Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Jul. 12, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | Muscle Maker, Inc. | |
Entity Central Index Key | 0001701756 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Reporting Status Current | Yes | |
Entity Interactive Data 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 Common Stock, Shares Outstanding | 11,117,637 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2018 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Cash | $ 283,903 | $ 78,683 |
Accounts receivable, net of allowance for doubtful accounts of $49,500 and $4,500 as of June 30, 2018 and December 31, 2017, respectively | 153,493 | 152,256 |
Inventory | 50,839 | 92,768 |
Current portion of loans receivable, net of allowance of $55,000 at June 30, 2018 and December 31, 2017, respectively | 23,814 | 20,146 |
Current portion of loans receivable from related party, net of allowance of $0 and $45,000 at June 30, 2018 and December 31, 2017, respectively | 650 | 9,704 |
Prepaid expenses and other current assets | 16,745 | 23,287 |
Total Current Assets | 529,444 | 376,844 |
Property and equipment, net | 497,905 | 517,002 |
Intangible assets, net | 3,134,788 | 3,181,880 |
Loans receivable - non current | 121,835 | 150,522 |
Security deposits and other assets | 22,587 | 21,401 |
Total Assets | 4,306,559 | 4,247,649 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 3,171,399 | 2,710,193 |
Convertible notes payable | 100,000 | 150,000 |
Other notes payable | 20,000 | |
Deferred revenue | 1,487,667 | 1,391,860 |
Deferred rent, current | 13,834 | 25,620 |
Payable to Former Parent, current | 16,995 | |
Other current liabilities | 534,497 | 369,123 |
Total Current Liabilities | 5,307,397 | 4,683,791 |
Convertible notes payable, net of debt discount of $1,007,044 and $0 at June 30, 2018 and December 31, 2017, respectively | 406,956 | 1,899,340 |
Convertible notes payable, related parties, net of debt discount of $383,595 and $0 at June 30, 2018 and December 31, 2017, respectively | 566,405 | 300,000 |
Convertible notes payable to Former Parent, net of debt discount of $64,945 and $0 at June 30, 2018 and December 31, 2017, respectively | 17,513 | |
Other notes payable | 860,294 | 200,000 |
Other notes payable, related parties | 335,000 | 335,000 |
Deferred rent, non-current | 41,947 | 31,313 |
Total Liabilities | 7,535,512 | 7,449,444 |
Commitments and Contingencies | ||
Stockholders' Deficit: | ||
Common stock, no par value, 100,000,000 shares authorized, 9,226,803 and 7,637,855 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively | 14,991,231 | 13,367,549 |
Additional paid-in capital | 3,963,650 | 552,670 |
Accumulated deficit | (22,183,834) | (17,052,086) |
Total Controlling Interest | (3,228,953) | (3,131,867) |
Non-controlling interest | (69,928) | |
Total Stockholders' Deficit | (3,228,953) | (3,201,795) |
Total Liabilities and Stockholders' Deficit | $ 4,306,559 | $ 4,247,649 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 49,500 | $ 4,500 |
Allowance for loan receivable | 55,000 | 55,000 |
Allowance of loan receivable from related party | 0 | 45,000 |
Debt discount on convertible notes payable | 1,007,044 | 0 |
Debt discount on convertible notes payable related party | 383,595 | 0 |
Debt discount on convertible notes payable former parent | $ 64,945 | $ 0 |
Common stock, no par value | ||
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 9,226,803 | 7,637,855 |
Common stock, shares outstanding | 9,226,803 | 7,637,855 |
Condensed Consolidated Statemen
Condensed Consolidated Statement of Operation (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Revenues: | ||||
Total Revenues | $ 1,536,963 | $ 1,925,322 | $ 3,575,266 | $ 3,890,822 |
Operating Costs and Expenses: | ||||
Total restaurant operating expenses | 1,164,154 | 1,812,005 | 3,243,191 | 3,331,295 |
Costs of other revenues | 46,646 | 59,618 | 114,388 | 113,481 |
Depreciation and amortization | 49,021 | 87,396 | 97,952 | 167,872 |
General and administrative expenses | 1,442,328 | 1,705,940 | 2,834,574 | 3,532,587 |
Total Costs and Expenses | 2,702,149 | 3,664,959 | 6,290,105 | 7,145,235 |
Loss from Operations | (1,165,186) | (1,739,637) | (2,714,839) | (3,254,413) |
Other (Expense) Income: | ||||
Other (expense) income | (6,215) | 85,229 | (5,619) | 85,229 |
Interest (expense) income, net | (88,914) | 477 | (731,500) | 760 |
Loss on sale of CTI | (456,169) | (456,169) | ||
Amortization of debt discounts | (647,251) | (117,461) | (1,646,591) | (3,761,090) |
Total Other Expense, Net | (1,198,549) | (31,755) | (2,839,879) | (3,675,101) |
Net Loss Before Income Tax | (2,363,735) | (1,771,392) | (5,554,718) | (6,929,514) |
Income tax provision | (31,820) | (63,641) | ||
Net Loss | (2,363,735) | (1,803,212) | (5,554,718) | (6,993,155) |
Net loss attributable to the non-controlling interest | 5,186 | (471,231) | (2,071) | (1,818,064) |
