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,
2010





Commission
File Number:   000-29507





CHANTICLEER HOLDINGS,
INC.


(Exact
name of registrant as specified in its charter)





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





11220 Elm Lane, Suite 203,
Charlotte, NC  28277


(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  ̈.





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  ̈ No  ̈.





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  ̈
Accelerated filer  ̈
Non-accelerated filer  ̈ 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  ̈ No x.





The
number of shares outstanding of registrant’s common stock, par value $.0001 per
share, as of October 31, 2010, was 1,005,058 shares.





Chanticleer
Holdings, Inc. and Subsidiaries





INDEX





PageNo.Part
      I
                  
                  Financial
      Information (unaudited)Item
      1:
                  Condensed
      Consolidated Financial StatementsBalance
      Sheets as of September 30, 2010 and December 31, 2009
                  3Statements
      of Operations – For the Three Months Ended September 30, 2010 and
      2009
                  4Statements
      of Operations – For the Nine Months Ended September 30, 2010 and
      2009
                  5Statements
      of Cash Flows – For the Nine Months Ended September 30, 2010 and
      2009
                  6Notes
      to Financial Statements
                  8Item
      2:
                  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  22Item
      3:
                  Quantitative
      and Qualitative Disclosure about Market Risk
                  26Item
      4:
                  Controls
      and Procedures
                  26Part
      II
                  
                  Other
      InformationItem
      1:
                  Legal
      Proceedings
                  28Item
      1A:
                  Risk
      Factors
                  28Item
      2:
                  Unregistered
      Sales of Equity Securities and Use of Proceeds
                  28Item
      3:
                  Defaults
      Upon Senior Securities
                  28Item
      4:
                  Submission
      of Matters to a Vote of Security Holders
                  28Item
      5:
                  Other
      Information
                  28Item
      6:
                  Exhibits
                  28


2


Chanticleer
Holdings, Inc. and Subsidiaries


Consolidated
Balance Sheets


September
30, 2010 (Unaudited) and December 31, 2009





2010
                        
                        
                        2009ASSETSCurrent
      assets:Cash
      and cash equivalents
                        
                        $
                        12,305
                        
                        
                        $
                        2,374Accounts
      receivable
                        
                        
                        2,482
                        
                        
                        
                        -Due
      from related parties
                        
                        
                        32,182
                        
                        
                        
                        32,806Prepaid
      expenses
                        
                        
                        13,914
                        
                        
                        
                        25,000Total
      current assets
                        
                        
                        60,883
                        
                        
                        
                        60,180Property
      and equipment, net
                        
                        
                        27,473
                        
                        
                        
                        32,125Available-for-sale
      investments at fair value
                        
                        
                        305,973
                        
                        
                        
                        83,286Investments
      accounted for under the equity method
                        
                        
                        76,016
                        
                        
                        
                        82,500Investments
      accounted for under the cost method
                        
                        
                        1,091,598
                        
                        
                        
                        1,191,598Deposits
                        
                        
                        3,980
                        
                        
                        
                        3,980Total
      assets
                        
                        $
                        1,565,923
                        
                        
                        $
                        1,453,669LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
                        
                        $
                        200,133
                        
                        
                        $
                        190,482Accrued
      expenses
                        
                        
                        36,758
                        
                        
                        
                        2,246Notes
      payable
                        
                        
                        412,500
                        
                        
                        
                        412,500Deferred
      revenue
                        
                        
                        4,375
                        
                        
                        
                        20,833Due
      to related parties
                        
                        
                        53,349
                        
                        
                        
                        109,590Total
      current liabilities
                        
                        
                        707,115
                        
                        
                        
                        735,651Convertible
      notes payable
                        
                        
                        436,500
                        
                        
                        
                        -Total
      liabilities
                        
                        
                        1,143,615
                        
                        
                        
                        735,651Commitments
      and contingenciesStockholders'
      equity:Common
      stock, $0.0001 par value.  Authorized 200,000,000 shares;issued
      1,266,673 and 1,246,376 shares and outstanding 1,005,058 and 984,911
      shares at September 30, 2010 and at December 31, 2009,
      respectively
                        
                        
                        127
                        
                        
                        
                        125Additional
      paid in capital
                        
                        
                        5,374,531
                        
                        
                        
                        5,255,749Non-controlling
      interest
                        
                        
                        41,637
                        
                        
                        
                        -Unrealized
      loss on available-for-sale securities
                        
                        
                        (45,054
                        )
                        
                        
                        (84,000
                        )Accumulated
      deficit
                        
                        
                        (4,412,250
                        )
                        
                        
                        (3,917,853
                        )Less
      treasury stock, 261,615 and 261,465 shares, respectively
                        
                        
                        (536,683
                        )
                        
                        
                        (536,003
                        )Total
      stockholders' equity
                        
                        
                        422,308
                        
                        
                        
                        718,018Total
      liabilities and stockholders' equity
                        
                        $
                        1,565,923
                        
                        
                        $
                        1,453,669





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, 2010 and 2009


(Unaudited)





2010
                
                
                2009Management
      and consulting revenueAffiliate
                
                $
                9,250
                
                
                $
                17,125Other
                
                
                -
                
                
                
                243,7509,250
                
                
                
                260,875Expenses:General
      and administrative expense
                
                
                163,177
                
                
                
                197,832163,177
                
                
                
                197,832Loss
      from operations before income taxes
                
                
                (153,927
                )
                
                
                63,043Income
      taxes
                
                
                -
                
                
                
                -Loss
      from operations
                
                
                (153,927
                )
                
                
                63,043Other
      income (expense)Realized
      gain (loss) from sales of investments
                
                
                (1,658
                )
                
                
                5,551Unrealized
      loss from marketable equity securities
                
                
                -
                
                
                
                (98,000
                )Equity
      in earnings of investments
                
                
                21,597
                
                
                
                -Interest
      and other income
                
                
                11,500
                
                
                
                11,550Interest
      expense
                
                
                (27,421
                )
                
                
                (19,116
                )Total
      other income (expense)
                
                
                4,018
                
                
                
                (100,015
                )Net
      earnings (loss) before non-controlling interest
                
                
                (149,909
                )
                
