Investment in Paradise on Wings

9 Months Ended

Sep. 28, 2014

Equity Method Investments and Joint Ventures [Abstract]

Investment in Paradise on Wings

Note 4.  Investment in Paradise on Wings

On January 20, 2014, the Company entered into a contribution agreement with Paradise on Wings.  In connection with the execution of the contribution agreement, on January 20, 2014, the Company and the incumbent members of Paradise on Wings entered into an amended and restated operating agreement of Paradise on Wings to reflect the terms of the contribution agreement.  The transactions contemplated by the contribution agreement and operating agreement were completed on January 20, 2014.

Under the terms of the contribution agreement, the Company (sometimes referred to herein as the “Class B Member”) acquired 117.65 Class B membership interests in Paradise on Wings, representing all of the outstanding Class B membership interests and a 50% ownership interest in Paradise on Wings (the “Class B Membership Interests”).  The incumbent members of Paradise on Wings (the “Class A Members”) converted their existing membership interests into a total of 117.65 Class A membership interests in Paradise on Wings, representing all of the outstanding Class A membership interests and a 50% ownership interest in Paradise on Wings (the “Class A Membership Interests”).

The Company agreed to pay $400,000 in cash, of which $350,000 was paid prior to closing and $50,000 was due upon closing, and $400,000 in shares of the Company’s common stock to Paradise on Wings in consideration for the Class B Membership Interests (the “Capital Contribution”).  The shares of common stock (the “ARC Shares”) were valued based upon the opening bid price of the common stock on the OTCmarkets.com on the morning of the closing date, which was $1.70 per share.  Accordingly, the Company issued 235,295 shares of common stock to Paradise on Wings on the closing date.

Under the operating agreement, the power to manage the business and affairs of Paradise on Wings has been vested in the managers of Paradise on Wings.  The Class A Members may appoint up to two managers, which manager(s) have a total of 50% of the vote of all managers.  The Company, as the owner of all of the Class B Membership Interests, may appoint one manager who has a total of 50% of the vote of all managers.  Notwithstanding the foregoing, the Contributed Capital may not be used to pay salaries or bonuses to any of the Class A Members or Class B Members, and the vote of 60% of the total outstanding Class A Membership Interests and Class B Membership Interests is required in the event Paradise on Wings wishes to use the Contributed Capital for any permitted purpose.

The Class A Membership Interests are identical to the Class B Membership Interests in all respects except that the Class A Membership Interests have a preferred right to distributions from Paradise on Wings with respect to the ARC Shares.  The Class A Members, through their ownership of the Class A Membership Interests, are entitled to receive a total of 50% of all items of income, gain, losses, deductions and expenses (including 100% of any such items associated with the ARC Shares), and the Company, through its ownership of the Class B Membership Interests, is entitled to receive 50% of all items of income, gain, losses, deductions and expenses (with the exception of any such items associated with the ARC Shares).

The Company accounts for its 50% ownership interest in Paradise on Wings using the equity method of accounting because the Company has the ability to exert significant influence, but not control, over the operating and financial policies of Paradise on Wings.   The investment was initially recorded at the fair value amount of the Company’s initial investment and subsequently adjusted for the Company’s share of the net income and loss, and cash contributions and distributions, to or from Paradise on Wings.  The Company reported its income from Paradise on Wings as income from investment in Paradise on Wings in its statements of operations, and reported its investment in Paradise on Wings as equity investment in Paradise on Wings in its balance sheets.

Set forth below is a summary of the unaudited income statement of Paradise on Wings for the three-month period ended September 28, 2014 and the period beginning January 21, 2014 and ending September 28, 2014 provided to the Company by Paradise on Wings.

Statement of Operations	Three Months Ended September 28, 2014		Period From January 21,  2014 Through September 28, 2014
Revenue	$	76,815	$	230,315
Operating expenses		64,113		212,285
Income from operations		12,702		18,030
Other income		-0-		499
Net income		12,702	$	18,529
Company’s share of net income	$	6,351	$	9,265

Set forth below is a summary of the unaudited balance sheet of Paradise on Wings as of September 28, 2014 provided to the Company by Paradise on Wings.

Balance Sheet	September 28, 2014
Current assets	$	68,298
Equity investment		400,000
Note receivable		160,051
Total assets	$	628,349
Total liabilities	$	40,192
Equity		588,157
Total liabilities and equity	$	628,349