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, 2012
|----------------------- | ------------------
|                        |                   
|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 x 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 December 18, 2012, was 3,698,896 shares.











Chanticleer Holdings, Inc. and Subsidiaries



INDEX



|        |          |                                                                                            | Page
|------- | -------- | ------------------------------------------------------------------------------------------ | ----
|        |          |                                                                                            | No. 
|        |          |                                                                                            |     
|Part I  |          | Financial Information (unaudited)                                                          | 3   
|        |          |                                                                                            |     
|        | Item 1:  | Condensed Consolidated Financial Statements                                                | 3   
|        |          |                                                                                            |     
|        |          | Balance Sheets as of September 30, 2012 and December 31, 2011                              | 3   
|        |          | Statements of Operations – For the Three and Nine Months Ended September 30, 2012 and 2011 | 4   
|        |          | Statement of Stockholders’ Equity – For the Nine Months Ended September 30, 2012           | 6   
|        |          | Statements of Cash Flows – For the Nine Months Ended September 30, 2012 and 2011           | 7   
|        |          | Notes to Financial Statements                                                              | 8   
|        | Item 2:  | Management’s Discussion and Analysis of Financial Condition and Results of Operations      | 28  
|        | Item 3:  | Quantitative and Qualitative Disclosure about Market Risk                                  | 36  
|        | Item 4:  | Controls and Procedures                                                                    | 36  
|        |          |                                                                                            |     
|Part II |          | Other Information                                                                          | 37  
|        |          |                                                                                            |     
|        | Item 1:  | Legal Proceedings                                                                          | 37  
|        | Item 1A: | Risk Factors                                                                               | 37  
|        | Item 2:  | Unregistered Sales of Equity Securities and Use of Proceeds                                | 37  
|        | Item 3:  | Defaults Upon Senior Securities                                                            | 37  
|        | Item 4:  | Submission of Matters to a Vote of Security Holders                                        | 37  
|        | Item 5:  | Other Information                                                                          | 37  
|        | Item 6:  | Exhibits                                                                                   | 37  



2









PART I: FINANCIAL INFORMATION

ITEM 1: CONDENSED FINANCIAL STATEMENTS

Chanticleer Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets



|                                                                                                                                                                                                                 |  | September 30, |            |   | December 31, |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | - | ------------ | -
|                                                                                                                                                                                                                 |  | 2012          |            |   | 2011         |  
|                                                                                                                                                                                                                 |  | (Unaudited)   |            |   |              |  
|ASSETS                                                                                                                                                                                                           |  |               |            |   |              |  
|Current assets:                                                                                                                                                                                                  |  |               |            |   |              |  
|Cash and cash equivalents                                                                                                                                                                                        |  | $             | 1,694,721  |   |              | $
|Accounts receivable                                                                                                                                                                                              |  |               | 119,582    |   |              |  
|Other receivable                                                                                                                                                                                                 |  |               | 118,827    |   |              |  
|Inventories                                                                                                                                                                                                      |  |               | 180,362    |   |              |  
|Due from related parties                                                                                                                                                                                         |  |               | 149,708    |   |              |  
|Prepaid expenses                                                                                                                                                                                                 |  |               | 300,552    |   |              |  
|TOTAL CURRENT ASSETS                                                                                                                                                                                             |  |               | 2,563,752  |   |              |  
|Property and equipment, net                                                                                                                                                                                      |  |               | 2,422,558  |   |              |  
|Intangible assets, net                                                                                                                                                                                           |  |               | 933,192    |   |              |  
|Investments at fair value                                                                                                                                                                                        |  |               | 54,309     |   |              |  
|Other investments                                                                                                                                                                                                |  |               | 2,148,397  |   |              |  
|Deposits and other assets                                                                                                                                                                                        |  |               | 130,244    |   |              |  
|TOTAL ASSETS                                                                                                                                                                                                     |  | $             | 8,252,452  |   |              | $
|                                                                                                                                                                                                                 |  |               |            |   |              |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                             |  |               |            |   |              |  
|Current liabilities:                                                                                                                                                                                             |  |               |            |   |              |  
|Current maturities of long-term debt, notes and convertible notes payable                                                                                                                                        |  | $             | 238,026    |   |              | $
|Accounts payable and accrued expenses                                                                                                                                                                            |  |               | 821,916    |   |              |  
|Other current liabilities                                                                                                                                                                                        |  |               | 360,125    |   |              |  
|Current maturities of capital leases payable                                                                                                                                                                     |  |               | 36,467     |   |              |  
|Deferred rent                                                                                                                                                                                                    |  |               | 8,030      |   |              |  
|Due to related parties                                                                                                                                                                                           |  |               | 13,733     |   |              |  
|TOTAL CURRENT LIABILITIES                                                                                                                                                                                        |  |               | 1,478,297  |   |              |  
|Long-term debt, less current maturities                                                                                                                                                                          |  |               | -          |   |              |  
|Capital leases payable, less current maturities                                                                                                                                                                  |  |               | 67,545     |   |              |  
|Deferred rent                                                                                                                                                                                                    |  |               | 89,672     |   |              |  
|Other liabilities                                                                                                                                                                                                |  |               | 201,490    |   |              |  
|TOTAL LIABILITIES                                                                                                                                                                                                |  |               | 1,837,004  |   |              |  
|Commitments and contingencies (Note 13)                                                                                                                                                                          |  |               |            |   |              |  
|                                                                                                                                                                                                                 |  |               |            |   |              |  
|Stockholders' equity:                                                                                                                                                                                            |  |               |            |   |              |  
|Common stock:  $0.0001 par value; authorized 200,000,000 shares; issued 3,698,896 and 1,506,061 shares; and outstanding 3,698,896 and 1,249,446 shares at September 30, 2012 and December 31, 2011, respectively |  |               | 370        |   |              |  
|Additional paid in capital                                                                                                                                                                                       |  |               | 14,849,855 |   |              |  
|Other comprehensive (loss) income                                                                                                                                                                                |  |               | (167,930   | ) |              |  
|Non-controlling interest                                                                                                                                                                                         |  |               | 112,454    |   |              |  
|Accumulated deficit                                                                                                                                                                                              |  |               | (8,379,301 | ) |              |  
|Less treasury stock, 256,615 shares at December 31, 2011                                                                                                                                                         |  |               | -          |   |              |  
|Total stockholders' equity                                                                                                                                                                                       |  |               | 6,415,448  |   |              |  
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                       |  | $             | 8,252,452  |   |              | $





See accompanying notes to condensed consolidated financial statements.



3







|Chanticleer Holdings, Inc. and Subsidiaries    
|-----------------------------------------------
|Condensed Consolidated Statements of Operations
|(Unaudited)                                    



|                                                                                            |  | For the three months ended September 30, |          
|------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ---------
|                                                                                            |  | 2012                                     |          
|Revenue:                                                                                    |  |                                          |          
|Restaurant sales, net                                                                       |  | $                                        | 1,710,632
|Management fee income - non-affiliates                                                      |  |                                          | 25,000   
|Management fee income - affiliates                                                          |  |                                          | 31,880   
|Total revenue                                                                               |  |                                          | 1,767,512
|Expenses:                                                                                   |  |                                          |          
|Restaurant cost of sales                                                                    |  |                                          | 714,551  
|Restaurant operating expenses                                                               |  |                                          | 943,618  
|Restaurant pre-opening expenses                                                             |  |                                          | 125,947  
|General and administrative expense                                                          |  |                                          | 666,300  
|Depreciation and amortization                                                               |  |                                          | 97,883   
|Total expenses                                                                              |  |                                          | 2,548,299
|Loss from operations                                                                        |  |                                          | (780,787 
|Other income (expense)                                                                      |  |                                          |          
|Equity in earnings (losses) of investments                                                  |  |                                          | 33,412   
|Miscellaneous income                                                                        |  |                                          | 1,680    
|Other than temporary decline in available-for-sale securities                               |  |                                          | -        
|Interest expense                                                                            |  |                                          | (39,583  
|Total otherexpense                                                                          |  |                                          | (4,491   
|Net loss before income taxes                                                                |  |                                          | (785,278 
|Provision for income taxes                                                                  |  |                                          | 7,997    
|Net loss before non-controlling interest                                                    |  |                                          | (793,275 
|Non-controlling interest                                                                    |  |                                          | 53,509   
|Net loss                                                                                    |  |                                          | (739,766 
|Other comprehensive income (loss):                                                          |  |                                          |          
|Unrealized loss on available-for-sale securities (none applies to non-controlling interest) |  |                                          | (26,404  
|Foreign translation income                                                                  |  |                                          | 46,511   
|Other comprehensive loss                                                                    |  | $                                        | (719,659 
|                                                                                            |  |                                          |          
|Net earnings (loss) per share, basic and diluted                                            |  | $                                        | (0.20    
|Weighted average shares outstanding                                                         |  |                                          | 3,698,896



See accompanying notes to condensed consolidated financial statements.



4







|Chanticleer Holdings, Inc. and Subsidiaries
|-------------------------------------------
|Consolidated Statements of Operations      
|(Unaudited)                                



|                                                                                            |  | For the nine months ended September 30, |           
|------------------------------------------------------------------------------------------- |  | --------------------------------------- | ----------
|                                                                                            |  | 2012                                    |           
|Revenue:                                                                                    |  |                                         |           
|Restaurant sales, net                                                                       |  | $                                       | 4,794,250 
|Management fee income - non-affiliates                                                      |  |                                         | 75,000    
|Management fee income - affiliates                                                          |  |                                         | 38,578    
|Total revenue                                                                               |  |                                         | 4,907,828 
|Expenses:                                                                                   |  |                                         |           
|Restaurant cost of sales                                                                    |  |                                         | 2,005,714 
|Restaurant operating expenses                                                               |  |                                         | 2,636,240 
|Restaurant pre-opening expenses                                                             |  |                                         | 190,167   
|General and administrative expense                                                          |  |                                         | 1,833,933 
|Depreciation and amortization                                                               |  |                                         | 265,068   
|Total expenses                                                                              |  |                                         | 6,931,122 
|Loss from operations                                                                        |  |                                         | (2,023,294
|Other income (expense)                                                                      |  |                                         |           
|Equity in earnings (losses) of investments                                                  |  |                                         | (10,474   
|Realized gains from sales of investments                                                    |  |                                         | -         
|Other than temporary decline in available-for-sale securities                               |  |                                         | -         
|Interest and other income                                                                   |  |                                         | 1,680     
|Interest expense                                                                            |  |                                         | (432,795  
|Total other expense                                                                         |  |                                         | (441,589  
|Net loss before income taxes                                                                |  |                                         | (2,464,883
|Provision for income taxes                                                                  |  |                                         | 7,997     
|Net loss before non-controlling interest                                                    |  |                                         | (2,472,880
|Non-controlling interest                                                                    |  |                                         | 185,711   
|Net loss                                                                                    |  |                                         | (2,287,169
|Other comprehensive income (loss):                                                          |  |                                         |           
|Unrealized loss on available-for-sale securities (none applies to non-controlling interest) |  |                                         | (264,044  
|Foreign translation income                                                                  |  |                                         | 45,464    
|Other comprehensive loss                                                                    |  | $                                       | (2,505,749
|                                                                                            |  |                                         |           
|Net earnings (loss) per share, basic and diluted                                            |  | $                                       | (1.06     
|Weighted average shares outstanding                                                         |  |                                         | 2,153,148 



See accompanying notes to condensed consolidated financial statements.



