Quarterly report pursuant to Section 13 or 15(d)

Condensed Consolidated and Combined Balance Sheets (Parenthetical)

v3.20.2
Condensed Consolidated and Combined Balance Sheets (Parenthetical) - USD ($)
Sep. 30, 2020
Dec. 31, 2019
Preferred stock, par value
Preferred stock, shares authorized
Preferred stock, shares issued
Preferred stock, shares outstanding
Debt discount [1] $ 268,418
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 50,000,000 45,000,000
Common stock, shares issued 14,282,736 10,404,342
Common stock, shares outstanding 14,282,736 10,404,342
Redeemable Preferred Stock: Series 1 [Member]    
Preferred stock, par value
Prefered stock, shares discount $ 0 $ 139,131
Preferred stock, shares authorized 0 0
Preferred stock, shares issued 0 62,876
Preferred stock, shares outstanding 0 62,876
Convertible Preferred Stock: Series 2 [Member]    
Preferred stock, par value $ 1,000 $ 1,000
Preferred stock, shares authorized 1,500
Preferred stock, shares issued 787
Preferred stock, shares outstanding 787
[1] In connection with and prior to the Spin-Off and Merger, on April 1, 2020, pursuant to an agreement among Chanticleer, Oz Rey and certain original holders of the 8% non-convertible debentures (see (a) above), the Company issued a 10% secured convertible debenture to Oz Rey in exchange for the 8% non-convertible debentures. The principal amount of the 10% secured convertible debenture is $4,037,889, payable in full on April 1, 2022, subject to extension by the holders in two-year intervals for up to 10 years from the issuance date upon Amergent meeting certain conditions. Interest is payable quarterly in cash. Prior to August 17, 2020, the 10% secured convertible debenture was convertible at any time by Oz Rey into common stock at the lower of $0.10 per share and the volume weighted average price on the last 10 trading days immediately prior to conversion. The 10% secured convertible debenture is also subject to adjustment if Amergent sells securities below this price (down round protection), among other triggers. In connection with the exchange of the debentures, Amergent issued warrants to Oz Rey and the original 8% non-convertible debenture holders to purchase 2,925,200 shares of common stock. The exercise price is $0.125 for 2,462,600 warrants and $0.50 for 462,500 warrants. The warrants can be exercised on a cashless basis and expire 10 years from the issuance date. Through August 16, 2020, Amergent did not have an adequate amount of authorized common stock to cover shares issuable upon exercise of the warrants and conversion of the 10% convertible notes. As such, the warrants were liability classified and the conversion feature was bifurcated from the host debt instrument and accounted for as a derivative and recorded as a liability in the accompanying condensed consolidated and combined balance sheet through August 16, 2020, with the change in the liability for the warrants and the conversion feature from the April 1, 2020 issuance date through August 16, 2020 recorded in the accompanying condensed consolidated and combined statement of operations for the three and nine month periods ended September 30, 2020. The warrants issued had an estimated fair value of $935,000 as of April 1, 2020 using a Monte Carlo simulation to determine the value. The fair value of the conversion feature was $11,231,000 as of April 1, 2020 using a Monte Carlo simulation to determine the value. The estimated carrying value of the 10% convertible secured debentures without the conversion feature was $3,680,000, and with the conversion feature was $14,911,000. On August 17, 2020, the Company and Oz Rey amended the 10% secured convertible debenture to fix the conversion rate into common stock at $0.10 per share. Further, the amendment provides a limitation on Oz Rey's ability to convert the debenture into common stock so that the conversion would not result in the the issuance of common stock exceeding the amount of authorized shares. Oz Rey may; however, upon reasonably notice to the Company, require the Company to include in its proxy materials, for any annual meeting of shareholders being held by the Company, a proposal to amend the Company's certificate of incorporation to increase the Company's authorized shares to a number sufficient to allow for conversion of all shares underlying the debenture, on a fully diluted basis. Oz Rey also agreed that the Company would not be required under any circumstances to make a cash payment to settle the conversion feature not exercisable due to the authorized share cap or in an event that the Company was unable to deliver shares under the conversion feature. Oz Rey also agreed to waive any event of default under the debenture that occurred or existed prior to August 17, 2020. As a result of these modifications, the warrants are no longer liability classified and the conversion feature is no longer required to be bifurcated from the debt host as of the date of the amendment. Through the date of the amendment, the warrants and the conversion feature were marked to fair value with the change in the liability recorded in the accompanying condensed consolidated and combined statement of operations. The liabilities for the warrants and conversion feature were reclassified into additional-paid-in-capital at the amendment date. The estimated fair value of the warrants and conversion feature at August 16, 2020 were $924,000 and $10,970,000, respectively. The change in value of these instruments from the issuance date through August 16, 2020 of ($11,000) and ($261,000) has been recorded as a component of other expense (income) and included in change in fair value of derivative liabilities and warrants in the accompanying condensed consolidated and combined statements of operations for the nine month period ended September 30, 2020. See note 10 for further discussion of determining the estimated fair value of these instruments. The exchange of the notes has been accounted for as the extinguishment of the 8% non-convertible notes with the difference in the carrying value of the 8% non-convertible notes, $4,037,889, and the fair value of the 10% convertible notes and warrants, $15,846,000, at the date of the exchange recorded as a debt extinguishment charge of $11,808,111 in the accompanying condensed consolidated and combined statement of operations for the nine month period ended September 30, 2020. The Company recorded a debt discount of approximately $358,000 for the difference between the face value of the 10% secured convertible debenture and the estimated fair value at the April 1, 2020 issuance date and is amortizing this discount over the two-year period of the notes. Amortization of approximately $45,000 and $90,000 was recorded as interest expense during three and nine month periods ended September 30, 2020, respectively. The Company's various loan agreements contain financial and non-financial covenants and provisions providing for cross-default. The evaluation of compliance with these provisions is subject to interpretation and the exercise of judgment.