Net Loss Attributable to Controlling Interest | $ (2,368,921) | $ (1,331,981) | $ (5,552,647) | $ (5,175,091) |
Net Loss Attributable to Controlling Interest Per Share: | ||||
Basic and Diluted | $ (0.29) | $ (0.25) | $ (0.68) | $ (1) |
Weighted Average Number of Common Shares Outstanding: | ||||
Basic and Diluted | 8,307,377 | 5,337,503 | 8,140,836 | 5,166,278 |
Restuarant Sales [Member] | ||||
Revenues: | ||||
Total Revenues | $ 940,484 | $ 1,427,387 | $ 2,524,741 | $ 2,658,015 |
Franchise Royalties and Fees [Member] | ||||
Revenues: | ||||
Total Revenues | 502,918 | 368,610 | 805,892 | 937,217 |
Other Revenues [Member] | ||||
Revenues: | ||||
Total Revenues | 93,561 | 129,325 | 244,633 | 295,590 |
Food and Beverage Costs [Member] | ||||
Operating Costs and Expenses: | ||||
Total restaurant operating expenses | 349,742 | 554,578 | 927,230 | 982,798 |
Labor [Member] | ||||
Operating Costs and Expenses: | ||||
Total restaurant operating expenses | 353,614 | 676,143 | 1,117,124 | 1,232,628 |
Rent [Member] | ||||
Operating Costs and Expenses: | ||||
Total restaurant operating expenses | 260,502 | 314,140 | 579,224 | 596,806 |
Other Restaurant Operating Expenses [Member] | ||||
Operating Costs and Expenses: | ||||
Total restaurant operating expenses | $ 200,296 | $ 267,144 | $ 619,613 | $ 519,063 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - 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, 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 | |||||
Issuance of restricted stock | ||||||
Issuance of restricted stock, shares | 119,721 | |||||
Conversion of convertible notes payable to Former Parent into common stock | $ 4,685,411 | 4,685,411 | 4,685,411 | |||
Conversion of convertible notes payable to Former Parent into common stock, shares | 1,197,022 | |||||
Beneficial conversion feature - First and Second 2017 ARH Note | 1,060,967 | 1,060,967 | 1,060,967 | |||
Warrants issued in connection with convertible debt | 145,940 | 145,940 | 145,940 | |||
Stock-based compensation: Amortization of restricted common stock | 270,788 | 270,788 | 270,788 | |||
Warrants issued in connection with common stock and convertible debt | ||||||
Warrants issued and recorded as debt discount in connection with notes payable | ||||||
Sale of interest in CTI | ||||||
Net loss | (5,175,091) | (5,175,091) | (1,818,064) | (6,993,155) | ||
Balance at Jun. 30, 2017 | $ 10,113,209 | 4,049,250 | (9,016,729) | 5,145,730 | (1,658,347) | 3,487,383 |
Balance, shares at Jun. 30, 2017 | 5,921,585 | |||||
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 | |||||
Issuance of restricted stock | ||||||
Issuance of restricted stock, shares | 26,286 | |||||
Conversion of convertible notes payable to Former Parent into common stock | $ 392,542 | 392,542 | 392,542 | |||
Conversion of convertible notes payable to Former Parent into common stock, shares | 785,084 | |||||
Stock-based compensation: Amortization of restricted common stock | $ 66,224 | 66,224 | 66,224 | |||
Shares issued for common stock | $ 180,000 | 180,000 | 180,000 | |||
Shares issued for common stock, shares | 180,000 | |||||
Beneficial conversion feature - Convertible Notes | 2,576,080 | 2,576,080 | 2,576,080 | |||
Beneficial conversion feature - Convertible Note to Former Parent | 475,000 | 475,000 | 475,000 | |||
Warrants issued in connection with common stock and convertible debt | 16,082 | 16,082 | 16,082 | |||
Warrants issued and recorded as debt discount in connection with notes payable | 343,818 | 343,818 | 343,818 | |||
Initial public offering on March 29, 2018, net of underwriter's discount and offering cost of $58,798 | $ 85,576 | 85,576 | 85,576 | |||
Initial public offering on March 29, 2018, net of underwriter's discount and offering cost of $58,798, shares | 44,153 | |||||
Conversion of convertible notes payable into common stock | $ 899,340 | 899,340 | 899,340 | |||
Conversion of convertible notes payable into common stock, shares | 553,425 | |||||
Sale of interest in CTI | 420,899 | 420,899 | 71,999 | 492,898 | ||
Net loss | (5,552,647) | (5,552,647) | (2,071) | (5,554,718) | ||
Balance at Jun. 30, 2018 | $ 14,991,231 | $ 3,963,650 | $ (22,183,834) | $ (3,228,953) | $ (3,228,953) | |
Balance, shares at Jun. 30, 2018 | 9,226,803 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parenthetical) | Mar. 29, 2018USD ($) |
Statement of Stockholders' Equity [Abstract] | |
Offering costs | $ 58,798 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Cash Flows from Operating Activities | ||
Net loss | $ (5,554,718) | $ (6,993,155) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 97,952 | 167,872 |
Accretion of interest expense | 234,044 | |
Interest expense related to issuances of warrants | 305,055 | |
Stock-based compensation | 66,224 | 270,788 |
Loss on sale of CTI | 456,169 | |
Amortization of debt discounts | 1,646,591 | 3,761,090 |
Bad debt expense | 51,520 | 11,223 |
Deferred rent | (1,152) | 103,292 |
Deferred income tax provision | 63,641 | |
