Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Feb. 28, 2023 | Jun. 30, 2022 | |
Document and Entity Information [Abstract] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2022 | ||
Document Fiscal Year Focus | 2022 | ||
Document Fiscal Period Focus | FY | ||
Current Fiscal Year End Date | --12-31 | ||
Entity File Number | 001-37379 | ||
Entity Registrant Name | ONE GROUP HOSPITALITY, INC. | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 14-1961545 | ||
Entity Address, Address Line One | 1624 Market Street | ||
Entity Address, Address Line Two | Suite 311 | ||
Entity Address, City or Town | Denver | ||
Entity Address, State or Province | CO | ||
Entity Address, Postal Zip Code | 80202 | ||
City Area Code | 646 | ||
Local Phone Number | 624-2400 | ||
Title of 12(b) Security | Common Stock, par value $0.0001 per share | ||
Trading Symbol | STKS | ||
Security Exchange Name | NASDAQ | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
ICFR Auditor Attestation Flag | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 166,595,032 | ||
Entity Common Stock, Shares Outstanding | 31,643,573 | ||
Auditor Name | Deloitte & Touche LLP | ||
Auditor Firm ID | 34 | ||
Auditor Location | Denver, Colorado | ||
Entity Central Index Key | 0001399520 | ||
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 55,121 | $ 23,614 |
Accounts receivable | 15,220 | 11,356 |
Inventory | 5,728 | 3,915 |
Other current assets | 2,091 | 3,666 |
Due from related parties | 376 | 376 |
Total current assets | 78,536 | 42,927 |
Property and equipment, net | 94,087 | 69,638 |
Operating lease right-of-use assets | 85,161 | 85,395 |
Deferred tax assets, net | 12,323 | 12,313 |
Intangibles, net | 15,290 | 15,505 |
Other assets | 4,774 | 3,199 |
Security deposits | 853 | 858 |
Total assets | 291,024 | 229,835 |
Current liabilities: | ||
Accounts payable | 13,055 | 11,094 |
Accrued expenses | 22,409 | 23,155 |
Deferred gift card revenue and other | 2,115 | 2,029 |
Current portion of operating lease liabilities | 6,336 | 5,396 |
Current portion of long-term debt | 1,500 | 500 |
Other current liabilities | 256 | 90 |
Total current liabilities | 45,671 | 42,264 |
Operating lease liabilities, net of current portion | 105,247 | 103,616 |
Long-term debt, net of current portion | 70,544 | 23,132 |
Other long-term liabilities | 972 | 298 |
Total liabilities | 222,434 | 169,310 |
Commitments and contingencies (Note 15) | ||
Stockholders' equity: | ||
Common stock, $0.0001 par value, 75,000,000 shares authorized; 32,829,995 issued and 31,735,423 outstanding at December 31, 2022 and 32,138,396 shares issued and 32,125,762 outstanding at December 31, 2021 | 3 | 3 |
Preferred stock, $0.0001 par value, 10,000,000 shares authorized; no shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively | ||
Treasury stock, 1,094,572 and 12,634 shares at cost at December 31, 2022 and December 31, 2021, respectively | (7,169) | (37) |
Additional paid-in capital | 55,583 | 53,481 |
Retained earnings | 24,166 | 10,632 |
Accumulated other comprehensive loss | (2,869) | (2,645) |
Total stockholders' equity | 69,714 | 61,434 |
Noncontrolling interests | (1,124) | (909) |
Total equity | 68,590 | 60,525 |
Total liabilities and equity | $ 291,024 | $ 229,835 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2022 | Dec. 31, 2021 |
CONSOLIDATED BALANCE SHEETS | ||
Common stock, par value per share (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 32,829,995 | 32,138,396 |
Common stock, shares outstanding | 31,735,423 | 32,125,762 |
Preferred stock, par value per share (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Treasury stock, shares | 1,094,572 | 12,634 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Revenues: | ||
Owned restaurant net revenue | $ 300,859 | $ 264,404 |
Management, license and incentive fee revenue | 15,779 | 12,774 |
Total revenues | 316,638 | 277,178 |
Owned operating expenses: | ||
Owned restaurant cost of sales | 75,365 | 67,468 |
Owned restaurant operating expenses | 174,689 | 144,529 |
Total owned operating expenses | 250,054 | 211,997 |
General and administrative (including stock-based compensation of $3,985 and $3,618 for the years ended December 31, 2022 and 2021, respectively) | 29,081 | 25,573 |
Depreciation and amortization | 12,134 | 10,790 |
COVID-19 related expenses | 2,534 | 5,821 |
Transaction costs | 123 | 160 |
Lease termination expenses | 257 | 1,912 |
Agreement restructuring expenses | 503 | |
Pre-opening expenses | 5,519 | 1,037 |
Write-off of trademark costs and other | 630 | |
Total costs and expenses | 300,332 | 257,793 |
Operating income | 16,306 | 19,385 |
Other expenses (income), net: | ||
Interest expense, net of interest income | 2,113 | 3,780 |
Loss on early debt extinguishment | 600 | |
Gain on CARES Act Loan Forgiveness | (18,529) | |
Total other expenses (income), net | 2,113 | (14,149) |
Income before provision for income taxes | 14,193 | 33,534 |
Provision for income taxes | 874 | 1,586 |
Net income | 13,319 | 31,948 |
Less: net (loss) income attributable to noncontrolling interest | (215) | 600 |
Net income attributable to The ONE Group Hospitality, Inc. | 13,534 | 31,348 |
Currency translation (loss) gain | (224) | 1 |
Comprehensive income attributable to The One Group Hospitality, Inc. | $ 13,310 | $ 31,349 |
Net income attributable to The ONE Group Hospitality, Inc. per share: | ||
Basic net income per share | $ 0.42 | $ 1.01 |
Diluted net income per share | $ 0.40 | $ 0.93 |
Shares used in computing basic income per share | 32,400,515 | 31,155,224 |
Shares used in computing diluted income per share | 33,871,797 | 33,794,344 |
CONSOLIDATED STATEMENTS OF OP_2
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | ||
Stock-based compensation | $ 3,985 | $ 3,618 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Common stock | Treasury stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Stockholders' equity | Noncontrolling interests | Total |
Balance at Dec. 31, 2020 | $ 3 | $ 46,538 | $ (20,716) | $ (2,646) | $ 23,179 | $ (1,200) | $ 21,979 | |
Balance (in shares) at Dec. 31, 2020 | 29,083,183 | |||||||
Stock-based compensation | 3,248 | 3,248 | 3,248 | |||||
Stock-based compensation (in shares) | 61,399 | |||||||
Exercise of stock options and warrants | 3,615 | 3,615 | 3,615 | |||||
Exercise of stock options and warrants (in shares) | 1,590,029 | |||||||
Issuance of vested restricted shares, net of tax withholding | (154) | (154) | (154) | |||||
Issuance of vested restricted shares, net of tax withholding (in shares) | 1,403,785 | |||||||
Purchase of treasury stock | $ (37) | (37) | (37) | |||||
Purchase of treasury stock (in shares) | (12,634) | |||||||
Purchase of noncontrolling interest | 234 | 234 | (309) | (75) | ||||
Gain (Loss) on foreign currency translation, net | 1 | 1 | 1 | |||||
Net income (loss) | 31,348 | 31,348 | 600 | 31,948 | ||||
Balance at Dec. 31, 2021 | $ 3 | (37) | 53,481 | 10,632 | (2,645) | 61,434 | (909) | 60,525 |
Balance (in shares) at Dec. 31, 2021 | 32,125,762 | |||||||
Stock-based compensation | 3,985 | 3,985 | 3,985 | |||||
Stock-based compensation (in shares) | 40,573 | |||||||
Exercise of stock options and warrants | 138 | 138 | 138 | |||||
Exercise of stock options and warrants (in shares) | 65,000 | |||||||
Issuance of vested restricted shares, net of tax withholding | (2,021) | (2,021) | (2,021) | |||||
Issuance of vested restricted shares, net of tax withholding (in shares) | 586,026 | |||||||
Purchase of treasury stock | (7,132) | (7,132) | (7,132) | |||||
Purchase of treasury stock (in shares) | (1,081,938) | |||||||
Gain (Loss) on foreign currency translation, net | (224) | (224) | (224) | |||||
Net income (loss) | 13,534 | 13,534 | (215) | 13,319 | ||||
Balance at Dec. 31, 2022 | $ 3 | $ (7,169) | $ 55,583 | $ 24,166 | $ (2,869) | $ 69,714 | $ (1,124) | $ 68,590 |
Balance (in shares) at Dec. 31, 2022 | 31,735,423 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Operating activities: | ||
Net income | $ 13,319 | $ 31,948 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 12,134 | 10,790 |
Stock-based compensation | 3,985 | 3,248 |
Loss on early debt extinguishment | 600 | |
Amortization of debt issuance costs | 373 | 415 |
Deferred taxes | (10) | 913 |
Gain on CARES Act Loan Forgiveness | (18,529) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (3,858) | (5,615) |
Inventory | (1,813) | (1,425) |
Other current assets | 1,574 | (2,189) |
Security deposits | 5 | 46 |
Other assets | (1,169) | (417) |
Accounts payable | 886 | 3,462 |
Accrued expenses | (4,001) | 7,261 |
Operating lease liabilities and right-of-use assets | 2,805 | 1,191 |
Deferred revenue | 1,021 | (733) |
Net cash provided by operating activities | 25,251 | 30,966 |
Investing activities: | ||
Purchase of property and equipment | (32,629) | (11,467) |
Net cash used in investing activities | (32,629) | (11,467) |
Financing activities: | ||
Repayments of long-term debt and financing lease liabilities | (5,551) | (22,758) |
Debt issuance costs | (1,332) | (866) |
Borrowings of term loan | 55,000 | |
Exercise of stock options and warrants | 138 | 3,615 |
Tax-withholding obligation on stock-based compensation | (2,021) | (154) |
Purchase of treasury stock | (7,132) | (37) |
Purchase of non-controlling interests | (75) | |
Net cash provided by (used in) financing activities | 39,102 | (20,275) |
Effect of exchange rate changes on cash | (217) | 5 |
Net increase (decrease) in cash and cash equivalents | 31,507 | (771) |
Cash and cash equivalents, beginning of year | 23,614 | 24,385 |
Cash and cash equivalents, end of year | 55,121 | 23,614 |
Supplemental disclosure of cash flow data: | ||
Interest paid, net of capitalized interest | 1,556 | 3,402 |
Income taxes paid | 789 | 437 |
Non-cash CARES Act Loan Forgiveness | 18,529 | |
Non-cash capital expenditures | $ 5,125 | $ 854 |
Description of Business
Description of Business | 12 Months Ended |
Dec. 31, 2022 | |
Description of Business | |
Description of Business | Note 1 – Description of Business The ONE Group Hospitality, Inc. and its subsidiaries (collectively, the “Company”) is a global restaurant company that develops, owns and operates, manages and licenses upscale and polished casual, high-energy restaurants and lounges and provides turn-key food and beverage (“F&B”) services for hospitality venues including hotels, casinos and other high-end locations. Turn-key F&B services are food and beverage services that can be scaled, customized and implemented by the Company at a particular hospitality venue and customized for the client. The Company’s primary restaurant brands are STK, a multi-unit steakhouse concept that combines a high-energy, social atmosphere with the quality and service of a traditional upscale steakhouse, and Kona Grill, a polished casual bar-centric grill concept featuring American favorites, award-winning sushi, and specialty cocktails in a polished casual atmosphere. As of December 31, 2022, the Company owned, operated, managed or licensed 63 venues including 25 STKs and 24 Kona Grills in major metropolitan cities in North America, Europe and the Middle East and 14 F&B venues in seven hotels and casinos in the United States and Europe. For those restaurants and venues that are managed or licensed, the Company generates management fees based on top-line revenues and incentive fee revenue based on a percentage of the location’s revenues and net profits. Overview of the Impact of COVID-19 In response to COVID-19, the Company has taken significant steps to adapt its business to increase sales while providing a safe environment for guests and employees. COVID-19 related expenses were $2.5 million and $5.8 million for 2022 and 2021, respectively, composed primarily of sanitation, supplies and safety precautions taken to prevent the spread of COVID-19. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2022 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions have been eliminated in consolidation. Change in Accounting Estimate Effective April 1, 2022, the Company changed its estimated useful life of the Kona Grill trade name. Based upon the strong performance of the Kona Grill restaurants over the twelve months ended March 31, 2022, significant capital investments in both existing and new restaurants and the Company’s commitment to expand the Kona Grill brand with the opening of new restaurants, the Company has determined that the Kona Grill trade name has an indefinite life rather than the twenty-year life previously determined. As of December 31, 2022, the Company had two Kona Grill venues under construction in Riverton, Utah and Columbus, Ohio and plans to open three to five Kona Grills each year for the foreseeable future. The effect of this change in estimate will reduce depreciation and amortization expense by $0.9 million annually, increase net income by $0.9 million annually, and increase basic and diluted Prior Period Reclassifications Certain reclassifications of the 2021 amounts in the segment reporting footnote have been made to conform to the current year presentation. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions for the reporting period and as of the reporting date. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingencies. Actual results could differ from those estimates. Fair Value Measurements Fair value represents the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Assets and liabilities are valued based upon observable and non-observable inputs. Valuations using Level 1 inputs are based on unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date. Level 2 inputs utilize significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly. Valuations using Level 3 inputs are based on significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. There were no significant transfers between levels during any period presented. Cash and Cash Equivalents Cash and cash equivalents are defined as cash on hand and highly liquid instruments with original maturities of three months or less when purchased. The Company’s cash and cash equivalents consist of cash in banks and at the restaurants as of December 31, 2022 and 2021. Accounts Receivable The Company’s receivables arise from credit cards, management agreements, trade customers and other reimbursable amounts due from hotel operators where the Company operates a food and beverage service. Accounts receivable from credit card processors and third-party delivery services at December 31, 2022 and 2021 was $6.4 million and $3.9 million, respectively. Receivables from the Company’s management, license and hotel partners were $7.0 million and $6.4 million at December 31, 2022 and 2021, respectively, The Company determines an allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due, previous loss and payment history, the customer’s current ability to pay its obligation to the Company and the condition of the general economy and industry as a whole. The Company has not reserved any trade receivables as of December 31, 2022 and 2021. Inventory Inventories, which consist of food, liquor and other beverages, are stated at the lower of cost or net realizable value. Cost is determined by the first in, first out method. