UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~WASHINGTON,~~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~~March 31, 2022

☐	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

~~Commission file number:~~ ~~001-39223~~Muscle Maker, Inc.

~~MUSCLE MAKER, INC.~~

(Exact name of registrant as specified in its charter)

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

2600 South Shore Blvd., Suite 300,

League City, Texas77573

(Address of principal executive offices), ~~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~~Stock, $0,0001 par value ~~per share~~		GRIL		The NASDAQCapital 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 electronically 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)~~submit and post such files). Yes☒ No ☐

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

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,~~May 12, 2022, was ~~17,720,364~~28,694,316.

MUSCLE MAKER, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~JUNE 30, 2021~~MARCH 31, 2022

TABLE OF CONTENTS

ITEM NO.		NAME OF ITEM		Page

PART ~~1 –~~I - 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.		FINANCIAL STATEMENTS

		~~Legal Proceedings.~~UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2022 AND DECEMBER 31, 2021	40	3

		UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021		4

		UNAUDITED CONDENSED CONSOLIDATED STATMENTS OF CHANGES IN SHOCKHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2022		5

		UNAUDITED CONDENSED CONSOLIDATED STATMENTS OF CHANGES IN SHOCKHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2021		6

		UNAUDITED CONDENSED COLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021		7

		NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS		9

ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		31

ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		43

ITEM 4.		CONTROLS AND PROCEDURES		43

PART II- OTHER INFORMATION				44

ITEM 1.		LEGAL PROCEEDING		44

ITEM 1A.	~~Risk Factors.~~	41RISK FACTORS		45

ITEM 2.		~~Unregistered Sales of Equity Securities and Use of Proceeds.~~UNGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	42	45

ITEM 3.		~~Defaults Upon Senior Securities.~~DEFAULTS UPON SENIOR SECURITIES	42	45

ITEM 4.		~~Mine Safety Disclosures.~~MINE SAFETY DISCLOSURES	42	45

ITEM 5.		~~Other Information.~~OTHER INFORMATION	42	45

ITEM 6.6		~~Exhibits.~~EXHIBITS	43	46

~~SIGNATURES~~	44	SIGNATURES		47

MUSCLE MAKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

~~(unaudited)~~(Unaudited)

							March 31,			December 31,
	June 30, 2021			December 31, 2020			2022			2021

Assets
Current Assets:
Cash	$	4,971,621		$	4,195,932		$	14,771,220		$	15,766,703
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
Accounts receivable, net of allowance for doubtful accounts of $6,964 and $23,693 as of March 31, 2022 and December 31, 2021, respectively								355,829			155,167
Inventory		169,103			113,824			260,097			258,785
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
Current portion of loans receivable, net of allowance of $70,784 and $71,184 at March 31, 2022 and December 31, 2021, respectively								-			-
Prepaid expenses and other current assets		91,739			40,903			1,091,276			1,789,328
Total Current Assets		5,519,453			4,493,358			16,478,422			17,969,983
Right of use assets								2,667,385			-
Property and equipment, net		2,549,717			2,342,723			1,935,792			2,280,267
Goodwill		2,661,564			656,348			2,626,399			2,626,399
Intangible assets, net		8,003,269			2,878,278			6,034,987			6,387,464
Loans receivable, non-current		-			996
Prepaid expense, Security deposits and other assets		229,799			131,916
Security deposits and other assets								151,073			167,770
Total Assets	$	18,963,802		$	10,503,619		$	29,894,058		$	29,431,883

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable and accrued expenses	$	2,006,882		$	1,500,935		$	1,804,540		$	2,208,523
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
Convertible note payable to Former Parent								82,458			82,458
Convertible note payable								100,000			100,000
Other notes payable								133,219			165,052
Operating lease liability, current								561,137			-
Deferred revenue, current		54,437			62,858			78,103			49,728
Deferred rent, current		73,741			20,569			-			36,800
Other current liabilities		651,951			641,418			278,420			286,088
Total Current Liabilities		3,093,817			3,109,790			3,037,877			2,928,649
Other notes payable, non-current		1,257,426			575,140			864,599			1,005,027
Operating lease liability, non-current								2,250,439			-
Deferred revenue, non-current		1,030,305			944,271			1,176,379			1,013,645
Deferred rent, non-current		35,964			79,290			-			91,295
Total Liabilities		5,417,512			4,708,491			7,329,294			5,038,616

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
Common stock, $0.0001 par value, 50,000,000 shares authorized, 28,643,406 and 26,110,268 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively								2,864			2,611
Additional paid-in capital		81,572,113			68,987,663			95,832,826			95,760,493
Accumulated deficit		(68,027,592	)		(63,193,707	)		(73,270,926	)		(71,369,837	)
Total Stockholders’ Equity		13,546,290			5,795,128			22,564,764			24,393,267
Total Liabilities and Stockholders’ Equity	$	18,963,802		$	10,503,619		$	29,894,058		$	29,431,883

See Notes to the Unaudited Condensed Consolidated Financial Statements

MUSCLE MAKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

~~(unaudited)~~(Unaudited)

	2021			2020			2021			2020
	For the Three Months Ended						For the Six Months Ended						2022			2021
	June 30,						June 30,						For the Three Months Ended
	2021			2020			2021			2020			March 31,
													2022			2021
Revenues:
Company restaurant sales, net of discounts	$	2,564,864		$	659,939		$	3,743,775		$	1,897,366		$	2,694,192		$	1,178,911
Franchise royalties and fees		169,549			142,293			304,889			318,324			208,141			135,340
Franchise advertising fund contributions		4,742			32,454			18,829			54,050			18,125			14,087
Total Revenues		2,739,155			834,686			4,067,493			2,269,740			2,920,458			1,328,338

Operating Costs and Expenses:
Restaurant operating expenses:
Food and beverage costs		920,691			255,329			1,425,152			721,023			1,025,935			504,461
Labor		903,772			342,823			1,670,837			929,443			1,073,047			767,065
Rent		304,930			139,604			561,121			284,281			340,396			256,191
Other restaurant operating expenses		652,251			100,552			992,173			432,912			653,473			339,922
Total restaurant operating expenses		2,781,644			838,308			4,649,283			2,367,659			3,092,851			1,867,639
Preopening expenses		-			46,764			10,986			46,764
Depreciation and amortization		284,646			97,245			453,774			208,502			475,729			169,128
Franchise advertising fund expenses		4,742			32,454			18,829			54,050			18,125			14,087
General and administrative expenses		1,995,319			1,213,851			4,961,955			6,343,254
Preopening expenses														-			10,986
Selling, general and administrative expenses														1,326,947			2,966,636
Total Costs and Expenses		5,066,351			2,228,622			10,094,827			9,020,229			4,913,652			5,028,476
Loss from Operations		(2,327,196	)		(1,393,936	)		(6,027,334	)		(6,750,489	)		(1,993,194	)		(3,700,138	)

Other Income (Expense):
Other income (expense), net		223,681			(10,360	)		226,309			(13,548	)
Other Income (Expenses):
Other income (expense)														(19,421	)		2,628
Interest expense, net		(22,160	)		(1,129	)		(36,334	)		(94,733	)		(14,743	)		(14,174	)
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	)
Gain on debt extinguishment														141,279			-
Total Other Income (Expenses), Net														107,115			(11,546	)

Loss Before Income Tax		(1,122,201	)		(1,501,425	)		(4,833,885	)		(6,993,688	)		(1,886,079	)		(3,711,684	)
Income tax provision		-			-			-			-			-			-
Net Loss	$	(1,122,201	)	$	(1,501,425	)	$	(4,833,885	)	$	(6,993,688	)	$	(1,886,079	)	$	(3,711,684	)

Net Loss Per Share:
Basic and Diluted	$	(0.07	)	$	(0.21	)	$	(0.36	)	$	(1.01	)		(0.07	)		(0.31	)

Weighted Average Number of Common Shares Outstanding:
Basic and Diluted		15,381,855			7,092,879			13,612,127			6,916,218			27,801,604			11,817,591

See Notes to the Unaudited Condensed Consolidated Financial Statements

MUSCLE MAKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

Shares 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

					Additional
	Common Stock				Paid-in			Accumulated
	Shares		Amount		Capital			Deficit			Total
Balance - December 31, 2021		26,110,268	$	2,611	$	95,760,493		$	(71,369,837	)	$	24,393,267
Cumulative effect of change in accounting principal		-		-		-			(15,010	)		(15,010	)
Cashless exercise of pre-funded warrants		2,409,604		241		(241	)					-
Common stock issued as compensation to board of directors		93,534		9		56,975						56,984
Common stock issued as compensation for services		30,000		3		15,599						15,602
Net loss		-		-		-			(1,886,079	)		(1,886,079	)

Balance - March 31, 2022		28,643,406	$	2,864	$	95,832,826		$	(73,270,926	)	$	22,564,764

See Notes to the Unaudited Condensed Consolidated Financial Statements

MUSCLE MAKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

Additional
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

					Additional
	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
Beginning balance, value		11,725,764	$	1,172	$	68,987,663	$	(63,193,707	)	$	5,795,128
Issuance of restricted stock		1,200		-		-		-			-
Common stock issued in connection 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
Amortization of 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
Ending balance, value		12,545,824	$	1,254	$	70,983,426	$	(66,905,391	)	$	4,079,289

See Notes to the Unaudited Condensed Consolidated Financial Statements

MUSCLE MAKER, ~~INC.~~INC AND SUBSIDIARIES

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	2021			2020			2022			2021
	For the Six Months Ended						For the Three Months Ended
	June 30,						March 31,
	2021			2020			2022			2021

Cash Flows from Operating Activities
Net loss	$	(4,833,885	)	$	(6,993,688	)	$	(1,886,079	)	$	(3,711,684	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		453,774			208,502			475,727			169,128
Stock-based compensation		1,727,545			3,625,220			72,586			1,712,845
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
Gain on extinguishments of debt								(141,279	)		-
Loss on disposal of assets								239,637			37,027
Bad debt expense		18,676			-			(9,258	)		18,676
Deferred rent		(21,471	)		17,829

Changes in operating assets and liabilities:
Accounts receivable		(102,563	)		(33,080	)
Accounts receivable, net								(175,404	)		(24,549	)
Inventory		(35,779	)		21,962			(1,312	)		(8,208	)
Prepaid expenses and other current assets		(107,139	)		24,023			698,052			5,976
Security deposits and other assets		(6,000	)		(34,600	)		16,697			-
Accounts payable and accrued expenses		208,164			(688,509	)		(403,983	)		219,716
Deferred rent								(128,095	)		4,294
Operating right of use asset and lease liability, net								129,181			-
Deferred revenue		(45,803	)		(109,738	)		191,109			(20,739	)
Other current liabilities		10,533			(6,970	)		(7,668	)		(2,717	)
Total Adjustments		1,133,490			3,159,557			955,990			2,111,449
Net Cash Used in Operating Activities		(3,700,395	)		(3,834,131	)		(930,089	)		(1,600,235	)

Cash Flows from Investing Activities
Purchases of property and equipment		(98,257	)		(172,387	)		(34,812	)		(67,754	)
Cash paid in connection with the acquisition of SuperFit Foods		(500,000	)		-			-			(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			400			200
Net Cash Used in Investing Activities		(3,412,847	)		(163,585	)		(34,412	)		(567,554	)

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	)		(30,982	)		(18,493	)
Proceeds from other notes payable – related party		-			150,000
Net Cash Provided by Financing Activities		7,888,931			6,680,057
Net Cash Used in Financing Activities								(30,982	)		(18,493	)

Net Increase in Cash		775,689			2,682,341
Net Decrease in Cash								(995,483	)		(2,186,282	)
Cash - Beginning of Period		4,195,932			478,854			15,766,703			4,195,932
Cash - End of Period	$	4,971,621		$	3,161,195		$	14,771,220		$	2,009,650

See Notes to the Unaudited Condensed Consolidated Financial Statements

MUSCLE MAKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

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

	2022		2021
	For the Three Months Ended
	March 31,
	2022		2021

Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	24,428	$	9,950

Supplemental Disclosures of non-cash investing and financing activities:
Cashless exercise of pre-funded warrants	$	241	$	-

See Notes to the Unaudited Condensed Consolidated Financial Statements

MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Unaudited 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®~~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, which 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~~trademark 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~~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~~SuperFit Foods that we use in connection with the operations of ~~Superfit~~SuperFit Foods. ~~In 2020 Superfit foods produced overs 220,000 fresh-prepared meals. Superfit~~SuperFit Foods is differentiated from other meal prep services by allowing customers in the Jacksonville Florida market to order online via the ~~company’s~~Company’s website or mobile app and pick up their fully prepared meals from 28 ~~company owned~~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~~had 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~~March 31, 2022, MMI consisted 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.three operating segments:

	●	Muscle Maker Grill Division
	●	Pokemoto Division
	●	SuperFit Foods Division

MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Unaudited 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 operates under the name Muscle Maker Grill, Pokemoto and SuperFit Foods and is ~~continually monitoring the outbreak~~a franchisor and owner operator of ~~COVID-19~~Muscle Maker Grill 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 onPokemoto restaurants. As of March 31, 2022, the Company’s ~~operations during~~restaurant system included nineteen Company-owned restaurants, including the ~~year ended December 31, 2020~~SuperFit Foods kitchen, 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.nineteen franchise restaurants.

