SCHEDULE
14C
INFORMATION
STATEMENT PURSUANT TO SECTION 14(C) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Check
the
appropriate box:
o
Preliminary Information
Statement
o
Confidential, for use of the Commission
only (only as permitted by Rule 14c-5(d)(2))
x
Definitive Information
Statement
CHANTICLEER
HOLDINGS, INC.
(Name
of
Registrant as Specified in its Charter)
Payment
of Filing Fee (Check the appropriate box):
o
Fee computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
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|
(1) |
Title
of each class of securities to which transaction
applies:
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|
|
(2) |
Aggregate
number of securities to which transaction
applies:
|
|
|
(3) |
Per
unit or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was
determined):
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(4) |
Proposed
maximum aggregate value of
transaction:
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o
Fee
paid previously with Preliminary materials.
| o |
Check
box if any part of the fee is offset as provided by Exchange
Act Rule
0-11(a)(2) and identify the filing fee for which the offsetting
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filing.
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(1)
Amount Previously Paid:
(2)
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(3)
Filing Party:
(4)
Date
Filed:
Chanticleer
Holdings, Inc.
4201
Congress Street, Suite 145
Charlotte,
NC 28209
NOTICE
OF STOCKHOLDER ACTION BY WRITTEN CONSENT
Dear
Stockholders:
The
purpose of this letter is to inform you that the board of directors of
Chanticleer Holdings, Inc., a Delaware corporation (“we”, “us” or “Company”),
and the holders of a majority of the outstanding shares of our issued and
outstanding common stock, par value $0.0001 per share ("Common Stock”), pursuant
to a written consent in lieu of a meeting in accordance with our certificate
of
incorporation and Delaware General Corporation Law ("DGCL") Section 228,
approved: (i) the withdrawal of the Company's election to be treated as a
business development company ("BDC") under the Investment Company Act of 1940,
as amended (the "1940 Act") (the "BDC Withdrawal"); and (ii) the reverse split
of the Company's issued and outstanding Common Stock at a ratio of 1:10 (the
"Reverse Split").
Notwithstanding
approval of the BDC Withdrawal and the Reverse Split by the stockholders, our
board of directors may, in its sole discretion, determine not to effect, and
abandon, the BDC Withdrawal and/or the Reverse Split without further action
by
our stockholders.
WE
ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
The
accompanying Information Statement, which describes the above corporate actions
in more detail, is being furnished to our stockholders for informational
purposes only pursuant to Section 14(c) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and the rules and regulations prescribed
thereunder. The accompanying Information Statement also serves as the notice
required by Section 228 of the DGCL of the taking of a corporate action without
a meeting by less than unanimous written consent of the Company’s stockholders.
Pursuant to Rule 14c-2 under the Exchange Act, these corporate actions will
not
be effective until twenty calendar days after the mailing of the Information
Statement to our stockholders. The Company anticipates effectuating the BDC
Withdrawal, through the filing of a Form N-54C, within thirty days of the
tolling of the twenty calendar day period. The Company anticipates effectuating
the Reverse Split, through the filing of a Certificate of Amendment to the
Certificate of Incorporation with the Office of the Secretary of State of
Delaware, immediately after the effectuation of the BDC Withdrawal. A copy
of
the Certificate of Amendment is attached to the Information Statement as
Appendix A.
I
encourage you to read the enclosed Information Statement, which is being
provided to all of our stockholders. It describes the proposed corporate actions
in detail.
| |
Sincerely,
|
| |
|
| |
/s/
Michael D. Pruitt
|
|
| |
MICHAEL
D. PRUITT
|
| |
Chief
Executive Officer
|
This
Information Statement is dated June 20, 2008 and is first being mailed to
stockholders of record of Chanticleer Holdings, Inc. on June 23,
2008.
Chanticleer
Holdings, Inc.
4201
Congress Street, Suite 145
Charlotte,
NC 28209
________________________
INFORMATION
STATEMENT
PURSUANT
TO SECTION 14(C)
OF
THE SECURITIES EXCHANGE ACT OF 1934
AND
RULE 14C-2 THEREUNDER
________________________
NO
VOTE OR ACTION OF THE COMPANY'S STOCKHOLDERS
IS
REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT
WE
ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY
We
are
distributing this Information Statement to stockholders of Chanticleer Holdings,
Inc. (sometimes hereinafter referred to as “we”, “us”, “Company” or
“Chanticleer”) in full satisfaction of any notice requirements we may have under
the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and
the Delaware General Corporation Law ("DGCL"), including Section 228 of the
DGCL. No additional action will be undertaken by us with respect to the receipt
of written consents, and no dissenters’ rights under the DGCL are afforded to
our stockholders as a result of the corporate action described in this
Information Statement. The record date for determining the stockholders entitled
to receive this Information Statement has been established as of the close
of
business on May 14, 2008 (the “Record Date”).