5







|Chanticleer Holdings, Inc. and Subsidiaries    
|-----------------------------------------------
|Consolidated Statements of Stockholders' Equity
|Nine Months ended September 30, 2012           
|(Unaudited)                                    



|                                                |  |              |           |   |         |   |     |            |  |   | Accumulated   |   |  |             |          |   |          |   |          |       |  |   |            |  
|----------------------------------------------- |  | ------------ | --------- | - | ------- | - | --- | ---------- |  | - | ------------- | - |  | ----------- | -------- | - | -------- | - | -------- | ----- |  | - | ---------- | -
|                                                |  |              |           |   |         |   |     |            |  |   | Other         |   |  |             |          |   |          |   |          |       |  |   |            |  
|                                                |  |              |           |   |         |   |     | Additional |  |   | Comprehensive |   |  | Non-        |          |   |          |   |          |       |  |   |            |  
|                                                |  | Common Stock |           |   | Paid-in |   |     | Income     |  |   | Controlling   |   |  | Accumulated |          |   | Treasury |   |          |       | 
|                                                |  | Shares       |           |   | Par     |   |     | Capital    |  |   | (Loss)        |   |  | Interest    |          |   | Deficit  |   |          | Stock |  |   | Total      |  
|                                                |  |              |           |   |         |   |     |            |  |   |               |   |  |             |          |   |          |   |          |       |  |   |            |  
|Balance, December 31, 2011                      |  |              | 1,506,061 |   |         | $ | 151 |            |  | $ | 6,459,656     |   |  | $           | 50,650   |   |          | $ | 593,863  |       |  | $ | (6,092,132 | )
|Common stock issued for:                        |  |              |           |   |         |   |     |            |  |   |               |   |  |             |          |   |          |   |          |       |  |   |            |  
|Services                                        |  |              | 5,000     |   |         |   | 1   |            |  |   | 32,399        |   |  |             | -        |   |          |   | -        |       |  |   | -          |  
|Convertible notes payable and accrued interest  |  |              | 423,828   |   |         |   | 42  |            |  |   | 1,907,196     |   |  |             |          |   |          |   |          |       |  |   |            |  
|Repurchase ofNon-controlling interest           |  |              | 219,248   |   |         |   | 22  |            |  |   | (190,108      | ) |  |             |          |   |          |   | -        |       |  |   |            |  
|Cash, net of expenses                           |  |              | 1,801,374 |   |         |   | 180 |            |  |   | 7,051,284     |   |  |             |          |   |          |   |          |       |  |   |            |  
|Available-for-sale securities                   |  |              | -         |   |         |   | -   |            |  |   | -             |   |  |             | (264,044 | ) |          |   | -        |       |  |   | -          |  
|Amortize warrants                               |  |              | -         |   |         |   | -   |            |  |   | 120,632       |   |  |             | -        |   |          |   | -        |       |  |   | -          |  
|Foreign translation loss                        |  |              |           |   |         |   |     |            |  |   |               |   |  |             | 45,464   |   |          |   |          |       |  |   |            |  
|Acquistion of non-controlling interest for cash |  |              | -         |   |         |   | -   |            |  |   | (4,810        | ) |  |             | -        |   |          |   | (295,698 | )     |  |   | -          |  
|Treasury stock cancelled                        |  |              | (256,615  | ) |         |   | (26 | )          |  |   | (526,394      | ) |  |             |          |   |          |   |          |       |  |   |            |  
|Net loss                                        |  |              | -         |   |         |   | -   |            |  |   | -             |   |  |             | -        |   |          |   | (185,711 | )     |  |   | (2,287,169 | )
|Balance, September 30, 2012                     |  |              | 3,698,896 |   |         | $ | 370 |            |  | $ | 14,849,855    |   |  | $           | (167,930 | ) |          | $ | 112,454  |       |  | $ | (8,379,301 | )



See accompanying notes to consolidated financial statements.



6







|Chanticleer Holdings, Inc. and Subsidiaries    
|-----------------------------------------------
|Condensed Consolidated Statements of Cash Flows
|(Unaudited)                                    



|                                                                            |  | For the nine months ended September 30, |           
|--------------------------------------------------------------------------- |  | --------------------------------------- | ----------
|                                                                            |  | 2012                                    |           
|Cash flows from operating activities:                                       |  |                                         |           
|Net loss                                                                    |  | $                                       | (2,287,169
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                                         |           
|Non-controlling interest                                                    |  |                                         | (185,711  
|Other than temporary decline in available-for-sale-securities               |  |                                         | -         
|Depreciation and amortization                                               |  |                                         | 265,068   
|Equity in (earnings) loss of investments                                    |  |                                         | 10,474    
|Common stock issued for services                                            |  |                                         | 25,606    
|Gain on sale of investments                                                 |  |                                         | -         
|Amortization of warrants                                                    |  |                                         | 120,632   
|Bad debt expense                                                            |  |                                         | -         
|(Increase)  in accounts and other receivables                               |  |                                         | (87,586   
|(Increase)  in prepaid expenses and other assets                            |  |                                         | (178,976  
|(Increase)  inventories                                                     |  |                                         | (75,289   
|Increase (decrease) in accounts payable and accrued expenses                |  |                                         | 477,250   
|Increase  in deferred rent                                                  |  |                                         | 17,315    
|Increase  in income taxes payable                                           |  |                                         | 7,997     
|(Decrease) in deferred revenue                                              |  |                                         | -         
|Advance from related parties for working capital                            |  |                                         | (89,587   
|Net cash used by operating activities                                       |  |                                         | (1,979,976
|                                                                            |  |                                         |           
|Cash flows from investing activities:                                       |  |                                         |           
|Proceeds from sale of investments                                           |  |                                         | -         
|Proceeds from sale of treasury stock                                        |  |                                         | -         
|Investment distribution                                                     |  |                                         | -         
|Purchase of investments                                                     |  |                                         | (1,213,391
|Franchise fees incurred                                                     |  |                                         | (210,000  
|Purchase of property and equipment                                          |  |                                         | (1,169,191
|Net cash provided (used) by investing activities                            |  |                                         | (2,592,582
|                                                                            |  |                                         |           
|Cash flows from financing activities:                                       |  |                                         |           
|Sale of common stock                                                        |  |                                         | 7,051,464 
|Loan proceeds, net                                                          |  |                                         | 2,915,000 
|Proceeds from non-controlling interests                                     |  |                                         | 90,000    
|Proceeds from sale of common stock warrants, net                            |  |                                         | -         
|(Decrease) in other liabilities                                             |  |                                         | (32,313   
|Loan and capital lease repayment                                            |  |                                         | (3,967,467
|Net cash provided (used) by financing activities                            |  |                                         | 6,056,684 
|Effect of exchange rate changes on cash                                     |  |                                         | 45,466    
|Net increase in cash and cash equivalents                                   |  |                                         | 1,529,592 
|Cash and cash equivalents, beginning of period                              |  |                                         | 165,129   
|Cash and cash equivalents, end of period                                    |  | $                                       | 1,694,721 



See accompanying notes to condensed consolidated financial statements.



7







|Chanticleer Holdings, Inc. and Subsidiaries               
|----------------------------------------------------------
|Condensed Consolidated Statements of Cash Flows, continued
|(Unaudited)                                               



|                                                            |  | For the nine months ended September 30, |          
|----------------------------------------------------------- |  | --------------------------------------- | ---------
|                                                            |  | 2012                                    |          
|                                                            |  |                                         |          
|Supplemental cash flow information:                         |  |                                         |          
|Cash paid for interest and income taxes:                    |  |                                         |          
|Interest                                                    |  | $                                       | 237,604  
|Income taxes                                                |  | $                                       | -        
|                                                            |  |                                         |          
|Non-cash investing and financing activities:                |  |                                         |          
|Due to related party exchanged for convertible note payable |  | $                                       | -        
|Convertible notes payable exchanged for common stock        |  | $                                       | 1,907,238
|Accrued interest exchanged for common stock                 |  | $                                       | -        
|Common stock units issued for Hoot limited partner units    |  | $                                       | 986,651  
|Investment contributed by the Company's CEO                 |  | $                                       | -        
|Common stock units issued for prepaid consulting contract   |  | $                                       | -        



See accompanying notes to condensed consolidated financial statements.



8







Chanticleer Holdings, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial
Statements

(Unaudited)



| | 1. | Nature of Business
| | -- | ------------------



Organization



Chanticleer
Holdings, Inc. (the “Company”) was organized October 21, 1999, under its original name, Tulvine Systems, Inc., under
the laws of the State of Delaware. The Company previously had limited operations and was considered a development stage company
until July 2005. 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.



The condensed
consolidated financial statements include the accounts of Chanticleer Holdings, Inc. and its subsidiaries, Chanticleer Advisors,
LLC, (“Advisors”), Avenel Ventures, LLC ("Ventures"), Avenel Financial Services, LLC ("AFS"), Chanticleer
Holdings Limited ("CHL"), Chanticleer Holdings Australia Pty, Ltd. (“CHA”), Chanticleer Investment Partners,
LLC (“CIP”), DineOut SA Ltd. ("DineOut”), Chanticleer and Shaw Foods (Pty) Ltd. (“C&S”),
Kiarabrite (Pty) Ltd (“KPL”), Dimaflo (Pty) Ltd (“DFLO”), Tundraspex (Pty) Ltd (“TPL”), Civisign
(Pty) Ltd (“CPL”), Dimalogix (Pty) Ltd (“DLOG”) and Crown Restaurants Kft (“Crown”) (collectively
referred to as “the Company,” “we,” “us,” or “the Companies”). All significant
inter-company balances and transactions have been eliminated in consolidation.



Further
detailed information regarding the Company's subsidiaries can be found in our Annual Report on Form 10-K/A filed with the SEC on
December 4, 2012 for the year ended December 31, 2011.



Effective
May 11, 2012, the Company's common stock was reverse split, 1 share for each 2 shares issued, pursuant to a majority vote of the
Company's shareholders. All share references have been adjusted as if the split occurred in to all periods presented.



GENERAL



The condensed
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 condensed consolidated financial
statements have not been audited.



Certain
information and footnote disclosures normally included in condensed 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, 2011, which is included in the
Company’s Form 10-K/A.



LIQUIDITY AND CAPITAL RESOURCES



At
September 30, 2012 and December 31, 2011, the Company had current assets of $2,563,752 and $641,963; current liabilities of
$1,478,297 and $3,720,486; and a working capital balance (deficit) of $1,085,455 and $(3,078,523), respectively. The Company
incurred a loss of $2,287,169 during the nine months ended September 30, 2012 and had an unrealized loss from
available-for-sale securities of $264,044 and a foreign currency translation gain of $45,464, resulting in a comprehensive
loss of $2,505,749. As of December 20, 2012, the Company has a consolidated cash balance of approximately $1,138,000.



9







The Company's
corporate general and administrative expenses averaged approximately $295,000 per quarter during 2011 and has increased to $481,000
in the first two quarters of 2012 and $657,000 in the current quarter as we expanded our footprint internationally. Effective October
1, 2011, the Company acquired majority control of the restaurants in South Africa and began consolidating these operations. In
August 2012, the Company opened its restaurant location in Budapest, Hungary. The Company shares 49% of the profits in our Hooters
location opened in January 2012 in Campbelltown, Australia, a suburb of Sydney and plans to open a second Australia location under
the same terms during the first six months of 2013.



The Company
has a note with a balance at September 30, 2012 of $238,026 owed to its bank which is due in August 2013 and a line of credit with
its bank with a balance at September 30, 2012 of $0 (total available was $2,000,000). The line matured on August 20, 2012. All
of our prior notes payable and convertible debt were paid in either cash or common stock with the closing of our raise in June
2012 (for further details, see notes 7 and 10). In addition, the Company may use limited partnerships, if the Company’s raise
is not sufficient or seek additional means of financing, to fund its share of costs for additional Hooters restaurants.



The Company
expects to meet its obligations in the remainder of 2012 and the first nine months of 2013 with some or all of the following:



| | · | Received $100,000 as an annual fee for its CEO sitting on the Board of Hooters of America and expect
to continue to receive this annual fee for the next three years based on the current agreement;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Borrow, if and to the extent available, additional funds;
| | - | ---------------------------------------------------------



Form joint
ventures or other financing vehicles

However, there can be no assurance
that the Company would be able to secure additional funds if needed and that if such funds were available, whether the terms or
conditions would be acceptable to the Company. In such case, the further reduction in operating expenses as well as possible curtailing
opening additional restaurants in order for the Company to generate positive cash flow to sustain the operations of the Company



| | 2. | SIGNIFICANT ACCOUNTING POLICIES
| | -- | -------------------------------



There have
been no material changes to the significant accounting policies previously disclosed in our Annual Report on Form 10-K/A filed
with the SEC on December 4, 2012 for the fiscal year ended December 31, 2011 except for the following:



RESTAURANT
PRE-OPENING EXPENSES



Restaurant
pre-opening expenses, which are expensed as incurred, consist of the costs of hiring and training the initial hourly work force
for each new restaurant, travel, the cost of food and supplies used in training, grand opening promotional costs, the cost of the
initial stocking of operating supplies and other direct costs related to the opening of a restaurant, including rent during the
construction and in-restaurant training period.



