in cash. The 8% Convertible Debt may be converted by the holders at any time at a fixed conversion price of $0.40 per share, and each warrant entitles the holder to purchase one share of common stock at an exercise price of $0.50 per share. Both the notes and the warrants include a beneficial ownership blocker of 4.99% and contain customary provisions preventing dilution and providing the holders rights in the event of fundamental transactions. Upon the earlier of the maturity date or the one-year anniversary of conversion of the 8% Convertible Debt, holders of 51% of the registerable securities may request the Company to file a registration statement for the securities. The warrants can be exercised on a cashless basis and expire five years from the issuance date. If the Company makes any distribution to the common stockholders, the holders of the warrants will be entitled to participate on an as-if-exercised basis. As of June 30, 2022, the 8% Convertible Debt was convertible into 3,375,000 shares of common stock.
The Company analyzed the 8% Convertible Debt and did not identify any embedded features that require bifurcation from the host and accounting as derivatives. However, as the convertible notes payable were issued with warrants, the net proceeds from the issuance were allocated to the 8% Convertible Debt and the warrants based on their relative fair values, resulting in an allocation of $1.0 million to the 8% Convertible Debt and $0.3 million to the warrants (see Note 12). The Company recorded a debt discount of approximately $0.3 million for the difference between the face value of the 8% Convertible Debt and the amount allocated to the debt at the issuance date and is amortizing this discount over the 18-month term of the related debt.
(c) On August 30, 2021, the Company purchased all of the outstanding membership interests in Pie Squared Holdings. The purchase price was funded through the issuance of an 8% secured, convertible promissory note with a face value of $1.0 million and a fair value of $1.2 million at the acquisition date. The note is convertible at any time, in whole or in part, at the holder’s option but includes a beneficial ownership blocker of 4.99%. The conversion price at any time is the volume weighted average price of the Company’s common stock the 30 trading days immediately prior to delivery of notice of conversion, less a discount of 15%; provided, however, that the conversion price has a floor of $0.50 per share and a cap of $2.00 per share. As of June 30, 2022, the note was convertible into 2,000,000 shares of common stock.
Interest on the convertible promissory note is due quarterly and $0.5 million of principal is due on August 30, 2022. Any remaining unpaid/non-converted amount is due on August 30, 2023. The Company elected to measure the convertible promissory note at fair value, with changes in the fair value recorded within change in fair value of convertible promissory note in the condensed consolidated statements of operations. See Note 5 for additional information on the valuation of the convertible promissory note as of June 30, 2022.
(d) On April 27, 2020, Amergent received a Paycheck Protection Program (“PPP”) loan in the amount of approximately $2.1 million. Due to the Spin-Off and Merger, Amergent was not publicly traded at the time of the loan application or funding. The note bears interest at 1% per year, matures in April 2022, and requires monthly interest and principal payments of approximately $0.1 million beginning in November 2020 and through maturity. The currently issued guidelines of the program allow for the loan proceeds to be forgiven if certain requirements are met. Any loan proceeds not forgiven will be repaid in full. The Company’s initial application for loan forgiveness in the full amount of the loan was denied, however, in March 2022, the U.S. SBA reversed its initial decision and will once again review the Company’s application for loan forgiveness. No assurance can be given as to the amount, if any, of forgiveness. The application for forgiveness allowed the Company to defer the timing of repayment until the forgiveness assessment is completed.
On February 25, 2021, the Company received a second PPP loan in the amount of $2.0 million. Amergent was not listed on a national securities exchange at the time of the loan application or funding. The note bears interest at 1% per year, matures on February 25, 2026, and requires monthly principal and interest payments of approximately $45,000 beginning June 25, 2022 through maturity. During 2022, the Company applied for loan forgiveness in the full amount of the loan. No assurance can be given as to the amount, if any, of forgiveness. The application for forgiveness allowed the Company to defer the timing of repayment until the forgiveness assessment is completed.
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(e) On August 4, 2020, the Company obtained two loans under the Economic Injury Disaster Loan (“EIDL”) assistance program from the U.S. SBA in light of the impact of the COVID-19 pandemic on the Company’s business. The principal amount of the loans is $0.3 million, with proceeds to be used for working capital purposes. Interest accrues at the rate of 3.75% per year. Total installment payments of $1,462, including principal and interest, are due monthly. The balance of principal and interest is payable over the next thirty years from the date of the promissory note (August 2050). There are no penalties for prepayment. Based upon guidance issued by the U.S. SBA on June 19, 2020, the EIDL loans are not required to be refinanced by the PPP loan. In March 2022, the U.S. SBA extended the deferral period for the EIDL payments for an additional 12 months. The Company’s installment payments will begin August 4, 2023.
(f) The Company entered into a promissory note to repay a contractor for the build-out of a new Little Big Burger location. The note bears interest at 12% per year. In connection with and prior to the Merger and Spin-Off, on April 1, 2020, this note was assumed by Amergent. The Company is currently in default on this loan and a writ of garnishment was ordered against the Company in 2020 for approximately $0.4 million. The additional $0.1 million is included in accounts payable and accrued expenses at June 30, 2022 and December 31, 2021.
(g) In February and March 2022, eight company-owned stores entered into notes payable to Toast Capital Loans. The terms of the notes require payment of 13.2% of daily credit card sales of the eight stores until the notes are paid in full. The terms of the notes are 270 days and the implied intertest rate is approximately 15% per year.
The Company’s various loan agreements contain financial and non-financial covenants and provisions providing for cross-default. The evaluation of compliance with these provisions is subject to interpretation and the exercise of judgment. Oz Rey has provided a ~~valuation allowance for the full amount~~waiver of ~~the deferred tax assets in the accompanying consolidated~~certain financial covenants through April 30, 2023.
Maturities of our debt as of June 30, 2022 are presented below (in thousands):
SCHEDULE OF FUTURE MINIMUM PAYMENTS
Year ending December 31:
2022 (remaining six months) $ 3,397
2023 2,383
2024 4,579
2025 547
2026 98
Thereafter 274
Total debt maturities 11,278
Less: discount on convertible debt (244 )
Less: fair value adjustment (72 )
Total debt $ 10,962
10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and ~~combined financial statements.~~accrued expenses are summarized as follows:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES
(in thousands) June 30, 2022 December 31, 2021
Accounts payable $ 2,239 $ 2,544
Accrued expenses 1,940 1,955
Accrued taxes (VAT, sales, payroll, etc.) 2,236 2,149
Accrued interest 292 196
Accounts payable and accrued expenses, total $ 6,707 $ 6,844

As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, approximately $2.2 million and $2.0 million, respectively, of employee and employer payroll taxes and associated interest and penalties have been accrued but not remitted to certain taxing authorities by the Company. These accruals are for periods prior to 2019 for cash compensation paid and are reflected as a component of the accrued taxes line above. As a result, the Company is liable for such payroll taxes and any related penalties and interest. The Company will record an additional accrual for such payroll taxes upon receipt of notice from a relevant taxing authority. During the three and six months ended June 30, 2022, the Company increased its accrual for payroll taxes by $0.2 million. Upon the advice of our tax professionals, we are paying the trust fund portion of the outstanding tax accruals which represents the portion of taxes withheld from our employees but not remitted to the taxing authorities. For our locations that have permanently closed, our tax liability after paying the trust fund balance is approximately $0.8 million and is recorded within accrued taxes on our condensed consolidated balance sheet as of June 30, 2022. The taxing authorities have indicated that we are still liable for these amounts, however, since the locations are permanently closed and have no assets, they will stop active collection procedures on these amounts.
19
As of June 30, 2022 and December 31, 2021, the Company had 0no accrued interest or penalties relating to any income tax obligations. The Company currently has no federal or state examinations in progress, nor has it had any federal or state tax examinations since its inception. The last three years of the Company’s tax years are subject to federal and state tax examination.

11. INCOME ~~(LOSS)~~OR LOSS PER COMMON SHARE
The Company computes net income ~~(loss)~~or loss per share using the weighted-average number of common shares outstanding during the period. For periods with a net loss, basic and diluted net loss per share are the same because the conversion, exercise or issuance of all potential common stock equivalents, which comprise the entire amount of the Company’s outstanding warrants, as described in Note ~~8, and~~12, the potential conversion of the convertible debt, as described in Note 6,9, and share-based compensation awards, as described in Note 12, would be anti-dilutive.

For the three months ended June 30, 2021, the Company used the two-class method to compute basic net income per common ~~share .~~share. Under this method, undistributed earnings are allocated to common stock, the Series 2 ~~Preferred Stock,~~convertible preferred stock and the convertible debt to the extent that the Series 2 ~~Preferred Stock~~convertible preferred stock and convertible debt may share in earnings. In periods of net loss, losses are not allocated to participating securities as the holders of such securities have no obligation to fund losses. The total earnings allocated to common stock is then divided by the weighted average common shares outstanding to determine the basic earnings per share.

For purposes of calculating diluted loss per common share, the denominator includes both the weighted average common shares outstanding and the number of common stock equivalents if the inclusion of such common stock equivalents would be dilutive. Dilutive common stock equivalents potentially include warrants using the treasury stock method. In addition, the Company considers the potential dilutive impact of its Series 2 ~~Preferred Stock~~convertible preferred stock and convertible debt using the treasury stock and if-converted methods, if either is more dilutive than the two-class method. The two-class method was more dilutive for the three months ended June 30, 2021.

16
~~Amergent Hospitality Group, Inc and Subsidiaries~~
~~Notes to the Condensed Consolidated and Combined Financial Statements~~
The following table summarizes the computation of basic and diluted net ~~(loss)~~ income per share for the three ~~and six~~ months ended June 30, ~~2021 and 2020, respectively:~~
~~SCHEDULE OF INCOME PER SHARE~~
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
Three Months Ended Six Months Ended
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
Basic net income (loss) per common share calculation:
Net income (loss) attributable to common shareholders $ 266,727 $ (8,986,302 ) $ (2,281,700 ) $ (10,786,135 )
Less: undistributed earnings to participating securities (179,013 ) — — —
Net income (loss) attributable to common shareholders - basic 87,714 (8,986,302 ) (2,281,700 ) (10,757,916 )
Weighted average common shares outstanding - basic 15,321,571 14,282,736 14,904,471 13,096,212
Net income (loss) per share - basic $ 0.02 $ (0.63 ) $ (0.15 ) $ (0.82 )
Diluted net income (loss) per common share calculation:
Net income (loss) attributable to common shareholders $ 266,727 $ (8,986,302 ) $ (2,281,700 ) $ (10,757,916 )
Less: undistributed earnings to participating securities (179,013 ) — — —
Net income (loss) attributable to common shareholders - diluted 87,714 (8,986,302 ) (2,281,700 ) (10,757,916 )
Weighted average common shares outstanding - basic 15,321,571 14,282,736 14,904,471 13,096,212
Warrants 1,959,054 — — —
Weighted average common shares outstanding - diluted 17,280,625 14,282,736 14,904,471 13,096,212
Net income (loss) per share - diluted $ 0.01 $ (0.63 ) $ (0.15 ) $ (0.82 )
~~RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS~~
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The objective of the standard is to improve areas of GAAP by removing certain exceptions permitted by Accounting Standards Codification 740 and clarifying existing guidance to facilitate consistent application. The standard was effective for the Company beginning on January 1, 2021. The adoption of ASU 2019-12 as of January 1, 2021 did not have a material impact on the condensed consolidated and combined financial statements.
~~RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS~~
~~In August 2020, the FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options~~” to address the complexity associated with applying U.S. GAAP to certain financial instruments with characteristics of liabilities and equity. ASU 2020-06 includes amendments to the guidance on convertible instruments and the derivative scope exception for contracts in an entity’s own equity and simplifies the accounting for convertible instruments which include beneficial conversion features or cash conversion features by removing certain separation models in Subtopic 470-20. Additionally, ASU 2020-06 will require entities to use the “if-converted” method when calculating diluted earnings per share for convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021 (fiscal year 2022 for the Company), including interim periods within those fiscal years. The Company is currently evaluating the new standard to determine the potential impact on its financial condition, results of operations, cash flows, and financial statement disclosures.
We reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated and combined financial statements.
17
~~Amergent Hospitality Group, Inc and Subsidiaries~~
~~Notes to the Condensed Consolidated and Combined Financial Statements~~
3. ~~INVESTMENTS~~
~~Investments consist of the following:~~
~~SCHEDULE OF INVESTMENTS~~
June 30, 2021 December 31, 2020
Common stock of Sonnet, at fair value $ 292,809 $ 413,268
Chanticleer Investors, LLC, at cost 365,001 365,001
Total $ 657,809 $ 778,269
~~Common stock of Sonnet~~
In 2020 the Company received warrants to purchase Sonnet common stock as part of consideration for the Merger with Sonnet (See Note 1). On November 17, 2020, the Company exercised the warrants and holds common stock of Sonnet.
~~Chanticleer Investors LLC~~
~~The Company invested $800,000~~ ~~during 2011 and 2012 in exchange for a~~ 22~~% ownership stake in Chanticleer Investors, LLC, which in turn held a~~ 3~~% interest in Hooters of America, the operator and franchisor of the Hooters Brand worldwide. As a result, the Company’s effective economic interest in Hooters of America was approximately 0.6%.~~ Effective June 28, 2019, Hooters of America closed on the sale of a controlling interest in the company. The consideration paid in the sale transaction was a combination of cash proceeds and equity in the newly formed company. The Company netted approximately $~~48,000~~ ~~in cash upon the transaction and retained a non-controlling interest in the equity of the newly-formed company.~~
In June 2019, an analysis of the transaction and the value of the cash received and retained non-controlling interest was performed. The Company concluded that its investment was impaired as of June 30, 2019 and recorded a $~~435,000~~ ~~write down of the investment during the year ended December 31, 2019. No further impairment charges were recognized since that time.~~
4. ~~PROPERTY AND EQUIPMENT, NET~~
~~Property and equipment, net consists of the following:~~2021:

SCHEDULE OF ~~PROPERTY AND EQUIPMENT, NET~~INCOME PER SHARE
June 30, 2021 December 31, 2020
Leasehold improvements $ 6,929,994 $ 7,301,908
Restaurant furniture and equipment 1,979,814 2,132,726
Construction in progress 650 5,450
Office and computer equipment 112,073 125,535
Office furniture and fixtures 61,328 59,635

Property, plant and equipment, gross
9,083,859 9,625,254
Accumulated depreciation and amortization (6,175,793 ) (5,922,360 )
Property, plant and equipment, net $ 2,908,066 $ 3,702,894

(in thousands, except share and per share data, restated)
Three months ended
June 30, 2021

Basic net income per common share calculation:
Net income attributable to common shareholders $ 437
Less: undistributed earnings to participating securities (293 )
Net income attributable to common shareholders, basic $ 144
Weighted average common shares outstanding, basic 15,321,571
Net income per common share, basic $ 0.01
Diluted net income per common share calculation:
Net income attributable to common shareholders $ 437
Less: undistributed earnings to participating securities (293 )
Net income attributable to common shareholders, diluted $ 144
Weighted average common shares outstanding, basic 15,321,571
Warrants 1,959,054
Weighted average common shares outstanding, diluted 17,280,625
Net income per common share, diluted $ 0.01

The COVID-19 outbreak in the United States has resulted in a significant impact throughout the hospitality industry. The impact has varied by state/geographical area within the United States at various intervals since the pandemic has been declared. Accordingly, the operating results and cash flows at the store level have varied significantly leading to an analysis of impairment at the store level for each quarter end beginning at the end of the first quarter of 2020 and continuing through June 30, 2021. Several stores were permanently or temporarily closed during 2020 and 2021 while others are operating at reduced capacity. Based on the assessment of recoverability, an impairment charge of approximately $~~255,115~~ ~~was recorded for property and equipment during the six months ended June 30, 2021. During the three and six months ended June 30, 2020, the Company recorded an impairment charge of $129,631for property and equipment and $13,374~~ ~~for other assets~~
~~Depreciation expense was $276,777~~ ~~and $554,330~~ ~~for the three and six months ended June 30, 2021 and 2021, respectively. Depreciation expense was $324,212~~ ~~and $649,084~~ ~~for the three and six months ended June 30, 2020 and 2020, respectively.~~
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~~Amergent Hospitality Group, Inc and Subsidiaries~~
~~Notes to the Condensed Consolidated and Combined Financial Statements~~
5. ~~INTANGIBLE ASSETS, NET~~
~~GOODWILL~~
~~A roll-forward of goodwill is as follows:~~
~~SCHEDULE OF GOODWILL~~
Six Months Ended June 30, 2021
Year Ended
December 31, 2020

Beginning balance $ 8,591,149 $ 8,567,888
Foreign currency translation gain 12,257 23,261
Ending balance $ 8,603,406 $ 8,591,149
~~OTHER INTANGIBLE ASSETS~~
~~Franchise and trademark/tradename intangible assets consist of the following:~~
~~SCHEDULE OF OTHER INTANGIBLE ASSETS~~
June 30, 2021 December 31, 2020
Trademark, Tradenames:
American Roadside Burger 10 years $ 561,191 $ 1,786,930
BGR: The Burger Joint Indefinite 739,245 739,245
Little Big Burger Indefinite 1,550,000 1,550,000
2,850,436 4,076,175
Acquired Franchise Rights:
BGR: The Burger Joint 7 years 827,757 827,757

