Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Feb. 25, 2019 | Jun. 30, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | Muscle Maker, Inc. | ||
Entity Central Index Key | 1,701,756 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity a Well-known Seasoned Issuer | No | ||
Entity a Voluntary Filer | No | ||
Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 0 | ||
Entity Common Stock, Shares Outstanding | 7,803,881 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Current Assets: | ||
Cash | $ 78,683 | $ 335,724 |
Accounts receivable, net of allowance for doubtful accounts of $4,500 as of December 31, 2017 and December 31, 2016 | 152,256 | 203,100 |
Inventory | 92,768 | 64,120 |
Current portion of loans receivable, net of allowance of $55,000 and $25,000 at December 31, 2017 and 2016, respectively | 20,146 | 30,434 |
Current portion of loans receivable from related party, net of allowance of $45,000 and $0 at December 31, 2017 and 2016 | 9,704 | 20,000 |
Prepaid expenses and other current assets | 23,287 | 50,316 |
Total Current Assets | 376,844 | 703,694 |
Property and equipment, net | 517,002 | 1,072,545 |
Goodwill | 2,521,468 | |
Intangible assets, net | 3,181,880 | 3,702,649 |
Loans receivable - non current | 150,522 | 53,229 |
Loans receivables from related parties - non current | 51,667 | |
Security deposits and other assets | 21,401 | 148,772 |
Total Assets | 4,247,649 | 8,254,024 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 2,710,193 | 966,341 |
Convertible notes payable | 150,000 | |
Other notes payable | 20,000 | |
Deferred revenue | 1,391,860 | 1,302,967 |
Deferred rent, current | 25,620 | |
Payable to Former Parent, current | 16,995 | |
Other current liabilities | 369,123 | 158,238 |
Total Current Liabilities | 4,683,791 | 2,427,546 |
Convertible notes payable to Former Parent, net of debt discount of $0 and $2,699,726 at December 31, 2017 and December 31, 2016, respectively | 1,004,736 | |
Convertible notes payable | 1,899,340 | |
Convertible notes payable, related parties | 300,000 | |
Other notes payable | 200,000 | |
Other notes payable, related parties | 335,000 | |
Payable to Former Parent, non-current | 74,145 | |
Deferred tax liability | 246,527 | |
Deferred rent, non-current | 31,313 | 183,638 |
Total Liabilities | 7,449,444 | 3,936,592 |
Commitments and Contingencies | ||
Stockholders' (Deficit)/Equity: | ||
Common stock, no par value, 100,000,000 shares authorized, 7,637,855 and 4,604,842 shares issued and outstanding as of December 31, 2017 and December 31, 2016, respectively | 13,367,549 | 5,157,010 |
Additional paid-in capital | 552,670 | 2,842,343 |
Accumulated deficit | (17,052,086) | (3,841,638) |
Total Controlling Interest | (3,131,867) | 4,157,715 |
Non-controlling interest | (69,928) | 159,717 |
Total Stockholders' (Deficit)/Equity | (3,201,795) | 4,317,432 |
Total Liabilities and Stockholders' Equity | $ 4,247,649 | $ 8,254,024 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 4,500 | $ 4,500 |
Allowance for loan receivable | 55,000 | 25,000 |
Net allowance of loan receivable from related party | 45,000 | 0 |
Debt discount on convertible notes payable to Former Parent | $ 0 | $ 2,699,726 |
Common stock, no par value | ||
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 7,637,855 | 4,604,842 |
Common stock, shares outstanding | 7,637,855 | 4,604,842 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Revenues: | ||
Other revenues | $ 725,685 | $ 557,106 |
Total Revenues | 7,929,137 | 4,953,205 |
Restaurant operating expenses: | ||
Food and beverage costs | 1,946,643 | 1,028,098 |
Labor | 2,634,730 | 1,306,614 |
Rent | 927,610 | 728,064 |
Other restaurant operating expenses | 1,283,286 | 586,248 |
Total restaurant operating expenses | 6,792,269 | 3,649,024 |
Costs of other revenues | 330,367 | 295,231 |
Depreciation and amortization | 446,369 | 204,486 |
Impairment of intangible assets | 410,225 | |
Impairment of property and equipment | 1,375,790 | |
Impairment of goodwill | 2,521,468 | |
General and administrative expenses | 7,983,673 | 4,770,613 |
Total Costs and Expenses | 19,860,161 | 8,919,354 |
Loss from Operations | (11,931,024) | (3,966,149) |
Other (Expense) Income: | ||
Other income | 88,874 | 6,563 |
Interest (expense) income, net | (15,336) | 6,114 |
Amortization of debt discounts | (3,956,792) | (138,933) |
Total Other Expense, Net | (3,883,254) | (126,256) |
Net Loss Before Income Tax | (15,814,278) | (4,092,405) |
Income tax benefit (provision) | 246,527 | (127,282) |
Net Loss | (15,567,751) | (4,219,687) |
Net loss attributable to the non-controlling interest | (2,357,303) | (1,110,106) |
Net Loss Attributable to Controlling Interest | $ (13,210,448) | $ (3,109,581) |
Net Loss Attributable to Controlling Interest Per Share: | ||
Basic and Diluted | $ (2.19) | $ (0.51) |
Weighted Average Number of Common Shares Outstanding: | ||
Basic and Diluted | 6,039,731 | 6,139,789 |
Restuarant Net Sales [Member] | ||
Revenues: | ||
Revenues | $ 5,215,285 | $ 2,735,222 |
Franchise Royalties and Fees [Member] | ||
Revenues: | ||
Revenues | $ 1,988,167 | $ 1,660,877 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' (Deficit)/Equity - USD ($) | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total Controlling Interest [Member] | Non-Controlling Interest [Member] | Total |
Balance at Dec. 31, 2015 | $ 5,157,010 | $ 216,524 | $ (732,057) | $ 4,641,477 | $ 1,269,823 | $ 5,911,300 |
Balance, shares at Dec. 31, 2015 | 4,604,842 | |||||
Beneficial conversion feature - 2016 ARH Note | 2,381,107 | 2,381,107 | 2,381,107 | |||
Warrants issued in connection with convertible debt | 241,028 | 241,028 | 241,028 | |||
Warrants issued in exchange for services | 3,684 | 3,684 | 3,684 | |||
Net loss | (3,109,581) | (3,109,581) | (1,110,106) | (4,219,687) | ||
Balance at Dec. 31, 2016 | $ 5,157,010 | 2,842,343 | (3,841,638) | 4,157,715 | 159,717 | 4,317,432 |
Balance, shares at Dec. 31, 2016 | 4,604,842 | |||||
Warrants issued in connection with convertible debt | $ 170,958 | $ 170,958 | $ 170,958 | |||
Issuance of restricted stock, shares | 53,383 | |||||
Shares issued for cash | $ 420,000 | $ 420,000 | $ 420,000 | |||
Shares issued for cash, shares | 56,250 | |||||
Exercise of warrants for purchase of common stock | $ 50,000 | 50,000 | 50,000 | |||
Exercise of warrants for purchase of common stock, shares | 5,356 | |||||
Restricted stock issued as compensation for services | $ 170,000 | 170,000 | 170,000 | |||
Restricted stock issued as compensation for services, shares | 52,307 | |||||
Shares issued in connection with merger | $ 1,466,541 | (3,594,199) | (2,127,658) | 2,127,658 | ||
Shares issued in connection with merger, shares | 1,550,964 | |||||
Options issued to franchisees | 47,583 | 47,583 | 47,583 | |||
Conversion of convertible notes payable to Former Parent into common stock | $ 5,361,177 | 5,361,177 | 5,361,177 | |||
Conversion of convertible notes payable to Former Parent into common stock, shares | 1,314,753 | |||||
Beneficial conversion feature - First, Second and Third 2017 ARH Notes | 1,085,985 | 1,085,985 | 1,085,985 | |||
Stock-based compensation: Amortization of restricted stock | 742,821 | 742,821 | 742,821 | |||
Net loss | (13,210,448) | (13,210,448) | (2,357,303) | (15,567,751) | ||
Balance at Dec. 31, 2017 | $ 13,367,549 | $ 552,670 | $ (17,052,086) | $ (3,131,867) | $ (69,928) | $ (3,201,795) |
Balance, shares at Dec. 31, 2017 | 7,637,855 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Cash Flows from Operating Activities | ||
Net loss | $ (15,567,751) | $ (4,219,687) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 446,369 | 204,486 |
Stock-based compensation | 742,821 | 3,684 |
Options issued to franchisees | 47,583 | |
Restricted stock issued as compensation for services | 170,000 | |
Amortization of debt discount | 3,956,792 | 138,933 |
Impairment of intangible asset | 410,225 | |
Impairment of property and equipment | 1,375,790 | |
Impairment of Goodwill | 2,521,468 | |
Write off of security deposits | 137,160 | |
Bad debt expense | 128,855 | 113,932 |
Deferred rent | (126,705) | |
Deferred income tax (benefit) provision | (246,527) | 127,282 |
Expenses paid by former parent | 490,071 | 74,970 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (8,008) | (50,211) |
Inventory | (28,648) | (49,921) |
Prepaid expenses and other current assets | 27,029 | (89,281) |
Security deposits and other assets | (9,789) | (42,446) |
Accounts payable and accrued expenses | 1,556,488 | 850,937 |
Deferred revenue | 88,893 | 656,466 |
Other current liabilities | 210,885 | 170,154 |
Total Adjustments | 11,890,752 | 2,108,985 |
Net Cash Used in Operating Activities | (3,676,999) | (2,110,702) |
Cash Flows from Investing Activities | ||
Purchases of property and equipment | (968,831) | (957,387) |
Cash paid in connection with acquisition of Winston Salem | (124,117) | |
Issuance of loans receivable | (58,753) | (192,500) |
Issuance of loans receivable - related parties | (5,533) | |
Collections from loans receivable | 167,452 | 158,329 |
Collections from loans receivable - related parties | 22,496 | 20,000 |
Net Cash Used in Investing Activities | (843,169) | (1,095,675) |
Cash Flows from Financing Activities | ||
Proceeds from exercise of warrants | 50,000 | |
Proceeds from issuance of restricted stock | 420,000 | |
(Repayments) Advances from Former Parent | (250,013) | 329,081 |
Repayments of notes payable | (8,100) | |
Proceeds from convertible notes payable | 2,049,340 | |
Proceeds from convertible notes payable - related parties | 300,000 | |
Proceeds from other notes payable | 220,000 | |
Proceeds from other notes payable - related parties | 335,000 | |
Proceeds from convertible notes payable to Former Parent | 1,138,800 | 2,621,842 |
Net Cash Provided by Financing Activities | 4,263,127 | 2,942,823 |
Net Decrease in Cash | (257,041) | (263,554) |
Cash - Beginning of Period | 335,724 | 599,278 |
Cash - End of Period | 78,683 | 335,724 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash paid for interest | 25,116 | 119 |
Supplemental disclosures of non-cash investing and financing activities | ||
Beneficial conversion feature | 1,085,985 | 2,381,107 |
Warrants issued in connection with convertible debt | 170,958 | 241,028 |
Payment on note payable by parent in exchange for reduction in receivable from Former Parent | 300,000 | |
Payable to Former Parent exchanged for convertible notes | 517,915 | |
Conversion of convertible notes payable to Former Parent into common stock | 5,361,177 | |
Loan receivable advanced by Former Parent | 162,500 | |
Accounts payable associated with purchases of property and equipment | $ 187,241 |
Business Organization and Natur
Business Organization and Nature of Operations, Going Concern and Management's Plans | 12 Months Ended |
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business Organization and Nature of Operations, Going Concern and Management's Plans | NOTE 1 – BUSINESS ORGANIZATION AND NATURE OF OPERATIONS, GOING CONCERN AND MANAGEMENT’S PLANS Muscle Maker, Inc. (“MMI”), a former subsidiary of American Restaurant Holdings (“ARH” or “Former Parent”) was incorporated in California on December 8, 2014 and was a majority owner of Muscle Maker Brands, LLC, (“MMB”). MMB’s subsidiaries include Company owned restaurants as well as Custom Technology, Inc, (“CTI”) a technology and point of sale (“POS”) systems dealer and technology consultant. MMB was formed on December 22, 2014 in the state of California for the purpose of acquiring and operating company owned restaurants, as well as franchising its name and business system to qualified franchisees. Muscle Maker Franchising, LLC (“MMF”) was founded in 1995 in order to develop a brand of healthy-option fast food restaurants. On January 23, 2015 (the “Closing Date”), MMI, MMB and MMF entered into an agreement whereby MMB purchased substantially all of the assets and liabilities of MMF, MMI acquired 74% of the membership units of MMB, and certain members of MMF acquired 26% of the membership units of MMB. On March 23, 2017, ARH authorized and facilitated the distribution of 5,536,308 shares of Common Stock of MMI held by American Restaurants, LLC, the wholly owned subsidiary of ARH, to the shareholders of the Former Parent (the “Spin-Off”). As a result of the Spin-Off on March 23, 2017, ARH is no longer a majority owner of MMI. On June 8, 2017, MMB converted from a limited liability company into a California corporation named Muscle Maker Brands Conversion, Inc. (“MMBC”). On July 18, 2017, MMI formed Muscle Maker Development, LLC (“Muscle Maker Development”) in the state of Nevada for the purpose of running our existing franchise operations and continuing to franchise the Muscle Maker Grill name and business system to qualified franchisees. Muscle Maker Development issued 1,000 membership units to its sole member and manager, MMI. MMB assigned all the existing franchise agreements to Muscle Maker Development (“Assignment and Assumption Agreement”) pursuant to the terms of that certain Assignment and Assumption Agreement, dated August 25, 2017, among MMI, MMB and Muscle Maker Development. On July 18, 2017, MMI formed Muscle Maker Corp., LLC (“Muscle Maker Corp.”) in the state of Nevada for the purpose of developing new corporate stores and operating new and existing corporate stores of MMI. Muscle Maker Corp. issued 1,000 membership units to its sole member and manager, MMI and MMI assigned all the existing corporate stores to Muscle Maker Corp. On September 15, 2017 (“Effective Merger Date”), pursuant to an Agreement of Merger, MMBC was merged (“Merger”) into MMI, with MMI as the surviving corporation, in a tax-free reorganization. Pursuant to the Merger, each share of common stock of MMBC (the “MMBC Common Stock”) owned by the members of MMF was converted into 796 shares of common stock of MMI, resulting in aggregate consideration of 1,550,964 shares of common stock of MMI to the members of MMF. As a result of the Merger, MMI directly owned 70% of the shares of CTI. MMI and its subsidiaries is the “Company”. The Company operates under the name Muscle Maker Grill and is a franchisor and owner operator of Muscle Maker Grill restaurants. As of December 31, 2017, the Company’s restaurant system included thirteen company-owned restaurants, and forty franchised restaurants. One company-owned restaurant was subsequently open for operation and eight company-owned restaurants were closed as of the date of the issuance of these consolidated financial statements. In addition, the Company currently has thirty-three United States based and one Kuwait based franchise locations open as of the date of the issuance of these consolidated financial statements. A Muscle Maker Grill restaurant offers quality food freshly prepared with the Company’s proprietary recipes created with the guest’s health in mind. The menu is protein based, and features various supplements, health food snacks, along with a nutritious children’s menu. Going Concern and Management’s Plans As of December 31, 2017, the Company had a cash balance, a working capital deficiency and an accumulated deficit of $78,683, $4,306,947, and $17,052,086, respectively. For the year ended December 31, 2017, the Company incurred a pre-tax net loss of $15,814,278. 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 consolidated financial statements. The Company’s operations have primarily been funded through proceeds from the issuance of equity and debt. Subsequent to December 31, 2017, the Company received an aggregate of $1,813,165 associated with the issuances of convertible promissory notes payable and warrants and other notes to various lenders, of which $1,072,000 was converted into common stock. From September 12, 2018 through the date of this report, the Company entered into Securities Purchase Agreements (“SPA”) with several accredited investors (the “Investors”) providing for the sale by the Company to the Investors of 15% Senior Secured Convertible Promissory Notes (the “SPA Notes”) in the aggregate amount of $1,835,000, in addition $635,000 in existing convertible debt was converted into SPA Notes. (See Note 17 – Subsequent Events -15% Senior Secured Convertible Notes). Although management believes that the Company has access to capital resources, there are no commitments, other than aforementioned, in place for new financing as of the date of the issuance of these consolidated financial statements there can be no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all. The Company expects to have ongoing needs for working capital in order to (a) fund operations; plus (b) expand operations by opening additional corporate-owned restaurants. To that end, the Company may be required to raise additional funds through equity or debt financing. However, there can be no assurance that the Company will be successful in securing additional capital. If the Company is unsuccessful, the Company may need to (a) initiate cost reductions; (b) forego business development opportunities; (c) seek extensions of time to fund its liabilities, or (d) seek protection from creditors. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. 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 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. |
Reverse Stock Splits
Reverse Stock Splits | 12 Months Ended |
Dec. 31, 2017 | |
Reverse Stock Splits | |
