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CCLR.OB > SEC Filings for CCLR.OB > Form 10-Q on 15-Aug-2011All Recent SEC Filings

Show all filings for CHANTICLEER HOLDINGS, INC.

Form 10-Q for CHANTICLEER HOLDINGS, INC.


15-Aug-2011

Quarterly Report


ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our financial statements and notes thereto included elsewhere in this Form 10-Q. This Form 10-Q contains forward-looking statements regarding the plans and objectives of management for future operations. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend," "project" or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and we cannot assure you that the projections included in these forward-looking statements will come to pass. Our actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Critical accounting policies are those that are both important to the presentation of our financial condition and results of operations and require management's most difficult, complex, or subjective judgments. Our most critical accounting policy relates to the valuation of our investments.

Liquidity and capital resources

At June 30, 2011 and December 31, 2010, the Company had current assets of $226,543 and $158,718; current liabilities of $638,374 and $645,634; and a working capital deficit of $411,831 and $486,916, respectively. The Company had a loss of $280 during the six months ended June 30, 2011 and had an unrealized loss from available-for-sale securities of $52,209 resulting in a comprehensive loss of $52,489.

The Company's general and administrative expenses were $489,285 during the six months ended June 30, 2011 as compared to $494,073 in the same period of 2010. The Company expects its general and administrative cost to be approximately $225,000 to $240,000 per quarter for the remainder of 2011.

As of June 30, 2011, the Company had raised $351,500, $412,500 and $433,250 from limited partners for its share of cost of the Durban and Johannesburg stores which opened in 2010 and the Cape Town store opened in June of 2011, respectively. Additional funds are not expected to be needed for these stores.


The Company expects to meet its obligations in the next twelve months with some or all of the following:

The Company holds 3,559,661 shares in DineOut at June 30, 2011, which are free-trading on the Frankfurt Exchange and were valued at $0.159 per share at June 30, 2011. The Company plans to continue to sell some of these shares to meet its short-term capital requirements and collected cash proceeds of $190,325 and recognized a gain of $19,991 from sales during the six months ended June 30, 2011;

The Company currently is receiving its share of earnings from the Durban and Johannesburg, South Africa restaurants which commenced operations in 2010 and will begin receiving its share of earnings from the Cape Town, South Africa location which opened in June of 2011;

The Company is funding the initial formation of Chanticleer Dividend Fund, Inc. ("CDF"), including the registration of its common stock. The Company expects to get most of its capital outlay back after the registration statement becomes effective and CDF begins raising funds; and

The Company has completed a registration statement on Form S-1 which was effective July 14, 2011, to register one Class A Warrant and one Class B Warrant for each share of the Company issued. If all warrants are sold this would raise approximately $98,000, less legal costs.

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.

Comparison of three months ended June 30, 2011 and 2010

Revenues amounted to $32,830 in the three months ended June 30, 2011, as compared to $42,921 in the year earlier period and is summarized as follows.


                                                 2011         2010

HOA LLC acquisition                            $      -     $      -
Investors II                                          -       11,171
Investors LLC                                         -        6,625
Total cash                                            -       17,796
HOA LLC consulting accrual                       25,000            -
Investors II accrual                              7,830            -
Efftec Internation shares for management fee          -       22,500
Amortization of deferred revenue                      -        2,625
                                               $ 32,830     $ 42,921

The Company received cash of $17,796 during the three months ended June 30, 2010 and none in the three months ended June 30, 2011. The Company has a consulting agreement with HOA LLC and is scheduled to receive $100,000 in January of each year for director and other services provided by Mr. Pruitt, three months of which was accrued during the quarter ended June 30, 2011. The Investors II accrual is for management services rendered to Investors II which is calculated based on fund performance and is paid after the end of each year. The amortization of deferred revenue is the consulting and management fees received by the Company in the form of stock that is earned over an extended period, generally one year.

