SecProbe.io

United States securities and exchange commission logo
May 6, 2020
Michael D. Pruitt
Chief Executive Officer
Amergent Hospitality Group, Inc
7621 Little Avenue
Suite 414
Charlotte, NC
Re:Amergent Hospitality Group, Inc
Registration Statement on Form 10-12G
Filed April 9, 2020
File No. 000-56160
Dear Mr. Pruitt:
            We have reviewed your filing and have the following comments.  In some of our
comments, we may ask you to provide us with information so we may better understand your
disclosure.
            Please respond to these comments within ten business days by providing the requested
information or advise us as soon as possible when you will respond.  If you do not believe our
comments apply to your facts and circumstances, please tell us why in your response.
            After reviewing your response to these comments, we may have additional comments.
Registration Statement on Form 10 filed April 9, 2020
General, page 1
1.We note that you incorporate by reference to the filings of your former parent, Chanticleer
Holdings, Inc. (hereinafter "Chanticleer"), most of the items required by Form 10.
However, it is unclear to us why incorporation by reference to such filings is appropriate
given that you currently are in a different position as compared to Chanticleer in its pre-
merger state.  For example, it appears that the merger and spin-off resulted in significant
changes to Amergent, such as you now being "in a greatly enhanced financial position to
continue the restaurant business of Chanticleer" (from the Chanticleer Form S-4).  Further,
it appears that you are ineligible to incorporate by reference to Chanticleer's filings
pursuant to Exchange Act Forms Compliance and Disclosure Interpretation Question
103.01, because you filed this Form 10 after your spin-off from Chanticleer was
completed and you were no longer a wholly-owned subsidiary of Chanticleer.

 FirstName LastNameMichael D. Pruitt
 Comapany NameAmergent Hospitality Group, Inc
 May 6, 2020 Page 2
 FirstName LastNameMichael D. Pruitt
Amergent Hospitality Group, Inc
May 6, 2020
Page 2
Accordingly, please amend your Form 10 to include the required disclosures.
Alternatively, provide us with your detailed legal analysis as to why you are eligible to
incorporate by reference, including why the incorporated disclosure is not incorrect as it
applies to Amergent or otherwise misleading to investors.
2.As a related matter, if you believe that your are eligible to incorporate by reference, we
note that the business of Chanticleer appears to have changed upon the spin-off, and while
you are Chanticleer's successor entity, it appears that Chanticleer's business and operations
are not related to yours moving forward.  Therefore, it appears that Chanticleer's and your
Exchange Act reporting requirements and disclosures will be different moving forward.
To ensure continuity of your SEC filings and accessibility of your disclosures to investors,
please consider including the disclosure required by Form 10 in your filing, rather than
incorporating by reference to your predecessor's filings.  Further, while we refer in our
comments to disclosure incorporated by reference to your filing, please amend your Form
10 in response to our comments, rather than amending Chanticleer's filings.
3.We note the disclosure in Chanticleer's Form S-4 filing that "at the closing of the Merger,
Chanticleer will issue to the Spin-Off Entity a warrant (the “Spin-Off Entity Warrant”) to
purchase that number of shares of Chanticleer Common Stock equal to two percent (2%)
of the number of shares of issued and outstanding Chanticleer Common Stock
immediately after the Effective Time."  Please disclose whether and when this warrant has
been issued to you, whether and when the warrant has been exercised, the material terms
of the warrant, and how and when the shares underlying the warrant will be distributed to
your shareholders.
Item No. 1 Business, page 2
4.We note that the spin-off transaction is briefly described in the disclosure incorporated by
reference to satisfy Item 1 of Form 10.  However, because this Form 10 is being filed in
relation to the spin-off transaction, please amend your disclosure to include a detailed
description of the spin-off transaction, including, but not limited to, a background
discussion of the spin-off transaction, the reasons for the spin-off (including Chanticleer's
valid business purpose for the spin-off), a description of the material terms of
any agreements related to the spin-off, the date of the spin-off, any new indebtedness you
will incur in relation to the spin-off, federal income tax consequences related to the spin-
off, and any other disclosure material to an understanding of the spin-off transaction.  As a
related matter, please file any material agreements related to the spin-off as exhibits to
your registration statement, as applicable.  See Item 601 of Regulation S-K.
5.On page 4 of Chanticleer's most recent Form 10-K, you disclose that "[you] operate and
franchise a system-wide total of 46 fast casual restaurants of which 35 are company-
owned and 11 are owned and operated by franchisees under franchise agreements."  You
also disclose that eight of your company-owned Little Big Burger restaurants are operated
pursuant to partnership agreements.  In an appropriate place in your filing, please briefly
describe the terms of these franchise and partner agreements.  Where you describe your