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs to sell. As of December 31, 2022 and 2021, food inventories were $3.7 million and $2.0 million, respectively, and beverage inventories were $2.0 million and $1.9 million, respectively. Property and Equipment Additions to property and equipment, including leasehold improvements, are recorded at cost while costs incurred to repair and maintain the Company’s operations and equipment are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful life of the asset. When assets are retired or otherwise disposed of, the cost of the assets and the related accumulated depreciation are removed from the accounts, and any gain or loss on retirements is reflected in operating income in the year of disposition. Computers and equipment as well as furniture and fixtures are depreciated over their useful lives from three Other Assets Other assets include liquor license acquisition costs and costs to fulfill obligations under the Company’s management and license agreements. Intangible Assets Intangible assets consist of the indefinite-lived “Kona Grill” trade name and other finite-lived intangible assets that are amortized using the straight-line method over their estimated useful life of 10 years. As of December 31, 2022 and 2021, the gross carrying amount of the Kona Grill trade name intangible was $17.4 million. As of December 31, 2022 and 2021 the gross carrying amount of the other finite-lived intangible assets were $0.1 million. The accumulated amortization of the trade name was $2.2 million and $2.0 million as of December 31, 2022 and 2021, respectively, and the amortization expense was $0.2 million and $0.9 million for the years ending December 31, 2022 and 2021, respectively. The Company’s estimated aggregate amortization expense for each of the five succeeding fiscal years is Impairment of Long-Lived Assets Long-lived assets, which include property and equipment and right-of-use assets for operating leases , For the years ended December 31, 2022 and 2021, the Company did not identify any event or changes in circumstances that indicated that the carrying values of its restaurant assets were impaired. Debt Issuance Costs Debt issuance costs incurred in connection with the issuance of long-term debt are capitalized and amortized to interest expense based on the term of the related debt agreement using the straight-line method, which approximates the effective interest method. The Company has recorded debt issuance costs related to the revolving credit facility in other assets on the consolidated balance sheets. The portion of debt issuance costs related to the term loan and delayed draw term loan is recorded in long-term debt, net of current portion on the consolidated balance sheets. Income Taxes The Company computes income taxes using the asset and liability method. Under this method, deferred income taxes are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes, using the enacted statutory rate in effect for the year these differences are expected to be taxable or refunded. Deferred income tax expenses or credits are based on the changes in the asset or liability, respectively, from period to period. A deferred tax asset or liability is recognized whenever there are future tax effects from existing temporary differences and operating loss and tax credit carry-forwards. If the Company determines that a deferred tax asset or liability could be realized in a greater or lesser amount than recorded, the deferred tax asset or liability is adjusted and a corresponding adjustment is made to the provision for income taxes in the consolidated statements of operations and comprehensive income in the period during which the determination is made. The Company reduces its deferred tax assets by a valuation allowance if it determines that it is more likely than not that some portion or all of these tax assets will not be realized. In making this determination, the Company considers various qualitative and quantitative factors, such as: ● the level of historical taxable income; ● the projection of future taxable income over periods in which the deferred tax assets would be deductible; ● events within the restaurant industry; ● the health of the economy; and, ● historical trending. As of December 31, 2022, the Company had a valuation allowance of $0.6 million that relates to foreign tax credits that the The Company recognizes the tax benefit from an uncertain tax position when it determines that it is more-likely-than-not that the position would be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. If the Company derecognizes an uncertain tax position, the Company’s policy is to record any applicable interest and penalties within the provision (benefit) for income taxes in the consolidated statements of operations and comprehensive income. Revenue Recognition Revenue is derived from restaurant sales, management services and license related operations. The Company recognizes restaurant revenues, net of discounts, when goods and services are provided. Sales tax amounts collected from customers that are remitted to governmental authorities are excluded from net revenue. Management agreements typically call for a management fee based on a percentage of revenue, a monthly marketing fee based on a percentage of revenues and an incentive fee based on a managed venue’s net profits. Similarly, royalties from the licensee in license agreements are generally based on a percentage of the licensed restaurant’s revenue. These management, license and incentive fees are recognized as revenue in the period the restaurant’s sales occur. The Company recognizes initial licensing fees and upfront fees related to management and license agreements on a straight-line basis over the term of the agreement as a component of management, license and incentive fee revenue on the consolidated statements of operations and comprehensive income. The Company has a loyalty program for Kona Grill to encourage customers to frequent its restaurants. The loyalty rewards program awards a customer one point for every dollar spent. When a customer is part of the rewards program, the obligation to provide future discounts related to points earned is considered a separate performance obligation, to which a portion of the transaction price is allocated. The performance obligation related to loyalty points is deemed to have been satisfied, and the amount deferred in the balance sheet is recognized as revenue, when the points are converted to a reward and redeemed, or the likelihood of redemption is remote. A portion of the transaction price is allocated to loyalty points, if necessary, on a pro-rata basis, based on the stand-alone selling price, as determined by menu pricing and loyalty points terms. As of December 31, 2022 and 2021 the deferred revenue allocated to loyalty points that have not been redeemed was $0.2 million and $0.1 million, respectively, which is recorded as a component of accrued expenses in the accompanying consolidated balance sheets. The Company expects the loyalty points to be redeemed and recognized over Gift Cards Proceeds from the sale of gift cards are recorded as deferred revenue and recognized as revenue when redeemed by the holder. There are no expiration dates on the Company’s gift cards and the Company does not charge any service fees that would result in a decrease to a customer’s available balance. Although the Company will continue to honor all gift cards presented for payment, it may determine the likelihood of redemption to be remote for certain gift cards due to, among other things, long periods of inactivity. In these circumstances, to the extent the Company determines there is no requirement for remitting balances to government agencies under unclaimed property laws, outstanding gift card balances may then be recognized as breakage in the consolidated statements of operations and comprehensive income as a component of owned restaurant net revenue. For the years ended December 31, 2022 and 2021, the Company recognized $0.3 million and $0.5 million, respectively, in revenue from gift card breakage. Pre-opening Costs Pre-opening costs for Company owned restaurants are expensed as incurred prior to a restaurant opening for business. Pre-opening costs for the years ended December 31, 2022 and 2021 were $5.5 million and $1.0 million, respectively. Advertising Costs The Company expenses the cost of advertising and promotions as incurred. Advertising expense was $7.5 million and $5.1 million for the years ended December 31, 2022 and 2021, respectively. Leases Contracts are evaluated to determine whether they contain a lease at inception. The Company’s contracts determined to be or contain a lease include explicitly or implicitly identified assets where the Company has the right to substantially all of the economic benefits of the assets and has the ability to direct how and for what purpose the assets are used during the lease term. If it is determined that the contract contains an operating lease, a right-of-use asset and operating lease liability are recorded on the consolidated balance sheets. A right-of-use asset represents the Company’s right to use the underlying asset and the lease liability represents the Company’s contractually obligated payments. Both the right-of-use asset and the lease liability are recognized as of the commencement date of the lease and are based upon the present value of lease payments due over the course of the lease. The right-of-use asset is reduced by any lease incentives received. For leases that do not have a rate implicit in the lease, the Company’s incremental borrowing rate at the date of commencement is used to determine the present value of the lease payments. The Company’s incremental borrowing rate is the rate of interest that it would have to borrow on a collateralized basis over a similar term on an amount equal to the lease payments in a similar economic environment. The Company enters into contracts to lease office and restaurant space with terms that expire at various dates through 2047. The lease term is the minimum of the noncancelable period of the lease or the lease term inclusive of reasonably certain renewal periods. The Company considers a number of factors when evaluating whether the options in its lease contracts were reasonably certain of exercise, such as length of time before option exercise, expected value of the leased asset at the end of the initial lease term, importance of the lease to overall operations, costs to negotiate a new lease, and any contractual or economic penalties. Certain of the Company’s leases also provide for percentage rent, which are variable lease costs determined as a percentage of gross sales in excess of specified, minimum sales targets, as well as other lease costs to reimburse the lessor for real estate tax and insurance expenses, and certain non-lease components that transfer a distinct service to the Company, such as common area maintenance services. These percentage rents and other variable lease costs are not included in the calculation of lease payments when classifying a lease and in the measurement of the lease liability as they do not meet the definition of in-substance, fixed-lease payments under ASC Topic 842, Leases. Stock-Based Compensation The Company maintains an equity incentive compensation plan under which it may grant options, warrants, restricted stock or other stock-based awards to directors, officers, key employees and other key individuals performing services to the Company. Restricted stock and restricted stock units (“RSUs”) are valued using the closing stock price on the date of grant. Under the plan, vesting of awards can either be based on the passage of time or on the achievement of performance goals. For awards that vest on the passage of time, compensation cost is recognized over the vesting period. For performance-based awards, the Company recognizes compensation costs over the requisite service period when conditions for achievement become probable. The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ or are expected to differ. These estimates, which are currently at 10%, are based on historical forfeiture behavior exhibited by employees of the Company. Earnings per Share Basic earnings per share is computed using the weighted average number of common shares outstanding during the period and income available to common stockholders. Diluted earnings per share is computed using the weighted average number of common shares outstanding during the period plus the dilutive effect of all potential shares of common stock including common stock issuable pursuant to stock options, warrants, and RSUs. Refer to Note 10 for the calculations of basic and diluted earnings per share. Segment Reporting The Company has identified the following four reportable operating segments: STK, Kona Grill, ONE Hospitality and Corporate. Refer to Note 13 for additional details and certain financial information regarding the Company’s operating segments relating to the years ended December 31, 2022 and 2021. Foreign Currency Translation Assets and liabilities of foreign operations are translated into U.S. dollars at the balance sheet date. Revenues and expenses are translated at average monthly exchange rates. Gains or losses resulting from the translation of foreign subsidiaries represent other comprehensive income (loss) and are accumulated as a separate component of stockholders’ equity. Currency translation gains or losses are recorded in accumulated other comprehensive loss within stockholders’ equity and amounted to a loss of approximately $0.2 million and a gain of approximately $1,000 during 2022 and 2021, respectively. Comprehensive Income Comprehensive income consists of two components: net income and other comprehensive income (loss). The Company’s other comprehensive income (loss) is comprised of foreign currency translation adjustments. All of the Company’s foreign currency translation adjustments relate to wholly owned subsidiaries of the Company. Recent Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326)” (“ASU 2016-13”). ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to assess credit loss estimates. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2022. The Company will adopt the standard effective January 1, 2023. The Company does not expect the adoption of ASU 2016-13 to result in a material change to its consolidated financial statements. |
Property and Equipment, net
Property and Equipment, net | 12 Months Ended |
Dec. 31, 2022 | |
Property and Equipment, net | |
Property and Equipment, net | Note 3 – Property and Equipment, net Property and equipment, net consist of the following (in thousands): December 31, December 31, 2022 2021 Furniture, fixtures and equipment $ 33,372 $ 24,942 Leasehold improvements 89,121 76,500 Less: accumulated depreciation and amortization (47,528) (39,425) Subtotal 74,965 62,017 Construction in progress 16,276 5,374 Restaurant smallwares 2,846 2,247 Total $ 94,087 $ 69,638 Depreciation and amortization related to property and equipment amounted to $11.7 million and $9.9 million for the years ended December 31, 2022 and 2021, respectively. The Company does not depreciate construction in progress until such assets are placed into service. |