Expenses paid by Former Parent | 617,355 | 188,642 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (139,381) | (60,133) |
Inventory | 41,929 | (56,243) |
Prepaid expenses and other current assets | 6,242 | (19,163) |
Security deposits and other assets | (1,186) | (8,024) |
Accounts payable and accrued expenses | 591,207 | 742,758 |
Deferred revenue | 103,917 | 268,057 |
Other current liabilities | 165,374 | 99,811 |
Total Adjustments | 4,241,860 | 5,533,611 |
Net Cash Used in Operating Activities | (1,312,858) | (1,459,544) |
Cash Flows from Investing Activities | ||
Purchases of property and equipment | (43,834) | (523,225) |
Issuance of loans receivable | (9,689) | (215,500) |
Issuance of loans receivable - related parties | (4,389) | |
Collections from loans receivable | 34,708 | 62,239 |
Collections from loans receivable - related party | 6,667 | 10,000 |
Net Cash Used in Investing Activities | (12,148) | (670,875) |
Cash Flows from Financing Activities | ||
Proceeds from issuance of restricted stock | 180,000 | |
Proceeds from initial public offering, net of underwriter's discount and offering costs | 85,576 | |
Repayments to Former Parent, net | (129,350) | (369,112) |
Repayments of convertible notes payable | (50,000) | |
Repayments of other note payable | (50,000) | |
Proceeds from convertible notes payable | 384,000 | 975,000 |
Proceeds from convertible notes payable - related parties | 650,000 | 100,000 |
Proceeds from other notes payable | 460,000 | |
Proceeds from convertible notes payable to Former Parent | 1,319,783 | |
Net Cash Provided by Financing Activities | 1,530,226 | 2,025,671 |
Net Increase (Decrease) in Cash | 205,220 | (104,748) |
Cash - Beginning of Period | 78,683 | 335,724 |
Cash - End of Period | 283,903 | 230,976 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash paid for interest | 32,363 | 486 |
Supplemental disclosures of non-cash investing and financing activities | ||
Beneficial conversion feature | 3,051,080 | 1,060,967 |
Warrants issued in connection with convertible debt | 16,082 | 145,940 |
Conversion of convertible notes payable to Former Parent into common stock | 392,542 | 4,685,411 |
Conversion of notes payable into common stock | 899,340 | |
Accounts payable associated with purchases of property and equipment | 190,000 | |
Warrants issued and recorded as debt discount in connection with notes payable | 343,818 | |
Convertible Note issued to Former Parent in exchange for payable to Former Parent | $ 475,000 |
Business Organization and Natur
Business Organization and Nature of Operations, Going Concern and Management's Plans | 6 Months Ended |
Jun. 30, 2018 | |
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. 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. See Note 4 -Sale of CTI for more details. On March 14, 2019, MMI formed Muscle Maker USA, Inc. (“Muscle USA.”) in the state of Texas. Muscle USA issued 1,000 membership units to its sole member and manager, MMI. 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 June 30, 2018, the Company’s restaurant system included six company-owned restaurants, and thirty-four franchise restaurants. Two company-owned restaurants were subsequently opened for operation and one company-owned restaurant closed as of the date of the issuance of these condensed 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 June 30, 2018, the Company had a cash balance, a working capital deficiency and an accumulated deficit of $283,903, $4,777,953, and $22,183,834, respectively. During the three and six months ended June 30, 2018, the Company incurred a pre-tax net loss of $2,363,735 and $5,554,718, respectively. These conditions indicate that there is substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date of the issuance of these consolidated financial statements. The Company’s operations have primarily been funded through proceeds from the issuance of equity and debt. Subsequent to June 30, 2018, the Company received an aggregate of $4,731,000 associated with the issuances of convertible promissory notes payable and warrants to various lenders, of which $137,000 was converted into common stock. (See Note 15 – Subsequent Events -15% Senior Secured Convertible Notes). In addition, during April 2019 through the date of the issuance of these condensed consolidated financial statements, Muscle USA. entered into securities purchase agreements (“April 2019 SPA”) with several accredited investors (the “April 2019 Investors”) providing for the sale by the Company to the investors of 12% secured convertible notes (“April 2019 Notes”) in the aggregate amount of $3,000,000 (the “April 2019 Offering”). (See Note 15 – Subsequent Events – 12% 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. Going Concern and Management’s Plans, continued The accompanying condensed 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 condensed consolidated financial statements do not necessarily purport to represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. |
