Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following sets forth the unaudited pro forma condensed combined financial statements (the “Pro Forma Financial Statements”) of BurgerFi International, Inc. (“BurgerFi” or the “Company”) after giving effect to the acquisition of Hot Air, Inc. and Subsidiaries (“Hot Air”). On November 3, 2021, BurgerFi closed on its Stock Purchase Agreement to acquire 100% of the equity interests in Hot Air (the “Transaction”). Hot Air through its subsidiaries, owns and operates casual dining pizza restaurants under the trade name Anthony’s Coal Fired Pizza (“AFCP”). As of September 30, 2021, Hot Air had 61 company owned restaurants in Florida, Delaware, Pennsylvania, New Jersey, New York, Massachusetts, Maryland and Rhode Island.

Under the Stock Purchase Agreement, BurgerFi acquired Hot Air in exchange for the issuance of common stock and redeemable preferred stock having an estimated value of $80.9 million. The number of newly issued shares of common stock was based on the 30-day volume-weighted average price per share on the day before closing, subject to a daily cap of $14.25 per share and floor of $10.25 per share. The number of newly issued shares of redeemable preferred stock were based on a price per share of $25.00.

The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2021 and combined statement of operations for the year ended December 31, 2020 (the “Pro Forma Statements of Operations”) give effect to the Transaction as if it was consummated on January 1, 2020, and the unaudited pro forma condensed combined balance sheet as of September 30, 2021 (the “Pro Forma Balance Sheet”) gives effect to the Transaction as if it was consummated on September 30, 2021. The historical consolidated financial information has been adjusted in the Pro Forma Financial Statements to reflect the pro forma impact of the Transaction. These Pro Forma Financial Statements do not include the effects of any transactions that took place subsequent to September 30, 2021 or any potential debt or equity offerings.

The Pro Forma Statement of Operations for the year ended December 31, 2020 also gives effect to the business combination between OPES Acquisition Corp. (“OPES”) and BurgerFi (the “OPES Merger”) on December 16, 2020, as if it was consummated on January 1, 2020.

The Pro Forma Financial Statements do not reflect any cost savings or associated costs to achieve such savings from operating efficiencies, synergies, debt refinancing or other restructuring that may result from the Transaction. The Pro Forma Financial Statements are preliminary and are not necessarily indicative of the operating results or financial position that would have occurred if the Transaction had been completed on the date assumed, nor are they necessarily indicative of the future operating results or financial position of the combined company. There were no transactions or balances between BurgerFi and Hot Air during the periods presented in the Pro Forma Financial Statements that required elimination as if BurgerFi and Hot Air were consolidated during the periods presented. The assumptions and estimates underlying the unaudited adjustments to the Pro Forma Financial Statements are described in the accompanying notes, which should be read together with the Pro Forma Financial Statements.

The Pro Forma Financial Statements have been derived from and should be read in conjunction with the consolidated financial statements and the related notes of BurgerFi included in its respective Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

 

1

BurgerFi International, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2021

 

		Historical								Pro Forma Adjustments						Pro Forma Combined
(in thousands, except for per share data)		BurgerFi				Hot Air, Inc.								Notes
ASSETS
CURRENT ASSETS
Cash		$	28,295			$	5,565				(8,800	)		4(e), 4(g)		$	25,060
Accounts receivable, net			551				583										1,134
Inventory			398				1,049										1,447
Asset held for sale			732				—										732
Prepaid expenses and other current assets			1,507				1,599										3,106
TOTAL CURRENT ASSETS			31,483				8,796				(8,800	)					31,479
PROPERTY & EQUIPMENT, net			15,122				15,608										30,730
DUE FROM RELATED COMPANIES			83				—										83
GOODWILL			123,560				48,399				40,205			4(a)			212,164
INTANGIBLE ASSETS			111,437				65,044				3,071			4(b)			179,552
OTHER ASSETS			246				466										712
TOTAL ASSETS		$	281,931			$	138,313			$	34,476					$	454,720
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable - trade and other			2,391				3,912										6,303
Accrued expense			2,272				6,136				2,700			4(g)			11,108
Other current liabilities			5,640				—										5,640
Current portion of long-term debt			76				2,441										2,517
TOTAL CURRENT LIABILITIES			10,379				12,489				2,700						25,568
NON-CURRENT LIABILITIES
Warrant liability			6,111				—										6,111
Deferred revenue, net of current portion			2,745				—										2,745
Long term debt - net of current portion			601				64,093				(8,300	)		4(e)			56,394
Related party note payable			—				10,000				(709	)		4(e)			9,291
Deferred tax liability			—				8,452										8,452
Deferred rent			472				2,424										2,896
Revolving line of credit			—				2,500										2,500
Other long term liabilities			—				4,662				(3,263	)		4(f)			1,399
Redeemable preferred stock			—				—				53,000			4(c)			53,000
TOTAL LIABILITIES			20,308				104,620				43,428						168,356
STOCKHOLDERS’ EQUITY
Common stock			2				—				—						2
Additional paid-in capital			268,083				126,688				(98,747	)		4(c)			296,024
Accumulated deficit			(6,462	)			(92,995	)			89,795			4(c), 4(g)			(9,662	)
TOTAL STOCKHOLDERS’ EQUITY			261,623				33,693				(8,952	)					286,364
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	281,931			$	138,313			$	34,476					$	454,720

