As
filed with the Securities and Exchange Commission on November 17 , 2016
Registration
No. 333-214319
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
PRE-EFFECTIVE
AMENDMENT NO. 1 TO
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
Chanticleer
Holdings, Inc.
(Exact
name of registrant as specified in its charter)
Delaware
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8742
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20-2932652
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(State
or jurisdiction of
incorporation
or organization)
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(Primary
Standard Industrial
Classification
Code Number)
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(I.R.S.
Employer
Identification
Number)
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7621
Little Avenue,
Suite
414, Charlotte, NC 28226
(Address
and telephone number of principal executive offices and principal place of business)
Michael
D. Pruitt
Chief
Executive Officer
Chanticleer
Holdings, Inc.
7621
Little Avenue, Suite 414
Charlotte,
NC 28226
(704)
366-5122
(Name,
address and telephone number of agent for service)
With
copy to:
Ruba
Qashu
Libertas
Law Group, Inc.
225
Santa Monica Boulevard, 5
th
Floor
Santa
Monica, CA 90401
Spencer
G. Feldman, Esq.
Olshan
Frome Wolosky LLP
1325
Avenue of the Americas, 15th Floor
New
York, New York 10019
Tel:
(212) 451-2300
Fax:
(212) 451-2222
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. [ ]
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
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 12b2 of the Exchange Act.
Large
accelerated filer [ ]
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Accelerated
filer [ ]
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Non-accelerated
filer [ ]
(Do
not check if a smaller reporting company)
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Smaller
reporting company [X]
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CALCULATION
OF REGISTRATION FEE
Title
of Each
Class of Securities
to be Registered
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Amount
to be Registered (1)
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Proposed
Maximum Offering
Price per Unit
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Estimated
Proposed
Maximum Aggregate
Offering Price
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Amount
of
Registration
Fee
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Subscription
Rights to purchase units consisting of shares of Series 1 Preferred Stock and Series 1 Warrants to purchase common stock,
$0.0001 par value (“common stock”)
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1,000,000
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—
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—
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(2
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)
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Units consisting
of shares of Series 1 Preferred Stock and Series 1 Warrants to purchase common stock
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1,000,000
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$
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13.50
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$
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13,500,000
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(3
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)
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Series 1 Preferred
Stock
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1,000,000
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$
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13.50
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$
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13,500,000
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$
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1564.65
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Series 1 Warrants
to purchase shares of common stock (2)
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1,000,000
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—
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—
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(4
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)
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Shares of common
stock issuable upon exercise of Series 1 Warrants (5)
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10,000,000
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$
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1.35
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$
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13,500,000
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$
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1564.65
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Shares of common
stock issuable as payment of dividends on shares of Series 1 Preferred (6)
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—
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—
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$
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8,505,000
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$
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985.74
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Total
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—
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—
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$
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4,115.03
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(1)
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This
registration statement relates to the subscription rights (or “rights”) to purchase units consisting of shares
of Series 1 Preferred Stock and Series 1 Warrants to purchase common stock.
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(2)
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The
rights are being issued without consideration. Pursuant to Rule 457(g), no separate registration fee is payable with respect
to the rights being offered hereby since the rights are being registered in the same registration statement as the securities
to be offered pursuant thereto.
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(3)
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No
additional filing fee required.
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(4)
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Pursuant
to Rule 457(g), no separate registration fee is required for the Series 1 Warrants offered hereby because they are being registered
on the same registration statement as the common stock underlying the Series 1 Warrants.
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(5)
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Pursuant
to Rule 416, the securities being registered hereunder include such indeterminate number of additional shares of common stock
as may be issuable upon exercise of Series 1 Warrants registered hereunder as a result of stock splits, stock dividends, or
similar transactions.
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(6)
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Represents
shares of common stock issuable in respect of dividends accruing on the Series 1 Preferred through the seventh anniversary
of issuance based on the liquidation preference of such shares.
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(7)
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$3,833.39 previously paid
with this initial filing on Form S-1. The balance of $281.65 has been submitted herewith.
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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 Commission, acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it
is not soliciting an offer to buy these securities in any state where the offer or sale is prohibited.
Subject
to completion, dated November 17, 2016
PROSPECTUS
CHANTICLEER
HOLDINGS, INC.
Subscription
Rights Offering
Up
to an Aggregate of 1,000,000 Units Consisting of
9%
Redeemable Series
1 Preferred Stock
and
Series
1 Warrants to Purchase Common Stock
Upon
the Exercise of Subscription Rights at $13.50 per Unit
We
are distributing, at no charge, to holders of our common stock, par value $0.0001 per share, and holders of our public
warrants listed for trading on the Nasdaq Capital Market under the symbol “HOTRW” (our “public warrants”),
non-transferable subscription rights to purchase up to an aggregate of 1,000,000 units consisting of shares of our 9% Redeemable
Series 1 Preferred Stock, which we refer to in this prospectus as the Series 1 Preferred, and Series 1 Warrants to
purchase 10 shares of our common stock, par value $0.0001 per share, which we refer to in this prospectus as the Series 1 Warrants.
Holders of the subscription rights will be entitled to purchase any number of units, up to the aggregate number of subscription
rights held by each holder, subject to proration as described herein. The purchase price for the units is $13.50 per unit. You
will receive one subscription right for every share of common stock and public warrant you own as of 5:00 p.m. Eastern time on
[●] , 2016, the record date of the rights offering. The subscription rights will not entitle you to purchase any shares
of our common stock, except upon the exercise of the Series 1 Warrants.
We
are conducting this rights offering to raise capital. We will allocate 90%, up to an amount not to exceed $8,000,000, of the proceeds
to payment of certain existing debt. The remainder of the proceeds will be used for repayment of unpaid interest on such debt, for planned store related capital expenditures and for general working capital purposes. We cannot assure you that
we will not need to seek additional financing in the future.
The
rights offering commences on [●] , 2016 and the subscription rights will expire if they are not exercised by 5:00
p.m. Eastern time on [●] , 2016, unless the rights offering is extended. There is no minimum number of subscription
rights that must be exercised in this rights offering, no minimum number that any subscription rights holder must exercise, and
no minimum number of units that we will issue at the closing of this rights offering. We may extend the subscription period up
to an additional 30 days, at our sole discretion, in which case the offering would continue on a subscriptions first-come, first-serve
basis, calculated on a daily basis with the potential for pro-rata allocation of shares among participants subscribing on the
last day of the subscription period or, if earlier, the last day on which the rights offering is first over-subscribed. If the
rights offering is not fully subscribed following expiration of the rights offering, Source Capital Group, Inc., the dealer-manager
for this rights offering, has agreed to use its commercially reasonable efforts to place any unsubscribed units of this rights
offering at the subscription price for an additional period of up to 45 days. The number of units that may be sold by us during
this period will depend upon the number of units that are subscribed for pursuant to the exercise of subscription rights by our
rights holders.
Shares
of our common stock are traded on the Nasdaq Capital Market under the symbol “HOTR”. On November 14 ,
2016, the closing sales price for our common stock was $0.54 per share. The shares of common stock issuable upon exercise
of the Series 1 Warrants will also be traded on the Nasdaq Capital Market under the same symbol. The subscription
rights are non-transferable and will not be listed for trading on the Nasdaq Capital Market or any stock exchange or market.
We intend to use our best efforts to list the units for trading on the Nasdaq Capital Market or quotation on the OTC marketplace.
There is no assurance that the units will be traded on the Nasdaq Capital Market or quoted on the OTC marketplace.
Our
board of directors may cancel the rights offering at any time prior to the expiration of the rights offering for any reason. In
the event the rights offering is cancelled, all subscription payments received by the subscription agent will be returned, without
interest, as soon as practicable.
We
have engaged Source Capital Group, Inc. as the dealer-manager for the rights offering. See “Plan of Distribution” .
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Purchase
Price
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Dealer-Manager
Fee (1)
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Proceeds,
Before
Expenses, to Us
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Per
unit
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$
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13.50
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$
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1.08
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$
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12.42
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Total
(2)
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$
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13,500,000
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$
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1,080,000
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$
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12,420,000
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(1) In
connection with this rights offering, we have agreed to pay Source Capital Group, Inc. “Source Capital Group” as
the dealer-manager a fee of 6.0% of the proceeds of the rights offering, plus a 1.8% non-accountable expense fee and an out-of-pocket
accountable expense allowance of 0.2% of the proceeds of the offering.
See “Plan of
Distribution”.
For any unsubscribed units placed by Source Capital Group after the expiration of the rights offering
and extension, we have agreed to pay Source Capital Group a placement fee equal to 6%, in lieu of the dealer-manager fee, along
with a continuing 1.8% non-accountable expense fee and an out-of-pocket accountable expense allowance of 0.2% of the proceeds
of the offering, with such placement fee and expenses to be calculated in respect of the total gross proceeds paid to and received
by us for subscriptions accepted by us from investors in connection with such placement and such placement fee and expenses not
to exceed the aggregate amounts that would have been otherwise received by Source Capital Group if the rights offering were to
have been fully subscribed. Neither the placement fee nor the expense allowance in connection with the placement will be payable
with respect to any units purchased as result of the exercise of any basic subscription privilege or over-subscription privilege
in the rights offering.
(2) Assumes
that the rights offering is fully subscribed, but excludes proceeds from the exercise of the Series 1 Warrants included within
the units.
The
exercise of your subscription rights involves material risks. See “Risk Factors” beginning on page [●]
of this prospectus, as well as the risk factors and other information in any documents we incorporate by reference into this prospectus
to read about important factors you should consider before exercising your subscription rights.
Our
board of directors is making no recommendation regarding your exercise of the subscription rights. You should carefully consider
whether to exercise your subscription rights before the expiration date. You may not revoke or revise any exercises of subscription
rights once made.
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. Any representation to the contrary is a criminal offense.
If
you have any questions or need further information about this rights offering, please contact Issuer Direct, the information
agent for the rights offering, at (919) 744-2722 or by email at transfer@issuerdirect.com.
Dealer-Manager
The
date of this prospectus is [●] , 2016
TABLE
OF CONTENTS
PROSPECTUS
SUMMARY
This
summary highlights selected information from this prospectus. This summary may not contain all of the information that you should
consider before deciding whether or not you should exercise your subscription rights. You should carefully read this prospectus,
including the documents incorporated by reference, which are described under the heading “Incorporation by Reference”
in this prospectus. We encourage you to carefully read this entire prospectus and the documents to which we refer you. Unless
the context otherwise requires, when we use the words “Chanticleer,” “the Company,” “we,”
“us” or “our Company” in this prospectus, we are referring to Chanticleer Holdings, Inc., a Delaware corporation
and its subsidiaries.
We
are in the business of owning, operating and franchising fast casual and full service dining concepts in the United States and
internationally.
We
own, operate and franchise a system-wide total of thirty-eight fast casual restaurants specializing the ‘Better Burger’
category of which twenty-seven are company-owned and eleven are operated by franchisees under franchise agreements. American Burger
Company (“ABC”) is a fast casual dining chain consisting of nine locations in New York and the Carolinas, known for
its diverse menu featuring, customized burgers, milk shakes, sandwiches, fresh salads and beer and wine. BGR: The Burger Joint
(“BGR”), consists of ten company-owned locations in the United States and eleven franchisee-operated locations in
the United States and the Middle East. Little Big Burger (“LBB”) consists of eight locations in Oregon.
We
own and operate Just Fresh, our healthier eating fast casual concept with eight company owned locations in Charlotte, North Carolina.
Just Fresh offers fresh-squeezed juices, gourmet coffee, fresh-baked goods and premium-quality, made-to-order sandwiches, salads
and soups.
We
own and operate nine Hooters full service restaurants in the United States, South Africa and the United Kingdom. In addition,
there are six Hooters restaurants in Australia and Hungary, which are being discontinued. Accordingly, the operating results and
store counts of those regions are excluded from Managements Analysis of the Business. Hooters restaurants are casual beach-themed
establishments featuring music, sports on large flat screens, and a menu that includes seafood, sandwiches, burgers, salads, and
of course, Hooters original chicken wings and the ‘nearly world famous’ Hooters Girls.
As
of November 17 , 2016, our system-wide store count totaled 55 locations, consisting of 44 company-owned locations and 11
franchisee-operated locations.
Investing
in our securities involves a high degree of risk. As an investor, you should be able to bear a complete loss of your investment.
You should carefully consider the information set forth in the section titled “Risk Factors” following this prospectus
summary.
Corporate
Information
Our
principal executive offices are located at 7621 Little Avenue, Suite 414, Charlotte, North Carolina 28226. Our telephone number
is (704) 366-5122. Our corporate website is www.chanticleerholdings.com. Information contained in or accessible through our website
is not part of this prospectus. Our transfer agent is Securities Transfer Corp., telephone (469) 633-0101.
THE
RIGHTS OFFERING
The
summary below describes the principal terms of the subscription rights, the units, the Series 1 Preferred and the Series 1 Warrants.
Certain of the terms and conditions described below are subject to important limitations and exceptions. Subscription rights holders
should read this prospectus in its entirety, as well as all documents incorporated by reference in it, before making any decision
to exercise their subscription rights. As used in this section, the terms “we”, “us”, “Chanticleer”,
“our”, “our company” and “the company” refer to Chanticleer Holdings, Inc. and not any of
its subsidiaries.
Issuer
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Chanticleer
Holdings, Inc.
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Rights
Offering
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We
are distributing to holders of our common stock and public warrants on the record date, at no charge, non-transferable
subscription rights to purchase up to an aggregate of 1,000,000 units consisting of shares of our Series 1 Preferred and Series
1 Warrants to purchase shares of our common stock. Holders will receive one subscription right for every share of common stock
and public warrant owned as of 5:00 p.m. Eastern time on [●] , 2016, the record date of the rights offering.
If the rights offering is fully subscribed, we expect the gross proceeds from the rights offering to be $13.5 million. Each
subscription right reflects a basic subscription privilege and an over-subscription privilege, as described below. The basic
subscription privilege and the over-subscription privilege are both subject to proration, as described below. This offering
is being made solely to holders of our common stock and public warrants on the record date. We do not expect to issue any
additional shares of Series 1 Preferred or Series 1 Warrants after this rights offering.
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Subscription
Price
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$13.50
per unit, payable in cash. To be effective, any payment related to the exercise of a subscription right must clear prior to
the end of the subscription period or such earlier date as may be specified in the subscription procedures furnished or made
available to subscription rights holders.
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Basic
Subscription Privilege
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The
basic subscription privilege will entitle you to purchase one unit at a subscription
price of $13.50 for each share of common stock and public warrant owned as of the record
date. A unit consists of one share of our Series 1 Preferred and a Series 1 Warrant to
purchase 10 shares of our common stock. At the end of the subscription period, unexercised
subscription rights will expire and have no value. You may exercise your basic subscription
privilege for any number of units you are entitled to pursuant to the basic subscription
privilege or you may choose not to exercise any subscription rights.
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There
is no minimum number of units you must purchase.
If
an insufficient number of units is available to fully satisfy all basic subscription privilege requests, we will allocate
the available units, as applicable, pro-rata among those rights holders exercising their basic subscription privilege
in proportion to the product (rounded down to the nearest whole number so that the aggregate number of units does not
exceed the aggregate number offered) obtained by multiplying the number of units such rights holder subscribed
for under the basic subscription privilege by a fraction (A) the numerator of which is 1,000,000 and (B) the denominator
of which is the total number of units sought to be subscribed for under the basic subscription privilege by all rights
holders exercising their basic subscription privilege. The subscription rights agent will notify subscription rights
holders of the number of units allocated to each holder exercising the basic subscription privilege as promptly as may
be practicable after the allocations are completed.
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Over-Subscription
Privilege
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If
you fully exercise your basic subscription privilege, you may also exercise an over-subscription
privilege to purchase additional units that remain unsubscribed at the expiration of
the rights offering, if any, subject to the availability and pro-rata allocation of units
among rights holders exercising this over-subscription privilege.
If
you fully exercise your basic subscription privilege, the over-subscription privilege entitles you to purchase additional
units that remain unsubscribed at the expiration of the rights offering, if any, by other holders of subscription rights
in this rights offering at the same subscription price per unit, subject to the availability and pro-rata allocation of
units among rights holders exercising this over-subscription privilege, as described herein.
If
an insufficient number of units is available to fully satisfy all over-subscription privilege requests, we will allocate
the available units pro-rata among those rights holders exercising their over-subscription privilege in proportion to
the product (rounded down to the nearest whole number so that the aggregate number of units does not exceed the aggregate
number offered) obtained by multiplying the number of units such rights holder subscribed for pursuant to the over-subscription
privilege by a fraction (A) the numerator of which is the number of unsubscribed units and (B) the denominator of which
is the total number of units sought to be subscribed for pursuant to the over-subscription privilege by all holders participating
in such over-subscription. The subscription rights agent will notify subscription rights holders of the number of units
allocated to each holder exercising the over-subscription privilege as promptly as may be practicable after the allocations
are completed.
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Additional
Limitations on Exercise
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If
the exercise by a rights holder of the basic subscription privilege or the over-subscription
privilege could, as determined by us in our sole discretion, potentially result in a
limitation on our Company’s ability to use net operating losses, tax credits and
other tax attributes (the “Tax Attributes”) under the Internal Revenue Code
of 1986, as amended (the “Code”), and rules promulgated by the Internal Revenue
Service, we may, but are under no obligation to, reduce the exercise by such rights holder
of the basic subscription privilege or the over-subscription privilege as we in our sole
discretion shall determine to be advisable in order to preserve our ability to use the
Tax Attributes.
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Record
Date
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5:00
p.m. Eastern time on [●] , 2016.
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Expiration
of the Rights Offering
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5:00
p.m. Eastern time on [●] , 2016.
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Securities
Holders of Subscription Rights May Purchase
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Holders
of the subscription rights will have the right to purchase an aggregate of up to 1,000,000
units consisting of shares of our Series 1 Preferred and Series 1 Warrants to purchase
shares of our common stock.
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No
Minimum Requirements
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There
is no minimum purchase requirement for closing this offering, and no minimum purchase
requirement for any subscription rights holder.
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Description
of 9% Redeemable Series 1 Preferred
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Dividends.
Holders of the Series 1 Preferred will be entitled to receive cumulative dividends
out of legally available funds at the rate of 9% of the purchase price per year
for a term of seven years, payable quarterly on the last day of March, June, September
and December in each year in cash or our registered common stock. Shares of common stock
issued as dividends will be issued at a 10% discount to the five-day volume weighted
average price per share of our common stock prior to the date of issuance. Dividends
will be entitled to be paid prior to any dividend to the holders of our common stock.
See “Description of Capital Stock —Series 1 Preferred —Dividends”.
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Liquidation
Preference.
The Series 1 Preferred will have a liquidation preference of $13.50
per share, equal to its purchase price. In the event of any liquidation, dissolution
or winding up of our company, any amounts remaining available for distribution to stockholders
after payment of all liabilities of our company will be distributed first to the holders
of Series 1 Preferred and then to the holders of our common stock. As of November
17 , 2016, we had total consolidated debt, including notes payable convertible debt
and capital lease obligations, of approximately $10.1 million.
No
Conversion.
The Series 1 Preferred will not be convertible into or exchangeable for shares of our common stock
or any other security, except through the exercise of Series 1 Warrants.
Voting
Rights.
Except as otherwise required by law, the Series 1 Preferred will be non-voting. Holders of the Series
1 Preferred will vote as a class on any amendment altering or changing the powers, preferences or special rights of the
Series 1 Preferred so as to affect them adversely.
Rank.
The Series 1 Preferred will rank with respect to distribution rights upon our liquidation, winding-up or dissolution
and dividend rights, junior to all of our existing and future indebtedness but senior to our common stock and any other
class of capital stock we issue in the future. See “Description of Capital Stock —Series 1 Preferred”.
Redemption.
We will redeem the outstanding Series 1 Preferred at the expiration of the seven year term out of legally available
funds (by issuing a press release or otherwise making a public announcement, by mailing a notice of redemption or
otherwise). The redemption price for any shares of Series 1 Preferred will be an amount equal to the $13.50 purchase price
per share plus any accrued but unpaid dividends to the date fixed for redemption. See “Description of Capital Stock
—Series 1 Preferred —Redemption”.
Anti-Dilution
Adjustments.
The Series 1 Preferred will not be adjusted, and no additional shares of Series 1 Preferred will
be issued solely as a result of, any future change to or affecting our common stock .
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Description
of Series 1 Warrants
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Exercise
Price and Terms.
Each Warrant entitles the holder to purchase 10 shares of common stock at any time and from time
to time on or before the seventh anniversary of the date of issuance, at an exercise price payable by the surrender
of one share of Series 1 Preferred. See “Description of Capital Stock —Series 1 Warrants —Exercise and
Terms”.
Automatic
Exercise.
At such time that our common stock trades above $3.00 per share for five consecutive trading days,
the Series 1 Warrants will automatically be exercised through the surrender of shares of Series 1 Preferred .