Reverse Stock Splits | NOTE 2 – REVERSE STOCK SPLITS Effective September 20, 2017, pursuant to authority granted by the stockholders of the Company, the Company implemented a 1-for-7 reverse split of the Company’s issued common stock (the “Reverse Split”). Effective January 31, 2018, pursuant to authority granted by the stockholders of the Company, the Company implemented a 3-for-4 reverse split of the Company’s issued common stock (the “Second Reverse Split”). All share and per share information has been retroactively adjusted to reflect the Reverse Split and Second Reverse Split for all periods presented. |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and majority-owned subsidiary. Any intercompany transactions and balances have been eliminated in consolidation. 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. 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 fair value of assets acquired and liabilities assumed in a business combination; ● 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; ● the recognition of revenue; and ● the recognition, measurement and valuation of current and deferred income taxes Estimates and assumptions are periodically reviewed, and the effects of any material revisions are reflected in the financial statements in the period that they are determined to be necessary. Actual results could differ from those estimates and assumptions. Cash and Cash Equivalents The Company considers all highly-liquid instruments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of December 31, 2017 or 2016. 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 Property and equipment are stated at cost less accumulated depreciation and amortization. Major improvements are capitalized, and minor replacements, maintenance and repairs are charged to expense as incurred. Depreciation and amortization are calculated on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the estimated useful life or the lease term of the related asset. The estimated useful lives are as follows: Furniture and equipment 5 - 7 years Leasehold improvements 1.7 – 10.4 years Intangible Assets The Company accounts for recorded intangible assets in accordance with ASC 350 “Intangibles - Goodwill and Other”. In accordance with ASC 350, the Company does not amortize intangible assets having indefinite useful lives. The Company’s goodwill and trademarks are deemed to have indefinite lives, and accordingly are not amortized, but are evaluated for impairment at least annually, or more often whenever changes in facts and circumstances may indicate that the carrying value may not be recoverable. The Accounting Standards Codification (“ASC”) requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment). Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgment is required to estimate the fair value of reporting units which includes estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment. When testing goodwill for impairment, the Company may assess qualitative factors for some or all of our reporting units to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill. Alternatively, the Company may bypass this qualitative assessment for some or all of our reporting units and perform a detailed quantitative test of impairment (step 1). If the Company performs the detailed quantitative impairment test and the carrying amount of the reporting unit exceeds its fair value, the Company would perform an analysis (step 2) to measure such impairment. In 2016, the Company performed a qualitative assessment to identify and evaluate events and circumstances to conclude whether it is more likely than not that the fair value of the Company’s reporting units is less than their carrying amounts. Based on the Company’s qualitative assessments, it is more likely than not that the fair value of the reporting units exceeded their carrying values and no impairments were identified in 2016. See Note 8 – Goodwill and Other Intangible Assets, Net for details associated with impairment of goodwill and certain intangible assets in 2017 based on the Company’s quantitative assessments. Other intangible assets include franchise agreements and a non-compete agreement which are amortized on a straight-line basis over their estimated useful lives of 13 years and 5 years, respectively. 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, the Company performs 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. See Note 8 – Goodwill and Other Intangible Assets, Net, and Note 7 – Property and Equipment, Net for details associated with impairment of goodwill and certain intangible assets and property and equipment. 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”). The accounting treatment of derivative financial instruments requires that the Company record embedded conversion options and any related freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. Embedded conversion options and any related freestanding instruments are recorded as a discount to the host instrument. If the instrument is 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 December 31, 2017, and December 31, 2016, the Company did not have any derivative liabilities on its balance sheets. Revenue Recognition In accordance with the Accounting Standard Codification Topic 605 “Revenue Recognition” (“ASC 605”), the Company recognizes revenue when the following four criteria are met: (1) delivery has occurred or services rendered; (2) persuasive evidence of an arrangement exists; (3) there are no continuing obligations to the customer; and (4) the collection of related accounts receivable is probable. Restaurant Sales Retail store revenue at company operated restaurants is recognized when payment is tendered at the point of sale, net of sales tax, discount and other sales related taxes. Franchise Royalties and Fees Franchise royalties and fees principally consists of royalties and franchise fees. Royalties are based on a percentage of franchisee net sales revenue. Initial franchise fees are recognized upon either termination of franchise agreement prior to opening or upon opening of a restaurant or granting of a new franchise term, which is when the Company has performed substantially all material obligations and initial services required by the franchise agreement. The Company recognizes renewal fees as income when a renewal agreement becomes effective. 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 $337,786 and $333,248 during the years ended December 31, 2017 and 2016, respectively, which is included in franchise royalties and fees on the accompanying consolidated statements of operations. Rebates earned on purchases by company owned stores are recorded as a reduction of cost of goods sold during the period in which the related food and beverage purchases are made. Other Revenues Through its subsidiary CTI, the Company derives revenue from the sale of POS computer systems, cash registers, digital menu boards and camera systems, and from the provision of related consulting and support services, which generally include implementation, installation and training services. We recognize revenue when persuasive evidence of an arrangement exists, delivery of the product or service has occurred, the fee is fixed or determinable and collectability is reasonably assured. The Company recorded $725,685 and $557,106 of revenues from these technology sales and services during the years ended December 31, 2017 and 2016, respectively. Deferred Revenue Deferred revenue primarily includes initial franchise fees received by the Company, for which the restaurant has not yet opened, as well as unearned vendor rebates and customer deposits received in connection with technology sales and services by CTI (see Note 12 – Deferred Revenue). The Company collects initial franchise fees when franchise agreements are signed and recognizes the initial franchise fees as revenue when the store is opened, which is when the Company has performed substantially all initial services required by the franchise agreement. Customer deposits received for technology sales or services are recorded as deferred revenue and recognized when the sale is complete, or the service is performed. Advertising Advertising costs are charged to expense as incurred. Advertising costs were approximately $609,000 and $173,000 for the years ended December 31, 2017 and 2016, respectively, and are included in general and administrative expenses in the consolidated statements of operations. Advertising costs incurred related to our national advertising fund are netted with contributions from our Company-owned stores and our franchisees. 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, and stock options from the conversion of convertible debt, from the conversion of Muscle Maker Brands, LLC (“MMB”) membership units and the vesting of restricted stock which were obtained by the non-controlling interest in connection with the acquisition of MMB and are convertible into shares of common stock of MMI. The following securities are excluded from the calculation of weighted average diluted common shares at December 31, 2017 and 2016, respectively, because their inclusion would have been anti-dilutive: December 31, 2017 2016 Warrants 521,045 318,116 Options 33,750 - Convertible debt 1,445,748 1,005,366 MMB membership units - 1,550,964 Total potentially dilutive shares 2,000,543 2,874,446 Concentration of Credit Risk The Company is subject to credit risk through its loans receivable consisting primarily of amounts due from franchisees. The financial condition of these franchisees is largely dependent upon the underlying business trends of our brand and market conditions within the quick service restaurant industry. At December 31, 2017, one franchisee accounted for 78% of loans receivable and at December 31, 2016, two franchisees accounted for 37% and 19%, respectively, of loans receivable. At December 31, 2017 and 2016, a loan to a consultant, who is also a stockholder of CTI, accounted for 4% and 53%, respectively, of loans receivable. Major Vendor The Company engages various vendors to distribute food products to their Company-owned restaurants. Purchases from the Company’s largest supplier totaled 82% and 84% of the Company’s purchases for the year ended December 31, 2017 and 2016, respectively. Controlling and Non-Controlling Interest MMI used to own a 74% controlling interest in MMB through the Effective Merger Date and owns a 70% controlling interest in CTI. The profits and losses of CTI are allocated among the controlling interest and the CTI non-controlling interest in the same proportions as their membership interests. All of the profits and losses of MMB and its subsidiaries were allocated among the controlling interest and MMB non-controlling Interest in proportion to the ownership interests through the Effective Merger Date. 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 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. 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 impact on 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 twelve months of the reporting date. The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the consolidated statements of operations. Reclassifications Certain prior year balances have been reclassified in order to conform to current year presentation. These reclassifications have no effect on the previously reported results of operations or loss per share. 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 FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. ASU 2016-02 will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating ASU 2016-02 and its impact on its consolidated financial statements and disclosures. In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers - Principal versus Agent Considerations”, in April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing” and in May 9, 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2016-12”). This update provides clarifying guidance regarding the application of ASU No. 2014-09 - Revenue From Contracts with Customers which is not yet effective. These new standards provide for a single, principles-based model for revenue recognition that replaces the existing revenue recognition guidance. In July 2015, the FASB deferred the effective date of ASU 2014-09 for private companies and emerging growth public companies until annual and interim periods beginning on or after December 15, 2018. It will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective. The Company will evaluate the effects, if any, that adoption of this guidance will have on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09,” Compensation – Stock Compensation (Topic 718)” (“ASU 2016-09”). ASU 2016-09 requires an entity to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company adopted ASU 2016-09 on the required effective date of January 1, 2017. The adoption of ASU 2016-09 did not have a material impact on the Company’s financial position, results of operations or cash flows. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments (Topic 230)” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The ASU requires adoption on a retrospective basis unless it is impracticable to apply, in which case we will be required to apply the amendments prospectively as of the earliest date practicable. We are currently evaluating the effect that adopting this new accounting guidance will have on its consolidated cash flows and related disclosures. In December 2016, the FASB issued ASU No. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” ASU No. 2016-20 amends certain aspects of ASU No. 2014-09 and clarifies, rather than changes, the core revenue recognition principles in ASU No. 2014-09. It is effective for annual reporting periods beginning after December 15, 2018. We are currently evaluating the effect that adopting this new accounting guidance will have on its consolidated cash flows and related disclosures. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350)” (“ASU 2017-04”) Simplifying the Test for Goodwill Impairment. The update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. It affects public entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. A public entity that is a U.S. Securities and Exchange Commission (“SEC”) filer should adopt the amendments in this update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. We are currently reviewing the new standard and assessing the impact of its adoption. In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718); Scope of Modification Accounting. The amendments in this ASU provide guidance that clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. If the value, vesting conditions or classification of the award changes, modification accounting will apply. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. This guidance is effective for all entities for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. The amendments in ASU 2018-02 should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The adoption of this guidance is not expected to have a material impact the Company’s consolidated financial statements and related disclosures. In June 2018, the FASB issued ASU No. 2018-07, “Compensation — Stock Compensation (Topic 718),” (“ASU 2018-07”). ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. Currently, the accounting requirements for nonemployee and employee share-based payment transactions are significantly different. ASU 2018-07 expands the scope of Topic 718, Compensation — Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. This ASU supersedes Subtopic 505-50, Equity — Equity-Based Payments to Nonemployees. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company is currently evaluating ASU 2018-07 and its impact on the consolidated financial statements. In July 2018, the FASB issued ASU No. 2018-09, “Codification Improvements” (“ASU 2018-09”). These amendments provide clarifications and corrections to certain ASC subtopics including the following: Income Statement - Reporting Comprehensive Income – Overall (Topic 220-10), Debt - Modifications and Extinguishments (Topic 470-50), Distinguishing Liabilities from Equity – Overall (Topic 480-10), Compensation - Stock Compensation - Income Taxes (Topic 718-740), Business Combinations - Income Taxes (Topic 805-740), Derivatives and Hedging – Overall (Topic 815-10), and Fair Value Measurement – Overall (Topic 820-10). The majority of the amendments in ASU 2018-09 will be effective in annual periods beginning after December 15, 2018. The Company is currently evaluating and assessing the impact this guidance will have on its consolidated financial statements. 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, 2019, 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 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, 2019, and interim periods within those fiscal years. The Company is currently assessing the impact this guidance will have on its consolidated financial statements. 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 17 – Subsequent Events. |
Acquisitions
Acquisitions | 12 Months Ended |
Dec. 31, 2017 | |
Business Combinations [Abstract] | |
Acquisitions | NOTE 4 – ACQUISITIONS On September 30, 2016, MMB acquired a business in Winston-Salem, North Carolina (the “Winston Acquisition”). The purchase price of the store was $124,117, of which $120,000 relates to leasehold improvements and equipment purchases and the remaining $4,117 relates to security deposits. The Winston-Salem store commenced operations on January 11, 2017. |
Loans Receivable
Loans Receivable | 12 Months Ended |
Dec. 31, 2017 | |
Receivables [Abstract] | |
Loans Receivable | NOTE 5 - LOANS RECEIVABLE At December 31, 2017 and 2016, the Company’s loans receivable consists of the following: December 31, 2017 December 31, 2016 Loans receivable, net $ 170,668 $ 83,663 Less: current portion (20,146 ) (30,434 ) Loans receivable, non-current $ 150,522 $ 53,229 Loans receivable includes loans to franchisees totaling, in the aggregate, $170,668 and $83,663, net of reserves for uncollectible loans of $55,000 and $25,000 at December 31, 2017 and 2016, respectively. The loans have original terms ranging from 6 months to 5 years, earn interest at rates ranging from 0% to 5%, and are being repaid on a weekly or monthly basis. |
Loans Receivable from Related P
Loans Receivable from Related Parties | 12 Months Ended |
Dec. 31, 2017 | |
Receivables [Abstract] | |
Loans Receivable from Related Parties | NOTE 6 – LOANS RECEIVABLE FROM RELATED PARTIES At December 31, 2017 and 2016, the Company’s loans receivable from related parties consist of the following: December 31, 2017 December 31, 2016 Loans receivable from related parties, net $ 9,704 $ 71,667 Less: current portion (9,704 ) (20,000 ) Loans receivable from related parties, non-current $ - $ 51,667 Included in loans receivable from related parties at December 31, 2017 and 2016, is $9,704 and $71,667, net of reserve for uncollectible related party loans of $45,000 and $0 at December 31, 2017 and 2016, respectively, related to an advance to the Chief Operating Officer (“COO”) and stockholder of CTI, in connection with a consulting agreement. Included in loans receivables from related parties at December 31, 2017 and 2016, is $3,037 and $2,250, respectively, related to advance to employees. |
Property and Equipment, Net