See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information

 

2

BurgerFi International, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the nine-month period ended September 30, 2021

 

		Historical								Pro Forma								Pro Forma
(in thousands, except for per share data)		BurgerFi				Hot Air, Inc.				Adjustments				Notes				Combined
REVENUE
Restaurant sales		$	26,067			$	90,347											$	116,414
Royalty and other fees			5,940				—												5,940
Royalty - brand development and co-op			1,527				—												1,527
Franchise fees			293				—												293
TOTAL REVENUE			33,827				90,347				—								124,174
Restaurant level operating expenses:
Food, beverage and paper costs			7,786				24,312												32,098
Labor and related expenses			6,988				27,346												34,334
Other operating expenses			5,861				18,365												24,226
Occupancy and related expenses			2,280				8,451												10,731
General and administrative expenses			10,731				6,404												17,135
Pre-opening costs			1,243				83												1,326
Share-based compensation expense			6,785				1,253												8,038
Depreciation and amortization expense			6,473				9,014				48				4(b	)			15,535
Brand development and co-op advertising expense			1,785				2,748												4,533
TOTAL OPERATING EXPENSES			49,932				97,976				48								147,956
OPERATING LOSS			(16,105	)			(7,629	)			(48	)							(23,782	)
Other income (expense)			2,240				(1,073	)			495				4(f	)			1,662
Gain on change in value of warrant liability			10,405				—												10,405
Change in fair value of redeemable preferred stock			—				—				(3,830	)			4(c	)			(3,830	)
Interest expense			(46	)			(2,614	)			(39	)			4(e	)			(2,699	)
Loss before income taxes			(3,506	)			(11,316	)			(3,422	)							(18,244	)
Income tax expense			731				1,999				102				4(h	)			2,832
Net Loss		$	(4,237	)		$	(13,315	)		$	(3,524	)						$	(21,076	)
Weighted average common shares outstanding
Basic			17,866,168				—				3,362,424				4(d	)			21,228,592
Diluted			18,154,434				—				3,362,424				4(d	)			21,516,858
Net loss per common share
Basic			$ (0.24	)			—				—							$	(0.99	)
Diluted		$	(0.93	)			—				—							$	(1.57	)

 

3

BurgerFi International, Inc., and Subsidiaries

Pro Forma Condensed Combined Statement of Operations

For the year ended December 31, 2020

 

