UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: June 30, 2017

Commission File Number: 001-35570

CHANTICLEER HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-2932652
(State or Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

7621 Little Avenue, Suite 414, Charlotte, NC 28226

(Address of principal executive offices) (zip code)

(704) 366-5122

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods as the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ].

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ].

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer [  ]	Accelerated Filer [  ]	Non-Accelerated Filer (do not check if Smaller Reporting Company) [  ]
Smaller Reporting Company [X]	Emerging Growth Company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

The number of shares outstanding of registrant’s common stock, par value $.0001 per share, as of August 10, 2017 was 2,500,534 shares.

Chanticleer Holdings, Inc. and Subsidiaries

INDEX

			Page No.
Part I		Financial Information
	Item 1:	Financial Statements	3
		Condensed Consolidated Balance Sheets as of June 30, 2017 (Unaudited) and December 31, 2016	3
		Condensed Consolidated Statements of Operations (Unaudited) – For the Three Months and Six Months Ended June 30, 2017 and 2016	4
		Condensed Consolidated Statements of Comprehensive Loss (Unaudited) – For the Three Months and Six Months Ended June 30, 2017 and 2016	5
		Condensed Consolidated Statements of Cash Flows (Unaudited) – For the Three Months and Six Months Ended June 30, 2017 and 2016	6
		Notes to Condensed Consolidated Financial Statements (Unaudited)	8
	Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 3:	Quantitative and Qualitative Disclosures about Market Risk	38
	Item 4:	Controls and Procedures	38
Part II		Other Information
	Item 1:	Legal Proceedings	40
	Item 1A:	Risk Factors	40
	Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	40
	Item 3:	Defaults Upon Senior Securities	40
	Item 4:	Mine Safety Disclosures	40
	Item 5:	Other Information	40
	Item 6:	Exhibits	41
Signatures			42

2

Part I: FINANCIAL INFORMATION

Item 1: FINANCIAL StatemenTS

Chanticleer Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	(Unaudited)
	June 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash	$	377,695		$	268,575
Restricted cash		275,463			-
Accounts and other receivables		330,055			524,481
Inventories		560,243			539,550
Prepaid expenses and other current assets		367,443			461,074
Assets held for sale, net		578,321			-
TOTAL CURRENT ASSETS		2,489,220			1,793,680
Property and equipment, net		10,342,514			11,513,693
Goodwill		12,540,817			12,405,770
Intangible assets, net		6,374,427			6,530,243
Investments		800,000			800,000
Deposits and other assets		509,907			442,737
TOTAL ASSETS	$	33,056,885		$	33,486,123
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	5,040,696		$	5,553,068
Current maturities of long-term debt and notes payable		928,870			6,171,649
Current maturities of capital leases payable		9,294			18,449
Due to related parties		194,350			194,350
Deferred rent		106,818			173,775
TOTAL CURRENT LIABILITIES		6,280,028			12,111,291
Long-term debt, less current portion, net of debt discount and deferred financing costs of $2,161,422 and $0, respectively		4,533,161			287,445
Convertible notes payable, net of debt discount (premium) of ($17,156) and $46,936, respectively		3,217,156			3,678,064
Redeemable preferred stock: no par value, 62,876 and 19,050 shares issued and outstanding, net of discount of $226,089 and $0, respectively		622,737			257,175
Deferred rent		2,207,160			1,961,751
Deferred tax liabilities		1,559,074			1,485,554
TOTAL LIABILITIES		18,419,316			19,781,280
Commitments and contingencies (Note 13)
Common stock subject to repurchase obligation;  0 and 56,290 shares issued and outstanding, respectively		-			349,000
Stockholders' equity:
Preferred stock: no par value; authorized 5,000,000 shares; 62,876 and 19,050 issued issued and outstanding, respectively		-			-
Common stock: $0.0001 par value; authorized 45,000,000 shares; issued and outstanding 2,500,534 and 2,139,424 shares, respectively		250			213
Additional paid in capital		59,996,594			55,926,196
Accumulated other comprehensive loss		(966,489	)		(1,155,658	)
Accumulated deficit		(45,357,031	)		(42,206,325	)
Total Chanticleer Holdings, Inc. Stockholders’ Equity		13,673,324			12,564,426
Non-Controlling Interests		964,245			791,417
TOTAL STOCKHOLDERS' EQUITY		14,637,569			13,355,843
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	33,056,885		$	33,486,123

See accompanying notes to unaudited condensed consolidated financial statements

3

Chanticleer Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

	Three Months Ended						Six Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
Revenue:
Restaurant sales, net	$	10,524,787		$	10,525,629		$	20,177,941		$	20,330,320
Gaming income, net		107,520			97,978			213,588			197,511
Management fee income		24,993			25,000			49,983			50,000
Franchise income		108,017			103,387			183,803			285,939
Total revenue		10,765,317			10,751,994			20,625,315			20,863,770
Expenses:
Restaurant cost of sales		3,579,558			3,445,116			6,770,947			6,695,086
Restaurant operating expenses		5,855,410			5,737,168			11,529,971			11,252,183
Restaurant pre-opening and closing expenses		90,761			-			105,196			7,555
General and administrative expenses		1,084,422			1,374,835			2,460,042			3,049,714
Asset impairment charge		633,962			-			633,962			-
Depreciation and amortization		602,659			577,942			1,196,039			1,148,382
Total expenses		11,846,772			11,135,061			22,696,157			22,152,920
Operating loss from continuing operations		(1,081,455	)		(383,067	)		(2,070,842	)		(1,289,150	)
Other (expense) income
Interest expense		(504,706	)		(650,479	)		(908,842	)		(1,251,406	)
Change in fair value of derivative liabilities		-			513,439			-			1,129,101
Gain (loss) on debt refinancing		267,512			-			(95,310	)		-
Other income (expense)		(21	)		(27,706	)		12,212			(19,969	)
Total other expense		(237,216	)		(164,746	)		(991,940	)		(142,274	)
Loss from continuing operations before income taxes		(1,318,672	)		(547,813	)		(3,062,782	)		(1,431,424	)
Income tax expense		(109,531	)		(51,405	)		(113,328	)		(85,393	)
Loss from continuing operations		(1,428,201	)		(599,217	)		(3,176,110	)		(1,516,817	)
Discontinued operations
Loss from  discontinued operations, net of tax		-			(556,528	)		-			(1,235,909	)
Loss on write down of net assets		-			(3,876,161	)		-			(3,876,161	)
Consolidated net loss		(1,428,201	)		(5,031,906	)		(3,176,110	)		(6,628,887	)
Less: Net loss  attributable to non-controlling interest of continuing operations		56,328			(21,375	)		77,171			14,365
Net loss attributable to Chanticleer Holdings, Inc.	$	(1,371,873	)	$	(5,053,281	)	$	(3,098,939	)	$	(6,614,522	)
		-			-
Net loss attributable to Chanticleer Holdings, Inc.:
Loss from continuing operations	$	(1,371,873	)	$	(620,592	)	$	(3,098,939	)	$	(1,502,452	)
Loss from discontinued operations		-			(4,432,689	)		-			(5,112,070	)
Net loss attributable to Chanticleer Holdings, Inc.	$	(1,371,873	)	$	(5,053,281	)	$	(3,098,939	)	$	(6,614,522	)
Dividends on redeemable preferred stock		(27,622	)		-			(51,769	)		-
Net loss attributable to common shareholders of Chanticleer Holdings, Inc.	$	(1,399,495	)	$	(5,053,281	)	$	(3,150,708	)	$	(6,614,522	)
Net loss attributable to Chanticleer Holdings, Inc. per common share, basic and diluted:	$	(0.58	)	$	(2.35	)	$	(1.40	)	$	(3.09	)
Continuing operations attributable to common stockholders, basic and diluted	$	(0.58	)	$	(0.29	)	$	(1.40	)	$	(0.70	)
Discontinued operations attributable to common stockholders, basic and diluted	$	-		$	(2.06	)	$	-		$	(2.39	)
Weighted average shares outstanding, basic and diluted		2,432,313			2,152,282			2,257,767			2,143,003

See accompanying notes to unaudited condensed consolidated financial statements

4

Chanticleer Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Comprehensive Loss

	Three Months Ended						Six Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
Net loss attributable to Chanticleer Holdings, Inc.	$	(1,371,873	)	$	(5,053,281	)	$	(3,098,939	)	$	(6,614,522	)
Unrealized loss on available-for-sale securities, net of tax		-			(22,381	)		-			(24,501	)
Foreign currency translation gain (loss)		142,339			(307,543	)		189,170			(109,140	)
Total other comprehensive income (loss)		142,339			(329,924	)		189,170			(133,641	)
Comprehensive loss	$	(1,229,535	)	$	(5,383,205	)	$	(2,909,770	)	$	(6,748,163	)

See accompanying notes to unaudited condensed consolidated financial statements

5

Chanticleer Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

	Six Months Ended
	June 30, 2017			June 30, 2016
Cash flows from operating activities:
Net loss	$	(3,176,110	)	$	(6,628,887	)
Net loss from discontinued operations		-			5,112,070
Net loss from continuing operations		(3,176,110	)		(1,516,817	)
Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities:
Depreciation and amortization		1,196,039			1,148,382
Asset impairment charge		633,962			-
Loss on debt refinancing		95,310			-
Common stock and warrants issued for services		154,318			24,510
Common stock and warrants issued for interest		-			349,000
Amortization of debt discount		408,359			726,317
Change in assets and liabilities:
Accounts and other receivables		194,426			32,395
Prepaid and other assets		26,460			140,440
Inventory		(20,693	)		73,315
Accounts payable and accrued liabilities		(19.125	)		502,777
Change in amounts payable to related parties		-			197,000
Derivative liabilities		-			(1,129,101	)
Deferred income taxes		73,520			67,841
Deferred rent		178,453			(257,507	)
Net cash provided by (used in) operating activities from continuing operations		(255,081	)		358,551
Net cash  used in operating activities from discontinued operations		-			(75,000	)
Net cash provided by (used in) operating activities		(255,081	)		283,551
Cash flows from investing activities:
Purchase of property and equipment		(984,301	)		(392,829	)
Cash paid for acquisitions, net of cash acquired		-			(72,215	)
Proceeds from sale of investments		-			8,902
Net cash used in investing activities from continuing operations		(984,301	)		(456,142	)
Cash flows from financing activities:
Proceeds from sale of preferred stock		591,651			-
Payments related to sale of preferred stock		(258,153	)		-
Loan proceeds		6,598,161			125,000
Payments of deferred financing costs		(293,294	)		-
Loan repayments		(5,478,494	)		(206,267	)
Capital lease payments		(14,551	)		(10,783	)
Contribution of non-controlling interest		500,000			46,911
Net cash provided by (used in) financing activities from continuing operations		1,645,320			(45,139	)
Effect of exchange rate changes on cash		(21,355	)		(23,474	)
Net increase (decrease) in cash and restricted cash		384,583			(241,204	)
Cash and restricted cash,  beginning of period		268,575			1,224,415
Cash and restricted cash, end of period	$	653,158		$	983,211

See accompanying notes to unaudited condensed consolidated financial statements

6

Chanticleer Holdings, Inc. and Subsidiaries

Unaudited Consolidated Statements of Cash Flows, continued

	Six Months Ended
	June 30, 2017		June 30, 2016
Supplemental cash flow information:
Cash paid for interest and income taxes:
Interest	$	526,680	$	68,467
Income taxes		6,532		-
Non-cash investing and financing activities:
Convertible debt settled through issuance of common stock	$	625,000	$	-
Accrued interest settled through issuance of convertible debt		95,107		-
Preferred stock dividends paid through issuance of common stock		15,067		-
Commons stock issued in connection with working capital adjustment		27,018		-
Purchases of businesses:
Current assets excluding cash	$	-	$	1,611
Goodwill		-		70,604
Cash paid for acquisitions	$	-	$	72,215

See accompanying notes to unaudited condensed consolidated financial statements

7

Chanticleer Holdings, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of Business

Organization

Chanticleer Holdings, Inc. and its subsidiaries (together, the “Company”) are in the business of owning, operating and franchising fast casual dining concepts domestically and internationally.