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Use
of Proceeds
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We
are conducting this rights offering to raise capital. We will allocate 90%, up to an
amount not to exceed $8,000,000, of the proceeds to payment of certain existing debt.
The remainder of the proceeds will be used for repayment of unpaid interest on such debt, for planned store related capital expenditures and for general working
capital purposes. We cannot assure you that we will not need to seek additional financing
in the future. See “Use of Proceeds”.
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Material
U.S. Federal
Tax Consequences to
U.S. Holders
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For
U.S. federal income tax purposes, you will not recognize income or loss upon receipt or exercise of a subscription right.
You should consult your own tax advisor as to the tax consequences to you of the receipt, exercise or lapse of the subscription
rights in light of your particular circumstances. See “Material U.S. Federal Income Tax Consequences to U.S. Holders”.
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Risk
Factors
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Before
you exercise your subscription rights to purchase a unit, you should carefully consider
risks described in the section entitled “Risk Factors”, beginning on page
[●] of this prospectus.
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Limitation
on Purchase of Units
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We
will not issue units to any rights holder that is required to obtain prior clearance
or approval from, or submit a notice to, any state or federal regulatory authority to
acquire, own, or control such units if we determine that, as of the expiration date of
the rights offering, such clearance or approval has not been satisfactorily obtained
and any applicable waiting period has not expired.
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Non-Transferability
of Subscription Rights
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The
subscription rights are non-transferable, may not be sold, transferred or assigned by rights holders and will not be listed
for trading on any stock exchange or market.
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No
Board Recommendation
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Our
board of directors is making no recommendation regarding your exercise of the subscription
rights. You are urged to make your decision based on your own assessment of our business
and of the rights offering. Please see “Risk Factors” for a discussion of
material risks.
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Extension,
Cancellation and Amendment
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We
have the option to extend the rights offering and the period for exercising your subscription
rights for a period not to exceed 30 days, at our sole discretion. We do not presently
intend to extend the rights offering or the subscription period. We may also extend the
rights offering and subscription period for a period of more than 30 days, but if we
do so, holders who have subscribed for rights may cancel their subscriptions and receive
a refund of all money advanced.
If
the rights offering is not fully subscribed following expiration of the rights offering and the 30-day extension, Source
Capital Group. has agreed to use its commercially reasonable efforts to place any unsubscribed units of this rights offering
at the subscription price for an additional period of up to 45 days. The number of units that may be sold by us during
this period will depend upon the number of units that are subscribed for pursuant to the exercise of subscription rights
by our rights holders. No assurance can be given that any unsubscribed units, if available, will be sold during this period.
Our
board of directors may cancel the rights offering at any time prior to the closing of the rights offering for any reason
or for no reason at all. If the rights offering is cancelled, we will issue a press release notifying rights holders
of the cancellation, and all subscription payments received by the subscription rights agent will be promptly returned,
without interest or penalty.
Our
board of directors also reserves the right to amend or modify the terms of the rights offering. If we make any fundamental
changes to the terms of the rights offering set forth in this prospectus, we will offer potential purchasers who have
subscribed for rights the opportunity to cancel such subscriptions and issue a refund of any money advanced by such stockholder
and recirculate an updated prospectus. In addition, upon such event, we may extend the expiration date of the subscription
period to allow holders of subscription rights ample time to make new investment decisions and for us to recirculate updated
documentation. Promptly following any such occurrence, we will issue a press release announcing any changes with respect
to the rights offering and the new expiration date of the subscription period. The terms of the rights offering cannot
be modified or amended after the expiration date of the subscription period. Although we do not presently intend to do
so, we may choose to amend or modify the terms of the rights offering for any reason, including, without limitation, to
increase participation in the rights offering.
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Procedures
for Exercising Rights
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To
exercise your subscription right to buy units, you must (a) properly complete the subscription
process as set forth in the subscription documents and (b) submit payment for all the
subscription rights you elect to exercise under the basic subscription privilege and
over-subscription privilege, to the subscription rights agent,
Securities
Transfer Corp.
, at the address set forth in the
subscription documents. The subscription documents must be received by the subscription
rights agent on or prior to 5:00 p.m. Eastern time on [●] , 2016, the expiration
date of the rights offering. Once you exercise your subscription rights, you cannot revoke
your exercise. In addition, because we may terminate or withdraw the rights offering
at our discretion, your participation in the rights offering is not assured. Persons
holding equity securities through a broker, dealer, trustee, depository for securities,
custodian bank or other nominee that desire to exercise their subscription rights with
respect thereto should contact the appropriate institution or nominee and request it
to effect the transaction for them.
If
you cannot deliver your completed subscription documents to the subscription rights agent prior to the expiration of the
subscription period, you may follow the guaranteed delivery procedures described under “The Rights and the Rights
Offering”.
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Transfer
Agent and Registrar for the Units and Series 1 Preferred and Warrants
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Securities
Transfer Corp.
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Subscription
Rights Agent
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Securities
Transfer Corp.
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Information
Agent
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Issuer
Direct
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Dealer-Manager
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Source
Capital Group, Inc.
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Shares
Outstanding Before the Rights Offering
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[●]
shares of our common
stock were outstanding as of the record date. [●] public warrants were outstanding
as of the record date. No shares of Series 1 Preferred or Series 1 Warrants were outstanding
as of the record date or are outstanding as of the date of this prospectus.
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Shares
Outstanding After the Rights Offering
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Assuming
all units are sold in the rights offering, in addition to the outstanding securities
noted above, we expect approximately 1,000,000 shares of our Series 1 Preferred and Series
1 Warrants to purchase up to 10,000,000 shares of our common stock will be outstanding
immediately after completion of this rights offering. We do not expect to issue any additional
shares of Series 1 Preferred or Series 1 Warrants after this rights offering.
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Fees
and Expenses
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We
will pay all fees in connection with the rights offering including legal and accounting
fees and all fees charged by the transfer agent, the subscription rights agent and the
information agent. We will also pay the fees of Source Capital Group. We have agreed
to pay Source Capital Group. as the dealer-manager a fee of 6.0% of the proceeds of the
rights offering, plus a 1.8% non-accountable expense fee and an out-of-pocket accountable
expense allowance of 0.2% of the proceeds of the offering. For any unsubscribed units
placed by Source Capital Group after the expiration of the rights offering and extension,
we have agreed to pay Source Capital Group a placement fee equal to 6%, in lieu of the
dealer-manager fee, along with a continuing 1.8% non-accountable expense fee and an out-of-pocket
accountable expense allowance of 0.2% of the proceeds of the offering, with such placement
fee and expenses to be calculated in respect of the total gross proceeds paid to and
received by us for subscriptions accepted by us from investors in connection with such
placement and such placement fee and expenses not to exceed the aggregate amounts that
would have been otherwise received by Source Capital Group if the rights offering were
to have been fully subscribed. Neither the placement fee nor the expense allowance in
connection with the placement will be payable with respect to any units purchased as
result of the exercise of any basic subscription privilege or over-subscription privilege
in the rights offering.
You will
be responsible for paying any other commissions, fees, taxes or other expenses incurred in connection with your exercise of the
subscription rights.
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Payments
to Broker-Dealers and Other Intermediaries
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The
dealer-manager, Source Capital Group, has informed us that it will re-allow 4.0% of its dealer-manager fee with respect
to any such sale to each broker-dealer whose clients purchase units in this offering pursuant to their subscription rights.
See “Plan of Distribution”.
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Questions
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If
you have any questions or need further information about this rights offering, please contact Issuer Direct, the information
agent for the rights offering, at (919) 744-2722 or by email at transfer@issuerdirect.com.
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Risk
Factors
Before
you invest in the offering, you should be aware that there are risks associated with your investment, including the risks described
in the section entitled “Risk Factors” beginning on page [●] of this prospectus and the risks set forth
in our Annual Report on Form 10-K for our fiscal year ended December 31, 2015, including, without limitation, the risks related
to our growth strategy, risks related to our business and risks related to the food service industry. You should carefully read
and consider the risk factors contained in our Annual Report on Form 10-K and in this prospectus, together with all of the other
information included in or incorporated by reference into this prospectus, before you decide to exercise your subscription rights
to purchase units of our securities .
QUESTIONS
AND ANSWERS ABOUT THE RIGHTS OFFERING
The
following questions and answers are intended to help you locate answers to questions you may have about this offering and related
matters, but they do not purport to be complete. The following questions and answers are subject to, and qualified in their entirety
by, the more detailed information set forth elsewhere in this prospectus or incorporated herein by reference. See “Risk
Factors,” “Description of Capital Stock —Series 1 Preferred,” “Description of Capital Stock —Series
1 Warrants,” “The Rights and the Rights Offering,” and the other information in this prospectus and the information
incorporated herein by reference.
What
is the rights offering?
We
are distributing to holders of our common stock and public warrants, at no charge, non-transferable subscription rights to subscribe
for units consisting of one share of our Series 1 Preferred and one seven year Series 1 W arrant to purchase
10 shares of our common stock. You will receive one subscription right for every share of our common stock and each public warrant
held of record by you as of 5:00 p.m. Eastern time on [●] , the record date.
The
subscription rights will be evidenced by subscription documents. Each subscription right will entitle the holder to a basic subscription
privilege and an over-subscription privilege for all basic subscription privileges that remain unsubscribed, in each case subject
to proration and as described below. The shares of Series 1 Preferred and the Series 1 Warrants to be issued as components of
the units in the rights offering do not currently trade on any exchange, and are only transferable to the extent permitted in
the instruments governing such securities. We intend to use our best efforts to list the units for trading on the Nasdaq Capital
Market or quotation on the OTC marketplace. There is no assurance that the units will be traded on the Nasdaq Capital Market or
quoted on the OTC marketplace. There will be no holders of units to help establish a trading market other than purchasers in this
rights offering. Further, we do not expect to issue any additional units. Consequently, trading of the units may be very limited
and possibly non-existent.
To
subscribe for the units, you must follow the process described in the subscription documents sent to you and also available from
the information agent. For assistance or copies of the documents you may contact Issuer Direct, the information agent for the
rights offering, at (919) 744-2722 or by email at transfer@issuerdirect.com .
Where
can I find the number of subscription rights I hold?
The
number of subscription rights you hold will be shown on the subscription documents. The number shown is the total number of your
subscription rights. You may exercise any or all of them for the units, but the number you exercise cannot exceed the number shown.
If
you want to increase the number of subscription rights that you will be entitled to receive, you will need to purchase additional
shares of common stock or public warrants at least four trading days prior to the record date, so that you or your nominee will
be the record holder of those additional shares on the record date. Neither our board of directors nor the dealer-manager recommends
that you do so.
What
are the Series 1 Preferred Shares?
The
Series 1 Preferred shares are traditional shares of preferred stock and may be held as registered book-entry shares or held in
a traditional brokerage account, at the holder’s election.
Do
the Series 1 Preferred have a liquidation preference over the common stock?
Yes,
the Series 1 Preferred will rank senior to the common stock if our company is liquidated. In the event of any liquidation, dissolution
or winding up of our company, any amounts remaining available for distribution to stockholders after payment of all of our liabilities
will be distributed first among the holders of Series 1 Preferred and then to the holders of common stock.
What
is the basic subscription privilege?
The
basic subscription privilege of each subscription right gives our stockholders of record and holders of our public warrants of
record the opportunity to purchase one unit at a subscription price of $13.50 per unit. We have granted to you, as a holder of
record as of 5:00 p.m. Eastern time on the record date, one subscription right for every share of our common stock or public warrant
you owned at that time. For example, if you owned 1,000 shares of our common stock and 50 public warrants as of 5:00 p.m. Eastern
time on the record date, you would receive 1,050 subscription rights and would have the right, subject to proration, to purchase
up to 1,050 units for $13.50 per unit with your basic subscription privilege. If you fully exercise your basic subscription privilege,
you would also be entitled to an unlimited over-subscription privilege, in each case subject to proration as described herein.
You may exercise the basic subscription privilege of any number of your subscription rights, or you may choose not to exercise
any subscription rights. If you exercise your basic subscription privilege, you may elect to purchase units up to the number of
subscription rights you hold. However, all subscriptions, including those pursuant to the basic subscription privilege, are subject
to proration.
If
you hold your shares in the name of a broker, custodian bank, dealer or other nominee who uses the services of the Depository
Trust Company (the “DTC”), DTC will issue one subscription right to the nominee for every share of our common stock
and each public warrant you own at the record date. The basic subscription privilege of each subscription right can then be used,
subject to proration, to purchase one unit at a subscription price of $13.50 per unit. If you fully exercise your basic subscription
privilege, you would also be entitled to an unlimited over-subscription privilege, subject to proration as described herein.
There
is no minimum number of units you must purchase. You may exercise all or a portion of your basic subscription privilege, or you
may choose not to exercise any subscription rights at all. However, if you exercise less than your full basic subscription privilege,
you will not be entitled to purchase shares under your over-subscription privilege.
Any
excess subscription payments received by the subscription rights agent will be promptly returned, without interest.
What
is proration?
We
do not intend to sell more than 1,000,000 units, in total, in this rights offering. If an insufficient number of shares is available
to fully satisfy all basic subscription privilege requests, we will allocate the available units pro-rata among those rights
holders exercising their basic subscription privilege in proportion to the product (rounded down to the nearest whole number
so that the aggregate number of units does not exceed the aggregate number offered) obtained by multiplying the number of units
such rights holder subscribed for under the basic subscription privilege by a fraction (A) the numerator of which is 1,000,000
and (B) the denominator of which is the total number of units sought to be subscribed for under the basic subscription privilege
by all holders exercising their basic subscription privilege. This is called proration. If any proration is necessary, subscriptions
for the units will be prorated.
The
subscription rights agent will notify rights holders of the number of units allocated to each holder promptly after completion
of the allocation process. Any excess subscription payments received by the subscription rights agent will be returned promptly,
without interest.
What
is the over-subscription privilege?
We
do not expect all of our rights holders to exercise all of their basic subscription privileges. The over-subscription privilege
provides rights holders that do exercise all of their basic subscription privileges the opportunity to purchase the units that
are not purchased by other rights holders. If you fully exercise your basic subscription privilege, the over-subscription privilege
entitles you to subscribe for additional units unclaimed by other holders of subscription rights in this offering at the same
purchase price per unit. If an insufficient number of units is available to fully satisfy all over-subscription privilege requests,
we will allocate the available units pro-rata among those rights holders exercising their over-subscription privilege in proportion
to the product (rounded down to the nearest whole number so that the aggregate number of units does not exceed the aggregate number
offered) obtained by multiplying the number of units such rights holder subscribed for pursuant to the over-subscription privilege
by a fraction (A) the numerator of which is the number of unsubscribed units and (B) the denominator of which is the total number
of units sought to be subscribed for pursuant to the over-subscription privilege by all holders participating in such over-subscription.
To
properly exercise your over-subscription privilege, you must deliver the subscription payment related to your over-subscription
privilege prior to the expiration of the rights offering or such earlier date as may be specified in the subscription documents
you receive from the subscription rights agent (or via the web portal established by the subscription rights agent). Because we
will not know the total number of unsubscribed units prior to the expiration of the rights offering, you will need to deliver
payment in an amount equal to the aggregate purchase price for the maximum number of units that you desire to purchase. See “The
Rights Offering—The Subscription Rights—Over-Subscription Privilege”.
Any
excess subscription payments received by the subscription rights agent will be promptly returned, without interest.
We
do not intend to extend the subscription period for the rights offering. If the rights offering subscription period is extended
(the “extension period”), (i) all basic subscription privileges exercised prior to the beginning of the extension
period will be honored first, (ii) all over-subscription privileges exercised prior to the beginning of the extension period will
be honored second, and all basic and over-subscription privileges exercised during the extension period will be filled daily on
a first-come, first-serve basis. If your subscription arrives during the first-come, first-serve extension period and the rights
offering is over-subscribed, then the subscriptions received on or after the day on which the offering is first over-subscribed
will be prorated as described above. Any subscriptions received during the extension period, but after the date on which the rights
offering is fully subscribed, will not be allocated any units. The subscription rights agent will notify rights holders of the
number of units, if any, allocated to each, promptly after completion of the allocation process.
What
are the limitations on the exercise of the basic subscription privilege and over-subscription privilege?
Subject
to your ability to exercise the over-subscription privilege, you may only purchase the number of units purchasable upon exercise
of the basic subscription privilege included in the subscription rights distributed to you in the rights offering, and even then
you will be subject to proration. Accordingly, the number of units that you may purchase in the rights offering is limited both
by the number of shares of our common stock and public warrants that you hold on the record date and by the potential proration
provisions of this offering. Although rights holders that fully and properly exercise their basic subscription privilege
have the right to exercise the over-subscription privilege, there can be no assurances of the number of units that a holder will
be able to acquire through the exercise of the over-subscription privilege, if any. 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 or which, for
any other reason, we deem inconsistent with the requirements of the offering as described herein.
All
subscriptions, including subscriptions pursuant to the basic subscription privilege, will be subject to proration.
In
addition, if the exercise by a rights holder of the basic subscription privilege or the over-subscription privilege could, as
determined by us in our sole discretion, potentially result in a limitation on our company’s ability to use the Tax Attributes,
under the Code, and rules promulgated by the Internal Revenue Service, we may, but are under no obligation to, reduce the exercise
by such holder of the basic subscription privilege or the over-subscription privilege to such number of units as we in our sole
discretion shall determine to be advisable in order to preserve our ability to use the Tax Attributes.
Why
is Chanticleer conducting this rights offering?
We
are conducting this rights offering to raise capital. We will allocate 90%, up to an amount not to exceed $8,000,000, of the proceeds
to payment of certain existing debt. The remainder of the proceeds will be used for repayment of unpaid interest on such debt, for planned store related capital expenditures and for general working capital purposes. We cannot assure you that
we will not need to seek additional financing in the future.
How
were the $13.50 per unit purchase price and the exercise price of the Series 1 Warrants determined?
The
purchase price of the units and exercise price of the Series 1 Warrants offered in this rights offering were determined by our
board of directors, taking into account the advice of the dealer-manager, Source Capital Group, Inc.,
based
on a number of factors, including but not limited to: our need for capital, the likely cost of capital from other sources, the
price at which our principal stockholders would be willing to purchase our securities, our business prospects, the need to offer
securities at a price that would be attractive to our investors and encourage them to participate in the rights offering, the
historic and current market price of our common stock, general conditions in the securities market and the difficult market conditions
prevailing for the raising of equity capital, our operating history and the liquidity of our common stock.
In determining
the purchase price, our board did not take into account the anticipated limited liquidity in the potential trading of the Series
1 Warrants, because the board had no way to estimate the probable extent or absence of trading activity in the Series 1 Warrants.
We have established the number of shares underlying the Series 1 Warrants by ourselves with the advice of the dealer-manager.
The number is not the result of any negotiation between any person and us. The board of directors established the exercise price
for 10 shares of common stock to be the surrender of one share of Series 1 Preferred with a liquidation value of $13.50.
The purchase price of the units is not necessarily related to our book value, net worth or any other established criteria of value
and may or may not be considered the fair value of the units offered in the rights offering.
You
should not consider the subscription price of the units or the exercise price of the Series 1 Warrants as any indications of the
fair value of our common stock or the securities to be offered in this rights offering. After the date of this prospectus, our
common stock may trade at prices above or below these prices.
Subscription rights holders should consider the potential
lack of liquidity carefully before making a decision to exercise their subscription rights for the units.
Will
there be an active trading market for the units?
We
intend to use our best efforts to list the units for trading on the Nasdaq Capital Market or quotation on the OTC marketplace.
There is no assurance that the units will be traded on the Nasdaq Capital Market or quoted on the OTC marketplace. There will
be no holders of units to help establish a trading market other than purchasers in this rights offering. Further, we do not expect
to issue any additional units. Consequently, trading of the units may be very limited and possibly non-existent.
Am
I required to exercise any or all of the subscription rights I receive in the rights offering?
No.
You may exercise any number of your subscription rights, or you may choose not to exercise any subscription rights at all. Exercising
or not exercising your subscription rights will not affect t
he number of shares of our common
stock you own (or have the right to own upon exercise or conversion of other securities)
. However, if you choose not to
exercise your subscription rights, your ownership interest in the company and your voting and other rights may be diluted by other
rights holder purchases and subsequent exercise of Series 1 Warrants by participants (to the extent we receive any
subscriptions in this rights offering).
How
soon must I act to exercise my subscription rights?
The
subscription rights may be exercised at any time beginning on [●] , 2016 and prior to the expiration of the subscription
period, which is on [●] , 2016, at 5:00 p.m. Eastern time unless the subscription period is extended. If you elect
to exercise any rights, the subscription rights agent must actually receive all required documents and payments from you prior
to the expiration of the subscription period or such earlier date as may be specified in the subscription documents. Although
we have the option of extending the subscription period for a period not to exceed 30 days, we do not intend to do so.
How
do I exercise my subscription rights?