										Hot Air								OPES
		Combined*				Historical				Pro Forma								Pro Forma								Pro Forma
(in thousands, except for per share data)		BurgerFi				Hot Air, Inc.				Adjustments				Notes				Adjustments				Notes				Combined
REVENUE
Restaurant sales		$	25,316			$	107,160																			$	132,476
Royalty and other fees			6,371				—																				6,371
Terminated franchise fees			693				—																				693
Royalty - brand development and co-op			1,515				—																				1,515
Initial franchise fees			387				—																				387
TOTAL REVENUE			34,282				107,160				—								—								141,442
Restaurant level operating expenses:
Food, beverage and paper costs			6,937				26,396																				33,333
Labor and related expenses			6,590				31,861																				38,451
Other operating expenses			6,330				23,316																				29,646
Occupancy and related expenses			2,740				11,184																				13,924
General and administrative expenses			7,782				10,181				3,200				4	(g)											21,163
Store closure costs			—				3,436																				3,436
Share-based compensation expense			818				1,005																				1,823
Depreciation and amortization expense			1,410				13,393				(319	)			4	(b)			7,218				4	(i)			21,702
Brand development and co-op advertising expense			2,317				2,203																				4,520
Gain on disposal of property and equipment			(2	)			—																				(2	)
TOTAL OPERATING EXPENSES			34,922				122,975				2,881								7,218								167,996
OPERATING LOSS			(640	)			(15,815	)			(2,881	)							(7,218	)							(26,554	)
Gain on extinguishment of debt			791				—																				791
Gain on change in value of warrant liability			5,597				—																				5,597
Change in fair value of redeemable preferred stock			—				—				(4,102	)			4	(c)											(4,102	)
Interest expense			(131	)			(3,685	)			(51	)			4	(e)											(3,867	)
Other expenses			—				(1,678	)			742				4	(f)											(936	)
Income (loss) before income taxes			5,617				(21,178	)			(6,292	)							(7,218	)							(29,071	)
Income benefit (expense)			366				524				548				4	(h)			1,877				4	(j)			3,315
Net Income (loss)			5,983				(20,654	)			(5,744	)							(5,341	)							(25,756	)
Net Income Attributable to Non-Controlling Interests		$	20				—																			$	20
Net Income (loss) Attributable to common shareholders and Controlling Interests		$	5,963			$	(20,654	)		$	(5,744	)						$	(5,341	)						$	(25,776	)
Weighted average common shares outstanding
Basic			17,541,838				—				3,362,424				4	(d)											20,904,262
Diluted			21,426,115				—				—								—								20,904,262
Net (loss) income per common share
Basic		$	0.30	(1)																						$	(1.01	)
Diluted		$	(0.01	)(1)																						$	(1.01	)

 

*	See Note 1.

(1)	Basic and diluted earnings per share for BurgerFi computed only for the successor period as defined in Note 1, where net income available to common shareholders was approximately $5,348,000.

See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information

 

4

Notes to Unaudited Pro Forma Condensed Combined Financial Information

Note 1. Basis of presentation

The Pro Forma Financial Statements are derived from the historical financial statements of BurgerFi and Hot Air to give effect to the Transaction with Hot Air. The Pro Forma Statements of Operations for the year ended December 31, 2020 and the nine months ended September 30, 2021 give effect to the Transaction as if it had occurred on January 1, 2020. The Pro Forma Statement of Operations for the year ended December 31, 2020 also gives effect to the OPES Merger as if it had occurred on January 1, 2020. The Pro Forma Balance Sheet as of September 30, 2021 gives effect to the Transaction as if it had occurred on September 30, 2021.

Hot Air’s fiscal year ends on the Monday closest to December 31. The Hot Air consolidated balance sheet presented herein is as of October 4, 2021. The Hot Air consolidated statements of operations presented herein are for the interim period from January 5, 2021 to October 4, 2021 and for the fiscal year from December 31, 2019 to January 4, 2021 (a 53-week period). The revenue and income for these fiscal periods are not materially different from what would be reported for the fiscal periods used by BurgerFi.

The Pro Forma Financial Statements have been prepared using the acquisition method of accounting for business combinations under accounting principles generally accepted in the United States (“U.S. GAAP”). The acquisition method of accounting is dependent upon certain valuations and other studies that are pending. The final determination of fair value of assets acquired and liabilities assumed could result in material changes to the Pro Forma Financial Statements.

In order to prepare the Pro Forma Financial Statements, BurgerFi performed a preliminary review of Hot Air accounting policies to identify significant differences from BurgerFi’s accounting policies used to prepare BurgerFi’s historical financial statements and no significant differences were noted. BurgerFi will conduct an additional review of Hot Air’s accounting policies to determine if differences in accounting policies require further adjustment or reclassification of Hot Air’s results of operations, assets or liabilities to conform to BurgerFi’s accounting policies and classifications. As a result of that review, BurgerFi may identify additional differences between the accounting policies of the two companies that, when conformed, could have a material impact on its future consolidated financial statements.