~~Going Concern and Management’s Plans~~Liquidity

Our primary source of liquidity is cash on hand. As of ~~June 30, 2021,~~March 31, 2022, the Company had a cash balance, a working capital surplus and an accumulated deficit of $~~4,971,621~~14,771,220, $~~2,425,636~~13,440,545, and $~~68,027,592~~73,270,926, respectively. During the ~~three and six months~~quarter ended ~~June 30, 2021,~~March 31, 2022, the Company incurred a pre-tax net loss of $~~1,122,201~~1,886,079 and net cash used in operations of $~~4,833,885~~930,089, 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~~. The Company 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~~its existing cash on hand and ~~there can be no assurance that the Company~~future cash flows from franchise operations, 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 timesufficient to fund ~~its liabilities, or (d) seek protection from creditors.~~operations, anticipated capital expenditures and repayment obligations over the next twelve months.

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,~~March 31, 2022, and for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, and ~~2020.~~2021. The results of operations for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, 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.~~2021. The balance sheet as of December 31, ~~2020~~2021, has been derived from the Company’s audited financial statements.

~~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.~~wholly owned subsidiaries and majority-owned subsidiary. Any intercompany transactions and balances have been eliminated in consolidation.

~~Use of Estimates~~Reclassifications

~~The preparation of financial statements~~Certain prior year balances have been reclassified in ~~conformity with GAAP requires management~~order to ~~make estimates and assumptions that affect~~conform to current year presentation. These reclassifications have no effect on the previously 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~~operations or ~~less when purchased to be cash equivalents. There were~~ 0~~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:

~~SCHEDULE OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT~~

~~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.~~loss per share.

1110

MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued

~~Intangible Assets~~Use of Estimates

~~We account~~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.

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.

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 0 cash equivalents as of March 31, 2022 or December 31, 2021.

Inventory

Inventories, which are stated at the lower of cost or net realizable value, consist primarily of perishable food items and supplies. Cost is determined using the first-in, first out method.

Property and Equipment

SCHEDULE OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT

	Furniture and equipment	3 - 7 years
	Leasehold improvements	1 - 11 years

MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued

Intangible Assets

The Company accounts for recorded intangible assets in accordance with ASC 350 “Intangibles - Goodwill and Other”. In accordance with ASC 350, ~~we do~~the Company does not amortize intangible assets ~~with~~having indefinite useful lives. ~~Our~~The Company’s trademark – Muscle Maker had an indefinite live as of December 31, 2021. The Company determined that as of January 1, 2022, the trademark - Muscle Maker had a finite life of 3 years and will be amortizing the value over the new estimated life. The Company’s goodwill has an indefinite life, and ~~one of our trademarks are deemed to have indefinite lives, and~~is accordingly ~~are~~ not amortized, but ~~are~~is 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:

SCHEDULE ~~OF ESTIMATED USEFUL LIVES~~ OF OTHER INTANGIBLE ASSETS USEFUL LIVES

	Franchisee agreements	13 years

Franchise license	10 years

	Trademark – Muscle Maker, SuperFit ~~Trademark~~and Pokemoto	3 – ~~Pokemoto, domain~~5 years
	Domain name, customer list and ~~proprietary~~Proprietary recipes	53 -– 7 years

Non-compete agreement	2 -– 3 years

~~Recent Accounting Pronouncements~~Impairment of Long-Lived Assets

~~In February 2016,~~When circumstances, such as adverse market conditions, indicate that the ~~FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires~~carrying value of a long-lived asset may be impaired, the Company performs an ~~entity~~analysis to ~~recognize assets~~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 ~~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~~prospects, as well as the effects of demand, competition and other ~~financial statement users better understand~~factors. If the ~~amount, timing, and uncertainty of~~analysis indicates that the carrying value is not recoverable from future cash flows, ~~arising from leases. ASU 2016-02~~an impairment loss 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.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.

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. Convertible Instruments

The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with Topic 815 of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

If the instrument is ~~currently evaluating ASU 2018-07~~determined not to be a derivative liability, the Company then evaluates for the existence of a beneficial conversion feature by comparing the market price of the Company’s common stock as of the commitment date to the effective conversion price of the instrument.

As of March 31, 2022 and ~~its impact on~~December 31, 2021, the ~~condensed consolidated financial statements.~~Company deemed the conversion feature was not required to be bifurcated and recorded as a derivative liability.

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.

~~MUSCLE MAKER, INC. AND SUBSIDIARIES~~

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued

Revenue Recognition

~~In accordance with the Accounting Standards Codification~~The Company’s revenues consist of restaurant sales, franchise royalties and fees, franchise advertising fund contributions, and other revenues. The Company recognized revenues according to Topic 606 “Revenue from Contracts with Customers”,. Under the ~~Company~~guidance, revenue is 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~~Company-operated restaurants is recognized when payment is tendered at the point of sale, net of sales tax, ~~discount~~discounts and other sales related taxes. The Company recorded retail store revenues of $~~2,564,864~~ 2,694,192and $~~3,743,775~~ 1,178,911during the ~~three~~quarters ended March 31, 2022 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~~108,421 and $~~185,899~~81,469 during the ~~three~~quarters ended March 31, 2022 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~~revenue from franchise fees of $~~12,352~~48,891 and $~~22,138~~9,786 ~~, respectively,~~ during the ~~three~~quarters ended March 31, 2022 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 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.~~

~~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~~50,829 and $~~96,852~~44,085 during the ~~three~~quarters ended March 31, 2022 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~~condensed consolidated statements of operations. Rebates earned on purchases by ~~Company owned~~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~~

MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

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.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued

~~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 selling, general and administrative expenses. When an advertising contribution fund is over-spent at year end, advertising expenses will be reported on the condensed 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~~18,125 and $~~18,829~~14,087 ~~, respectively,~~ during the ~~three~~quarters ended March 31, 2022 and ~~six months ended June 30,~~ 2021, respectively, which are included in franchise advertising fund contributions on the accompanying condensed consolidated statements of operations.

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. Gift card liability is recorded in other current liabilities on the condensed consolidated balance sheet. For the quarter ended March 31, 2022 and 2021, the Company ~~recorded contributions from franchisees of $~~did not record any gift card breakage.

~~32,454~~

Deferred Revenue

~~and $~~

~~54,050, respectively, during~~Deferred revenue primarily includes initial franchise fees received by the ~~three and six months ended June 30, 2020, respectively,~~Company, which are ~~included~~being amortized over the life of the Company’s franchise agreements. Deferred revenue is recognized in income over the life of the franchise ~~advertising fund contributions on the accompanying condensed consolidated statements of operations.~~agreements and vendor rebates are recognized in income as performance obligations are satisfied.

Advertising

Advertising costs are charged to expense as incurred. Advertising costs were approximately $~~11,143~~113,719 and $~~24,758~~24,051 ~~for~~during the ~~three~~quarters ended March 31, 2022 and ~~six months ended June 30,~~ 2021, ~~and approximately $25,092and $128,735for the three and six months ended June 30, 2020,~~ respectively, and are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

1514

MUSCLE MAKER, INC. AND SUBSIDIARIES

Notes to Unaudited 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,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, because their inclusion would have been anti-dilutive:

SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE

	2021		2020		2022		2021
	June 30,				March 31,
	2021		2020		2022		2021
Warrants		6,615,302		2,537,264		17,873,906		2,560,361
Options		100,000		4,821		100,000		300,000
Convertible debt		32,350		32,350		32,350		32,350
Total potentially dilutive shares		6,747,652		2,574,435		18,006,256		2,892,711

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%~~45% and ~~68.69%~~84% of the Company’s purchases for the ~~three~~quarters ended March 31, 2022 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:

MUSCLE MAKER, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued

Fair Value of Financial Instruments, continued

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~~modelling 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 –~~16– Equity – Warrant and Options Valuation for details related to an accrued compensation liability being fair valued using Level 1 inputs.

~~Reclassifications~~Leased Assets

~~Certain amounts in prior periods have been reclassified to conform~~The Company adopted Topic 842 as of January 1, 2022 and recognized a cumulative-effect adjustment to the ~~current~~opening balance of accumulated deficit of $15,010 as of the adoption date. Lease right-of-use assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make payments arising from the lease agreement. These assets and liabilities are recognized at the commencement of the lease based upon the present value of the future minimum lease payments over the lease term. The lease term reflects the no cancellable period ~~presentation. These reclassifications~~of the lease together with periods covered by an option to extend or terminate the lease when management is reasonably certain that it will exercise such option. Changes in the lease term assumption could impact the right-of-use assets and lease liabilities recognized on the balance sheet. As our leases typically do not contain a readily determinable implicit rate, we determine the present value of the lease liability using our incremental borrowing rate at the lease commencement date based on the lease term on a collateralized basis.

Income Taxes

The Company accounts 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 carry forwards 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.

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 the Company’s 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. Uncertain tax positions have had no ~~effect~~impact on ~~previously reported net loss.~~the Company’s financial condition, results of operations or cash flows. The Company does not expect any significant changes in its unrecognized tax benefits within years of the reporting date.

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

MUSCLE MAKER, INC. ~~AND~~& SUBSIDIARIES

Notes to ~~Condensed~~ Consolidated Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued

Stock-Based Compensation

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally recorded on the grant date and re-measured on financial reporting dates and vesting dates until the service period is complete. The fair value amount of the award is then recognized over the period services are required to be provided in exchange for the award, usually the vesting period.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which requires companies to recognize lease liabilities and corresponding right-of-use leased assets on the balance sheets and to disclose key information about leasing arrangements. Qualitative and quantitative disclosures will be enhanced to better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2022, with early adoption permitted. Additionally, in 2018 and 2019, the FASB issued the following Topic 842–related ASUs:

● ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842, which clarifies the applicability of Topic 842 to land easements and provides an optional transition practical expedient for existing land easements;

● ASU 2018-10, Codification Improvements to Topic 842, Leases, which makes certain technical corrections to Topic 842;

● ASU 2018-11, Leases (Topic 842): Targeted Improvements, which allows companies to adopt Topic 842 without revising comparative period reporting or disclosures and provides an optional practical expedient to lessors to not separate lease and non-lease components of a contract if certain criteria are met; and

● ASU 2019-01, Leases (Topic 842): Codification Improvements, which provides guidance for certain lessors on determining the fair value of an underlying asset in a lease and on the cash flow statement presentation of lease payments received; ASU No. 2019-01 also clarifies disclosures required in interim periods after adoption of ASU No. 2016-02 in the year of adoption.

