Sadot Group Inc. - Interim / Quarterly Report 2021

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-39223

MUSCLE MAKER, INC.

(Exact name of registrant as specified in its charter)

Nevada	47-2555533
(State
or Other Jurisdiction of	(I.R.S.
Employer
Incorporation
or Organization)	Identification
No.)

| 2600
South Shore Blvd. , Suite
300 , League
City , Texas | 77573 |
| --- | --- |
| (Address
of Principal Executive Offices) | (Zip
Code) |

Registrant’s telephone number, including area code: (682) - 708-8250

Securities registered pursuant to Section 12(b) of the Act:

| Title
of each class | Trading
Symbol(s) | Name
of each exchange on which registered |
| --- | --- | --- |
| Common
stock, $0.0001 par value per share | GRIL | The NASDAQ Capital
Market |

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 period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

| Large
accelerated filer | ☐ | Accelerated
filer | ☐ |
| --- | --- | --- | --- |
| Non-accelerated
filer | ☐ | Smaller
reporting company | ☒ |
| Emerging
growth company | ☒ | | |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes ☐ No ☒

The number of shares if the Registrant’s common stock, $0.0001 par value per share, outstanding as of August 16, 2021, was 17,720,364 .

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MUSCLE MAKER, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

TABLE OF CONTENTS

		Page
PART
1 – FINANCIAL INFORMATION
ITEM
1. Financial Statements.
	Condensed
Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020	3
	Unaudited
Condensed Consolidated Statements of Operations for the Three and Six months ended June 30, 2021 and 2020	4
	Unaudited
Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three and Six months ended June 30, 2020	5
	Unaudited
Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three and Six months ended June 30, 2021	6
	Unaudited
Condensed Consolidated Statements of Cash Flows for the Three and Six months ended June 30, 2021 and 2020	7
	Notes
to Unaudited Condensed Consolidated Financial Statements	9
ITEM
2.	Management’s
Discussion and Analysis of Financial Condition and Results of Operations.	25
ITEM
3.	Quantitative
and Qualitative Disclosures About Market Risk.	39
ITEM
4.	Controls
and Procedures.	39
PART
II - OTHER INFORMATION
ITEM
1.	Legal
Proceedings.	40
ITEM
1A.	Risk
Factors.	41
ITEM
2.	Unregistered
Sales of Equity Securities and Use of Proceeds.	42
ITEM
3.	Defaults
Upon Senior Securities.	42
ITEM
4.	Mine
Safety Disclosures.	42
ITEM
5.	Other
Information.	42
ITEM
6.	Exhibits.	43
SIGNATURES		44

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MUSCLE MAKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

| | June
30, 2021 | | | |
| --- | --- | --- | --- | --- |
| Assets | | | | |
| Current Assets: | | | | |
| Cash | $ 4,971,621 | $ | 4,195,932 | |
| Accounts receivable, net
of allowance for doubtful accounts of $ 75,000 as of June 30, 2021 and December 31, 2020, respectively | 280,434 | | 140,305 | |
| Inventory | 169,103 | | 113,824 | |
| Current portion of loans
receivable, net of allowance of $ 61,275 and $ 106,900 at June 30, 2021 and December 31, 2020, respectively | 6,556 | | 2,394 | |
| Prepaid
expenses and other current assets | 91,739 | | 40,903 | |
| Total Current Assets | 5,519,453 | | 4,493,358 | |
| Property and equipment,
net | 2,549,717 | | 2,342,723 | |
| Goodwill | 2,661,564 | | 656,348 | |
| Intangible assets, net | 8,003,269 | | 2,878,278 | |
| Loans receivable, non-current | - | | 996 | |
| Prepaid
expense, Security deposits and other assets | 229,799 | | 131,916 | |
| Total
Assets | $ 18,963,802 | $ | 10,503,619 | |
| Liabilities and Stockholders’
Equity | | | | |
| Current Liabilities: | | | | |
| Accounts payable and accrued
expenses | $ 2,006,882 | $ | 1,500,935 | |
| Convertible notes payable
to Former Parent | 82,458 | | 82,458 | |
| Convertible notes payable | 100,000 | | 100,000 | |
| Other notes payable, current | 124,348 | | 701,552 | |
| Deferred revenue, current | 54,437 | | 62,858 | |
| Deferred rent, current | 73,741 | | 20,569 | |
| Other
current liabilities | 651,951 | | 641,418 | |
| Total Current Liabilities | 3,093,817 | | 3,109,790 | |
| Other notes payable, non-current | 1,257,426 | | 575,140 | |
| Deferred revenue, non-current | 1,030,305 | | 944,271 | |
| Deferred
rent, non-current | 35,964 | | 79,290 | |
| Total
Liabilities | 5,417,512 | | 4,708,491 | |
| Commitments and Contingencies | - | | - | |
| Stockholders’ Equity: | | | | |
| Common stock, $ 0.0001 par value, 25,000,000 shares authorized, 17,689,454 and 11,725,764 shares issued and outstanding as of June 30, 2021, and December
31, 2020, respectively | 1,769 | | 1,172 | |
| Additional paid-in capital | 81,572,113 | | 68,987,663 | |
| Accumulated
deficit | ( 68,027,592 | ) | ( 63,193,707 | ) |
| Total
Stockholders’ Equity | 13,546,290 | | 5,795,128 | |
| Total
Liabilities and Stockholders’ Equity | $ 18,963,802 | $ | 10,503,619 | |

See Notes to the Condensed Consolidated Financial Statements

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MUSCLE MAKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	2021		2020		2021		2020
	For the Three
Months Ended				For the Six
Months Ended
	June
30,				June
30,
	2021		2020		2021		2020
Revenues:
Company restaurant
sales, net of discounts	$ 2,564,864		$ 659,939		$ 3,743,775		$ 1,897,366
Franchise royalties and
fees	169,549		142,293		304,889		318,324
Franchise
advertising fund contributions	4,742		32,454		18,829		54,050
Total
Revenues	2,739,155		834,686		4,067,493		2,269,740
Operating Costs and Expenses:
Restaurant operating expenses:
Food and beverage costs	920,691		255,329		1,425,152		721,023
Labor	903,772		342,823		1,670,837		929,443
Rent	304,930		139,604		561,121		284,281
Other
restaurant operating expenses	652,251		100,552		992,173		432,912
Total restaurant operating
expenses	2,781,644		838,308		4,649,283		2,367,659
Preopening expenses	-		46,764		10,986		46,764
Depreciation and amortization	284,646		97,245		453,774		208,502
Franchise advertising fund
expenses	4,742		32,454		18,829		54,050
General
and administrative expenses	1,995,319		1,213,851		4,961,955		6,343,254
Total
Costs and Expenses	5,066,351		2,228,622		10,094,827		9,020,229
Loss
from Operations	( 2,327,196	)	( 1,393,936	)	( 6,027,334	)	( 6,750,489	)
Other Income (Expense):
Other income (expense),
net	223,681		( 10,360	)	226,309		( 13,548	)
Interest expense, net	( 22,160	)	( 1,129	)	( 36,334	)	( 94,733	)
Change in fair value of
accrued compensation	127,500		( 96,000	)	127,500		( 96,000	)
Gain on extinguishment
of debt	875,974		-		875,974		-
Amortization
of debt discounts	-		-		-		( 38,918	)
Total
Other Income (Expense), Net	1,204,995		( 107,489	)	1,193,449		( 243,199	)
Loss Before Income Tax	( 1,122,201	)	( 1,501,425	)	( 4,833,885	)	( 6,993,688	)
Income
tax provision	-		-		-		-
Net
Loss	$ ( 1,122,201	)	$ ( 1,501,425	)	$ ( 4,833,885	)	$ ( 6,993,688	)
Net Loss Per Share:
Basic
and Diluted	$ ( 0.07	)	$ ( 0.21	)	$ ( 0.36	)	$ ( 1.01	)
Weighted Average Number of Common Shares Outstanding:
Basic
and Diluted	15,381,855		7,092,879		13,612,127		6,916,218

See Notes to the Condensed Consolidated Financial Statements

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MUSCLE MAKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

		Amount	Capital	Deficit		Total
			Additional
Common
Stock			Paid-in	Accumulated
Shares		Amount	Capital	Deficit		Total
Balance - December 31, 2019	5,714,464	$ 571	$ 53,339,793	$ ( 53,094,602	)	$ 245,762
Issuance of restricted
stock	1,226	-	-	-		-
Common stock issued upon
offering on February 12, 2020, net of underwriter’s discount and offering costs of $920,000	1,540,000	154	6,779,846	-		6,780,000
Restricted common stock
issued as compensation to executive team upon completion of the initial public offering	216,783	22	1,083,893	-		1,083,915
Common
stock, pre-funded warrants and warrant issued in private placement on April 7, 2021, net of fees $790,000
Common
stock, pre-funded warrants and warrant issued in private placement, shares
Common stock issued in
exchange for accrued interest
Common stock issued in
exchange for accrued interest, shares
Common stock issued as
compensation to board of directors	25,616	3	128,077	-		128,080
Common stock issued as
part of the acquisition of SuperFit Foods on March 25, 2021
Common stock issued as
part of the acquisition of SuperFit Foods on March 25, 2021,Shares
Restricted common stock
issued as compensation to executives and employees
Restricted common stock
issued as compensation to executives and employees,Shares
Common stock issued as
compensation for services	385,000	39	1,924,961	-		1,925,000
Exercise of pre-funding
warrants
Exercise of pre-funding
warrants,Shares
Cancellation of share per
agreement with shareholder
Cancellation of share per
agreement with shareholder,Shares
Common stock issued as
compensation for services
Stock-based compensation:
Restricted common stock	-	-	20,148	-		20,148
Warrant	-	-	191,000	-		191,000
Net
loss	-	-	-	( 5,492,263	)	( 5,492,263	)
Balance - March 31, 2020	7,883,089	$ 789	$ 63,467,718	$ ( 58,586,865	)	$ 4,881,642
Common stock issued as
compensation for services	20,000	2	56,198	-		56,200
Common stock issued in
exchange for accrued interest	51,105	5	357,730	-		357,735
Common stock issued as
compensation to board of directors	4,340	-	11,874	-		11,874
Stock-based compensation:
Restricted common stock	-	-	20,148	-		20,148
Net loss	-	-	-	( 1,501,425	)	( 1,501,425	)
Balance – June
30, 2020	7,958,534	$ 796	$ 63,913,668	$ ( 60,088,290	)	$ 3,826,174

See Notes to the Condensed Consolidated Financial Statements

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MUSCLE MAKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


Common
Stock				Paid-in		Accumulated
Shares		Amount		Capital		Deficit			Total
Balance - December 31, 2020	11,725,764	$	1,172	$	68,987,663	$	( 63,193,707	)	$ 5,795,128
Issuance of restricted
stock	1,200		-		-		-		-
Common stock issued as
part of the acquisition of SuperFit Foods on March 25, 2021	268,240		27		624,973		-		625,000
Restricted common stock
issued as compensation to executives and employees	221,783		22		636,495		-		636,517
Common stock issued as
compensation to board of directors	28,837		3		57,199		-		57,202
Common stock issued as
compensation for services	300,000		30		676,670		-		676,700
Stock-based compensation:
Restricted common stock	-		-		426		-		426
Net
loss	-		-		-		( 3,711,684	)	( 3,711,684	)
Balance – March 31, 2021	12,545,824	$	1,254	$	70,983,426	$	( 66,905,391	)	$ 4,079,289
Balance, value	12,545,824	$	1,254	$	70,983,426	$	( 66,905,391	)	$ 4,079,289
Common stock, pre-funded warrants and warrant issued in private placement on April 7, 2021, net of
fees $ 790,000	1,250,000		125		9,181,224		-		9,181,349
Common stock issued
as part of the acquisition of Pokemoto on May 14, 2021	880,282		88		1,249,912		-		1,250,000
Common stock issued as part of the acquisition	880,282		88		1,249,912		-		1,250,000
Exercise of pre-funding warrants	2,865,227		287		28,365		-		28,652
Cancellation of share per agreement with
shareholder	( 11,879	)	( 1	)	( 99,999	)	-		( 100,000	)
Common stock issued as
compensation for services	160,000		16		229,185		-		229,201
Net
loss	-		-		-		( 1,122,201	)	( 1,122,201	)
Balance – June
30, 2021	17,689,454	$	1,769	$	81,572,113	$	( 68,027,592	)	$ 13,546,290
Balance, value	17,689,454	$	1,769	$	81,572,113	$	( 68,027,592	)	$ 13,546,290

