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
Quarter Ended: September 30,
2009





Commission
File Number: 000-29507





CHANTICLEER HOLDINGS,
INC.


(Exact
name of registrant as specified in its charter)





Delaware
            20-2932652(State
      or Jurisdiction of
              Incorporation
      or Organization)
            (IRS
      EmployerID
      No)





11220 Elm Lane, Suite 203,
Charlotte, NC  28277


(Address
of principal executive office) (zip code)





4201 Congress Street, Suite
145, Charlotte, NC  28209


(Former
address of principal executive office) (zip code)





(704)
366-5122


(Issuer’s
telephone number)





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 o.





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 o No o.





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





Large
accelerated filer o Accelerated
filer o Non-accelerated
filer o Smaller
reporting company x





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





The
number of shares outstanding of registrant’s common stock, par value $.0001 per
share, as of October 31, 2009, was 984,911 shares.









Chanticleer
Holdings, Inc. and Subsidiaries





INDEX




Page
              No.Part
      I
            Financial
      Information (unaudited)Item
      1:
            Condensed
      Consolidated Financial StatementsBalance
      Sheets as of September 30, 2009 and December 31, 2008
            
            3Statements
      of Operations – For the Three Months Ended September 30, 2009 and
      2008
            
            4Statements
      of Operations – For the Nine Months Ended September 30, 2009 and
      2008
            
            5Statements
      of Cash Flows – For the Nine Months Ended September 30, 2009 and
      2008
            
            6Notes
      to Financial Statements
            
            7Item
      2:
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            
            18Item
      3:
            Quantitative
      and Qualitative Disclosure about Market Risk
            
            22Item
      4:
            Controls
      and Procedures
            
            22Part
      II
            Other
      Information
            
            24Item
      1:
            Legal
      Proceedings
            
            24Item
      1A:
            Risk
      Factors
            
            24Item
      2:
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            
            24Item
      3:
            Defaults
      Upon Senior Securities
            
            24Item
      4:
            Submission
      of Matters to a Vote of Security Holders
            
            24Item
      5:
            Other
      Information
            
            24Item
      6:
            Exhibits
            
            24




2




PART
1:  FINANCIAL INFORMATION




ITEM
1:  CONDENSED FINANCIAL STATEMENTS





Chanticleer
Holdings, Inc. and Subsidiaries


Consolidated
Balance Sheets


September
30, 2009 (Unaudited) and December 31, 2008





2009
            
            
            2008ASSETSCurrent
      assets:Cash
      and cash equivalents
            
            $
            41,007
            
            
            $
            14,151Accounts
      receivable
            
            
            7,899
            
            
            
            5,150Marketable
      securities
            
            
            385,000
            
            
            
            -Due
      from related parties
            
            
            93,442
            
            
            
            -Prepaid
      expenses
            
            
            -
            
            
            
            4,255Total
      current assets
            
            
            527,348
            
            
            
            23,556Property
      and equipment, net
            
            
            31,308
            
            
            
            36,161Deferred
      acquisition costs
            
            
            -
            
            
            
            279,050Investments
      at fair value
            
            
            37,835
            
            
            
            108,545Other
      investments accounted for under the equity method
            
            
            50,000
            
            
            
            1,241,371Other
      investments accounted for under the cost method
            
            
            1,469,098
            
            
            
            532,598Deposits
            
            
            28,980
            
            
            
            3,980Total
      assets
            
            $
            2,144,569
            
            
            $
            2,225,261LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
            
            $
            175,815
            
            
            $
            178,325Accrued
      expenses
            
            
            9,500
            
            
            
            500Notes
      payable
            
            
            350,000
            
            
            
            500,000Deferred
      revenue
            
            
            114,583
            
            
            
            -Due
      to related parties
            
            
            76,590
            
            
            
            7,300Total
      current liabilities
            
            
            726,488
            
            
            
            686,125Commitments
      and contingenciesStockholders'
      equity:Common
      stock, $.0001 par value.  Authorized 200,000,000
      shares;issued
      and outstanding 984,911 shares at September 30, 2009 and946,376
      at December 31, 2008
            
            
            985
            
            
            
            946Additional
      paid in capital
            
            
            4,718,886
            
            
            
            4,642,347Unrealized
      loss on available-for-sale securities
            
            
            (6,428
            )
            
            
            -Accumulated
      deficit
            
            
            (3,295,362
            )
            
            
            (3,104,157
            )Total
      stockholders' equity
            
            
            1,418,081
            
            
            
            1,539,136Total
      liabilities and stockholders' equity
            
            $
            2,144,569
            
            
            $
            2,225,261





See
accompanying notes to condensed consolidated financial statements.




3




Chanticleer
Holdings, Inc. and Subsidiaries


Consolidated
Statements of Operations


For
the Three Months Ended September 30, 2009 and 2008


(Unaudited)





2009
            
            
            2008Management
      and consulting revenueAffiliate
            
            $
            17,125
            
            
            $
            25,000Other
            
            
            163,750
            
            
            
            -180,875
            
            
            
            25,000Expenses:General
      and administrative expense
            
            
            197,832
            
            
            
            294,901197,832
            
            
            
            294,901Loss
      from operations before income taxes
            
            
            (16,957
            )
            
            
            (269,901
            )Income
      taxes
            
            
            -
            
            
            
            -Loss
      from operations
            
            
            (16,957
            )
            
            
            (269,901
            )Other
      income (expense)Unrealized
      gain (loss) from marketable equity securities
            
            
            (98,000
            )
            
            
            -Realized
      gain from sales of investments
            
            
            5,551
            
            
            
            -Equity
      in earnings of investments
            
            
            -
            
            
            
            11,500Miscellaneous
      income
            
            
            50
            
            
            
            -Interest
      income
            
            
            11,500
            
            
            
            -Interest
      expense
            
            
            (19,116
            )
            
            
            (6,852
            )Total
      other income (expense)
            
            
            (100,015
            )
            
            
            4,648Net
      loss
            
            
            (116,972
            )
            
            
            (265,253
            )Other
      comprehensive loss:Unrealized
      loss on available-for-sale securities
            
            
            -
            
            
            
            (192,844
            )Net
      comprehensive loss
            
            $
            (116,972
            )
            
            $
            (458,097
            )Net
      loss per share, basic and diluted
            
            $
            (0.12
            )
            
            $
            (0.28
            )Weighted
      average shares outstanding
            
            
            978,159
            
            
            
            945,053





See
accompanying notes to condensed consolidated financial statements.