The Pro Forma Financial Statements are preliminary, provided for illustrative purposes only and do not purport to represent what the combined Company’s actual consolidated results of operations or consolidated financial position would have been had the Transaction occurred on the date assumed, nor are they indicative of the combined Company’s future consolidated results of operations or financial position. The actual results reported in periods following the Transaction may differ significantly from those reflected in these Pro Forma Financial Statements for a number of reasons, including, but not limited to, differences between the assumptions used to prepare these Pro Forma Financial Statements and actual amounts, cost savings or associated costs to achieve such savings from operating efficiencies, synergies, debt refinancing, or other restructuring that may result from the Transaction.

As a result of the OPES Merger, BurgerFi’s historical financial statement presentation for the fiscal year ended December 31, 2020 distinguished BurgerFi’s financial performance into two distinct periods, the period up to the closing date of the OPES Merger (labeled “Predecessor” in BurgerFi’s historical financial reporting for the year ended December 31, 2020, which included the period from January 1, 2020 through December 15, 2020) and the period including and after that date (labeled “Successor” in BurgerFi’s historical financial reporting for the year ended December 31, 2020, which included the period from December 16, 2020 through December 31, 2020). For purposes of reporting on the Pro Forma Statement of Operations for the year ended December 31, 2020, the financial performance of both respective periods has been combined and presented cumulatively herein as the combined BurgerFi Statement of Operations for the year ended December 31, 2020. The historical LLC equity structure of BurgerFi for the Predecessor period did not include outstanding member units and as such, earnings per share information for the year ended December 31, 2020 only includes the Successor period.

 

5

Notes to Unaudited Pro Forma Condensed Combined Financial Information

The following table reflects BurgerFi’s combined Consolidated Statement of Operations for the year ended December 31, 2020, which included the predecessor period from January 1, 2020 through December 15, 2020, and the successor period from December 16, 2020 through December 31, 2020:

 

(in thousands, except for per share data)		Successor Period (December 16, 2020 through December 31, 2020)				Predecessor Period (January 1, 2020 through December 15, 2020)				Combined
REVENUE
Restaurant sales		$	1,350			$	23,966			$	25,316
Royalty and other fees			255				6,116				6,371
Terminated franchise fees			—				693				693
Royalty - brand development and co-op			74				1,441				1,515
Initial franchise fees			25				362				387
TOTAL REVENUE			1,704				32,578				34,282
Restaurant level operating expenses:											—
Food, beverage and paper costs			370				6,567				6,937
Labor and related expenses			321				6,269				6,590
Other operating expenses			323				6,007				6,330
Occupancy and related expenses			33				2,707				2,740
General and administrative expenses			857				6,925				7,782
Share-based compensation expense			818				—				818
Depreciation and amortization expense			348				1,062				1,410
Brand development and co-op advertising expense			34				2,283				2,317
Gain on disposal of property and equipment			—				(2	)			(2	)
TOTAL OPERATING EXPENSES			3,104				31,818				34,922
OPERATING LOSS			(1,400	)			760				(640	)
Gain on extinguishment of debt			791				—				791
Gain on change in value of warrant liability			5,597				—				5,597
Interest expense			(6	)			(125	)			(131	)
Other expenses			—				—				—
Income before income taxes			4,982				635				5,617
Income benefit			366				—				366
Net Income			5,348				635				5,983
Net Income Attributable to Non-Controlling Interests			—				20				20
Net Income Attributable to common shareholders and Controlling Interests		$	5,348			$	615			$	5,963
Weighted average common shares outstanding
Basic			17,541,838				—				17,541,838
Diluted			21,426,115				—				21,426,115
Net (loss) income per common share
Basic		$	0.30				—			$	0.30
Diluted		$	(0.01	)			—			$	(0.01	)

 

6

Notes to Unaudited Pro Forma Condensed Combined Financial Information

Note 2. Calculation of preliminary estimated purchase price

The calculation of the preliminary estimated purchase price presented below is based on the terms of the acquisition. The Pro Forma Financial Statements include various assumptions, including those related to the Company’s shares to be issued in connection with the acquisition and the fair value of BurgerFi’s stock. The actual purchase price may be materially different from the estimated purchase price. The calculation of the estimated purchase price is as follows (in thousands, except for share and per share amounts):

 

Total BurgerFi common shares issued*			2,952,900
BurgerFi share price**		$	8.31
Estimated fair value of common stock issued		$	24,539
Estimated fair value of preferred stock issued		$	53,000
Estimated fair value of option consideration shares***		$	3,403
Total estimated fair value of stock issued		$	80.942

 

*	Common shares are calculated based on the 30-day volume-weighted average price per share (with a per day cap of $14.25 per share and a minimum per day of $10.25) calculated based on the 30-day period prior to the closing date .