Accrued Expenses
Accrued Expenses | 12 Months Ended |
Dec. 31, 2022 | |
Accrued Expenses | |
Accrued Expenses | Note 4 – Accrued Expenses Accrued expenses consist of the following (in thousands): December 31, December 31, 2022 2021 Payroll and related (1) $ 5,249 $ 6,554 VAT and sales taxes 4,118 3,477 Amounts due to landlords 2,949 1,847 Income taxes and related 156 — Construction on new restaurants 1,903 359 Insurance 742 642 Legal, professional and other services 626 458 Interest 268 132 Accrued lease exit costs (2) — 4,913 Other (3) 6,398 4,773 Total $ 22,409 $ 23,155 (1) Payroll and related included $1.2 million in employer payroll taxes for which payment was deferred under the CARES Act as of December 31, 2021. (2) Amount relates to lease exit costs for 2016 leases for restaurants never built and still under dispute with landlords. (3) Amount primarily relates to recurring restaurant operating expenses. |
Long Term Debt
Long Term Debt | 12 Months Ended |
Dec. 31, 2022 | |
Long Term Debt. | |
Long Term Debt | Note 5 – Long Term Debt Long-term debt consists of the following (in thousands): December 31, December 31, 2022 2021 Term loan agreements $ 24,250 $ 24,750 Revolving credit facility — — Delayed draw term facility 50,000 — Total long-term debt 74,250 24,750 Less: current portion of long-term debt (1,500) (500) Less: debt issuance costs (2,206) (1,118) Total long-term debt, net of current portion $ 70,544 $ 23,132 Future minimum loan payments: 2023 $ 1,500 2024 1,500 2025 1,500 2026 69,750 Total $ 74,250 Interest expense for the Company’s debt arrangements, excluding the amortization of debt issuance costs and other discounts and fees, was approximately $1.7 million and $3.3 million for the years ended December 31, 2022 and 2021, respectively. As of both December 31, 2022 and 2021, the Company had $1.4 million in standby letters of credit outstanding for certain restaurants and $10.6 million available in its revolving credit facility, subject to certain conditions. Credit and Guaranty Agreement On October 4, 2019, in conjunction with the acquisition of Kona Grill, the Company entered into a Credit Agreement with Goldman Sachs Bank USA. On August 6, 2021, the Company entered into the Third Amendment to the Credit Agreement to extend the maturity date for both the term loan and revolving credit facility to August 2026, to eliminate all financial covenants except a maximum net leverage ratio of 2.00 to 1.00, and to eliminate restrictions on the maximum amount of capital expenditures, the maximum number of Company-owned new locations, and credit extensions under the revolving credit facility. The Third Amendment to the Credit Agreement provided for a secured revolving credit facility of $12.0 million and a $25.0 million term loan (reduced from $48.0 million). The term loan is payable in quarterly installments of $0.1 million, with the final payment due in August 2026. On December 13, 2022, the Company entered into the Fourth Amendment to the Credit Agreement that: ● Allows for a new $50.0 million delayed draw term facility, available to draw for twelve months and subject to a 1.75 x Net Leverage Ratio incurrence test (as defined in the Credit Agreement) for permitted acquisitions, stock repurchases and new restaurant capital expenditures; ● Allows the Company to redeem, repurchase or otherwise acquire its own capital stock in an aggregate amount of up to $50 million subject to a 1.75 x Net Leverage Ratio incurrence test and no default or event of default; ● Changes the interest rate from London Interbank Offered Rate (“LIBOR“) plus a margin to Secured Overnight Financing Rate (“SOFR”) plus an applicable margin; and ● Requires the Company to pay interest on an undrawn portion of the delayed draw term loan up to $35.0 million, beginning 90 days following the effective date until December 13, 2023. The Company borrowed $50.0 million on the delayed draw term facility on December 28, 2022. Loans under the amended Credit Agreement bear interest at a rate per annum using the SOFR rate subject to a 1.00% floor plus an interest rate margin of 6.50%. Prior to the Fourth Amendment to the Credit Agreement, the amended Credit Agreement had several borrowing and interest rate options, including the following: (a) a LIBOR rate (or a comparable successor rate) subject to a 1.00% floor (b) a base rate equal to the greatest of (i) the prime rate, (ii) the federal funds rate plus 0.50%, (iii) the LIBOR rate for a one-month period plus 1.00% or (iv) 4.00%. Loans under the Third Amendment to the Credit Agreement bore interest at a rate per annum using the applicable indices plus an interest rate margin of 5.00% (for LIBOR rate loans) and 4.00% (for base rate loans). In conjunction with the Third Amendment to the Credit Agreement, the Company made a pre-payment on the loan of $22.2 million and incurred $0.9 million in debt issuance costs. The Company accounted for the amendment as a debt modification with a partial extinguishment and recognized a loss on early debt extinguishment of $0.6 million for the year ended December 31, 2021 and $0.1 million in transaction costs. The Company’s weighted average interest rate on the borrowings under the amended Credit Agreement as of December 31, 2022 and December 31, 2021 was 10.31% and 6.00%, respectively. The Credit Agreement contains customary representations, warranties and conditions to borrowing including customary affirmative and negative covenants, which include covenants that limit or restrict the Company’s ability to incur indebtedness and other obligations, grant liens to secure obligations, make investments, merge or consolidate, alter the organizational structure of the Company and its subsidiaries, and dispose of assets outside the ordinary course of business, in each case subject to customary exceptions for credit facilities of this size and type. The Company and certain operating subsidiaries of the Company guarantee the obligations under the Credit Agreement, which also are secured by liens on substantially all of the assets of the Company and its subsidiaries. As of December 31, 2022, the Company had $2.2 million of debt issuance costs related to the amended Credit Agreement, which were capitalized and are recorded as a direct deduction to long-term debt and $0.5 million in debt issuance costs recorded in other assets on the consolidated balance sheets. As of December 31, 2022, the Company was in compliance with the financial covenants required by the Credit Agreement. CARES Act Loans On May 4, 2020, two subsidiaries of the Company entered into promissory notes (“CARES Act Loans”) with BBVA USA under the Paycheck Protection Program (“PPP”) created by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Repayment of the CARES Act Loans is guaranteed by the U.S. Small Business Administration (“SBA”). The ONE Group, LLC received a loan of $9.8 million related to the operations of STK restaurants, and Kona Grill Acquisition, LLC received a loan of $8.5 million related to the operation of Kona Grill restaurants. The CARES Act Loans were eligible for forgiveness if the proceeds were used for qualified purposes within a specified period and if at least 60% was spent on payroll costs. The Company used all of the proceeds from the CARES Act Loans for qualified purposes in accordance with the CARES Act and SBA regulations, and these funds supported the re-opening of in person dining and the return of approximately 3,000 furloughed employees to work. The Company applied for forgiveness of the CARES Act Loans in February 2021, and the loans were forgiven in June 2021 and July 2021. As a result, the Company recognized $18.5 million gain on CARES Act Loan forgiveness for the year ended December 31, 2021. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2022 | |
Related Party Transactions | |
Related Party Transactions | Note 6 – Related Party Transactions As of December 31, 2022 and 2021, the Company owned interests in the following companies, which directly or indirectly operate restaurants: ● 31.24% interest in Bagatelle NY LA Investors, LLC (“Bagatelle Investors”) ● 51.13% interest in Bagatelle Little West 12th, LLC (“Bagatelle NY”) Bagatelle Investors is a holding company that has an interest in Bagatelle NY. The Company records its retained interests in Bagatelle Investors and Bagatelle NY as cost method investments as the Company has determined that it does not have ability to exercise significant influence over its investees, Bagatelle Investors and Bagatelle NY. As of December 31, 2022 and 2021, the Company has zero carrying value in these investments. Net receivables from the Bagatelle entities included in due from related parties were $0.4 million as of December 31, 2022 and 2021. These receivables represent the Company’s maximum exposure to loss. Upon expiration of the lease in November 2020, the Company exited its contract with Bagatelle. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2022 | |
Income Taxes | |
Income Taxes | Note 7 – Income Taxes The components of income before provision for income taxes were as follows (in thousands): For the years ended December 31, 2022 2021 Domestic $ 14,051 $ 33,331 Foreign 142 203 Total $ 14,193 $ 33,534 The components of the Company’s provision for income taxes were as follows (in thousands): For the years ended December 31, 2022 2021 Current: Federal $ — $ — State and local 808 564 Foreign 75 110 Total current 883 674 Deferred: Federal (429) (195) State and local 420 1,107 Foreign — — Total deferred (9) 912 Total provision for income taxes $ 874 $ 1,586 The Company’s effective tax rate differs from the statutory rates as follows: For the years ended December 31, 2022 2021 Income tax provision at federal statutory rate 21.0% 21.0% State and local taxes 7.6% 4.5% FICA tip credit (22.5)% (7.2)% Compensation subject to IRC Section 162(m) 8.6% 6.2% Equity based compensation (9.3)% (7.6)% PPP income exclusion —% (11.6)% Other items, net 0.8% (0.6)% Effective income tax rate 6.2% 4.7% The income tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows (in thousands): For the years ended December 31, 2022 2021 Deferred tax assets: Operating lease liabilities $ 18,871 $ 17,152 Stock compensation 415 247 FICA tip credit carryforward 13,976 9,929 Net operating loss 3,203 3,290 Goodwill 906 1,055 Inventory 20 10 Charitable contributions carryforward 3 — Foreign tax credit carryforward 622 382 Deferred revenue 190 165 State and local tax credit carryforward 135 310 Expenses not deductible until paid 298 1,667 IRC 163(j) disallowed interest carryforward 483 — Debt issuance costs 113 143 Kona related acquisition costs 755 813 Deferred payroll taxes — 281 Total deferred tax assets 39,990 35,444 Deferred tax liabilities: Operating lease right-of-use assets (13,974) (13,150) Depreciation and amortization (13,064) (9,605) Other (7) (40) Total deferred tax liabilities (27,045) (22,795) Valuation allowance (622) (336) Net deferred tax assets $ 12,323 $ 12,313 Tax Carryforwards As of December 31, 2022, the Company has federal net operating loss (“NOL”) carryforwards of $13.9 million which have no expiration date. The Company has various state NOL carryforwards. The determination of the state NOL carryforwards is dependent upon apportionment percentages and state laws that can change from year to year and impact the amount of such carryforwards. The state NOLs expire at various dates from 2036 2041 In assessing the realizability of deferred tax assets, the Company evaluates whether it is more likely than not that the deferred tax assets will be realized. In the assessment of the valuation allowance, appropriate consideration was given to all positive and negative evidence including current operating results, tax planning strategies and forecasts of future earnings. As of December 31, 2022 and December 31, 2021, the Company had a valuation allowance of $0.6 million and $0.3 million, respectively, related to foreign tax credits the Company does not expect to utilize as a result of generating income in a jurisdiction with a higher income tax rate than the U.S. Uncertain tax positions The following table summarizes the activity related to the Company’s uncertain tax positions (in thousands): For the years ended December 31, 2022 2021 Balance, beginning of year $ 447 $ 814 Increase related to current year positions — — Decrease related to prior period positions (401) (367) Balance, end of year $ 46 $ 447 Included in the balance of unrecognized tax benefits as of December 31, 2022 and December 31, 2021, are less than $0.1 million and $0.1 million, respectively, of tax benefits that, if recognized, would result in adjustments to deferred taxes. Management believes it is reasonably possible that a nominal amount of the uncertain tax position as of December 31, 2022 will decrease within the next twelve months. The Company is subject to income taxes in the U.S. federal jurisdiction, and the various states and local jurisdictions in which it operates. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company’s federal tax filings remain subject to examination for federal tax years 2019 through 2021. The Company’s state and local tax filings remain subject to examination for tax years 2019 through 2021. NOL carryforwards are subject to examination regardless of whether the tax year in which they are generated has been closed by statute. The amount subject to disallowance is limited to the NOL utilized. Accordingly, the Company may be subject to examination for prior NOLs generated as such NOLs are utilized. The Company’s foreign income tax returns prior to fiscal year 2019 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. |
Revenue recognition
Revenue recognition | 12 Months Ended |
Dec. 31, 2022 | |
Revenue recognition | |
Revenue recognition | Note 8 – Revenue recognition The following table provides information about contract receivables and liabilities from contracts with customers, which include deferred license revenue, deferred gift card revenue and the Konavore rewards program and deposits from customers for future events (in thousands): December 31, December 31, 2022 2021 Deferred license revenue (1) 297 388 Deferred gift card revenue (2) 1,680 1,769 Advanced party deposits (2) 435 260 Konavore rewards program (3) 163 136 (1) Includes the current and long-term portion of deferred license revenue which are included in other current liabilities and other long-term liabilities on the consolidated balance sheets. (2) Deferred gift card revenue and advance party deposits on goods and services yet to be provided are included in deferred gift card revenue and other on the consolidated balance sheets. (3) Konavore rewards program is included in accrued expenses on the consolidated balance sheets. Significant changes in deferred license revenue and deferred gift card revenue for the years ended December 31, 2022 and 2021 are as follows (in thousands): December 31, December 31, 2022 2021 Revenue recognized from deferred license revenue $ 79 $ 164 Revenue recognized from deferred gift card revenue 1,295 1,214 Revenue recognized from advanced party deposits 248 60 As of December 31, 2022, the estimated deferred license revenue to be recognized in the future related to performance obligations that are unsatisfied as of December 31,2022 were as follows for each year ending (in thousands): 2023 $ 78 2024 45 2025 44 2026 37 2027 34 Thereafter 59 Total future estimated deferred license revenue $ 297 |