                
                (36,972
                )Non-controlling
      interest
                
                
                553
                
                
                
                -Net
      earnings (loss)
                
                
                (149,356
                )
                
                
                (36,972
                )Other
      comprehensive income:Unrealized
      gain (loss) on available-for-sale securities
                
                
                (62,901
                )
                
                
                -Net
      comprehensive income
                
                $
                (212,257
                )
                
                $
                (36,972
                )Net
      loss per share, basic and diluted
                
                $
                (0.15
                )
                
                $
                (0.04
                )Weighted
      average shares outstanding
                
                
                1,004,636
                
                
                
                978,159





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, 2010 and 2009


(Unaudited)





2010
                
                
                2009Management
      and consulting revenueAffiliate
                
                $
                59,671
                
                
                $
                88,625Other
                
                
                20,833
                
                
                
                410,97880,504
                
                
                
                499,603Expenses:General
      and administrative expense
                
                
                657,249
                
                
                
                592,073Acquisition
      related costs
                
                
                -
                
                
                
                279,050657,249
                
                
                
                871,123Loss
      from operations before income taxes
                
                
                (576,745
                )
                
                
                (371,520
                )Income
      taxes
                
                
                -
                
                
                
                -Loss
      from operations
                
                
                (576,745
                )
                
                
                (371,520
                )Other
      income (expense)Realized
      gain (loss) from sales of investments
                
                
                149,350
                
                
                
                (8,731
                )Unrealized
      gain from marketable equity securities
                
                
                -
                
                
                
                259,000Equity
      in earnings of investments
                
                
                42,850
                
                
                
                23,000Other
      than temporary decline in available-for-sale securities
                
                
                (40,386
                )
                
                
                -Interest
      and other income
                
                
                34,500
                
                
                
                11,550Interest
      expense
                
                
                (104,396
                )
                
                
                (24,504
                )Total
      other income (expense)
                
                
                81,918
                
                
                
                260,315Net
      loss before non-controlling interest
                
                
                (494,827
                )
                
                
                (111,205
                )Non-controlling
      interest
                
                
                430
                
                
                
                -Net
      loss
                
                
                (494,397
                )
                
                
                (111,205
                )Other
      comprehensive income:Unrealized
      income (loss) on available-for-sale securities
                
                
                38,946
                
                
                
                -Net
      comprehensive loss
                
                $
                (455,451
                )
                
                $
                (111,205
                )Net
      loss per share, basic and diluted
                
                $
                (0.50
                )
                
                $
                (0.12
                )Weighted
      average shares outstanding
                
                
                984,911
                
                
                
                957,087





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, 2010 and 2009


(Unaudited)





2010
                
                
                2009Cash
      flows from operating activitiesNet
      loss
                
                $
                (494,397
                )
                
                $
                (111,205
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Change
      in unrealized (gain) loss of marketable securities
                
                
                -
                
                
                
                (259,000
                )Other
      than temporary decline in available-for-sale securities
                
                
                40,386
                
                
                
                -Depreciation
                
                
                8,281
                
                
                
                9,001Equity
      in (earnings) loss of investments
                
                
                (42,850
                )
                
                
                (23,000
                )Beneficial
      conversion feature of convertible notes payable
                
                
                49,994
                
                
                
                -Investment
      received in exchange for management services
                
                
                (33,000
                )
                
                
                (150,000
                )Realized
      (gains) losses from sales of investments
                
                
                (149,350
                )
                
                
                8,731Acquisition
      related costs
                
                
                -
                
                
                
                279,050Non-controlling
      interest
                
                
                (430
                )
                
                
                -Change
      in other assets and liabilities:
                
                
                -(Increase)
      decrease in accounts receivable
                
                
                (2,482
                )
                
                
                (750
                )(Increase)
      decrease in prepaid expenses and other assets
                
                
                2,500
                
                
                
                (20,745
                )Increase
      (decrease) in accounts payable and accrued expenses
                
                
                44,163
                
                
                
                6,490Advances
      from related parties for working capital, net
                
                
                3,174
                
                
                
                43,349Increase
      (decrease) in deferred revenue
                
                
                (16,459
                )
                
                
                (260,417
                )Net
      cash used in operating activities
                
                
                (590,470
                )
                
                
                (478,496
                )Cash
      flows from investing activitiesPurchase
      of fixed assets
                
                
                (3,628
                )
                
                
                (4,148
                )Purchase
      of investments
                
                
                (26,334
                )
                
                
                (79,000
                )Purchase
      of treasury stock
                
                
                (680
                )
                
                
                -Distributions
      from equity investments
                
                
                11,833
                
                
                
                64,371Advance
      to Chanticleer Investors LLC
                
                
                -
                
                
                
                (69,500
                )Proceeds
      from sale of investments
                
                
                182,710
                
                
                
                667,051Net
      cash provided by operating activities
                
                
                163,901
                
                
                
                578,774Cash
      flows from financing activitiesProceeds
      from sale of common stock
                
                
                -
                
                
                
                76,578Loan
      repayment
                
                
                (4,500
                )
                
                
                (500,000
                )Loan
      proceeds
                
                
                441,000
                
                
                
                350,000Net
      cash provided (used) by financing activities
                
                
                436,500
                
                
                
                (73,422
                )Net
      increase in cash and cash equivalents
                
                
                9,931
                
                
                
                26,856Cash
      and cash equivalents, beginning of period
                
                
                2,374
                
                
                
                14,151Cash
      and cash equivalents, end of period
                
                $
                12,305
                
                
                $
                41,007


(Continued)





See
accompanying notes to condensed consolidated financial
statements.


6


Chanticleer
Holdings, Inc. and Subsidiaries


Consolidated
Statements of Cash Flows, continued


For
the Nine Months Ended September 30, 2010 and 2009


(Unaudited)





2010
                
                
                2009Supplemental
      cash flow informationCash
      paid for interest and income taxes:Interest
                
                $
                20,139
                
                
                $
                15,503Income
      taxes
                
                
                -
                
                
                
                -Non-cash
      investing and financing activities:Investments
      received for management consulting contracts
                
                
                33,000
                
                
                
                -Exchange
      of investment in oil and gas properties for marketable equity
      securities
                
                
                -
                
                
                
                126,000Common
      stock issued for loan from related party
                
                
                58,790
                
                
                
                -Investment
      exchanged for another investment
                
                
                124,573
                
                
                
                -Common
      stock issued for consulting contract
                
                
                10,000
                
                
                
                -





See
accompanying notes to condensed consolidated financial
statements.


