Quarterly report pursuant to Section 13 or 15(d)

INVESTMENTS

v2.4.0.8
INVESTMENTS
 6 Months Ended
Jun. 30, 2013
Investments, Debt and Equity Securities [Abstract]  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
4.
INVESTMENTS
 
INVESTMENTS AT FAIR VALUE CONSIST OF THE FOLLOWING AT JUNE 30, 2013 AND DECEMBER 31, 2012.
 
 
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Available-for-sale investments at fair value
 
$
19,983
 
$
56,949
 
Total
 
$
19,983
 
$
56,949
 
 
AVAILABLE-FOR-SALE SECURITIES
 
Activity in our available-for-sale securities may be summarized as follows:
 
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Cost at beginning and end of periods
 
$
263,331
 
$
263,331
 
Unrealized loss
 
 
(243,348)
 
 
(206,382)
 
Total
 
$
19,983
 
$
56,949
 
 
Our available-for-sale securities consist of the following:
 
 
 
 
 
 
Unrecognized
 
 
 
Realized
 
Loss
 
 
 
 
 
 
Holding
 
Fair
 
Holding
 
on
 
 
 
Cost
 
Losses
 
Value
 
Loss
 
Sale
 
June 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North Carolina Natural Energy
 
 
1,500
 
 
-
 
 
1,500
 
 
-
 
 
-
 
North American Energy
 
 
126,000
 
 
(121,100)
 
 
4,900
 
 
-
 
 
-
 
North American Energy
 
 
10,500
 
 
(9,450)
 
 
1,050
 
 
-
 
 
-
 
North American Energy
 
 
125,331
 
 
(112,798)
 
 
12,533
 
 
-
 
 
-
 
 
 
$
263,331
 
$
(243,348)
 
$
19,983
 
$
-
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North Carolina Natural Energy
 
 
1,500
 
 
-
 
 
1,500
 
 
-
 
 
-
 
North American Energy
 
 
126,000
 
 
(111,300)
 
 
14,700
 
 
-
 
 
-
 
North American Energy
 
 
10,500
 
 
(7,350)
 
 
3,150
 
 
-
 
 
-
 
North American Energy
 
 
125,331
 
 
(87,732)
 
 
37,599
 
 
-
 
 
-
 
 
 
$
263,331
 
$
(206,382)
 
$
56,949
 
$
-
 
$
-
 
 
North Carolina Natural Energy, Inc. (“NCNE”) – NCNE is a successor to Remodel Auction Incorporated whose business was discontinued. NCNE has plans to become involved in some form of natural energy. The Company received 100,000,000 shares of NCNE (less than 1% on a fully diluted basis) for management services during 2011. The shares were valued at $1,500 based on NCNE’s valuation as a shell.
 
North American Energy Resources, Inc. - During the quarter ended June 30, 2009, the Company exchanged its oil & gas property investments for 700,000 shares of North American Energy Resources, Inc. ("NAEY") which were valued at $126,000 based on the closing price of NAEY on the date of the trade. At June 30, 2013 and December 31, 2012, the stock was $0.007 and $0.02 per share, respectively, and the Company recorded an unrealized loss of $121,100 and $111,300, respectively, based on the Company's determination that the price decline was temporary.
 
During the first quarter of 2010, the Company received an additional 150,000 shares of NAEY in exchange for management services. The shares were initially valued at $10,500, based on the trading price at the time. At June 30, 2013 and December 31, 2012, the Company recorded an unrealized loss of $9,450 and $7,350, respectively, based on the market value at the time.
 
During June 2011, the Company’s CEO contributed 1,790,440 shares of NAEY to the Company which was valued at $125,331 based on the trading price at the time. Mr. Pruitt did not receive additional compensation as a result of the transfer. At June 30, 2013 and December 31, 2012, the Company recorded an unrealized loss of $112,798 and $87,732, respectively, based on the market value of the securities.
 