The consolidated financial statements include the accounts of Chanticleer Holdings, Inc. and its subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.

The Company operates on a calendar year-end. The accounts of Hooters Nottingham (“WEW”), are consolidated based on a 13 and 26 week periods ending on the Sunday closest to each calendar quarter end. No events occurred related to the difference between the Company’s reporting calendar period-end and the subsidiary’s period end that materially affected the company’s financial position, results of operations, or cash flows.

Name	Jurisdiction of Incorporation	Percent Owned			Name	Jurisdiction of Incorporation	Percent Owned
CHANTICLEER HOLDINGS, INC.	DE, USA
Burger Business					Just Fresh
American Roadside Burgers, Inc.	DE, USA		100	%	JF Franchising Systems, LLC	NC, USA		56	%
ARB Stores					JF Restaurants, LLC	NC, USA		56	%
American Burger Ally, LLC	NC, USA		100	%
American Burger Morehead, LLC	NC, USA		100	%	West Coast Hooters
American Roadside McBee, LLC	NC, USA		100	%	Jantzen Beach Wings, LLC	OR, USA		100	%
American Roadside Southpark LLC	NC, USA		100	%	Oregon Owl’s Nest, LLC	OR, USA		100	%
American Roadside Burgers Smithtown, Inc.	DE, USA		100	%	Tacoma Wings, LLC	WA, USA		100	%
American Burger Prosperity, LLC	NC, USA		100	%
BGR Acquisition, LLC	NC, USA		100	%	South African Entities
BGR Acquisition 1, LLC					Chanticleer South Africa (Pty) Ltd.	South Africa		100	%
BGR Franchising, LLC	VA, USA		100	%	Hooters Emperors Palace (Pty.) Ltd.	South Africa		88	%
BGR Operations, LLC	VA, USA		100	%	Hooters On The Buzz (Pty) Ltd	South Africa		95	%
BGR Arlington, LLC	VA, USA		100	%	Hooters PE (Pty) Ltd	South Africa		100	%
BGR Cascades, LLC	VA, USA		100	%	Hooters Ruimsig (Pty) Ltd.	South Africa		100	%
BGR Dupont, LLC	DC, USA		100	%	Hooters SA (Pty) Ltd	South Africa		78	%
BGR Old Keene Mill, LLC	VA, USA		100	%	Hooters Umhlanga (Pty.) Ltd.	South Africa		90	%
BGR Old Town, LLC	VA, USA		100	%	Hooters Willows Crossing (Pty) Ltd	South Africa		100	%
BGR Potomac, LLC	MD, USA		100	%
BGR Springfield Mall, LLC	VA, USA		100	%	European Entities
BGR Tysons, LLC	VA, USA		100	%	Chanticleer Holdings Limited	Jersey		100	%
BGR Washingtonian, LLC	MD, USA		100	%	West End Wings LTD	United Kingdom		100	%
Capitol Burger, LLC	MD, USA		100	%	Chanticleer Finance UK (No. 1) Plc	United Kingdom		100	%
BGR Mosaic, LLC	VA, USA		100	%
BGR Michigan Ave, LLC	DC, USA		100	%	Inactive Entities
BGR Chevy Chase, LLC	MD, USA		100	%	Hoot Surfers Paradise Pty. Ltd.	Australia		60	%
BT Burger Acquisition, LLC	NC, USA		100	%	Hooters Brazil	Brazil		100	%
BT’s Burgerjoint Biltmore, LLC	NC, USA		100	%	DineOut SA Ltd.	England		89	%
BT’s Burgerjoint Promenade, LLC	NC, USA		100	%	Avenel Financial Services, LLC	NV, USA		100	%
BT’s Burgerjoint Rivergate LLC	NC, USA		100	%	Avenel Ventures, LLC	NV, USA		100	%
BT’s Burgerjoint Sun Valley, LLC	NC, USA		100	%	Chanticleer Advisors, LLC	NV, USA		100	%
LBB Acquisition, LLC	NC, USA		100	%	Chanticleer Investment Partners, LLC	NC, USA		100	%
Cuarto LLC	OR, USA		100	%	Dallas Spoon Beverage, LLC	TX, USA		100	%

8

LBB Acquisition 1 LLC	OR, USA	100	%	Dallas Spoon, LLC	TX, USA	100	%
LBB Green Lake LLC	OR, USA	50	%	American Roadside Cross Hill, LLC	NC, USA	100	%
LBB Hassalo LLC	OR, USA	80	%	UK Bond Company	United Kingdom	100	%
LBB Platform LLC	OR, USA	80	%
LBB Progress Ridge LLC	OR, USA	50	%
Noveno LLC	OR, USA	100	%
Octavo LLC	OR, USA	100	%
Primero LLC	OR, USA	100	%
Quinto LLC	OR, USA	100	%
Segundo LLC	OR, USA	100	%
Septimo LLC	OR, USA	100	%
Sexto LLC	OR, USA	100	%
Wallingford, LLC	OR, USA	50	%
Capitol Hill, LLC	WA, USA	50	%
LBB Franchising, LLC	NC, USA	100	%

GENERAL

The accompanying condensed consolidated financial statements included in this report have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting and include all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation. These condensed consolidated financial statements have not been audited. The results of operations for the three month and six months periods ended June 30, 2017 are not necessarily indicative of the operating results for the full year.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations for interim reporting. The Company believes that the disclosures contained herein are adequate to make the information presented not misleading. However, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 31, 2017. Certain amounts for the prior year have been reclassified to conform to the current year presentation.

9

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2017, our unrestricted cash balance was $0.4 million and, our working capital was negative $3.8 million. We incurred losses from continuing operations of $3.2 million and cash used in operating activities was $0.3 million for the six months ended June 30, 2017 and our debt, preferred stock, accounts payable and accrual obligations total approximately $14.3 million. The level of additional cash needed to fund operations and our ability to conduct business for the next twelve months will be influenced primarily by the following factors:

● our ability to access the capital and debt markets to satisfy current obligations and operate the business;

● our ability to continue to extend, refinance or recapitalize our debt obligations;

● the level of investment in acquisition of new restaurant businesses and entering new markets;

● our ability to manage our operating expenses and generate positive cash flow as we grow:

● popularity of and demand for our fast-casual dining concepts; and

● general economic conditions and changes in consumer discretionary income.

We have typically funded our operating costs, acquisition activities, working capital deficits and expenditures with proceeds from the issuances of our common stock and other financing arrangements, including convertible debt, lines of credit, notes payable, capital leases, and other forms of external financing.

Our operating plans for the next twelve months contemplate moderate organic growth, opening 6-10 new company stores within our current markets and restaurant concepts, the majority of which will utilize funds already committed from outside investors. As we execute our growth plans over the next twelve months, we intend to carefully monitor the impact of growth on our working capital needs and cash balances relative to the availability of cost-effective debt and equity financing.

We have approximately $6.3 million in current liabilities payable within the next twelve months from date of issuance of these financial statements and approximately $7.8 million in obligations payable within the next twenty-four months. In the event that additional working capital is not available, we may then have to scale back or freeze our growth plans, sell assets on less than favorable terms, reduce expenses, and/or curtail future acquisition plans to manage our liquidity and capital resources. We also have financial covenants and debt service obligations and may incur financial penalties or other negative actions from our lenders if we are not able to meet our obligations.

During March 2017, we extended the payment terms of our convertible debt obligations. During May 2017, we completed a $6 million private placement of 8% debentures and warrants, the proceeds of which were used to repay, settle and release the $5 million note payable and related obligations to Florida Mezzanine Fund and to provide additional working capital for new store openings and operations.

Management is actively considering the possible benefits of selling certain of its operating assets to reduce debt and provide additional working capital to fund future growth of its domestic burger business, as well as possibly closing certain underperforming store locations to improve operating cash flow. Our evaluations are at a preliminary stage, no decisions have been made, and we can provide no assurance that the Company will proceed with any asset sales, or that such asset sales could be completed on favorable terms, or at all. In the event that management does elect to proceed with asset sales and/or store closures in the future rather than continue to hold and operate all its assets long term, management’s assessment of the fair value, and ultimate recoverability, of goodwill, intangibles, and other long-lived assets could be impacted and the Company could incur significant noncash charges and cash exit costs in future periods.

There can be no assurance that we will be successful in implementing our growth plans, obtaining additional debt or equity financing at reasonable terms, if at all, or selling any of our operating assets. Accordingly, this raises substantial doubt about our ability to continue on a going concern for a period of one year from the issuance of these condensed consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might become necessary should the Company decide to liquidate assets or be unable to continue as a going concern.

10

REVERSE SPLIT

As of May 19, 2017, the Company effected a one-for-ten reverse stock split of the Company’s shares of common stock. As a result of reverse stock split, each ten shares of common stock issued and outstanding were combined into one share of common stock. No fractional shares were issued in connection with the reverse stock split. The Company rounded fractional shares up to the nearest whole number.

The reverse stock split had no impact on the par value per share of the Company’s common stock or the number of authorized shares. All current and prior period amounts related to shares, share prices and earnings per share contained in the accompanying unaudited condensed consolidated financial statements have been restated to give retrospective presentation for the reverse stock split.

2. SIGNIFICANT ACCOUNTING POLICIES

There have been no material changes to our significant accounting policies previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates include the valuation of the investments in portfolio companies, deferred tax asset valuation allowances, valuing warrants using the Black Scholes models, intangible asset valuations and useful lives, depreciation and uncollectible accounts and reserves. Actual results could differ from those estimates.

REVENUE RECOGNITION

Revenue is recognized when all of the following criteria have been satisfied:

● Persuasive evidence of an arrangement exists;

● Delivery has occurred or services have been rendered;

● The seller’s price to the buyer is fixed or determinable; and

● Collectability is reasonably assured.

Restaurant Net Sales and Food and Beverage Costs

The Company records revenue from restaurant sales at the time of sale, net of discounts, coupons, employee meals, and complimentary meals and gift cards. Sales, value added tax (“VAT”) and goods and services tax (“GST”) collected from customers and remitted to governmental authorities are presented on a net basis within sales in our consolidated statements of operations and comprehensive loss. Restaurant cost of sales primarily includes the cost of food, beverages, and merchandise and disposable paper and plastic goods used in preparing and selling our menu items, and exclude depreciation and amortization. Vendor allowances received in connection with the purchase of a vendor’s products are recognized as a reduction of the related food and beverage costs as earned.

Management Fee Income

The Company receives revenue from management fees from certain non-affiliated companies, including from managing its investment in Hooters of America.

Gaming Income

The Company receives revenue from operating a gaming facility adjacent to its Hooters restaurant in Jantzen Beach, Oregon. The Company also previously received gaming revenue from gaming machines located in Sydney, Australia. Revenue from gaming is recognized as earned from gaming activities, net of taxes and other government fees.

11

Franchise Income

The Company accounts for initial franchisee fees in accordance with FASB ASC 952, Franchisors. The Company grants franchises to operators in exchange for initial franchise license fees and continuing royalty payments. Franchise license fees are deferred when received and recognized as revenue when the Company has performed substantially all initial services required by the franchise or license agreement, which is generally upon the opening of a store. Continuing fees, which are based upon a percentage of franchisee revenues, are recognized on the accrual basis as those sales occur.