4




Chanticleer
Holdings, Inc. and Subsidiaries


Consolidated
Statements of Operations


For
the Nine Months Ended September 30, 2009 and 2008


(Unaudited)





2009
            
            
            2008Management
      and consulting revenueAffiliate
            
            $
            88,625
            
            
            $
            203,555Other
            
            
            330,978
            
            
            
            -419,603
            
            
            
            203,555Expenses:General
      and administrative expense
            
            
            592,073
            
            
            
            985,911Acquisition
      related costs
            
            
            279,050
            
            
            
            -Asset
      impairment
            
            
            -
            
            
            
            137,730871,123
            
            
            
            1,123,641Loss
      from operations before income taxes
            
            
            (451,520
            )
            
            
            (920,086
            )Income
      taxes
            
            
            -
            
            
            
            -Loss
      from operations
            
            
            (451,520
            )
            
            
            (920,086
            )Other
      income (expense)Unrealized
      gain from marketable equity securities
            
            
            259,000
            
            
            
            5,000Realized
      loss from sale of investments
            
            
            (8,731
            )
            
            
            -Equity
      in earnings of investments
            
            
            23,000
            
            
            
            11,748Miscellaneous
      income
            
            
            50
            
            
            
            -Interest
      income
            
            
            11,500
            
            
            
            -Interest
      expense
            
            
            (24,504
            )
            
            
            (14,846
            )Total
      other income (expense)
            
            
            260,315
            
            
            
            1,902Net
      loss
            
            
            (191,205
            )
            
            
            (918,184
            )Other
      comprehensive loss:Unrealized
      loss on available-for-sale securities
            
            
            -
            
            
            
            (663,572
            )Net
      comprehensive loss
            
            $
            (191,205
            )
            
            $
            (1,581,756
            )Net
      loss per share, basic and diluted
            
            $
            (0.20
            )
            
            $
            (1.02
            )Weighted
      average shares outstanding
            
            
            957,087
            
            
            
            899,338





See
accompanying notes to condensed consolidated financial statements.




5





Chanticleer
Holdings, Inc. and Subsidiaries


Consolidated
Statements of Cash Flows


For
the Nine Months Ended September 30, 2009 and 2008


(Unaudited)





2009
            
            
            2008Cash
      flows from operating activitiesNet
      loss
            
            $
            (191,205
            )
            
            $
            (918,184
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Change
      in unrealized (gain) loss of marketable securities
            
            
            (259,000
            )
            
            
            (5,000
            )Depreciation
            
            
            9,001
            
            
            
            8,581Equity
      in (earnings) loss of investments
            
            
            (23,000
            )
            
            
            (11,748
            )Common
      stock issued for services
            
            
            -
            
            
            
            7,993Investment
      received in exchange for management services
            
            
            (70,000
            )
            
            
            -Realized
      losses
            
            
            8,731
            
            
            
            -Acquisition
      related costs
            
            
            279,050
            
            
            
            -Asset
      impairment
            
            
            -
            
            
            
            137,730Change
      in other assets and liabilities:(Increase)
      decrease in accounts receivable
            
            
            (750
            )
            
            
            (4,462
            )(Increase)
      decrease in prepaid expenses and other assets
            
            
            (20,745
            )
            
            
            14,250Increase
      (decrease) in accounts payable and accrued expenses
            
            
            6,490
            
            
            
            129,137(Increase)
      decrease in deferred acquisition costs
            
            
            -
            
            
            
            (279,050
            )Loan
      from related parties, net
            
            
            43,349
            
            
            
            -Increase
      (decrease) in deferred revenue
            
            
            (260,417
            )
            
            
            (128,555
            )Net
      cash used in operating activities
            
            
            (478,496
            )
            
            
            (1,049,308
            )Cash
      flows from investing activitiesPurchase
      of fixed assets
            
            
            (4,148
            )
            
            
            (1,822
            )Purchase
      of investments
            
            
            (79,000
            )
            
            
            (120,000
            )Distributions
      from equity investments
            
            
            64,371
            
            
            
            34,500Advance
      to Chanticleer Investors LLC
            
            
            (69,500
            )
            
            
            -Proceeds
      from sale of investments
            
            
            667,051
            
            
            
            -Net
      cash provided by (used in) operating activities
            
            
            578,774
            
            
            
            (87,322
            )Cash
      flows from financing activitiesProceeds
      from sale of common stock
            
            
            76,578
            
            
            
            784,701Cash
      overdraft
            
            
            -
            
            
            
            (25,736
            )Loan
      repayment
            
            
            (500,000
            )
            
            
            -Loan
      proceeds
            
            
            350,000
            
            
            
            378,228Net
      cash provided by financing activities
            
            
            (73,422
            )
            
            
            1,137,193Net
      increase in cash and cash equivalents
            
            
            26,856
            
            
            
            563Cash
      and cash equivalents, beginning of period
            
            
            14,151
            
            
            
            183Cash
      and cash equivalents, end of period
            
            $
            41,007
            
            
            $
            746Supplemental
      cash flow informationCash
      paid for interest and income taxes:Interest
            
            $
            15,503
            
            
            $
            6,594Income
      taxes
            
            
            -
            
            
            
            -Non-cash
      investing and financing activities:Rescission
      of investment purchased with a note
            
            
            -
            
            
            
            70,000Exchange
      of oil and gas investment for marketable securities
            
            
            126,000
            
            
            
            -





See
accompanying notes to condensed consolidated financial statements.




6





Chanticleer
Holdings, Inc. and Subsidiaries


Notes to Consolidated Financial Statements


(Unaudited)





NOTE
1: NATURE
OF BUSINESS





(1)
              Organization – The
      consolidated financial statements include the accounts of Chanticleer
      Holdings, Inc. (“Holdings”) and its wholly owned subsidiaries Chanticleer
      Advisors LLC (“Advisors”), Avenel Ventures LLC ("Ventures") and Avenel
      Financial Services LLC ("Financial") (collectively the “Company”,
      "Companies," “we”, or “us”).  All significant intercompany
      balances and transactions have been eliminated in
      consolidation.  Holdings was organized October 21, 1999, under
      the laws of the State of Delaware.  On April 25, 2005, the
      Company formed a wholly owned subsidiary, Chanticleer Holdings,
      Inc.  On May 2, 2005, Tulvine Systems, Inc. merged with and
      changed its name to Chanticleer Holdings, Inc.  Ventures has
      entered into consulting agreements with two clients and has received
      common stock from the clients for its business management and consulting
      services.  Financial was organized to provide unique financial
      services to the restaurant, real estate development, investment
      advisor/asset management and philanthropic
      organizations.  Initial services are expected to include captive
      insurance, CHIRA and trust services, and Financial's business operation is
      currently being organized.





