Quarterly report pursuant to Section 13 or 15(d)

ACQUISITION OF MAJORITY OWNED HOOTERS RESTAURANTS (RESTATED NOTE 16)

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ACQUISITION OF MAJORITY OWNED HOOTERS RESTAURANTS (RESTATED NOTE 16)
 3 Months Ended
Mar. 31, 2012
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]
3. ACQUISITION OF MAJORITY OWNED HOOTERS RESTAURANTS (RESTATED NOTE 16)

 

Effective October 1, 2011, the Company acquired majority ownership of a management company, a company that owns the HOA franchise rights for the territory of South Africa, and four Hooters restaurants in South Africa. Previously, the Company owned a minority interest in the restaurants and was not in control and these operations were accounted for using the equity method of accounting. New entities were formed for the operations and the Company’s ownership at March 31, 2012 is as follows: KPL 80%, DFLO 56%, TPL 69%, CPL 60% and DLOG 100%. The restaurant owned by DFLO in Durban opened in January 2010, the restaurant owned by TPL in Johannesburg opened in June 2010, the restaurant owned by CPL in Cape Town opened in June 2011and the restaurant owned by DLOG opened in February 2012.

 

The acquisition was accounted for using the purchase method of accounting and, accordingly, the consolidated statements of operations include the results of the South African operations beginning October 1, 2011. The assets acquired and the liabilities assumed were recorded at estimated fair values as determined by the Company’s management based on information currently available and on current assumptions as to future operations. A summary of the estimated fair value of assets acquired and liabilities assumed in the acquisition follows:

 

Current assets, excluding cash and cash equivalents   $ 138,801  
Property and equipment and intangible assets     1,985,799  
Total assets excluding cash and cash equivalents   $ 2,124,600  
Liabilities assumed     953,917  
Non-controlling interest     645,436  
Prior investment of the Company     320,247  
Purchase price (net assets acquired)   $ 205,000  
Cash paid   $ 205,000  

 

Liabilities assumed includes $604,446 and $593,928 at March 31, 2012 and December 31, 2011, respectively, in bank debt of the prior entities which the Company has agreed to repay without interest upon completion of its new financing. These amounts are included in other liabilities at March 31, 2012 and December 31, 2011.

 

Unaudited pro forma results of operations for the three months ended March 31, 2011, as if the Company had acquired majority ownership of the South African Hooters restaurants on January 1, 2011 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.

 

    2011  
       
Net revenues   $ 1,399,048  
Net earnings   $ 276,736  
Net earnings per share, basic and diluted   $ 0.13