See Notes to the Condensed Consolidated Financial Statements

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MUSCLE MAKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	2021		2020
	For the Six
Months Ended
	June
30,
	2021		2020
Cash Flows from Operating
Activities
Net loss	$ ( 4,833,885	)	$ ( 6,993,688	)
Adjustments to reconcile
net loss to net cash used in operating activities:
Depreciation and amortization	453,774		208,502
Stock-based compensation	1,727,545		3,625,220
Amortization of debt discounts	-		38,918
Gain on extinguishment
of debt	( 875,974	)	-
Write off of property and
equipment	37,027		-
Loss on change in fair
value of accrued compensation	( 127,500	)	96,000
Bad debt expense	18,676		-
Deferred rent	( 21,471	)	17,829
Changes in operating assets
and liabilities:
Accounts receivable	( 102,563	)	( 33,080	)
Inventory	( 35,779	)	21,962
Prepaid expenses and other
current assets	( 107,139	)	24,023
Security deposits and other
assets	( 6,000	)	( 34,600	)
Accounts payable and accrued
expenses	208,164		( 688,509	)
Deferred revenue	( 45,803	)	( 109,738	)
Other
current liabilities	10,533		( 6,970	)
Total
Adjustments	1,133,490		3,159,557
Net
Cash Used in Operating Activities	( 3,700,395	)	( 3,834,131	)
Cash Flows from Investing
Activities
Purchases of property and
equipment	( 98,257	)	( 172,387	)
Cash paid in connection
with the acquisition of SuperFit Foods	( 500,000	)	-
Cash paid in connection
with the acquisition of Pokemoto	( 2,815,390	)	-
Cash paid in connection
with the acquisition
Collections
from loans receivable	800		8,802
Net
Cash Used in Investing Activities	( 3,412,847	)	( 163,585	)
Cash Flows from Financing
Activities
Proceeds from offering,
net of underwriter’s discount and offering costs of $ 920,000	-		6,780,000
Proceeds from PPP loan	-		866,300
Proceeds from Private Placement
offering, net of offering costs	9,181,350		-
Proceeds from exercised
of pre-funded warrants	28,652		-
Repayments of convertible
note payable	-		( 550,000	)
Cash paid in connection
with the cancellation of shares	( 100,000	)	-
Repayments of other notes
payable - related party	-		( 91,000	)
Repayments of other notes
payables	( 1,221,071	)	( 475,243	)
Proceeds
from other notes payable – related party	-		150,000
Net
Cash Provided by Financing Activities	7,888,931		6,680,057
Net Increase in Cash	775,689		2,682,341
Cash - Beginning of Period	4,195,932		478,854
Cash - End of Period	$ 4,971,621		$ 3,161,195

See Notes to the Condensed Consolidated Financial Statements

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MUSCLE MAKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

| | For the Six
Months Ended | |
| --- | --- | --- |
| | June
30, | |
| | 2021 | 2020 |
| Supplemental Disclosures
of Cash Flow Information: | | |
| Cash
paid for interest | $ 66,179 | $ 297,455 |
| Supplemental disclosures
of non-cash investing and financing activities | | |
| Common
stock issued in exchange for interest earned on convertible notes payable | $ - | $ 357,735 |

See Notes to the Condensed Consolidated Financial Statements

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MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE 1 – BUSINESS ORGANIZATION AND NATURE OF OPERATIONS, GOING CONCERN AND MANAGEMENT’S PLANS

Muscle Maker, Inc. (“MMI”), a Nevada corporation was incorporated in Nevada on October 25, 2019. MMI was a wholly owned subsidiary of Muscle Maker, Inc (“MMI-Cal”), a California corporation incorporated on December 8, 2014, but the two merged on November 13, 2019 with MMI as the surviving entity. MMI wholly owns Muscle Maker Development, LLC (“MMD”), Muscle Maker Corp, LLC (“MMC”) and Muscle Maker USA, Inc (“Muscle USA”). MMD was formed on July 18, 2017, in the State of Nevada for the purpose of running our existing franchise operations and continuing to franchise the Muscle Maker Grill® name and business system to qualified franchisees. MMC was formed on July 18, 2017, in the State of Nevada for the purpose of developing new corporate stores and operating new and existing corporate stores of MMI. Muscle USA was formed on March 14, 2019 in the State of Texas for the purpose of opening additional new corporate stores. Muscle Maker Development International. LLC, a directly wholly owned subsidiary, was formed in Nevada on November 13, 2020 to franchise the Muscle Maker Grill name and business system to qualified franchisees internationally.

MMI is a fast-casual restaurant concept that specializes in preparing healthy-inspired, high-quality, fresh, made-to-order lean, protein-based meals featuring chicken, seafood, pasta, hamburgers, wraps and flat breads. In addition, our restaurants feature freshly prepared entrée salads and an appealing selection of sides, protein shakes and fruit smoothies. MMI operates in the fast-casual restaurant segment.

MMI is the owner of the trade name and service mark Muscle Maker Grill®, Healthy Joe’s and other trademarks and intellectual property we use in connection with the operation of Muscle Maker Grill® restaurants. We license the right to use the Muscle Maker Grill® and Healthy Joe’s trademarks and intellectual property to our wholly-owned subsidiaries, MMD, MMC and Muscle USA, and to further sublicense them to our franchisees for use in connection with Muscle Maker Grill® and Healthy Joe’s restaurants.

On March 25, 2021, MMI acquired the assets of Superfit Foods, a subscription based fresh-prepared meal prep business located in Jacksonville, Florida. With this acquisition, we are also the owner of the trade name Superfit Foods that we use in connection with the operations of Superfit Foods. In 2020 Superfit foods produced overs 220,000 fresh-prepared meals. Superfit Foods is differentiated from other meal prep services by allowing customers in the Jacksonville Florida market to order online via the company’s website or mobile app and pick up their fully prepared meals from 28 company owned coolers located in gyms and wellness centers.

On May 14, 2021, MMI acquired PKM Stamford, LLC, Poke Co., LLC, LB Holdings LLC, and TNB Holdings, LLC, Poke Co Holdings LLC, GLL Enterprises, LLC, and TNB Holdings II, LLC, each a Connecticut limited liability company (collectively, Pokemoto”), a healthier modern culinary twist on the traditional Hawaiian poke classic. Pokemoto has thirteen locations in four states – Connecticut, Rhode Island, Massachusetts, and Georgia and offers up chef-driven contemporary flavors with fresh delectable and healthy ingredients such as Atlantic salmon, sushi-grade tuna, fresh mango, roasted cashews and black caviar tobiko that appeals to foodies, health enthusiasts, and sushi-lovers everywhere. The colorful dishes and modern chic dining rooms provide an uplifting dining experience for guests of all ages. Customers can dine in-store or order online via third party delivery apps for contactless delivery.

MMI and its subsidiaries are hereinafter referred to as the “Company”.

The Company operates under the name SuperFit Foods, Pokemoto and Muscle Maker Grill and is a franchisor and owner operator of Muscle Maker Grill, Healthy Joe’s and Pokemoto restaurants. As of June 30, 2021, the Company’s restaurant system included twenty-five company-owned restaurants, and fourteen franchise restaurants. Seven of the company-owned restaurants are delivery-only locations, including SuperFit Foods. In addition, not included in the store count, the Company built four new locations on university campuses but due to Covid-19 restrictions have not yet opened these locations but incurred expenses during the twelve months ended December 31, 2020.

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MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE 1 – BUSINESS ORGANIZATION AND NATURE OF OPERATIONS, GOING CONCERN AND MANAGEMENT’S PLANS, continued

COVID-19

The COVID-19 global pandemic continues to rapidly evolve. The Company is continually monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread, and its impact on operations, financial position, cash flows, inventory, supply chains, labor shortages resulting from various factors including mandatory vaccination requirements, purchasing trends, customer payments, and the industry in general, in addition to the impact on its employees. The pandemic has resulted in a negative impact on the Company’s operations during the year ended December 31, 2020 and continued into the six months ended June 30, 2021. However, due to the rapid development and fluidity of this situation, the magnitude and duration of the pandemic and its impact on the Company’s operations and liquidity is uncertain as of the date of this report. While there could ultimately be an additional material impact on operations and liquidity of the Company, the full impact could not be determined, as of the date of this report.

Going Concern and Management’s Plans

As of June 30, 2021, the Company had a cash balance, a working capital surplus and an accumulated deficit of $ 4,971,621 , $ 2,425,636 , and $ 68,027,592 , respectively. During the three and six months ended June 30, 2021, the Company incurred a pre-tax net loss of $ 1,122,201 and $ 4,833,885 , respectively. These conditions indicate that there is substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date of the issuance of these condensed consolidated financial statements.

Although management believes that the Company has access to capital resources, there are no commitments in place for new financing as of the date of the issuance of these condensed consolidated financial statements and there can be no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all. The Company expects to have ongoing needs for working capital in order to (a) fund operations; plus (b) expand operations by opening additional corporate-owned restaurants. To that end, the Company may be required to raise additional funds through equity or debt financing. However, there can be no assurance that the Company will be successful in securing additional capital. If the Company is unsuccessful, the Company may need to (a) initiate cost reductions; (b) forego business development opportunities; (c) seek extensions of time to fund its liabilities, or (d) seek protection from creditors.

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the condensed consolidated financial statements do not necessarily purport to represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of June 30, 2021, and for the three and six months ended June 30, 2021, and 2020. The results of operations for the three and six months ended June 30, 2021, are not necessarily indicative of the operating results for the full year. It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2020. The balance sheet as of December 31, 2020 has been derived from the Company’s audited financial statements.

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MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Any intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant estimates include:

| ● | the
assessment of recoverability of long-lived assets, including property and equipment, goodwill and intangible assets; |
| --- | --- |
| ● | the
estimated useful lives of intangible and depreciable assets; |
| ● | estimates
and assumptions used to value warrants and options; |
| ● | the
recognition of revenue; and |
| ● | the
recognition, measurement and valuation of current and deferred income taxes. |

Estimates and assumptions are periodically reviewed, and the effects of any material revisions are reflected in the financial statements in the period that they are determined to be necessary. Actual results could differ from those estimates and assumptions.

Cash and Cash Equivalents

The Company considers all highly-liquid instruments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of June 30, 2021 and December 31, 2020.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Major improvements are capitalized, and minor replacements, maintenance and repairs are charged to expense as incurred. Depreciation and amortization are calculated on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the estimated useful life or the lease term of the related asset. The estimated useful lives are as follows:

| Furniture
and equipment | 5 - 7 years |
| --- | --- |
| Vehicles | 5 years |
| Leasehold
improvements | 0.5 – 10.38 years |

Smallware, which consists of pots, pans and other cooking utensils, is carried at cost and any replacements are expensed when acquired.

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MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued

Intangible Assets

We account for recorded intangible assets in accordance with ASC 350 “Intangibles - Goodwill and Other”. In accordance with ASC 350, we do not amortize intangible assets with indefinite useful lives. Our goodwill and one of our trademarks are deemed to have indefinite lives, and accordingly are not amortized, but are evaluated for impairment at least annually, or more often whenever changes in facts and circumstances may indicate that the carrying value may not be recoverable. The Accounting Standards Codification (“ASC”) requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment). Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgment is required to estimate the fair value of reporting units which includes estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment.

Other intangible assets include a trademark with an indefinite useful life. The other intangible assets estimated useful lives are as follows:

| Franchisee
agreements | 13 years |
| --- | --- |
| Franchise
license | 10 years |
| Trademark
– SuperFit, Trademark – Pokemoto, domain name, customer list and proprietary recipes | 5 - 7 years |
| Non-compete
agreement | 2 - 3 years |

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. ASU 2016-02 will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating ASU 2016-02 and its impact on its condensed consolidated financial statements and disclosures.

In June 2018, the FASB issued ASU No. 2018-07, “Compensation — Stock Compensation (Topic 718),” (“ASU 2018-07”). ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. Currently, the accounting requirements for nonemployee and employee share-based payment transactions are significantly different. ASU 2018-07 expands the scope of Topic 718, Compensation — Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. This ASU supersedes Subtopic 505-50, Equity — Equity-Based Payments to Nonemployees. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted, but no earlier than a Company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company is currently evaluating ASU 2018-07 and its impact on the condensed consolidated financial statements.

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MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued

Recent Accounting Pronouncements, continued

In July 2018, the FASB issued ASU No. 2018-10, “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”). The amendments in ASU 2018-10 provide additional clarification and implementation guidance on certain aspects of the previously issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) and have the same effective and transition requirements as ASU 2016-02. Upon the effective date, ASU 2018-10 will supersede the current lease guidance in ASC Topic 840, Leases. Under the new guidance, lessees will be required to recognize for all leases, with the exception of short-term leases, a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis. Concurrently, lessees will be required to recognize a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2018-10 is effective for emerging growth companies for interim and annual reporting periods beginning after December 15, 2021, with early adoption permitted. The guidance is required to be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative periods presented in the financial statements. The Company is currently assessing the impact this guidance will have on its condensed consolidated financial statements.

In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” (“ASU 2018-11”). The amendments in ASU 2018-11 related to transition relief on comparative reporting at adoption affect all entities with lease contracts that choose the additional transition method and separating components of a contract affect only lessors whose lease contracts qualify for the practical expedient. The amendments in ASU 2018-11 are effective for emerging growth companies for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The Company is currently assessing the impact this guidance will have on its condensed consolidated financial statements.

In March 2019, the FASB issued ASU 2019-01, “Leases (Topic 842): Codification Improvements” (“Topic 842”) (“ASU 2019-01”). These amendments align the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842 with that of existing guidance. As a result, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply. However, if there has been a significant lapse of time between when the underlying asset is acquired and when the lease commences, the definition of fair value (in Topic 820, Fair Value Measurement) should be applied. (Issue 1). The ASU also requires lessors within the scope of Topic 942, Financial Services—Depository and Lending, to present all “principal payments received under leases” within investing activities. (Issue 2). Finally, the ASU exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard. (Issue 3). The transition and effective date provisions apply to Issue 1 and Issue 2. They do not apply to Issue 3 because the amendments for that Issue are to the original transition requirements in Topic 842. On June 3, 2020, the FASB issued ASU 2020-05 that extended the adoption to fiscal years beginning after December 15, 2021, with interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating ASU 2019-01 and its impact on its unaudited condensed consolidated financial statements and financial statement disclosures.