OUTSTANDING
VOTING SECURITIES
As
of the
Record Date, we had issued and outstanding 8,628,532 shares of common stock,
par
value $0.0001 per share (the “Common Stock”), such shares constituting all of
the Company’s issued and outstanding capital stock.
The
DGCL
and our certificate of incorporation permit the holders of a majority of the
shares of the our outstanding Common Stock to approve and authorize actions
by
written consent as if the action were undertaken at a duly constituted meeting
of the stockholders of the Company. On May 14, 2008, our board of directors
consented in writing without a meeting to the matters described herein, and
recommended that the matters described herein be presented to the stockholders
for approval. On May 16, 2008, the holders of an aggregate of 5,314,762 shares
of Common Stock (the “Consenting Stockholders”), representing approximately
61.6% of the total shares of Common Stock entitled to vote on the matters set
forth herein, consented in writing without a meeting to the matters described
herein.
CORPORATE
ACTIONS
The
corporate actions described in this Information Statement will not afford
stockholders the opportunity to dissent from the actions described herein or
to
receive an agreed or judicially appraised value for their shares.
Our
board
of directors and the Consenting Stockholders have consented to (i) the
withdrawal of the Company's election to be treated as a business development
company ("BDC") under the Investment Company Act of 1940, as amended (the "1940
Act") (the "BDC Withdrawal"); and (ii) the reverse split of the Company's issued
and outstanding Common Stock at a ratio of 1:10 (the "Reverse
Split").
We
will
pay the expenses of furnishing this Information Statement to our stockholders,
including the cost of preparing, assembling and mailing this Information
Statement.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To
the
Company's knowledge, the following table sets forth information with respect
to
beneficial ownership of outstanding common stock as of May 15, 2008,
by:
| |
·
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each
person known by the Company to beneficially own more than 5% of the
outstanding shares of the Company's Common
Stock;
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·
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each
of the Company's named executive
officers;
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·
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each
of the Company's directors; and
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·
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all
of the Company's executive officers and directors as a
group.
|
Beneficial
ownership is determined in accordance with the rules of the U.S. Securities
and
Exchange Commission (the "SEC") and includes voting or investment power with
respect to the securities as well as securities which the individual or group
has the right to acquire within 60 days of the original filing of this
Information Statement. Unless otherwise indicated, the address for those listed
below is c/o Chanticleer Holdings, Inc., 4201 Congress Street, Suite 145,
Charlotte, NC 28209. Except as indicated by footnote, and subject to applicable
community property laws, the persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them. The number of shares of the Common Stock outstanding
used in calculating the percentage for each listed person includes the shares
of
Common Stock underlying options or other convertible securities held by such
persons that are exercisable within 60 days of May 15, 2008, but excludes shares
of Common Stock underlying options or other convertible securities held by
any
other person. The number of shares of Common Stock outstanding as of May 15,
2008, was 8,628,532. Except as noted otherwise, the amounts reflected below
are
based upon information provided to the Company and filings with the
SEC.
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Number of Shares of
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Name
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Common Stock Owned
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Percentage of Class
|
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Palisades
Master Fund, LP
|
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1,884,401
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21.8
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%
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Michael
D. Pruitt
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1,688,511
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19.6
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%
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Michael
Carroll
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25,000
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*
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|
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|
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Brian
Corbman
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25,500
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*
|
|
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|
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|
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Paul
I. Moskowitz
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1,000
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*
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|
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Officers
and Directors As a Group (4 Persons)
|
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1,740,011
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20.2
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%
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FORWARD-LOOKING
STATEMENTS MAY PROVE INACCURATE
This
Information Statement contains forward-looking statements that involve risks
and
uncertainties. Such statements are based on current expectations, assumptions,
estimates and projections about the Company and its industry. Forward-looking
statements are subject to known and unknown risks, uncertainties and other
factors that may cause actual results, levels of activity, performance,
achievements and prospects to be materially different from those expressed
or
implied by such forward-looking statements. The Company undertakes no obligation
to update publicly any forward-looking statements for any reason even if new
information becomes available or other events occur in the future. The Company
believes that such statements are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
Actual
outcomes are dependent upon many factors. Words such as "anticipates,"
"believes," "estimates," "expects," "hopes," "targets" or similar expressions
are intended to identify forward-looking statements, which speak only as of
the
date of this Information Statement, and in the case of documents incorporated
by
reference, as of the date of those documents. The Company undertakes no
obligation to update or release any revisions to any forward-looking statements
or to report any events or circumstances after the date of this Information
Statement or to reflect the occurrence of unanticipated events, except as
required by law.