The
Company formed Chanticleer Holdings, Ltd.,("CHL") a Jersey corporation, during
the first quarter of 2009.  The Company plans to transfer the
franchise rights for South Africa to this company and raise funds in Germany to
fund initial development of four planned Hooters restaurant
locations.  The Company is in a 50/50 joint venture with another
company which will fund one-half of the costs.  CHL was not active at
September 30, 2009, and the Company is pursuing another source of
funding.





On July
31, 2006, the Company formed Chanticleer Investors II, LLC (“Investors
II”).  Investors II began raising funds in January 2007 for the
purpose of investing in publicly traded value securities and is managed by
Advisors.





(2)
              Shareholder Actions –
      The holders of a majority of the Company’s issued and outstanding common
      stock, pursuant to a written consent in lieu of a meeting, in accordance
      with the Company’s certificate of incorporation and Delaware General
      Corporation Law Section 228, have approved: (i) the withdrawal of the
      Company’s election to be treated as a BDC under the 1940 Act and (ii) the
      reverse split of the Company’s issued and outstanding common stock at a
      ratio of 1:10.





Withdrawal
of the Company’s election to be treated as a BDC under the 1940 Act became
effective on July 21, 2008, when the Company filed Form N-54c with the U.S.
Securities and Exchange Commission (“SEC”).




7





The 1:10
reverse split of the Company’s issued and outstanding common stock was effective
on July 17, 2008, at which time the Company began trading under a new symbol on
the OTC Bulletin Board (CCLR).  All share amounts and transactions
have been restated to give effect to the reverse split as if it happened at the
beginning of the earliest period presented.





(3)
              General - The financial
      statements included in this report have been prepared by the Company
      pursuant to the rules and regulations of the Securities and Exchange
      Commission 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 financial
      statements have not been
audited.





Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America 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 financial statements and notes thereto included in the
Company’s Annual Report for the period ended December 31, 2008, which is
included in the Company’s Form 10-K/A.





In
preparing the accompanying unaudited condensed consolidated financial
statements, the Company has reviewed, as determined necessary by the Company's
management, events that have occurred after September 30, 2009, up until the
issuance of the financial statements, which occurred on November 13,
2009.




(4)
              New accounting
      pronouncements - On June 29, 2009, the FASB issued an accounting
      pronouncement establishing the FASB Accounting Standards
      Codification (the “ASC”) as the source of authoritative accounting
      principles recognized by the FASB to be applied by nongovernmental
      entities.  This pronouncement was effective for financial
      statements issued for interim and annual periods ending after September
      15, 2009, for most entities.  On the effective date, all non-SEC
      accounting and reporting standards will be superseded.  Rules
      and interpretive releases of the SEC under the authority of federal
      securities laws are also sources of authoritative GAAP for SEC
      registrants. All other accounting literature is considered
      non-authoritative. The switch to the ASC affects the way companies refer
      to U.S. GAAP in financial statements and accounting policies. Citing
      particular content in the ASC involves specifying the unique numeric path
      to the content through the Topic, Subtopic, Section and Paragraph
      structure.  The Company adopted this new accounting
      pronouncement for the quarterly period ended September 30, 2009, as
      required, and adoption did not have a material impact on our consolidated
      financial statements taken as a
whole.




FASB ASC Topic 260, “Earnings Per
Share.”On January 1, 2009, we adopted new authoritative accounting
guidance under FASB ASC Topic 260, “Earnings Per Share,” which provides that
unvested share-based payment awards that contain non-forfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating
securities and shall be included in the computation of earnings per share
pursuant to the two-class method.




8




FASB ASC Topic 320, “Investments -
Debt and Equity Securities.” New authoritative accounting guidance under
ASC Topic 320, “Investments - Debt and Equity Securities,” (i) changes
existing guidance for determining whether an impairment is other than temporary
to debt securities and (ii) replaces the existing requirement that the
entity’s management assert it has both the intent and ability to hold an
impaired security until recovery with a requirement that management assert:
(a) it does not have the intent to sell the security; and (b) it is
more likely than not it will not have to sell the security before recovery of
its cost basis. Under ASC Topic 320, declines in the fair value of
held-to-maturity and available-for-sale securities below their cost that are
deemed to be other than temporary are reflected in earnings as realized losses
to the extent the impairment is related to credit losses. The amount of the
impairment related to other factors is recognized in other comprehensive income.
We adopted the provisions of the new authoritative accounting guidance under ASC
Topic 320 during the first quarter of 2009. Adoption of the new guidance did not
significantly impact our consolidated financial statements.




FASB ASC Topic 715, “Compensation -
Retirement Benefits.”New authoritative accounting guidance under ASC
Topic 715, “Compensation - Retirement Benefits,” provides guidance related to an
employer’s disclosures about plan assets of defined benefit pension or other
post-retirement benefit plans. Under ASC Topic 715, disclosures should provide
users of financial statements with an understanding of how investment allocation
decisions are made, the factors that are pertinent to an understanding of
investment policies and strategies, the major categories of plan assets, the
inputs and valuation techniques used to measure the fair value of plan assets,
the effect of fair value measurements using significant unobservable inputs on
changes in plan assets for the period and significant concentrations of risk
within plan assets. The disclosures required by ASC Topic 715 are not applicable
to us.




FASB ASC Topic 805, “Business
Combinations.” On January 1, 2009, new authoritative accounting
guidance under ASC Topic 805, “Business Combinations,” became applicable to the
Corporation’s accounting for business combinations closing on or after
January 1, 2009. ASC Topic 805 applies to all transactions and other events
in which one entity obtains control over one or more other businesses. ASC Topic
805 requires an acquirer, upon initially obtaining control of another entity, to
recognize the assets, liabilities and any non-controlling interest in the
acquiree at fair value as of the acquisition date. Contingent consideration is
required to be recognized and measured at fair value on the date of acquisition
rather than at a later date when the amount of that consideration may be
determinable beyond a reasonable doubt. This fair value approach replaces the
cost-allocation process required under previous accounting guidance whereby the
cost of an acquisition was allocated to the individual assets acquired and
liabilities assumed based on their estimated fair value. ASC Topic 805 requires
acquirers to expense acquisition-related costs as incurred rather than
allocating such costs to the assets acquired and liabilities assumed, as was
previously the case under prior accounting guidance. Assets acquired and
liabilities assumed in a business combination that arise from contingencies are
to be recognized at fair value if fair value can be reasonably estimated. If
fair value of such an asset or liability cannot be reasonably estimated, the
asset or liability would generally be recognized in accordance with ASC Topic
450, “Contingencies.” Under ASC Topic 805, the requirements of ASC Topic 420,
“Exit or Disposal Cost Obligations,” would have to be met in order to accrue for
a restructuring plan in purchase accounting. Pre-acquisition contingencies are
to be recognized at fair value, unless it is a non-contractual contingency that
is not likely to materialize, in which case, nothing should be recognized in
purchase accounting and, instead, that contingency would be subject to the
probable and estimable recognition criteria of ASC Topic 450,
“Contingencies.”