To
exercise your subscription rights, you must follow the process described in the subscription documents sent to you and also available
from the information agent. For assistance, you may contact the Issuer Direct, the information agent for the rights offering,
at (919) 744-2722 or by email at transfer@issuerdirect.com.
If
I want to exercise my subscription rights but my shares are held in the name of my broker, dealer, custodian bank or other nominee,
what should I do?
You
should contact
Issuer Direct, the information agent for the
rights offering, at (919) 744-2722 or by email at transfer@issuerdirect.com.
What
if I attempt to exercise my subscription rights for the units, but I am not a U.S. citizen, or for any other reason the subscription
rights agent determines that I am not allowed to subscribe for the units?
If
for any reason the subscription rights agent determines that you cannot subscribe for the units, the subscription rights agent
will return your subscription funds to you. You may contact Issuer Direct, the information agent for the rights offering, at
(919) 744-2722 or by email at transfer@issuerdirect.com.
Who
is the subscription rights agent for this offering?
Securities
Transfer Corp.
Who
is the transfer agent for our Series 1 Preferred, Series 1 Warrants and common stock?
Securities
Transfer Corp.
Who
is the information agent for this offering?
Issuer
Direct.
Who
is the dealer-manager and/ or placement agent for this offering?
Source
Capital Group, Inc.
May
I transfer my subscription rights?
No.
You may not sell or transfer your subscription rights to anyone.
Are
we requiring a minimum subscription to complete the rights offering?
No,
we may complete the rights offering regardless of the number of subscription rights that may be exercised.
Are
there any conditions to completing the rights offering?
No,
but we have the right to cancel or modify the terms of the offering in our sole discretion.
Can
our company’s board of directors extend, cancel or amend the rights offering?
Yes.
We have the option to extend the rights offering and the period for exercising your subscription rights for a period not to exceed
30 days, at our sole discretion, in which case the offering would continue on a subscriptions first-come, first-serve basis, calculated
on a daily basis with the potential for pro-rata allocation of units among participants subscribing on the day, if any, on which
the offering becomes oversubscribed. We do not presently intend to extend the rights offering. If we elect to extend the expiration
of the rights offering, we will issue a press release announcing such extension no later than 9:00 a.m. Eastern time on the next
business day after the most recently announced expiration time of the rights offering. We will extend the duration of the rights
offering as required by applicable law or regulation and may choose to extend it if we decide to give investors more time to exercise
their subscription rights in the rights offering. If we elect to extend the rights offering for a period of more than 30 days,
holders who have subscribed for rights may cancel their subscriptions and receive a refund of all money advanced. Our board of
directors may cancel the rights offering at any time in its sole discretion. If the rights offering is cancelled, we will issue
a press release notifying rights holders of the cancellation and all subscription payments received by the subscription
rights agent will be returned promptly, without interest or penalty.
Our
board of directors also has the right to amend or modify the terms of the rights offering in its sole discretion. If we make any
fundamental change to the terms of the rights offering set forth in this prospectus, we will offer persons who have exercised
their subscription rights the opportunity to cancel their purchases and the subscription rights agent will refund the funds advanced
by each such person and recirculate an updated prospectus. In addition, upon such event, we may extend the expiration date of
the rights offering to allow holders of subscription rights ample time to make new investment decisions and for us to recirculate
updated documentation. Promptly following any such occurrence, we will issue a press release announcing any changes with respect
to the rights offering and the new expiration date. The terms of the rights offering cannot be modified or amended after the expiration
date of the rights offering. Although we do not presently intend to do so, we may choose to amend or modify the terms of the rights
offering for any reason, including, without limitation, in order to increase participation in the rights offering. Such amendments
or modifications may include a change in the purchase price, although we do not currently anticipate any such change.
Has
our company’s board of directors made any recommendation to rights holders regarding the rights offering?
No.
Neither we nor our board nor the dealer-manager are making any recommendation to rights holders regarding the exercise of subscription
rights in the rights offering. You should make an independent investment decision about whether or not to exercise your rights.
Rights holders who exercise subscription rights risk the loss of the amount invested. There is currently no public market for
our shares of Series 1 Preferred or Series 1 Warrants. Further, although the units are expected to trade on either the Nasdaq
Capital Market or the OTC marketplace, there may not be a liquid market or even any purchasers at any price for the units you
may purchase in this offering. Please see “Risk Factors” for a discussion of material risks involved in investing
in the units.
What
will happen if I choose not to exercise my subscription rights?
Whether
or not you exercise your subscription rights, the number of shares of our common stock you own
(or
have the right to own upon exercise or conversion of other securities)
will not change. However, if you choose not to exercise
your subscription rights, your ownership interest in the company and your voting and other rights may be diluted by other rights
holder purchases and subsequent exercises of the Series 1 Warrants (to the extent we receive any subscriptions in this rights
offering).
I
am not a U.S. citizen or resident. May I exercise my subscription rights in this rights offering?
Persons
who are not U.S. citizens or residents may exercise their subscription rights in this rights offering.
Will
I receive a certificate representing my new Series 1 Preferred if I purchase units?
You
will have the choice to receive a certificate or to hold your Series 1 Preferred in a brokerage account of your choice.
Will
there be a CUSIP number for the units, Series 1 Preferred and Series 1 Warrants?
Yes.
If
I exercise some or all of my subscription rights, may I cancel my exercise before the rights offering closes?
No.
All exercises of subscription rights are irrevocable, even if you later learn information that you consider to be unfavorable
to the exercise of your subscription rights and even if our board of directors extends the rights offering for a period of up
to 30 days. However, if we amend the rights offering to allow for an extension of the rights offering for a period of more than
30 days or make a fundamental change to the terms of the rights offering set forth in this prospectus, you may cancel your purchase
and receive a refund of any money you have advanced. You should not exercise your subscription rights unless you are certain that
you wish to purchase units at the purchase price of $13.50 per unit.
How
many shares of the company’s common stock and how many shares of the Series 1 Preferred and Series 1 Warrants will be outstanding
after the rights offering?
At
the record date, [●] shares of our common stock were outstanding, and no shares of our Series 1 Preferred or Series
1 Warrants were outstanding. The offering of the Series 1 Preferred and Series 1 Warrants in this offering will have no effect
at all initially on the number of shares of our common stock outstanding. The number of shares of our Series 1 Preferred and the
Series 1 Warrants that we will issue in this rights offering through the exercise of subscription rights will depend on the number
of units that are subscribed for in the rights offering. If the rights offering is fully subscribed, we will issue a total of
1,000,000 units consisting of 1,000,000 shares of Series 1 Preferred and Series 1 Warrants to purchase 10,000,000 shares of our
common stock. We do not expect to issue any additional shares of Series 1 Preferred or Series 1 Warrants after this rights offering.
Consequently, we expect trading of the units to be limited to what we issue in this offering.
How
much will the company receive from the rights offering?
If
the offering is fully subscribed for 1,000,000 units, the proceeds of the offering, net of estimated expenses, including dealer-manager
fees, will be approximately $12,232,000 . Please see “Use of Proceeds”.
Are
there material risks in exercising my subscription rights?
Yes,
the exercise of your subscription rights involves material risks. Among other things, you should carefully consider each of the
risks described under the heading “Risk Factors” in this prospectus and the documents incorporated by reference.
If
the rights offering is not completed, will my subscription payment be refunded to me?
Yes,
the subscription rights 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 received by the subscription rights agent will be promptly
returned, without interest. If you own your common stock in a brokerage account, it may take longer for you to receive the return
of your payment because the subscription rights agent will return your payment through the record holder of your shares of common
stock.
Will
the subscription rights be listed on a stock exchange or national market?
No,
the subscription rights are non-transferable, may not be sold, transferred or assigned by rights holders and will not be listed
for trading on any stock exchange or market.
How
do I exercise my subscription rights if I live outside the United States?
We
will mail this prospectus and the subscription documents to stockholders whose addresses are outside the United States or who
have an army post office or foreign post office address. To exercise your subscription rights, you must follow the process described
in the subscription documents sent to you and also available from the information agent.
For
assistance you may contact Issuer Direct, the information agent for the rights offering, at (919) 744-2722 or by email at transfer@issuerdirect.com.
What
fees or charges apply if I purchase the units?
We
are not charging any fee or sales commission to issue subscription rights to you or to issue the units to you if you exercise
your subscription rights. If you exercise your subscription rights through the record holder of your shares, you are responsible
for paying any fees your record holder may charge you.
What
are the U.S. federal income tax consequences of exercising subscription rights?
For
U.S. federal income tax purposes, you generally will not recognize income or loss in connection with the receipt or exercise of
subscription rights unless the rights offering is treated as a distribution described in either Section 305(b) or 305(c) of the
Code. We believe that the rights offering will not be treated as either such distribution, but certain aspects of that determination
are unclear. Our position is not binding on the Internal Revenue Service or the courts, however. You are urged to consult your
own tax advisor as to your particular tax consequences resulting from the receipt and exercise of subscription rights and the
receipt, ownership and disposition of our Series 1 Preferred and Series 1 Warrants. For further information, please see “Material
U.S. Federal Income Tax Consequences to U.S. Holders”.
If
I hold Series 1 Preferred, how will I receive any dividends paid on the Series 1 Preferred?
Dividends
declared on the Series 1 Preferred will be paid in cash or in additional shares of Series 1 Preferred out of legally available
funds and will be paid to the record holders of the Series 1 Preferred.
Who
should I contact if I have other questions?
If
you have other questions or need assistance, please contact
Issuer
Direct, the information agent for the rights offering, at (919) 744-2722 or by email at transfer@issuerdirect.com.
RISK
FACTORS
An
investment in our securities involves a high degree of risk. You should carefully consider the risks described below and
the risks set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, including, without limitation,
the risks described therein related to our growth strategy, our business and the food service industry, together with the other
information included or incorporated by reference in this prospectus, before making a decision to invest in our securities
or to exercise your subscription rights to purchase units . If any of these risks actually occur, our business, results
of operations and financial condition could suffer. In that case, the market price of our securities could decline, and
you may lose all or part of your investment.
None
of our officers, directors or significant stockholders is obligated to exercise their subscription rights and, as a result, the
offering may be undersubscribed
.
None
of our officers, directors or significant stockholders is obligated to participate in this offering. As a result, the offering
may be undersubscribed and proceeds may not be sufficient for the use of proceeds we describe in this prospectus.
If
we terminate this offering, we will have no obligation other than to promptly return subscription monies.
We
may decide, in our discretion and for any reason, or for no reason at all, to cancel or terminate the rights offering at any time
prior to the closing date. If this offering is terminated, we will have no obligation with respect to rights that have been exercised
except to promptly return, without interest or deduction, the subscription monies deposited with the subscription rights agent.
If we terminate this offering, your rights will expire worthless.
There
is no back-stop or standby commitment in place to purchase rights or units that are not purchased in the offering.
There
is no back-stop or standby commitment in place to purchase rights or units that are not exercised in the offering. Consequently,
there is no assurance that the offering will raise any amount of funds.
The
dealer-manager is not underwriting this offering, but may act as a placement agent of the units underlying the rights.
If
the rights offering is not fully subscribed following expiration of the rights offering and the 30-day extension, Source Capital
Group, as the dealer-manager for this rights offering, has agreed to use its commercially reasonable efforts to place any unsubscribed
units of this rights offering at the subscription price for an additional period of up to 45 days. The number of units that may
be sold by us during this period will depend upon the number of units that are subscribed for pursuant to the exercise of subscription
rights by our rights holders. No assurance can be given that any unsubscribed units, if available, will be sold during this period.
Source Capital Group is not an underwriter of the rights or the units issuable upon exercise of the basic subscription privilege
or over-subscription privilege. Under our agreement with the dealer-manager, Source Capital Group, is solely providing marketing
assistance and advice to us in connection with this offering. Its services to us in this connection cannot be construed as any
assurance that this offering will be successful. Source Capital Group does not make any recommendation with respect to whether
you should exercise the basic subscription privilege or over-subscription privilege, or to otherwise invest in our company.
Your
subscription privilege is subject to adjustment and reduction.
If
the exercise by a rights holder of the basic subscription privilege or the over-subscription privilege could, as determined
by us in our sole discretion, potentially result in a limitation on our ability to use the Tax Attributes, under the Code, and
rules promulgated by the Internal Revenue Service, the Company may, but is under no obligation to, reduce the exercise by such
rights holder of the basic subscription privilege or the over-subscription privilege as the company in its sole discretion
shall determine to be advisable in order to preserve the company’s ability to use the Tax Attributes.
If
the rights offering is over-subscribed, in which case the total number of units available in the rights offering will be allocated
to participating rights holders on a pro-rata basis, as set forth more fully in this prospectus, then the number of units
that each participating rights holder will be eligible to receive will depend upon the total number of subscription rights
exercised. All subscriptions are subject to proration.
We
do not intend to issue any additional shares of Series 1 Preferred or Series 1 Warrants after this rights offering.
We
do not expect to issue any additional shares of Series 1 Preferred or Series 1 Warrants after this rights offering. Consequently,
we expect trading of the units to be limited to what we issue in this rights offering.
Although
there may be low or no correlations between the trading prices of the units and our common stock, decreases in the price of our
common stock may cause decreases in the trading price of the units.
The
trading price of the units may have only a low correlation, and may have no correlation, with the trading price of our common
stock. Nevertheless, decreases in the trading price of our common stock, which could occur as the result of developments in our
business or from future sales of common stock by us or by holders of the common stock or for other reasons, may cause decreases
in the trading price of the units to decline. For example, in the future, we may sell shares of our common stock to raise capital.
Such an event may dilute your ownership interest in the company and adversely affect the price of our common stock and, in turn,
of the units. In addition, we have reserved shares of our common stock for issuance upon the exercise of stock options, warrants
and convertible notes. Any of these events, and any other event that results in sales of a substantial amount of our common stock
in the public market, or the perception that any such sales may occur, could reduce the market price of our common stock and,
in turn, the trading price of the units. This could also impair our ability to raise additional capital through the sale of our
securities. Any of the foregoing events could have a material adverse effect on holders of the units and the trading price of
the units.
The
Series 1 Preferred will rank senior to our common stock but junior to all of our existing and future indebtedness in the event
of a liquidation, winding up or dissolution of our business.
In
the event of our liquidation, winding up or dissolution, our assets would be available to make payments to holders of our Series
1 Preferred only after all of our liabilities have been paid. In the event of our bankruptcy, liquidation or winding up, there
may not be sufficient assets remaining, after paying our and our subsidiaries’ liabilities, to pay any amounts to the holders
of our Series 1 Preferred then outstanding.
Your
subscription privilege, including your basic subscription privilege, is subject to adjustment and reduction.
If
the rights offering is over-subscribed, in which case the total number of units available in the rights offering will be allocated
to participating rights holders on a pro-rata basis, as set forth more fully in this prospectus, then the number of units that
each participating rights holder will be eligible to receive will depend upon the number of subscription rights exercised
by the rights holder and the total number of subscription rights exercised. All subscriptions, including the basic subscription
privilege and over-subscription privilege, are subject to proration. If any proration is necessary, subscriptions for the units
will be prorated.
In
addition, if the exercise by a rights holder of the basic subscription privilege or the over-subscription privilege could, as
determined by the company in its sole discretion, potentially result in a limitation on the company’s ability to use the
Tax Attributes under the Code, and rules promulgated by the Internal Revenue Service, the company may, but is under no obligation
to, reduce the exercise by such rights holder of the basic subscription privilege or the over-subscription privilege to
such number of units as the company in its sole discretion shall determine to be advisable in order to preserve the company’s
ability to use the Tax Attributes.
Your
rights as a Series 1 Preferred stockholder are primarily those set forth in the terms of the Series 1 Preferred, and our board
may prefer the interests of the common stockholders if they differ from those of the Series 1 Preferred stockholders.
The
special contractual preferences of the Series 1 Preferred are primarily governed by the principles of contract law, rather than
being fiduciary in nature. While our board of directors has fiduciary duties to the holders of the Series 1 Preferred to the extent
those holders share rights with the common stockholders, if there is a divergence of interests between the holders of the Series
1 Preferred stock and common stock, it will generally be the duty of our board to prefer the interests of the common stockholders
to those of the preferred stockholders.
Dividends
may be paid only out of legally available funds as determined under Delaware General Corporation Law and our ability to pay dividends
in the future will depend upon our financial results, liquidity and financial and financial condition.
Under
Delaware corporate law, we may only pay dividends (regardless of whether it is a cash or stock dividend) to our stockholders from
our “surplus”, as determined in accordance with Delaware General Corporation Law, or our net profits for the current
fiscal year or the fiscal year before which the dividend is declared under certain circumstances. Therefore, our ability to pay
dividends in the future will depend upon our financial results, liquidity and financial and financial condition.
Management
may choose to pay dividends on the Series 1 Preferred in cash or in registered common shares. The Company’s election to
pay in either cash or in common shares may or may not align with your interests at a particular dividend payment date, or the
Company may be forced to use either cash or common shares at suboptimal times depending on various factors.
Payment
in common shares could increase your exposure to the Company’s common equity and your ability to liquidate shares received
from dividend payments may be impacted by various factors affecting our common share price and trading volume , which are
inherently unpredictable. In addition, if the Company were to have insufficient authorized common shares to make dividend payments
in common shares, it could be forced to utilize cash for dividend payments even at times when the Company’s interest would
be served by paying in shares. Conversely, if the Company were to have insufficient cash on hand to make dividend payments in
cash, it could be forced to utilize common shares for dividend payments even at times when the Company’s interest would
be served by paying in cash.
Redemption
price of the Series 1 Preferred may be paid only out of legally available funds as determined under Delaware General Corporation
Law and our ability to redeem the Series 1 Preferred will depend upon our financial results, liquidity and financial and financial
condition.
Under
Delaware corporate law, we may only redeem the Series 1 Preferred from our “surplus” provided that we have ready access
to the cash necessary to effect the redemption. The form in which we hold our assets, liquid or otherwise, could greatly affect
our decision to effect a redemption of the Series 1 Preferred. Therefore, our ability to redeem the Series 1 Preferred will depend
upon our financial results, liquidity and financial and financial condition.
The
Series 1 Warrants will be automatically exercised through the surrender of shares of Series 1 Preferred at such time our common
stock trades above $3.00 per share for five consecutive trading days.
If
our common stock trades above $3.00 per share for five consecutive trading days, the Series 1 Warrants will be automatically exercised
through the surrender of shares of Series 1 Preferred, thereby cancelling all outstanding shares of Series 1 Preferred and terminating
the rights of holders of Series 1 Preferred to accrual of dividends, liquidation preference and redemption payment. In such case,
investors in this offering would hold ten (10) shares of common stock, subject to adjustment, for every unit purchased.
Because
our management will have broad discretion over the use of proceeds from the rights offering reserved for working capital, you
may not agree with how we use the proceeds, and we may not invest the proceeds successfully.
We
will allocate 90%, up to an amount not to exceed $8,000,000, of the proceeds to payment of certain existing debt. The remainder
of the proceeds will be used for repayment of unpaid interest on such debt, for planned store related capital expenditures
and for general working capital purposes. We cannot assure you that we will not need to seek additional financing in the future.
We will retain broad discretion of the use of proceeds earmarked for working capital. You will be relying on the judgment of our
management with regard to the use of such proceeds, and you will not have the opportunity, as part of your investment decision,
to assess whether the proceeds are being used appropriately. It is possible that the proceeds will be invested in a way that does
not yield a favorable, or any, return for the company.
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.
Completion
of this offering is not subject to us raising a minimum offering amount. As such, proceeds from this rights offering may not be
sufficient to meet the objectives we state in this prospectus or other corporate milestones that we may set. Investors should
not rely on the success of this offering to address our need for funding. If we fail to raise capital by the end of December 2016,
we would expect to have to significantly decrease our growth plans and operating expenses, which will curtail the progress of
our business.
The
subscription rights are not transferable and there is no market for the subscription rights , units, Series 1 Preferred or the
Series 1 Warrants .
You
may not sell, transfer or assign your subscription rights. The subscription rights are only transferable by operation of law.
Because the subscription rights are non-transferable, there is no market or other means for you to directly realize any value
associated with the subscription rights. You must exercise the subscription rights to realize any value that may be embedded in
the subscription rights.
None
of the subscription rights, the Series 1 Preferred or the Series 1 Warrants will be listed for trading on any national securities
exchange or market. We intend to use our best efforts to list the units for trading on the Nasdaq Capital Market or quotation
on the OTC marketplace. There is no assurance that the units will be traded on the Nasdaq Capital Market or quoted on the OTC
marketplace. There will be no holders of units to help establish a trading market other than purchasers in this rights offering.
Further, we do not expect to issue any additional units. Consequently, trading of the units may be very limited and possibly non-existent.
If
you do not act on a timely basis and follow subscription instructions, your exercise of rights may be rejected.