WITHDRAWAL
OF ELECTION TO BE TREATED AS A BDC
General
On
May
14, 2008, our board of directors consented in writing without a meeting to
the
withdrawal of the Company's election to be treated as a BDC under the 1940
Act,
and recommended that the matter be presented to the Company's stockholders
for
their approval. On May 16, 2008, the Consenting Stockholders, who hold an
aggregate of 5,314,762 shares of Common Stock, representing approximately 61.6%
of the total issued and outstanding shares of Common Stock, consented in writing
without a meeting to the BDC Withdrawal.
The
BDC
Withdrawal cannot be effectuated until at least 20 calendar days after the
mailing of a definitive information statement to the Company's shareholders.
The
Company anticipates effectuating the BDC Withdrawal, through the filing of
a
Form N-54C, within thirty days of the tolling of the twenty calendar day period.
Reasons
for Withdrawal of BDC Election
On
June
1, 2005, the Company filed a notification of election to be regulated as a
BDC
under the 1940 Act on Form N-54A. The Company elected BDC status intending
to
provide equity and debt investment capital to fund growth, acquisitions and
recapitalizations of small market companies primarily located in the United
States. The Company no longer intends to pursue the foregoing business plan,
and
has determined it to be in the best interest of the Company to withdraw its
BDC
election so that it can more flexibly pursue other business opportunities that
would not be permitted if the Company remained a BDC, including, but not limited
to, the identification and acquisition of an operating company (see "Risks
Associated with the Withdrawal of BDC Election").
Under
the
Company's new business model, the Company will at all times conduct its
activities in such a way that it will not be deemed an "investment company"
subject to the regulation under the 1940 Act. Thus, it will not hold itself
out
as being engaged primarily in the business of investing, reinvesting or trading
in securities.
SEC
Comment Letter
The
Company filed a Form 1-E with the SEC on April 12, 2007 (the "Old E-1"). On
May
30, 2007, the SEC issued a comment letter to the Company (the "1st
SEC
Comment Letter") with respect to the Old 1-E setting forth certain instances
in
which the Company may have been out of compliance with the rules and regulations
governing the business, affairs, financial status, and financial reporting
items
required of BDC's. The Company filed a response to the foregoing comment letter
on June 21, 2007.
On
January 30, 2008, the SEC issued a second comment letter to the Company (the
"2nd
SEC
Comment Letter") setting forth additional comments on the Company's disclosure
and filings with the SEC. The Company has not yet responded to the 2nd
SEC
Comment Letter.
The
Company filed a Form 1-E with the SEC on March 27, 2008 (the "New 1-E"). On
April 22, 2008, the SEC issued a third comment letter to the Company (the
"3rd
SEC
Comment Letter, and collectively with the 1st
SEC
Comment Letter and the 2nd
SEC
Comment Letter, the "SEC Comment Letters") setting forth the SEC's comments
on
the New 1-E and certain other filings with the SEC. The Company has not yet
responded to the 3rd
SEC
Comment Letter.
The
Company has taken certain steps to comply with the comments set forth in the
SEC
Comment Letters. Many of the comments set forth in the SEC Comment Letters
have
not yet been fully addressed by the Company. The Company's responsibility to
address the matters raised in the SEC Comment Letters and to comply with any
other currently outstanding obligations under the 1940 Act will continue
notwithstanding the effectuation of the Company's proposed BDC Withdrawal.
The
Company intends to file written responses to the 2nd
SEC
Comment Letter and the 3rd
SEC
Comment Letter with the SEC promptly. The compliance and remediation costs
associated with the foregoing cannot be estimated by management at this time,
but could be significant in terms of both time and dollars. To the extent such
liabilities are significant they will materially negatively impact on the
Company's resources and will have an impact on the Company's ability to continue
as a going concern.
Risks
Associated with the Withdrawal of BDC Election
Upon
the
Company's withdrawal of its BDC election the Company's stockholders will lose
certain protections under the 1940 Act, including the following:
1. The
Company will no longer be required to maintain a ratio of assets to senior
securities of at least 200%;
2. The
Company will no longer be prohibited from protecting directors or officers
against any liability to the Company or Company’s stockholders arising from
willful malfeasance, bad faith, gross negligence, or reckless disregard of
the
duties involved the conduct of the person’s office;
3. The
Company will no longer be required to provide and maintain a bond issued by
a
reputable fidelity insurance company to protect against larceny and
embezzlement;
4. The
Company will no longer be required to ensure that a majority of directors are
not “interested persons,” as the term is defined in Section 2(a)(19) of the 1940
Act, and persons that would be prevented from acting in the capacity of an
employee, officer or director of the Company if it were a BDC (such as persons
convicted of certain malfeasance) will be able to be on the Company’s
board;
5. The
Company will no longer be subject to provisions of the 1940 Act regulating
transactions between BDCs and certain affiliates restricting the Company’s
ability to issue warrants and options;
6. The
Company will no longer be prohibited from issuing its shares for
services;
7. The
Company will be able to change the nature of its business without having to
obtain the approval of its stockholders;
8. The
Company will no longer be subject to provisions of the 1940 Act prohibiting
the
issuance of securities below net asset value book value;
9. The
Company will no longer be required to disclose its net value per share on the
face of its financial statements; and
10. The
Company will no longer be subject to the other protections set forth in Sections
55 through 64 of the 1940 Act and the rules and regulations promulgated
thereunder.