9




FASB ASC Topic 810,
“Consolidation.” New authoritative accounting guidance under ASC Topic
810, “Consolidation,” amended prior guidance to establish accounting and
reporting standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. Under ASC Topic 810, a non-controlling interest
in a subsidiary, which is sometimes referred to as minority interest, is an
ownership interest in the consolidated entity that should be reported as a
component of equity in the consolidated financial statements. Among other
requirements, ASC Topic 810 requires consolidated net income  to be
reported at amounts that include the amounts attributable to both the parent and
the non-controlling interest. It also requires disclosure, on the face of the
consolidated income statement, of the amounts of consolidated net income
attributable to the parent and to the non-controlling interest. The new
authoritative accounting guidance under ASC Topic 810 became effective for us on
January 1, 2009 and did not have a significant impact on our consolidated
financial statements.




Further
new authoritative accounting guidance under ASC Topic 810 amends prior guidance
to change how a company determines when an entity that is insufficiently
capitalized or is not controlled through voting (or similar rights) should be
consolidated. The determination of whether a company is required to consolidate
an entity is based on, among other things, an entity’s purpose and design and a
company’s ability to direct the activities of the entity that most significantly
impact the entity’s economic performance. The new authoritative accounting
guidance requires additional disclosures about the reporting entity’s
involvement with variable-interest entities and any significant changes in risk
exposure due to that involvement as well as its affect on the entity’s financial
statements. The new authoritative accounting guidance under ASC Topic 810 will
be effective January 1, 2010 and is not expected to have a significant
impact on our consolidated financial statements.




FASB ASC Topic 815, “Derivatives and
Hedging.” New authoritative accounting guidance under ASC Topic 815,
“Derivatives and Hedging,” amends prior guidance to amend and expand the
disclosure requirements for derivatives and hedging activities to provide
greater transparency about (i) how and why an entity uses derivative
instruments, (ii) how derivative instruments and related hedge items are
accounted for under ASC Topic 815, and (iii) how derivative instruments and
related hedged items affect an entity’s financial position, results of
operations and cash flows. To meet those objectives, the new authoritative
accounting guidance requires qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures about fair value
amounts of gains and losses on derivative instruments and disclosures about
credit-risk-related contingent features in derivative agreements. The new
authoritative accounting guidance under ASC Topic 815 became effective for us on
January 1, 2009 and did not impact our consolidated financial
statements.




10




FASB ASC Topic 820, “Fair Value
Measurements and Disclosures.”New authoritative accounting guidance
under ASC Topic 820,”Fair Value Measurements and Disclosures,” affirms that the
objective of fair value when the market for an asset is not active is the price
that would be received to sell the asset in an orderly transaction, and
clarifies and includes additional factors for determining whether there has been
a significant decrease in market activity for an asset when the market for that
asset is not active. ASC Topic 820 requires an entity to base its conclusion
about whether a transaction was not orderly on the weight of the evidence. The
new accounting guidance amended prior guidance to expand certain disclosure
requirements. We adopted the new authoritative accounting guidance under ASC
Topic 820 during the first quarter of 2009. Adoption of the new guidance did not
significantly impact our consolidated financial statements.




Further
new authoritative accounting guidance (Accounting Standards Update
No. 2009-5) under ASC Topic 820 provides guidance for measuring the fair
value of a liability in circumstances in which a quoted price in an active
market for the identical liability is not available. In such instances, a
reporting entity is required to measure fair value utilizing a valuation
technique that uses (i) the quoted price of the identical liability when
traded as an asset, (ii) quoted prices for similar liabilities or similar
liabilities when traded as assets, or (iii) another valuation technique
that is consistent with the existing principles of ASC Topic 820, such as an
income approach or market approach. The new authoritative accounting guidance
also clarifies that when estimating the fair value of a liability, a reporting
entity is not required to include a separate input or adjustment to other inputs
relating to the existence of a restriction that prevents the transfer of the
liability. The forgoing new authoritative accounting guidance under ASC Topic
820 will be effective for our consolidated financial statements beginning
October 1, 2009 and is not expected to have a significant impact on our
consolidated financial statements.




FASB ASC Topic 825 “Financial
Instruments.” New authoritative accounting guidance under ASC Topic
825,”Financial Instruments,” requires an entity to provide disclosures about the
fair value of financial instruments in interim financial information and amends
prior guidance to require those disclosures in summarized financial information
at interim reporting periods. The new interim disclosures required under Topic
825 had no impact on our consolidated financial statements.




FASB ASC Topic 855, “Subsequent
Events.” New authoritative accounting guidance under ASC Topic 855,
“Subsequent Events,” establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or available to be issued. ASC Topic 855 defines
(i) the period after the balance sheet date during which a reporting
entity’s management should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements, (ii) the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and
(iii) the disclosures an entity should make about events or transactions
that occurred after the balance sheet date. The new authoritative accounting
guidance under ASC Topic 855 became effective for our consolidated financial
statements for periods ending after June 15, 2009 and did not have a
significant impact on our consolidated financial statements.




11





FASB ASC Topic 860, “Transfers and
Servicing.”New authoritative accounting guidance under ASC Topic 860,
“Transfers and Servicing,” amends prior accounting guidance to enhance reporting
about transfers of financial assets, including securitizations, and where
companies have continuing exposure to the risks related to transferred financial
assets. The new authoritative accounting guidance eliminates the concept of a
“qualifying special-purpose entity” and changes the requirements for
derecognizing financial assets. The new authoritative accounting guidance also
requires additional disclosures about all continuing involvements with
transferred financial assets including information about gains and losses
resulting from transfers during the period. The new authoritative accounting
guidance under ASC Topic 860 will be effective January 1, 2010 and is not
expected to have a significant impact on our consolidated financial
statements.





