Annual report pursuant to Section 13 and 15(d)

ACQUISITIONS

v2.4.0.8
ACQUISITIONS
 12 Months Ended
Dec. 31, 2013
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]
3.
ACQUISITIONS
 
During the year ended December 31, 2013, the Company made the following acquisitions:
·
American Roadside Burgers, effective September 30, 2013;
·
West End Wings, LTD (Hooters Nottingham), effective November 7, 2013; and
·
Just Fresh, effective December 10, 2013.
 
American Roadside Burgers (“ARB”)
 
On September 30, 2013, the Company acquired American Roadside Burgers, Inc. and entered into an agreement and plan of merger with ARB, whereby the Company acquired 100% of the outstanding shares of ARB. In exchange, the Company issued 740,000 shares of its common stock and warrants to acquire 740,000 shares of common stock for $5 per share. The warrants are exercisable beginning October 1, 2014 until September 30, 2018. The merger agreement provides that Chanticleer Roadside Burgers International, LLC (a single-member LLC, of which the Company is the sole member) shall merge with and into ARB, with ARB continuing as the surviving entity and subsidiary of the Company. In connection with this acquisition and the related management team, the Company acquired a strategic opportunity to participate in a high-growth space with an already established brand. The Company’s plan is to continue to expand the American Roadside chain as future opportunities occur, which has the potential to bring additional revenue and profits to the Company in the future.
 
The acquisition was accounted for using the purchase method in accordance with ASC 805 “Business Combinations”. The consolidated statements of operations include the results of the ARB operations beginning October 1, 2013. The assets acquired and the liabilities assumed were recorded at September 30, 2013 at estimated fair values as determined by an independent appraisal and the Company’s management, based on information currently available and on current assumptions as to future operations.
 
West End Wings (“WEW” or “Hooters Nottingham”)
 
On November 6, 2013, the Company finalized the purchase of West End Wings LTD, which is the owner of the Nottingham, England Hooters restaurant location. The purchase price paid by the Company for WEW was $3,150,000.
 
The acquisition was accounted for using the purchase method in accordance with ASC 805 “Business Combinations”. The consolidated statements of operations include the results of the Hooters Nottingham operations beginning November 7, 2013. The assets acquired and the liabilities assumed were recorded at November 6, 2013 at estimated fair values as determined by the Company’s management.
 
Just Fresh (“JF”)
 
On November 5, 2013, the Company entered into a Subscription Agreement with JF Restaurants, L.L.C. (“JFR”) and JF Franchising Systems, L.L.C. (“JFFS”), for the purchase of a 51%ownership interest in each entity, for a total purchase price of $560,000. The purchase was finalized on December 10, 2013 with the execution of an Assignment, Assumption, Joinder, and Amendment Agreement with both JFR and JFFS. On December 11, 2013, the Company purchased an additional 5% interest in both JFR and JFFS from an original interest holder for the total purchase price of $30,000, increasing the Company’s ownership interest in JFR and JFFS to a total of 56%.
 
Just Fresh currently operates five restaurants in the Charlotte, North Carolina area that offer fresh-squeezed juices, gourmet coffee, fresh-baked goods and premium-quality, made-to-order sandwiches, salads and soups.
 
The acquisitions were accounted for using the purchase method of accounting and, accordingly, the consolidated statements of operations include the results of these operations from the dates of acquisition. The assets acquired and the liabilities assumed were recorded at estimated fair values as determined by an independent appraisal and the Company’s management, based on information currently available and on current assumptions as to future operations as follows:
 
 
 
ARB
 
WEW
 
JF
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consideration paid:
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock
 
$
3,611,126
 
$
-
 
$
-
 
$
3,611,126
 
Warrants
 
 
1,710,077
 
 
-
 
 
-
 
 
1,710,077
 
Cash
 
 
-
 
 
3,150,000
 
 
590,000
 
 
3,740,000
 
Total consideration paid
 
 
5,321,203
 
 
3,150,000
 
 
590,000
 
 
9,061,203
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current assets, excluding cash
 
 
281,574
 
 
151,546
 
 
42,206
 
 
475,326
 
Property and equipment
 
 
3,000,122
 
 
20,493
 
 
242,531
 
 
3,263,146
 
Goodwill
 
 
2,550,611
 
 
3,124,507
 
 
425,151
 
 
6,100,269
 
Trademark/trade name
 
 
1,784,443
 
 
-
 
 
1,010,000
 
 
2,794,443
 
Deposits and other assets
 
 
98,035
 
 
-
 
 
-
 
 
98,035
 
Total assets acquired, less cash
 
 
7,714,785
 
 
3,296,546
 
 
1,719,888
 
 
12,731,219
 
Liabilities assumed
 
 
(1,490,288)
 
 
(337,831)
 
 
(282,317)
 
 
(2,110,436)
 
Deferred tax liabilities
 
 
(956,000)
 
 
-
 
 
(384,000)
 
 
(1,340,000)
 
Non-controlling interest
 
 
-
 
 
-
 
 
(463,571)
 
 
(463,571)
 
Common stock and warrants issued
 
 
(5,321,203)
 
 
-
 
 
-
 
 
(5,321,203)
 
Cash paid
 
 
-
 
 
(3,150,000)
 
 
(590,000)
 
 
(3,740,000)
 
Cash received in excess of cash paid
 
$
52,706
 
$
191,285
 
$
-
 
$
243,991
 
 
Unaudited pro forma results of operations for the years ended December 31, 2013 and 2012, as if the Company had acquired majority ownership of the operation on January 1 of each year is as follows. The pro forma results include estimates and assumptions which management believes are reasonable. However, pro forma results are not necessarily indicative of the results that would have occurred if the business combination had been in effect on the dates indicated, or which may result in the future.
 
 
 
Years ended
 
 
 
December 31,
 
 
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Net revenues
 
$
17,496,810
 
$
16,389,150
 
Loss from continuing operations
 
 
(5,795,871)
 
 
(4,427,130)
 
Loss from discontinued operations
 
 
(25,215)
 
 
(239,318)
 
Loss attributable to non-controlling interest
 
 
(140,142)
 
 
(705,310)
 
Net loss
 
$
(5,961,228)
 
$
(5,371,758)
 
Net loss per share, continuing operations, basic and diluted
 
$
(1.33)
 
$
(1.74)
 
Net loss per share, discontinued operations
 
$
(0.01)
 
$
(0.09)
 
Weighted average shares outstanding, basic and diluted
 
 
4,365,468
 
 
2,541,696