COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2014

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 6 - COMMITMENTS AND CONTINGENCIES

Commitments:

Franchise agreement

The Company operates its Denver restaurant property under a franchise agreement with the Franchisor under an initial ten-year term, renewable for two additional five-year terms. Pursuant to the franchise agreement, the Company is to pay royalty fees based on a percentage of gross revenues (generally between 3% and 5% of gross sales, as defined), plus additional fees and costs for marketing, training, inventory and other franchisor costs. Two officers of the Company have personally guaranteed royalty payments to the Franchisor.

In September 2013, the Company amended the Franchise Agreement with the Franchisor. The amendment resulted in a reduction in the royalty fees for the Company's Denver restaurant to be paid to the Franchisor beginning January 1, 2014. The reduced rate is 2.5% of gross sales, subject to a monthly floor of $5,000.

For the three months ended March 31, 2014 and 2013, the Company incurred franchise royalty expense of $14,300 and $12,200, respectively.

Leases:

In April 2012, the Company entered into a ten-year, non-cancellable lease for the restaurant in Denver, Colorado. This lease provides for two, five-year renewal options. Rent payments are approximately $16,000 per month plus certain common area maintenance charges, as defined, and are subject to escalation provisions.  Lease expense was approximately $50,000 and $48,000 for the three months ended March 31, 2014 and 2013, respectively.

The Company has a 10-year lease with Bourbon Brothers, LLC ("BBLLC"), a related party, for the real property in connection with the restaurant location in Colorado Springs.  The lease commenced upon taking possession of the premises, on January 11, 2014.  Rent is approximately $32,000 per month for the first 60 months, and thereafter subject to adjustment every 60 months.  Any increase on a yearly basis will equal 11% of the construction costs in excess of $2,000,000.  A long-term deposit on the lease in the amount of $32,083 is recorded as of March 31, 2014. Related party lease expense was $85,295 for the three months ended March 31, 2014. Subsequent to March 31, 2014, the Company issued 400,000 shares of common stock for $200,000.

On January 1, 2014, the Company assumed a lease from a related party for the corporate office in Colorado Springs.  The lease is for 78 months with an unaffiliated party.  Monthly rent is $5,800 per month escalating up to $6,000 per month in year 6.  A long-term deposit in the amount of $5,794 is recorded as of March 31, 2014.

The Company also paid rent and rent-related expenses to Accredited Members Acquisition Corporation ("AMAC"), a related party (Note 8), on a month-to-month basis for office space at the AMAC corporate headquarters in Colorado Springs, Colorado. This arrangement began in October 2011 and terminated July 31, 2013, as the Management Service Agreement terminated. Base rental payments were approximately $3,500 per month. Related party rent expense was approximately $0 and $14,300 for the three months ended March 31, 2014 and 2013, respectively.

Contingencies:

From time to time, the Company may become party to litigation and other claims in the ordinary course of business. To the extent that such claims and litigation arise, management provides for them if upon the advice of counsel, losses are determined to be both probable and estimable.