Franchise License Fees:
Hooters Pacific NW 20 years — 74,507
Hooters UK 5 years 12,073 11,001
12,073 85,508
Total intangibles at cost 3,690,266 4,989,440
Accumulated amortization (1,149,398 ) (1,945,555 )
Intangible assets, net $ 2,540,868 $ 3,043,885
An analysis of the recoverability of the carrying value was performed at each quarter end beginning at the end of the first quarter of 2020 and continuing through June 30, 2021. Based on that analysis, an impairment charge of approximately $~~327,342~~ ~~was recorded to trademarks/tradenames for ABC: American Burger Company during the six months ended June 30, 2021.~~
~~Amortization of intangible assets was $84,915~~ ~~and $175,675~~ ~~for the three and six months ended June 30, 2021 and $91,566~~ ~~and $182,525~~ ~~for the three and six months ended June 30, 2020, respectively.~~
19
~~Amergent Hospitality Group, Inc and Subsidiaries~~
~~Notes to the Condensed Consolidated and Combined Financial Statements~~
6. ~~DEBT AND NOTES PAYABLE~~
~~Debt and notes payable are summarized as follows at June 30, 2021 and December 31, 2020:~~
~~SCHEDULE OF DEBT AND NOTES PAYABLE~~
June 30, 2021 December 31, 2020
Notes payable (a) $ — $ 25,850
Notes payable (b) — 27,048
Contractor note (c) 348,269 348,269
PPP loans (d) 4,109,400 2,109,400
UK Bounce Back loan (e) 68,245 68,245
EIDL loans (f) 299,900 299,900
Convertible debt (g) 4,037,889 4,037,889
Total Debt 8,863,703 6,916,601
Less: discount on convertible debt (g) (134,023 ) (223,681 )
Total Debt, net of discount $ 8,729,680 $ 6,692,920

Current portion of long-term debt $ 6,377,550 $ 2,338,978
Long-term debt, less current portion $ 2,352,130 $ 4,353,942
~~(a)~~ ~~In connection with the assets acquired from the two BGR franchisees, the Company entered into notes payable of $9,600~~ ~~and $187,000~~ ~~during 2018. The notes bore interest at 4% and were due within 12 months of each acquisition date. Principal and interest payments were due monthly.~~
~~(b)~~ ~~During September 2019 and October 2019, the Company entered into two merchant capital advances in the amount of $46,000~~ ~~and $84,700, respectively. The Company agreed to repay these advances through daily payments until those amounts were repaid with the specified interest rate per those agreements.~~
~~(c)~~ ~~The Company entered into a promissory note to repay a contractor for the build-out of a new Little Big Burger location. The note has a balance of $348,269, and a stated interest rate of~~ 12% per year. In connection with and prior to the Merger and Spin-Off, on April 1, 2020, this note was assumed by Amergent. The Company is currently in default on this loan and a writ of garnishment was ordered against the Company in 2020 for approximately $~~445,000. The additional $95,000~~ ~~is included in accounts payable and accrued expenses at June 30, 2021 and December 31, 2020.~~
~~(d)~~ ~~On April 27, 2020, Amergent received a $2.1~~ ~~million loan under the first round of the Payment Protection Program (PPP Loan). The note bears interest at~~ 1~~% per year, matures in~~ ~~April 2022, and requires monthly interest and principal payments of approximately $119,000~~ beginning in November 2020 and through maturity. The currently issued guidelines of the program allow for the loan proceeds to be forgiven if certain requirements are met. Any loan proceeds not forgiven will be repaid in full. The Company has currently applied for loan forgiveness in the full amount of the loan, but no assurance can be given as to the amount, if any, of forgiveness. The application for forgiveness allowed the Company to defer the timing of repayment until the forgiveness assessment is completed. See Note 10 for additional information.
~~On February 25, 2021, the Company received a second PPP Loan of $2.0~~ ~~million. The note bears interest at~~ 1~~% per year, matures on~~ ~~February 25, 2026, and requires monthly principal and interest payments of approximately $44,660~~ ~~beginning June 25, 2022 through maturity. The loan may be forgiven if certain criteria are met. No assurance can be given as to the amount, if any, of forgiveness.~~
20

~~Amergent Hospitality Group, Inc and Subsidiaries~~
~~Notes to the Condensed Consolidated and Combined Financial Statements~~
~~(e)~~ ~~On November 24, 2020, Amergent received approximately $68,200~~ ~~through the Bounce Back Loan Scheme in the United Kingdom. The loan has a term of~~ ~~six~~ ~~years that can be extended to~~ 10 ~~years. No payments are required and no interest is accrued for the first twelve months after the loan is received. After the first year, the loan accrues interest at~~ ~~2.5% per year.~~
~~(f)~~ On August 4, 2020, the Company obtained two loans under the Economic Injury Disaster Loan (“EIDL”) assistance program from the Small Business Administration (“SBA”) in light of the impact of the COVID-19 pandemic on the Company’s business. The principal amount of the loans is approximately $~~300,000, with proceeds to be used for working capital purposes. Interest accrues at the rate of~~ ~~3.75% per year. Total installment payments, including principal and interest, are due monthly beginning~~ ~~August 4, 2021~~ ~~in the amount of $1,762~~. The balance of principal and interest is payable over the next thirty years from the date of the promissory note (August 2050). There are no penalties for prepayment. Based upon guidance issued by the SBA on June 19, 2020, the EIDL loans are not required to be refinanced by the PPP Loan.
~~(g)~~ On ~~April 1, 2020, pursuant to an agreement among Chanticleer, Oz Rey and certain original holders of the~~ 8~~% non-convertible debentures previously outstanding, the Company issued a 10% secured convertible debenture to Oz Rey in exchange for the 8% non-convertible debentures. The principal amount of the~~ 10~~% secured convertible debenture is $4,037,889~~, payable in full on April 1, 2022, subject to extension by the holders in two-year intervals for up to 10 years from the issuance date upon Amergent meeting certain conditions. Interest is payable quarterly in cash. Prior to August 17, 2020, the 10% secured convertible debenture was convertible at any time by Oz Rey into common stock at the lower of $0.10 per share and the volume weighted average price on the last 10 trading days immediately prior to conversion. The 10% secured convertible debenture is also subject to adjustment if Amergent sells securities below this price (down round protection), among other triggers. In connection with the exchange of the debentures, Amergent issued warrants to Oz Rey and the original 8% non-convertible debenture holders to purchase ~~2,925,200~~ ~~shares of common stock. The exercise price is $0.125~~ ~~for~~ ~~2,462,600~~ ~~warrants and $0.50~~ ~~for~~ ~~462,500~~ ~~warrants. The warrants can be exercised on a cashless basis and expire~~ 10 ~~years from the issuance date. The warrants were equity classified at June 30, 2021 and December 31, 2020.~~
~~The Company recorded a debt discount of approximately $358,000~~ ~~for the difference between the face value of the~~ 10~~% secured convertible debenture and the estimated fair value at the April 1, 2020 issuance date and is amortizing this discount over the two-year period of the notes. Amortization of $44,922~~ ~~and $89,658~~ ~~was recorded as interest expense during the three and six months ended June 30, 2021, respectively.~~
The Company’s various loan agreements contain financial and non-financial covenants and provisions providing for cross-default. The evaluation of compliance with these provisions is subject to interpretation and the exercise of judgment. The Company’s lender has provided a waiver of certain financial covenants through June 30, 2021.
7. ~~ACCOUNTS PAYABLE AND ACCRUED EXPENSES~~
~~Accounts payable and accrued expenses are summarized as follows:~~

12. ~~SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES~~STOCKHOLDERS’ EQUITY
June 30, 2021 December 31, 2020
Accounts payable $ 3,232,188 $ 3,752,036
Accrued expenses 1,982,431 1,436,679
Accrued taxes (VAT, Sales, Payroll, etc.) 2,810,872 3,356,496
Accrued interest 142,753 122,057
Accounts payable and accrued expenses, total $ 8,168,244 $ 8,667,268
~~As of June 30, 2021 and December 31, 2020, approximately $2.5~~ ~~million and $3.0~~ million, respectively, of employee and employer payroll taxes and associated interest and penalties have been accrued but not remitted to certain taxing authorities by the Company. These accruals are for periods prior to 2019 for cash compensation paid and are reflected as a component of the accrued taxes line above. As a result, the Company is liable for such payroll taxes and any related penalties and interest. Tax authorities have placed liens on certain of the Company’s cash accounts, which accounts had a total balance of $~~36,905~~ ~~at June 30, 2021.~~
21
~~Amergent Hospitality Group, Inc and Subsidiaries~~
~~Notes to the Condensed Consolidated and Combined Financial Statements~~

8. ~~STOCKHOLDER’S EQUITY~~
2020 Bridge Financing
Pursuant to a Securities Purchase Agreement dated February 7, 2020, the Company sold 1,500 shares of a new series of convertible preferred stock of Chanticleer (the “Series 2 ~~Preferred Stock”~~Preferred”) to an institutional ~~investor for gross proceeds to the Company of $1,500,000~~ ~~less transaction costs of $95,000. In addition, pursuant to the original agreement with the investors, the Company issued~~ 5~~-year warrants to purchase an aggregate of~~ ~~350,000~~ ~~shares of common stock to the investors at $1.25~~ ~~per share. Each share of Series 2 Preferred has a stated value of $1,000. Upon issuance, the Company bifurcated and recorded, as a liability, an embedded derivative (more fully described below and in Note 9) in the amount of $529,000. The effective conversion price of the Series 2 Preferred Stock after the bifurcation of the derivative resulted a beneficial conversion feature of $729,000, which was then immediately recorded as a deemed dividend as the preferred stock is immediately convertible.~~investor. In March 2020, an aggregate of 713 shares of Series 2 Preferred ~~Stock~~ were converted into~~1,426,854~~ shares of common stock. In connection with the Merger, ~~(see Note 1),~~ all remaining outstanding shares of the Series 2 Preferred ~~Stock~~ were automatically cancelled and exchanged for substantially similar shares of preferred stock in ~~Amergent,~~Amergent. ~~the~~The shareholders of Chanticleer common stock received shares of Amergent on a 1 for 1 basis ~~(Spin-Off~~(spin-off shares) and received 1 share of Sonnet common stock for 26 shares of Chanticleer common stock held at the time of the Merger.
On August 17, 2020, the Company and the holders of the Series 2 Preferred Stock entered into a Waiver, Consent, and Amendment to the Certificate of Designations (the “Extension Agreement”) which included provisions for an extension of the true-up payment discussed below from August 7, 2020 to December 10, 2020 and permitted the shares of Amergent obtained by the investor in the Spin-Off to be included in the determination of the True-Up Payment discussed below, with the Company paying all expenses incurred by the institutional investor in connection with the Extension Agreement and certain consideration for the institutional in investor’s willingness to extend the date of the true-up payment. The consideration included $~~66,000~~ ~~of cash and warrants to purchase~~ ~~134,000~~ ~~shares of the Company’s common stock with a value of $28,060~~ ~~(see below).~~
On February 16, 2021, the Company and the holders of the Series 2 Preferred Stock entered into a Waiver, Consent and Amendment to the Certificate of Designations (the “Waiver”). Pursuant to the Waiver, the Company filed the Second Amendment and Restated Certificate of Designations of Series 2 Convertible Preferred Stock (“Amended COD”) with the Delaware Secretary of State (i) providing for the extension of the True-Up Payment to April 1, 2021, (ii) providing for the deduction of proceeds to the original holders from sales of Series 2 Preferred for the True-Up Payment, and (iii) providing for a reduction in amount of cash subject to restriction as discussed below from $~~1,250,000~~ ~~to $850,000~~.

During the ~~six months~~year ended ~~June 30,~~December 31, 2021, the investors converted 637 shares of the Series 2 Preferred ~~Stock~~ into 1,274,000 common shares and sold those common shares in the market. In addition, the investors sold their remaining 150 Series 2 Preferred ~~Stock~~ to other investors. The shares sold to the investors no longer contain the True-Up Payment provision discussed below. The new investors converted 50 shares of Series 2 Preferred ~~Stock~~ into100,000 shares of common stock during May 2021, and 100 shares of Series 2 Preferred ~~Stock~~ remain outstanding at December 31, 2021 and June 30, ~~2021.~~2022.
The Series 2 Preferred ~~Stock~~ is classified in the accompanying condensed consolidated ~~and combined~~ balance ~~sheet at June 30, 2021~~sheets as temporary equity due to certain contingent redemption features which are outside the control of the Company.
Designations, rights and preferences of Series 2 ~~Preferred Stock:~~Preferred:
Stated ~~value~~:value: Each share of Series 2 Preferred ~~Stock~~ had a stated value of ~~$1,000.~~$1,000.
True-Up Payment: Amergent was required to pay the original holder an amount in cash equal to the dollar value of 125% of the stated value of the Series 2 Preferred ~~Stock~~ less the proceeds previously realized by the holder from the sale of all conversion and spin-off shares received by ~~the original~~ holder in Amergent, net of brokerage commissions and any other fees incurred by the holder in connection with the sale of any conversion shares or spin-off shares on April 1, 2021 (which period was extended). ~~The~~This True-Up Payment was settled in July 2021 with a payment of $~~66,136~~0.1, million, and the cash ~~account~~previously held in escrow for repayment is no longer subject to restriction for this matter.

22
The Company determined that the True-Up Payment constituted a “make-whole” provision as defined by U.S. GAAP that was required to be settled in cash and, as such, was bifurcated from the host instrument, the Series 2 Preferred. It was accounted for as a derivative liability prior to settlement, with changes in fair value recorded in change in fair value of derivative liabilities in the condensed consolidated statement of operations. A $0.1 million increase in fair value was recorded for the three months ended June 30, 2021 and a $0.1 million decrease in fair value was recorded for the six months ended June 30, 2021.

~~Amergent Hospitality Group, Inc and Subsidiaries~~
~~Notes to the Condensed Consolidated and Combined Financial Statements~~
Redemption
~~Redemption:~~ If the Merger was not completed within six months of issuance of the Series 2 Preferred Stock, the Company would have been required to redeem all the outstanding Series 2 Preferred Stock for 125% of the aggregate stated value of the Series 2 Preferred Stock then outstanding plus any default interest and any other fees or liquidated damages then due and owing thereon under the Certificate of Designations. Additionally, there: There are ~~other~~ triggering events, as defined, that can cause the Series 2 Preferred ~~Stock~~ to be redeemable at the option of the holder, some of which ~~some~~ are outside of the control of the Company.
Conversion at option of holder/ beneficial ownership ~~limitation~~limitation: The Series 2 Preferred ~~Stock~~ is convertible at the option of holder at the lesser of (i) $1.00 (subject to adjustment for forward and reverse stock splits, recapitalizations and the like) or (ii) 90% of the ~~five-day~~five day average volume weighted average price of the common, provided the conversion price has a floor of ~~$0.50~~$0.50 (subject to adjustment for forward and reverse stock splits, recapitalizations and the like). Conversion is subject to a beneficial ownership limitation of 4.99%. This limitation was increased by the holder to 9.99% prior to the Merger.
~~Forced conversion:~~ ~~The Company had the right to require the holder to convert up to~~ ~~1,400~~ shares of Series 2 Preferred Stock upon delivery of notice three days prior to the Merger, subject to the beneficial ownership limitation and applicable Nasdaq rules. Unconverted shares of Series 2 Preferred Stock automatically were exchanged for an equal number of shares of Series 2 Preferred Stock in Amergent on substantially the same terms.
Liquidation ~~preference~~preference: Upon any liquidation, dissolution or winding-up of the Company, the holder is entitled to receive out of the assets, whether capital or surplus, an amount equal to ~~125%~~125% of the stated value plus any default interest and any other fees or liquidated damages then due and owing thereon under the Certificate of Designations, for each share of Series 2 Preferred ~~Stock~~ before any distribution or payment to the holders of common stock.
Voting rights: The holder of Series 2 Preferred ~~Stock~~ has the right to vote together with the holders of common stock as a single class on an as-converted basis on all matters presented to the holders of common stock and shall vote as a separate class on all matters presented to the holders of Series 2 ~~Preferred Stock.~~Preferred. In addition, without the approval of the holder, the Company is required to obtain the approval of Series 2 Preferred, ~~Stock,~~ as is customary, for certain events and transactions not contemplated by the Merger.

