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EX-23.1 - Sonnet BioTherapeutics Holdings, Inc. | v207394_ex23-1.htm |
As
filed with the Securities and Exchange Commission on January 6,
2010
REGISTRATION
NO. 333-__________
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
CHANTICLEER
HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
8742
|
20-2932652
|
||
(State
or other jurisdiction of
incorporation
or organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S.
Employer Identification
No.)
|
11220
Elm Lane, Suite 103
Charlotte,
NC 28277
(704)
366-5122
(Address,
including zip code, and telephone number,
including
area code, of registrant’s principal executive officers)
Michael
D. Pruitt
Chief
Executive Officer
11220
Elm Lane, Suite 103
Charlotte,
NC 28277
(704)
366-5122
(Name,
address, including zip code, and telephone number,
including
area code, of agent for service)
Copies
to:
Joel
D. Mayersohn, Esq.
Clint
J. Gage, Esq.
Roetzel
& Andress
350
East Las Olas Blvd., Ste. 1150
Fort
Lauderdale, FL 33301
(954)
462-4150
Approximate
date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration
Statement.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act, check the
following box. x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company x
|
(Do
not check if a smaller reporting company)
|
CALCULATION
OF REGISTRATION FEE
Title of each class of Securities to be Registered(1)
|
Amount
to be
Registered
|
Proposed
Maximum
Offering
Price Per
Unit
|
Proposed
Maximum
Aggregate
Offering
Price
|
Amount of
Registration
Fee
|
||||||||||||
Non-transferable
subscription rights, each to purchase a Class A Warrant to purchase one
share of our common stock and a Class B Warrant to purchase one share of
our common stock (2)
|
— | — | — | — | ||||||||||||
Common
stock, no par value, underlying the Class A Warrants(3)
|
1,270,959 | $ | 5.50 | $ | 6,990,275 | $ | 812 | |||||||||
Common
stock, no par value, underlying the Class B Warrants(4)
|
1,270,959 | $ | 7.00 | $ | 8,896,713 | $ | 1,033 | |||||||||
Total
|
$ | 15,886,988 | $ | 1,845 |
(1)
|
This
registration statement relates to (a) the subscription rights to purchase
warrants, and (b) shares of our common stock that are deliverable upon
exercise of the warrants.
|
(2)
|
The
subscription rights are being issued without
consideration. Pursuant to Rule 457(g), no separate
registration fee is payable with respect to the subscription rights being
offered hereby since the subscription rights are being registered in the
same registration statement as the securities to be offered pursuant
thereto.
|
(3)
|
Calculated
pursuant to Rule 457(o) based on an estimate of the proposed maximum
exercise price of $5.50.
|
(4)
|
Calculated
pursuant to Rule 457(o) based on an estimate of the proposed maximum
exercise price of $7.00.
|
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The
information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities nor may offers to buy these
securities be accepted until the registration statement filed with the
Securities and Exchange Commission becomes effective. This
preliminary prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any jurisdiction where the offer
or sale is not permitted.
Subject
To Completion, Dated January 6, 2010
Preliminary
Prospectus
CHANTICLEER
HOLDINGS, INC.
Warrants
to purchase up to 2,541918 Shares of Common Stock
Issuable Upon Exercise of
Nontransferable Rights to Subscribe for such Warrants
We are
distributing, at no charge to the holders of our common stock as of 5:00 p.m.,
Charlotte, NC time, on __________, 2010 (the “Record Date”), non-transferable
subscription rights to subscribe for class a warrants (“Class A Offered
Warrants”) and class B warrants (“Class B Offered Warrants”, and together with
the Class A Offered Warrants the “Offered Warrants”) to purchase shares of our
common stock. Our shareholders will receive one non-transferable subscription
right for every share of our common stock held as of the Record Date. Pursuant
to the terms of this offering, if all rights are exercised, we will receive
$50,838 of subscription proceeds.
Each
non-transferable subscription right entitles the holder to subscribe for one
Class A Offered Warrant to purchase one share of our common stock at $5.50 for a
period of 5 years following __________, 2011, and one Class B Warrant to
purchase one share of our common stock at $7.00 for a period of 5 years
following __________, 2011, which we refer to as the subscription
right. Unless we otherwise agree in writing, a person or entity,
together with related persons or entities, may not exercise subscription rights
to purchase Offered Warrants that, when aggregated with their
existing ownership, would result in such person or entity, together with any
related persons or entities beneficially owning in excess of nine and 9/10
percent (9.90%) of our issued and outstanding shares of common stock following
the closing of the transactions contemplated by this rights
offering.
The
subscription rights will expire if they are not exercised by 5:00 p.m.,
Charlotte, NC time, on __________, 201___, which date we refer to as the
expiration date. We may extend the expiration date for up to an
additional 30 trading days in our sole discretion. Any subscription
rights not exercised by the expiration date will expire worthless without any
payment to the holders of those unexercised subscription
rights. There is no minimum subscription amount required for
consummation of this rights offering.
You
should carefully consider whether to exercise your subscription rights before
the expiration date. All exercises of subscription rights are
irrevocable. Our board of directors is making no recommendation
regarding your exercise of the subscription rights. Our board of
directors may cancel, modify, or amend this rights offering at any time prior to
the expiration date for any reason. In the event that we cancel the
rights offering, all subscription payments received by the subscription agent
will be returned, without interest or deduction, as soon as
practicable.
Investing
in our securities involves a high degree of risk. In addition, your
holdings of common stock in our company will be diluted if you do not exercise
the full amount of your subscription rights. You should read “Risk
Factors” beginning on page ___ of this prospectus and all other information
included or incorporated by reference in this prospectus before deciding whether
to exercise your rights.
Our
common stock is quoted on the OTCBB under the symbol “CCLR.” The
shares of common stock issued pursuant to the terms of the Offered
Warrants will also be quoted on the OTCBB under the same “CCLR”
symbol. The last reported sale price of our common stock on December
29, 2010 was $4.00 per share. The subscription rights are
non-transferable. The Offered Warrants to be issued pursuant to this
offering are non-transferable following their issuance through their expiration
date.
2
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus or the information incorporated by reference
herein. Any representation to the contrary is a criminal
offense.
The date of this prospectus
is January __, 2010
Unless
the context otherwise requires, all references to “Chanticleer” “we,” “us,”
“our,” “our company,” or similar language in this prospectus refer to
Chanticleer Holdings, Inc., a Delaware corporation, and its consolidated
subsidiaries.
You
should rely only on the information incorporated by reference or contained in
this prospectus or any supplement to this prospectus, including any free writing
prospectus that we use in connection with this offering. We have not
authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent
information, you should not rely on it. For further information,
please see the section of this prospectus entitled “Where You Can Find
Additional Information.” We are not making an offer of these
securities in any jurisdiction where the offer is not permitted or in which the
person making the offer or solicitation is not qualified to do so or to anyone
to whom it is unlawful to make the offer or solicitation.
You
should not assume that the information appearing in this prospectus or documents
incorporated herein by reference is accurate as of any date other than the dates
on the front of those documents, regardless of the time of delivery of this
prospectus, the time of any exercise of the subscription rights or any sale of a
security. Our business, financial condition, results of operations
and prospects may have changed since the date of this prospectus.
We
obtained statistical data, market data and other industry data and forecasts
used throughout this prospectus and the documents incorporated herein by
reference from market research, publicly available information and industry
publications. Industry publications generally state that they obtain
their information from sources that they believe to be reliable, but they do not
guarantee the accuracy and completeness of the
information. Similarly, while we believe that the statistical data,
industry data and forecasts and market research are reliable, we have not
independently verified the data, and we do not make any representation as to the
accuracy of the information. We have not generally sought the consent of the
sources to refer to their reports appearing in this prospectus or the documents
incorporated herein by reference.
This
prospectus and the documents incorporated herein by reference contain
trademarks, tradenames, service marks and service names of Chanticleer Holdings,
Inc.
3
TABLE
OF CONTENTS
Questions
and Answers About the Rights Offering
|
5
|
|
Prospectus
Summary
|
10
|
|
Special
Note Regarding Forward-Looking Statements
|
13
|
|
Risk
Factors
|
14
|
|
The
Rights Offering
|
20
|
|
Use
of Proceeds
|
25
|
|
Selected
Financial Data
|
25
|
|
Quarterly
Financial Data
|
26
|
|
Capitalization
|
27
|
|
Dilution
|
___
|
|
Market
for Common Stock and Related Shareholder Matters
|
27
|
|
Dividend
Policy
|
28
|
|
Description
of Securities
|
28
|
|
Description
of Offered Warrants
|
29
|
|
Material
U.S. Federal Income Tax Considerations
|
29
|
|
The
Public Offering of Unsubscribed Shares of Offered Common Stock and Offered
Warrants
|
___
|
|
Information
with Respect to Registrant
|
32
|
|
Business
|
32
|
|
Properties
|
35
|
|
Legal
Proceedings
|
35
|
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
35
|
|
Quantitative
and Qualitative Disclosures about Market Risk
|
41
|
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
41
|
|
Director
and Executive Officers
|
41
|
|
Executive
Compensation
|
43
|
|
Security
Ownership of Certain Beneficial Owners
|
44
|
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Security
Ownership of Management
|
___
|
|
Certain
Relationships and Related Transactions
|
45
|
|
Plan
of Distribution
|
46
|
|
Transfer
Agent and Registrar
|
47
|
|
Legal
Matters
|
47
|
|
Experts
|
47
|
|
Where
You Can Find Additional Information
|
47
|
4
QUESTIONS
AND ANSWERS ABOUT THE RIGHTS OFFERING
The
following are examples of what we anticipate may be common questions about the
rights offering. The answers are based on selected information from
this prospectus. The following questions and answers do not contain
all of the information that may be important to you and may not address all of
the questions that you may have about the rights offering. This
prospectus and the information incorporated herein by reference contains more
detailed descriptions of the terms and conditions of the rights offering and
provides additional information about us and our business, including potential
risks related to the rights offering, our common stock and our
business.
Exercising
the subscription rights and investing in our securities involves a high degree
of risk. We urge you to carefully read the section entitled “Risk
Factors” beginning on page ___ of this prospectus and all other
information included in this prospectus and in the documents incorporated herein
by reference in its entirety before you decide whether to exercise your
subscription rights.
Q:
|
What
is a rights offering?
|
A:
A rights offering is a distribution of subscription
rights on a pro rata
basis to all existing common shareholders of a company. We are
distributing to holders of our common stock, at no charge, as of the close of
business on the Record Date (__________, 20___), subscription rights to purchase
up to an aggregate of 2,541,918 Offered Warrants. You will receive one
subscription right for every share of our common stock you own at the close of
business on the Record Date. The subscription rights will be evidenced by
subscription rights certificates, which will be distributed to the record
holders of our common stock.
Q:
|
Why
are you undertaking the rights
offering?
|
A:
We are making the rights offering to raise
funds for general corporate purposes, including working capital. Our
board of directors has elected a rights offering over other types of financings
because a rights offering provides our existing shareholders the opportunity to
participate in this offering, and our board of directors believes this creates
less percentage dilution of shareholder ownership interest in our company than
if we issued shares to new investors.
Q:
|
How
much money will Chanticleer raise as a result of the rights
offering?
|
A: Assuming
the maximum offering amount of $50,838 of subscription proceeds, we estimate
that the net proceeds from the rights offering will be approximately $___, after
deducting expenses related to this offering payable by us estimated at
approximately $___. We may decide to close the rights offering and
accept such proceeds of the subscription rights as we have received as of the
expiration date of the rights offering even if such amount is less than the
maximum offering amount. See “Risk Factors — Completion of this
offering is not subject to us raising a minimum offering amount and proceeds may
be insufficient to meet our objectives, thereby increasing the risk to investors
in this offering.”
Q:
|
What
is a subscription right?
|
A:
Each subscription right entitles the holder of the
subscription right the opportunity to purchase one Class A Offered Warrant and
one Class B Offered Warrant at the exercise price of $0.04. The Class
A Offered Warrant entitles the holder to purchase one share of our common stock
at $5.50, for a period of 5 years following __________,
2011. The Class B Offered Warrant entitles the holder to
purchase one share of our common stock at $7.00, for a period of 5 years
following __________, 2011. The subscription rights are
non-transferable. The Offered Warrants to be issued pursuant to
this offering are non-transferable following their issuance and through their
expiration date.
A holder
may exercise any number of his subscription rights or he may choose not to
exercise any subscription rights at all.
5
For
example, if you own 1,000 shares of our common stock on the Record Date, you
will be granted one subscription right for every share of our common stock you
own at that time, representing the right to subscribe for Class A Offered
Warrants to purchase up to an aggregate of 1,000 shares of our common stock and
Class B Offered Warrants to purchase up to an aggregate of 1,000 shares of our
common stock. If you hold your shares in the name of a broker dealer,
custodian bank, trustee or other nominee who uses the services of the Depository
Trust Company, or DTC, then DTC will issue one right to the nominee for every
share of our common stock you own at the Record Date.
Q.
|
Will
our officers, directors and significant shareholders be exercising their
subscription rights?
|
A:
Our officers, directors and greater than 5% beneficial
shareholders may participate in this offering at the same subscription price per
share as all other purchasers, but none of our officers, directors or greater
than 5% beneficial shareholders are obligated to so participate.
Q:
|
Will
the subscription rights and Offered Warrants that I receive upon exercise
of my subscription rights be tradable on the
OTCBB?
|
A: Our
common stock is currently traded on the OTCBB under the symbol
“CCLR”. The subscription rights are non-transferable and will not be
traded. The Offered Warrants to be issued pursuant to this offering will be
non-transferable following their issuance and through their expiration date, and
will not be traded. The common stock underlying the Offered Warrants, upon
issuance, will be traded on the OTCBB under the symbol “CCLR”.
Q:
|
How
do I exercise my subscription
right?
|
A:
You may exercise your subscription rights by
properly completing and signing your subscription rights certificate if you are
a record holder of our common stock or by properly completing the subscription
documents received from your bank or broker-dealer if your shares of common
stock are held in street name. Your subscription rights certificate,
or properly completed subscription documents, as the case may be, together with
full payment of the subscription price, must be received by Routh Stock
Transfer, Inc., the subscription agent for this rights offering, by 5:00 p.m.,
Charlotte, NC time, on or prior to the expiration date of the rights
offering. We sometimes refer to Routh Stock Transfer, Inc. in this
prospectus as the subscription agent. Routh Stock Transfer, Inc. is also the
transfer agent and registrar for our common stock. All funds received by the
subscription agent from the exercise of subscription
rights that are not fulfilled will be returned to investors, without
interest, as soon as practicable after the rights offering has
expired.
If you
use the mail, we recommend that you use insured, registered mail, return receipt
requested. We will not be obligated to honor your exercise of
subscription rights if the subscription agent receives the
documents relating to your exercise after the rights offering
expires, regardless of when you transmitted the documents.
Q:
|
Am
I required to subscribe in the rights
offering?
|
A: No. You
may exercise any number of your subscription rights, or you may choose not to
exercise any subscription rights. If you choose not to exercise your
subscription rights in full, however, the relative percentage of our common
stock that you own will substantially decrease, and your voting and other rights
will be substantially diluted.
Q:
|
What
happens if I choose not to exercise my subscription
rights?
|
A:
You will retain your current number of shares of
our common stock even if you do not exercise your subscription
rights. However, if you do not exercise your subscription
right in full, the percentage of our common stock that you own will decrease,
and your voting and other rights will be diluted to the extent that other
shareholders exercise their subscription rights.
6
Q:
|
Are
there any limits on the number of Offered Warrants I may purchase in the
rights offering or own as a result of the rights
offering?
|
A. No. You
may exercise subscription rights to purchase any or all of the Offered Warrants
underlying your subscription rights.
Q:
|
Are
there any limits on the number of Offered Warrants I may
exercise?
|
A. Yes. Unless
we otherwise agree in writing, a person or entity, together with related persons
or entities, may not exercise Offered Warrants resulting in the issuance of
shares of our common stock that, when aggregated with their existing ownership,
would result in such person or entity, together with any related persons or
entities, owning in excess of 9.9% of our issued and outstanding shares of
common stock following said exercises. See “The Rights Offering —
Limit on How Many Offered Warrants You May Exercise in the Rights
Offering.”
Q:
|
When
will the rights offering expire?
|
A:
The subscription rights will expire, if not
exercised, at 5:00 p.m., Charlotte, NC time, on __________, 20___, unless we
decide to terminate the rights offering earlier or extend the expiration date
for up to an additional 30 trading days in our sole discretion. If we
extend the expiration date, you will have at least ten trading days during which
to exercise your subscription rights. Any subscription rights not
exercised at or before that time will expire without any payment to the holders
of those unexercised subscription rights. See “The Rights Offering —
Expiration of the Rights Offering and Extensions, Amendments, and
Termination.” The subscription agent must actually receive all
required documents and payments before that time and date.
Q:
|
May
I transfer or sell my subscription rights if I do not want to purchase my
shares?
|
A:
No. You may not sell or transfer the subscription
rights because they are non-transferable.
Q:
|
Will
Chanticleer be requiring a minimum dollar amount of subscriptions to
consummate the rights offering?
|
A:
No. There is no minimum
subscription requirement to consummate the rights offering.
Q:
|
Are
there risks in exercising my subscription
rights?
|
A:
Yes. The exercise of your
subscription rights (and the resulting ownership of our common stock) involves a
high degree of risk. Exercising your subscription rights means buying
Offered Warrants and should be considered as carefully as you would consider any
other equity investment. You should carefully consider the
information under the heading “Risk Factors” and all other information included
in this prospectus and in the documents incorporated herein by reference before
deciding to exercise your subscription rights.
Q:
|
Can
the board of directors cancel or terminate the rights
offering?
|
A:
Yes. Our board of directors may decide to
cancel or terminate the rights offering at any time and for any reason before
the expiration date. If our board of directors cancels or terminates
the rights offering, we will issue a press release notifying shareholders of the
cancellation or termination, and any money received from subscribing holders of
rights will be returned as soon as practicable, without interest.