Holders
of shares of common stock who desire to purchase shares of our common stock 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. Eastern time on the expiration
date, unless extended. If you are a beneficial owner of shares of common stock and you wish to exercise your 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 rights granted in this offering that you beneficially own prior
to 5:00 p.m. Eastern 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. Eastern time on the expiration date, as may be extended.
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 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 units in this rights offering.
Any
uncertified check used to pay for units 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 units 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 units you wish to purchase.
The
tax treatment of the rights offering is somewhat uncertain and it may be treated as a taxable event to our rights holders .
If
the rights offering is deemed to be part of a “disproportionate distribution” under section 305 of the Internal Revenue
Code, our rights holders may recognize taxable income for U.S. federal income tax purposes in connection with the receipt
of subscription rights in the rights offering depending on our current and accumulated earnings and profits and our stockholders’
tax basis in our common stock. A “disproportionate distribution” is a distribution or a series of distributions, including
deemed distributions, that has the effect of the receipt of cash or other property by some stockholders or holders of debt instruments
convertible into stock and an increase in the proportionate interest of other stockholders in a company’s assets or earnings
and profits. It is unclear whether the fact that we have outstanding options and certain other equity-based awards could cause
the receipt of subscription rights to be part of a disproportionate distribution. Please see “Material U.S. Federal Income
Tax Consequences” for further information on the treatment of the rights offering.
The
rights offering could impair or limit our net operating loss carry forwards.
As
of December 31, 2015 , we had net operating loss carryovers (which we refer to as “NOLs”) of approximately $29,635,000
for U.S. federal income tax purposes, which will expire at various dates beginning in 2031 through 2036, if not utilized.
Under the Internal Revenue Code, an “ownership change” with respect to a corporation can significantly limit the amount
of pre-ownership change NOLs and certain other tax assets that the corporation may utilize after the ownership change to offset
future taxable income, possibly reducing the amount of cash available to the corporation to satisfy its obligations. An ownership
change generally should occur if the aggregate stock ownership of holders of at least 5% of our stock increases by more than 50
percentage points over the preceding three-year period. The purchase of units pursuant to the rights offering may trigger
an ownership change with respect to our stock.
We
may amend or modify the terms of the rights offering at any time prior to the expiration of the rights offering in our sole discretion.
Our
board of directors reserves the right to amend or modify the terms of the rights offering in its sole discretion. Although we
do not presently intend to do so, we may choose to amend or modify the terms of the rights offering for any reason, including,
without limitation, in order to increase participation in the rights offering. Such amendments or modifications may include a
change in the subscription price, although no such change is presently contemplated. If we should make any fundamental changes
to the terms of the rights offering set forth in this prospectus, we will file a post-effective amendment to the registration
statement in which this prospectus is included, offer potential purchasers who have subscribed for rights the opportunity to cancel
such subscriptions and issue a refund of any subscription payments advanced by such rights holder and recirculate an updated
prospectus after the post-effective amendment is declared effective by the SEC. In addition, upon such event, we may extend the
expiration date of the rights offering to allow holders of rights ample time to make new investment decisions and for us to recirculate
updated documentation. Promptly following any such occurrence, we will issue a press release announcing any changes with respect
to the rights offering and the new expiration date. The terms of the rights offering cannot be modified or amended after the expiration
date of the rights offering.
RISKS
RELATED TO OUR BUSINESS
We
are in default under notes payable in the amount of $5,856,073 due to the appointment of an administrator over the Australia Hooters
entities in the third quarter of 2015.
We
are in default under notes payable in the amount of $5,856,073 due to the appointment of an administrator over the Australia Hooters
entities in the third quarter of 2015. These notes are deemed accelerated until such time as we are able to renegotiate the terms
or obtain a waiver of the default. To date the note holders have given no indication that they intend to enforce acceleration
of the various notes. However, our inability to renegotiate the terms of these notes or obtain a waiver and action by the note
holders to collect on the accelerated notes could adversely affect our growth and our operating results.
We
have $9.6 million in notes and convertible debt obligations, which could potentially be called for payment within the next twelve
months. Our current operations are contingent upon successfully obtaining additional financing in the near future, and failure
to obtain financing will adversely affect our growth and operating results
If
capital is not available, we may then need to scale back or freeze our organic growth plans, reduce general and administrative
expenses, and/or curtail future acquisition plans to manage our liquidity and capital resources. We may also not be able refinance
or otherwise extend or repay our current obligations of $9.6 million, or continue to operate as a going concern.
We
have not been profitable to date and expect our operating losses to continue for the foreseeable future; we may never be profitable.
We
have incurred operating losses and generated negative cash flows since our inception and have financed our operations principally
through equity investments and borrowings. At this time, our ability to generate sufficient revenues to fund operations is uncertain.
For the fiscal year ended December 31, 2015, we had net revenue of $42.4 million and incurred a net loss of $14.5 million. Our
total accumulated deficit through December 31, 2015 was $33 million. In addition , we incurred a loss from continuing operations
of $ 2.4 million during the nine months ended September 30, 2016.
As
a result of our brief operating history, revenue is difficult to predict with certainty. Current and projected expense levels
are based largely on estimates of future revenue. We expect expenses to increase in the future as we expand our activities. We
cannot assure you that we will be profitable in the future. Accordingly, the extent of our future losses and the time required
to achieve profitability, if ever, is uncertain. Failure to achieve profitability could materially and adversely affect the value
of our Company and our ability to effect additional financings. The success of the business depends on our ability to increase
revenues to offset expenses. If our revenues fall short of projections, our business, financial condition and operating results
will be materially adversely affected.
Our
financial statements have been prepared assuming a going concern.
Our
independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
Our financial statements as of December 31, 2015, were prepared under the assumption that we will continue as a going concern
for the next twelve months. Our independent registered public accounting firm has issued a report that includes an explanatory
paragraph referring to our losses from operations and expressing substantial doubt in our ability to continue as a going concern
without additional capital becoming available. Our ability to continue as a going concern is dependent upon our ability to obtain
additional financing, obtain further operating efficiencies, reduce expenditures and ultimately, create profitable operations.
Such financings may not be available or may not be available on reasonable terms. Our financial statements do not include adjustments
that result from the outcome of this uncertainty.
There
may be future sales or other dilution of our equity, which may adversely affect the market price of our common stock.
We
are not restricted from issuing additional shares of common stock, including any securities that are convertible into or exchangeable
for, or that represent the right to receive, shares of common stock, as well as any shares of common stock that may be issued
pursuant to our shareholder rights plan. The market price of our common stock could decline as a result of sales of our common
stock made after this offering or the perception that such sales could occur.
We
may issue and sell additional shares of our common stock in private placements or registered offerings in the future. We also
may conduct additional rights offerings in the future pursuant to which we may issue shares of our common stock.
Provisions
in our certificate of incorporation, our bylaws and Delaware law could make it more difficult for a third party to acquire us,
discourage a takeover and adversely affect existing stockholders.
Our
certificate of incorporation, our bylaws, and the Delaware General Corporation Law contain provisions that may have the effect
of making more difficult, delaying, or deterring attempts by others to obtain control of our company, even when these attempts
may be in the best interests of stockholders. These include provisions on our maintaining a classified board of directors and
limiting the stockholders’ powers to remove directors or take action by written consent instead of at a stockholders’
meeting. Our certificate of incorporation also authorizes our board of directors, without stockholder approval, to issue one or
more series of preferred stock, which could have voting and conversion rights that adversely affect or dilute the voting power
of the holders of our common stock. Delaware law also imposes conditions on certain business combination transactions with “interested
stockholders”.
These
provisions and others that could be adopted in the future could deter unsolicited takeovers or delay or prevent changes in our
control or management, including transactions in which stockholders might otherwise receive a premium for their shares over then-current
market prices. These provisions may also limit the ability of stockholders to approve transactions that they may deem to be in
their best interests.
We
are not in compliance with the Nasdaq Capital Market’s bid price rule and may be required to complete a reverse stock
split in order to regain compliance or face delisting.
The
Nasdaq Listing Qualifications Department notified us on February 18, 2016 that, based on the previous 30 consecutive business
days, our common stock no longer met the minimum $1 bid price per share requirement. Therefore, in accordance with the
Nasdaq Stock Market’s Listing Rules, we were provided 180 calendar days, or until August 16, 2016, to regain compliance.
We did not regain compliance with the Nasdaq Capital Market’s bid price rule within the specified period. Since Chanticleer
meets all of the other applicable standards for initial listing on the Nasdaq Capital Market and has provided the Nasdaq Listing
Qualifications Department with a representation that, if necessary, we intend to cure the defect by effecting a reverse stock
split during the compliance period, we has been granted an additional 180 calendar days through February 13, 2017 to regain compliance
with the bid price rule. If at any time during this additional time period the closing bid price of our common stock is at least
$1 per share for a minimum of 10 consecutive business days, or if we complete a reverse split by January 30, 2017, we will have
regained compliance.
If
we effect a reverse stock split of our common stock , the number of shares underlying the Series 1 Warrants will
be proportionately reduced.
A
reverse stock split will proportionately reduce the number of shares of common stock that are issuable upon exercise of the Series
1 Warrants. For example, if we effect a 2:1 reverse stock split, the Series 1 Warrants will be exercisable for five shares of
our common stock , instead of 10 shares , in exchange for the surrender of one share of Series 1 Preferred. The per share
exercise price would, in effect, be increased from $1.35 to $2.70.
The
uncertainty surrounding the implementation and effect of Brexit may impact our UK operations.
The
uncertainty surrounding the implementation and effect of Brexit, including the commencement of the exit negotiation period, the
terms and conditions of such exit, the uncertainty in relation to the legal and regulatory framework that would apply to the UK
and its relationship with the remaining members of the EU (including, in relation to trade) during a withdrawal process and after
any Brexit is effected, has caused and is likely to cause increased economic volatility and market uncertainty globally. It is
too early to ascertain the long term effects. To date, the only measurable impact is attributable to the decline in the pound
sterling as measured against the U.S. dollar.
Negative
publicity could reduce sales at some or all of our restaurants.
We
may, from time to time, be faced with negative publicity relating to food quality and integrity, the safety, sanitation and welfare
of our restaurant facilities, customer complaints or litigation alleging illness or injury, health inspection scores, integrity
of our or our suppliers’ food processing and other policies, practices and procedures, employee relationships and welfare
or other matters at one or more of our restaurants. Negative publicity may adversely affect us, regardless of whether the allegations
are valid or whether we are held to be responsible. The risk of negative publicity is particularly great with respect to our franchised
restaurants because we are limited in the manner in which we can regulate them, especially on a real-time basis and negative publicity
from our franchised restaurants may also significantly impact company-operated restaurants. A similar risk exists with respect
to food service businesses unrelated to us, if customers mistakenly associate such unrelated businesses with our operations. Employee
claims against us based on, among other things, wage and hour violations, discrimination, harassment or wrongful termination may
also create not only legal and financial liability but negative publicity that could adversely affect us and divert our financial
and management resources that would otherwise be used to benefit the future performance of our operations. These types of employee
claims could also be asserted against us, on a co-employer theory, by employees of our franchisees. A significant increase in
the number of these claims or an increase in the number of successful claims could materially adversely affect our business, financial
condition, results of operations and cash flows.
The
interests of our franchisees may conflict with ours or yours in the future and we could face liability from our franchisees or
related to our relationship with our franchisees.
Franchisees,
as independent business operators, may from time to time disagree with us and our strategies regarding the business or our interpretation
of our respective rights and obligations under the franchise agreement and the terms and conditions of the franchisee/franchisor
relationship or have interests adverse to ours. This may lead to disputes with our franchisees and we expect such disputes to
occur from time to time in the future as we continue to offer franchises. Such disputes may result in legal action against us.
To the extent we have such disputes, the attention, time and financial resources of our management and our franchisees will be
diverted from our restaurants, which could have a material adverse effect on our business, financial condition, results of operations
and cash flows even if we have a successful outcome in the dispute.
In
addition, various state and federal laws govern our relationship with our franchisees and our potential sale of a franchise. A
franchisee and/or a government agency may bring legal action against us based on the franchisee/franchisor relationships that
could result in the award of damages to franchisees and/or the imposition of fines or other penalties against us.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements, within the meaning of the Federal securities laws, which involve substantial risks
and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words “outlook,” “believes,” “plans,” “intends,”
“expects,” “goals,” “potential,” “continues,” “may,” “should,”
“seeks,” “will,” “would,” “approximately,” “predicts,” “estimates,”
“anticipates” and similar expressions are intended to identify forward-looking statements, although not all forward-looking
statements contain these words. You should read statements that contain these words carefully because they discuss our plans,
strategies, prospects and expectations concerning our business, operating results, financial condition and other similar matters.
We believe that it is important to communicate our future expectations to our investors. There will be events in the future, however,
that we are not able to predict accurately or control. The factors listed under “Risk Factors” in this prospectus
and in any documents incorporated by reference into this prospectus as well as any cautionary language in this prospectus, provide
examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe
in our forward-looking statements. Such risks and uncertainties include, among other things, risks and uncertainties related to:
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●
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Operating
losses may continue for the foreseeable future; we may never be profitable;
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Inherent
risks in expansion of operations, including our ability to acquire additional territories, generate profits from new restaurants,
find suitable sites and develop and construct locations in a timely and cost-effective way;
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●
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Inherent
risks associated with acquiring and starting new restaurant concepts and store locations;
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●
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General
risk factors affecting the restaurant industry, including current economic climate, costs of labor and food prices;
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●
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Intensive
competition in our industry and competition with national, regional chains and independent restaurant operators;
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●
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Our
rights to operate and franchise the Hooters-branded restaurants are dependent on the Hooters’ franchise agreements;
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●
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We
do not have full operational control over the businesses of our franchise partners or operations where we hold less 100% ownership;
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●
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Failure
to protect our intellectual property rights, including the brand image of our restaurants;
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●
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Our
business has been adversely affected by declines in discretionary spending and may be affected by changes in consumer preferences;
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●
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Increases
in costs, including food, labor and energy prices;
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●
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Our
business and the growth of our Company is dependent on the skills and expertise of management and key personnel;
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●
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Constraints
could affect our ability to maintain competitive cost structure, including but not limited to labor constraints;
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●
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Work
stoppages at our restaurants or supplier facilities or other interruptions of production;
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●
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Our
food service business and the restaurant industry are subject to extensive government regulation;
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●
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We
may be subject to significant foreign currency exchange controls in certain countries in which we operate;
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●
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Inherent
risk in foreign operations and currency fluctuations;
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●
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Unusual
expenses associated with our expansion into international markets;
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●
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The
risks associated with leasing space subject to long-term non-cancelable leases;
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●
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We
may not attain our target development goals and aggressive development could cannibalize existing sales;
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Current
conditions in the global financial markets and the distressed economy;
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●
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A
decline in market share or failure to achieve growth;
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●
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Negative
publicity about the ingredients we use or the potential occurrence of food-borne illnesses or other problems at our restaurants;
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●
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Breaches
of security of confidential consumer information related to our electronic processing of credit and debit card transactions;
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●
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Unusual
or significant litigation governmental investigations or adverse publicity or otherwise;
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●
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Our
debt financing agreements expose us to interest rate risks, contain obligations that may limit the flexibility of our operations,
and may limit our ability to raise additional capital;
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●
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Adverse
effects on our results from a decrease in or cessation or claw back of government incentives related to investments;
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●
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Adverse
effects on our operations resulting from certain geo-political or other events ; and
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●
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Delisting
of our common stock from the Nasdaq Capital Market.
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Before
you invest in our securities, you should be aware that the occurrence of the events described in these risk factors and elsewhere
in this prospectus under the heading “Risk Factors” and in any documents incorporated by reference into this prospectus
could have a material adverse effect on our business, results of operations and financial position. Any forward-looking statement
made by us in this prospectus speaks only as of the date on which we make it. Factors or events that could cause our actual results
to differ will emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to update
or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except
as required by law. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. You
are advised to consult any further disclosures we make on related subjects in the reports we file with the SEC pursuant to Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended (or the “Exchange Act”).
USE
OF PROCEEDS
Assuming
full participation in the rights offering, we estimate that the net proceeds from the rights offering will be approximately $12,232,000
after deducting expenses related to this offering payable by us estimated at approximately $1,268,000 , including dealer-manager
fees.
We
agreed to allocate 90%, up to an amount not to exceed $8,000,000, of the proceeds of this offering to payment of certain existing
debt.
Of
the allocated financing proceeds, up to $5,000,000 will be paid to Florida Mezzanine Fund, LLP (“Florida Mezz”) to
be applied toward our obligation in the aggregate amount, including accrued and unpaid interest, of $5,275,000.
As a premium, we agreed to pay Florida Mezz a fee equal to five percent (5%) of the outstanding principal balance of the obligation
after the application of the financing proceeds, if any, on the earlier of the date of payment of the financing proceeds or December
31, 2016.
Of
the allocated proceeds, up to $3,000,000 will be paid to the holders of our 6% Secured Subordinate Convertible Notes in the aggregate
amount of $3,150,000, including accrued and unpaid interest.
The
remainder of the proceeds will be used for repayment of unpaid interest on such debt, for planned store related capital
expenditures and for general working capital purposes.
We
will retain broad discretion of the use of proceeds reserved for working capital. You will be relying on the judgment of our management
with regard to the use of such proceeds, and you will not have the opportunity, as part of your investment decision, to assess
whether the proceeds are being used appropriately. It is possible that the proceeds will be invested in a way that does not yield
a favorable, or any, return for the company.
If
we fail to raise capital by the end of December 2016, we would expect to have to significantly decrease our growth plans and operating
expenses, which will curtail the progress of our business.
The
table below sets forth the breakdown of the use of proceeds from the rights offering, in order of priority and assuming full participation
in the rights offering:
Repayment
of Florida Mezz Note
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$
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5,000,000
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Repayment
of 6% Secured Subordinate Convertible notes
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$
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3,000,000
|
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Unpaid
Interest
|
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$
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425,000
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Store
Related Capital Expenditures
|
|
$
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1,450,000
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Working
Capital
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$
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2,257,000
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TOTAL
|
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$
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12,232,000
|
|
CAPITALIZATION
The
following table sets forth our short-term debt and consolidated capitalization as of September 30, 2016 and our consolidated
capitalization as adjusted to give effect to:
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●
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the
issuance of the units offered pursuant to this prospectus, assuming the sale of 1,000,000 units at $13.50 per unit and no
exercise of the Series 1 Warrants; and
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|
|
|
|
●
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the
use of the net proceeds from this offering as described under “Use of Proceeds” in this prospectus.
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You
should read this table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” included in our Quarterly Report on Form 10-Q for the quarterly period ended September 30,
2016, which is incorporated herein by reference and our historical financial statements and notes to those financial statements
that are incorporated by reference in this prospectus.
We
are unable to predict the actual level of participation in the offerings.
|
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As of September 30, 2016
(in thousands)
|
|
|
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As Reported
|
|
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Pro Forma
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Cash
|
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$
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991
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|
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$
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4,798
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TOTAL DEBT
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|
|
|
|
|
|
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Convertible notes payable, net of discount of $121 and $121, respectively
|
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3,604
|
|
|
|
604
|
|
Capital leases payable
|
|
|
27
|
|
|
|
27
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Notes payable, net of discount of $43 and $Ø, respectively
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|
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6,436
|
|
|
|
1,479
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|
TOTAL DEBT
|
|
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10,067
|
|
|
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2,110
|
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Redeemable preferred stock and warrants, $.0001 par value, 0 and 1 million shares issued and
outstanding, respectively.
(1)
|
|
|
-
|
|
|
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12,232
|
|
|
|
|
|
|
|
|
|
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Stockholders' equity:
|
|
|
|
|
|
|
|
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Common stock: $0.0001 par value; authorized 45,000,000 shares; issued
and outstanding 21,957,147
|
|
|
2
|
|
|
|
2
|
|
Additional paid in capital
|
|
|
56,264
|
|
|
|
56,264
|
|
Other comprehensive income (loss)
|
|
|
(1,248
|
)
|
|
|
(1,248
|
)
|
Non-controlling interest
|
|
|
696
|
|
|
|
696
|
|
Accumulated deficit
|
|
|
(40,284
|
)
|
|
|
(40,327
|
)
|
TOTAL STOCKHOLDERS’ EQUITY
|
|
|
15,430
|
|
|
|
15,387
|
|
TOTAL CAPITALIZATION
|
|
$
|
25,497
|
|
|
$
|
29,729
|
|
(1)
|
The
Company has 5 million shares of $.0001 par value preferred stock authorized arid available for issuance, of which 1 million
shares will be issued and outstanding following this offering
|
THE
RIGHTS OFFERING
The
Subscription Rights
We
are distributing, at no charge, to holders of our common stock and our public warrants, non-transferable subscription rights to
purchase up to an aggregate of 1,000,000 units consisting of shares of our Series 1 Preferred Stock, liquidation value
$13.50 per share, and Series 1 Warrants to purchase shares of our common stock, par value $0.0001 per share. Each subscription
right will entitle you, subject to proration as described herein, to purchase one unit consisting of one share of our Series 1
Preferred and a warrant to purchase 10 shares of our common stock, at a subscription price of $13.50 per unit.