The Company adopted Topic 842 as of January 1, 2022, and recognized a cumulative-effect adjustment to the opening balance of accumulated deficit of $15,010 as of the adoption date. See Note 11 - Leases for further details.

In October 2021, the FASB issued ASU 2021-08 Business Combinations (“Topic 805”): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. We are currently evaluating the extent of the impact of this ASU, but do not expect the adoption of this standard to have a significant impact on our condensed consolidated financial statements.

MUSCLE MAKER, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued

Subsequent Events

The Company evaluated events that have occurred after the balance sheet date but before the financial statements are issued. 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 16 – Subsequent Events.

NOTE 3 – ACQUISITIONS

SuperFit Foods Acquisition

On March 25, 2021, the Company entered into an asset purchase agreement with ~~Superfit~~SuperFit Foods, LLC, a Florida limited liability company and ~~Superfit~~SuperFit Foods, LLC, a Nevada limited liability company (the ~~“Superfit~~“SuperFit Acquisition”). The purchase price of the assets and rights was $1,150,000. The purchase price iswas payable as follows: $500,000that was paid at closing, of which $25,000was released from an escrow account held by our attorney, and $625,000paid in 268,240shares of common ~~stock to be held for six months before being registered.~~ stock. The remaining $25,000, ~~shall~~which was to be ~~paid~~issued in ~~shares of~~the Company’s common stock, ~~provided that the seller meets various obligation, within 60 days,~~was forfeited as ~~outline in the purchase agreement. As of June 30, 2021~~ the Company ~~has accrued for the liability in accounts payable~~ and ~~accrued expenses.~~former owner agreed that not all obligations were met.

The Company acquired the following assets as part of the purchase ~~agreement:~~agreement, adjusted for purchase accounting adjustments to reflect the fair value of the net assets acquired during 2021:

SCHEDULE OF ASSETS AND LIABILITIES ACQUIRED IN BUSINESS COMBINATIONS


Furniture and equipment	$	82,000
Vehicles		55,000
Property and Equipment		55,000
Tradename		45,000
Customer list		140,000
Domain name		125,000
Proprietary Recipes		160,000
Non-compete agreement		260,000
Intangible assets		260,000
Goodwill		258,000
Total assets acquired	$	1,125,000

Furniture and equipment $ 82,000
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 adjustment to the estimate identifiable net assets acquired resulted in a corresponding $25,000 decrease in estimated goodwill due to the Company having no further obligation to issue the $25,000 shares of common stock as mentioned above.

The unaudited pro-forma financial information in the table below summarizes the condensed consolidated results of operations of the Company and ~~SuperFits~~SuperFit Foods, LLC as though the acquisition had occurred as of January 1, ~~2020.~~2021. 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.

SCHEDULE OF ~~SUPPLEMENTAL PROFORMA ACQUIRED FRANCHISEE STORE~~BUSINESS ACQUISITION PRO FORMA INFORMATION

													2022			2021
	Pro Forma						Pro Forma						Pro Forma
	(Unaudited)						(Unaudited)						(Unaudited)
	For the Three Months Ended						For the Six Months Ended						For the Three Months Ended
	June30,						June30,						March 31,
	2021			2020			2021			2020			2022			2021
Revenues	$	2,739,155		$	1,696,536		$	4,574,993		$	3,131,590		$	2,920,458		$	1,835,838
Restaurant operating expenses		2,781,644			1,610,616			5,104,056			3,139,967			3,092,851			2,322,412
Total cost and expenses		5,066,351			3,000,930			10,549,600			9,792,537			4,913,652			5,482,877
Loss from Operations		(2,327,196	)		(1,304,394	)		(5,974,607	)		(6,660,947	)		(1,993,194	)		(3,647,039	)

MUSCLE MAKER, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 3 – ACQUISITIONS, continued

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 $4,000,000in cash and $730,000payable in the form of a promissory note (the “Poke Note”).

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 880,282shares 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 IIare hereinafter referred to as “Pokemoto”.

As of the date of the acquisition Pokemoto operated a total of 14 locations, six Company-owned restaurants and eight franchised restaurants, in four states, offering 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 Company acquired the following assets as part of the purchase ~~agreement:~~agreement, adjusted for purchase accounting adjustments to reflect our estimate of the fair value of the net assets acquired during 2021:

SCHEDULE OF ASSETS AND LIABILITIES ACQUIRED IN BUSINESS COMBINATIONS


Purchase Price	$	5,980,000	$	5,980,000

Assets
Cash	$	1,184,610	$	1,184,610
Accounts Receivables		60,208		-
Inventory		19,500		19,500
Property and Equipment		297,529		297,529
Intangible assets, net		4,560,000		4,560,000
Operating lease right-of-use assets, net		719,941		719,941
Security deposits and other assets		35,580		35,580
	$	6,877,368	$	6,817,160
Liabilities
Accounts payable and accrued expenses	$	282,457	$	296,224
Other notes payable		1,462,453		1,462,453
Deferred revenue		123,416		125,624
Operating lease liability		751,258		751,258
	$	2,619,584	$	2,635,559

Fair value of identifiable net assets acquired		4,257,784		4,181,601

Goodwill	$	1,722,216	$	1,798,399

MUSCLE MAKER, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 3 – ACQUISITIONS, continued

Pokemoto Acquisition, continued

Identifiable intangible assets acquired include the following:

SCHEDULE OF IDENTIFIABLE INTANGIBLE ASSETS

	Fair Value		Weighted average amortization period		Fair Value		Weighted average amortization period

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

The unaudited pro-forma financial information in the table below summarizes the condensed consolidated results of operations of the Company and Pokemoto, LLC as though the acquisition had occurred as of January 1, ~~2020.~~2021. 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.

SCHEDULE OF ~~SUPPLEMENTAL PROFORMA ACQUIRED FRANCHISEE STORE~~BUSINESS ACQUISITION PRO FORMA INFORMATION

Pro Forma 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.

~~SCHEDULE OF SUPPLEMENTAL PROFORMA ACQUIRED FRANCHISEE STORE~~

Pro Forma 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 )

~~MUSCLE MAKER, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

	2022			2021
	Pro Forma
	(Unaudited)
	For the Three Months Ended
	March 31,
	2022			2021
Revenues	$	2,920,458		$	2,312,161
Restaurant operating expenses		3,092,851			2,588,186
Total cost and expenses		4,913,652			5,927,844
Loss from Operations		(1,993,194	)		(3,615,683	)

NOTE 4 - LOANS RECEIVABLE

At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company’s loans receivable ~~consists of the following:~~balance was $0.

~~SCHEDULE OF LOANS RECEIVABLES~~

June 30,
2021

December 31,
2020

Loans receivable, net $ 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~~ 0~~and $3,390~~, net of reserves for uncollectible loans of $~~61,275~~70,784 and $71,184 at March 31, 2022 and December 31, 2021, respectively.

NOTE 5 –PREPAID EXPENSES AND OTHER CURRENT ASSETS

At March 31, 2022 and December 31, 2021, the Company’s prepaid expenses and other current assets consisted of the following:

SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

	March 31,		December 31,
	2022		2021
Prepaid expenses	$	362,685	$	83,975
Preopening expenses		457		602
Other receivables		728,134		1,704,751
Prepaid and Other Current Assets	$	1,091,276	$	1,789,328

MUSCLE MAKER, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 5 –PREPAID EXPENSES AND OTHER CURRENT ASSETS, continued

Prepaid and other current assets at March 31, 2022 and December 31, 2021, included a receivable of $728,134 and $~~106,900~~ 1,704,751~~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.~~, respectively, related to the employee retention tax credits receivable from the Internal Revenue Services (“IRS”) that was made available to companies effected by Covid-19.

NOTE 56 – PROPERTY AND EQUIPMENT, NET

As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021, property and equipment ~~consists~~consist of the following:

SCHEDULE OF PROPERTY AND EQUIPMENT, NET

							March 31,			December 31,
	June 30, 2021			December 31, 2020			2022			2021

Furniture and equipment	$	1,309,003		$	1,143,320		$	1,335,774		$	1,397,098
Vehicles		55,000			-			55,000			55,000
Leasehold improvements		2,153,697			1,940,907			1,692,480			1,981,019
Property and equipment, gross		3,517,700			3,084,227			3,083,254			3,433,117
Less: accumulated depreciation and amortization		(967,983	)		(741,504	)		(1,147,462	)		(1,152,850	)
Property and equipment, net	$	2,549,717		$	2,342,723		$	1,935,792		$	2,280,267

Depreciation expense amounted to $~~135,243~~123,250 and $~~288,765~~153,522 for the three ~~and three and six~~ months ended ~~June 30,~~March 31, 2022 and 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,~~March 31, 2022 and 2021, the Company wrote off property and equipment with an original cost value of $0384,675 and $99,313r~~elated~~, respectively, related to a closed ~~location~~locations and a future ~~location~~locations that ~~was~~were terminated due to the economic environment as a result of COVID-19 and recorded a loss on disposal of $0239,637 and $37,027, respectively, after accumulated depreciation of $0127,926 and $62,286, respectively, in the ~~unaudited~~ condensed consolidated statement of operations.

NOTE 67 – 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~~Intangible Assets.

A summary of the intangible assets is presented below:

SCHEDULE OF INTANGIBLE ASSETS

Intangible Assets	Intangible assets, net at December 31, 2021		Acquisitions		Impairment of intangible assets		Amortization expense			Intangible assets, net at March 31, 2022
Trademark Muscle Maker Grill	$	1,525,653	$	-	$	-	$	(125,396	)	$	1,400,257
Franchise Agreements		162,439		-		-		(6,603	)		155,836
Trademark SuperFit		38,075		-		-		(2,218	)		35,857
Domain Name SuperFit		105,764		-		-		(6,161	)		99,603
Customer List SuperFit		118,455		-		-		(6,900	)		111,555
Proprietary Recipes SuperFit		135,378		-		-		(7,886	)		127,492
Non-Compete Agreement SuperFit		193,339		-		-		(21,350	)		171,989
Trademark Pokemoto		152,862		-		-		(8,625	)		144,237
Franchisee License Pokemoto		2,599,473		-		-		(68,387	)		2,531,086
Proprietary Recipes Pokemoto		1,027,916		-		-		(39,773	)		988,143
Non-Compete Agreement Pokemoto		328,110		-		-		(59,178	)		268,932

	$	6,387,464	$	-	$	-	$	(352,477	)	$	6,034,987

Intangible Assets Trademark Franchise Agreements Trademark
Superfit Domain Name Superfit Customer List Superfit Proprietary Recipes Superfit Non-Compete Agreement Superfit Trademark
Pokemoto Franchisee License Pokemoto Proprietary Recipes Pokemoto Non-Compete Agreement Pokemoto Total
Intangible assets, net at December 31, 2020 $ 2,524,000 $ 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

MUSCLE MAKER, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 7 – GOODWILL AND OTHER INTANGIBLE ASSETS, NET, continued

Intangible Assets, continued

Amortization expense related to intangible assets ~~amounted to~~was $~~149,403~~352,477 and $~~165,009~~15,606 for the three ~~and three and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, respectively. ~~Amortization~~

The estimated future amortization expense ~~related to~~is as follows:

SCHEDULE OF FUTURE AMORTIZATION EXPENSE

For the three months ended March 31,	2023		2024		2025		2026		2027		Thereafter		Total
Trademark Muscle Maker Grill	$	508,551	$	509,944	$	381,762	$	-	$	-	$	-	$	1,400,257
Franchise Agreements		26,780		26,853		26,780		26,780		26,780		21,864		155,836
Trademark SuperFit		8,995		9,020		8,995		8,847		-		-		35,857
Domain Name SuperFit		24,986		25,055		24,986		24,576		-		-		99,603
Customer List SuperFit		27,985		28,061		27,985		27,524		-		-		111,555
Proprietary Recipes SuperFit		31,982		32,070		31,982		31,457		-		-		127,492
Non-Compete Agreement SuperFit		86,588		85,401		-		-		-		-		171,989
Trademark Pokemoto		34,981		35,077		34,981		34,981		4,218		-		144,237
Franchisee License Pokemoto		277,348		278,108		277,348		277,348		277,348		1,143,586		2,531,086
Proprietary Recipes Pokemoto		161,303		161,744		161,302		161,302		161,302		181,189		988,143
Non-Compete Agreement Pokemoto		240,000		28,932		-		-		-		-		268,932

Total	$	1,429,500	$	1,220,265	$	976,121	$	592,815	$	469,648	$	1,346,639		6,034,987

The Company determined that no impairment testing of the Company’s intangible assets ~~amounted to $~~was require as of March 31, 2022. Therefore, no impairment charge is required.