LOSS PER COMMON SHARE

The Company is required to report both basic earnings per share, which is based on the weighted-average number of shares outstanding, and diluted earnings per share, which is based on the weighted-average number of common shares outstanding plus all potentially diluted shares outstanding. The following table summarizes the number of common shares potentially issuable upon the exercise of certain warrants, convertible notes payable and convertible interest as of June 30, 2017 and 2016 that have been excluded from the calculation of diluted net loss per common share since the effect would be antidilutive.

	June 30, 2017		June 30, 2016
Warrants		1,862,758		950,630
Convertible notes		366,667		390,074
Accrued interest on convertible notes		-		23,327
Total		2,229,425		1,364,031

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 “Revenue from Contracts with Customers (as subsequently amended)” which provides a single, comprehensive accounting model for revenue arising from contracts with customers. This guidance supersedes most of the existing revenue recognition guidance, including industry-specific guidance. Under this model, revenue is recognized at an amount that a company expects to be entitled to upon transferring control of goods or services to a customer. The new guidance also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flow arising from customer contracts, including significant judgments and changes in judgments. The new guidance will be effective for the Company beginning in calendar 2018 and may be applied retrospectively to all prior periods presented or through a cumulative adjustment to the opening retained earnings balance in the year of adoption. The Company is currently evaluating the effect of this update on its consolidated financial statements and believes that the primary change will be the recognition of initial franchise fees over the life of the related franchise agreements, which will cause up front franchise fee revenue deferrals to extend over a longer timeframe.

In November 2015, the FASB issued ASU No. 2015-07 “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” related to the presentation of deferred income taxes. The guidance requires that deferred tax assets and liabilities be classified as non-current in a consolidated balance sheet. This guidance was adopted in the first quarter of 2017 and did not materially affect the Company’s consolidated financial statements.

12

In February 2016, the FASB issued ASU No. 2016-02 “Leases,” which supersedes ASC 840 “Leases” and creates a new topic, ASC 842 “Leases.” This update requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with earlier adoption permitted. This update will be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company has not completed its evaluation of effect this update will have on its consolidated financial statements, but does expect there could be a material increase in both assets and liabilities reflect on its consolidated balance sheets as a result of adoption as of January 1, 2019.

In January 2017, the FASB issued ASU No. 2017-04 “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The new guidance simplifies the test for goodwill impairment. Currently, the fair value of the reporting unit is compared with the carrying value of the reporting unit (identified as “Step 1”). If the fair value of the reporting unit is lower than its carrying amount then, the implied fair value of goodwill is calculated. If the implied fair value of goodwill is lower than the carrying value of goodwill an impairment is recognized (identified as “Step 2”). The new standard eliminates Step 2 from the impairment test; therefore, a goodwill impairment will be recognized as the difference of the fair value and the carrying value of the reporting unit. The new standard becomes effective on January 1, 2020 with early adoption permitted. The Company is currently evaluating the effect of this update on its consolidated financial statements.

There are several other new accounting pronouncements issued by FASB, which are not yet effective. Each of these pronouncements has been or will be adopted, as applicable, by the Company. At June 30, 2017, other than the adoption of ASU No. 2016-02 “Leases,” none of these pronouncements are expected to have a material effect on the financial position, results of operations or cash flows of the Company.

3. ACQUISITIONS

2016 Acquisition

The Company completed one acquisition during 2016, which was the acquisition of a restaurant location in the Harris YMCA in Charlotte, N.C. to expand our Just Fresh business. The Company allocated the purchase price as of the date of acquisition based on the estimated fair value of the acquired assets and assumed liabilities. In consideration of the purchased assets, the Company paid a purchase price totaling $72,215 in cash, of which $1,611 was allocated to acquired inventory and $70,604 to goodwill. The equipment and other assets used in the operation of the business are property of the YMCA and no other tangible or identifiable intangible assets other than inventory were acquired, with the balance being allocated to goodwill.

No proforma information was included as the proforma impact of the acquisition is not material.

4. DISCONTINUED OPERATIONS

In June 2016, the Company approved a plan to exit the Australia and Eastern Europe markets, authorizing management to sell or close its five Hooters stores in Australia and its one store in Budapest.

The Company completed the sale of the Hooters Australia and Budapest stores during the third quarter of 2016, transferring substantially all of the assets and liabilities of those operations to the local operating groups. In both cases, the Company did not receive any proceeds from the transfer, although in the case of Hooters Australia, the Company retained a five-year option to repurchase a 20% interest in the stores for $1.

There were no remaining balances attributable to discontinued operations on the accompanying condensed consolidated balance sheets as of June 30, 2017 or December 31, 2016.

The major line items comprising the loss of discontinued operations are as follows:

13

Major line items constituting pre-tax loss of discontinued operations:

	Three Months Ended					Six Months Ended
	June 30, 2017		June 30, 2016			June 30, 2017		June 30, 2016
Revenue	$	-	$	1,464,459		$	-	$	2,970,401
Restaurant cost of sales		-		515,718			-		1,042,543
Restaurant operating expenses		-		1,147,178			-		2,450,557
General and administrative expenses		-		168,048			-		254,174
Depreciation and amortization		-		177,929			-		436,144
Other		-		12,114			-		22,892
Loss of discontinued operations		-		(556,528	)		-		(1,235,909	)
Loss on write-down of net assets		-		(3,876,161	)		-		(3,876,161	)
Total pretax loss of discontinued operations		-		(4,432,689	)		-		(5,112,070	)
Income tax		-		-			-		-
Loss on discontinued operations	$	-	$	(4,432,689	)	$	-	$	(5,112,070	)

5. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

	June 30, 2017			December 31, 2016
Leasehold improvements	$	11,450,081		$	10,363,996
Restaurant furniture and equipment		6,814,102			6,716,926
Construction in progress		59,963			582,265
Office and computer equipment		68,303			68,303
Land and buildings		-			826,664
Office furniture and fixtures		108,030			108,030
		18,500,479			18,666,184
Accumulated depreciation and amortization		(8,157,965	)		(7,152,491	)
	$	10,342,514		$	11,513,693

6. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill is summarized by location as follows:

	June 30, 2017		December 31, 2016
Hooters Full Service	$	4,596,214	$	4,461,167
Better Burgers Fast Casual		7,448,848		7,448,848
Just Fresh Fast Casual		495,755		495,755
	$	12,540,817	$	12,405,770

The changes in the carrying amount of goodwill are summarized as follows:

	June 30, 2017		December 31, 2016
Beginning Balance	$	12,405,770	$	12,702,139
Acquisitions		-		70,604
Adjustments		-		62,192
Foreign currency translation (loss) gain		135,047		(429,165	)
Ending Balance	$	12,540,817	$	12,405,770

14

Other intangible assets, consisting of franchise costs, trademarks and tradenames, is summarized by location as follows:

	Estimated
	Useful Life	June 30, 2017			December 31, 2016
Trademark, Tradenames:
Just Fresh	10 years	$	1,010,000		$	1,010,000
American Roadside Burger	10 years		1,786,930			1,786,930
BGR: The Burger Joint	Indefinite		1,430,000			1,430,000
Little Big Burger	Indefinite		1,550,000			1,550,000
			5,776,930			5,776,930
Franchise fees:
Hooters South Africa	20 years		338,458			322,258
Hooters Pacific NW	20 years		88,826			88,826
BGR: The Burger Joint	Indefinite		1,320,000			1,320,000
Hooters UK	5 years		12,665			30,848
			1,759,949			1,761,932
Total Intangibles at cost			7,536,879			7,538,862
Accumulated amortization			(1,162,452	)		(1,008,619	)
Intangible assets, net		$	6,374,427		$	6,530,243

The Company reviews goodwill for impairment annually or more frequently if indicators of impairment exist. Goodwill is not subject to amortization and has been assigned to reporting units for purposes of impairment testing. The reporting units are our segments.

A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in the Company’s expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; the testing for recoverability of a significant asset group within a reporting unit; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on the Company’s consolidated financial statements.

The goodwill impairment test involves a two-step process. The first step is a comparison of each reporting unit’s fair value to its carrying value. The Company estimates fair value using the best information available, including market information and discounted cash flow projections (also referred to as the income approach). The income approach uses a reporting unit’s projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions. The projection uses management’s best estimates of economic and market conditions over the projected period including growth rates in sales, costs and number of units, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements. The Company validates its estimates of fair value under the income approach by comparing the values to fair value estimates using a market approach. A market approach estimates fair value by applying cash flow and sales multiples to the reporting unit’s operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics of the reporting units.

If the fair value of the reporting unit is higher than its carrying value, goodwill is deemed not to be impaired, and no further testing is required. If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss. The amount of impairment is determined by comparing the implied fair value of reporting unit goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination. Specifically, fair value is allocated to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical analysis that would calculate the implied fair value of goodwill. If the implied fair value of goodwill is less than the recorded goodwill, the Company would record an impairment loss for the difference.

15

Management tested its long-lived assets for impairment as of June 30, 2017 comparing each reporting unit’s fair value to its carrying value. That assessment included the assumption that management would continue to hold and operate each segment and generate cash flows over a period of years. Those cash flows were discounted using the income approach and compared to the carrying value of each segment. Management also evaluated the fair value of the reporting segments using the market value approach, comparing the carrying value to fair value based on multiples of current earnings and other indicators of value for each reporting unit. Management determined that the estimated fair value of its reporting unites was greater than the carrying value of the reporting units and that the Company’s goodwill, intangibles and long-lived assets were not impaired as of June 30, 2017.

However, management noted that the margin between the estimated fair value and carrying value was very narrow for one of its reporting units and that the impairment assessment in future periods would be sensitive to changes in estimates of cash flow, discount rates and other assumptions increasing the risk that an impairment could be triggered in future periods. The Company is also considering various strategies to improve cash flow and reduce long term debt, which could include selling certain of its operating assets, as well as possibly closing certain underperforming store locations to improve operating cash flow.

Those strategic evaluations are at a preliminary stage as of the date of this report, no decisions have been made, and management can provide no assurance that the Company will proceed with any asset sales, or that such asset sale can be completed on favorable terms, or at all.

In the event that management does elect to proceed with asset sales and/or effect store closures in the future rather than continue to hold and operate all its assets long term, management’s assessment of the fair value, and ultimate recoverability, of goodwill, intangibles, property and equipment and other assets would be impacted and the Company could incur significant noncash impairment charges and cash exit costs in future periods.

16

7. LONG-TERM DEBT AND NOTES PAYABLE

Long-term debt and notes payable are summarized as follows.