**	BurgerFi’s closing stock price as of November 2, 2021

***	Represents the estimated fair value of Hot Air’s in-the-money outstanding stock options that were converted to common stock of BurgerFi (“Option Consideration Shares”) attributable to pre-combination service recorded as part of the purchase consideration.

The actual purchase price was subject to adjustment at closing based on the difference between the actual net indebtedness, as defined in the Stock Purchase Agreement, of Hot Air at the closing date and $75.6 million (subject to further adjustment based on net indebtedness 30 days after close). It was also subject to adjustment at closing based on the amount of Leakage, defined in the Stock Purchase Agreement as transaction costs paid by Hot Air. The Leakage at closing was $3.8 million, which effectively reduced the assumed number of shares of common stock issued, as noted in the table above.

The $53.0 million is an estimate of the fair value of the preferred stock. The terms of the preferred stock include the future accrual of dividends beginning upon the earlier of (1) September 15, 2024 and (2) the date on which Hot Air’s lenders are refinanced or repaid in full. From and after this date, dividends will accrue on paid-in-kind (PIK) and cumulative basis at 7% per annum, compounded quarterly, increasing at 0.35% per quarter with no maximum interest rate. In the event Hot Air’s bank debt is refinanced or repaid in full prior to September 15, 2024 and the preferred stock is not redeemed in full, the dividend rate will be 5% per annum, compounded quarterly, until September 15, 2024, at which time the dividend rate will resume to 7%. In the event BurgerFi fails to timely redeem the preferred stock as required by the following paragraph, the dividend rate will increase to the lesser of (a) 10% (increasing by an additional 0.35% each quarter thereafter) or (b) the maximum rate allowed under applicable law, unless waived by a majority of the holders of the preferred stock.

At any time upon BurgerFi’s election or upon a Deemed Liquidation Event (including a change of control) or Qualified

Financing, as defined in the Certificate of Designation, the preferred stock will be redeemable at a per share amount equal to the Series A original issue price ($25.00 per share, adjusted for any stock dividend, split or similar event) plus any accrued and unpaid dividends for each share held. In addition, the preferred stock will be mandatorily redeemable upon the sixth anniversary of the closing date (November 3, 2021).

 

7

Notes to Unaudited Pro Forma Condensed Combined Financial Information

Note 3. Preliminary Purchase Price Allocation

A preliminary purchase price allocation has been used to prepare the pro forma adjustments described in Note 4. The final purchase price allocation will be determined when the Transaction has been completed and BurgerFi has finished the detail valuations and necessary calculations, which will require engaging a third party valuation firm. For purposes of the Pro Forma Financial Statements, for tangible assets and liabilities, BurgerFi used the carrying values as reported in the audited historical financial statements of Hot Air, as they are expected to approximate fair value, with the exception of the related party note payable (see Note 4). For intangible assets, management developed a preliminary estimate of fair value, however, the final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. The final allocation may include (1) changes in fair values of inventories and property and equipment, (2) changes in allocations to intangible assets, such as trade names, liquor licenses, and proprietary processes as well as goodwill and (3) other changes to assets and liabilities. Additional intangible asset classes may be identified during the valuation process. In addition, the number of shares of common and preferred stock to be issued will depend on the final net indebtedness balance, which will be determined within 30 days following the closing date.