Q:
|
After
I exercise my subscription rights, can I change my mind and cancel my
purchase?
|
A:
No. All exercises of subscription
rights are irrevocable. Once you send in your subscription rights
certificate and payment, you cannot revoke the exercise of your
subscription right. You should not exercise your subscription right
unless you are certain that you wish to purchase Offered Warrants at the
subscription price of $0.04 for one Class A Offered Warrant and one Class B
Offered Warrant.
7
Q:
|
If
the rights offering is not completed, will my subscription payment be
refunded to me?
|
A.
Yes. The subscription agent will hold all
funds it receives in a segregated bank account until completion of the rights
offering. If the rights offering is not completed, all subscription
payments that the subscription agent receives will be returned, without interest
or deduction, as soon as practicable after the rights offering has expired and
all prorating calculations and reductions contemplated by the terms of the
rights offering have been effected. If you own shares of common stock
in “street name,” it may take longer for you to receive payment because the
subscription agent will return payments to the record holder of your shares of
common stock.
Q:
|
What
should I do if I want to participate in the rights offering but my shares
of common stock are held in the name of my broker dealer, custodian bank,
trustee or other nominee?
|
A:
Beneficial owners of our shares of common stock
that are held by a nominee, such as a broker, dealer custodian bank or
trustee, must contact that nominee to exercise their subscription
rights. In that case, the nominee will exercise the subscription
rights on behalf of the beneficial owner and arrange for proper
payment.
If you
wish to purchase Offered Warrants through the rights offering, please promptly
contact your broker, dealer, custodian bank, or other nominee that is the record
holder of your shares of common stock. We will ask your record holder
to notify you of the rights offering. You should complete and return
to your record holder the appropriate subscription documentation you receive
from your record holder.
Q:
|
What
should I do if I want to participate in the rights offering, but I am a
shareholder with a foreign address?
|
A:
Subscription rights certificates will not be
mailed to foreign shareholders whose address of record is outside the United
States, or is an Army Post Office (APO) address or Fleet Post Office
(FPO). If you are a foreign shareholder you will be sent written
notice of this offering. The subscription agent will hold your
subscription rights, subject to you making satisfactory arrangements with the
subscription agent for the exercise of your subscription rights, and follow your
instructions for the exercise of the subscription rights if such instructions
are received by the subscription agent at or before 5:00 p.m., Charlotte, NC
time, on __________, 20___, three business days prior to the expiration date
(or, if this offering is extended, on or before three business days prior to the
extended expiration date). If no instructions are received by the
subscription agent by that time, your subscription rights will expire worthless
without any payment to you of those unexercised subscription
rights.
Q:
|
Will
I be charged a fee or a sales commission if I exercise my subscription
rights?
|
A:
We will not charge any fee or sales commission to subscription
rights holders for exercising their subscription rights (other than the
subscription price). However, if you exercise your subscription
rights through a broker, dealer, custodian bank, trustee or other nominee, you
are responsible for any fees charged by your broker, dealer, custodian bank,
trustee or other nominee.
Q:
|
Is
a recommendation to shareholders regarding the rights offering being
made?
|
A:
No. Neither we, our board of directors, nor
the subscription agent are making any recommendation as to whether or not you
should exercise your subscription rights. Shareholders who exercise subscription
rights risk investment loss on new money invested. We urge you to
make your decision based on your own assessment of our business and financial
condition, our prospects for the future, the terms of this rights offering, and
the information in, or incorporated by reference into, this
prospectus. Please see “Risk Factors” for a discussion of some of the
risks involved in investing in our Offered Warrants and underlying common
stock.
Q:
|
How was the $0.04 subscription
price established?
|
A:
The subscription price per Offered Warrant for the rights offering was set
by our board of directors. In determining the subscription price, our board of
directors also considered, among other things, our cash needs, the terms and
expenses of this offering relative to other alternatives for raising capital
(including fees payable to our advisors), the price at which our shareholders
might be willing to participate in the rights offering, and the size of this
offering and the general condition of the securities market. Based
upon the factors described above, our board of directors determined that the
subscription price represented an appropriate subscription
price.
8
Q:
|
What
are the material U.S. federal income tax consequences of receiving or
exercising my subscription rights?
|
A:
A holder of common stock should not recognize
income or loss for U.S. federal income tax purposes in connection with the
receipt or exercise of subscription rights in this rights
offering. However, if this rights offering is deemed to be part of a
“disproportionate distribution” under Section 305 of the Internal Revenue Code,
your receipt of subscription rights in this offering may be treated as the
receipt of a taxable distribution to you. You should consult your own tax
advisor as to the particular consequences to you of the rights
offering. For a more detailed discussion, see “Material U.S. Federal
Income Tax Considerations.”
Q:
|
If
I exercise my subscription rights, when will I receive Offered Warrants
purchased in the rights offering?
|
A:
If your shares are held of record by Cede & Co. or by any
other depository or nominee through the facilities of DTC on your behalf or on
behalf of your broker, dealer, custodian bank, trustee or other nominee, you
will have any Offered Warrants that you acquire credited to the account of
Cede & Co. or the other depository or nominee. With respect to all other
shareholders, Offered Warrants acquired will be mailed to such shareholders. Any
such mailing or crediting will occur as soon as practicable after the rights
offering has expired, and payment for the Offered Warrants subscribed for has
cleared.
Q:
|
Who
is the subscription agent for the rights offering and to whom should I
send my forms and payment?
|
A:
The subscription agent is Routh Stock Transfer, Inc. If
your shares of common stock are held in the name of a broker, dealer, or other
nominee, then you should send your applicable subscription documents to your
broker, dealer, or other nominee. If you are a record holder, then
you should send your applicable subscription documents, by overnight delivery,
first class mail or courier service to: Routh Stock Transfer, Inc.,
6860 North Dallas Parkway, Suite 200, Plano, Texas 75024.
We will
pay the fees and expenses of the subscription agent and have agreed to indemnify
the subscription agent against certain liabilities that it may incur in
connection with the rights offering.
You are
solely responsible for timely completing delivery to the subscription agent of
your subscription documents, subscription rights certificate, and
payment. We urge you to allow sufficient time for delivery of your
subscription materials to the subscription agent.
Q:
|
What
should I do if I have other
questions?
|
A:
If you have any questions or need further
information about this rights offering, please call _____, our _____, at
704-366-5122. You may also email the foregoing individual at
www.___.com.
9
PROSPECTUS
SUMMARY
This
prospectus summary contains basic information about us and this rights
offering. Because it is a summary, it does not contain all of the
information that you should consider before deciding whether or not you should
exercise your subscription rights. To understand this offering fully,
you should carefully read this entire prospectus, including the “Risk Factors”
section, and the documents incorporated herein by reference. The
following summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this registration statement or incorporated
by reference into this registration statement.
Corporate
Information
Our
principal executive offices are located at 11220 Elm Lane, Suite 103, Charlotte,
NC 28277. Our web site is
www.chanticleerholdings.com. Information on our website is not
incorporated in this prospectus and is not a part of this
prospectus.
Summary
of this Rights Offering
|
|
Securities
Offered
|
We
are distributing, at no charge, to the holders of our common stock as of
the Record Date, 5:00 p.m., Charlotte, NC time, on __________, 2011,
non-transferable subscription rights to subscribe for Offered Warrants to
purchase shares of common stock. We will distribute one right
to the holder of record of every share of common stock that is held by the
holder of record on the Record Date, or, in the case of shares held of
record by brokers, dealers, custodian banks, or other nominees, as a
beneficial owner of such shares. We anticipate that the total purchase
price for the securities sold in this rights offering will be up to
$50,838. No assurances can be given, however, as to the level of
participation in this rights offering.
|
Subscription
Right
|
Each
non-transferable subscription right entitles the holder to subscribe for
one Class A Offered Warrant to purchase one share of our common stock at
$5.50 for a period of 5 years following __________, 2011, and one Class B
Offered Warrant to purchase one share of our common stock at $7.00 for a
period of 5 years following __________, 2011, which we refer to as the
subscription right.
|
Limitation
on Exercise of Offered Warrants
|
Unless
we otherwise agree in writing, a person or entity, together with related
persons or entities, may not exercise Offered Warrants to purchase
shares of our common stock that, when aggregated with their existing
ownership of common stock, would result in such person or entity, together
with any related persons or entities, owning in excess of nine and 9/10
percent (9.90%) of our issued and outstanding shares of common stock
following said exercise. See “The Rights Offering — Limit on
How Many Offered Warrants You May Exercise in the Rights
Offering.”
|
Record
Date
|
5:00
p.m., Charlotte, NC time, on __________, 2011.
|
Commencement
Date of Subscription Period
|
5:00
p.m., Charlotte, NC time, on __________, 2011.
|
Expiration
of the Rights Offering
|
5:00
p.m., Charlotte, NC time, on __________, 2011, unless extended by us as
described below in this summary under “—Extension, Cancellation and
Amendment.” Any subscription rights not exercised at or before
the expiration date and time will have no value and expire without any
payment to the holders of those unexercised subscription
rights. To exercise subscription rights, the subscription agent
must actually receive all required documents and payments before the
expiration date and time.
|
10
Subscription
Price
|
$0.04
for one Class A Offered Warrant and one Class B Offered Warrant, payable
in immediately available funds. To be effective, any payment related to
the exercise of the right must clear prior to the expiration of the rights
offering.
|
Use
of Proceeds
|
The
proceeds from the rights offering, less fees and expenses incurred by us
in connection with the rights offering, are intended to be used for
general corporate purposes, including working capital.
|
Non-Transferability
of Subscription Rights
|
The
subscription rights may not be transferred or assigned at any time during
or after the subscription period.
|
Non-Transferability
of Offered Warrants
|
The
Offered Warrants to be issued pursuant to this offering may not be
transferred or assigned at any time.
|
No
Recommendation
|
Our
board of directors makes no recommendation to you about whether you should
exercise or let expire any of your subscription rights. You are
urged to consult your own financial advisors in order to make an
independent investment decision about whether to exercise or let expire
any of your subscription rights. We cannot assure you that the
market price for our common stock will be above the subscription price or
that anyone purchasing Offered Warrants at the subscription price will be
able to sell the underlying shares of common stock at the same price or a
higher price. You are urged to make your decision based on your
own assessment of our business and this rights offering. Please
see “Risk Factors” for a discussion of some of the risks involved in
investing in our common stock and “The Rights Offering—Reason for the
Rights Offering; Determination of Offering Price.”
|
No
Minimum Subscription
Requirement
|
There
is no minimum subscription requirement. We will consummate the
rights offering regardless of the amount raised from the exercise of
subscription rights by the expiration date.
|
Maximum
Offering Size
|
If
this offering is fully subscribed we will raise $50,838 of subscription
proceeds.
|
No
Revocation
|
If
you exercise any of your subscription rights, you will not be permitted to
revoke or change the exercise or request a refund of monies
paid. You should not exercise your subscription rights unless
you are sure that you wish to purchase Offered Warrants. Once
you exercise your subscription rights, you cannot revoke the exercise of
your subscription rights even if you later learn information that you
consider to be unfavorable.
|
Material
U.S. Federal Income Tax Considerations
|
A
holder of common stock should not recognize income, gain, or loss for U.S.
federal income tax purposes in connection with the receipt, exercise or
expiration of subscription rights in the rights
offering. However, if this rights offering is deemed to be part
of a “disproportionate distribution” under Section 305 of the Internal
Revenue Code, your receipt of subscription rights in this offering may be
treated as the receipt of a taxable distribution to you. You should
consult your own tax advisor as to the particular tax consequences to you
of the receipt, exercise or expiration of the subscription rights in light
of your particular circumstances. For a more detailed
discussion, see “Material U.S. Federal Income Tax
Considerations.”
|
11
Extension,
Cancellation and Amendment
|
Extension. Our
board of directors may extend the expiration date for exercising your
subscription rights for up to an additional 30 trading days in their sole
discretion. If we extend the expiration date, you will have at
least ten trading days during which to exercise your subscription
rights. Any extension of this offering will be followed as
promptly as practicable by an announcement, and in no event later than
9:00 a.m., Charlotte, NC time, on the next business day following the
previously scheduled expiration date.
|
Cancellation. We
may cancel the rights offering at any time and for any reason prior to the
expiration date. Any cancellation of this offering will be
followed as promptly as practicable by announcement thereof, and in no
event later than 9:00 a.m., Charlotte, NC time, on the next business day
following the cancellation. In the event that we cancel this
rights offering, all subscription payments that the subscription agent has
received will be returned, without interest or deduction, as soon as
practicable.
|
|
Amendment. We
reserve the right to amend or modify the terms of the rights offering at
any time prior to the expiration date of the offering.
|
|
Procedure
for Exercising Subscription
Rights
|
To
exercise your subscription rights, you must take the following
steps:
|
●
|
If
you are a registered holder of our common stock the subscription agent
must receive your payment for each Offered Warrant subscribed for pursuant
to your subscription right at the initial subscription price of $0.04 for
one Class A Offered Warrant and one Class B Offered Warrant, and properly
completed subscription rights certificate before 5:00 p.m., Charlotte, NC
time, on _____, 2011. You may deliver the documents and
payments by mail or commercial carrier. If regular mail is used
for this purpose, we recommend using registered mail, properly insured,
with return receipt requested.
|
|
●
|
If
you are a beneficial owner of shares that are registered in the name of a
broker, dealer, custodian bank, or other nominee, or if you would prefer
that an institution conduct the transaction on your behalf, you should
instruct your broker, dealer, custodian bank, or other nominee to exercise
your subscription rights on your behalf and deliver all documents and
payments to the subscription agent before 5:00 p.m., Charlotte, NC time,
on _____, 2011.
|
|
●
|
If
you wish to purchase Offered Warrants through the rights offering, please
promptly contact any broker, dealer, custodian bank, or other nominee who
is the record holder of your shares. We will ask your record holder to
notify you of the rights offering. You should complete and
return to your record holder the appropriate subscription documentation
you receive from your record
holder.
|
12
Foreign
Stockholders
|
We
will not mail subscription rights certificates to foreign shareholders
whose address of record is outside the United States, or is an Army Post
Office (APO) address or Fleet Post Office. The subscription
agent will hold the subscription rights certificates for such holder’s
account. To exercise subscription rights, stockholders with
such addresses must notify the subscription agent and timely follow the
procedures described in “The Rights Offering—Foreign
Shareholders.”
|
Subscription
Agent
|
The
subscription agent for the rights offering is our transfer agent, Routh
Stock Transfer, Inc.___
|
Information
on Rights Offering
|
If
you have any questions or need further information about this rights
offering, please call _____, our _____, at 704-366-5122 or by e-mail to
_____.
|
Shares
Outstanding Before this
Rights
Offering
|
1,270,959 shares
of our common stock were outstanding as of December 31, 2010, the date of
this prospectus (which excludes the shares underlying the Offered Warrants
being issued as part of this offering and outstanding options and
warrants).
|
Shares
Outstanding after
Completion
of this Rights Offering
|
Up
to 3,812,877 shares of our common stock will be outstanding, assuming
the maximum offering amount is subscribed for pursuant to this rights
offering and all Offered Warrants are fully exercised. These
amounts exclude other outstanding options and warrants.
|
Risk
Factors
|
Investing
in our Offered Warrants involves a high degree of
risk. Shareholders considering making an investment in our
Offered Warrants should carefully read the section entitled “Risk Factors”
and all other information included in this prospectus and in the documents
incorporated herein by reference in its entirety.
|
Fees
and Expenses
|
We
will bear the fees and expenses relating to the rights
offering.
|
Trading
Symbols
|
Common
Stock. Our common stock is quoted on the OTCBB under the
symbol “CCLR.” The shares underlying the Offered Warrants will
also be quoted on the OTCBB under the same symbol.
|
Subscription
Rights. The subscription rights are not transferable
either during or after the subscription period.
|
|
Offered
Warrants. The Offered Warrants to be issued pursuant to
this offering are not
transferable.
|
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus and the documents incorporated by reference herein contain certain
forward-looking statements regarding, among other things, the anticipated
financial and operating results of our company. For this purpose,
forward-looking statements are any statements contained herein and in the
documents incorporated by reference herein that are not statements of historical
fact and include, but are not limited to, those preceded by or that include the
words, “estimate,” “could,” “should,” “would,” “likely,” “may,”
“will,” “plan,” “intend,” “believes,” “expects,” “anticipates,”
“projected,” or similar expressions. Those statements are subject to
known and unknown risks, uncertainties and other factors that could cause the
actual results to differ materially from those contemplated by the
statements. The forward looking information is based on various
factors and was derived using numerous assumptions. Important factors
that could cause our company’s actual results to differ materially from those
projected, include, for example:
13
|
·
|
general
economic, market or business
conditions;
|
|
·
|
our
ability to generate sufficient sales to generate operating
profits, or to sell products at a
profit;
|
|
·
|
the
ability of our company to raise funds in the future through sales of
securities;
|
|
·
|
whether
our company is able to enter into binding agreements with third parties to
assist in product or network
development;
|
|
·
|
the
ability of our company to commercialize its developmental products, or if
actually commercialized, to obtain commercial acceptance
thereof;
|
|
·
|
the
ability of our company to compete with its competitors to obtain market
share;
|
|
·
|
the
ability of our company to obtain sufficient funds through operations or
otherwise to repay its debt obligations, or to fund development and
marketing of its products;
|
|
·
|
the
ability of our company to satisfy its trade obligations included in
accounts payable and accrued
liabilities;
|
|
·
|
the
ability of our company to predict or estimate its future quarterly or
annual revenues and expenses given the developing and unpredictable market
for its products and the lack of established
revenues;
|
|
·
|
the
ability of a key customer to reduce or delay purchasing products from our
company; and
|
|
·
|
as
a result of the slowdown in the economy and/or the tightening of the
capital and credit markets, our customers may modify, delay or cancel
plans to purchase our products or services, and suppliers may increase
their prices, reduce their output or change their terms of
sale.
|
Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance,
or achievements. We caution investors that actual results or business
conditions may differ materially from those projected or suggested in
forward-looking statements as a result of various factors including, but not
limited to, those described above and in the “Risk Factors” section of this
prospectus and the documents incorporated herein by reference. We
cannot assure you that we have identified all the factors that create
uncertainties. Moreover, new risks emerge from time to time and it is
not possible for our management to predict all risks, nor can we assess the
impact of all risks on our business or the extent to which any risk, or
combination of risks, may cause actual results to differ from those contained in
any forward-looking statements. Readers should not place undue
reliance on forward-looking statements.