	June 30, 2017		December 31, 2016
Note Payable, due January 2019, net of discount and deferred financing costs of $2,161,422 and $0, respectively (a)	$	3,838,578	$	-
Note Payable, due January 2017, net of discount of $0 and $171,868, respectively (a)		-		5,000,000
Notes Payable Paragon Bank (b)		701,043		811,205
Note Payable (c )		75,000		-
Receivables financing facilities (d)		326,168		161,899
Mortgage Note, South Africa, due July 2024 (e)		224,395		215,962
Bank overdraft facilities, South Africa, annual renewal		174,084		124,599
Equipment financing arrangements, South Africa		122,763		145,430
Total long-term debt	$	5,462,031	$	6,459,094
Current portion of long-term debt		928,870		6,171,649
Long-term debt, less current portion	$	4,533,161	$	287,445

For the six months ended June 30, 2017 and 2016 amortization of debt discount was $432,932 and $ 85,938, respectively.

a) On May 4, 2017, pursuant to a Securities Purchase Agreement, the Company issued 8% non-convertible secured debentures in the principal amount of $6,000,000 and warrants to purchase 1,200,000 shares of common stock (as adjusted for the Company’s subsequent one-for-ten reverse stock split) to accredited investors. The debentures bear interest at a rate of 8% per annum, payable in cash quarterly in arrears. The debentures mature on December 31, 2018 and contain customary financial and other covenants, including a requirement to maintain positive earnings before interest, taxes, depreciation and amortization. The debentures are secured by a second priority security interest on the Company’s assets and the obligation is guaranteed by the Company’s subsidiaries. The debentures contain a mandatory redemption provision that is triggered by an asset sale. Sale of greater than 33% of the Company’s assets will also trigger an event of default. Upon any event of default, in addition to other customary remedies, the holders have the right, at their sole option, to purchase Little Big Burger from the Company, for an aggregate purchase price of $6,500,000. The warrants have an exercise price of $3.50 (as adjusted for the reverse stock split) and a ten-year term. The warrants are not exercisable until November 4, 2017. Warrants to purchase 800,000 shares include a beneficial ownership limit upon exercise of 4.99% of the number of shares of the common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon exercise of the warrant; warrants to purchase the remaining 400,000 shares were amended to increase the beneficial ownership limit upon exercise to 19.99%. The shares of common stock underlying the warrants have registration rights, and, if the warrant shares are not registered, the holders will have the right to cashless exercise.

In conjunction with the financing described above, the Company entered into a Satisfaction, Settlement and Release Agreement with Florida Mezzanine Fund LLLP, a Florida limited liability partnership (“Florida Mezz”), pursuant to which Florida Mezz agreed to release the Company from all claims and outstanding obligations pursuant to that certain Assumption Agreement dated June 30, 2014, as amended October 15, 2014 and October 22, 2016, and that certain Agreement dated May 23, 2016, as amended January 30, 2017, in exchange for payment of $5,000,000.

Five million of the net proceeds from the offering were remitted to Florida Mezz, $500,000 will be reserved to fund the opening of new stores, and the balance of $206,746, after transaction expenses, will be used for working capital and general corporate purposes. As of June 30, 2017, $275,463 of the proceeds restricted to fund the opening of new stores remains unexpended, and has been presented as restricted cash in the accompanying condensed consolidated balance sheet.

As a result of the issuance of the debentures and the settlement of the Florida Mezz obligations subsequent to March 31, 2016, the $5 million notes payable are no longer outstanding, the Company’s share repurchase obligation from Florida Mezz has been terminated and Florida Mezz waived unpaid interest and penalties previously recorded in the Company’s consolidated financial statements which resulted in the Company recognizing a gain of $267,512. As a result, as of June 30, 2017, the shares subject to repurchase were reclassified from temporary equity to permanent capital and the amounts accrued for interest and penalties reversed effective as of May 14, 2017.

17

The new $6 million loan was accounted for as a new borrowing with consideration allocated between the loan and the warrants based upon the relative fair value of the loan and the warrants. The Company valued the warrants associated with the new debt obligation using the Black Sholes model, which resulted in the allocation of $2.3 million to additional paid in capital with a corresponding offset to debt discount. In addition, there were $293,294 in debt origination costs that are also accounted for as an offset to outstanding debt. The resulting debt discount of $2.6 million is being amortized to interest expense over the 20-month term of the notes.

b) The Company has three term loans with Paragon Bank, all of which are collateralized by all assets of the Company and personally guaranteed by our Chief Executive Officer. The outstanding balance, interest rate and maturity date of each loan is as follows:

	Maturity date	Interest rate			Principal balance		Monthly principal and interest payment
Note 1	9/10/2018		5.50	%	$	61,151	$	4,406
Note 2	5/10/2019		5.25	%		262,778		11,532
Note 3	8/10/2021		5.25	%		377,114		8,500
					$	701,043	$	24,438

(c ) The Company has a promissory note payable on demand in the amount of $75,000 with 800 shares of restricted company common stock to be paid to the lender each month while the note is outstanding.

d) During February 2017, in consideration for proceeds of $330,000, the Company agreed to remit a total of $412,500 from the merchant accounts of eight of its restaurant locations directly to a lender. The Company agreed to make payments of $1,965 per day for 210 days. The Company has the option to payoff the loan early by remitting a total of $372,900 by the 120^th day. Also, during March 2017 in consideration for proceeds of $150,000, the company agreed to remit a total of $205,500 from the merchant accounts of three of its restaurant locations directly to the lender. The Company agreed to make payments of $856 per day for 240 days. The Company granted a security interest in the credit card receivables of the specified restaurants in connection with the Receivables Financing Agreements.

(e) The Company’s mortgage note is secured by the Company’s land and building used for the Hooters Port Elizabeth facility. The Company has identified several potential purchases for its land and building and anticipates closing the Port Elizabeth Hooters location in the third calendar quarter of 2017 and closing the sale of the land and building. If a transaction closes, the Company estimates it would receive gross proceeds of approximately 6 million to 8 million Rand (approximately $470,000 - $570,000 USD net estimated proceeds after broker commissions). The Company expects to pay the mortgage in full at closing using the net proceeds from the sale of the property. The net assets and liabilities related to Port Elizabeth location have been reclassified to Assets Held for Sale in the accompanying unaudited condensed consolidated balance sheet as of June 30, 2017 and an impairment loss of $634 thousand has been reflected in the accompanying unaudited condensed statement of operations for the periods ended June 30, 2017. These amounts are still subject to change and there can be no assurance that the transaction will be consummated and the estimated net proceeds and impairment loss remain subject to adjustment until finalization of the transaction.

18

8. cONVERTIBLE NOTEs PAYABLE

Convertible Notes payable are summarized as follows:

	June 30, 2017		December 31, 2016
6% Convertible notes payable due June 2018	$	3,000,000	$	3,000,000
8% Convertible notes payable due March 2019		100,000		100,000
Premium on above convertible note		8,578		-
8% Convertible notes payable due March 2019		100,000		150,000
Premium (discount) on above convertible note		8,578		(46,936	)
8% Convertible notes payable due March 2019		-		475,000
Total Convertible notes payable		3,217,156		3,678,064
Current portion of convertible notes payable		-		-
Convertible notes payable, less current portion	$	3,217,156	$	3,678,064

For the six months ended June 30, 2017 and 2016 amortization of debt discount was $24,573 and $640,379, respectively.

Pursuant to exchange agreements dated and effective March 10, 2017 by and between the Company and four existing note holders, the Company exchanged its 8% convertible notes in the aggregate principal amount of $725,000, which notes were in default, for new two-year 2% notes, in the aggregate principal amount of $820,107, representing $725,000 in principal and $95,107 unpaid accrued interest. The original convertible notes were canceled and new convertible notes issued that may be converted to common stock of the Company, at the option of the holder, at a conversion price of $3.00 per share. The notes have a two-year term, but may be called by the holder after the one-year anniversary of the exchange date. During March 2017, subsequent to the exchange agreements, convertible notes in the amount of $150,000 were converted by the holders into 50,000 shares of common stock. During April and May 2017, convertible notes in the amount of $475,000, plus related accrued interest balances, were converted by the holders into 187,798 shares of common stock.

The exchange of the convertible notes was accounting for as an extinguishment of the previous debt, resulting in the recognition of a net loss on extinguishment of $362,822 in the accompanying condensed consolidated financial statements, which was recorded during March 2017. In addition, the lenders of the $3 million 6% convertible debt agreed to waive defaults and extend the note maturity by eighteen months to December 2018.

19

9. accounts payable and accrued expenses

Accounts payable and accrued expenses are summarized as follows:

	June 30,2017		December 31, 2016
Accounts payable and accrued expenses	$	3,675,139	$	3,807,880
Accrued taxes (VAT, Sales Payroll)		879,254		988,056
Accrued income taxes		134,828		71,713
Accrued interest		351,475		685,419
	$	5,040,696	$	5,553,068

10. Stockholders’ Equity

The Company had 45,000,000 shares of its $0.0001 par value common stock authorized at both June 30, 2017 and December 31, 2016. The Company had 2,500,534 and 2,190,014 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively (including 56,290 shares that were previously classified as shares subject to repurchase obligations as of December 31, 2016). All current and prior period amounts related to shares, share prices and earnings per share contained in the accompanying unaudited condensed consolidated financial statements, have been restated to give retrospective presentation for the reverse stock split (See Note 1).

The Company has 5,000,000 shares of its no par value preferred stock authorized at both June 30, 2017 and December 31, 2016.

Beginning in December 2016, the Company conducted a rights offering of units, each unit consisting of one share of 9% Redeemable Series 1 Preferred Stock (“Series 1 Preferred”) and one Series 1 Warrant (“Series 1 Warrant”) to purchase 10 shares of common stock. Holders of the Series 1 Preferred are 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 registered common stock at the election of the Company. 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 common stock prior to the date of issuance. Dividends are to be paid prior to any dividend to the holders of common stock. The Series 1 Preferred is non-voting and has a liquidation preference of $13.50 per share, equal to its purchase price. Chanticleer is required to redeem the outstanding Series 1 Preferred at the expiration of the seven-year term. 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.

As of December 31, 2016, 19,050 shares of preferred stock were issued pursuant to the Preferred Stock Units rights offering. In addition, 43,826 additional shares were issued following in February 2017 for a total of 62,876 issued and outstanding as June 30, 2017.

In connection with the payment of past due interest on its $5 million note payable, the Company issued 56,290 shares of its common stock to the lender. Concurrently, the Company entered into a put agreement with Florida Mezzanine Fund during 2016, which provided the lender the right to require the Company to repurchase those shares at a price of $0.62 cents per share. This put right originally expired in January 2017 and was subsequently extended to June 30, 2017. The shares subject to the repurchase were reflected as a redeemable temporary equity on the accompanying consolidated balance sheet as of December 31, 2016. In May 2017, Florida Mezzanine fund’s put right terminated in connection with the Company’s repayment of its principal and the shares were reclassified as permanent equity in the accompanying consolidated balance sheet as of June 30, 2017.

20

Options and Warrants

The Company’s shareholders have approved the Chanticleer Holdings, Inc. 2014 Stock Incentive Plan (the “2014 Plan”), authorizing the issuance of options, stock appreciation rights, restricted stock awards and units, performance shares and units, phantom stock and other stock-based and dividend equivalent awards. Pursuant to the approved 2014 Plan, 400,000 shares have been approved for grant.

As of June 30, 2017, the Company had issued 32,534 restricted and unrestricted shares on a cumulative basis under the plan pursuant to compensatory arrangements with employees, board members and outside consultants. No employee stock options have been issued or are outstanding as of June 30, 2017 or December 31, 2016. The Company issued 15,000 restricted stock units to an employee during 2016. Approximately 367,466 shares remained available for grant in the future.

The Company also has issued warrants to investors in connection with financing transactions in prior periods. A summary of the warrants outstanding and related activity is presented below:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Life
Outstanding January 1, 2017		922,203		$	49.80		1.7
Granted		1,200,000		$	3.50		-
Exercised		-			-		-
Forfeited		(259,445	)		51.01		-
Outstanding June 30, 2017		1,862,758		$	19.79		2.6
Exercisable June 30, 2017		1,862,758		$	19.79		2.6

Exercise Price	Outstanding Number of Warrants		Weighted Average Remaining Life in Years		Exercisable Number of Warrants
>$40.00		484,518		1.47		484,518
$30.00-$39.99		49,990		2.14		49,990
$20.00-$29.99		77,950		2.57		77,950
$10.00-$19.99		50,300		3.78		50,300
$0.00-$9.99		1,200,000		9.84		1,200,000
		1,862,758		2.56		1,862,758

11. RELATED PARTY TRANSACTIONS

Due to related parties

The Company has received non-interest bearing, short-term advances Chanticleer Investors, LCC, a related party, in the amount of $194,350 as of June 30, 2017 and December 31, 2016. The amount owed to Chanticleer Investors LLC is related to cash distributions received from Chanticleer Investors LLC’s interest Hooters of America which is payable to the Company’s co-investors in that investment.

