| Restatement Of Financial Information Disclosure [Text Block] |
| 17. |
RESTATEMENT OF 2011 FINANCIAL INFORMATION |
These consolidated financial statements restate certain items previously reported by the Company for the 2011 year and revise certain items previously reported by the Company in the notes to the consolidated financial statements due to the events described below.
Restated balances for 2011 Financial Information items have been identified with the notation “Restated” where appropriate and applicable.
Other than the revising of the previously filed consolidated financial statements relating to the restatement, these notes to the consolidated financial statements speak as of the filing date of the Company’s original Form 10-K for the year ended December 31, 2011, filed on April 6, 2012, and these notes to the consolidated financial statements have not been updated to reflect other events occurring subsequent to the original filing date. These notes to the consolidated financial statements should be read in their historical context, except to the extent revised as a result of this restatement.
On September 7, 2012, the audit committee of Chanticleer Holdings, Inc. (the “Company”), upon recommendation of the Company’s management determined that the Company’s Consolidated Financial Statements for its fiscal year ended December 31, 2011 as originally filed in the Form 10-K could no longer be relied on. The Company determined that the Financial Statements of Kiarabrite (Pty) Ltd., Dimaflo (Pty) Ltd., Tundraspex (Pty) Ltd., Civisign (Pty) Ltd., Dimalogix (Pty) Ltd., and Chanticleer & Shaw Foods (Pty.) Ltd. (collectively referred to as the “South Africa Operations”) which are the South African management company and the four entities organized for the stores we operate in South Africa, and the company that owns the HOA franchise rights for the territory of South Africa, were not audited as the Company was led to believe. Accordingly, this Amendment is being filed to include the report of the independent registered public accounting firm responsible for performing the audit of our South Africa Operations. The following tables reflect the items which changed as a result of the restatement and includes the balances as previously reported, the adjustments and the restated balance.
On September 7, 2012, the Company’s South African Chief Financial Officer (“SA CFO”) resigned. It was determined that the SA CFO had committed certain illegal acts, fraud and certain misrepresentations of facts. Due to the SA CFO’s actions, certain taxes were not paid. In addition, the applicable tax forms were not filed during the proper periods. The Company has engaged tax experts to assist in the tax process. The Company also discovered approximately $42,109 of cash that was misappropriated by the SA CFO during the fourth quarter of 2011 (presented as “other receivable” on the Company’s combined balance sheet as of December 31, 2011), and approximately $128,000 in total for the period October 2011 through September 2012. As of November 23, 2012, approximately $40,000 has been recovered by the Company and payment plans are in place for the remainder.
The Company has engaged outside South African tax experts in September 2012 to assist with compliance with Value Added Tax (VAT), payroll taxes, and income taxes in South Africa. A voluntary disclosure agreement has been submitted and the Company is awaiting contact from the South African governmental agency.
In connection with the acquisition of assets as described in Note 3, the Company believes the purchase and sale with the seller was accomplished in accordance with the laws and regulations of the taxing authorities in South Africa. However, there can be no absolute assurance that the seller has fulfilled its tax and regulatory filing requirements, and whether or not the local authorities could seek to recover any unpaid taxes or other amounts from the Company, its shareholders or others. The Company is not aware of any known obligations for which the Company may be required to settle.
The following tables reflect the consolidated balance sheet, statement of operations and statement of cash flows as of December 31, 2011, and for the year then ended of the consolidated amounts previously reported, adjustments reflected in this amended filing, and the restated amounts for 2011.