Leases
Leases | 12 Months Ended |
Dec. 31, 2022 | |
Leases | |
Leases | Note 9 – Leases The components of lease expense for the period were as follows (in thousands): December 31, December 31, 2022 2021 Lease cost Operating lease cost $ 14,587 $ 13,602 Finance lease cost Amortization of ROU assets 59 — Interest on lease liabilities 25 — Total finance lease cost 84 — Variable lease cost (1) 11,373 7,400 Short-term lease cost 945 684 Total lease cost $ 26,989 $ 21,686 Weighted average remaining lease term Operating leases 13 years 13 years Finance leases 5 years — Weighted average discount rate Operating leases 8.40 % 8.43 % Finance leases 8.96 % — % (1) Variable lease cost is comprised of percentage rent and common area maintenance. The components of finance lease assets and liabilities on the consolidated balance sheet were as follows (in thousands): December 31, December 31, 2022 2021 Finance lease right-of-use assets (1) $ 942 $ — Current portion of finance lease liabilities (1) 177 — Long-term portion of finance lease liabilities (1) 754 — (1) Finance lease assets and liabilities are included in other assets, other current liabilities, and other long-term liabilities on the consolidated balance sheets. The Company has entered into two operating leases for future restaurants in Denver, Colorado, and Phoenix, Arizona that have not commenced as of December 31, 2022. The present value of the aggregate future commitment related to these leases totals $2.9 million. The Company expects these leases, which have an initial lease terms of 10 to 15 years, to commence within the next twelve months. Supplemental cash flow information related to leases for the period was as follows (in thousands): December 31, December 31, 2022 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 13,297 $ 12,644 Operating cash flows from finance leases $ 59 $ — Financing cash flows from finance leases $ 51 $ — Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 5,487 $ 8,068 Finance leases $ 1,000 $ — As of December 31, 2022, maturities of the Company’s operating lease liabilities are as follows (in thousands): 2023 $ 11,789 2024 14,881 2025 14,105 2026 14,047 2027 14,356 Thereafter 124,223 Total lease payments 193,401 Less: imputed interest (81,818) Present value of operating lease liabilities $ 111,583 As of December 31, 2022, maturities of the Company’s finance lease liabilities are as follows (in thousands): 2023 $ 253 2024 233 2025 233 2026 233 2027 194 Total lease payments 1,146 Less: imputed interest (215) Present value of finance lease liabilities $ 931 |
Earnings per share
Earnings per share | 12 Months Ended |
Dec. 31, 2022 | |
Earnings per share | |
Earnings per share | Note 10 – Earnings per share Basic earnings per share is computed using the weighted average number of common shares outstanding during the period and income available to common stockholders. Diluted earnings per share is computed using the weighted average number of common shares outstanding during the period plus the dilutive effect of all potential shares of common stock including common stock issuable pursuant to stock options, warrants, and restricted stock units. For the years ended December 31, 2022 and 2021, earnings per share was calculated as follows (in thousands, except earnings per share and related share data): Year ended December 31, 2022 2021 Net income attributable to The ONE Group Hospitality, Inc. $ 13,534 $ 31,348 Basic weighted average shares outstanding 32,400,515 31,155,224 Dilutive effect of stock options, warrants and restricted share units 1,471,282 2,639,120 Diluted weighted average shares outstanding 33,871,797 33,794,344 Net income available to common stockholders per share - Basic $ 0.42 $ 1.01 Net income available to common stockholders per share - Diluted $ 0.40 $ 0.93 For the years ended December 31, 2022 and 2021, stock options warrants and |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2022 | |
Stockholders' Equity. | |
Stockholders' Equity | Note 11 – Stockholders’ Equity Common Stock The Company is authorized by its amended and restated certificate of incorporation to issue up to 75.0 million shares of common stock, par value $0.0001 per share. As of December 31, 2022 and 2021, there are 31.7 million and 32.1 million shares of common stock outstanding, respectively. Stock Purchase Program In September 2022, the Company’s Board of Directors authorized a stock purchase program of up to $10.0 million of outstanding common stock. As of December 31, 2022, the Company had repurchased 1,081,938 shares for $7.1 million under the program. Warrants The Company has the following warrants to purchase shares of common stock outstanding as of December 31, 2022 and 2021: Shares available for purchase as of Warrants Exercise December 31, December 31, Issuance date Holder of warrants Expiration date Issued Price 2022 2021 November 15, 2017 2017 Securities Purchase Agreement investors May 15, 2023 875,000 $ 1.63 125,000 125,000 The issuance of a dividend is dependent on a variety of factors, including but not limited to, available cash and the overall financial condition of the Company. The issuance of a dividend is also subject to legal restrictions and the terms of the Company’s credit agreement. The Company did not issue dividends related to its common stock in 2022 or 2021. Preferred Stock The Company is authorized by its amended and restated certificate of incorporation to issue 10.0 million shares of preferred stock, par value $0.0001 per share. The Company’s Board may designate the rights, powers and preferences of the preferred stock, which may have superior rights to common shareholders in terms of liquidation and dividend preference, voting and other rights. As of December 31, 2022 and 2021, the Board had not designated the rights of the preferred stock and there were no outstanding shares of preferred stock. |
Employee Benefit Plans
Employee Benefit Plans | 12 Months Ended |
Dec. 31, 2022 | |
Stock-Based Compensation and Warrants | |
Employee Benefit Plans | Note 12 – Employee Benefit Plans Defined Contribution Retirement Plan The Company sponsors a qualified defined contribution retirement plan (the “401(k) Plan”) covering all eligible employees, as defined in the 401(k) Plan. The 401(k) Plan allows participating employees to defer the receipt of a portion of their compensation, on a pre-tax or post-tax basis, and contribute such amount to one or more investment options. Employer contributions to the plan are at the discretion of the Company. The Company did not accrue or make any employer contributions in 2022 and 2021. Equity Incentive Plan The Company provides equity-based compensation to directors, officers, key employees and other key individuals performing services for the Company under its 2019 Equity Incentive Plan (the “Equity Incentive Plan”). The Equity Incentive Plan provides for the granting of stock options, warrants, restricted stock or other stock-based awards. All awards are required to be approved by the Board or a designated committee of the Board. Options are generally granted with an exercise price equal to fair market value of the Company’s common stock on the date of grant and expire after ten years. Vesting of options and restricted stock can either be based on the passage of time or on the achievement of performance goals. The Board has the authority to amend, modify or terminate the Equity Incentive Plan, subject to any required approval by the Company’s stockholders under applicable law or upon advice of counsel. No such action would affect any options previously granted under the Equity Incentive Plan without the consent of the holders. Effective May 18, 2022, the Board and the Company’s stockholders approved a 4,500,000 increase to the number of shares of common stock authorized for issuance under the Equity Incentive Plan, bringing the maximum aggregate limit to 11,573,922 shares. As of December 31, 2022, the Company had 3,727,848 shares available for issuance under the Equity Incentive Plan. Stock-based compensation cost for 2022 and 2021 was $4.0 million and $3.6 million, respectively, and is included in general and administrative expenses in the consolidated statements of operations and comprehensive income. Included in stock-based compensation cost was $0.3 million and $0.5 million of unrestricted stock granted to directors for the years ended December 31, 2022 and 2021, respectively. Such grants were awarded consistent with the Board’s compensation practices and included grants to two new board members appointed in September 2021. Stock-based compensation for the year ended December 31, 2022 included $0.2 million of compensation costs for market condition-based restricted stock units (“RSU”). Refer to discussion of CEO RSUs below. In addition, stock-based compensation expense for the year ended December 31, 2021 included $0.4 million of employer payroll taxes associated with stock option and restricted RSU activity and $0.3 million of compensation costs for the vesting of market condition-based stock options and RSUs. Stock Option Activity Changes in outstanding stock options during the years ended December 31, 2022 and 2021 were as follows: Weighted Weighted average Intrinsic average exercise remaining value Shares price contractual life (thousands) Outstanding at January 1, 2021 1,707,008 $ 3.37 Vested 594,402 3.09 Exercised (1,039,058) 3.23 Cancelled, expired or forfeited (10,000) 2.13 Outstanding at December 31, 2021 1,252,352 3.36 3.92 years $ 11,581 Exercisable at December 31, 2021 1,126,685 3.48 3.72 years $ 10,283 Vested - - Exercised (65,000) 2.13 Cancelled, expired or forfeited - - Outstanding at December 31, 2022 1,187,352 3.43 2.84 years $ 3,811 Exercisable at December 31, 2022 1,187,352 $ 3.43 2.84 years $ 3,811 There were no stock options granted in 2022 or 2021. A summary of the status of the Company’s non-vested stock options as of December 31, 2022 and 2021 and changes during the years then ended, is presented below: Weighted average Shares grant date fair value Non-vested stock options at January 1, 2021 263,333 $ 0.99 Granted — — Vested (127,667) 1.00 Cancelled, expired or forfeited (10,000) 0.87 Non-vested stock options at December 31, 2021 125,667 $ 1.00 Granted — — Vested (125,667) 1.00 Cancelled, expired or forfeited — — Non-vested stock options at December 31, 2022 — $ — The fair value of options that vested in each of the years ended December 31, 2022 and 2021 was $0.1 million. Restricted Stock Unit Activity The Company issues restricted stock units under the 2019 Equity Plan. The fair value of RSUs is determined based upon the closing fair market value of the Company’s common stock on the grant date, except for the RSUs discussed below. Awards granted during September 2022 included 500,000 RSUs awarded to our Chief Executive Officer with both a market condition and time element (“CEO RSUs”). The CEO RSUs may be earned based on achieving common stock price targets within a 48-month period and, if earned, will vest and be settled based on a time element as outlined in the RSU agreement governing the CEO RSUs. To value the CEO RSUs, the Company, with the assistance of a third-party specialist, calculated the fair value of CEO RSUs using the Monte Carlo Simulation, a risk-free rate of 3.31% , a starting common stock value of $6.95 , volatility of 73% , and a standard normal distribution. The Company valued the CEO RSUs at $2.9 million and will amortize this amount evenly over 48 months . For 2022, the Company recorded $0.2 million of stock-based compensation expense associated with these awards. A summary of the status of RSUs and changes during the years ended December 31, 2022 and 2021 is presented below: Weighted average Shares grant date fair value Non-vested RSUs at January 1, 2021 1,871,592 $ 1.68 Granted 977,599 7.74 Vested (1,109,250) 1.90 Cancelled, expired or forfeited (49,931) 5.18 Non-vested RSUs at December 31, 2021 1,690,010 $ 4.98 Granted 983,147 7.31 Vested (742,781) 3.82 Cancelled, expired or forfeited (90,944) 6.38 Non-vested RSUs at December 31, 2022 1,839,432 $ 6.62 As of December 31, 2022, the Company had approximately $9.8 million of total unrecognized compensation costs related to restricted stock awards, which will be recognized over a weighted average period of 2.8 years. |
Segment Reporting
Segment Reporting | 12 Months Ended |
Dec. 31, 2022 | |
Segment Reporting | |
Segment Reporting | Note 13 – Segment Reporting The Company has identified its reportable operating segments as follows: ● STK . The STK segment consists of the results of operations from STK restaurant locations, competing in the full-service dining industry, as well as management, license and incentive fee revenue generated from the STK brand and pre-opening expenses associated with new restaurants under development. ● Kona Grill . The Kona Grill segment includes the results of operations of Kona Grill restaurant locations and pre-opening expenses associated with new restaurants under development. ● ONE Hospitality . The ONE Hospitality segment is composed of the management, license and incentive fee revenue and results of operations generated from the Company’s other brands and venue concepts, which include ANGEL, Bao Yum, Heliot, Hideout, Marconi, Radio and Rivershore Bar & Grill. Additionally, this segment includes the results of operations generated from F&B hospitality management agreements with hotels, casinos and other high-end locations. ● Corporate . The Corporate segment consists of the following: general and administrative costs, stock-based compensation, lease termination expenses, transaction costs, COVID-19 related expenses and other income and expenses. This segment also includes STK Meat Market, an e-commerce platform that offers signature steak cuts nationwide, the Company’s major off-site events group, which supports all brands and venue concepts, and revenue generated from gift card programs. The Corporate segment’s total assets primarily include cash and cash equivalents, the Kona Grill tradename, and deferred tax assets. The Company’s Chief Executive Officer, who is the Company’s Chief Operating Decision Maker, manages the business and allocates resources via a combination of restaurant sales reports and operating segment profit information, defined as revenues less operating expenses, related to the Company’s four operating segments. In the second quarter of 2022, the Company changed its financial information regularly reviewed by the CODM to include all cash and cash equivalents, the Kona Grill tradename and deferred tax assets in the Corporate segment. Previously, certain cash amounts were included in the STK and Kona Grill segments and the Kona Grill tradename and certain deferred tax assets were included in the Kona Grill segment. Fiscal 2021 figures have been reclassified for comparability. Total assets for each of the segments include operating lease liabilities for both existing and new venues under construction. Certain financial information relating to the years ended December 31, 2022 and 2021 for each segment is provided below (in thousands). STK Kona Grill ONE Hospitality Corporate Total For the year ended December 31, 2022 Total revenues $ 187,402 $ 126,341 $ 2,344 $ 551 $ 316,638 Operating income (loss) 40,343 7,217 1,282 (32,536) 16,306 Capital asset additions $ 19,116 $ 10,496 $ 139 $ 2,878 $ 32,629 As of December 31, 2022 Total assets $ 113,911 $ 78,691 $ 5,746 $ 92,676 $ 291,024 STK Kona Grill ONE Hospitality Corporate Total For the year ended December 31, 2021 Total revenues $ 151,436 $ 123,181 $ 1,725 $ 836 $ 277,178 Operating income (loss) 39,863 12,982 466 (33,926) 19,385 Capital asset additions $ 7,581 $ 2,307 $ 170 $ 1,409 $ 11,467 As of December 31, 2021 Total assets $ 95,579 $ 69,006 $ 5,735 $ 59,515 $ 229,835 |