Any
forward-looking statement made by us in this prospectus or in the documents
incorporated by reference herein speaks only as of the date of such document.
Unless required by law, we undertake no obligation to publicly revise any
forward-looking statement to reflect circumstances or events after the date of
this prospectus or to reflect the occurrence of unanticipated
events.
RISK
FACTORS
An investment in our Offered
Warrants involves a high degree of risk. Before making an investment decision,
you should carefully consider the specific risks described below, which are
incorporated herein by reference, and other information included in this
prospectus and incorporated herein by reference. The risks described below and
in the information incorporated herein by reference are not the only risks
involved in an investment in our Offered Warrants. The risks and uncertainties
not presently known to us or that we currently deem immaterial also may impair
our business operations. If any of the risks described below or in the
information incorporated herein by reference actually occur, our business,
results of operations, and financial condition could suffer materially. In that
event, the trading price and market value of our common stock could decline, and
you may lose all or part of your investment in our common
stock.
14
Risks
Related to the Rights Offering
Your
interest in our company may be diluted as a result of this rights
offering.
Shareholders
who do not fully exercise their subscription rights should expect that they
will, at the completion of this offering, own a smaller proportional interest in
our company than would otherwise be the case had they fully exercised their
subscription rights. Further, the shares of common stock issuable upon the
exercise of the Offered Warrants will dilute the ownership interest of
shareholders not participating in this offering who have not exercised the
subscription rights they receive.
Completion
of this rights offering is not subject to us raising a minimum offering
amount.
Completion
of this offering is not subject to us raising a minimum offering amount and
therefore proceeds may be insufficient to meet our objectives, thereby
increasing the risk to investors in this offering, including investing in a
company that continues to require capital.
This
rights offering may cause the trading price of our common stock to
decrease.
The
subscription price, together with the number of shares of common stock we
propose to issue and ultimately will issue if this rights offering is completed,
may result in an immediate decrease in the market value of our common
stock. This decrease may continue after the completion of this rights
offering. We cannot predict the effect, if any, that the availability
of shares for future sale, represented by the Offered Warrants issued in
connection with the rights offering, will have on the market price of our common
stock from time to time. Further, if a substantial number of subscription rights
are exercised and the holders of the Offered Warrants exercise them and
choose to sell some or all of the shares underlying the Offered Warrants, the
resulting sales could depress the market price of our common
stock. Following the exercise of your subscription rights and Offered
Warrants, you may not be able to sell your common stock at a price equal to or
greater than the exercise price.
If
we terminate this offering for any reason, we will have no obligation other than
to return subscription monies as soon as practicable.
We may
decide, in our sole discretion and for any reason, to cancel or terminate the
rights offering at any time prior to the expiration date. If this
offering is cancelled or terminated, we will have no obligation with respect to
subscription rights that have been exercised except to return as soon as
practicable, without interest, the subscription payments deposited with the
subscription agent. If we terminate this offering and you have not
exercised any subscription rights, such subscription rights will expire
worthless.
Our
common stock price may be volatile as a result of this rights
offering.
The
trading price of our common stock may fluctuate substantially depending on many
factors, some of which are beyond our control and may not be directly related to
our operating performance. These factors include, but are not limited
to, the following:
|
•
|
price
and volume fluctuations in the overall stock market from time to time,
including increased volatility due to the worldwide credit and financial
markets crisis;
|
|
•
|
significant
volatility in the market price and trading volume of our securities,
including increased volatility due to the worldwide credit and financial
markets crisis;
|
|
•
|
actual
or anticipated changes or fluctuations in our operating results and cash
flow;
|
|
•
|
material
announcements by us regarding business performance, financings, mergers
and acquisitions or other
transactions;
|
15
|
•
|
general
economic and market conditions and
trends;
|
|
•
|
competitive
factors;
|
|
•
|
announcement
of technological innovations that affect our products, customers,
competitors or markets,
|
|
•
|
availability
for resale of our shares issuable upon exercise of the warrants and
options;
|
|
•
|
loss
of key supplier or customer relationships;
or
|
|
•
|
departures
of key personnel.
|
Additionally,
the stock market historically has experienced significant price and volume
fluctuations. These fluctuations are often unrelated to the operating
performance of particular companies. These broad market fluctuations may cause
declines in the trading price and market value of our common stock.
We cannot
assure you that the trading price of our common stock will not decline after you
elect to exercise your subscription rights.
Because
we do not have any formal commitments from any of our stockholders to
participate in the rights offering, the net proceeds we receive from the rights
offering may be lower than we currently anticipate.
We do not
have any formal commitments from any of our stockholders to participate in the
rights offering, and we cannot assure you that any of our stockholders will
exercise all or any part of their subscription right. If our stockholders and
third parties that may acquire subscription rights subscribe for fewer shares of
our common stock than we currently anticipate, the net proceeds we receive from
the rights offering could be significantly lower than we currently
expect.
The
subscription price determined for this offering is not an indication of the fair
value of our Offered Warrants.
The
subscription price of $0.04 for one Class A Offered Warrant and one Class B
Offered Warrant does not necessarily bear any relationship to the book value of
our assets, results of operations, cash flows, losses, financial condition or
any other established criteria for value. You should not consider the
subscription price as an indication of the fair value of our Offered
Warrants.
We
will have broad discretion in the use of the net proceeds from this offering and
may not use the proceeds effectively.
Although
we plan to use the proceeds of this offering for general corporate purposes,
including working capital, we will not be restricted to such use and will have
broad discretion in determining how the proceeds of this offering will be
used. Our discretion is not limited by the uses set forth in this
prospectus in the section entitled “Use of Proceeds.” While our board
of directors believes the flexibility in application of the net proceeds is
prudent, the broad discretion it affords entails increased risks to the
investors in this offering. Investors in this offering have no
current basis to evaluate the possible merits or risks of any application of the
net proceeds of this offering. Our shareholders may not agree with
the manner in which we choose to allocate and spend the net
proceeds.
16
If
you do not act on a timely basis and follow subscription instructions, your
exercise of subscription rights may be rejected.
Holders
of subscription rights who desire to purchase Offered Warrants in this offering
must act on a timely basis to ensure that all required forms and payments are
actually received by the subscription agent prior to 5:00 p.m., Charlotte, NC
time, on the expiration date, unless extended. If you are a
beneficial owner of shares of common stock and you wish to exercise your
subscription rights, you must act promptly to ensure that your broker, dealer,
custodian bank, trustee or other nominee acts for you and that all required
forms and payments are actually received by your broker, dealer, custodian bank,
trustee or other nominee in sufficient time to deliver such forms and payments
to the subscription agent to exercise the subscription rights granted in this
offering that you beneficially own prior to 5:00 p.m., Charlotte, NC time on the
expiration date, as may be extended. We will not be responsible if
your broker, dealer, custodian bank, trustee or other nominee fails to ensure
that all required forms and payments are actually received by the subscription
agent prior to 5:00 p.m., Charlotte, NC time, on the expiration
date.
If you
fail to complete and sign the required subscription forms, send an incorrect
payment amount, or otherwise fail to follow the subscription procedures that
apply to your exercise in this rights offering, the subscription agent may,
depending on the circumstances, reject your subscription or accept it only to
the extent of the payment received. Neither we nor the subscription
agent undertakes to contact you concerning an incomplete or incorrect
subscription form or payment, nor are we under any obligation to correct such
forms or payment. We have the sole discretion to determine whether a
subscription exercise properly follows the subscription procedures.
If
you make payment of the subscription price by uncertified check, your check may
not clear in sufficient time to enable you to purchase shares in this rights
offering.
Any
uncertified check used to pay for Offered Warrants to be issued in this rights
offering must clear prior to the expiration date of this rights offering, and
the clearing process may require five or more business days. If you
choose to exercise your subscription rights, in whole or in part, and to pay for
Offered Warrants by uncertified check and your check has not cleared prior to
the expiration date of this rights offering, you will not have satisfied the
conditions to exercise your subscription rights and will not receive the Offered
Warrants you wish to purchase.
The
receipt of subscription rights may be treated as a taxable distribution to
you.
The
distribution of the subscription rights in this rights offering should be a
non-taxable distribution under Section 305(a) of the Internal Revenue Code of
1986, as amended (the “Code”). Please see the discussion on the
“Material U.S. Federal Income Tax Considerations” below. This
position is not binding on the IRS, or the courts, however. If this
rights offering is deemed to be part of a “disproportionate distribution” under
Section 305 of the Code, your receipt of subscription rights in this offering
may be treated as the receipt of a taxable distribution to you equal to the fair
market value of the subscription rights. Any such distribution would
be treated as dividend income to the extent of our current and accumulated
earnings and profits, if any, with any excess being treated as a return of
capital to the extent thereof and then as capital gain. Each holder
of common stock is urged to consult his, her or its own tax advisor with respect
to the particular tax consequences of this rights offering.
Absence
of a public trading market for the Offered Warrants.
The
Offered Warrants are non-transferable, and therefore there is no established
trading market for the Offered Warrants to be issued pursuant to this
offering.
Since
the Offered Warrants are executory contracts, they may have no value in a
bankruptcy or reorganization proceeding.
In the
event a bankruptcy or reorganization proceeding is commenced by or against us, a
bankruptcy court may hold that any unexercised Offered Warrants are executory
contracts that are subject to rejection by us with the approval of the
bankruptcy court. As a result, holders of the Offered Warrants may, even if we
have sufficient funds, not be entitled to receive any consideration for their
Offered Warrants or may receive an amount less than they would be entitled to if
they had exercised their Offered Warrants prior to the commencement of any such
bankruptcy or reorganization proceeding.
17
There
can be no assurance that we can maintain an effective registration statement
covering the shares of common stock underlying the Offered Warrants, and in such
event, the shares could not be sold in the open market unless subsequently
registered or pursuant to an exemption from registration.
The
Offered Warrants are exercisable at any time during the period from _____, 2011
through _____, 2016. There can be no assurance that we will be able to maintain
an effective registration statement covering the shares underlying the Offered
Warrants at all times during the exercise period. Upon issuance, the shares of
common stock could only be sold in the open market if there is an effective
registration statement covering the shares. If the shares would not be covered
by an effective registration statement at the time of issuance, the shares would
constitute restricted securities and could only be sold pursuant to an exemption
from registration under the Securities Act of 1933, such as Rule 144, or if
subsequently registered under the Act. Pursuant to Rule 144, the holder of the
shares who is not affiliated with the company may not sell the shares on the
open market until six months following the date of issuance.
Risks
Relating to Our Business
Our
existence is dependent on our ability to raise capital that may not be
available.
There can
be no assurance that our business will prove financially profitable or generate
sufficient revenues to cover our expenses. From inception, we have generated
funds primarily through the sale of securities. Although we believe that we have
adequate existing resources to provide for our funding requirements through at
least _____, 201__, there can be no assurances that we will be able to continue
to generate sufficient funds thereafter. Even with the proceeds of
this offering, if any, subsequent to _____, 20__, our inability to obtain
additional needed funding can have a material adverse effect on our operations
and our ability to achieve profitability. If we fail to generate increased
revenues or fail to sell additional securities, you may lose all or a
substantial portion of your investment.
We
may be required to incur further debt to meet future capital requirements of our
business. Should we be required to incur additional debt, the restrictions
imposed by the terms of such debt could adversely affect our financial condition
and our ability to respond to changes in our business.
If we
incur additional debt, we may be subject to the following risks:
|
·
|
our
vulnerability to adverse economic conditions and competitive pressures may
be heightened;
|
|
·
|
our
flexibility in planning for, or reacting to, changes in our business and
industry may be limited;
|
|
·
|
our
debt covenants may affect our flexibility in planning for, and reacting
to, changes in the economy and in our
industry;
|
|
·
|
a
high level of debt may place us at a competitive disadvantage compared to
our competitors that are less leveraged and therefore, may be able to take
advantage of opportunities that our indebtedness would prevent us from
pursuing;
|
|
·
|
the
covenants contained in the agreements governing our outstanding
indebtedness may limit our ability to borrow additional funds,
dispose of assets, pay dividends and make certain
investments;
|
|
·
|
a
significant portion of our cash flows could be used to service our
indebtedness;
|
|
·
|
we
may be sensitive to fluctuations in interest rates if any of our debt
obligations are subject to variable interest rates;
and
|
|
·
|
our
ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions, general corporate purposes or other
purposes may be impaired.
|
We cannot
assure you that our leverage and such restrictions will not materially and
adversely affect our ability to finance our future operations or capital needs
or to engage in other business activities. In addition, we cannot assure you
that additional financing will be available when required or, if available, will
be on terms satisfactory to us.
Current
conditions in the global financial markets and the distressed economy may
materially adversely affect our business, results of operations and ability to
raise capital.
Our
business and results of operations may be materially affected by conditions in
the financial markets and the economy generally. The stress being experienced by
global financial markets that began in late 2007 continued and substantially
increased during 2008 and into 2009. The volatility and disruption in the
financial markets have reached unprecedented levels. The availability and cost
of credit has been materially affected. These factors, combined with volatile
oil prices, depressed home prices and increasing foreclosures, falling equity
market values, declining business and consumer confidence and the risks of
increased inflation and unemployment, have precipitated an economic slowdown and
severe recession. These events and the continuing market upheavals may have an
adverse effect on us, our suppliers and our customers. The demand for our
products could be adversely affected in an economic downturn and our revenues
may decline under such circumstances.
18
Furthermore,
the fixed-income markets are experiencing a period of both extreme volatility
and limited market liquidity, which has affected a broad range of asset classes
and sectors. Equity markets have also been experiencing heightened volatility.
We may find it difficult, or we may not be able, to access the credit or equity
markets, or we may experience higher funding costs as a result of the current
adverse market conditions. Continued instability in these markets may limit our
ability to access the capital we require to fund and grow our
business.
We
depend on our key personnel and if they would leave us, our business could be
adversely affected.
We are
dependent on key management personnel, particularly the Chairman and Chief
Executive Officer, Michael D. Pruitt. The loss of services of Mr. Pruitt or
other executive officers would dramatically affect our business prospects.
Certain of our employees are particularly valuable to us because:
|
·
|
they
have specialized knowledge about our company and
operations;
|
|
·
|
they
have specialized skills that are important to our operations;
or
|
|
·
|
they
would be particularly difficult to
replace.
|
We do not
have employment agreements with any of our officers.
Risks
Related to Our Common Stock
We
do not expect to pay cash dividends in the foreseeable future and therefore
investors should not anticipate cash dividends on their investment.
Our board
of directors does not intend to pay cash dividends in the foreseeable future,
but instead intends to retain any and all earnings to finance the growth of the
business. To date, we have not paid any cash dividends and there can be no
assurance that cash dividends will ever be paid on our common
stock.
We
may issue additional shares of our common stock, which could depress the market
price of our common stock and dilute your ownership.
As of
_____, 2011, we had issued and outstanding options to purchase ___ shares of our
common stock and warrants to purchase ___ shares of our common stock. None of
the shares underlying of these options and warrants have been registered and may
be freely sold. Market sales of large amounts of our common stock, or the
potential for those sales even if they do not actually occur, may have the
effect of depressing the market price of our common stock. In addition, if our
future financing needs require us to issue additional shares of common stock or
securities convertible into common stock, the supply of common stock available
for resale could be increased which could stimulate trading activity and cause
the market price of our common stock to drop, even if our business is doing
well. Furthermore, the issuance of any additional shares of our common stock,
including those pursuant to the Offered Warrants subject to this offering,
or securities convertible into our common stock could be substantially dilutive
to holders of our common stock if they do not invest in future
offerings.
Our
stock price may be volatile.
The
trading price of our common stock is expected to be subject to significant
fluctuations in response to various factors including, but not limited to, the
following:
|
·
|
quarterly
variations in operating results and achievement of key business
metrics;
|
|
·
|
changes
in earnings estimates by securities analysts, if
any;
|
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·
|
any
differences between reported results and securities analysts’ published or
unpublished expectations;
|
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·
|
announcements
of new contracts or service offerings by us or our
competitors;
|
19
|
·
|
market
reaction to any acquisitions, joint ventures or strategic investments
announced by us or our competitors;
|
|
·
|
shares
being sold pursuant to Rule 144 or upon exercise of
warrants;
|
|
·
|
our
ability to obtain working capital financing;
and
|
|
·
|
general
economic or stock market conditions unrelated to our operating
performance.
|
The
securities market in recent years has from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. These market fluctuations as well as
general economic conditions may also materially and adversely affect the market
price of our common stock.
Director
and officer liability is limited.
As
permitted by Delaware law, our by-laws limit the liability of our directors for
monetary damages for breach of a director’s fiduciary duty except for liability
in certain instances. As a result of our by-law provisions and Delaware law,
shareholders may have limited rights to recover against directors for breach of
fiduciary duty. In addition, our by-laws and indemnification agreements entered
into by our company with each of the officers and directors provide that we
shall indemnify our directors and officers to the fullest extent permitted by
law.
Our
publicly-filed reports are reviewed by the SEC from time to time and any
significant changes required as a result of any such review may result in
material liability to us, and have a material adverse impact on the trading
price of our common stock.
The
reports of publicly-traded companies are subject to review by the SEC from time
to time for the purpose of assisting companies in complying with applicable
disclosure requirements and to enhance the overall effectiveness of companies’
public filings, and comprehensive reviews of such reports are now required at
least every three years under the Sarbanes-Oxley Act of 2002. SEC reviews may be
initiated at any time. While we believe that our previously filed SEC reports
comply, and we intend that all future reports will comply in all material
respects with the published SEC rules and regulations, we could be required to
modify or reformulate information contained in prior filings as a result of an
SEC review. Any modification or reformulation of information contained in such
reports could be significant and result in material liability to us and have a
material adverse impact on the trading price of our common stock.
THE
RIGHTS OFFERING
Terms
of the Offer
We are
distributing, at no charge to the holders of our common stock as
of _____, 2011, the Record Date, non-transferable subscription rights
to subscribe for our Offered Warrants to purchase shares of our common
stock. Record Date shareholders will receive one non-transferable
subscription right for every share of our common stock owned on the Record Date,
or an aggregate of 1,270,959 rights.