The following table summarizes the preliminary allocation of the purchase price based on the estimated fair value of the acquired assets and assumed liabilities as of September 30, 2021 (in thousands except share and per share amounts):

 

Common stock (2,952,900 shares x $8.31 per share)		$	24,539
Preferred stock (2,120,000 shares x $25.00 per share)			53,000
Option consideration shares			3,403
Total purchase price consideration		$	80,942
Estimated fair value of assets:
Cash		$	5,565
Accounts receivable			583
Inventories			1,049
Prepaid expenses			1,600
Deposits			466
Property and equipment			15,608
			24,871
Estimated fair value of liabilities assumed:
Accounts payable, accrued expenses and other current liabilities			10,048
Bank debt			69,034
Related party note payable			9,291
Other long-term liabilities			12,275
			100,648
Net tangible assets			(75,777	)
Intangible assets			68,115
Goodwill			88,604
Total consideration		$	80,942

 

8

Notes to Unaudited Pro Forma Condensed Combined Financial Information

Note 4. Pro forma adjustments

The pro forma adjustments are based on preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed combined financial information:

Hot Air Pro Forma Adjustments

 

(a)

Reflects the elimination of Hot Air’s historical goodwill and the preliminary estimate of goodwill recognized as a result of the Transaction, which represents the amount by which the estimated consideration transferred exceeds the fair value of Hot Air’s assets acquired and liabilities assumed, based on the preliminary purchase price allocation.

 

(b)

Reflects the adjustment of historical intangible assets acquired by BurgerFi to their estimated fair values. As part of a preliminary analysis, BurgerFi identified intangible assets, including tradename, liquor licenses, proprietary process and below-market leases. Since all information required to perform a detailed valuation analysis of Hot Air’s intangible assets could not be obtained as of the date of this filing, for purposes of these unaudited pro forma financial statements, management used readily available assumptions in arriving at the preliminary estimates of fair value, which will be subject to material change upon the completion of the preliminary purchase price allocation.

The following table summarizes the estimated fair values of Hot Air’s identifiable intangible assets and their estimated useful lives (in thousands):

 

		Estimated Fair Value				Estimated Useful Life In Years				Year Ended December 31, 2020 Amortization Expense				Nine Months Ended September 30, 2021 Amortization Expense
Trade name		$	58,160				10			$	5,816			$	4,362
Liquor licenses			5,656				Indefinite				—				—
Proprietary processes			3,383				5				677				507
Lease valuations			916				5				183				137
		$	68,115
Historical amortization expense											(6,995	)			(4,958	)
Pro forma adjustments to amortization expense										$	(319	)		$	48

These preliminary estimates of fair value and estimated useful lives will likely differ from final amounts BurgerFi will calculate after completing a detailed valuation analysis, and the difference could have a material impact on the accompanying unaudited pro forma financial statements. A 10% change in the valuation of intangible assets would cause a corresponding increase or decrease in the balance of goodwill and annual amortization expense of approximately $0.8 million, assuming an overall weighted average life of 9 years.

 

(c)

Represents the elimination of the historical equity of Hot Air and the issuance of common and preferred shares of BurgerFi to finance the acquisition. The adjustment to additional paid-in capital is summarized as follows:

 

		($ in millions)
Net equity proceeds from the issuance of 2,952,900 common shares		$	24.5
Estimated fair value of option consideration shares			3.4
Less: historical Hot Air, Inc. additional paid-in capital as of June 30, 2021			(126.6	)
Pro forma adjustment to additional paid-in capital		$	(98.7	)

The Hot Air accumulated deficit of $93.0 million was eliminated.    

 

9

Notes to Unaudited Pro Forma Condensed Combined Financial Information

Since the terms of the preferred stock call for mandatory redemption six years after closing, the $53 million of preferred stock has been classified as a liability. The changes in fair value of $3.8 million and $4.1 million are recorded in the pro forma statements of operations for the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively.

BurgerFi will assume Hot Air’s stock options for continuing employees under the Stock Purchase Agreement. Hot Air stock options were exchanged for Option Consideration Shares of BurgerFi. The estimated fair value at close was $3.4 million. Since the stock options essentially became 100% vested at close, and relate to pre-combination service, no adjustment to share-based compensation expense has been included in the pro forma statements of operations.

 

(d)

Represents the increase in the weighted average shares in connection with the issuance of 2,952,900 shares of common stock to finance the acquisition and 409,524 Option Consideration Shares.

 

(e)

BurgerFi paid down approximately $8.3 million of Hot Air’s outstanding debt at closing pursuant to the terms of the Transaction. Interest expense of $0.3 million and $0.4 million has been adjusted to reflect the debt principal reduction in the pro forma statements of operations for the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively.