~~15,908~~

Goodwill

~~and $31,816~~

~~for~~A summary of the ~~three and three and six months ended June 30, 2020, respectively.~~goodwill assets is presented below:

SCHEDULE OF GOODWILL ASSETS

Goodwill	Muscle Maker Grill		Pokemoto		SuperFit Food		Total
Goodwill, net at December 31, 2021	$	570,000	$	1,798,399	$	258,000	$	2,626,399
Impairment of goodwill		-		-		-		-
Goodwill, net at March 31, 2022	$	570,000	$	1,798,399	$	258,000	$	2,626,399

The Company determined that no impairment testing of the Company’s goodwill was require as of March 31, 2022. Therefore, no impairment charge is required.

1922

MUSCLE MAKER, INC. ~~AND~~& SUBSIDIARIES

Notes to ~~Condensed~~ Consolidated Financial Statements

NOTE 78 – ACCOUNTS ~~PAYABLE~~PAYABLES AND ACCRUED EXPENSES

Accounts payables and accrued expenses consist of the following:

SCHEDULE OF ACCOUNTS PAYABLES AND ACCRUED EXPENSES

					March 31,		December 31,
	June 30, 2021		December 31, 2020		2022		2021
Accounts payable	$	870,489	$	692,966	$	999,922	$	734,688
Accrued payroll		218,482		78,667		254,130		758,732
Accrued professional fees		280,519		224,028		113,642		185,872
Accrued board members fees		41,706		36,697		18,000		57,573
Accrued rent expense		176,061		171,266		203,895		176,727
Sales taxes payable ⁽²⁾		252,558		231,177
Accrued compensation expense						-		36,600
Sales taxes payable (1)						106,500		125,550
Accrued interest		24,188		25,222		28,290		28,426
Other accrued expenses		142,879		40,912		80,161		104,355
Total Accounts Payable and Accrued Expenses	$	2,006,882	$	1,500,935	$	1,804,540	$	2,208,523

(1)

~~(2)~~

See Note 1114 – Commitments and Contingencies –Taxes for ~~detail~~detailed related to delinquent sales taxes.

NOTE 9 – CONVERTIBLE NOTE PAYABLE TO FORMER PARENT

On April 6, 2018, the Company issued a $475,000 convertible promissory note (the “2018 ARH Note”) to the Former Parent for services rendered and expense paid on behalf of the Company. The 2018 ARH Note has no stated interest rate or maturity date and is convertible into shares of the Company’s common stock at a conversion price of $3.50 per share at a time to be determined by the lender.

On April 11, 2018, the Former Parent elected to partially convert the 2018 ARH Note for the principal of $392,542 into 112,154 shares of the Company’s common stock.

The Company had an aggregate gross amount of $82,458, as of March 31, 2022 and December 31, 2021, respectively, in convertible notes payable to Former Parent outstanding.

NOTE 10 –NOTES PAYABLE

Convertible Notes

As of March 31, 2022 and December 31, 2021, the Company has convertible note payable in the amount of $100,000 which is included within convertible notes payable. See Note 14 – Commitments and Contingencies – Litigation, Claims and Assessments for details related to the $100,000 convertible note payable.

Other Notes Payable

On October 10, 2019, the Company issued a note payable in connection with the acquisition of the franchisee location in the amount of $300,000. The note has a stated interest rate of 8% with monthly payments payable over 5 years.

MUSCLE MAKER, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 10 –NOTES PAYABLE, continued

Other Notes Payable, continued

On May 9, 2020, the Company entered into a Paycheck Protection Program Promissory Note and Agreement with Greater Nevada Credit Union, pursuant to which the Company received loan proceeds of $866,300 (the “PPP Loan”). The PPP Loan was made under, and is subject to the terms and conditions of, the PPP which was established under the CARES Act and is administered by the U.S. Small Business Administration.

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.

During the year ended December 31, 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 year ended December 31, 2021.

During the year ended December 31, 2021, as part of the Pokemoto acquisition the Company acquired $291,053 in paycheck protection loans second draw (the “PPP 2 Loan”). The SBA forgave $139,877 in principal and $1,402 in interest expense during the three months ended March 31, 2022.

During the three months ended March 31, 2022 and 2021, the Company repaid a total amount of $30,982 and $18,493, respectively, of the other notes payable and other notes payable, related party.

As of March 31, 2022, the Company had an aggregate amount of $997,818 in other notes payable. The notes had interest rates ranging between 1% - 8% per annum, due on various dates through May 2026.

The maturities of other notes payable as of March 31, 2022, are as follows:

SCHEDULE OF MATURITIES OF OTHER NOTES PAYABLE

	Principal
Repayments due as of	Amount
03/31/2023	$	133,219
03/31/2024		142,203
03/31/2025		121,016
03/31/2026		69,906
03/31/2027		531,474
Long term debt	$	997,818

NOTE 11 –LEASES

The Company adopted Topic 842 as of January 1, 2022. The Company’s leases consist of restaurant locations. We determine if a contract contains a lease at inception. The lease generally has remaining terms of 1-10 years and most lease included the option to extend the lease for an additional 5-year period.

The total lease cost associated with right of use assets and operating lease liabilities for the three months ended March 31, 2021, was $241,588 and has been recorded in the condensed consolidated statement of operations as rent expense within restaurant operating expenses.

As of March 31, 2022, assets and liabilities related to the Company’s leases were as follows:

SCHEDULE OF OPERATING LEASE ASSETS AND LIABILITIES

	2022
	March 31,
	2022
Assets
Right to use asset	$	2,667,385
Total lease assets	$	2,667,385

Liabilities
Current:
Operating leases	$	561,137
Operating leases Current	$	561,137
Noncurrent:
Operating leases		2,250,439
Operating leases Noncurrent		2,250,439
Total Lease liabilities	$	2,811,576

As of March 31, 2022, the Company’s lease liabilities mature as follows:

SCHEDULE OF OPERATING LEASE LIABILITY MATURITY

	Operating Leases
Fiscal Year:
Remainder of 2022	$	662,377
2023		769,266
2024		712,592
2025		578,094
2026		367,041
Thereafter		783,390
Total lease payments	$	3,872,760
Less imputed interest		(1,061,184	)
Present value of lease liabilities	$	2,811,576

The Company’s lease term and discount rates were as follows:

SCHEDULE OF LEASE TERM AND DISCOUNT RATE

	March 31,
	2022
Weighted-average remaining lease term (in year)
Operating leases		5.65
Weighted-average discount rate
Operating leases		12	%

MUSCLE MAKER, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 812 – DEFERRED REVENUE

At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, deferred revenue consists of the following:

SCHEDULE OF DEFERRED REVENUE

June 30,
2021

December 31,
2020

Franchise fees $ 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

	March 31,			December 31,
	2022			2021
Deferred revenues, net	$	1,254,482		$	1,063,373
Less: Deferred revenues, current		(78,103	)		(49,728	)
Deferred revenues, non-current	$	1,176,379		$	1,013,645

NOTE 913 – OTHER CURRENT LIABILITIES

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

SCHEDULE OF OTHER CURRENT LIABILITIES

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

	March 31,		December 31,
	2022		2021
Gift card liability	$	27,997	$	27,633
Co-op advertising fund liability		117,358		126,564
Advertising fund liability		133,065		131,891
Other current liabilities	$	278,420	$	286,088

~~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 112 – ~~Commitments and Contingencies~~Significant Accounting Policies – ~~Litigation, Claims and Assessments~~Revenue Recognition for details related to the $~~100,000~~ ~~other convertible note payable.~~gift card liability and advertising fund liability.

~~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:~~

~~SCHEDULE OF OUTSTANDING DEBT~~

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

NOTE 1114 – COMMITMENTS AND CONTINGENCIES

~~Consulting Agreements~~Franchising

~~On February 7, 2021,~~During the three months ended March 31, 2022, 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~~various franchise 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 eleven potentially new Pokemoto locations with various franchisees. The franchisees paid the Company an aggregate of $~~100,000~~205,000 ~~shares~~and this has been recorded in deferred revenue as 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.~~31, 2022.

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,~~March 31, 2022, the Company has accrued for the liability in convertible notes payable in the amount of $100,000 and accrued interest of $~~25,116~~28,290 is included in accounts payable and accrued expenses.

~~In May 2018, Resolute Contractors, Inc., Quality Tile, MTL Construction, Genesis Electric, JNB Interiors~~ See Note 17 – Subsequent Events – Litigations, Claims and ~~Captive Aire filed a Mechanics Lien~~Assessments for ~~labor, service, equipment and materials in~~details related to the ~~total amount~~settlement 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.~~this judgement.

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.~~Texas in El Paso County #2019DCV0824. The contractor is claiming a breach of contract and is seeking approximately $32,809in 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,~~December 31, 2021, the Company accrued $30,000for theliability in accounts payable and accrued expenses.

On January 23, 2020, the Company was served a judgment issued by the Judicial Council of California in the amount of $130,185for a breach of a lease agreement in Chicago, Illinois, in connection with a ~~Company owned~~Company-owned store that was closed in 2018. As of ~~June 30,~~December 31, 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~~normal course of business, 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.

2225

MUSCLE MAKER, INC. ~~AND~~& SUBSIDIARIES

Notes to ~~Condensed~~ Consolidated Financial Statements

NOTE 14 – COMMITMENTS AND CONTINGENCIES, continued

Employment Agreements

On January 2, 2022, the Company appointed Jennifer Black as Chief Financial Officer of the Company and entered into an Offer Letter with Ms. Black. Pursuant to the Offer Letter, Ms. Black will be employed as Chief Financial Officer of the Company on an at-will basis. Ms. Black will be entitled to a base salary at the annualized rate of $190,000. The Company’s previous CFO, Ferdinand Groenewald, will remain and was appointed as the Chief Accounting Officer of the Company. The Company issued Ms. Black 20,000 shares of common stock upon completion of 90 days of employment. Ms. Black will be entitled to receive stock options to acquire 20,000 shares of common stock subject to the approval of the Board of Directors and Compensation Committee and the terms and conditions will be subject to entering into a stock option agreement. See Note 17 – Subsequent Events – Common Stock and Options for details related to the issuance of the shares of common stock and stock options.