However,
the Board will still be subject to customary principles of fiduciary duty under
the DGCL with respect to the Company and its stockholders. The composition
of
the Board upon the effectuation of the BDC Withdrawal will remain the same
as
before the BDC Withdrawal, with a majority of the members of the Board being
independent and disinterested.
In
addition, withdrawal of the Company’s election to be treated as a BDC will not
affect the Company’s registration under Section 12(g) of the Exchange Act, which
requires, in part, the Company to file periodic reports on Form 10-K, Form
10-Q,
Form 8-K, proxy statements and other reports with the SEC.
Effect
on the Financial Statements and Tax Status
The
withdrawal of the Company’s election to be regulated as a BDC will result in a
change in its method of accounting. BDC financial statement presentation and
accounting uses the value method of accounting used by investment companies,
which allows BDCs to value their investments at fair market value as opposed
to
historical cost. In addition, entities in which the Company owns majority
ownership stakes are not consolidated; rather, investments in those entities
are
reflected on the balance sheet as an investment in a majority-owned portfolio
company at fair market value. In this regard, the Company’s only significant
investments at March 31, 2008, were in two minority-owned entities, Syzygy
Entertainment, Ltd. and Chanticleer Investors, LLC. At March 31, 2008, the
value
of such investments recorded in the Company’s financials statement was
approximately $964,000 and $1,610,000, respectively.
Operating
companies use either the fair-value or historical-cost methods of accounting
for
financial statement presentation and accounting for securities, depending on
how
the investment is held. In addition, operating companies consolidate the
accounts of majority-owned entities; any previously recorded unrealized
appreciation on investments which would not be classified as trading securities
will no longer be reflected in the Company’s financial statements. At March 31,
2008, the Company had unrealized appreciation of $691,341 recorded on these
investments.
Upon
the
effectuation of the BDC Withdrawal the Company will change its methods of
accounting as set forth above. The changes will result in the reversal of the
unrealized appreciation in the total amount of $691,341 through the
retrospective recording of said amounts in the prior periods in which it arose.
The Company believes that the effect of these changes in methods of accounting
will be material.
The
Company does not believe that withdrawing its election to be regulated as a
BDC
will have any impact on its federal income tax status, because the Company
never
elected to be treated as a regulated investment company under Subchapter M
of
the Internal Revenue Code. Instead, the Company has always been subject to
corporate level income tax on its income (without regard to any distributions)
as a “regular” corporation under Subchapter C of the Internal Revenue Code.
Pro
Forma Unaudited Financial Statements
The
following pro forma unaudited financial statements of the Company as of and
for
the three months ended March 31, 2008, show the effect of the changes in the
Company's method of accounting had the BDC Withdrawal occurred on March 31,
2008. As shown, the accumulated deficit increased and investments decreased
$691,341 on a pro forma basis when not operating as a BDC. All of the unrealized
appreciation previously recognized as earnings of a BDC will be recorded in
2007
to reduce net income (increase net loss) in the period in which it arose in
operating company statements.
Chanticleer
Holdings, Inc.