Subsequent Events

Based upon the evaluation and transactions, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements, except as disclosed in Note 13 – Subsequent Events.

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MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued

Revenue Recognition

In accordance with the Accounting Standards Codification Topic 606 “Revenue from Contracts with Customers”, the Company recognized revenue in accordance with a five-step revenue model, as follows: (1) identifying the contract with the customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations; and (5) recognizing revenue when (or as) the entity satisfies a performance obligation. In applying this five-step model, we have made significant judgments in identifying the promised goods or services in our contracts with franchisees that are distinct, and which represent separate performance obligations.

Restaurant Sales

Retail store revenue at Company operated restaurants is recognized when payment is tendered at the point of sale, net of sales tax, discount and other sales related taxes. The Company recorded retail store revenues of $ 2,564,864 and $ 3,743,775 during the three and six months ended June 30, 2021, respectively. The Company recorded retail store revenues of $ 659,939 and $ 1,897,366 during the three and six months ended June 30, 2020, respectively.

The Company sells gift cards which do not have an expiration date, and it does not deduct dormancy fees from outstanding gift card balances. The Company recognizes revenues from gift cards as restaurant revenues once the Company performs its obligation to provide food and beverage to the customer simultaneously with the redemption of the gift card or through gift card breakage, as discussed in Other Revenues below.

Franchise Royalties and Fees

Franchise revenues consists of royalties, franchise fees and rebates. Royalties are based on a percentage of franchisee net sales revenue. The Company recognizes the royalties as the underlying sales occur. The Company recorded revenue from royalties of $ 104,430 and $ 185,899 during the three and six months ended June 30, 2021, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company recorded revenue from royalties of $ 52,870 and $ 173,779 during the three and six months ended June 30, 2020, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations.

The Company provides the franchisees with management expertise, training, pre-opening assistance, and restaurant operating assistance in exchange for the multi-unit development fees and franchise fees. The Company capitalizes these fees upon collection from the franchisee, these fees are then recognized as franchise fee revenue on a straight-line basis over the life of the related franchise agreements and any exercised renewal periods. Cash payments are due upon the execution of the related franchise agreement. The Company’s performance obligation with respect to franchise fee revenues consists of a license to utilize the Company’s brand for a specified period of time, which is satisfied equally over the life of each franchise agreement. The Company recorded revenues from franchise fees of $ 12,352 and $ 22,138 , respectively, during the three and six months ended June 30, 2021, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company recorded revenues from franchise fees of $ 75,190 and $ 89,630 , respectively, during the three and six months ended June 30, 2020, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations.

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MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued

Franchise Royalties and Fees, continued

The Company has supply agreements with certain food and beverage vendors. Pursuant to the terms of these agreements, rebates are provided to the Company based upon the dollar volume of purchases for all company-owned and franchised restaurants from these vendors. Rebates earned on purchases by franchise stores are recorded as revenue during the period in which the related food and beverage purchases are made. The Company recorded revenue from rebates of $ 52,767 and $ 96,852 during the three and six months ended June 30, 2021, respectively, which is included in franchise royalties and fees on the accompanying consolidated statements of operations. The Company recorded revenue from rebates of $ 14,233 and $ 54,915 during the three and six months ended June 30, 2020, respectively, which is included in franchise royalties and fees on the accompanying consolidated statements of operations. Rebates earned on purchases by Company owned stores are recorded as a reduction of food and beverage costs during the period in which the related food and beverage purchases are made.

Other Revenues

Gift card breakage is recognized when the likelihood of a gift card being redeemed by the customer is remote and the Company determines there is not a legal obligation to remit the unredeemed gift card balance to the relevant jurisdiction. The determination of the gift card breakage rate is based upon the Company’s specific historical redemption patterns. The Company recognizes gift card breakage by applying its estimate of the rate of gift card breakage on a pro rata basis over the period of estimated redemption. Gift card liability is recorded in other current liabilities on the condensed consolidated balance sheet. For the three and six months ended June 30, 2021 and 2020, respectively, the Company determined that no gift card breakage is necessary based on current redemption rates.

Deferred Revenue

Deferred revenue primarily includes initial franchise fees received by the Company, which are being amortized over the life of the Company’s franchise agreements, as well as unearned vendor rebates. Deferred revenue is recognized in income over the life of the franchise agreements and vendor rebates are recognized in income as performance obligations are satisfied.

Franchise Advertising Fund Contributions

Under the Company’s franchise agreements, the Company and its franchisees are required to contribute a certain percentage of revenues to a national advertising fund. The Company’s national advertising services are provided on a system-wide basis and therefore, not considered distinct performance obligations for individual franchisees. In accordance with Topic 606, the Company recognizes these sales-based advertising contributions from franchisees as franchise revenue when the underlying franchisee Company incurs the corresponding advertising expense. The Company records the related advertising expenses as incurred under general and administrative expenses. When an advertising contribution fund is over-spent at year end, advertising expenses will be reported on the consolidated statement of operations in an amount that is greater than the revenue recorded for advertising contributions. Conversely, when an advertising contribution fund is under-spent at a period end, the Company will accrue advertising costs up to advertising contributions recorded in revenue. The Company recorded contributions from franchisees of $ 4,742 and $ 18,829 , respectively, during the three and six months ended June 30, 2021, respectively, which are included in franchise advertising fund contributions on the accompanying condensed consolidated statements of operations. The Company recorded contributions from franchisees of $ 32,454 and $ 54,050 , respectively, during the three and six months ended June 30, 2020, respectively, which are included in franchise advertising fund contributions on the accompanying condensed consolidated statements of operations.

Advertising

Advertising costs are charged to expense as incurred. Advertising costs were approximately $ 11,143 and $ 24,758 for the three and six months ended June 30, 2021, and approximately $ 25,092 and $ 128,735 for the three and six months ended June 30, 2020, respectively, and are included in general and administrative expenses in the accompanying condensed consolidated statements of operations.

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MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued

Net Loss per Share

Basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding, plus the impact of potential common shares, if dilutive, resulting from the exercise of warrants, options or the conversion of convertible notes payable.

The following securities are excluded from the calculation of weighted average diluted common shares at June 30, 2021 and 2020, respectively, because their inclusion would have been anti-dilutive:


June
30,
2021	2020
Warrants	6,615,302	2,537,264
Options	100,000	4,821
Convertible debt	32,350	32,350
Total
potentially dilutive shares	6,747,652	2,574,435

Major Vendor

The Company engages various vendors to distribute food products to their Company-owned restaurants. Purchases from the Company’s largest supplier totaled 60.25 % and 68.69 % of the Company’s purchases for the three and six months ended June 30, 2021, respectively. Purchases from the Company’s largest supplier totaled 82.95 % and 84.41 % of the Company’s purchases for the three and six months ended June 30, 2020, respectively.

Fair Value of Financial Instruments

The Company measures the fair value of financial assets and liabilities based on the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures” (“ASC 820”).

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

The carrying amounts of accrued liabilities approximate fair value due to the short-term nature of these instruments. The carrying amounts of our short–term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates, taken together with other features such as concurrent issuance of common stock and warrants, are comparable to rates of returns for instruments of similar credit risk.

See Note 12 – Equity – Warrant and Options Valuation for details related to an accrued compensation liability being fair valued using Level 1 inputs.

Reclassifications

Certain amounts in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no effect on previously reported net loss.

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MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE 3 – ACQUISITIONS

SuperFit Foods Acquisition

On March 25, 2021, the Company entered into an asset purchase agreement with Superfit Foods, LLC, a Florida limited liability company and Superfit Foods, LLC, a Nevada limited liability company (the “Superfit Acquisition”). The purchase price of the assets and rights was $ 1,150,000 . The purchase price is payable as follows: $ 500,000 that was paid at closing, of which $ 25,000 was released from an escrow account held by our attorney, and $ 625,000 paid in 268,240 shares of common stock to be held for six months before being registered. The remaining $25,000 shall be paid in shares of common stock provided that the seller meets various obligation, within 60 days, as outline in the purchase agreement . As of June 30, 2021 the Company has accrued for the liability in accounts payable and accrued expenses.

The Company acquired the following assets as part of the purchase agreement:

Furniture and equipment	$
Vehicles	55,000
Tradename	45,000
Customer list	140,000
Domain name	125,000
Proprietary Recipes	160,000
Non-compete agreement	260,000
Goodwill	283,000
Total assets acquired	$ 1,150,000

The unaudited pro-forma financial information in the table below summarizes the consolidated results of operations of the Company and SuperFits Foods, LLC as though the acquisition had occurred as of January 1, 2020. The pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the earliest period presented, nor does it intend to be a projection of future results.

| | Pro
Forma | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | (Unaudited) | | | (Unaudited) | | | | |
| | For
the Three Months Ended | | | For
the Six Months Ended | | | | |
| | June30, | | | June30, | | | | |
| | 2021 | 2020 | | 2021 | | 2020 | | |
| Revenues | $ 2,739,155 | $ | 1,696,536 | $ | 4,574,993 | $ | 3,131,590 | |
| Restaurant operating expenses | 2,781,644 | | 1,610,616 | | 5,104,056 | | 3,139,967 | |
| Total cost and expenses | 5,066,351 | | 3,000,930 | | 10,549,600 | | 9,792,537 | |
| Loss from Operations | ( 2,327,196 | ) | ( 1,304,394 | ) | ( 5,974,607 | ) | ( 6,660,947 | ) |

Pokemoto Acquisition

On May 14, 2021, the Company entered into Membership Interest Purchase Agreement with the members (the (“Poke Sellers”) of PKM Stamford, LLC, Poke Co., LLC, LB Holdings LLC, and TNB Holdings, LLC, each a Connecticut limited liability company (collectively, the “Poke Entities”) pursuant to which the Company acquired all of the issued and outstanding membership interest of the Poke Entities in consideration of $ 4,000,000 in cash and $ 730,000 payable in the form of a promissory note (the “Poke Note”).

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In a related transaction, on May 14, 2021, the Company and the Poke Sellers entered into a Membership Interest Exchange Agreement pursuant to which the Company acquired Poke Co Holdings LLC, GLL Enterprises, LLC, and TNB Holdings II, LLC, each a Connecticut limited liability company (collectively, the Poke Entities II”) in exchange for shares of common stock of the Company valued at $ 1,250,000 . The Company issued 880,282 shares of common stock of the Company on May 14, 2021. The price per share was determined by using the 10-day trading average preceding the date of closing. The closing occurred on May 14, 2021.

Poke Entities and Poke Entities II are hereinafter referred to as “Pokemoto”.

The Company acquired the following assets as part of the purchase agreement:

Purchase Price	$
Assets
Cash	$ 1,184,610
Accounts Receivables	60,208
Inventory	19,500
Property and Equipment	297,529
Intangible assets, net	4,560,000
Operating lease right-of-use assets, net	719,941
Security deposits and
other assets	35,580
	$ 6,877,368
Liabilities
Accounts payable and accrued expenses	$ 282,457
Other notes payable	1,462,453
Deferred revenue	123,416
Operating lease liability	751,258
	$ 2,619,584
Fair value of identifiable
net assets acquired	4,257,784
Goodwill	$ 1,722,216

Identifiable intangible assets acquired include the following:

| Tradename | Fair
Value — $ 175,000 | 5.00 |
| --- | --- | --- |
| Franchise License | 2,775,000 | 10.00 |
| Proprietary Recipes | 1,130,000 | 7.00 |
| Non-Compete | 480,000 | 2.00 |
| | $ 4,560,000 | 8.22 |

The unaudited pro-forma financial information in the table below summarizes the consolidated results of operations of the Company and Pokemoto, LLC as though the acquisition had occurred as of January 1, 2020. The pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the earliest period presented, nor does it intend to be a projection of future results.

| | Pro
Forma | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | (Unaudited) | | | (Unaudited) | | | | |
| | For
the Three Months Ended | | | For
the Six Months Ended | | | | |
| | June30, | | | June30, | | | | |
| | 2021 | 2020 | | 2021 | | 2020 | | |
| Revenues | $ 3,052,164 | $ | 1,707,360 | $ | 5,364,325 | $ | 4,096,479 | |
| Restaurant operating expenses | 2,926,106 | | 1,454,987 | | 5,514,292 | | 3,701,979 | |
| Total cost and expenses | 5,160,154 | | 2,972,456 | | 11,232,460 | | 10,642,794 | |
| Loss from Operations | ( 2,107,990 | ) | ( 1,265,096 | ) | ( 5,868,135 | ) | ( 6,546,315 | ) |

Combined Results

The unaudited pro-forma financial information in the table below summarizes the consolidated results of operations of the Company for both acquisitions, SuperFit Foods, LCC and Pokemoto, LLC as though the acquisition had occurred as of January 1, 2020. The pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of the earliest period presented, nor does it intend to be a projection of future results.

