|9 Months Ended|
Sep. 30, 2020
Investments consist of the following at September 30, 2020 and December 31, 2019:
Warrant to purchase common stock of Sonnet
Upon consummation of the Merger discussed in Note 1, the Company received a warrant to purchase 2% of the common stock of Sonnet as part of the Merger Consideration. Amergent cannot exercise the warrant until 180 days after the closing of the Merger.
The estimated fair value of the warrant to purchase 2% of the common stock of Sonnet (186,161 shares) was $1,628,909 as of April 1, 2020 and $476,724 as of September 30, 2020. The warrant has an exercise price of $0.01 per share and is exercisable beginning on September 28, 2020 through April 1, 2025. The estimated fair value of the warrant was determined based on the $8.76 and $2.57 closing stock price of a common share of Sonnet as of April 1, 2020 and September 30, 2020, respectively, net of the $0.01 exercise price multiplied by the 186,161 shares issuable upon exercise of the warrant. This value is also equal to the value under the Black-Scholes option pricing model with the following inputs:
The fair value of the warrant as of April 1, 2020 of $1,628,909 was recorded as an increase in additional paid-in-capital as of the Merger date. The decrease in fair value through September 30, 2020 was recorded as an investment loss in the accompanying condensed combined and consolidated statement of operations with $199,152 and $1,152,185 recognized in the three and nine months ended September 30, 2020, respectively.
Chanticleer Investors LLC
The Company invested $800,000 during 2011 and 2012 in exchange for a 22% ownership stake in Chanticleer Investors, LLC, which in turn held a 3% interest in Hooters of America, the operator and franchisor of the Hooters Brand worldwide. As a result, the Company’s effective economic interest in Hooters of America was approximately 0.6%. Effective June 28, 2019, Hooters of America closed on the sale of a controlling interest in the company. The consideration paid in the sale transaction was a combination of cash proceeds and equity in the newly formed company. The Company netted approximately $48,000 in cash upon the transaction and retained a non-controlling interest in the equity of the newly-formed company.
The entire disclosure for investment.
Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef