Acquisitions | 3. ACQUISITIONS During the first nine months of 2105, the Company acquired three businesses to complement and expand its current operations in the better burger fast casual restaurant category. In connection with these acquisitions, the Company acquired strategic opportunities to expand its scale and presence in the better burger category. Acquisition of BGR: The Burger Joint The Company completed the acquisition of BGR: The Burger Joint effective March 15, 2015. As of June 30, 2015, the Company allocated the purchase price as of the date of acquisition based on appraisals and estimated the fair value of the acquired assets and assumed liabilities. In consideration of the purchased assets, the Company paid a purchase price consisting of $4,000,000 in cash, 500,000 shares of the Companys common stock valued at $1.0 million, and a contractual working capital adjustment of $276,429. Acquisition of BTs Burger Joint On July 1, 2015, the Company completed the acquisition with BTs Burgerjoint Management, LLC, a limited liability company organized under the laws of North Carolina (BTs), including the ownership interests of four operating restaurant subsidiaries engaged in the fast casual hamburger restaurant business under the name BTs Burger Joint. In consideration of the purchased assets, the Company paid a purchase price consisting of $1,400,000 in cash and 424,080 shares of the Companys common stock valued at $1.0 million. Acquisition of Little Big Burger On September 30, 2015, the Company completed the acquisition of various entities operating eight Little Big Burger restaurants in the State of Oregon. In consideration of the purchased assets, the Company paid a purchase price consisting of $3,600,000 in cash and 1,874,063 shares of the Companys common stock valued at $2.1 million. In connection with each acquisition, the Company determined the purchase price allocation in consideration of all identifiable intangibles. Based on our evaluation, there were no marketing related assets, customer related intangibles or contract based arrangements for which the purchase price would be required to be allocated. The value of any trademark/tradename was calculated using a relief of royalty method considering future franchise opportunities. With respect to customer related intangibles, the Company did not acquire any customer lists or enter into any customer contractual arrangements nor did the Company enter into any licensing or royalty arrangements requiring a further allocation of the purchase price. The premium paid for the businesses represents the economic value which is not captured by other assets such as the reputation of the businesses, the value of its human capital, its future growth potential and its professional management. The acquisition of these businesses will help the Company expand its domestic operations and presence in the Fast Casual burger market. The Companys acquisitions were accounted for using the purchase method of accounting in accordance with ASC 805 Business Combinations and, accordingly, the condensed consolidated statements of operations include the results of these operations from the dates of acquisition. The assets acquired and the liabilities assumed were recorded at estimated fair values based on information currently available and based on certain assumptions as to future operations. The allocation of purchase price presented below is based on preliminary analyses which are still continuing and may be subject to change as such analyses are finalized in future periods: 2015 Acquisitions BGR: The Burger Joint BTs Burger Joint Little Big Burger Total Consideration paid: Common stock $ 1,000,000 $ 1,000,848 $ 2,061,469 $ 4,062,317 Cash 4,276,429 1,400,000 3,600,000 9,276,429 Total consideration paid 5,276,429 2,400,848 5,661,469 13,338,746 Property and equipment 2,164,023 1,511,270 1,710,849 5,386,141 Goodwill 663,037 939,281 2,417,653 4,019,972 Trademark/trade name/franchise fee 2,750,000 - 1,550,000 4,300,000 Inventory, deposits ands other assets 296,104 103,451 77,014 476,569 Total assets acquired, less cash 5,873,164 2,554,002 5,755,516 14,182,682 Liabilities assumed (607,735 ) (161,154 ) (268,557 ) (1,037,446 ) Common stock and warrants issued (1,000,000 ) (1,000,848 ) (2,061,469 ) (4,062,317 ) Cash paid (4,276,429 ) (1,400,000 ) (3,600,000 ) (9,276,429 ) Cash acquired $ 11,000 $ 8,000 $ 174,511 $ 193,511 The allocation of purchase price presented for the Companys 2014 acquisitions: 2014 Acquisitions Hooters Hooters Australia The Pacific NW Spoon April 1, 2014 July 1, 2014 Burger Co. Total Consideration paid: Common stock $ 2,891,156 $ 828,750 $ - $ - $ 300,000 $ 4,019,906 Warrants 978,000 280,400 - 123,333 - 1,381,733 Assumption of debt - - - 5,000,000 - 5,000,000 Cash - - 100,000 - 250,000 350,000 Total consideration paid 3,869,156 1,109,150 100,000 5,123,333 550,000 10,751,639 Current assets, excluding cash 112,078 89,817 377,296 47,777 9,926 636,894 Property and equipment 2,731,031 391,462 2,934,307 1,603,557 284,795 7,945,152 Goodwill 1,951,909 698,583 - 8,487,138 256,379 11,394,009 Trademark/trade name/franchise fee 60,937 - 277,867 220,500 - 559,304 Deposits and other assets 20,275 5,193 90,371 20,186 - 136,025 Total assets acquired, less cash 4,876,230 1,185,055 3,679,841 10,379,158 551,100 20,671,384 Liabilities assumed (1,009,348 ) (97,541 ) (1,560,710 ) (1,496,536 ) (1,100 ) (4,165,235 ) Deferred tax liabilities - - - - Non-controlling interest - - (993,999 ) (3,759,289 ) - (4,753,288 ) Chanticleer equity - - (1,028,749 ) - - (1,028,749 ) Common stock and warrants issued (3,869,156 ) (1,109,150 ) - (123,333 ) (300,000 ) (5,401,639 ) Assumption of debt - - - (5,000,000 ) - (5,000,000 ) Cash paid - - (100,000 ) - (250,000 ) (350,000 ) Cash acquired $ 2,274 $ 21,636 $ 3,617 $ - $ - $ 27,527 Unaudited pro forma results of operations for the three and nine month periods ended September 30, 2015 and 2014, as if the Company had acquired majority ownership of all operations acquired during 2014 and 2015 on January 1, 2014 is as follows. Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Total revenues $ 11,551,329 $ 13,473,304 $ 36,159,199 $ 37,626,727 Loss from continuing operations (2,972,928 ) (1,287,982 ) (5,255,488 ) (2,091,978 ) Gain (loss) frorm discontinued operations 2,088 (72,300 ) 189 (104,973 ) Loss attributable to non-controlling interest 69,397 (61,209 ) 412,366 88,163 Net loss $ (2,901,443 ) $ (1,421,491 ) $ (4,842,933 ) $ (2,108,788 ) Net loss per share, basic and diluted $ (0.20 ) $ (0.21 ) $ (0.34 ) $ (0.34 ) Weighted average shares outstanding, basic and diluted 14,802,370 6,628,011 14,059,116 6,279,688 The pro forma results include estimates and assumptions which management believes are reasonable. However, pro forma results do not include any adjustments to reflect expected synergies or profit improvements that might be anticipated post-acquisition, and are not necessarily indicative of the results that would have occurred if the business combination had been in effect on the dates indicated, or which may result in the future. |