7


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"), Avenel
      Financial Services LLC ("Financial"), Chanticleer Holdings Limited ("CHL")
      and DineOut S.A. Ltd. ("DineOut") (during the nine months ended September
      30, 2010, the Company sold approximately 7% of its DineOut shares)
      (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.





Information
regarding the Company's subsidiaries is as follows:




·
            Advisors
      was formed as a Nevada Limited Liability Company on January 18, 2007 to
      manage an affiliate company, Chanticleer Investors II, LLC ("Investors
      II") and other investments owned by the
Company;




·
            Ventures
      was formed as a Nevada Limited Liability Company on December 24, 2008 to
      provide business management and consulting services to its
      clients;




·
            AFS
      was formed as a Nevada Limited Liability Company on February 19, 2009 to
      provide unique financial services to the restaurant, real estate
      development, investment advisor/asset management and philanthropic
      organizations.  AFS's business operation is currently being
      organized and is expected to initially include captive insurance, CHIRA
      and trust services;




·
            CHL
      is wholly owned and was formed as a Limited Liability Company in Jersey on
      March 24, 2009 and owns our 50% interest in Chanticleer & Shaw Foods
      Pty. Ltd., a Republic of South Africa corporation, which holds the
      franchise rights for the Republic of South Africa with Hooters of America,
      Inc. ("HOA");




·
            DineOut
      was formed as a Private Limited Liability Company in England and Wales on
      October 29, 2009 to finance growth activity for the Company around the
      world.  DineOut's common stock is listed on the Frankfort stock
      exchange and during the nine months ended September 30, 2010, the Company
      sold approximately 7% of its shares for proceeds of $217,501, of which
      $124,573 was from an exchange for an investment in HiTech Stages,
      Ltd.


8


On July
31, 2006, the Company formed Chanticleer 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)
            General - The
      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 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 consolidated financial statements have not
      been audited.





Certain
information and footnote disclosures normally included in consolidated 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 consolidated financial statements and notes
thereto included in the Company’s Annual Report for the period ended December
31, 2009, which is included in the Company’s Form 10-K.





(3)
            Going Concern - At
      September 30, 2010 and December 31, 2009, the Company had current assets
      of $60,883 and $60,180; current liabilities of $707,115 and $735,651; and
      a working capital deficit of $646,232 and $675,471,
      respectively.  The Company incurred a loss of $494,397 during
      the nine months ended September 30, 2010 and had an unrealized gain from
      available-for-sale securities of $38,946 resulting in a comprehensive loss
      of $455,451.





The
Company's general and administrative expenses were approximately $657,000 during
the nine months ended September 30, 2010.  These costs have declined
from $264,221 in the first quarter of 2010, $229,851 in the second quarter of
2010 and $163,177 in the third quarter of 2010.  The Company expects
to be required to invest approximately $350,000 for each new restaurant opened
in 2010.  (1 more planned).  The Company used limited
partner investors for $314,000 of their requirement for the restaurant opened in
December 2009 and sold their limited partner interest in March 2010 for its cost
of $37,500.  The Company raised $387,500 for the larger restaurant in
Johannesburg from limited partners which opened in June 2010.  As of
September 30, 2010, the Company's limited partnership, Hoot S.A. III, Ltd., had
collected $100,000 of the $300,000 required for the third restaurant with
commitments for the remaining $200,000.





The
Company expects to meet its obligations in the next twelve months with some or
all of the following:


9


·
            The
      Company holds 3,727,937 shares in DineOut at September 30, 2010, which are
      free-trading on the Frankfort Exchange and were trading at approximately
      €1.50 ($2.05) per share at September 30, 2010.  The Company
      plans to continue to sell some of these shares to meet its short-term
      capital requirements and collected cash proceeds of $92,928, had noncash
      proceeds of $124,573 and recognized a gain of $156,848 from sales during
      the nine months ended September 30,
2010;


·
            The
      Company currently receives interest income and management fees for its
      investment in Investors LLC of $18,125 per quarter.  The note
      held by Investors LLC matures in November
2010;


·
            The
      Company currently is receiving its share of earnings from the Durban,
      South Africa restaurant which commenced operations on January 1, 2010 and
      will begin receiving its share of earnings from the Johannesburg, South
      Africa location which opened in June 2010, although cash distributions are
      expected to commence in the fourth quarter of 2010.  The Company
      also expects at least one more restaurant to be opened during 2010;
      and


·
            The
      Company expects to raise its cash requirements for the South Africa
      restaurants from limited partners.





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.





(4)
            Reclassifications -Certain reclassifications have been made in the financial
      statements at December 31, 2009 and for the periods ended September 30,
      2009 to conform to the September 30, 2010 presentation.  The
      reclassifications had no effect on net earnings
  (loss).





(5)
            Fair value measurements -For financial assets and liabilities measured at fair value on a
      recurring basis, fair value is the price we would receive to sell an asset
      or pay to transfer a liability in an orderly transaction with a market
      participant at the measurement date.  In the absence of active
      markets for the identical assets or liabilities, such measurements involve
      developing assumptions based on market observable data and, in the absence
      of such data, internal information that is consistent with what market
      participants would use in a hypothetical transaction that occurs at the
      measurement date.





Observable
inputs reflect market data obtained from independent sources, while unobservable
inputs reflect our market assumptions.  Preference is given to
observable inputs.  These two types of inputs create the following
fair value hierarchy:





Level
      1
            Quoted
      prices for identical instruments in active
  markets.


Level
      2
            Quoted
      prices for similar instruments in active markets; quoted prices for
      identical or similar instruments in markets that are not active; and
      model-derived valuations whose inputs are observable or whose significant
      value drivers are observable.


10


Level
      3
            Significant
      inputs to the valuation model are
unobservable.





We
maintain policies and procedures to value instruments using the best and most
relevant data available.  Our investment committee reviews and
approves all investment valuations.