21
Triggering ~~Events:~~events: Breach of the Company’s obligations will trigger a redemption event.
~~Anti-Dilution:~~Anti-dilution: ~~Customary~~The Series 2 Preferred provides for customary adjustments in the event of dividends or stock splits and anti-dilution protection.
Warrants
Concurrently with the Preferred Securities Purchase Agreement, the parties entered into a registration rights agreement (the “Preferred Registration Rights Agreement”). Pursuant to the Preferred Registration Rights Agreement, the Company was required to file a registration statement registering the conversion shares no later than 15 days from the closing of this transaction.
At June 30, 2022, the outstanding warrants consisted of the following:
~~Options and Warrants~~
SCHEDULE OF OUTSTANDING WARRANTS
Date Issued Number of Warrants Exercise Price Expiration Date
April 1, 2020 2,462,600 $ 0.125 April 1, 2030
April 1, 2020 462,600 $ 0.500 April 1, 2030
March 30, 2020 350,000 $ 1.250 March 30, 2025
August 17, 2020 134,000 $ 1.250 August 17, 2025
March 15, 2022 250,000 $ 0.500 March 15, 2027
March 21, 2022 250,000 $ 0.500 March 21, 2027
March 22, 2022 250,000 $ 0.500 March 22, 2027
March 24, 2022 600,000 $ 0.500 March 24, 2027
4,759,200
A summary of the warrant activity during the six months ended June 30, ~~2021~~2022 is presented below:
SUMMARY OF ~~WARRANT~~WARRANTS ACTIVITY
Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Life
Outstanding at December 31, 2020 3,409,200 $ 0.34 8.6
Granted — — —
Exercised — — —
Forfeited/Other Adjustments — — —
Outstanding at June 30, 2021 3,409,200 $ 0.34 8.1

Exercisable June 30, 2021 3,409,200 $ 0.34 8.1
23
~~Amergent Hospitality Group, Inc and Subsidiaries~~
~~Notes to the Condensed Consolidated and Combined Financial Statements~~

Number of
Warrants

Weighted
Average
Exercise Price

Weighted
Average
Remaining
Contractual
Term (years)

Outstanding at January 1, 2022 3,409,200 $ 0.34 7.6
Granted 1,350,000 $ 0.50 5.0
Outstanding at June 30, 2022 4,759,200 $ 0.38 6.4

Exercisable at June 30, 2022 4,759,200 $ 0.38 6.4

~~At June 30, 2021,~~As discussed in Note 9, 1,350,000 warrants were granted in March 2022 in connection with the ~~outstanding~~issuance of 8% Convertible Debt and are equity-classified in the condensed consolidated financial statements. The net proceeds from the issuance were allocated to the 8% Convertible Debt and the warrants ~~consisted of the following:~~
~~SCHEDULE OF OUTSTANDING WARRANTS~~
Date issued Number of warrants Exercise Price Expiration Date
April 1, 2020 2,462,600 $ 0.125 April 1, 2030
April 1, 2020 462,600 $ 0.500 April 1, 2030
March 30, 2020 350,000 $ 1.250 March 30, 2025
August 17, 2020 134,000 $ 1.250 August 17, 2025
3,409,200
9. ~~DERIVATIVE LIABILITIES~~
The derivative liabilities at December 31, 2020 consisted of a True-Up Payment provision of the Series 2 Preferred Stock (See Note 8). The True-Up payment was valued at June 30, 2021 and was determined to have a value of $~~66,136~~ based on their relative fair values at the ~~instruments known settlement value. The liability was subsequently settled~~issuance date, resulting in ~~July 2021 for~~an allocation of approximately $0.3 million to the $~~66,136~~.
~~The table presented below is a summary of changes~~warrants. Assumptions used in calculating the fair ~~market~~ value of the ~~Company’s Level 3 valuations for~~warrants at the ~~six months ended June 30, 2021.~~
issuance date include the following:
SUMMARY OF CHANGES IN FAIR VALUE ~~DERIVATIVE LIABILITIES~~WARRANTS

True-Up
Payment

Balance at December 31, 2020 $ 184,800
Change in fair value during the period (118,664 )
Balance at June 30, 2021 $ 66,136
Stock price per share $ 0.37 – 0.40
Term 5.0 years
Expected volatility 90.00 %
Divided yield —
Risk-free interest rate 2.10% – 2.39 %
Options
In August 2021, the Company adopted the 2021 Inducement Plan (the “Plan”). Under the 2021 Inducement Plan, the Company can grant stock options and stock awards. There are 500,000 shares of common stock reserved for issuance under the Plan. As of June 30, 2022, 50,000 shares remained available for future grants.
In November 2021, the Company adopted the 2021 Equity Incentive Plan (the “Incentive Plan”). Under the 2021 Incentive Plan, the Company can grant stock options and stock awards. The stockholders of the Company approved the Incentive Plan on December 30, 2021. There are 2,000,000 shares of common stock reserved for issuance under the Incentive Plan. As of June 30, 2022, 2,000,000 shares remained available for future grants.
22
Share-based awards generally vest over a period of three years, and share-based awards that lapse or are forfeited are available to be granted again. The contractual life of all share-based awards is five years. The expiration date of the outstanding share-based awards is August 2026.
During the three and six months ended June 30, 2022, the Company recorded share-based compensation expense of approximately $5,000 and $11,000, respectively, in general and administrative expenses.
The following table summarizes the share-based awards as of June 30, 2022:
SCHEDULE OF SHARE BASED AWARDS

Number of
Options

Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Term (years)
Outstanding at June 30, 2022 450,000 $ 1.38 4.1

Exercisable at June 30, 2022 250,000 $ 1.72 4.1
~~10.~~13. COMMITMENTS AND CONTINGENCIES
~~Legal proceedings~~Indemnification Agreement and Tail Policy
~~Indemnification agreement and tail policy~~
On March 25, 2020, pursuant to the requirements of the Merger Agreement, Chanticleer, Sonnet and Amergent entered into an indemnification agreement (“Indemnification Agreement”) providing that Amergent will fully indemnify and hold harmless each of Chanticleer and Sonnet, and each of their respective directors, officers, stockholders and managers who assumes such role upon or following the closing of the ~~merger~~Merger against all actual or threatened claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements, incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, administrative, investigative or otherwise, related to the Spin-Off ~~Business~~business prior to or in connection with its disposition to Amergent. The Indemnification Agreement expires on March 25, 2026.
In addition, pursuant to the Merger Agreement, prior to closing of the Merger, the Spin-Off ~~Entity~~entity acquired a tail insurance policy in a coverage amount of $3.0 million, prepaid in full by the Spin-Off ~~Entity,~~entity, at no cost to the indemnitees, and effective for at least six years following the consummation of the disposition, covering the Spin-Off ~~Entity’s~~entity’s indemnification obligations to the indemnitees (referred to herein as the “Tail Policy”). ~~The~~No claims have arisen to date, and the Company does not anticipate that any potential liability would exceed the insured amount.
Legal Proceedings
Litigation related to leased properties
During ~~2020~~2021 and ~~2021~~the three and six months ended June 30, 2022, the Company was in arrears on rent due on several of its leases as a result of the COVID-19 pandemic. As a result, the Company has pending litigation related to 10four sites, all of which 5 have permanently closed. The outcome of this litigation could result in the permanent closure of additional restaurant locations as well as the possibility of the Company being required to pay interest and damages, modify certain leases on unfavorable terms and could result in material impairments to the Company’s assets. See Leases section below for discussion of past due rent on abandoned locations.
No amounts have been accrued as of June 30, ~~2021 and~~2022 or December 31, ~~2020~~2021 in the accompanying condensed consolidated ~~and combined~~ balance sheets as management does not believe the outcome will result in additional liabilities to the Company; however, there can be no guarantees.
24
~~Amergent Hospitality Group, Inc and Subsidiaries~~
~~Notes to the Condensed Consolidated and Combined Financial Statements~~

From time to time, the Company may be involved in other legal proceedings and claims that have arisen in the ordinary course of business are generally covered by insurance. As of June 30, ~~2021,~~2022, the Company does not expect the amount of ultimate liability with respect to these matters to be material to the Company’s consolidated financial condition, results of operations or cash flows.
23

Leases
The Company’s leases typically contain rent escalations over the lease ~~term.~~terms. The Company recognizes expense for these leases on a straight-line basis over the lease ~~term.~~terms. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce our right-of-use asset related to the ~~lease.~~leases. These incentives are amortized through the right-of-use asset as reductions of expense over the lease ~~term.~~terms.
Some of the Company’s leases include rent escalations based on inflation indexes and fair market value adjustments. Certain leases contain contingent rental provisions that include a fixed base rent plus an additional percentage of the restaurant’s sales in excess of stipulated amounts. Operating lease liabilities are calculated using the prevailing index or rate at lease commencement. Subsequent escalations in the index or rate and contingent rental payments are recognized as variable lease expenses. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. As part of the lease agreements, the Company is also responsible for payments regarding non-lease components (common area maintenance, operating expenses, etc.) and percentage rent payments based on monthly or annual restaurant sales amounts which are considered variable costs and are not included as part of the lease liabilities.
Related to the adoption of Leases Topic 842, our policy elections were as follows:
~~Separation of lease and non-lease components~~Short-term policy
~~The Company elected this expedient to account for lease and non-lease components as a single component for the entire population of operating lease assets.~~
~~Short-term policy~~
The Company has elected the short-term lease recognition exemption for all applicable classes of underlying assets. Leases with an initial term of 12 months or less, that do not include an option to purchase the underlying asset that ~~we are~~the Company is reasonably certain to exercise, are not recorded on the balance sheet.
Supplemental balance sheet information related to leases was as ~~follows:~~follows (in thousands):

SCHEDULE OF OPERATING LEASE INFORMATION
Operating Leases Classification June 30, 2022 December 31, 2021
Right-of-use assets Operating lease assets $ 7,962 $ 8,021

Current lease liabilities Current operating lease liabilities $ 4,180 $ 4,599
Non-current lease liabilities Long-term operating lease liabilities 8,604 8,644
$ 12,784 $ 13,243
Operating Leases Classification June 30, 2021 December 31, 2020
Right-of-use assets Operating lease assets $ 8,395,200 $ 9,529,443

Current lease liabilities Current operating lease liabilities $ 4,411,073 $ 4,209,389
Non-current lease liabilities Long-term operating lease liabilities 9,415,805 10,667,862
Operating Lease Liability $ 13,826,878 $ 14,877,251
Lease term and discount rate were as follows:

June 30, 2021 December 31, 2020 June 30, 2022 December 31, 2021
Weighted average remaining lease term (years) 7.68 7.70 6.4 6.7
Weighted average discount rate 10 % 10 % 7.8 % 8.1 %
As of June 30, 2021, we performed an analysis of the recoverability of our right-of-use assets. Based on the analysis, we recorded an impairment of approximately $0.7 million for the six months ended June 30, 2021, which is included in asset impairment charges in our condensed consolidated statements of operations. The impairment recognized during the six months ended June 30, 2021 was primarily the result of the impact of the COVID-19 ~~has negatively impacted~~outbreak in the United States, which had a significant impact throughout the hospitality industry. Negative impacts to the operating results and cash flows atvaried significantly ~~varying amounts~~ at the store ~~level. Several~~level, where some stores ~~were permanently closed during the year ended December 31, 2020 while others~~ operated at a reduced ~~capacity. Based on an assessment~~capacity and several stores were permanently closed. There were no indicators of impairment related to our right-of-use assets during the ~~recoverability of the right-of-use asset as of~~six months ended June 30, ~~2021, an impairment charge of $705,122~~ ~~was recorded during the six-months then ended. Based on an assessment of the recoverability of the right-of-use asset as of June 30, 2020, an impairment charge of $9,465~~ ~~was recorded during the three and six months then ended.~~
25
~~Amergent Hospitality Group, Inc and Subsidiaries~~
~~Notes to the Condensed Consolidated and Combined Financial Statements~~2022.

During each of the three and six months ended June 30, 2022 and 2021, approximately $~~275,164~~0.3 ~~and $318,519~~million of lease liabilities were derecognized due to the Company negotiating the cancellation of its obligations under certain lease ~~agreements.~~agreements, which is included in gain on extinguished/settled lease liabilities in our condensed consolidated statements of operations. The cancellations resulted from the COVID-19 pandemic. The Company had lease liabilities of $~~2,819,059~~2.7 million related to abandoned ~~leases.~~leases as of June 30, 2022. These lease liabilities are ~~presented as part of~~included in current operating lease liabilities in our condensed consolidated balance sheets.
24
During the six months ended June 30, 2022, the Company amended certain leases and changed its assumptions regarding the exercise of a renewal option, which have been accounted for as lease modifications. The operating lease assets and liabilities were remeasured at the modification dates, resulting in an increase of $0.6 million during the six months ended June 30, 2022 to both the right-of-use assets and lease liabilities. There were no lease modifications during the six months ended June 30, 2021.

Rent expense of approximately $0.6 million and $1.1 million was incurred during the three and six months ended June 30, 2022, respectively. Rent expense of approximately $0.6 million and $1.2 million was incurred during the three and six months ended June 30, 2021, respectively, of which approximately $0.1 million was variable. ~~Rent expense~~
Maturities of ~~approximately $0.6~~ ~~million and $1.2~~ ~~million was recognized during the three and six months ended~~our operating lease liabilities as of June 30, ~~2020, respectively, of which approximately $~~2022 are presented below (in thousands):
~~0.1~~ ~~million was variable.~~
SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES

Year ending December 31:
2022 (remaining six months) $ 1,427
2023 2,645
2024 2,654
2025 2,501
2026 2,097
Thereafter 5,167
Total remaining lease payments 16,491
Less: imputed interest (3,707 )
Total lease liabilities $ 12,784
PPP Loan
~~PPP Loan~~
~~The~~As discussed in Note 9, the Company received two PPP loans ~~for amounts of~~totaling $~~2.1~~4.1 million, ~~and $2.0~~ ~~million. The PPP loan program was~~which were established under the CARES Act and administered by the ~~Small Business Administration (“SBA”).~~U.S. SBA. The application for the PPP loans requires the Company to, in good faith, certify that the current economic uncertainty made the loan ~~request~~requests necessary to support the ongoing ~~operation~~operations of the Company. This certification further requires the Company to take into account current business activity and the Company’s ability to access other sources of liquidity sufficient to support the ongoing operations in a manner that is not significantly detrimental to the business. The receipt of funds from the PPP loans and forgiveness of the PPP loans is dependent on the Company having initially qualified for the PPP loans and qualifying for the forgiveness of such PPP loans based on funds being used for certain expenditures such as payroll costs and rent, as required by the terms of the PPP loans. There is no assurance that the Company’s obligation under the PPP loans will be forgiven. If the PPP loans are not forgiven, the Company will need to repay the PPP loans over the applicable deferral period.
Presently, the U.S. SBA and other governmental communications have indicated that all loans in excess of $2.0 million will be subject to audit and that those audits could take up to seven years to complete. If the U.S. SBA determines that the PPP loans were not properly obtained and/or expenditures supporting forgiveness were not appropriate, the Company ~~will~~would need to repay some or all of the PPP loans and record additional expense which could have a material adverse impact on the business, financial condition and results of operations in a future period.

~~11.~~ ~~Restatement of Previously Issued Condensed Consolidated and Combined Financial Statements (Unaudited)~~RRF
The Company, while undergoing the audit of its consolidated and combined financial statements as of December 31, 2020 and for the year then ended, re-evaluated the lease term for three restaurants that were permanently closed in 2020 due to the pandemic and determined that the lease terms should no longer have included periods subject to renewal options. Impairment charges had been recorded for these restaurants during the respective quarter that the restaurants were closed, but the 2020 interim unaudited financial statements did not reflect the revised lease terms. This impacted the previously reported amounts for operating lease assets, operating lease liabilities, and rent expense, among other line items in the condensed consolidated and combined interim financial statements.
The following table sets forth the effects of the adjustments on the affected items within the Company’s previously reported Condensed Consolidated and Combined Interim Balance Sheet as of June 30, 2020:

As discussed in Note 3, Pie Squared Holdings received an approximately $~~SCHEDULE OF PREVIOUSLY ISSUED INTERIM FINANCIAL STATEMENTS~~10.0
June 30, 2020
As reported Adjustment As restated
Operating lease assets $ 11,007,038 $ (98,944 ) $ 10,908,094
Long-term operating lease liabilities $ 13,832,826 $ (458,154 ) $ 13,374,672
Accumulated deficit $ (85,658,825 ) $ 284,848 $ (85,373,977 )
Non-controlling interests $ (310,801 ) $ 74,362 $ (236,439 )
26
~~Amergent Hospitality Group, Inc~~ million grant under the RRF and ~~Subsidiaries~~
~~Notes~~the Company assumed the risks and rewards related to the ~~Condensed Consolidated and Combined Financial Statements~~
~~The following tables sets forth~~grant through the ~~effects~~acquisition of Pie Squared Holdings. If it is determined that Pie Squared Holdings obtained the grant improperly or the disbursement of such grant monies was not for “eligible uses,” then the Company would be responsible for the ramifications of such actions including the repayment of the ~~adjustments on affected items within the Company’s previously reported Condensed Consolidated and Combined Interim Statements~~$10.0 million of ~~Operations for the three and six months ended June 30, 2020:~~grant monies, among other items.
Three Months Ended June 30, 2020
As reported Adjustment As restated
Restaurant operating expenses $ 3,261,393 $ (13,346 ) $ 3,247,957
Asset impairment charges $ 273,927 $ (121,457 ) $ 152,470
Operating loss $ (2,655,587 ) $ 134,893 $ (2,520,694 )
Other income $ (70,748 ) $ — $ (70,748 )
Consolidated and combined net loss $ (9,210,911 ) $ 134,893 $ (9,076,018 )
Net loss attributable to non-controlling interests $ 89,716 $ — $ 89,716
Net loss attributable to Amergent Hospitality Group Inc $ (9,121,195 ) $ 134,893 $ (8,986,302 )
Net loss per common share, basic and diluted $ (0.64 ) $ 0.01 $ (0.63 )

Six Months Ended June 30, 2020
As reported Adjustment As restated
Restaurant operating expenses $ 6,887,237 $ (13,346 ) $ 6,873,801
Asset impairment charges $ 273,927 $ (121,457 ) $ 152,470
Operating loss $ (4,009,677 ) $ 134,893 $ (3,874,784 )
Other income (expense) $ (48,009 ) $ 224,317 $ 176,308
Consolidated and combined net loss $ (11,003,437 ) $ 359,210 $ (10,644,227 )
Net income attributable to non-controlling interests $ (39,327 ) $ (74,362 ) $ (113,689 )
Net loss attributable to Amergent Hospitality Group Inc $ (11,042,764 ) $ 284,848 $ (10,757,916 )
Net loss per common share, basic and diluted $ (0.85 ) $ 0.03 $ (0.82 )
~~12.~~14. SUBSEQUENT EVENTS
The Company has evaluated subsequent events from the balance sheet date through the date at which the condensed consolidated ~~and combined~~ financial statements were available to be issued, and there are no ~~other~~ items requiring disclosure ~~except~~other than the following:
~~In July 2021 the Company entered into an at-will amended and restated employment agreement with its President, which extended the term of his employment agreement to June 2024.~~
In August ~~2021,~~2022, the Company ~~adopted the 2021 Inducement Plan (“the Plan”). Under the 2021 Inducement Plan, the Company can grant stock options and stock awards. There are~~ ~~500,000~~ ~~shares of common stock reserved for issuance under the Plan. During August 2021, the Company issued~~ ~~50,000~~ ~~unrestricted shares of common stock; fully vested five-year stock options to purchase~~ ~~150,000~~ ~~shares at an exercise price~~received related party advance of $~~2.50~~0.3 ~~per share;~~million from an entity in which the Company’s Chairman and ~~five-year stock options to purchase~~Chief Executive Officer has an ~~aggregate of~~ownership interest and serves as the Chief Executive Officer. The advance must be repaid within 30 days and bears interest at ~~300,000~~1 ~~shares,~~ ~~100,000~~ ~~of which are exercisable at $0.56~~ ~~per share,~~ ~~100,000~~ ~~of which are exercisable at $0.81~~ ~~per share and~~ ~~100,000~~ ~~of which are exercisable at $1.08~~ ~~per share.~~%.