Each
holder of record of our common stock as of the record date for the rights offering will receive one subscription right for every
share of our common stock and public warrant owned by such holder as of 5:00 p.m. Eastern time on the record date.
Each
subscription right will entitle the holder to a basic subscription privilege and an over-subscription privilege, which are described
below. The basic subscription privilege and the over-subscription privilege are both subject to proration. If all the rights were
exercised, all subscription rights holders would be subject to proration of their basic subscription privilege, and each subscription
rights holder would be entitled to purchase a total number of units of approximately 4.5% of the number of subscription
rights held by such subscription rights holder. If any proration is necessary, subscriptions for the units will be prorated.
Basic
Subscription Privilege
The
basic subscription privilege of each subscription right gives our rights holders of record as of the record date the opportunity
to purchase one unit consisting of one share of our Series 1 Preferred and a Series 1 Warrant to purchase 10 shares of our common
stock, from the date of issuance through its expiration seven years from the date of issuance, at a subscription price of $13.50
per unit, subject to proration. We have granted to each rights holder of record as of 5:00 p.m. Eastern time on the record date,
one subscription right for every share of our common stock and every public warrant owned by such rights holder at that
time. For example, if you owned 1,000 shares of our common stock as of 5:00 p.m. Eastern time on the record date and 50 public
warrants, you would receive 1,050 subscription rights and would have the right to purchase 1,050 units, for $13.50 per unit, with
your basic subscription privilege plus an unlimited over-subscription privilege, in each case subject to proration as described
herein. You may exercise the basic subscription privilege of any number of your subscription rights, or you may choose not to
exercise any subscription rights. If you do not exercise your basic subscription privilege in full, you will not be entitled to
purchase any units under your over-subscription privilege.
If
you hold your shares or public warrants in the name of a broker, custodian bank, dealer or other nominee who uses the services
of the Depository Trust Company, or DTC, DTC will issue one subscription right to the nominee for every shares of our common stock
and public warrant you own at the record date. The basic subscription privilege of each subscription right can then be used to
purchase one unit for $13.50 per unit, subject to proration.
If
an insufficient number of units is available to fully satisfy all basic subscription privilege requests, we will allocate the
available units pro-rata among those rights holders exercising their basic subscription privilege in proportion to the
product (rounded down to the nearest whole number so that the aggregate number of units does not exceed the aggregate number offered)
obtained by multiplying the number of units such rights holder subscribed for under the basic subscription privilege by
a fraction (A) the numerator of which is 1,000,000 and (B) the denominator of which is the total number of units sought to be
subscribed for under the basic subscription privilege by all holders exercising their basic subscription privilege. All subscriptions,
including subscriptions pursuant to the basic subscription privilege, will be subject to proration. The subscription rights agent
will notify subscription rights holders of the number of units allocated to each holder exercising the basic subscription privilege
as promptly as may be practicable after the allocations are completed.
Any
excess subscription payments received by the subscription rights agent will be promptly returned, without interest.
Over-Subscription
Privilege
The
over-subscription privilege provides each rights holder that fully exercises all of such holder’s basic subscription
privilege the opportunity to purchase the units that are not purchased by other rights holders . If you fully exercise your
basic subscription privilege, the over-subscription privilege entitles you to subscribe for additional units unclaimed by other
holders of subscription rights in this offering at the same subscription price per unit. If an insufficient number of units is
available to fully satisfy all over-subscription privilege requests, we will allocate the available units, pro-rata among those
rights holders exercising their over-subscription privilege in proportion to the product (rounded down to the nearest whole
number so that the subscription price multiplied by the aggregate number of units does not exceed the aggregate offering amount)
obtained by multiplying the number of units such rights holder subscribed for pursuant to the over-subscription privil
ege
by a fraction (A) the numerator of which is the number of unsubscribed units and (B) the denominator of which is the total number
of units sought to be subscribed for pursuant to the over-subscription privilege by all holders participating in such over-subscription.
The subscription rights agent will notify subscription rights holders of the number of units, if any, allocated to each holder
exercising the over-subscription privilege as promptly as may be practicable after the allocations are completed.
To
properly exercise your over-subscription privilege, you must deliver the subscription payment related to your over-subscription
privilege prior to the expiration of the subscription period. Because we will not know the total number of unsubscribed units
prior to the expiration of the rights offering, if you wish to maximize the number of units you purchase pursuant to your over-subscription
privilege, you will need to deliver payment in an amount equal to the aggregate subscription price for the maximum number of units
available to you, assuming that no stockholder other than you has purchased any units pursuant to its basic subscription privilege
and over-subscription privilege.
There
may not be sufficient units available to purchase the number of units issuable upon the exercise of your basic subscription privilege
or your over-subscription privilege. We will only honor over-subscription privileges to the extent sufficient unsubscribed units
are available following the exercise of subscription rights under the basic subscription privilege. We will not issue more than
1,000,000 units, consisting in the aggregate of 1,000,000 shares of Series 1 Preferred and Series 1 Warrants to purchase up to
10,000,000 shares of common stock.
To
the extent the aggregate subscription available to you pursuant to the subscription privileges is less than the amount you actually
paid in connection with the exercise of the subscription privileges, you will be allocated only the number of unsubscribed units
available to you promptly after the expiration of the rights offering.
To
the extent the amount you actually paid in connection with the exercise of the subscription privileges is less than the aggregate
subscription price of the maximum number of units available to you, you will be allocated the number of units for which you actually
paid in connection with the privileges.
Any
excess subscription payments received by the subscription rights agent will be promptly returned, without interest.
Limitation
on Exercise of Basic Subscription Privilege and Over-Subscription Privilege
If
the rights offering is over-subscribed, in which case the total number of units available in the rights offering will be allocated
to participating rights holders on a pro-rata basis, as set forth more fully in this prospectus, then the number of units that
each participating rights holder will be eligible to receive will depend upon the number of subscription rights exercised by the
rights holder and the total number of subscription rights exercised. All subscriptions, including the basic subscription
privilege, are subject to proration. If any proration is necessary, subscriptions for units will be prorated.
If
the exercise by a rights holder of the basic subscription privilege or the over-subscription privilege could, as determined by
us in our sole discretion, potentially result in a limitation on our company’s ability to use the Tax Attributes, under
the Code and rules promulgated by the Internal Revenue Service, we may, but are under no obligation to, reduce the exercise by
such rights holder of the basic subscription privilege or the over-subscription privilege to such number of units as we
in our sole discretion shall determine to be advisable in order to preserve our company’s ability to use the Tax Attributes.
Allocations
The
subscription rights agent will perform the allocations of the units in this offering. The subscription rights agent will notify
rights holders who validly exercise their subscription rights the number of units allocated to each as promptly as may be practicable
after completion of the allocation process.
Reasons
for the Rights Offering
We
are conducting this rights offering to raise capital. We will allocate 90%, up to an amount not to exceed $8,000,000, of the
proceeds to payment of certain existing debt. The remainder of the proceeds will be used for repayment of unpaid interest on
such debt, for planned store related capital expenditures and for general working capital purposes. We cannot assure you
that we will not need to seek additional financing in the future.
Method
of Exercising Subscription Rights
To
exercise your subscription rights, you must follow the process described in the subscription documents sent to you and also available
from the information agent. For assistance you may contact Issuer Direct, the information agent for the rights offering, at
(919) 744-2722 or by email at transfer@issuerdirect.com.
The
exercise of subscription rights will be irrevocable and may not be cancelled or modified, even if the rights offering is extended
by our board of directors, unless we amend the subscription period to extend it by more than 30 days or make a fundamental change
to the terms of the rights offering set forth in this prospectus. In any such case, you may cancel your subscription and receive
a refund of any money you have advanced. You may exercise your subscription rights as follows:
Subscription
By Registered Holder with U.S. or Canadian Address
To
exercise your subscription right to buy units, you must (a) properly complete the subscription process as set forth in the subscription
documents and (b) submit payment for all the subscription rights you elect to exercise under the basic subscription privilege
and over-subscription privilege, to the subscription rights agent, Securities Transfer Corp., at the address set forth on the
subscription documents prior to 5:00 p.m. Eastern time on [●] , 2016, the expiration date of the rights offering.
If the mail is used to forward subscription documents and/or a certified or bank check, it is recommended that insured, registered
mail be used. Once you exercise your subscription rights, you cannot revoke your exercise. In addition, since we may terminate
or withdraw the rights offering at our discretion, your participation in the rights offering is not assured.
Subscription
By DTC Participants
Banks,
trust companies, securities dealers and brokers that hold our equity securities or warrants therefor as nominee for more than
one beneficial owner may, upon proper showing to the subscription rights agent, exercise their subscription privileges on the
same basis as if the beneficial owners were record holders on the record date through the Depository Trust Company (the “DTC”).
The DTC will issue one basic subscription privilege to purchase one unit to you for every share of our common stock and each public
warrant that is held by you or is issuable to you as of the record date. Each basic subscription privilege can then be used to
purchase one unit for $13.50 per unit. You may exercise these subscription privileges through DTC’s PSOP Function and instructing
DTC to charge your applicable DTC account for the subscription payment for the units and deliver such amount to the subscription
rights agent. DTC must receive the subscription instructions and payment for the units by the expiration date of the rights offering.
Subscription
by Beneficial Owners
If
you are a beneficial owner of our common stock or public warrants therefor that are registered in the name of a
broker, custodian bank or other nominee, or if you hold certificates and would prefer to have an institution conduct the transaction
relating to the subscription rights on your behalf, you should instruct your broker, custodian bank or other nominee or institution
to exercise your subscription rights and deliver all documents and payment on your behalf prior to 5:00 p.m. Eastern time on the
expiration date of this rights offering. Your subscription rights will not be considered exercised unless the subscription rights
agent receives from you, your broker, custodian, nominee or institution, as the case may be, all of the required documents and
your full subscription price payment prior to 5:00 p.m. Eastern time on the expiration date of the rights offering.
Payment
Method
Payments
must be made in full in U.S. currency by personal check, certified check or bank draft, or by wire transfer. You must timely pay
the full subscription payment, including payment for the over-subscription privilege, if applicable, for the full number of units
you wish to acquire pursuant to the exercise of subscription rights by delivering a:
|
●
|
certified
or personal check drawn against a U.S. bank payable to Securities Transfer Corp., the subscription rights agent;
|
|
|
|
|
●
|
U.S.
Postal money order payable to Securities Transfer Corp.; or
|
|
|
|
|
●
|
wire
transfer of immediately available funds to the subscription account maintained by Securities Transfer Corp., as subscription
agent.
|
Any
personal check used to pay for units must clear the appropriate financial institutions prior to the expiration date of the rights
offering. The clearinghouse may require five or more business days. Accordingly, rights holders who wish to pay the subscription
price by means of an uncertified personal check are urged to make payment sufficiently in advance of the expiration date to ensure
such payment is received and clears by such date. Subscription documents received after that time will not be honored, and we
will return your payment to you, without interest or deduction.
The
subscription rights agent will be deemed to receive payment upon:
|
●
|
clearance
of any uncertified check deposited by the subscription rights agent; or
|
|
|
|
|
●
|
receipt
by the subscription rights agent of any certified check bank draft drawn upon a U.S. bank.
|
You
should read the instruction letter accompanying the subscription documents carefully and strictly follow it.
DO NOT SEND SUBSCRIPTION
DOCUMENTS OR PAYMENTS TO US
. We will not consider your subscription received until the subscription rights agent has received
delivery of a properly completed and duly executed subscription documents and payment of the full subscription amount. The risk
of delivery of all documents and payments is on you or your nominee, not us or the subscription agent.
Unless
a subscription document provides that the units are to be delivered to the record holder of such subscription rights or such document
is submitted for the account of a bank or a broker, signatures on such subscription document must be guaranteed by an “Eligible
Guarantor Institution,” as such term is defined in Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended, subject
to any standards and procedures adopted by the subscription rights agent.
Calculation
of Subscription Rights Exercised
If
you do not indicate the number of subscription rights being exercised, or do not forward full payment of the total subscription
price payment for the number of subscription rights that you indicate are being exercised, then you will be deemed to have exercised
your basic subscription privilege and over subscription privilege with respect to the maximum number of subscription rights
that may be exercised with the aggregate subscription price payment you delivered to the subscription rights agent. If we do not
apply your full subscription price payment to your purchase of units, we or the subscription rights agent will promptly return
the excess amount to you by mail, without interest or deduction after the expiration date of this rights offering.
Expiration
Date and Amendments
The
subscription period during which you may exercise your subscription rights expires at 5:00 p.m. Eastern time on [●] ,
2016. If you do not exercise your subscription rights prior to that time, your subscription rights will expire and will no longer
be exercisable. We will not be required to issue units to you if the subscription rights agent receives your subscription documents
or your subscription payment after that time, regardless of when the subscription documents and subscription payment were sent.
We may extend the offering up to an additional 30 days, at our sole discretion. We do not presently intend to extend the rights
offering. If we elect to extend the rights offering, we will issue a press release announcing such extension no later than 9:00
a.m. Eastern time on the next business day after the most recently announced expiration time of the rights offering. We will extend
the rights offering as required by applicable law or regulation and may choose to extend it if we decide to give investors more
time to exercise their subscription rights in the rights offering. If we elect to extend the rights offering for a period of more
than 30 days, then holders who have subscribed for rights may cancel their subscriptions and receive a refund of all subscription
payments advanced.
If
the rights offering is not fully subscribed following expiration of the rights offering, Source Capital Group, Inc. has agreed
to use its commercially reasonable efforts to place any unsubscribed units of this rights offering at the subscription price for
an additional period of up to 45 days. The number of units that may be sold by us during this period will depend upon the number
of units that are subscribed for pursuant to the exercise of subscription rights by our rights holders. No assurance can be given
that any unsubscribed units, if available, will be sold during this period.
Our
board of directors also reserves the right to amend or modify the terms of the rights offering. If we make any fundamental changes
to the terms of the rights offering set forth in this prospectus, we will offer potential purchasers who have exercised their
rights the opportunity to cancel their subscriptions and issue a refund of any subscription payments advanced by such rights
holder and recirculate an updated prospectus. In addition, upon such event, we may extend the expiration date of the rights
offering to allow holders of subscription rights ample time to make new investment decisions and for us to recirculate updated
documentation. Promptly following any such occurrence, we will issue a press release announcing any changes with respect to the
rights offering and the new expiration date. The terms of the rights offering cannot be modified or amended after the closing
of the rights offering. Although we do not presently intend to do so, we may choose to amend or modify the terms of the rights
offering for any reason, including, without limitation, in order to increase participation in the rights offering. Such amendments
or modifications may include a change in the subscription price, although no such change is presently contemplated.
Subscription
Price
The
purchase price was determined by our board of directors, taking into account the advice of the dealer-manager, Source Capital
Group, as well as historical and recent trading prices of our common stock. The purchase price is not the result of any negotiation
between any person and us. The board of directors established the purchase price at $13.50 per unit and the Series 1 Warrant exercise
price to equal surrender of one share of Series 1 Preferred with a liquidation value of $13.50 for 10 shares of
common stock. The purchase price is not necessarily related to our book value, net worth or any other established criteria of
value and may or may not be considered the fair value of the units offered in the rights offering. Subscription rights holders
should consider the potential lack of liquidity carefully before making a decision to exercise their subscription rights for the
units. See “Risk Factors”.
Conditions,
Withdrawal and Termination
We
reserve the right to withdraw the rights offering prior to the expiration of the rights offering for any reason. We may terminate
the rights offering, in whole or in part, if at any time before completion of the rights offering there is any judgment, order,
decree, injunction, statute, law or regulation entered, enacted, amended or held to be applicable to the rights offering that
in the sole judgment of our board of directors would or might make the rights offering or its completion, whether in whole or
in part, illegal or otherwise restrict or prohibit completion of the rights offering. We may choose to proceed with the rights
offering even if one or more of these events occur. If we terminate, cancel or withdraw the rights offering, in whole or in part,
we will issue a press release notifying the rights holders of such event, all affected subscription rights will expire
without value, and all subscription payments received by the subscription rights agent will be promptly returned, without interest,
following such termination, cancellation or withdrawal.
Cancellation
Rights
Our
board of directors may cancel the rights offering at any time prior to the time the rights offering is completed for any reason.
If we cancel the rights offering, we will issue a press release notifying rights holders of the cancellation and all subscription
payments received by the subscription rights agent will be promptly returned, without interest.
Subscription
Rights Agent
The
subscription rights agent for this offering is Securities Transfer Corp. To exercise your subscription rights for the units,
you must follow the process described in the subscription documents sent to you and also available from the information agent.
For assistance or copies of the documents you may contact Issuer Direct, the information agent for the rights offering, at
(919) 744-2722 or by email at
transfer@issuerdirect.com
.
To exercise your subscription rights for the units you will need to use the traditional paper documentation.
You
should direct any questions or requests for assistance concerning the method of subscribing for the units, or for additional copies
of this prospectus and subscription documents to Issuer Direct, the information agent for the rights offering, at (919) 744-2722
or by email at transfer@issuerdirect.com.
Fees
and Expenses
We
will pay all fees related to the offering, including legal and accounting fees and fees charged by each of the transfer agent,
the subscription rights agent and the information agent in connection with the rights offering. We have agreed to pay Source Capital
Group as the dealer-manager a fee of 6.0% of the proceeds of the rights offering, plus a 1.8% non-accountable expense fee and
an out-of-pocket accountable expense allowance of 0.2% of the proceeds of the offering. For any unsubscribed units placed by Source
Capital Group after the expiration of the rights offering and extension, we have agreed to pay Source Capital Group a placement
fee equal to 6%, in lieu of the dealer-manager fee, along with a continuing 1.8% non-accountable expense fee and an out-of-pocket
accountable expense allowance of 0.2% of the proceeds of the offering, with such placement fee and expenses to be calculated in
respect of the total gross proceeds paid to and received by us for subscriptions accepted by us from investors in connection with
such placement and such placement fee and expenses not to exceed the aggregate amounts that would have been otherwise received
by Source Capital Group if the rights offering were to have been fully subscribed. Neither the placement fee nor the expense allowance
in connection with the placement will be payable with respect to any units purchased as result of the exercise of any basic subscription
privilege or over-subscription privilege in the rights offering. Source Capital Group has informed us that it will re-allow 4.0%
of its dealer-manager fee with respect to any such sale to each broker-dealer whose clients purchase units in this offering pursuant
to the exercise some or all of their subscription rights. See “Plan of Distribution”. You are responsible for paying
any other commissions, fees, taxes or other expenses incurred in connection with the exercise of the subscription rights.
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 any stock exchange or market.
Validity
of Subscriptions
We
will resolve all questions regarding the validity and form of the exercise of your subscription rights, including time of receipt
and eligibility to participate in the rights offering. In resolving all such questions, we will review the relevant facts, consult
with our legal advisors to the extent we deem necessary, and we may request input from the relevant parties. Our determination
will be final and binding. Once made, subscriptions and directions are irrevocable, and even if the rights offering is extended
by our board of directors, and we will not accept any alternative, conditional or contingent subscriptions or directions. However,
if we amend the rights offering to allow for an extension of the rights offering for a period of more than 30 days or make a fundamental
change to the terms of the rights offering set forth in this prospectus, you may cancel your subscription and receive a refund
of any money you have advanced. We reserve the absolute right to reject any subscriptions or directions not properly submitted
or the acceptance of which would be unlawful. You must resolve any irregularities in connection with your subscriptions before
the subscription period expires, unless waived by us in our sole discretion. Neither we nor the subscription rights agent has
any duty to notify you or your representative of defects in your subscriptions. A subscription will be considered accepted, subject
to our right to withdraw or terminate the rights offering, only when the subscription rights agent has received a properly completed
and duly executed subscription documents and any other required documents and the full subscription payment. Our interpretations
of the terms and conditions of the rights offering will be final and binding.
Return
of Funds
The
subscription rights agent will hold funds received in payment for the units in a segregated account pending completion of the
rights offering. The subscription rights agent will hold this money until the rights offering is completed or is withdrawn and
canceled. If the rights offering is canceled for any reason, all subscription payments received by the subscription rights agent
will be promptly returned, without interest. In addition, all subscription payments received by the subscription rights agent
will be promptly returned, without interest, if subscription rights holders decide to cancel their subscription rights in the
event that we extend the rights offering for a period of more than 30 days after the expiration date or if there is a fundamental
change to the terms of the rights offering.
Foreign
Rights Holders
Non-U.S.
citizens or residents are permitted to purchase the units to the extent such purchases do not violate any law, rule, regulation
or other requirement or prohibition of any non-U.S. governmental authority and do not require any registration or qualification
or other action by or on behalf of the company or any other entity involved in the offering. To exercise subscription rights,
our foreign rights holders must notify the subscription rights agent prior to 11:00 a.m. Eastern time at least three business
days prior to the expiration of the rights offering.