Our
available-for-sale equity securities are all valued using Level 1 inputs (quoted
prices in active markets for identical assets).





Our other
investments are in private entities which are valued, using Level 3 inputs, on a
recurring basis using significant unobservable inputs.





Management
has determined that it will not, at this time, adopt fair value accounting for
nonfinancial assets or liabilities currently recorded in the consolidated
financial statements, which includes property and equipment, investments carried
at cost, deposits and other assets.




(6)
            New accounting pronouncements
      -There
      are several new accounting pronouncements issued by the Financial
      Accounting Standards Board (“FASB”) which are not yet
      effective.  Each of these pronouncements, as applicable, has
      been or will be adopted by the Company.  Below is a listing of
      those pronouncements which may impact the Company when
      adopted.





In August
2010, the FASB issued Accounting Standards Update 2010-21 (ASU 2010-21),
"Accounting for Technical Amendments to Various SEC Rules and Schedules —
Amendments to SEC Paragraphs Pursuant to Release No. 33-9026; Technical
Amendments to Rules, Forms, Schedules and Codification of Financial Reporting
Policies" and ASU 2010-22, "Accounting for Various Topics — Technical
Corrections to SEC Paragraphs - An announcement made by the staff of the U.S.
Securities and Exchange Commission." Both corrections have been adopted by the
Company and had no effect on the financial position, results of operations or
cash flows of the Company.


11


NOTE
      2:
            INVESTMENTS





Available
for sale securities consist of the following at September 30, 2010 and December
31, 2009:





2010
                    
                    
                    2009North
      American Energy Resources, Inc.
                    
                    $
                    136,500
                    
                    
                    $
                    126,000Vought
      Defense Systems
                    
                    
                    66,554
                    
                    
                    
                    -EffTec
      International, Inc.
                    
                    
                    22,500
                    
                    
                    
                    -HiTech
      Stages, Ltd.
                    
                    
                    124,573
                    
                    
                    
                    -Remodel
      Auction Incorporated
                    
                    
                    900
                    
                    
                    
                    40,000Syzygy
      Entertainment, Ltd.
                    
                    
                    -
                    
                    
                    
                    1,286Cost
      less non-temporary impairment
                    
                    
                    351,027
                    
                    
                    
                    167,286Unrealized
      loss
                    
                    
                    (45,054
                    )
                    
                    
                    (84,000
                    )Total
                    
                    $
                    305,973
                    
                    
                    $
                    83,286





North American Energy Resources, Inc.
- 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 initially
classified the NAEY as a trading security when it was acquired based on the
Company's intent to begin selling the shares before the end of
2009.  In November 2009 the Company decided that it would not sell the
stock in the near term and determined that the investment should be reclassified
as an available-for-sale security and classified as non-current, due to
uncertainties about when it would be sold.  At the time of the
decision to reclassify the investment as available-for-sale, the trading price
and value were approximately equal to the cost.  Accordingly, upon the
transfer at fair value, the shares were transferred at $126,000, the original
cost to the Company.  On February 24, 2010, the Company received
150,000 shares of NAEY which were valued at $10,500, based on the trading price
at that time, for a twelve month management services contract.  At
September 30, 2010, the stock had declined to $0.01 per share and the Company
recorded an additional unrealized loss of $25,500 (total of $128,000), based on
the Company's determination that the price decline was temporary.  It
is the Company's understanding that there are certain transactions which are
expected to happen which could enhance the value of the Company's
investment.  Accordingly, the Company determined that the decline was
temporary.





Vought Defense Systems Corp. -
On May 31, 2006, we acquired debt owed by Alas Defense Systems, Inc. ("ADS") and
formerly Vought Defense Systems Corp. ("VDSC") (formerly, 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 owned approximately 28% of the debt of
LFSI at December 31, 2009.  LFSI was valued at approximately $400,000
as a shell, ($100,000 for the Company's interest) based on estimates provided by
an attorney knowledgeable in the area.


12


On
February 16, 2010, a majority of the shareholders of LFSI approved a name change
to Vought Defense Systems Corp. and a 1 for 545 reverse stock split of the
issued shares of common stock.  On February 17, 2010, VDSC acquired
100% of RedTide Defense Group, Inc. ("RedTide") which has created a solution to
a growing worldwide demand for the manufacturing of Unmanned Aerial Vehicles
("UAVs").  RedTide owns and operates
www.redtidedefense.com.  The Company's debt was converted into 449,959
shares of VDSC common stock with a September 30, 2010 price of $0.05 per
share.  During the second and third quarters, the Company sold 150,500
shares for $19,364 and recognized a loss of $14,082.  VDSC has a
number of plans for acquisitions and expansions.  Accordingly, the
Company considers the decline of $51,581 to be temporary.





EffTec International, Inc. -Effective April 1, 2010, the Company's CEO became a director and the CEO
of EffTec International, Inc.  The Company received 150,000 shares of
EffTec and an option to acquire an additional 150,000 shares at $0.15 per share
in exchange for the management services to be provided for the quarter ended
June 30, 2010.  The shares were valued at $22,500 based on the trading
price of EffTec at the date of the transaction.  At September 30,
2010, the shares were valued at $0.18 per share and the $4,500 increase in value
plus the value of the option of $4,500 was included in accumulated other
comprehensive income (loss).





EffTec
has developed a powerful, easy to use, Internet-based chiller tool called
EffTrackTM that:





·      Collects,
stores and analyzes chiller operating data,


·      Calculates
and trends chiller performance,


·      Diagnoses
the cause of chiller inefficiencies,


·      Notifies
plant contacts when problems occur,


·      Recommends
corrective actions,


·      Measures
the results of corrective actions and


·      Provides
cost analysis of operational improvements.





Chillers
are the single largest energy-using component in most industrial or commercial
type facilities using water-cooled chillers for comfort or process cooling and
can consume up to 50% of the facility’s electrical usage.  There is a
vast array of operational and mechanical problems that occur causing a chiller
to lose performance.  Even small inefficiencies can result in
thousands of dollars in energy waste.





