| Restatement To Prior Year Income [Text Block] |
|
16. |
RESTATEMENT OF 2011 AND 2012 FINANCIAL INFORMATION |
These condensed consolidated financial statements restate certain items previously reported by the Company for the three and six months ended June 30, 2012 and revise certain items previously reported by the Company in the notes to the consolidated financial statements due to the events described below. For information regarding the restatement of the 2011 year see the Company’s Amended Form 10-K/A filed with the SEC on December 4, 2012.
Restated balances for 2012 and 2011 financial information items have been identified with the notation “Restated” where appropriate and applicable.
Other than the revising of the previously filed condensed consolidated financial statements relating to the restatement, these notes to the condensed consolidated financial statements speak as of the filing date of the Company’s original Form 10-Q for the six months ended June 30, 2012, filed on August 13, 2012, and these notes to the condensed consolidated financial statements have not been updated to reflect other events occurring subsequent to the original filing date. These notes to the condensed consolidated financial statements should be read in their historical context, except to the extent revised as a result of this restatement.
On September 7, 2012, the audit committee of the Company, upon recommendation of the Company’s management determined that the Company’s Consolidated Financial Statements for its fiscal year ended December 31, 2011 as originally filed in the Form 10-K could no longer be relied on. The Company determined that the financial statements of Kiarabrite (Pty) Ltd., Dimaflo (Pty) Ltd., Tundraspex (Pty) Ltd., Civisign (Pty) Ltd., Dimalogix (Pty) Ltd., and Chanticleer & Shaw Foods (Pty) Ltd. (collectively referred to as the “South African Operations”) which are the South African management company and the four entities organized for the stores we operate in South Africa, and the company that owns the HOA franchise rights for the territory of South Africa, were not audited as the Company was led to believe. Accordingly, this Amendment is being filed to include the changes to the financial statements of the South African Operations and its impact on the condensed consolidated financial statements of the Company for the period ended June 30, 2012, as a result of the audit of the South African Operations for the three months ended December 31, 2011 and the subsequent review of the operations for the three and six months ended June 30, 2012.
On September 7, 2012, the Company’s South African Chief Financial Officer (“SA CFO”) resigned. It was determined that the SA CFO had committed certain illegal acts, fraud and certain misrepresentations of facts. Due to the SA CFO’s actions, certain taxes were not paid. In addition, the applicable tax forms were not filed during the proper periods. The Company has engaged tax experts to assist in the tax process. The Company also discovered a balance of approximately $96,737 and $42,109 of cash that was misappropriated by the SA CFO as of the end of the second quarter of 2012 and the fourth quarter of 2011 (presented as “other receivable” on the Company’s condensed consolidated balance sheet as of June 30, 2012 and December 31, 2011), and approximately $128,000 in total for the period from October 2011 through September 2012. As of December 10, 2012, approximately $41,000 has been recovered by the Company and payment plans are in place for the remainder.
The Company engaged outside South African tax experts in September 2012 to assist with compliance with Value Added Tax (VAT), payroll taxes, and income taxes n South Africa. A voluntary disclosure agreement has been submitted and the Company is awaiting contract from the South African governmental agency.
In connection with the acquisition of assets as described in Note 3, the Company believes the purchase and sale with the seller was accomplished in accordance with the laws and regulations of the taxing authorities in South Africa. However, there can be no absolute assurance that the seller has fulfilled its tax and regulatory filing requirements, and whether or not the local authorities could seek to recover any unpaid taxes or other amounts from the Company, its shareholders or others. The Company is not aware of any known obligations for which the Company may be required to settle.
The following tables include the condensed consolidated balance sheet as of June 30, 2012, condensed consolidated statement of operations for the three months ended June 30, 2012 and condensed consolidated statements of operations and cash flows for the six months ended June 30, 2012 and
include the consolidated amounts previously reported, adjustments reflected in this amended filing, and the restated amounts for 2012.
