Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

v3.3.0.814
Acquisitions
 9 Months Ended
Sep. 30, 2015
Business Combinations [Abstract]  
Acquisitions

3. ACQUISITIONS

 

During the first nine months of 2105, the Company acquired three businesses to complement and expand its current operations in the better burger fast casual restaurant category. In connection with these acquisitions, the Company acquired strategic opportunities to expand its scale and presence in the better burger category.

 

Acquisition of BGR: The Burger Joint

 

The Company completed the acquisition of BGR: The Burger Joint effective March 15, 2015. As of June 30, 2015, the Company allocated the purchase price as of the date of acquisition based on appraisals and estimated the fair value of the acquired assets and assumed liabilities. In consideration of the purchased assets, the Company paid a purchase price consisting of $4,000,000 in cash, 500,000 shares of the Company’s common stock valued at $1.0 million, and a contractual working capital adjustment of $276,429.

 

Acquisition of BT’s Burger Joint

 

On July 1, 2015, the Company completed the acquisition with BT’s Burgerjoint Management, LLC, a limited liability company organized under the laws of North Carolina (“BT’s”), including the ownership interests of four operating restaurant subsidiaries engaged in the fast casual hamburger restaurant business under the name “BT’s Burger Joint.” In consideration of the purchased assets, the Company paid a purchase price consisting of $1,400,000 in cash and 424,080 shares of the Company’s common stock valued at $1.0 million.

 

Acquisition of Little Big Burger

 

On September 30, 2015, the Company completed the acquisition of various entities operating eight Little Big Burger restaurants in the State of Oregon. In consideration of the purchased assets, the Company paid a purchase price consisting of $3,600,000 in cash and 1,874,063 shares of the Company’s common stock valued at $2.1 million.

 

In connection with each acquisition, the Company determined the purchase price allocation in consideration of all identifiable intangibles. Based on our evaluation, there were no marketing related assets, customer related intangibles or contract based arrangements for which the purchase price would be required to be allocated. The value of any trademark/tradename was calculated using a relief of royalty method considering future franchise opportunities. With respect to customer related intangibles, the Company did not acquire any customer lists or enter into any customer contractual arrangements nor did the Company enter into any licensing or royalty arrangements requiring a further allocation of the purchase price.

 

The premium paid for the businesses represents the economic value which is not captured by other assets such as the reputation of the businesses, the value of its human capital, its future growth potential and its professional management. The acquisition of these businesses will help the Company expand its domestic operations and presence in the Fast Casual burger market.

 

The Company’s acquisitions were accounted for using the purchase method of accounting in accordance with ASC 805 “Business Combinations” 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.

 

The allocation of purchase price presented below is based on preliminary analyses which are still continuing and may be subject to change as such analyses are finalized in future periods:

 

    2015 Acquisitions        
    BGR:                    
    The Burger Joint     BT’s Burger Joint     Little Big Burger     Total  
Consideration paid:                                
Common stock   $ 1,000,000     $ 1,000,848     $ 2,061,469     $ 4,062,317  
Cash     4,276,429       1,400,000       3,600,000       9,276,429  
Total consideration paid     5,276,429       2,400,848       5,661,469       13,338,746  
                                 
Property and equipment     2,164,023       1,511,270       1,710,849       5,386,141  
Goodwill     663,037       939,281       2,417,653       4,019,972  
Trademark/trade name/franchise fee     2,750,000       -       1,550,000       4,300,000  
Inventory, deposits ands other assets     296,104       103,451       77,014       476,569  
Total assets acquired, less cash     5,873,164       2,554,002       5,755,516       14,182,682  
Liabilities assumed     (607,735 )     (161,154 )     (268,557 )     (1,037,446 )
Common stock and warrants issued     (1,000,000 )     (1,000,848 )     (2,061,469 )     (4,062,317 )
Cash paid     (4,276,429 )     (1,400,000 )     (3,600,000 )     (9,276,429 )
Cash acquired   $ 11,000     $ 8,000     $ 174,511     $ 193,511  

 

The allocation of purchase price presented for the Company’s 2014 acquisitions:

 

    2014 Acquisitions  
    Hooters           Hooters Australia     The        
    Pacific NW     Spoon     April 1, 2014     July 1, 2014     Burger Co.     Total  
Consideration paid:                                                
Common stock   $ 2,891,156     $ 828,750     $ -     $ -     $ 300,000     $ 4,019,906  
Warrants     978,000       280,400       -       123,333       -       1,381,733  
Assumption of debt     -       -       -       5,000,000       -       5,000,000  
Cash     -       -       100,000       -       250,000       350,000  
Total consideration paid     3,869,156       1,109,150       100,000       5,123,333       550,000       10,751,639  
                                                 
Current assets, excluding cash     112,078       89,817       377,296       47,777       9,926       636,894  
Property and equipment     2,731,031       391,462       2,934,307       1,603,557       284,795       7,945,152  
Goodwill     1,951,909       698,583       -       8,487,138       256,379       11,394,009  
Trademark/trade name/franchise fee     60,937       -       277,867       220,500       -       559,304  
Deposits and other assets     20,275       5,193       90,371       20,186       -       136,025  
Total assets acquired, less cash     4,876,230       1,185,055       3,679,841       10,379,158       551,100       20,671,384  
Liabilities assumed     (1,009,348 )     (97,541 )     (1,560,710 )     (1,496,536 )     (1,100 )     (4,165,235 )
Deferred tax liabilities     -       -                       -       -  
Non-controlling interest     -       -       (993,999 )     (3,759,289 )     -       (4,753,288 )
Chanticleer equity     -       -       (1,028,749 )     -       -       (1,028,749 )
Common stock and warrants issued     (3,869,156 )     (1,109,150 )     -       (123,333 )     (300,000 )     (5,401,639 )
Assumption of debt     -       -       -       (5,000,000 )     -       (5,000,000 )
Cash paid     -       -       (100,000 )     -       (250,000 )     (350,000 )
Cash acquired   $ 2,274     $ 21,636     $ 3,617     $ -     $ -     $ 27,527  

 

Unaudited pro forma results of operations for the three and nine month periods ended September 30, 2015 and 2014, as if the Company had acquired majority ownership of all operations acquired during 2014 and 2015 on January 1, 2014 is as follows.

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2015     2014     2015     2014  
                         
Total revenues   $ 11,551,329     $ 13,473,304     $ 36,159,199     $ 37,626,727  
Loss from continuing operations     (2,972,928 )     (1,287,982 )     (5,255,488 )     (2,091,978 )
Gain (loss) frorm discontinued operations     2,088       (72,300 )     189       (104,973 )
Loss attributable to non-controlling interest     69,397       (61,209 )     412,366       88,163  
Net loss   $ (2,901,443 )   $ (1,421,491 )   $ (4,842,933 )   $ (2,108,788 )
Net loss per share, basic and diluted   $ (0.20 )   $ (0.21 )   $ (0.34 )   $ (0.34 )
Weighted average shares outstanding, basic and diluted     14,802,370       6,628,011       14,059,116       6,279,688  

 

The pro forma results include estimates and assumptions which management believes are reasonable. However, pro forma results do not include any adjustments to reflect expected synergies or profit improvements that might be anticipated post-acquisition, and 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.