Each
non-transferable subscription right entitles the holder to subscribe for one
Class A Offered Warrant and one Class B Offered Warrant for a subscription price
of $0.04. The Class A Offered Warrants entitle the holder to
purchase one share of our common stock at $5.50 for a period of 5 years
following _____, 2011, and the Class B Offered Warrants entitle the holder to
purchase one share of our common stock at $7.00 for a period of 5 years
following _____, 2011, which we refer to as the subscription
right.
The
subscription rights will expire if they are not exercised by 5:00 p.m.,
Charlotte, NC time, on _____, 2011, which date we refer to as the expiration
date. We may extend the expiration date for up to an additional 30
trading days in our sole discretion.
To
exercise subscription rights, holders must return the properly completed
subscription rights certificate and any other required documents along with full
payment of the subscription price for all shares for which subscriptions are
exercised by the expiration date. Any subscription rights not
exercised by the expiration date will expire worthless without any payment to
the holders of those unexercised subscription rights.
20
There is
no minimum subscription amount required for consummation of this rights
offering. We will raise no more than $50,838 in this rights offering.
Our board of directors may cancel, modify, or amend this rights offering at any
time prior to the expiration date for any reason. In the event that
we cancel the rights offering, all subscription payments received by the
subscription agent will be returned, without interest, as soon as
practicable.
Our
common stock is quoted on the OTCBB under the symbol “CCLR.” The last reported
sale price of our common stock on December 29, 2010 was $4.00 per
share. The subscription rights are non-transferable during and after
the subscription period. The Offered Warrants are
non-transferable.
For
purposes of determining the number of Offered Warrants a subscription
rights holder may acquire in this offering, brokers, dealers, custodian banks,
trust companies or others whose shares are held of record by Cede & Co. or
by any other depository or nominee will be deemed to be the holders of the
subscription rights that are issued to Cede or the other depository or nominee
on their behalf.
Expiration
of the Rights Offering and Extensions, Amendments, and Termination
Expiration and
Extensions. You may exercise your subscription rights at any
time before 5:00 p.m., Charlotte, NC time, on _____, 2011, the expiration date
of the rights offering, unless extended. Our board of directors may
extend the expiration date for exercising your subscription rights for up to an
additional 30 trading days in their sole discretion. We may extend the
expiration date of the rights offering by giving oral or written notice to the
subscription agent on or before the scheduled expiration date. If we extend the
expiration date, you will have at least ten trading days during which to
exercise your subscription rights. Any extension of this offering
will be followed as promptly as practicable by an announcement, and in no event
later than 9:00 a.m., Charlotte, NC time, on the next business day following the
previously scheduled expiration date.
Any
subscription rights not exercised at or before that time will have no value and
expire without any payment to the holders of those unexercised subscription
rights. We will not be obligated to honor your exercise of
subscription rights if the subscription agent receives the documents relating to
your exercise after the rights offering expires, regardless of when you
transmitted the documents.
Termination;
Cancellation. We may cancel or terminate the rights offering
at any time prior to the expiration date. Any cancellation or
termination of this offering will be followed as promptly as practicable by an
announcement of the cancelation or termination and any money received form
subscribing rights holders will be returned as soon as practicable, without
interest.
Amendment. We
reserve the right to amend or modify the terms of the rights offering at any
time prior to the expiration date of the offering.
Limit
on How Many Offered Warrants You May Purchase and Exercise in the Rights
Offering
There is
not limit on the number of Offered Warrants underlying your subscription rights
that you may purchase. Unless we otherwise agree in writing, a person or entity,
together with related persons or entities, may not exercise Offered Warrants to
purchase shares of our common stock that, when aggregated with their existing
ownership, would result in such person or entity, together with any related
persons or entities, owning in excess of 9.9% of our issued and outstanding
shares of common stock following the closing of the transactions contemplated by
this rights offering.
Reasons
for the Rights Offering; Determination of the Offering Price
We are
making the rights offering to raise funds for general corporate purposes,
including working capital (see “Use of Proceeds”). Prior to approving
the rights offering, our board of directors carefully considered current market
conditions and financing opportunities, as well as the potential dilution of the
ownership percentage of the existing holders of our common stock that may be
caused by the rights offering.
21
After
weighing the factors discussed above and the effect of the $50,838 in additional
capital, before expenses, that may be generated by the sale of Offered Warrants
pursuant to the rights offering, our board of directors believes that the rights
offering is in the best interests of our company. Although we believe
that the rights offering will strengthen our financial condition, our board of
directors is not making any recommendation as to whether you should exercise
your subscription rights.
The
subscription price for the rights offering was set by our board of
directors. In determining the subscription price, the board of
directors also considered, among other things, the following
factors:
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•
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our
cash needs;
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•
|
the
historical and current market price of our common
stock;
|
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•
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the
terms and expenses of this offering relative to other alternatives for
raising capital, including fees payable to the dealer manager and our
advisors;
|
|
•
|
the
size of this offering; and
|
|
•
|
the
general condition of the securities
market.
|
Information
on Rights Offering
If you
have any questions or need further information on this rights offering, please
contact _____, our _____, either at 704-366-5122, at our address 11220 Elm Lane,
Suite 103, Charlotte, NC 28277, or via email at _____.
Subscription
Agent
Routh
Stock Transfer, Inc. will act as the subscription agent in connection with this
rights offering. The subscription agent will receive for its
administrative, processing, invoicing and other services a fee estimated to be
approximately $___ plus reimbursement for all reasonable out-of-pocket expenses
related to this offering. The subscription agent does not make any
recommendations as to whether or not you should exercise your subscription
rights. We have also agreed to indemnify the Subscription Agent against certain
liabilities that it may incur in connection with this offering.
Completed
subscription rights certificates must be sent together with full payment of the
subscription price for all shares subscribed for through the exercise of the
subscription right to the subscription agent by one of the methods described
below.
We will
accept only properly completed and duly executed subscription rights
certificates actually received at any of 6860 North Dallas Parkway, Suite 200,
Plano, Texas 75024, at or prior to 5:00 p.m., Charlotte, NC time, on the
expiration date of this offering. See “Payment for Shares”
below. In this prospectus, close of business means 5:00 p.m.,
Charlotte, NC time, on the relevant date.
Delivery
to an address other than the address listed above will not constitute valid
delivery and, accordingly, may be rejected by us.
Shareholders
may also contact their broker, dealer, custodian bank, trustee or other nominee
for information with respect to this offering.
22
Methods
for Exercising Subscription Rights
Subscription
rights are evidenced by subscription rights certificates, which may be physical
certificates but will more likely be electronic certificates issued through the
facilities of DTC. Except as described below under “Foreign Shareholders,” the
subscription certificates will be mailed to Record Date shareholders or, if a
Record Date shareholder’s shares are held by a depository or nominee on his, her
or its behalf, to such depository or nominee. Subscription rights may
be exercised by completing and signing the subscription rights certificate that
accompanies this prospectus and mailing it in the envelope provided, or
otherwise delivering the completed and duly executed subscription rights
certificate to the subscription agent, together with payment in full for the
shares at the subscription price by the expiration date of this offering.
Completed subscription rights certificates and related payments must be received
by the subscription agent prior to 5:00 p.m., Charlotte, NC time, on or before
the expiration date, at the offices of the subscription agent at the address set
forth above.
Record
Date Shareholders Whose Shares are Held by a Nominee
Record
Date shareholders whose shares are held by a nominee, such as a broker, dealer,
custodian bank, trustee or other nominee, must contact that nominee to exercise
their subscription rights. In that case, the nominee will exercise
the subscription rights on behalf of the Record Date shareholder and arrange for
proper payment by one of the methods set forth under “Payment for Shares”
below.
You
should complete and send to that record holder the applicable subscription
documents from your record holder with the other rights offering materials.
While we will not charge any fee or sales commission to subscription rights
holders for exercising their subscription rights (other than the subscription
price), if you exercise your subscription rights and/or sell any underlying
shares of our common stock through a broker, dealer, custodian bank, trustee or
other nominee, you are responsible for any fees charged by your broker, dealer,
custodian bank, trustee or other nominee.
Nominees
Nominees,
such as brokers, dealers, custodian banks, trustees or depositories for
securities, who hold shares for the account of others, should notify the
respective beneficial owners of the shares as soon as possible to ascertain the
beneficial owners’ intentions and to obtain instructions with respect to the
subscription rights. If the beneficial owner so instructs, the
nominee should exercise the subscription rights on behalf of the beneficial
owner and arrange for proper payment as described under “Payment for Shares”
below.
All
Exercises are Irrevocable
All
exercises of subscription rights are irrevocable. Once you send in your
subscription rights certificate and payment, you cannot revoke the exercise of
your subscription rights. You should not exercise your subscription rights
unless you are certain that you wish to purchase Offered Warrants at the
subscription price of $0.04 for one Class A Offered Warrant and one Class B
Offered Warrant.
General
All
questions as to the validity, form, eligibility (including times of receipt and
matters pertaining to beneficial ownership) and the acceptance of subscription
forms and the subscription price will be determined by us, which determinations
will be final and binding. No alternative, conditional or contingent
subscriptions will be accepted. We reserve the right to reject any or
all subscriptions not properly submitted or the acceptance of which would, in
the opinion of our counsel, be unlawful.
We
reserve the right to reject any exercise if such exercise is not in accordance
with the terms of this rights offering or not in proper form or if the
acceptance thereof or the issuance of shares of our common stock thereto could
be deemed unlawful. We reserve the right to waive any deficiency or irregularity
with respect to any subscription rights certificate. Subscriptions will not be
deemed to have been received or accepted until all irregularities have been
waived or cured within such time as we determine in our sole
discretion. We will not be under any duty to give notification of any
defect or irregularity in connection with the submission of subscription rights
certificates or incur any liability for failure to give such
notification.
23
Non-Transferability
of Subscription Rights
The
subscription rights granted to you are non-transferable and, therefore, you may
not sell, transfer or assign your subscription rights to anyone. The
subscription rights will not be listed for trading on the OTCBB or any other
stock exchange or market.
Foreign
Shareholders
Subscription
rights certificates will not be mailed to foreign shareholders. A
foreign shareholder is any record holder of common stock on the Record Date
whose address of record is outside the United States, or is an Army Post Office
(APO) address or Fleet Post Office (FPO) address. Foreign
shareholders will be sent written notice of this offering. The
subscription agent will hold the subscription rights to which those subscription
rights certificates relate for these shareholders’ accounts, subject to that
shareholder making satisfactory arrangements with the subscription agent for the
exercise of the subscription rights, and follow the instructions of such
shareholder for the exercise of the subscription rights if such instructions are
received by the subscription agent at or before 11:00 a.m., Charlotte, NC time,
on _____, 2011, three business days prior to the expiration date (or, if this
offering is extended, on or before three business days prior to the extended
expiration date). If no instructions are received by the subscription
agent by that time, the subscription rights will expire worthless without any
payment to the holders of those unexercised rights.
Payment
for Shares
A
participating subscription rights holder may send the subscription rights
certificate together with payment for the Offered Warrants subscribed for in the
rights offering to the subscription agent based on the subscription price of
$0.04 for one Class A Offered Warrant and one Class B Offered Warrant. To be
accepted, the payment, together with a properly completed and executed
subscription rights certificate, must be received by the subscription agent at
one of the subscription agent’s offices set forth above (see “Subscription
Agent”), at or prior to 5:00 p.m., Charlotte, NC time, on the expiration date.
Do not send subscription rights
certificates or payments to us.
All
payments by a participating subscription rights holder must be in U.S. dollars
by check or bank draft drawn on a bank or branch located in the U.S. and payable
to___ FBO Chanticleer Holdings, Inc. Payment also may be made by wire
transfer to _____, with reference to the subscription rights holder’s
name.
The
method of delivery of subscription rights certificates and payment of the
subscription price to us will be at the election and risk of the participating
subscription rights holders, but if sent by mail it is recommended that such
certificates and payments be sent by registered mail, properly insured, with
return receipt requested, and that a sufficient number of days be allowed to
ensure delivery to the subscription agent and clearance of payment prior to 5:00
p.m., Charlotte, NC time, on the expiration date. Because uncertified
personal checks may take at least five business days to clear, you are strongly
urged to pay, or arrange for payment, by means of certified or cashier’s check
or wire transfer.
Whichever
of the methods described above is used, issuance of the shares purchased is
subject to collection of checks and actual payment.
If a
participating subscription rights holder who subscribes for shares as part of
the subscription right does not make payment of any amounts due by the
expiration date, the subscription agent reserves the right to take any or all of
the following actions: (i) apply any payment actually received by it
from the participating subscription rights holder toward the purchase of the
greatest whole number of Offered Warrants which could be acquired by such
participating subscription rights holder upon exercise of the subscription
right; and/or (ii) exercise any and all other rights or remedies to which it may
be entitled, including the right to set off against payments actually received
by it with respect to such subscribed for Offered Warrants.
All
questions concerning the timeliness, validity, form and eligibility of any
exercise of subscription rights will be determined by us, whose determinations
will be final and binding. We, in our sole discretion, may waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as we may determine, or reject the purported exercise of any
right. Subscriptions will not be deemed to have been received or
accepted until all irregularities have been waived or cured within such time as
we determine in our sole discretion. The subscription agent will not
be under any duty to give notification of any defect or irregularity in
connection with the submission of subscription rights certificates or incur any
liability for failure to give such notification.
24
Participating
subscription rights holders will have no right to rescind their subscription
after receipt of their payment for shares.
Delivery
of Stock Certificates
Shareholders
whose shares are held of record by Cede & Co. or by any other depository or
nominee on their behalf or on behalf of their broker, dealer, custodian bank,
trustee or other nominee will have any Offered Warrants that they acquire
credited to the account of Cede & Co. or the other depository or nominee.
With respect to all other shareholders all Offered Warrants acquired will be
mailed. Any such mailing or crediting will occur as soon as practicable after
the rights offering has expired, payment for the Offered Warrants subscribed for
has cleared, and all prorating calculations and reductions contemplated by the
terms of the rights offering have been effected.
ERISA
Considerations
Retirement
plans and other tax exempt entities, including governmental plans, should also
be aware that if they borrow in order to finance their exercise of subscription
rights, they may become subject to the tax on unrelated business taxable income
under Section 511 of the Code. If any portion of an individual
retirement account is used as security for a loan, the portion so used is also
treated as distributed to the IRA depositor. The Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), contains fiduciary
responsibility requirements, and ERISA and the Code contain prohibited
transaction rules that may impact the exercise of subscription
rights. Due to the complexity of these rules and the penalties for
noncompliance, retirement plans should consult with their counsel and other
advisers regarding the consequences of their exercise of subscription rights
under ERISA and the Code.
USE
OF PROCEEDS
Assuming
the maximum offering amount of $50,838 is subscribed for in the rights offering,
we estimate that the net proceeds from the rights offering will be approximately
$___, after deducting expenses related to this offering payable by us estimated
at approximately $___. Assuming that the maximum offering amount is
subscribed for in the rights offering, and all of the Offered Warrants are
exercised, we would receive $15,886,988 of proceeds from the exercise of all of
the Offered Warrants for 1,270,959 shares at the stated exercise price of $5.50
per share under the Class A Offered Warrants, and for 1,270,959 shares at the
stated exercise price of $7.00 per share under the Class B Offered
Warrants. There can be no assurances that all of the rights or
Offered Warrants will be exercised in full.
We intend
to use the net proceeds received from the exercise of the rights for general
corporate purposes, including working capital. Any of the proceeds we
do not use immediately upon receipt, we will temporarily invest in short-term
investment grade instruments, interest-bearing bank accounts, certificates of
deposit, money market securities or U.S. government securities. Any
proceeds received by us from exercises of the Offered Warrants will be used for
general corporate purposes, including working capital.
SELECTED
FINANCIAL DATA
The
following selected financial data for the five years ended December 31, 2009 are
derived from the audited consolidated financial statements of Chanticleer
Holdings, Inc. The financial data for the nine months ended September
30, 2010 and 2009 are derived from unaudited consolidated financial
statements. The unaudited consolidated financial statements include all
adjustments, consisting of normal recurring accruals, which Chanticleer
Holdings, Inc. considers necessary for a fair presentation of the financial
position and the results of operations for these periods. Operating results for
the nine months ended September 30, 2010 are not necessarily
indicative of the results that may be expected for the entire year ending
December 31, 2010. The data should be read in conjunction with the consolidated
financial statements, related notes, and other financial information
incorporated herein by reference.
25
Year
ended December 31
|
||||||||||||||||||||
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||
OPERATIONS
DATA
|
||||||||||||||||||||
Revenues
|
$ | 602,978 | 234,055 | 574,675 | 127,243 | 4,798 | ||||||||||||||
Net
loss
|
(813,696 | ) | (2,238,613 | ) | 11,887 | (199,213 | ) | (172,179 | ) | |||||||||||
Cumulative
preferred dividends
|
- | - | - | - | - | |||||||||||||||
Loss
applicable to common shares
|
$ | (813,696 | ) | (2,238,613 | ) | 11,887 | (199,213 | ) | (172,179 | ) | ||||||||||
Loss
per common share (basic and diluted)
|
$ | (0.84 | ) | (2.46 | ) | - | (0.03 | ) | (0.03 | ) | ||||||||||
Cash
dividends per common share
|
$ | - | - | - | - | - | ||||||||||||||
BALANCE
SHEET DATA
|
||||||||||||||||||||
Total
assets
|
$ | 1,453,669 | 2,225,261 | 3,824,543 | 2,577,048 | 2,537,036 | ||||||||||||||
Convertible
Senior Notes and other long-term debt
|
$ | - | - | - | - | - | ||||||||||||||
Shareholders’
equity
|
$ | 718,018 | 1,539,136 | 3,475,276 | 2,413,389 | 2,529,352 |
Nine months
ended
|
||||||||
September
30
|
||||||||
2010
|
2009
|
|||||||
OPERATIONS
DATA
|
||||||||
Revenues
|
$ | 80,504 | $ | 499,603 | ||||
Net
loss
|
(494,397 | ) | (111,205 | ) | ||||
Cumulative
preferred dividends
|
- | - | ||||||
Loss
applicable to common shares
|
$ | (494,397 | ) | $ | (111,205 | ) | ||
Loss
per common share (basic and diluted)
|
$ | (0.50 | ) | $ | (0.12 | ) | ||
Cash
dividends per common share
|
$ | - | $ | - | ||||
BALANCE
SHEET DATA
|
||||||||
Total
assets
|
$ | 1,565,923 | $ | 2,224,569 | ||||
Long-term
debt
|
$ | 436,500 | $ | - | ||||
Shareholders'
equity
|
$ | 422,308 | $ | 1,498,081 |
QUARTERLY
FINANCIAL DATA
Unaudited
quarterly results of operations for the years ended December 31, 2009 and 2008
and the nine months ended September 30, 2010 follow and should be
read in conjunction with the consolidated financial statements, related notes
and other financial information incorporated herein by reference and the
Company's quarterly reports on Form 10-Q for the fiscal years 2009 and 2008 and
the nine months ended September 30, 2010.