Condensed Consolidated Balance Sheet
| |
|
June 30, 2012 |
|
| |
|
As Previously |
|
|
|
|
|
|
|
| |
|
Reported |
|
|
Adjustment |
|
|
As Revised |
|
| ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
3,673,005 |
|
|
|
(104,589 |
) |
|
|
3,568,416 |
|
| Accounts receivable |
|
|
41,667 |
|
|
|
36,429 |
|
|
|
78,096 |
|
| Other receivable |
|
|
|
|
|
|
96,737 |
|
|
|
96,737 |
|
| Inventory |
|
|
122,499 |
|
|
|
17,508 |
|
|
|
140,007 |
|
| Due from related parties |
|
|
110,676 |
|
|
|
- |
|
|
|
110,676 |
|
| Prepaid expenses |
|
|
125,056 |
|
|
|
(22,450 |
) |
|
|
102,606 |
|
| TOTAL CURRENT ASSETS |
|
|
4,072,903 |
|
|
|
23,635 |
|
|
|
4,096,538 |
|
| Property and equipment, net |
|
|
3,102,917 |
|
|
|
(1,059,954 |
) |
|
|
2,042,963 |
|
| Intangible assets, net |
|
|
769,386 |
|
|
|
198,932 |
|
|
|
968,318 |
|
| Investments at fair value |
|
|
80,713 |
|
|
|
- |
|
|
|
80,713 |
|
| Other investments |
|
|
2,077,176 |
|
|
|
(272,469 |
) |
|
|
1,804,707 |
|
| Deposits and other assets |
|
|
3,980 |
|
|
|
96,511 |
|
|
|
100,491 |
|
| TOTAL ASSETS |
|
$ |
10,107,075 |
|
|
$ |
(1,013,345 |
) |
|
$ |
9,093,730 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Current maturities of long-term debt and notes payable |
|
$ |
7,722 |
|
|
|
- |
|
|
|
7,722 |
|
| Accounts payable anc accrued expenses |
|
|
592,963 |
|
|
|
329,955 |
|
|
|
922,918 |
|
| Other current liabilities |
|
|
332,340 |
|
|
|
20,058 |
|
|
|
352,398 |
|
| Deferred rent |
|
|
- |
|
|
|
5,573 |
|
|
|
5,573 |
|
| Current maturities of capital leases payable |
|
|
- |
|
|
|
39,054 |
|
|
|
39,054 |
|
| Income taxes payable |
|
|
62,555 |
|
|
|
(62,555 |
) |
|
|
- |
|
| Due to related parties |
|
|
27,485 |
|
|
|
- |
|
|
|
27,485 |
|
| TOTAL CURRENT LIABILITIES |
|
|
1,023,065 |
|
|
|
332,085 |
|
|
|
1,355,150 |
|
| Deferred rent |
|
|
- |
|
|
|
76,098 |
|
|
|
76,098 |
|
| Other liabilities |
|
|
- |
|
|
|
216,518 |
|
|
|
216,518 |
|
| Long-term debt and capital leases, less current maturities |
|
|
231,519 |
|
|
|
74,397 |
|
|
|
305,916 |
|
| TOTAL LIABILITIES |
|
|
1,254,584 |
|
|
|
699,098 |
|
|
|
1,953,682 |
|
| Commitments and contingencies (Note 13) |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock |
|
|
396 |
|
|
|
- |
|
|
|
396 |
|
| Additional paid in capital |
|
|
16,509,226 |
|
|
|
(1,181,546 |
) |
|
|
15,327,680 |
|
| Other comprehensive income (loss) |
|
|
(194,446 |
) |
|
|
6,409 |
|
|
|
(188,037 |
) |
| Non-controlling interest |
|
|
398,037 |
|
|
|
(232,075 |
) |
|
|
165,962 |
|
| Accumulated deficit |
|
|
(7,334,302 |
) |
|
|
(305,231 |
) |
|
|
(7,639,533 |
) |
| Less treasury stock |
|
|
(526,420 |
) |
|
|
- |
|
|
|
(526,420 |
) |
| |
|
|
8,852,491 |
|
|
|
(1,712,443 |
) |
|
|
7,140,048 |
|
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
|
$ |
10,107,075 |
|
|
$ |
(1,013,345 |
) |
|
$ |
9,093,730 |
|
| Condensed Consolidated Statement of Operations |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
Three Months Ended June 30, 2012 |
|
| |
|
As Previously |
|
|
|
|
|
|
|
| |
|
Reported |
|
|
Adjustments |
|
|
As Restated |
|
| Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
| Restaurant sales, net |
|
$ |
1,654,829 |
|
|
$ |
41,294 |
|
|
$ |
1,696,123 |
|
| Management fee income - non-affiliates |
|
|
25,000 |
|
|
|
- |
|
|
|
25,000 |
|
| Management fee income - affiliates |
|
|
6,698 |
|
|
|
- |
|
|
|
6,698 |
|
| Total revenue |
|
|
1,686,527 |
|
|
|
41,294 |
|
|
|
1,727,821 |
|
| Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| Restaurant cost of sales |
|
|
606,221 |
|
|
|
103,391 |
|
|
|
709,612 |
|
| Restaurant operating expenses |
|
|
711,808 |
|
|
|
211,482 |
|
|
|
923,290 |
|
| Restaurant pre-opening expenses |
|
|
25,000 |
|
|