Property and Equipment, Net | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | NOTE 7 – PROPERTY AND EQUIPMENT, NET At December 31, 2017 and 2016, property and equipment consists of the following: December 31, 2017 December 31, 2016 Furniture and equipment $ 189,401 $ 517,603 Leasehold improvements 472,218 665,350 661,619 1,182,953 Less: accumulated depreciation and amortization (144,617 ) (110,408 ) Property and equipment, net $ 517,002 $ 1,072,545 Depreciation expense amounted to $335,825 and $93,641 for the years ended December 31, 2017 and 2016, respectively. During the year ended December 31, 2017, the Company performed an impairment analysis on various assets and concluded that they were fully impaired. The Company recorded impairment charges for those assets in the amount of $1,375,790. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets, Net | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangible Assets, Net | NOTE 8 – GOODWILL AND OTHER INTANGIBLE ASSETS, NET The Company’s intangible assets include a trademark with an indefinite useful life as well as franchise agreements and a non-compete agreement, which are amortized over useful lives of thirteen years and five years, respectively. A summary of the intangible assets is presented below: Intangible Assets Trademark Franchise Agreements Non-Compete Agreement Total Intangible assets, net at December 31, 2015 $ 2,524,000 $ 1,262,039 $ 27,455 $ 3,813,494 Amortization expense - (104,835 ) (6,010 ) (110,845 ) Intangible assets, net at December 31, 2016 2,524,000 1,157,204 21,445 3,702,649 Amortization expense - (104,550 ) (5,994 ) (110,544 ) Impairment of intangible assets - (410,225 ) - (410,225 ) Intangible assets, net at December 31, 2017 $ 2,524,000 $ 642,429 $ 15,451 $ 3,181,880 Weighted average remaining amortization period at December 31, 2017 (in years) 10.1 2.6 Amortization expense related to intangible assets was $110,544 and $110,845 for the years ended December 31, 2017 and 2016, respectively. The Company sustained operating and cash flow losses from inception which formed a basis for performing an impairment test of its Intangible Assets. The Company performed a recoverability test on the franchise agreements that failed the test based on its projected future undiscounted cash flows generated through the asset’s use and eventual disposal. We measured and recorded an impairment charge based on a measurement of fair value of those assets using an income approach. The key assumptions used in the estimates of projected cash flows utilized in both the test and measurement steps of the impairment analysis were projected revenues and royalty payments. These forecasts were based on actual revenues and take into account recent developments as well as the Company’s plans and intentions. Based upon the results of the undiscounted cash flow analysis, the Company recorded an impairment charge on the franchise agreements of $410,225 during the year ended December 31, 2017. The estimated future amortization expense is as follows: For the Year Ended December 31, Franchise Agreements Non-Compete Agreement Total 2018 $ 63,806 $ 5,993 $ 69,799 2019 63,806 5,993 69,799 2020 63,981 3,465 67,446 2021 63,806 - 63,806 2022 63,806 - 63,806 Thereafter 323,224 - 323,224 $ 642,429 $ 15,451 $ 657,880 During the fourth quarter of 2017, the Company performed the annual assessment and determined that goodwill was impaired, and recorded impairment of goodwill of $2,521,468. The impairment charges resulted from decrease in the Company’s estimated undiscounted cash flows from the expected future operations of the assets. These estimates considered factors such as expected future operating income, operating trends and prospects, as well as the effects of demand, competition and other factors. |
Accounts Payables and Accrued E
Accounts Payables and Accrued Expenses | 12 Months Ended |
Dec. 31, 2017 | |
Payables and Accruals [Abstract] | |
Accounts Payables and Accrued Expenses | NOTE 9 – ACCOUNTS PAYABLES AND ACCRUED EXPENSES Accounts payables and accrued expenses consist of the following: December 31, 2017 2016 Accounts payable $ 1,425,281 $ 360,250 Accrued payroll 150,709 28,554 Accrued vacation 93,477 58,477 Accrued professional fees 318,379 205,935 Accrued board members fees 31,500 - Accrued rent expense 284,999 33,455 Sales taxes payable (1) 355,692 111,760 Accrued interest 24,275 - Other accrued expenses 25,881 167,910 $ 2,710,193 $ 966,341 (1) See Note 15 – Commitments and Contingencies –Taxes for detailed related to delinquent sales taxes. |
Convertible Notes Payable to Fo
Convertible Notes Payable to Former Parent | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Convertible Notes Payable to Former Parent | NOTE 10 – CONVERTIBLE NOTES PAYABLE TO FORMER PARENT On December 31, 2015, the Company issued a promissory note in the amount of $1,082,620 (the “2015 ARH Note”) to the holder of a majority of the Company’s common stock. The 2015 ARH Note has no stated interest rate or maturity date. The note is convertible into 231,990 shares of the Company’s common stock at $4.67 per share. The fair value of the Company’s common stock on the date the note was issued was $5.60 per share, creating an intrinsic value of $0.93 per share. On December 15, 2016, the Company issued a promissory note in the amount of $2,621,842 (the “2016 ARH Note”) to the Former Parent. The 2016 ARH Note has no stated interest rate or maturity date. The note is convertible into 702,279 shares of the Company’s common stock at $3.73 per share. The 2016 ARH Note was issued with a three-year warrant for the purchase of 245,797 shares of the Company’s common stock at an exercise price of $9.33 per share, with an aggregate grant date value of $241,028. The Company allocated the proceeds to the 2016 ARH Note and related warrant based on the relative fair values at the time of issuance, resulting in an effective conversion price of $3.39 per share. The fair value of the Company’s common stock on the date the note was issued was $6.78 per share, creating an intrinsic value of $3.39 per share. On February 15, 2017, the Company issued a promissory note in the amount of $980,949 (the “First 2017 ARH Note”) and on March 15, 2017, MMI issued a promissory note in the amount of $338,834 (the “Second 2017 ARH Note”), both to the Former Parent. The First 2017 ARH Note and the Second 2017 ARH Note bear no stated interest rate or maturity date and are convertible into 262,753 and 72,606 shares of the Company’s common stock at a conversion price of $3.73 per share and $4.67 per share, respectively, at a time to be determined by the Former Parent. The First 2017 ARH Note and the Second 2017 ARH note include a three-year warrant for the purchase of 91,963 and 15,793 shares, respectively, of the Company’s common stock at an exercise price of $9.33 per share. The warrants issued in connection with the First 2017 ARH Note and the Second 2017 ARH note had a grant date value of $122,820 and $23,120, respectively. The Company allocated the proceeds to the First 2017 ARH Note and the Second 2017 ARH and related warrants based on the relative fair values at the time of issuance, resulting in an effective conversion price of $3.27 and $4.35 per share, respectively. The fair value of the Company’s common stock on the dates the notes were issued was $7.15 per share, creating an intrinsic value of $3.88 and $2.80 per share, respectively. On July 18, 2017, the Company issued a convertible promissory note (the “Third 2017 ARH Note”) to the Former Parent in exchange for cash proceeds of $336,932. The Third 2017 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 $7.47 per share at a time to be determined by the lender. The Third 2017 ARH Note includes a three-year warrant for the purchase of 15,793 shares of the Company’s common stock at an exercise price of $9.33 per share, with an aggregate grant date value of $25,018. The 2015 ARH Note, 2016 ARH Note, First 2017 ARH Note, Second 2017 ARH Note and Third 2017 ARH Note are together, the “ARH Notes”. On March 14, 2017, the Former Parent elected to convert aggregate principal of $4,685,411 under the 2015 ARH Note, the 2016 ARH Note and the First 2017 ARH Note into an aggregate 1,197,022 shares of the Company’s common stock. On September 19, 2017, the Former Parent elected to convert aggregate principal of $675,766 under the Second 2017 ARH Note and the Third 2017 Note into an aggregate 117,731 shares of the Company’s common stock. In accordance with ASC 470-20 “Debt with Conversion and other Options”, the intrinsic value related to the convertible notes results in a beneficial conversion feature which is recorded as a debt discount with a corresponding credit to additional paid in capital. The relative fair value of the warrant at the date of grant of is also recorded as a debt discount. For the year ended December 31, 2016 the Company recorded aggregate debt discounts of $241,028 and $2,381,107, related to the warrants and the beneficial conversion feature, respectively, on the ARH notes and for the year ended December 31, 2017 the Company recorded aggregate debt discounts of $170,958 and $1,085,985, related to the warrants and the beneficial conversion feature, respectively, on the ARH Notes, which were amortized over the expected terms of the respective notes. The grant date fair value of the warrants issued was valued on the date of issuance using the Black-Scholes option pricing model with the following weighted average assumptions: For the Years Ended December 31, 2017 2016 Risk free interest rate 1.07% - 1.57 % 1.61 % Contractual term (years) 3.00 3.00 Expected volatility 43.5 % 37 % Expected dividend 0.00 % 0.00 % Stock price $ 7.06 - $7.47 $ 6.78 |
Other Notes Payable
Other Notes Payable | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Other Notes Payable | NOTE 11 - OTHER NOTES PAYABLE Convertible Notes During the year ended December 31, 2017, the Company received an aggregate of $1,550,000 associated with the issuances of convertible promissory notes payable and warrants to various parties, of which convertible promissory notes in the aggregate amount of $300,000 were issued to related parties. These notes are convertible into shares of the Company’s common stock upon the occurrence of the initial public offering at a 50% discount to the initial public offering price (the “Conversion Price”). If the convertible notes are not converted within six months, they are to be repaid with 10% interest. The maturity dates of all of the notes were extended subsequent to the year ended December 31, 2017. See Note 17 – Subsequent Events- Convertible Notes Payable for details related to subsequent issuances and extensions. In connection with the issuances of the convertible promissory notes, the Company issued three-year warrants for the purchase of an aggregate of 84,736 shares of the Company’s common stock exercisable at the Conversion Price (see Note 17 - Equity – Warrants). During the year ended December 31, 2017, the Company received an aggregate of $799,340 associated with the issuances of convertible promissory notes payable to various parties. The notes are automatically converted into common stock at the Conversion Price upon the earlier of the closing of the offering or the maturity dates of the notes. See Note 17 – Subsequent Events- Convertible Notes Payable for details related to subsequent issuances or extensions and details related to automatic conversions of convertible notes. Other Notes Payable During the year ended December 31, 2017, the Company received an aggregate of $555,000 associated with the issuances of promissory notes, as amended and extended (See Note 17 – Subsequent Events – Other Notes Payable), payable to various parties, of which $335,000 were issued to a related party with a stated interest rate of 10% per the original 60-day-term. |
Deferred Revenue
Deferred Revenue | 12 Months Ended |
Dec. 31, 2017 | |
Revenue Recognition and Deferred Revenue [Abstract] | |
Deferred Revenue | NOTE 12 – DEFERRED REVENUE At December 31, 2017 and 2016, deferred revenue consists of the following: December 31, 2017 December 31, 2016 Customer deposits $ 18,179 $ 46,441 Franchise fees 1,223,608 1,256,526 Unearned vendor rebates 150,073 - $ 1,391,860 $ 1,302,967 During the year ended December 31, 2017, the Company entered into a new agreement with a vendor whereby the vendor advanced the Company approximately $200,000 against future rebates that the Company will earn from the vendor. |
Other Current Liabilities
Other Current Liabilities | 12 Months Ended |
Dec. 31, 2017 | |
Other Liabilities Disclosure [Abstract] | |
Other Current Liabilities | NOTE 13 – OTHER CURRENT LIABILITIES Other current liabilities consist of the following: December 31, 2017 2016 Gift card liability $ 107,568 $ 91,318 Marketing and co-op advertising fund liability 261,555 66,920 $ 369,123 $ 158,238 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 14 – INCOME TAXES The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2017 and 2016 are presented below: For the Years Ended December 31, 2017 2016 Deferred tax assets: Net operating loss carryforwards $ 2,058,299 $ 1,544,234 Receivable allowance 27,000 18,000 Stock-based compensation 200,471 - Accruals 20,250 - Intangible assets 603,746 - Deferred revenues 264,330 174,600 Gross deferred tax asset 3,174,096 1,736,834 Deferred tax liabilities: Beneficial conversion feature - (952,336 ) Intangible assets - (246,527 ) Gross deferred tax liabilities - (1,198,863 ) Net deferred tax assets 3,174,096 537,971 Valuation allowance (3,174,096 ) (784,498 ) Net deferred tax liability $ - $ (246,527 ) The income tax provision for the periods shown consist of the following: For the Years Ended December 31, 2017 2016 Federal: Current $ - $ - Deferred 2,050,319 206,566 State and local: Current - - Deferred 585,806 36,452 2,636,125 243,018 Change in valuation allowance (2,389,598 ) (370,300 ) Income tax benefit (provision) $ 246,527 $ (127,282 ) A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the periods shown, are as follows: For the Years Ended December 31, 2017 2016 Federal income tax benefit at statutory rate 21.0 % 34.0 % State income tax benefit, net of federal impact 6.0 % 6.0 % Permanent differences (0.8 %) (0.3 %) Income passed through to non-controlling interests (4.1 %) (10.5 %) Change in effective rate (9.8 %) - Other (0.9 %) - Change in valuation allowance (13.1 %) (32.3 %) Effective income tax rate (1.7 %) (3.1 %) At December 31, 2017, the Company had approximately $7.6 million each of federal and state net operating losses that may be available to offset future taxable income. The net operating loss carry-forwards, if not utilized, will expire from 2030 to 2037 for federal purposes. In accordance with Section 382 of the Internal Revenue Code, the usage of the Company’s net operating loss carry-forwards could be subject to annual limitations if there have been greater than 50% ownership changes. The Company completed a Section 382 analysis and determined that none of it’s operating losses would be limited. The Company has filed income tax returns in the U.S. federal jurisdiction and the states of California, New Jersey, Texas and New York. The Company’s tax return filed for 2017, 2016 and 2015 remains subject to examination. On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act includes a number of changes to existing U.S. tax laws that impact the company, most notably a reduction of the U.S. corporate income tax rate from 35 percent to 21 percent for tax years beginning after December 31, 2017. The company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Accordingly, the company’s deferred tax assets and liabilities were remeasured to reflect the reduction in the U.S. corporate income tax rate from 35% to 21%, resulting in a $1,529,547 decrease in net deferred tax assets for the year ended December 31, 2017 and a corresponding $1,529,547 decrease in valuation allowance as of December 31, 2017. The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the 2017 Tax Act enactment date for companies to complete the accounting for the income tax effects of certain elements of the 2017 Tax Act. In accordance with SAB 118, we have recognized the provisional tax impacts related to the remeasurement of deferred tax assets and liabilities and included these amounts in our financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions we have made, additional regulatory guidance that may be issued, and actions we may take as a result of the 2017 Tax Act. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 15 – COMMITMENTS AND CONTINGENCIES Operating Leases During the year ended December 31, 2016, the Company became obligated for payments pursuant to six lease agreements for restaurant spaces with lease terms ranging from 3 years to 10 years, exclusive of options to renew. Rent expenses pursuant to these lease agreements range from $2,897 to $13,176 per month. During the year ended December 31, 2017, the Company became obligated for payments pursuant to four lease agreements for restaurant spaces with lease terms ranging from 5 years to 10 years, exclusive of options to renew. One of the lease agreements has a monthly rent expense based on a percentage fee of eight percent of gross sales for each year of the agreement. Rent expenses pursuant to the remaining three lease agreements range from $5,916 to $7,532 per month. The leases are subject to certain annual escalations as defined in the agreements. The Company recognizes rent on a straight-line basis. The cumulative difference between the rent payments and the rent expense since the inception of the leases was $56,933 at December 31, 2017. The Company has recorded security deposits, totaling, in the aggregate, approximately $21,000 and $149,000 as of December 31, 2017 and 2016, respectively. Future aggregate minimum lease payments for these leases and others as of December 31, 2017 are: Future Minimum Lease Payments 2018 $ 234,248 2019 217,043 2020 154,810 2021 86,947 2022 80,926 Thereafter 303,295 $ 1,077,269 Total rent expense was $980,238 and $806,724 for the years ended December 31, 2017 and 2016, respectively. Subsequent to December 31, 2017, the Company became obligated for payments pursuant to two new lease agreements for restaurant spaces with lease terms of 10 years, exclusive of options to renew. These lease agreements have a monthly rent expense based on a percentage fee of eight percent of gross sales for each year of the agreement. Employment Agreements On January 23, 2015, the Company entered into an employment agreement (the “COO Agreement”) with its Chief Operations Officer (the “COO”). The COO Agreement provides for a base salary of $22,500 per month and performance-based bonuses, as well as standard employee insurance and other benefits as defined in the COO Agreement. The COO Agreement expired on January 23, 2017. On January 23, 2015, the Company entered into an employment agreement (the “DBD Agreement”) with its Director of Brand Development (the “DBD”). The DBD Agreement provides for a base salary of $12,500 per month and performance-based bonuses, as well as standard employee insurance and other benefits as defined in the DBD Agreement. Upon the execution of the DBD Agreement, the DBD received 21,428 shares of immediately vested Company common stock valued at $1.31 per share or $28,000. The DBD Agreement expired on January 23, 2017. The Company entered into an at-will employment agreement with each of (i) Robert Morgan, as former Chief Executive Officer (the “CEO Agreement”), (ii) Grady Metoyer, as former Chief Financial Officer (the “CFO Agreement”) and (iii) Rodney Silva, as Chief Culture Officer (the “CCO Agreement). The employment agreements are effective as of the date the Company receives at least $5,000,000 in gross proceeds from an SEC qualified offering under the Offering Statement under Regulation A+ under the Securities Act of 1933, as amended. The term of these employment agreements are two years and are automatically extended for successive one-year periods unless either party delivers a 60-day notice of termination. These employment agreements did not become effective since the company terminated its Regulation A+ offering on March 29, 2018, yielding proceeds of approximately $143,497. See Note 17 – Subsequent Events - Termination of Offering. Taxes The Company failed in certain instances in paying sales taxes collected from customers in specific states that impose a tax on sales of the Company’s products. The Company had accrued for approximate $356,000 liability, which includes interest, as of December 31, 2017 related to this matter. Consulting Agreement On August 1, 2015, the Company entered into a consulting agreement (the “Consulting Agreement) with an officer of CTI, who is also a stockholder of CTI, (the “Consultant”). The Consulting Agreement has a term of five years, and automatically extends for successive one-year periods, unless either party provides written notice of termination at least 60 days prior to the end of the term. Pursuant to the terms of the agreement, the Consultant will receive a base fee of $11,667 per month. In connection with the agreement, the Company provided a $100,000 advance to the consultant, to be repaid in equal monthly installments of $1,667, over the term of the consulting agreement (See Note 6 – Loans Receivable from Related Parties). Litigations, Claims and Assessments In 2017, Limestone Associates LLC (“Limestone”) filed a complaint against ARH in the Civil Court of the City of New York, County of New York, #78549/2017 for commercial non-payment of rent for the amount of $25,748 plus costs and disbursements of this proceeding. In May 2018, Limestone filed a complaint against ARH and Mr. Morgan in the Supreme Court of the State of New York, County of New York, index # 154469 seeking $1,357,243 in damages for rent, interest and other expenses. On or about December 1, 2017, a landlord commenced legal proceedings in the Supreme Court of New Jersey, Special Civil Part, Union County docket number LT-010222-17 due to the Company’s default under the lease. This was resolved by the Company on January 23, 2018. The Company again defaulted under the terms of the lease and the landlord evicted the Company from the premises. In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business, and as of December 31, 2017, none are expected to materially impact the Company’s financial position. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements. |
Equity
Equity | 12 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
Equity | NOTE 16 – EQUITY Authorized Capital As of December 31, 2017, the Company was authorized to issue 100,000,000 shares of no par value common stock. The holders of the Company’s common stock are entitled to one vote per share. Common Stock Issuances On July 21, 2017, the Company issued 6,696 shares of common stock of the company to an investor at a purchase price of $7.47 per share providing $50,000 of proceeds to the Company. On August 25, 2017, the Company issued an aggregate of 42,856 shares of common stock of the company to investors at a purchase price of $7.47 per share providing $320,000 of proceeds to the Company. On September 1, 2017, the Company issued 6,698 shares of common stock of the company to an investor at a purchase price of $7.47 per share providing $50,000 of proceeds to the Company. During the year ended December 31, 2017, the Company issued 1,314,753 shares of its common stock upon conversion of various ARH Notes in the aggregate principal amount of $5,361,177 (See Note 10 – Convertible Notes Payable to Former Parent). Stock Option and Stock Issuance Plan The Company’s board of directors and shareholders adopted and approved on July 27, 2017 and September 21, 2017, respectively, the Stock Option and Stock Issuance Plan (“2017 Plan”), effective September 21, 2017, under which stock options and restricted stock may be granted to officers, directors, employees and consultants. Under the 2017 Plan, the company reserved 1,071,428 shares of common stock, no par value per share, for issuance. As of the date of the issuance of these consolidated financial statements 1,039,292 shares of common stock were outstanding under the 2017 Plan. Warrant and Option Valuation The Company has computed the fair value of warrants and options granted using the Black-Scholes option pricing model. The expected term used for warrants and options issued to non-employees is the contractual life. The Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time, equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued. Options Granted On July 27, 2017, the Company issued stand-alone non-qualified stock options, not pursuant to a plan, to purchase an aggregate of 33,750 shares of the Company’s common stock to its franchisees. The options are fully vested on the date of issuance and have an exercise price of $9.33 per share. The options expire three years from the date of issuance. The options have a grant date value of $47,583. The Company has estimated the fair value of the options granted using the Black-Scholes model using the following assumptions: expected volatility of 37%, risk-free rate of 1.52%, expected term of 3 years, expected dividends of 0%, and stock price of $7.47. Restricted Common Stock Issuances In May 2017, Muscle Maker granted 119,709 shares of its restricted common stock to its employees and consultants, with an aggregate grant date value of $1,117,403 or $9.33 per share. The restricted common stock awards granted to the employees will vest in five equal installments with the first installment vesting on the date of grant and the remaining installments vesting on the first day of each of the next four calendar years thereafter. In the event of resignation or termination for any reason of an employee or consultant that received such shares, any remaining non-vested shares will be forfeited. These awards were granted under the 2017 Plan. Effective July 20, 2017, the Company entered into a Master Services Agreement (the “MSA”), with a consultant for marketing services to the Company in connection with the Regulation A + offering. Pursuant to the terms of the MSA, the Company issued 52,307 shares of fully vested restricted common stock at a value of $3.25 per share with an aggregate value of $170,000, as well as a cash fee of $145,000. On September 21, 2017, the Company granted an aggregate amount of 32,136 shares of its restricted common stock at a price of $9.33 per share to its directors. The restricted common stock awards granted to the directors are subject to graded vesting in the following installments: (i) 66.67% as of the date of grant and (ii) four installments of 8.333% vesting on the first day of each of the next four calendar months. At December 31, 2017, the unamortized value of the restricted common stock was $662,940. The unamortized amount will be expensed over a weighted average period of 3.01 years. A summary of the activity related to the restricted common stock for the year ended December 31, 2017 is presented below: Weighted Average Grant Total Date Fair Value Outstanding at January 1, 2017 - $ - Granted 204,152 7.78 Forfeited (1,285 ) 9.33 Vested (105,690 ) 6.32 Outstanding at December 31, 2017 97,177 $ 6.82 Stock-Based Compensation Expense Stock-based compensation related to restricted stock issued to employees, directors and consultants amounted to $912,485 and $3,684 for the years ended December 31, 2017 and 2016, respectively, of which $729,073 and $3,684, respectively, was recorded in general and administrative expenses, $13,748 and $0, respectively, was recorded in labor expense with restaurant operating expenses and $170,000 and $0, respectively, was recorded in consulting expenses. Stock-based compensation related to options issued to franchisees amounted to $47,583 year ended December 31, 2017 of which was offset against franchisee royalties and fees in the statement of operations. Warrants On April 21, 2016, the Company granted a three-year warrant for the purchase of 5,356 shares of the Company’s common stock at an exercise price of $9.33 per share to a franchisee and developer of the Company in exchange for services. The warrant had a grant date value of $3,684. On July 25, 2017, a warrant was exercised for the 5,356 shares of common stock of the Company at an exercise price of $9.33 per share for gross proceeds of $50,000. A summary of warrants activity during the years ended December 31, 2017 and 2016 is presented below (See Note 10 —Convertible Notes Payable to Former Parent and Note 11 —Other Notes Payable for warrants issued during the year ended December 31, 2017): Weighted Weighted Average Average Remaining Number of Exercise Life Warrants Price In Years Outstanding, December 31, 2015 - $ - - Issued 318,116 8.84 Exercised - - Outstanding, December 31, 2016 318,116 $ 8.84 2.2 Issued 208,285 9.33 Exercised (5,356 ) 9.33 Outstanding, December 31, 2017 521,045 9.03 1.9 Exercisable, December 31, 2017 521,045 $ 9.03 1.9 The grant date fair value of warrants granted during the years ended December 31, 2017 and 2016 was determined on the date of issuance using the Black-Scholes option pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate and the expected life. The Company calculates the expected volatility using the historical volatility of comparable companies over the most recent period equal to the expected term and evaluates the extent to which available information indicates that future volatility may differ from historical volatility. The expected dividend rate is zero as the Company does not expect to pay or declare any cash dividends on common stock. The risk-free rates for the expected terms of the stock options are based on the U.S. Treasury yield curve in effect at the time of the grant. The Company has not experienced significant exercise activity on stock options. Due to the lack of historical information, the Company determined the expected term of its stock option awards issued using the simplified method. In applying the Black-Scholes option pricing model, the Company used the following assumptions: For the Years Ended December 31, 2017 2016 Risk free interest rate 1.07% - 1.59 % 1.61 % Expected term (years) 3.00 3.00 Expected volatility 43.50 % 40.00 % Expected dividends 0.00 % 0.00 % |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 17 – SUBSEQUENT EVENTS Company-Owned Restaurants Subsequent to December 31, 2017 and through the date of the issuance of these consolidated financial statements, the Company opened one additional company-owned restaurant. Subsequent to December 31, 2017 and through the date of the issuance of these consolidated financial statement, various franchisees opened five franchised restaurants and closed eleven franchised restaurants. From March 2018 through July 2018, as a cost saving measure, the Company closed eight of its thirteen corporate locations. As a result of these closures, the Company’s subsidiaries have been involved in several lawsuits as outlined below under litigations, claims and assessments. Convertible Notes 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. 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 $0.50 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 785,085 shares of the Company’s common stock. Convertible Notes On January 4, 2018 the Company issued a $100,000 convertible promissory note. The note bears no stated interest or maturity date. The note as amended and extended on January 29, 2018, will automatically convert into shares of the Company’s common stock upon the earlier of (a) twelve months from the extension date or (b) the approval of the Form 1-A Registration Statement, at a 50% discount to the initial public offering price. During January 24, 2018 to January 25, 2018, the Company received an aggregate of $150,000 associated with the issuances of convertible promissory notes payable, of which $100,000 were issued to a related party, as amended and extended on or about January 29, 2018, with a stated interest rate of 10% per the original 60-day-term, convertible at the option of the holder into common stock at a price per share of $1.625 (50% of initial public offering price), and, if not converted, will become due and payable along with the principal amount upon the earlier of (a) six months following the extension or (b) the approval of the Form 1-A Registration Statement. In January 2018, the Company and certain note holders, including related parties, agreed to extend the maturity date of additional notes payables and convertible notes payable in the aggregate principal amount of $2,151,800 to be upon the earlier of the closing of the initial public offering, but no later than July 29, 2018. See automatic note conversion and further note extension during August 2018. During May 8, 2018 to July 11, 2018, the Company received an aggregate of $972,000 associated with the issuances of convertible promissory notes payable, of which $550,000 were issued to a related party. The note bears no stated interest or maturity date. The notes are convertible into shares of the Company’s stock upon the earlier of (a) six months from the issue date or (b) the first day the company’s stock is publicly traded or (c) converted at the option of the holder. In connection with the issuances of the convertible promissory notes, the Company issued three-year warrants for the purchase of an aggregate of 486,000 shares of MMI’s common stock at an exercise price of $3.25 per share. Convertible Notes, continued On or about January 23, 2019, the Company and certain note holders, including related parties, agreed to extend the maturity date of the convertible notes payable, as amended and extended on or about August 2018, in the aggregate principal amount of $1,550,000 to be upon the earlier of (a) January 24, 2020 or (b) the first day the company’s stock is publicly traded. All interest due and payable on the notes, shall be converted into shares of common stock at a conversion price of $1.00 per share. Subsequent to December 31, 2017, other convertible promissory notes with an aggregate principal amount of $1,871,340 were automatically converted into 1,525,425 shares of the Company’s common stock pursuant to the terms of the notes. Other Notes Payable On January 4, 2018 the Company issued a $25,000 promissory note to a related party. The note has a stated interest of 10% over the original term of sixty days. The note as amended and extended on January 29, 2018 becomes due and payable upon the earlier of (a) six month following the date of extension or (b) the approval of the Form 1-A Registration Statement. On January 24, 2018, the Company entered into a promissory note with an unrelated third party in the principal amount of $511,765 with a maturity date of March 30, 2018. The note is issued with a 15% original issue discount of which the Company received cash proceeds of $435,000. In connection with the promissory note, the Company issued three-year warrants for the purchase of an aggregate of 78,733 shares of the Company’s common stock with an exercise price per share at 50% of initial public offering price. The warrant contains a cashless exercise provision and piggyback registration rights as to the common stock underlying the warrants subsequent to the filing and effectiveness of the Form 8-A with the SEC following the closing of the initial public offering. In the event of default, the principal amount of the note is to be increased by 30% of the original principal amount and another three-year warrant for the purchase of an additional 78,333 shares of the Company’s common stock with an exercise price per share at 50% of initial public offering price, which together with the original warrant would constitute 100% warrant coverage. The Company has since defaulted on the note and note was subsequently converted into SPA Notes (see Note 17 Subsequent Events - 15% Senior Secured Convertible Notes). On February 7, 2018, the Company and a note holder entered into an amendment to a promissory note issued by the Company on May 31, 2017, whereby the parties agreed to (i) extend the term of the note to March 15, 2018 and (ii) the Company agreed to payments on the following dates: (a) $70,000 upon entering into the amendment and (b) $100,000 on March 15, 2018. See Note 17 – Subsequent Events - Litigations, Claims and Assessments for further action taken by the note holder. On or about January 23, 2019, the Company and certain note holders, including related parties, agreed to extend the maturity date of the notes payable, as amended and extended on or about August 2018, in the aggregate principal amount of $560,000 to be upon the earlier of (a) January 24, 2020 or (b) the first day the company’s stock is publicly traded. All interest due and payable on the notes, shall be converted into shares of common stock at a conversion price of $1.00 per share Termination of Offering On March 29, 2018, the Company decided to terminate its Regulation A+ offering in order to register its common stock with the SEC under the Securities Exchange Act of 1934, as amended, using a Form 8-A12g and become a publicly reporting company. Prior to terminating the Regulation A+ offering, the Company sold 44,153 shares in the offering at $3.25 per share, yielding proceeds of approximately $143,497. 