Balance
Sheet
March
31, 2008 Historical and Pro Forma
| |
|
Historical
|
|
Pro Forma
|
|
| |
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
1,108
|
|
|
1,108
|
|
|
Accounts
receivable, controlled affiliate investment
|
|
|
25,000
|
|
|
25,000
|
|
|
Marketable
equity securities, less unrealized loss of $285,442
|
|
|
-
|
|
|
1,043,128
|
|
|
Prepaid
expenses and other assets
|
|
|
14,811
|
|
|
14,811
|
|
|
TOTAL
CURRENT ASSETS
|
|
|
40,919
|
|
|
1,084,047
|
|
|
Fixed
assets, net
|
|
|
44,429
|
|
|
44,429
|
|
|
Investments
at fair value
|
|
|
3,818,128
|
|
|
2,083,659
|
|
|
Deposits
|
|
|
23,980
|
|
|
23,980
|
|
|
TOTAL
ASSETS
|
|
|
3,927,456
|
|
|
3,236,115
|
|
| |
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
39,292
|
|
|
39,292
|
|
|
Accrued
expenses
|
|
|
1,564
|
|
|
1,564
|
|
|
Notes
payable
|
|
|
379,500
|
|
|
379,500
|
|
|
TOTAL
CURRENT LIABILITIES
|
|
|
420,356
|
|
|
420,356
|
|
| |
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
Common
stock, $.0001 par value. Authorized 200,000,000 shares; issued and
outstanding 8,618,033 shares at March 31, 2008
|
|
$
|
862
|
|
$
|
862
|
|
|
Additional
paid in capital
|
|
|
4,049,738
|
|
|
4,049,738
|
|
|
Accumulated
deficit
|
|
|
(543,500
|
)
|
|
(1,234,841
|
)
|
|
TOTAL
STOCKHOLDERS' EQUITY
|
|
|
3,507,100
|
|
|
2,815,759
|
|
|
TOTAL
LIABILITIES AND STOCKHOLERS' EQUITY
|
|
$
|
3,927,456
|
|
$
|
3,236,115
|
|
Chanticleer
Holdings, Inc.
Statements
of Operations
For
the Three Months Ended March 31, 2008
Historical
and Pro Forma
(Unaudited)
| |
|
Historical
|
|
Pro Forma
|
|
|
Income
from operations:
|
|
|
|
|
|
|
|
|
Interest
and dividend income - affiliates
|
|
$
|
11,500
|
|
$
|
11,500
|
|
|
Management
fee income - affiliates
|
|
|
153,555
|
|
|
153,555
|
|
| |
|
|
165,055
|
|
|
165,055
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Salaries
and wages
|
|
|
77,652
|
|
|
77,652
|
|
|
Professional
fees
|
|
|
121,429
|
|
|
121,429
|
|
|
Shareholder
services
|
|
|
2,647
|
|
|
2,647
|
|
|
Interest
expense
|
|
|
2,047
|
|
|
2,047
|
|
|
Insurance
expense
|
|
|
10,563
|
|
|
10,563
|
|
|
Dues
and subscriptions
|
|
|
6,189
|
|
|
6,189
|
|
|
Rent
expense
|
|
|
12,159
|
|
|
12,159
|
|
|
Travel
and entertainment expense
|
|
|
27,808
|
|
|
27,808
|
|
|
Other
general and administrative expense
|
|
|
34,299
|
|
|
34,299
|
|
| |
|
|
294,793
|
|
|
294,793
|
|
|
Loss
before income taxes
|
|
|
(129,738
|
)
|
|
(129,738
|
)
|
|
Income
taxes
|
|
|
-
|
|
|
-
|
|
|
Loss
from operations
|
|
|
(129,738
|
)
|
|
(129,738
|
)
|
| |
|
|
|
|
|
|
|
|
Net
realized and unrealized gains (losses):
|
|
|
|
|
|
|
|
|
Net
realized gain on investments, with no income tax provision
|
|
|
-
|
|
|
-
|
|
|
Change
in unrealized depreciation of investments, net of deferred tax benefit
of
$0
|
|
|
(38,438
|
)
|
|
(38,438
|
)
|
|
Net
loss
|
|
$
|
(168,176
|
)
|
$
|
(168,176
|
)
|
| |
|
|
|
|
|
|
|
|
Net
loss per share - basic and diluted
|
|
$
|
(0.0196
|
)
|
$
|
(0.0196
|
)
|
|
Weighted
average shares outstanding
|
|
|
8,592,915
|
|
|
8,592,915
|
|
REVERSE
SPLIT
General
On
May
14, 2008, our Board of Directors consented in writing without a meeting to
a 1
for 10 reverse split of the Company's outstanding shares of Common Stock, and
recommended the matter be submitted to the Company's stockholders for their
approval. On May 16, 2008, the Consenting Stockholders, who hold an aggregate
of
5,314,762 shares of Common Stock, representing approximately 61.6% of the total
issued and outstanding shares of Common Stock, consented in writing without
a
meeting to the Reverse Split.
Reasons
for the Reverse Split
In
approving the Reverse Split, the Board considered that the Company's Common
Stock may not appeal to brokerage firms that are reluctant to recommend lower
priced securities to their clients. Investors may also be dissuaded from
purchasing lower priced stocks because the brokerage commissions, as a
percentage of the total transaction, tend to be higher for such stocks.
Moreover, the analysts at many brokerage firms do not monitor the trading
activity or otherwise provide coverage of lower priced stocks. The Board also
believes that most investment funds are reluctant to invest in lower priced
stocks.
The
Board
proposed the Reverse Split as one method to attract investors and business
opportunities in the Company. The Company believes that the Reverse Split may
improve the price level of the Company's Common Stock and that this higher
share
price could help generate additional interest in the Company.