	Pro Forma
	(Unaudited)			(Unaudited)
	For the Three Months Ended			For the Six Months Ended
	June30,			June30,
	2021	2020		2021		2020
Revenues	$ 3,052,164	$	2,569,210	$	5,871,825	$	4,958,329
Restaurant operating expenses	2,926,106		2,227,295		5,969,065		4,474,287
Total cost and expenses	5,160,154		3,744,764		11,687,233		11,415,102
Loss from Operations	( 2,107,990	)	( 1,175,554	)	( 5,815,408	)	( 6,456,773	)

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MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE 4 - LOANS RECEIVABLE

At June 30, 2021 and December 31, 2020, the Company’s loans receivable consists of the following:

| Loans receivable, net | June
30, 2021 — $ 6,556 | $ | 3,390 | |
| --- | --- | --- | --- | --- |
| Less:
current portion | ( 6,556 | ) | ( 2,394 | ) |
| Loans
receivable, non-current | $ - | $ | 996 | |

Loans receivable includes loans to franchisees and a former franchisee totaling, in the aggregate, $ 6,556 and $ 3,390 , net of reserves for uncollectible loans of $ 61,275 and $ 106,900 at June 30, 2021 and December 31, 2020, respectively. The remaining loan has an original term of 10 years, earn interest at rate of 12 % annually, and is being paid on a monthly basis.

NOTE 5 – PROPERTY AND EQUIPMENT, NET

As of June 30, 2021 and December 31, 2020 property and equipment consists of the following:

| Furniture and equipment | June
30, 2021 — $ 1,309,003 | $ | 1,143,320 | |
| --- | --- | --- | --- | --- |
| Vehicles | 55,000 | | - | |
| Leasehold improvements | 2,153,697 | | 1,940,907 | |
| Property and equipment, gross | 3,517,700 | | 3,084,227 | |
| Less:
accumulated depreciation and amortization | ( 967,983 | ) | ( 741,504 | ) |
| Property
and equipment, net | $ 2,549,717 | $ | 2,342,723 | |

Depreciation expense amounted to $ 135,243 and $ 288,765 for the three and three and six months ended June 30, 2021 and 2020, respectively. Depreciation expense amounted to $ 81,337 and $ 176,686 for the three and six months ended June 30, 2020, respectively. During the three and six months ended June 30, 2021, the Company wrote off property and equipment with an original cost value of $ 0 and $ 99,313 r elated to a closed location and a future location that was terminated due to the economic environment as a result of COVID-19 and recorded a loss on disposal of $ 0 and $ 37,027 after accumulated depreciation of $ 0 and $ 62,286 in the unaudited condensed consolidated statement of operations.

NOTE 6 – GOODWILL AND OTHER INTANGIBLE ASSETS, NET

The Company’s intangible assets include a trademark with an indefinite useful life as well as a trademark – SuperFit Foods and trademark – Pokemote which are being amortized over useful lives of five years .

A summary of the intangible assets is presented below:

| Intangible
Assets — Intangible
assets, net at December 31, 2020 | Trademark — $ 2,524,000 | Franchise
Agreements — $ 354,278 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 2,878,278 | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Superfit
acquisition | - | - | | 45,000 | | 125,000 | | 140,000 | | 160,000 | | 260,000 | | - | | - | | - | | - | | 730,000 | |
| Pokemoto
acquisition | - | - | | - | | - | | - | | - | | - | | 175,000 | | 2,775,000 | | 1,130,000 | | 480,000 | | 4,560,000 | |
| Amortization
expense | - | ( 25,139 | ) | ( 2,391 | ) | ( 6,640 | ) | ( 7,437 | ) | ( 8,500 | ) | ( 23,011 | ) | ( 4,504 | ) | ( 35,713 | ) | ( 20,770 | ) | ( 30,904 | ) | ( 165,009 | ) |
| Intangible
assets, net at June 30, 2021 | $ 2,524,000 | $ 329,139 | $ | 42,609 | $ | 118,360 | $ | 132,563 | $ | 151,500 | $ | 236,989 | $ | 170,496 | $ | 2,739,287 | $ | 1,109,230 | $ | 449,096 | $ | 8,003,269 | |
| Weighted
average remaining amortization period at June 30, 2021 (in years) | | 6.57 | | 4.73 | | 4.73 | | 4.73 | | 4.73 | | 2.74 | | 4.87 | | 9.87 | | 6.87 | | 1.87 | | | |

Amortization expense related to intangible assets amounted to $ 149,403 and $ 165,009 for the three and three and six months ended June 30, 2021, respectively. Amortization expense related to intangible assets amounted to $ 15,908 and $ 31,816 for the three and three and six months ended June 30, 2020, respectively.

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MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payables and accrued expenses consist of the following:

| | June
30, 2021 | December
31, 2020 |
| --- | --- | --- |
| Accounts payable | $ 870,489 | $ 692,966 |
| Accrued payroll | 218,482 | 78,667 |
| Accrued professional fees | 280,519 | 224,028 |
| Accrued board members fees | 41,706 | 36,697 |
| Accrued rent expense | 176,061 | 171,266 |
| Sales taxes payable (2) | 252,558 | 231,177 |
| Accrued interest | 24,188 | 25,222 |
| Other accrued expenses | 142,879 | 40,912 |
| Total
Accounts Payable and Accrued Expenses | $ 2,006,882 | $ 1,500,935 |

(2) See Note 11 – Commitments and Contingencies –Taxes for detail related to delinquent sales taxes.

NOTE 8 – DEFERRED REVENUE

At June 30, 2021 and December 31, 2020, deferred revenue consists of the following:

| Franchise fees | June
30, 2021 — $ 1,084,742 | $ | 983,958 | |
| --- | --- | --- | --- | --- |
| Unearned vendor rebates | - | | 23,171 | |
| Less: Unearned vendor rebates,
current | - | | ( 23,171 | ) |
| Less:
Franchise fees, current | ( 54,437 | ) | ( 39,687 | ) |
| Deferred revenues, non-current | $ 1,030,305 | $ | 944,271 | |

NOTE 9 – OTHER CURRENT LIABILITIES

At June 30, 2021 and December 31, 2020, other current liabilities consist of the following:

| | June
30, 2021 | December
31, 2020 |
| --- | --- | --- |
| Gift card liability | $ 92,958 | $ 91,034 |
| Co-op advertising fund liability | 297,017 | 299,490 |
| Advertising fund
liability | 261,976 | 250,894 |
| Other current
liabilities | $ 651,951 | $ 641,418 |

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MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE 10 – NOTES PAYABLE

Convertible Notes

Convertible Note Payable to Former Parent

As of June 30, 2021, the Company had an amount of $ 82,458 in convertible notes payable to Former Parent outstanding.

Other Convertible Notes

As of June 30, 2021, and December 31, 2020, the Company has another convertible note payable in the amount of $ 100,000 which is included within convertible notes payable. See Note 11 – Commitments and Contingencies – Litigation, Claims and Assessments for details related to the $ 100,000 other convertible note payable.

Other Notes Payable

On June 21, 2021 the U.S. Small Business Administration (the “SBA”) forgave the Company’s first Paycheck Promissory Note (“PPP loan”) entered into on May 9, 2020. The aggregate amount forgiven is $ 875,974 , consisting of $866,300 in principal and $9,674 in interest expenses. The forgiven amount was accounted for as a gain on debt extinguishment of $ 875,974 and was recorded in our condensed consolidated statement of operations.

As of June 30, 2021, the Company had an amount of $ 291,053 in paycheck protection loans second draw (the “PPP 2 Loan”) that was acquired in the Pokemoto acquisition.

The PPP 2 Loan is administered by the SBA. The interest rate of the loan is 1.00 % per annum and accrues on the unpaid principal balance computed on the basis of the actual number of days elapsed in a year of 360 days. Commencing ten months after the effective date of the PPP 2 Loan, the Company is required to pay the Lender equal monthly payments of principal and interest as required to fully amortize any unforgiven principal balance of the loan by the five-year anniversary of the effective date of the PPP 2 Loan (the “Maturity Date”). The PPP 2 Loan contains customary events of default relating to, among other things, payment defaults, making materially false or misleading representations to the SBA or the Lender, or breaching the terms of the PPP 2 Loan. The occurrence of an event of default may result in the repayment of all amounts outstanding under the PPP 2 Loan, collection of all amounts owing from the Company, or filing suit and obtaining judgment against the Company. Under the terms of the CARES Act, PPP 2 loan recipients can apply for and be granted forgiveness for all, or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities.

During the six months ended June 30, 2021, as part of the Pokemoto acquisition the Company acquired $ 1,171,400 loans issued by the Small Business Administration under its Economic Injury Disaster Loans (“EIDL”). The Company repaid all the loans in full during the six months ended June 30, 2021.

During the six months ended June 30, 2021 and 2020, the Company repaid a total amount of $ 1,221,071 and $ 475,243 , respectively, of the other notes payable.

As of June 30, 2021, the Company had an aggregate amount of $ 1,381,774 in other notes payable. The notes had interest rates ranging between 1 % - 8 % per annum, due on various dates through October 31, 2025 .

The maturities of other notes payable as of June 30, 2021, are as follows:

	Principal
Repayments
due as of	Amount
06/30/2022	$ 161,004
06/30/2023	204,975
06/30/2024	214,102
06/30/2025	174,081
06/30/2026	627,612
	$ 1,381,774

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NOTE 11 – COMMITMENTS AND CONTINGENCIES

Consulting Agreements

On February 7, 2021, the Company entered into a Consulting Agreement with consultants as a strategy business consultant to provide the Company with business and marketing advice as needed. The term of the agreement is for five months from the effective date on February 7, 2021. Pursuant to the terms of the agreement the Company agreed to pay the consultant a total of 100,000 shares of the Company’s common stock. The Company issued 60,000 shares of common stock upon the effective date of the agreement with the remaining 40,000 to be issued upon the successful completion of the agreement.

On March 8, 2021, the Company entered into a Consulting Agreement with consultants as a strategy business consultant to provide the Company with financial and business advice. The term of the agreement is for five months from the effective date on March 8, 2021. Pursuant to the terms of the agreement the Company agreed to pay the consultant a total of 100,000 shares of the Company’s common stock. The Company issued 70,000 shares of common stock upon the effective date of the agreement with the remaining 30,000 to be issued upon the successful completion of the agreement.

On March 22, 2021, the Company entered into a Consulting Agreement with consultants with experience in the area of investor relations and capital introductions. The term of the agreement is for six months from the effective date on March 22, 2021. Pursuant to the terms of the agreement the Company agreed to pay $ 250,000 in cash for ancillary marketing, to be paid out at the Company’s discretion. In addition, the Company issued 150,000 shares of the Company’s common stock as a commencement incentive which is fully earned by entering into the agreement.

Litigations, Claims and Assessments

On March 27, 2018, a convertible note holder filed a complaint in the Iowa District Court for Polk County #CVCV056029 against the Company for failure to pay the remaining balance due on a promissory note in the amount of $ 100,000 , together with interest, attorney fees and other costs of $ 171,035 . On June 6, 2018 a default judgement was entered against the Company for the amount of $ 171,035 . The Company repaid an aggregate amount of $ 71,035 , consisting of principal and interest, as of the date of the filing of this report. As of June 30, 2021, the Company has accrued for the liability in convertible notes payable in the amount of $ 100,000 and accrued interest of $ 25,116 is included in accounts payable and accrued expenses.

In May 2018, Resolute Contractors, Inc., Quality Tile, MTL Construction, Genesis Electric, JNB Interiors and Captive Aire filed a Mechanics Lien for labor, service, equipment and materials in the total amount of $ 98,005 . The Company intends to set up various payment plans with these vendors. As of June 30, 2021, the Company has accrued for the liability in accounts payable and accrued expenses.

On or about March 7, 2019, the Company was listed as a defendant to a lawsuit filed by a contractor in the State of Texas. The contractor is claiming a breach of contract and is seeking approximately $ 32,809 in damages for services claimed to be rendered by the contractor. The Company is working with legal counsel in order to reach a settlement. As of June 30, 2021, the Company accrued $ 30,000 for the liability in accounts payable and accrued expenses.

On January 23, 2020, the Company was served a judgment in the amount of $ 130,185 for a breach of a lease agreement in Chicago, Illinois, in connection with a Company owned store that was closed in 2018. As of June 30, 2021, the Company has accrued for the liability in accounts payable and accrued expenses.

In March 2021, the Company participated in a mediation concerning an investor who invested with American Restaurant Holdings, Inc and/or American Restaurants, LLC, our former parent company, from 2013 through 2015 in the total amount of $ 531,250 . As of the filing of this report, the company entered into a settlement with American Restaurant, LLC and the investor in the amount of $ 160,000 . The Company paid $ 100,000 as part of the settlement, including legal fees, while the remining balance was paid by the insurance carrier and American Restaurants, LLC. See Note 12 Equity – Common stock for the cancellation of the investor shares pursuant to the agreement.

The Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. In the opinion of management after consulting legal counsel, such matters are currently not expected to have a material impact on the Company’s financial statements.

The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements after consulting legal counsel.

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MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE 11 – COMMITMENTS AND CONTINGENCIES, continued

Private Placement

On April 7, 2021, the Company entered into a Securities Purchase Agreement with an accredited investor (the “Securities Purchase Agreement”) for a private placement (the “Private Placement”) pursuant to which the investor agreed to purchase from the Company for an aggregate purchase price of approximately $ 10,000,000 (i) 1,250,000 shares of common stock of the Company (ii) a common stock purchase warrant to purchase up to 4,115,227 shares of Common Stock (the “Common Warrant”) and (iii) a pre-funded common stock purchase warrant to purchase up to 2,865,227 shares of Common Stock (the “Pre-Funded Warrant”). Each share is being sold together at a combined offering price of $ 2.43 per share and Common Warrant, and each Pre-Funded Warrant and accompanying Common Warrant is being sold together at a combined offering price of $ 2.42 per Pre-Funded Warrant and accompanying Common Warrant. The Pre-Funded Warrant is immediately exercisable, at a nominal exercise price of $ 0.01 per share, and may be exercised at any time until the Pre-Funded Warrant is fully exercised. The Common Warrant will have an exercise price of $ 2.43 per share, are immediately exercisable and will expire five and one-half ( 5.5 ) years from the date of issuance. The Private Placement closed on April 9, 2021.

