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)
 6 Months Ended
Jun. 30, 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 50% of the restaurants but 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 June 30, 2012, after the buyout of the Hoot partnerships is as follows: KPL 80%, DFLO 82%, TPL 88%, CPL 90% and DLOG 97%. 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 $568,916 and $593,928 at June 30, 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 financing, subject to certain releases the Company has requested from the bank. These amounts are included in other liabilities at June 30, 2012 and December 31, 2011.

 

Unaudited pro forma results of operations for the three and six months ended June 30, 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.

 

    Three Months Ended     Six Months Ended  
    June 30, 2011     June 30, 2011  
             
Net revenues   $ 1,093,134     $ 2,492,182  
Net earnings (loss)   $ (163,757 )   $ 107,465  
Net earnings (loss) per share, basic and diluted   $ (0.13 )   $ 0.10