NAEY appointed a new management team in December 2010 and they are seeking acquisition opportunities for onshore and offshore oil and gas properties. Accordingly, the Company determined that any decline was temporary.
 
OTHER INVESTMENTS ARE SUMMARIZED AS FOLLOWS AT JUNE 30, 2013 AND DECEMBER 31, 2012.
 
 
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Investments accounted for under the equity method
 
$
933,927
 
$
1,066,915
 
Investments accounted for under the cost method
 
 
1,050,000
 
 
1,050,000
 
Total
 
$
1,983,927
 
$
2,116,915
 
 
INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
 
Activity in investments accounted for using the equity method is summarized as follows:
 
 
 
June 30,
 
December 31,
 
 
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Balance, beginning of year
 
$
1,066,915
 
$
815,550
 
Equity in earnings (loss)
 
 
(33,053)
 
 
(14,803)
 
Investment fundings (repayments)
 
 
(99,935)
 
 
409,543
 
Reclassification of investments
 
 
-
 
 
(143,375)
 
Balance, end of period
 
$
933,927
 
$
1,066,915
 
 
Equity investments consist of the following at June 30, 2013 and December 31, 2012:
 
 
 
2013
 
2012
 
Carrying value:
 
 
 
 
 
 
 
Hoot Campbelltown Pty. Ltd. (49%) - Australia
 
$
522,278
 
$
555,331
 
Second Hooters location (49%) - Australia
 
 
411,649
 
 
511,584
 
 
 
$
933,927
 
$
1,066,915
 
 
Equity in losses from equity investments during the three and six months ended June 30, 2013 and 2012 follows:
 
 
2013
 
2012
 
 
 
Three Months
Ended June 30
 
Six Months
Ended June 30
 
Three Months
Ended June 30
 
Six Months
Ended June 30
 
Equity in losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Hoot Campbelltown (49%)
 
 
(18,806)
 
 
(33,053)
 
 
(33,348)
 
 
(43,886)
 
 
 
$
(18,806)
 
$
(33,053)
 
$
(33,348)
 
$
(43,886)
 
 
The summarized financial data below includes the Hoot Campbelltown location in Australia, which we owned 49% of at June 30, 2013:
 
 
2013
 
2012
 
 
 
Three Months
Ended June 30
 
Six Months
Ended June 30
 
Three Months
Ended June 30
 
Six Months
Ended June
30
 
Revenue
 
$
569,838
 
$
1,204,412
 
$
767,721
 
$
1,875,784
 
Gross profit
 
 
465,358
 
 
910,254
 
 
545,896
 
 
1,327,149
 
Recurring expenses
 
 
503,738
 
 
977,710
 
 
613,952
 
 
1,320,099
 
Pre-opening costs
 
 
-
 
 
-
 
 
-
 
 
96,613
 
Loss from continuing operations
 
 
(38,380)
 
 
(67,456)
 
 
(68,056)
 
 
(89,563)
 
Net loss
 
 
(38,380)
 
 
(67,456)
 
 
(68,056)
 
 
(89,563)
 
 
The summarized balance sheets for the two locations in Australia of which we owned 49% at June 30, 2013 and December 31, 2012 follows:
 
 
 
June 30,
 
December 31,
 
 
 
2013
 
2012
 
ASSETS
 
 
 
 
 
 
 
Current assets
 
$
171,110
 
$
604,147
 
Non-current assets
 
 
2,573,144
 
 
2,909,276
 
TOTAL ASSETS
 
$
2,744,254
 
$
3,513,423
 
LIABILITIES
 
 
 
 
 
 
 
Current liabilities
 
$
865,022
 
$
1,057,911
 
PARTNER'S EQUITY
 
 
1,879,232
 
 
2,455,512
 
TOTAL LIABILITIES AND PARTNERS' EQUITY
 
$
2,744,254
 
$
3,513,423
 
 
 
 
CHA (Hoot Campbelltown Pty. Ltd and Hoot Surfers Paradise Pty. Ltd.) – CHA entered into a partnership with the current local Hooters franchisee in Australia in which CHA will own 49% and its partner own 51%. The local partner will also manage the restaurants. The first location, Hoot Campbelltown Pty. Ltd. opened in Campbelltown, a suburb of Sydney, in January 2012. A second location in Townsville, is underway with plans to open late in the third quarter or early in the fourth quarter of 2013.
 