The Securities Purchase Agreement contains customary representations, warranties and agreements of the Company and the Purchaser and customary indemnification rights and obligations of the parties thereto. Pursuant to the Securities Purchase Agreement, the Company is required to register the resale of the Shares and the shares issuable upon exercise of the Common Warrant and the Pre-Funded Warrant. The Company is required to prepare and file a registration statement with the Securities and Exchange Commission within 30 days of the date of the Securities Purchase Agreement and to use commercially reasonable efforts to have the registration statement declared effective within 90 days of the closing of the Private Placement.

Pursuant to a placement agency agreement, dated April 6, 2021, between the Company and A.G.P./Alliance Global Partners (the “Placement Agent”) entered into in connection with the Private Offering, the Placement Agent acted as the sole placement agent for the Private Placement and the Company has paid customary placement fees to the Placement Agent, including a cash fee equal to 8% of the gross proceeds raised in the Private Placement and a 164,609 common stock purchase warrant to purchase shares of Common Stock in an amount equal to 4% of the Shares and shares of Common Stock issuable upon exercise of the Warrants sold in the Private Placement, the warrant has an exercise price of $ 2.916 per share and is exercisable commencing six months from the date of the pricing of the Private Placement for a period of five years after such date. Pursuant to the Placement Agency Agreement, the Company has also agreed to reimburse certain expenses of the placement agent incurred in connection with the Private Placement.

Taxes

The Company failed in certain instances in paying sales taxes collected from customers in specific states that impose a tax on sales of the Company’s products during 2018 and 2019. The Company had accrued $ 252,558 and $ 231,177 which includes penalties and interest as of June 30, 2021 and December 31, 2020, respectively, related to this matter.

NOTE 12 – EQUITY

Common Stock

On February 3, 2021, the Company issued an aggregate of 20,000 shares of common stock of the Company to a digital marketing consultant with an aggregate fair value of $ 42,600 .

On February 3, 2021, the Company issued an aggregate of 16,126 shares of common stock of the Company to the members of the board of directors as compensation earned through the end of the fourth quarter of 2020.

On March 31, 2021, the Company authorized the issuance of an aggregate of 12,711 shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2021.

On April 30, 2021, the Company issued an aggregate of 10,000 shares of common stock of the Company to a digital marketing consultant, pursuant to their service agreement, with an aggregate fair value of $ 14,700 .

On May 6, 2021, the Company issued an aggregate of 150,000 shares of common stock of the Company to a digital marketing consultant with an aggregate fair value of $ 214,500 . The Company accrued for the liability as accrued compensation expense on the books as of March 31, 2021, as the share were fully earned pursuant to their service agreement. On the date of issues of the shares the Company recorded a gain on the change in fair value of the accrued compensation of $ 127,500 in the condensed consolidated statement of operations.

On May 27, 2021, the Company cancelled 11,879 shares of common stock previously issued to an investor pursuant a settlement agreement in exchange for $ 100,000 the portion paid by the Company in the Settlement. See Note 11 – Commitments and Contingencies – Litigation, Claims and Assessments for further details related to the settlement.

See Note 4 – Acquisitions – Pokemoto Acquisition and SupferFit Foods Acquisition for details related to the stock issuance in connection with the acquisitions.

See Note 11 – Commitments and Contingencies – Consulting Agreements for details related to additional stock issuances during the six months ended June 30, 2021.

See Note 12 – Equity – warrants for details related to stock issuance in connection with the exercising of warrants.

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MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE 12 – EQUITY, continued

Restricted Common Stock

On February 11, 2021, the Company issued an aggregate of 221,783 shares of restricted common stock of the Company to various executives and an employee. The restricted common stock is fully vested upon the date of grant.

A summary of the activity related to the restricted common stock for the six months ended June 30, 2021 is presented below:

| Total | | Date
Fair Value | | |
| --- | --- | --- | --- | --- |
| Outstanding at January 1, 2021 | 1,200 | $ | 65.33 | |
| Granted | 221,783 | | 2.87 | |
| Forfeited | - | | - | |
| Vested | ( 222,983 | ) | ( 3.21 | ) |
| Outstanding at June 30, 2021 | - | $ | - | |

Stock-Based Compensation Expense

Stock-based compensation related to restricted stock issued to employees, directors and consultants and warrants issued to consultants amounted to $ 14,700 and $ 1,727,545 for the three and six months ended June 30, 2021, respectively, of which $ 14,700 and $ 1,727,297 , respectively, was recorded in general and administrative expenses and $ 0 and $ 248 , respectively, was recorded in labor expense within restaurant operating expenses. Stock-based compensation related to restricted stock issued to employees, directors and consultants and warrants issued to consultants amounted to $ 277,077 and $ 3,625,220 for the three and six months ended June 30, 2020, respectively, of which $ 276,525 and $ 3,624,116 , respectively, was recorded in general and administrative expenses and $ 552 and $ 1,104 , respectively, was recorded in labor expense within restaurant operating expenses

Options

A summary of option activity during the three and six months ended June 30, 2021 is presented below:

		Weighted	Average
		Average	Remaining
Number of		Exercise	Life
Options		Price	In
Years
Outstanding, December 31, 2020	300,000	$	3.33	1.1
Issued	-		-
Exercised	-		-
Forfeited	( 200,000	)	-
Outstanding, June 30, 2021	100,000	$	5.00	0.9
Exercisable, June 30, 2021	300,000	$	5.00	1.93

Warrants

A summary of warrants activity during the three and six months ended June 30, 2021 is presented below:

Outstanding, December 31, 2020	2,582,857	$	4.08	3.3
Issued	6,980,454		1.44	-
Exercised	( 2,865,227	)	0.01	-
Forfeited/cancelled	( 82,782	)	19.66	-
Outstanding, June 30, 2021	6,615,302	$	2.86	4.4
Exercisable, June 30, 2021	6,615,302	$	2.86	4.4

See Note 11 – Commitments and Contingencies – Private Placement for details related to the warrants issued during the six months ended June 30, 2021.

On May 24, 2021, the Company issued 1,465,227 shares of common stock in connection with the exercising of the Pre-Funded Warrant for $ 14,652 .

On May 28, 2021, the Company issued 1,400,000 shares of common stock in connection with the exercising of the Pre-Funded Warrant for $ 14,000 .

NOTE 13 – SUBSEQUENT EVENTS

Company-Owned Restaurants

Subsequent to June 30, 2021 and through the date of the issuance of the these consolidated financial statements, the Company closed 5 delivery-only kitchen locations. The decision was made not to renew the monthly license agreement after their initial one-year term at these locations as a cost saving measure due to the location not performing as anticipated. Four of the locations were located in the Chicago market and the last one was located in Philadelphia. The existing assets at these locations were transfer to a storage unit and will be installed in future new locations.

Legal

On July 2, 2021, the Company was named as a defended in a wage dispute by a former employee. On July 27, 2021, the Company entered a settlement with the plaintiff for an amount of $ 18,500 to be paid on or before August 30, 2021.

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ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of the results of operations and financial condition of Muscle Maker, Inc. (“Muscle Maker”), together with its subsidiaries (collectively, the “Company”) as of June 30, 2021 and December 31, 2020 and for the three and six months ended June 30, 2021 and 2020 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us,” “we,” “our,” and similar terms refer to Muscle Maker. “Muscle Maker Grill” refers to the name under which our corporate and franchised restaurants do business. This Quarterly Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “forecast,” “model,” “proposal,” “should,” “may,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. For a detailed discussion of risk factors affecting us, see “Part I – Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020

OVERVIEW

We operate under the name SuperFit Foods, Pokemoto and Muscle Maker Grill as a franchisor and owner-operator of Muscle Maker Grill restaurants and Healthy Joe’s restaurants. As of June 30, 2021, the Company’s restaurant system included twenty-five company-owned restaurants, and fourteen franchise restaurants. Seven of the company-owned restaurants are delivery-only locations, including SuperFit Foods. In addition, not included in the store count, the Company built four new locations on university campuses but due to Covid-19 restrictions have not yet opened these locations but incurred expenses during the twelve months ended December 31, 2020.

We believe our healthy-inspired restaurant concept delivers a highly differentiated customer experience. We combine the quality and hospitality that customers commonly associate with our full service and fast casual restaurant competitors with the convenience and value customers generally expect from traditional fast food restaurants, but in a healthy-inspired way. The following core values form the foundation of our brand:

| ● | Quality .
Commitment to provide high quality, healthy-inspired food for a perceived wonderful experience for our guests. |
| --- | --- |
| ● | Empowerment
and Respect . We seek to empower our employees to take initiative and give their best while respecting themselves and others to
maintain an environment for team work and growth. |
| ● | Service. Provide world class service to achieve excellence each passing day. |
| ● | Value .
Our combination of high-quality, healthy-inspired food, empowerment of our employees, world class service, all delivered at an affordable
price, strengthens the value proposition for our customers. |

In striving for these goals, we aspire to connect with our target market and create a great brand with a strong and loyal customer base.

We are the owner of the trade name and service mark Muscle Maker Grill®, Healthy Joe’s, MMG Burger Bar, Meal Plan AF and other trademarks and intellectual property we use in connection with the operation of Muscle Maker Grill® restaurants. We license the right to use the Muscle Maker Grill® and Healthy Joe’s trademarks and intellectual property to our wholly owned subsidiaries, Muscle Maker Development and Muscle Maker Corp., and to further sublicense them to our franchisees for use in connection with Muscle Maker Grill® and Healthy Joe’s restaurants.

On March 25, 2021, we acquired the assets of Superfit Foods, a subscription based fresh-prepared meal prep business located in Jacksonville, Florida. With this acquisition, we are also the owner of the trade name Superfit Foods that we use in connection with the operations of Superfit Foods. In 2020 Superfit foods produced overs 220,000 fresh-prepared meals. Superfit Foods is differentiated from other meal prep services by allowing customers in the Jacksonville Florida market to order online via the company’s website or mobile app and pick up their fully prepared meals from 28 company owned coolers located in gyms and wellness centers.

On May 14, 2021, MMI acquired PKM Stamford, LLC, Poke Co., LLC, LB Holdings LLC, and TNB Holdings, LLC, Poke Co Holdings LLC, GLL Enterprises, LLC, and TNB Holdings II, LLC, each a Connecticut limited liability company (collectively, Pokemoto”), a healthier modern culinary twist on traditional Hawaiian poke classic. Pokemoto has thirteen locations in four states – Connecticut, Rhode Island, Massachusetts, and Georgia and offers up chef-driven contemporary flavors with fresh delectable and healthy ingredients such as Atlantic salmon, sushi-grade tuna, fresh mango, roasted cashews and black caviar tobiko that appeals to foodies, health enthusiasts, and sushi-lovers everywhere. The colorful dishes and modern chic dining rooms provide an uplifting dining experience for guests of all ages. Customers can dine in-store or order online via third party delivery apps for contactless delivery.

As of June 30, 2021, we had an accumulated deficit of $68,027,592 and expect to continue to incur operating and net losses for the foreseeable future. In its report on our consolidated financial statements for the fiscal year ended December 31, 2020, our independent registered public accounting firm included an explanatory paragraph relating to our ability to continue as a going concern. See “Liquidity and Capital Resources – Availability of Additional Funds and Going Concern” and Note 1 – Business Organization and Nature of Operations, Going Concern and Management’s Plans to Notes to Consolidated Financial Statements for additional information describing the circumstances that led to the inclusion of this explanatory paragraph.

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Key Financial Definitions

Total Revenues

Our revenues are derived from three primary sources: company restaurant sales, franchise revenues and vendor rebates from Franchisees. Franchise revenues are comprised of franchise royalty revenues collected based on 5% of franchisee net sales and other franchise revenues which include initial and renewal franchisee fees. Vendor rebates are received based on volume purchases or services from franchise owned locations.

Food and Beverage Costs

Food and beverage costs include the direct costs associated with food, beverage and packaging of our menu items at company-operated restaurants partially offset by vendor rebates from company-owned stores. The components of food, beverages and supplies are variable in nature, change with sales volume, are affected by menu mix and are subject to fluctuations in commodity costs.

Labor

Restaurant labor costs, including preopening labor, consists of company-operated restaurant-level management and hourly labor costs, including salaries, wages, payroll taxes, workers’ compensation expense, benefits and bonuses paid to our company-operated restaurant-level team members. Like other cost items, we expect restaurant labor costs at our company-operated restaurants to increase due to inflation and as our company restaurant revenues grow. Factors that influence labor costs include minimum wage and employer payroll tax legislation, mandated health care costs and operational productivity established by the management team.