Geographic Information
Geographic Information | 12 Months Ended |
Dec. 31, 2022 | |
Geographic Information | |
Geographic Information | Note 14 – Geographic Information Certain financial information by geographic location relating to the years ended December 31, 2022 and 2021 is provided below (in thousands). For the year ended December 31, 2022 2021 Domestic revenues $ 311,119 $ 272,651 International revenues 5,519 4,527 Total revenues $ 316,638 $ 277,178 December 31, December 31, 2022 2021 Domestic long-lived assets $ 211,143 $ 185,718 International long-lived assets 1,345 1,190 Total long-lived assets $ 212,488 $ 186,908 |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingencies. | |
Commitments and Contingencies | Note 15 – Commitments and Contingencies The Company is party to claims in lawsuits incidental to its business, including lease disputes and employee-related matters. The Company has recorded accruals in its consolidated financial statements in accordance with ASC 450, Contingencies. While the resolution of a lawsuit, proceeding or claim may have an impact on the Company’s financial results for the period in which it is resolved, in the opinion of management, the ultimate outcome of such matters and judgements in which the Company is currently involved, either individually or in the aggregate, will not have a material adverse effect on the Company’s consolidated financial position or results of operations. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2022 | |
Summary of Significant Accounting Policies | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions have been eliminated in consolidation. |
Change in Accounting Estimate | Change in Accounting Estimate Effective April 1, 2022, the Company changed its estimated useful life of the Kona Grill trade name. Based upon the strong performance of the Kona Grill restaurants over the twelve months ended March 31, 2022, significant capital investments in both existing and new restaurants and the Company’s commitment to expand the Kona Grill brand with the opening of new restaurants, the Company has determined that the Kona Grill trade name has an indefinite life rather than the twenty-year life previously determined. As of December 31, 2022, the Company had two Kona Grill venues under construction in Riverton, Utah and Columbus, Ohio and plans to open three to five Kona Grills each year for the foreseeable future. The effect of this change in estimate will reduce depreciation and amortization expense by $0.9 million annually, increase net income by $0.9 million annually, and increase basic and diluted |
Prior Period Reclassifications | Prior Period Reclassifications Certain reclassifications of the 2021 amounts in the segment reporting footnote have been made to conform to the current year presentation. |
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions for the reporting period and as of the reporting date. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingencies. Actual results could differ from those estimates. |
Fair Value Measurements | Fair Value Measurements Fair value represents the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Assets and liabilities are valued based upon observable and non-observable inputs. Valuations using Level 1 inputs are based on unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date. Level 2 inputs utilize significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly. Valuations using Level 3 inputs are based on significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. There were no significant transfers between levels during any period presented. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents are defined as cash on hand and highly liquid instruments with original maturities of three months or less when purchased. The Company’s cash and cash equivalents consist of cash in banks and at the restaurants as of December 31, 2022 and 2021. |
Accounts Receivable | Accounts Receivable The Company’s receivables arise from credit cards, management agreements, trade customers and other reimbursable amounts due from hotel operators where the Company operates a food and beverage service. Accounts receivable from credit card processors and third-party delivery services at December 31, 2022 and 2021 was $6.4 million and $3.9 million, respectively. Receivables from the Company’s management, license and hotel partners were $7.0 million and $6.4 million at December 31, 2022 and 2021, respectively, The Company determines an allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due, previous loss and payment history, the customer’s current ability to pay its obligation to the Company and the condition of the general economy and industry as a whole. The Company has not reserved any trade receivables as of December 31, 2022 and 2021. |
Inventory | Inventory Inventories, which consist of food, liquor and other beverages, are stated at the lower of cost or net realizable value. Cost is determined by the first in, first out method. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs to sell. As of December 31, 2022 and 2021, food inventories were $3.7 million and $2.0 million, respectively, and beverage inventories were $2.0 million and $1.9 million, respectively. |
Property and Equipment | Property and Equipment Additions to property and equipment, including leasehold improvements, are recorded at cost while costs incurred to repair and maintain the Company’s operations and equipment are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful life of the asset. When assets are retired or otherwise disposed of, the cost of the assets and the related accumulated depreciation are removed from the accounts, and any gain or loss on retirements is reflected in operating income in the year of disposition. Computers and equipment as well as furniture and fixtures are depreciated over their useful lives from three |
Other Assets | Other Assets Other assets include liquor license acquisition costs and costs to fulfill obligations under the Company’s management and license agreements. |
Intangible Assets | Intangible Assets Intangible assets consist of the indefinite-lived “Kona Grill” trade name and other finite-lived intangible assets that are amortized using the straight-line method over their estimated useful life of 10 years. As of December 31, 2022 and 2021, the gross carrying amount of the Kona Grill trade name intangible was $17.4 million. As of December 31, 2022 and 2021 the gross carrying amount of the other finite-lived intangible assets were $0.1 million. The accumulated amortization of the trade name was $2.2 million and $2.0 million as of December 31, 2022 and 2021, respectively, and the amortization expense was $0.2 million and $0.9 million for the years ending December 31, 2022 and 2021, respectively. The Company’s estimated aggregate amortization expense for each of the five succeeding fiscal years is |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Long-lived assets, which include property and equipment and right-of-use assets for operating leases , For the years ended December 31, 2022 and 2021, the Company did not identify any event or changes in circumstances that indicated that the carrying values of its restaurant assets were impaired. |
Debt Issuance Costs | Debt Issuance Costs Debt issuance costs incurred in connection with the issuance of long-term debt are capitalized and amortized to interest expense based on the term of the related debt agreement using the straight-line method, which approximates the effective interest method. The Company has recorded debt issuance costs related to the revolving credit facility in other assets on the consolidated balance sheets. The portion of debt issuance costs related to the term loan and delayed draw term loan is recorded in long-term debt, net of current portion on the consolidated balance sheets. |
Income Taxes | Income Taxes The Company computes income taxes using the asset and liability method. Under this method, deferred income taxes are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes, using the enacted statutory rate in effect for the year these differences are expected to be taxable or refunded. Deferred income tax expenses or credits are based on the changes in the asset or liability, respectively, from period to period. A deferred tax asset or liability is recognized whenever there are future tax effects from existing temporary differences and operating loss and tax credit carry-forwards. If the Company determines that a deferred tax asset or liability could be realized in a greater or lesser amount than recorded, the deferred tax asset or liability is adjusted and a corresponding adjustment is made to the provision for income taxes in the consolidated statements of operations and comprehensive income in the period during which the determination is made. The Company reduces its deferred tax assets by a valuation allowance if it determines that it is more likely than not that some portion or all of these tax assets will not be realized. In making this determination, the Company considers various qualitative and quantitative factors, such as: ● the level of historical taxable income; ● the projection of future taxable income over periods in which the deferred tax assets would be deductible; ● events within the restaurant industry; ● the health of the economy; and, ● historical trending. As of December 31, 2022, the Company had a valuation allowance of $0.6 million that relates to foreign tax credits that the The Company recognizes the tax benefit from an uncertain tax position when it determines that it is more-likely-than-not that the position would be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. If the Company derecognizes an uncertain tax position, the Company’s policy is to record any applicable interest and penalties within the provision (benefit) for income taxes in the consolidated statements of operations and comprehensive income. |
Revenue Recognition | Revenue Recognition Revenue is derived from restaurant sales, management services and license related operations. The Company recognizes restaurant revenues, net of discounts, when goods and services are provided. Sales tax amounts collected from customers that are remitted to governmental authorities are excluded from net revenue. Management agreements typically call for a management fee based on a percentage of revenue, a monthly marketing fee based on a percentage of revenues and an incentive fee based on a managed venue’s net profits. Similarly, royalties from the licensee in license agreements are generally based on a percentage of the licensed restaurant’s revenue. These management, license and incentive fees are recognized as revenue in the period the restaurant’s sales occur. The Company recognizes initial licensing fees and upfront fees related to management and license agreements on a straight-line basis over the term of the agreement as a component of management, license and incentive fee revenue on the consolidated statements of operations and comprehensive income. The Company has a loyalty program for Kona Grill to encourage customers to frequent its restaurants. The loyalty rewards program awards a customer one point for every dollar spent. When a customer is part of the rewards program, the obligation to provide future discounts related to points earned is considered a separate performance obligation, to which a portion of the transaction price is allocated. The performance obligation related to loyalty points is deemed to have been satisfied, and the amount deferred in the balance sheet is recognized as revenue, when the points are converted to a reward and redeemed, or the likelihood of redemption is remote. A portion of the transaction price is allocated to loyalty points, if necessary, on a pro-rata basis, based on the stand-alone selling price, as determined by menu pricing and loyalty points terms. As of December 31, 2022 and 2021 the deferred revenue allocated to loyalty points that have not been redeemed was $0.2 million and $0.1 million, respectively, which is recorded as a component of accrued expenses in the accompanying consolidated balance sheets. The Company expects the loyalty points to be redeemed and recognized over |
Gift Cards | Gift Cards Proceeds from the sale of gift cards are recorded as deferred revenue and recognized as revenue when redeemed by the holder. There are no expiration dates on the Company’s gift cards and the Company does not charge any service fees that would result in a decrease to a customer’s available balance. Although the Company will continue to honor all gift cards presented for payment, it may determine the likelihood of redemption to be remote for certain gift cards due to, among other things, long periods of inactivity. In these circumstances, to the extent the Company determines there is no requirement for remitting balances to government agencies under unclaimed property laws, outstanding gift card balances may then be recognized as breakage in the consolidated statements of operations and comprehensive income as a component of owned restaurant net revenue. For the years ended December 31, 2022 and 2021, the Company recognized $0.3 million and $0.5 million, respectively, in revenue from gift card breakage. |
Pre-opening Costs | Pre-opening Costs Pre-opening costs for Company owned restaurants are expensed as incurred prior to a restaurant opening for business. Pre-opening costs for the years ended December 31, 2022 and 2021 were $5.5 million and $1.0 million, respectively. |
Advertising Costs | Advertising Costs The Company expenses the cost of advertising and promotions as incurred. Advertising expense was $7.5 million and $5.1 million for the years ended December 31, 2022 and 2021, respectively. |