26
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
Year
|
||||||||||||||||
YEAR
ENDED DECEMBER 31, 2009
|
||||||||||||||||||||
Revenues
|
$
|
103,417
|
$
|
134,750
|
$
|
260,875
|
$
|
103,936
|
$
|
602,978
|
||||||||||
Gross
profit (loss)
|
$
|
(380,637
|
) |
$
|
(54,487
|
) |
$
|
63,043
|
$
|
(170,189
|
) |
$
|
(542,270
|
) | ||||||
Net
profit (loss)
|
$
|
(437,285
|
) |
$
|
362,492
|
$
|
(36,972
|
) |
$
|
(701,931
|
) |
$
|
(813,696
|
) | ||||||
Loss
per common share (basic and diluted)
|
$
|
(0.46
|
) |
$
|
0.38
|
$
|
(0.04
|
) |
$
|
(0.72
|
) |
$
|
(0.84
|
) | ||||||
YEAR
ENDED DECEMBER 31, 2008
|
||||||||||||||||||||
Revenues
|
$
|
153,555
|
$
|
25,000
|
$
|
25,000
|
$
|
30,500
|
$
|
234,055
|
||||||||||
Gross
profit
|
$
|
(145,086
|
) |
$
|
(505,097
|
) |
$
|
(269,901
|
) |
$
|
(29,907
|
) |
$
|
(949,991
|
) | |||||
Net
loss
|
$
|
(161,285
|
) |
$
|
(491,644
|
) |
$
|
(265,253
|
) |
$
|
(1,320,431
|
) |
$
|
(2,238,613
|
) | |||||
Loss
per common share (basic and diluted)
|
$
|
(0.19
|
) |
$
|
(0.55
|
) |
$
|
(0.28
|
) |
$
|
(1.45
|
) |
$
|
(2.46
|
) | |||||
NINE MONTHS
ENDED SEPTEMBER 30, 2010
|
||||||||||||||||||||
Revenues
|
$
|
28,333
|
42,921
|
9,250
|
-
|
80,504
|
||||||||||||||
Gross
profit (loss)
|
$
|
(235,888
|
) |
(186,930
|
) |
(153,927
|
) |
-
|
(576,745
|
) | ||||||||||
Net
loss
|
$
|
(230,916
|
) |
(114,125
|
) |
(149,356
|
) |
-
|
(494,397
|
) | ||||||||||
Loss
per common share (basic and diluted)
|
$
|
(0.23
|
) |
(0.12
|
) |
(0.15
|
) |
-
|
(0.50
|
) |
CAPITALIZATION
The
following table sets forth our capitalization, cash and cash equivalents as of
September 30, 2010:
This
table should be read in conjunction with our “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and our consolidated
financial statements and the related notes for the quarterly period ended
September 30, 2010 and other financial data incorporated herein by
reference.
|
At
September
30, 2010
(Unaudited)
|
|||
Cash
|
$
|
12,305
|
||
Total
assets
|
$
|
1,565,923
|
||
Total
liabilities
|
$
|
1,143,615
|
||
Total shareholders’
equity
|
$
|
422,308
|
||
Total liabilities and
shareholders’ deficit
|
$
|
1,565,923
|
MARKET
FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Our
common stock has traded on the OTCBB under the symbol “CCLR” since _____,
20___.
The high
and low sales prices on the OTCBB for the common stock were as
follows:
27
Year
ended December 31, 2010
|
High
|
Low
|
||||||
First
Quarter
|
$
|
4.25
|
$
|
2.50
|
||||
Second
Quarter
|
$
|
4.25
|
$
|
2.60
|
||||
Third
Quarter
|
$
|
4.25
|
$
|
3.50
|
||||
Fourth
Quarter
|
$
|
4.25
|
$
|
3.01
|
||||
Year
ended December 31, 2009
|
||||||||
First
Quarter
|
$
|
5.75
|
$
|
1.01
|
||||
Second
Quarter
|
$
|
5.55
|
$
|
3.00
|
||||
Third
Quarter
|
$
|
5.40
|
$
|
2.25
|
||||
Fourth
Quarter
|
$
|
5.50
|
$
|
2.05
|
||||
Year
ended December 31, 2008
|
||||||||
First
Quarter
|
$
|
8.00
|
$
|
5.40
|
||||
Second
Quarter
|
$
|
7.00
|
$
|
5.10
|
||||
Third
Quarter
|
$
|
7.00
|
$
|
5.75
|
||||
Fourth
Quarter
|
$
|
7.00
|
$
|
5.50
|
As of
_____, 2011, there were approximately ___ holders of record of our common
stock.
DIVIDEND
POLICY
The
holders of our common stock are entitled to receive such dividends as our board
of directors may from time to time declare out of funds legally available
for payment of dividends We have never declared or paid dividends on our common
stock. We currently intend to retain future earnings, if any, for use in
our business, and, therefore, we do not anticipate declaring or paying any
dividends in the foreseeable future. Payments of future dividends, if any,
will be at the discretion of our board of directors after taking into account
various factors, including our financial condition, operating results, current
and anticipated cash needs and plans for expansion.
DESCRIPTION
OF SECURITIES
General
We are
authorized to issue up to 200,000,000 shares of common stock, $0.0001 par
value. As of December 31, 2010, there were 1,270,959 shares of
common stock issued and outstanding.
Common
Stock
The
holder of each share of common stock:
|
•
|
is
entitled to one vote on all matters submitted to a vote of the
shareholders of Chanticleer, including the election of directors.
There is no cumulative voting for
directors;
|
|
•
|
does
not have any preemptive rights to subscribe for or purchase shares,
obligations, warrants, or other securities of Chanticleer;
and
|
|
•
|
is
entitled to receive such dividends as the board of directors may from time
to time declare out of funds legally available for payment of
dividends.
|
Upon any
liquidation, dissolution or winding up of Chanticleer, holders of shares of
common stock are entitled to receive pro rata all of the assets of
Chanticleer available for distribution.
28
Outstanding
Options and Warrants
As of
___, 201__, there were ___ common stock options and warrants outstanding,
with an average weighted exercise price of $___, and a weighted average
expiration date of _____, 20___, of which ___ were exercisable as of said
date.
DESCRIPTION
OF OFFERED WARRANTS
The
Offered Warrants to be issued pursuant to exercise of the subscription rights
are non-transferable and will expire _____, 2016. The Class A Offered Warrants
may be exercised for $5.50 per share commencing on ___, 2011 and at any time
through ___, 2016, and the Class B Offered Warrants may be exercised for $7.00
per share commencing on ___, 2011 and at any time through ___,
2016 The common stock underlying the Offered Warrants, upon issuance,
will be traded on the OTCBB under the symbol “CCLR.”
Certificates
for all Offered Warrants acquired will be mailed as soon as practicable after
the rights offering has expired, payment for the Offered Warrants subscribed for
has cleared, unless shares are held of record by Cede & Co. or by any other
depository or nominee through the facilities of DTC on behalf of the shareholder
or on behalf of the shareholder’s broker, dealer, custodian bank, trustee or
other nominee, in which case the shareholder will have any Offered Warrants
acquired by the shareholder credited to the account of Cede & Co. or the
other depository or nominee as soon as practicable after the rights offering has
expired, payment for the Offered Warrants subscribed for has
cleared.
We will
deliver certificates representing your Offered Warrants or credit your account
at your nominee holder with the Offered Warrants that you purchased pursuant to
your subscription right as soon as practicable after the rights offering has
expired.
The
exercise price of the Offered Warrants and the number of shares of common stock
issuable upon exercise of the Offered Warrants are subject to adjustment in
certain circumstances, including a stock split of, stock dividend on, or a
subdivision, combination or recapitalization of the common stock. Upon the
merger, consolidation, sale of substantially all the assets of Chanticleer, or
other similar transaction, the holders of Offered Warrants shall, at the option
of Chanticleer, be required to exercise the Offered Warrants immediately prior
to the closing of the transaction, or such Offered Warrants shall automatically
expire. Upon such exercise, the holders of Offered Warrants shall
participate on the same basis as the holders of common stock in connection with
the transaction.
The Offered
Warrants do not confer upon the holder any voting or any other rights of a
shareholder of Chanticleer. Upon notice to the of Offered
Warrants holders, Chanticleer has the right, at any time and from time to
time, to reduce the exercise price or to extend the of Offered Warrants
termination date.
MATERIAL
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The
following discussion sets forth the material U.S. Federal income tax
consequences of the receipt of subscription rights described in this offering
and of the exercise or expiration of those subscription rights to U.S. Holders
(as defined below) of our common stock that hold such stock as a capital asset
for Federal income tax purposes. This discussion is based upon the Code,
Treasury Regulations promulgated thereunder, judicial decisions, and the U.S.
Internal Revenue Service’s (“IRS”) current administrative rules, practices and
interpretations of law, all as in effect on the date of this document, and all
of which are subject to change, possible with retroactive effect. This
discussion applies only to U.S. Holders and does not address all aspects of
Federal income taxation that may be important to particular holders in light of
their individual investment circumstances or to holders who may be subject to
special tax rules, including, without limitation, holders of preferred stock,
partnerships (including any entity or arrangement treated as a partnership for
Federal income tax purposes), holders who are dealers in securities or foreign
currency, foreign persons, insurance companies, tax-exempt organizations,
non-U.S. Holders, banks, financial institutions, broker-dealers, holders who
hold common stock as part of a hedge, straddle, conversion, constructive sale or
other integrated security transaction, or who acquired common stock pursuant to
the exercise of compensatory stock options or otherwise as compensation, all of
whom may be subject to tax rules that differ significantly from those summarized
below.
29
We have
not sought, and will not seek, a ruling from the IRS regarding the Federal
income tax consequences of this offering or the related securities issuance.
This discussion is based on varying interpretations that could result in U.S
federal income tax consequences different from those described below. The
following discussion does not address the tax consequences of this offering or
the related share issuance under foreign, state, or local tax laws, or the
alternative minimum tax provisions of the Code. Accordingly, each holder
of common stock is urged to consult its tax advisor with respect to the
particular tax consequences of this offering or the related share issuance to
such holder.
For
purposes of this description, a “U.S. Holder” is a holder of our common stock
that is for U.S. federal income tax purposes:
|
•
|
a
citizen or resident of the U.S.;
|
|
•
|
a
corporation or other entity taxable as a corporation that is organized in
or under the laws of the U.S., any state thereof or the District of
Columbia;
|
|
•
|
an
estate, the income of which is subject to U.S. federal income taxation,
regardless of its source; or
|
|
•
|
a
trust, if a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust (or the trust
was in existence on August 20, 1996, and validly elected to continue to be
treated as a U.S. trust).
|
THIS
SUMMARY IS ONLY A GENERAL DISCUSSION AND IS NOT INTENDED TO BE, AND SHOULD NOT
BE CONSTRUED TO BE, LEGAL, OR TAX ADVICE. THE U.S. FEDERAL INCOME TAX
TREATMENT OF THE RIGHTS IS COMPLEX AND POTENTIALLY UNFAVORABLE TO U.S.
HOLDERS. ACCORDINGLY, EACH U.S. HOLDER WHO ACQUIRES RIGHTS IS STRONGLY
URGED TO CONSULT HIS, HER OR ITS OWN TAX ADVISER WITH RESPECT TO THE U.S.
FEDERAL, STATE, LOCAL AND FOREIGN INCOME, ESTATE AND OTHER TAX CONSEQUENCES OF
THE ACQUISITION OF THE RIGHTS, WITH SPECIFIC REFERENCE TO SUCH PERSON’S
PARTICULAR FACTS AND CIRCUMSTANCES.
THE
FEDERAL TAX DISCUSSION CONTAINED IN THIS PROSPECTUS IS NOT INTENDED OR WRITTEN
TO BE USED, AND CANNOT BE USED, BY ANY PERSON FOR THE PURPOSE OF AVOIDING ANY
PENALTIES THAT MAY BE IMPOSED BY THE CODE. THE FEDERAL TAX DISCUSSION
CONTAINED IN THIS PROSPECTUS WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING
OF THE TRANSACTION DESCRIBED IN THIS PROSPECTUS. PROSPECTIVE INVESTORS
SHOULD SEEK ADVICE FROM THEIR OWN INDEPENDENT TAX ADVISORS CONCERNING THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF AN INVESTMENT IN THE COMPANY BASED
ON THEIR PARTICULAR CIRCUMSTANCES.
Receipt
of the Subscription Rights
The
distribution of the subscription rights should be a non-taxable distribution to
U.S. Holders under Section 305(a) of the Code. This position is not
binding on the IRS, or the courts, however. If this position is finally
determined by the IRS or a court to be incorrect, the fair market value of the
subscription rights would be taxable to holders of our common stock as a
dividend to the extent of the holder’s pro rata share of our current
and accumulated earnings and profits, if any, with any excess being treated as a
return of capital to the extent thereof and then as capital gain.
The
distribution of the subscription rights would be taxable under Section 305(b) of
the Code if it were a distribution or part of a series of distributions,
including deemed distributions, that have the effect of the receipt of cash or
other property by some of our shareholders and an increase in the proportionate
interest of other shareholders in our assets or earnings and profits, if
any. Distributions having this effect are referred to as “disproportionate
distributions.”
The
remaining description assumes that U.S. Holders who receive the
subscription rights on account of their common stock will not be subject to
U.S. federal income tax on such receipt.
30
Tax
Basis and Holding Period of the Subscription Rights
A U.S.
Holder's tax basis in the subscription rights will depend on the fair market
value of the subscription rights and the fair market value of our common stock
at the time of the distribution.
• If
the total fair market value of the subscription rights being distributed in this
offering to holders of our common stock represents 15 percent or more of the
total fair market value of our common stock at the time of the distribution, a
holder must allocate the basis of the holder's shares of common stock (with
respect to which the subscriptions rights were distributed) between such stock
and the subscription rights received by such holder. This allocation is made in
proportion to the fair market value of the common stock and the fair market
value of the subscription rights at the date of distribution.
• If
the total fair market value of the subscription rights being distributed in this
offering to holders of our common stock is less than 15 percent of the total
fair market value of our common stock at the time of the distribution, the basis
of such subscription rights will be zero unless the holder elects to allocate
part of the basis of the holder's shares of common stock (with respect to which
the subscriptions rights were distributed) to the subscription rights. A holder
makes such an election by attaching a statement to the holder's tax return for
the year in which the subscription rights are received. This election, once
made, will be irrevocable with respect to those rights. Any holder that makes
such election should retain a copy of the election and of the tax return with
which it was filed in order to substantiate the use of an allocated basis upon a
subsequent disposition of the security acquired through exercise of
the rights. If the basis of a holder's subscription rights is deemed to be zero
because the fair market value of the subscription rights at the time of
distribution is less than 15 percent of the fair market value of our common
stock and because the holder does not make the election described above, the
holder's basis of the shares of common stock with respect to which such rights
are received will not change. If an allocation of basis is made between
the subscriptions rights and common stock, and the subscription rights are later
exercised, the tax basis in the common stock originally owned by the holder will
be reduced by an amount equal to the tax basis allocated to the subscription
rights.
The
holding period for the subscriptions rights received by a U.S. Holder on account
of common stock in the rights offering will include the holder's holding period
for the common stock with respect to which the subscriptions rights were
received.
Expiration
of the Subscription Rights
If the
subscription rights expire without exercise while the holder continues to hold
the shares of our common stock with respect to which the subscription rights are
received, the holder will recognize no loss and the tax basis of the common
stock with respect to which the subscription rights were received will equal its
tax basis before receipt of the subscription rights. If the subscription
rights expire without exercise or are exercised after you have disposed of the
shares of our common stock with respect to which the subscription rights are
received, the tax consequences are uncertain and you should consult your tax
advisor regarding your ability to recognize a loss (if any) on the expiration of
the subscription rights, or regarding the tax basis of the securities acquired
upon exercise.
Exercise
of the Subscription Rights; Tax Basis and Holding Period of the
Securities
A
U.S. Holder of
common stock will not recognize any gain or loss upon the exercise of
subscription rights received in the rights offering.
The tax
basis of the Offered Warrants acquired through exercise of the subscription
rights will equal the sum of (a) the exercise price and (b) the holder's tax
basis, if any, in the subscription rights (determined as described
above).
The
holding period for the Offered Warrants acquired through exercise of the
subscription rights will begin on the date the subscription rights are
exercised. The holding period of common stock subsequently acquired through the
exercise of the Offered Warrants will begin with the date the Offered
Warrants are exercised.
31
If a U.S.
Holder subsequently exercises an Offered Warrant that the holder acquired
through the prior exercise of the subscription rights, that holder will not
recognize gain or loss upon the subsequent exercise of the Offered Warrant. The
shares of common stock that the holder acquires as a result of exercising the
warrant will have a tax basis equal to that holder's adjusted basis in the
warrant, plus the amount paid to exercise the warrant. The holding period of
shares acquired upon exercise of an Offered Warrant will begin on the day
after the warrant is exercised.
If a U.S.
Holder sells the Offered Warrant to another person, the holder will recognize
taxable gain or loss, if any, in an amount equal to the difference between (a)
the proceeds from the sale and (b) the holder's tax basis in the warrant
(determined as described above). This gain or loss will be a capital gain or
loss if the warrant is a capital asset in the hands of the seller. Whether the
capital gain will be long-term or short-term capital gain will depend on the
seller's holding period for the warrant.