Reverse Stock Splits
Reverse Stock Splits | 6 Months Ended |
Jun. 30, 2018 | |
Reverse Stock Splits | |
Reverse Stock Splits | NOTE 2 – REVERSE STOCK SPLITS 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 Second Reverse Split for all periods presented. |
Significant Accounting Policies
Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of June 30, 2018, and for the three and six months ended June 30, 2018 and 2017. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the operating results for the full year. It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2017, included in this filing. The balance sheet as of December 31, 2017 has been derived from the Company’s audited financial statements. Principles of Consolidation The accompanying unaudited condensed 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. Use of Estimates, continued 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 June 30, 2018 and December 31, 2017. 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 June 30, 2018 and December 31, 2017, 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 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 $192,932 and $209,328 during the three and six months ended June 30, 2018, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company recorded revenue from rebates of $113,152 and $144,457 during the three and six months ended June 30, 2017, respectively, which is included in franchise royalties and fees on the accompanying condensed 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 which was sold in May 2018, the Company derived revenue from the sale of POS computer systems, cash registers 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 $93,561 and $244,633 of revenues from these technology sales and services during the three and six months ended June 30, 2018, respectively. The Company recorded $129,325 and $295,590 of revenues from these technology sales and services during the three and six months ended June 30, 2017, 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 10 – 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 $19,599 and $8,932 for the three and six months ended June 30, 2018, respectively, and approximately $224,748 and $41,460 for the three and six months ended June 30, 2017, respectively, and are included in general and administrative expenses in the accompanying condensed 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. The following securities are excluded from the calculation of weighted average diluted common shares at June 30, 2018 and 2017, respectively, because their inclusion would have been anti-dilutive: June 30, 2018 2017 Warrants 1,100,511 487,476 Options 33,750 - Convertible debt 2,025,070 332,879 MMB membership units - 1,550,964 Total potentially dilutive shares 3,159,331 2,371,319 Major Vendor The Company engages various vendors to distribute food products to their Company-owned restaurants. Purchases from the Company’s largest supplier totaled 80% and 77% of the Company’s purchases for the three and six months ended June 30, 2018, respectively. Purchases from the Company’s largest supplier totaled 85% and 84% of the Company’s purchases for the three and six months ended June 30, 2017, respectively. Controlling and Non-Controlling Interest MMI used to own a 74% controlling interest in MMB through the Effective Merger Date and used to own a 70% controlling interest in CTI. The profits and losses of CTI were 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. Reclassification Certain amounts in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no effect on previously reported net loss. 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 15 – Subsequent Events. 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 condensed 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 condensed consolidated financial statements. 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 condensed 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 July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815),” which addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in any interim period. The Company is currently evaluating the impact of the adoption of this standard on its condensed 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 on the Company’s condensed 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 condensed 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 condensed 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 condensed consolidated financial statements. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” (“ASU 2018-11”). The amendments in ASU 2018-11 related to transition relief on comparative reporting at adoption affect all entities with lease contracts that choose the additional transition method and separating components of a contract affect only lessors whose lease contracts qualify for the practical expedient. The amendments in ASU 2018-11 are effective for emerging growth companies for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently assessing the impact this guidance will have on its condensed consolidated financial statements. |