HiTech Stages, Ltd. - HiTech
Stages, Ltd. ("HiTech") is registered in the UK and is listed on the Frankfurt
Stock Exchange (Symbol "JT2.F").  HiTech, in conjunction with a
manufacturer, has developed a mobile event stage, including multimedia, which
can be packed in three 20' x 8' x 8' containers.  The stage can be
fully assembled in less than one hour and deployed and operational in ten
minutes, including the set-up of all lighting, sound and video
systems.  This is a revolutionary first in the event business and will
rent for approximately one-half of the cost of conventional stage
systems.  HiTech is in its initial funding stage and intends to raise
up to $5.5 million to finance the manufacture of the first stage and build the
distribution support services.


13


The
Company acquired 250,000 shares of HiTech in exchange for 150,450 shares of
DineOut.  The transaction was initially recorded as an
available-for-sale security at the average net sales price of DineOut shares of
$124,573.  At September 30, 2010, HiTech closed on the Frankfurt Stock
Exchange at €1.23 ($1.68).  Due to the start-up status of HiTech and
limited trading volume, the Company valued its investment at $250,000 at
September 30, 2010.





Remodel Auction Incorporated -Remodel Auction Incorporated was formed to launch and operate an online
listing service for remodeling projects.  The Company received 500,000
shares of Remodel Auction common stock in exchange for providing management
services for one year, effective January 1, 2009.  We valued our
initial investment of 500,000 shares at 50% of the price Remodel was receiving
from third parties for its stock, $125,000.  Remodel Auction began
trading under the symbol REMD on August 10, 2009, and the Company received an
additional 500,000 shares of Remodel common stock pursuant to its management
agreement.  We recorded the additional 500,000 shares at the trading
price of the stock on that date of $0.30 per share and recognized $150,000 in
management income.  Since the market price of Remodel Auction was now
readily determinable, the Company transferred this investment from investments
accounted for by the cost method to available-for-sale
securities.  The market value of Remodel Auction was approximately the
same as the original cost at the time of the transfer and the transfer was
recorded at the original cost.  At December 31, 2009, the common stock
had decline to $0.04 per share and the Company determined that the loss was
other-than temporary and recorded a loss of $235,000 on its investment in
Remodel Auction common stock.  At March 31, 2010, the value of the
stock had decline further to $900 and was determined to be other than
temporary.  Accordingly, the Company recognized an additional loss of
$39,100 at March 31, 2010.  At September 30, 2010, the value was
$1,000 and the $100 increase is included in accumulated other comprehensive
income (loss) at that date.





Syzygy Entertainment, Ltd. -
During 2007, the Company acquired 342,814 shares of Syzygy in exchange for a
management services contract which covered a one-year period commencing April 1,
2007.  The shares were valued at $1.50 per share, a discount to the
listed price at that time.  Also during 2007, Mr. Pruitt contributed
300,000 shares of Syzygy Entertainment, Ltd. to the Company, which was valued by
the investment committee at $600,000 on the dates contributed.  Mr.
Pruitt did not receive additional compensation as a result of the
transfers.





As a
result of the above transactions, the Company owns 642,814 shares of Syzygy with
a cost of $1,114,221 and a fair value of zero at September 30,
2010.  The fair value is based on Syzygy discontinuing its public
filing requirement and there being no market for the stock.  The
Company considers this decline in value to be other than temporary and has
recognized the additional loss of $1,286 in 2010.


14


Investments
accounted for using the equity method at September 30, 2010 and December 31,
2009 follows:





2010
                  
                  
                  2009Investments
      using the equity method:Balance,
      beginning of period
                  
                  $
                  82,500
                  
                  
                  $
                  1,241,371Equity
      in earnings (loss)
                  
                  
                  42,850
                  
                  
                  
                  23,000Sale
      of investment
                  
                  
                  (37,500
                  )
                  
                  
                  (575,000
                  )Transfer
      to investments at cost
                  
                  
                  -
                  
                  
                  
                  (575,000
                  )Transfers
      from deposits
                  
                  
                  -
                  
                  
                  
                  82,500Investment
      impairment
                  
                  
                  -
                  
                  
                  
                  (50,000
                  )Distributions
                  
                  
                  (11,834
                  )
                  
                  
                  (64,371
                  )Balance,
      end of period
                  
                  $
                  76,016
                  
                  
                  $
                  82,500





Equity
investments consist of the following at September 30, 2010 and December 31,
2009:





2010
                  
                  
                  2009Carrying
      value:Chanticleer
      & Shaw Foods Pty. Ltd. (50%)
                  
                  $
                  76,016
                  
                  
                  $
                  82,500$
                  76,016
                  
                  
                  $
                  82,500





Activity
from equity investments during the nine months ended September 30, 2010 and 2009
follows:


2010
                  
                  
                  2009Equity
      in earnings (loss):Chanticleer
      Investors, LLC
                  
                  
                  N/A
                  
                  
                  $
                  23,000Hoot
      S.A. I, LLC (20%)
                  
                  
                  21,023
                  
                  
                  
                  N/AHoot
      S.A. II, LLC (20%)
                  
                  
                  21,827
                  
                  
                  
                  N/A$
                  42,850
                  
                  
                  $
                  23,000Distributions:Chanticleer
      Investors, LLC
                  
                  
                  N/A
                  
                  
                  $
                  23,000Hoot
      S.A. I, LLC (20%)
                  
                  
                  11,834
                  
                  
                  
                  N/AHoot
      S.A. II, LLC (20%)
                  
                  
                  -
                  
                  
                  
                  N/AInvestment
      liquidation
                  
                  
                  -
                  
                  
                  
                  41,371$
                  11,834
                  
                  
                  $
                  64,371




15


Chanticleer & Shaw Foods Pty.
Ltd. ("C&S") -The Company through its wholly owned subsidiary, CHL,
owns 50% of C&S.  C&S holds the franchise rights for the
Republic of South Africa with HOA.




Hoot S.A. 1, LLC ("Hoot I") -The Company is financing its share of cost for each Hooters restaurant in
South Africa in a limited partnership ("LP").  Hoot I receives the 50%
share of profits from the Durban, South Africa restaurant which opened in
December 2009 and began operations on January 1, 2010.  At September
30, 2010, the Company owns 20% of the LP and the limited partners ("LPs") own
80% of the LP until the LPs receive a 20% return on their investment
("Payout").  After Payout the LPs interest will be reduced to 20% and
the Company through CL will have 80%.  Through September 30, 2010, the
Company's share of revenues has amounted to $21,023 and it has received
distributions of $11,834.