However,
the effect of the Reverse Split upon the market price for the Company's Common
Stock cannot be predicted, and the history of similar stock split combinations
for companies in like circumstances is varied. There can be no assurance that
the market price per share of the Company's Common Stock after the Reverse
Split
will rise in proportion to the reduction in the number of shares of Common
Stock
outstanding resulting from the Reverse Split. The market price of the Company's
Common Stock is also based on its performance and other factors, some of which
may be unrelated to the number of shares outstanding.
Potential
Risks of the Reverse Split
Upon
effectiveness of the Reverse Split, there can be no assurance that the bid
price
of the Company's Common Stock will continue at a level in proportion to the
reduction in the number of outstanding shares resulting from the Reverse Split,
that the Reverse Split will result in a per share price that will increase
the
Company's ability to attract and retain employees and other service providers
or
that the market price of the post-split Common Stock will be maintained. The
market price of the Company's Common Stock will also be based on its financial
performance, market condition, the market perception of its future prospects,
as
well as other factors, many of which are unrelated to the number of shares
outstanding. If the Reverse Split is effected and the market price of the
Company's Common Stock declines, the percentage decline as an absolute number
and as a percentage of the Company's overall capitalization may be greater
than
would occur in the absence of the Reverse Split.
Effects
of the Reverse Split
General
Pursuant
to the Reverse Split, each 10 shares of the Company's Common Stock issued and
outstanding, or held as treasury shares, immediately prior to the effectiveness
of the Reverse Split, will become one share of the same class of the Company's
Common Stock after consummation of the Reverse Split.
Effect
on
Authorized and Outstanding Shares
The
Company is currently authorized to issue a maximum of 200,000,000 shares of
Common Stock and no shares of preferred stock. There are 8,628,532 shares of
Common Stock issued and outstanding, or held as treasury shares. The number
of
issued and outstanding shares of capital stock, including treasury shares (as
well as the number of shares of Common Stock underlying any options, warrants,
convertible debt or other derivative securities), will be reduced to a number
that will be approximately equal to the number of shares of capital stock issued
and outstanding, or held as treasury shares, immediately prior to the
effectiveness of the Reverse Split, divided by 10.
With
the
exception of the number of shares issued and outstanding, or held as treasury
shares, the rights and preferences of the shares of Common Stock prior and
subsequent to the Reverse Split will remain the same. It is not anticipated
that
the Company's financial condition, the percentage ownership of management,
the
number of stockholders, or any aspect of the Company's business will materially
change, as a result of the Reverse Split.
The
Reverse Split will be effected simultaneously for all of the Company's Common
Stock and the exchange ratio will be the same for all of the Company's issued
and outstanding capital stock. Subject to the provisions for elimination of
fractional shares, the Reverse Split will affect all of our stockholders
uniformly and will not affect any stockholder's percentage ownership interests
in the Company or proportionate voting power (See "Fractional Shares" below).
The
Company will continue to be subject to the periodic reporting requirements
of
the Exchange Act. The Company's Common Stock is currently registered under
Section 12(g) of the Exchange Act and as a result, is subject to periodic
reporting and other requirements. The proposed Reverse Split will not affect
the
registration of the Company's Common Stock under the Exchange Act.
Fractional
Shares
No
fractional shares of post-split Common Stock will be issued to any stockholder
in connection with the Reverse Split. Stockholders of record who would otherwise
be entitled to receive fractional shares upon the effective date of the Reverse
Split, will, upon surrender of their certificates representing shares of
pre-split Common Stock, receive a cash payment in lieu thereof equal to the
fair
value of such fractional share. For purposes of the Reverse Split, fair value
shall be the price per share equal to the average closing trading price of
the
Company's Common Stock over the 10 trading days immediately preceding the
effective date of the Reverse Split (as adjusted to reflect the Reverse Split).
The procedures for cashing out fractional shares will be set forth in a
Transmittal Letter forwarded to stockholders after the effective date of the
Reverse Split.
Number
of
Shares of Common Stock Available for Future Issuance
The
number of shares of Common Stock the Company is authorized to issue will remain
200,000,000 shares of Common Stock after giving effect to the Reverse Split.
The
ratio of shares of Common Stock authorized and available for issue to the number
of shares issued and outstanding will increase after the Reverse Split from
approximately 95.7% to approximately 99.4%. The actual number of shares of
Common Stock authorized and available for issuance will increase as a result
of
the Reverse Split from approximately 191,371,468 shares to 199,137,146
shares.
Effectiveness
of the Reverse Split
The
Reverse Split cannot be effectuated until at least 20 calendar days after the
mailing of a definitive information statement to the Company's shareholders.