15% Senior Secured Convertible Notes From September 12, 2018 through the date of the issuance of these consolidated financial statements, the Company entered into securities purchase agreements with several accredited investors (the “Investors”) providing for the sale by the Company to the investors of 15% SPA Notes in the aggregate amount of $2,470,000, which included $635,000 in convertible notes converted into SPA Notes (the “September 2018 Offering”). The Notes bear interest at 15% per annum paid quarterly and mature 18 months from issuance. Following the initial closing, there shall be two additional closings in the amount of $1,000,000 each provided the Company achieves certain business milestones outlined in the Securities Purchase Agreement. In addition to the SPA Notes, the Investors also received warrants to purchase common stock of the Company (the “Warrants”) to acquire an aggregate of 1,082,000 shares of common stock of the Company. The Warrants are exercisable for five years at an exercise price of $1.20. The Investors may exercise the Warrants on a cashless basis. The Securities Purchase Agreements require that until the Listing Event, Catalytic Capital LLC holds the right to designate one member and one observer to the board of directors of the Company and that the Company shall engage an investor relations firm mutually agreed to by the Company and Catalytic Capital LLC from the time of the Listing Event until six months after the Listing Event. The Company is also required to engage Insight Advisory as a consultant to provide business and financial advice. The Company granted the Investors piggy back registration rights with respect to the shares of common stock underlying the Notes and the Warrants Sale of CTI On May 24, 2018, the Company entered into a stock purchase agreement between John Guild, JohnG Solutions LLC and CTI in which the Company agreed to sell their 70% ownership in CTI for a total purchase price of $1.00. Employment Agreements On January 17, 2018, Grady Metoyer resigned as the Company’s Chief Financial Officer, effective immediately. Employment Agreements, continued In connection with the resignation of Grady Metoyer, on January 25, 2018, the Company’s board of directors appointed Ferdinand Groenewald as its Vice President of Finance, Principal Financial Officer and Principal Accounting Officer. The Company entered into an at-will employment agreement with Ferdinand Groenewald for a one-year term that is to commence as of the date the Company successfully receives at least $5,000,000 in gross proceeds from an SEC qualified offering under Offering Statement under Regulation A+ under the Securities Act of 1933, as amended. On April 11, 2018, Robert E. Morgan resigned as Chief Executive Officer, President and Director of the Company and all other positions with subsidiaries of the Company. On April 16, 2018, Kevin Mohan was appointed by the Company to serve as the Interim President of the Company. On April 30, 2018, Tim M. Betts resigned as a director of the Company for personal reasons. On May 1, 2018, the Company appointed Michael J. Roper as Chief Executive Officer (“CEO”) of the Company and entered into an Employment Agreement with Mr. Roper. In addition, Mr. Mohan resigned as Interim President of the Company. On May 29, 2018, Ferdinand Groenewald, the Vice President of Finance, Principal Financial Officer and Principal Accounting Officer, notified Muscle Maker, Inc. (the “Company”) that he is resigning from his positions with the Company and its subsidiaries effective May 29, 2018. On September 26, 2018, Muscle Maker, Inc. (the “Company”) appointed Ferdinand Groenewald as Chief Financial Officer of the Company and entered into an Employment Agreement with Mr. Groenewald. On September 26, 2018, the Company appointed Kenneth Miller as Chief Operating Officer of the Company and entered into an Employment Agreement with Mr. Miller. On October 26, 2018, the Company entered into an Employment Agreement with Michael Roper, which replaced his employment agreement from May 2018. Pursuant to the Employment Agreement, Mr. Roper will continue to be employed as Chief Executive Officer of the Company for a period of two years unless earlier terminated pursuant to the terms of the agreement. The Employment Agreement will be automatically extended upon listing the Company on a national exchange and raising $3,000,000 (the “IPO”). During the term of the Employment Agreement, Mr. Roper will be entitled to a base salary at the annualized rate of $250,000, which will be increased to $275,000 upon achieving various milestones required by the Investors that participated in the September 2018 Offering and again to $350,000 upon the Company completing the IPO. Mr. Roper will be eligible for a discretionary performance bonus to be paid in cash or equity, provided, however, no cash bonus will be paid until the closing of the IPO. Mr. Roper is entitled to $100,000 bonus upon closing of the IPO. In addition to 350,000 restricted stock units previously granted, the Company agreed to issue Mr. Roper up to 250,000 additional restricted stock units. In the event the Company raises $3 million or $5 million, then Mr. Roper will receive 150,000 restricted stock units or 250,000 restricted stock units, respectively. In addition, Mr. Roper will receive 100,000 restricted stock units upon the one- and two-year anniversaries of his employment. Employment Agreements, continued On October 26, 2018, the Company entered into an Employment Agreement with Kevin Mohan. Pursuant to the Employment Agreement, Mr. Mohan will be engaged as Chief Investment Officer of the Company for a period of two years unless earlier terminated pursuant to the terms of the agreement. The Employment Agreement will be automatically extended upon the IPO. During the term of the Employment Agreement, Mr. Mohan will be entitled to a base salary at the annualized rate of $156,000, which will be increased to $175,000 upon the IPO. Mr. Mohan will be eligible for a discretionary performance bonus to be paid in cash following the closing of the IPO. Mr. Mohan is entitled to $50,000 bonus upon closing of the IPO. The Company agreed to issue Mr. Mohan up to 200,000 additional restricted stock units. In the event the Company raises $3 million or $5 million, then Mr. Mohan will receive 100,000 restricted stock units or 200,000 restricted stock units, respectively. 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. In April 2018, the Company and Former Parent was listed as a defendant in a lawsuit filed by a landlord (“Former Landlord”) in the Superior Court of the State of California. The Former Landlord is seeking $531,594 in damages for rent, interest and other expenses. The original lease was for a 5-year period and commenced on or about September 30, 2015. On January 15, 2019, the Company and the Former Landlord entered a settlement and release agreement. Pursuant to the settlement the Company shall pay the amount of $531,594 as follows (i) first payment of $49,815, net of security deposit of $11,185, on or before January 23, 2019, (ii) second payment of $25,000 on or before February 28, 2019 and (iii) thereafter sixty-nine payments of $6,400 on or before the 15 th On or about April 5, 2018, the Company and Former Parent, Inc entered into a settlement agreement with 918-924 Belmont, LLC for $100,000 regarding past rents owed, other charges and the termination of its lease at this location. The settlement calls for monthly payments of $8,333 thru March 2019. On May 4, 2018, Stratford Road Partners, LLC (“Stratford”) filed suit against the Company’s subsidiary for non-payment of rent in the small Claims court in the state of North Carolina. Since then the property has been vacated and the landlord offered a settlement of $10,000 with no further lease obligation. The Company has not signed the settlement agreement dated June 30, 2018. 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. On or about May 1, 2018, a suit was filed in the Supreme Court of the State of New York, County of Rockland, by Imperial Bag & Paper seeking $44,585 in past due amounts for goods received. The company entered into a payment plan and as of January 2019 this amount has been paid in full. Litigations, Claims and Assessments, continued On May 25, 2018, the Civil Court of the City of New York, County of New York, entered into a settlement agreement between the Company and a landlord, in the amount of $55,891 for past due rent. The Company agreed to make the following payments (i) $15,000 on or before May 31, 2018, and (ii) $40,891 on or before September 4,2018. These amounts have been paid in full. On September 25, 2018, the Supreme Court of the State of New York, County of Rockland, entered into a judgement in favor of a creditor, in the amount of $69,367. The Company worked with legal counsel and on October 22, 2018, the Company entered into a settlement agreement with the creditor in the amount of $36,000 that was payable on or before November 16, 2018. On December 12, 2018, the Company was listed as a defendant to a lawsuit filed by a landlord in the Superior Court of the State of California. The landlord is seeking approximately $121,000 in damages for rent, interest and other expenses. On February 15, 2019, the company entered into a settlement agreement and payment plan in the amount of $85,000. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and majority-owned subsidiary. Any intercompany transactions and balances have been eliminated in consolidation. |
Use of Estimates | 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. 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 fair value of assets acquired and liabilities assumed in a business combination; ● 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; ● 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 | Cash and Cash Equivalents The Company considers all highly-liquid instruments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of December 31, 2017 or 2016. |
Inventory | 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 | Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Major improvements are capitalized, and minor replacements, maintenance and repairs are charged to expense as incurred. Depreciation and amortization are calculated on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the estimated useful life or the lease term of the related asset. The estimated useful lives are as follows: Furniture and equipment 5 - 7 years Leasehold improvements 1.7 – 10.4 years |
Intangible Assets | Intangible Assets The Company accounts for recorded intangible assets in accordance with ASC 350 “Intangibles - Goodwill and Other”. In accordance with ASC 350, the Company does not amortize intangible assets having indefinite useful lives. The Company’s goodwill and trademarks are deemed to have indefinite lives, and accordingly are not amortized, but are evaluated for impairment at least annually, or more often whenever changes in facts and circumstances may indicate that the carrying value may not be recoverable. The Accounting Standards Codification (“ASC”) requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment). Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgment is required to estimate the fair value of reporting units which includes estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment. When testing goodwill for impairment, the Company may assess qualitative factors for some or all of our reporting units to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill. Alternatively, the Company may bypass this qualitative assessment for some or all of our reporting units and perform a detailed quantitative test of impairment (step 1). If the Company performs the detailed quantitative impairment test and the carrying amount of the reporting unit exceeds its fair value, the Company would perform an analysis (step 2) to measure such impairment. In 2016, the Company performed a qualitative assessment to identify and evaluate events and circumstances to conclude whether it is more likely than not that the fair value of the Company’s reporting units is less than their carrying amounts. Based on the Company’s qualitative assessments, it is more likely than not that the fair value of the reporting units exceeded their carrying values and no impairments were identified in 2016. See Note 8 – Goodwill and Other Intangible Assets, Net for details associated with impairment of goodwill and certain intangible assets in 2017 based on the Company’s quantitative assessments. Other intangible assets include franchise agreements and a non-compete agreement which are amortized on a straight-line basis over their estimated useful lives of 13 years and 5 years, respectively. |
Impairment of Long-Lived Assets | 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, the Company performs 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. See Note 8 – Goodwill and Other Intangible Assets, Net, and Note 7 – Property and Equipment, Net for details associated with impairment of goodwill and certain intangible assets and property and equipment. |
Convertible Instruments | 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”). The accounting treatment of derivative financial instruments requires that the Company record embedded conversion options and any related freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. Embedded conversion options and any related freestanding instruments are recorded as a discount to the host instrument. If the instrument is 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 December 31, 2017, and December 31, 2016, the Company did not have any derivative liabilities on its balance sheets. |
Revenue Recognition | Revenue Recognition In accordance with the Accounting Standard Codification Topic 605 “Revenue Recognition” (“ASC 605”), the Company recognizes revenue when the following four criteria are met: (1) delivery has occurred or services rendered; (2) persuasive evidence of an arrangement exists; (3) there are no continuing obligations to the customer; and (4) the collection of related accounts receivable is probable. Restaurant Sales Retail store revenue at company operated restaurants is recognized when payment is tendered at the point of sale, net of sales tax, discount and other sales related taxes. Franchise Royalties and Fees Franchise royalties and fees principally consists of royalties and franchise fees. Royalties are based on a percentage of franchisee net sales revenue. Initial franchise fees are recognized upon either termination of franchise agreement prior to opening or upon opening of a restaurant or granting of a new franchise term, which is when the Company has performed substantially all material obligations and initial services required by the franchise agreement. The Company recognizes renewal fees as income when a renewal agreement becomes effective. 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 $337,786 and $333,248 during the years ended December 31, 2017 and 2016, respectively, which is included in franchise royalties and fees on the accompanying consolidated statements of operations. Rebates earned on purchases by company owned stores are recorded as a reduction of cost of goods sold during the period in which the related food and beverage purchases are made. Other Revenues Through its subsidiary CTI, the Company derives revenue from the sale of POS computer systems, cash registers, digital menu boards and camera systems, and from the provision of related consulting and support services, which generally include implementation, installation and training services. We recognize revenue when persuasive evidence of an arrangement exists, delivery of the product or service has occurred, the fee is fixed or determinable and collectability is reasonably assured. The Company recorded $725,685 and $557,106 of revenues from these technology sales and services during the years ended December 31, 2017 and 2016, respectively. Deferred Revenue Deferred revenue primarily includes initial franchise fees received by the Company, for which the restaurant has not yet opened, as well as unearned vendor rebates and customer deposits received in connection with technology sales and services by CTI (see Note 12 – Deferred Revenue). The Company collects initial franchise fees when franchise agreements are signed and recognizes the initial franchise fees as revenue when the store is opened, which is when the Company has performed substantially all initial services required by the franchise agreement. Customer deposits received for technology sales or services are recorded as deferred revenue and recognized when the sale is complete, or the service is performed. |
Advertising | Advertising Advertising costs are charged to expense as incurred. Advertising costs were approximately $609,000 and $173,000 for the years ended December 31, 2017 and 2016, respectively, and are included in general and administrative expenses in the consolidated statements of operations. Advertising costs incurred related to our national advertising fund are netted with contributions from our Company-owned stores and our franchisees. |
Net Loss Per Share | 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, and stock options from the conversion of convertible debt, from the conversion of Muscle Maker Brands, LLC (“MMB”) membership units and the vesting of restricted stock which were obtained by the non-controlling interest in connection with the acquisition of MMB and are convertible into shares of common stock of MMI. The following securities are excluded from the calculation of weighted average diluted common shares at December 31, 2017 and 2016, respectively, because their inclusion would have been anti-dilutive: December 31, 2017 2016 Warrants 521,045 318,116 Options 33,750 - Convertible debt 1,445,748 1,005,366 MMB membership units - 1,550,964 Total potentially dilutive shares 2,000,543 2,874,446 |
Concentration of Credit Risk | Concentration of Credit Risk The Company is subject to credit risk through its loans receivable consisting primarily of amounts due from franchisees. The financial condition of these franchisees is largely dependent upon the underlying business trends of our brand and market conditions within the quick service restaurant industry. At December 31, 2017, one franchisee accounted for 78% of loans receivable and at December 31, 2016, two franchisees accounted for 37% and 19%, respectively, of loans receivable. At December 31, 2017 and 2016, a loan to a consultant, who is also a stockholder of CTI, accounted for 4% and 53%, respectively, of loans receivable. |
Major Vendor | Major Vendor The Company engages various vendors to distribute food products to their Company-owned restaurants. Purchases from the Company’s largest supplier totaled 82% and 84% of the Company’s purchases for the year ended December 31, 2017 and 2016, respectively. |