No
Revocation or Change
Once
you submit the subscription documents to exercise any subscription rights, you have no right to revoke or change the exercise
or request a refund of funds paid. All exercises of subscription rights are irrevocable, even if you later learn information that
you consider to be unfavorable to the exercise of your subscription rights and even if the rights offering is extended by our
board of directors, unless we amend the rights offering to allow for an extension of the rights offering for a period of more
than 30 days or make a fundamental change to the terms of the rights offering set forth in this prospectus, in which case you
may cancel your subscription and receive a refund of any money you have advanced. You should not exercise your subscription rights
unless you are certain that you wish to purchase units at the purchase price.
Regulatory
Limitations
We
will not be required to issue to you any units in this rights offering if, in our opinion, you are or may be required to obtain
prior clearance or approval from any state or federal regulatory authorities to purchase, own or control such units and if, at
the time the subscription period expires, you have not obtained such clearance or approval. We also will not be required to issue
to you any units in this rights offering if, in our opinion, any such issuance may violate any law, rule or regulation or other
requirement or prohibition of any non-U.S. governmental authority or may require any registration or qualification or other action
by or on behalf of the company or any other entity involved in the offering.
U.S.
Federal Income Tax Treatment of Subscription Rights Distribution
We
believe that our distribution and any rights holder’s receipt and exercise of the rights to purchase the units will
not be taxable to our rights holders for the reasons described below in “Material U.S. Federal Income Tax Consequences
to U.S. Holders”.
No
Recommendation to Subscription Rights Holders
Our
board of directors is making no recommendation regarding your exercise of the subscription rights. You are urged to make your
decision based on your own assessment of our business and the rights offering. Please see “Risk Factors” for a discussion
of unique and material risks involved in investing in the units.
No
Standby Commitment
We
have not entered into any standby purchase arrangement in connection with this offering.
Listing
None
of the subscription rights, the Series 1 Preferred or the Series 1 Warrants will be listed for trading on any national securities
exchange or market. The subscription rights are completely non-transferrable. We intend to use our best efforts to list the units
for trading on the Nasdaq Capital Market or quotation on the OTC marketplace. There is no assurance that the units will be traded
on the Nasdaq Capital Market or quoted on the OTC marketplace. There will be no holders of units to help establish a trading market
other than purchasers in this rights offering. Further, we do not expect to issue any additional units. Consequently, trading
of the units may be very limited and possibly non-existent.
Other
Matters
We
are not making the rights offering in any state or other jurisdiction in which it would be unlawful to do so, nor are we distributing
or accepting any offers to purchase any units from subscription rights holders who are residents of any such states or other jurisdictions
or who are otherwise prohibited by federal or state laws or regulations from accepting or exercising the subscription rights or
holding units.
MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES
The
following is a discussion of the material U.S. federal income tax consequences of the ownership and disposition of the units.
Unless otherwise noted below, the following discussion is the opinion of Cherry Bekaert LLP, our U.S. tax advisors, insofar
as such discussion relates to matters of U.S. federal income tax law and conclusions with respect to those matters. This discussion
does not describe all of the tax considerations that may be relevant to a particular holder’s ownership of the units. This
discussion applies only to U.S. Holders that hold the units as a capital asset for tax purposes and does not address all of the
tax consequences that may be relevant to holders subject to special rules, such as: regulated investment companies, real estate
investment trusts, certain financial institutions, dealers and certain traders in securities or foreign currencies, insurance
companies, persons holding the units as part of a hedge, straddle, conversion transaction or integrated transaction, persons whose
“functional currency” is not the U.S. dollar, persons liable for the alternative minimum tax, tax-exempt organizations,
and persons holding the units that own or are deemed to own 10% or more of our voting shares.
This
discussion is based upon the tax laws of the United States including the Internal Revenue Code of 1986, as amended to the date
hereof (the “Code”), administrative pronouncements, judicial decisions and final, temporary and proposed Treasury
regulations, as of the date hereof. These laws are subject to change, possibly with retroactive effect. The discussion does not
address any state, local or non-U.S. tax consequences.
This
discussion does not address all aspects of U.S. federal income taxation that may be applicable to holders in light of their particular
circumstances or to holders subject to special treatment under the U.S. federal income tax laws, including, but not limited to,
financial institutions, brokers and dealers in securities or currencies, insurance companies, regulated investment companies,
real estate investment trusts, tax-exempt organizations, persons who hold their shares as part of a straddle, hedge, conversion
or other risk-reduction transaction, persons liable for the alternative minimum tax, persons who have received their common stock
pursuant to which the subscription rights in this rights offering have been granted through the exercise of employee stock options
or otherwise as compensation for services, partnerships or other entities treated as partnerships for U.S. federal income tax
purposes, U.S. expatriates, and persons whose functional currency is not the U.S. dollar and foreign taxpayers. This discussion
does not describe any tax consequences arising out of the tax laws of any state, local or foreign jurisdiction, or any U.S. federal
tax considerations other than income taxation (such as alternative minimum, estate or gift taxation). This discussion is limited
to U.S. holders which hold our shares as capital assets and does not address U.S. holders which beneficially hold our shares through
either a “foreign financial institution” (as such term is defined in Section 1471(d)(4) of the Code) or certain other
non-U.S. entities specified in Section 1472 of the Code. For purposes of this discussion, a “U.S. holder” is a holder
that is, for U.S. federal income tax purposes:
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a
citizen or resident of the United States;
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●
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a
corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under
the laws of the United States or any political subdivision thereof;
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an
estate the income of which is subject to U.S. federal income taxation regardless of its source; or
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a
trust if (i) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more “United
States persons” (within the meaning of the Code) have the authority to control all substantial decisions of the trust
or (ii) has a valid election in effect under applicable Treasury regulations to be treated as a United States person.
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If
a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) receives the subscription rights
or holds the units received upon exercise of the subscription rights or the over-subscription privilege, the tax treatment of
a partner in a partnership generally will depend upon the status of the partner and the activities of the partnership. Such a
partner or partnership should consult its own tax advisor as to the U.S. federal income tax consequences of the receipt and ownership
of the subscription rights or the ownership of the units received upon exercise of the subscription rights or, if applicable,
upon exercise of the over-subscription privilege.
YOU
SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO YOU OF YOUR RECEIPT, OWNERSHIP, AND EXERCISE OF THE SUBSCRIPTION
RIGHTS, THE OWNERSHIP AND DISPOSITION OF SERIES 1 PREFERRED AND THE SERIES 1 WARRANTS, AND THE OWNERSHIP AND DISPOSITION OF COMMON
STOCK RECEIVED UPON THE EXERCISE OF THE SERIES 1 WARRANTS TO PURCHASE OUR COMMON STOCK, INCLUDING THE APPLICABILITY OF ANY FEDERAL
ESTATE OR GIFT TAX LAWS OR ANY STATE, LOCAL OR FOREIGN TAX LAWS.
Receipt
of the Subscription Rights
Each
subscription right entitles an eligible rights holder the right to purchase one unit consisting of one share of our Series
1 Preferred and Series 1 Warrants to purchase 10 shares of our common stock, from the date of issuance through its expiration
seven years from the date of issuance, at a subscription price of $13.50 per unit. Generally, the distribution of stock by a corporation
to its stockholders with respect their stock is not taxable to such stockholders pursuant to Section 305(a) of the Code. For such
purpose, a distribution of rights to acquire stock of the distributing corporation constitutes a distribution of stock. However,
if a distribution of stock or rights to acquire stock is within one of several exceptions to the general rule of Section 305(a)
set forth in Section 305(b) of the Code, the distribution may be taxable to the stockholders of the distributing corporation as
described below.
Many
of the exceptions to the general rule of Section 305(a) set forth in Section 305(b) involve preferred stock, such as the distribution
of preferred stock in certain circumstances pursuant to Section 305(b)(5). Treasury regulations define preferred stock not for
its preferred rights and privileges, but its inability to participate in corporate growth to any significant extent. The Series
1 Preferred will not be preferred stock for tax purposes based certain representations relied upon in rendering the opinion, and,
accordingly, that none of the Section 305(b) exceptions that apply to preferred stock for tax purposes should apply to the rights
offering and that the rights offering should be evaluated for Section 305 purposes as if the company has only one outstanding
class of stock. This opinion is not binding on the IRS or any court and there can be no assurance that the IRS or a court will
agree with this opinion. The remainder of this discussion assumes that the Series 1 Preferred is not treated as preferred stock
for tax purposes.
Section
305(b)(2) is an exception to the general rule of Section 305(a) that applies to a “disproportionate distribution”.
Pursuant to Section 305(b)(2), a distribution (or a series of distributions of which such a distribution is one) of stock rights
constitutes a “disproportionate distribution,” and is therefore taxable, if the distribution results in (i) the receipt
of property by some stockholders, and (ii) an increase in the proportionate interest of other stockholders in the assets or earnings
and profits of the distributing corporation. For this purpose, the term “property” means money, securities and any
other property, except that such term does not include stock in the corporation making the distribution or rights to acquire such
stock. A “series of distributions” encompasses all distributions of stock made or deemed made by a corporation which
have the result of receipt of cash or property by some stockholders and an increase in the proportionate interests of other stockholders.
It is not necessary for a distribution of stock to be considered as one of a series of distributions that such distribution be
pursuant to a plan to distribute cash and property to some stockholders and to increase the proportionate interests of the other
stockholders, rather it is sufficient if there is a distribution (or a deemed distribution) having such effect. In addition, there
is no requirement that both elements of Section 305(b)(2) of the Code occur in the form of a distribution or series of distributions
as long as the result is that some stockholders receive cash and property and other stockholders’ proportionate interests
increase. Under the applicable Treasury regulations, where the receipt of cash or property occurs more than 36 months following
a distribution or series of distributions of stock, or where a distribution is made more than 36 months following the receipt
of cash or property, such distribution or distributions will be presumed not to result in the receipt of cash or property by some
stockholders and an increase in the proportionate interest of other stockholders, unless the receipt of cash or property by some
stockholders and the distribution or series of distributions are made pursuant to a plan.
The
distribution of subscription rights in the rights offering will not constitute an increase in the proportionate interest of some
stockholders in the assets or earnings and profits of the company for the purpose of Section 305(b)(2) based on the fact that
all of our stockholders will receive rights in the rights offering based upon their respective ownership of our common stock,
as well as based on certain representations relied upon in rendering the opinion, and, accordingly, that the rights offering will
not constitute part of a “disproportionate distribution,” pursuant to Section 305(b)(2) of the Code. This opinion
is not binding on the IRS or any court and there can be no assurance that the IRS or a court will agree with this opinion. The
remainder of this discussion assumes that Section 305(b)(2) does not apply to the subscription rights offering.
Subject
to the foregoing, you will not recognize taxable income for U.S. federal income tax purposes in connection with the receipt of
the subscription rights in the rights offering and the remainder of this discussion so assumes. However, in the event the IRS
successfully asserts or a court determines that your receipt of subscription rights is currently taxable pursuant to Section 305(b)(2)
of the Code, the discussion below under the heading “Alternative Treatment of Subscription Rights” describes the tax
consequences that will result from such a determination.
Tax
Basis and Holding Period of the Subscription Rights
Your
tax basis of the subscription rights for U.S. federal income tax purposes will depend on the fair market value of the subscription
rights you receive and the fair market value of your existing shares of common stock on the date you receive the subscription
rights. The tax basis of the subscription rights received by you in the subscription rights offering will be zero unless either
(i) the fair market value of the subscription rights on the date such subscription rights are distributed is equal to at least
15% of the fair market value of such common stock on the date of distribution or (ii) you elect to allocate part of the tax basis
of such shares to the subscription rights. If either (i) or (ii) is true, then, if you exercise the subscription rights, your
tax basis in your shares of common stock will be allocated between the subscription rights and the shares of common stock with
respect to which the subscription rights were received in proportion to their respective fair market values on the date the subscription
rights are distributed.
We
have not obtained an independent appraisal of the valuation of the subscription rights and, therefore, you should consult with
your tax advisor to determine the proper allocation of basis between the subscription rights and the shares of common stock with
respect to which the subscription rights are received.
Your
holding period for the subscription rights will include your holding period for the shares of common stock with respect to which
the subscription rights were received.
Expiration
of the Subscription Rights
If
you allow subscription rights received in the subscription rights offering to expire, you will not recognize any gain or loss.
If you have tax basis in the subscription rights, the tax basis of the shares of common stock owned by you with respect to which
such subscription rights were distributed will be restored to the tax basis of such shares immediately prior to the receipt of
the subscription rights in the offering.
Alternative
Treatment of Subscription Rights
Receipt
.
If the IRS were to successfully assert that the distribution of the subscription rights in the rights offering resulted in a “disproportionate”
distribution or is otherwise taxable pursuant to Section 305(b)(2), each holder would be considered to have received a distribution
with respect to such holder’s stock in an amount equal to the fair market value of the subscription rights received by such
holder on the date of the distribution. This distribution generally would be taxed as dividend income to the extent of your ratable
share of our current and accumulated earnings and profits. The amount of any distribution in excess of our earnings and profits
will be applied to reduce, but not below zero, your tax basis in your stock, and any excess generally will be taxable to you as
capital gain (long-term, if your holding period with respect to your capital stock is more than one year as of the date of distribution,
and otherwise short-term). Your tax basis in the subscription rights received pursuant to the rights offering would be equal to
their fair market value on the date of distribution and the holding period for the subscription rights would begin upon receipt.
Expiration
.
In the event that you allow your subscription rights to expire without exercising them, the tax basis in your shares of common
stock with respect to which the subscription rights were received will be equal to their tax basis immediately before your receipt
of the subscription rights (and, accordingly, the tax basis in your subscription rights will be deemed to be zero) and, therefore,
you will not recognize any loss upon the expiration of the subscription rights. If the subscription rights expire without exercise
after you have disposed of all or a portion of your shares of common stock, you should consult your own tax advisor regarding
the ability to recognize a loss (if any) on the expiration of the subscription rights.
Exercise
of the Subscription Rights; Tax Basis and Holding Period of the Shares
The
exercise of the subscription rights by you or on your behalf likely will not be a taxable transaction for U.S. federal income
tax purposes. Your tax basis in the units acquired upon exercise of the subscription rights will equal the sum of the price paid
for the units and your tax basis (as determined above), if any, in the subscription rights you exercised. The holding period of
the units will begin on the day the subscription rights are exercised.
The
holding period for the Series 1 Preferred and Series 1 Warrants acquired through exercise of the subscription rights will begin
on the date the subscription rights are exercised.
Taxation
of Warrants
You
generally will not recognize gain or loss upon exercise of a Series 1 Warrant to acquire common stock.
Your
holding period of common stock received upon exercise of a Series 1 Warrant will begin on the date the Series 1 Warrant is exercised.
In
the event a Series 1 Warrant lapses unexercised, you will recognize a capital loss in an amount equal to the tax basis of the
Series 1 Warrant. Such capital loss will be long-term if your holding period of such Series 1 Warrant was more than one year at
the time of lapse. The deductibility of capital losses is subject to limitations.
Taxation
of Series 1 Preferred
Distributions
.
Generally, any distribution with respect to the Series 1 Preferred that is paid out of our current or accumulated earnings
and profits, as determined for U.S. federal income tax purposes, will constitute a dividend and will be includible in gross income
by you when paid. Distributions with respect to the Series 1 Preferred in excess of our current or accumulated earnings and profits
would be treated first as a non-taxable return of capital to the extent of your basis in the Series 1 Preferred (thus reducing
such tax basis dollar-for-dollar), and thereafter as capital gain, which will be long-term capital gain if the your holding period
for such stock at the time of distribution exceeds one year.
Taxation
of Common Stock
Distributions
.
Distributions received with respect to our common stock will be treated as described above under “— Taxation of
Series 1 Preferred — Distributions”.
Sale,
Exchange or Other Disposition
.
Upon a sale, exchange or other disposition of our common stock, you generally will
recognize capital gain or loss in the manner described above under “— Taxation of Series 1 Preferred— Sale,
Exchange or Other Disposition”.
Additional
Medicare Tax on Net Investment Income
An
additional 3.8% tax will be imposed on the “net investment income” of certain U.S. citizens and resident aliens, and
on the undistributed “net investment income” of certain estates and trusts. Among other items, “net investment
income” generally includes gross income from dividends and net gain from the disposition of property, such as our capital
stock, less certain deductions. You should consult your tax advisor with respect to this additional tax.
Information
Reporting and Backup Withholding
In
general, payments made to you of proceeds from the sale or other disposition of Series 1 Warrants, Series 1 Preferred, or our
common stock may be subject to information reporting to the IRS and possible U.S. federal backup withholding at the then applicable
backup withholding rate. Backup withholding will not apply if you furnish a correct taxpayer identification number (certified
on the IRS Form W-9 or valid substitute 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 timely filing the appropriate claim
for refund with the IRS and furnishing any required information.
You
should consult your own tax advisor regarding your qualification for an exemption from backup withholding and the procedures for
obtaining such an exemption, if applicable.
MARKET
FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Our
common stock trades on the Nasdaq Capital Market under the trading symbol “HOTR”. On November 14 ,
2016, there were approximately 185 record holders of our common stock. This number does not include the number of persons
or entities that hold stock in nominee or street name through various brokerage firms, banks and other nominees. On November
14 , 2016, the last closing sale price reported on the Nasdaq Capital Market for our common stock was $0.54
per share. Past price performance is not indicative of future price performance.
The
following table sets forth the high and low sale prices of our common stock on Nasdaq for the periods indicated:
PERIOD
ENDED
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HIGH
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LOW
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September
30, 2016
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$
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0.64
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$
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0.36
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June
30, 2016
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$
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0.89
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$
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0.41
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March
31, 2016
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$
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1.02
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$
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0.64
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December
31, 2015
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$
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1.32
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$
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0.75
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September
30, 2015
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$
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2.73
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$
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1.03
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June
30, 2015
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$
|
4.18
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$
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2.17
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March
31, 2015
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$
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3.07
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$
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1.65
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December
31, 2014
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$
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2.54
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$
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1.40
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September
30, 2014
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$
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2.84
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$
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1.85
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DIVIDEND
POLICY
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 on our common stock in the foreseeable future.
Payments of future dividends on our common stock, if any, will be at the discretion of our board of directors after taking into
account various factors, including the terms of our credit facility and our financial condition, operating results, current and
anticipated cash needs and plans for expansion.
The
Series 1 Preferred will have a liquidation preference of $13.50 per share, equal to the purchase price, and will pay cumulative
dividends at the rate of 9% of the liquidation preference per year for seven years, payable in cash or our registered common stock
quarterly on the last day of March, June, September and December in each year.
DESCRIPTION
OF CAPITAL STOCK
The
following is a summary of the material terms of our capital stock. This summary does not purport to be exhaustive and is qualified
in its entirety by reference to our amended and restated certificate of incorporation, amended and restated bylaws and to the
applicable provisions of Delaware law.
Common
Stock
We
are authorized to issue 45,000,000 shares of common stock. Holders of common stock are each entitled to cast one vote for each
share held of record on all matters presented to shareholders. Cumulative voting is not allowed; the holders of a majority of
our outstanding shares of common stock may elect all directors. Holders of common stock are entitled to receive such dividends
as may be declared by our board out of funds legally available and, in the event of liquidation, to share pro rata in any distribution
of our assets after payment of liabilities. Our directors are not obligated to declare a dividend. It is not anticipated that
dividends will be paid in the foreseeable future. Holders of common stock do not have preemptive rights to subscribe to any additional
shares we may issue in the future. There are no conversion, redemption, sinking fund or similar provisions regarding the common
stock. All outstanding shares of common stock are fully paid and nonassessable.
Anti-Takeover
Effects of Certain Provisions of Delaware Law and Our Certificate of Incorporation and Bylaws
We
are subject to the provisions of Section 203 of the Delaware General Corporation Law, an anti-takeover law. Subject to certain
exceptions, the statute prohibits a publicly held Delaware corporation from engaging in a “business combination” with
an “interested stockholder” for a period of three years after ‘the date of the transaction in which the person
became an interested stockholder unless:
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prior
to such date, the board of directors of the corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;
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●
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upon
consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned (1) by persons who are directors and also officers
and (2) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer; or
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●
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on
or after such date, the business combination is approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock that is not owned by the interested stockholder.
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For
purposes of Section 203, a “business combination” includes a merger, asset sale or other transaction resulting in
a financial benefit to the interested stockholder, and an “interested stockholder” is a person who, together with
affiliates and associates, owns, or within three years prior to the date of determination whether the person is an “Interested
Stockholder” did own, 15% or more of the corporation’s voting stock.