21

12. SEGMENT INFORMATION

The Company is in the business of operating restaurants and its operations are organized by geographic region and by brand within each region. Further each restaurant location produces monthly financial statements at the individual store level. The Company’s chief operating decision maker reviews revenues and profitability at the at the group level comprised of: Full Service Hooters, Better Burger Fast Casual, Just Fresh Fast Casual, and Corporate.

The following are revenues and operating income (loss) from continuing operations by segment as of and for the periods presented. The Company does not aggregate or review non-current assets at the segment level.

	Three  Months Ended						Six Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
Revenue:
Hooters Full Service	$	3,392,766		$	3,338,259		$	6,528,229		$	6,512,172
Better Burgers Fast Casual		6,010,542			5,898,316			11,326,830			11,449,966
Just Fresh Fast Casual		1,337,017			1,490,419			2,720,274			2,851,632
Corporate and Other		24,992			25,000			49,982			50,000
	$	10,765,317		$	10,751,994		$	20,625,315		$	20,863,770
Operating Income (Loss):
Hooters Full Service	$	(546,770	)	$	54,196		$	(589,616	)	$	43,744
Better Burgers Fast Casual		110,488			7,524			(58,622	)		(60,514	)
Just Fresh Fast Casual		(109,524	)		45,753			(45,884	)		(27,455	)
Corporate and Other		(535,649	)		(490,540	)		(1,376,720	)		(1,244,925	)
	$	(1,081,455	)	$	(383,067	)	$	(2,070,842	)	$	(1,289,150	)
Depreciation and Amortization
Hooters Full Service	$	142,759		$	132,650		$	278,938		$	261,926
Better Burgers Fast Casual		379,331			365,092			755,963			730,224
Just Fresh Fast Casual		79,726			79,247			159,452			154,370
Corporate and Other		843			953			1,686			1,862
	$	602,659		$	577,942		$	1,196,039		$	1,148,382

The following are revenues and operating income (loss) from continuing operations and non-current assets by geographic region as of and for the periods presented.

22

	Three  Months Ended						Six Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
Revenue:
United States	$	8,598,831		$	8,675,754		$	16,510,926		$	16,904,900
South Africa		1,482,379			1,307,517			2,866,773			2,521,573
Europe		684,107			768,723			1,247,616			1,437,297
	$	10,765,317		$	10,751,994		$	20,625,315		$	20,863,770
Operating Income (Loss):
United States	$	(1,123,772	)	$	(406,169	)	$	(2,064,843	)	$	(1,271,981	)
South Africa		(28,453	)		(57,571	)		(85,514	)		(117,629	)
Europe		70,770			80,673			79,515			100,460
	$	(1,081,455	)	$	(383,067	)	$	(2,070,842	)	$	(1,289,150	)
Non-current  Assets:								June 30, 2017			December 31, 2016
United States							$	26,800,768		$	26,812,062
South Africa								1,299,979			2,519,135
Europe								2,466,918			2,361,246
							$	30,567,665		$	31,692,443

13. COMMITMENTS AND CONTINGENCIES

On March 26, 2013, our South African operations received Notice of Motion filed in the Kwazulu-Natal High Court, Durban, Republic of South Africa, filed against Rolalor (PTY) LTD (“Rolalor”) and Labyrinth Trading 18 (PTY) LTD (“Labyrinth”) by Jennifer Catherine Mary Shaw (“Shaw”). Rolalor and Labyrinth were the original entities formed to operate the Johannesburg and Durban locations, respectively. On September 9, 2011, the assets and the then-disclosed liabilities of these entities were transferred to Tundraspex (PTY) LTD (“Tundraspex”) and Dimaflo (PTY) LTD (“Dimaflo”), respectively. The current entities, Tundraspex and Dimaflo are not parties in the lawsuit. Shaw is requesting that the Respondents, Rolalor and Labyrinth, be wound up in satisfaction of an alleged debt owed in the total amount of R4,082,636 (approximately $480,000). The two Notices were defended and argued in the High Court of South Africa (Durban) on January 31, 2014. Madam Justice Steryi dismissed the action with costs on May 5, 2014. Ms. Shaw appealed this decision and in December 2016, the Court dismissed the Labyrinth case with costs payable to the Company, and allowed the Rolalor case to proceed to liquidation. The Company did not object to the proposed liquidation of Rolalor as the entity has no assets. Mrs. Shaw has since applied to the High Court for Rolalor to be re registered to seek to set aside the transfer by Rolalor [Pty] Limited, which is now in final liquidation, of its assets to Tundraspex [Pty] Limited. This request to re-register Rolalor is being opposed by Tundraspex [Pty] Limited. No amounts have been accrued as of June 30, 2017 or December 31, 2016 in the accompanying condensed consolidated balance sheets.

On January 28, 2016, our Just Fresh subsidiary was notified that it had been served with a copyright infringement complaint, Kevin Chelko Photography, Inc. f. JF Restaurants, LLC, Case No. 3:13-CV-60-GCM (W.D. N.C.). The claim was filed in the United States District Court for the Western District of North Carolina Charlotte Division and seeks unspecified damages related to the use of certain photographic assets allegedly in violation of the United States copyright laws. On January 19, 2017, the case was dismissed with no damages being awarded and no amounts have been reflected in the accompanying condensed consolidated balance sheets as of June 30, 2017 or December 31, 2016.

23

From time to time, the Company may be involved in legal proceedings and claims that have arisen in the ordinary course of business. These actions, when ultimately concluded and settled, will not, in the opinion of management, have a material adverse effect upon the financial position, results of operations or cash flows of the company.

16. SUBSEQUENT EVENTS

Management has evaluated all events and transactions that occurred from July 1, 2017 through the date these unaudited condensed consolidated financial statements were issued for subsequent events requiring recognition or disclosure in the condensed consolidated financial statements.

ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. These statements include projections, predictions, expectations or statements as to beliefs or future events or results or refer to other matters that are not historical facts. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from those contemplated by these statements. The forward-looking statements contained in this Annual Report are based on various factors and were derived using numerous assumptions. In some cases, you can identify these forward-looking statements by the words “anticipate”, “estimate”, “plan”, “project”, “continuing”, “ongoing”, “target”, “aim”, “expect”, “believe”, “intend”, “may”, “will”, “should”, “could”, or the negative of those words and other comparable words. You should be aware that those statements reflect only the Company’s predictions. If known or unknown risks or uncertainties should materialize, or if underlying assumptions should prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. You should bear this in mind when reading this Quarterly Report and not place undue reliance on these forward-looking statements. Factors that might cause such differences include, but are not limited to:

● The quality of Company and franchise store operations and changes in sales volume;

● Our ability to operate our business and generate profits. We have not been profitable to date;

● 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;

● Inherent risks associated with acquiring and starting new restaurant concepts and store locations;

● General risk factors affecting the restaurant industry, including current economic climate, costs of labor and food prices;

● Intensive competition in our industry and competition with national, regional chains and independent restaurant operators;

● Our rights to operate and franchise the Hooters-branded restaurants are dependent on the Hooters’ franchise agreements;

24

● Our ability, and our dependence on the ability of our franchisees, to execute on our and their business plans effectively;

● Actions of our franchise partners or operating partners which could harm our business;

● Failure to protect our intellectual property rights, including the brand image of our restaurants;

● Changes in customer preferences and perceptions;

● Increases in costs, including food, rent, labor and energy prices;

● Our business and the growth of our Company is dependent on the skills and expertise of management and key personnel;

● Constraints could affect our ability to maintain competitive cost structure, including, but not limited to labor constraints;

● Work stoppages at our restaurants or supplier facilities or other interruptions of production;

● Our food service business and the restaurant industry are subject to extensive government regulation;

● We may be subject to significant foreign currency exchange controls in certain countries in which we operate;

● Inherent risk in foreign operations and currency fluctuations;

● Unusual expenses associated with our expansion into international markets;

● The risks associated with leasing space subject to long-term non-cancelable leases;

● We may not attain our target development goals and aggressive development could cannibalize existing sales;

● Current conditions in the global financial markets and the distressed economy;

● A decline in market share or failure to achieve growth;

● Negative publicity about the ingredients we use, or the potential occurrence of food-borne illnesses or other problems at our restaurants;

● Breaches of security of confidential consumer information related to our electronic processing of credit and debit card transactions;

● Unusual or significant litigation, governmental investigations or adverse publicity, or otherwise;

● 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;

● Adverse effects on our results from a decrease in or cessation or clawback of government incentives related to investments; and

● Adverse effects on our operations resulting from certain geo-political or other events.

25

You should also consider carefully the Risk Factors contained in Part II, Item 1A of this Quarterly Report and Item 1A of Part I of our Annual Report filed on Form 10-K for the period ended December 31, 2016, which address additional factors that could cause its actual results to differ from those set forth in the forward-looking statements and could materially and adversely affect the Company’s business, operating results and financial condition. The risks discussed in this Quarterly Report and the Annual Report are factors that, individually or in the aggregate, the Company believes could cause its actual results to differ materially from expected and historical results. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider such disclosures to be a complete discussion of all potential risks or uncertainties.

The forward-looking statements are based on information available to the Company as of the date hereof, and, except to the extent required by federal securities laws, the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, the Company cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Management’s Analysis of Business

We are in the business of owning, operating and franchising fast casual and full service dining concepts in the United States and internationally. As of June 30, 2017, our system-wide store count totaled 61 locations, consisting of 47 company-owned locations and 14 franchisee-operated locations as summarized below:

	As of June 30, 2017
	Better Burgers		Just Fresh		Hooters		Corp		Total		% of Total
Store Count
Company		31		7		9		-		47		77.0	%
Franchise		14		-		-		-		14		23.0	%
Total		45		7		9		-		61		100.0	%

	As of June 30, 2016
	Better Burgers		Just Fresh		Hooters		Corp		Total		% of Total
Store Count
Company		27		8		9		-		44		80.0	%
Franchise		11		-		-		-		11		20.0	%
Total		38		8		9		-		55		100.0	%

We own, operate and franchise a system-wide total of 45 fast casual restaurants specializing in the “Better Burger” category of which 31 are company-owned and 14 are operated by franchisees under franchise agreements. American Burger Company (“ABC”) is a fast casual dining chain consisting of 9 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 11 company-owned locations in the United States and 14 franchisee-operated locations in the United States and the Middle East. Little Big Burger (“LBB”) consists of 11 company-owned locations in Oregon.

26

We also own and operate Just Fresh, our healthier eating fast casual concept with 7 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 9 Hooters full service restaurants in the United States, South Africa, and the United Kingdom. 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.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2017 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2016

Our results of operations are summarized below:

	June 30, 2017						June 30, 2016
	Amount			% of Revenue*			Amount			% of Revenue*			% Change
Restaurant sales, net	$	10,524,787					$	10,525,629						0.0	%
Gaming income, net		107,520						97,978						9.7	%
Management fees		24,993						25,000						0.0	%
Franchise income		108,017						103,387						4.5	%
Total revenue		10,765,317						10,751,994						0.1	%
Expenses:
Restaurant cost of sales		3,579,558			34.0	%		3,445,116			32.7	%		3.9	%
Restaurant operating expenses		5,855,410			55.6	%		5,737,168			54.5	%		2.1	%
Restaurant pre-opening and closing expenses		90,761			0.9	%		-			0.0	%		-
General and administrative		1,084,422			10.1	%		1,374,835			12.8	%		-21.1	%
Asset impairment charge		633,962			5.9	%		-			0.0	%		-
Depreciation and amortization		602,659			5.6	%		577,942			5.4	%		4.3	%
Total expenses		11,846,772			110.0	%		11,135,061			103.6	%		6.4	%
Operating loss from continuing operations	$	(1,081,455	)				$	(383,067	)

  *  Restaurant cost of sales, operating expenses and pre-opening and closing expense percentages are based on restaurant sales, net.