 FirstName LastNameMichael D. Pruitt
 Comapany NameAmergent Hospitality Group, Inc
 May 6, 2020 Page 3
 FirstName LastNameMichael D. Pruitt
Amergent Hospitality Group, Inc
May 6, 2020
Page 3
partnership agreements, please include a discussion of the amount of control you have in
these restaurants and the terms of any revenue sharing agreements with your partners, if
applicable.
Item No. 1A Risk Factors, page 2
6.We note that, on page 14 of Chanticleer's most recent Form 10-K, you disclose that "[i]f
an existing or future restaurant is not profitable, and [you] decide to close it, [you] may
nonetheless be committed to perform [y]our obligations under the applicable lease
including, among other things, paying the base rent for the balance of the lease term."
Please disclose whether and to what extent you are currently obligated under leases for
closed locations.  Please also clarify whether you are responsible for franchisee leases, or
whether this risk factor applies only to your company-owned restaurants.
7.We note your reference on page 15 of Chanticleer's most recent Form 10-K to "net
restaurant count."  In an appropriate place in your filing, please define this term.
8.We note that you incorporate by reference to the risk factor section in Chanticleer's most
recent Form 10-K, including the risk factors under the heading "Risks Related to Our
Common Stock."  Considering that you are a newly formed entity, please amend the risk
factor disclosure in your Form 10 to reflect the risks related to your common stock, and
not that of Chanticleer's pre-merger and pre-spin-off common stock.  For example, please
discuss risks associated with your current or future efforts to have your common
stock quoted on the OTCQX or any other quotation service, exchange, or trading facility.
9.As a related matter, we note that Chanticleer's most recent Form 10-K includes a risk
factor section tiled "Risks Related to the Merger."  In this regard, it appears that the spin-
off has been completed, you are no longer a party to the merger, and this no longer applies
to you.  However, we were unable to find specific risks related to the spin-off transaction.
Please amend your filing to include risks specific to you as the successor entity, including
risks related to the spin-off.  Please be sure to tailor this and all of your risk factor
disclosure to your current circumstances.
Item No. 2. Financial Information, page 2
10.Reference is made to Item 7 of your Form 10-K for the Fiscal Year Ended December 31,
2019.  Please revise to provide disclosures required by Item 303(a)(3)(ii) of Regulation S-
K.  These disclosures would include any known trends or uncertainties that have had or
that you reasonably expect will have a material favorable or unfavorable impact on
revenues, asset impairments, or income from continuing operations.
11.Reference is made to your discussion of results of operations beginning on page 29
of Form 10-K for the Fiscal Year Ended December 31, 2019.  Please revise to discuss and
analyze underlying causes of changes in results of operations.  For example, you state that
for 2019, revenue for restaurant sales decreased by 2.5%, gaming income increased by
14.9%, and franchise income increased by 29.1%; but you do not specify any causes for

 FirstName LastNameMichael D. Pruitt
 Comapany NameAmergent Hospitality Group, Inc
 May 6, 2020 Page 4
 FirstName LastNameMichael D. Pruitt
Amergent Hospitality Group, Inc
May 6, 2020
Page 4
the changes.  Note that Item 303 of Regulation S-K requires that MD&A include
a discussion of the extent to which material increases or decreases in revenue are
attributable to increases in prices or to increases in the volume or amount of goods or
services sold, or to the introduction of new products or services.  Item 303 of Regulation
S-K also requires a discussion of any material changes from year to year in one or more
line items reflected in your financial statements to the extent necessary to understand
changes in your business as a whole, and should not be a recitation of financial statements
in narrative form or an otherwise uninformative series of technical responses to MD&A
requirements.  We do not believe that your current discussion adequately addresses the
changes in your revenues, the related cost of sales and operating expenses, and other costs
necessary for an investor to understand changes in your results of operations during the
periods presented.  Refer to Section III.B.3 of SEC Release No. 34-48960, issued
December 19, 2003 and available on our website at www.sec.gov.
12.Reference is made to page 32 of Form 10-K for the Fiscal Year Ended December 31,
2019.  Your discussion and analysis of cash flows used in operating activities merely
compares the total cash flows used in each period.  Please provide a robust discussion and
analysis of your operating cash flows that addresses material changes including the key
drivers of changes.  Refer to Item 303 of Regulation S-K.
13.Reference is made to your disclosure of critical accounting policies beginning on page 33
of Form 10-K for the Fiscal Year Ended December 31, 2019.  Critical accounting
estimates are those estimates or assumptions where the nature of the estimates or
assumptions is material due to the levels of subjectivity and judgment necessary to
account for highly uncertain matters or the susceptibility of such matters to change and the
impact of the estimates and assumptions on financial condition or operating performance
is material.  Disclosures related to critical accounting estimates should supplement, not
duplicate, the description of accounting policies that are already disclosed in the notes to
the financial statements and provide greater insight into the quality and variability of
information regarding financial condition and results of operations.  Please revise
your disclosures, where applicable, to:

•Address why accounting estimates or assumptions bear the risk of change;

•Discuss the effect of changes in critical accounting estimates between periods to the
extent such changes had a significant effect on your financial position or operating
results;

•Describe the methods and key assumptions used and how the key assumptions were
determined;

•Discuss the degree of uncertainty associated with the key assumptions.  The
discussion regarding uncertainty should provide specifics to the extent possible (e.g.,
the valuation model assumes recovery from a business downturn within a defined

 FirstName LastNameMichael D. Pruitt
 Comapany NameAmergent Hospitality Group, Inc
 May 6, 2020 Page 5
 FirstName LastNameMichael D. Pruitt
Amergent Hospitality Group, Inc
May 6, 2020
Page 5
period of time); and

•Describe potential events and/or changes in circumstances that could reasonably be
expected to negatively affect key assumptions.

Please refer to Item 303(a)(3)(ii) of Regulation S-K and Section V of SEC Release No.
34-48960.
14.Reference is made to page 35 of your Form 10-K for the Fiscal Year Ended December 31,
2019 where you discuss goodwill as a critical accounting policy.  Please provide
information for investors to assess the probability of future goodwill impairment charges.
For example, please disclose whether any of your reporting units are at risk of failing step
one of the quantitative impairment test or that the fair value of each of your reporting units
are substantially in excess of carrying value and are not at risk of failing step one.  If a
reporting unit is at risk of failing step one, you should disclose:

•The percentage by which fair value exceeded carrying value at the date of the most
recent step one test;

•The amount of goodwill allocated to the reporting unit;

•A detailed description of the methods and key assumptions used and how the key
assumptions were determined;

•A discussion of the degree of uncertainty associated with the assumptions; and

•A description of potential events and/or changes in circumstances that could
reasonably be expected to negatively affect the key assumptions.

Please refer to Item 303(a)(3)(ii) of Regulation S-K, which requires a description of
known uncertainties, and Section V of SEC Release No. 34-48960.
Item No. 4 Security Ownership of Certain Beneficial Owners and Managment, page 2
15.Please amend your filing to include the information required by Item 403 of Regulation S-
K "as of the most recent practicable date."  In this regard, we note that your spin-off
transaction occurred on March 31, 2020, but the beneficial ownership table includes data
as of December 31, 2019.  Further, you should provide the required disclosure for you as
the registrant, but the disclosure that you incorporate by reference relates to the share
ownership in pre-merger Chanticleer Holdings, Inc.
Item No. 5. Directors and Executive Officers
Item No. 6. Executive Compensation, page 2
16.Please amend your disclosure to include the information required by Item 5 of Form 10
and Item 401 of Regulation S-K for your company, rather than for that of your

 FirstName LastNameMichael D. Pruitt
 Comapany NameAmergent Hospitality Group, Inc
 May 6, 2020 Page 6
 FirstName LastNameMichael D. Pruitt
Amergent Hospitality Group, Inc
May 6, 2020
Page 6
predecessor.  Please also include the information required by Item 6 of Form 10 and Item
402 of Regulation S-K for your company, rather than for that of your predecessor.
Item No. 7 Certain Relationships and Related Transactions, and Director Independence, page 2
17.Please amend your disclosure to clarify whether you as the spun off entity has assumed
any or all of the loan agreements described in Chanticleer's most recent Form 10-K.
Please also amend your disclosure to discuss any related transactions to which you are a
party that have occurred on or after the date of the spin-off.
Item No. 8 Legal Proceedings, page 2
18.We note that you incorporate your Legal Proceedings disclosure by reference to the
"Legal Proceedings" disclosure in Chanticleer's most recent Form 10-K.  Please amend
your disclosure to clarify whether, pursuant to the spin-off, you obtained liability for
Chanticleer's legal proceedings.  Please also update this disclosure to include any recent
developments in the proceedings described, or any other material developments in legal
proceedings to which you or any of your subsidiaries are a party or of which any of your
property is subject.  See Item 103 of Regulation S-K.
Item 10. Recent Sales of Unregistered Securities, page 3
19.We note your disclosure that