Recent
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. At December 20, 2012, none
of these pronouncements are expected to have a material effect on the financial position, results of operations or cash flows of
the Company.



| | 3. | ACQUISITION OF MAJORITY OWNED HOOTERS RESTAURANTS
| | -- | -------------------------------------------------



Effective
October 1, 2011, the Company acquired majority ownership of a management company, a company that owns the HOA franchise rights
for the territory of South Africa, and four Hooters restaurants in South Africa. Previously, the Company owned 50% of the restaurants
but was not in control and these operations were accounted for using the equity method of accounting. New entities were formed
for the operations and the Company’s ownership at September 30, 2012, after the buyout of the Hoot partnerships is as follows:
KPL 80%, DFLO 82%, TPL 88%, CPL 90% and DLOG 97%. The restaurant owned by DFLO in Durban opened in January 2010, the restaurant
owned by TPL in Johannesburg opened in June 2010, the restaurant owned by CPL in Cape Town opened in June 2011and the restaurant
owned by DLOG opened in February 2012.



10







The acquisition
was accounted for using the purchase method of accounting and, accordingly, the consolidated statements of operations include the
results of the South African operations beginning October 1, 2011. The assets acquired and the liabilities assumed were recorded
at estimated fair values as determined by the Company’s management based on information currently available and on current
assumptions as to future operations. A summary of the estimated fair value of assets acquired and liabilities assumed in the acquisition
follows:



|Current assets, excluding cash and cash equivalents |  | $ | 138,801   | 
|--------------------------------------------------- |  | - | --------- | 
|Property and equipment and intangible assets        |  |   | 1,985,799 | 
|Total assets excluding cash and cash equivalents    |  | $ | 2,124,600 | 
|Liabilities assumed                                 |  |   | 953,917   | 
|Non-controlling interest                            |  |   | 645,436   | 
|Prior investment of the Company                     |  |   | 320,247   | 
|Purchase price (net assets acquired)                |  | $ | 205,000   | 
|Cash paid                                           |  | $ | 205,000   | 



Liabilities
assumed includes $561,815 and $593,928 at September 30, 2012 and December 31, 2011, respectively. These amounts are included in
other liabilities at September 30, 2012 and December 31, 2011.



Unaudited
pro forma results of operations for the three and nine months ended September 30, 2011, as if the Company had acquired majority
ownership of the South African Hooters restaurants on January 1, 2011 is as follows. The pro forma results include estimates and
assumptions which management believes are reasonable. However, pro forma results are not necessarily indicative of the results
that would have occurred if the business combination had been in effect on the dates indicated, or which may result in the future.



|                                                 |  | Three Months Ended |           |   | Nine Months Ended  |  
|------------------------------------------------ |  | ------------------ | --------- | - | ------------------ | -
|                                                 |  | September 30, 2011 |           |   | September 30, 2011 |  
|                                                 |  |                    |           |   |                    |  
|Net revenues                                     |  | $                  | 1,340,500 |   |                    | $
|Net earnings (loss)                              |  | $                  | (480,380  | ) |                    | $
|Net earnings (loss) per share, basic and diluted |  | $                  | (0.39     | ) |                    | $



11







| | 4. | INVESTMENTS
| | -- | -----------



INVESTMENTS AT FAIR VALUE CONSIST OF
THE FOLLOWING AT SEPTEMBER 30, 2012 AND DECEMBER 31, 2011.



|                                             |  | 2012 |        |  | 2011 |  
|-------------------------------------------- |  | ---- | ------ |  | ---- | -
|                                             |  |      |        |  |      |  
|Available-for-sale investments at fair value |  | $    | 54,309 |  |      | $
|Trading securities                           |  |      | -      |  |      |  
|Total                                        |  | $    | 54,309 |  |      | $





AVAILABLE-FOR-SALE
SECURITIES



Activity in our available-for-sale
securities may be summarized as follows:

|                                                           |  | 2012 |          |   | 2011 |  
|---------------------------------------------------------- |  | ---- | -------- | - | ---- | -
|                                                           |  |      |          |   |      |  
|Cost at beginning of year                                  |  | $    | 263,331  |   |      | $
|Contributed to the Company by it's CEO                     |  |      | -        |   |      |  
|Received as management fees                                |  |      | -        |   |      |  
|Other than temporary loss in available-for-sale securities |  |      | -        |   |      |  
|Cost at end of period                                      |  |      | 263,331  |   |      |  
|Unrealized gain (loss)                                     |  |      | (209,022 | ) |      |  
|Total                                                      |  | $    | 54,309   |   |      | $



Our available-for-sale securities consist of the following:



|                                |  |      |         |  | Unrecognized   |   |          |       |  |   | Realized |  |  | Loss |         
|------------------------------- |  | ---- | ------- |  | -------------- | - | -------- | ----- |  | - | -------- |  |  | ---- | --------
|                                |  |      |         |  | Holding        |   |          | Fair  |  |   | Holding  |  |  | on   |         
|                                |  | Cost |         |  | Gains (Losses) |   |          | Value |  |   | Loss     |  |  | Sale |         
|June 30, 2012                   |  |      |         |  |                |   |          |       |  |   |          |  |  |      |         
|North Carolina Natural Energy * |  | $    | 1,500   |  |                | $ | -        |       |  | $ | 1,500    |  |  | $    | -       
|North American Energy           |  |      | 126,000 |  |                |   | (112,000 | )     |  |   | 14,000   |  |  |      | -       
|North American Energy *         |  |      | 10,500  |  |                |   | (7,500   | )     |  |   | 3,000    |  |  |      | -       
|North American Energy           |  |      | 125,331 |  |                |   | (89,522  | )     |  |   | 35,809   |  |  |      | -       
|                                |  | $    | 263,331 |  |                | $ | (209,022 | )     |  | $ | 54,309   |  |  | $    | -       
|                                |  |      |         |  |                |   |          |       |  |   |          |  |  |      |         
|December 31, 2011               |  |      |         |  |                |   |          |       |  |   |          |  |  |      |         
|Remodel Auction *               |  | $    | -       |  |                | $ | -        |       |  | $ | -        |  |  | $    | (900    
|North Carolina Natural Energy * |  |      | 1,500   |  |                |   | -        |       |  |   | 1,500    |  |  |      | -       
|North American Energy           |  |      | 126,000 |  |                |   | (42,000  | )     |  |   | 84,000   |  |  |      | -       
|North American Energy *         |  |      | 10,500  |  |                |   | 7,500    |       |  |   | 18,000   |  |  |      | -       
|North American Energy           |  |      | 125,331 |  |                |   | 89,522   |       |  |   | 214,853  |  |  |      | -       
|Efftec International, Inc. *    |  |      | -       |  |                |   | -        |       |  |   | -        |  |  |      | (22,500 
|HiTech Stages                   |  |      | -       |  |                |   | -        |       |  |   | -        |  |  |      | (124,573
|                                |  | $    | 263,331 |  |                | $ | 55,022   |       |  | $ | 318,353  |  |  | $    | (147,973



* Investments acquired in exchange for management services.



Remodel Auction
Incorporated (“REMC”) –During 2009, the Company acquired 334 shares of REMC for management services with
an initial cost of $275,000 which has now been fully impaired.



12







North Carolina
Natural Energy, Inc. (“NCNE”) – NCNE is a successor to REMC whose business was discontinued. NCNE has plans
to become involved in some form of natural energy. The Company received 100,000,000 shares of NCNE (less than 1% on a fully diluted
basis) for management services during 2011. The shares were valued at $1,500 based on NCNE’s valuation as a shell.



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. At September 30, 2012 and December 31, 2011, the shares were valued at $14,000 and $84,000.



During the first quarter
of 2010, the Company received an additional 150,000 shares of NAEY in exchange for management services. The shares were initially
valued at $10,500, based on the trading price at the time. At September 30, 2012 and December 31, 2011, the shares were valued
at $3,000 and $18,000.



During June 2011,
the Company’s CEO contributed 1,790,440 shares of NAEY to the Company which was valued at $125,331 based on the trading price
at the time. Mr. Pruitt did not receive additional compensation as a result of the transfer. At September 30, 2012 and December
31, 2011, the shares had a market value of $35,809 and $214,853, respectively.



NAEY appointed a new
management team in December 2010 and they are seeking acquisition opportunities for onshore and offshore oil and gas properties.
Accordingly, the Company determined that any decline was 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. The shares were valued at $22,500 based on the trading price of EffTec at the date of the transaction.
At September 30, 2011, the market value of the Efftec stock dropped to less than $0.01 per share and the Company determined the
reduction was other than temporary and impaired its investment to zero.



HiTech Stages,
Ltd. (“HiTech”) – The Company originally acquired 275,000 shares of HiTech in exchange for 150,450
shares of DineOut during the June 2010 quarter. HiTech was unable to raise sufficient capital to fund its business plan and the
stock price dropped to near zero at September 30, 2011. The Company determined the decline was other than temporary and fully impaired
its investment on September 30, 2011.



OTHER INVESTMENTS ARE SUMMARIZED AS
FOLLOWS AT SEPTEMBER 30, 2012 AND DECEMBER 31, 2011.



|                                                  |  | 2012 |           |  | 2011 |  
|------------------------------------------------- |  | ---- | --------- |  | ---- | -
|                                                  |  |      |           |  |      |  
|Investments accounted for under the equity method |  | $    | 1,081,799 |  |      | $
|Investments accounted for under the cost method   |  |      | 1,066,598 |  |      |  
|Total                                             |  | $    | 2,148,397 |  |      | $



13







INVESTMENTS ACCOUNTED FOR USING THE
EQUITY METHOD



Activity in investments
accounted for using the equity method is summarized as follows.



|                                                |  | 2012 |           |   | 2011 |  
|----------------------------------------------- |  | ---- | --------- | - | ---- | -
|                                                |  |      |           |   |      |  
|Balance, beginning of year                      |  | $    | 815,550   |   |      | $
|Equity in earnings (loss)                       |  |      | (10,474   | ) |      |  
|Equity investment consolidated at June 30, 2012 |  |      | (143,274  | ) |      |  
|New investments                                 |  |      | 419,997   |   |      |  
|Distributions received                          |  |      | -         |   |      |  
|Balance, end of year                            |  | $    | 1,081,799 |   |      | $



Equity investments consist of the following
at September 30, 2012 and December 31, 2011:



|                                                  |  | 2012 |           |  | 2011 |  
|------------------------------------------------- |  | ---- | --------- |  | ---- | -
|Carrying value:                                   |  |      |           |  |      |  
|Hoot SA I, II, III - South Africa                 |  | $    | -         |  |      | $
|Hoot Campbelltown Pty. Ltd. (49%) - Australia     |  |      | 559,660   |  |      |  
|Hoot Surfers Paradise Pty. Ltd. (49%) - Australia |  |      | 511,584   |  |      |  
|Brazil                                            |  |      | 10,555    |  |      |  
|                                                  |  | $    | 1,081,799 |  |      | $



Equity in earnings
(loss) and distributions from equity investments during the three and nine months ended September 30, 2012 and 2011 follows. The
activity from the South African restaurants is through September 30, 2011 at which time the Company acquired majority ownership
and began consolidating these operations.



|                                        |  | Three Months ended September 30, |        |  | Nine Months ended September 30, |  
|--------------------------------------- |  | -------------------------------- | ------ |  | ------------------------------- | -
|                                        |  | 2012                             |        |  | 2011                            |  
|Equity in earnings (loss):              |  |                                  |        |  |                                 |  
|Hoot S.A. I, II, III (opened June 2011) |  |                                  | -      |  |                                 |  
|Hoot Campbelltown (49%)                 |  |                                  | 33,412 |  |                                 |  
|                                        |  | $                                | 33,412 |  |                                 | $
|Distributions:                          |  |                                  |        |  |                                 |  
|Hoot S.A. I, LLC (20%)                  |  |                                  | -      |  |                                 |  
|Hoot S.A. II, LLC (20%)                 |  |                                  | -      |  |                                 |  
|                                        |  | $                                | -      |  |                                 | $



In June 2012, the
Company issued 219,248 shares of its common stock and cash in the amount of $480,929 to acquire 75% of the interest held by the
limited partners of the four Hoot limited partnerships. The Company’s interest in the four restaurants increased to the amounts
in Note 3.