Consolidated Balance Sheet
| |
|
December 31, 2011 |
|
| |
|
As Previously |
|
|
|
|
|
|
|
| |
|
Reported |
|
|
Adjustment |
|
|
As Restated |
|
| ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
151,928 |
|
|
|
13,201 |
|
|
|
165,129 |
|
| Accounts receivable |
|
|
103,982 |
|
|
|
4,732 |
|
|
|
108,714 |
|
| Other receivable |
|
|
- |
|
|
|
42,109 |
|
|
|
42,109 |
|
| Inventory |
|
|
59,266 |
|
|
|
45,807 |
|
|
|
105,073 |
|
| Due from related parties |
|
|
76,591 |
|
|
|
- |
|
|
|
76,591 |
|
| Prepaid expenses |
|
|
231,914 |
|
|
|
(87,567 |
) |
|
|
144,347 |
|
| TOTAL CURRENT ASSETS |
|
|
623,681 |
|
|
|
18,282 |
|
|
|
641,963 |
|
| Property and equipment, net |
|
|
2,508,823 |
|
|
|
(1,003,764 |
) |
|
|
1,505,059 |
|
| Goodwill |
|
|
- |
|
|
|
396,487 |
|
|
|
396,487 |
|
| Intangible assets, net |
|
|
470,164 |
|
|
|
(145,080 |
) |
|
|
325,084 |
|
| Investments at fair value |
|
|
318,353 |
|
|
|
- |
|
|
|
318,353 |
|
| Other investments |
|
|
1,579,677 |
|
|
|
2,471 |
|
|
|
1,582,148 |
|
| Deposits and other assets |
|
|
3,980 |
|
|
|
25,625 |
|
|
|
29,605 |
|
| TOTAL ASSETS |
|
$ |
5,504,678 |
|
|
$ |
(705,979 |
) |
|
$ |
4,798,699 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Current maturities of long-term debt and notes payable |
|
$ |
1,171,855 |
|
|
|
- |
|
|
|
1,171,855 |
|
| Convertible notes payable |
|
|
1,625,000 |
|
|
|
- |
|
|
|
1,625,000 |
|
| Accounts payable and accrued expenses |
|
|
288,996 |
|
|
|
189,009 |
|
|
|
478,005 |
|
| Deferred rent |
|
|
- |
|
|
|
43,225 |
|
|
|
43,225 |
|
| Other current liabilities |
|
|
496,643 |
|
|
|
(166,036 |
) |
|
|
330,607 |
|
| Current maturities of capital lease payable |
|
|
- |
|
|
|
41,590 |
|
|
|
41,590 |
|
| Income taxes payable |
|
|
14,608 |
|
|
|
(14,608 |
) |
|
|
- |
|
| Due to related parties |
|
|
30,204 |
|
|
|
|
|
|
|
30,204 |
|
| TOTAL CURRENT LIABILITIES |
|
|
3,627,306 |
|
|
|
93,180 |
|
|
|
3,720,486 |
|
| Capital lease payable, less current maturities |
|
|
- |
|
|
|
85,853 |
|
|
|
85,853 |
|
| Deferred rent |
|
|
- |
|
|
|
7,162 |
|
|
|
7,162 |
|
| Other liabilities |
|
|
- |
|
|
|
263,321 |
|
|
|
263,321 |
|
| Long-term debt, less current maturities |
|
|
236,109 |
|
|
|
- |
|
|
|
236,109 |
|
| TOTAL LIABILITIES |
|
|
3,863,415 |
|
|
|
449,516 |
|
|
|
4,312,931 |
|
| Commitments and contingencies (Note 14) |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock |
|
|
301 |
|
|
|
- |
|
|
|
301 |
|
| Additional paid in capital |
|
|
6,459,506 |
|
|
|
- |
|
|
|
6,459,506 |
|
| Other comprehensive income |
|
|
48,665 |
|
|
|
1,985 |
|
|
|
50,650 |
|
| Non-controlling interest |
|
|
1,692,019 |
|
|
|
(1,098,156 |
) |
|
|
593,863 |
|
| Accumulated deficit |
|
|
(6,032,808 |
) |
|
|
(59,324 |
) |
|
|
(6,092,132 |
) |
| Less treasury stock |
|
|
(526,420 |
) |
|
|
- |
|
|
|
(526,420 |
) |
| |
|
|
1,641,263 |
|
|
|
(1,155,495 |
) |
|
|
485,768 |
|
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
|
$ |
5,504,678 |
|
|
$ |
(705,979 |
) |
|
$ |
4,798,699 |
|
Consolidated Statement of Operations
| |
|
December 31, 2011 |
|
| |
|
As Previously |
|
|
|
|
|
|
|
| |
|
Reported |
|
|
Adjustments |
|
|
As Restated |
|
| Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