2725

15. RESTATEMENT OF PREVIOUSLY ISSUED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The Company, while undergoing the audit of its consolidated financial statements as of December 31, 2021 and for the year then ended, determined that it had over-depreciated certain assets from January 1, 2021 through June 30, 2021 and had incorrectly stated the UK subsidiary’s balances as of and for the three and six month periods ended June 30, 2021. This impacted the previously reported amounts for cash, property and equipment, intangible assets, accounts payable and accrued expenses, restaurant sales, restaurant cost of sales, restaurant operating expenses, and depreciation and amortization, among other line items, in the condensed consolidated interim financial statements.
The following table sets forth the effects of the adjustment on affected items within the Company’s previously reported Condensed Consolidated Balance Sheet:
SCHEDULE OF PREVIOUSLY ISSUED INTERIM FINANCIAL STATEMENTS

June 30, 2021
(in thousands) As reported Adjustment As restated
Cash $ 2,083 $ 179 $ 2,262
Accounts and other receivables $ 157 $ 5 $ 162
Inventories $ 154 $ 9 $ 163
Property and equipment, net $ 2,908 $ 272 $ 3,180
Intangible assets, net $ 2,541 $ (1 ) $ 2,540
Accounts payable and accrued expenses $ 8,168 $ 159 $ 8,327
Accumulated deficit $ (96,869 ) $ 307 $ (96,562 )
The following tables set forth the effects of the adjustment on affected items within the Company’s previously reported Condensed Consolidated Statements of Operations:

Three months ended June 30, 2021
(in thousands, except per share data) As reported Adjustment As restated
Restaurant sales, net $ 4,738 $ 479 $ 5,217
Restaurant cost of sales $ 1,435 $ 182 $ 1,617
Restaurant operating expenses $ 3,180 $ 275 $ 3,455
General and administrative expenses $ 1,194 $ 14 $ 1,208
Depreciation and amortization $ 362 $ (135 ) $ 227
Operating income $ 256 $ 143 $ 399
Other income $ 144 $ 27 $ 171
Consolidated net income $ 327 $ 170 $ 497
Net income attributable to Amergent Hospitality Group, Inc. $ 267 $ 170 $ 437
Net income attributable to Amergent Hospitality Group Inc. per common share, basic $ 0.02 $ (0.01 ) $ 0.01

Six months ended June 30, 2021
(in thousands, except per share data) As reported Adjustment As restated
Restaurant sales, net $ 9,182 $ 479 $ 9,661
Restaurant cost of sales $ 2,751 $ 182 $ 2,933
Restaurant operating expenses $ 6,426 $ 275 $ 6,701
General and administrative expenses $ 2,361 $ 14 $ 2,375
Depreciation and amortization $ 730 $ (271 ) $ 459
Operating (loss) income $ (2,533 ) $ 279 $ (2,254 )
Other income $ 147 $ 27 $ 174
Consolidated net (loss) income $ (2,386 ) $ 306 $ (2,080 )
Net (loss) income attributable to Amergent Hospitality Group Inc. $ (2,282 ) $ 306 $ (1,976 )
Net (loss) income attributable to Amergent Hospitality Group Inc. per common share, basic and diluted $ (0.15 ) $ 0.02 $ (0.13 )
The following table sets forth the effects of the adjustments on affected items within the Company’s previously reported Condensed Consolidated Statement of Cash Flows:

Six months ended June 30, 2021
(in thousands) As reported Adjustment As restated
Net cash flows from operating activities $ (1,346 ) $ 179 $ (1,167 )
Net increase in cash and restricted cash $ 595 $ 179 $ 774
26
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes and the other financial information included elsewhere in this ~~Quarterly Report on Form 10-Q (“Report”).~~Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Report, particularly those under “Risk Factors.”

Overview

As of June 30, ~~2021,~~2022, we ~~operated~~operate and ~~franchised~~franchise a system-wide total of 3541 fast casual restaurants, of which ~~26 were~~28 are company-owned and ~~9 were~~13 are owned and operated by franchisees under franchise agreements. During the six months ended June 30, 2021, there was one company-owned restaurants that was permanently closed because of the COVID-19 pandemic. During the six-month period ended June 30, 2020, no company owned restaurants had been temporarily or permanently closed but 8 stores were permanently closed during the year ended 2020 .

American Burger Company (“ABC”) is a fast-casual dining chain consisting of 3two company-owned locations in North Carolina and New York. ABC is known for its diverse menu featuring fresh salads, customized burgers, milk shakes, sandwiches, and beer and wine.

~~BGR:~~ The Burger Joint (“BGR”) ~~was acquired in March 2015 and~~ consists of 7six company-owned locations ~~in the United States~~ and 9seven franchisee-operated locations in the United ~~States and the Middle East.~~States.

Little Big Burger (“LBB”) ~~was acquired in September 2015 and~~ consists of 1516 company-owned locations in the Portland, Oregon, Seattle, Washington, and Charlotte, North Carolina areas. One location was temporarily closed until it re-opened at the end of June 2022 due to lack of available employees. Of the company-owned restaurants, 8eight of those locations are operated under partnership agreements with investors where we control the management and operations of the stores, and the ~~partner supplied~~partners supply the capital to open the ~~store~~stores in exchange for a non-controlling interest.

AsPie Squared Holdings (“PIE”) was acquired in August 2021. PIE, directly and through its four wholly-owned subsidiaries, owns, operates and franchises pizza restaurants operating under the tradename PizzaRev. The PizzaRev stores consist of ~~June 30, 2021, we operated 1~~three company-owned locations, one of which opened on January 4, 2022, and nine franchised locations. Three of these franchised locations were not open at the time of purchase and are not included in our total store count. One additional franchise location is planned to open in 2022.
The Jantzen Beach, Oregon gaming location was a former Hooters ~~full-service restaurant in the United Kingdom. Hooters restaurants, which are casual beach-themed establishments featuring music, sports on large flat screens,~~of America location and is only open for online gaming sales, drinks and a menu that includes seafood, sandwiches, burgers, salads, and of course, Hooters original chicken wings and the “nearly world famous” Hooters Girls. The Company started initially as an investor in corporate owned Hooters and, subsequently, evolved into a franchisee operator. We hold a minority investment stake in Hooters of America.limited food menu.

Recent ~~Developments~~developments

~~PPP Loan~~In March 2022, we commenced a private placement of up to $3.0 million of 8% senior unsecured convertible debentures (the “8% Convertible Debt”) and 3,000,000 common stock warrants. Pursuant to the Securities Purchase Agreement, we issued $1.35 million of 8% Convertible Debt and warrants to purchase the number of shares of our common stock equal to the principal amount of 8% Convertible Debt issued. The 8% Convertible Debt matures 18 months after issuance and is subject to acceleration in the event of customary events of default. Interest is payable quarterly in cash. The 8% Convertible Debt may be converted by the holders at any time at a fixed conversion price of $0.40 per share, and each warrant entitles the holder to purchase one share of common stock at an exercise price of $0.50 per share. Both the notes and the warrants include a beneficial ownership blocker of 4.99% and contain customary provisions preventing dilution and providing the holders rights in the event of fundamental transactions. Upon the earlier of the maturity date or the one-year anniversary of conversion of the 8% Convertible Debt, holders of 51% of the registrable securities may request the Company to file a registration statement for the securities. The warrants can be exercised on a cashless basis and expire five years from the issuance date. If the Company makes any distribution to the common stockholders, the holders of the warrants will be entitled to participate on an as-if-exercised basis.

~~On March 27, 2020, Congress passed “The Coronavirus Aid, Relief, and Economic Security Act” (CARES Act), which included~~In connection with the “Paycheck Protection Program” (PPP) for small businesses. On April 27, 2020, Amergent received a PPP loan of $2.1 million. Due to the Spin-Off and Merger, Amergent was not publicly traded at the timeissuance of the ~~loan application or funding. The note bears interest at 1% per year, matures in~~8% Convertible Debt, the maturity date of the existing 10% secured convertible debenture (“10% Convertible Debt”) was extended to April ~~2022,~~1, 2024, and ~~requires monthly interest and principal payments~~the holder of ~~approximately $119,000 beginning in November 2020 and through maturity.~~the existing 10% Convertible Debt agreed to subordinate payment of its 10% Convertible Debt to payment of the 8% Convertible Debt.

~~On February 25, 2021, the Company~~In August 2022, we received a ~~second loan~~related party advance of ~~$2.0~~$0.3 million ~~under~~from an entity in which our Chairman and Chief Executive Officer has an ownership interest and serves as the ~~Paycheck Protection Program .~~Chief Executive Officer. The ~~note~~advance must be repaid within 30 days and bears interest at 1% ~~per year, matures on February 25, 2026, and requires monthly principal and interest payments of approximately $44,660 beginning June 25, 2022 through maturity.~~
The currently issued guidelines of the program allow for the loan proceeds to be forgiven if certain requirements are met. Any loan proceeds not forgiven will be repaid in full. The Company applied for forgiveness of the first loan and the application is under review by the government agency administering the PPP. No assurance can be given as to the amount, if any, of forgiveness. The application for forgiveness allowed the Company to defer the timing of repayment until the forgiveness assessment is completed..

2827

~~Employee Retention Credit~~
The Employee Retention Credit (“ERC”) under the CARES Act is a refundable tax credit which encourages businesses to keep employees on the payroll during the COVID-19 pandemic. Eligible employers can qualify for up to $7,000 of credit for each employee based on qualified wages paid after December 31, 2020 and before January 1, 2022. Qualified wages are the wages paid to an employee for the time that the employee is not providing services due to an economic hardship, specifically, either (1) a full or partial suspension of operations by order of a governmental authority due to COVID-19, or (2) a significant decline in gross receipts. The Company recognized $1.5 million of ERC as a contra-expense in the condensed consolidated and combined statements of operations for the three and six months ended June 30, 2021.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, ~~2021~~2022 COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, ~~2020~~2021

Our results of operations are summarized below:

Three Months Ended Three months ended ��
June 30, 2021 June 30, 2020 June 30, 2022 June 30, 2021 (Restated)
Amount % of Revenue* Amount % of Revenue* % Change
(in thousands) Amount
% of
Revenue*
Amount
% of
Revenue*
% Change
Revenue:
Restaurant sales, net $ 4,737,867 95.6 % $ 3,880,841 99.0 % 22.1 % $ 5,323 95.5 % $ 5,217 96.0 % 2.0 %
Gaming income, net 111,108 2.2 % 29,463 0.8 % 277.1 % 145 2.6 % 111 2.1 % 30.6 %
Franchise income 106,196 2.2 % 8,166 0.2 % 1200.5 % 108 1.9 % 105 1.9 % 2.9 %
Total revenue 4,955,071 3,918,470 5,576 5,433

Expenses
Expenses:
Restaurant cost of sales 1,435,192 30.3 % 1,162,291 29.9 % 23.5 % 1,701 32.0 % 1,617 31.0 % 5.2 %
Restaurant operating expenses 3,180,414 67.1 % 3,247,957 83.7 % (2.1 )% 3,679 69.1 % 3,455 66.2 % 6.5 %
Restaurant pre-opening and closing expenses — —% — — % — %
General and administrative expenses 1,193,973 24.1 % 1,460,668 37.3 % (18.3 )% 1,806 32.4 % 1,208 22.2 % 49.5 %
Asset impairment charge — — % 152,470 3.9 % (100.0 )%
Depreciation and amortization 362,350 7.3 % 415,778 10.6 % (12.9 )% 201 3.6 % 227 4.2 % (11.5 )%
Employee retention credit (1,473,355 ) (29.7 )% — — % (100.0 )%
Employee retention credit and other grant income (1,287 ) (23.1 )% (1,473 ) (27.1 )% (12.6 )%
Total expenses 4,698,574 94.8 % 6,439,164 164.3 % (27.0 )% 6,100 5,034
Operating income (loss) 256,497 (2,520,694 )
Other (expense) income:
Operating (loss) income (524 ) 399
Other income (expense):
Interest expense (158,690 ) (3.2 )% (159,460 ) (4.1 )% (0.5 )% (224 ) (4.0 )% (158 ) (2.9 )% 41.8 %
Change in fair value of derivative liabilities (66,136 ) (1.3 )% 6,443,380 164.4 % (101.0 )% — — % (66 ) (1.2 )% (100.0 )%
Change in fair value of investment (124,166 ) (2.5 )% (953,033 ) (24.3 )% (87.0 )% (12 ) (0.2 )% (124 ) (2.3 )% (90.3 )%
Debt extinguishment expense — — % (11,808,111 ) (301.3 )% (100.0 )%
Other income (expense) 143,942 2.9 % (70,748 ) (1.8 )% (303.5 )%
Gain on extinguished lease liabilities 275,164 5.6 % — — % 100 %
Total other income (expense) 70,114 (6,547,972 )
Income (Loss) before income taxes 326,611 (9,068,666 )
Change in fair value of convertible promissory note 55 1.0 % — — % 100.0 %
Gain on extinguished/settled lease liabilities 256 4.6 % 275 5.1 % (6.9 )%
Other income 92 1.6 % 171 3.1 % (46.2 )%
Total other income 167 98
(Loss) income before income taxes (357 ) 497
Income tax expense — — % (7,352 ) 0.2 % (100.0 )% — — % — — % — %
Consolidated net income (loss) $ 326,611 $ (9,076,018 )
Consolidated net (loss) income $ (357 ) $ 497

2928

Six Months Ended Six months ended
June 30, 2021 June 30, 2020 June 30, 2022 June 30, 2021 (Restated)
Amount % of Revenue* Amount % of Revenue* % Change
(in thousands) Amount
% of
Revenue*
Amount
% of
Revenue*
% Change
Revenue:
Restaurant sales, net $ 9,182,059 96.2 % $ 9,372,298 97.6 % (2.0 )% $ 10,081 89.8 % $ 9,661 96.3 % 4.3 %
Gaming income, net 168,038 1.8 % 129,212 1.4 % 30.0 % 248 2.2 % 169 1.7 % 46.7 %
Franchise income 198,424 2.0 % 98,198 1.0 % 102.1 % 897 8.0 % 199 2.0 % 350.8 %
Total revenue 9,548,521 9,599,708 11,226 10,029
��
Expenses
Expenses:
Restaurant cost of sales 2,751,114 30.0 % 2,960,061 31.6 % (7.1 )% 3,193 31.7 % *2,933 30.4 % *8.9 %
Restaurant operating expenses 6,425,529 70.0 % 6,873,801 73.3 % (6.5 )% 7,158 71.0 % *6,701 69.4 % *6.8 %
Restaurant pre-opening and closing expenses — — % 20,730 0.2 %
(100.0
)%
General and administrative expenses 2,361,100 24.7 % 2,635,821 27.5 % (10.4 )% 3,142 28.0 % 2,375 23.7 % 32.3 %
Asset impairment charge 1,287,579 13.5 % 152,470 1.6 % (744.5 )%
Asset impairment charges — — % 1,288 12.8 % (100.0 )%
Depreciation and amortization 730,005 7.6 % 831,609 8.7 % (12.2 )% 423 3.8 % 459 4.6 % (7.8 )%
Employee retention credit (1,473,355 ) (15.4 )% — — % (100.0 )%
Employee retention credit and other grant income (1,835 ) (16.3 )% (1,473 ) (14.7 )% 24.6 %
Total expenses 12,081,972 126.5 % 13,474,492 140.4 % (10.3 )% 12,081 12,283
Operating loss (2,533,451 ) (3,874,784 ) (855 ) (2,254 )
Other (expense) income:
Other income (expense):
Interest expense (315,931 ) (3.3 )% (322,448 ) (3.4 )% (2.0 )% (411 ) (3.7 )% (318 ) (3.2 )% 29.2 %
Change in fair value of derivative liabilities 118,664 1.2 % 6,141,517 64.0 % (98.1 )% — — % 119 1.2 % (100.0 )%
Change in fair value of investment (120,460 ) (1.3 )% (953,033 ) (9.9 )% (87.4 )% (16 ) (0.1 )% (120 ) (1.2 )% (86.7 )%
Debt extinguishment expense — — % (11,808,111 ) (123.0 )% (100.0 )%
Other income (expense) 146,558 1.5 % 176,308 (1.8 )% (16.9 )%
Gain on extinguished lease liabilities 318,519 3.3 % — — % 100 %
Total other income (expense) 147,350 (6,765,767 )
Income (Loss) before income taxes (2,386,101 ) (10,640,551 )
Change in fair value of convertible promissory note 171 1.5 % — — % 100.0 %
Gain on extinguished/settled lease liabilities 256 2.3 % 319 3.2 % (19.7 )%
Gain on extinguished trade payable 161 1.4 % — — % 100.0 %
Other income 311 2.8 % 174 1.7 % 78.7 %
Total other income 472 174
Loss before income taxes (383 ) (2,080 )
Income tax expense — — % (3,676 ) 0.1 % (100.0 )% (2 ) — % — — % 100.0 %
Consolidated net income (loss) $ (2,386,101 ) $ (10,644,227 )
Consolidated net loss $ (385 ) $ (2,080 )
* Restaurant cost of sales and operating expenses ~~and closing expense~~ percentages are based on restaurant sales, net. Other percentages are based on total revenue.
3029

Revenue

Total revenue increased ~~to $5.0~~$0.1 million or 2.6% and $1.2 million or 11.9% for the three and six months ended June 30, ~~2021 from $3.9 million for~~2022, respectively, as compared to the ~~three months ended June 30, 2020.~~corresponding periods in 2021.