14















The summarized financial
data below includes the South African operations, of which we owned 20% at September 30, 2011 and the Hoot Campbelltown location
in Australia, which we owned 49% of at September 30, 2012. The Company acquired majority ownership of the South African operations
effective September 30, 2011.



|                                         |  | Three Months ended September 30, |         |  | Nine Months ended September 30, |  
|---------------------------------------- |  | -------------------------------- | ------- |  | ------------------------------- | -
|                                         |  | 2012 (1)                         |         |  | 2011 (2)                        |  
|Revenue                                  |  | $                                | 762,634 |  |                                 | $
|Gross profit                             |  |                                  | 546,410 |  |                                 |  
|Recurring expenses                       |  |                                  | 478,221 |  |                                 |  
|Pre-opening costs                        |  |                                  | -       |  |                                 |  
|Income (loss) from continuing operations |  |                                  | 68,189  |  |                                 |  
|Net income (loss)                        |  |                                  | 68,189  |  |                                 |  



| | (1) | Represents the Hoot Campbelltown location in Australia.
| | --- | -------------------------------------------------------

| | (2) | Represents the South African restaurants prior to acquiring majority interest.
| | --- | ------------------------------------------------------------------------------



The summarized balance
sheets for the two locations in Australia of which we owned 49% at September 30, 2012 and December 31, 2011 follows:



|                                       |  | 2012 |           |  | 2011 |  
|-------------------------------------- |  | ---- | --------- |  | ---- | -
|ASSETS                                 |  |      |           |  |      |  
|Current assets                         |  | $    | 618,524   |  |      | $
|Non-current assets                     |  |      | 2,351,545 |  |      |  
|TOTAL ASSETS                           |  | $    | 2,970,069 |  |      | $
|LIABILITIES                            |  |      |           |  |      |  
|Current liabilities                    |  | $    | 507,097   |  |      | $
|PARTNER'S EQUITY                       |  |      | 2,462,972 |  |      |  
|TOTAL LIABILITIES AND PARTNERS' EQUITY |  | $    | 2,970,069 |  |      | $



Hooters S.A., GP
-The Company formed CHL to own the Company's 50% general partner interest in Hooters S.A., GP, the general partner of the
Hooters' restaurant franchises in South Africa. The initial restaurant opened in December 2009 in Durban, South Africa and operations
commenced in January 2010. In the initial restaurant CHL had a 10% interest in restaurant cash flows until the limited partners
received payout and a 40% interest in restaurant cash flows after limited partner payout. The second location opened in Johannesburg
in June 2010 and a third location opened in Cape Town in June of 2011 with similar structures. Effective September 30, 2011, the
Company acquired majority control of the South African operations and began consolidating its operations on October 1, 2011.



CHA (Hoot Campbelltown
Pty. Ltd and Hoot Surfers Paradise Pty. Ltd.) – CHA entered into a partnership with the current local Hooters franchisee
in Australia in which CHA will own 49% and its partner own 51%. The local partner will also manage the restaurants. The first location,
Hoot Campbelltown Pty. Ltd. opened in Campbelltown, a suburb of Sydney, in January 2012. A second location, Hoot Surfers Paradise
Pty. Ltd., is underway with plans to open during the first six months of 2013.



15







INVESTMENTS ACCOUNTED FOR USING THE COST METHOD



Investments at cost consist of the following
at September 30, 2012 and December 31, 2011:



|                                      |  | 2012 |           |  | 2011 |  
|------------------------------------- |  | ---- | --------- |  | ---- | -
|                                      |  |      |           |  |      |  
|Chanticleer Investors, LLC            |  | $    | 800,000   |  |      | $
|Edison Nation LLC (FKA Bouncing Brain |  |      |           |  |      |  
|Productions)                          |  |      | 250,000   |  |      |  
|Chanticleer Investors II              |  |      | 16,598    |  |      |  
|                                      |  | $    | 1,066,598 |  |      | $



Chanticleer Investors
LLC -The Company sold 1/2 of its investment in Investors LLC in May 2009 for its cost of $575,000, 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. In December 2010, the Company sold an additional $75,000 of its investment
at cost.



On April 18, 2006,
the Company formed Investors LLC and sold units for $5,000,000. Investors LLC’s principal asset was 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%.



On January 24, 2011,
Investors LLC and its three partners combined to form HOA Holdings, LLC ("HOA LLC") and completed the acquisition of
Hooters of America, Inc. ("HOA") and Texas Wings, Inc. ("TW"). Together HOA LLC has created an operating company
with 161 company-owned locations across sixteen states, or nearly half of all domestic Hooters restaurants and over one-third of
the locations worldwide.



Investors, LLC had
a note receivable in the amount of $5,000,000 from HOA that was repaid at closing. Investors LLC then invested $3,550,000 in HOA
LLC (approximately 3%) ($500,000 of which is the Company's share). One of the investors in Investors LLC that owned a $1,750,000
share is a direct investor in HOA LLC and will now carry its ownership in HOA LLC directly. In July 2012, the Company acquired
an additional interest of $300,000, at cost, from one of the partners for cash, which increased our ownership to approximately
20% of Investors LLC at September 30, 2012.



Based on the current
status of this investment, the Company does not consider the investment to be impaired.



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. 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. Edison Nation plans to repay the majority of its debt in 2012 and expects to subsequently begin making
distributions to its owners. Based on the current status of this investment, the Company does not consider the investment to be
impaired.



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



16







| | 5. | PROPERTY AND EQUIPMENT
| | -- | ----------------------



Property and equipment
consists of the following at September 30, 2012 and December 31, 2011:



|                                     |  | 2012 |           |   | 2011               |  
|------------------------------------ |  | ---- | --------- | - | ------------------ | -
|                                     |  |      |           |   | (Restated Note 16) |  
|Office and computer equipment        |  | $    | 33,525    |   |                    | $
|Furniture and fixtures               |  |      | 47,686    |   |                    |  
|Construction in progress             |  |      | -         |   |                    |  
|Restaurant furnishings and equipment |  |      | 2,718,771 |   |                    |  
|                                     |  |      | 2,799,982 |   |                    |  
|Accumulated depreciation             |  |      | (377,424  | ) |                    |  
|                                     |  | $    | 2,422,558 |   |                    | $



|Depreciation expense for the three months ended September 30, 2012 and 2011:
|----------------------------------------------------------------------------
|                                                                            
|Restaurants                                                                 
|Other                                                                       
|Total                                                                       



|Depreciation expense for the nine months ended September 30, 2012 and 2011:
|---------------------------------------------------------------------------
|                                                                           
|Restaurants                                                                
|Other                                                                      
|Total                                                                      



Restaurant furnishings
and equipment consists of leasehold improvements, and bar, kitchen and restaurant equipment used in our four South Africa locations
and our Budapest, Hungary location at September 30, 2012. Construction in progress consisted of costs incurred as of December 31,
2011 for our Emperor’s Palace location in Johannesburg, South Africa, which opened in February 2012 and its assets are currently
in the restaurant furnishings and equipment line above.



Restaurant furnishings
and equipment includes capital lease assets of $141,416 with a net book value of $114,706 at September 30, 2012 and capital lease
assets of $141,416 with a net book value of $131,544 at December 31, 2011.



17







| | 6. | INTANGIBLE ASSETS, NET
| | -- | ----------------------



GOODWILL

Goodwill arose from
the excess paid over the fair value of the net assets acquired for the three operating restaurants effective October 1, 2011 and
amounted to $396,487. An evaluation was completed effective December 31, 2011 at which time the Company determined that no impairment
was necessary. No change has occurred as of September 30, 2012 which would cause the Company to revise their evaluation.



FRANCHISE COST

Franchise cost for
the Company’s Hooters restaurants consists of the following at September 30, 2012 and December 31, 2011. The Company is amortizing
these costs from the opening of each restaurant for the 20 year term of the franchise agreement with HOA.



|                                                |  | 2012 |         |   | 2011 |  
|----------------------------------------------- |  | ---- | ------- | - | ---- | -
|                                                |  |      |         |   |      |  
|Goodwill                                        |  | $    | 396,487 |   |      | $
|                                                |  |      |         |   |      |  
|Franchise cost:                                 |  |      |         |   |      |  
|                                                |  |      |         |   |      |  
|South Africa                                    |  | $    | 345,386 |   |      | $
|Brazil                                          |  |      | 135,000 |   |      |  
|Hungary                                         |  |      | 75,000  |   |      |  
|                                                |  |      | 555,386 |   |      |  
|Accumulated amortization                        |  |      | (18,681 | ) |      |  
|                                                |  |      | 536,705 |   |      |  
|Intangible assets, net                          |  | $    | 933,192 |   |      | $
|                                                |  |      |         |   |      |  
|Three months ended September 30, 2012 and 2011: |  |      |         |   |      |  
|                                                |  |      |         |   |      |  
|Amortization expense                            |  | $    | 5,126   |   |      | $
|                                                |  |      |         |   |      |  
|Nine months ended September 30, 2012 and 2011:  |  |      |         |   |      |  
|                                                |  |      |         |   |      |  
|Amortization expense                            |  | $    | 13,377  |   |      | $



18







| | 7. | LONG-TERM DEBT AND NOTES PAYABLE
| | -- | --------------------------------



Long-term debt and
notes payable are summarized as follows.



|                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | June 30, |         |  | December 31, |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ------- |  | ------------ | -
|                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | 2012     |         |  | 2011         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |          |         |  |              |  
|$2,000,000 line of credit with a bank, interest at Wall Street Journal Prime +0.5% (minimum of 4.5%) payable monthly; due August 20, 2012; collateralized by a certificate of deposit owned by a shareholder; collateralized by substantially all of the Company's assets and guaranteed by Mr. Pruitt (the line of credit was paid off in cash with the closing of the raise in June 2012 and collateral was returned in August 2012) |  | $        | -       |  |              | $
|                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |          |         |  |              |  
|Note payable to a bank due in monthly installments of $1,739 including interest at Wall Street Journal Prime + 1% (minimum of 5.5%); remaining balance due August 10, 2013; collateralized by substantially all of the Company's assets and guaranteed by Mr. Pruitt                                                                                                                                                                   |  |          | 238,026 |  |              |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |          |         |  |              |  
|18% convertible notes payable; interest payable quarterly; due on the six-month anniversary of the date issued which range from January 22-June 26, 2012; convertible under the same terms as the subsequent capital raised in connection with a public offering of the Company's securities (all notes and accrued interest were paid off with closing of raise in June 2012, either in cash or common stock)                         |  |          | -       |  |              |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |          | 238,026 |  |              |  
|Notes payable and current portion of long-term debt                                                                                                                                                                                                                                                                                                                                                                                    |  |          | 238,026 |  |              |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |          |         |  |              |  
|Long-term debt, less current portion                                                                                                                                                                                                                                                                                                                                                                                                   |  | $        | -       |  |              | $



The Company paid the
shareholder whose certificate of deposit was used as collateral on the $2,000,000 line of credit 1% of the outstanding balance
on the line of credit monthly. In addition, the Company issued warrants to the shareholder, as described in Note 10.





19









| | 8. | bank overdraft
and term facilities
| | -- | ----------------------------------



Bank overdraft and term facilities at September
30, 2012 and December 31, 2011 are associated with the South African Operations and consist of the following:



|                              |  | September 30, |         |  | December 31, |  
|----------------------------- |  | ------------- | ------- |  | ------------ | -
|                              |  | 2012          |         |  | 2011         |  
|                              |  |               |         |  |              |  
|Bank overdraft facilities (1) |  | $             | 249,090 |  |              | $
|                              |  |               |         |  |              |  
|Term facility (2)             |  |               | 112,950 |  |              |  
|                              |  |               |         |  |              |  
|Term facility (3)             |  |               | 199,575 |  |              |  
|                              |  |               | 561,615 |  |              |  
|Other current liabilities     |  |               | 360,125 |  |              |  
|Other liabilities             |  | $             | 201,490 |  |              | $



| | (1) | Bank overdraft facilities are unsecured and have a total maximum facility of approximately $260,000. The interest rate as of
September 30, 2012 and December 31, 2011 was 11%. The facilities are reviewed annually and are payable on demand.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Term facility is payable on demand and the facility is secured by certain assets of one of the Company’s shareholders.
| | --- | ----------------------------------------------------------------------------------------------------------------------

| | (3) | The monthly payments of principal and interest of the term facility total approximately $5,300 and have been made currently
since October 1, 2011. The interest rate at September 30, 2012 and December 31, 2011 was 10.3%.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 9. | capital lease
payable
| | -- | ---------------------



Capital leases payable at September 30,
2012 and December 31, 2011 is associated with the South African Operations and consists of the following.



|                                                                                                                  |  | September 30, |         |  | December 31, |  
|----------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- |  | ------------ | -
|                                                                                                                  |  | 2012          |         |  | 2011         |  
|                                                                                                                  |  |               |         |  |              |  
|Capital lease payable, due in 49 monthly installments of $1,081, including interest at 10%, through April 2016    |  | $             | 43,284  |  |              | $
|                                                                                                                  |  |               |         |  |              |  
|Capital lease payable, due in 32 monthly insallments of $800 including interest at 10%, through November 2014     |  |               | 19,192  |  |              |  
|                                                                                                                  |  |               |         |  |              |  
|Capital lease payable, due in 14 monthly installments of $1,470, including interest at 10%, through May 2013      |  |               | 11,678  |  |              |  
|                                                                                                                  |  |               |         |  |              |  
|Capital lease payable, due in 36 monthly installments of $1,022, including interest at 10%, through February 2015 |  |               | 29,858  |  |              |  
|Total capital leases payable                                                                                      |  |               | 104,012 |  |              |  
|Current maturities                                                                                                |  |               | 36,467  |  |              |  
|Capital leases payable, less current maturities                                                                   |  | $             | 67,545  |  |              | $



The capital leases cover point of sale
and other equipment for three of the four restaurants operating at September 30, 2012.