Leases | Leases Contracts are evaluated to determine whether they contain a lease at inception. The Company’s contracts determined to be or contain a lease include explicitly or implicitly identified assets where the Company has the right to substantially all of the economic benefits of the assets and has the ability to direct how and for what purpose the assets are used during the lease term. If it is determined that the contract contains an operating lease, a right-of-use asset and operating lease liability are recorded on the consolidated balance sheets. A right-of-use asset represents the Company’s right to use the underlying asset and the lease liability represents the Company’s contractually obligated payments. Both the right-of-use asset and the lease liability are recognized as of the commencement date of the lease and are based upon the present value of lease payments due over the course of the lease. The right-of-use asset is reduced by any lease incentives received. For leases that do not have a rate implicit in the lease, the Company’s incremental borrowing rate at the date of commencement is used to determine the present value of the lease payments. The Company’s incremental borrowing rate is the rate of interest that it would have to borrow on a collateralized basis over a similar term on an amount equal to the lease payments in a similar economic environment. The Company enters into contracts to lease office and restaurant space with terms that expire at various dates through 2047. The lease term is the minimum of the noncancelable period of the lease or the lease term inclusive of reasonably certain renewal periods. The Company considers a number of factors when evaluating whether the options in its lease contracts were reasonably certain of exercise, such as length of time before option exercise, expected value of the leased asset at the end of the initial lease term, importance of the lease to overall operations, costs to negotiate a new lease, and any contractual or economic penalties. Certain of the Company’s leases also provide for percentage rent, which are variable lease costs determined as a percentage of gross sales in excess of specified, minimum sales targets, as well as other lease costs to reimburse the lessor for real estate tax and insurance expenses, and certain non-lease components that transfer a distinct service to the Company, such as common area maintenance services. These percentage rents and other variable lease costs are not included in the calculation of lease payments when classifying a lease and in the measurement of the lease liability as they do not meet the definition of in-substance, fixed-lease payments under ASC Topic 842, Leases. |
Stock-Based Compensation | Stock-Based Compensation The Company maintains an equity incentive compensation plan under which it may grant options, warrants, restricted stock or other stock-based awards to directors, officers, key employees and other key individuals performing services to the Company. Restricted stock and restricted stock units (“RSUs”) are valued using the closing stock price on the date of grant. Under the plan, vesting of awards can either be based on the passage of time or on the achievement of performance goals. For awards that vest on the passage of time, compensation cost is recognized over the vesting period. For performance-based awards, the Company recognizes compensation costs over the requisite service period when conditions for achievement become probable. The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ or are expected to differ. These estimates, which are currently at 10%, are based on historical forfeiture behavior exhibited by employees of the Company. |
Earnings per Share | Earnings per Share Basic earnings per share is computed using the weighted average number of common shares outstanding during the period and income available to common stockholders. Diluted earnings per share is computed using the weighted average number of common shares outstanding during the period plus the dilutive effect of all potential shares of common stock including common stock issuable pursuant to stock options, warrants, and RSUs. Refer to Note 10 for the calculations of basic and diluted earnings per share. |
Segment Reporting | Segment Reporting The Company has identified the following four reportable operating segments: STK, Kona Grill, ONE Hospitality and Corporate. Refer to Note 13 for additional details and certain financial information regarding the Company’s operating segments relating to the years ended December 31, 2022 and 2021. |
Foreign Currency Translation | Foreign Currency Translation Assets and liabilities of foreign operations are translated into U.S. dollars at the balance sheet date. Revenues and expenses are translated at average monthly exchange rates. Gains or losses resulting from the translation of foreign subsidiaries represent other comprehensive income (loss) and are accumulated as a separate component of stockholders’ equity. Currency translation gains or losses are recorded in accumulated other comprehensive loss within stockholders’ equity and amounted to a loss of approximately $0.2 million and a gain of approximately $1,000 during 2022 and 2021, respectively. |
Comprehensive Income | Comprehensive Income Comprehensive income consists of two components: net income and other comprehensive income (loss). The Company’s other comprehensive income (loss) is comprised of foreign currency translation adjustments. All of the Company’s foreign currency translation adjustments relate to wholly owned subsidiaries of the Company. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326)” (“ASU 2016-13”). ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to assess credit loss estimates. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2022. The Company will adopt the standard effective January 1, 2023. The Company does not expect the adoption of ASU 2016-13 to result in a material change to its consolidated financial statements. |
Property and Equipment, net (Ta
Property and Equipment, net (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Property and Equipment, net | |
Schedule of property and equipment, net | Property and equipment, net consist of the following (in thousands): December 31, December 31, 2022 2021 Furniture, fixtures and equipment $ 33,372 $ 24,942 Leasehold improvements 89,121 76,500 Less: accumulated depreciation and amortization (47,528) (39,425) Subtotal 74,965 62,017 Construction in progress 16,276 5,374 Restaurant smallwares 2,846 2,247 Total $ 94,087 $ 69,638 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Accrued Expenses | |
Schedule of accrued expenses | Accrued expenses consist of the following (in thousands): December 31, December 31, 2022 2021 Payroll and related (1) $ 5,249 $ 6,554 VAT and sales taxes 4,118 3,477 Amounts due to landlords 2,949 1,847 Income taxes and related 156 — Construction on new restaurants 1,903 359 Insurance 742 642 Legal, professional and other services 626 458 Interest 268 132 Accrued lease exit costs (2) — 4,913 Other (3) 6,398 4,773 Total $ 22,409 $ 23,155 (1) Payroll and related included $1.2 million in employer payroll taxes for which payment was deferred under the CARES Act as of December 31, 2021. (2) Amount relates to lease exit costs for 2016 leases for restaurants never built and still under dispute with landlords. (3) Amount primarily relates to recurring restaurant operating expenses. |
Long Term Debt (Tables)
Long Term Debt (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Long Term Debt. | |
Schedule of long-term debt | Long-term debt consists of the following (in thousands): December 31, December 31, 2022 2021 Term loan agreements $ 24,250 $ 24,750 Revolving credit facility — — Delayed draw term facility 50,000 — Total long-term debt 74,250 24,750 Less: current portion of long-term debt (1,500) (500) Less: debt issuance costs (2,206) (1,118) Total long-term debt, net of current portion $ 70,544 $ 23,132 |
Schedule of future minimum loan payments | Future minimum loan payments: 2023 $ 1,500 2024 1,500 2025 1,500 2026 69,750 Total $ 74,250 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Income Taxes | |
Schedule of components of income before provision for income taxes | The components of income before provision for income taxes were as follows (in thousands): For the years ended December 31, 2022 2021 Domestic $ 14,051 $ 33,331 Foreign 142 203 Total $ 14,193 $ 33,534 |
Schedule of components of provision for income taxes | The components of the Company’s provision for income taxes were as follows (in thousands): For the years ended December 31, 2022 2021 Current: Federal $ — $ — State and local 808 564 Foreign 75 110 Total current 883 674 Deferred: Federal (429) (195) State and local 420 1,107 Foreign — — Total deferred (9) 912 Total provision for income taxes $ 874 $ 1,586 |
Schedule of effective tax rate differs from the statutory rates | The Company’s effective tax rate differs from the statutory rates as follows: For the years ended December 31, 2022 2021 Income tax provision at federal statutory rate 21.0% 21.0% State and local taxes 7.6% 4.5% FICA tip credit (22.5)% (7.2)% Compensation subject to IRC Section 162(m) 8.6% 6.2% Equity based compensation (9.3)% (7.6)% PPP income exclusion —% (11.6)% Other items, net 0.8% (0.6)% Effective income tax rate 6.2% 4.7% |
Schedule of income tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities | The income tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows (in thousands): For the years ended December 31, 2022 2021 Deferred tax assets: Operating lease liabilities $ 18,871 $ 17,152 Stock compensation 415 247 FICA tip credit carryforward 13,976 9,929 Net operating loss 3,203 3,290 Goodwill 906 1,055 Inventory 20 10 Charitable contributions carryforward 3 — Foreign tax credit carryforward 622 382 Deferred revenue 190 165 State and local tax credit carryforward 135 310 Expenses not deductible until paid 298 1,667 IRC 163(j) disallowed interest carryforward 483 — Debt issuance costs 113 143 Kona related acquisition costs 755 813 Deferred payroll taxes — 281 Total deferred tax assets 39,990 35,444 Deferred tax liabilities: Operating lease right-of-use assets (13,974) (13,150) Depreciation and amortization (13,064) (9,605) Other (7) (40) Total deferred tax liabilities (27,045) (22,795) Valuation allowance (622) (336) Net deferred tax assets $ 12,323 $ 12,313 |
Schedule of activity of uncertain tax positions | The following table summarizes the activity related to the Company’s uncertain tax positions (in thousands): For the years ended December 31, 2022 2021 Balance, beginning of year $ 447 $ 814 Increase related to current year positions — — Decrease related to prior period positions (401) (367) Balance, end of year $ 46 $ 447 |
Revenue recognition (Tables)
Revenue recognition (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Revenue recognition | |
Schedule of contract liabilities | The following table provides information about contract receivables and liabilities from contracts with customers, which include deferred license revenue, deferred gift card revenue and the Konavore rewards program and deposits from customers for future events (in thousands): December 31, December 31, 2022 2021 Deferred license revenue (1) 297 388 Deferred gift card revenue (2) 1,680 1,769 Advanced party deposits (2) 435 260 Konavore rewards program (3) 163 136 (1) Includes the current and long-term portion of deferred license revenue which are included in other current liabilities and other long-term liabilities on the consolidated balance sheets. (2) Deferred gift card revenue and advance party deposits on goods and services yet to be provided are included in deferred gift card revenue and other on the consolidated balance sheets. (3) Konavore rewards program is included in accrued expenses on the consolidated balance sheets. |
Revenue recognized during the period from contract liabilities | Significant changes in deferred license revenue and deferred gift card revenue for the years ended December 31, 2022 and 2021 are as follows (in thousands): December 31, December 31, 2022 2021 Revenue recognized from deferred license revenue $ 79 $ 164 Revenue recognized from deferred gift card revenue 1,295 1,214 Revenue recognized from advanced party deposits 248 60 |
Schedule of estimated deferred license revenue to be recognized in the future related to performance obligations | As of December 31, 2022, the estimated deferred license revenue to be recognized in the future related to performance obligations that are unsatisfied as of December 31,2022 were as follows for each year ending (in thousands): 2023 $ 78 2024 45 2025 44 2026 37 2027 34 Thereafter 59 Total future estimated deferred license revenue $ 297 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Leases | |
Schedule of components of lease expense | The components of lease expense for the period were as follows (in thousands): December 31, December 31, 2022 2021 Lease cost Operating lease cost $ 14,587 $ 13,602 Finance lease cost Amortization of ROU assets 59 — Interest on lease liabilities 25 — Total finance lease cost 84 — Variable lease cost (1) 11,373 7,400 Short-term lease cost 945 684 Total lease cost $ 26,989 $ 21,686 Weighted average remaining lease term Operating leases 13 years 13 years Finance leases 5 years — Weighted average discount rate Operating leases 8.40 % 8.43 % Finance leases 8.96 % — % (1) Variable lease cost is comprised of percentage rent and common area maintenance. |
Schedule of supplemental cash flow information related to leases | Supplemental cash flow information related to leases for the period was as follows (in thousands): December 31, December 31, 2022 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 13,297 $ 12,644 Operating cash flows from finance leases $ 59 $ — Financing cash flows from finance leases $ 51 $ — Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 5,487 $ 8,068 Finance leases $ 1,000 $ — |
Schedule of maturities of operating lease liabilities | As of December 31, 2022, maturities of the Company’s operating lease liabilities are as follows (in thousands): 2023 $ 11,789 2024 14,881 2025 14,105 2026 14,047 2027 14,356 Thereafter 124,223 Total lease payments 193,401 Less: imputed interest (81,818) Present value of operating lease liabilities $ 111,583 |
Summary of components of finance lease assets and liabilities on the consolidated balance sheet | The components of finance lease assets and liabilities on the consolidated balance sheet were as follows (in thousands): December 31, December 31, 2022 2021 Finance lease right-of-use assets (1) $ 942 $ — Current portion of finance lease liabilities (1) 177 — Long-term portion of finance lease liabilities (1) 754 — (1) Finance lease assets and liabilities are included in other assets, other current liabilities, and other long-term liabilities on the consolidated balance sheets. |
Schedule of maturities of finance lease liabilities | As of December 31, 2022, maturities of the Company’s finance lease liabilities are as follows (in thousands): 2023 $ 253 2024 233 2025 233 2026 233 2027 194 Total lease payments 1,146 Less: imputed interest (215) Present value of finance lease liabilities $ 931 |
Earnings per share (Tables)
Earnings per share (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Earnings per share | |
Schedule of earnings per share, basic and diluted | For the years ended December 31, 2022 and 2021, earnings per share was calculated as follows (in thousands, except earnings per share and related share data): Year ended December 31, 2022 2021 Net income attributable to The ONE Group Hospitality, Inc. $ 13,534 $ 31,348 Basic weighted average shares outstanding 32,400,515 31,155,224 Dilutive effect of stock options, warrants and restricted share units 1,471,282 2,639,120 Diluted weighted average shares outstanding 33,871,797 33,794,344 Net income available to common stockholders per share - Basic $ 0.42 $ 1.01 Net income available to common stockholders per share - Diluted $ 0.40 $ 0.93 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Stockholders' Equity. | |