Rent

Restaurant rent, including preopening rental charges, consist of company-operated restaurant-level rental or lease payments applicable to executed rental or lease agreements. In many cases these rental payments may include payments for common area maintenance as well as property tax assessments. Our rent strategy mostly consists of a variable rent structure calculated on net sales of the restaurant. While this can have a negative effect on higher volume locations where we cannot leverage a fixed rent, it provides downside protection for lower volume locations. While we cannot guarantee a favorable variable rent expense in all future leases, we have forecasted average rental costs as a percentage of total sales at 8%.

Other restaurant operating expenses

Other restaurant operating expenses, including preopening operating expenses, consist of company-operated restaurant-level ancillary expenses not inclusive of food and beverage, labor and rent expense. These expenses are generally marketing, advertising, merchant and bank fees, utilities, leasehold and equipment repairs, insurance and maintenance. A portion of these costs are associated with third party delivery services such as Uber Eats, Grub Hub, DoorDash, and others. The fees associated with these third-party delivery services can range up to 25% of the total order being delivered. Management believes delivery is a critical component of our business model and industry trends will continue to push consumers towards delivery. Our cost structure will need to be adjusted to reflect a different pricing model, portion sizes, menu offerings, and other considerations to potentially offset these rising costs of delivery.

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Other Expenses Incurred for Closed Locations

Other expenses incurred for closed locations consists primarily of restaurant operating expenses incurred subsequent to store closures as the Company still has to certain obligations to vendors due to signed agreements.

Depreciation and Amortization

Depreciation and amortization primarily consist of the depreciation of property and equipment and amortization of intangible assets.

General and Administrative Expenses

General and administrative expenses include expenses associated with corporate and administrative functions that support our operations, including wages, benefits, travel expense, stock-based compensation expense, legal and professional fees, training, and other corporate costs. We expect to incur incremental general and administrative expenses as a result of becoming a public listed company on the Nasdaq capital market. A certain portion of these expenses are related to the preparation of an initial stock offering and should be considered one-time expenses.

Other Income (Expense), net

Other expenses primarily consist of amortization of debt discounts on the convertible notes payable and interest expense related to other notes payable and convertible notes payable.

Income Taxes

Income taxes represent federal, state, and local current and deferred income tax expense.

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Consolidated Results of Operations

Three Months Ended June 30, 2021 Compared with Three Months Ended June 30, 2020

The following table represents selected items in our condensed consolidated statements of operations for the three months ended June 30, 2021 and 2020, respectively:

| | For the Three
Months Ended | | | |
| --- | --- | --- | --- | --- |
| | June
30, | | | |
| | 2021 | | 2020 | |
| Revenues: | | | | |
| Company restaurant
sales, net of discounts | $ 2,564,864 | | $ 659,939 | |
| Franchise royalties and
fees | 169,549 | | 142,293 | |
| Franchise
advertising fund contributions | 4,742 | | 32,454 | |
| Total Revenues | 2,739,155 | | 834,686 | |
| Operating Costs and Expenses: | | | | |
| Restaurant operating expenses: | | | | |
| Food and beverage costs | 920,691 | | 255,329 | |
| Labor | 903,772 | | 342,823 | |
| Rent | 304,930 | | 139,604 | |
| Other
restaurant operating expenses | 652,251 | | 100,552 | |
| Total restaurant operating
expenses | 2,781,644 | | 838,308 | |
| Preopening expenses | - | | 46,764 | |
| Depreciation and amortization | 284,646 | | 97,245 | |
| Franchise advertising fund
expenses | 4,742 | | 32,454 | |
| General
and administrative expenses | 1,995,319 | | 1,213,851 | |
| Total
Costs and Expenses | 5,066,351 | | 2,228,622 | |
| Loss
from Operations | (2,327,196 | ) | (1,393,936 | ) |
| Other Income (Expense): | | | | |
| Other income (expense),
net | 223,681 | | (10,360 | ) |
| Interest expense, net | (22,160 | ) | (1,129 | ) |
| Gain on extinguishment
of debt | 875,974 | | - | |
| Loss
on change in fair value of accrued compensation | 127,500 | | (96,000 | ) |
| Total
Other Income (Expense), Net | 1,204,995 | | (107,489 | ) |
| Loss Before Income Tax | (1,122,201 | ) | (1,501,425 | ) |
| Income
tax provision | - | | - | |
| Net
Loss | $ (1,122,201 | ) | $ (1,501,425 | ) |

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Revenues

Company total revenues totaled $2,739,155 for the three months ended June 30, 2021 compared to $834,686 for the three months ended June 30, 2020. The $1,904,469 increase is attributed an increase in restaurant sales and franchise royalties and fees.

We generated restaurant sales, net of discounts, of $2,564,864 for the three months ended June 30, 2021 compared to $659,939 for the three months ended June 30, 2020. This represented an increase of $1,904,925, which is directly attributed to higher company owned stores in the current period as compared to the prior period and a result of a decrease in restriction since the start of Covid-19.

Franchise royalties and fees for the three months ended June 30, 2021 and 2020 totaled $169,549 compared to $142,293, respectively. The $27,256 increase is primarily attributable to an increase in royalty income of $51,560, $14,233 in vendor rebates as restaurant sales increase in franchise locations and corporate locations, partially offset by a decrease of $62,838 in franchisee fees as fewer locations was terminated in current period as compared to the prior period which results in an acceleration of initial franchisee fees.

Franchise advertising fund contributions for the three months ended June 30, 2021 and 2020 totaled $4,742 compared to $32,454, respectively.

Operating Costs and Expenses

Operating costs and expenses primarily consist of restaurant food and beverage costs, restaurant labor expense, restaurant rent expense, other restaurant operating expenses, depreciation and amortization expenses and general and administrative expenses.

Restaurant food and beverage costs for the three months ended June 30, 2021, and 2020 totaled $920,691, or 35.90%, as a percentage of restaurant sales, and $255,329, or 38.7%, as a percentage of restaurant sales, respectively. The $665,362 increase was primarily due to the increase in restaurant sales resulting from six new cloud kitchens opened, the acquisition of the two-franchisee location, the acquisition of Superfit foods and the acquisition of six company owned store with the acquisition of Pokemoto as compared to the prior period.

Restaurant labor for the three months ended June 30, 2021, and 2020 totaled $903,772, or 35.2%, as a percentage of restaurant sales, and $342,823, or 51.9%, as a percentage of restaurant sales, respectively. The $560,949 decrease is a direct result of an increase in restaurant sales as compared to the prior period due to new stores acquired and opened and fewer restrictions on restaurant operation during the current period as compared to the prior period due to Covid-19. In addition, the decrease in restaurant labor as a percentage of restaurant sales is also attributed due to operational efficiencies in addition to the increase in restaurant sales.

Restaurant rent expense for the three and six months ended June 30, 2021 and 2020 totaled $304,930, or 11.9%, as a percentage of restaurant sales, and $139,604, or 21.2%, as a percentage of restaurant sales, respectively. The increase in rent expense is a direct result of us opening and acquiring a total of fourteen new company owned restaurants as compared to the prior period.

Other restaurant operating expenses for the three months ended June 30, 2021, and 2020 totaled $652,251, or 25.4% as a percentage of restaurant sales, and $100,552, or 15.2% as a percentage of restaurant sales, respectively. The increase of $551,699 is directly attributed to the increase in our company owned store count as certain cost is fixed and an increase in restaurant sales resulted in increased merchant fees.

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Depreciation and amortization expense for the three months ended June 30, 2021 and 2020 totaled $284,646 and $97,245, respectively. The $187,401 increase is primarily attributable to depreciation expense related to additional property and equipment acquired for new store build outs and stores acquired through acquisitions.

General and administrative expenses for the three months ended June 30, 2021 and 2020 totaled $1,995,319, or 72.8% of total revenues, and $1,213,851, or 145.4% of total revenues, respectively. The $781,468 increase is primarily attributable to an increase salaries and bonus of $90,877 and an increase in professional fees and consulting expense in the aggregate amount of $704,813 mainly attributed to a onetime expense of $665,00 incurred in connection with the private placement during the current period partially offset by a decrease of $14,223 in various general and administrative expenses.

Loss from Operations

Our loss from operations for the three months ended June 30, 2021 and 2020 totaled $2,327,196 or 85.0% of total revenues and $1,393,936 or 167.0% of total revenues, respectively. The increase of $933,260 in loss from operations is primarily attributable to an increase in total costs and expenses of approximately $2,837,729 partially offset by an increase in our total revenues of approximately $ 1,904,469.

Other Income (Expense), net

Other income (expense), net for the three months ended June 30, 2021 and 2020 totaled $1,204,995 and ($107,489), respectively. The $1,312,484 increase in other income (expense) was primarily attributable to a gain on extinguishment of debt of $875,974 due to the forgiveness of our PPP loan, an increase in other income of $234,041 which is a result of a revitalization fund grant that was attributed to one of our store locations and an increase of $223,500 in the change in fair value of accrued compensation issued during the current period as compared to the prior period due to administrative delays by the Company as the shares were earned by the consultant but not issued in the correct period, partially offset by a decrease in of $21,031 in interest expense, net as we repaid the majority of our interest bearing instruments.

Net Loss

Our net loss for the three months ended June 30, 2021, decreased by $379,224 to $1,122,201 as compared to $1,501,425 for the three months ended June 30, 2020 resulting from an increase in our loss from operations and partially of set by our increase other income (expense), net as discussed above.

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Consolidated Results of Operations

Six Months Ended June 30, 2021 Compared with Six Months Ended June 30, 2020

The following table represents selected items in our condensed consolidated statements of operations for the six months ended June 30, 2021 and 2020, respectively:

| | For the Six
Months Ended | | | |
| --- | --- | --- | --- | --- |
| | June
30, | | | |
| | 2021 | | 2020 | |
| Revenues: | | | | |
| Company restaurant
sales, net of discounts | $ 3,743,775 | | $ 1,897,366 | |
| Franchise royalties and
fees | 304,889 | | 318,324 | |
| Franchise
advertising fund contributions | 18,829 | | 54,050 | |
| Total Revenues | 4,067,493 | | 2,269,740 | |
| Operating Costs and Expenses: | | | | |
| Restaurant operating expenses: | | | | |
| Food and beverage costs | 1,425,152 | | 721,023 | |
| Labor | 1,670,837 | | 929,443 | |
| Rent | 561,121 | | 284,281 | |
| Other
restaurant operating expenses | 992,173 | | 432,912 | |
| Total restaurant operating
expenses | 4,649,283 | | 2,367,659 | |
| Preopening expenses | 10,986 | | 46,764 | |
| Depreciation and amortization | 453,774 | | 208,502 | |
| Franchise advertising fund
expenses | 18,829 | | 54,050 | |
| General
and administrative expenses | 4,961,955 | | 6,343,254 | |
| Total
Costs and Expenses | 10,094,827 | | 9,020,229 | |
| Loss
from Operations | (6,027,334 | ) | (6,750,489 | ) |
| Other Income (Expense): | | | | |
| Other income (expense),
net | 226,309 | | (13,548 | ) |
| Interest expense, net | (36,334 | ) | (94,733 | ) |
| Loss on change in fair
value of accrued compensation | 127,500 | | (96,000 | ) |
| Gain on extinguishment
of debt | 875,974 | | - | |
| Amortization
of debt discount | - | | (38,918 | ) |
| Total
Other Income (Expense), Net | 1,193,449 | | (243,199 | ) |
| Loss Before Income Tax | (4,833,885 | ) | (6,993,688 | ) |
| Income
tax provision | | | | |
| Net
Loss | $ (4,833,885 | ) | $ (6,993,688 | ) |

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Company total revenues totaled $4,067,493 for the six months ended June 30, 2021 compared to $2,269,740 for the six months ended June 30, 2020. The 79.21% increase is attributed to an increase in restaurant sales partially offset by a decrease in franchise royalties and fees and franchise advertising fund contributions.

We generated restaurant sales, net of discounts, of $3,743,775 for the six months ended June 30, 2021 compared to $1,897,366, for the six months ended June 30, 2020. This represented an increase of $1,846,409, or 97.3%, which is attributable to an increase of approximately $1,848,619 in restaurants sales due to additional stores that were open in current period compared to prior period, partially offset by a decrease of approximately $2,210 in restaurant sales from existing store in addition to the effect of the permanent closure of two company owned store since the impact of Covid-19.

Franchise royalties and fees for the six months ended June 30, 2021 and 2020 totaled $304,889 compared to $318,324, respectively. The $13,435 decrease is primarily attributable to a decrease in initial franchise fees of $67,492 as there were fewer franchisee agreement terminations in the current period as compared to the prior period, partially offset by a increase in royalty income and vendor rebates in the aggregate amount of $54,057 as a result of increase sales due to new corporate owned locations and fewer restrictions due to Covid-19 as compared to the prior period.

Franchise advertising fund contributions for the six months ended June 30, 2021 and 2020 totaled $18,829 compared to $54,050, respectively.

Operating Costs and Expenses

Restaurant food and beverage costs for the six months ended June 30, 2021 and 2020 totaled $1,425,152, or 38.1%, as a percentage of restaurant sales, and $721,023, or 38.0%, as a percentage of restaurant sales, respectively. The $704,129 increase primarily is due to a higher store count during the period as compared to the prior period resulting in higher sales.

Restaurant labor for the six months ended June 30, 2021 and 2020 totaled $1,670,837, or 44.6%, as a percentage of restaurant sales, and $929,443, or 49.0%, as a percentage of restaurant sales, respectively. The $741,394 increase results primarily due to a higher store count during the current period as compared to the prior period as the Company opened and acquired more stores as compared to the prior period. In addition, the decrease in labor as a percentage of sales is a direct result of increase efficiencies and an increase in overall restaurant sales.