INVESTMENTS ACCOUNTED FOR USING THE COST METHOD
 
A summary of the activity in investments accounted for using the cost method follows.
 
 
 
June 30,
 
December 31,
 
 
 
2013
 
2012
 
Investments at cost:
 
 
 
 
 
 
 
Balance, beginning of year
 
$
1,050,000
 
$
766,598
 
Impairment
 
 
-
 
 
(16,598)
 
New investments
 
 
-
 
 
300,000
 
Total
 
$
1,050,000
 
$
1,050,000
 
 
Investments at cost consist of the following at June 30, 2013 and December 31, 2012:
 
 
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Chanticleer Investors, LLC
 
$
800,000
 
$
800,000
 
Edison Nation LLC (FKA Bouncing Brain Productions)
 
 
250,000
 
 
250,000
 
 
 
$
1,050,000
 
$
1,050,000
 
 
Chanticleer Investors LLC - The Company sold 1/2 of its investment in Investors LLC in May 2009, which reduced its ownership from 23% to 11.5%. Accordingly, in May 2009, the Company discontinued accounting for this investment using the equity method and began to account for the investment using the cost method. In December 2010, the Company sold an additional $75,000 of its investment at cost.
 
On April 18, 2006, the Company formed Investors LLC and sold units for $5,000,000. Investors LLC’s principal asset was a convertible note in the amount of $5,000,000 with Hooters of America, Inc. (“HOA”), 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 $1,150,000 (23%) of Investors LLC 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 received a management fee of $6,625 quarterly and interest income of $11,500 quarterly until it was repaid in January 2011.
 
On January 24, 2011, Investors LLC and its three partners combined to form HOA Holdings, LLC ("HOA LLC") and completed the acquisition of HOA and Texas Wings, Inc. ("TW"). Together HOA LLC has created an operating company with 161 company-owned locations across sixteen states, or nearly half of all domestic Hooters restaurants and over one-third of the locations worldwide.
 
Investors, LLC had a note receivable in the amount of $5,000,000 from HOA that was repaid at closing. Investors LLC then invested $3,550,000 in HOA LLC (approximately 3.1%) ($500,000 of which was the Company's share). One of the investors in Investors LLC that owned a $1,750,000 share is a direct investor in HOA LLC and will now carry its ownership in HOA LLC directly. In July 2012, the Company acquired an additional interest of $300,000, at cost, from one of the partners for cash, which increased our ownership to approximately 22% of Investors LLC as of December 31, 2012.
 
Based on the current status of this investment, the Company does not consider the investment to be impaired.
 
EE Investors, LLC - On January 26, 2006, we acquired an investment in EE Investors, LLC with cash in the amount of $250,000. We acquired 1,205 units (3.378%) in EE Investors, LLC, whose sole asset is 40% of Edison Nation, LLC (formerly Bouncing Brain Productions, LLC). Edison Nation was formed to provide equity capital for new inventions and help bring them to market. The initial business plan included developing the products and working with manufacturers and marketing organizations to sell the products. This has evolved into a less hands-on program which involves selling products with patents to other larger companies and retaining royalties. Edison Nation has now reached cash flow break-even, and in addition has been retained by a number of companies for which they do product searches to supplement its business. Edison Nation plans to repay the majority of its debt in 2013 and expects to subsequently begin making distributions to its owners. Based on the current status of this investment, the Company does not consider the investment to be impaired.