NOTE
2: CHANGE IN REPORTING ENTITY





From May
23, 2005 until July 21, 2008, the Company operated as a business development
company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940
Act”).  As such, the Company was subject to different reporting
requirements and methods of accounting for its investments.  With the
change back to being an operating company, the Company is no longer subject to
the requirements of a BDC and the Company was required to retroactively modify
its financial statements as if it were not subject to the requirements of a BDC
during all periods presented.





All
consolidated financial statements issued by the Company commencing with the Form
10-Q filed for September 30, 2008 have been retroactively modified to exclude
any prior BDC accounting.




12





NOTE
3: INVESTMENTS





Investments
are summarized as follows at September 30, 2009 and December 31,
2008:





2009
            
            
            2008Marketable
      equity securities:North
      American Energy Resources, Inc. at cost
            
            $
            126,000
            
            
            $
            -Valuation
      adjustment
            
            
            259,000
            
            
            
            -$
            385,000
            
            
            $
            -Available
      for sale securities:Special
      Projects Group
            
            $
            31,407
            
            
            $
            31,407Syzygy
      Entertainment, Ltd.
            
            
            12,856
            
            
            
            77,138Cost
      less non-temporary impairment
            
            
            44,263
            
            
            
            108,545Unrealized
      loss
            
            
            (6,428
            )
            
            
            -Total
            
            $
            37,835
            
            
            $
            108,545Investments
      using the equity method:Balance,
      beginning of period
            
            $
            1,241,371
            
            
            $
            1,410,482Equity
      in earnings (loss)
            
            
            23,000
            
            
            
            (123,111
            )Sale
      of investment
            
            
            (575,000
            )
            
            
            -Transfer
      to investments at cost
            
            
            (575,000
            )
            
            
            -Distributions
            
            
            (64,371
            )
            
            
            (46,000
            )Balance,
      end of period
            
            $
            50,000
            
            
            $
            1,241,371Investments
      at cost:Edison
      Nation, LLC (FKA Bouncing Brain Productions)
            
            $
            250,000
            
            
            $
            250,000Remodel
      Auction
            
            
            195,000
            
            
            
            -Lifestyle
      Innovations, Inc.
            
            
            100,000
            
            
            
            100,000BreezePlay,
      Inc.
            
            
            250,000
            
            
            
            -Chanticleer
      Investors LLC
            
            
            575,000
            
            
            
            -Oil
      and gas investment
            
            
            -
            
            
            
            76,000Chanticleer
      Investors II
            
            
            16,598
            
            
            
            16,598Total
            
            
            1,386,598
            
            
            
            442,598Deposits
            
            
            82,500
            
            
            
            90,000Total
      other investments
            
            $
            1,469,098
            
            
            $
            532,598





13




Equity
investments consist of the following at September 30, 2009 and December 31,
2008:





2009
            
            
            2008Carrying
      value:Chanticleer
      Investors, LLC (11.5% and 23%)
            
            $
            -
            
            
            $
            1,150,000First
      Choice Mortgage (33 1/3%) (a)
            
            
            -
            
            
            
            41,371Confluence
      Partners, LLC (50%)
            
            
            50,000
            
            
            
            50,000$
            50,000
            
            
            $
            1,241,371Equity
      in earnings (loss):Chanticleer
      Investors, LLC
            
            $
            23,000
            
            
            $
            46,000First
      Choice Mortgage
            
            
            -
            
            
            
            (169,111
            )$
            23,000
            
            
            $
            (123,111
            )Distributions:Chanticleer
      Investors, LLC
            
            $
            23,000
            
            
            $
            46,000First
      Choice Mortgage
            
            
            41,371
            
            
            
            -$
            64,371
            
            
            $
            46,000Undistributed
      earnings (loss) included in accumulated deficit
            
            $
            23,000
            
            
            $
            (208,629
            )


(a)
liquidated in January 2009.





During
the quarter ended June 30, 2009, the Company exchanged its oil & gas
property investments for 700,000 shares of North American Energy Resources, Inc.
("NAEY") which were valued at $126,000 based on the closing price of NAEY on the
date of the trade.  The Company has classified the NAEY as a trading
security and recorded a cumulative unrealized gain of $259,000 at September 30,
2009, based on the closing price of the stock on that date.  In
addition, the Company sold 1/2 of its interest in Chanticleer Investors LLC for
its carrying value of $575,000 during the second quarter and the remaining 11.5%
interest was transferred from equity investments to cost
investments.





The
Company received common stock investments in two non-public companies in
exchange for providing management services for one year during the quarter ended
March 31, 2009.  The Company recorded the investments at their
estimated fair market value of $375,000 and is amortizing the related deferred
revenue over the one year period in which services are being
provided.  The investments are being accounted for using the cost
method.  At September 30, 2009, the Company owned 500,000 shares of
Remodel Auction and 250,000 shares of BreezePlay.





Remodel
Auction Incorporated was formed to launch and operate an online listing service
for remodeling projects.  We valued our initial investment for 250,000
shares at 50% of the price Remodel was receiving from third parties for its
stock.  Remodel Auction began trading under the symbol REMD on August
10, 2009, and the Company received an additional 250,000 shares of Remodel
common stock pursuant to its management agreement.




14





BreezePlayTM
LLC (“BreezePlay”), headquartered in Charlotte, NC, is an energy solutions
provider serving the needs of residents and utilities via partnership programs
with major utilities. BreezePlay offers a proprietary monitoring system called
EnviroScapeTM, which is the only residential consumer energy management product
on the market that monitors residential energy consumption 24/7 to provide
actual usage and rate data, and that enables customers the ability to
automatically adjust systems to effect consumption and automate
savings.  BreezePlay’s unique technology process and business model
gives it significant advantages over other home energy management systems, which
are generally too complex, too expensive, and/or require smart meters. Unlike
many other software solutions in the marketplace, utilities are encouraged to be
strategic partners with BreezePlay, but the business model is not reliant on
their participation. There is a pay per-unit installation price, as well as a
monthly fee to BreezePlay for ongoing monitoring. Interactive, real-time,
consumer energy management using smart grid technology has been an imperative
goal of utilities for years and many are aggressively pursuing the BreezePlay
system.  We valued the 250,000 shares we received in BreezePlay at
$250,000, the price at which BreezePlay was selling its common stock to
unrelated parties.