Schedule of warrants to purchase shares of common stock outstanding | The Company has the following warrants to purchase shares of common stock outstanding as of December 31, 2022 and 2021: Shares available for purchase as of Warrants Exercise December 31, December 31, Issuance date Holder of warrants Expiration date Issued Price 2022 2021 November 15, 2017 2017 Securities Purchase Agreement investors May 15, 2023 875,000 $ 1.63 125,000 125,000 |
Employee Benefit Plans (Tables)
Employee Benefit Plans (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Stock-Based Compensation and Warrants | |
Schedule of stock option activity | Changes in outstanding stock options during the years ended December 31, 2022 and 2021 were as follows: Weighted Weighted average Intrinsic average exercise remaining value Shares price contractual life (thousands) Outstanding at January 1, 2021 1,707,008 $ 3.37 Vested 594,402 3.09 Exercised (1,039,058) 3.23 Cancelled, expired or forfeited (10,000) 2.13 Outstanding at December 31, 2021 1,252,352 3.36 3.92 years $ 11,581 Exercisable at December 31, 2021 1,126,685 3.48 3.72 years $ 10,283 Vested - - Exercised (65,000) 2.13 Cancelled, expired or forfeited - - Outstanding at December 31, 2022 1,187,352 3.43 2.84 years $ 3,811 Exercisable at December 31, 2022 1,187,352 $ 3.43 2.84 years $ 3,811 |
Schedule of non-vested stock options | A summary of the status of the Company’s non-vested stock options as of December 31, 2022 and 2021 and changes during the years then ended, is presented below: Weighted average Shares grant date fair value Non-vested stock options at January 1, 2021 263,333 $ 0.99 Granted — — Vested (127,667) 1.00 Cancelled, expired or forfeited (10,000) 0.87 Non-vested stock options at December 31, 2021 125,667 $ 1.00 Granted — — Vested (125,667) 1.00 Cancelled, expired or forfeited — — Non-vested stock options at December 31, 2022 — $ — |
Schedule of restricted stock awards and changes | A summary of the status of RSUs and changes during the years ended December 31, 2022 and 2021 is presented below: Weighted average Shares grant date fair value Non-vested RSUs at January 1, 2021 1,871,592 $ 1.68 Granted 977,599 7.74 Vested (1,109,250) 1.90 Cancelled, expired or forfeited (49,931) 5.18 Non-vested RSUs at December 31, 2021 1,690,010 $ 4.98 Granted 983,147 7.31 Vested (742,781) 3.82 Cancelled, expired or forfeited (90,944) 6.38 Non-vested RSUs at December 31, 2022 1,839,432 $ 6.62 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Segment Reporting | |
Schedule of segment information | Certain financial information relating to the years ended December 31, 2022 and 2021 for each segment is provided below (in thousands). STK Kona Grill ONE Hospitality Corporate Total For the year ended December 31, 2022 Total revenues $ 187,402 $ 126,341 $ 2,344 $ 551 $ 316,638 Operating income (loss) 40,343 7,217 1,282 (32,536) 16,306 Capital asset additions $ 19,116 $ 10,496 $ 139 $ 2,878 $ 32,629 As of December 31, 2022 Total assets $ 113,911 $ 78,691 $ 5,746 $ 92,676 $ 291,024 STK Kona Grill ONE Hospitality Corporate Total For the year ended December 31, 2021 Total revenues $ 151,436 $ 123,181 $ 1,725 $ 836 $ 277,178 Operating income (loss) 39,863 12,982 466 (33,926) 19,385 Capital asset additions $ 7,581 $ 2,307 $ 170 $ 1,409 $ 11,467 As of December 31, 2021 Total assets $ 95,579 $ 69,006 $ 5,735 $ 59,515 $ 229,835 |
Geographic Information (Tables)
Geographic Information (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Geographic Information | |
Schedule of revenues by geographic location | Certain financial information by geographic location relating to the years ended December 31, 2022 and 2021 is provided below (in thousands). For the year ended December 31, 2022 2021 Domestic revenues $ 311,119 $ 272,651 International revenues 5,519 4,527 Total revenues $ 316,638 $ 277,178 |
Schedule of long-lived assets by geographic location | December 31, December 31, 2022 2021 Domestic long-lived assets $ 211,143 $ 185,718 International long-lived assets 1,345 1,190 Total long-lived assets $ 212,488 $ 186,908 |
Description of Business (Detail
Description of Business (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 USD ($) restaurant item | Dec. 31, 2021 USD ($) | |
Number of venues | 63 | |
Number of hotels provided F&B services | item | 7 | |
COVID-19 related expenses | $ | $ 2,534 | $ 5,821 |
STK | ||
Number of venues | 25 | |
Kona Grill | ||
Number of venues | 24 | |
F&B Venues | ||
Number of venues | 14 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 USD ($) segment $ / shares | Dec. 31, 2021 USD ($) $ / shares | |
Number of restaurants under construction | two | |
Depreciation and amortization | $ (12,134) | $ (10,790) |
Net income (loss) | $ 13,319 | $ 31,948 |
Basic net income per share | $ / shares | $ 0.42 | $ 1.01 |
Diluted net income per share | $ / shares | $ 0.40 | $ 0.93 |
Intangible assets, estimated useful life | 10 years | |
Property and equipment, net | $ 94,087 | $ 69,638 |
Operating lease right-of-use assets | 85,161 | 85,395 |
Finance lease right-of-use assets | 942 | |
Impairment loss related to long-lived assets | 0 | |
Accounts receivable | 15,220 | 11,356 |
Amortization expense | 200 | 900 |
Amortization expense, 2023 | 100 | |
Amortization expense, 2024 | 100 | |
Amortization expense, 2025 | 100 | |
Amortization expense, 2026 | 100 | |
Amortization expense, 2027 | 100 | |
Valuation allowance of deferred tax assets, net | $ 622 | 336 |
Recognized uncertain tax position, Description | The amount recognized is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. | |
Revenue recognized, gift card breakage | $ 300 | 500 |
Pre-opening costs | 5,519 | 1,037 |
Advertising expense | $ 7,500 | 5,100 |
Estimated percentage of forfeitures | 10% | |
Number of reportable segments | segment | 4 | |
Gain (Loss) on foreign currency translation, net | $ (224) | 1 |
Inventories | 5,728 | 3,915 |
Food | ||
Inventories | 3,700 | 2,000 |
Beverage [Member] | ||
Inventories | 2,000 | 1,900 |
Credit card processors and third party delivery services | ||
Accounts receivable | 6,400 | 3,900 |
Management, license and hotel partners | ||
Accounts receivable | 7,000 | 6,400 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | ||
Deferred revenue | $ 100 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | ||
Deferred revenue | $ 200 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Trade Names | ||
Gross carrying amount, intangible assets | $ 17,400 | $ 17,400 |
Accumulated amortization | 2,200 | $ 2,000 |
Other intangible assets | ||
Gross carrying amount, intangible assets | $ 100 | |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment, estimated useful lives | shorter of their estimated useful lives or the remaining term of the associated lease | |
Maximum | Computer and Equipment Furniture and Fixture [Member] | ||
Property, Plant and Equipment, useful life | 15 years | |
Minimum | Computer and Equipment Furniture and Fixture [Member] | ||
Property, Plant and Equipment, useful life | 3 years | |
Intangible Assets, Amortization Period | Kona Grill Trade Name | ||
Depreciation and amortization | $ 900 | |
Net income (loss) | $ 900 | |
Basic net income per share | $ / shares | $ 0.03 | |
Diluted net income per share | $ / shares | $ 0.03 | |
Intangible Assets, Amortization Period | Kona Grill Trade Name | Maximum | ||
Number of restaurants planned to be opened in future | five | |
Intangible Assets, Amortization Period | Kona Grill Trade Name | Minimum | ||
Number of restaurants planned to be opened in future | three |
Property and Equipment, net - T
Property and Equipment, net - Total PPE (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Property, Plant and Equipment [Line Items] | ||
Less: accumulated depreciation and amortization | $ (47,528) | $ (39,425) |
Property and equipment, net | 94,087 | 69,638 |
Furniture, fixtures and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 33,372 | 24,942 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 89,121 | 76,500 |
Total amount net of accumulated depreciation and amortization | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, net | 74,965 | 62,017 |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, net | 16,276 | 5,374 |
Restaurant smallwares | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, net | $ 2,846 | $ 2,247 |
Property and Equipment, net - N
Property and Equipment, net - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Property and Equipment, net | ||
Depreciation | $ 11.7 | $ 9.9 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Accrued Expenses | ||
Payroll and related | $ 5,249 | $ 6,554 |
VAT and sales taxes | 4,118 | 3,477 |
Amounts due to landlords | 2,949 | 1,847 |
Income taxes and related | 156 | |
Construction on new restaurants | 1,903 | 359 |
Insurance | 742 | 642 |
Legal, professional and other services | 626 | 458 |
Interest | 268 | 132 |
Accrued lease exit costs | 4,913 | |
Other | 6,398 | 4,773 |
Total | $ 22,409 | 23,155 |
Employer payroll taxes, deferred | $ 1,200 |
Long Term Debt - Debt (Details)
Long Term Debt - Debt (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 | Aug. 06, 2021 |
Debt Instrument [Line Items] | |||
Long-term debt | $ 74,250 | $ 24,750 | |
Less: current portion of long-term debt | (1,500) | (500) | |
Less: debt issuance costs | (2,206) | (1,118) | $ (900) |
Long-term debt, net of current portion | 70,544 | 23,132 | |
Delayed draw term Loan | |||
Debt Instrument [Line Items] | |||
Long-term debt | 50,000 | ||
Medium-term Notes | Term Loan Agreements | |||
Debt Instrument [Line Items] | |||
Long-term debt | $ 24,250 | $ 24,750 |
Long Term Debt - Future Minimum
Long Term Debt - Future Minimum Loan Payments (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Future minimum loan payments: | ||
2023 | $ 1,500 | |
2024 | 1,500 | |
2025 | 1,500 | |
2026 | 69,750 | |
Total | $ 74,250 | $ 24,750 |
Long Term Debt - Narrative (Det
Long Term Debt - Narrative (Details) $ in Thousands | 12 Months Ended | |||||||
Dec. 28, 2022 USD ($) | Dec. 13, 2022 USD ($) | Aug. 06, 2021 USD ($) | May 04, 2020 USD ($) subsidiary | Dec. 31, 2022 USD ($) employee | Dec. 31, 2021 USD ($) | Sep. 30, 2022 USD ($) | Aug. 05, 2021 USD ($) | |
Debt Instrument [Line Items] | ||||||||
Interest expense | $ 1,700 | $ 3,300 | ||||||
Weighted average interest rate | 10.31% | 6% | ||||||
Standby letters of credit outstanding | $ 1,400 | |||||||
Debt issuance costs | $ 900 | 2,206 | $ 1,118 | |||||
Gain on CARES Act Loan Forgiveness | (18,529) | |||||||
Debt interest rate | 4% | |||||||
Debt Instrument, Floor Interest Rate | 1% | |||||||
Transaction costs | 100 | |||||||
Prepayment of outstanding balances | $ 22,200 | |||||||
Loss on early debt extinguishment | $ 600 | |||||||
Other Assets | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt issuance costs | 500 | |||||||
Maximum | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum net leverage ratio | 2% | |||||||
Shares authorized | $ 10,000 | |||||||
LIBOR | ||||||||
Debt Instrument [Line Items] | ||||||||
Basis spread on variable rate | 5% | |||||||
Base Rate | ||||||||
Debt Instrument [Line Items] | ||||||||
Basis spread on variable rate | 4% | |||||||
One Month LIBOR | ||||||||
Debt Instrument [Line Items] | ||||||||
Basis spread on derivative rate | 1% | |||||||
LIBOR Floor | ||||||||
Debt Instrument [Line Items] | ||||||||
Basis spread on variable rate | 1% | |||||||
Fed Funds Effective Rate Overnight Index Swap Rate [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Basis spread on variable rate | 0.50% | |||||||
Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Basis spread on variable rate | 6.50% | |||||||
Goldman Sachs Credit Agreement | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt issuance costs | 2,200 | |||||||
Revolving Credit Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Available amount | $ 10,600 | |||||||
Secured revolving credit facility | $ 12,000 | |||||||
Term Loans | ||||||||
Debt Instrument [Line Items] | ||||||||
Face value of debt | 25,000 | $ 48,000 | ||||||
Principal payments | $ 100 | |||||||
Delayed draw term Loan | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum net leverage ratio | 1.75% | |||||||
Face value of debt | $ 50,000 | |||||||
Debt Instrument, Delayed Draw Period | 12 months | |||||||
Loan received | $ 50,000 | |||||||
Debt Instrument, delayed draw period | 12 months | |||||||
Debt Instrument, Period of Interest on Undrawn Portion | 90 days | |||||||
Delayed draw term Loan | Maximum | ||||||||
Debt Instrument [Line Items] | ||||||||
Shares authorized | $ 50,000 | |||||||
Debt Instrument, Interest on Undrawn Portion | $ 35,000 | |||||||
CARES ACT Loans | ||||||||
Debt Instrument [Line Items] | ||||||||
Number of employees return to work from furlough | employee | 3,000 | |||||||
Number of subsidiaries | subsidiary | 2 | |||||||
Eligibility percentage for loan forgiveness | 60% | |||||||
CARES ACT Loans | STK | ||||||||
Debt Instrument [Line Items] | ||||||||
Loan received | $ 9,800 | |||||||
CARES ACT Loans | Kona Grill | ||||||||
Debt Instrument [Line Items] | ||||||||
Loan received | $ 8,500 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Variable Interest Entity, Primary Beneficiary | ||
Related Party Transaction [Line Items] | ||
Due from related parties | $ 400 | $ 400 |
Bagatelle NY LA Investors, LLC (Bagatelle Investors) | ||
Related Party Transaction [Line Items] | ||
Ownership percentage equity method investment | 31.24% | 31.24% |
Equity Method Investments | $ 0 | $ 0 |
Bagatelle Little West 12th, LLC (Bagatelle NY) | ||
Related Party Transaction [Line Items] | ||
Ownership percentage equity method investment | 51.13% | 51.13% |
Income Taxes - Summary of Incom
Income Taxes - Summary of Income before Provision for Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Income before (benefit) provision for income taxes | ||
Domestic | $ 14,051 | $ 33,331 |
Foreign | 142 | 203 |
Income before provision for income taxes | $ 14,193 | $ 33,534 |
Income Taxes - Summary of Provi
Income Taxes - Summary of Provision for Income Tax Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Current | ||
State and local | $ 808 | $ 564 |
Foreign | 75 | 110 |
Total current | 883 | 674 |
Deferred | ||
Federal | (429) | (195) |
State and local | 420 | 1,107 |
Total deferred | (9) | 912 |
Total provision for income taxes | $ 874 | $ 1,586 |
Income Taxes - Summary of Effec
Income Taxes - Summary of Effective Statutory Federal Income Tax Rate (Details) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Effective Income Tax Rate Reconciliation, Percent [Abstract] | ||
Income tax provision at federal statutory rate | 21% | 21% |
State and local taxes | 7.60% | 4.50% |
FICA tip credit | (22.50%) | (7.20%) |
Compensation subject to IRC Section 162(m) | 8.60% | 6.20% |
Equity based compensation | (9.30%) | (7.60%) |
PPP income exclusion | (11.60%) | |
Other items, net | 0.80% | (0.60%) |