Other percentages are based on total revenue.

Revenue

Total revenue from continuing operations increased 0.1% to $10.8 million for the three months ended June 30, 2017 from $10.8 million for the three months ended June 30, 2016.

27

Revenues by concept and revenue type and a breakdown of system-wide store count are further summarized below:

	Three Months Ended June 30, 2017
Revenue	Better Burgers		Just Fresh		Hooters		Corp		Total		% of Total
Restaurant sales, net	$	5,902,525		1,337,017		3,285,245	$	-	$	10,524,787		97.8	%
Gaming income, net		-		-		107,520		-		107,520		1.0	%
Management fees		-		-		-		24,993		24,993		0.2	%
Franchise income		108,017		-		-		-		108,017		1.0	%
Total revenue	$	6,010,542	$	1,337,017	$	3,392,765	$	24,993	$	10,765,317		100.0	%

	Three Months Ended June 30, 2016
Revenue	Better Burgers		Just Fresh		Hooters		Corp		Total		% of Total
Restaurant sales, net	$	5,794,929		1,490,418		3,240,281	$	-	$	10,525,629		97.9	%
Gaming income, net		-		-		97,978		-		97,978		0.9	%
Management fees		-		-		-		25,000		25,000		0.2	%
Franchise income		103,387		-		-		-		103,387		1.0	%
Total revenue	$	5,898,316	$	1,490,418	$	3,338,259	$	25,000	$	10,751,994		100.0	%

	% Change in Revenues Compared to Prior Year
Revenue	Better Burgers			Just Fresh			Hooters			Corp			Total
Restaurant sales, net		1.9	%		-10.3	%		1.4	%		-			0.0	%
Gaming income, net		-			-			9.7	%		-			9.7	%
Management fees		-			-			-			0.0	%		0.0	%
Franchise income		4.5	%		-			-			-			4.5	%
Total revenue		1.9	%		-10.3	%		1.6	%		0.0	%		0.1	%

Restaurant revenues from continuing operations were unchanged at $10.5 million for both the three months ended June 30, 2017 and for the three months ended June 30, 2016.

● Restaurant revenue from the Company’s Better Burger Group increased 1.9% to $5.9 million for the three months ended June 30, 2017 from $5.8 million for the three months ended June 30, 2016. The increase was attributable the opening of one new Little Big Burger store during the first quarter of 2017, two new Little Big Burger stores and one new BGR store during the second quarter of 2017. The increases attributable to new store openings were partially offset by a 9.7% decrease in revenue from stores open during both periods, primarily at certain of the Company’s American Burger and BGR locations.

● Restaurant revenue from the Company’s Just Fresh Group decreased 10.3% to $1.3 million for the three months ended June 30, 2017 from $1.5 million for the three months ended June 30, 2016. Revenue was negatively impacted by a reduction in days of operation at the East Boulevard location, which we reduced from seven days per week to five to improve operating margins, and the decision to not renew the Charlotte Knights location, which contributed to a same stores sales decrease of 10.9%.

● Restaurant revenue from the Company’s Hooter’s restaurants increased 1.4% to $3.3 million for the three months ended June 30, 2017 from $3.2 million for the three months ended June 30, 2016. Revenue increased by 16% in South Africa primarily due to favorable foreign currency rates as compared with the prior year. In the United Kingdom, revenue declined 11%, primarily due to unfavorable foreign currency exchange rates as compared to prior year. Revenue from Hooters in United States declined 3.9%.

28

Gaming revenue increased 9.7% due to increased play as a result of recent upgrades to the VLT terminals at our Hooters locations in the Pacific Northwest over the past year. The favorable effects of the upgrades were partially offset by the opening of a new casino property in the areas during the current year.

Franchise revenue consisted of recurring royalties in both periods and was essentially unchanged, increasing 4.5% to $108 thousand for the three months ended June 30, 2017 from $103 thousand for the three months ended June 30, 2016.

Management fee revenue was unchanged at $25 thousand in each period. The Company earns $100 thousand annually for its CEO serving on the Board of Directors of Hooters of America.

Cost of Restaurant sales

Cost of restaurant sales increased 3.9% to $3.6 million for the three months ended June 30, 2017 from $3.4 million for the three months ended June 30, 2016.

	Three Months Ended
	June 30, 2017					June 30, 2016
Cost of Restaurant Sales	Amount		% of Restaurant Net Sales			Amount		% of Restaurant Net Sales			% Change
Better Burgers Fast Casual	$	1,957,303		33.2	%	$	1,867,303		32.2	%		4.8	%
Just Fresh Fast Casual		520,922		39.0	%		506,911		34.0	%		2.8	%
Hooters Full Service		1,101,333		33.5	%		1,070,902		33.0	%		2.8	%
	$	3,579,558		34.0	%	$	3,445,116		32.7	%		3.9	%

Cost of restaurant sales increased to 34.0% as a percent of net restaurant revenues for the three months ended June 30, 2017 from 32.7% for the three months ended June 30, 2016. The increase in cost of restaurant sales was partially due to increased revenues associated with new stores opened in the past twelve months combined with increases in the cost of beef and other ingredients.

29

Restaurant operating expenses

Restaurant operating expenses increased 2.1% to $5.9 million for the three months ended June 30, 2017 from $5.7 million for the three months ended June 30, 2016.

Our restaurant operating expenses as a percentage of restaurant sales for each region of operations is included in the following table:

	Three Months Ended
	June 30, 2017					June 30, 2016
Operating Expenses	Amount		% of Restaurant Net Sales			Amount		% of Restaurant Net Sales			% Change
Better Burgers Fast Casual	$	3,205,085		54.3	%	$	3,143,990		54.3	%		1.9	%
Just Fresh Fast Casual		739,155		55.3	%		744,077		49.9	%		-0.7	%
Hooters Full Service		1,911,170		58.2	%		1,849,101		57.1	%		3.4	%
	$	5,855,410		55.6	%	$	5,737,168		54.5	%		2.1	%

As a percent of restaurant revenues, operating expenses increased to 55.6% for the three months ended June 30, 2017 from 54.5% for the three months ended June 30, 2016. Operating expenses increased partially due to increased revenues associated with new stores opened in the past twelve months combined with the impact of fixed operating costs in certain of our restaurant locations which experienced revenue declines as compared to the prior year period.

Restaurant pre-opening and closing expenses

Restaurant pre-opening and closing expenses increased to $91 thousand for the three months ended June 30, 2017 from $0 for the three months ended June 30, 2016. The preopening costs in the current period were primarily related to pre-opening payroll and other expenses for our Little Big Burger openings in Portland and our BGR opening in northern Virginia during the current quarter.

General and Administrative Expense (“G&A”)

G&A decreased 21.1% to $1.1 million for the three months ended June 30, 2017 from $1.4 million for the three months ended June 30, 2016. Significant components of G&A are summarized as follows:

	Three Months Ended
	June 30, 2017		June 30, 2016
Audit, legal and other professional services	$	308,982	$	193,576
Salary and benefits		542,650		660,918
Consulting and other fees		17,853		76,642
Travel and entertainment		21,834		68,834
Shareholder services and fees		35,154		1,867
Advertising, Insurance and other		157,949		372,998
Total G&A Expenses	$	1,084,422	$	1,374,835

30

As a percentage of total revenue, G&A decreased to 10.1% for the three months ended June 30, 2017 from 12.8% for the three months ended June 30, 2016.

For the current period, approximately 52% of the Company’s consolidated G&A is attributable to operating the Corporate office primarily comprised of public company costs (officer salaries, audit, legal, insurance and related expenses) and store support services (accounting, human resources, IT and related expenses).

Approximately 48% of total consolidated G&A is attributable to regional management, franchising, marketing, advertising, and other administrative activities within the Better Burger group, Hooters, and Just Fresh.

The improvement in G&A is primarily due to reductions in regional management and administrative staffing as the Company has continued to streamline and integrate its corporate office and regional operations following the acquisitions... The Company implemented a new enterprise-wide accounting platform and point of sale system across the company’s US based locations further streamlining and simplifying operational process during the current year, which also contributed to the overhead expense reductions.

Depreciation and amortization

Depreciation and amortization expense was essentially unchanged at $0.6 million for the three months ended June 30, 2017 and 2016.

OTHER INCOME (EXPENSE)

Other income (expense) consisted of the following:

	Three Months Ended
Other Income (Expense)	June 30, 2017			June 30, 2016			% Change
Interest expense	$	(504,706	)	$	(650,479	)		-22.4	%
Change in fair value of derivative liabilities		-			513,439			-100.0	%
Gain on debt refinancing		267,512			-			-
Total other expense		(21	)		(27,706	)		-99.9	%
Total other expense	$	(237,215	)	$	(164,746	)		44.0	%

Other expense, net increased 44.0% to $237 thousand for the three months ended June 30, 2017 from $165 thousand for the three months ended June 30, 2016. The change in other expenses, net was primarily related to lower interest expenses and a gain on refinancing of the Florida Mezzanine debt in 2017 were partially offset by the $0.5 million noncash income from the change in fair value of non-cash derivative liabilities in the prior year.

Interest expense decreased 22.4% to $0.5 million for the three months ended June 30, 2017 from $0.7 million for the three months ended June 30, 2016. The reduction in interest is primarily due to lower non-cash amortization of debt discounts and the reduction in convertible debt outstanding during the current period.

The Company recognized changes in the fair value of derivative liabilities totaling $0.5 million for the three months ended June 30, 2016. This is a non-cash income or expense associated with our convertible debt and is adjusted quarterly based primarily on the change in the fair value of the price of the Company’s common stock. The Company does not have derivative liabilities in 2017.

In connection with the refinancing of the $5 million Florida Mezzanine Fund debt in May 2017, the Company recognized a gain of $267,512 from Florida Mezz waiving the unpaid interest and penalties previously owed to them.

31

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2017 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2016

Our results of operations are summarized below:

	Six Months Ended
	June 30, 2017						June 30, 2016
	Amount			% of Revenue*			Amount			% of Revenue*			% Change
Restaurant sales, net	$	20,177,941					$	20,330,320						-0.7	%
Gaming income, net		213,588						197,511						8.1	%
Management fee income		49,983						50,000						0.0	%
Franchise income		183,803						285,939						-35.7	%
Total revenue		20,625,315						20,863,770						-1.1	%
Expenses:
Restaurant cost of sales		6,770,947			33.6	%		6,695,086			32.9	%		1.1	%
Restaurant operating expenses		11,529,971			57.1	%		11,252,183			55.3	%		2.5	%
Restaurant pre-opening and closing expenses		105,196			0.5	%		7,555			0.0	%		1292.4	%
General and administrative		2,460,042			11.9	%		3,049,714			14.6	%		-19.3	%
Asset impairment charge		633,962			3.1	%		-			0.0	%		-
Depreciation and amortization		1,196,039			5.8	%		1,148,382			5.5	%		4.1	%
Total expenses		22,696,157			110.0	%		22,152,920			106.2	%		2.5	%
Operating loss from continuing operations	$	(2,070,842	)				$	(1,289,150	)					60.6	%

* Restaurant cost of sales, operating expenses and pre-opening and closing expense percentages are based on restaurant sales, net. Other percentages are based on total revenue.