Three Months Ended
June 30, 2021

Six Months Ended
June 30, 2021

Three months ended
June 30, 2022

Three months ended
June 30, 2021 (Restated)

Amount % of Revenue* Amount % of Revenue* Amount
% of
Revenue
Amount
% of
Revenue

(in thousands)
Restaurant sales, net $ 4,737,867 95.6 % $ 9,182,059 96.2 % $ 5,323 95.5 % $ 5,217 96.0 %
Gaming income, net 111,108 2.2 % 168,038 1.8 % 145 2.6 % 111 2.1 %
Franchise income 106,196 2.2 % 198,424 2.0 % 108 1.9 % 105 1.9 %
Total revenue $ 4,955,071 100 % $ 9,548,521 100 % $ 5,576 100.0 % $ 5,433 100.0 %

Three Months Ended
June 30, 2020

Six Months Ended
June 30, 2020

Six months ended
June 30, 2022

Six months ended
June 30, 2021 (Restated)

Amount % of Revenue* Amount % of Revenue* Amount
% of
Revenue
Amount
% of
Revenue

(in thousands)
Restaurant sales, net $ 3,808,841 99.0 % 9,372,298 97.6 % $ 10,081 89.8 % $ 9,661 96.3 %
Gaming income, net 29,463 0.8 % 129,212 1.4 % 248 2.2 % 169 1.7 %
Franchise income 8,166 0.2 % 98,198 1.0 % 897 8.0 % 199 2.0 %
Total revenue $ 3,918,470 100 % $ 9,599,708 100 % $ 11,226 100.0 % $ 10,029 100.0 %

● Revenue from restaurant sales increased ~~22.1% to $4.7~~$0.1 million or 2.0% and $0.4 million or 4.3% for the three and six months ended June 30, ~~2021,~~2022, respectively, as compared to ~~$3.8 million for~~ the ~~three months ended June 30, 2020. The primary reasons for the increase were~~corresponding periods in 2021 primarily due to increased occupancy and declining hesitancy from the public to dine in public locations as a result of the rebound from the COVID-19 pandemic. Revenue from restaurant sales decreased 2.0% to $9.2 million for the six months ended June 30, 2021, compared to $9.4 million for the six months ended June 30, 2020. The primary reasons for the decline were due to the permanent closure of 8 stores in 2020, occupancy limitations and ongoing hesitancy for the public to dine in public locations as a result of the ongoing COVID-19 pandemic. The closed stores accounted for $548,859 of revenue during the six months ended June 30, 2020.
● Gaming income increased 277.1% to $111,108 for the three months ended June 30, 2021, compared to $29,463 for the three months ended June 30, 2020. Gaming income increased 30.0% to $168,038 for the six months ended June 30, 2021, compared to $129,212 for the six months ended June 30, 2020. The primary reason for this increase was due the effect of the COVID-19 pandemic recovery.
● Franchise ~~Income~~income increased ~~1200.5% to $106,196~~$3,000 or 2.9% and $0.7 million or 350.8% for the three ~~months ended June 30, 2021, compared to $8,166 during the three months ended June 30, 2020. Franchise Income increased 102.1% to $198,424 for the~~and six months ended June 30, ~~2021,~~2022, respectively, as compared to ~~$98,198~~the corresponding periods in 2021. The increase during the ~~six months ended June 30, 2020. The primary reason for this increase~~six-month period was primarily due to ~~our~~$0.7 million of franchise ~~stores recovering from the effects~~income recognized in March 2022 as a result of the ~~COVID-19 pandemic during~~Company terminating its international Master Franchise Agreements as the ~~second quarter~~requirements in the agreement had not been met and all international stores had been closed. The Master Franchisee notified the Company that it would not be reopening these stores. In addition, contract liabilities decreased $0.7 million as a result of ~~2021 based on declining hesitancy from~~ the ~~public to dine in public locations.~~termination of the international Master Franchise Agreements.

Expenses
Restaurant cost of sales

Restaurant cost of sales increased ~~to $1.4~~$0.1 million or 5.2% and $0.3 million or 8.9% for the three and six months ended June 30, 2022, respectively, as compared to the corresponding periods in 2021 ~~from $1.2 million for~~primarily due to the ~~three months ended June 30, 2020. The percent~~2.0% and 4.3% increases in restaurant revenue. Restaurant cost of sales as a percentage of restaurant sales increased to ~~30.3%~~32.0% and 31.7% for the three and six months ended June 30, ~~2021 from 29.9%~~2022, respectively, compared to 31.0% and 30.4% for the three months ended June 30, 2020. The overall increase in cost of sales was due to the 22.1% increase in restaurant revenue to $4.7 million for the three months ended June 30, 2021 compared to $3.9 million for the three months ended June 30, 2020.
~~Restaurant cost of sales decreased to $2.8 million for the~~and six months ended June 30, 2021, ~~from $3.0 million for the six months ended June 30, 2020. The percent~~respectively, primarily as a result of restaurant sales decreased to 30.0% for the six months ended June 30, 2021 from 31.6% for the six months ended June 30, 2020. The overall decrease in cost of sales was due to the 2.0% decline in restaurant revenue to $9.2 million for the six months ended June 30, 2021 compared to $9.4 million for the six months ended June 30, 2020.rising food costs.

Restaurant operating expenses

Restaurant operating expenses ~~remained flat at $3.2~~increased $0.2 million or 6.5% and $0.5 million or 6.8% for the three ~~months ended June 30, 2021~~ and 2020. The overall percentage of restaurant operating expenses dropped from 83.7% in 2020 to 67.1% in 2021 and was driven by the overall increase of revenue as described in the revenue section above, and the corresponding adjustment of labor at the store level and tighter controls of store level operating expenses.
~~Restaurant operating expenses decreased to $6.5 million for the~~ six months ended June 30, ~~2021 from $6.9 million for~~2022, respectively, as compared to the ~~six months ended June 30, 2020.~~corresponding periods in 2021. The ~~decrease of restaurant operating expenses was driven by the overall improvement in cost of goods sold, direct labor and other general and administrative expenses.~~
~~Restaurant pre-opening and closing expenses~~
~~There~~increases were no restaurant pre-opening and closing expenses for the three months ended June 30, 2021 and 2020 as no stores were opened or closed during the three months ended June 30, 2021 and 2020. There were no restaurant pre-opening and closing expenses for the six months ended June 30, 2021 compared with $20,730 for the six months ended June 30, 2020. The decrease is primarily due to ~~limited restaurant openings~~the overall increase in revenue as described above and ~~closings in the six months ended~~additional company-operated restaurants. As of June 30, ~~2020 and no openings or closings during the six months ended~~2022, we operated 28 company-owned restaurants, as compared to 26 company-owned restaurants as of June 30, 2021.
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General and administrative expense (“G&A”)

G&A expenses ~~decreased to $1.2~~increased $0.6 million or 49.5% and ~~$2.4~~$0.8 million or 32.3% for the three and six months ended June 30, 2022, respectively, as compared to the corresponding periods in 2021 respectively, from $1.5 million and $2.6 million for the three and six months ended June 30, 2020. During the three and six months ended June 30, 2021, audit, legal and professional services increased by $161,026 and $503,985primarily due to the first year-end audit subsequent to being spun-off from Chanticleer, professional services and professional fees related to lease related legal and accounting matters. This increase was offset by a $278,464 and $400,434 decreasenet effect of (i) increases in salary and benefits of $0.3 million and $0.5 million, respectively, primarily due to the ~~departure~~addition of two senior management personnel and ~~a $127,543~~an increase in our employee headcount from June 30, 2021 to June 30, 2022 and ~~$160,073 decrease~~(ii) increases in ~~shareholder services and fees due to spin-off from Chanticleer. Advertising, Insurance~~advertising, insurance and other expenses ~~decreased by $37,969~~of $0.2 million and ~~$215,691~~$0.3 million, respectively, primarily due to ~~less need during~~increases in advertising spending as we begin to recover from the ~~covid~~COVID-19 pandemic.
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Significant components of G&A are summarized as follows:

Three Months Ended
June 30,

Six Months Ended
June 30,
Three months ended Six months ended
2021 2020 2021 2020 June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
(in thousands) (Restated) (Restated)
Audit, legal and other professional services $ 612,464 $ 451,438 $ 1,227,467 $ 723,482 $ 738 $ 621 $ 1,203 $ 1,229
Salary and benefits 549,710 828,174 987,761 1,388,195 843 558 1,500 996
Advertising, Insurance and other 8,755 46,724 117,741 333,432
Shareholder services and fees 3,587 131,130 7,639 167,712
Advertising, insurance and other 194 6 373 118
Stockholder services and fees 4 4 17 8
Travel and entertainment 19,457 3,202 25,492 23,000 27 19 49 24
Total G&A Expenses $ 1,193,973 $ 1,460,668 $ 2,361,100 $ 2,635,821
Total G&A expenses $ 1,806 $ 1,208 $ 3,142 $ 2,375

Asset impairment charges
We did not record any asset impairment charges during the three and six months ended June 30, 2022.

Asset impairment charges of $1.3 million were recorded during the ~~six months ended June 30,~~first quarter of 2021. The impairment was comprised of $0.3 million, $0.7 million and $0.3 million of impairment on property and equipment, ~~right of use~~right-of-use asset and intangible assets, respectively, and was due to ~~ongoing~~ cash flow implications resulting from the ongoing COVID-19 pandemic. ~~These changes were recorded in the first quarter of 2021 and no asset impairment charges were recorded during the three months ended June 30, 2021 as store operating performance began to improve.~~

~~There was an asset impairment charge~~Employee retention credit and other grant income
Employee Retention Credit (“ERC”). For each of ~~$152,470 for~~ the three and six months ended June 30, ~~2020~~2022 and 2021, the Company recognized $0.7 million and $1.5 million, respectively, of ERC as a ~~result of the impairment of assets of one location~~contra-expense included in employee retention credit and ~~the charge was recorded~~grant income in the ~~three months~~condensed consolidated statements of operations. Although the program ended ~~June 30, 2020.~~on January 1, 2022, the Company performed an analysis during the current period and determined that it was eligible for additional credits related to 2021 wages.

~~Depreciation~~Restaurant Revitalization Fund (“RRF”). Pie Squared Holdings, which we acquired during August 2021, received a grant under the RRF and ~~amortization~~
~~Depreciation and amortization expense was $362,350 and $730,005~~$2.0 million of unused funds at the closing of the acquisition were placed into escrow for our benefit. For the three and six months ended June 30, ~~2021, compared~~2022, the Company recognized $0.6 million and $1.1 million, respectively, related to ~~$415,778~~the RRF as a contra-expense included in employee retention credit and ~~$831,609~~other grant income in the condensed consolidated statements of operations. As of June 30, 2022, there was $0.4 million remaining available for future recognition recognition under the RRF.
For additional information, see Note 3 to the condensed consolidated financial statements.
Other Income (Expense)
Change in fair value of derivative liabilities
There were no derivative liabilities recorded during the three and six months ended June 30, 2020. Impairments of property and equipment and intangible assets during 2020 and year to date in 2021 caused a decrease in the gross value of the underlying assets thereby resulting in a decrease in depreciation and amortization.
~~Other (expense) income~~
~~Interest expense for~~2022. During the three and ~~six months ended June 30, 2021, of $158,690 and $315,931, respectively, was comparable to the comparative periods in 2020 of $159,460 and $322,448.~~
~~During the three months ended June 30, 2021, the change in the fair value of derivative liabilities was expense of $66,136 and during the~~ six months ended June 30, 2021, the change in fair value of derivative liabilities was ~~income~~a gain (loss) of ~~$118,664, which was~~$(0.1) million and $0.1 million, respectively, related to the True-Up Payment derivative. Derivative liabilities ~~and warrants are~~were marked to market on a quarterly basis and ~~fluctuation~~fluctuations in value are reflective of the fair market value at the point in time ~~that~~at which the instruments ~~are~~were measured. During the three and six months ended June 30, 2020, the change in fair value of derivative liabilities and warrants was income of $6.4 million and $6.1 million, respectively. The income in the three months ended June 30, 2020, was primarily due to a decrease in the Company’s stock price at June 30, 2020 compared to March 31, 2020, thus driving a decrease in the value of the derivative instruments. The True-Up Payment derivative was settled in July 2021 with a cash payment of ~~$66,136.~~$0.1 million.

~~On April 1, 2020, the Company exchanged the then existing 8% non-convertible notes for 10% convertible notes. Warrants to purchase common stock were also issued~~Change in ~~connection with the issuance of the new notes. The Company recorded a $11.8 million loss on the extinguishment of the 8% notes based on the difference in the carrying~~fair value of ~~the old notes and~~investment
Our investment represents the fair value of the ~~new notes~~common stock of Sonnet held by the Company after its exercise of warrants received in connection with the Merger, as defined and ~~warrants issued.~~described in Note 1 to the condensed consolidated financial statements. We recognized a loss in fair value of $12,000 and $0.1 million during the three months ended June 30, 2022 and 2021, respectively, and $16,000 and $0.1 million during the six months ended June 30, 2022, respectively, as a result of decreases in Sonnet’s common stock price.

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Change in fair value of convertible promissory note
In connection with the Merger, the Company obtained warrants to purchase 186,101 shares of Sonnet at $0.001 per share. The share price of Sonnet has decreased since the Merger and a loss on investment of $124,166 and $120,460 was recognizedAugust 2021, we issued an 8% secured, convertible promissory note as consideration for the ~~three and six month periods ended June 30, 2021, respectively. The Company also~~acquisition of Pie Squared Holdings. We have elected to measure the convertible promissory note at fair value, with changes in fair value recognized in operations. We recognized a ~~loss on investment~~change in fair value of ~~$953,033~~$0.1 million and $0.2 million during the three and six ~~month periods~~months ended June 30, ~~2020. This instrument will continue to be recorded at fair value until~~2022, respectively. There were no similar transactions during the ~~warrants are exercised~~three and ~~the underlying common stock security is sold.~~six months ended June 30, 2021.
Gain on extinguished trade payable

During the three and six months ended June 30, ~~2021,~~2022, we recognized a gain on extinguished trade payable of nil and $0.2 million, respectively, due to the ~~Company recognized gains~~settlement of ~~$275,164~~outstanding amounts with a supplier. There were no such settlements during the three and ~~$318,519 on the extinguishment of lease liabilities. No such gains were recorded in the comparable 2020 periods.~~six months ended June 30, 2021.
Other income

Other income ~~was $143,942~~increased (decreased) ($0.1) million or (46.2%) and ~~$146,558~~$0.1 million or 78.7% for the three and six months ended June 30, ~~2021,~~2022, respectively, compared to ~~other expense of $70,748 and other income of $176,308~~the corresponding periods in 2021 primarily due to (i) a gain recognized during the three ~~and six month comparative periods in 2020. Other income for the three and six~~ months ended June 30, ~~2021, includes~~2022 of $0.1 million as a result of a franchise-related litigation settlement and (ii) a dividend received during the ~~reversal~~first quarter of ~~liabilities~~2022 from our investment in Hooters of America of approximately $180,609 from accounts no longer deemed payable. During the three and six months ended June 30, 2020, other income and expense was driven by a change in impairment valuation of operating lease assets and operating lease liabilities in the amount of a decrease of $70,748 and an increase of $224,317.$0.1 million.

STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, ~~2021,~~2022 COMPARED TO THE SIX MONTHS ENDED JUNE 30, ~~2020~~2021

Six Months Ended
June 30, 2021 June 30, 2020
Net cash used in operating activities $ (1,346,396 ) $ (3,265,722 )
Net cash used in investing activities (14,899 ) (27,740 )
Net cash provided by financing activities 1,947,102 7,028,478
Effect of foreign currency exchange rates 9,065 (34,628 )
$ 594,872 $ 3,700,388
Six months ended
June 30, 2022 June 30, 2021
(in thousands) (Restated)
Net cash flows used in operating activities $ (2,646 ) $ (1,167 )
Net cash flows used in investing activities (154 ) (15 )
Net cash flows provided by financing activities 1,448 1,947
Effect of exchange rate changes on cash — 9
Net (decrease) increase in cash and restricted cash $ (1,352 ) $ 774
Operating activities
Cash used in operating activities ~~was approximately $1.3 million~~ for the six months ended June 30, ~~2021.~~ 2022 was primarily attributable to the net loss of $0.4 million and non-cash income of $0.3 million for a gain on extinguished/settled lease liabilities, $0.2 million for a fair value adjustment to a convertible promissory note and $0.2 million for a gain on extinguished trade payable, offset by non-cash charges to operations of $1.1 million for depreciation and amortization. The balance of the change in cash flows from operating activities was related to net movements in asset and liability accounts.
The use of cash in the six months ended June 30, 2021 was primarily attributable to the net loss of ~~$2.4~~$2.1 million and non-cash income of $0.3 million from a gain on extinguished lease liabilities and a fair value adjustment to a derivative of $0.1 million, offset by non-cash charges to operations of $1.3 million for asset impairments and ~~$1.2~~$0.9 million for depreciation and amortization. Additionally, the Company recognized a loss on investments of $0.1 million and non-cash expense of $0.1 million related to the amortization of debt discounts. The balance of the change in cash flows from operating activities was related to net movements in asset and liability accounts.
Investing activities
Cash used in ~~operating~~investing activities ~~was approximately $3.3 million~~ for the six months ended June 30, ~~2020. This use of cash~~2022 and 2021 was driven by a significant reduction in accounts payable and accrued expenses, the paydown of payroll tax liabilities, and the prepayment of insurance premiums for 2020 as a result of the Merger with Sonnet.
~~Cash used in investing activities in the six months ended June 30, 2021, and June 30, 2020, was~~primarily attributable to expenditures on property and equipment.
Financing activities
Cash provided by financing activities for the six months ended June 30, ~~2021,~~2022 was ~~approximately $2.0~~primarily attributable to proceeds of $1.4 million ~~compared~~related to ~~cash~~the issuance of 8% senior unsecured convertible debentures and proceeds of $0.2 million related to the issuance of notes payable. Cash provided by financing activities ~~of approximately $7.0 million~~ for the six months ended June 30, ~~2020. Cash provided by financing activities during~~ 2021 ~~resulted from~~was primarily attributable to proceeds from a $2.0 million ~~PPP~~Payment Protection Program (“PPP”) loan. The primary drivers of the cash provided by financing activities during 2020 were proceeds from the bridge preferred equity investment, the exercise of warrants, and the Merger Consideration received of $5.4 million.
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LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN
~~Liquidity, Capital Resources and Going Concern~~
As of June 30, ~~2021,~~2022, our cash balance was ~~$2.5~~$1.0 million, ~~of which $0.4 million was restricted cash,~~ our working capital deficiency was ~~$15.5~~$12.3 million and we had significant near-term commitments and contractual obligations. The level of additional cash needed to fund operations and our ability to conduct business for the next 12 months will be influenced primarily by the following factors:

● our ability to access the capital and debt markets to satisfy current obligations and operate the business;
● our ability to qualify for and access financial stimulus programs available through federal and state government programs;
● our ability to refinance or otherwise extend maturities of current debt obligations;
● our ability to manage our operating expenses and maintain gross margins;
● popularity of and demand for our fast-casual dining concepts; and
● general economic conditions and changes in consumer discretionary income.

We have typically funded our operating costs, acquisition activities, working capital requirements and capital expenditures with proceeds from the issuances of our common stock and other financing arrangements, including convertible debt, lines of credit, notes payable, capital leases, government stimulus funds and other forms of external financing.
OnIn early March ~~10,~~ 2020, the ~~World~~COVID-19 pandemic was declared to be a National Public Health ~~Organization characterized~~Emergency. The global COVID-19 pandemic continues to adversely impact the ~~novel~~economies in which we operate. As a result of rising case rates toward the end of 2020 and certain jurisdictions implementing restrictions that reduced dining room capacity or mandated the closure of dining rooms, we began fiscal 2021 with significant limitations on our operations which, throughout the fiscal year, varied widely from time to time, state to state and city to city, however, nonetheless negatively impacted sales. Once COVID-19 ~~virus as a global pandemic. The COVID-19 outbreak~~vaccines were approved and moved into wider distribution in the United States ~~has resulted~~ in ~~a significant impact throughout~~early to mid-2021, public health conditions improved and almost all of the ~~hospitality industry that~~COVID-19 restrictions on businesses eased.
While cases continue to decline and staffing continues to improve, overall consumer and business activity remains muted in certain markets as consumer behaviors have ~~continued through June 30, 2021. The Company~~changed due to the COVID-19 pandemic and some businesses have yet to bring employees back into their offices. Our restaurant operations have been, and could again in the future, be disrupted by team member staffing issues because of illness, exclusion, fear of contracting COVID-19 or caring for family members due to COVID-19, legal requirements for employee vaccinations or COVID testing, lack of labor supply, competitive labor pressures, or for other reasons. Furthermore, inflation has been ~~impacted~~and is elevated across our business, including food costs, due in part to the supply chain impacts of the pandemic. We remain in regular contact with our major suppliers and while, to date, we have not experienced significant disruptions in our supply chain due to ~~restrictions placed by~~the COVID-19 pandemic, we could see significant future disruptions should the impacts of the pandemic continue. Currently, national, state and local ~~governments~~jurisdictions have removed their capacity restrictions on businesses and, therefore, our restaurants are serving customers in our dining rooms without social distancing requirements. However, it is possible additional outbreaks could lead to restrictive measures that caused temporary restaurant closures or significantly reduced the Company’s ability to operate, restricting some of the Company’s restaurants to take-out only. It is difficult to estimate the length or severity of this outbreak; however, the Company has made operational changes, as needed, to reduce the impact.could impact our guest demand and dining room capacity.
As Amergent executes its business plan over the next 12 months, it intends to carefully monitor the impact of its working capital needs and cash balances relative to the availability of cost-effective debt and equity financing. In the event that capital is not available, Amergent may then have to scale back or freeze its operations plans, sell assets on less than favorable terms, reduce expenses, and/or curtail future acquisition plans to manage its liquidity and capital resources.
~~The Company’s~~Our current operating losses combined with ~~its~~our working capital deficit ~~and uncertainties regarding the impact of COVID-19,~~ raise substantial doubt about our ability to continue as a going concern.
In addition, our business is subject to additional risks and uncertainties including, but not limited to, those described in Item 1A. “Risk Factors.”
The condensed consolidated ~~and combined~~ financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should ~~the Company~~we be unable to continue as a going concern.
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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.
33

~~Item~~ITEM 4: ~~Controls and Procedures~~CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We evaluated, under the supervision and with the participation of the principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”)) as of June 30, ~~2021,~~2022, the end of the period covered by this Report. Based on this evaluation, our Chairman, President and Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial officer) have concluded that our disclosure controls and procedures were not effective at the reasonable assurance level at June 30, ~~2021~~2022 because of the material weakness in the Company’s internal control over financial reporting that existed at December 31, ~~2020~~2021 that has not been fully remediated by the end of the ~~three~~six month period ended June 30, ~~2021.~~2022.

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Controls and procedures can only provide reasonable, not absolute, assurance that the above objectives have been met.
Changes in Internal Control over Financial Reporting

Other than the material weakness and remediation activities discussed below, there were no changes in our internal control over financial reporting during the three months ended June 30, ~~2021,~~2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Material Weakness in Internal Control over Financial Reporting

Material Weaknesses. A material weakness is a control deficiency, or a combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Management identified the following deficiency in its internal control over financial reporting:

● We identified a deficiency related to our financial close process including maintaining a sufficient complement of personnel commensurate with our accounting and financial reporting requirements, as well as development and extension of controls over the recording of closing journal entries, accounting for business combinations, contingencies and proper cut-off of accounts payable and accrued expenses at period end.

Management determined that the deficiency could potentially result in a material misstatement of the consolidated ~~and combined~~ financial statements in a future annual or interim period that would not be prevented or detected. Therefore, the deficiency constitutes a material weakness in internal control.

Remediation Plans

~~The Company is committed~~We initiated several steps to ~~remediating its material weaknesses as promptly as possible. Implementation~~evaluate and implement measures designed to improve our internal control over financial reporting in order to remediate the control deficiencies noted above, including recruitment of an accounting consultant and seeking outside advice from other third-party consultants to assist in improving the Company’s ~~remediation plans has commenced~~internal control, simplifying its reporting processes and ~~is being overseen by~~reducing the ~~audit committee. As part~~risk of ~~its remediation efforts,~~undetected errors. In June 2020, the Company hired ~~two third party~~an accounting ~~firms with technical~~consultant that has appropriate expertise in accounting ~~experience during 2020 to support management to ensure accurate reporting. Further,~~and reporting under U.S. GAAP and SEC regulations and has allowed the Company ~~is in the process of designing and implementing procedures for control over the~~to be better aligned with segregation of ~~duties for~~duties. With the ~~preparation~~hiring of ~~approval~~this consultant, the Company will be instituting monthly and ~~recording~~quarterly meetings to identify significant, infrequent and unusual transactions as well as ensure timely reporting. Additionally, in September 2020 the Company engaged a third-party accounting and advisory firm to assist with, among other areas, the analysis of ~~journal entries~~complex, infrequent and ~~procedure~~unusual transactions as well as provide valuation services to ~~obtain~~ the ~~proper cut-off of accounts payable and accrued expenses in a period.~~Company. However, there can be no assurance as to when ~~these~~this material ~~weaknesses~~weakness will be remediated or that additional material weaknesses will not arise in the future. Even effective internal control can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. Any failure to remediate the material weaknesses, or the development of new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial statements, which in turn could have a material adverse effect on our financial condition and the trading price of our common stock and we could fail to meet our financial reporting obligations.

3534

~~part~~PART II – ~~Other information~~OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS

Various subsidiaries of Amergent are delinquent in payment of payroll taxes to taxing authorities. As of June 30, 2021, approximately ~~$2.5~~$2.2 million of employee and employer taxes (including estimated penalties and interest) was accrued but not remitted in years prior to 2019 to certain taxing authorities by certain of these subsidiaries for cash compensation paid. As a result, these subsidiaries are liable for such payroll taxes. These subsidiaries have received warnings and demands from the taxing authorities and management is prioritizing and working with the taxing authorities to make these payments in order to avoid further penalties and interest. Failure to remit these payments promptly could result in increased penalty fees.

During ~~2020~~2021 and ~~2021~~the three and six months ended June 30, 2022, the Company was in arrears on rent due on several of its leases as a result of the COVID-19 pandemic. As a result, the Company has pending litigation related to 10four sites, all of which 5 have permanently closed. The outcome of this litigation could result in the permanent closure of additional restaurant locations as well as the possibility of the Company being required to pay interest and damages, modify certain leases on unfavorable terms and could result in material impairments to the Company’s assets.

The Company entered into a promissory note to repay a contractor for the build-out of a new Little Big Burger location. The note has a balance of $348,269, and a stated interest rate of 12% per year. In connection with and prior to the Merger and Spin-Off, on April 1, 2020, this note was assumed by Amergent. The Company is currently in default on this loan and a writ of garnishment was ordered against the Company in 2020 for approximately $445,000.
From time to time, the Company may be involved in other legal proceedings and claims that have arisen in the ordinary course of business are generally covered by insurance. As of June 30, ~~2021,~~2022, the Company does not expect the amount of ultimate liability with respect to these matters to be material to the Company’s consolidated financial condition, results of operations or cash flows.