On May
31, 2006, we acquired debt owed by Lifestyle Innovations, Inc. with a face value
of $1,177,395 for $100,000 in cash.  Lifestyle has traded under the
symbol LFSI and has only had a deminimus amount of income from a royalty during
the last three years.  LFSI is not currently a reporting
company.  The debt was converted into a note with interest at 12% on
July 1, 2008.  We currently own approximately 28% of the debt of
LFSI.  LFSI is seeking an acquisition and is currently valued at
approximately $400,000 as a shell, based on estimates provided by an attorney
knowledgeable in the area.





On
January 26, 2006, we acquired an investment in EE Investors, LLC with cash in
the amount of $250,000.  We acquired 1,205 units (3.378%) in EE
Investors, LLC, whose sole asset is 40% of Edison Nation, LLC (formerly Bouncing
Brain Productions, LLC).  Edison Nation was formed to provide equity
capital for new inventions and help bring them to market.  The initial
business plan included developing the products and working with manufacturers
and marketing organizations to sell the products.  This has evolved
into a less hands-on program which involves selling products with patents to
other larger companies and retaining royalties.  Edison Nation has not
reached cash flow break-even yet, but has developed a number of companies for
which they do product searches to supplement its business.  The
managing member of EE Investors, LLC is in current discussions with another
company that would acquire up to 50% of the ownership of EE Investors at a price
which would allow the initial investors to get all of their money back while
retaining a smaller interest on a go-forward basis.




NOTE
4: NOTES PAYABLE





On July
15, 2009 the Company repaid its $500,000 line of credit using $250,000 of its
cash balance and a new loan in the amount of $250,000.  The new loan
is due July 10, 2010; includes interest at Wall Street Journal Prime + 1%
(minimum of 5.5%) payable monthly; is collateralized by substantially all of the
assets of the Company; and is guaranteed by Mr. Pruitt.




15





On April
3, 2009, the Company received loan proceeds from an individual in the amount of
$100,000 which was due June 30, 2009, together with interest at 18% per
annum.  The individual has agreed to extend the loan to December 31,
2009.  Chanticleer Holdings, Ltd is the borrower and the Company has
guaranteed the loan.




NOTE
5: RELATED PARTY TRANSACTIONS





Michael
D. Pruitt, the Company’s Chief Executive Officer, was CFO and the sole director
of Syzygy Entertainment, Ltd until he resigned effective June 1,
2009.





The
Company had non-interest bearing advances in the amount of $64,590 and $7,300 at
September 30, 2009 and December 31, 2008, respectively, from a company partly
owned by Mr. Pruitt and $12,000 at September 30, 2009 from personal colleagues
of Mr. Pruitt.





At
September 30, 2009, the Company had advanced $67,500 to Chanticleer Investors
LLC, $21,907 to Green St. Energy, Inc. for whom the Company provides accounting
services and for whom Mr. Pruitt is a director, and $4,035 to Chanticleer
Holdings Limited, a Jersey corporation the Company may activate.




NOTE
6: COMMITMENTS AND CONTINGENCIES





PENDING
ACQUISITION




Hooters,
Inc.





On March
11, 2008, the Company entered into a Stock Purchase Agreement for the purchase
of Hooters, Inc., Hooters Management Corporation and their related restaurants
(collectively “HI”) from the nine current individual HI shareholders, many of
whom will continue to stay involved in the ongoing operation as shareholders of
Chanticleer.  The transaction is valued at approximately $55.1 million
and could close by the end of 2009.





The
termination date for the Company’s pending acquisition of the stock of HI and
certain of its related entities has passed.  Although the sellers have
not, to date, exercised their rights to terminate the agreements and the Company
continues to seek to consummate these transactions, there is no assurance that
the Company will be able to close the pending acquisitions.





In
addition, the commitment letters from certain financial institutions to provide
one or more related entities of the Company the $85,000,000 Senior Secured
Credit have expired, primarily due to the inability of the Company to raise the
necessary equity portion of the financing at acceptable terms in today’s
financial environment.  The Company continues to communicate with the
financial institutions that agreed to provide the credit facility; however,
there can be no assurance that the Company will be successful in obtaining any
financing or that the terms of any credit facility in the future will be
acceptable to the Company.





16




NOTE
7: ACQUISITION RELATED COSTS





FASB ASC
805-10-25-23 replaced prior guidance and became effective January 1,
2009.  Acquisition-related costs are defined as costs the acquirer
incurs to effect a business combination.  The paragraph further
provides that the acquirer shall account for acquisition-related costs as
expenses in the periods in which the costs are incurred and the services
received.  Pursuant to the Company's planned acquisition of HI, the
Company incurred $279,050 in acquisition-related costs which were capitalized in
2008 pursuant to accounting guidance in effect at that time.





FASB ASC
805-10-25-23 applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning after December 15, 2008.  Accordingly, on January 1,
2009 the Company charged its previously capitalized acquisition costs to expense
on that date.





NOTE
8: GOING CONCERN





At
September 30, 2009 and December 31, 2008, the Company had current assets of
$527,348 and $23,556; current liabilities of $726,488 and $686,125; and a
working capital deficit of $199,140 and $662,569, respectively.  The
Company incurred a loss of $191,205 during the nine month period ended September
30, 2009.  In addition, the Company sold 1/2 of its interest in
Chanticleer Investors, LLC for its carrying value of $575,000 during the second
quarter.





At
September 30, 2009, the Company had $41,007 in cash and has an advance to
Investors in the amount of $67,500 available to be returned, giving the Company
$108,507 in cash.





Cash
administrative expenses were approximately $195,000 in the third quarter and are
expected to be approximately $175,000 in the fourth quarter of 2009 and the
first three quarters of 2010, assuming no other changes.  This total
estimated future cash requirement of $700,000 is expected to be met with a
combination of existing cash, sales of common stock and management fees and
distributions from investments.





The
Company formed Chanticleer Holdings, Ltd.,("CHL") a Jersey corporation, during
the first quarter of 2009.  The Company planned to transfer the
franchise rights for South Africa to this company and raise funds in Germany to
fund initial development of four planned Hooters restaurant
locations.  The Company is in a 50/50 joint venture with another
company which will fund one-half of the costs.  CHL was not active at
September 30, 2009, and the Company was pursuing another source of
funds.





If the
above events do not occur or if the Company does not raise sufficient capital,
substantial doubt about the Company's ability to continue as a going concern
exists.  These consolidated financial statements do not reflect any
adjustments that might result from the outcome of these
uncertainties.




17




ITEM
      2:
              MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





The
following discussion should be read in conjunction with our financial statements
and notes thereto included elsewhere in this Form 10-Q.  This Form
10-Q contains forward-looking statements regarding the plans and objectives of
management for future operations.  This information may involve known
and unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from future
results, performance or achievements expressed or implied by any forward-looking
statements.  Forward-looking statements, which involve assumptions and
describe our future plans, strategies and expectations, are generally
identifiable by use of the words “may,” “will,” “should,” “expect,”
“anticipate,” “estimate,” “believe,” “intend,” “project” or the negative of
these words or other variations on these words or comparable
terminology.  These forward-looking statements are based on
assumptions that may be incorrect, and we cannot assure you that the projections
included in these forward-looking statements will come to pass.  Our
actual results could differ materially from those expressed or implied by the
forward-looking statements as a result of various factors.





On June
1, 2005, we filed a notification on Form N54a with the U.S. Securities and
Exchange Commission, (the “SEC”) indicating our election to be regulated as a
business development company (a “BDC”) under the Investment Company Act of 1940
(the “1940 Act”).  Under this election, we adopted corporate
resolutions to operate as a closed-end management investment company as a
BDC.  We operated as a non-diversified company as that term is defined
in Section 5(b)(2) of the 1940 Act and at all times conducted our business so as
to retain our status as a BDC.  We could not change the nature of our
business so as to cease to be, or withdraw our election as, a BDC without the
approval of the holders of a majority of our outstanding voting stock as defined
under the 1940 Act.





Withdrawal
of the Company’s election to be treated as a BDC under the 1940 Act became
effective on July 21, 2008, when the Company filed Form N-54c with the SEC,
following approval by a majority of the Company’s shareholders.





Critical
Accounting Policies and Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements.  Critical accounting policies are those that are both
important to the presentation of our financial condition and results of
operations and require management’s most difficult, complex, or subjective
judgments.  Our most critical accounting policy relates to the
valuation of our investments.





Liquidity
and capital resources





At
September 30, 2009 and December 31, 2008, the Company had current assets of
$527,348 and $23,556; current liabilities of $726,488 and $686,125; and a
working capital deficit of $199,140 and $662,569, respectively.  The
Company incurred a loss of $191,205 during the nine month period ended September
30, 2009.  In addition, the Company sold 1⁄2 of its interest in
Chanticleer Investors, LLC for its carrying value of $575,000 during the second
quarter.




18





At
September 30, 2009, the Company had $41,007 in cash and has an advance to
Investors in the amount of $67,500 available to be returned, giving the Company
$108,507 in cash.





Cash
administrative expenses were approximately $195,000 in the third quarter and are
expected to be approximately $175,000 in the fourth quarter of 2009 and the
first three quarters of 2010, assuming no other changes.  This total
estimated cash requirement of $700,000 is expected to be met with a combination
of existing cash, sales of common stock and management fees and distributions
from investments.





The
Company formed Chanticleer Holdings, Ltd. ("CHL"), a Jersey corporation, during
the first quarter of 2009.  The Company planned to transfer the
franchise rights for South Africa to this company and raise funds in Germany to
fund initial development of four planned Hooters restaurant
locations.  The Company is in a 50/50 joint venture with another
company which will fund one-half of the costs.  CHL was not active at
September 30, 2009, and the Company was pursuing another source of
funds.





If the
above events do not occur or if the Company does not raise sufficient capital,
substantial doubt about the Company's ability to continue as a going concern
exists.  These consolidated financial statements do not reflect any
adjustments that might result from the outcome of these
uncertainties.





Comparison
of three months ended September 30, 2009 and 2008





Revenues
amounted to $180,875 ($6,625 from Investors LLC) in the three months ended
September 30, 2009, as compared to the $25,000 from Investors LLC in the year
earlier period.  The Company received cash from Investors LLC and was
compensated with shares of common stock for the other revenue
earned.





General
and administrative expense amounted to $197,832 in the 2009 quarter as compared
to $294,901 in the 2008 quarter.  The principal decreases were
professional fees of $40,768, payroll of $28,546, franchise taxes of $16,225 and
travel and entertainment of $4,682.  The professional fees in 2008
were higher due to the initial work being done to raise capital for the pending
acquisitions.




19





Other
income (expense) consists of the following for the three months ended September
30, 2009 and 2008.





2009
            
            
            2008Unrealized
      gain (loss) from marketable securities
            
            $
            (98,000
            )
            
            $
            -Realized
      gain from sale of investments
            
            
            5,551
            
            
            
            -Equity
      in earnings of investments
            
            
            -
            
            
            
            11,500Miscellaneous
      income
            
            
            50
            
            
            
            -Interest
      income
            
            
            11,500
            
            
            
            -Interest
      expense
            
            
            (19,116
            )
            
            
            (6,852
            )$
            (100,015
            )
            
            $
            4,648





The
Company recorded an unrealized loss from its investment in marketable equity
securities during the September 2009 quarter, of $98,000, which decreased a
portion of the $357,000 unrealized gain recorded in the June 2009
quarter.





The
Company realized a gain of $5,551 from sales of marketable securities during the
2009 quarter.





As a
result of the sale of 50% of its interest in Chanticleer Investors, LLC, the
Company reduced its ownership to 11.5% and now accounts for this investment on
the cost method.  The earnings included in equity in earnings of
investments in 2008 is now included in interest income.





Interest
expense increased during the 2009 quarter primarily due to the higher interest
rate on funds borrowed at the end of the first quarter (18%) of
2009.





Comparison
of nine months ended September 30, 2009 and 2008





Revenues
amounted to $419,603 ($56,625 from Investors LLC and $5,500 from Syzygy
Entertainment, Ltd. in cash) in the nine months ended September 30, 2009, as
compared to the $203,553 ($75,000 from Investors LLC) in the year earlier
period.  The Company received cash from Investors LLC and was
compensated with shares of common stock for all of the other revenue
earned.





General
and administrative expense amounted to $592,073 in the nine months ended
September 30, 2009 as compared to $985,911 in the 2008 period.  The
principal decreases were professional fees of $227,215, printing and
reproduction of $20,218, payroll of $36,163 and travel and entertainment of
$47,136.  The professional fees in 2008 were higher due to the initial
work being done to raise capital for the pending acquisitions.





The
Company charged its previously capitalized acquisition costs to expense on
January 1, 2009, as a result of a revision in an accounting
pronouncement.




20





Other
income (expense) consists of the following for the nine months ended September
30, 2009 and 2008.