Hoot S.A. II, LLC ("Hoot II") -Hoot II receives the 50% share of profits from the Johannesburg, South
Africa restaurant which opened in June 2010.  At September 30, 2010,
the Company owns 20% of the LP and the limited partners ("LPs") own 80% of the
LP until the LPs receive a 20% return on their investment
("Payout").  After Payout the LPs interest will be reduced to 20% and
the Company through CL will have 80%.  Through September 30, 2010, the
Company's share of revenues has amounted to $21,827 and its distributions should
commence in the fourth quarter of 2010.





Hoot S.A. III, LLC ("Hoot III") -Hoot III will receive 50% of profits from the Cape Town, South Africa
restaurant which is currently under construction.  At September 30,
2010, Hoot III had received $100,000 of the $300,000 requirement in cash and had
commitments for the balance.  The restaurant is expected to be open by
the end of the year.





Investments
accounted for using the cost method at September 30, 2010 and December 31, 2009
follow:





2010
                  
                  
                  2009Investments
      at cost:Edison
      Nation, LLC (FKA Bouncing Brain Productions)
                  
                  $
                  250,000
                  
                  
                  $
                  250,000Vought
      Defense Systems (fka Lifestyle Innovations, Inc.)
                  
                  
                  -
                  
                  
                  
                  100,000BreezePlay,
      Inc.
                  
                  
                  250,000
                  
                  
                  
                  250,000Chanticleer
      Investors LLC
                  
                  
                  575,000
                  
                  
                  
                  575,000Chanticleer
      Investors II
                  
                  
                  16,598
                  
                  
                  
                  16,598Total
                  
                  $
                  1,091,598
                  
                  
                  $
                  1,191,598





Chanticleer Investors LLC ("Investors
LLC") -The Company sold 1/2 of its investment in Investors LLC in May
2009, which reduced its ownership from 23% to 11.5%.  Accordingly, in
May 2009, the Company discontinued accounting for this investment using the
equity method and began to account for the investment using the cost
method.


16





On April
18, 2006, the Company formed Investors LLC and sold units for
$5,000,000.  Investors LLC’s principal asset is a convertible note in
the amount of $5,000,000 with Hooters of America, Inc. (“HOA”), collateralized
by and convertible into 2% of Hooters common stock.  The original note
included interest at 6% and was due May 24, 2009.  The note was
extended until November 24, 2010 and included an increase in the interest rate
to 8%.





The
Company invested $1,250,000 and owned (23%) of Investors LLC at December 31,
2008 and until May 29, 2009 when it sold 1/2 of its share for
$575,000.  Under the original arrangement, the Company received 2% of
the 6% interest as a management fee ($25,000 quarterly) and 4% interest on its
investment ($11,500 quarterly).  Under the extended note and revised
operating agreement, the Company receives a management fee of $6,625 quarterly
and interest income of $11,500 quarterly.





The
Company and its new partner in Investors LLC have made extensive reviews of
HOA's financial status and continued strong performance and expects to
ultimately receive a premium for its investment.





EE Investors, LLC -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 now
reached cash flow break-even, and in addition has been retained by a number of
companies for which they do product searches to supplement its
business.  Based on the current status of this investment, the Company
does not consider the investment to be impaired.





BreezePlay, Inc. -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.  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.  We received the shares in exchange for management
services which were provided from February 1, 2009 through January 31,
2010.  We recognized eleven months of income in 2009 and recognized
the remaining month in 2010.  Based on the current status of this
company, the Company does not consider its investment to be
impaired.





Chanticleer Investors II -The
Company paid $16,598 in professional services to form this
partnership.  Chanticleer Advisors, LLC acts as the managing general
partner and receives a management fee based on a percentage of
profits.


17





NOTE 3:
            CONVERTIBLE
      NOTES PAYABLE





During
the nine months ended September 30, 2010, the Company issued convertible notes
payable with a total principal balance of $441,000 and made a partial repayment
of $4,500.  The convertible notes include interest at 10% per annum,
which is payable quarterly beginning on April 1, 2010 until maturity on January
4, 2012.  The convertible notes are convertible into our common stock
at the rate of $3.50 per share.  The conversion price was below the
market price of our common stock on the dates the convertible notes were
issued.  Accordingly, $49,994 of the proceeds were allocated to the
intrinsic value of the conversion feature by crediting additional paid in
capital and charging interest expense, since the notes were immediately
convertible.





NOTE 4:
            NOTES
      PAYABLE





The
Company has a loan with a bank with a balance of $250,000 which includes
interest at Wall Street Journal Prime + 1% (minimum of 5.5%) payable monthly; is
due in monthly payments of $1,729 commencing February 10, 2011 and the remaining
balance is due July 10, 2011.  The loan is collateralized by
substantially all of the assets of the Company; and is guaranteed by Mr.
Pruitt.  The bank has agreed to extend the loan for one year and is in
process of preparing the loan documents.





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.  On December 8, 2009, the individual loaned the Company an
additional $50,000 and added accrued interest of $12,500 to the note, which was
re-written with a balance of $162,500 and a due date of June 30,
2010.  Chanticleer Holdings, Ltd is the borrower and the Company has
guaranteed the loan.  The loan has been extended until December 31,
2010.





NOTE 5:
            RELATED
      PARTY TRANSACTIONS





The
Company had non-interest bearing advances in the amount of $53,349 and $109,590
at September 30, 2010 and December 31, 2009, respectively, from a company owned
by Mr. Pruitt and $12,000 from a personal colleague of Mr.
Pruitt.  During June 2010, 16,797 shares of common stock were issued
in exchange for $58,790 of the balance.





At
September 30, 2010 and December 31, 2009, the Company had $32,182 and $32,806,
respectively, due from related parties, which consisted primarily of a
receivable of $24,907 from Green St. Energy, Inc. for whom the Company provided
management and accounting services and for whom Mr. Pruitt is a director and
$7,150 from Investors LLC.





Michael
D. Pruitt, the Company’s Chief Executive Officer, became a director and the CEO
of EffTec International, Inc., effective April 1, 2010.