On February 10, 2022, the Company entered into an Employment Agreement with Michael Roper effective February 14, 2022, which replaced his prior employment agreement. Pursuant to the Employment Agreement, Mr. Roper will continue to be employed as Chief Executive Officer of the Company on an at will basis. During the term of the Employment Agreement, Mr. Roper will be entitled to a base salary at the annualized rate of $350,000, will be increased to $375,000 upon the one-year anniversary. Mr. Roper will be eligible for a discretionary performance bonus to be paid in cash or equity. Within 90 days of the effective date, the Company will issue Mr. Roper stock options to receive 100,000 shares of common stock which will vest over a term of five years. If Mr. Roper is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, Mr. Roper will be entitled to a severance package of 18 months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule, but subject to the execution of a valid release in favor of the Company and its related parties. See Note 17 – Subsequent Events – Options for details related to the issuance of the stock options.

On February 10, 2022, the Company and Kevin Mohan, Chief Investment Officer, entered a letter agreement providing that Mr. Mohan will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $200,000 effective February 14, 2022. Mr. Mohan will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 75% of his salary. Within 90 days of the effective date, the Company will issue Mr. Mohan stock options to receive 75,000 shares of common stock which will vest over a term of five years. If Mr. Mohan is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. See Note 17 – Subsequent Events – Options for details related to the issuance of the stock options.

On February 9, 2022, the Company and Kenn Miller, Chief Operations Officer, entered a letter agreement providing that Mr. Miller will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $275,000 effective February 14, 2022. Mr. Miller will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 75% of his salary. Within 90 days of the effective date, the Company will issue Mr. Miller stock options to receive 50,000 shares of common stock which will vest over a term of five years. If Mr. Miller is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of 12 months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. See Note 17 – Subsequent Events – Options for details related to the issuance of the stock options.

MUSCLE MAKER, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 14 – COMMITMENTS AND CONTINGENCIES, continued

Employment Agreements, continued

On February 9, 2022, the Company and Aimee Infante, Chief Marketing Officer, entered a letter agreement providing that Ms. Infante will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $175,000 effective February 14, 2022. Ms. Infante will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25% of her salary. Within 90 days of the effective date, the Company will issue Ms. Infante stock options to receive 42,500 shares of common stock which will vest over a term of five years. If Ms. Infante is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, she will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. See Note 17 – Subsequent Events – Options for details related to the issuance of the stock options.

On February 9, 2022, the Company and Ferdinand Groenewald, Chief Accounting Officer, entered a letter agreement providing that Mr. Groenewald will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $175,000 effective February 14, 2022. Mr. Groenewald will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25% of his salary. Within 90 days of the effective date, the Company will issue Mr. Groenewald stock options to receive 25,000 shares of common stock which will vest over a term of five years. If Mr. Groenewald is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. See Note 17 – Subsequent Events – Options for details related to the issuance of the stock options.

Nasdaq Notice

On February 1, 2022, the Company received notice from The Nasdaq Stock Market (“Nasdaq”) that the closing bid price for the Company’s common stock had been below $1.00 per share for the previous 30 consecutive business days, and that the Company is therefore not in compliance with the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Rule”).

Nasdaq’s notice has no immediate effect on the listing or trading of the Company’s common stock on The Nasdaq Capital Market.

The notice indicates that the Company will have 180 calendar days, until August 1, 2022, to regain compliance with this requirement. The Company can regain compliance with the $1.00 minimum bid listing requirement if the closing bid price of its common stock is at least $1.00 per share for a minimum of ten (10) consecutive business days during the 180-day compliance period. If the Company does not regain compliance during the initial compliance period, it may be eligible for additional time of 180 calendar days to regain compliance. To qualify, the Company will be required to meet the continued listing requirement for market value of our publicly held shares and all other Nasdaq initial listing standards, except the bid price requirement, and will need to provide written notice to Nasdaq of its intention to cure the deficiency during the second compliance period. If the Company is not eligible or it appears to Nasdaq that the Company will not be able to cure the deficiency during the second compliance period, Nasdaq will provide written notice to the Company that the Company’s common stock will be subject to delisting. In the event of such notification, the Company may appeal Nasdaq’s determination to delist its securities, but there can be no assurance that Nasdaq would grant the Company’s request for continued listing.

The Company intends to actively monitor the minimum bid price of its common stock and may, as appropriate, consider available options to regain compliance with the Rule. There can be no assurance that the Company will be able to regain compliance with the Rule or will otherwise be in compliance with other Nasdaq listing criteria.

MUSCLE MAKER, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 1114 – 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 past state and local sales taxes collected from customers in specific states that impose a tax on sales of the Company’s products during ~~2018~~2017 and ~~2019.~~2018. The Company had accrued a liability for approximately $~~252,558~~ 38,792and $~~231,177~~ 125,550~~which includes penalties and interest~~ as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, related to this matter. All current state and local sales taxes from January 1, 2018 for open Company-owned locations have been fully paid and in a timely manner. The Company has completed or is in discussions on payment plans with the various state or local entities for these past owed amounts.

NOTE 1215 – REPORTABLE OPERATING SEGMENTS

See Note 1 – Business Organization and Nature of Operations for descriptions of our operating segments.

SUMMARY OF OPERATING SEGMENTS

		For The Three Months Ended
		March 31, 2022
Revenues
Muscle Maker Grill Division		$	1,271,935
Pokemoto Division			1,287,637
SuperFit Foods Division			360,886
Revenues		$	2,920,458

Operating Loss
Muscle Maker Grill Division		$	(307,474	)
Pokemoto Division			(22,858	)
SuperFit Division			16,564
Corporate and unallocated G&A expenses (a)			(1,326,947	)
Unallocated operating other income (expense) (b)			(352,479	)
Operating Loss		$	(1,993,194	)
Gain in debt extinguishment			141,279
Interest expense, net			(14,743	)
Other non-operating income (expense)	��		(19,421	)
Loss before income taxes		$	(1,886,079	)

(a)	Includes charges related to corporate expense that the Company does not allocate to the respective divisions. The largest portion of this expense relates to payroll, benefits and other compensation expense of $779,718, professional fees of $97,963, and consulting fees of $8,645.

(b)	This includes amortization of intangible assets. See Note 7.

MUSCLE MAKER, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 16 – EQUITY

Common Stock

On ~~February~~January 3, ~~2021,~~2022, the Company ~~issued~~authorized the issuance of an aggregate of ~~20,000~~ 1,200,000shares of common stock in connection with the cashless exercise of the ~~Company~~Pre-Funded Warrants. Pursuant to the terms of the Pre-Funded Warrants a ~~digital marketing consultant with an aggregate fair value~~total of $~~42,600~~1,200,215. warrants were exercised.

On ~~February 3, 2021,~~January 6, 2022, the Company ~~issued~~authorized the issuance of an aggregate of ~~16,126~~ 39,573shares of common stock ~~of the Company~~ to the members of the board of directors as compensation earned ~~through the end of~~during the fourth quarter of ~~2020.~~2021. The Company accrued for the liability as of December 31, 2021.

On ~~March~~January 18, 2022, the Company issued an aggregate of 30,000 shares of common stock of the Company to a consultant that assisted with the acquisition of SuperFit Foods and Pokemoto, with an aggregate fair value amount of $15,600. The Company accrued for the liability as of December 31, ~~2021,~~2021.

On February 24, 2022, the Company authorized the issuance of an aggregate of ~~12,711~~ 1,209,604 shares of common stock in connection with the cashless exercise of the Pre-Funded Warrants. Pursuant to the terms of the Pre-Funded Warrants a total of 1,210,110 warrants were exercised.

On March 31, 2022, the Company authorized the issuance of an aggregate of 53,961shares of common stock to the members of the board of directors as compensation earned during the first quarter of ~~2021.~~2022.

~~On April 30, 2021, the Company issued an aggregate of~~ ~~10,000~~ Options~~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,~~A summary of options activity during 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~~three months ended 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.~~2022 is presented below:

SCHEDULE OF OPTION ACTIVITY

~~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.~~

					Weighted
			Weighted		Average
			Average		Remaining
	Number of		Exercise		Life
	Options		Price		In Years
Outstanding, December 31, 2021		100,000	$	5.00		1.92
Issued		-		-
Exercised		-		-
Forfeited				-
Outstanding, March 31, 2022		100,000	$	5.00		1.67

Exercisable, March 31, 2022		100,000	$	5.00		1.67

2329

MUSCLE MAKER, INC. ~~AND~~& SUBSIDIARIES

Notes to ~~Condensed~~ Consolidated Financial Statements

NOTE 1216 – EQUITY, continued

~~Restricted Common Stock~~Warrants

~~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 warrants activity during the ~~activity related to the restricted common stock for the six~~three months ended ~~June 30, 2021~~March 31, 2022 is presented below:

SCHEDULE OF WARRANTS ACTIVITY ~~RELATED TO RESTRICTED COMMON STOCK~~

Weighted
Average Grant
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 - $ -

						Weighted
				Weighted		Average
				Average		Remaining
	Number of			Exercise		Life
	Warrants			Price		In Years
Outstanding, December 31, 2021		20,284,016		$	1.66		4.0
Issued		-			-
Exercised		(2,410,110	)		0.01
Forfeited		-			-
Outstanding, March 31, 2022		17,873,906		$	1.89		4.3

Exercisable, March 31, 2022		17,873,906		$	1.89		4.3

Stock-Based Compensation Expense

Stock-based compensation related to restricted stock issued to employees, directors and consultants, warrants and warrants ~~issued~~ to consultants amounted to $~~14,700~~72,586 and $~~1,727,545~~1,712,845 for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, respectively, of which $~~14,700~~72,586 and $~~1,727,297~~1,712,597, respectively, was recorded in selling, 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:~~

~~SCHEDULE OF OPTION ACTIVITY~~

Weighted
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:~~

~~SCHEDULE OF WARRANTS ACTIVITY~~

Number of Warrants Weighted
Average
Exercise Price
Weighted
Average
Remaining
Life
In Years

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 1317 – SUBSEQUENT EVENTS

Company-Owned Restaurants

Subsequent to ~~June 30, 2021~~March 31, 2022, and through the date of the issuance of ~~the~~ these condensed 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~~opened one new Company-owned Pokemoto 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.~~Miami.

~~Legal~~Common Stock

On ~~July 2, 2021,~~April 4, 2022, the Company authorized the issuance of 20,000 shares of common stock to a member of the executive team per the employment agreement. The stock was ~~named as a defended in a wage dispute by a former employee.~~ not fully earned until April 4, 2022.

Options

On ~~July 27, 2021,~~May 2, 2022, the Company, pursuant to the employment agreements, issued options to purchase an aggregate of 312,500 shares of the Company’s common stock. The options had an exercise price of $0.41 per share and vest over ratably over twenty quarters anniversaries with the first vesting occurring on June 30, 2022.

Litigations, Claims and Assessments

On April 22, 2022, the Company and a convertible note holder entered into a settlement ~~with~~agreement to settle the ~~plaintiff for an~~outstanding principal and interest due on the note in the aggregate amount of $~~18,500~~110,000 to. The Company paid $40,000, on of before May 1, 2022, and the remaining balance will be paid in seven instalments of $10,000 a month with the first payment being due on ~~or before August 30, 2021.~~June 1, 2022.

2430

ITEM 22.

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~~March 31, 2022 and December 31, ~~2020~~2021 and for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 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”, “SuperFit Foods” and “Pokemoto” refers to the ~~name~~names under which our corporate and franchised restaurants do ~~business.~~business depending on the concept. 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,~~“forecast,” “model,” “proposal,” “should,” “may,” ~~“intend,~~“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~~2021.

OVERVIEW

~~We operate~~The Company operates under the ~~name SuperFit Foods, Pokemoto and~~names Muscle Maker Grill, asPokemoto and SuperFit Foods and is a franchisor and ~~owner-operator~~owner operator of Muscle Maker Grill ~~restaurants~~ and ~~Healthy Joe’s~~Pokemoto restaurants. As of ~~June 30, 2021,~~March 31, 2022, the Company’s restaurant system included ~~twenty-five company-owned~~nineteen Company-owned restaurants, including the SuperFit Foods kitchen, and ~~fourteen~~nineteen franchise restaurants. ~~Seven~~In addition to these restaurants, the Company also operates from time to time with the following brand names under our ghost kitchen model: Meal Plan AF, Muscle Maker Burger Bar, Bowls Deep, Burger Joe’s, Wrap It Up, Salad Vibes, Mr. T’s House of Boba and Gourmet Sandwich. Our direct mail to consumer meal prep/plan program operates under the musclemakerprep.com and superfitfoods.com websites.