In
addition, our authorized but unissued shares of common stock and preferred stock are available for our board to issue without
stockholder approval. We may use these additional shares for a variety of corporate purposes, including future public or private
offerings to raise additional capital, corporate acquisitions and employee benefit plans The existence of our authorized but unissued
shares of common stock and preferred stock could render more difficult or discourage an attempt to obtain control of our company
by means of a proxy contest, tender offer, merger or other transaction. Our authorized but unissued shares may be used to delay,
defer or prevent a tender offer or takeover attempt that a stockholder might consider in its best interest, including those attempts
that might result in a premium over the market price for the shares held by our stockholders. The board of directors is also authorized
to adopt, amend or repeal our bylaws, which could delay, defer or prevent a change in control.
Preferred
Stock
Under
our certificate of incorporation, our board of directors is authorized, without further stockholder action, to issue up to 5,000,000
shares of preferred stock in one or more series, with such powers, designations, preferences and relative, participating, optional
and other rights and such qualifications, limitations and restrictions thereof as shall be set forth in the resolutions providing
therefor. After issuance of the redeemable Series 1 Preferred, our board of directors will be authorized, without further stockholder
action, to issue up to 4,000,000 shares of preferred stock. We have no other preferred stock outstanding and no present plans
to issue any shares of preferred stock except for 1,000,000 shares of Series 1 Preferred as described in this prospectus.
Units
Offered
The
following description of the material terms and provisions of the 9% Redeemable Series 1 Preferred Stock and the
Series 1 Warrants comprising the units being offered is qualified in its entirety by reference to the form of certificate of designation,
preferences and rights of the 9% Redeemable Series 1 Preferred Stock and to the form of Series 1 Warrant, filed
as exhibits to the registration statement of which this prospectus forms a part.
The
9% Redeemable Series 1 Preferred Stock (“Series 1 Preferred”) and Series 1 Warrants offered by this
prospectus will be sold only together in units. Each unit consists of one share of Series 1 Preferred and a Series 1 Warrant
to purchase 10 shares of our common stock. The shares of Series 1 Preferred and Series 1 Warrants are not detachable
and will not be separately transferable following the closing. We intend to use our best efforts to list the units for trading
on the Nasdaq Capital Market or quotation on the OTC marketplace. There is no assurance that the units will be traded on the Nasdaq
Capital Market or quoted on the OTC marketplace or outstanding.
Dividends
The
Series 1 Preferred will have a liquidation preference of $13.50 per share, equal to the purchase price, and will pay cumulative
dividends at the rate of 9% of the liquidation preference per year for seven years, payable in cash or our registered common stock
quarterly on the last day of March, June, September and December in each year out of legally available funds. Shares of
common stock issued as dividends will be issued at a 10% discount to the five-day volume weighted average price per share of our
common stock prior to the date of issuance. Series 1 Preferred will be non-voting, except as otherwise required under applicable
law. The Series 1 Preferred will not be convertible into or exchangeable for shares of our common stock. We will redeem shares
of Series 1 Preferred out of legally available funds at a redemption price equal to the $13.50 per share liquidation preference
plus any accrued but unpaid dividends, if any, upon the expiration of the seven year term. The Series 1 Preferred will not be
listed for trading on any stock exchange or market.
Liquidation
Preference
The
Series 1 Preferred will have a liquidation preference of $13.50 per share, equal to its purchase price. In the event of any liquidation,
dissolution or winding up of our company, any amounts remaining available for distribution to stockholders after payment of all
liabilities of our company will be distributed first to the holders of Series 1 Preferred, and then to the holders of our common
stock.
Voting
Rights
Except
as otherwise required by law, the Series 1 Preferred will be non-voting. Holders of the Series 1 Preferred will vote as a class
on any amendment altering or changing the powers, preferences or special rights of the Series 1 Preferred so as to affect them
adversely.
No
Conversion
The
Series 1 Preferred will not be convertible into or exchangeable for shares of our common stock or any other security, except through
the exercise of Series 1 Warrants.
Redemption
We
will redeem shares of Series 1 Preferred at a redemption price equal to the $13.50 per share liquidation preference out of
legally available funds plus any accrued but unpaid dividends, if any, upon the expiration of the seven year term. The Series
1 Preferred will not be listed for trading on any stock exchange or market. listed for trading on any stock exchange or market.
Anti-dilution
Adjustments
The
Series 1 Preferred will not be adjusted, and no additional shares of Series 1 Preferred will be issued solely as a result of,
any future change to or affecting our common stock.
Form
The
Series 1 Preferred may be held in registered book-entry form or through an intermediary.
No
Other Rights
The
holders of the Series 1 Preferred will have no preemptive or preferential or other rights to purchase or subscribe to any stock,
obligations, warrants or other securities of ours.
Series
1 Warrants
Exercise
and Terms
Each
Series 1 Warrant entitles will be exercisable into 10 shares of our common stock at any time and from time to time on or before
the seventh anniversary of the date of issuance. The Series 1 Warrants may be exercised by surrendering one share of Series
1 Preferred in exchange for 10 shares of or common stock.
A
holder will be prohibited under the terms of the Series 1 Warrants from effecting the exercise of the Series 1 Warrants to the
extent that, as a result of the exercise, the holder of such shares beneficially owns more than 4.99% (or, if this limitation
is waived by the holder upon no less than 61 days prior notice to us, 9.99%) in the aggregate of the outstanding shares of our
common stock calculated immediately after giving effect to the issuance of shares of common stock upon such exercise.
Automatic
Exercise
At
such time that
our common stock trades above $3.00 per share
for five consecutive trading days, the Series 1 Warrants will automatically be exercised through the surrender of shares of
Series 1 Preferred .
Warrant
Agent
Securities
Transfer Corp. will be the warrant agent for the Series 1 Warrants.
PLAN
OF DISTRIBUTION
Promptly
after the record date for the rights offering, we will distribute the subscription rights and subscription documents to stockholders
of record and public warrant holders of record as of 5:00 p.m. Eastern time on [●] , 2016. If you wish to exercise
your subscription rights, you should follow the instructions in the subscription documents sent to you and also available from
the information agent. If you are unable to do so, you may call the information agent for assistance. See “The Rights Offering—Method
of Exercising Subscription Rights”. If you have any questions, you should contact Issuer Direct, the information agent
for the rights offering, at (919) 744-2722 or by email at transfer@issuerdirect.com.
Source
Capital Group, Inc., which is a registered broker-dealer and member of the Financial Industry Regulatory Authority (“FINRA”),
will act as the dealer-manager for this rights offering. The dealer-manager’s principal business address is 276 Post Road
West, Westport, Connecticut 06880. Under the terms and subject to the conditions contained in the dealer-manager agreement between
us and the dealer-manager, the dealer-manager will provide marketing assistance and advice to us in connection with this offering
and will solicit the exercise of subscription rights. This rights offering is not contingent upon any number of subscription rights
being exercised. The dealer-manager is not underwriting or placing any of the rights or the units being offered in this offering
and does not make any recommendation with respect to such rights or units, including with respect to the exercise of such rights.
Pursuant
to the dealer-manager agreement, we are obligated to pay Source Capital Group as compensation a cash fee of 6% of the proceeds
of the rights offering plus a 1.8% non-accountable expense fee and an out-of-pocket accountable expense allowance of 0.2% of the
proceeds of the offering and to indemnify the dealer-manager for, or contribute to losses arising out of, certain liabilities,
including liabilities under the Securities Act of 1933, as amended. For any unsubscribed units placed by Source Capital Group
after the expiration of the rights offering, we have agreed to pay Source Capital Group a placement fee equal to 6%, in lieu of
the dealer-manager fee, along with a continuing 1.8% non-accountable expense fee and an out-of-pocket accountable expense allowance
of 0.2%, with such placement fee and expenses to be calculated in respect of the total gross proceeds paid to and received by
us for subscriptions accepted by us from investors in connection with such placement and such placement fee and expenses not to
exceed the aggregate amounts that would have been otherwise received by Source Capital Group if the rights offering were to have
been fully subscribed. Neither the placement fee or expense allowance in connection with the placement will be payable with respect
to any units purchased as result of the exercise of any basic subscription privilege or over-subscription privilege in the rights
offering. The dealer-manager agreement also provides that the dealer-manager will not be subject to any liability to us in rendering
the services contemplated by the dealer-manager agreement except for any act of bad faith or gross negligence of the dealer-manager.
The dealer-manager and its affiliates have provided to us in the past and may provide to us from time to time in the future in
the ordinary course of its business certain financial advisory, investment banking and other services for which it will be entitled
to receive customary fees.
The
dealer-manager has informed us that it has entered into or intends to enter into Selected Dealer Agreements with other broker-dealers
pursuant to which (i) such other broker-dealers have agreed or will agree to use their commercially reasonable to procure subscriptions
for the units, and (ii) the dealer-manager has agreed or will agree to re-allow 4% of its dealer-manager fee to each such broker-dealer
whose clients purchase units in this offering pursuant to their subscription rights.
The
maximum commission to be received by any independent broker-dealer or any member of FINRA will not be greater than 8% of the proceeds
from the sale of units offered pursuant to this prospectus.
Other
than as described herein, we do not know of any existing agreements between or among any stockholder, broker, dealer, underwriter
or agent relating to the sale or distribution of the units offered hereby.
This
prospectus may be made available in electronic format on websites or via email or through other online services maintained by
the dealer-manager. Other than this prospectus in electronic format, the information on the dealer-manager’s websites and
any information contained in any other websites maintained by the dealer-manager is not part of this prospectus or the registration
statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the dealer-manager, and should
not be relied upon by investors.
The
foregoing does not purport to be a complete statement of the terms and conditions of the dealer-manager agreement. A copy of the
dealer-manager agreement is included as an exhibit to the registration statement of which this prospectus forms a part. See “Where
You Can Find More Information” on page [●] .
The
dealer-manager may be deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act, and any fees received
by it might be deemed to be underwriting discounts or commissions under the Securities Act. As an underwriter, the dealer-manager
would be required to comply with the requirements of the Securities Act and the Exchange Act, including, without limitation, Rule
10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of any purchases and sales of
securities by the dealer-manager acting as a principal. Under these rules and regulations, the dealer-manager must not engage
in any stabilization activity in connection with our securities, and must not bid for or purchase any of our securities or attempt
to induce any person to purchase any of our securities, other than as permitted under the Exchange Act.
No
person has been authorized by our company to engage in any form of price stabilization in connection with this rights offering.
We
expect one or more of our directors and executive officers to purchase units in the offering at the public offering price, although
none have any commitment to do so.
LEGAL
MATTERS
The
validity of the rights and the shares of common stock offered by this prospectus have been passed upon for us by Libertas Law
Group, Inc., Santa Monica, California. We have filed a copy of this opinion as an exhibit to the registration statement in
which this prospectus is included.
Olshan
Frome Wolosky LLP, New York, New York, is acting as counsel to the dealer-manager in this offering.
EXPERTS
Certain
matters regarding the material U.S. federal income tax consequences of the rights offering have been passed upon for us by Cherry
Bekaert LLP, Charlotte, North Carolina. We have filed a copy of this opinion as an exhibit to the registration statement in which
this prospectus is included.
The
consolidated financial statements of Chanticleer Holdings, Inc. as of and for the year ended December 31, 2015 incorporated in
this prospectus by reference to the Annual Report on Form 10-K for the year ended December 31, 2015 have been audited by Cherry
Bekaert LLP, an independent registered public accounting firm, as stated in its report incorporated by reference herein, and have
been so incorporated in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.
The
consolidated financial statements of Chanticleer Holdings, Inc. as of and for the year ended December 31, 2014 incorporated in
this prospectus by reference to the Annual Report on Form 10-K for the year ended December 31, 2015 have been audited by Marcum
LLP, an independent registered public accounting firm, as stated in its report incorporated by reference herein, and have been
so incorporated in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.
MATERIAL
CHANGES
There
have been no material changes in the Company’s affairs since its fiscal year ended December 31, 2015 that have not been
described in its 2016 Quarterly Reports on Form 10-Q or Current Reports on Form 8-K pursuant to the Securities Exchange Act of
1934.
INCORPORATION
BY REFERENCE
The
SEC allows us to “incorporate by reference” into this prospectus the information we file with the SEC. This means
that we can disclose important information to you by referring you to those documents. The information incorporated by reference
is considered to be part of this prospectus.
We
are incorporating by reference the following documents that we have filed with the SEC (other than any filing or portion thereof
that is furnished, rather than filed, under applicable SEC rules):
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our Annual Report on Form 10-K
for the year ended December 31, 2015, filed with the SEC on March 31 , 2016 and
amended on April 26 , 2016;
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our
Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2016, June 30, 2016 and September 30, 2016, filed
with the SEC on May 16, 2016, August 11, 2016 and November 10, 2016, respectively;
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our
Current Reports on Form 8-K and amendments thereto filed with the SEC on February 23, 2016, March 11, 2016, April 1, 2016,
May 19, 2016, July 12, 2016, August 11, 2016, August 18, 2016, September 7, 2016, September 15, 2016, September 30, 2016 and
October 28, 2016; and
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the
description of our common stock contained in the prospectus, constituting part of our Registration Statement on Form S-1 (File
No. 333-178307) filed with the SEC on December 2, 2011, and subsequently amended on December 8, 2011, February 3, 2012, February
22, 2012, April 12, 2012, May 21, 2012, May 30, 2012, June 5, 2012, and June 19, 2012.
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All
documents that we subsequently file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of this offering shall be deemed to be incorporated by reference into this prospectus.
Our
Web site address is chanticleerholdings.com and the URL where incorporated reports and other reports may be accessed is
http://ir.stockpr.com/chanticleerholdings/all-sec-filings
.
The
reports incorporated by reference into this prospectus are available from us upon request. We will provide a copy of any and all
of the reports and documents that are incorporated by reference, including exhibits to such reports and documents, in this prospectus
to any person, including a beneficial owner, to whom a prospectus is delivered, without charge, upon written or oral request.
Requests for such copies should be directed to the following:
Chanticleer
Holdings, Inc.
Investor
Relations
7621
Little Avenue, Suite 414
Charlotte,
North Carolina 28226
(704)
366-5122
ir@chanticleerholdings.com
Except
as expressly provided above, no other information, including none of the information on our website, is incorporated by reference
into this prospectus
.
AVAILABLE
INFORMATION
We
file periodic reports, proxy statements and other information with the SEC. Our filings are available to the public over the Internet
at the SEC’s web site at http://www.sec.gov. You may also read and copy any document we file with the SEC at the SEC’s
Public Reference Room, located at 100 F Street, N.E., Washington, D.C. 20549. You can also obtain copies of the documents at prescribed
rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC
at 1-800-SEC-0330 for further information on the operation of its Public Reference Room. We will also provide you with a copy
of any or all of the reports or documents that have been incorporated by reference into this prospectus or the registration statement
of which it is a part (i) upon written or oral request, and at no cost to you. If you would like to request any reports or documents
from the company, please contact Investor Relations at Chanticleer Holdings, Inc., 7621 Little Avenue, Suite 414 Charlotte, NC
28226, (704) 366-5122 or at
ir@chanticleerholdings.com.
Our
Internet address is chanticleerholdings.com. We have not incorporated by reference into this prospectus the information on our
website, and you should not consider it to be a part of this document. Our web address is included in this document as an inactive
textual reference only.
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 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.
CHANTICLEER
HOLDINGS, INC.
Subscription
Rights Offering
Up
to an Aggregate of 1,000,000 Units Consisting of
9%
Redeemable Series 1 Preferred Stock
and
Series
1 Warrants to Purchase Common Stock
Upon
the Exercise of Subscription Rights at $13.50 per Unit
PROSPECTUS
Dealer-Manager
[●]
,
2016
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution.
The
following table sets forth the expenses payable by us in connection with this offering of securities described in this registration
statement. All amounts shown are estimates, except for the SEC registration fee. The Registrant will bear all expenses shown below.
SEC
filing fee
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$
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3833
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FINRA
filing fee
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5461
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Accounting
fees and expenses
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90,000
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Legal
fees and expenses
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35,000
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Printing
and engraving expenses
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14,000
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Other
(including Nasdaq listing fee, subscription and information agent fees)
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40,000
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Total
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$
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188,294
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*Assumes
all of the units being registered are sold.
* To be
completed by amendment
Item
14. Indemnification of Directors and Officers.
We
are subject to the laws of Delaware on corporate matters, including its indemnification provisions. Section 102 of the General
Corporation Law of Delaware (the “DGCL”) permits a corporation to eliminate the personal liability of directors of
a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except
where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated
a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained
an improper personal benefit.
Section
145 of the DGCL provides that a corporation has the power to indemnify a director, officer, employee, or agent of the corporation,
or a person serving at the request of the corporation for another corporation, partnership, joint venture, trust or other enterprise
in related capacities against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually
and reasonably incurred by the person in connection with an action, suit or proceeding to which he was or is a party or is threatened
to be made a party to any threatened, ending or completed action, suit or proceeding by reason of such position, if such person
acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and,
in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of
actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter
as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court
of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper. The statute provides that indemnification pursuant to these provisions is not exclusive of other
rights of indemnification to which a person may be entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
Article
Tenth of our certificate of incorporation, as amended, states that to the fullest extent permitted by the DGCL, a director of
the corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as
a director.
Under
Article XI of our bylaws, any person who was or is made a party or is threatened to be made a party to or is in any way involved
in any threatened, pending or completed action suit or proceeding, whether civil, criminal, administrative or investigative, including
any appeal therefrom, by reason of the fact that he is or was a director or officer of ours or was serving at our request as a
director or officer of another entity or enterprise (including any subsidiary), may be indemnified and held harmless by us, and
we may advance all expenses incurred by such person in defense of any such proceeding prior to its final determination, if this
person acted in good faith and in a manner reasonably believed to be in and not opposed to our best interest, and, with respect
to any criminal action or proceeding, the indemnified party had no reason to believe his or her conduct was unlawful. The indemnification
provided in our bylaws is not exclusive of any other rights to which those seeking indemnification may otherwise be entitled.
We
maintain a general liability insurance policy that covers certain liabilities of directors and officers of our corporation arising
out of claims based on acts or omissions in their capacities as directors or officers.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Item
15. Recent Sales of Unregistered Securities
The
following sets forth information regarding unregistered securities sold by us since the fourth quarter of 2013. These issuances
were exempt from registration under Section 4(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder
on the basis of the Company’s preexisting relationship with the recipients and fact that that securities were issued without
any form of general solicitation or general advertising.
In
October, 2015, certain holders of the 8% convertible notes issued in January 2015 converted $100,000 principal into 100,000 shares
of our common stock.
During
October 2015, the Company issued 54,226 shares of common stock for consulting, acquisition and other services.
On
July 1, 2015, we acquired substantially all of the assets of BT’s Burgerjoint Management, LLC, including the ownership interests
of four operating restaurant subsidiaries engaged in the fast casual hamburger restaurant business under the name “BT’s
Burger Joint”. In consideration of the purchased assets, we paid a purchase price consisting of one million four hundred
thousand dollars in cash and four hundred twenty four thousand eighty eight shares of the Company’s common stock, $0.0001
par value per share.
On
March 15, 2015, we acquired substantially all the assets of BGR Acquisition, LLC , including the ownership interests of a franchising
subsidiary, an operating subsidiary and various restaurant locations engaged in the fast casual hamburger restaurant business
under the name “BGR The Burger Joint”. In consideration of the purchased assets, we paid a purchase price consisting
of four million dollars in cash and five hundred thousand shares of the Company’s common stock, $0.0001 par value per share.
On
February 11, 2015, we executed a securities purchase agreement with an accredited investor whereby we agreed to issue and sell
an initial note in the amount of $200,000 (the “Initial Note”) with an initial warrant with a five year term to purchase
80,000 shares of common stock at an exercise price of $2.50 per share (the “Initial Warrant”). The Initial Note is
convertible into shares of our common stock at an exercise price of two dollars per share. We also agreed to cancel the Initial
Note and concurrently issue an amended and restated note with an aggregate principal amount of $1 million and a subsequent warrant
with a five year term to purchase 320,000 shares of common stock at an exercise price of $2.50 per share (the “Subsequent
Warrant”) upon a subsequent closing date which is scheduled to occur on or before February 27, 2015.
On
March 13, 2015, the Company conducted a subsequent closing with respect to the February 11, 2015 securities purchase agreement.
At the Subsequent Closing, the Company cancelled the initial note issued on February 18, 2015 in the amount of $200,000 and issued
an Amended and Restated Note with an aggregate principal amount of $1 million and a subsequent warrant with a five year term to
purchase 320,000 shares of common stock at an exercise price of $2.50 per share.
In
January 2015, we sold a total of 14.5 units to accredited investors resulting in net proceeds of $725,000 to the Company and the
issuance of 181,250 warrants to these investors. Each unit consists of an 8% convertible promissory note with the principal face
value of $50,000 and a warrant to purchase 12,500 shares of the Company’s common stock. The notes have a term of 3 years,
pay interest quarterly at 8% per annum and contain an option by the holder to demand full repayment of the outstanding principal
amount of the note, plus all accrued and unpaid interest, at any time after the one-year anniversary of the issuance of the note.