The
Company anticipates effectuating the Reverse Split, through the filing of a
Certificate of Amendment to the Certificate of Incorporation with the Office
of
the Secretary of State of Delaware, immediately after the effectuation by the
Company of its BDC Withdrawal, which the Company anticipates effectuating within
thirty days of the tolling of the twenty calendar day period.
Commencing
on the effective date, each certificate of the Company's Common Stock will
be
deemed for all corporate purposes to evidence ownership of the reduced number
of
shares of Common Stock resulting from the Reverse Split. As soon as practicable
after the effective date, stockholders will be notified via a Letter of
Transmittal as to the effectiveness of the Reverse Split and instructed how
and
when to surrender their certificates representing shares of pre-split Common
Stock in exchange for certificates representing shares of post-split Common
Stock, and how they will receive cash in consideration for any post-split
fractional shares of Common Stock they hold. We intend to use Routh Stock
Transfer, Inc. as our agent to effect the exchange of the certificates and
the
cashing out of fractional shares following the effective date of the Reverse
Split. STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE AND SHOULD NOT
SUBMIT ANY CERTIFICATES WITHOUT THE LETTER OF TRANSMITTAL.
Certain
Federal Income Tax Consequences
The
following discussion summarizing certain federal income tax consequences of
the
Reverse Split is based on the Internal Revenue Code of 1986, as amended (the
"Code"), the applicable Treasury Regulations promulgated thereunder, judicial
authority and current administrative rulings and practices in effect on the
date
this Information Statement was first mailed to stockholders. This discussion
is
for general information only and does not discuss consequences that may apply
to
special classes of taxpayers (e.g., non-resident aliens, broker-dealers, or
insurance companies).
The
receipt of the Common Stock following the effective date of the Reverse Split,
solely in exchange for the Common Stock held prior to the Reverse Split will
not
generally result in a recognition of gain or loss to the stockholders. Cash
received in lieu of fractional shares, however, will generally be treated as
a
sale of the fractional shares (although in unusual circumstances such cash
might
possibly be deemed a dividend), and stockholders will recognize gain or loss
based upon the difference between the amount of cash received and the basis
in
the surrendered fractional share.
The
adjusted tax basis of a stockholder in the Common Stock received after the
Reverse Split will be the same as the adjusted tax basis of the Common Stock
held prior to the Reverse Split exchanged therefore (subject to the treatment
of
fractional shares), and the holding period of the Common Stock received after
the Reverse Split will include the holding period of the Common Stock held
prior
to the Reverse Split exchanged therefore. No gain or loss will be recognized
by
the Company as a result of the Reverse Split. The Company's views regarding
the
tax consequences of the Reverse Split are not binding upon the Internal Revenue
Service or the courts, and there can be no assurance that the Internal Revenue
Service or the courts would accept the positions expressed above.
THIS
SUMMARY IS PROVIDED FOR GENERAL INFORMATION ONLY AND DOES NOT PURPORT TO ADDRESS
ALL ASPECTS OF THE POSSIBLE FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE
SPLIT
AND IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. IN PARTICULAR, AND WITHOUT
LIMITING THE FOREGOING, THIS SUMMARY ASSUMES THAT THE SHARES OF COMMON STOCK
ARE
HELD AS "CAPITAL ASSETS" AS DEFINED IN THE CODE, AND DOES NOT CONSIDER THE
FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY'S STOCKHOLDERS IN LIGHT OF THEIR
INDIVIDUAL INVESTMENT CIRCUMSTANCES OR TO HOLDERS WHO MAY BE SUBJECT TO SPECIAL
TREATMENT UNDER THE FEDERAL INCOME TAX LAWS (SUCH AS DEALERS IN SECURITIES,
INSURANCE COMPANIES, FOREIGN INDIVIDUALS AND ENTITIES, FINANCIAL INSTITUTIONS
AND TAX EXEMPT ENTITIES). IN ADDITION, THIS SUMMARY DOES NOT ADDRESS ANY
CONSEQUENCES OF THE REVERSE SPLIT UNDER ANY STATE, LOCAL OR FOREIGN TAX LAWS.