Controlling and Non-Controlling Interest | Controlling and Non-Controlling Interest MMI used to own a 74% controlling interest in MMB through the Effective Merger Date and owns a 70% controlling interest in CTI. The profits and losses of CTI are allocated among the controlling interest and the CTI non-controlling interest in the same proportions as their membership interests. All of the profits and losses of MMB and its subsidiaries were allocated among the controlling interest and MMB non-controlling Interest in proportion to the ownership interests through the Effective Merger Date. |
Income Taxes | 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 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. 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 impact on 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 twelve months of the reporting date. The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the consolidated statements of operations. |
Reclassifications | Reclassifications Certain prior year balances have been reclassified in order to conform to current year presentation. These reclassifications have no effect on the previously reported results of operations or loss per share. |
Stock-Based Compensation | 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 | Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. ASU 2016-02 will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating ASU 2016-02 and its impact on its consolidated financial statements and disclosures. In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers - Principal versus Agent Considerations”, in April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing” and in May 9, 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2016-12”). This update provides clarifying guidance regarding the application of ASU No. 2014-09 - Revenue From Contracts with Customers which is not yet effective. These new standards provide for a single, principles-based model for revenue recognition that replaces the existing revenue recognition guidance. In July 2015, the FASB deferred the effective date of ASU 2014-09 for private companies and emerging growth public companies until annual and interim periods beginning on or after December 15, 2018. It will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective. The Company will evaluate the effects, if any, that adoption of this guidance will have on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09,” Compensation – Stock Compensation (Topic 718)” (“ASU 2016-09”). ASU 2016-09 requires an entity to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company adopted ASU 2016-09 on the required effective date of January 1, 2017. The adoption of ASU 2016-09 did not have a material impact on the Company’s financial position, results of operations or cash flows. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments (Topic 230)” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The ASU requires adoption on a retrospective basis unless it is impracticable to apply, in which case we will be required to apply the amendments prospectively as of the earliest date practicable. We are currently evaluating the effect that adopting this new accounting guidance will have on its consolidated cash flows and related disclosures. In December 2016, the FASB issued ASU No. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” ASU No. 2016-20 amends certain aspects of ASU No. 2014-09 and clarifies, rather than changes, the core revenue recognition principles in ASU No. 2014-09. It is effective for annual reporting periods beginning after December 15, 2018. We are currently evaluating the effect that adopting this new accounting guidance will have on its consolidated cash flows and related disclosures. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350)” (“ASU 2017-04”) Simplifying the Test for Goodwill Impairment. The update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. It affects public entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. A public entity that is a U.S. Securities and Exchange Commission (“SEC”) filer should adopt the amendments in this update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. We are currently reviewing the new standard and assessing the impact of its adoption. In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718); Scope of Modification Accounting. The amendments in this ASU provide guidance that clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. If the value, vesting conditions or classification of the award changes, modification accounting will apply. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. This guidance is effective for all entities for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. The amendments in ASU 2018-02 should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The adoption of this guidance is not expected to have a material impact the Company’s consolidated financial statements and related disclosures. In June 2018, the FASB issued ASU No. 2018-07, “Compensation — Stock Compensation (Topic 718),” (“ASU 2018-07”). ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. Currently, the accounting requirements for nonemployee and employee share-based payment transactions are significantly different. ASU 2018-07 expands the scope of Topic 718, Compensation — Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. This ASU supersedes Subtopic 505-50, Equity — Equity-Based Payments to Nonemployees. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company is currently evaluating ASU 2018-07 and its impact on the consolidated financial statements. In July 2018, the FASB issued ASU No. 2018-09, “Codification Improvements” (“ASU 2018-09”). These amendments provide clarifications and corrections to certain ASC subtopics including the following: Income Statement - Reporting Comprehensive Income – Overall (Topic 220-10), Debt - Modifications and Extinguishments (Topic 470-50), Distinguishing Liabilities from Equity – Overall (Topic 480-10), Compensation - Stock Compensation - Income Taxes (Topic 718-740), Business Combinations - Income Taxes (Topic 805-740), Derivatives and Hedging – Overall (Topic 815-10), and Fair Value Measurement – Overall (Topic 820-10). The majority of the amendments in ASU 2018-09 will be effective in annual periods beginning after December 15, 2018. The Company is currently evaluating and assessing the impact this guidance will have on its consolidated financial statements. 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, 2019, 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 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, 2019, and interim periods within those fiscal years. The Company is currently assessing the impact this guidance will have on its consolidated financial statements. |
Subsequent Events | 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 17 – Subsequent Events. |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Schedule of Estimated Useful Lives of Property and Equipment | The estimated useful lives are as follows: Furniture and equipment 5 - 7 years Leasehold improvements 1.7 – 10.4 years |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following securities are excluded from the calculation of weighted average diluted common shares at December 31, 2017 and 2016, respectively, because their inclusion would have been anti-dilutive: December 31, 2017 2016 Warrants 521,045 318,116 Options 33,750 - Convertible debt 1,445,748 1,005,366 MMB membership units - 1,550,964 Total potentially dilutive shares 2,000,543 2,874,446 |
Loans Receivable (Tables)
Loans Receivable (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Receivables [Abstract] | |
Schedule of Loans Receivables | At December 31, 2017 and 2016, the Company’s loans receivable consists of the following: December 31, 2017 December 31, 2016 Loans receivable, net $ 170,668 $ 83,663 Less: current portion (20,146 ) (30,434 ) Loans receivable, non-current $ 150,522 $ 53,229 |
Loans Receivable from Related_2
Loans Receivable from Related Parties (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Receivables [Abstract] | |
Schedule of Loans Receivable from Related Parties | At December 31, 2017 and 2016, the Company’s loans receivable from related parties consist of the following: December 31, 2017 December 31, 2016 Loans receivable from related parties, net $ 9,704 $ 71,667 Less: current portion (9,704 ) (20,000 ) Loans receivable from related parties, non-current $ - $ 51,667 |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment, Net | At December 31, 2017 and 2016, property and equipment consists of the following: December 31, 2017 December 31, 2016 Furniture and equipment $ 189,401 $ 517,603 Leasehold improvements 472,218 665,350 661,619 1,182,953 Less: accumulated depreciation and amortization (144,617 ) (110,408 ) Property and equipment, net $ 517,002 $ 1,072,545 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets, Net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | A summary of the intangible assets is presented below: Intangible Assets Trademark Franchise Agreements Non-Compete Agreement Total Intangible assets, net at December 31, 2015 $ 2,524,000 $ 1,262,039 $ 27,455 $ 3,813,494 Amortization expense - (104,835 ) (6,010 ) (110,845 ) Intangible assets, net at December 31, 2016 2,524,000 1,157,204 21,445 3,702,649 Amortization expense - (104,550 ) (5,994 ) (110,544 ) Impairment of intangible assets - (410,225 ) - (410,225 ) Intangible assets, net at December 31, 2017 $ 2,524,000 $ 642,429 $ 15,451 $ 3,181,880 Weighted average remaining amortization period at December 31, 2017 (in years) 10.1 2.6 |
Schedule of Future Amortization Expense | The estimated future amortization expense is as follows: For the Year Ended December 31, Franchise Agreements Non-Compete Agreement Total 2018 $ 63,806 $ 5,993 $ 69,799 2019 63,806 5,993 69,799 2020 63,981 3,465 67,446 2021 63,806 - 63,806 2022 63,806 - 63,806 Thereafter 323,224 - 323,224 $ 642,429 $ 15,451 $ 657,880 |
Accounts Payables and Accrued_2
Accounts Payables and Accrued Expenses (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Payables and Accruals [Abstract] | |
Schedule of Accounts Payables and Accrued Expenses | Accounts payables and accrued expenses consist of the following: December 31, 2017 2016 Accounts payable $ 1,425,281 $ 360,250 Accrued payroll 150,709 28,554 Accrued vacation 93,477 58,477 Accrued professional fees 318,379 205,935 Accrued board members fees 31,500 - Accrued rent expense 284,999 33,455 Sales taxes payable (1) 355,692 111,760 Accrued interest 24,275 - Other accrued expenses 25,881 167,910 $ 2,710,193 $ 966,341 (1) See Note 15 – Commitments and Contingencies –Taxes for detailed related to delinquent sales taxes. |
Convertible Notes Payable to _2
Convertible Notes Payable to Former Parent (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule Fair Value of Weighted Average Assumptions | The grant date fair value of the warrants issued was valued on the date of issuance using the Black-Scholes option pricing model with the following weighted average assumptions: For the Years Ended December 31, 2017 2016 Risk free interest rate 1.07% - 1.57 % 1.61 % Contractual term (years) 3.00 3.00 Expected volatility 43.5 % 37 % Expected dividend 0.00 % 0.00 % Stock price $ 7.06 - $7.47 $ 6.78 |
Deferred Revenue (Tables)
Deferred Revenue (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Revenue Recognition and Deferred Revenue [Abstract] | |
Schedule of Deferred Revenue | At December 31, 2017 and 2016, deferred revenue consists of the following: December 31, 2017 December 31, 2016 Customer deposits $ 18,179 $ 46,441 Franchise fees 1,223,608 1,256,526 Unearned vendor rebates 150,073 - $ 1,391,860 $ 1,302,967 |
Other Current Liabilities (Tabl
Other Current Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Other Current Liabilities | Other current liabilities consist of the following: December 31, 2017 2016 Gift card liability $ 107,568 $ 91,318 Marketing and co-op advertising fund liability 261,555 66,920 $ 369,123 $ 158,238 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule of Deferred Tax Assets and Liabilities | The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2017 and 2016 are presented below: For the Years Ended December 31, 2017 2016 Deferred tax assets: Net operating loss carryforwards $ 2,058,299 $ 1,544,234 Receivable allowance 27,000 18,000 Stock-based compensation 200,471 - Accruals 20,250 - Intangible assets 603,746 - Deferred revenues 264,330 174,600 Gross deferred tax asset 3,174,096 1,736,834 Deferred tax liabilities: Beneficial conversion feature - (952,336 ) Intangible assets - (246,527 ) Gross deferred tax liabilities - (1,198,863 ) Net deferred tax assets 3,174,096 537,971 Valuation allowance (3,174,096 ) (784,498 ) Net deferred tax liability $ - $ (246,527 ) |
Schedule of Income Tax Provision | The income tax provision for the periods shown consist of the following: For the Years Ended December 31, 2017 2016 Federal: Current $ - $ - Deferred 2,050,319 206,566 State and local: Current - - Deferred 585,806 36,452 2,636,125 243,018 Change in valuation allowance (2,389,598 ) (370,300 ) Income tax benefit (provision) $ 246,527 $ (127,282 ) |
Schedule of Reconciliation of Statutory Federal Income Tax Rate | A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the periods shown, are as follows: For the Years Ended December 31, 2017 2016 Federal income tax benefit at statutory rate 21.0 % 34.0 % State income tax benefit, net of federal impact 6.0 % 6.0 % Permanent differences (0.8 %) (0.3 %) Income passed through to non-controlling interests (4.1 %) (10.5 %) Change in effective rate (9.8 %) - Other (0.9 %) - Change in valuation allowance (13.1 %) (32.3 %) Effective income tax rate (1.7 %) (3.1 %) |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Lease Payments | Future aggregate minimum lease payments for these leases and others as of December 31, 2017 are: Future Minimum Lease Payments 2018 $ 234,248 2019 217,043 2020 154,810 2021 86,947 2022 80,926 Thereafter 303,295 $ 1,077,269 |
Equity (Tables)
Equity (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
Schedule of Activity Related to Restricted Common Stock | A summary of the activity related to the restricted common stock for the year ended December 31, 2017 is presented below: Weighted Average Grant Total Date Fair Value Outstanding at January 1, 2017 - $ - Granted 204,152 7.78 Forfeited (1,285 ) 9.33 Vested (105,690 ) 6.32 Outstanding at December 31, 2017 97,177 $ 6.82 |
Schedule of Warrants Activity | A summary of warrants activity during the years ended December 31, 2017 and 2016 is presented below (See Note 10 - Convertible Notes Payable to Former Parent and Note 11 - Other Notes Payable for warrants issued during the year ended December 31, 2017): Weighted Weighted Average Average Remaining Number of Exercise Life Warrants Price In Years Outstanding, December 31, 2015 - $ - - Issued 318,116 8.84 Exercised - - Outstanding, December 31, 2016 318,116 $ 8.84 2.2 Issued 208,285 9.33 Exercised (5,356 ) 9.33 Outstanding, December 31, 2017 521,045 9.03 1.9 Exercisable, December 31, 2017 521,045 $ 9.03 1.9 |
Schedule of Stock Options Assumptions | In applying the Black-Scholes option pricing model, the Company used the following assumptions: For the Years Ended December 31, 2017 2016 Risk free interest rate 1.07% - 1.59 % 1.61 % Expected term (years) 3.00 3.00 Expected volatility 43.50 % 40.00 % Expected dividends 0.00 % 0.00 % |
Business Organization and Nat_2
Business Organization and Nature of Operations, Going Concern and Management's Plans (Details Narrative) - USD ($) | Sep. 15, 2017 | Jul. 18, 2017 | Mar. 23, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Jan. 23, 2015 |
Equity ownership percentage | 50.00% | |||||
Cash balance | $ 78,683 | $ 335,724 | ||||
Working capital deficiency | 4,306,947 | |||||
Accumulated deficit | (17,052,086) | (3,841,638) | ||||
Net loss before income tax | (15,814,278) | (4,092,405) | ||||
Debt conversion of converted instruments | 1,085,985 | $ 2,381,107 | ||||
Convertible Promissory Notes Payable [Member] | ||||||
Debt conversion of converted instruments | 1,813,165 | |||||
Warrants [Member] | ||||||
Debt conversion of converted instruments | 1,072,000 | |||||
Agreement of Merger [Member] | MMBC Common Stock [Member] | ||||||
Stock converted to shares | 796 | |||||
Accredited Investors [Member] | SPA Notes [Member] | ||||||
Debt conversion of converted instruments | $ 635,000 | |||||
Interest rate | 15.00% | |||||
Debt principal amount | $ 1,835,000 | |||||
Muscle Maker Brands, LLC [Member] | ||||||
Acquisition percentage | 74.00% | |||||
Equity ownership percentage | 74.00% | |||||
Muscle Maker Franchising, LLC [Member] | ||||||
Acquisition percentage | 26.00% | |||||
Muscle Maker Franchising, LLC [Member] | Agreement of Merger [Member] | ||||||
Aggregate consideration | 1,550,964 | |||||
American Restaurant Holdings [Member] | ||||||
Common stock authorized and facilitated | 5,536,308 | |||||
Muscle Maker Development, LLC [Member] | Sole Member and Manager [Member] | ||||||
Number of membership unit issued | 1,000 | |||||
Muscle Maker Corp., LLC [Member] | Sole Member and Manager [Member] | ||||||
Number of membership unit issued | 1,000 | |||||
CTI [Member] | ||||||
Equity ownership percentage | 70.00% | |||||
CTI [Member] | Agreement of Merger [Member] | ||||||
Equity ownership percentage | 70.00% |
Reverse Stock Splits (Details N
Reverse Stock Splits (Details Narrative) | Sep. 20, 2017 | Dec. 31, 2017 |
Reverse split | Company implemented a 1-for-7 reverse split of the Company's issued common stock (the "Reverse Split"). | |
Reserve split ratio | 0.142 | |
January 31, 2018 [Member] | ||
Reverse split | Company implemented a 3-for-4 reverse split of the Company's issued common stock (the "Second Reverse Split"). | |
Reserve split ratio | 0.75 |
Significant Accounting Polici_4
Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Cash equivalents | ||
Other revenues | 725,685 | 557,106 |
Advertising costs | $ 609,000 | $ 173,000 |
Equity ownership percentage | 50.00% | |
CTI [Member] | ||
Equity ownership percentage | 70.00% | |
Muscle Maker Brands, LLC [Member] | ||
Equity ownership percentage | 74.00% | |
Customer Concentration Risk [Member] | Loans Receivable [Member] | Franchisee One [Member] | ||
Concentration risk percentage | 78.00% | 37.00% |
Customer Concentration Risk [Member] | Loans Receivable [Member] | Franchisee Two [Member] | ||
Concentration risk percentage | 19.00% | |
Customer Concentration Risk [Member] | Loans Receivable [Member] | Consultant [Member] | CTI [Member] | ||