20







| | 10. | Stockholders’
Equity
| | --- | --------------------



The Company has 20,000,000
shares of its $0.0001 par value common stock authorized, 3,698,896 shares issued and 3,698,896 shares outstanding at September
30, 2012 and had 200,000,000 shares of its $0.0001 par value common stock authorized, 1,506,061 shares issued and 1,249,446 shares
outstanding at December 31, 2011.



Effective May 11,
2012, the Company's common stock was reverse split, 1 share for each 2 shares issued, pursuant to approval of a majority of the
Company's shareholders. All share references have been adjusted as if the split occurred prior to all periods presented.



2012 Transactions



On May 8, 2012, the
Company issued 5,000 shares of its common stock in exchange for services to be performed over a six month period and valued at
$32,400. There is an unamortized balance of $6,794 at September 30, 2012, and $25,606 has been expensed.



EQUITY RAISE



The Company filed
a Form S-1 Registration Statement under the Securities Act of 1933 which was declared effective on June 21, 2012. The Company issued
2,444,450 units at $4.50 per unit, consisting of one share of Common Stock and one five year redeemable warrant (redeemable at
the Company’s option) exercisable at $5.00 per share for an issuance value of $11 million (net $7.2 million). The issuance
of shares included shares issued upon the conversion of notes payable and accrued interest of approximately $1.9 million and shares
issued for the purchase of a percentage of the Hoot SA non-controlling interest of approximately $1.0 million.



During August 2012,
treasury stock shares of 256,615 were cancelled and returned to the Company.



2011 Transactions



On March 30, 2011,
the Company issued 412,286 shares of its common stock in exchange for convertible notes payable with a balance of $711,500 and
accrued interest of $19,588.



On July 28, 2011,
the Company issued 10,000 shares of its common stock in exchange for consulting services valued at $21,500.



On September 23, 2011,
the Company issued 15,000 shares of its common stock in exchange for consulting services to be performed valued at $44,850.



On September 23, 2011,
the Company issued 2,750 shares of its common stock in exchange for services performed and valued at $8,223.



On October 19, 2011,
the Company issued 167 shares of its common stock in exchange for cash in the amount of $500.



Warrants



On January 6, 2011,
the Company filed a Form S-1 Registration Statement under the Securities Act of 1933. The Registration Statement was declared effective
on July 14, 2011 and registers one Class A Warrant and one Class B Warrant for each common share of the Company issued and outstanding.
The warrants have a subscription price of $0.08 which entitles our shareholders to acquire one Class A Warrant which would entitle
the holder to acquire one share of our common stock for $5.50 and one Class B Warrant which would entitle the holder to acquire
one share of our common stock for $7.00. The warrants have a five year life. At September 30, 2012 and December 31, 2011, the Company
had issued 1,097,254 Class A and Class B warrants. Net proceeds from the offering are included in additional paid in capital and
are summarized as follows.





21







|Proceeds from sales of Class A and Class B warrants |  | $ | 87,780  |  
|--------------------------------------------------- |  | - | ------- | -
|Legal and professional fees incurred for offering   |  |   | (67,172 | )
|                                                    |  | $ | 20,608  |  



On August 10, 2011,
the Company issued two warrants to the shareholder who collateralized the Company's $2,000,000 line of credit discussed in Note
7. The Class A Warrant is for 100,000 shares exercisable at $5.50 per share for 10 years and the Class B Warrant is for 112,500
shares exercisable at $7.00 per share for 10 years. The warrants were valued using Black-Scholes at $906,351. This amount will
be amortized to interest expense over the ten year life of the warrants. At September 30, 2012 and December 31, 2011, additional
paid-in capital includes $80,565 and $35,247, respectively, in amortization. Interest expense included $35,247 in the last six
months of 2011 and $22,659 and $45,318 for the three and nine months ended September 30, 2012, respectively.



On November 1, 2011,
the Company entered into an investor relations consulting agreement. In addition to cash compensation, the consultant is entitled
to receive warrants for certain performance goals. These warrants will be accounted for when the goals are accomplished.



On March 28, 2012,
the Company issued 125,000 and 25,000 five year warrants at $6.50 and $8.00, respectively for consulting services related to the
Company’s expansion into Europe. The warrants were valued using Black-Scholes at $518,599. This amount will be amortized
to consulting fees (in G&A on consolidated statements of operations) over the five year life of the warrants. At September
30, 2012, additional paid-in capital and consulting expense include $26,745 in amortization for the period since the warrants were
issued.



On June 21, 2012,
the Company issued 2,444,450 five-year redeemable warrants as noted above in the “Equity Raise” section.



| | 11. | RELATED PARTY
TRANSACTIONS
| | --- | --------------------------



Due to related parties



The Company has received
non-interest bearing loans and advances from related parties. The amounts owed by the Company as of September 30, 2012 and December
31, 2011 are as follows:



|                             |  | 2012 |        |  | 2011 |  
|---------------------------- |  | ---- | ------ |  | ---- | -
|                             |  |      |        |  |      |  
|Hoot SA I, LLC               |  | $    | 12,191 |  |      | $
|Chanticleer Foundation, Inc. |  |      | -      |  |      |  
|Chanticleer Investors, LLC   |  |      | 1,542  |  |      |  
|                             |  | $    | 13,733 |  |      | $



Due from related parties



The Company has earned
income from and made advances to related parties. The amounts owed to the Company as of September 30, 2012 and December 31, 2011
are as follows:



|                                |  | 2012 |         |  | 2011 |  
|------------------------------- |  | ---- | ------- |  | ---- | -
|                                |  |      |         |  |      |  
|Chanticleer Investors II, LLC   |  | $    | 31,808  |  |      | $
|Chanticleer Dividend Fund, Inc. |  |      | 74,281  |  |      |  
|Hoot SA II, III and IV, LLC's   |  |      | 43,619  |  |      |  
|                                |  | $    | 149,708 |  |      | $







22







Management income - related parties



The Company had management income from
its affiliates in the three and nine months ended September 30, 2012 and 2011, as follows:



|                                      |  | Three Months ended September 30, |        |  | Nine Months ended September 30, |  
|------------------------------------- |  | -------------------------------- | ------ |  | ------------------------------- | -
|                                      |  | 2012                             |        |  | 2011                            |  
|Chanticleer Investors II, LLC         |  |                                  | 31,880 |  |                                 |  
|North American Energy Resources, Inc. |  |                                  | -      |  |                                 |  
|                                      |  | $                                | 31,880 |  |                                 | $



OTHER TRANSACTIONS WITH REALTED PARTIES



Chanticleer Investors LLC



Investors LLC loaned
the Company $4,045 at September 30, 2012 and December 31, 2011.



Chanticleer Investors II LLC



The Company manages
Investors II and earned management income of $6,698 and $30,726 in the nine months ended September 30, 2012 and 2011, respectively.



Chanticleer Dividend Fund, Inc. ("CDF")



On November 10, 2010
the Company formed CDF under the general corporation laws of the State of Maryland. CDF filed a registration statement under Form
N-2 to register as a non-diversified, closed-end investment company in January 2011. The Company, through Advisors, will have a
role in management of CDF when its registration statement becomes effective.



Hoot SA, LLC; Hoot SA II, LLC; Hoot
SA III, LLC; and Hoot SA IV, LLC



The Hoot partnerships
were formed to help finance the first four Hooters restaurants in South Africa.



Efftec International, Inc. ("Efftec")



The Company's CEO
became CEO and the sole director of Efftec during 2010 and the Company received 150,000 common shares and an option to acquire
150,000 shares for management services. The shares and option were initially valued at $22,500, based on the trading price of Efftec
at the time.



North American Energy Resources, Inc.
("NAEY")



The Company's CEO
became CEO and a director of NAEY during 2010 and the Company received 150,000 common shares for management services. The shares
were valued at $10,500, based on the trading price of NAEY at the time. The Company's CEO resigned as CEO of NAEY in December 2010
and remains a director. During June 2011, the Company’s CEO contributed 1,790,440 shares of NAEY to the Company which was
valued at $125,331 based on the trading price at the time. Mr. Pruitt did not receive additional compensation as a result of the
transfer.



Chanticleer Foundation, Inc.



Chanticleer Foundation,
Inc. is a Donor-Advised Fund whose governing body consists of Mr. Pruitt, a director of the Company and an employee of the Company.
The Foundation loaned the Company $10,750 during 2011.





23







Avenel Financial Group, Inc.



Avenel Financial Group,
Inc. is a company owned by Mr. Pruitt. Advances previously made to the Company were repaid during 2011. Avenel Financial Group,
Inc. invested as a limited partner in the South African Hooters locations. Avenel Financial Group, Inc. invested $14,000, $12,500,
and $25,000 in the Durban, Johannesburg, and Cape Town locations, respectively, and is entitled to receive approximately 2.0%,
1.5%, and 2.9%, respectively, of the net profits after taxation (“SA Profits”) of each of the locations. As of September
30, 2012, Avenel Financial Group, Inc. has received an aggregate of $6,441 in SA Profits and $49,816 in return of investment under
the same terms as the other limited partners.



| | 12. | SEGMENTS OF
BUSINESS
| | --- | --------------------



The Company is organized into two segments.



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, Investors II and other unaffiliated companies.



Operation of restaurants ("Restaurants")

At September 30, 2012,
the Company has majority ownership of four restaurants and a management company in South Africa. Three of the restaurants and the
management company were operating for the entire first quarter of 2012 and the fourth restaurant opened in February 2012. Majority
ownership was acquired effective September 30, 2011 and these operations are consolidated with the Company’s other operations
since that date. At September 30, 2012, the Company has 49% ownership of two restaurants in Australia, one of which opened in January
2012 and the second is under construction and expected to open by the end of 2012. The operations in Australia will be accounted
for using the equity method. The Company has also started activity in Hungary, Brazil and Europe, but operations have not yet commenced.



Financial information
regarding the Company's segments is as follows for the three and nine months ended September 30, 2012 and 2011.