18





Michael
D. Pruitt was CFO and the sole director of Syzygy Entertainment, Ltd until he
resigned effective June 1, 2009.





The
Company realized a gain of $6,583 on sale of marketable securities acquired from
a related party for $26,334.





NOTE 6:
            COMMITMENTS
      AND CONTINGENCIES





Hooters,
Inc. Acquisition





The
planned acquisition of Hooters, Inc. has been cancelled by the
parties.





Lease





Effective
August 1, 2009, the Company entered into an office lease agreement for its
office with a term of one year and monthly lease payments of
$2,100.  During the quarter ended September 30, 2010, the lease was
extended for an additional year with the same terms.





Hooters
South Africa





On April
23, 2009, the Company's wholly owned subsidiary CHL through its 50% ownership of
Chanticleer & Shaw Pty, Ltd. entered into a franchise agreement with HOA to
open and operate Hooters restaurants in the Republic of South
Africa.  The current plan calls for four restaurants in the first
phase with three additional locations to be added later.  The first
restaurant opened in December 2009 in Durban and commenced operations effective
January 1, 2010.  A location in Johannesburg opened in June 2010 and
the third location is scheduled to open in Cape Town during the fourth quarter
of 2010.  A fourth location in either Johannesburg or Pretoria is also
now scheduled for sometime in 2011.  The Company's remaining financial
commitments have been and will be covered with limited partner
commitments.





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.


19





NOTE
      8:
            DEFERRED
      REVENUE





The
Company receives equity securities from companies for which it provides
management services.  Generally the securities are issued in advance
of the period over which the service is to be provided, generally one
year.  The Company values the equity instruments received based upon
the stock prices as of the date we reached an agreement with the third party and
defers the related revenue.  The revenue is then recognized over the
period earned.  Deferred revenue consists of the following at
September 30, 2010 and  December 31, 2009.





2010
                  
                  
                  2009Balance
      at beginning of year
                  
                  $
                  20,833
                  
                  
                  $
                  -Additions:North
      American Energy common stock
                  
                  
                  10,500
                  
                  
                  
                  -Remodel
      Auction common stock
                  
                  
                  -
                  
                  
                  
                  125,000BreezePlay,
      Inc. common stock
                  
                  
                  -
                  
                  
                  
                  250,000Amortization
                  
                  
                  (26,958
                  )
                  
                  
                  (354,167
                  )Balance
      end of year
                  
                  $
                  4,375
                  
                  
                  $
                  20,833





NOTE
      9:
            SEGMENTS
      OF BUSINESS





The
Company is organized into three segments as of September 30, 2010, two of which
were added at the end of 2009 and had not recorded any revenue as of December
31, 2009.





Management
and consulting services ("Management")


The
Company provides management and consulting services for small companies which
are generally seeking to become publicly traded.  The Company also
provides management and investment services for Investors LLC and Investors
II.





Insurance
and specialized financial services ("Insurance")


We have
formed AFS to provide unique financial services to the restaurant, real estate
development, investment advisor/asset management and philanthropic
organizations.  AFS's business operation is currently being organized
and is expected to initially include captive insurance, CHIRA and trust
services.





Operation
of restaurants (South Africa) ("Restaurants")


CHL owns
50% of C&S which holds the franchise for the Republic of South Africa with
HOA.  The Company is funding its 50% capital requirement for the cost
of each restaurant with limited partnerships in which it retains a 20% interest
and the LPs are allocated an 80% interest in revenues until the LPs receive a
20% return on their investment ("Payout").  After Payout, the
Company's share of revenue reverts to 80% and the LPs to 20% of the 50%
interest.  As of September 30, 2010, two restaurants had been opened
and a third was being completed in Cape Town.


20





Financial
information regarding the Company's segments is as follows for the nine months
ended September 30, 2010.  In 2009, the Company operated in only one
segment, management, until the fourth quarter of 2009.





Management
                                              
                                              
                                              Insurance
                                              
                                              
                                              Restaurants
                                              
                                              
                                              TotalRevenues
                                              
                                              $
                                              80,504
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              80,504Interest
      expense **
                                              
                                              $
                                              104,396
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              104,396Depreciation
      and amortization
                                              
                                              $
                                              8,281
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              8,281Profit
      (loss)
                                              
                                              $
                                              (681,141
                                              )
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              42,850
                                              
                                              
                                              $
                                              (638,291
                                              )Investments
      and other
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              143,894$
                                              (494,397
                                              )Assets
                                              
                                              $
                                              89,336
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              76,016
                                              
                                              
                                              $
                                              165,352Investments
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              1,400,571$
                                              1,565,923Liabilities
                                              
                                              $
                                              1,118,615
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              25,000
                                              
                                              
                                              $
                                              1,143,615Expenditures
      for non-current assets
                                              
                                              $
                                              3,628
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              3,628





**
Includes $49,994 for the beneficial conversion feature of convertible notes
payable.


21





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.





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, 2010 and December 31, 2009, the Company had current assets of
$60,883 and $60,180; current liabilities of $707,115 and $735,651; and a working
capital deficit of $646,232 and $675,471, respectively.  The Company
incurred a loss of $494,397 during the nine months ended September 30, 2010 and
had an unrealized gain from available-for-sale securities of $38,946 resulting
in a comprehensive loss of $455,451.





The
Company's general and administrative expenses were approximately $657,000 during
the nine months ended September 30, 2010.  These costs declined from
$264,221 in the first quarter of 2010, $229,851 in the second quarter of 2010
and $163,177 in the third quarter of 2010.  The fourth quarter of 2010
is expected to be approximately the same as the third quarter of
2010.  The Company expects to be required to invest approximately
$350,000 for each new restaurant opened in 2010.  (total of 3
planned).  The Company used limited partner investors for $314,000 of
their requirement for the restaurant opened in December 2009 and sold their
limited partner interest in March 2010 for its cost of $37,500.  The
Company raised $387,500 from limited partners for the restaurant in Johannesburg
which opened in June 2010.  All funds have been committed for the
third restaurant which is expected to open before the end of 2010 in Cape
Town.