Revenue

Total revenue from continuing operations decreased 1.1% to $20.6 million for the six months ended June 30, 2017 from $20.9 million for the six months ended June 30, 2016.

32

Revenues by concept and revenue type and a breakdown of system-wide store count are further summarized below:

	Six Months Ended June 30, 2017
Revenue	Better Burgers		Just Fresh		Hooters		Corp		Total		% of Total
Restaurant sales, net	$	11,143,026		2,720,274		6,314,641	$	-	$	20,177,941		97.8	%
Gaming income, net		-		-		213,588		-		213,588		1.0	%
Management fees		-		-		-		49,983		49,983		0.2	%
Franchise income		183,803		-		-		-		183,803		0.9	%
Total revenue	$	11,326,829	$	2,720,274	$	6,528,228	$	49,983	$	20,625,315		100.0	%

	Six Months Ended June 30, 2016
Revenue	Better Burgers		Just Fresh		Hooters		Corp		Total		% of Total
Restaurant sales, net	$	11,164,027		2,851,632		6,314,660	$	-	$	20,330,320		97.4	%
Gaming income, net		-		-		197,511		-		197,511		0.9	%
Management fees		-		-		-		50,000		50,000		0.2	%
Franchise income		285,939		-		-		-		285,939		1.4	%
Total revenue	$	11,449,966	$	2,851,632	$	6,512,171	$	50,000	$	20,863,770		100.0	%

	% Change in Revenues Compared to Prior Year
Revenue	Better Burgers		Just Fresh		Hooters		Corp		Total
Restaurant sales, net	-0.2	%	-4.6	%	0.0	%	-		-0.7	%
Gaming income, net	-		-		8.1	%	-		8.1	%
Management fees	-		-		-		0.0	%	0.0	%
Franchise income	-35.7	%	-		-		-		-35.7	%
Total revenue	-1.1	%	-4.6	%	0.2	%	0.0	%	-1.1	%

Restaurant revenues from continuing operations decreased 0.7% to $20.2 million for the six months ended June 30, 2017 from $20.3 million for the six months ended June 30, 2016.

● Restaurant revenue from the Company’s Better Burger Group decreased 0.2% to $11.1 million for the six months ended June 30, 2017 from $11.2 million for the six months ended June 30, 2016. The increases attributable to new store openings were partially offset by a 9.2% decrease in revenue from stores open during both periods, primarily at certain of the Company’s American Burger and BGR locations. The decrease was also attributable to the loss of approximately 4 operating days due to unusual weather in the Pacific Northwest, combined with slower than normal traffic in January and February in the Charlotte and Washington DC markets. Those decreases were partially offset by increased restaurant revenue from the opening of three new Little Big Burger stores and one new BGR store during the first half of 2017.

● Restaurant revenue from the Company’s Just Fresh Group decreased 4.6% to $2.7 million for the six months ended June 30, 2017 from $2.9 million for the six months ended June 30, 2016. Revenue was negatively impacted by a reduction in days of operation at the East Boulevard location, which we reduced from seven days per week to five to improve operating margins, and the decision to not renew the Charlotte Knights location, which contributed to a same stores sales decrease of 6.6%.

33

● Restaurant revenue from the Company’s Hooter’s restaurants were unchanged at $6.3 million for both the six months ended June 30, 2017 and the six months ended June 30, 2016. Revenue increased by 16% in South Africa primarily due to favorable foreign currency rates as compared with the prior year. In the United Kingdom, revenue declined 13%, primarily due to unfavorable foreign currency exchange rates as compared to prior year. Revenue from Hooters in the United States declined 6.6%, primarily as a result of unfavorable weather in the Pacific Northwest during the current year with the loss of approximately 4 operating days and slower than normal traffic during January and February.

Gaming revenue increased 8.1% due to increased play as a result of recent upgrades to the VLT terminals at our Hooters locations in the Pacific Northwest over the past year. The favorable effects of the upgrades were partially offset by unfavorable weather and the opening of a new casino property in the area during the current year.

Franchise revenue decreased 35.7% to $183 thousand for the six months ended June 30, 2017 from $285 thousand for the six months ended June 30, 2016. The decline in franchise revenue is primarily due to limited new franchising activity in the current period while the BGR groups is undertaking a comprehensive rebranding process to improve their store design and offerings, combined with a decline in international royalties.

Management fee revenue was unchanged at $50 thousand in each period. The Company earns $100 thousand annually for its CEO serving on the Board of Directors of Hooters of America.

Cost of Restaurant sales

Cost of restaurant sales increased 1.1% to $6.8 million for the six months ended June 30, 2017 from $6.7 million for the six months ended June 30, 2016.

	Six Months Ended
	June 30, 2017					June 30, 2016
Cost of Restaurant Sales	Amount		% of Restaurant Net Sales			Amount		% of Restaurant Net Sales			% Change
Better Burgers Fast Casual	$	3,657,763		32.8	%	$	3,602,376		32.3	%		1.5	%
Just Fresh Fast Casual		963,338		35.4	%		996,924		35.0	%		-3.4	%
Hooters Full Service		2,149,846		34.0	%		2,095,786		33.2	%		2.6	%
	$	6,770,947		33.6	%	$	6,695,086		32.9	%		1.1	%

Cost of restaurant sales increased to 33.6% of net restaurant revenues for the six months ended June 30, 2017 compared to 32.9% for the six months ended June 30, 2016. The increase in cost of restaurant sales was partially due to increased revenues associated with new stores opened in the past twelve months combined with increases in the cost of beef and other ingredients.

Restaurant operating expenses

Restaurant operating expenses increased 2.5% to $11.5 million for the six months ended June 30, 2017 from $11.3 million for the six months ended June 30, 2016.

Our restaurant operating expenses, as a percentage of restaurant sales for each region of operations, are included in the following table:

34

	Six Months Ended
	June 30, 2017					June 30, 2016
Operating Expenses	Amount		% of Restaurant Net Sales			Amount		% of Restaurant Net Sales			% Change
Better Burgers Fast Casual	$	6,273,355		56.3	%	$	6,090,148		54.6	%		3.0	%
Just Fresh Fast Casual		1,448,127		53.2	%		1,472,100		51.6	%		-1.6	%
Hooters Full Service		3,808,489		60.3	%		3,689,935		58.4	%		3.2	%
	$	11,529,971		57.1	%	$	11,252,183		55.3	%		2.5	%

As a percent of restaurant revenues, operating expenses increased to 57.1% for the six months ended June 30, 2017 from 55.3% for the six months ended June 30, 2016. Operating expenses increased partially due to increased revenues associated with new stores opened in the past twelve months combined with the impact of fixed operating costs in certain of our restaurant locations which experienced revenue declines as compared to the prior year period.

Restaurant pre-opening and closing expenses

Restaurant pre-opening and closing expenses increased to $105 thousand for the six months ended June 30, 2017 from $8 thousand for the six months ended June 30, 2016. The preopening costs in the current period were primarily related to pre-opening payroll and other expenses for our Little Big Burger openings in Portland and our BGR opening in northern Virginia during the current quarter.

General and Administrative Expense (“G&A”)

G&A decreased 19.3% to $2.5 million for the six months ended June 30, 2017 from $3.0 million for the six months ended June 30, 2016. Significant components of G&A are summarized as follows:

	Six Months Ended
	June 30, 2017		June 30, 2016
Audit, legal and other professional services	$	675,888	$	561,590
Salary and benefits		1,088,489		1,313,422
Consulting and other fees		54,840		234,634
Travel and entertainment		81,899		146,050
Shareholder services and fees		86,973		17,541
Advertising, Insurance and other		471,953		776,477
Total G&A Expenses	$	2,460,042	$	3,049,714

As a percentage of total revenue, G&A decreased to 11.9% for the six months ended June 30, 2017 from 14.6% for the six months ended June 30, 2016.

For the current period, approximately 58% of the Company’s consolidated G&A is attributable to operating the Corporate office primarily comprised of public company costs (officer salaries, audit, legal, insurance and related expenses) and store support services (accounting, human resources, IT and related expenses).

Approximately 42% of total consolidated G&A is attributable to regional management, franchising, marketing, advertising, and other administrative activities within the Better Burger group, Hooters, and Just Fresh.

35

The improvement in G&A is primarily due to reductions in regional management and administrative staffing as the Company has continued to streamline and integrate its operations. The Company is also in process of implementing a new enterprise-wide accounting platform and point of sale system across the majority of the company’s locations, which increased G&A spending in the current period.

Depreciation and amortization

Depreciation and amortization expense was essentially unchanged at $1.2 and $1.1 million for the six months ended June 30, 2017 and 2016, respectively.

OTHER INCOME (EXPENSE)

Other income (expense) consisted of the following:

	Six Months Ended
Other Income (Expense)	June 30, 2017			June 30, 2016			% Change
Interest expense	$	(908,842	)	$	(1,251,406	)		-27.4	%
Change in fair value of derivative liabilities		-			1,129,101			-100.0	%
Loss on debt refinancing		(95,310	)		-			-
Other income		12,212			(19,969	)		-161.2	%
Total other expense	$	(991,940	)	$	(142,274	)		597.2	%

Other expense, net increased to a net expense of $1.0 million for the six months ended June 30, 2017 from $0.1 million. The change in other expenses, net was primarily as a result of lower interest expenses and a net loss on refinancing of the Florida Mezzanine debt and several convertible debt obligations during 2017 were partially offset by the $1.1 million noncash income from change in fair value of non-cash derivative liabilities in the prior year.

Interest expense decreased 27.4% to $0.9 million for the six months ended June 30, 2017 from $1.3 million for the six months ended June 30, 2016. The reduction in interest is primarily due to lower non-cash amortization of debt discounts and the reduction in convertible debt outstanding during the current period.

The Company recognized changes in the fair value of derivative liabilities totaling $1.1 million for the six months ended June 30, 2016. This is a non-cash income or expense associated with our convertible debt and is adjusted quarterly based primarily on the change in the fair value of the price of the Company’s common stock. The Company does not have derivative liabilities in 2017.

In connection with the refinancing of the $5 million Florida Mezzanine Fund debt in May 2017, the Company recognized a gain of $268 thousand from Florida Mezz waiving the unpaid interest and penalties previously owed to them. In connection with the modification of convertible note obligations in March 2017, the Company recognized net loss on extinguishment of $363 thousand during the first quarter of 2017, resulting in a net loss of $95 thousand for the six months ended June 30, 2017.

LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN

As of June 30, 2017, our unrestricted cash balance was $0.4 million, our working capital was negative $3.8 million. We incurred losses from continuing operations of $3.2 million and cash used in operating activities was $0.3 million for the six months ended June 30, 2017 and our debt, preferred stock, accounts payable and accrual obligations total approximately $14.3 million. The level of additional cash needed to fund operations and our ability to conduct business for the next twelve months will be influenced primarily by the following factors:

36

● our ability to access the capital and debt markets to satisfy current obligations and operate the business;

● our ability to continue to extend, refinance or recapitalize our debt obligations;

● the level of investment in acquisition of new restaurant businesses and entering new markets;

● our ability to manage our operating expenses and generate positive cash flow as we grow:

● popularity of and demand for our fast-casual dining concepts; and

● general economic conditions and changes in consumer discretionary income.

We have typically funded our operating costs, acquisition activities, working capital deficits and expenditures with proceeds from the issuances of our common stock and other financing arrangements, including convertible debt, lines of credit, notes payable, capital leases, and other forms of external financing.