Three months ended
September 30, 2012



|                              |  | Management |          |   | Restaurants |   |           | Total | 
|----------------------------- |  | ---------- | -------- | - | ----------- | - | --------- | ----- | 
|                              |  |            |          |   |             |   |           |       | 
|Revenues                      |  | $          | 56,880   |   |             | $ | 1,710,632 |       | 
|                              |  |            |          |   |             |   |           |       | 
|Interest expense              |  | $          | 28,097   |   |             | $ | 11,486    |       | 
|                              |  |            |          |   |             |   |           |       | 
|Depreciation and amortization |  | $          | 2,444    |   |             | $ | 95,439    |       | 
|                              |  |            |          |   |             |   |           |       | 
|Profit (loss)                 |  | $          | (511,247 | ) |             | $ | (282,028  | )     | 
|Investments and other         |  |            |          |   |             |   |           |       | 
|Non-controlling interest      |  |            |          |   |             |   |           |       | 
|                              |  |            |          |   |             |   |           |       | 





Three months ended September 30, 2011



|                              |  | Management |          |   | Restaurants |   |         | Total | 
|----------------------------- |  | ---------- | -------- | - | ----------- | - | ------- | ----- | 
|                              |  |            |          |   |             |   |         |       | 
|Revenues                      |  | $          | (5,726   | ) |             | $ | -       |       | 
|                              |  |            |          |   |             |   |         |       | 
|Interest expense              |  | $          | 41,190   |   |             | $ | -       |       | 
|                              |  |            |          |   |             |   |         |       | 
|Depreciation and amortization |  | $          | 2,512    |   |             | $ | -       |       | 
|                              |  |            |          |   |             |   |         |       | 
|Profit (loss)                 |  | $          | (327,362 | ) |             | $ | (20,820 | )     | 
|Investments and other         |  |            |          |   |             |   |         |       | 
|Non-controlling interest      |  |            |          |   |             |   |         |       | 
|                              |  |            |          |   |             |   |         |       | 





24







Nine months ended September 30,
2012



|                                    |  | Management |            |   | Restaurants |   |           | Total | 
|----------------------------------- |  | ---------- | ---------- | - | ----------- | - | --------- | ----- | 
|                                    |  |            |            |   |             |   |           |       | 
|Revenues                            |  | $          | 113,578    |   |             | $ | 4,794,250 |       | 
|                                    |  |            |            |   |             |   |           |       | 
|Interest expense                    |  | $          | 165,602    |   |             | $ | 267,193   |       | 
|                                    |  |            |            |   |             |   |           |       | 
|Depreciation and amortization       |  | $          | 6,969      |   |             | $ | 258,099   |       | 
|                                    |  |            |            |   |             |   |           |       | 
|Profit (loss)                       |  | $          | (1,535,715 | ) |             | $ | (937,165  | )     | 
|Investments and other               |  |            |            |   |             |   |           |       | 
|Non-controlling interest            |  |            |            |   |             |   |           |       | 
|                                    |  |            |            |   |             |   |           |       | 
|                                    |  |            |            |   |             |   |           |       | 
|Assets                              |  | $          | 457,321    |   |             | $ | 3,897,704 |       | 
|Cash and cash equivalents           |  |            |            |   |             |   |           |       | 
|Investments                         |  |            |            |   |             |   |           |       | 
|                                    |  |            |            |   |             |   |           |       | 
|                                    |  |            |            |   |             |   |           |       | 
|Liabilities                         |  | $          | 407,935    |   |             | $ | 1,429,069 |       | 
|                                    |  |            |            |   |             |   |           |       | 
|Expenditures for non-current assets |  | $          | 1,346      |   |             | $ | 1,167,845 |       | 



Nine months ended
September 30, 2011



|                                    |  | Management |           |   | Restaurants |   |         | Total | 
|----------------------------------- |  | ---------- | --------- | - | ----------- | - | ------- | ----- | 
|                                    |  |            |           |   |             |   |         |       | 
|Revenues                            |  | $          | 468,417   |   |             | $ | -       |       | 
|                                    |  |            |           |   |             |   |         |       | 
|Interest expense                    |  | $          | 63,876    |   |             | $ | -       |       | 
|                                    |  |            |           |   |             |   |         |       | 
|Depreciation and amortization       |  | $          | 7,573     |   |             | $ | -       |       | 
|                                    |  |            |           |   |             |   |         |       | 
|Profit (loss)                       |  | $          | (365,191  | ) |             | $ | (9,256  | )     | 
|Investments and other               |  |            |           |   |             |   |         |       | 
|Non-controlling interest            |  |            |           |   |             |   |         |       | 
|                                    |  |            |           |   |             |   |         |       | 
|                                    |  |            |           |   |             |   |         |       | 
|Assets                              |  | $          | 506,838   |   |             | $ | 786,560 |       | 
|Investments                         |  |            |           |   |             |   |         |       | 
|                                    |  |            |           |   |             |   |         |       | 
|                                    |  |            |           |   |             |   |         |       | 
|Liabilities                         |  | $          | 1,071,938 |   |             | $ | 716,756 |       | 
|                                    |  |            |           |   |             |   |         |       | 
|Expenditures for non-current assets |  | $          | -         |   |             | $ | -       |       | 



| | 13. | COMMITMENTS
AND CONTINGENCIES
| | --- | -----------------------------



Effective August 1,
2010, the Company extended its office lease agreement for its office for a term of one year with monthly lease payments of $2,100.
Since August 1, 2011, the office lease continues at the same rate on a month-to-month basis.



The
Company leases the land and buildings for its four restaurants in South Africa through its subsidiaries. The leases are for five
year terms and include options to extend the terms. We lease our restaurant facilities under “triple net” leases that
require us to pay minimum rent, real estate taxes, maintenance costs and insurance premiums and, in some instances, percentage
rent based on sales in excess of specified amounts. On May 7, 2012, the Company, through its subsidiary, signed a lease for the
Budapest, Hungary location under similar terms to our South Africa restaurants, except the term is for 10 years. On July 1, 2012,
the Company signed an office lease agreement for a satellite office in Florida for one year at a monthly rate of $600. Rent obligations
at current foreign currency exchange rates for our five restaurants and the Florida satellite office as of September 30 are presented
below:





25







|2013       |  | $ | 572,399   | 
|---------- |  | - | --------- | 
|2014       |  |   | 612,465   | 
|2015       |  |   | 545,110   | 
|2016       |  |   | 490,794   | 
|thereafter |  |   | 911,009   | 
|Totals     |  | $ | 3,131,777 | 



Rent expense for the
three months ended September 30, 2012 and September 30, 2011 was $158,115 and $6,300, respectively. Rent expense for the three
months ended September 30, 2012 for the South African and Budapest restaurants was $124,838, and $21,012, respectively, and is
included in the “Restaurant operating expenses” of the Consolidated Statement of Operations. Rent expense for the three
months ended September 30, 2012 for the management segment was $12,266, and is included in the “General and administrative
expense” of the Consolidated Statement of Operations. Rent expense for the three months ended September 30, 2011 was all
for the management segment. Rent expense for the nine months ended September 30, 2012 and September 30, 2011 was $524,689 and $12,600,
respectively. Rent expense for the nine months ended September 30, 2012 for the South African and Budapest restaurants was $478,362
and $21,012, respectively, and is included in the “Restaurant operating expenses” of the Consolidated Statement of
Operations. Rent expense for the nine months ended September 30, 2012 for the management segment was $25,316, and is included in
the “General and administrative expense” of the Consolidated Statement of Operations. Rent expense for the nine months
ended September 30, 2011 was all for the management segment.



The Company engaged
outside South African tax experts in September 2012 to assist with compliance with Value Added Tax (VAT), payroll taxes, and income
taxes n South Africa. A voluntary disclosure agreement has been submitted and the Company is awaiting contract from the South African
governmental agency.



In connection with
the acquisition of assets as described in Note 3, the Company believes the purchase and sale with the seller was accomplished in
accordance with the laws and regulations of the taxing authorities in South Africa. However, there can be no absolute assurance
that the seller has fulfilled its tax and regulatory filing requirements, and whether or not the local authorities could seek to
recover any unpaid taxes or other amounts from the Company, its shareholders or others. The Company is not aware of any known obligations
for which the Company may be required to settle.



| | 14. | DISCLOSURES ABOUT FAIR VALUE
| | --- | ----------------------------



Assets and liabilities measured at fair
value on a recurring basis are summarized in the following tables according to FASB ASC 820 pricing levels.



|                              |  | Fair Value Measurement Using |        
|----------------------------- |  | ---------------------------- | -------
|                              |  |                              |        
|                              |  |                              |        
|                              |  |                              |        
|                              |  |                              |        
|                              |  | Recorded                     |        
|                              |  | value                        |        
|                              |  |                              |        
|September 30, 2012            |  |                              |        
|Assets:                       |  |                              |        
|Available-for-sale securities |  | $                            | 54,309 
|                              |  |                              |        
|December 31, 2011             |  |                              |        
|Assets:                       |  |                              |        
|Available-for-sale securities |  | $                            | 318,353





26









At September 30, 2012
and December 31, 2011, the Company's available-for-sale equity securities were valued using Level 1 and Level 2 inputs as summarized
above. Level 1 inputs are based on unadjusted prices for identical assets in active markets that the Company can access. Level
2 inputs are based on quoted prices for similar assets other than quoted prices in Level 1, quoted prices in markets that are not
yet active, or other inputs that are observable or can be derived principally from or corroborated by observable market data for
substantially the full term of the assets.



The Company does not
have any investments that are measured on a recurring basis using Level 3 inputs.



Certain assets are
not carried at fair value on a recurring basis, including investments accounted for under the equity and cost methods. Accordingly,
such investments are only included in the fair value hierarchy disclosure when the investment is subject to re-measurement at fair
value after initial recognition and the resulting re-measurement is reflected in the consolidated financial statements.



See Note 4 for further
details of the Company's investments.



| | 15. | SUBSEQUENT EVENTS
| | --- | -----------------



On October 12th,
2012, Francis Howard (“Howard”), individually and on behalf of all other similarly situated, filed a lawsuit against
Chanticleer Holdings, Inc. (The “Company”), Michael D. Pruitt, Eric S. Lederer, Michael Carroll, Paul I. Moskowitz,
Keith Johnson (The “Individual Defendants”), Merriman Capital, Inc., Dawson James Securities, Inc. (The “Underwriter
Defendants”), and Creason & Associates P.L.L.C. (The “Auditor Defendant”), in the U.S. District Court for
the Southern District of Florida.  The class action lawsuit alleges violations of Section 11 of the Securities Act against
all Defendants, violations of Section 12(a)(2) of the Securities Act against only the Underwriter Defendants, and violations of
Section 15 against the Individual Defendants.  Howard seeks unspecified damages, reasonable costs and expenses incurred in
this action, and such other and further relief as the Court deems just and proper. On October 15th, 2012, the Honorable
Judge James I. Cohn filed an Order setting the Calendar Call for the case for June 13th, 2013, and the Trial Date for
the trial period commencing on June 17th, 2013.  On October 31st, 2012, the Company and the Individual
Defendants retained Stanley Wakshlag at Kenny Nachwalter, P.A. to represent them in this litigation. Requests by the Underwriting
Defendants for indemnification were denied.  On November 2nd, 2012, we filed a Joint Motion to Extend Deadline
to Respond to Class Action Complaint, requesting that our responsive pleading deadline be delayed until after a lead Plaintiff
is named.  That Motion was approved, and on December 12th, 2012, Howard filed a Motion to Appoint himself Lead
Plaintiff and to Approve his Selection of The Rosen Law Firm, P.A. as his Counsel.  An Order has yet to be entered on this
Motion.



Given that the outcome
of litigation is inherently uncertain, and the early stage of this class action, the Company can neither comment on the probability
of potential liabilities, nor provide an estimate of such.



| | 16. | Company’s South African Chief Financial Officer
resigned
| | --- | --------------------------------------------------------



On September 7, 2012,
the Company’s South African Chief Financial Officer (“SA CFO”) resigned. It was determined that the SA CFO had
committed certain illegal acts, fraud and certain misrepresentations of facts. Due to the SA CFO’s actions, certain taxes
were not paid. In addition, the applicable tax forms were not filed during the proper periods. The Company has engaged tax experts
to assist in the tax process. The Company also discovered a balance of approximately $118,827 and $42,109 of cash that was misappropriated
by the SA CFO as of the end of the third quarter of 2012 and the fourth quarter of 2011 (presented as “other receivable”
on the Company’s condensed consolidated balance sheet as of September 30, 2012 and December 31, 2011), and approximately
$128,000 in total for the period from October 2011 through September 2012. As of December 10, 2012, approximately $41,000 has been
recovered by the Company and payment plans are in place for the remainder.



27















ITEM 2:Management’s
Discussion and Analysis of Financial Condition and Results of Operations



FORWARD-LOOKING STATEMENTS



Certain statements
contained in this report that are not historical fact are "forward-looking statements" as that term is defined in the
Private Securities Litigation Reform Act of 1995. The words or phrases "will likely result," "are expected to,"
"will continue," "is anticipated," "believes," "estimates," "projects" or similar
expressions are intended to identify these forward-looking statements. These statements are subject to risks and uncertainties
beyond our reasonable control that could cause our actual business and results of operations to differ materially from those reflected
in our forward-looking statements. The safe harbor provisions provided in the Securities Litigation Reform Act do not apply to
forward-looking statements we make in this report. Forward-looking statements are not guarantees of future performance. Our forward-looking
statements are based on trends which we anticipate in our industry and our good faith estimate of the effect on these trends of
such factors as industry capacity, product demand and product pricing. The inclusion of projections and other forward-looking
statements should not be regarded a representation by us or any other person that we will realize our projections or that any
of the forward-looking statements contained in this prospectus will prove to be accurate.



Management’s Analysis of Business



We have changed our
focus recently from managing investments to owning and operating Hooters franchises internationally.  Hooters restaurants
are casual beach-themed establishments with sports on television, jukebox music, and the “nearly world famous” Hooters
Girls.  The menu consists of spicy chicken wings, seafood, sandwiches and salads.  Each locations menu can
vary with the tastes of the locality it is in.  Hooters began in 1983 with its first restaurant in Clearwater, Florida.
From the original restaurant and licensee Mr. Robert Brooks, Hooters has become a global brand, with locations in 44 states domestically
and over 430 Hooters restaurants worldwide. Besides restaurants, Hooters has also branched out to other areas, including licensing
its name to a golf tour and the sale of packaged food in supermarkets.