Effective income tax rate | 6.20% | 4.70% |
Income Taxes - Summary of Defer
Income Taxes - Summary of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Deferred tax assets: | ||
Operating lease liabilities | $ 18,871 | $ 17,152 |
Stock compensation | 415 | 247 |
FICA tip credit carryforward | 13,976 | 9,929 |
Net operating loss | 3,203 | 3,290 |
Goodwill | 906 | 1,055 |
Inventory | 20 | 10 |
Charitable contributions carryforward | 3 | |
Foreign tax credit carryforward | 622 | 382 |
Deferred revenue | 190 | 165 |
State and local tax credit carryforward | 135 | 310 |
Expenses not deductible until paid | 298 | 1,667 |
IRC 163(j) disallowed interest carryforward | 483 | |
Debt issuance costs | 113 | 143 |
Kona related acquisition costs | 755 | 813 |
Deferred payroll taxes | 281 | |
Total deferred tax assets | 39,990 | 35,444 |
Deferred tax liabilities: | ||
Operating lease right-of-use assets | (13,974) | (13,150) |
Depreciation and amortization | (13,064) | (9,605) |
Other | (7) | (40) |
Total deferred tax liabilities | (27,045) | (22,795) |
Valuation allowance | (622) | (336) |
Net deferred tax assets | $ 12,323 | $ 12,313 |
Income Taxes - Summary of Uncer
Income Taxes - Summary of Uncertain Tax Positions (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | ||
Balance, beginning of year | $ 447 | $ 814 |
Decrease related to prior period positions | (401) | (367) |
Balance, end of year | $ 46 | $ 447 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Operating Loss Carryforwards [Line Items] | ||
Effective income tax rate | 6.20% | 4.70% |
Valuation allowance of deferred tax assets, net | $ 622 | $ 336 |
Amount of valuation allowance determined to release | 600 | 300 |
Operating lease liabilities | 18,871 | 17,152 |
Operating lease right-of-use assets | 13,974 | 13,150 |
Net operating loss | 3,203 | 3,290 |
Unrecognized tax benefits, other | 100 | $ 100 |
Federal income tax | ||
Operating Loss Carryforwards [Line Items] | ||
Operating loss | $ 13,900 | |
State income tax | Minimum | ||
Operating Loss Carryforwards [Line Items] | ||
Operating loss, expiration date | Dec. 31, 2036 | |
State income tax | Maximum | ||
Operating Loss Carryforwards [Line Items] | ||
Operating loss, expiration date | Dec. 31, 2041 |
Revenue recognition - Contract
Revenue recognition - Contract Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Deferred license revenue | ||
Deferred revenue | $ 297 | $ 388 |
Deferred gift card revenue | ||
Deferred revenue | 1,680 | 1,769 |
Advanced party deposits | ||
Deferred revenue | 435 | 260 |
Konavore rewards program | ||
Deferred revenue | $ 163 | $ 136 |
Revenue recognition - Changes i
Revenue recognition - Changes in Deferred License Revenue and Deferred Gift Card Revenue (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Deferred license revenue | ||
Revenue recognized | $ 79 | $ 164 |
Deferred gift card revenue | ||
Revenue recognized | 1,295 | 1,214 |
Advanced party deposits | ||
Revenue recognized | $ 248 | $ 60 |
Revenue recognition - Future Es
Revenue recognition - Future Estimated Deferred License Revenue (Details) - Deferred license revenue $ in Thousands | Dec. 31, 2022 USD ($) |
2023 | $ 78 |
2024 | 45 |
2025 | 44 |
2026 | 37 |
2027 | 34 |
Thereafter | 59 |
Total future estimated deferred license revenue | $ 297 |
Leases - Lease Expense (Details
Leases - Lease Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Lease cost | ||
Operating lease cost | $ 14,587 | $ 13,602 |
Amortization of ROU assets | 59 | |
Interest on lease liabilities | 25 | |
Total finance lease cost | 84 | |
Variable lease cost | 11,373 | 7,400 |
Short-term lease cost | 945 | 684 |
Total lease cost | $ 26,989 | $ 21,686 |
Weighted average remaining lease term - operating leases | 13 years | 13 years |
Weighted average remaining lease term - finance leases | 5 years | |
Weighted average discount rate - operating leases | 8.40% | 8.43% |
Weighted average discount rate - finance leases | 8.96% |
Leases - Supplemental Cash Flow
Leases - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Leases | ||
Operating cash flows from operating leases | $ 13,297 | $ 12,644 |
Operating cash flows from finance leases | 59 | |
Financing cash flows from finance leases | 51 | |
Operating leases | 5,487 | $ 8,068 |
Finance leases | $ 1,000 |
Leases - Operating Lease Liabil
Leases - Operating Lease Liabilities (Details) $ in Thousands | Dec. 31, 2022 USD ($) |
Operating Lease Liabilities, Payments Due [Abstract] | |
2023 | $ 11,789 |
2024 | 14,881 |
2025 | 14,105 |
2026 | 14,047 |
2027 | 14,356 |
Thereafter | 124,223 |
Total lease payments | 193,401 |
Less: imputed interest | (81,818) |
Present value of operating lease liabilities | $ 111,583 |
Leases - Finance Lease Liabilit
Leases - Finance Lease Liabilities (Details) $ in Thousands | Dec. 31, 2022 USD ($) |
Finance Lease, Liability, Payment, Due [Abstract] | |
2023 | $ 253 |
2024 | 233 |
2025 | 233 |
2026 | 233 |
2027 | 194 |
Total lease payments | 1,146 |
Less: imputed interest | (215) |
Present value of finance lease liabilities | $ 931 |
Leases - Finance Lease Assets a
Leases - Finance Lease Assets and Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Leases | ||
Finance lease right-of-use assets | $ 942 | |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Other Assets, Noncurrent | Other Assets, Noncurrent |
Current portion of finance lease liabilities | $ 177 | |
Finance Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration] | Other Liabilities, Current | Other Liabilities, Current |
Long-term portion of finance lease liabilities | $ 754 | |
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration] | Other Liabilities, Noncurrent | Other Liabilities, Noncurrent |
Leases - Operating Lease - Narr
Leases - Operating Lease - Narrative (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2022 USD ($) lease | |
Lessee, Lease, Description [Line Items] | |
Number of operating leases | lease | 2 |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Initial lease term | 10 years |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Initial lease term | 15 years |
STK Restaurant in Dallas, Texas [Member] | |
Lessee, Lease, Description [Line Items] | |
The amount of lessee's operating lease not yet commenced | $ | $ 2.9 |
Lessee, Operating Lease, Lease Not yet Commenced, Existence of Option to Extend [true false] | true |
Earnings per share - Calculatio
Earnings per share - Calculation (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Earnings per share | ||
Net income attributable to The One Group Hospitality, Inc. | $ 13,534 | $ 31,348 |
Basic weighted average shares outstanding | 32,400,515 | 31,155,224 |
Dilutive effect of stock options, warrants and restricted share units | 1,471,282 | 2,639,120 |
Diluted weighted average shares outstanding | 33,871,797 | 33,794,344 |
Net income available to common stockholders per share - Basic | $ 0.42 | $ 1.01 |
Net income available to common stockholders per share - Diluted | $ 0.40 | $ 0.93 |
Earnings per share - Narrative
Earnings per share - Narrative (Details) - shares shares in Millions | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Stock Options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities excluded from the calculation of diluted earnings per share | 0.1 | 0.4 |
Warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities excluded from the calculation of diluted earnings per share | 0.1 | 0.4 |
Restricted Share Units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities excluded from the calculation of diluted earnings per share | 0.1 | 0.4 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||
Dec. 31, 2022 | Sep. 30, 2022 | Dec. 31, 2021 | |
Equity, Class of Treasury Stock [Line Items] | |||
Common stock, par value per share (in dollars per share) | $ 0.0001 | $ 0.0001 | |
Common Stock, Shares Authorized | 75,000,000 | 75,000,000 | |
Common stock, shares issued | 32,829,995 | 32,138,396 | |
Common stock, shares outstanding | 31,735,423 | 32,125,762 | |
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 | |
Preferred stock, par value per share (in dollars per share) | $ 0.0001 | $ 0.0001 | |
Preferred Stock, Shares Issued | 0 | 0 | |
Preferred Stock, Shares Outstanding | 0 | 0 | |
Shares repurchased | 1,081,938 | ||
Amount of shares repurchased | $ 7.1 | ||
Maximum | |||
Equity, Class of Treasury Stock [Line Items] | |||
Shares authorized | $ 10 |
Stockholders' Equity - Warrants
Stockholders' Equity - Warrants to Purchase Shares of Common Stock Outstanding (Details) - Common Stock Warrants Maturing on May 15, 2023 - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Warrants Issued | $ 875,000 | |
Strike price | $ 1.63 | |
Shares available for purchase | 125,000 | 125,000 |
Employee Benefit Plans - Summar
Employee Benefit Plans - Summary of Status of Company's Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Shares | ||
Outstanding at the beginning (in shares) | 1,252,352 | 1,707,008 |
Vested (in shares) | 0 | 594,402 |
Exercised (in shares) | (65,000) | (1,039,058) |
Cancelled, expired or forfeited (in shares) | 0 | (10,000) |
Outstanding at the ending (in shares) | 1,187,352 | 1,252,352 |
Exercisable (in shares) | 1,187,352 | 1,126,685 |
Weighted average exercise price | ||
Outstanding at the beginning (in dollars per share) | $ 3.36 | $ 3.37 |
Vested (in dollars per share) | 0 | 3.09 |
Exercised (in dollars per share) | 2.13 | 3.23 |
Cancelled, expired or forfeited (in dollars per share) | 0 | 2.13 |
Outstanding at the ending (in dollars per share) | 3.43 | 3.36 |
Exercisable (in dollars per share) | $ 3.43 | $ 3.48 |
Weighted average remaining contractual life (Years) | ||
Weighted average remaining contractual life | 2 years 10 months 2 days | 3 years 11 months 1 day |
Exercisable weighted average remaining contractual life | 2 years 10 months 2 days | 3 years 8 months 19 days |
Intrinsic value | ||
Intrinsic value, Outstanding | $ 3,811 | $ 11,581 |
Intrinsic value, Exercisable | $ 3,811 | $ 10,283 |
Employee Benefit Plans - Summ_2
Employee Benefit Plans - Summary of Non-Vested Stock Options (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Shares | ||
Non-vested stock options (in shares) | 125,667 | 263,333 |
Granted (in shares) | 0 | 0 |
Vested (in shares) | (125,667) | (127,667) |
Cancelled, expired or forfeited (in shares) | 0 | (10,000) |
Non-vested stock options (in shares) | 0 | 125,667 |
Weighted average grant date fair value | ||
Non-vested stock options (in dollars per share) | $ 1 | $ 0.99 |
Granted (in dollars per share) | 0 | 0 |
Vested (in dollars per share) | 1 | 1 |
Cancelled, expired or forfeited (in dollars per share) | 0 | 0.87 |
Non-vested stock options (in dollars per share) | $ 0 | $ 1 |
Employee Benefit Plans - Summ_3
Employee Benefit Plans - Summary of Status of Company's Restricted Stock Option Activity (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Shares | ||
Non-vested RSUs at beginning of period (in shares) | 1,690,010 | 1,871,592 |
Granted (in shares) | 983,147 | 977,599 |
Vested (in shares) | (742,781) | (1,109,250) |
Cancelled, expired or forfeited (in shares) | (90,944) | (49,931) |
Non-vested RSUs at ending of period (in shares) | 1,839,432 | 1,690,010 |
Weighted Average Grant Date Fair Value | ||
Non-vested RSUs at beginning of period (in dollars per share) | $ 4.98 | $ 1.68 |
Granted (in dollars per share) | 7.31 | 7.74 |
Vested (in dollars per share) | 3.82 | 1.90 |
Cancelled, expired or forfeited (in dollars per share) | 6.38 | 5.18 |
Non-vested RSUs at ending of period (in dollars per share) | $ 6.62 | $ 4.98 |
Employee Benefit Plans - Narrat
Employee Benefit Plans - Narrative (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | |||
May 18, 2022 shares | Sep. 30, 2022 USD ($) $ / shares shares | Dec. 31, 2022 USD ($) shares | Dec. 31, 2021 USD ($) shares | Sep. 30, 2021 item | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Stock-based compensation | $ 3,985 | $ 3,248 | |||
Number of board members appointed | item | 2 | ||||
Employer payroll taxes | $ 400 | ||||
Stock options, granted | shares | 0 | 0 | |||
Granted (in shares) | shares | 983,147 | 977,599 | |||
Stock-based compensation | $ 3,985 | $ 3,618 | |||
General and Administrative Expense. | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Stock-based compensation | 4,000 | 3,600 | |||
Stock Options | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Fair value of options vested | 100 | 100 | |||
Restricted Stock | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Unrecognized compensation cost related to non-vested awards | $ 9,800 | ||||
Unrecognized compensation cost, recognition period | 2 years 9 months 18 days | ||||
CEO RSUs | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Granted (in shares) | shares | 500,000 | ||||
Contractual term | 48 months | ||||
Risk-free interest rate | 3.31% | ||||
Common stock value | $ / shares | $ 6.95 | ||||
Volatility | 73% | ||||
Fair value of RSU | $ 2,900 | ||||
Stock-based compensation | $ 200 | ||||
Milestone-Based Options | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Stock-based compensation | 300 | ||||
Market Condition Based Restricted Stock Units | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Stock-based compensation | $ 200 | ||||
Equity Incentive Plan 2019 | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Shares available for issuance | shares | 3,727,848 | ||||
Increase in authorized shares (in shares) | shares | 4,500,000 | ||||
Authorized shares (in shares) | shares | 11,573,922 | ||||
Contractual term | 10 years | ||||
Director | Restricted Stock | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Stock-based compensation | $ 300 | $ 500 |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 USD ($) segment | Dec. 31, 2021 USD ($) | |
Segment Reporting Information [Line Items] | ||
Number of reportable segments | segment | 4 | |
Total revenues | $ 316,638 | $ 277,178 |
Operating income (loss) | 16,306 | 19,385 |
Capital asset additions | 32,629 | 11,467 |
Total assets | 291,024 | 229,835 |
STK | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 187,402 | 151,436 |
Operating income (loss) | 40,343 | 39,863 |
Capital asset additions | 19,116 | 7,581 |
Total assets | 113,911 | 95,579 |
Kona Grill | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 126,341 | 123,181 |
Operating income (loss) | 7,217 | 12,982 |
Capital asset additions | 10,496 | 2,307 |
Total assets | 78,691 | 69,006 |
ONE Hospitality | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 2,344 | 1,725 |
Operating income (loss) | 1,282 | 466 |
Capital asset additions | 139 | 170 |
Total assets | 5,746 | 5,735 |
Corporate | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 551 | 836 |
Operating income (loss) | (32,536) | (33,926) |
Capital asset additions | 2,878 | 1,409 |
Total assets | $ 92,676 | $ 59,515 |
Geographic Information (Details
Geographic Information (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | $ 316,638 | $ 277,178 |
Long-lived assets | 212,488 | 186,908 |
Domestic | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | 311,119 | 272,651 |
Long-lived assets | 211,143 | 185,718 |
International | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | 5,519 | 4,527 |
Long-lived assets | $ 1,345 | $ 1,190 |