THE STATE AND LOCAL TAX CONSEQUENCES OF THE REVERSE SPLIT MAY VARY AS TO EACH
STOCKHOLDER DEPENDING ON THE STATE IN WHICH SUCH STOCKHOLDER RESIDES. AS A
RESULT, IT IS THE RESPONSIBILITY OF EACH STOCKHOLDER TO OBTAIN AND RELY ON
ADVICE FROM HIS, HER OR ITS TAX ADVISOR AS TO, BUT NOT LIMITED TO, THE
FOLLOWING: (A) THE EFFECT ON HIS, HER OR ITS TAX SITUATION OF THE REVERSE SPLIT,
INCLUDING, BUT NOT LIMITED TO, THE APPLICATION AND EFFECT OF STATE, LOCAL AND
FOREIGN INCOME AND OTHER TAX LAWS; (B) THE EFFECT OF POSSIBLE FUTURE LEGISLATION
OR REGULATIONS; AND (C) THE REPORTING OF INFORMATION REQUIRED IN CONNECTION
WITH
THE REVERSE SPLIT ON HIS, HER OR ITS OWN TAX RETURNS. IT WILL BE THE
RESPONSIBILITY OF EACH STOCKHOLDER TO PREPARE AND FILE ALL APPROPRIATE FEDERAL,
STATE AND LOCAL TAX RETURNS.
EFFECTIVE
DATE OF STOCKHOLDER ACTIONS
The
BDC
Withdrawal and the Reverse Split cannot be effectuated until at least 20
calendar days after the mailing of a definitive information statement to the
Company's shareholders. The Company anticipates effectuating the BDC Withdrawal,
through the filing of a Form N-54C, within thirty days of the tolling of the
twenty calendar day period. The Company anticipates effectuating the Reverse
Split, through the filing of a Certificate of Amendment to the Certificate
of
Incorporation with the Office of the Secretary of State of Delaware, immediately
after the effectuation of the BDC Withdrawal.
STOCKHOLDERS'
RIGHTS
The
elimination of the need for a special meeting of the stockholders to approve
the
actions set forth herein is authorized by Section 228 of the DGCL, which
provides that action may be taken by the written consent of the holders of
outstanding shares of voting capital stock, having not less than the minimum
number of votes which would be necessary to authorize or take the action at
a
meeting at which all shares entitled to vote on a matter were present and voted.
Pursuant to Section 228 of the DGCL, we are required to provide prompt notice
of
the taking of a corporate action by written consent to our stockholders who
have
not consented in writing to such action. This Information Statement serves
as
the notice required by Section 228 of the DGCL.
DISSENTERS'
RIGHTS
The
DGCL
does not provide for dissenter's rights in connection with any of the actions
proposed in this Information Statement.
STOCKHOLDERS
SHARING AN ADDRESS
The
Company will deliver only one Information Statement to multiple stockholders
sharing an address unless the Company has received contrary instructions from
one or more of the stockholders. The Company undertakes to deliver promptly,
upon written or oral request, a separate copy of the Information Statement
to a
stockholder at a shared address to which a single copy of the Information
Statement is delivered. A stockholder can notify the Company that the
stockholder wishes to receive a separate copy of the Information Statement
by
contacting the Company via telephone at (704) 366-5122 or at the address set
forth above.
Appendix
A
CERTIFICATE
OF AMENDMENT
OF
CERTIFICATE
OF INCORPORATION
OF
CHANTICLEER
HOLDINGS, INC.
Chanticleer
Holdings, Inc., a corporation duly organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), does hereby
certify that:
1. The
Certificate of Incorporation of the Corporation is hereby amended by deleting
Article Fourth thereof in its entirety and inserting the following in lieu
thereof:
"FOURTH:
The
total number of shares of stock of which the Corporation shall have authority
to
issue is 200,000,000, all of which shall be shares of Common Stock, par value
$.0001 per share.
Upon
this
Certificate of Amendment to the Certificate of Incorporation of the Corporation
becoming effective pursuant to the General Corporation Law of the State of
Delaware (the "Effective Time"), each share of the Corporation's common stock,
par value $.0001 per share (the "Old Common Stock"), issued and outstanding
immediately prior to the Effective Time, will be automatically reclassified
as
and converted into one tenth (1/10) of a share of common stock, par value $.0001
per share, of the Corporation (the "New Common Stock"). Any stock certificate
that, immediately prior to the Effective Time, represented shares of the Old
Common Stock will, from and after the Effective Time, automatically and without
the necessity of presenting the same for exchange, represent the number of
shares of the New Common Stock as equals the product obtained by multiplying
the
number of shares of Old Common Stock represented by such certificate immediately
prior to the Effective Time by one tenth (1/10) (the "Reverse Stock Split").
The
Corporation shall not issue fractional shares in connection with the Reverse
Stock Split."
2. The
foregoing amendment was duly adopted in accordance with the provisions of
Sections 242, 141 (by written consent of the board of directors), and 228 (by
written consent of the stockholders) of the General Corporation Law of the
State
of Delaware.
IN
WITNESS WHEREOF, the undersigned has caused this Certificate to be executed
on
this ___ day of _____________, 2008.
| |
CHANTICLEER
HOLDINGS, INC.
|
| |
|
|
| |
By:
|
|
| |
|
Name: |
|
| |
|
Title:
|
|