We expect to either
own 100% of the Hooters franchise or partner with a local franchisee in the countries we target.   We based this
decision on what we believe to be the successful launch of our South African Hooters venture and believe we have aligned partners
and operators in various international markets. We are focused on expanding our Hooters operations, and expect to use substantially
all the net proceeds from the upcoming offering, in South Africa, Brazil, Hungary, Australia and Europe.



Accordingly, we operate
in two business segments; Hooters franchise restaurants and our legacy investment management and consulting services businesses.



RESTAURANT OPERATIONS



The following is
a condensed unaudited statement of operations for our restaurant operations for the three and nine months ended September 30,
2012, which currently consists of four Hooters locations in South Africa and one location in Budapest, Hungary which opened in
August 2012.



28







Three months ended
September 30, 2012:



|                                                |  | (1)          |           |   | (2)                |   |          |                    | 
|----------------------------------------------- |  | ------------ | --------- | - | ------------------ | - | -------- | ------------------ | 
|                                                |  | South Africa |           |   | Budapest, 
Hungary |   |          | Total 
Restaurants | 
|Revenues                                        |  | $            | 1,533,767 |   |                    | $ | 176,865  |                    | 
|Cost of Sales                                   |  |              | 636,164   |   |                    |   | 78,387   |                    | 
|Gross Profit                                    |  |              | 897,603   |   |                    |   | 98,478   |                    | 
|                                                |  |              |           |   |                    |   |          |                    | 
|Recurring expenses:                             |  |              |           |   |                    |   |          |                    | 
|Operating expenses                              |  |              | 860,245   |   |                    |   | 83,373   |                    | 
|General and administrative                      |  |              | 79,388    |   |                    |   | 48,799   |                    | 
|Interest expense                                |  |              | 11,486    |   |                    |   | -        |                    | 
|Depreciation and amortization                   |  |              | 85,241    |   |                    |   | 10,198   |                    | 
|Miscellaneous                                   |  |              |           |   |                    |   | (1,153   | )                  | 
|Income taxes                                    |  |              | 7,997     |   |                    |   | -        |                    | 
|                                                |  |              | 1,044,357 |   |                    |   | 141,217  |                    | 
|Net income (loss) before non-recurring expenses |  |              | (146,754  | ) |                    |   | (42,739  | )                  | 
|Pre-opening costs                               |  |              | (537      | ) |                    |   | 126,484  |                    | 
|Net income (loss)                               |  | $            | (146,217  | ) |                    | $ | (169,223 | )                  | 
|                                                |  |              |           |   |                    |   |          |                    | 
|Non-controlling interest                        |  |              |           |   |                    |   |          |                    | 
|                                                |  |              |           |   |                    |   |          |                    | 







|(1) In South Africa, the Durban location opened in December 2009, the Johannesburg location opened in June 2010, the Cape Town location opened in June 2011 and the Emperors Palace location opened in February 2012.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) The Budapest, Hungary location opened in August 2012.                                                                                                                                                            







Nine months ended
September 30, 2012:



|                                                |  | (1)          |           |   | (2)                |   |          |                    | 
|----------------------------------------------- |  | ------------ | --------- | - | ------------------ | - | -------- | ------------------ | 
|                                                |  | South Africa |           |   | Budapest, 
Hungary |   |          | Total 
Restaurants | 
|Revenues                                        |  | $            | 4,617,385 |   |                    | $ | 176,865  |                    | 
|Cost of Sales                                   |  |              | 1,927,327 |   |                    |   | 78,387   |                    | 
|Gross Profit                                    |  |              | 2,690,058 |   |                    |   | 98,478   |                    | 
|                                                |  |              |           |   |                    |   |          |                    | 
|Recurring expenses:                             |  |              |           |   |                    |   |          |                    | 
|Operating expenses                              |  |              | 2,552,867 |   |                    |   | 83,373   |                    | 
|General and administrative                      |  |              | 285,266   |   |                    |   | 71,417   |                    | 
|Interest expense                                |  |              | 37,515    |   |                    |   | -        |                    | 
|Depreciation and amortization                   |  |              | 247,901   |   |                    |   | 10,198   |                    | 
|Miscellaneous                                   |  |              |           |   |                    |   | (1,153   | )                  | 
|Income taxes                                    |  |              | 7,997     |   |                    |   | -        |                    | 
|                                                |  |              | 3,131,546 |   |                    |   | 163,835  |                    | 
|Net income (loss) before non-recurring expenses |  |              | (441,488  | ) |                    |   | (65,357  | )                  | 
|Pre-opening costs                               |  |              | 38,683    |   |                    |   | 151,484  |                    | 
|Net income (loss)                               |  | $            | (480,171  | ) |                    | $ | (216,841 | )                  | 
|                                                |  |              |           |   |                    |   |          |                    | 
|Non-controlling interest                        |  |              |           |   |                    |   |          |                    | 
|                                                |  |              |           |   |                    |   |          |                    | 







|(1) In South Africa, the Durban location opened in December 2009, the Johannesburg location opened in June 2010, the Cape Town location opened in June 2011 and the Emperors Palace location opened in February 2012.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) The Budapest, Hungary location opened in August 2012.                                                                                                                                                            







29







LIQUIDITY AND CAPITAL RESOURCES



Historical information:



At September 30,
2012 and December 31, 2011, the Company had current assets of $2,563,752 and $641,963; current liabilities of $1,478,297 and $3,720,486;
and a working capital balance (deficit) of $1,085,455 and $(3,078,523), respectively. The Company incurred a loss of $2,287,169
during the nine months ended September 30, 2012 and had an unrealized loss from available-for-sale securities of $264,044 and
a foreign currency translation gain of $45,464, resulting in a comprehensive loss of $2,505,749. As of December 20, 2012, the Company has a consolidated cash balance of approximately $1,138,000.



The Company's corporate
general and administrative expense averaged approximately $295,000 per quarter during 2011 and has increased to $481,000 in the
first quarter of 2012 and $657,000 in the current quarter as we expanded our footprint internationally. Effective October 1, 2011,
the Company acquired majority control of the restaurants in South Africa and began consolidating these operations. In August 2012,
the Company opened its Budapest, Hungary location. The Company also will share 49% of the profits in our Hooters location opened
in January 2012 in Campbelltown, Australia, a suburb of Sydney and plans to open a second Australia location under the same terms
in the first six months of 2013.



The Company has a
note with a balance at September 30, 2012 of $238,026 owed to its bank which is due in August 2013. The Company is currently seeking
other financing options. All of our prior notes payable and convertible debt were paid in either cash or common stock with the
closing of our raise in June 2012.



The Company expects
to meet its obligations in the remainder of 2012 and the first nine months of 2013 with some or all of the following:



| | · | Received
                                                                                                               $100,000 as an
                                                                                                               annual fee for
                                                                                                               its CEO sitting
                                                                                                               on the Board of
                                                                                                               Hooters of America
                                                                                                               and expect to continue
                                                                                                               to receive this
                                                                                                               annual fee for
                                                                                                               the next three
                                                                                                               years based on
                                                                                                               the current agreement;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Borrow,
                                                                                                               if and to the extent
                                                                                                               available, additional
                                                                                                               funds;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Form
                                                                                                               joint ventures
                                                                                                               or other financing
                                                                                                               vehicles;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Evaluation of the amounts and certainty of cash flows:



The Company plans
to use the funding from the S-1 Registration to partially complete its expansion plans in South Africa, Brazil, Australia, Hungary
and Europe. The Company has used short-term financing to meet the preliminary requirements of its planned expansion, principally
in South Africa and Australia. The Company obtained less than originally contemplated from our offering, which may require the
Company to limit its expansion plans. We would use limited partner funding and other sources of capital to the extent necessary
to attempt to fund as much of the planned expansion as possible. There can be no assurance that any of this funding will be available
when needed.



Cash requirements and capital expenditures:



In the remainder of 2012 and the first
nine months of 2013, we expect to open one restaurant in each of the following countries – Australia (in addition to the
one already opened in January 2012) and South Africa; and plans to secure a location in Brazil. The Company expects the total
cash requirements for these restaurants to be approximately $1.8 million, of which approximately $0.6 million has been paid as
of September 30, 2012.



In addition, we expect general and administrative
expenses to be approximately $2.4 million for the next 12 months.



Discussion and analysis of known trends and uncertainties:



The world economy has been in a state
of flux for some time with the debt problems of a number of countries in Europe, the recent recession in the United States, the
significant increase to debt in the United States compounded by continuing to give away more than can reasonably be collected,
the slowing economy in China and other factors. It is impossible to forecast what this will mean to our expansion plans in South
Africa, Brazil, Australia, Europe and Hungary. We feel that we minimize our risks through investment in different geographical
areas.



30







Expected changes in the mix and relative cost of capital resources:



Since the middle
of 2010, the Company has utilized high cost capital to finance its international growth. The Company has eliminated the majority
of this debt with new equity in June 2012 and further, to use this equity and possible additional financing as necessary to complete
its expansion plans over the next two years.



Other prospective sources for and uses of cash:



The Company is seeking
other forms of financing. As discussed elsewhere in this Form 10-Q, effective October 1, 2011, the Company acquired majority control
of the restaurants in South Africa and began consolidating these operations. Previously all restaurant operations were accounted
for using the equity method.



Comparison of three months ended September
30, 2012 and 2011



Revenue



Revenue amounted
to $1,767,512 in the three months ended September 30, 2012 and ($5,726) in the year earlier period.



Restaurant sales
amounted to $1,710,632 for our four locations in South Africa and our Budapest, Hungary location which opened in August 2012.



Revenues for the
management business for the three months ended September 30, 2012 amounted to $56,880 and ($5,726) in the year earlier period.
In the three months ended September 30, 2012 and in the year earlier period, the revenue from non-affiliates of $25,000 represents
three months of the Company’s annual payment from HOA of $100,000, which is due in January each year while Mr. Pruitt serves
on its board.  In the three months ended September 30, 2012 and in the year earlier period, an accrual of $31,880 and
($30,726), respectively, was recorded for management fees from Investors II. In 2011, Investors II had a large loss in the quarter
which resulted in the reversal of the previously accrued management fee for the year-to-date period.



Restaurant cost of sales



Restaurant cost of sales amounted to $714,551,
or 41.8% of restaurant net sales. We expect the percentage to remain approximately the same in 2012 as we expand our business
in South Africa and other countries.



Restaurant operating expenses



Restaurant operating expenses amounted
to $943,618, or 55.2% of restaurant net sales. We expect the percentage of operating expenses to restaurant net sales to decline
as we open more Hooters locations, however we have a limited history to be able to forecast a range.



Restaurant pre-opening expenses



Restaurant pre-opening expenses amounted
to $125,947 incurred for the opening of our Hooters location in Budapest, Hungary which opened in the third quarter of 2012.



31







General and Administrative Expense (“G&A”)



G&A amounted
to $666,300 in the three months ended September 30, 2012 and $277,934 in the year earlier period. The more significant components
of G&A are summarized as follows:



|                                      |  | 2012 |         |  | 2011 |  
|------------------------------------- |  | ---- | ------- |  | ---- | -
|                                      |  |      |         |  |      |  
|Professional fees                     |  | $    | 81,512  |  |      | $
|Payroll and benefits                  |  |      | 240,992 |  |      |  
|Consulting and investor relation fees |  |      | 206,636 |  |      |  
|Travel and entertainment              |  |      | 29,489  |  |      |  
|Accounting and auditing               |  |      | 2,900   |  |      |  
|Other G&A                             |  |      | 104,771 |  |      |  
|                                      |  | $    | 666,300 |  |      | $



G&A costs are
expected to range from $550-$650,000 per quarter for the remainder of 2012, with the costs associated with the activities of the
restaurant business continuing to grow. Revenue from the restaurants is expected to exceed this increase in expense.



Professional fees
increased $69,331 in 2012 from 2011 primarily from additional legal and regulatory expenses incurred as part of the continued
growth of the Company.



Payroll and benefits
increased $122,022 in 2012 from 2011 primarily from the addition of restaurant management personnel beginning in the fourth quarter
of 2011 and the addition of corporate personnel in the second quarter of 2012.