Restaurant rent expense for the six months ended June 30, 2021 and 2020 totaled $561,121, or 15.0%, as a percentage of restaurant sales, and 284,281, or 15.0%, as a percentage of restaurant sales, respectively. The increase of $276,840 is directly attributed to the increase company owned store count from eleven stores to twenty five stores due to acquisitions and due to the opening of new stores compared to the prior period.

Other restaurant operating expenses for the six months ended June 30, 2021 and 2020 totaled $992,173, or 26.5% as a percentage of restaurant sales, and $432,912, or 22.8% as a percentage of restaurant sales, respectively. The $559,261 increase is primarily due to higher third-party merchant fees, utility fees and insurance expenses attributed to a higher store count during the current period as compared to the prior period as the Company opened and acquired more stores as compared to the prior period.

Preopening expense for the six months ended June 30, 2021 and 2020 totaled $10,986 and $46,764 which resulted from expense incurred prior to the opening of our Company owned store. The decrease is a direct result of stores that opened subsequent to the prior period, partially offset by new expense being incurred.

Depreciation and amortization expense for the six months ended June 30, 2021 and 2020 totaled $453,774 and $208,502, respectively. The $245,272 increase is primarily attributable to depreciation expense related to additional property and equipment acquired for new store build outs and additions of property and equipment additions through stores acquisitions

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General and administrative expenses for the six months ended June 30, 2021 and 2020 totaled $4,961,955, or 122.0% of total revenues, and $$6,343,254, or 279.5% of total revenues, respectively. The $1,381,299 decrease is primarily attributable to a decrease in salary and wages, including stock-based compensation, of $463,329 resulting from a decrease one time stock-based compensation and bonuses issued to the executive team upon the completion of the offering during the prior period, partially offset by increased salaries and stock-based compensation issued in the current period and a decrease in one-time consulting expense during the current period compare to the prior period resulting in a decrease of approximately $1,706,286. Partially offset by an increase in professional fees of $798,839, which mainly consist of a one-time expense paid to a consultant in connection with the private placement during the current period of $665,000.

Loss from Operations

Our loss from operations for the six months ended June 30, 2021 and 2020 totaled $6,027,334 or 148.2% of total revenues and $6,750,489 or 297.4% of total revenues, respectively. The decrease of $723,155 in loss from operations is primarily attributable to increase in total revenues of approximately $1,797,753, partially offset by an increase in total costs and expenses of approximately $1,074,598. The increase in total costs and expenses of approximately $1,074,598 is primarily due to one-time expenses of approximately $665,000 incurred in connection with our private placement. The remainder of the increase is attributed to the decrease depreciation and amortization, and total operating expenses that increase as compared to the prior period.

Other Income (Expense), net

Other expense, net for the six months ended June 30, 2021 and 2020 totaled $1,193,449 and ($243,199), respectively. The $1,436,648 increase in other income (expense) was primarily attributable a gain on extinguishment of debt of $875,974 due to the forgiveness of our PPP loan, an increase in other income of approximately $239,857 due to a revitalization fund grant that was attributed to one of our store locations, an increase of $223,500 in the change in fair value of accrued compensation issued during the current period as compared to the prior period due to administrative delays by the Company as the shares were earned by the consultant but not issued in the correct period. Attributing to the increase in other income (expense) is a decrease in interest expense of $61,575 due to the reduction of interest bearing instrument in the current period as compared to the prior period and finally a decrease in amortization of debt discounts of $38,918

Net Loss

Our net loss for the six months ended June 30, 2021 decreased by $2,159,803 to $4,833,885 as compared to $6,993,688 for the six months ended June 30, 2020, resulting from an decrease in our loss from operations an decrease in other income (expense), net as discussed above.

Liquidity and Capital Resources

Liquidity

We measure our liquidity in a number of ways, including the following:

| | June
30, 2021 | December
31, 2020 |
| --- | --- | --- |
| Cash | $ 4,971,621 | $ 4,195,932 |
| Working Capital Surplus | $ 2,425,636 | $ 1,383,568 |
| Convertible notes payable | $ 182,458 | $ 182,458 |
| Other notes payable, including related party | $ 1,381,774 | $ 1,276,692 |

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Availability of Additional Funds and Going Concern

Although we have a working capital surplus of $2,425,636, we presently have an accumulated deficit of $68,027,592, as of June 30, 2021, and we utilized $3,700,395 of cash in operating activities during the three months ended June 30, 2021, therefore we require additional equity and/or debt financing to continue our operations. These conditions raise substantial doubt about our ability to continue as a going concern for at least one year from the date of this filing.

Our principal source of liquidity to date has been provided by loans and convertible loans from related and unrelated third parties, (ii) the sale of common stock through private placements and (iii) and the sale of common stock in public offerings.

The pandemic novel coronavirus (COVID-19) outbreak, federal, state and local government responses to COVID-19 and our Company’s responses to the outbreak have all disrupted and will continue to disrupt our business. In the United States, individuals are being encouraged to practice social distancing, restricted from gathering in groups and in some areas during the first quarter of 2020 continuing through the third quarter of 2020. As a result of the disruption and volatility in the global capital markets, we have seen an increase in the cost of capital which adversely impacts access to capital.

On April 7, 2021, the Company entered into a Securities Purchase Agreement with an accredited investor (the “Securities Purchase Agreement”) for a private placement (the “Private Placement”) pursuant to which the investor agreed to purchase from the Company for an aggregate purchase price of approximately $10,000,000 (i) 1,250,000 shares of common stock of the Company (ii) a common stock purchase warrant to purchase up to 4,115,227 shares of Common Stock (the “Common Warrant”) and (iii) a pre-funded common stock purchase warrant to purchase up to 2,865,227 shares of Common Stock (the “Pre-Funded Warrant”). Each share and accompanying Common Warrant are being sold together at a combined offering price of $2.43 per share and Common Warrant, and each Pre-Funded Warrant and accompanying Common Warrant is being sold together at a combined offering price of $2.42 per Pre-Funded Warrant and accompanying Common Warrant. The Pre-Funded Warrant is immediately exercisable, at a nominal exercise price of $0.01 per share, and may be exercised at any time until the Pre-Funded Warrant is fully exercised. The Common Warrant will have an exercise price of $2.43 per share, are immediately exercisable and will expire five and one-half (5.5) years from the date of issuance. The Private Placement closed on April 9, 2021.

We expect to have ongoing needs for working capital in order to (a) fund operations; plus (b) expand operations by opening additional corporate-owned restaurants. To that end, we may be required to raise additional funds through equity or debt financing. However, there can be no assurance that we will be successful in securing additional capital. If we are unsuccessful, we may need to (a) initiate cost reductions; (b) forego business development opportunities; (c) seek extensions of time to fund our liabilities, or (d) seek protection from creditors.

In addition, if we are unable to generate adequate cash from operations, and if we are unable to find sources of funding, it may be necessary for us to sell one or more lines of business or all or a portion of our assets, enter into a business combination, or reduce or eliminate operations. These possibilities, to the extent available, may be on terms that result in significant dilution to our shareholders or that result in our shareholders losing all of their investment in our Company.

If we are able to raise additional capital, we do not know what the terms of any such capital raising would be. In addition, any future sale of our equity securities would dilute the ownership and control of your shares and could be at prices substantially below prices at which our shares currently trade. Our inability to raise capital could require us to significantly curtail or terminate our operations. We may seek to increase our cash reserves through the sale of additional equity or debt securities. The sale of convertible debt securities or additional equity securities could result in additional and potentially substantial dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity. In addition, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties.

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Our condensed consolidated financial statements included elsewhere in this 10-Q document have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplate our continuation as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

Sources and Uses of Cash for the six months ended June 30, 2021 and June 30, 2020

During the six months ended June 30, 2021 and 2020, we used cash of $3,700,395 and $3,834,131, respectively, in operations. Our net cash used in operating activities for the six months ended June 30, 2021 was primarily attributable to our net loss of $4,833,885, adjusted for net non-cash items in the aggregate amount of $1,212,077 and $78,587 of net cash provided by changes in the levels of operating assets and liabilities.

During the six months ended June 30, 2021, net cash used in investing activities was $3,412,847, of which $98,257 was used to purchase property, $500,000 used in connection with acquisition of SuperFit foods a healthy meal prep Company, $2,815,390 used in connection with acquisition of Pokemoto a healthier modern culinary twist on traditional Hawaiian poke classic, and, partially offset by $800 of loan collections from a former franchisee. During the six months ended June 30, 2020, net cash used in investing activities was $163,585, of which $172,387 was used to purchase property and equipment, partially offset by $8,802 of loans repayments by franchisees.

Net cash used by financing activities for the three and six months ended June 30, 2021 was $7,888,931 of which $9,181,350 was contributed by proceeds from a private placement offering , net of offering costs, $790,000 and proceeds from the exercising of the pre-funded warrants of $28,652, partially offset by repayments of various other notes payable of $1,221,071, which consisted mainly of SBA loans that was acquired through the Pokemoto acquisition and $100,000 cash paid to a former investor in connection with the cancellation of their shares. Net cash provided by financing activities for the six months ended June 30, 2020 was $6,680,057 of which $6,780,000 was contributed by proceeds from the offering ,net of underwriter’s discount and offering costs, $150,000 proceeds from other notes payable, $866,300 proceeds from the PPP loan, partially offset by repayments of various convertible notes of $550,000 and $566,243 of repayments of other notes payables, including a related party.

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Critical Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

Intangible Assets

We account for recorded intangible assets in accordance with ASC 350 “Intangibles - Goodwill and Other”. In accordance with ASC 350, we do not amortize intangible assets with indefinite useful lives. Our goodwill and trademarks are deemed to have indefinite lives, and accordingly are not amortized, but are evaluated for impairment at least annually, or more often whenever changes in facts and circumstances may indicate that the carrying value may not be recoverable. The Accounting Standards Codification (“ASC”) requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment). Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgment is required to estimate the fair value of reporting units which includes estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment.

Other intangible assets include a trademark with an indefinite useful life. The other intangible assets estimated useful lives are as follows:

| Franchisee
agreements | 13
years |
| --- | --- |
| Franchise
license | 10
years |
| Trademark
– SuperFit, Trademark – Pokemoto, domain name, customer list and proprietary recipes | 5
- 7 years |
| Non-compete
agreement | 2
- 3 years |

Impairment of Long-Lived Assets

When circumstances, such as adverse market conditions, indicate that the carrying value of a long-lived asset may be impaired, we perform an analysis to review the recoverability of the asset’s carrying value, which includes estimating the undiscounted cash flows (excluding interest charges) from the expected future operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects of demand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized to the extent that the carrying value exceeds the estimated fair value. Any impairment losses are recorded as operating expenses, which reduce net income.

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Revenue Recognition

Restaurant Sales

Retail store revenue at Company operated restaurants is recognized when payment is tendered at the point of sale, net of sales tax, discount and other sales related taxes. The Company recorded retail store revenues of $2,564,864 and $3,743,775 during the three and six months ended June 30, 2021, respectively. The Company recorded retail store revenues of $659,939 and $1,897,366 during the three and six months ended June 30, 2020, respectively.

Franchise Royalties and Fees

Franchise revenues consists of royalties, franchise fees and rebates. Royalties are based on a percentage of franchisee net sales revenue. The Company recognizes the royalties as the underlying sales occur. The Company recorded revenue from royalties of $104,430 and $185,899 during the three and six months ended June 30, 2021, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company recorded revenue from royalties of $52,870 and $173,779 during the three and six months ended June 30, 2020, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations.

The Company provides the franchisees with management expertise, training, pre-opening assistance, and restaurant operating assistance in exchange for the multi-unit development fees and franchise fees. The Company capitalizes these fees upon collection from the franchisee, these fees are then recognized as franchise fee revenue on a straight-line basis over the life of the related franchise agreements and any exercised renewal periods. Cash payments are due upon the execution of the related franchise agreement. The Company’s performance obligation with respect to franchise fee revenues consists of a license to utilize the Company’s brand for a specified period of time, which is satisfied equally over the life of each franchise agreement. The Company recorded revenues from franchise fees of $12,352 and $22,138, respectively, during the three and six months ended June 30, 2021, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company recorded revenues from franchise fees of $75,190 and $89,630, respectively, during the three and six months ended June 30, 2020, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations.

The Company has supply agreements with certain food and beverage vendors. Pursuant to the terms of these agreements, rebates are provided to the Company based upon the dollar volume of purchases for all company-owned and franchised restaurants from these vendors. Rebates earned on purchases by franchise stores are recorded as revenue during the period in which the related food and beverage purchases are made. The Company recorded revenue from rebates of $52,767 and $96,852 during the three and six months ended June 30, 2021, respectively, which is included in franchise royalties and fees on the accompanying consolidated statements of operations. The Company recorded revenue from rebates of $14,233 and $54,915 during the three and six months ended June 30, 2020, respectively, which is included in franchise royalties and fees on the accompanying consolidated statements of operations. Rebates earned on purchases by Company owned stores are recorded as a reduction of food and beverage costs during the period in which the related food and beverage purchases are made.