Concentration risk percentage | 4.00% | 53.00% |
Supplier Concentration Risk [Member] | Purchases [Member] | ||
Concentration risk percentage | 82.00% | 84.00% |
Rebates [Member] | ||
Revenues | $ 337,786 | $ 333,248 |
Technology Sales and Services [Member] | ||
Other revenues | $ 725,685 | $ 557,106 |
Franchise Agreements [Member] | ||
Other intangible asset, useful life | 13 years | |
Non-compete Agreements [Member] | ||
Other intangible asset, useful life | 5 years |
Significant Accounting Polici_5
Significant Accounting Policies - Schedule of Estimated Useful Lives of Property and Equipment (Details) | 12 Months Ended |
Dec. 31, 2017 | |
Furniture and Equipment [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 5 years |
Furniture and Equipment [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 7 years |
Leasehold Improvements [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 1 year 8 months 12 days |
Leasehold Improvements [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 10 years 4 months 24 days |
Significant Accounting Polici_6
Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Total potentially dilutive shares | 2,000,543 | 2,874,446 |
Warrants [Member] | ||
Total potentially dilutive shares | 521,045 | 318,116 |
Options [Member] | ||
Total potentially dilutive shares | 33,750 | |
Convertible Debt [Member] | ||
Total potentially dilutive shares | 1,445,748 | 1,005,366 |
MMB Membership Units [Member] | ||
Total potentially dilutive shares | 1,550,964 |
Acquisitions (Details Narrative
Acquisitions (Details Narrative) - Winston Acquisition [Member] | Sep. 30, 2016USD ($) |
Business acquisition purchase price | $ 124,117 |
Security Deposits [Member] | |
Business acquisition purchase price | 4,117 |
Leasehold Improvements [Member] | |
Business acquisition purchase price | $ 120,000 |
Loans Receivable (Details Narra
Loans Receivable (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Loans receivable | $ 170,668 | $ 83,663 |
Net of reserves for uncollectible loans | $ 55,000 | $ 25,000 |
Minimum [Member] | ||
Loan original term | 6 months | |
Interest rate | 0.00% | |
Maximum [Member] | ||
Loan original term | 5 years | |
Interest rate | 5.00% |
Loans Receivable - Schedule of
Loans Receivable - Schedule of Loans Receivables (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Receivables [Abstract] | ||
Loans receivable, net | $ 170,668 | $ 83,663 |
Less: current portion | (20,146) | (30,434) |
Loans receivable, non-current | $ 150,522 | $ 53,229 |
Loans Receivable from Related_3
Loans Receivable from Related Parties (Details Narrative) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Chief Operating Officer and Stockholder [Member] | ||
Loans receivable from related parties | $ 9,704 | $ 71,667 |
Net of reserve for uncollectible related party loans | 45,000 | 0 |
Employees [Member] | ||
Loans receivable from related parties | $ 3,037 | $ 2,250 |
Loans Receivable from Related_4
Loans Receivable from Related Parties - Schedule of Loans Receivable from Related Parties (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Receivables [Abstract] | ||
Loans receivable from related parties, net | $ 9,704 | $ 71,667 |
Less: current portion | (9,704) | (20,000) |
Loans receivable from related parties, non-current | $ 51,667 |
Property and Equipment, Net (De
Property and Equipment, Net (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 335,825 | $ 93,641 |
Assets impairment charges | $ 1,375,790 |
Property and Equipment, Net - S
Property and Equipment, Net - Schedule of Property and Equipment, Net (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Property, Plant and Equipment [Abstract] | ||
Furniture and equipment | $ 189,401 | $ 517,603 |
Leasehold improvements | 472,218 | 665,350 |
Property and equipment, gross | 661,619 | 1,182,953 |
Less: accumulated depreciation and amortization | (144,617) | (110,408) |
Property and equipment, net | $ 517,002 | $ 1,072,545 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets, Net (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Amortization expense | $ 110,544 | $ 110,845 | |
Impairment of intangible assets | (410,225) | ||
Impairment of goodwill | $ 2,521,468 | $ 2,521,468 | |
Franchise Agreements [Member] | |||
Other intangible asset, useful life | 13 years | ||
Impairment of intangible assets | $ 410,225 | ||
Non-compete Agreements [Member] | |||
Other intangible asset, useful life | 5 years |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets, Net - Schedule of Intangible Assets (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Intangible assets, net beginning balance | $ 3,702,649 | $ 3,813,494 |
Amortization expense | (110,544) | (110,845) |
Impairment of intangible assets | (410,225) | |
Intangible assets, net ending balance | 3,181,880 | 3,702,649 |
Trademarks [Member] | ||
Intangible assets, net beginning balance | 2,524,000 | 2,524,000 |
Amortization expense | ||
Impairment of intangible assets | ||
Intangible assets, net ending balance | 2,524,000 | 2,524,000 |
Franchise Agreements [Member] | ||
Intangible assets, net beginning balance | 1,157,204 | 1,262,039 |
Amortization expense | (104,550) | (104,835) |
Impairment of intangible assets | (410,225) | |
Intangible assets, net ending balance | $ 642,429 | 1,157,204 |
Weighted average remaining amortization period at December 31, 2017 (in years) | 10 years 1 month 6 days | |
Non-Compete Agreement [Member] | ||
Intangible assets, net beginning balance | $ 21,445 | 27,455 |
Amortization expense | (5,994) | (6,010) |
Impairment of intangible assets | ||
Intangible assets, net ending balance | $ 15,451 | $ 21,445 |
Weighted average remaining amortization period at December 31, 2017 (in years) | 2 years 7 months 6 days |
Goodwill and Other Intangible_5
Goodwill and Other Intangible Assets, Net - Schedule of Future Amortization Expense (Details) | Dec. 31, 2017USD ($) |
2,018 | $ 69,799 |
2,019 | 69,799 |
2,020 | 67,446 |
2,021 | 63,806 |
2,022 | 63,806 |
Thereafter | 323,224 |
Estimated future amortization expense | 657,880 |
Franchise Agreements [Member] | |
2,018 | 63,806 |
2,019 | 63,806 |
2,020 | 63,981 |
2,021 | 63,806 |
2,022 | 63,806 |
Thereafter | 323,224 |
Estimated future amortization expense | 642,429 |
Non-compete Agreements [Member] | |
2,018 | 5,993 |
2,019 | 5,993 |
2,020 | 3,465 |
2,021 | |
2,022 | |
Thereafter | |
Estimated future amortization expense | $ 15,451 |
Accounts Payables and Accrued_3
Accounts Payables and Accrued Expenses - Schedule of Accounts Payables and Accrued Expenses (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 | |
Payables and Accruals [Abstract] | |||
Accounts payable | $ 1,425,281 | $ 360,250 | |
Accrued payroll | 150,709 | 28,554 | |
Accrued vacation | 93,477 | 58,477 | |
Accrued professional fees | 318,379 | 205,935 | |
Accrued board members fees | 31,500 | ||
Accrued rent expense | 284,999 | 33,455 | |
Sales taxes payable | [1] | 355,692 | 111,760 |
Accrued interest | 24,275 | ||
Other accrued expenses | 25,881 | 167,910 | |
Accounts payables and accrued expenses | $ 2,710,193 | $ 966,341 | |
[1] | See Note 15 - Commitments and Contingencies - Taxes for detailed related to delinquent sales taxes. |
Convertible Notes Payable to _3
Convertible Notes Payable to Former Parent (Details Narrative) - USD ($) | Sep. 19, 2017 | Jul. 18, 2017 | Mar. 15, 2017 | Mar. 14, 2017 | Feb. 15, 2017 | Dec. 15, 2016 | Dec. 31, 2015 | Dec. 31, 2017 | Dec. 31, 2016 |
Aggregate principal conversion of debt, amount | $ 1,085,985 | $ 2,381,107 | |||||||
Warrants issued in connection with convertible debt | 170,958 | 241,028 | |||||||
Beneficial conversion feature | 2,381,107 | ||||||||
Warrants [Member] | |||||||||
Warrants issued in connection with convertible debt | 170,958 | 241,028 | |||||||
Beneficial conversion feature | $ 1,085,985 | $ 2,381,107 | |||||||
2015 ARH Note [Member] | |||||||||
Debt principal amount | $ 1,082,620 | ||||||||
Number of shares issued for conversion of debt | 231,990 | ||||||||
Conversion price per share | $ 4.67 | ||||||||
Shares issued price per share | 5.60 | ||||||||
Stock intrinsic value | $ 0.93 | ||||||||
2016 ARH Note [Member] | |||||||||
Debt principal amount | $ 2,621,842 | ||||||||
Number of shares issued for conversion of debt | 702,279 | ||||||||
Conversion price per share | $ 3.73 | ||||||||
Shares issued price per share | 6.78 | ||||||||
Stock intrinsic value | $ 3.39 | ||||||||
Warrants to purchase common stock | 245,797 | ||||||||
Warrants exercise price | $ 9.33 | ||||||||
Fair value of warrants | $ 241,028 | ||||||||
Warrants term | 3 years | ||||||||
2016 ARH Note and Related Warrants [Member] | |||||||||
Conversion price per share | $ 3.39 | ||||||||
First 2017 ARH Note [Member] | |||||||||
Debt principal amount | $ 980,949 | ||||||||
Number of shares issued for conversion of debt | 262,753 | ||||||||
Conversion price per share | $ 3.73 | ||||||||
Shares issued price per share | 7.15 | ||||||||
Stock intrinsic value | $ 3.88 | ||||||||
Warrants to purchase common stock | 91,963 | ||||||||
Warrants exercise price | $ 9.33 | ||||||||
Fair value of warrants | $ 122,820 | ||||||||
Warrants term | 3 years | ||||||||
Second 2017 ARH Note [Member] | |||||||||
Debt principal amount | $ 338,834 | ||||||||
Number of shares issued for conversion of debt | 72,606 | ||||||||
Conversion price per share | $ 4.67 | ||||||||
Shares issued price per share | 7.15 | ||||||||
Stock intrinsic value | $ 2.80 | ||||||||
Warrants to purchase common stock | 15,793 | ||||||||
Warrants exercise price | $ 9.33 | ||||||||
Fair value of warrants | $ 23,120 | ||||||||
Warrants term | 3 years | ||||||||
First 2017 ARH Note and Related Warrants [Member] | |||||||||
Conversion price per share | $ 3.27 | ||||||||
Second 2017 ARH Note and Related Warrants [Member] | |||||||||
Conversion price per share | $ 4.35 | ||||||||
Third 2017 ARH Note [Member] | Former Parent [Member] | |||||||||
Debt principal amount | $ 336,932 | ||||||||
Conversion price per share | $ 7.47 | ||||||||
Warrants to purchase common stock | 15,793 | ||||||||
Warrants exercise price | $ 9.33 | ||||||||
Fair value of warrants | $ 25,018 | ||||||||
Warrants term | 3 years | ||||||||
ARH Note [Member] | Former Parent [Member] | |||||||||
Number of shares issued for conversion of debt | 1,197,022 | ||||||||
Aggregate principal conversion of debt, amount | $ 4,685,411 | ||||||||
Second 2017 ARH Note and the Third 2017 Note [Member] | Former Parent [Member] | |||||||||
Number of shares issued for conversion of debt | 117,731 | ||||||||
Aggregate principal conversion of debt, amount | $ 675,766 |
Convertible Notes Payable to _4
Convertible Notes Payable to Former Parent - Schedule Fair Value of Weighted Average Assumptions (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Risk Free Interest Rate [Member] | ||
Fair value assumptions, measurement input, percentage | 1.61% | |
Risk Free Interest Rate [Member] | Minimum [Member] | ||
Fair value assumptions, measurement input, percentage | 1.07% | |
Risk Free Interest Rate [Member] | Maximum [Member] | ||
Fair value assumptions, measurement input, percentage | 1.57% | |
Contractual Term (Years) [Member] | ||
Fair value assumptions, measurement input, term | 3 years | 3 years |
Expected Volatility [Member] | ||
Fair value assumptions, measurement input, percentage | 43.50% | 37.00% |
Expected Dividend [Member] | ||
Fair value assumptions, measurement input, percentage | 0.00% | 0.00% |
Stock Price [Member] | ||
Fair value assumptions, measurement input, per share | $ 6.78 | |
Stock Price [Member] | Minimum [Member] | ||
Fair value assumptions, measurement input, per share | $ 7.06 | |
Stock Price [Member] | Maximum [Member] | ||
Fair value assumptions, measurement input, per share | $ 7.47 |
Other Notes Payable (Details Na
Other Notes Payable (Details Narrative) | 12 Months Ended |
Dec. 31, 2017USD ($)shares | |
Proceeds from issuance of notes payable | $ 799,340 |
Convertible Promissory Notes [Member] | |
Proceeds from issuance of notes payable | 1,550,000 |
Due to related parties | $ 300,000 |
Offering conversion price percentage | 50.00% |
Debt interest percentage | 10.00% |
Warrants term | 3 years |
Warrants to purchase shares of common stock | shares | 84,736 |
Other Notes Payable [Member] | |
Proceeds from issuance of notes payable | $ 555,000 |
Due to related parties | $ 335,000 |
Debt interest percentage | 10.00% |
Warrants term | 60 days |
Deferred Revenue (Details Narra
Deferred Revenue (Details Narrative) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Vendor [Member] | |
Payments on future rebates | $ 200,000 |
Deferred Revenue - Schedule of
Deferred Revenue - Schedule of Deferred Revenue (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Revenue Recognition and Deferred Revenue [Abstract] | ||
Customer deposits | $ 18,179 | $ 46,441 |
Franchise fees | 1,223,608 | 1,256,526 |
Unearned vendor rebates | 150,073 | |
Deferred revenue | $ 1,391,860 | $ 1,302,967 |
Other Current Liabilities - Sch
Other Current Liabilities - Schedule of Other Current Liabilities (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Other Liabilities Disclosure [Abstract] | ||
Gift card liability | $ 107,568 | $ 91,318 |
Marketing and co-op advertising fund liability | 261,555 | 66,920 |
Other current liabilities | $ 369,123 | $ 158,238 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Net operating losses of federal and state | $ 7,600,000 | |
Operating loss carryforward expiration term | Will expire from 2030 to 2037 | |
Ownership percentage | 50.00% | |
Corporate income tax rate | 21.00% | 34.00% |
Income tax reconciliation description | On December 22, 2017, the Tax Cuts and Jobs Act (the "2017 Tax Act") was enacted. The 2017 Tax Act includes a number of changes to existing U.S. tax laws that impact the company, most notably a reduction of the U.S. corporate income tax rate from 35 percent to 21 percent for tax years beginning after December 31, 2017. | |
Decrease in deferred tax assets | $ 1,529,547 | |
Decrease in valuation allowance | $ 2,389,598 | $ 370,300 |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforwards | $ 2,058,299 | $ 1,544,234 |
Receivable allowance | 27,000 | 18,000 |
Stock-based compensation | 200,471 | |
Accruals | 20,250 | |
Intangible assets | 603,746 | |
Deferred revenues | 264,330 | 174,600 |
Gross deferred tax asset | 3,174,096 | 1,736,834 |
Beneficial conversion feature | (952,336) | |
Intangible assets | (246,527) | |
Gross deferred tax liabilities | (1,198,863) | |
Net deferred tax assets | 3,174,096 | 537,971 |
Valuation allowance | (3,174,096) | (784,498) |
Net deferred tax liability | $ (246,527) |
Income Taxes - Schedule of Inco
Income Taxes - Schedule of Income Tax Provision (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Federal Current | ||
Federal Deferred | 2,050,319 | 206,566 |
State and local Current | ||
State and local Deferred | 585,806 | 36,452 |
Deferred Federal, State and Local, Tax Expense (Benefit) | 2,636,125 | 243,018 |
Change in valuation allowance | (2,389,598) | (370,300) |
Income tax benefit (provision) | $ 246,527 | $ (127,282) |
Income Taxes - Schedule of Reco
Income Taxes - Schedule of Reconciliation of Statutory Federal Income Tax Rate (Details) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Federal income tax benefit at statutory rate | 21.00% | 34.00% |
State income tax benefit, net of federal impact | 6.00% | 6.00% |
Permanent differences | (0.80%) | (0.30%) |
Income passed through to non-controlling interests | (4.10%) | (10.50%) |
Change in effective rate | (9.80%) | |
Other | (0.90%) | |
Change in valuation allowance | (13.10%) | (32.30%) |
Effective income tax rate | (1.70%) | (3.10%) |
Commitments and Contingencies_2
Commitments and Contingencies (Details Narrative) - USD ($) | Dec. 31, 2017 | Aug. 02, 2015 | Jan. 23, 2015 | Dec. 31, 2017 | Dec. 31, 2016 |
Rent expense | $ 56,933 | ||||
Value of issued shares of common stock | |||||
Accrued taxes | $ 356,000 | $ 356,000 | |||
COO Agreement [Member] | |||||
Base salary | $ 22,500 | ||||
Agreement expiry date | Jan. 23, 2017 | ||||
DBD Agreement [Member] | |||||
Base salary | $ 12,500 | ||||
Number of issued shares of common stock | 21,428 | ||||
Shares issued price per share | $ 1.31 | ||||
Value of issued shares of common stock | $ 28,000 | ||||
Employment Agreements [Member] | |||||
Gross proceeds from offering | $ 5,000,000 | ||||
Agreements term description | The term of these employment agreements are two years and are automatically extended for successive one-year periods unless either party delivers a 60-day notice of termination. | ||||
Consulting Agreement [Member] | Officer [Member] | |||||
Agreements term description | The Consulting Agreement has a term of five years, and automatically extends for successive one-year periods, unless either party provides written notice of termination at least 60 days prior to the end of the term. | ||||
Consultant Base fee | $ 11,667 | ||||
Advance to consultant | 100,000 | ||||
Monthly installments | $ 1,667 | ||||
Restaurant Spaces [Member] | |||||
Operating lease term | 10 years | 10 years | |||
Rent expense | $ 980,238 | $ 806,724 | |||
Security deposits | $ 21,000 | $ 21,000 | $ 149,000 | ||
Restaurant Spaces [Member] | Minimum [Member] | |||||
Operating lease term | 5 years | 5 years | 3 years | ||
Rent expense | $ 5,916 | $ 2,897 | |||
Restaurant Spaces [Member] | Maximum [Member] | |||||
Operating lease term | 10 years | 10 years | 10 years | ||
Rent expense | $ 7,532 | $ 13,176 | |||
Termination of Offering [Member] | Employment Agreements [Member] | |||||
Gross proceeds from offering | $ 143,497 | ||||
American Restaurant Holdings [Member] | Limestone Associates LLC [Member] | |||||
Non-payment of rent | $ 25,748 | ||||
American Restaurant Holdings [Member] | Limestone Associates LLC [Member] | May 2018 [Member] | |||||
Loss contingency seeking damages | $ 1,357,243 |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Future Minimum Lease Payments (Details) | Dec. 31, 2017USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,018 | $ 234,248 |
2,019 | 217,043 |
2,020 | 154,810 |
2,021 | 86,947 |
2,022 | 80,926 |
Thereafter | 303,295 |
Total | $ 1,077,269 |
Equity (Details Narrative)
Equity (Details Narrative) - USD ($) | Sep. 21, 2017 | Sep. 01, 2017 | Aug. 25, 2017 | Jul. 27, 2017 | Jul. 25, 2017 | Jul. 21, 2017 | Jul. 20, 2017 | Apr. 21, 2016 | May 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 |
Common stock, shares authorized | 100,000,000 | 100,000,000 | |||||||||
Common stock, no par value | |||||||||||
Value of common stock shares issued | |||||||||||