Our operating plans for the next twelve months contemplate moderate organic growth, opening 6-10 new company stores within our current markets and restaurant concepts, the majority of which will utilize funds already committed from outside investors. As we execute our growth plans over the next twelve months, we intend to carefully monitor the impact of growth on our working capital needs and cash balances relative to the availability of cost-effective debt and equity financing.

We have approximately $6.3 million in current liabilities payable within the next twelve months from date of issuance of these financial statements and approximately $7.8 million in obligations payable within the next twenty-four months. In the event that additional working capital is not available, we may then have to scale back or freeze our growth plans, sell assets on less than favorable terms, reduce expenses, and/or curtail future acquisition plans to manage our liquidity and capital resources. We also have financial covenants and debt service obligations and may incur financial penalties or other negative actions from our lenders if we are not able to meet our obligations.

During March 2017, we extended the payment terms of our convertible debt obligations. During May 2017, we completed a $6 million private placement of 8% debentures and warrants, the proceeds of which were used to repay, settle and release the $5 million note payable and related obligations to Florida Mezzanine Fund and to provide additional working capital for new store openings and operations.

Management is actively considering the possibility benefits of selling certain of its operating assets to reduce debt and provide additional working capital to fund future growth of its domestic burger business, as well as possibly closing certain underperforming store locations to improve operating cash flow. These evaluations are at a preliminary stage, no decisions have been made, and we can provide no assurance that the Company will proceed with any asset sales, or that such asset sale can be completed on favorable terms, or at all. In the event that management does elect to proceed with asset sales and/or store closures in the future rather than continue to hold and operate all its assets long term, management’s assessment of the fair value, and ultimate recoverability, of goodwill, intangibles, and other long-lived assets could be impacted and the Company could incur significant noncash charges and cash exit costs in future periods.

There can be no assurance that we will be successful in implementing our growth plans, obtaining additional debt or equity financing at reasonable terms, if at all, or selling any of our operating assets. Accordingly, this raises substantial doubt about our ability to continue on a going concern for a period of one year from the issuance of these condensed consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might become necessary should the Company decide to liquidate assets or be unable to continue as a going concern.

In addition, our business is subject to additional risks and uncertainties, including, but not limited to, those described Part II, Item 1A of this Quarterly Report and in Item 1A of Part I of our Annual Report filed on Form 10-K for the period ended December 31, 2016. “Risk Factors”.

37

CRITICAL ACCOUNTING POLICIES

Our condensed consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. Preparation of these statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and assumptions are affected by the application of our accounting policies. Critical accounting policies are those that require application of management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain and may change in subsequent periods. A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in our 2016 Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission on March 31, 2017, in the Notes to the Consolidated Financial Statements, Note 1, and the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 3: QUANTITATIVE and QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

Item 4: Controls and Procedures

Evaluation of disclosure controls and procedures

Under the PCAOB standards, a control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit the attention by those responsible for oversight of the company’s financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such terms are defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of June 30, 2017. Our management has determined that, as of June 30, 2017 the Company’s disclosure controls and procedures were not effective.

Management’s report on internal control over financial reporting

Management Responsibility for Internal Control over Financial Reporting. Management is responsible for establishing and maintaining effective internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements in accordance with the United States’ generally accepted accounting principles (US GAAP), including those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP and that receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

38

Management’s Evaluation of Internal Control over Financial Reporting. Management evaluated our internal control over financial reporting as of June 30, 2017. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework. As a result of this assessment and based on the criteria in this framework, management has concluded that, as June 30, 2017, our internal control over financial reporting was ineffective.

Material Weaknesses

A material weakness is a control deficiency, or a combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Management identified the following deficiencies in its internal control over financial reporting during the prior year:

● As the Company completed multiple acquisitions in a short period of time over the past two years, it has operated multiple accounting systems using disparate charts of accounts and inconsistent financial close procedures and timetables. The lack of consistency makes it more difficult to ensure that the consolidated financial records are completed timely and on a consistent basis each reporting period, which increases the risk of undetected errors.

● The Company’s financial close procedures are not formally documented across the organization to the degree necessary to ensure that financial statements are prepared consistently and accurately each reporting period.

● The Company’s information systems, as well as the organization and storage of critical financial records, were not deemed adequate to ensure the timely ability to recover from a disaster or prevent the accidental loss of critical financial records.

● The Company’s financial statements include complex transactions and financial instruments that are subject to extensive technical accounting standards that increase the risk of undetected errors and where the Company’s internal resources do not possess deep technical specialization.

● The Company performs extensive reconciliation and manual review procedures to ensure that the financial statements results are accurately presented; however, there is inconsistent and informal documentation of these review procedures.

Management determined that the deficiencies, evaluated in the aggregate, could potentially result in a material misstatement of the consolidated financial statements in a future annual or interim period that would not be prevented or detected. Therefore, the deficiencies constitute material weaknesses in internal control. Based on that evaluation, management determined that our internal control over financial reporting was not effective as of June 30, 2017.

Remediation Plans

We have initiated several steps and plan to continue to evaluate and implement measures designed to improve our internal control over financial reporting in order to remediate the control deficiencies noted above.

While our evaluation of the appropriate remediation plans is still ongoing, efforts to date have included recruiting additional qualified personnel with experience in financial reporting and internal control. During 2016, the Company took steps to standardize its chart of accounts and accounting procedures. During the first half of 2017, the Company implemented a new enterprise wide accounting system and point of sale systems at the majority of its US based operations to further standardize accounting procedures and reporting and address the information system weaknesses identified.

39

Changes in Internal Control over Financial Reporting — The Company is implementing changes to its accounting systems internal processes and policies to further standardize the internal control over financial reporting with respect to the monitoring, reporting and consolidation of the financial results of the acquired operations into the Company’s financial statements. During the three months ended June 30, 2017, the Company made changes to its accounting systems and its internal control over financial reporting that it expects to materially improve its internal control over financial reporting in future periods.

PART II – OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

We are subject to various legal proceedings from time to time in the ordinary course of business, which may not be required to be disclosed under this Item 1. For the three month period ending June 30, 2017 covered by this Quarterly Report, there have been no reportable legal proceedings or material developments to previously reported legal proceedings.

ITEM 1A: RISK FACTORS

In the event that management proceeds with asset sales and/or store closures rather than continuing to hold and operate all its assets long term, management’s assessment of the fair value, and ultimate recoverability, of goodwill, intangibles, and other long-lived assets would be impacted and the Company could incur significant noncash charges and cash exit costs in future periods.

We have approximately $6.3 million in current liabilities payable within the next twelve months from date of issuance of these financial statements and approximately $7.8 million in obligations payable within the next twenty-four months. In the event that additional working capital is not available, we may be forced to scale back or freeze our growth plans, sell assets on less than favorable terms, reduce expenses, and/or curtail future acquisition plans to manage our liquidity and capital resources. In the event that management elects to proceed with asset sales and/or store closures in the future rather than continue to hold and operate all its assets long term, management’s assessment of the fair value, and ultimate recoverability, of goodwill, intangibles, and other long-lived assets would be impacted and the Company could incur significant noncash charges and cash exit costs in future periods.

We may not be able to refinance, extend or repay our substantial indebtedness owed to our secured lenders, which would have a material adverse affect on our financial condition and ability to continue as a going concern.

We have approximately $6.3 million in current liabilities payable within the next twelve months from date of issuance of these financial statements and approximately $7.8 million in obligations payable within the next twenty-four months. If we are unable to repay these obligations at maturity and we are otherwise unable to extend the maturity dates or refinance these obligations, we would be in default. We cannot provide any assurances that we will be able to raise the necessary amount of capital to repay these obligations or that we will be able to extend the maturity dates or otherwise refinance these obligations. Upon a default, our secured lenders would have the right to exercise their rights and remedies to collect, which would include foreclosing on our assets. Accordingly, a default would have a material adverse effect on our business and we would likely be forced to seek bankruptcy protection.

Proceeds from asset sales are subject to a right of mandatory redemption of our 8% non-convertible secured debenture holders, in principal amount of $6,000,000, thereby limiting our flexibility to allocate proceeds from asset sales to payment of other debt obligations or working capital.

Management is actively considering the possible benefits of selling certain of its operating assets to reduce debt and provide additional working capital to fund future growth of its domestic burger business, as well as possibly closing certain underperforming store locations to improve operating cash flow. Proceeds from asset sales are subject to a right of mandatory redemption of our 8% non-convertible secured debenture holders, in principal amount of $6,000,000, thereby limiting our flexibility to allocate proceeds from asset sales to payment of other debt obligations or working capital.

On June 12, 2017, we received notification from Nasdaq that we regained compliance with the minimum bid price rule and we are in compliance with other applicable requirements required for listing on The Nasdaq Stock Market. Accordingly, our securities will continue to be listed on The Nasdaq Stock Market.

There have been no other material changes to our risk factors as previously disclosed in “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31,2016 (“Risk Factors”). Readers should carefully consider these Risk Factors, which could materially affect our business, financial condition or future results. These Risk Factors are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not issue or sell any other unregistered equity securities during the period covered by this report that were not previously reported on a Current Report on Form 8-K.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5: OTHER INFORMATION

None.

40

ITEM 6: EXHIBITS

Exhibit No.	Description
3.1	Certificate of Amendment of Certificate of Incorporation of Chanticleer Holdings Inc. dated May 16, 2017 (Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K, as filed May 18, 2017)
4.1	Form of 8% Non-convertible Secured Debenture (Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K, as filed May 5, 2017)
4.2	Form of Warrant issued May 4, 2017 (Incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K, as filed May 5, 2017)
4.3	Amendment to Warrant dated April 7, 2017 by and between Chanticleer Holdings, Inc., and Larry S. Spitcaufsky, Trustee of Larry Spitcaufsky Family Trust UTD 1-19-88 (Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K, as filed August 9, 2017)
4.4	Form of 2% Convertible Note issued March 10, 2017 (filed herewith)
4.5	Form of Amendment to 6% Secured Convertible Note dated March 24, 2017 (filed herewith)
10.1	Form of Exchange Agreement by and between Chanticleer Holdings Inc. and holders of 8% Notes dated March 10, 2017 (filed herewith)
10.2	Securities Purchase Agreement dated May 4, 2017 by and between Chanticleer Holdings Inc. and certain purchasers (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K, as filed May 5, 2017)
10.3	Security Agreement dated May 4, 2017 by and between Chanticleer Holding’s Inc. and holders of 8% Non-convertible Secured Debentures (Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K, as filed May 5, 2017)
10.3	Subsidiary Guarantee dated May 4, 4017 by and between the subsidiaries of Chanticleer Holdings Inc. and holders of 8% Non-convertible Secured Debentures (Incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K, as filed May 5, 2017)
10.4	Satisfaction, Settlement and Release Agreement dated May 2, 2017 by and between Chanticleer Holdings Inc. and Florida Mezzanine Fund, LLLP (Incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K, as filed May 5, 2017)
10.5	Amendment to Securities Purchase Agreement by and between Chanticleer Holdings, Inc. and holders of 8% Non-convertible Secured Debentures executed August 7, 2017 (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K, as filed August 9, 2017)
31.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1	Certification of Principal Executive Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.2	Certification of Principal Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

*XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are furnished and not filed.

41

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CHANTICLEER HOLDINGS, INC.
Date: August 14, 2017	By:	/s/ Michael D. Pruitt
		Michael D. Pruitt
		Chief Executive Officer
		(Principal Executive Officer)
		/s/ Eric S. Lederer
		Eric S. Lederer
		Chief Financial Officer
		(Principal Accounting Officer)

42