The notes may be voluntarily converted by the holder into shares of common stock during the period commencing 180 days after the
issuance of the notes at an exercise price equal to the lesser of $2.00 per share and a 15% discount to the average of the lowest
3 trading prices for the Company’s common stock during the 10 trading day period ending on the last complete trading day
prior to the conversion date of the note, provided however that the conversion price shall not be less than $1.00 per share. The
warrants have an exercise price of $2.50 per share and a term of five years.
During
December 2014, we issued the following common stock shares and warrants:
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11,101
shares of the Company’s common stock at $2.00 and 3,330 common stock warrants at an exercise price of $3.50 for $22,202;
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●
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20,750
shares of the Company’s common stock at $2.00 and 6,225 common stock warrants at an exercise price of $3.50 for payment
of accounts payable for consulting services totaling $41,500;
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●
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54,837
shares of the Company’s common stock for payment of accounts payable for consulting services totaling $108,855;
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●
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36,667
shares of the Company’s common stock at $1.80 for payment of Board of Directors fees totaling $66,000;
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●
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67,807
shares of the Company’s common stock at $2.00 per share for accrued interest totaling $135,614;
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●
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14,451
shares of the Company’s common stock at $1.73 for payment of an employee contractual bonus totaling $25,000.
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In
November 2014, we issued $175,000 of the Company’s common stock (87,500 shares at $2.00 per share) and 26,250 common stock
warrants at $3.50 per share exercise price in consideration for the debt restructuring related to Hooters Australia.
During
October 2014, we re-priced certain warrants with an original exercise price of $5.50 and $7.00 to $2.00, subject to immediate
cash exercise. The Company received $349,544 of funds related to this transaction.
During
the three months ended September 30, 2014, we raised from private investors $641,000 for the sale of 320,500 shares of common
stock, and accompanying sales of 96,150 5-year common stock warrants exercisable at $3.50 per share.
On
September 9, 2014, we purchased 100% of the net assets of The Burger Company located in Charlotte, North Carolina, a similar concept
to our ARB restaurants, for a purchase price of $550,000, which consisted of $250,000 in cash and $300,000 (146,628 shares) in
the Company’s common stock.
During
the six months ended June 30, 2014, we issued an aggregate of 40,000 and 98,764 shares of our common stock, valued at $101,900
and $330,757 to several investor relations firms in exchange for investor relations services provided to the Company.
During
the three and six months ended June 30, 2014, we raised from private investors $200,000 for 137,500 shares of common stock and
15,000 five year common stock warrants exercisable at $3.50 per share.
On
March 19, 2014, we received $500,000 from the issuance of convertible debt to one investor. We issued 15% Secured Subordinate
Convertible Notes and five year warrants, at a price of $5.25 per share, to purchase up to 30% of the number of shares of Company
common stock issuable upon conversion of the 2014 note.
During
the first three months of 2014, we issued an aggregate of 58,764 shares of the Company’s common stock, valued at $228,857
to several investor relations firms in exchange for investor relations services provided to the Company.
On
January 31, 2014, pursuant to an agreement and plan of merger executed on December 31, 2013, we completed the acquisition of all
of the outstanding shares of each of Tacoma Wings, LLC, Jantzen Beach Wings, LLC and Oregon Owl’s Nest, LLC (collectively,
the “Hooters Entities”), which owned and operated the Hooters restaurant locations in Tacoma, Washington and Portland,
Oregon, respectively. The Hooters Entities were purchased from Hooters of Washington, LLC and Hooters of Oregon Partners, LLC
(collectively, the “Hooters Sellers”) for a total purchase price of 680,272 Company units, with each unit consisting
of one share of our common stock and one five year warrant to purchase a share of our common stock. Half (340,136) of the warrants
are exercisable at $5.50 and half (340,136) of the warrants are exercisable at $7.00. As part of this transaction, the Hooters
Sellers were granted registration rights with respect to our common stock issued and underlying the warrants, and franchise rights
and leasehold rights to the locations were transferred to the Company. These transactions are referred to as the “Hooters
Pacific Mergers”.
On
January 31, 2014, pursuant to an agreement and plan of merger executed on January 14, 2014, we completed the acquisition of all
of the outstanding shares of Dallas Spoon, LLC from Express Restaurant Holdings, LLC and Express Restaurant Holdings Beverage,
LLC. The purchase price of 195,000 Company units was paid to Express Working Capital, LLC (“EWC”); the units consist
of one share of the Company’s common stock and one five year warrant to purchase a share of the Company’s common stock.
Half (97,500) of the warrants are exercisable at $5.50 and half (97,500) of the warrants are exercisable at $7.00. As part of
this transaction, EWC was granted registration rights with respect to our common stock issued and underlying the warrants, and
all leaseholds and other rights were transferred to the Company. This transaction is referred to as the “Spoon Merger”.
On
November 7, 2013, we sold 160,000 units, at a purchase price of $5.00 per unit, to three accredited investors for a total of $800,000.
Each unit consisted of one share of the Company’s common stock and one 5-year warrant to purchase one share, exercisable
after twelve months. One half (80,000) of the warrants had an exercise price of $5.50, and the remaining half (80,000) of the
warrants had an exercise price of $7.00. Palladium Capital Partners, as placement agent for this private placement, received commissions
totaling $32,000 and also 5-year warrants, subject to the same terms as those issued in the transaction, to purchase 6,400 shares.
In
October 2013, we sold 666,667 units, each consisting of one share of common stock and a 5-year warrant to purchase one share,
at a purchase price of $3.75 per unit, to 22 investors for a total of $2,500,000 in a private placement. The warrants are exercisable
after twelve months for $5.00 per share. Dragonfly Capital, as placement agent, received commissions totaling $150,000 and five
year warrants to purchase 40,000 shares.
During
the fourth quarter of 2013, 93,334 common stock shares valued at $445,270 were issued in exchange for investor relations and consulting
services.
Item
16. Exhibits
See Exhibit
Index attached hereto and incorporated herein by reference.
Item
17. Undertakings
(a)
|
The
undersigned registrant hereby undertakes:
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(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 this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information 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 this registration statement
or any material change to such information in this registration statement.
(2) That,
for the purpose of determining any liability under the Securities Act, 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.
(3) To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) The
undersigned registrant hereby undertakes that, for purposes of determining any liability under the securities act of 1933, each
filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the securities exchange act of 1934
(and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the securities
exchange act of 1934) that is incorporated by reference in the registration statement 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.
(5)
The undersigned registrant hereby undertakes to supplement the prospectus, after the expiration of the subscription period,
to set forth the results of the subscription offer, the transactions by the underwriters during the subscription period, the amount
of unsubscribed securities to be purchased by the underwriters, and the terms of any subsequent reoffering thereof. If any public
offering by the underwriters is to be made on terms differing from those set forth on the cover page of the prospectus, a post-effective
amendment will be filed to set forth the terms of such offering.
(4) 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 a part of the registration statement will, as to a purchaser with a time of contract of sale prior
to such first use, superseded or modify any statement that was made in the registration statement or prospectus that was part
of the registration statement or made in any such document immediately prior to such date of first use.
(5) 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:
(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.
(b) The
undersigned registrant hereby undertakes to supplement the prospectus, after the expiration of the subscription period, to set
forth the results of the subscription offer and the amount of unsubscribed securities to be offered to the public. If any public
offering of the securities is to be made on terms differing from those set forth on the cover page of the prospectus, a post-effective
amendment will be filed to set forth the terms of such offering.
Insofar
as indemnification for liabilities arising under the Securities Act 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
SEC such indemnification is against public policy as expressed in the Securities 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 Securities Act and will
be governed by the final adjudication of such issue.
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-1 and authorized this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Charlotte, State of North Carolina, on November 17 , 2016.
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CHANTICLEER
HOLDINGS, INC.
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By:
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/s/
Michael D. Pruitt
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Michael
D. Pruitt
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Chief
Executive Officer
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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 indicated.
Signature
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Title
|
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Date
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|
|
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/s/
Michael D. Pruitt
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Chief
Executive Officer, Chairman, President
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November
17
, 2016
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Michael
D. Pruitt
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(Principal
Executive Officer)
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/s/
Eric S. Lederer
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Chief
Financial Officer (Principal Financial Officer;
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November
17
, 2016
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Eric
S. Lederer
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Principal
Accounting Officer)
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*
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Director
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November
17
, 2016
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Paul
G. Porter
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*
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Director
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November
17
, 2016
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Keith
Johnson
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*
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Director
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November
17
, 2016
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Gregory
E. Kraut
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|
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*
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Director
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November
17
, 2016
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Russell
Page
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*By
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/s/
Michael D. Pruitt
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|
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Michael
D. Pruitt, Attorney in Fact
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EXHIBIT
INDEX
Exhibit
|
|
Description
|
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|
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1.0
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|
Dealer
Manager Agreement by and between the Company and Source Capital Group Inc., to be filed by amendment.
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2.1
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Purchase
Agreements for Australian Entities dated June 30, 2014 (Incorporated by reference to Exhibit 2.1 to our Current Report on
Form 8-K, filed with the SEC on July 3, 2014)
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2.2
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Share
Purchase Agreement dated October 2013 between Company and Manchester Wings Limited (Incorporated by reference to Exhibit 10.1
to our Current Report on Form 8-K, filed with the SEC on October 24, 2013)
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2.3
|
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Tax
Covenant to October 2013 Share Purchase Agreement with Manchester Wings Limited (Incorporated by reference to Exhibit 10.2
to our Current Report on Form 8-K, filed with the SEC on October 24, 2013)
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2.4
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Subscription
Agreement dated November 2013 among the Company, JF Restaurants, LLC and the other parties named therein (Incorporated by
reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on November 5, 2013)
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2.5
|
|
Assignment,
Assumption, Joinder and Amendment Agreement dated December 2013 among the Company, JF Franchising Systems, LLC and the other
parties named therein (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on
December 12, 2013)
|
2.6
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Asset
Purchase Agreement by and among The Burger Company LLC, American Burger Morehead LLC and the Company dated September 9, 2014
(Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on September 10, 2014)
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2.7
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Asset
Purchase Agreement by and among Dallas Spoon, LLC, Express Working Capital, LLC and the Company dated December 31, 2014 (incorporated
by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC January 6, 2014)
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3.1
|
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Certificate
of Incorporation (Incorporated by reference to Exhibit 3.1A to our Registration Statement on Form 10SB-12G, filed with the
SEC on February 15, 2000 (File No. 000-29507))
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3.2
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Certificate
of Merger, filed May 2, 2005 (Incorporated by reference to Exhibit 2.1 to our Quarterly Report on Form 10-Q, filed with the
SEC on August 15, 2014)
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3.3
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Certificate
of Amendment, filed July 16, 2008 (Incorporated by reference to Exhibit 3.1(c) to our Registration Statement on Form S-1/A
(Registration No. 333-178307), filed with the SEC on February 3, 2012)
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3.4
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Certificate
of Amendment, filed March 18, 2011 (Incorporated by reference to the Exhibit 3.1 to our Current Report on Form 8-K, filed
with the SEC on March 18, 2011)
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3.5
|
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Certificate
of Amendment, filed May 23, 2012 (Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed with the
SEC on May 24, 2012)
|
3.6
|
|
Certificate
of Amendment, filed February 3, 2014 (Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed with
the SEC on February 4, 2014)
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3.7
|
|
Certificate
of Amendment, filed October 2, 2014 (Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed with
the SEC on October 2, 2014)
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3.8
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Form
of
Certificate of Designation of the Series 1 Preferred
Stock +
|
3.9
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|
Bylaws
(Incorporated by reference to Exhibit 3.II.A to our Registration Statement on Form 10SB-12G, filed with the SEC on February
15, 2000 (File No. 000-29507))
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4.1
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Form
of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-1 (Registration
No. 333-178307), filed with the SEC on December 2, 2011)
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4.2
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Form
of Unit Certificate dated June 2012 (Incorporated by reference to Exhibit 4.2 filed with our Registration Statement on Form
S-1/A (Registration No. 333-178307), filed with the SEC on May 30, 2012)
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4.3
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Form
of Warrant Agency Agreement dated June 2012 with Form of Warrant Certificate with $6.50 Exercise Price (Incorporated by reference
to Exhibit 4.4 filed with our Registration Statement on Form S-1/A (Registration No. 333-178307), filed with the SEC on May
30, 2012)
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4.4
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Form
of 6% Secured Subordinate Convertible Note dated August 2013 (Incorporated by reference to Exhibit 10.1 to our Current Report
on Form 8-K, filed with the SEC on August 5, 2013)
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4.5
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Form
of Warrant for August 2013 Convertible Note with $3.00 Exercise Price (Incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K, filed with the SEC on August 5, 2013)
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4.6
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Form
of Warrant for September 2013 Merger Agreement with $5.00 Exercise Price (Incorporated by reference to Exhibit 10.1 to our
Current Report on Form 8-K, filed with the SEC on October 1, 2013)
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4.7
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Form
of Warrant for September 2013 Subscription Agreement with $5.00 Exercise Price (Incorporated by reference to Exhibit 10.2
to our Current Report on Form 8-K, filed with the SEC on October 10, 2013)
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4.8
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Form
of Warrant for November 2013 Subscription Agreement with $5.50 and $7.00 Exercise Price (Incorporated by reference to Exhibit
10.2 to our Current Report on Form 8-K, filed with the SEC on November 13, 2013)
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4.9
|
|
Form
of Warrant for January 2015 Subscription Agreement (Incorporated by reference to Exhibit 4.1 to our Current Report on Form
8-K/A, filed with the SEC on January 8, 2015)
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4.10
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|
Form
of 8% Convertible Note dated January 2015 (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K/A,
filed with the SEC on January 8, 2015)
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4.11
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Form
of Subscription Rights Certificate+
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4.12
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Form
of Series 1 Preferred Stock Certificate , to be filed by amendment.
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4.13
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Form
of Series 1 Warrant+
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4.14
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Form
of Information Agent Agreement, to be filed by amendment.
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5.1
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Opinion
of Libertas Law Group Inc., to be filed by amendment
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8.1
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Opinion
of Cherry Bekaert LLP regarding certain tax matters, to be filed by amendment.
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10.1
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Form
of Franchise Agreement between the Company and Hooters of America, LLC (Incorporated by reference to Exhibit 10.2 to our Registration
Statement on Form S-1 (Registration No. 333-178307), filed with the SEC on December 2, 2011)
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10.2
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Chanticleer
Holdings, Inc. 2014 Stock Incentive Plan effective February 3, 2014 (Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K, filed with the SEC on February 4, 2014)*
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10.3
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Debt
Assumption Agreements, dated July 1, 2014 (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed
with the SEC on July 3, 2014)
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10.4
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Gaming
Assignment, dated July 1, 2014 (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed with the
SEC on July 3, 2014)
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10.5
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Asset
Purchase Agreement by and between Chanticleer Holdings, Inc., The Burger Company, LLC and American Burger Morehead, LLC dated
September 9, 2014 (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on September
10, 2014)
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10.6
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|
Asset
Purchase Agreement by and between Chanticleer Holdings, Inc., Dallas Spoon, LLC and Express Working Capital, LLC d/b/a CapRock
Services dated December 31, 2014 (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with
the SEC on January 6, 2015)
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10.7
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|
Form
of Subscription Agreement dated January 2015 (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K/A,
filed with the SEC on January 9, 2015)
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10.8
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|
Form
of Note dated January 2015 (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K/A, filed with the
SEC on January 9, 2015)
|
10.9
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|
Form
of Registration Rights Agreement dated January 2015 (Incorporated by reference to Exhibit 10.3 to our Current Report on Form
8-K/A, filed with the SEC on January 9, 2015)
|
10.10
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|
Asset
Purchase Agreement by and between Chanticleer Holdings, Inc., BGR Holdings, LLC and BGR Acquisition LLC, dated February 18,
2015 (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on February 18, 2015)
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10.11
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|
Membership
Interest Purchase Agreement dated July 31, 2015 (Incorporated by reference to exhibit 10.1 to our Current Report on Form 8-K,
filed with the SEC on August 3, 2015)
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10.12
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|
Form
of Leak Out Agreement dated September 30, 2015 (Incorporated by reference to exhibit 10.2 to our Current Report on Form 8-K,
filed with the SEC on October 5, 2015)
|
10.13
|
|
Form
of Securities Account Control Agreement dated September 30, 2015 (Incorporated by reference to exhibit 10.3 to our Current
Report on Form 8-K, filed with the SEC on October 5, 2015)
|
10.14
|
|
Stock
Pledge and Security Agreement dated September 30, 2015 (Incorporated by reference to exhibit 10.4 to our Current Report on
Form 8-K, filed with the SEC on October 5, 2015)
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10.15
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|
Asset
Purchase Agreement by and between Chanticleer Holdings, Inc., BT’s Burgerjoint Management, LLC and BT Burger Acquisition,
LLC dated March 31, 2015 (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC
on March 31, 2015)
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10.16
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|
Amendment No. 1
to Asset Purchase Agreement by and between Chanticleer Holdings, Inc., BT’s Burgerjoint Management, LLC and BT Burger
Acquisition, LLC dated May 31, 2015 (incorporated by reference to Exhibit 10.7 to Amendment No. 1 to Form S-3, Registration
No. 333- 203679, as filed June 3, 2015)
|
10.17
|
|
Form of Securities
Purchase Agreement by and between the Company and Carl Caserta dated February 11, 2015 (Incorporated by reference to Exhibit
10.1 to our Registration Statement on Form S-3 filed with the SEC on April 27, 2015)
|
10.18
|
|
Agreement dated
April 24, 2015 by and among the Company, AT Media Corp. and Aton Select Fund, Ltd. (Incorporated by reference to Exhibit 10.2
to our Registration Statement on Form S-3 filed with the SEC on April 27, 2015)
|
10.19
|
|
Registration Rights
Agreement by and between the Company and Carl Caserta dated February 11, 2015 (Incorporated by reference to Exhibit 10.3 to
our Registration Statement on Form S-3 filed with the SEC on April 27, 2015)
|
10.20
|
|
Membership Interest
Purchase Agreement dated July 31, 2015 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K as filed with
the SEC on August 3, 2015)
|
10.21
|
|
Form of Leak out
Agreement (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K as filed with the SEC on October 5, 2015)
|
10.22
|
|
Form of Securities
Account Control Agreement Form of Leak out Agreement (incorporated by reference to Exhibit 10.3 to Current Report on Form
8-K as filed with the SEC on October 5, 2015)
|
10.23
|
|
Stock Pledge and
Security Agreement dated September 30, 2015 (incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K as filed
with the SEC on October 5, 2015)
|
10.24
|
|
Business sale agreement
to purchase the assets of Hoot Campbelltown Pty Ltd and Hoot Penrith Pty Ltd for the purchase price of $390,000 AUD dated
August 12, 2015 (Incorporated by reference to Exhibit 10.24 to Annual Report on Form 10K for the period ending December 31,
2015, as filed March 30, 2016)
|
10.25
|
|
Business sale agreement
to purchase the assets of Hoot Gold Coast Pty Ltd and Hoot Townsville Pty Limited dated August 12, 2015 (Incorporated by reference
to Exhibit 10.25 to Annual Report on Form 10K for the period ending December 31, 2015, as filed March 30, 2016)
|
10.26
|
|
Business sale agreement
to purchase the assets of Hoot Parramatta Pty Ltd dated August 13, 2015 (Incorporated by reference to Exhibit 10.26 to Annual
Report on Form 10K for the period ending December 31, 2015, as filed March 30, 2016)
|
10.27
|
|
Second Amendment
to Assumption and Assignment Agreement dated October 22, 2016 by and between the Company and Florida Mezzanine Fund, LLLP
(previously filed with this Registration Statement on Form S-1)
|
21.
|
|
Subsidiaries of
the Company (Incorporated by reference to Exhibit 21 to our Annual Report on Form 10-K, filed with the SEC on March 31, 2014)
|
23.1
|
|
Consent of Marcum,
LLP, Independent Registered Public Accounting Firm +
|
23.2
|
|
Consent of Cherry
Bekaert LLP, Independent Registered Public Accounting Firm +
|
23.3
|
|
Consent of Libertas
Law Group Inc. (included in Exhibit 5.1)
|
24.1
|
|
Power of Attorney
(included in signature page hereto)
|
99.1
|
|
Form of Instructions
for Use of Subscription Rights Certificate+
|
99.2
|
|
Form of Letter to
Rights Holders+
|
99.3
|
|
Form of Notice of
Guaranteed Delivery+
|
99.4
|
|
Form of Letter to
Security Dealers, Commercial Banks, Trust Companies and Other Nominees+
|
99.5
|
|
Form of Letter to
Clients+
|
99.6
|
|
Form of Nominee
Holder Certification+
|
99.7
|
|
Form of Beneficial
Ownership Election Form+
|
* Denotes
an executive compensation plan or agreement
+ Filed
herewith
Our
SEC file number reference for documents filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, is 001-35570.
Prior to June 7, 2012, our SEC file number reference was 000-29507.
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