Sale of CTI
Sale of CTI | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Sale of CTI | NOTE 4 – 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. During the six months ended June 30, 2018, the Company recorded a loss of $456,169 related to the sale of CTI, as follows: Cash $ (1,973 ) Accounts receivable, net (84,653 ) Accounts receivable from CTI (429,171 ) Property and equipment, net (2,912 ) Intangible assets, net (13,086 ) Loans receivable from related party, net (2,387 ) Security deposits and other assets (300 ) Accounts payable and accrued expenses 133,930 Deferred revenue 8,110 Net fair value of assets and liabilities sold (392,442 ) Accumulated deficit 8,272 Subtotal (384,170 ) Non-controlling interest (71,999 ) Loss on sale of CTI $ (456,169 ) |
Loans Receivable
Loans Receivable | 6 Months Ended |
Jun. 30, 2018 | |
Receivables [Abstract] | |
Loans Receivable | NOTE 5 - LOANS RECEIVABLE At June 30, 2018 and December 31, 2017, the Company’s loans receivable consists of the following: June 30, December 31, 2018 2017 Loans receivable, net $ 145,649 $ 170,668 Less: current portion (23,814 ) (20,146 ) Loans receivable, non-current $ 121,835 $ 150,522 Loans receivable includes loans to franchisees totaling, in the aggregate, $145,649 and $170,668, net of reserves for uncollectible loans of $55,000 at June 30, 2018 and December 31, 2017. 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 | 6 Months Ended |
Jun. 30, 2018 | |
Receivables [Abstract] | |
Loans Receivable from Related Parties | NOTE 6 – LOANS RECEIVABLE FROM RELATED PARTIES At June 30, 2018 and December 31, 2017, the Company’s loans receivable from related parties consist of the following: June 30, December 31, 2018 2017 Loans receivable from related parties, net $ 650 $ 9,704 Less: current portion (650 ) (9,704 ) Loans receivable from related parties, non-current $ - $ - Included in loans receivable from related parties at June 30, 2018 and December 31, 2017, is $650 and $9,704, net of reserve for uncollectible related party loans of $0 and $45,000, respectively. |
Property and Equipment, Net
Property and Equipment, Net | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | NOTE 7 – PROPERTY AND EQUIPMENT, NET As of June 30, 2018, and December 31, 2017 property and equipment consists of the following: June 30, December 31, 2018 2017 Furniture and equipment $ 200,401 $ 189,401 Leasehold improvements 500,052 472,218 700,453 661,619 Less: accumulated depreciation and amortization (202,548 ) (144,617 ) Property and equipment, net $ 497,905 $ 517,002 Depreciation expense amounted to $32,226 and $63,946 for the three and six months ended June 30, 2018, respectively. Depreciation expense amounted to $57,672 and $110,892 for the three and six months ended June 30, 2017, respectively. |
Intangible Assets, Net
Intangible Assets, Net | 6 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets, Net | NOTE 8 – 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 Non-Compete Total Intangible assets, net at December 31, 2017 $ 2,524,000 $ 642,429 $ 15,451 $ 3,181,880 Amortization expense - (31,641 ) (2,365 ) (34,006 ) Sale of CTI - - (13,086 ) (13,086 ) Intangible assets, net at June 30, 2018 $ 2,524,000 $ 610,788 $ - $ 3,134,788 Weighted average remaining amortization period at June 30, 2018 (in years) 9.6 0.0 Amortization expense related to intangible assets amounted to $16,795 and $34,006 for the three and six months ended June 30, 2018, respectively. Amortization expense related to intangible assets amounted to $29,724 and $56,980 for the three and six months ended June 30, 2017, respectively. |
Accounts Payables and Accrued E
Accounts Payables and Accrued Expenses | 6 Months Ended |
Jun. 30, 2018 | |
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: June 30, December 31, 2018 2017 Accounts payable $ 912,946 $ 1,425,281 Accrued payroll 191,572 150,709 Accrued vacation 62,055 93,477 Accrued professional fees 508,422 318,379 Accrued board members fees 100,500 31,500 Accrued rent expense 667,016 284,999 Sales taxes payable (1) 363,852 355,692 Accrued interest 189,737 24,275 Other accrued expenses 175,299 25,881 $ 3,171,399 $ 2,710,193 (1) See Note 13 – Commitments and Contingencies –Taxes for detailed related to delinquent sales taxes. |
Deferred Revenue
Deferred Revenue | 6 Months Ended |
Jun. 30, 2018 | |
Revenue Recognition and Deferred Revenue [Abstract] | |
Deferred Revenue | NOTE 10 – DEFERRED REVENUE At June 30, 2018 and December 31, 2017, deferred revenue consists of the following: June 30, December 31, 2018 2017 Customer deposits $ - $ 18,179 Franchise fees 1,363,607 1,223,608 Unearned vendor rebates 124,060 150,073 $ 1,487,667 $ 1,391,860 |