If the
U.S. Holder allows the Offered Warrant to lapse or expire without exercise, the
warrant is deemed to be sold or exchanged on the date of expiration. Therefore,
the holder will generally recognize a capital loss in an amount equal to the
holder's basis in the warrant. The loss is treated as short-term or long-term
depending on the holder's holding period in the warrant.
Information
Reporting and Backup Withholding
Payments
made to you of proceeds from the sale of rights shares may be subject to
information reporting to the IRS and possible U.S. federal backup
withholding. Backup withholding will not apply if you furnish a correct
taxpayer identification number (certified on the IRS Form W-9) or otherwise
establish that you are exempt from backup withholding. Backup withholding
is not an additional tax. Amounts withheld as backup withholding may be
credited against your U.S. federal income tax liability. You may obtain a
refund of any excess amounts withheld under the backup withholding rules by
filing the appropriate claim for refund with the IRS and furnishing any required
information.
INFORMATION
WITH RESPECT TO REGISTRANT
ITEM
1:
|
BUSINESS
|
GENERAL
DEVELOPMENT OF BUSINESS
Chanticleer
Holdings, Inc. filed an election to be treated as a business development company
under the Investment Company Act of 1940 (the “1940 Act”) on May 23, 2005. In
connection with this election, we adopted corporate resolutions and operated as
a closed-end, non-diversified management investment company and as a business
development company (a “BDC”) until this election was revoked, as described
below.
The
consolidated financial statements include the accounts of Chanticleer Holdings,
Inc. and its wholly owned subsidiaries, Chanticleer Advisors, LLC, (“Advisors”),
Avenel Ventures, LLC ("Ventures"), Avenel Financial Services, LLC ("AFS"),
Chanticleer Holdings Limited ("CHL") and DineOut SA Ltd. ("DineOut")
collectively referred to as “the Company,” “we,” “us,” or “the
Companies”.
Information
regarding the Company's subsidiaries is as follows:
|
·
|
Advisors
was formed as a Nevada Limited Liability Company on January 18, 2007 to
manage an affiliate company, Chanticleer Investors II, LLC ("Investors
II") and other investments owned by the Company (For additional
information, see
www.chanticleeradvisors.com.);
|
|
·
|
Ventures
was formed as a Nevada Limited Liability Company on December 24, 2008 to
provide business management and consulting services to its
clients;
|
|
·
|
AFS
was formed as a Nevada Limited Liability Company on February 19, 2009 to
provide unique financial services to the restaurant, real estate
development, investment advisor/asset management and philanthropic
organizations. AFS's business operation is currently being organized
and is expected to initially include captive insurance, CHIRA and trust
services;
|
32
|
·
|
CHL
was formed as a Limited Liability Company in Jersey on March 24, 2009 and
was intended to be used to raise capital in Europe, but has not been
activated;
|
|
·
|
DineOut
was formed as a Private Limited Liability Company in England and Wales on
October 29, 2009 to own the Company's 50% interest in Hooters SA, GP, the
general partner of the Hooters restaurant franchises in South
Africa.
|
On April
18, 2006, the Company formed Chanticleer Investors LLC (“Investors LLC”) and
sold units for $5,000,000. Investors LLC’s principal asset is a
convertible note in the amount of $5,000,000 with Hooters of America, Inc.
(“Hooters”), collateralized by and convertible into 2% of Hooters common
stock. The original note included interest at 6% and was due May 24,
2009. The note was extended until November 24, 2010 and included an
increase in the interest rate to 8%.
The
Company owned $1,250,000 (23%) of Investors LLC at December 31, 2008 and until
May 29, 2009 when it sold 1/2 of its share for $575,000. Under the
original arrangement, the Company received 2% of the 6% interest as a management
fee ($25,000 quarterly) and 4% interest on its investment ($11,500
quarterly). Under the extended note and revised operating agreement, the
Company receives a management fee of $6,625 quarterly and interest income of
$11,500 quarterly.
On July
31, 2006, the Company formed Investors II. Investors II began raising
funds in January 2007 for the purpose of investing in publicly traded value
securities and has now completed its third year of operations with $1,244,765
under management at December 31, 2009.
On July
21, 2008, we filed Form N-54C with the Securities and Exchange Commission
(“SEC”) to notify the SEC of the withdrawal of our previous election to be
regulated as a BDC under applicable provisions of the 1940 Act. After
careful consideration of the 1940 Act requirements applicable to BDCs,
evaluation of the Company’s ability to operate as a going concern in an
investment company regulatory environment, the costs associated with complying
with the 1940 Act and a thorough assessment of potential alternative business
models, our Board of Directors determined that continuation as a BDC was not in
the best interests of the Company or our stockholders. With the approval
of more than a majority of the voting power of our common stock, we proceeded to
file Form N-54C and thereby revoking our BDC status.
Pursuant
to Regulation S-X, Rule 6, the Company operated on a non-consolidated basis
until July 21, 2008. Operations of the portfolio companies were reported
at the portfolio company level and only the appreciation or impairment of these
investments was included in the Company’s financial statements. Subsequent
to July 21, 2008, as noted above, we ceased operating as a BDC and prepared
consolidated financial statements with our wholly owned
subsidiaries.
SEGMENTS
OF BUSINESS
The
Company is organized into three business segments as of the end of 2009, two of
which were added during 2009 and have not had any revenues as of December 31,
2009. See Note 11.
Management
and consulting services
The
Company provides management and consulting services for small companies which
are generally seeking to become publicly traded. The Company also provides
management and investment services for Investors II.
Insurance
and specialized financial services
We have
formed AFS to provide unique financial services to the restaurant, real estate
development, investment advisor/asset management and philanthropic
organizations. AFS's business operation is currently being organized and
is expected to initially include captive insurance, CHIRA and trust
services.
33
Operation
of restaurants (South Africa)
The
Company formed DineOut to own the Company's 50% general partner interest in
Hooters S.A., GP, the general partner of the Hooters' restaurant franchises in
South Africa. The Company plans to sell its interest in each restaurant in
a separate limited partnership which will provide for the Company to receive 10%
of the total net revenue until payout and 40% after payout. The Limited
partner would receive 40% of total net revenue until payout and 10% after
payout. The initial restaurant opened December 2009 in Durban, South
Africa and operations will commence in January 2010. The second location
opened in Johannesburg in May 2010 with a third location planned to open in Cape
Town before the end of the year.
NARRATIVE
DESCRIPTION OF BUSINESS - NEW BUSINESS MODEL
We intend
to pursue a business model whereby we acquire ownership in restaurant-related
companies, principally the Hooters brand and concept. We also intend to
continue to provide business management and consulting services to clients who
need assistance in becoming publicly traded. We have also formed AFS to
provide unique financial services to the restaurant, real estate development,
investment advisor/asset management and philanthropic organizations. AFS's
business operation is currently being organized and is expected to initially
include captive insurance, CHIRA and trust services.
DineOut
will own our share of the Hooters locations in South Africa. Each
restaurant is being organized as a limited partnership. In the first
location in Durban, South Africa, the Hooters Durban, LP is structured as
follows. DineOut owns one half of the general partner ("GP")
interest. The LP interest is allocated 80% of our half of the restaurant
cash flow until they have received a return of their capital and a pre-tax
compounded return on that capital of 20%. After the LP interest has
received its return, the LP interest share will reduce to 20% of our half and
the GP interest will increase to 80% of our half.
Under our
new business model, we will at all times conduct our activities in such a way
that we will not be deemed an “investment company” subject to regulation under
the 1940 Act. Thus, we will not hold ourselves out as being engaged
primarily in the business of investing, reinvesting or trading in
securities. In addition, we will conduct our business in such a manner as
to ensure that we will at no time own or propose to acquire investment
securities having a value exceeding 40% of our total assets at any one
time.
Pending
Acquisition
Hooters,
Inc.
On March
11, 2008, the Company entered into a Stock Purchase Agreement for the purchase
of Hooters, Inc., Hooters Management Corporation and their related restaurants
(collectively “HI”) from the nine current individual HI shareholders, many of
whom will continue to stay involved in the ongoing operation as shareholders of
Chanticleer. The transaction is valued at approximately $55.1
million.
The
termination date for the Company's pending acquisition of the stock of HI and
certain of its related entities has passed. Although the sellers have not,
to date, exercised their rights to terminate the agreements and the Company
continues to seek to consummate these transactions, there is no assurance that
the Company will be able to close the pending acquisition.
In
addition, the commitment letters from certain financial institutions to provide
one or more related entities of the Company the Senior Secured Credit have
expired, primarily due to the inability of the Company to raise the necessary
equity portion of the financing at acceptable terms in today's financial
environment. The Company continues to communicate with the financial
institutions that agreed to provide the credit facility; however, there can be
no assurance that the Company will be successful in obtaining any financing or
that the terms of any credit facility in the future will be acceptable to the
Company.
Texas
Wings
On July
8, 2008, the Company entered into an Asset Purchase Agreement ("APA") to acquire
substantially all of the assets of Texas Wings Incorporated and its 45 related
Hooters branded restaurants for total consideration of approximately $106
million. On May 13, 2009, the Company received written notification
terminating this APA, because one or more of the conditions to closing could not
be timely satisfied.
34
Employees
At
December 31, 2009 and 2008, we had 6 and 4 full-time employees,
respectively.
Our
employees are not represented by a labor union. We have experienced no
work stoppage and believe that our employee relationships are good.
PROPERTIES
Effective
August 1, 2009, the Company entered into a new office lease agreement for a
period of one year at a monthly rental of $2,100, for its office located at
11220 Elm Lane, Suite 103, Charlotte, NC 28277.
Our
office facilities are suitable and adequate for our business as it is presently
conducted.
LEGAL
PROCEEDINGS
We are
not currently subject to any legal proceedings, nor, to our knowledge, is any
legal proceeding threatened against us. However, from time to time, we may be a
party to certain legal proceedings in the ordinary course of
business.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management’s
Analysis of Business
We intend
to pursue a business model whereby we acquire ownership in restaurant-related
companies, principally the Hooters brand and concept. We also intend to
continue to provide business management and consulting services to clients who
need assistance in becoming publicly traded. We have also formed AFS to
provide unique financial services to the restaurant, real estate development,
investment advisor/asset management and philanthropic organizations. AFS's
business operation is currently being organized and is expected to initially
include captive insurance, CHIRA and trust services.
DineOut
will own our share of the Hooters locations in South Africa. Each
restaurant is being organized as a limited partnership. In the first
location in Durban, South Africa, the Hooters Durban, LP is structured as
follows. DineOut owns 50% of the general partner ("GP") interest and owns
a 5.56% limited partner ("LP") interest. The LP interest is allocated 80%
of the restaurant cash flow until they have received a return of their capital
and a pre-tax compounded return on that capital of 20%. After the LP
interest has received its return, the LP interest share will reduce to 20% and
the GP interest will increase to 80%. DineOut initially has a 10% GP
interest and a 5.56% LP interest which will convert to 40% GP interest and 1.39%
LP interest after the LP payout.
Under our
new business model, we will at all times conduct our activities in such a way
that we will not be deemed an “investment company” subject to regulation under
the 1940 Act. Thus, we will not hold ourselves out as being engaged
primarily in the business of investing, reinvesting or trading in
securities. In addition, we will conduct our business in such a manner as
to ensure that we will at no time own or propose to acquire investment
securities having a value exceeding 40% of our total assets at any one
time.
While
operating as a BDC, the Company provided equity and debt investment capital to
fund growth, acquisitions and recapitalizations of small market companies in the
United States.
35
Liquidity
and Capital Resources
At
September 30, 2010 and December 31, 2009, the Company had current assets of
$60,883 and $60,180; current liabilities of $707,115 and $735,651; and a working
capital deficit of $646,232 and $675,471, respectively. The Company
incurred a loss of $494,397 during the nine months ended September 30, 2010 and
had an unrealized gain from available-for-sale securities of $38,946 resulting
in a comprehensive loss of $455,451.
The
Company's general and administrative expenses were approximately $657,000 during
the nine months ended September 30, 2010. These costs declined from
$264,221 in the first quarter of 2010, $229,851 in the second quarter of 2010
and $163,177 in the third quarter of 2010. The fourth quarter of 2010 is
expected to be approximately the same as the third quarter of 2010. The
Company expects to be required to invest approximately $350,000 for each new
restaurant opened in 2010. (total of 3 planned). The Company used
limited partner investors for $314,000 of their requirement for the restaurant
opened in December 2009 and sold their limited partner interest in March 2010
for its cost of $37,500. The Company raised $387,500 from limited partners
for the restaurant in Johannesburg which opened in June 2010. All funds
have been committed for the third restaurant which is expected to open before
the end of 2010 in Cape Town.
The
Company expects to meet its obligations in the next twelve months with some or
all of the following:
|
·
|
The Company holds 3,727,937
shares in DineOut which are free-trading on the Frankfort Exchange and
were trading at approximately €1.50 ($2.05) per share at September 30,
2010. The Company plans to continue to sell some of these shares to
meet its short-term capital requirements and realized cash proceeds of
$92,928, non cash proceeds of $124,573 and recognized a gain of $156,848
from sales during the nine months ended September 30,
2010;
|
|
·
|
The Company currently receives
interest income and management fees for its investment in Investors LLC of
$18,125 per quarter. The note held by Investors LLC matures in
November 2010;
|
|
·
|
The Company currently is
receiving its share of earnings from the Durban, South Africa restaurant
which commenced operations on January 1, 2010 and the Johannesburg, South
Africa location which opened in June 2010 should commence distributions in
the fourth quarter. The Company expects at least one more
restaurants to be opened during 2010 in Cape Town and a fourth location
planned for 2011; and
|
|
·
|
The Company expects to raise the
majority of its cash requirements for the South Africa restaurants from
limited partners.
|
If the
above events do not occur or if the Company does not raise sufficient capital,
substantial doubt about the Company’s ability to continue as a going concern
exists. These consolidated financial statements do not reflect any
adjustments that might result from the outcome of these
uncertainties.
Business
Segments
The
Company is organized into three business segments as of the end of 2009, two of
which were added during 2009 and have not had any revenues as of December 31,
2009. The financial information about these business segments is included
in Note 11.
Results
of Operations
Comparison
of three months ended September 30, 2010 and 2009
Revenues
amounted to $9,250 ($6,625 from Investors LLC) in the three months ended
September 30, 2010, as compared to $260,875 ($25,000 from Investors LLC) in the
year earlier period. The Company received cash from Investors LLC and was
compensated with shares of common stock for the other revenue
earned.
General
and administrative expense amounted to $163,177 in the 2010 quarter as compared
to $197,832 in the 2009 quarter. The decrease is composed of several
items, including payroll of $6,586, travel of $5,132, accounting and auditing of
$4,786 and rent of $4,281.
36
Other
income (expense) consists of the following for the three months ended September
30, 2010 and 2009.
2010
|
2009
|
|||||||
Realized
gain (loss) from sale of investments
|
$
|
(1,658
|
)
|
$
|
5,551
|
|||
Unrealized
loss from marketable equity securities
|
-
|
(98,000
|
)
|
|||||
Equity
in earnings of investments
|
21,597
|
-
|
||||||
Interest
and other income
|
11,500
|
11,550
|
||||||
Interest
expense
|
(27,421
|
)
|
(19,116
|
)
|
||||
$
|
4,018
|
$
|
(100,015
|
)
|
The
Company realized a gain of $11,768 from sales of DineOut shares during the 2010
quarter and realized a loss of $13,426 from sale of part of its investment in
VDSC.
In 2009,
the Company accounted for its investment in North American Energy Resources,
Inc. as a trading security with unrealized increases and decreases in value
included in earnings. In 2010 this investment is accounted for as an
available for sale security with unrealized gains/losses included in accumulated
other comprehensive income (loss).
Equity in
earnings of investments in 2010 represents the Company's share of net profits
from its investment in restaurants in South Africa.
Interest
expense increased during the 2010 quarter primarily due to the amortization of
the beneficial conversion feature on new convertible notes of $8,334 and to the
higher amount of debt during the 2010 period as compared to the 2009
period. There were no convertible notes outstanding during
2009.
Comparison
of nine months ended September 30, 2010 and 2009
Revenues
amounted to $80,504 ($19,875 from Investors LLC) in the nine months ended
September 30, 2010, as compared to $499,603 ($56,625 from Investors LLC) in the
year earlier period. The Company received cash from Investors LLC and was
compensated with shares of common stock for the other revenue
earned.
General
and administrative expense amounted to $657,249 in the 2010 period as compared
to $592,073 in the 2009 period. The principal increase was payroll of
$113,072. Payroll increased due to hiring two employees to assist in
raising capital for the Company. In addition, the Company's CEO was taking
a reduced salary in the 2009 period and he received his normal salary in the
2010 period. The payroll increase was partially offset by a reduction in
travel costs of $17,422 and a reduction of insurance in the amount of $18,047,
among others.
Acquisition
related costs are discussed in Note 7 to the consolidated financial
statements.
Other
income (expense) consists of the following for the nine months ended September
30, 2010 and 2009.
2010
|
2009
|
|||||||
Realized
gain (loss) from sale of investments
|
$
|
149,350
|
$
|
(8,731
|
)
|
|||
Unrealized
gain from marketable equity securities
|
-
|
259,000
|
||||||
Equity
in earnings of investments
|
42,850
|
23,000
|
||||||
Other
than temporary decline in available-for-sale securities
|
(40,386
|
)
|
-
|
|||||
Interest
and other income
|
34,500
|
11,550
|
||||||
Interest
expense
|
(104,396
|
)
|
(24,504
|
)
|
||||
$
|
81,918
|
$
|
260,315
|
37
The
Company realized a gain of $156,848 from sales of DineOut shares during the 2010
period, realized a gain of $6,584 from marketable securities acquired from a
related party and realized a loss of $14,082 from sale of part of its investment
in VDSC.
In 2009,
the Company accounted for its investment in North American Energy Resources,
Inc. as a trading security with unrealized increases and decreases in value
included in earnings. In 2010 this investment is accounted for as an
available for sale security with unrealized gains/losses included in accumulated
other comprehensive income (loss).
