Quarterly report pursuant to Section 13 or 15(d)

ACQUISITIONS

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ACQUISITIONS
 3 Months Ended
Mar. 31, 2014
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]
3.
ACQUISITIONS
 
The Company completed the following acquisitions:
·
American Roadside Burgers, effective September 30, 2013;
·
West End Wings, LTD (Hooters Nottingham), effective November 7, 2013;
·
Just Fresh, effective December 10, 2013;
·
Tacoma Wings, LLC, Jantzen Beach Wings, LLC and Oregon Owl’s Nest, LLC, effective January 31, 2014; and
·
Dallas Spoon, LLC and Dallas Spoon Beverage, LLC, effective January 31, 2014.
  
American Roadside Burgers (“ARB”)
 
On September 30, 2013, the Company 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 $5.00 per share. The warrants are exercisable beginning October 1, 2014 until September 30, 2018. 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. During March and April 2014, the Company began doing business as American Burger Co. at the two Charlotte ARB locations.
 
The acquisition was accounted for using the purchase method in accordance with ASC 805 “Business Combinations”. The condensed 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 based on information currently available and based on certain assumptions as to future operations.
 
West End Wings (“WEW” or “Hooters Nottingham”)
 
On November 6, 2013, the Company closed 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 condensed 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 JFR and JFFS, for the purchase of a 51% ownership interest in each entity, for a total purchase price of $560,000. The transaction closed 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 six 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.
 
Tacoma Wings, Jantzen Beach Wings and Oregon Owl’s Nest (“Hooters Pacific NW”)
 
On January 31, 2014, pursuant to an Agreement and Plan of Merger executed on December 31, 2013, the Company completed the acquisition of all of the outstanding shares of each of Tacoma Wings, LLC, Jantzen Beach Wings, LLC and Oregon Owl’s Nest, LLC, which owned and operated the Hooters restaurant locations in Tacoma, Washington and Portland, Oregon, respectively. These entities were purchased from Hooters of Washington, LLC and Hooters of Oregon Partners, LLC (collectively, the “Hooters Sellers”) for a total purchase price of 680,272 Company units, with each unit consisting of one share of the Company’s common stock and one five-year warrant to purchase a share of the Company’s common stock. Half of the warrants are exercisable at $5.50 and half of the warrants are exercisable at $7.00. As part of this transaction, the Hooters Sellers were granted registration rights with respect to the Company’s common stock issued and underlying the warrants, and franchise rights and leasehold rights to the locations were transferred to the Company.
 
Dallas Spoon and Dallas Spoon Beverage (“Spoon”)
 
Also on January 31, 2014, pursuant to an Agreement and Plan of Merger executed on January 14, 2014, the Company completed the acquisition of all of the outstanding shares of Dallas Spoon, LLC and Dallas Spoon Beverage, LLC from Express Restaurant Holdings, LLC and Express Restaurant Holdings Beverage, LLC. The purchase price of 195,000 Company units was paid to Express Working Capital, LLC (“EWC”); the units consist of one share of the Company’s common stock and one five-year warrant to purchase a share of the Company’s common stock. Half of the warrants are exercisable at $5.50 and half of the warrants are exercisable at $7.00. As part of this transaction, EWC was granted registration rights with respect to the Company’s common stock issued and underlying the warrants, and all leaseholds and other rights were transferred to the Company.
 
The acquisitions were accounted for using the purchase method of accounting and, accordingly, the condensed 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 based on information currently available and based on certain assumptions as to future operations as follows:
 
 
 
 
 
 
 
2013 Acquisitions
 
 
 
 
2014 Acquisitions
 
 
 
 
 
ARB
 
WEW
 
JF
 
Hooters
Pacific NW
 
Spoon
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consideration paid:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock
 
$
3,611,126
 
$
-
 
$
-
 
$
2,891,156
 
$
828,750
 
$
7,331,032
 
Warrants
 
 
1,710,077
 
 
-
 
 
-
 
 
978,000
 
 
280,400
 
 
2,968,477
 
Cash
 
 
-
 
 
3,150,000
 
 
590,000
 
 
-
 
 
-
 
 
3,740,000
 
Total consideration paid
 
 
5,321,203
 
 
3,150,000
 
 
590,000
 
 
3,869,156
 
 
1,109,150
 
 
14,039,509
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current assets, excluding cash
 
 
281,574
 
 
151,546
 
 
42,206
 
 
112,078
 
 
89,817
 
 
677,221
 
Property and equipment
 
 
3,000,122
 
 
20,493
 
 
242,531
 
 
2,731,031
 
 
391,462
 
 
6,385,639
 
Goodwill
 
 
2,550,611
 
 
3,124,507
 
 
425,151
 
 
1,951,909
 
 
719,740
 
 
8,771,918
 
Trademark/trade name/franchise fee
 
 
1,784,443
 
 
-
 
 
1,010,000
 
 
60,937
 
 
-
 
 
2,855,380
 
Deposits and other assets
 
 
98,035
 
 
-
 
 
-
 
 
20,275
 
 
5,193
 
 
123,503
 
Total assets acquired, less cash
 
 
7,714,785
 
 
3,296,546
 
 
1,719,888
 
 
4,876,230
 
 
1,206,212
 
 
18,813,661
 
Liabilities assumed
 
 
(1,490,288)
 
 
(337,831)
 
 
(282,317)
 
 
(1,009,348)
 
 
(118,698)
 
 
(3,238,482)
 
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)
 
 
-
 
 
-
 
 
(3,869,156)
 
 
(1,109,150)
 
 
(10,299,509)
 
Cash paid
 
 
-
 
 
(3,150,000)
 
 
(590,000)
 
 
-
 
 
-
 
 
(3,740,000)
 
Cash received in excess of cash paid
 
$
52,706
 
$
191,285
 
$
-
 
$
2,274
 
$
21,636
 
$
267,901
 
 
Unaudited pro forma results of operations for the quarter ended March 31, 2014 and 2013, 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.
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Net revenues
 
$
6,058,859
 
$
5,650,789
 
Loss from continuing operations
 
 
(1,505,272)
 
 
(1,070,811)
 
Loss attributable to non-controlling interest
 
 
(2,886)
 
 
(47,251)
 
Net loss
 
$
(1,508,158)
 
$
(1,118,062)
 
Net loss per share, basic and diluted
 
$
(0.25)
 
$
(0.30)
 
Weighted average shares outstanding, basic and diluted
 
 
5,974,495
 
 
3,698,896