As of March 31, 2022, MMI consisted of three operating segments:

	●	Muscle Maker Grill Restaurant Division
	●	Pokemoto Hawaiian Poke Restaurant Division
	●	SuperFit Foods Meal Prep Division

MMI is our parent company. We own and operate three unique “healthier for you” restaurant concepts within our portfolio of companies: Muscle Maker Grill restaurants, SuperFit Foods meal prep and Pokemoto Hawaiian Poke restaurants. Our Company was founded on the belief of taking every-day menu options and converting them into “healthier for you” menu choices. Consumers are demanding healthier choices, customization, flavor and convenience. We believe our portfolio of companies directly satisfy these consumer needs. We focus on lean proteins, fresh fruits and vegetables, proprietary sauces, whole grains and various other items like protein shakes, meal plans, specialty drinks and super foods. Each of our three concepts offers different menus that are tailored to specific consumer segments. We operate in the fast-casual and meal prep segments of the ~~company-owned~~restaurant industry. We believe our “healthier for you” inspired concepts deliver a highly differentiated customer experience.

Muscle Maker Grill Restaurants (“Muscle Maker Grill”): our Muscle Maker Grill restaurants are ~~delivery-only~~fast casual style restaurants specializing in “healthier for you” high quality, made to order, lean protein-based meals. These meals feature all-natural chicken breast, grass fed beef, lean turkey, shrimp and plant-based items. We pair these lean proteins with super foods such as avocado, spinach and broccoli, while also offering cauliflower rice, whole wheat pasta, sweet potato fries and proprietary specialty sauces like zero carb, fat free or gluten free options. Our products are made to order. The menu features bowls, wraps, salads and burgers. We also offer protein shakes and fruit smoothies along with meal plans and catering. Customers can dine in or take out or have their meals delivered to their door via Company delivery personnel or third-party services such as Uber Eats, DoorDash and GrubHub.

SuperFit Foods Meal Prep (“SuperFit Foods”): SuperFit Foods is a wholly owned meal prep division located in Jacksonville, Florida and focuses solely on meal plans. The terms meal prep and meal plans will be used interchangeably throughout this document. The business operates with a centralized kitchen that prepares all meals for distribution to consumers twice per week. This is a subscription-based business model where consumers order their meals via the SuperFitfoods.com website and are charged automatically every week. There are over 150 meal plan options to choose from as well as various healthy juices, snacks and desserts. Meal plans focus on specific dietary needs such as vegetarian, high protein, gluten free and low calorie.

SuperFit Foods’ distribution process is different than most meal prep companies. The business operates with a centralized kitchen that prepares all meals for distribution to consumers twice per week. While other meal plan companies ship meals directly to consumer’s homes, the SuperFit Foods model uses Company-owned coolers placed at designated pick-up locations throughout the Jacksonville, Florida market. Pick up locations are placed inside wellness centers such as gyms, yoga studios, and various lifestyle locations. SuperFit Foods delivers twice per week by independent contractors to these locations and consumers conveniently pick up their orders after their workouts or during their daily routines. This model allows us to keep food fresh and refrigerated (even in the summer months), reduces shipping costs to consumers and provides an easier distribution model for the Company. While we do offer direct shipment or drop-offs to homes, this represents a smaller percentage of overall Company revenue. As the lockdowns and restrictions from Covid are reducing, we believe our distribution model becomes even more attractive for consumers.

Pokemoto Hawaiian Poke restaurants (“Pokemoto”): Pokemoto restaurants are fast casual style restaurants that specialize in Hawaiian inspired poke bowls, wraps and salads. Poke is native Hawaiian cuisine made up of diced fresh fish served as an appetizer or main course with strong influences of Japanese and Korean cuisine. Think of it as deconstructed sushi that a consumer can customize into a bowl, salad or wrap every time. Hawaiian Poke is trending in the restaurant industry. It is a unique segment that is healthy, customizable, popular with millennials and Gen-Zs, offers unique flavor profiles and is “Instagrammable.”

Pokemoto offers consumers the possibility to customize their order every time. Consumers move down a linear production line (similar to Chipotle or Subway customer interaction and operations) customizing their bowl from a wide selection of ingredients. Pokemoto offers five types of protein including ~~SuperFit Foods.~~sushi grade tuna, salmon, chicken, shrimp or tofu. Consumers pick a base of white/brown rice or salad, select from over 25 mix-ins/toppings including avocado, kani salad, pickled daikon, hijiki seaweed, masago, caviar, mandarin oranges, edamame, mango, roasted cashews or wonton crisps to name a few and topped off with over eight proprietary sauces that are made in house. All this gets mixed together creating a flavor explosion that is customized for every consumer.

Pokemoto requires little to no cooking. Everything is either raw (tuna, salmon, veggies and fruits) or comes in pre-cooked (chicken and shrimp). The only cooking we do is soup and rice. It’s that simple. Because we have little cooking and consumers customize their orders, our labor requirements compared to most restaurants may be reduced. In addition, we believe training becomes much easier when you are not ~~included in~~cooking or requiring recipes to be followed while consumers customize their menu options. This creates a consistent product across all our Pokemoto restaurants as we expand into more markets. Finally, because we have little to no cooking, our build outs usually do not require expensive hoods, fire suppression systems, deep fryers, grills, ovens, etc. making 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.potential cost of building out a location very favorable.

We believe our healthy-inspired restaurant concept delivers a highly differentiated customer ~~experience. We combine~~experience by combining 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.~~restaurants. The ~~following core values form the~~ foundation of our ~~brand:~~brand is based on our core values of quality, empowerment, respect, service and value.

	●	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.~~ 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,~~SuperFit Foods®, Pokemoto®, MMG Burger ~~Bar,~~Bar®, Meal Plan AFAF® 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®, Pokemoto®, and ~~Healthy Joe’s~~SuperFit Foods trademarks and intellectual property to our wholly owned subsidiaries, Muscle Maker Development, Poke Co Holdings LLC and Muscle Maker Corp., and to further sublicense them to our franchisees for use in connection with Muscle Maker Grill® and ~~Healthy Joe’s~~Pokemoto® 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~~March 31, 2022, the Company had a cash balance, a working capital surplus and an accumulated deficit of ~~$68,027,592~~$14,771,220, $13,440,545, and ~~expect to continue to incur operating~~$73,270,926, respectively. During the three months ended March 31, 2022, the Company incurred a pre-tax net loss of $1,886,079 and net ~~losses for~~cash used in operations of $930,089. The Company believes that our existing cash on hand and future cash flows from our franchise operations, will be sufficient to fund our operations, anticipated capital expenditures and repayment obligations over 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.next twelve months.

Key Financial Definitions

Total Revenues

Our revenues are derived from three primary sources: ~~company~~Company restaurant sales, franchise fee revenues and vendor rebates from Franchisees. Franchise revenues are comprised of franchise royalty revenues collected based on 5%2% to 6% of franchisee net sales and other franchise revenues which include initial, transfer and renewal franchisee fees. Vendor rebates are received based on volume purchases or services from franchise owned locations. In addition, we have other revenues which consists of gift card breakage which is recognized when we determine that there is no further legal obligation to remit the unredeemed gift card balance.

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~~Company-operated restaurants partially offset by vendor rebates from ~~company-owned~~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~~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~~Company-operated restaurant-level team members. Like other cost items, we expect total restaurant labor costs at our ~~company-operated~~Company-operated restaurants to increase due to inflation and as our ~~company~~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~~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~~in some locations 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~~The Company does incur rent for some closed 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%.~~seek to negotiate lease terminations or sublease to other companies.

Other ~~restaurant operating expenses~~Restaurant Operating Expenses

Other restaurant operating expenses, including preopening operating expenses, consist of ~~company-operated~~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~~We have adjusted our cost structure ~~will need to be adjusted~~ to reflect a different pricing ~~model,~~models, portion sizes, menu offerings, and other considerations to potentially partially offset these rising costs of delivery.

~~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.

Franchise Advertising Expenses

In accordance with Topic 606, the Company recognizes sales-based advertising contributions from franchisees as franchise revenue when the underlying franchisee incurs the corresponding advertising expense. The Company records the related advertising expenses as incurred under general and administrative expenses.

Selling, General and Administrative Expenses

~~General~~

Selling, general and administrative expenses include expenses associated with corporate, marketing and administrative functions that support our operations, including wages, benefits, advertising, travel expense, stock-based compensation expense, legal and professional fees, training, investor relations and other corporate costs. We ~~expect to~~ incur incremental general and administrative expenses as a result of ~~becoming~~being a ~~public~~publicly 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~~income (expenses) consists of amortization of debt discounts on the convertible notes, ~~payable and~~ interest expense related to ~~other~~convertible notes payable, change in fair value of accrued compensation and ~~convertible notes payable.~~gains on debt extinguishments in connection with the PPP loan forgiveness.

Income Taxes

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

2734

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,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively:

	For the Three Months Ended
	June 30,						For the Three Months Ended
	2021			2020			March 31,
							2022			2021
Revenues:
Company restaurant sales, net of discounts	$	2,564,864		$	659,939		$	2,694,192		$	1,178,911
Franchise royalties and fees		169,549			142,293			208,141			135,340
Franchise advertising fund contributions		4,742			32,454			18,125			14,087
Total Revenues		2,739,155			834,686			2,920,458			1,328,338

Operating Costs and Expenses:
Restaurant operating expenses:
Food and beverage costs		920,691			255,329			1,025,935			504,461
Labor		903,772			342,823			1,073,047			767,065
Rent		304,930			139,604			340,396			256,191
Other restaurant operating expenses		652,251			100,552			653,473			339,922
Total restaurant operating expenses		2,781,644			838,308			3,092,851			1,867,639
Preopening expenses		-			46,764
Depreciation and amortization		284,646			97,245			475,729			169,128
Franchise advertising fund expenses		4,742			32,454			18,125			14,087
General and administrative expenses		1,995,319			1,213,851
Preopening expenses								-			10,986
Selling, general and administrative expenses								1,326,947			2,966,636
Total Costs and Expenses		5,066,351			2,228,622			4,913,652			5,028,476
Loss from Operations		(2,327,196	)		(1,393,936	)		(1,993,194	)		(3,700,138	)

Other Income (Expense):
Other income (expense), net		223,681			(10,360	)
Other Income (Expenses):
Other income (expense)								(19,421	)		2,628
Interest expense, net		(22,160	)		(1,129	)		(14,743	)		(14,174	)
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	)
Gain on debt extinguishment								141,279			-
Total Other Income (Expenses), Net								107,115			(11,546	)

Loss Before Income Tax		(1,122,201	)		(1,501,425	)		(1,886,079	)		(3,711,684	)
Income tax provision		-			-			-			-
Net Loss	$	(1,122,201	)	$	(1,501,425	)	$	(1,886,079	)	$	(3,711,684	)

2835

Three Months Ended March 31, 2022 Compared with Three Months Ended March 31, 2021

Revenues

~~Company total~~Our revenues totaled ~~$2,739,155~~$2,920,458 for the three months ended ~~June 30, 2021~~March 31, 2022 compared to ~~$834,686~~$1,328,338 for the three months ended ~~June 30, 2020.~~March 31, 2021. The ~~$1,904,469~~$1,592,120 increase is primarily attributed to an increase in restaurant sales as a direct result of the acquisition of Pokemoto and ~~franchise royalties and fees.~~SuperFit Foods, in addition to the opening of new company owned locations.