2009
            
            
            2008Unrealized
      gain from marketable securities
            
            $
            259,000
            
            
            $
            5,000Realized
      loss from sale of investments
            
            
            (8,731
            )
            
            
            -Equity
      in earnings of investments
            
            
            23,000
            
            
            
            11,748Miscellaneous
      income
            
            
            50
            
            
            
            -Interest
      income
            
            
            11,500
            
            
            
            -Interest
      expense
            
            
            (24,504
            )
            
            
            (14,846
            )$
            260,315
            
            
            $
            1,902





The
Company recorded an unrealized gain from appreciation of its investment in
marketable equity securities during the 2009 period.





The
realized loss of $8,731 consists of an other than temporary decline in value of
available-for-sale securities in the amount of $64,282 in the first quarter of
2009, a gain from the exchange of our oil and gas property investments for
marketable equity securities of $50,000 in the second quarter of 2009 and a gain
of $5,551 from sales of marketable equity securities in the third quarter of
2009.





The
equity in earnings of investments is from our investment in Investors LLC of
$23,000 in 2009 and $34,500 in 2008, with a loss of $22,752 in 2008 from another
investment which was liquidated in January 2009.  As a result of the
sale of 50% of its interest in Chanticleer Investors, Ltd., the Company reduced
its ownership to 11.5% and now accounts for this investment on the cost
method.  The earnings included in equity in earnings of investments in
prior periods is now included in interest income.





Interest
expense increased during the 2009 quarter primarily due to the higher interest
rate on funds borrowed at the end of the first quarter (18%) of
2009.




21





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 significant deficiency is a control deficiency, or
combination of control deficiencies, that , in the Company's judgment, would
adversely affect the ability to initiate, authorize, record, process, or report
external financial data reliably in accordance with generally accepted
accounting principles such that there is more than a remote likelihood that a
misstatement of the annual or interim financial statements that is more than
inconsequential will not be prevented or detected.  A material
weakness is a significant deficiency, or combination of significant
deficiencies, that, in our judgment, results in more than a remote likelihood
that a material misstatement of the annual or interim financial statements will
not be prevented or detected.





The
material weaknesses identified were:




·
            Due
      to the limited number of accounting employees, the Company is unable to
      segregate all noncompatible duties, which would prevent one person from
      having significant control over the initiation, authorization and
      recording of transactions.  This condition is characteristic of
      all companies except those with large numbers of accounting
      personnel.  A mitigating control is the personal involvement of
      the members of the Board of Directors in the analysis and review of
      internal financial data, as well as the consultant retained by the Company
      to serve the functions of a controller for assistance and preparation of
      financial reporting.




·
            An
      effective Audit Committee is an integral part to the integrity of the
      Company's financial reporting.  The responsibilities of the
      Audit Committee should be detailed in the Committee's charter and provided
      to its members.  These responsibilities should, at a minimum,
      require inquiry and awareness of current Company transactions, analysis of
      interim and annual financial data and review of minutes of the Board of
      Directors.  The Audit Committee's oversight and periodic
      investigation can serve as a mitigating control to the lack of segregation
      of duties inherent to companies with a limited number of
      personnel.  The current practices of the Company's Audit
      Committee do not fulfill these
criteria.




·
            We
      did not maintain effective control over the application, monitoring and
      reporting of the appropriate accounting policies related to
      available-for-sale securities.  Specifically, we did not take
      into account the other than temporary impairment of available-for-sale
      securities and did not record the other than temporary impairment as a
      realized loss rather than as a component of other comprehensive loss in
      stockholders' equity.




·
            We
      did not maintain effective control over the application, monitoring and
      reporting of the appropriate accounting policies related to deferred
      acquisition costs.  Specifically, we did not take into account
      paragraph 59 of SFAS 141(R) which became effective on January 1, 2009 and
      provides that acquisition related costs shall be expensed in the period in
      which they are incurred.




22




Our
management has discussed these material weaknesses with our board of directors
and has commenced the following remediation efforts to ensure that the
significant deficiencies are mitigated.  The board of directors has
reviewed the lack of segregation of duties issue and has determined it is not
practical to add personnel merely to allow for segregation of noncompatible
duties.  The Company already retains a third party consultant who acts
as controller for the Company, who has no check signing authority and no access
to assets, to oversee its reporting responsibilities.  In addition, as
discussed below, the Company plans on expanding the duties of its Audit
Committee, which will also further mitigate any perceived weakness due to a lack
of segregation of duties.





The board
of directors is updating the Audit Committee procedures and responsibilities and
will require active participation from the Audit Committee.  This is
expected to be completed before the end of 2009.





Management
of the Company is working with its consultants to implement procedures to reduce
the likely-hood of a reoccurrence of the miss-application of accounting
procedures.





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 term is 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 September 30,
2009.  Based on the information set forth above, our management has
determined that, as of the date of this report, we do not have effective
disclosure controls and procedures.





Changes in internal control
over financial reporting





There
have been no significant changes in internal controls or in other factors that
could significantly affect these controls during the quarter ended September 30,
2009, including any corrective actions with regard to significant deficiencies
and material weaknesses.





23





PART II – OTHER
INFORMATION




ITEM
      1:
            LEGAL
      PROCEEDINGS




Not
applicable.




ITEM
      1A:
            RISK
      FACTORS





Not
applicable.




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




During
the three months ended September 30, 2009, the Company sold 38,535 shares of its
common stock for net proceeds of $76,578 pursuant to a Reg S
offering.




ITEM
      3:
            DEFAULTS
      UPON SENIOR SECURITIES




Not
applicable.




ITEM
      4:
              SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS




Not
applicable.




ITEM
      5:
            OTHER
      INFORMATION




Although
the Company does not currently employ a Chief Financial Officer, Michael D.
Pruitt, President and Chief Executive Officer, is also the principal accounting
officer.




ITEM
      6:
            EXHIBITS




The
following exhibits are filed with this report on Form 10-Q.





Exhibit
      31
            
            Certification
      pursuant to 18 U.S.C. Section 1350 Section 302 of the Sarbanes-Oxley Act
      of 2002Exhibit
      32
            
            Certification
      pursuant to 18 U.S.C. Section 1350 Section 906 of the Sarbanes-Oxley Act
      of 2002




24




SIGNATURE





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: November
      13, 2009
              By:
              /s/
      Michael D. PruittMichael
      D. Pruitt,
                Chief
      Executive Officer and
                Chief
      Financial Officer
  25