Business Combinations

3 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

Business Combinations

Note 2.           Business Combinations

The Company believes the Bad Daddy Burger Bar brand has significant growth potential and can be expanded   beyond its current regional footprint.  In order to acquire control over the Bad Daddy’s Burger Bar brand to take advantage of this growth potential, on April 28, 2015, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) to purchase from five sellers all of the membership interests in BDI, a North Carolina limited liability company.  The Company closed on the purchase of BDI on May 7, 2015, and BDI became a wholly-owned subsidiary of the Company.  BDI owns all of the member interests in four limited liability companies, each of which owns and operates a Bad Daddy’s Burger Bar restaurant in North Carolina.  In addition, BDI owns a portion of the member interests in three other limited liability companies, each of which also owns a Bad Daddy’s Burger Bar restaurant in North Carolina.  BDI also owns the intellectual property associated with the Bad Daddy’s Burger Bar concept and owns 52 percent of the member interests in BDFD, which has granted franchises for the ownership and operation of Bad Daddy’s Burger Bar restaurants in South Carolina and Tennessee. BDI has also granted a license for the operation of a Bad Daddy’s Burger Bar at the Charlotte airport.  As a result of the purchase of BDI, the Company has acquired all of the foregoing interests and assets.   Prior to the acquisition, the Company owned the remaining 48 percent of the member interests in BDFD and carried an Investment in Affiliates balance of $498,000.

The aggregate price paid by the Company for the purchase of BDI was $21,402,000, comprised of $18,988,000 payable in cash and a one-year secured promissory note bearing interest at 3.25 percent in the amount of $2,414,000.    Pursuant to a Pledge Agreement (the “Pledge Agreement”), the promissory note is secured by a pledge of the ownership of the two entities which own two of the acquired restaurants. Upon the reduction of the principal of the promissory note by at least 50% the sellers are to select one of the entities for release from the pledge.  The Company acquired all of BDI’s ownership interests. 

The preliminary estimated fair values of the assets acquired and liabilities assumed for the acquisition approximated the following (in thousands): 

	Allocated Fair Value
Cash	$	1,376
Receivables		124
Prepaid expenses and other		49
Inventories		133
Deposits		52
Property and equipment		3,672
Trademarks		3,900
Franchise agreements		116
Non-compete agreements		15
Goodwill		14,978
Total assets purchased		24,415
Accounts payable and other accrued liabilities		(758	)
Unfavorable lease liability		(481	)
Non-controlling interests in partnerships		(1,276	)
Total liabilities assumed		(2,515	)
Investment in BDFD balance		(498	)
Total purchase price	$	21,402
Cash	$	18,988
Notes payable		2,414
Total purchase price	$	21,402

The excess of the purchase price over the aggregate fair value of net assets acquired was allocated to goodwill.  The portion of the purchase price attributable to goodwill represents benefits expected as a result of the acquisition, including sales and unit growth opportunities in addition to supply-chain synergies.

Included in the consolidated statement of operations for the three month period ended December 31, 2015 are revenues of $4,463,000 and net income of $73,000 attributed to BDI and BDFD. 

Estimates of acquired goodwill and identifiable intangible assets related to the acquisition are as follows (in thousands):

	Estimated Fair Value		Weighted Average Estimated Useful Life (yrs)
Trademarks and trade names	$	3,900	Indefinite
Franchise Agreements		116	3 – 9
Non-Compete Agreements		15	3
Goodwill, including assembled workforce		14,978	Indefinite

The table below presents the proforma revenue and net income for the three month periods ended December 31, 2015 and 2014, assuming the acquisition had occurred on October 1, 2014.  This proforma information does not purport to represent what the actual results of operations of the Company would have been had the acquisition occurred on this date nor does it purport to predict the results of operations for future periods (in thousands). 

	Three Months Ended
	December 31,(1)
	2015			2014
Revenues	$	13,838		$	11,289
Net loss	$	(961	)	$	(1,036	)
Net loss attributable to common shareholders	$	(1,124	)	$	(1,112	)
Basic and diluted loss per share	$	(.09	)	$	(.12	)

(1)  Net loss during the three month period ended December 31, 2014 includes acquisition related costs of $648,000