Consulting and investor
relations fees increased $133,386 in 2012 from 2011 as the Company engaged experienced personnel to startup our European subsidiary
and Brazil operations and to increase the Company’s recognition in the investment arena. Non-cash fees for services were
$16,,200 and $0 in 2012 and 2011, respectively. Non-cash amortization of warrant expense for services were $52,655 and $0 in 2012
and 2011, respectively.



Other G&A expense
increased $64,070 in 2012 from 2011 primarily related to the addition of restaurant management costs.



Depreciation and amortization



Depreciation expense
for the three months ended September 30, 2012 and 2011 amounted to $92,757 and $2,512, respectively. The restaurant segment for
the three months ended September 30, 2012 and 2011 amounted to $90,313 and $0, respectively, and the management business amounted
to $2,444 and $2,512, respectively.



Amortization expense
for the three months ended September 30, 2012 for the restaurant businesses related to franchise fees was $5,126. There was no
amortization expense in 2011.



OTHER INCOME (EXPENSE)



Other income (expense)
consisted of the following for the three months ended September 30, 2012 and 2011:



|                                                              |  | 2012 |         |   | 2011 |  
|------------------------------------------------------------- |  | ---- | ------- | - | ---- | -
|Other income (expense):                                       |  |      |         |   |      |  
|Equity in earnings (losses) of investments                    |  | $    | 33,412  |   |      | $
|Miscellaneous income                                          |  |      | 1,680   |   |      |  
|Other than temporary decline in available-for-sale securities |  |      | -       |   |      |  
|Interest expense                                              |  |      | (39,583 | ) |      |  
|                                                              |  | $    | (4,491  | ) |      | $



32







Equity in Earnings of Investments



Equity in earnings
of investments includes our share of earnings from investments in which we own at least 20% and are being accounted for using
the equity method. This included earnings from the Hoot Campbelltown partnership in 2012 of $33,412, and a loss from the Hoot
SA partnerships in 2011 of $20,820.



Interest Expense



Interest expense
decreased by $1,607 in 2012 from 2011 primarily due to the addition in 2011 of a line of credit and convertible notes payable,
all of which were paid off at the end of June 2012 with the closing of the Company’s raise. The majority of the 2012 interest
expense is non-cash amortization of warrant expense.



Comparison of nine months ended September
30, 2012 and 2011



Revenue



Revenue amounted
to $4,907,828 in the nine months ended September 30, 2012 and $468,417 in the year earlier period.



Restaurant sales
amounted to $4,794,250 for our four locations in South Africa, one of which opened to the public on February 17, 2012.



Revenues for the
management business for the nine months ended September 30, 2012 amounted to $113,578 and $468,417 in the year earlier period.
The cash revenues for the management business in 2011was from a fee of $400,000 received in January 2011 for our services in facilitating
the acquisition of HOA and TW plus the accrual of $66,667 for the annual $100,000 fee received in January 2012. In the nine months
ended September 30, 2012 the cash revenue of $75,000 represents nine months of the Company’s annual payment from HOA of
$100,000, which is due in January each year while Mr. Pruitt serves on its board.  Non-cash revenues in the nine months
ended September 30, 2011 of $1,750 was recognized from the receipt of securities for our services.



The fair value of
the equity instruments for management fees received was determined based upon the stock prices as of the date we reached an agreement
with the third party. The terms of the securities are not subject to adjustment after the measurement date. See Note 4 of the
condensed consolidated financial statements for details.



Restaurant cost of sales



Restaurant cost of
sales amounted to $2,005,714, or 44.8% of restaurant net sales. We expect the percentage to remain approximately the same in 2012
as we expand our business in South Africa and other countries.



Restaurant operating expenses



Restaurant operating
expenses amounted to $2,636,240, or 55.0% of restaurant net sales. We expect the percentage of operating expenses to restaurant
net sales to decline as we open more Hooters locations, however we have a limited history to be able to forecast a range.



Restaurant pre-opening expenses



Restaurant pre-opening
expenses amounted to $190,167 incurred for the opening of our location at the Emperor’s Palace Casino in Johannesburg, South
Africa in February 2012 and the opening of our Budapest, Hungary location in August of 2012.



33







General and Administrative Expense (“G&A”)



G&A amounted
to $1,833,933 in the nine months ended September 30, 2012 and $762,159 in the year earlier period. The more significant components
of G&A are summarized as follows:



|                                      |  | 2012 |           |  | 2011 |  
|------------------------------------- |  | ---- | --------- |  | ---- | -
|                                      |  |      |           |  |      |  
|Professional fees                     |  | $    | 188,633   |  |      | $
|Payroll and benefits                  |  |      | 671,440   |  |      |  
|Consulting and investor relation fees |  |      | 478,279   |  |      |  
|Travel and entertainment              |  |      | 151,796   |  |      |  
|Accounting and auditing               |  |      | 49,500    |  |      |  
|Other G&A                             |  |      | 294,285   |  |      |  
|                                      |  | $    | 1,833,933 |  |      | $



G&A costs are
expected to range from $550-$650,000 per quarter for the remainder of 2012, with the costs associated with the activities of the
restaurant business continuing to grow. Revenue from the restaurants is expected to exceed this increase in expense.



Payroll and benefits
increased $87,588 in 2012 from 2011 primarily from the addition of restaurant management personnel beginning in the fourth quarter
of 2011 and the addition of corporate personnel in the second quarter of 2012.



Consulting and investor
relations fees increased $314,,739 in 2012 from 2011 as the Company engaged experienced personnel to startup our European subsidiary
and Brazil operations and to increase the Company’s recognition in the investment arena. Non-cash fees for services were
$25,606 and $0 in 2012 and 2011, respectively. Non-cash amortization of warrant expense for services were $26,745 and $0 in 2012
and 2011, respectively.



Travel and entertainment
increased $91,171 as Company personnel, primarily the CEO, traveled to increase our company awareness and lockdown financing and
partners for the restaurant locales.



Other G&A expense
increased $148,044 in 2012 from 2011 primarily related to indirect costs of the capital raise which was completed in June 2012.



Depreciation and amortization



Depreciation expense
for the nine months ended September 30, 2012 and 2011 amounted to $251,691 and $7,573, respectively. The restaurant segment for
the nine months ended September 30, 2012 and 2011 amounted to $244,722 and $0, respectively, and the management business amounted
to $6,969 and $7,573, respectively.



Amortization expense
for the nine months ended September 30, 2012 for the restaurant businesses related to franchise fees was $13.377. There was no
amortization expense in 2011.



OTHER INCOME (EXPENSE)



Other income (expense)
consisted of the following for the nine months ended September 30, 2012 and 2011:



|                                                              |  | 2012 |          |   | 2011 |  
|------------------------------------------------------------- |  | ---- | -------- | - | ---- | -
|Other income (expense):                                       |  |      |          |   |      |  
|Equity in earnings (losses) of investments                    |  | $    | (10,474  | ) |      | $
|Realized gains from sale of investments                       |  |      | -        |   |      |  
|Other than temporary decline in available-for-sale securities |  |      | -        |   |      |  
|Interest expense                                              |  |      | (432,795 | ) |      |  
|Interest income                                               |  |      | -        |   |      |  
|Miscellaneous income                                          |  |      | 1,680    |   |      |  
|                                                              |  | $    | (441,589 | ) |      | $



34







Equity in Earnings of Investments



Equity in earnings
of investments includes our share of earnings from investments in which we own at least 20% and are being accounted for using
the equity method. This included losses from the Hoot Campbelltown partnership in 2012 of $10,474, and a loss from the Hoot SA
partnerships in 2011 of $9,256.



Realized Gains from Sale of Investments



Realized gains are
recorded when investments are sold and include transactions in 2011 from a gain on sales of DineOut.



Interest Expense



Interest expense
increased by $368,919 in 2012 from 2011 primarily due to the addition in 2011 of a line of credit and convertible notes payable,
all of which were paid in full in June 2012 with the closing of the Company’s raise. Non-cash amortization of warrant expense
for interest amounted to $120,632 and $0 in 2012 and 2011, respectively.



Interest Income



Interest income in
2012 decreased $4,540 as 2011 includes earnings from Investors for one month, compared to 2012 which had none.



35







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 control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course
of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a deficiency,
or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet
important enough to merit the attention by those responsible for oversight of the company's financial reporting. A material weakness
is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected
on a timely basis.



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, 2012. Our management has determined
that, as of September 30, 2012, the Company's disclosure controls and procedures are ineffective.



In connection with
the preparation of the its quarterly report for the period ended September 30, 2012, the Company’s management evaluated
the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were ineffective as of September
30, 2012, as a result of the existence of a material weakness in our internal controls over financial reporting related to the
Company’s South African subsidiaries.



Since September 2012,
the Company has made progress in improving its disclosure controls and procedures. The Company has taken, and are taking, the
following actions to remediate the remaining material weaknesses in our internal control over financial reporting that existed
at that date: (i) appointed a new South African CFO; (ii) improve segregation of duties; and (iii) adopt sufficient written policies
and procedures for accounting and financial reporting.



The Company continues to strive to improve processes to enable
them to provide complete and accurate public disclosure. Management believes they will not be able to conclude that the Company’s
disclosure controls and procedures are effective until the material weaknesses have been fully remediated.



To address the material
weaknesses listed above, management performed analyses and post-closing procedures designed to ensure the Company’s condensed
consolidated financial statements were prepared in accordance with U.S. GAAP. These procedures included documentation and testing
of processes, data validation procedures from the systems into the general ledger, testing of systems, validation of results,
disclosure review, and other analytics. As a result, management believes the condensed consolidated financial statements included
in this report fairly present, in all material respects, our financial position, results of operations and cash flows for the
period ended September 30, 2012.



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, 2012, including any corrective actions with regard to significant deficiencies and material weaknesses.



36







PART II – OTHER INFORMATION



ITEM 1:          LEGAL PROCEEDINGS



On October 12th, 2012,
Francis Howard (“Howard”), individually and on behalf of all other similarly situated, filed a lawsuit against Chanticleer
Holdings, Inc. (The “Company”), Michael D. Pruitt, Eric S. Lederer, Michael Carroll, Paul I. Moskowitz, Keith Johnson
(The “Individual Defendants”), Merriman Capital, Inc., Dawson James Securities, Inc. (The “Underwriter Defendants”),
and Creason & Associates P.L.L.C. (The “Auditor Defendant”), in the U.S. District Court for the Southern District
of Florida.  The class action lawsuit alleges violations of Section 11 of the Securities Act against all Defendants, violations
of Section 12(a)(2) of the Securities Act against only the Underwriter Defendants, and violations of Section 15 against the Individual
Defendants.  Howard seeks unspecified damages, reasonable costs and expenses incurred in this action, and such other and
further relief as the Court deems just and proper. On October 15th, 2012, the Honorable Judge James I. Cohn filed an
Order setting the Calendar Call for the case for June 13th, 2013, and the Trial Date for the trial period commencing
on June 17th, 2013.  On October 31st, 2012, the Company and the Individual Defendants retained Stanley
Wakshlag at Kenny Nachwalter, P.A. to represent them in this litigation. Requests by the Underwriting Defendants for indemnification
were denied.  On November 2nd, 2012, we filed a Joint Motion to Extend Deadline to Respond to Class Action Complaint,
requesting that our responsive pleading deadline be delayed until after a lead Plaintiff is named.  That Motion was approved,
and on December 12th, 2012, Howard filed a Motion to Appoint himself Lead Plaintiff and to Approve his Selection of
The Rosen Law Firm, P.A. as his Counsel.  An Order has yet to be entered on this Motion.



Given that the outcome of litigation is inherently uncertain,
and the early stage of this class action, the Company can neither comment on the probability of potential liabilities, nor provide
an estimate of such.



ITEM 1A:          RISK FACTORS



Not applicable.



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



None.



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



Effective December
20, 2012, Brian Corbman resigned as a Director of Chanticleer Holdings, Inc. A Director to fill this vacancy will
be selected and announced as soon as reasonably possible.





ITEM 6:          EXHIBITS



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







|Exhibit 31.1 | Certification pursuant to 18 U.S.C. Section 1350
|------------ | ------------------------------------------------
|             | Section 302 of the Sarbanes-Oxley Act of 2002   



|Exhibit 32.1 | Certification pursuant to 18 U.S.C. Section 1350
|------------ | ------------------------------------------------
|             | Section 906 of the Sarbanes-Oxley Act of 2002   







37







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:December 21, 2012 | By:                       
|                       | Michael D. Pruitt,        
|                       | Chief Executive Officer   
|                       |                           
|Date:December 21, 2012 | By:                       
|                       | Eric S. Lederer,          
|                       | Chief Financial Officer   



38