Equity in
earnings of investments in 2010 represents the Company's share of net profits
from its investment in restaurants in South Africa. As a result of the
sale of 50% of its interest in Chanticleer Investors, LLC, the Company reduced
its ownership to 11.5% and began accounting for this investment on the cost
method after June 30, 2009. Under the cost method, earnings are
included in interest income.
The
Company recorded an other than temporary loss on the decline in available for
sale securities during the first quarter of 2010, primarily from the decline in
value of its investment in Remodel Auction.
Interest
expense increased during the 2010 period primarily due to the amortization of
the beneficial conversion feature on new convertible notes of $49,994 and to the
higher amount of debt during the 2010 period as compared to the 2009
period.
Comparison
of twelve months ended December 31, 2009 and 2008
Revenue
Revenue
amounted to $602,978 in 2009 and $234,055 in 2008. Cash revenues were
$74,250 in 2009 and $105,500 in 2008. Non-cash revenues from management
fees include $504,167 in 2009 and include $128,555 in 2008 which was recognized
from the receipt of securities for our services. In addition, 2009
included revenues from a related party of $24,000 which had not been collected
at December 31, 2009. The majority of our cash revenues are management
fees from Investors LLC. Investors LLC has one principal asset, a
$5,000,000 convertible note with HOA, which was extended until November
2010.
The fair
value of the equity instruments received was determined based upon the stock
prices as of the date we reached an agreement with the third party. The
terms of the securities are not subject to adjustment after the measurement
date. See Note 3 for details.
General and Administrative
Expense (“G&A”)
G&A
amounted to $816,198 in 2009 and $1,131,830 in 2008. The more significant
components of G&A are summarized as follows:
2009
|
2008
|
|||||||
Professional
fees
|
$
|
106,379
|
$
|
275,456
|
||||
Payroll
|
385,320
|
374,435
|
||||||
Travel
and entertainment
|
57,120
|
106,203
|
||||||
Accounting
and auditing
|
59,675
|
76,100
|
||||||
Other
G&A
|
207,704
|
299,636
|
||||||
$
|
816,198
|
$
|
1,131,830
|
The
majority of the decrease in professional fees, travel and entertainment and
accounting and auditing are a result of the planned acquisition of HI and Texas
Wings which was active during 2008.
38
G&A
costs are expected to continue at approximately the same level as 2009, $200,000
per quarter, with the costs associated with the activities of Ventures, AFS and
DineOut increasing. Revenue is expected to exceed this increase in
expense.
Asset
Impairment
In 2009,
the Company recorded an impairment of our equity investment in Confluence
Partners of $50,000 due to the uncertain SPAC market. In 2008, we recorded
an impairment loss of $52,216 on our investment in two gas wells, primarily due
to a reduction in gas prices from which the estimated future cash flow was
calculated.
Deferred acquisition
costs
FASB ASC
805-10-25-23 replaced prior guidance and became effective January 1, 2009.
Acquisition-related costs are defined as costs the acquirer incurs to effect a
business combination and further provides that the acquirer shall account for
acquisition-related costs as expenses in the periods in which the costs are
incurred and the services received. Pursuant to the Company's planned
acquisition of HI, the Company incurred $279,050 in acquisition-related costs
which were capitalized in 2008 pursuant to accounting guidance in effect at that
time.
FASB ASC
805-10-25-23 applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning after December 15, 2008. Accordingly, on January 1, 2009
the Company charged its previously capitalized acquisition costs to expense on
that date.
Other Income
(Expense)
Other
income (expense) consisted of the following at December 31, 2009 and
2008:
2009
|
2008
|
|||||||
Other
income (expense):
|
||||||||
Equity
in earnings (losses) of investments
|
$
|
23,000
|
$
|
(123,111
|
)
|
|||
Realized
gains from sale of investments
|
58,697
|
-
|
||||||
Unrealized
gains (losses) of marketable equity securities
|
-
|
5,000
|
||||||
Interest
expense
|
(33,914
|
)
|
(20,486
|
)
|
||||
Interest
income
|
23,000
|
-
|
||||||
Miscellaneous
income
|
50
|
-
|
||||||
Other
than temporary decline in available-for-sale securities
|
(342,259
|
)
|
(1,150,025
|
)
|
||||
$
|
(271,426
|
)
|
$
|
(1,288,622
|
)
|
Equity in Earnings (Losses)
of Investments
Equity in
earnings of investments includes our share of earnings (losses) from investments
in which we own at least 20% and are being accounted for using the equity
method. This included income from Investors of $23,000 and $46,000 in 2009
and 2008, respectively, and a loss from First Choice Mortgage, which was closed
at the end of 2008, of $169,111 in 2008.
Realized Gains from Sale of
Investments
Realized
gains are recorded when investments are sold and include transactions in
marketable equity securities in 2009 for $8,697 and a $50,000 gain from the
exchange of our oil and gas property investment for marketable equity
securities.
Unrealized Gains (Losses) of
Marketable Equity Securities
The
Company recorded an unrealized gain from trading securities of $5,000 in
2008.
39
Interest
Expense
Interest
expense increased in 2009 from 2008 primarily due to the higher interest rate on
a portion of the debt which was added in 2009.
Interest
Income
Interest
income includes our earnings from Investors in 2009, after we sold 1/2 of our
23% investment in May 2009.
Other than Temporary Decline
in Available-for-Sale Securities
The
Company determined that its investment in available-for-sale securities had an
other than temporary decline in value and recorded a realized loss in the amount
of $342,259 and $1,150,025 in 2009 and 2008, respectively. Valuations were
determined based on the quoted market price for the stock on December 31, 2009
and 2008, respectively.
Recent
Accounting Pronouncements
There are
several new accounting pronouncements issued by the Financial Accounting
Standards Board (“FASB”) which are not yet effective. Each of these
pronouncements, as applicable, has been or will be adopted by the Company.
Management does not believe any of these accounting pronouncements has had or
will have a material impact on the Company’s financial position or operating
results. See Note 2.
Critical
Accounting Policies
The SEC
has suggested companies provide additional disclosure and commentary on their
most critical accounting policies, which they defined as the ones that are most
important to the portrayal of a company’s financial condition and operating
results, and require management to make its most difficult and subjective
judgments, often as a result of the need to make estimates of matters that are
inherently uncertain. Based on this definition our most critical
accounting policy is the valuation of our investments. The methods,
estimates and judgments we use in applying this accounting policy has a
significant impact on the results we report in our financial
statements.
We
determine fair value to be the amount for which an investment could be exchanged
in an orderly disposition over a reasonable period of time between willing
parties other than in a forced or liquidation sale. Our evaluation
process is intended to provide a consistent basis for determining the fair value
of our available-for-sale investments. In summary, for individual
securities classified as available-for-sale securities, an enterprise shall
determine whether a decline in fair value below the amortized cost basis is
other than temporary. If the decline in fair value is judged to
be other than temporary, the individual security shall be written
down to fair value as a new cost basis and the amount of the write-down shall be
included in earnings (accounted for as a realized loss). The new cost
basis shall not be changed for subsequent recoveries in fair
value. Subsequent increases in the fair value of available-for-sale
securities shall be included in other comprehensive income and subsequent
decreases in fair value, if not an other-than-temporary impairment, also shall
be included in other comprehensive income.
The first
step in the analysis is to determine if the security is impaired. All
of our available-for-sale securities were listed and we use the closing market
price to determine the amount of impairment if any. The second step,
if there is an impairment, is to determine if the impairment is other than
temporary. To determine if a decline in the value of an equity
security is other than temporary and that a write-down of the carrying value is
required, we considered the following:
|
·
|
The length of the time and the
extent to which the market value has been less than the
cost;
|
|
·
|
The financial condition and
near-term prospects of the issuer, including any specific events which may
influence the operations of the issuer such as changes in technology that
may impair the earnings potential of the investment or the discontinuance
of a segment of the business that may affect the future earnings
potential; or
|
|
·
|
The intent and ability of the
holder to retain its investment in the issuer for a period of time
sufficient to allow for any anticipated recovery in market
value.
|
40
Unless
evidence exists to support a realizable value equal to or greater than the
carrying value of the investment in equity securities classified as
available-for-sale, a write-down to fair value accounted for as a realized loss
should be recorded. Such loss should be recognized in the
determination of net income of the period in which it occurs and the written
down value of the investment in the issuer becomes the new cost basis of the
investment.
Investments
in which the Company has the ability to exercise significant influence and that,
in general, are at least 20 percent owned are stated at cost plus equity in
undistributed net earnings (loss), less distributions received. An
impairment loss would be recorded whenever a decline in the value of an equity
investment or investment carried at cost below its carrying amount is determined
to be other than temporary. In judging “other than temporary,” the
Company considers the length of time and extent to which the fair value of the
investment has been less than the carrying amount of the investment, the
near-term and long-term operating and financial prospects of the investee, and
the Company’s long-term intent of retaining the investment in the
investee.
Off-Balance
Sheet Arrangements
Effective
August 1, 2009, the Company entered into a new office lease agreement for a
period of one year at a monthly rental of $2,100, for its office located at
11220 Elm Lane, Suite 103, Charlotte, NC 28277.
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not
applicable.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
DIRECTORS
AND EXECUTIVE OFFICERS
The
following section sets forth the names, ages and current positions with the
Company held by the Directors, Executive Officers and Significant Employees as
of December 31, 2009; together with the year such positions were
assumed. There is no immediate family relationship between or among
any of the Directors, Executive Officers or Significant Employees, and the
Company is not aware of any arrangement or understanding between any Director or
Executive Officer and any other person pursuant to which he was elected to his
current position. Each Executive Officer will serve until he or she
resigns or is removed or otherwise disqualified to serve, or until his or her
successor is elected and qualified.
Each
Director will serve until he or she resigns or is removed or otherwise
disqualified to serve or until his or her successor is elected. The
Company currently has four Directors.
NAME
|
AGE
|
POSITION
|
Michael
D. Pruitt
|
49
|
President,
CEO and Director since June 2005
|
Michael
Carroll
|
61
|
Independent
Director since June 2005
|
Brian
Corbman
|
34
|
Independent
Director since August 2005
|
Paul
I. Moskowitz
|
53
|
Independent
Director since April 2007
|
Keith
Johnson
|
52
|
Independent
Director since November 2009
|
41
Michael D.
Pruitt. Michael Pruitt, a long-time entrepreneur with a
proven track record, possesses the expertise to evaluate potential investments,
form key relationships and recognize a strong management team. Mr. Pruitt
founded Avenel Financial Group, a boutique financial services firm concentrating
on emerging technology company investments. The business succeeded
immediately, and in order to grow Avenel Financial Group to its full potential
and better represent the company's ongoing business model, he formed Avenel
Ventures, an innovative technology investment and business development
company. In the late 1980s, Mr. Pruitt owned Southern Cartridge, Inc.,
which he eventually sold to MicroMagnetic, Inc., where he continued working as
Executive Vice President and a Board member until Southern Cartridge was sold to
Carolina Ribbon in 1992. From 1992 to 1996, Mr. Pruitt worked in a
trucking firm where he was instrumental in increasing revenues from $6 million
to $30 million. The firm was sold in 1996 to Priority Freight
Systems. Between 1997 and 2000, Mr. Pruitt assisted several public and
private companies in raising capital, recruiting management and preparing
companies to go public or be sold. He was the CEO, President and
Chairman of the Board of Onetravel Holdings, Inc. (formerly RCG Companies), a
publicly traded holding company formerly listed on the AMEX. Mr.
Pruitt received a Bachelor of Arts degree from Coastal Carolina University
in Conway, South Carolina, where he sits on the Board of Visitors of the Wall
School of Business. Mr. Pruitt is currently a director of Green St.
Energy, Inc.
Michael
Carroll. Michael Carroll currently owns and operates a sales
and training consulting firm based in Richmond, Virginia. Mr. Carroll
has also served as a director for OneTravel Holdings, Inc., formerly RCG
Companies Incorporated, since January of 2004. He previously spent 22
years in the distribution business, 19 of which were in computer products
distribution. In 1978, Mr. Carroll founded MicroMagnetic, Inc., a
computer supply distribution company that he sold to Corporate Express in
1997. From 1997 to 1999, he was a division president at Corporate
Express, a publicly traded business-to-business office products and service
provider. He holds a Bachelor’s Degree in Business Management from
The College of William & Mary in Williamsburg, Virginia, and a Master’s
Degree in Business Administration from Virginia Commonwealth
University.
Brian
Corbman. Brian Corbman is the managing director of Ardent
Advisors, a consulting company he co-founded in 2003, that specializes in
business strategy and corporate advisory services for emerging growth
companies. Mr. Corbman is in the process of becoming an Officer of
Supervisory Jurisdiction under the Westor Capital broker dealer umbrella and
services buy-side institutional investors via equity research, institutional
trading execution and investment banking activities. Previously, he
was an institutional salesman at Fulcrum Global Partners and Banc of America
Securities. Prior to that, he gained valuable corporate experience
working for GSI Commerce, a publicly traded company, where he was the sole
corporate development analyst. A Magna Cum Laude graduate of George
Washington University in Washington, DC, he holds a Bachelor’s degree in
Business Administration. Mr. Corbman has also attained the NASD
general securities principal Series 24, Series 7 and Series 63
licenses.
Paul I.
Moskowitz. Paul Moskowitz is a Phi Beta Kappa of Vassar
College and Cardozo Law School. Mr. Moskowitz was a co-founder and
partner of a successful New York law firm specializing in corporate and real
estate law. He became affiliated with The World Travel Specialist
Group/The Lawyers’ Travel Service (“WTSG/LTS”) in 1988 and served as corporate
counsel, representing the growing travel agency network in legal, real estate,
and other business activities. In 1989, he joined WTSG full time as
President and Chief Operating Officer until March 2003, with his primary
responsibilities including day-to-day operations which encompassed WTSG’s
airline relationships and sales and marketing. Mr. Moskowitz led the
growth of WTSG to one of the top 20 U.S. travel management firms with more than
90 offices throughout the U.S. Mr. Moskowitz is currently engaged as
a consultant for another travel organization.
Keith
Johnson. Mr. Johnson has been the President and Chief
Executive Officer of YRT² (Your Residential Technology Team) in Charlotte, North
Carolina, since 2004. Mr. Johnson served as Executive Vice President
and Chief Financial Officer of The Telemetry Company in Dallas, Texas
(1997-2004), Senior Vice President - Finance and Administration of Brinks Home
Security in Dallas, Texas (1995-1997), and Chief Financial Officer of BAX Global
in London, England (1992-1995). Mr. Johnson has a BS in accounting
from Fairfield University in Fairfield, Connecticut.
42
EXECUTIVE
COMPENSATION
The
Compensation Committee of the Board of Directors deliberates executive
compensation matters to the extent they are not delegated to the Chief Executive
Officer.
Summary
Compensation Table
The
following table shows the compensation of the Company’s Chief Executive Officer
and each executive officer whose total cash compensation exceeded $100,000 for
the three years ended December 31, 2008.
Name and Principal Position
|
Year
|
Salary
|
Bonus
|
Total
|
||||||||||
Michael
D. Pruitt (CEO since
|
2009
|
$
|
171,000
|
$
|
-
|
$
|
171,000
|
|||||||
June
2005) (1)
|
2008
|
$
|
136,148
|
$
|
-
|
$
|
136,148
|
|||||||
2007
|
$
|
41,917
|
-
|
$
|
41,917
|
(1)
|
The 2009 compensation
includes $11,000 in consulting fees during the time Mr. Pruitt had
temporarily discontinued his salary. The 2008 compensation
includes $8,000 in consulting fees after Mr. Pruitt temporarily
discontinued his salary.
|
Required
columns for stock awards, option awards, non-entity incentive plan compensation,
change in pension value and nonqualified deferred compensation earnings and all
other compensation are omitted from the table above as the amounts are all
zero.
Mr.
Pruitt did not receive compensation during our initial start-up phase as a
BDC. His compensation commenced in February 2007. Our
compensation for Officers and Directors is based on comparative compensation
levels for similar positions and time requirements.
Options/SAR
Grants Table
There
were no grants of options or SARs during the year for the named
individual.
Aggregated
option/SAR exercises and fiscal year-end option/SAR value table.
There
were no option/SAR exercises or any options/SARs outstanding at fiscal year-end
for the named individual.
Long-term
incentive plan ("LTIP") awards table
There
were no LTIP awards during the year for the named individual.
Compensation
of directors
Directors
are generally compensated $1,500 for each meeting during the
year. There were no formal meetings during the year, and no directors
were paid director fees. Mr. Pruitt and Mr. Corbman do not currently
receive director fees.
Employment
contracts and termination of employment and changes in control
arrangements
The
Company does not have any current employment agreements with its officers and
directors. The Company intends to pay its Executives and Directors salaries,
wages, or fees commensurate with experience and industry standards in
relationship to the success of the company.
The
Company does not have any change in control arrangements.
Report
on repricing of options/SARs
The
Company has no options or SARs outstanding during 2009 or 2008, accordingly,
none were repriced.