| Restaurant sales, net |
|
$ |
967,418 |
|
|
$ |
12,829 |
|
|
$ |
980,247 |
|
| Management fee income - non-affiliates |
|
|
493,167 |
|
|
|
- |
|
|
|
493,167 |
|
| Management fee income - affiliates |
|
|
3,235 |
|
|
|
- |
|
|
|
3,235 |
|
| Total revenue |
|
|
1,463,820 |
|
|
|
12,829 |
|
|
|
1,476,649 |
|
| Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| Restaurant cost of sales |
|
|
360,810 |
|
|
|
144,161 |
|
|
|
504,971 |
|
| Restaurant operating expenses |
|
|
483,946 |
|
|
|
114,279 |
|
|
|
598,225 |
|
| General and administrative expense |
|
|
1,245,752 |
|
|
|
3,997 |
|
|
|
1,249,749 |
|
| Depreciation and amortization |
|
|
87,617 |
|
|
|
(8,075 |
) |
|
|
79,542 |
|
| Total expenses |
|
|
2,178,125 |
|
|
|
254,362 |
|
|
|
2,432,487 |
|
| Loss from operations |
|
|
(714,305 |
) |
|
|
(241,533 |
) |
|
|
(955,838 |
) |
| Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
| Equity in earnings (losses) of investments |
|
|
(76,113 |
) |
|
|
- |
|
|
|
(76,113 |
) |
| Realized gains from sales of investments |
|
|
19,991 |
|
|
|
74,362 |
|
|
|
94,353 |
|
| Interest income |
|
|
4,541 |
|
|
|
- |
|
|
|
4,541 |
|
| Miscellaneous income |
|
|
476 |
|
|
|
- |
|
|
|
476 |
|
| Interest expense |
|
|
(180,825 |
) |
|
|
(2,642 |
) |
|
|
(183,467 |
) |
| Other than temporary decline in available-for-sale securities |
|
|
(147,973 |
) |
|
|
- |
|
|
|
(147,973 |
) |
| Total other income (expense) |
|
|
(379,903 |
) |
|
|
71,720 |
|
|
|
(308,183 |
) |
| Net loss before income taxes |
|
|
(1,094,208 |
) |
|
|
(169,813 |
) |
|
|
(1,264,021 |
) |
| Provision for income taxes |
|
|
14,608 |
|
|
|
(14,608 |
) |
|
|
- |
|
| Net loss before non-controlling interest |
|
|
(1,108,816 |
) |
|
|
(155,205 |
) |
|
|
(1,264,021 |
) |
| Non-controlling interest |
|
|
5,426 |
|
|
|
95,881 |
|
|
|
101,307 |
|
| Net loss |
|
|
(1,103,390 |
) |
|
|
(59,324 |
) |
|
|
(1,162,714 |
) |
| Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized gain (loss) on available-for-sale securities (none applies to non-controlling interest) |
|
|
(13,005 |
) |
|
|
- |
|
|
|
(13,005 |
) |
| Foreign translation losses |
|
|
(6,357 |
) |
|
|
1,985 |
|
|
|
(4,372 |
) |
| Other comprehensive loss |
|
$ |
(1,122,752 |
) |
|
$ |
(57,339 |
) |
|
$ |
(1,180,091 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net earnings (loss) per share, basic and diluted |
|
$ |
(0.47 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.49 |
) |
| Weighted average shares outstanding |
|
|
2,370,036 |
|
|
|
2,370,036 |
|
|
|
2,370,036 |
|
Consolidated Statement of Cash Flows
| |
|
December 31, 2011 |
|
| |
|
As Previously |
|
|
|
|
|
|
|
| |
|
Reported |
|
|
Adjustments |
|
|
As Restated |
|
| Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(1,103,390 |
) |
|
$ |
(59,324 |
) |
|
$ |
(1,162,714 |
) |
| Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Other than temporary decline in value of available-for-sale securities |
|
|
147,973 |
|
|
|
- |
|
|
|
147,973 |
|
| Bad debt expense - related party |
|
|
750 |
|
|
|
- |
|
|
|
750 |
|
| Non-controlling interest |
|
|
(5,426 |
) |
|
|
(95,881 |
) |
|
|
(101,307 |
) |
| Services rendered in exchange for investment securities |