We generated Company restaurant sales, net of discounts, of ~~$2,564,864~~$2,694,192 for the three months ended ~~June 30, 2021~~March 31, 2022 compared to ~~$659,939~~$1,178,911 for the three months ended ~~June 30, 2020.~~March 31, 2021. This represented an increase of ~~$1,904,925,~~$1,515,281, or 128.5%, which is ~~directly attributed~~mainly attributable to ~~higher company owned stores in~~the Pokemoto restaurants sales and SupferFit Foods sales generated during the current ~~period as compared to the prior period and a result~~year since their dates of ~~a decrease in restriction since the start of Covid-19.~~acquisition.

Franchise royalties and fees for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ totaled ~~$169,549~~$208,141 compared to ~~$142,293,~~$135,340 respectively. ~~The $27,256 increase is primarily attributable to~~This represents 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.$72,801, or 53.79%.

Franchise advertising fund contributions for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ totaled ~~$4,742~~$18,125 compared to ~~$32,454,~~$14,087, respectively. 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. Thus the increase has been a direct result of us increasing our expenses incurred related to our national advertising services to benefit our franchisees and the brands as a whole.

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 selling, general and administrative expenses.

Restaurant food and beverage costs for the three months ended ~~June 30,~~March 31, 2022 and 2021 totaled $1,025,935 or 38.1% as a percentage of Company restaurant net sales, and ~~2020 totaled $920,691,~~$504,461 or ~~35.90%~~42.8%, as a percentage of Company restaurant ~~sales, and $255,329, or 38.7%, as a percentage of restaurant~~net sales, respectively. The ~~$665,362~~$521,474 increase ~~was primarily due to~~resulted from higher store counts during 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 Pokemotocurrent year as compared to the prior ~~period.~~year resulting in higher sales with an overall decrease (improvement) of (4.7%) in restaurant and food beverage cost as a percentage of sales.

Restaurant labor for the three months ended ~~June 30,~~March 31, 2022 and 2021 totaled $1,073,047, or 39.9%, as a percentage of Company restaurant net sales, and ~~2020~~$767,065, or 64%, as a percentage of Company restaurant net sales, respectively. The $318,883 increase resulted due a higher store count during the current year as compared to the prior year as the Company opened and acquired more stores as compared to the prior period. We were able to reduce (improve) our overall labor costs as a percentage of sales by (24.1%) due to increased sales and also due to improvements in operations.

Restaurant rent expense for the three months ended March 31, 2022 and March 31, 2021 totaled ~~$903,772,~~$340,396 or ~~35.2%,~~12.7% as a percentage of restaurant sales, and ~~$342,823,~~$256,191, or ~~51.9%~~21.7%, as a percentage of restaurant sales, respectively. The ~~$560,949 decrease~~increase of $84,205 is ~~a direct result of an increase in restaurant sales as compared~~directly attributed to the ~~prior period due to~~ new ~~stores~~Company-owned locations acquired ~~and opened and fewer restrictions on restaurant operation~~ during the current period as compared to the prior period ~~due~~thus increasing the store count from sixteen stores to ~~Covid-19. In addition, the decrease in restaurant labor~~nineteen stores as ~~a percentage~~ of ~~restaurant~~March 31, 2022. The percent of total sales ~~is also attributed due~~reduced (improved) by (9.1)% as sales increased overall and we are able to ~~operational efficiencies in addition to the increase in restaurant sales.~~

~~Restaurant~~leverage fixed 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~~against these higher 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.levels.

Other restaurant operating expenses for the three months ended ~~June 30,~~March 31, 2022 and March 31, 2021 ~~and 2020~~ totaled ~~$652,251,~~$653,473, or ~~25.4%~~24.3% as a percentage of restaurant sales, and ~~$100,552,~~$339,922, or ~~15.2%~~29.9% as a percentage of restaurant sales, respectively. The $300,650 increase ~~of $551,699~~ is ~~directly attributed~~due to ~~the increase in our company owned store count as certain cost is fixed and~~higher third-party merchant fees resulting from an increase in ~~restaurant sales~~delivery orders and a higher store count during the year as compared to the prior year. The increased store count also resulted in ~~increased merchant fees.~~an increase in utility fees and insurance expenses. The other restaurant operating expenses as a percent of total sales reduced (improved) by (5.7%).

Depreciation and amortization expense for the three months ended ~~June 30,~~March 31, 2022 and March 31, 2021 totaled $475,729 and ~~2020 totaled $284,646 and $97,245,~~$169,128, respectively. The ~~$187,401~~$306,601 increase is ~~primarily~~mainly attributed to amortization expense attributed to the additions of definite life intangible assets of approximately $4,150,000 acquired through the various acquisitions during the prior year as compared to the prior year. The remaining of the variance is attributable to depreciation expense related to additional property and equipment acquired through acquisitions and additional property and equipment purchased for new store build outs and ~~stores~~the remodeling of an existing and acquired ~~through acquisitions.~~Company-owned restaurant compared to the prior year.

~~General~~

Selling, general and administrative expenses for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ totaled ~~$1,995,319,~~$1,326,947, or ~~72.8%~~45.4% of total ~~revenues,~~revenue, and ~~$1,213,851,~~$2,966,636, or ~~145.4%~~223.3% of total ~~revenues,~~revenue, 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~~$1,639,689 decrease was mainly attributed to a ~~onetime~~reduction in consulting expenses of approximately $1,029,000 which is mainly due to stock-based compensation expense ~~of $665,00 incurred~~for stock issued to various consultants for various services rendered in ~~connection with~~ the ~~private placement during~~prior year as compared to the current year, a decrease in professional fees of approximately $267,000 which resulted from changing our auditing firm during 2021 and a decrease in salaries and wages of approximately $465,000 resulting from a reduction in employee stock based compensation expense as the executive received shares of common stock in the prior period as compared to the current period. The decrease was partially offset by a ~~decrease~~write off of ~~$14,223~~fixed assets of approximately $105,000 due to closed locations in the current period as compared to the prior period. The remainder of the variance was attributed to various ~~general and administrative expenses.~~other expenses including recruiting, marketing, computer expenses etc.

Loss from Operations

Our loss from operations for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ totaled ~~$2,327,196~~$1,993,194, or ~~85.0%~~68.25% of total revenues and ~~$1,393,936~~$3,700,138, or ~~167.0%~~278.6% of total ~~revenues,~~revenue, respectively. The ~~increase~~decrease of ~~$933,260~~$1,706,944 in loss from operations is primarily attributable to anthe increase of total revenues of $1,592,120 and a decrease in total ~~costs~~cost and expenses of ~~approximately $2,837,729 partially offset by an increase in our total revenues of approximately $ 1,904,469.~~$114,824 as discussed above.

Other Income (Expense)~~, net~~

Other income (expense)~~, net~~ for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ totaled ~~$1,204,995~~$107,115 and ($~~107,489)~~11,546), respectively. The ~~$1,312,484~~$118,661 increase in other income (expense) was primarily attributable to a gain on extinguishment of debt of ~~$875,974~~$141,279 due to the forgiveness of our PPP ~~loan,~~loans partially offset by an increase in other ~~income~~expenses of ~~$234,041 which is a result of a revitalization fund grant that was~~$22,049, mainly attributed to ~~one of our store locations~~settlement expense, 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.~~$569.

Net Loss

Our net loss for the three months ended ~~June 30, 2021, decreased by $379,224 to $1,122,201~~March 31, 2022 was $1,886,079 which was an improvement of $1,825,605 as compared to ~~$1,501,425~~a net loss of $3,711,684 for the three months ended ~~June 30, 2020~~March 31, 2021, resulting from an increase in our ~~loss from operations and partially~~total revenue of ~~set by~~$1,592,120, an increase in our ~~increase~~ other income (expense)~~, net as discussed above.~~ of $118,661 and a decrease of our total cost and expenses of $114,824.

3037

~~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~~three months ended ~~June 30, 2021 and 2020, respectively:~~March 31, 2022, respectively by our operating segments:

	For the Six Months Ended
	June 30,									Muscle Maker			Pokemoto			SuperFit Foods
	2021			2020			Consolidated			Grill Division			Division			Division		Unallocated

Revenues:
Company restaurant sales, net of discounts	$	3,743,775		$	1,897,366		$	2,694,192		$	1,108,199		$	1,225,108		$	360,886	$	-
Franchise royalties and fees		304,889			318,324			208,141			145,611			62,529			-		-
Franchise advertising fund contributions		18,829			54,050			18,125			18,125			-			-		-
Total Revenues		4,067,493			2,269,740			2,920,458			1,271,935			1,287,637			360,886		-

Operating Costs and Expenses:
Restaurant operating expenses:
Food and beverage costs		1,425,152			721,023			1,025,935			465,684			427,174			133,074		-
Labor		1,670,837			929,443			1,073,047			568,099			405,550			99,404		-
Rent		561,121			284,281			340,396			207,334			102,904			30,159		-
Other restaurant operating expenses		992,173			432,912			653,473			251,780			328,056			73,633		-
Total restaurant operating expenses		4,649,283			2,367,659			3,092,851			1,492,897			1,263,684			336,270		-
Preopening expenses		10,986			46,764
Depreciation and amortization		453,774			208,502			475,729			68,387			46,811			8,052		352,479	(b)
Franchise advertising fund expenses		18,829			54,050			18,125			18,125			-			-		-
General and administrative expenses		4,961,955			6,343,254
Selling, general and administrative expenses								1,326,947			-			-			-		1,326,947	(a)
Total Costs and Expenses		10,094,827			9,020,229			4,913,652			1,579,409			1,310,495			344,322		1,679,426
Loss from Operations		(6,027,334	)		(6,750,489	)
(Loss) Income from Operations								(1,993,194	)		(307,474	)		(22,858	)		16,564		(1,679,426	)

Other Income (Expense):
Other income (expense), net		226,309			(13,548	)
Other income (expense)								(19,421	)		(19,560	)		79			60		-
Interest expense, net		(36,334	)		(94,733	)		(14,743	)		(14,743	)		-			-		-
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	)
Gain on debt extinguishment								141,279			-			141,279			-		-
Amortization of debt discounts								-			-			-			-		-
Total Other Income (Expense), Net		1,193,449			(243,199	)		107,115			(34,303	)		141,358			60		-

Loss Before Income Tax		(4,833,885	)		(6,993,688	)		(1,886,079	)		(341,777	)		118,500			16,624		(1,679,426	)
Income tax provision								-			-			-			-		-
Net Loss	$	(4,833,885	)	$	(6,993,688	)
Net (Loss) Income Net							$	(1,886,079	)	$	(341,777	)	$	118,500		$	16,624	$	(1,679,426	)

Income tax provision								-			-			-			-		-
Net (Loss) Income							$	(1,886,079	)	$	(341,777	)	$	118,500		$	16,624	$	(1,679,426	)

(a)	Includes charges related to corporate expense that the Company does not allocate to the respective divisions. The largest portion of this expense relates to payroll, benefits and other compensation expense of $779,718, professional fees of $97,963, and consulting fees of $8,645.

(b)	This includes amortization of intangible assets. See Note 7.

