15. AUSTRALIA ADMINISTRATION TRANSACTIONS

On July 14, 2015, voluntary administrators were appointed to review the affairs and assess the financial condition of the Hooters Australia stores. The initiation of voluntary administration followed the request of the Company because the Company believed its operating partner had been mismanaging the business. The Company believed that the Administration process would be the most effective means to objectively evaluate the state of the business and enhance the Company’s position and ability to restore the operational and financial performance of the Hooters Australia stores.

From July 14, 2015 through the end of September, the Hooters Australia stores operated under the management of administrators which were appointed by the directors of the Australia entities to facilitate the Administration process. In August, 2015, the Company entered into definitive agreements to invest additional consideration into the Australia business to increase its ownership in the Australia Hooters stores from 60% to 80% and to obtain the assets of those stores free of any prior liabilities or liens. In addition, the Company agreed to purchase the Margaritaville property in Australia which it did not previously control.

The Company and a new local partner, PCS Investments, Pty (“PCS”) closed on the purchase of the five Hooters Australia stores in early October 2015, with the Company contributing $1.0 million in additional capital for 80% ownership and PCS investing $0.3 million for 20% ownership in the five Hooters stores. The Company did not complete the purchase the Margaritaville site as the administrator was unable to provide an acceptable lease transfer for the property. Effective early October, the Company resume management and operating control for the Hooters stores.

During the Administration period from July 14, 2015 through early October, 2015, the Company’s control was temporarily restricted and management did not recognize revenue or expenses related to the operation of the stores during this brief period. Effective with the resumption of control in early October, 2015, the Company resume normal operations and recognition of revenue.

In connection with the Administration process, the Company evaluated its long-lived assets for impairment and evaluated the carrying value of all other assets and liabilities related to the Australia stores to their net realizable value. As a result of that analysis, management concluded that the goodwill balance had been impaired and that certain other balances were no longer valid or realizable as a consequence of the Administration process. As a result, the Company recorded a net impairment charge of $4.5 million during the three months ended September 30, 2015.