|
|
(1,500 |
) |
|
|
- |
|
|
|
(1,500 |
) |
| Depreciation and amortization |
|
|
87,617 |
|
|
|
(8,075 |
) |
|
|
79,542 |
|
| Equity in (earnings) loss of investments |
|
|
76,113 |
|
|
|
- |
|
|
|
76,113 |
|
| Common stock issued for services |
|
|
74,573 |
|
|
|
- |
|
|
|
74,573 |
|
| (Gain) loss on sale of investments |
|
|
(19,991 |
) |
|
|
(74,362 |
) |
|
|
(94,353 |
) |
| Revaluation of equity investments prior to acquistion |
|
|
- |
|
|
|
74,362 |
|
|
|
74,362 |
|
| Amortization of warrants |
|
|
35,247 |
|
|
|
- |
|
|
|
35,247 |
|
| (Increase) decrease in amounts due from affiliate |
|
|
(54,217 |
) |
|
|
- |
|
|
|
(54,217 |
) |
| (Increase) decrease in accounts receivable |
|
|
(73,830 |
) |
|
|
(7,698 |
) |
|
|
(81,528 |
) |
| (Increase) decrease in other receivable |
|
|
- |
|
|
|
(42,109 |
) |
|
|
(42,109 |
) |
| (Increase) decrease in prepaid expenses and other assets |
|
|
(168,393 |
) |
|
|
109,703 |
|
|
|
(58,690 |
) |
| (Increase) decrease inventory |
|
|
5,988 |
|
|
|
(42,664 |
) |
|
|
(36,676 |
) |
| Increase (decrease) in accounts payable and accrued expenses |
|
|
(58,779 |
) |
|
|
28,078 |
|
|
|
(30,701 |
) |
| Increase (decrease) in income taxes payable |
|
|
14,608 |
|
|
|
(14,608 |
) |
|
|
- |
|
| Increase (decrease) in deferred revenue |
|
|
(1,750 |
) |
|
|
- |
|
|
|
(1,750 |
) |
| Increase (decrease) in deferred rent |
|
|
- |
|
|
|
20,308 |
|
|
|
20,308 |
|
| Net cash used by operating activities |
|
|
(1,044,407 |
) |
|
|
(112,270 |
) |
|
|
(1,156,677 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Proceeds from sale of investments |
|
|
190,325 |
|
|
|
- |
|
|
|
190,325 |
|
| Investment distribution |
|
|
8,140 |
|
|
|
- |
|
|
|
8,140 |
|
| Purchase of investments |
|
|
(1,285,500 |
) |
|
|
(216,747 |
) |
|
|
(1,502,247 |
) |
| Franchise cost |
|
|
- |
|
|
|
(75,000 |
) |
|
|
(75,000 |
) |
| Acquisition of subsidiaries |
|
|
(205,000 |
) |
|
|
205,000 |
|
|
|
- |
|
| Purchase of property and equipment |
|
|
(388,109 |
) |
|
|
168,298 |
|
|
|
(219,811 |
) |
| Treasury stock proceeds (acquired) |
|
|
26,400 |
|
|
|
- |
|
|
|
26,400 |
|
| Net cash provided (used) by investing activities |
|
|
(1,653,744 |
) |
|
|
81,551 |
|
|
|
(1,572,193 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Proceeds from sale of common stock |
|
|
500 |
|
|
|
- |
|
|
|
500 |
|
| Proceeds from sale of common stock warrants, net |
|
|
20,608 |
|
|
|
- |
|
|
|
20,608 |
|
| Loan proceeds |
|
|
2,790,000 |
|
|
|
- |
|
|
|
2,790,000 |
|
| Loan repayment |
|
|
(7,036 |
) |
|
|
- |
|
|
|
(7,036 |
) |
| Capital lease payments |
|
|
- |
|
|
|
(13,970 |
) |
|
|
(13,970 |
) |
| Increase in other liabilities |
|
|
- |
|
|
|
62,262 |
|
|
|
62,262 |
|
| Net cash provided by financing activities |
|
|
2,804,072 |
|
|
|
48,292 |
|
|
|
2,852,364 |
|
| Effect of exchange rate changes on cash |
|
|
- |
|
|
|
(4,372 |
) |
|
|
(4,372 |
) |
| Net increase in cash and cash equivalents |
|
|
105,921 |
|
|
|
13,201 |
|
|
|
119,122 |
|
| Cash and cash equivalents, beginning of year |
|
|
46,007 |
|
|
|
- |
|
|
|
46,007 |
|
| Cash and cash equivalents, end of year |
|
$ |
151,928 |
|
|
$ |
13,201 |
|
|
$ |
165,129 |
|
|