General and administrative expenses consisted of the following for the three months ended June 30, 2011 and 2010:

                                   2011          2010

Professional services and fees   $  70,154     $  53,486
Payroll                            129,104       134,204
Travel and entertainment            17,384         9,087
Other                               45,636        33,074

                                 $ 262,278     $ 229,851

Professional services and fees increased primarily due to retaining a PR firm. Travel cost increases are primarily the result of increased travel associated with management services for HOA LLC.

Other income (expense) consists of the following for the three months ended June 30, 2011 and 2010.


                                           2011         2010

Realized gain from sale of investments   $    361     $ 114,279
Equity in earnings of investments           6,461         9,456
Interest and other income                       -        11,500
Interest expense                           (3,927 )     (62,672 )
                                         $  2,895     $  72,563

The Company realized a gain of $361 from sales of DineOut shares during the 2011 quarter and realized a gain of $114,279 primarily from sales of DineOut shares during the 2010 quarter.

Equity in earnings of investments in 2011 and 2010 represents the Company's share of net profits from its investment in restaurants in South Africa.

Interest expense was higher during the 2010 quarter than the 2011 period, since convertible notes were all exchanged for our common stock on March 30, 2011. Accordingly, interest expense is substantially lower after March 31, 2011.


Comparison of six months ended June 30, 2011 and 2010

Revenues amounted to $474,143 in the six months ended June 30, 2011, as compared to $71,254 in the year earlier period and is summarized as follows.

                                                 2011          2010

HOA LLC acquisition                            $ 400,000     $      -
Investors II                                           -       11,171
Investors LLC                                          -       13,250
Total cash                                       400,000       24,421
HOA LLC consulting accrual                        41,667            -
Investors II accrual                              30,726            -
Efftec Internation shares for management fee           -       22,500
Amortization of deferred revenue                   1,750       24,333
                                               $ 474,143     $ 71,254

The Company received cash of $400,000 and $24,421 during the three months ended June 30, 2011 and 2010, respectively. The $400,000 received in 2011 was for services provided in completion of the purchase of HOA and TW by HOA LLC. The Company has a consulting agreement with HOA LLC and is scheduled to receive $100,000 in January of each year for director and other services provided by Mr. Pruitt, five months of which was accrued at June 30, 2011. The Investors II accrual is for management services rendered to Investors II which is calculated based on fund performance and is paid after the end of each year. The amortization of deferred revenue is the consulting and management fees received by the Company in the form of stock that is earned over an extended period, generally one year.

General and administrative expenses consisted of the following for the six months ended June 30, 2011 and 2010:

                                   2011          2010

Professional services and fees   $ 123,022     $  89,467
Payroll                            237,731       300,967
Travel and entertainment            30,570        21,830
Other                               97,962        81,809

                                 $ 489,285     $ 494,073

Payroll costs decreased $63,236 (21%) primarily due to staff reductions after the first quarter of 2010 for personnel employed primarily to assist the Company in raising funds. Professional services and fees increased $33,555 (38%) primarily due to retaining a PR firm.

Other income (expense) consists of the following for the six months ended June 30, 2011 and 2010.


                                                                  2011          2010

Realized gain from sale of investments                          $  19,991     $ 151,008
Other than temporary decline in available-for-sale securities           -       (40,386 )
Equity in earnings of investments                                  11,564        21,253
Interest and other income                                           5,016        23,000
Interest expense                                                  (22,686 )     (76,974 )
                                                                $  13,885     $  77,901

The Company realized a gain of $19,991 from sales of DineOut shares during the 2011 period and realized a gain of $151,008 primarily from sales of DineOut shares during the 2010 period.

The Company recorded a loss from an other than temporary decline in its available-for-sale securities of $40,386 in the six months ended June 30, 2010. The loss included $39,100 for Remodel Auction and $1,286 for Syzygy.

Equity in earnings of investments in 2011 and 2010 represents the Company's share of net profits from its investment in restaurants in South Africa.

Interest expense was higher during the 2010 period primarily due to the amortization of the beneficial conversion feature on new convertible notes of $35,248. The convertible notes were all exchanged for our common stock on March 30, 2011. Accordingly, interest expense should be substantially lower after March 31, 2011.


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