ITEM 1A: RISK FACTORS
~~We have identified a material weakness~~In addition to other information set forth in our internal control and procedures and internal control over financial reporting. If not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could resultthis Report, you should carefully consider the risk factors discussed in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and the trading pricePart I, Item 1A of our ~~common stock.~~
~~Maintaining effective internal control over financial reporting and effective disclosure controls and procedures are necessary~~Annual Report on Form 10-K (our “Form 10-K”) for us to produce reliable financial statements. We have re-evaluated our internal control over financial reporting and our disclosure controls and procedures and concluded that they were not effective as of June 30,the year ended December 31, 2021 and ~~we concluded there was a material weakness in the design of our internal control over financial reporting.~~
A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
We identified a deficiency related to our financial close process including maintaining a sufficient compliment of personnel commensurate with our accounting and financial reporting requirements, as well as development and extension of controls over the recording of journal entries and proper cutoff of accounts payable and accrued expenses at period end and in assessing agreements and the accounting treatment required to record the agreements correctly in the financial records.
Management determined that the deficiency could potentially result in a material misstatement of the consolidated and combined financial statements in a future annual or interim period that would not be prevented or detected. Therefore, the deficiency constitutes a material weakness in internal control.
36
~~Remediation Plans~~
We initiated several steps to evaluate and implement measures designed to improve our internal control over financial reporting in order to remediate the control deficiencies noted above, including recruitment of an accounting consultant and seeking outside advice from other third-party consultants to assist in improving the Company’s internal control, simplify its reporting processes and reduced the risk of undetected errors. In June 2020, the Company hired an accounting consultant that has appropriate expertise in accounting and reporting under U.S. GAAP and SEC regulations and has allowed the Company to be better aligned with segregation of duties. With the hiring of this consultant, the Company will be instituting monthly and quarterly meetings to identify significant, infrequent and unusual transactions as well as ensure timely reporting. Additionally, in September 2020 the Company engaged a third-party accounting and advisory firm to assist with, among other areas, the analysis of complex, infrequent and unusual transactions as well as provide valuation services to the Company.
~~The Chief Financial Officer has initiated a preliminary assessment of management’s internal control over financial reporting in accordance~~any subsequent filings with the ~~2013 integrated framework, as prescribed by the Committee of Sponsoring Organizations of the Treadway~~Securities and Exchange Commission ~~or COSO.~~
~~Inherent Limitations on Effectiveness of Controls~~
An effective internal control system, no matter how well designed, has inherent limitations, including the possibility of human error or overriding of controls, and, therefore, can provide only reasonable assurance with respect to reliable financial reporting. Because of its inherent limitations, our internal control over financial reporting may not prevent or detect all misstatements, including the possibility of human error, the circumvention or overriding of controls, or fraud. Effective internal control can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.
We may not be entitled to forgiveness of our recently received Paycheck Protection Program Loans, and our application for the Paycheck Protection Program Loans could in the future be determined to have been impermissible.
On March 27, 2020, Congress passed “The Coronavirus Aid, Relief, and Economic Security Act” (CARES Act), which included the “Paycheck Protection Program” (PPP) for small businesses. On April 27, 2020, Amergent received a PPP loan of $2.1 million. Due to the Spin-Off and Merger, Amergent was not publicly traded at the time of the loan application or funding. The note bears interest at 1% per year, matures in April 2022, and requires monthly interest and principal payments of approximately $119,000 beginning in November 2020 and through maturity.
On February 25, 2021, the Company received a second loan of $2.0 million under the PPP. Amergent is not listed on a national securities exchange. The note bears interest at 1% per year, matures on February 25, 2026, and requires monthly principal and interest payments of approximately $44,660 beginning June 25, 2022, through maturity. The loan may be forgiven if certain criteria are met. The currently issued guidelines of the program allow for the loan proceeds to be forgiven if certain requirements are met. Any loan proceeds not forgiven will be repaid in full. Amergent applied for forgiveness of the first loan and the application is under review by the government agency administering the PPP. No assurance can be given as to the amount, if any, of forgiveness. The application for forgiveness allowed the Company to defer the timing of repayment until the forgiveness assessment is completed.
We will be required to repay any portion of the outstanding principal that is not forgiven, along with accrued interest, and we cannot provide any assurance that we will be eligible for loan forgiveness, that we will apply for forgiveness, or that any amount of the PPP Loans will ultimately be forgiven by the SBA. In order to apply for the PPP Loans, we were required to certify, among other things, that the current economic uncertainty(“SEC”) made the PPP Loans request necessary to support our ongoing operations. We made this certification in good faith after analyzing, among other things, the maintenance of our workforce, our need for additional funding to continue operations, and our ability to access alternative forms of capital in the current market environment to offset the effects of the COVID-19 pandemic. Following this analysis, we believe that we satisfied all eligibility criteria for the PPP Loans, and that our receipt of the PPP Loans is consistent with the broad objectives of the CARES Act. The certification described above is subject to interpretation. On April 23, 2020, the SBA issued guidance stating that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith. The lack of clarity regarding loan eligibility under the Paycheck Protection Program has resulted in significant media coverage and controversy with respect to public companies applying for and receiving loans. If, despite our good-faith belief that given our circumstances we satisfied all eligible requirements for the PPP Loans, we are later determined to have not been in compliance with these requirements or it is otherwise determined that we were ineligible to receive the PPP Loans, we may be required to repay the PPP Loans in their entirety and/or be subject to additional penalties. Should we be audited or reviewed by federal or state regulatory authorities as a result of filing an application for forgiveness of the PPP Loans or otherwise, such audit or review could result in the diversion of management’s time and attention and the incurrence of additional costs. Any of these events could have a material adverse effect on our business, results of operations and financial condition.
37
~~Various subsidiaries of the Company are delinquent in payment of payroll taxes to taxing authorities~~ prior to the ~~previous year when previous management was in place, and a failure to remit these payments promptly or through settlements~~date hereof, which could ~~have a material adverse effect on~~materially affect our business, financial condition, ~~and results of operations.~~
As of June 30, 2021, approximately $2.5 million of employee and employer taxes (including estimated penalties and interest) has been accrued but not remitted in years prior to 2019 to certain taxing authorities by certain subsidiaries of the Company for cash compensation paid. As a result, these subsidiaries of the Company are liable for such payroll taxes. These various subsidiaries of the Company have received warnings and demands from the taxing authorities and management is prioritizing and working with the taxing authorities to make these payments in order to avoid further penalties and interest. Failure to remit these payments promptly could result in increased penalty fees and have a material adverse effect on our business, financial condition, and results of operations.
~~Defaults and closures under restaurant leases as a result of the COVID-19 pandemic could result in material impairments to the Company’s assets.~~
If an existing or future restaurant is not profitable, and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. In addition, as each of our leases expires, we may fail to negotiate renewals, either on commercially acceptable terms or at all, which could cause us to pay increased occupancy costs or to close restaurants in desirable locations. These potential increased occupancy costs and closed restaurants could have a material adverse effect on our business, financial condition and results of operations.
~~We are not contractually obligated to guarantee leasing arrangements between franchisees and their landlords.~~
During 2020 and 2021 the Company was in arrears on rent due on several of its leases as a result of the COVID-19 pandemic. The Company had lease liabilities of approximately $2.8 million related to abandoned leases at June 30, 2021. As a result, the Company has pending litigation related to 10 sites of which 5 have permanently closed. The outcome of this litigation could result in the permanent closure of additional restaurant locations as well as the possibility of the Company being required to pay interest and damages, modify certain leases on unfavorable terms and could result in material impairments to the Company’s assets.
During the six months ended June 30, 2021, $0.3 million of lease liabilities were derecognized due to the Company negotiating the cancellation of its obligations under certain lease agreements. The cancellations resulted from the COVID-19 pandemic.
Pandemics or disease outbreaks, such as the recent outbreak of the novel coronavirus (COVID-19 virus), have disrupted, and may continue to disrupt, our business, and have materially affected our operations and results of operations.
Pandemics or disease outbreaks such as the novel coronavirus (COVID-19 virus) have and may continue to have a negative impact on customer traffic at our restaurants, may make it more difficult to staff our restaurants and, in more severe cases, may cause a temporary inability to obtain supplies and/or increase to commodity costs and have caused closures of affected restaurants, sometimes for prolonged periods of time. We have temporarily shifted to a “to-go” only operating model, suspending sit-down dining. We have also implemented closures, modified hours or reductions in onsite staff, resulting in cancelled shifts for some of our employees. COVID-19 may also materially adversely affect our ability to implement our growth plans, including delays in construction of new restaurants, or adversely impact our overall ability to successfully execute our plans to enter into new markets. These changes have negatively impacted our results of operations or future results. These risks and ~~these~~uncertainties discussed in our Form 10-K and in any ~~additional changes~~subsequent filings with the SEC made prior to the date hereof are not the only ones facing our business. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially adversely affect our business, ~~or results of operations in the future, and may impact our liquidity or~~cash flows, financial condition particularly if these changes are in place for a significant amount of time. In addition, our operations could be further disrupted if any of our employees or employees of our business partners were suspected of having contracted COVID19 or other illnesses since this could require us or our business partners to quarantine some or all such employees or close and disinfect our impacted restaurant facilities. If a significant percentage of our workforce or the workforce of our business partners are unable to work, including because of illness or travel or government restrictions in connection with pandemics or disease outbreaks, our operations may be negatively impacted, potentially materially adversely affecting our business, liquidity, financial condition and/or results of operations. ~~Furthermore, such viruses may be transmitted through human contact, and~~Please also read the ~~risk of contracting viruses could continue to cause employees or guests to avoid gathering~~section entitled Cautionary Notice Regarding Forward-Looking Statements included in public places, which has had, and could further have, adverse effects on our restaurant guest traffic or the ability to adequately staff restaurants, in addition to the measures we have already taken with respect to shifting to a “to-go” only operating model. We could also be adversely affected if government authorities continue to impose restrictions on public gatherings, human interactions, operations of restaurants or mandatory closures, seek voluntary closures, restrict hours of operations or impose curfews, restrict the import or export of products or if suppliers issue mass recalls of products. Additional regulation or requirements with respect to the compensation of our employees could also have an adverse effect on our business. Even if such measures are not implemented and a virus or other disease does not spread significantly within a specific area, the perceived risk of infection or health risk in such area may adversely affect our business, liquidity, financial condition and results of operations. The COVID-19 pandemic and mitigation measures have also had an adverse impact on global economic conditions, which could have an adverse effect on our business and financial condition. Our revenue and operating results may be affected by uncertain or changing economic and market conditions arising in connection with and in response to the COVID-19 pandemic, including prolonged periods of high unemployment, inflation, deflation, prolonged weak consumer demand, a decrease in consumer discretionary spending, political instability or other changes. The significance of the operational and financial impact to us will depend on how long and widespread the disruptions caused by COVID-19, and the corresponding response to contain the virus and treat those affected by it, prove to be. Currently, many states and municipalities in the U.S. and abroad have temporarily suspended the operation of restaurants in light of COVID-19.this Report.
38

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5: OTHER INFORMATION
~~Series 2 Preferred Stock~~

Amergent was required to pay the original holder an amount in cash equal to the dollar value of 125% of the stated value of the Series 2 Preferred Stock less the proceeds previously realized by the holder from the sale of all conversion and spin-off shares received by the original holder in Amergent, net of brokerage commissions and any other fees incurred by the holder in connection with the sale of any conversion shares or spin-off shares on April 1, 2021 (which period was extended). The True-Up Payment was settled in July 2021 with a payment of $66,136, and the cash account is no longer subject to restriction for this matter.None.

During the six months ended June 30, 2021, the investors converted 637 shares of the Series 2 Preferred Stock into 1,274,000 common shares and sold those common shares in the market. In addition, the investors sold their remaining 150 Series 2 Preferred Stock to other investors. The new investors converted 50 shares of Series 2 Preferred Stock into common stock during May 2021, and 100 Series 2 Preferred Stock remain outstanding at June 30, 2021.
35

ITEM 6: EXHIBITS

Exhibit No. Description

4.1** 2021 Amergent Hospitality Group Inc. Inducement Plan, as amended, incorporated by reference to Exhibit 4.4 to Amergent’s Registration Statement on Form S-8, File No. 333-258345, as filed August 2, 2021
10.1** Amended and Restated Employment Agreement by and between Frederick L. Glick and Amergent Hospitality Group Inc. effective July 1, 2021, incorporated by reference to Amergent’s Current Report on Form 8-K dated July 15, 2021
31.1 Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), filed herewith.

31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), filed herewith.

32.1*** Certification of Principal Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b), filed herewith.

32.2*** Certification of Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b), filed herewith.

101.INS* Inline XBRL Instance Document

101.SCH* Inline XBRL Taxonomy Extension Schema Document

101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
** Management Compensatory Contract or Arrangement
*** Furnished, not filed.

3936

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on August ~~[ ], 2021.~~15, 2022.

AMERGENT HOSPITALITY GROUP INC.

Date: August ~~16, 2021~~15, 2022 By: /s/ Michael D. Pruitt
Michael D. Pruitt
Chief Executive Officer
(Principal Executive Officer)

Date: August 15, 2022 /s/ ~~Steven~~Stephen Hoelscher
~~Steven~~Stephen Hoelscher
Chief Financial Officer
(Principal Financial Officer)

4037

	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
	Three Months Ended						Six Months Ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
				(Restated)						(Restated)
Revenue:
Restaurant sales, net	$	4,737,867		$	3,880,841		$	9,182,059		$	9,372,298
Gaming income, net		111,008			29,463			168,038			129,212
Franchise income		106,196			8,166			198,424			98,198
Management fee income		—			—			—			—
Total revenue		4,955,071			3,918,470			9,548,521			9,599,708
Expenses:
Restaurant cost of sales		1,435,192			1,162,291			2,751,114			2,960,061
Restaurant operating expenses		3,180,414			3,247,957			6,425,529			6,873,801
Restaurant pre-opening and closing expenses		—			—			—			20,730
General and administrative expenses		1,193,973			1,460,668			2,361,100			2,635,821
Asset impairment charge		—			152,470			1,287,579			152,470
Depreciation and amortization		362,350			415,778			730,005			831,609
Employee retention credit		(1,473,355	)		—			(1,473,355	)		—
Total expenses		4,698,574			6,439,164			12,081,972			13,474,492
Operating income (loss)		256,497			(2,520,694	)		(2,533,451	)		(3,874,784	)
Other income (expense):
Interest expense		(158,690	)		(159,460	)		(315,931	)		(322,448	)
Change in fair value of derivative liabilities		(66,136	)		6,443,380			118,664			6,141,517
Change in the fair value of investment		(124,166	)		(953,033	)		(120,460	)		(953,033	)
Debt extinguishment expense		—			(11,808,111	)		—			(11,808,111	)
Other income (expense)		143,942			(70,748	)		146,558			176,308
Gain on extinguished lease liabilities		275,164			—			318,519			—
Total other income (expense)		70,114			(6,547,972	)		147,350			6,765,767
Income (Loss) before income taxes		326,611			(9,068,666	)		(2,386,101	)		(10,640,551	)
Income tax expense		—			(7,352	)		—			(3,676	)
Consolidated net income (loss)		326,611			(9,076,018	)		(2,386,101	)		(10,644,227	)
Less: Net (income) loss attributable to non-controlling interests		(59,884	)		89,716			104,401			(113,689	)
Net income (loss) attributable to Amergent Hospitality Group Inc.		266,727			(8,986,302	)		(2,281,700	)		(10,757,916	)
Dividends on redeemable preferred stock		—			—			—			(28,219	)
Net income (loss) attributable to common shareholders of Amergent Hospitality Group Inc.	$	266,727		$	(8,986,302	)	$	(2,281,700	)	$	(10,786,135	)
Net income (loss) attributable to Amergent Hospitality Group, Inc. per common share, basic:	$	0.02		$	(0.63	)	$	(0.15	)	$	(0.82	)
Net income (loss) attributable to Amergent Hospitality Group, Inc. per common share, diluted:	$	0.01		$	(0.63	)	$	(0.15	)	$	(0.82	)
Weighted average shares outstanding, basic		15,321,571			14,282,736			14,904,471			13,096,212
Weighted average shares outstanding, diluted		17,280,625			14,282,736			14,904,471			13,096,212


	Three months ended						Six months ended
	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
(in thousands except share and per share data)				(Restated)						(Restated)
Revenue:
Restaurant sales, net	$	5,323		$	5,217		$	10,081		$	9,661
Gaming income, net		145			111			248			169
Franchise income		108			105			897			199
Total revenue		5,576			5,433			11,226			10,029
Expenses:
Restaurant cost of sales		1,701			1,617			3,193			2,933
Restaurant operating expenses		3,679			3,455			7,158			6,701
General and administrative expenses		1,806			1,208			3,142			2,375
Asset impairment charges		—			—			—			1,288
Depreciation and amortization		201			227			423			459
Employee retention credit and other grant income		(1,287	)		(1,473	)		(1,835	)		(1,473	)
Total expenses		6,100			5,034			12,081			12,283
Operating (loss) income		(524	)		399			(855	)		(2,254	)
Other income (expense):
Interest expense		(224	)		(158	)		(411	)		(318	)
Change in fair value of derivative liabilities		—			(66	)		—			119
Change in fair value of investment		(12	)		(124	)		(16	)		(120	)
Change in fair value of convertible promissory note		55			—			171			—
Gain on extinguished/settled lease liabilities		256			275			256			319
Gain on extinguished trade payable		—			—			161			—
Other income		92			171			311			174
Total other income		167			98			472			174
(Loss) income before income taxes		(357	)		497			(383	)		(2,080	)
Income tax expense		—			—			(2	)		—
Consolidated net (loss) income		(357	)		497			(385	)		(2,080	)

Less: Net (income) loss attributable to non-controlling interests		(45	)		(60	)		(44	)		104
Net (loss) income attributable to Amergent Hospitality Group Inc.	$	(402	)	$	437		$	(429	)	$	(1,976	)

Net (loss) income attributable to Amergent Hospitality Group Inc. per common share, basic	$	(0.03	)	$	0.01		$	(0.03	)	$	(0.13	)
Net (loss) income attributable to Amergent Hospitality Group Inc. per common share, diluted	$	(0.03	)	$	0.01		$	(0.03	)	$	(0.13	)

Weighted average shares outstanding, basic		15,706,736			15,321,571			15,706,736			14,904,471
Weighted average shares outstanding, diluted		15,706,736			17,280,625			15,706,736			14,904,471

	Shares			Amount			Shares		Amount		Capital		Deficit			Income (Loss)			Interest			Total
	(Temporary equity)										Additional					Accumulated Other			Non-
	Preferred Series 2						Common Stock				Paid-in		Accumulated			Comprehensive			Controlling
	Shares			Amount			Shares		Amount		Capital		Deficit			Income (Loss)			Interest			Total
Balance, December 31, 2020		787		$	459,608			14,282,736	$	1,428	$	92,433,344	$	(94,587,482	)	$	(25,916	)	$	(969,680	)	$	(3,148,306	)
Conversion of preferred stock into common		(125	)		(73,000	)		250,000		25		72,975		—			—			—			73,000
Preferred unit dividend
Preferred unit dividend
Exercise of warrants
Exercise of warrants, Shares
Issuance of shares, net of transaction costs of $95,000
Issuance of shares, net of transaction costs of $95,000, Shares
Bifurcation of derivative liability
Beneficial conversion feature
Preferred stock deemed dividend
Conversion of Series 2 preferred to common
Conversion of Series 2 preferred to common, Shares
Reclassification of non-controlling interest
Cash contribution of merger consideration, net transaction costs of $588,255
Contribution of warrant portion of merger consideration
Foreign currency translation		—			—			—		—		—		—			8,792			—			8,792
Net loss		—			—			—		—		—		(2,548,427	)		—			(164,285	)		(2,712,712	)
Balance, March 31, 2021		662		$	386,608			14,532,736	$	1,453	$	92,506,319	$	(97,135,909	)	$	(17,124	)	$	(1,133,965	)	$	(5,779,226	)
Conversion of preferred stock into common		(562	)		(328,208	)		1,124,000		112		328,096		—			—			—			328,208
Foreign currency translation		—			—			—		—		—		—			6,802			—			6,802
Net income (loss)		—			—			—		—		—		266,727			—			59,884			326,611
Balance, June 30, 2021		100		$	58,400			15,656,736	$	1,565	$	92,834,415	$	(96,869,182	)	$	(10,322	)	$	(1,074,081	)	$	(5,117,605	)


	(Temporary equity) Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Accumulated Other Comprehensive		Non-Controlling
(in thousands except share data)	Shares		Amount		Shares		Amount		Capital		Deficit			Loss		Interests			Total
Balance, January 1, 2022		100	$	58		15,706,736	$	2	$	92,882	$	(97,963	)	$	—	$	(1,157	)	$	(6,236	)
Share-based compensation expense		—		—		—		—		6		—			—		—			6
Issuance of warrants		—		—		—		—		263		—			—		—			263
Net loss		—		—		—		—		—		(27	)		—		(1	)		(28	)
Balance, March 31, 2022		100		58		15,706,736		2		93,151		(97,990	)	$	—		(1,158	)		(5,995	)
Share-based compensation expense		—		—		—		—		5		—			—		—			5
Net loss		—		—		—		—		—		(402	)		—		45			(357	)
Balance, June 30, 2022		100	$	58		15,706,736	$	2	$	93,156	$	(98,392	)	$	—	$	(1,113	)	$	(6,347	)