|
(1,501 |
) |
|
|
23,499 |
|
| General and administrative expense |
|
|
656,596 |
|
|
|
(484 |
) |
|
|
656,112 |
|
| Depreciation and amortization |
|
|
127,087 |
|
|
|
(39,926 |
) |
|
|
87,161 |
|
| Total expenses |
|
|
2,126,712 |
|
|
|
272,962 |
|
|
|
2,399,674 |
|
| Loss from operations |
|
|
(440,185 |
) |
|
|
(231,668 |
) |
|
|
(671,853 |
) |
| Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
| Equity in earnings (losses) of investments |
|
|
(33,348 |
) |
|
|
- |
|
|
|
(33,348 |
) |
| Interest expense |
|
|
(201,550 |
) |
|
|
(6,552 |
) |
|
|
(208,102 |
) |
| Total other income (expense) |
|
|
(234,898 |
) |
|
|
(6,552 |
) |
|
|
(241,450 |
) |
| Net loss before income taxes |
|
|
(675,083 |
) |
|
|
(238,220 |
) |
|
|
(913,303 |
) |
| Provision for income taxes |
|
|
47,327 |
|
|
|
(47,327 |
) |
|
|
- |
|
| Net loss before non-controlling interest |
|
|
(722,410 |
) |
|
|
(190,893 |
) |
|
|
(913,303 |
) |
| Non-controlling interest |
|
|
(10,971 |
) |
|
|
80,658 |
|
|
|
69,687 |
|
| Net loss |
|
|
(733,381 |
) |
|
|
(110,235 |
) |
|
|
(843,616 |
) |
| Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized gain (loss) on available-for-sale securities |
|
|
(132,021 |
) |
|
|
- |
|
|
|
(132,021 |
) |
| (none applies to non-controlling interest) |
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign translation losses |
|
|
(4,193 |
) |
|
|
11,859 |
|
|
|
7,666 |
|
| Other comprehensive loss |
|
$ |
(869,595 |
) |
|
$ |
(98,376 |
) |
|
$ |
(967,971 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net earnings (loss) per share, basic and diluted |
|
$ |
(0.49 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.56 |
) |
| Weighted average shares outstanding |
|
|
1,502,418 |
|
|
|
1,502,418 |
|
|
|
1,502,418 |
|
Condensed Consolidated Statement of Operations
| |
|
Six Months Ended June 30, 2012 |
|
| |
|
As Previously |
|
|
|
|
|
|
|
| |
|
Reported |
|
|
Adjustments |
|
|
As Restated |
|
| Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
| Restaurant sales, net |
|
$ |
3,003,816 |
|
|
$ |
79,802 |
|
|
$ |
3,083,618 |
|
| Management fee income - non-affiliates |
|
|
50,000 |
|
|
|
- |
|
|
|
50,000 |
|
| Management fee income - affiliates |
|
|
6,698 |
|
|
|
- |
|
|
|
6,698 |
|
| Total revenue |
|
|
3,060,514 |
|
|
|
79,802 |
|
|
|
3,140,316 |
|
| Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| Restaurant cost of sales |
|
|
1,102,770 |
|
|
|
188,393 |
|
|
|
1,291,163 |
|
| Restaurant operating expenses |
|
|
1,327,578 |
|
|
|
365,044 |
|
|
|
1,692,622 |
|
| Restaurant pre-opening expenses |
|
|
91,120 |
|
|
|
(26,900 |
) |
|
|
64,220 |
|
| General and administrative expense |
|
|
1,137,868 |
|
|
|
29,765 |
|
|
|
1,167,633 |
|
| Depreciation and amortization |
|
|
235,699 |
|
|
|
(68,514 |
) |
|
|
167,185 |
|
| Total expenses |
|
|
3,895,035 |
|
|
|
487,788 |
|
|
|
4,382,823 |
|
| Loss from operations |
|
|
(834,521 |
) |
|
|
(407,986 |
) |
|
|
(1,242,507 |
) |
| Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
| Equity in earnings (losses) of investments |
|
|
(43,886 |
) |
|
|
- |
|
|
|
(43,886 |
) |
| Interest expense |
|
|
(378,768 |
) |
|
|
(14,444 |
) |
|
|
(393,212 |
) |
| Total other income (expense) |
|
|
(422,654 |
) |
|
|
(14,444 |
) |
|
|
(437,098 |
) |
| Net loss before income taxes |
|
|
(1,257,175 |
) |
|
|
(422,430 |
) |
|
|
(1,679,605 |
) |
| Provision for income taxes |
|
|
51,143 |
|
|
|
(51,143 |
) |
|
|
- |
|
| Net loss before non-controlling interest |
|
|
(1,308,318 |
) |
|
|
(371,287 |
) |
|
|
(1,679,605 |
) |
| Non-controlling interest |
|
|
6,824 |
|
|
|
125,380 |
|
|
|
132,204 |
|
| Net loss |
|
|
(1,301,494 |
) |
|
|
(245,907 |
) |
|
|
(1,547,401 |
) |
| Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized gain (loss) on available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
| (none applies to non-controlling interest) |
|
|
(237,639 |
) |
|
|
- |
|
|
|
(237,639 |
) |
| Foreign translation losses |
|
|
(5,472 |
) |
|
|
4,424 |
) |
|
|
(1,048 |
) |
| Other comprehensive loss |
|
$ |
(1,544,605 |
) |
|
$ |
(241,483 |
) |
|
$ |
(1,786,088 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net earnings (loss) per share, basic and
diluted |
|
$ |
(0.52 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.62 |
) |
| Weighted average shares outstanding |
|
|
2,498,882 |
|
|
|
2,498,882 |
|
|
|
2,498,882 |
|
Condensed Consolidated Statement of Cash Flows
| |
|
Six Months Ended June 30, 2012 |
|
| |
|
As Previously |
|
|
|
|
|
|
|
| |
|
Reported |
|
|
Adjustments |
|
|
As Restated |
|
| Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(1,301,494 |
) |
|
$ |
(245,907 |
) |
|
$ |
(1,547,401 |
) |
| Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Non-controlling interest |
|
|
(6,824 |
) |
|
|
(125,380 |
) |
|
|
(132,204 |
) |
| Services rendered in exchange for investment securities |
|
|
9,406 |
|
|
|
- |
|
|
|
9,406 |
|
| Depreciation and amortization |
|
|
235,699 |
|
|
|
(68,514 |
) |
|
|
167,185 |
|
| Equity in (earnings) loss of investments |
|
|
43,886 |
|
|
|
- |
|
|
|
43,886 |
|
| Amortization of warrants |
|
|
72,063 |
|
|
|
- |
|
|
|
72,063 |
|
| Bad debt expense |
|
|
12,315 |
|
|
|
(12,315 |
) |
|
|
- |
|
| (Increase) decrease in accounts and other receivables |
|
|
50,000 |
|
|
|
(74,010 |
) |
|
|
(24,010 |
) |
| (Increase) decrease in prepaid expenses and other assets |
|
|
170,374 |
|
|
|
(86,358 |
) |
|
|
84,016 |
|
| (Increase) decrease inventory |
|
|
(63,233 |
) |
|
|
28,299 |
|
|
|
(34,934 |
) |
| Increase (decrease) in accounts payable and accrued expenses |
|
|
424,261 |
|
|
|
141,039 |
|
|
|
565,300 |
|
| Increase (decrease) in income taxes payable |
|
|
47,947 |
|
|
|
(47,947 |
) |
|
|
- |
|
| Advance from related party for working capital |
|
|
(63,202 |
) |
|
|
- |
|
|
|
(63,202 |
) |
| Increase (decrease) in deferred revenue and other liabilities |
|
|
(70,802 |
) |
|
|
70,802 |
|
|
|
- |
|
| Increase (decrease) in deferred rent |
|
|
- |
|
|
|
31,284 |
|
|
|
31,284 |
|
| Net cash used by operating activities |
|
|
(439,604 |
) |
|
|
(389,007 |
) |
|
|
(828,611 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Proceeds from non-controlling interest |
|
|
- |
|
|
|
90,000 |
|
|
|
90,000 |
|
| Purchase of investments |
|
|
(933,948 |
) |
|
|
29,091 |
|
|
|
(904,857 |
) |
| Franchise fees incurred |
|
|
(312,674 |
) |
|
|
72,674 |
|
|
|
(240,000 |
) |
| Purchase of property and equipment |
|
|
(816,341 |
) |
|
|
119,502 |
|
|
|
(696,839 |
) |
| Net cash provided (used) by investing activities |
|
|
(2,062,963 |
) |
|
|
311,267 |
|
|
|
(1,751,696 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Proceeds from sale of common stock |
|
|
7,051,464 |
|
|
|
- |
|
|
|
7,051,464 |
|
| Loan proceeds |
|
|
2,915,000 |
|
|
|
|
|
|
|
2,915,000 |
|
| Other liabilities |
|
|
- |
|
|
|
(25,012 |
) |
|
|
(25,012 |
) |
| Loan and capital lease repayment |
|
|
(3,942,820 |
) |
|
|
(13,993 |
) |
|
|
(3,956,813 |
) |
| Net cash provided by financing activities |
|
|
6,023,644 |
|
|
|
(39,005 |
) |
|
|
5,984,639 |
|
| Effect of exchange rate changes on cash |
|
|
- |
|
|
|
(1,045 |
) |
|
|
(1,045 |
) |
| Net increase in cash and cash equivalents |
|
|
3,521,077 |
|
|
|
(117,790 |
) |
|
|
3,403,287 |
|
| Cash and cash equivalents, beginning of year |
|
|
151,928 |
|
|
|
13,201 |
|
|
|
165,129 |
|
| Cash and cash equivalents, end of year |
|
$ |
3,673,005 |
|
|
$ |
(104,589 |
) |
|
$ |
3,568,416 |
|
|