Other Current Liabilities
Other Current Liabilities | 6 Months Ended |
Jun. 30, 2018 | |
Other Liabilities Disclosure [Abstract] | |
Other Current Liabilities | NOTE 11 – OTHER CURRENT LIABILITIES Other current liabilities consist of the following: June 30, December 31, 2018 2017 Gift card liability $ 118,192 $ 107,568 Marketing and co-op advertising fund liability 416,305 261,555 $ 534,497 $ 369,123 |
Notes Payable
Notes Payable | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTE 12 –NOTES PAYABLE 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. On 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 convertible notes payable in the aggregate principal amount of $1,591,800 to be upon the earlier of the closing of the initial public offering, but no later than July 29, 2018. 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, (ii) increase the outstanding balance of the note to $170,000, inclusive of principal and interest and (iii) 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 13 – Litigations, Claims and Assessments for further action taken by the note holder. During May 8, 2018 to June 30, 2018, the Company received an aggregate of $784,000 associated with the issuances of convertible promissory notes payable, of which $550,000 were issued to a related party. In addition, the Company issued a convertible promissory note of $30,000 for which the proceeds was received by the Former Parent and the Company recorded the corresponding receivable. The notes bear 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 407,000 shares of MMI’s common stock at an exercise price of $3.25 per share. During the six months ended June 30, 2018, convertible notes with an aggregate amount of $899,340 were automatically converted into 553,425 shares of the Company’s common stock pursuant to the terms of the notes. 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 six months ended June 30, 2017 the Company recorded aggregate debt discounts of $145,940 and $1,060,967, related to the warrants and the beneficial conversion feature, respectively, on the convertible notes and for the six months ended June 30, 2018 the Company recorded aggregate debt discounts of $359,900 and $3,051,080, related to the warrants and the beneficial conversion feature, respectively, on the convertible notes, which were amortized over the expected terms of the respective notes. 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, in exchange for the payable to Former Parent for services provided and expenses paid on behalf of the Company. The 2018 ARH Note has no stated interest rate or maturity date and is convertible into shares of the Company’s common stock at a conversion price of $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 785,084 shares of the Company’s common stock. 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 grant date fair value of the warrants of $155,104 has been amortized over the terms of the note and was recorded as interest. 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. On March 30, 2018, the Company had defaulted on the loan and as a result the principal interest amount of the note has increase by $153,529 and the Company issued the additional 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 grant date fair value of the warrants of $149,951 has been recorded as interest expense. The Company has since defaulted on the note and the note was subsequently converted into Secured Convertible Promissory Notes (see Note 15 Subsequent Events - 15% Senior Secured Convertible Notes). 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. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 13 – COMMITMENTS AND CONTINGENCIES 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 cost 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. In May 2018, the Company, Former Parent and Robert E. Morgan (the former CEO of the Company) were listed as defendants to a lawsuit filed by Crownhall Realty, LLC (“Crownhall”) in the Supreme Court of the State of New York county of New York, #154467. Crownhall is seeking $1,034,087 in damages for rent, interest and other expenses. On October 3, 2018, the Company, ARH and Mr. Morgan entered into a settlement agreement with Crownhall and Limestone agreeing to forfeit all security deposits, pay an upfront amount of $25,000 and an additional $175,000 to be paid over 20 months. This agreement settles litigation surrounding two closed locations, which the plaintiffs were seeking a total of $2,391,330 in past 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. 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. As of June 30, 2018, the Company has accrued for the liability in accounts payable and accrued expenses. 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 the Belmont location. The settlement calls for monthly payments of $8,333 thru March 2019. As of June 30, 2018, the Company has accrued for the liability in accounts payable and accrued expenses. See details related to settlement above. 