43
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the
Company's knowledge, the following table sets forth information with respect to
beneficial ownership of outstanding common stock as of December 31, 2010,
by:
|
·
|
each person known by the Company
to beneficially own more than 5% of the outstanding shares of the
Company's Common Stock;
|
|
·
|
each of the Company's named
executive officers;
|
|
·
|
each of the Company's directors;
and
|
|
·
|
all of the Company's executive
officers and directors as a
group.
|
Beneficial
ownership is determined in accordance with the rules of the U.S. Securities and
Exchange Commission (the "SEC") and includes voting or investment power with
respect to the securities as well as securities which the individual or group
has the right to acquire within 60 days of the original filing of this
Information Statement. Unless otherwise indicated, the address for those listed
below is c/o Chanticleer Holdings, Inc., 11220 Elm Lane, Suite 103, Charlotte,
NC 28277. Except as indicated by footnote, and subject to applicable
community property laws, the persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them. The number of shares of the Common Stock outstanding
used in calculating the percentage for each listed person includes the shares of
Common Stock underlying options or other convertible securities held by such
persons that are exercisable within 60 days of November 22, 2010, but excludes
shares of Common Stock underlying options or other convertible securities held
by any other person. The number of shares of Common Stock outstanding as of
December 31, 2010, was 1,270,959. Except as noted otherwise, the amounts
reflected below are based upon information provided to the Company and filings
with the SEC.
|
Number of Shares of
|
|
||||||
Name
|
Common Stock Owned
|
Percentage of Class
|
||||||
Sandor
Capital Master Fund LP (1)
|
77,386 | 6.1 | % | |||||
Robert
B. Prag (2)
|
90,000 | 7.1 | % | |||||
Michael
D. Pruitt (3)
|
193,262 | 15.2 | % | |||||
Michael
Carroll
|
2,500 | * | ||||||
Brian
Corbman
|
2,550 | * | ||||||
Paul
I. Moskowitz
|
100 | * | ||||||
Keith
Johnson
|
- | * | ||||||
Officers
and Directors
As
a Group (5 Persons)
|
198,412 | 15.6 | % |
|
(1)
|
John S. Lemak has investment and
voting control over the securities held by Sandor Capital Master Fund
LP. Sandor maintains principal offices at 2828 Routh Street,
Suite 500, Dallas, TX 75201.
|
|
(2)
|
Mr. Prag’s address is 2455 El
Amigo Road, Del Mar, CA
92014.
|
|
(3)
|
Includes 22,297 shares of common
stock held by Avenel Financial Group, Inc., a corporation controlled by
Michael D. Pruitt.
|
44
Equity
Compensation Plan Information
We do not
currently have an equity compensation plan.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Due
to related parties
The
Company has received non-interest bearing loans and advances from related
parties. The amounts owed by the Company as of December 31, 2009 and
2008 are as follows:
|
2009
|
2008
|
||||||
Tyler
Industrial Group, a company partially owned by Mr. Pruitt
|
$
|
58,590
|
$
|
7,300
|
||||
Chanticleer
Investors, LLC
|
6,000
|
-
|
||||||
Avenel
Financial Group, a company owned by Mr. Pruitt
|
33,000
|
-
|
||||||
Personal
friend of Mr. Pruitt
|
12,000
|
-
|
||||||
$
|
109,590
|
$
|
7,300
|
Due
from related parties
The
Company has earned income from and made advances to related
parties. The amounts owed to the Company at December 31, 2009 and
2008 is as follows:
|
2009
|
2008
|
||||||
Green
St. Energy, Inc.
|
$
|
24,907
|
$
|
-
|
||||
Chanticleer
Investors, LLC
|
7,149
|
5,150
|
||||||
Other
|
750
|
-
|
||||||
$
|
32,806
|
$
|
5,150
|
Management
income from affiliates
The
Company had management income from its affiliates in 2009 and 2008, as
follows:
|
2009
|
2008
|
||||||
Green
St. Energy, Inc.
|
$
|
24,000
|
$
|
-
|
||||
Chanticleer
Investors, LLC
|
63,250
|
100,000
|
||||||
Syzygy
Entertainment, Ltd.
|
11,000
|
134,055
|
||||||
$
|
98,250
|
$
|
234,055
|
Syzygy
Entertainment, Ltd. ("Syzygy")
Mr.
Pruitt was a director of Syzygy until his resignation on June 1,
2009.
Revenue
in 2009 included $11,000 in cash management fees and revenue in 2008 included
cash management fees of $5,500 and the amortization of deferred revenue in the
amount of $128,555 for the balance of the Company's management contract with
Syzygy.
During
2007, Mr. Pruitt contributed 300,000 shares of Syzygy Entertainment, Ltd. to the
Company, which was valued by the investment committee at $600,000 on the dates
contributed. Mr. Pruitt did not receive additional compensation as a
result of the transfers.
45
The
Company owns 642,814 shares of Syzygy with a cost of $1,114,221 and a fair value
as of December 31, 2009 of $1,286.
Green
St. Energy, Inc. ("Green St.")
Mr.
Pruitt is a director of Green St. During 2009, the Company billed
Green St. $24,000 for management services and has advanced $907 for Green St.
expenses. At December 31, 2009, Green St. owes the Company $24,907,
which is included in due from related parties.
Chanticleer
Investors LLC
On April
18, 2006, the Company formed Investors LLC and sold units for
$5,000,000. Investors LLC’s principal asset is a convertible note in
the amount of $5,000,000 with Hooters of America, Inc. (“Hooters”),
collateralized by and convertible into 2% of Hooters common
stock. The original note included interest at 6% and was due May 24,
2009. The note was extended until November 24, 2010 and includes an
increase in the interest rate to 8%.
The
Company owned $1,250,000 (23%) of Investors LLC at December 31, 2008 and until
May 29, 2009 when it sold 1/2 of its share for $575,000. Under the
original arrangement, the Company received 2% of the 6% interest as a management
fee ($25,000 quarterly) and 4% interest on its investment ($11,500
quarterly). Under the extended note and revised operating agreement,
the Company receives a management fee of $6,625 quarterly and interest income of
$11,500 quarterly.
The
Company received management income of $63,250 and $100,000 in 2009 and 2008,
respectively, for its management services, which is included in management
income from affiliates. The Company recorded earnings from its equity
investment of $23,000 and $46,000 in 2009 and 2008,
respectively. After the Company sold 1/2 of its investment in May
2009, the Company's earnings of $23,000 was included in interest
income.
Chanticleer
Investors II LLC
The
Company manages Investors II and received management income of $561 in 2009 and
none in 2008.
Other
The
Company acquired trading securities from a related party for $31,500 which was
sold for $40,197.
Director
Independence
We
undertook a review of the independence of our directors and, using the
definitions and independence standards for directors provided in the rules of
The Nasdaq Stock Market, although not required as the standard for the Company
as it is traded on the Over-the-Counter Market considered whether any director
has a material relationship with us that could interfere with his ability to
exercise independent judgment in carrying out his
responsibilities. As a result of this review, we determined that
Michael Carroll, Brian Corbman, Paul Moskowitz and Keith Johnson are
"independent directors" as defined under the rules of The Nasdaq Stock
Market.
PLAN
OF DISTRIBUTION
On or
about _____, 2011, we will distribute the subscription rights, subscription
rights certificates and copies of this prospectus to the holders of our common
stock on the Record Date. Subscription rights holders who wish to
exercise their subscription rights and purchase our Offered Warrants must
complete the subscription rights certificate and return it with payment for the
shares to the subscription agent at the following address:
See “The
Rights Offering — Methods for Exercising Subscription Rights”. If you have any
questions, you should contact _____, our _____, at 704-366-5122 or by e-mail to
_____. Other than as described in this prospectus, we do not know of any
existing agreements between any shareholder, broker, dealer, underwriter or
agent relating to the sale or distribution of the underlying common
stock.
46
To the
extent required, we will file, during any period in which offers or sales are
being made, a supplement to this prospectus which sets forth, with respect to a
particular offering, the specific number of shares of common stock to be sold,
the name of the holder, the sales price, the name of any participating broker,
dealer, underwriter or agent, any applicable commission or discount and any
other material information with respect to the plan of distribution not
previously disclosed.
In order
to comply with certain states’ securities laws, if applicable, the shares of
common stock will be sold in such jurisdictions only through registered or
licensed brokers or dealers.
TRANSFER
AGENT AND REGISTRAR
The
Transfer Agent and Registrar for our common stock is Routh Stock Transfer, Inc.,
6860 North Dallas Parkway, Suite 200, Plano, Texas 75024, phone
972-381-2782.
LEGAL
MATTERS
The
validity of the common stock has been passed upon for us by Roetzel &
Andress, 350 East Las Olas Blvd., Ste. 1150, Fort Lauderdale, Florida
33301.
EXPERTS
The
consolidated financial statements and schedule of Chanticleer Holdings, Inc. at
and for each of the years ended December 31, 2009 and December 31, 2008 have
been incorporated by reference herein in reliance upon the reports of Creason
& Associates, PLLC, 7170 S. Braden Ave., Suite 100, Tulsa, Oklahoma 74136,
independent registered public accounting firm, incorporated by reference herein,
and upon the authority of such firm as experts in accounting and
auditing.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We file
annual, quarterly and other reports, proxy statements and other information with
the SEC. Anyone may inspect a copy of the registration statement or
any other reports we file, without charge at the public reference facility
maintained by the Securities and Exchange Commission at 100 F Street, N.E.,
Room 1580, Washington, DC 20549. Copies of all or any part of the
registration statement may be obtained from that facility upon payment of the
prescribed fees. The public may obtain information on the operation
of the public reference room by calling the Securities and Exchange Commission
at 1-800-SEC-0330. The Securities and Exchange Commission maintains a
website at http://www.sec.gov that contains reports, proxy and information
statements, and other information regarding registrants that file electronically
with the Securities and Exchange Commission.
You can
find additional information concerning us on our website
http://www.chanticleerholdings.com. Information contained on, or
linked from, our website is not and should not be considered a part of this
prospectus.
47
$_____
CHANTICLEER
HOLDINGS INC.
Warrants to purchase up to
2,541,918 shares of Common
Stock
Issuable
Upon Exercise of Non-Transferable Rights to Subscribe for such
Warrants
PROSPECTUS
_____,
2011
No
dealer, salesperson or any other person is authorized to give any information or
make any representations in connection with this offering other than those
contained in this prospectus or any supplement to this prospectus, including any
free writing prospectus that we use in connection with this offering, and, if
given or made, the information or representations must not be relied upon as
having been authorized by us. This prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any security other than the
securities offered by this prospectus, or an offer to sell or a solicitation of
an offer to buy any securities by anyone in any jurisdiction in which the offer
or solicitation is not authorized or is unlawful.
48
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The
following is an itemized statement of the estimated amounts of all expenses
payable by the Registrant in connection with the registration of the common
stock and warrants.
SEC
Registration Fee
|
$
|
1,845
|
||
FINRA
filing fee
|
$
|
|||
Printing
and Mailing Expenses
|
$
|
|||
Accounting
Fees and Expenses
|
$
|
|||
Legal
Fees and Expenses
|
$
|
|||
Other
(including subscription fees)
|
$
|
|||
Total
|
$
|
ITEM
14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Our
officers and directors are indemnified as provided by the Delaware General
Corporate Law and our bylaws. Section
145 of the Delaware General Corporation Law provides that a corporation may
indemnify directors and officers as well as other employees and individuals
against expenses (including attorneys’ fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
any threatened, pending or completed actions, suits or proceedings in which such
person is made a party by reason of such person being or having been a director,
officer, employee or agent of our company. The Delaware General Corporation Law
provides that Section 145 is not exclusive of other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
Our
bylaws provide that we shall indemnify our directors and officers, our employees
and other agents, to the fullest extent permitted by the Delaware General
Corporation Law and that we shall pay the expenses incurred in defending any
proceeding in advance of its final disposition. However, the payment of expenses
incurred by a director or officer in advance of the final disposition of the
proceeding will be made only upon the receipt of an undertaking by the director
or officer to repay all amounts advanced if it should be ultimately determined
that the director or officer is not entitled to be indemnified.
Section
102(b)(7) of the Delaware General Corporation Law permits a corporation to
provide in its certificate of incorporation that a director of the corporation
shall not be personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director’s duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases, redemptions or
other distributions, or (iv) for any transaction from which the director derived
an improper personal benefit. Our certificate of incorporation provides for such
limitation of liability.
We do not
currently maintain standard policies of insurance under which coverage is
provided (a) to our directors, officers, employees and other agents against loss
arising from claims made by reason of breach of duty or other wrongful act, and
(b) to us with respect to payments which may be made by us to such officers and
directors pursuant to the above indemnification provision or otherwise as a
matter of law, although we may do so in the future.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers and control persons pursuant to the
foregoing provisions or otherwise, we have been advised that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy, and is, therefore, unenforceable.
49
ITEM
15. RECENT SALES OF UNREGISTERED SECURITIES.
During
the three months ended March 31, 2008, the Company sold 285,714 shares of its
common stock for $200,000 in cash, pursuant to its Form 1-E offering. All
of the shares issued were sold pursuant to an exemption from registration under
Section 4(2) promulgated under the Securities Act of 1933, as
amended.
The
Company sold 80,032 shares of its common stock for $560,200 in cash, pursuant to
its Form 1-E
offering during the three months ended June 30, 2008. All of the
shares issued were sold pursuant to an exemption from registration under Section
4(2) promulgated under the Securities Act of 1933, as amended.
The
Company sold 3,500 shares of its common stock for $24,500 in cash, pursuant to
its Form 1-E
offering during the three months ended September 30, 2008. In August 2008, after
the Company ceased being a BDC, the Company issued 1,150 shares for professional
services. All of the shares issued were sold pursuant to an exemption from
registration under Section 4(2) promulgated under the Securities Act of 1933, as
amended.
During
the three months ended September 30, 2009, the Company sold 38,535 shares of its
common stock for net proceeds of $76,578 pursuant to a Reg S
offering.
During
the three months ended December 31, 2009, the Company issued 261,465 shares of
its common stock valued at $2.05 per share based on the trading price on the
issuance date, October 29, 2009, to DineOut for 4,000,000 shares of DineOut
common stock. DineOut is a wholly owned subsidiary at December 31,
2009 and the value of these shares of $536,003 is included in treasury stock at
December 31, 2009 upon consolidation.
During
the three months ended June 30, 2010, the Company issued 16,797 shares of its
common stock to a related party in exchange for $58,790 in loans previously made
to the Company. The shares were sold pursuant to an exemption from
registration under Section 4(2) promulgated under the Securities Act of 1933, as
amended.
During
the three months ended September 30, 2010, the Company issued 3,500 shares of
its common stock to a consultant in exchange for a one year consulting agreement
valued at $10,000. The shares were sold pursuant to an exemption from
registration under Section 4(2) promulgated under the Securities Act of 1933, as
amended.
In
December 2010, the Company issued 4,286 shares of its common stock to a
consultant in exchange for a six-month consulting agreement valued at
$15,000. The shares were sold pursuant to an exemption from
registration under Section 4(2) promulgated under the Securities Act of 1933, as
amended.
ITEM
16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The
following exhibits are included herein or incorporated herein by
reference:
Exhibit
Number
|
Description
|
|
3.1
|
Articles
of Incorporation (3)
|
|
3.2
|
Bylaws
(3)
|
|
4.1
|
Form
of Warrant underlying the Rights (2)
|
|
4.2
|
Form
of Subscription Rights Certificate (2)
|
|
4.3
|
Form
of Preliminary Subscription Agreement (2)
|
|
4.4
|
Form
of Acknowledgment of Subscription (2)
|
|
5.1
|
Legal
opinion of Roetzel & Andress (2)
|
|
21
|
List
of significant subsidiaries of the Company (1)
|
|
23.1
|
Consent
of McGladrey & Pullen, LLP, Independent Registered Public Accounting
Firm (1)
|
|
99.1
|
Form
of Instructions as to Use of Subscription Rights Certificates
(2)
|
|
99.2
|
Form
of Letter to Shareholders Who Are Record Holders (2)
|
|
99.3
|
Form
of Letter to Shareholders Who Are Nominees (2)
|
|
99.4
|
Form
of Letter to Clients (2)
|
|
99.5
|
Form
of Beneficial Owner Election Form
(2)
|
50
99.6
|
Form
of Nominee Holder Certification
(2)
|
|
(1)
|
Filed
herewith.
|
|
(2)
|
To
be filed by amendment.
|
|
(3)
|
Incorporated
by reference to Registration on Form 10-SB filed on February 15,
2000.
|
ITEM
17. UNDERTAKINGS
The
undersigned registrant hereby undertakes:
1. To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
i)
to include any prospectus required by Section 10(a)(3) of the Securities
Act;
ii)
to reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the “Calculation of Registration Fee”
table in the effective registration statement; and
iii)
to include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement;
2. That,
for the purpose of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective;
3. That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof;
4. To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of this
offering;
5. That,
for the purpose of determining liability under the Securities Act to any
purchaser, each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness; provided,
however, that no statement made in a registration statement or prospectus that
is part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such first use, supersede or modify any statement
that was made in the registration or prospectus that was part of the
registration statement or made in any such document immediately prior to such
date of first use; and
6. That,
for the purpose of determining liability of the registrant under the Securities
Act to any purchaser in the initial distribution of the securities, the
undersigned registrant undertakes that in a primary offering of securities of
the undersigned registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
51
i) any
preliminary prospectus or prospectus of an undersigned registrant relating to
this offering required to be filed pursuant to Rule 424;
ii)
any free writing prospectus relating to this offering prepared by, or on
behalf of, the undersigned registrant or used or referred to by the undersigned
registrant;
iii) the
portion of any other free writing prospectus relating to this offering
containing material information about an undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
iv)
any other communication that is an offer in this offering made by
the undersigned registrant to the purchaser.
7. Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
8.
To supplement the prospectus, after the expiration of the subscription period,
to set forth the results of the subscription offer and the terms of any
subsequent reoffering thereof.
52
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Charlotte, North
Carolina, on January 6, 2010.
CHANTICLEER
HOLDINGS, INC.
|
||
By:
|
/s/
Michael D. Pruitt
|
|
Michael
D. Pruitt
|
||
Chairman
& Chief Executive Officer
|
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
stated.
SIGNATURES
|
TITLE
|
DATE
|
||
/s/ Michael D. Pruitt
|
Chairman
of the Board of Directors,
CEO,
and CFO
|
January
6, 2010
|
||
Michael
D. Pruitt
|
(Principal
Executive Officer &
Principal
Financial Officer)
|
|||
/s/ Michael Carroll
|
Director
|
January
6, 2010
|
||
Michael
Carroll
|
||||
/s/ Brian Corbman
|
Director
|
January
6, 2010
|
||
Brian
Corbman
|
||||
/s/ Paul I. Moskowitz
|
Director
|
January
6, 2010
|
||
Paul
I. Moskowitz
|
||||
/s/ Keith Johnson
|
Director
|
January
6, 2010
|
||
Keith
Johnson
|
53
EXHIBIT
INDEX
Exhibit
|
Description of Exhibit
|
|
23.1
|
Consent
of Creason & Associates, P.L.L.C., Independent Registered Public
Accounting Firm.
|
54