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Other Revenues

Deferred Revenue

Franchise Advertising Fund Contributions

Under the Company’s franchise agreements, the Company and its franchisees are required to contribute a certain percentage of revenues to a national advertising fund. The Company’s national advertising services are provided on a system-wide basis and therefore, not considered distinct performance obligations for individual franchisees. In accordance with Topic 606, the Company recognizes these sales-based advertising contributions from franchisees as franchise revenue when the underlying franchisee Company incurs the corresponding advertising expense. The Company records the related advertising expenses as incurred under general and administrative expenses. When an advertising contribution fund is over-spent at year end, advertising expenses will be reported on the consolidated statement of operations in an amount that is greater than the revenue recorded for advertising contributions. Conversely, when an advertising contribution fund is under-spent at a period end, the Company will accrue advertising costs up to advertising contributions recorded in revenue. The Company recorded contributions from franchisees of $4,742 and $18,829, respectively, during the three and six months ended June 30, 2021, respectively, which are included in franchise advertising fund contributions on the accompanying condensed consolidated statements of operations. The Company recorded contributions from franchisees of $32,454 and $54,050, respectively, during the three and six months ended June 30, 2020, respectively, which are included in franchise advertising fund contributions on the accompanying condensed consolidated statements of operations.

Income Taxes

We account for income taxes under Accounting Standards Codification (“ASC”) 740 Income Taxes (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.

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ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

Tax benefits claimed or expected to be claimed on a tax return are recorded in our financial statements. A tax benefit from an uncertain tax position is only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution.

Our policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the condensed consolidated statements of operations.

Recently Issued Accounting Pronouncements

See Note 3 to our condensed consolidated financial statements for the three and six months ended June 30, 2021.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

ITEM 3 . QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES .

Evaluation of Disclosure Controls and Procedures

Pursuant to Rules 13a-15(b) and 15-d-15(b) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. The term “disclosure controls and procedures”, as defined under Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective due to material weaknesses in our internal control over financial reporting that existed as of June 30, 2021, as discussed below.

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, we identified the following material weaknesses:

| ● | The
Company does not have sufficient resources in its accounting function, which restricts the Company’s ability to gather, analyze
and properly review information related to financial reporting in a timely manner. In addition, due to our size and nature, segregation
of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation
of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. |
| --- | --- |
| ● | The
Company has inadequate controls to ensure that information necessary to properly record transactions is adequately communicated on
a timely basis from non-financial personnel to those responsible for financial reporting. |
| ● | The
Company has significant deficiencies in the design and implementation of IT controls, specifically in the following areas: data center
and network operations, access security and change management. |

As a company with limited resources, the Company does not have the resources to fund sufficient staff to ensure a complete segregation of responsibilities within the accounting function. However, Company management does review, and will increase the review of the financial statements. This action, in addition to future improvements identified above, will minimize any risk of a potential material misstatement occurring.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we are a defendant or plaintiff in various legal actions that arise in the normal course of business. We record legal costs associated with loss contingencies as incurred and have accrued for all probable and estimable settlements.

We are currently involved in material pending legal proceedings that have been previously disclosed in our filings with the Securities and Exchange Commission under the Securities and Exchange Act of 1934, as amended. Below is a summary of the material legal proceedings that have become a reportable event, or which have had material developments during the quarter ended June 30, 2021.

On March 27, 2018, a convertible note holder filed a complaint in the Iowa District Court for Polk County #CVCV056029 against the Company for failure to pay the remaining balance due on a promissory note in the amount of $100,000, together with interest, attorney fees and other costs of $171,035. On June 6, 2018 a default judgement was entered against the Company for the amount of $171,035. The Company repaid an aggregate amount of $71,035, consisting of principal and interest, as of the date of the filing of this report. As of June 30, 2021, the Company has accrued for the liability in convertible notes payable in the amount of $100,000 and accrued interest of $25,116 is included in accounts payable and accrued expenses.

In May 2018, Resolute Contractors, Inc., Quality Tile, MTL Construction, Genesis Electric, JNB Interiors and Captive Aire filed a Mechanics Lien for labor, service, equipment and materials in the total amount of $98,005. The Company intends to set up various payment plans with these vendors. As of June 30, 2021, the Company has accrued for the liability in accounts payable and accrued expenses.

On or about March 7, 2019, the Company was listed as a defendant to a lawsuit filed by a contractor in the State of Texas. The contractor is claiming a breach of contract and is seeking approximately $32,809 in damages for services claimed to be rendered by the contractor. The Company is working with legal counsel in order to reach a settlement. As of June 30, 2021, the Company accrued $30,000 for the liability in accounts payable and accrued expenses.

On January 23, 2020, the Company was served a judgment in the amount of $130,185 for a breach of a lease agreement in Chicago, Illinois, in connection with a Company owned store that was closed in 2018. As of June 30, 2021, the Company has accrued for the liability in accounts payable and accrued expenses.

In March 2021, the Company participated in a mediation concerning an investor who invested with American Restaurant Holdings, Inc and/or American Restaurants, LLC, our former parent company, from 2013 through 2015 in the total amount of $531,250. As of the filing of this report, the company entered into a settlement with American Restaurant, LLC and the investor in the amount of $160,000. The Company paid $100,000 as part of the settlement, including legal fees, while the remining balance was paid by the insurance carrier and American Restaurants, LLC. See Note 12 Equity – Common stock for the cancellation of the investor shares pursuant to the agreement.

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In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. In the opinion of management, such matters are currently not expected to have a material impact on the Company’s financial statements.

The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements after consulting legal counsel.

Muscle Maker or its subsidiaries failed in certain instances in paying past state and local sales taxes collected from customers in specific states that impose a tax on sales of the Company’s products during 2017 and 2018. The Company had accrued $252,558 and $231,177 which includes penalties and interest as of June 30, 2021 and December 31, 2020, respectively, related to this matter. The Company has completed or is in discussions on payment plans with the various state or local entities for these past owed amounts.

Item 1A. Risk Factors.

Not applicable. See, however, Item 7 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors That May Affect Future Results and Financial Condition”) of our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on April 15, 2021.

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Form 10-K for the year ended December 31, 2020. In addition to our discussion in the MD&A, and other sections of this report, to address effects of the COVID-19 pandemic, we have provided an additional risk factor regarding COVID-19 below. The impact of COVID-19 can also exacerbate other risks discussed in the “Risk Factors” sections of our Form 10-K for the year ended December 31, 2020 and this Report, which could in turn have a material adverse effect on us. The risks discussed below and in the “Risk Factors” section in our Form 10-K for the year ended December 31, 2020 do not identify all risks that we face—our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.

The COVID-19 pandemic has affected our business and could materially adversely affect our financial condition and results of operations and ability to continue as a going concern.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. In response to the COVID-19 outbreak, “shelter in place” orders and other public health measures have been implemented across much of the United States.

The COVID-19 global pandemic continues to rapidly evolve. The Company is continually monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread, and its impact on operations, financial position, cash flows, inventory, supply chains, labor shortages resulting from various factors including mandatory vaccination requirements, purchasing trends, customer payments, and the industry in general, in addition to the impact on its employees. The pandemic has resulted in a negative impact on the Company’s operations during the quarter ended June 30, 2021. However, due to the rapid development and fluidity of this situation, the magnitude and duration of the pandemic and its impact on the Company’s operations and liquidity is uncertain as of the date of this report. While there could ultimately be an additional material impact on operations and liquidity of the Company, the full impact could not be determined, as of the date of this report.

Our Superfit Foods, LLC meal prep company located and operating in the Jacksonville, FL market is exposed to the risk of natural disasters.

Our meal prep service located and operating throughout the Jacksonville, Florida market could be subject to natural disasters such as hurricanes, fires, floods, or tornados. Adverse weather conditions could result in events that adversely affect our services. Such events could result in physical damage to our property and outlying areas where our consumer base is located delaying future services and our total revenue and operation profits could be materially adversely affected. These events could also result in indirect consequences such as increase in cost of insurance if they result in significant loss of property.

Due to COVID-19 and the ongoing pandemic, we and our franchisees may face labor shortages or increased labor costs due to local regulations associated with mandated vaccinations.

Labor is a primary component in the cost of operating our company-operated and franchised restaurants. Our success depends in part upon our and our franchisees’ ability to attract, motivate and retain a sufficient number of well-qualified restaurant operators, management personnel and other employees. Many industries, including the restaurant industry, are having difficulties in hiring and retaining qualified personnel as some employees have remained hesitant to rejoin the workforce. In addition to these factors, some parts of the country are instituting proof of vaccination requirements for indoor dining or be employed in restaurant positions that interact with the public, large group settings or office spaces. New York City has implemented these regulations as of August 16, 2021. The company may have to increase wages, reduce hours of operations or reduce menu offerings, among other tactics, to offset a potential lack of personnel to operate our restaurants. These events could materially affect our total revenue and operating profits.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On June 30, 2021, the Company authorized the issuance of an aggregate of 12,711 shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2021.

On April 7, 2021, the Company entered into a Securities Purchase Agreement with an accredited investor (the “Securities Purchase Agreement”) for a private placement (the “Private Placement”) pursuant to which the investor agreed to purchase from the Company for an aggregate purchase price of approximately $10,000,000 (i) 1,250,000 shares of common stock of the Company (ii) a common stock purchase warrant to purchase up to 4,115,227 shares of Common Stock (the “Common Warrant”) and (iii) a pre-funded common stock purchase warrant to purchase up to 2,865,227 shares of Common Stock (the “Pre-Funded Warrant”). Each share and accompanying Common Warrant are being sold together at a combined offering price of $2.43 per share and Common Warrant, and each Pre-Funded Warrant and accompanying Common Warrant is being sold together at a combined offering price of $2.42 per Pre-Funded Warrant and accompanying Common Warrant. The Pre-Funded Warrant is immediately exercisable, at a nominal exercise price of $0.01 per share, and may be exercised at any time until the Pre-Funded Warrant is fully exercised. The Common Warrant will have an exercise price of $2.43 per share, are immediately exercisable and will expire five and one-half (5.5) years from the date of issuance. The Private Placement closed on April 9, 2021.

On May 14, 2021, the Company and the Poke Sellers entered into a Membership Interest Exchange Agreement pursuant to which the Company acquired Poke Co Holdings LLC, GLL Enterprises, LLC, and TNB Holdings II, LLC, each a Connecticut limited liability company (collectively, the Poke Entities II”) in exchange for shares of common stock of the Company valued at $1,250,000. The Company issued 880,282 shares of common stock of the Company. The price per share was determine by using the 10-day trading average preceding the date of closing. The closing occurred on May 14, 2021.

The offers, sales, and issuances of the securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited or sophisticated person and had adequate access, through employment, business or other relationships, to information about us.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

On May 4, 2021, Mr. Southall resigned from the compensation committee. On May 10, 2021, the Board appointed Major General (ret) Malcolm Frost to the compensation committee and added Philip Balatsos as an additional member to the compensation committee.

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Item 6. Exhibits.

| Exhibit No. | Exhibit
Description |
| --- | --- |
| 4.1+ | Promissory
Note in the principal amount of $730,000 dated May 14, 2021 (Incorporated by reference to Exhibit 4.1 to the Registrant’s current
report on Form 8-K filed on May 14, 2021) |
| 10.1+ | Asset
Purchase Agreement dated March 25, 2021 between Muscle Maker, Inc and SuperFit Foods, LLC (Incorporated by reference to Exhibit
10.1 to the Registrant’s current report on Form 10-Q filed on May 21, 2021) |
| 10.2+ | Membership
Interest Purchase Agreement dated May 14, 2021 between Muscle Maker, Inc. and Thienson Nguyen, Dennis Bok, William Bok, Lisa Bok
and Gladys Longwa for the purchase of PKM Stamford, LLC, Poke Co., LLC, LB Holdings LLC, and TNB Holdings, LLC (Incorporated by reference
to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on May 14, 2021) |
| 10.3+ | Membership
Interest Exchange Agreement dated May 14, 2021 between Muscle Maker, Inc. and Thienson Nguyen, Dennis Bok, William Bok, Lisa Bok
and Gladys Longwa for the purchase of Poke Co Holdings LLC, GLL Enterprises, LLC, and TNB Holdings II, LLC (Incorporated by reference
to Exhibit 10.2 to the Registrant’s current report on Form 8-K filed on May 14, 2021) |
| 10.4+ | Intellectual
Property License Agreement by and between Saladco Holdings, LLC and Poke Co Holdings, LLC dated May 14, 2021 (Incorporated by reference
to Exhibit 10.3.1 to the Registrant’s current report on Form 8-K filed on May 14, 2021) |
| 31.1 | Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. |
| 31.2 | Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. |
| 32.1 | Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2 | Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS | XBRL
Instance Document |
| 101.SCH | XBRL
Schema Document |
| 101.CAL | XBRL
Calculation Linkbase Document |
| 101.DEF | XBRL
Definition Linkbase Document |
| 101.LAB | XBRL
Label Linkbase Document |
| 101.PRE | XBRL
Presentation Linkbase Document |

† Includes management contracts and compensation plans and arrangements.

*Filed herewith.

+Previously filed.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

| Date:
August 16, 2021 | |
| --- | --- |
| By: | /s/
Michael J. Roper |
| | Michael
J. Roper |
| | Chief
Executive Officer |
| | (Principal
Executive Officer) |
| By: | /s/
Ferdinand Groenewald |
| | Ferdinand
Groenewald |
| | Chief
Financial Officer |
| | (Principal
Financial and Accounting Officer) |

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