	(Temporary equity)										Additional						Accumulated Other			Non-
	Preferred Series 2						Common Stock				Paid-in			Accumulated			Comprehensive			Controlling
	Shares			Amount			Shares		Amount		Capital			Deficit			Loss			Interest			Total
Balance, December 31, 2019		—		$	—			10,404,342	$	1,041	$	71,505,989		$	(75,068,385	)	$	(46,437	)	$	455,781		$	(3,152,011	)
Common stock and warrants issued for:
Preferred unit dividend		—			—			37,518		4		19,519			(28,219	)		—			—			(8,696	)
Exercise of warrants		—			—			2,414,022		246		1,528,867			(325,366	)		—			—			1,203,747
Preferred Shares - Series 2
Issuance of shares, net of transaction costs of $95,000		1,500			1,405,000			—		—		—			—			—			—			—
Bifurcation of derivative liability		—			(529,000	)		—		—		—			—			—			—			—
Beneficial conversion feature		—			(729,000	)		—		—		729,000			—			—			—			729,000
Preferred stock deemed dividend		—			729,000			—		—		(729,000	)		—			—			—			(729,000	)
Conversion of Series 2 preferred to common		(713	)		(416,392	)		1,426,854		143		416,249			—			—			—			416,392
Foreign currency translation		—			—			—		—		—			—			(81,069	)		—			(81,069	)
Net loss		—			—			—		—		—			(1,771,614	)		—			203,405			(1,568,209	)
Balance, March 31, 2020		787		$	459,608			14,282,736	$	1,434	$	73,470,624		$	(77,193,584	)	$	(127,506	)	$	659,186		$	(3,189,846	)
Reclassification of non-controlling interest		—			—			—		—		—			805,909			—			(805,909	)		—
Cash contribution of merger consideration, net transaction costs of $588,255		—			—			—		—		5,411,745			—			—			—			5,411,745
Contribution of warrant portion of merger consideration		—			—			—		—		1,628,909			—			—			—			1,628,909
Foreign currency translation		—			—			—		—		—			—			(6,541	)		—			(6,541	)
Net loss		—			—			—		—		—			(8,986,302	)		—			(89,716	)		(9,076,018	)
Balance, June 30, 2020		787		$	459,608			14,282,736	$	1,434	$	80,511,278		$	(85,373,977	)	$	(134,047	)	$	(236,439	)	$	(5,231,751	)

	Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
June 30, 2021
Assets (Note 3)
Common stock of Sonnet	$	292,809		—	$	—	$	292,809
Liabilities (Note 9)
True-up provision of Convertible Preferred Series 2	$	—	$	—	$	66,136	$	66,136


(in thousands)	Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
June 30, 2022
Assets (Note 6)
Common stock of Sonnet	$	34	$	—	$	—	$	34
Liabilities (Note 9)
Convertible note payable	$	—	$	—	$	928	$	928


(in thousands)	Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
December 31, 2021
Assets (Note 6)
Common stock of Sonnet	$	50	$	—	$	—	$	50
Liabilities (Note 9)
Convertible note payable	$	—	$	—	$	1,099	$	1,099

~~Leasehold improvements~~		5-15 ~~years~~
~~Restaurant furnishings and equipment~~		3-10 ~~years~~
~~Furniture and fixtures~~		3-10 ~~years~~
~~Office and computer equipment~~		3-7 ~~years~~

Volatility		105.00	%
Risk free rate		1.5% - 2.82	%
Stock price	$	0.26
Credit spread		26.28	%

(in thousands)	Six months ended June 30, 2022
Balance at January 1, 2022	$	1,099
Change in fair value		(171	)
Balance at June 30, 2022	$	928


(in thousands)	Six Months Ended June 30, 2022		Year Ended December 31, 2021
Beginning balance	$	7,810	$	8,591
Acquisition of Pie Squared Holdings		—		51
Sale of Hooters UK		—		(820	)
Foreign currency translation loss		—		(12	)
Ending balance	$	7,810	$	7,810

Year ending December 31:
2022 (remaining six months)	$	82
2023		164
2024		164
2025		164
2026		110
Amortization Expense, net	$	684

	(a)	In connection with and prior to the Spin-Off and Merger, on April 1, 2020, pursuant to an agreement among Chanticleer, Oz Rey, LLC (“Oz Rey”) and certain original holders of the 8% non-convertible debentures that were satisfied during 2020, the Company issued a 10% secured convertible debenture (the “10% Convertible Debt”) to Oz Rey in exchange for the 8% non-convertible debentures. The principal amount of the 10% Convertible Debt is $4.0 million and is payable in full on April 1, 2024, subject to extension by the holders in two-year intervals for up to 10 years from the issuance date upon Amergent meeting certain conditions. Interest is payable quarterly in cash. In connection with the exchange of the debentures, Amergent issued warrants to Oz Rey and the original 8% non-convertible debenture holders to purchase 2,925,200 shares of common stock. The exercise price is $0.125 for 2,462,600 warrants and $0.50 for 462,500 warrants. The warrants can be exercised on a cashless basis and expire 10 years from the issuance date.

		The 10% Convertible Debt was previously amended to fix the conversion rate into common stock at $0.10 per share. There is also a limitation on Oz Rey’s ability to convert the debenture into common stock such that only the portion of the balance for which the Company has sufficient available shares, considering all other outstanding instruments at the time of conversion on a fully diluted basis, can be converted. Oz Rey may, however, upon reasonable notice to the Company, require the Company to include in its proxy materials, for any annual meeting of stockholders being held by the Company, a proposal to amend the Company’s certificate of incorporation to increase the Company’s authorized shares to a number sufficient to allow for conversion of all shares underlying the debenture, on a fully diluted basis. Oz Rey also agreed that the Company would not be required under any circumstances to make a cash payment to settle the conversion feature not exercisable due to the authorized share cap or in an event that the Company was unable to deliver shares under the conversion feature. As of June 30, 2022, $2.4 million of the 10% Convertible Debt was convertible into approximately 23,500,000 shares of common stock.

		The Company recorded a debt discount of approximately $0.4 million for the difference between the face value of the 10% Convertible Debt and the estimated fair value at the April 1, 2020 issuance date and amortized this discount over the two-year term of the notes.

		In connection with the 8% Convertible Debt transaction described in (b) below, the maturity date of the 10% Convertible Debt was extended to April 1, 2024 and Oz Rey agreed to subordinate payment of its 10% Convertible Debt to payment of the 8% Convertible Debt, which has been accounted for as a loan modification. In addition, Oz Rey received a fee equal to 2.0% of the principal amount of the 8% Convertible Debt issued in the transaction, which has been recorded as a debt discount and is being amortized over the two-year term of the related debt.

	(b)	In March 2022, the Company commenced a private placement of up to $3.0 million of 8% senior unsecured convertible debentures (the “8% Convertible Debt”) and 3,000,000 common stock warrants. Pursuant to the Securities Purchase Agreement, the Company issued $1.35 million of 8% Convertible Debt and warrants to purchase the number of shares of the Company’s common stock equal to the principal amount of 8% Convertible Debt issued.

		The 8% Convertible Debt matures 18 months after issuance and is subject to acceleration in the event of customary events of default. Interest is payable quarterly in cash. The 8% Convertible Debt may be converted by the holders at any time at a fixed conversion price of $0.40 per share, and each warrant entitles the holder to purchase one share of common stock at an exercise price of $0.50 per share. Both the notes and the warrants include a beneficial ownership blocker of 4.99% and contain customary provisions preventing dilution and providing the holders rights in the event of fundamental transactions. Upon the earlier of the maturity date or the one-year anniversary of conversion of the 8% Convertible Debt, holders of 51% of the registerable securities may request the Company to file a registration statement for the securities. The warrants can be exercised on a cashless basis and expire five years from the issuance date. If the Company makes any distribution to the common stockholders, the holders of the warrants will be entitled to participate on an as-if-exercised basis. As of June 30, 2022, the 8% Convertible Debt was convertible into 3,375,000 shares of common stock.

		The Company analyzed the 8% Convertible Debt and did not identify any embedded features that require bifurcation from the host and accounting as derivatives. However, as the convertible notes payable were issued with warrants, the net proceeds from the issuance were allocated to the 8% Convertible Debt and the warrants based on their relative fair values, resulting in an allocation of $1.0 million to the 8% Convertible Debt and $0.3 million to the warrants (see Note 12). The Company recorded a debt discount of approximately $0.3 million for the difference between the face value of the 8% Convertible Debt and the amount allocated to the debt at the issuance date and is amortizing this discount over the 18-month term of the related debt.

	(c)	On August 30, 2021, the Company purchased all of the outstanding membership interests in Pie Squared Holdings. The purchase price was funded through the issuance of an 8% secured, convertible promissory note with a face value of $1.0 million and a fair value of $1.2 million at the acquisition date. The note is convertible at any time, in whole or in part, at the holder’s option but includes a beneficial ownership blocker of 4.99%. The conversion price at any time is the volume weighted average price of the Company’s common stock the 30 trading days immediately prior to delivery of notice of conversion, less a discount of 15%; provided, however, that the conversion price has a floor of $0.50 per share and a cap of $2.00 per share. As of June 30, 2022, the note was convertible into 2,000,000 shares of common stock.

		Interest on the convertible promissory note is due quarterly and $0.5 million of principal is due on August 30, 2022. Any remaining unpaid/non-converted amount is due on August 30, 2023. The Company elected to measure the convertible promissory note at fair value, with changes in the fair value recorded within change in fair value of convertible promissory note in the condensed consolidated statements of operations. See Note 5 for additional information on the valuation of the convertible promissory note as of June 30, 2022.

	(d)	On April 27, 2020, Amergent received a Paycheck Protection Program (“PPP”) loan in the amount of approximately $2.1 million. Due to the Spin-Off and Merger, Amergent was not publicly traded at the time of the loan application or funding. The note bears interest at 1% per year, matures in April 2022, and requires monthly interest and principal payments of approximately $0.1 million beginning in November 2020 and through maturity. The currently issued guidelines of the program allow for the loan proceeds to be forgiven if certain requirements are met. Any loan proceeds not forgiven will be repaid in full. The Company’s initial application for loan forgiveness in the full amount of the loan was denied, however, in March 2022, the U.S. SBA reversed its initial decision and will once again review the Company’s application for loan forgiveness. No assurance can be given as to the amount, if any, of forgiveness. The application for forgiveness allowed the Company to defer the timing of repayment until the forgiveness assessment is completed.

		On February 25, 2021, the Company received a second PPP loan in the amount of $2.0 million. Amergent was not listed on a national securities exchange at the time of the loan application or funding. The note bears interest at 1% per year, matures on February 25, 2026, and requires monthly principal and interest payments of approximately $45,000 beginning June 25, 2022 through maturity. During 2022, the Company applied for loan forgiveness in the full amount of the loan. No assurance can be given as to the amount, if any, of forgiveness. The application for forgiveness allowed the Company to defer the timing of repayment until the forgiveness assessment is completed.

	(e)	On August 4, 2020, the Company obtained two loans under the Economic Injury Disaster Loan (“EIDL”) assistance program from the U.S. SBA in light of the impact of the COVID-19 pandemic on the Company’s business. The principal amount of the loans is $0.3 million, with proceeds to be used for working capital purposes. Interest accrues at the rate of 3.75% per year. Total installment payments of $1,462, including principal and interest, are due monthly. The balance of principal and interest is payable over the next thirty years from the date of the promissory note (August 2050). There are no penalties for prepayment. Based upon guidance issued by the U.S. SBA on June 19, 2020, the EIDL loans are not required to be refinanced by the PPP loan. In March 2022, the U.S. SBA extended the deferral period for the EIDL payments for an additional 12 months. The Company’s installment payments will begin August 4, 2023.

	(f)	The Company entered into a promissory note to repay a contractor for the build-out of a new Little Big Burger location. The note bears interest at 12% per year. In connection with and prior to the Merger and Spin-Off, on April 1, 2020, this note was assumed by Amergent. The Company is currently in default on this loan and a writ of garnishment was ordered against the Company in 2020 for approximately $0.4 million. The additional $0.1 million is included in accounts payable and accrued expenses at June 30, 2022 and December 31, 2021.

	(g)	In February and March 2022, eight company-owned stores entered into notes payable to Toast Capital Loans. The terms of the notes require payment of 13.2% of daily credit card sales of the eight stores until the notes are paid in full. The terms of the notes are 270 days and the implied intertest rate is approximately 15% per year.

Year ending December 31:
2022 (remaining six months)	$	3,397
2023		2,383
2024		4,579
2025		547
2026		98
Thereafter		274
Total debt maturities		11,278
Less: discount on convertible debt		(244	)
Less: fair value adjustment		(72	)
Total debt	$	10,962

	June 30, 2021		December 31, 2020
Common stock of Sonnet, at fair value	$	292,809	$	413,268
Chanticleer Investors, LLC, at cost		365,001		365,001
Total	$	657,809	$	778,269

	June 30, 2021			December 31, 2020
Leasehold improvements	$	6,929,994		$	7,301,908
Restaurant furniture and equipment		1,979,814			2,132,726
Construction in progress		650			5,450
Office and computer equipment		112,073			125,535
Office furniture and fixtures		61,328			59,635
Property, plant and equipment, gross		9,083,859			9,625,254
Accumulated depreciation and amortization		(6,175,793	)		(5,922,360	)
Property, plant and equipment, net	$	2,908,066		$	3,702,894


(in thousands, except share and per share data, restated)	Three months ended June 30, 2021
Basic net income per common share calculation:
Net income attributable to common shareholders	$	437
Less: undistributed earnings to participating securities		(293	)
Net income attributable to common shareholders, basic	$	144
Weighted average common shares outstanding, basic		15,321,571
Net income per common share, basic	$	0.01
Diluted net income per common share calculation:
Net income attributable to common shareholders	$	437
Less: undistributed earnings to participating securities		(293	)
Net income attributable to common shareholders, diluted	$	144
Weighted average common shares outstanding, basic		15,321,571
Warrants		1,959,054
Weighted average common shares outstanding, diluted		17,280,625
Net income per common share, diluted	$	0.01

	Six Months Ended June 30, 2021		Year Ended December 31, 2020
Beginning balance	$	8,591,149	$	8,567,888
Foreign currency translation gain		12,257		23,261
Ending balance	$	8,603,406	$	8,591,149

		June 30, 2021			December 31, 2020
Trademark, Tradenames:
American Roadside Burger	10 years	$	561,191		$	1,786,930
BGR: The Burger Joint	Indefinite		739,245			739,245
Little Big Burger	Indefinite		1,550,000			1,550,000
			2,850,436			4,076,175
Acquired Franchise Rights:
BGR: The Burger Joint	7 years		827,757			827,757

Franchise License Fees:
Hooters Pacific NW	20 years		—			74,507
Hooters UK	5 years		12,073			11,001
			12,073			85,508
Total intangibles at cost			3,690,266			4,989,440
Accumulated amortization			(1,149,398	)		(1,945,555	)
Intangible assets, net		$	2,540,868		$	3,043,885

	June 30, 2021			December 31, 2020
Notes payable (a)	$	—		$	25,850
Notes payable (b)		—			27,048
Contractor note (c)		348,269			348,269
PPP loans (d)		4,109,400			2,109,400
UK Bounce Back loan (e)		68,245			68,245
EIDL loans (f)		299,900			299,900
Convertible debt (g)		4,037,889			4,037,889
Total Debt		8,863,703			6,916,601
Less: discount on convertible debt (g)		(134,023	)		(223,681	)
Total Debt, net of discount	$	8,729,680		$	6,692,920

Current portion of long-term debt	$	6,377,550		$	2,338,978
Long-term debt, less current portion	$	2,352,130		$	4,353,942

	June 30, 2021		December 31, 2020
Accounts payable	$	3,232,188	$	3,752,036
Accrued expenses		1,982,431		1,436,679
Accrued taxes (VAT, Sales, Payroll, etc.)		2,810,872		3,356,496
Accrued interest		142,753		122,057
Accounts payable and accrued expenses, total	$	8,168,244	$	8,667,268

Date Issued	Number of Warrants		Exercise Price		Expiration Date
April 1, 2020		2,462,600	$	0.125	April 1, 2030
April 1, 2020		462,600	$	0.500	April 1, 2030
March 30, 2020		350,000	$	1.250	March 30, 2025
August 17, 2020		134,000	$	1.250	August 17, 2025
March 15, 2022		250,000	$	0.500	March 15, 2027
March 21, 2022		250,000	$	0.500	March 21, 2027
March 22, 2022		250,000	$	0.500	March 22, 2027
March 24, 2022		600,000	$	0.500	March 24, 2027
		4,759,200

	Number of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Life
Outstanding at December 31, 2020		3,409,200	$	0.34		8.6
Granted		—		—		—
Exercised		—		—		—
Forfeited/Other Adjustments		—		—		—
Outstanding at June 30, 2021		3,409,200	$	0.34		8.1

Exercisable June 30, 2021		3,409,200	$	0.34		8.1

	Number of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)
Outstanding at January 1, 2022		3,409,200	$	0.34		7.6
Granted		1,350,000	$	0.50		5.0
Outstanding at June 30, 2022		4,759,200	$	0.38		6.4

Exercisable at June 30, 2022		4,759,200	$	0.38		6.4


	True-Up Payment
Balance at December 31, 2020	$	184,800
Change in fair value during the period		(118,664	)
Balance at June 30, 2021	$	66,136

Stock price per share	$ 0.37 – 0.40
Term	5.0 years
Expected volatility	90.00	%
Divided yield	—
Risk-free interest rate	2.10% – 2.39	%