The related party note payable has no stated interest rate. The estimated fair value is approximately $9.3 million based on the net present value using a discount rate of 4.5%. Therefore, the pro forma balance sheet includes an adjustment of $0.7 million to reduce the related party note payable balance to its estimated fair value. The Pro Forma Statements of Operations include adjustments to increase interest expense by $0.2 million and $0.4 million for the six months ended June 30, 2021 and the year ended December 31, 2020, respectively, relating to imputed interest.

 

(f)

Other long-term liabilities within the Pro Forma Balance Sheet includes an adjustment of $3.3 million, which represents accrued management fees. The accrued management fees will be forgiven by the stockholders of Hot Air and therefore not assumed by BurgerFi as part of the transaction. In addition, the Pro Forma Statements of Operations include adjustments to other expense of $0.5 million and $0.7 million for the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively, which represent the management fee expense recorded by Hot Air during those periods.

The pro forma adjustments do not include any adjustment to deferred income tax liabilities related to any potential fair value adjustments to non-deductible intangible assets. The estimate of deferred income tax balances will be subject to material change based on the final determination of the fair value of assets acquired and liabilities assumed by jurisdiction.

 

(g)

BurgerFi has incurred acquisition costs related to the transaction of approximately $3.2 million for the period from July 1, 2021 through November 3, 2021. Because these costs are required to be expensed as incurred, they are charged to retained earnings as of September 30, 2021. The pro forma statement of operations for the year ended December 31, 2020 includes an adjustment to general and administrative expenses. Approximately $0.5 million has been paid through the closing date and reflected as a reduction of cash in the Pro Forma Balance Sheet and $2.7 million has been accrued and reflected as such in the Pro Forma Balance Sheet.

 

(h)

Reflects the income tax effect of pro forma adjustments based on the estimated blended federal and state statutory tax rate of 25%, excluding the change in fair value of preferred stock, which represents a permanent difference for tax purposes.

OPES Pro Forma Adjustments

 

(i)

Represents the amortization of intangible assets of $7.2 million related to the OPES acquisition of BurgerFi. The estimated useful lives were determined based on a review of the time period over which economic benefit is estimated to be generated as well as other factors. Factors considered include contractual life, the period

 

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Notes to Unaudited Pro Forma Condensed Combined Financial Information

of which a majority of cash flow is expected and/or management’s view based on historical experience with similar assets.

 

($ in thousands)
Franchise agreements		$	24,839				7
Trade names / trademarks			83,033				30
Liquor license			235				Indefinite
Reef Kitchens license agreement			8,882				10
VegeFi product			135				10
		$	117,124

 

(j)

Represents the related effect on deferred income taxes for the amortization expense noted in (i) above (assuming a blended federal and state tax rate of 26%) of $1.9 million for the year ended December 31, 2020.

Note 5. Reclassifications

BurgerFi has made certain reclassifications to the Hot Air historical balance sheet as of September 30, 2021 and statements of operations for the nine months ended September 30, 2021 and the year ended December 31, 2020 to conform to BurgerFi’s presentation, as detailed below:

 

(a)

Accounts receivable of approximately $583,000 included within prepaid and other current assets in Hot Air’s historical balance sheet is presented as a separate line on the Pro Forma Balance Sheet.

 

(b)

Short-term accrued expenses of approximately $6,136,000 included in accounts payable and accrued expenses within Hot Air’s historical balance sheet is presented as a separate line on the Pro Forma Balance Sheet.

 

(c)

Brand development and co-op advertising expense of approximately $2,748,000 and $2,203,000 for the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively, included in other operating expenses in Hot Air’s historical statements of operations is presented as a separate line on the Pro Forma Statements of Operations.

 

(d)

Pre-opening expenses of approximately $496,000 for the year ended December 31, 2020, included as a separate line in Hot Air’s historical statement of operations are presented within other operating expenses on the Pro Forma Statement of Operations.

 

(e)

Store closure costs of approximately $252,000 for the nine months ended September 30, 2021, included as a separate line in Hot Air’s historical statement of operations is presented within general and administrative expenses on the Pro Forma Statement of Operations.

 

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