22





The
Company expects to meet its obligations in the next twelve months with some or
all of the following:





·
            The
      Company holds 3,727,937 shares in DineOut which are free-trading on the
      Frankfort Exchange and were trading at approximately €1.50 ($2.05) per
      share at September 30, 2010.  The Company plans to continue to
      sell some of these shares to meet its short-term capital requirements and
      realized cash proceeds of $92,928, non cash proceeds of $124,573 and
      recognized a gain of $156,848 from sales during the nine months ended
      September 30, 2010;


·
            The
      Company currently receives interest income and management fees for its
      investment in Investors LLC of $18,125 per quarter.  The note
      held by Investors LLC matures in November
2010;


·
            The
      Company currently is receiving its share of earnings from the Durban,
      South Africa restaurant which commenced operations on January 1, 2010 and
      the Johannesburg, South Africa location which opened in June 2010 should
      commence distributions in the fourth quarter.  The Company
      expects at least one more restaurants to be opened during 2010 in Cape
      Town and a fourth location planned for 2011;
and


·
            The
      Company expects to raise the majority of its cash requirements for the
      South Africa restaurants from limited
partners.





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, 2010 and 2009





Revenues
amounted to $9,250 ($6,625 from Investors LLC) in the three months ended
September 30, 2010, as compared to $260,875 ($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 $163,177 in the 2010 quarter as compared
to $197,832 in the 2009 quarter.  The decrease is composed of several
items, including payroll of $6,586, travel of $5,132, accounting and auditing of
$4,786 and rent of $4,281.





Other
income (expense) consists of the following for the three months ended September
30, 2010 and 2009.


23





2010
                  
                  
                  2009Realized
      gain (loss) from sale of investments
                  
                  $
                  (1,658
                  )
                  
                  $
                  5,551Unrealized
      loss from marketable equity securities
                  
                  
                  -
                  
                  
                  
                  (98,000
                  )Equity
      in earnings of investments
                  
                  
                  21,597
                  
                  
                  
                  -Interest
      and other income
                  
                  
                  11,500
                  
                  
                  
                  11,550Interest
      expense
                  
                  
                  (27,421
                  )
                  
                  
                  (19,116
                  )$
                  4,018
                  
                  
                  $
                  (100,015
                  )





The
Company realized a gain of $11,768 from sales of DineOut shares during the 2010
quarter and realized a loss of $13,426 from sale of part of its investment in
VDSC.





In 2009,
the Company accounted for its investment in North American Energy Resources,
Inc. as a trading security with unrealized increases and decreases in value
included in earnings.  In 2010 this investment is accounted for as an
available for sale security with unrealized gains/losses included in accumulated
other comprehensive income (loss).





Equity in
earnings of investments in 2010 represents the Company's share of net profits
from its investment in restaurants in South Africa.





Interest
expense increased during the 2010 quarter primarily due to the amortization of
the beneficial conversion feature on new convertible notes of $8,334 and to the
higher amount of debt during the 2010 period as compared to the 2009
period.  There were no convertible notes outstanding during
2009.





Comparison
of nine months ended September 30, 2010 and 2009





Revenues
amounted to $80,504 ($19,875 from Investors LLC) in the nine months ended
September 30, 2010, as compared to $499,603 ($56,625 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 $657,249 in the 2010 period as compared
to $592,073 in the 2009 period.  The principal increase was payroll of
$113,072.  Payroll increased due to hiring two employees to assist in
raising capital for the Company.  In addition, the Company's CEO was
taking a reduced salary in the 2009 period and he received his normal salary in
the 2010 period.  The payroll increase was partially offset by a
reduction in travel costs of $17,422 and a reduction of insurance in the amount
of $18,047, among others.





Acquisition
related costs are discussed in Note 7 to the consolidated financial
statements.





Other
income (expense) consists of the following for the nine months ended September
30, 2010 and 2009.


24





2010
                  
                  
                  2009Realized
      gain (loss) from sale of investments
                  
                  $
                  149,350
                  
                  
                  $
                  (8,731
                  )Unrealized
      gain from marketable equity securities
                  
                  
                  -
                  
                  
                  
                  259,000Equity
      in earnings of investments
                  
                  
                  42,850
                  
                  
                  
                  23,000Other
      than temporary decline in available-for-sale securities
                  
                  
                  (40,386
                  )
                  
                  
                  -Interest
      and other income
                  
                  
                  34,500
                  
                  
                  
                  11,550Interest
      expense
                  
                  
                  (104,396
                  )
                  
                  
                  (24,504
                  )$
                  81,918
                  
                  
                  $
                  260,315





The
Company realized a gain of $156,848 from sales of DineOut shares during the 2010
period, realized a gain of $6,584 from marketable securities acquired from a
related party and realized a loss of $14,082 from sale of part of its investment
in VDSC.





In 2009,
the Company accounted for its investment in North American Energy Resources,
Inc. as a trading security with unrealized increases and decreases in value
included in earnings.  In 2010 this investment is accounted for as an
available for sale security with unrealized gains/losses included in accumulated
other comprehensive income (loss).





Equity in
earnings of investments in 2010 represents the Company's share of net profits
from its investment in restaurants in South Africa.  As a result of
the sale of 50% of its interest in Chanticleer Investors, LLC, the Company
reduced its ownership to 11.5% and began accounting for this investment on the
cost method after June 30, 2009.  Under the cost method, earnings are
included in interest income.





The
Company recorded an other than temporary loss on the decline in available for
sale securities during the first quarter of 2010, primarily from the decline in
value of its investment in Remodel Auction.





Interest
expense increased during the 2010 period primarily due to the amortization of
the beneficial conversion feature on new convertible notes of $49,994 and to the
higher amount of debt during the 2010 period as compared to the 2009
period.


25





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.





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.


26





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 during 2010.





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,
2010.  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,
2010, including any corrective actions with regard to significant deficiencies
and material weaknesses.


27


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




The
Company issued 3,500 shares of its common stock to a consultant in exchange for
a one year consulting agreement valued at $10,000.  The shares were
sold pursuant to an exemption from registration under Section 4(2) promulgated
under the Securities Act of 1933, as amended.




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


28


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 10, 2010
                  By:
                  /s/ Michael D. PruittMichael
      D. Pruitt,Chief
      Executive Officer andChief
      Financial Officer


29