3138

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

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:

					March 31,		December 31,
	June 30, 2021		December 31, 2020		2021		2021
Cash	$	4,971,621	$	4,195,932	$	14,771,220	$	15,766,703
Working Capital Surplus	$	2,425,636	$	1,383,568	$	13,440,545	$	15,041,334
Convertible notes payable	$	182,458	$	182,458
Other notes payable, including related party	$	1,381,774	$	1,276,692
Convertible notes payable, including related parties and Former Parent, net					$	182,458	$	182,458
Other notes payable, including related parties					$	997,818	$	1,170,079

Availability of Additional Funds ~~and Going Concern~~

Although we have a working capital surplus of ~~$2,425,636,~~$13,440,545, we presently have an accumulated deficit of ~~$68,027,592,~~$73,270,926, as of ~~June 30, 2021,~~March 31, 2022, and we utilized ~~$3,700,395~~$930,089 of cash in operating activities during the three months ended ~~June 30, 2021, therefore we require additional equity and/or debt financing~~March 31, 2022. We believe that our existing cash on hand and future cash flows from our franchise operations, will be sufficient to ~~continue~~fund our ~~operations. These conditions raise substantial doubt about our ability to continue as a going concern for at least one year from~~operations, anticipated capital expenditures and repayment obligations over the ~~date of this filing.~~next twelve months.

~~Our principal source of liquidity~~In the event we are required to ~~date has been provided by loans and convertible loans from related and unrelated third parties, (ii) the sale of common stock~~obtain additional financing, either through borrowings, private placements, ~~and (iii) and the sale~~public offerings, or some type of ~~common stock in public offerings.~~

~~The pandemic novel coronavirus (COVID-19) outbreak, federal, state~~business combination, such as a merger, or buyout, 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~~such pursuits. We may be unable to acquire the additional ~~capital. If we are unsuccessful, we may need~~funding necessary 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,~~continue operating. Accordingly, 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~~need 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~~could 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. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. Any failure to raise additional funds on favorable terms could have a material adverse effect on our liquidity and financial condition.

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,~~Three Months Ended March 31, 2022 and March 31, 2021 ~~and June 30, 2020~~

~~During~~For the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we used cash of ~~$3,700,395~~$930,089 and ~~$3,834,131,~~$1,600,235, respectively, in operations. Our cash used for the three months ended March 31, 2022 was primarily attributable to our net loss of $1,886,079, adjusted for net non-cash income in the aggregate amount of $637,413, partially offset by $318,577 of net cash ~~used~~provided by changes in the levels of operating ~~activities~~assets and liabilities. Our cash used for the ~~six~~three months ended ~~June 30,~~March 31, 2021 was primarily attributable to our net loss of ~~$4,833,885,~~$3,711,684, adjusted for net non-cash ~~items~~income in the aggregate amount of ~~$1,212,077 and $78,587~~$1,941,970, partially offset by $169,479 of net cash provided by changes in the levels of operating assets and liabilities.

During the ~~six~~three months ended ~~June 30, 2021, net~~March 31, 2022, cash used in investing activities was ~~$3,412,847,~~$34,412, 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~~$34,812 was used to purchase property and equipment, partially offset by ~~$8,802~~$400 of collections in loans ~~repayments by franchisees.~~receivable. During the three months ended March 31, 2021, cash used in investing activities was $567,554, of which $67,754 was used to purchase property and equipment and $500,000 used in connection with the acquisition of SuperFit Foods.

Net cash used by financing activities for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 was ~~$7,888,931~~$30,982, consisting 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.payable. Net cash ~~provided~~used by financing activities for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 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$18,493, for repayments of various ~~convertible notes of $550,000 and $566,243 of repayments of~~ other notes ~~payables, including a related party.~~payable.

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.

	●	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;~~issued in connection with notes payable;
	●	the recognition of revenue; and
	●	the recognition, measurement and valuation of current and deferred income taxes.

Intangible Assets

~~We account~~The Company accounts for recorded intangible assets in accordance with ASC 350 “Intangibles - Goodwill and Other”. In accordance with ASC 350, ~~we do~~the Company does not amortize intangible assets ~~with~~having indefinite useful lives. ~~Our~~The Company’s trademark – Muscle Maker had a finite life as of December 31, 2021. The Company determined that as of January 1, 2022, the trademark - Muscle Maker had a finite life of 3 years and will be amortizing the value over the new estimated life. The Company’s goodwill has an indefinite life, and ~~trademarks are deemed to have indefinite lives, and~~is 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 original useful lives are as follows:

	Franchisee agreements	13 years

Franchise license	10 years

	Trademark – Muscle Maker, SuperFit ~~Trademark~~and Pokemoto	3 – ~~Pokemoto, domain~~5 years
	Domain name, customer list and ~~proprietary~~Proprietary recipes	~~5 -~~3 – 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.

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. 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.

Revenue Recognition

Restaurant Sales

Retail store revenue at ~~Company operated~~Company-operated restaurants is recognized when payment is tendered at the point of sale, net of sales tax, ~~discount~~discounts and other sales related taxes. The Company recorded retail store revenues of ~~$2,564,864~~$2,694,192 and ~~$3,743,775~~$1,178,911 during the ~~three~~quarters ended March 31, 2022 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~~$108,421 and ~~$185,899~~$81,469 during the ~~three~~quarters ended March 31, 2022 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~~revenue from franchise fees of ~~$12,352~~$48,891 and ~~$22,138, respectively,~~$9,786 during the ~~three~~quarters ended March 31, 2022 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~~$50,829 and ~~$96,852~~$44,085 during the ~~three~~quarters ended March 31, 2022 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 accompanyingcondensed consolidated statements of operations. Rebates earned on purchases by ~~Company owned~~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~~

~~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 selling, general and administrative expenses. When an advertising contribution fund is over-spent at year end, advertising expenses will be reported on the condensed 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~~$18,125 and ~~$18,829, respectively,~~$14,087 during the ~~three~~quarters ended March 31, 2022 and ~~six months ended June 30,~~ 2021, respectively, which are included in franchise advertising fund contributions on the accompanying condensed consolidated statements of operations.

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. Gift card liability is recorded in other current liabilities on the condensed consolidated balance sheet. For the quarter ended March 31, 2022 and 2021, the Company ~~recorded contributions from franchisees of $32,454 and $54,050, respectively, during~~did not record any gift card breakage.

Deferred Revenue

Deferred revenue primarily includes initial franchise fees received by the ~~three and six months ended June 30, 2020, respectively,~~Company, which are ~~included~~being amortized over the life of the Company’s franchise agreements. Deferred revenue is recognized in income over the life of the franchise ~~advertising fund contributions on the accompanying condensed consolidated statements of operations.~~agreements and vendor rebates are recognized in income as performance obligations are satisfied.

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.

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 selling, general and administrative expenses in the condensed consolidated statements of operations.

Recently Issued Accounting Pronouncements

See Note 32 to our condensed consolidated financial statements for the three ~~and six~~ months ended ~~June 30, 2021.~~March 31, 2022.

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 33..

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET ~~RISK~~RISK..

Not applicable.

ITEM 4.

CONTROLS AND ~~PROCEDURES~~PROCEDURES..

Evaluation of Disclosure Controls and Procedures

~~Pursuant to Rules 13a-15(b)~~Under the supervision 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~~we conducted an evaluation of our disclosure controls and procedures, ~~were not~~as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the quarter ended March 31, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of such date our disclosure controls and procedures are effective ~~due~~in recording, processing, summarizing and reporting, on a timely basis, information requested to ~~material weaknesses~~be disclosed by us in our ~~internal control over financial reporting~~reports that ~~existed as of June 30, 2021, as discussed below.~~we file or submit under the Exchange Act.

~~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~~three months ended ~~June 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3943

PART II - OTHER INFORMATION

~~Item 1. Legal Proceedings.~~

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~~three months ended ~~June 30, 2021.~~March 31, 2022.

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,~~March 31, 2022, the Company has accrued for the liability in convertible notes payable in the amount of $100,000 and accrued interest of ~~$25,116~~$28,290 is included in accounts payable and accrued expenses.See Note 17 – Subsequent Events – Litigations, Claims and Assessments for details related to the settlement of this judgement.

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.~~Texas in El Paso County #2019DCV0824. 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,~~March 31, 2022, the Company accrued $30,000 for the liability in accounts payable and accrued expenses.

On January 23, 2020, the Company was served a judgment issued by the Judicial Council of California in the amount of $130,185 for a breach of a lease agreement in Chicago, Illinois, in connection with a ~~Company owned~~Company-owned store that was closed in 2018. As of ~~June 30, 2021,~~March 31, 2022, 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.

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~~MMI 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~~a liability for approximately $38,792 and ~~$231,177 which includes penalties and interest~~$125,550 as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, related to this matter. ~~The~~All current state and local sales taxes from January 1, 2018 for open Company-owned locations have been fully paid and in a timely manner. Subsequent to March 31, 2022, the Company has ~~completed or is in discussions on payment plans with~~made all the payments to various states to satisfy the outstanding past state orand local ~~entities for these past owed amounts.~~sales taxes.

~~Item 1A. Risk Factors.~~

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,~~2021, filed with the SEC on ~~April 15, 2021.~~March 17, 2022.

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.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Issuance of Stock

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

On ~~June 30, 2021,~~January 3, 2022, the Company authorized the issuance of an aggregate of ~~12,711~~1,200,000 shares of common stock in connection with the cashless exercise of the Pre-Funded Warrants. Pursuant to the terms of the Pre-Funded Warrants a total of 1,200,215 warrants were exercised.

On January 6, 2022, the Company authorized the issuance of an aggregate of 39,573 shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2021. The Company accrued for the liability as of December 31, 2021.

On January 18, 2022, the Company issued an aggregate of 30,000 shares of common stock of the Company to a consultant that assisted with the acquisition of SuperFit Foods and Pokemoto, with an aggregate fair value amount of $15,600. The Company accrued for the liability as of December 31, 2021.

On February 24, 2022, the Company authorized the issuance of an aggregate of 1,209,604 shares of common stock in connection with the cashless exercise of the Pre-Funded Warrants. Pursuant to the terms of the Pre-Funded Warrants a total of 1,210,110 warrants were exercised.

On March 31, 2022, the Company authorized the issuance of an aggregate of 53,961 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 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 June 30, 2021, as the share were fully earned pursuant to their service agreement.

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, 2021.2022.

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.~~

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

~~Item 4. Mine Safety Disclosures.~~

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.

ITEM 5.

OTHER INFORMATION.

4245

~~Item 6. Exhibits.~~

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

32.3		Certification of Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document*
101.SCH		Inline XBRL Schema Document*
101.CAL		Inline XBRL Calculation Linkbase Document*
101.DEF		Inline XBRL Definition Linkbase Document*
101.LAB		Inline XBRL Label Linkbase Document*
101.PRE		Inline XBRL Presentation Linkbase Document*
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

† Includes management contracts and compensation plans and ~~arrangements.~~arrangements

*Filed herewith.

+Previously filed.

4346

SIGNATURES~~SIGNATURES~~

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the ~~Registrant~~registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~August 16, 2021~~May 12, 2022	MUSCLE MAKER, INC.

	By:	/s/ Michael J. Roper
		Michael J. Roper
		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ ~~Ferdinand Groenewald~~Jennifer Black
		~~Ferdinand Groenewald~~Jennifer Black
		Chief Financial Officer
		(Principal Financial ~~and~~Officer)

	By:	/s/ Ferdinand Groenewald
		Ferdinand Groenewald
		Chief Accounting Officer
		(Principal Accounting Officer)

4447

	June 30, 2021			December 31, 2020
Loans receivable, net	$	6,556		$	3,390
Less: current portion		(6,556	)		(2,394	)
Loans receivable, non-current	$	-		$	996

Intangible Assets	Trademark		Franchise Agreements			Trademark Superfit			Domain Name Superfit			Customer List Superfit			Proprietary Recipes Superfit			Non-Compete Agreement Superfit			Trademark Pokemoto			Franchisee License Pokemoto			Proprietary Recipes Pokemoto			Non-Compete Agreement Pokemoto			Total
Intangible assets, net at December 31, 2020	$	2,524,000	$	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

	June 30, 2021			December 31, 2020
Franchise fees	$	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

				Weighted Average Grant
	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		-		$	-

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Life In Years
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