Common stock, shares outstanding | 7,637,855 | 4,604,842 | |||||||||
Expected volatility | 43.50% | 40.00% | |||||||||
Risk-free rate | 1.61% | ||||||||||
Expected term | 3 years | 3 years | |||||||||
Expected dividends | 0.00% | 0.00% | |||||||||
Stock price | $ 5.60 | ||||||||||
Stock-based compensation | $ 742,821 | $ 3,684 | |||||||||
Labor expense | 2,634,730 | 1,306,614 | |||||||||
Proceeds from warrant exercises | $ 50,000 | ||||||||||
Warrants [Member] | |||||||||||
Warrant term | 3 years | ||||||||||
Number of warrant to purchase shares of common stock | 5,356 | ||||||||||
Warrant exercise price per share | $ 9.33 | $ 9.33 | |||||||||
Value of warrant | $ 3,684 | ||||||||||
Number of warrant exercised | 5,356 | ||||||||||
Proceeds from warrant exercises | $ 50,000 | ||||||||||
Restricted Common Stock [Member] | |||||||||||
Shares issued price per share | $ 9.33 | ||||||||||
Number of restricted common stock shares issued | 32,136 | ||||||||||
Number of restricted common stock fully vested | 105,690 | ||||||||||
Restricted stock vested price per share | $ 6.32 | ||||||||||
Vesting description | The restricted common stock awards granted to the directors are subject to graded vesting in the following installments: (i) 66.67% as of the date of grant and (ii) four installments of 8.333% vesting on the first day of each of the next four calendar months. | ||||||||||
Vested percentage of restricted stock granted | 66.67% | ||||||||||
Unamortized value | $ 662,940 | ||||||||||
Unamortized value weighted average period | 3 years 4 days | ||||||||||
Labor expense | $ 13,748 | 0 | |||||||||
Consulting expense | 170,000 | 0 | |||||||||
Restricted Common Stock [Member] | General and Administrative Expense [Member] | |||||||||||
Stock-based compensation | 729,073 | 3,684 | |||||||||
Restricted Common Stock [Member] | Master Services Agreement [Member] | |||||||||||
Number of restricted common stock fully vested | 52,307 | ||||||||||
Restricted stock vested price per share | $ 3.25 | ||||||||||
Value of restricted common stock fully vested | $ 170,000 | ||||||||||
Cash fee | $ 145,000 | ||||||||||
Non-qualified Stock Options [Member] | |||||||||||
Number of options to purchase shares of common stock | 33,750 | ||||||||||
Options exercise price per share | $ 9.33 | ||||||||||
Options expiry term | 3 years | ||||||||||
Options grant date value | $ 47,583 | ||||||||||
Expected volatility | 37.00% | ||||||||||
Risk-free rate | 1.52% | ||||||||||
Expected term | 3 years | ||||||||||
Expected dividends | 0.00% | ||||||||||
Stock price | $ 7.47 | ||||||||||
Options [Member] | Restricted Common Stock [Member] | |||||||||||
Stock-based compensation | $ 47,583 | ||||||||||
2017 Plan [Member] | |||||||||||
Number of common stock reserved | 1,071,428 | ||||||||||
Common stock, shares outstanding | 1,039,292 | ||||||||||
2017 Plan [Member] | Restricted Common Stock [Member] | |||||||||||
Shares issued price per share | $ 9.33 | ||||||||||
Number of restricted common stock shares issued | 119,709 | ||||||||||
Value of restricted common stock shares issued | $ 1,117,403 | ||||||||||
ARH Note [Member] | |||||||||||
Number of common stock shares issued | 1,314,753 | ||||||||||
Value of common stock shares issued | $ 5,361,177 | ||||||||||
Investors [Member] | |||||||||||
Number of common stock shares issued | 6,698 | 42,856 | 6,696 | ||||||||
Shares issued price per share | $ 7.47 | $ 7.47 | $ 7.47 | ||||||||
Value of common stock shares issued | $ 50,000 | $ 320,000 | $ 50,000 | ||||||||
Employees Directors and Consultants [Member] | Restricted Common Stock [Member] | |||||||||||
Stock-based compensation | $ 912,485 | $ 3,684 |
Equity - Schedule of Activity R
Equity - Schedule of Activity Related to Restricted Common Stock (Details) - Restricted Common Stock [Member] | 12 Months Ended |
Dec. 31, 2017$ / sharesshares | |
Restricted Common Stock, Outstanding Beginning | shares | |
Restricted Common Stock, Granted | shares | 204,152 |
Restricted Common Stock, Forfeited | shares | (1,285) |
Restricted Common Stock, Vested | shares | (105,690) |
Restricted Common Stock, Outstanding Ending | shares | 97,177 |
Weighted Average Grant Date Fair Value, Outstanding Beginning | $ / shares | |
Weighted Average Grant Date Fair Value, Granted | $ / shares | 7.78 |
Weighted Average Grant Date Fair Value, Forfeited | $ / shares | 9.33 |
Weighted Average Grant Date Fair Value, Vested | $ / shares | 6.32 |
Weighted Average Grant Date Fair Value, Outstanding Ending | $ / shares | $ 6.82 |
Equity - Schedule of Warrants A
Equity - Schedule of Warrants Activity (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Equity [Abstract] | ||
Number of Warrants, Outstanding Beginning | 318,116 | |
Number of Warrants, Issued | 208,285 | 318,116 |
Number of Warrants, Exercised | (5,356) | |
Number of Warrants, Outstanding Ending | 521,045 | 318,116 |
Number of Warrants, Exercisable | 521,045 | |
Weighted Average Exercise Price, Outstanding Beginning | $ 8.84 | |
Weighted Average Exercise Price, Issued | 9.33 | 8.84 |
Weighted Average Exercise Price, Exercised | 9.33 | |
Weighted Average Exercise Price, Outstanding Ending | 9.03 | $ 8.84 |
Weighted Average Exercise Price, Exercisable | $ 9.03 | |
Weighted Average Remaining Life In Years, Outstanding Beginning | 2 years 2 months 12 days | 0 years |
Weighted Average Remaining Life In Years, Outstanding Ending | 1 year 10 months 25 days | 2 years 2 months 12 days |
Weighted Average Remaining Life In Years, Exercisable | 1 year 10 months 25 days |
Equity - Schedule of Stock Opti
Equity - Schedule of Stock Options Assumptions (Details) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Risk free interest rate | 1.61% | |
Expected term (years) | 3 years | 3 years |
Expected volatility | 43.50% | 40.00% |
Expected dividends | 0.00% | 0.00% |
Minimum [Member] | ||
Risk free interest rate | 1.07% | |
Maximum [Member] | ||
Risk free interest rate | 1.59% |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Feb. 15, 2019 | Jan. 23, 2019 | Jan. 15, 2019 | Dec. 12, 2018 | Oct. 26, 2018 | Oct. 22, 2018 | Sep. 25, 2018 | Sep. 12, 2018 | Jun. 06, 2018 | May 31, 2018 | May 25, 2018 | May 02, 2018 | Apr. 11, 2018 | Apr. 05, 2018 | Mar. 29, 2018 | Mar. 27, 2018 | Feb. 07, 2018 | Jan. 25, 2018 | Jan. 24, 2018 | Jan. 24, 2018 | Jan. 04, 2018 | Jan. 01, 2018 | Jan. 23, 2015 | Apr. 30, 2018 | Jan. 31, 2018 | Jul. 11, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | May 24, 2018 | May 04, 2018 | Apr. 06, 2018 | Mar. 15, 2018 | Jul. 25, 2017 | Apr. 21, 2016 |
Proceeds from issuance of convertible notes payable | $ 2,049,340 | |||||||||||||||||||||||||||||||||
Proceeds from related party debt | 300,000 | |||||||||||||||||||||||||||||||||
Proceeds from notes payable | 799,340 | |||||||||||||||||||||||||||||||||
Debt conversion of converted instruments | $ 1,085,985 | $ 2,381,107 | ||||||||||||||||||||||||||||||||
Equity ownership percentage | 50.00% | |||||||||||||||||||||||||||||||||
Stock issued for restricted stock, value | $ 170,000 | |||||||||||||||||||||||||||||||||
Rent expense | $ 56,933 | |||||||||||||||||||||||||||||||||
Minimum [Member] | ||||||||||||||||||||||||||||||||||
Debt stated interest rate | 0.00% | |||||||||||||||||||||||||||||||||
Debt original term | 6 months | |||||||||||||||||||||||||||||||||
Maximum [Member] | ||||||||||||||||||||||||||||||||||
Debt stated interest rate | 5.00% | |||||||||||||||||||||||||||||||||
Debt original term | 5 years | |||||||||||||||||||||||||||||||||
CTI [Member] | ||||||||||||||||||||||||||||||||||
Equity ownership percentage | 70.00% | |||||||||||||||||||||||||||||||||
Employment Agreements [Member] | ||||||||||||||||||||||||||||||||||
Gross proceeds from offering | $ 5,000,000 | |||||||||||||||||||||||||||||||||
Warrants [Member] | ||||||||||||||||||||||||||||||||||
Warrant term | 3 years | |||||||||||||||||||||||||||||||||
Warrant to purchase shares of common stock | 5,356 | |||||||||||||||||||||||||||||||||
Warrant exercise price per share | $ 9.33 | $ 9.33 | ||||||||||||||||||||||||||||||||
Debt conversion of converted instruments | $ 1,072,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | ||||||||||||||||||||||||||||||||||
Convertible promissory notes | $ 100,000 | |||||||||||||||||||||||||||||||||
Conversion price per share | $ 1 | |||||||||||||||||||||||||||||||||
Debt note extended date | Mar. 15, 2018 | |||||||||||||||||||||||||||||||||
Debt principal amount | $ 560,000 | |||||||||||||||||||||||||||||||||
Notes payable other | $ 70,000 | $ 100,000 | ||||||||||||||||||||||||||||||||
Sales of stock | 44,153 | |||||||||||||||||||||||||||||||||
Sales of stock price per shares | $ 3.25 | |||||||||||||||||||||||||||||||||
Proceeds from sale of stock | $ 143,497 | |||||||||||||||||||||||||||||||||
Other costs | $ 171,035 | $ 171,035 | ||||||||||||||||||||||||||||||||
Damages expenses | $ 121,000 | |||||||||||||||||||||||||||||||||
Litigation settlement amount | $ 85,000 | $ 69,367 | $ 44,585 | |||||||||||||||||||||||||||||||
Subsequent Event [Member] | Upon One and Two Year Anniversaries [Member] | ||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 100,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Stratford Road Partners, LLC [Member] | ||||||||||||||||||||||||||||||||||
Lease obligation | $ 10,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Stock Purchase Agreement [Member] | CTI [Member] | ||||||||||||||||||||||||||||||||||
Shares issued price per share | $ 1 | |||||||||||||||||||||||||||||||||
Equity ownership percentage | 70.00% | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Employment Agreements [Member] | ||||||||||||||||||||||||||||||||||
Gross proceeds from offering | $ 3,000,000 | $ 5,000,000 | ||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Settlement Agreement [Member] | ||||||||||||||||||||||||||||||||||
Rent expense | $ 55,891 | $ 100,000 | ||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Settlement Agreement [Member] | Through March 2019 [Member] | ||||||||||||||||||||||||||||||||||
Debt monthly payment | $ 8,333 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Settlement Agreement [Member] | Before May 31, 2018 [Member] | ||||||||||||||||||||||||||||||||||
Rent expense | 15,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Settlement Agreement [Member] | Before September 4,2018 [Member] | ||||||||||||||||||||||||||||||||||
Rent expense | $ 40,891 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Settlement Agreement [Member] | Before November 16, 2018 [Member] | ||||||||||||||||||||||||||||||||||
Litigation settlement amount | $ 36,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Unrelated Third Party [Member] | ||||||||||||||||||||||||||||||||||
Debt note extended date | Mar. 30, 2018 | |||||||||||||||||||||||||||||||||
Initial public offering discount percentage | 15.00% | 15.00% | ||||||||||||||||||||||||||||||||
Debt principal amount | $ 511,765 | $ 511,765 | ||||||||||||||||||||||||||||||||
Proceeds from notes payable | $ 435,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Unrelated Third Party [Member] | Warrants [Member] | ||||||||||||||||||||||||||||||||||
Initial public offering discount percentage | 50.00% | 50.00% | ||||||||||||||||||||||||||||||||
Warrant term | 3 years | 3 years | ||||||||||||||||||||||||||||||||
Warrant to purchase shares of common stock | 78,733 | 78,733 | ||||||||||||||||||||||||||||||||
Debt instrument description | The principal amount of the note is to be increased by 30% of the original principal amount and another three-year warrant for the purchase of an additional 78,333 shares of the Company's common stock with an exercise price per share at 50% of initial public offering price, which together with the original warrant would constitute 100% warrant coverage. | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Investor [Member] | Securities Purchase Agreements [Member] | ||||||||||||||||||||||||||||||||||
Debt stated interest rate | 15.00% | |||||||||||||||||||||||||||||||||
Warrant to purchase shares of common stock | 1,082,000 | |||||||||||||||||||||||||||||||||
Warrant exercise price per share | $ 1.20 | |||||||||||||||||||||||||||||||||
Secured convertible notes debt | $ 2,470,000 | |||||||||||||||||||||||||||||||||
Debt conversion of converted instruments | $ 635,000 | |||||||||||||||||||||||||||||||||
Debt instrument maturity description | Mature 18 months from issuance | |||||||||||||||||||||||||||||||||
Warrant exercisable period | 5 years | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Investor [Member] | Securities Purchase Agreements [Member] | Installment One [Member] | ||||||||||||||||||||||||||||||||||
Secured convertible notes debt | $ 1,000,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Investor [Member] | Securities Purchase Agreements [Member] | Installment Two [Member] | ||||||||||||||||||||||||||||||||||
Secured convertible notes debt | $ 1,000,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Michael Roper [Member] | Employment Agreements [Member] | ||||||||||||||||||||||||||||||||||
Base salary | 250,000 | |||||||||||||||||||||||||||||||||
Employment salary increased upon achieving various milestones by investors | $ 350,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Michael Roper [Member] | Employment Agreements [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 350,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Michael Roper [Member] | Employment Agreements [Member] | Restricted Stock Units (RSUs) [Member] | Minimum [Member] | ||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 150,000 | |||||||||||||||||||||||||||||||||
Stock issued for restricted stock, value | $ 3,000,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Michael Roper [Member] | Employment Agreements [Member] | Restricted Stock Units (RSUs) [Member] | Maximum [Member] | ||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 250,000 | |||||||||||||||||||||||||||||||||
Stock issued for restricted stock, value | $ 5,000,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Michael Roper [Member] | Employment Agreements [Member] | Restricted Stock Units (RSUs) One [Member] | ||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 250,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Michael Roper [Member] | Employment Agreements [Member] | September 2018 Offering [Member] | ||||||||||||||||||||||||||||||||||
Employment salary increased upon achieving various milestones by investors | $ 275,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Michael Roper [Member] | Employment Agreements [Member] | IPO [Member] | ||||||||||||||||||||||||||||||||||
Employee bonus | 100,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Kevin Mohan [Member] | ||||||||||||||||||||||||||||||||||
Gross proceeds from offering | 175,000 | |||||||||||||||||||||||||||||||||
Base salary | 156,000 | |||||||||||||||||||||||||||||||||
Employee bonus | $ 50,000 | |||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 200,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Kevin Mohan [Member] | Employment Agreements [Member] | Restricted Stock Units (RSUs) [Member] | Minimum [Member] | ||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 100,000 | |||||||||||||||||||||||||||||||||
Stock issued for restricted stock, value | $ 3,000,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Kevin Mohan [Member] | Employment Agreements [Member] | Restricted Stock Units (RSUs) [Member] | Maximum [Member] | ||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 200,000 | |||||||||||||||||||||||||||||||||
Stock issued for restricted stock, value | $ 5,000,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Former Landlord [Member] | ||||||||||||||||||||||||||||||||||
Damages expenses | $ 531,594 | |||||||||||||||||||||||||||||||||
Original lease term | 5 years | |||||||||||||||||||||||||||||||||
Paid of litigation settlement amount | 49,815 | $ 531,594 | ||||||||||||||||||||||||||||||||
Security deposit | $ 11,185 | |||||||||||||||||||||||||||||||||
Payments of settlement in twelve timely installment payments | $ 6,400 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Former Landlord [Member] | February 28, 2019 [Member] | ||||||||||||||||||||||||||||||||||
Paid of litigation settlement amount | 25,000 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Former Landlord [Member] | March 15, 2019 [Member] | ||||||||||||||||||||||||||||||||||
Paid of litigation settlement amount | $ 6,400 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Resolute Contractors, Inc, Quality Tile, MTL Construction, Genesis Electric, JNB Interiors and Captive [Member] | ||||||||||||||||||||||||||||||||||
Rent expense | $ 98,005 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | 2018 ARH Note [Member] | Former Parent [Member] | ||||||||||||||||||||||||||||||||||
Convertible promissory notes | $ 392,542 | $ 475,000 | ||||||||||||||||||||||||||||||||
Conversion price per share | $ 0.50 | |||||||||||||||||||||||||||||||||
Number of shares issued for conversion of debt | 785,085 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Convertible Notes [Member] | ||||||||||||||||||||||||||||||||||
Convertible promissory notes | $ 100,000 | |||||||||||||||||||||||||||||||||
Conversion price per share | $ 1 | |||||||||||||||||||||||||||||||||
Number of shares issued for conversion of debt | 1,525,425 | |||||||||||||||||||||||||||||||||
Debt note extended date | Aug. 31, 2018 | Jan. 29, 2018 | Jan. 29, 2018 | Aug. 31, 2018 | ||||||||||||||||||||||||||||||
Initial public offering discount percentage | 50.00% | 50.00% | ||||||||||||||||||||||||||||||||
Proceeds from issuance of convertible notes payable | $ 150,000 | $ 972,000 | ||||||||||||||||||||||||||||||||
Proceeds from related party debt | $ 100,000 | $ 550,000 | ||||||||||||||||||||||||||||||||
Debt stated interest rate | 10.00% | |||||||||||||||||||||||||||||||||
Debt original term | 60 days | |||||||||||||||||||||||||||||||||
Shares issued price per share | $ 1.625 | |||||||||||||||||||||||||||||||||
Debt principal amount | $ 1,550,000 | $ 1,871,340 | $ 2,151,800 | |||||||||||||||||||||||||||||||
Warrant term | 3 years | |||||||||||||||||||||||||||||||||
Warrant to purchase shares of common stock | 486,000 | |||||||||||||||||||||||||||||||||
Warrant exercise price per share | $ 3.25 | |||||||||||||||||||||||||||||||||
Subsequent Event [Member] | Promissory Note [Member] | Related Party [Member] | ||||||||||||||||||||||||||||||||||
Debt note extended date | Jan. 29, 2018 | |||||||||||||||||||||||||||||||||
Debt stated interest rate | 10.00% | |||||||||||||||||||||||||||||||||
Debt principal amount | $ 25,000 |