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 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. 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. On June 5, 2019 the Company signed the settlement agreement and made the payment to the landlord. In May 2018, Resolute Contractors, Inc, Quality Tile, MTL Construction, Genesis Electric, JNB Interiors and Captive Aire filed a Mechanics Lien for labor, service, equipment and materials in the total amount of $98,005. The Company intends to set up various payment plans with these vendors. As of June 30, 2018, the Company has accrued for the liability in accounts payable and accrued expenses. 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 pursuant to the settlement. In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. In the opinion of management, such matters are currently not expected to have a material impact on the Company’s financial statements. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements. 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 net proceeds of approximately $85,000. Employment Agreements 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. On January 17, 2018, Grady Metoyer resigned as the Company’s Chief Financial Officer, effective immediately. 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. The employment agreements did not become effective since the company terminated its Regulation A+ offering on March 29, 2018. 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. 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 $363,852 and $355,692, which includes interest, as of June 30, 2018 and December 31, 2017, respectively, related to this matter. |
Equity
Equity | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Equity | NOTE 14 – EQUITY Common Stock During the six months ended June 30, 2018, the Company sold 180,000 shares of common stock of the company to various investors at a purchase price of $1.00 per share providing $180,000 of proceeds to the Company. Warrant Valuation The Company has computed the fair value of warrants granted using the Black-Scholes option pricing model. The expected term used for warrants 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. Restricted Common Stock At June 30, 2018, the unamortized value of the restricted common stock was $347,535. The unamortized amount will be expensed over a weighted average period of 2.51 years. A summary of the activity related to the restricted common stock for the six months ended June 30, 2018 is presented below: Weighted Average Grant Total Date Fair Value Outstanding at January 1, 2018 97,177 $ 6.82 Granted - - Forfeited (27,164 ) 9.33 Vested (26,286 ) 9.12 Outstanding at June 30, 2018 43,727 $ 7.95 Stock-Based Compensation Expense Stock-based compensation related to restricted stock issued to employees, directors and consultants amounted to $27,133 and $66,224 for the three and six months ended June 30, 2018, respectively, of which $26,879 and $64,677 was recorded in general and administrative expenses and $254 and $1,547 was recorded in labor expense within restaurant operating expenses. Stock-based compensation related to restricted stock issued to employees, directors and consultants amounted to $270,788 for the three and six months ended June 30, 2017, of which $262,360 was recorded in general and administrative expenses and $8,428 was recorded in labor expense within restaurant operating expenses. Warrants A summary of warrants activity during the six months ended June 30, 2018 is presented below: Weighted Weighted Average Average Remaining Number of Exercise Life Warrants Price In Years Outstanding, December 31, 2017 521,045 $ 9.52 1.9 Issued 579,466 2.81 Exercised - - Outstanding, June 30, 2018 1,100,511 5.76 2.2 Exercisable, June 30, 2018 1,100,511 $ 5.76 2.2 The grant date fair value of warrants granted during the six months ended June 30, 2018 and 2017 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 Three Months Ended For the Six Months Ended June 30, June 30, 2018 2017 2018 2017 Risk free interest rate 2.51 - 3.13 % 1.57 - 1.59 % 2.20 - 3.13 % 1.57 - 1.59 % Expected term (years) 3.00 3.00 3.00 3.00 Expected volatility 55.37 % 43.50 % 53.68 - 55.37 % 43.50 % Expected dividends 0.00 % 0.00 % 0.00 % 0.00 % |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 15 – SUBSEQUENT EVENTS Company-Owned Restaurants Subsequent to June 30, 2018 and through the date of the issuance of these condensed consolidated financial statements, the Company opened two additional company-owned restaurants. Convertible Notes During July 2018, the Company received an aggregate of $137,000 associated with the issuances of convertible promissory notes payable. The notes bear 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 68,500 shares of MMI’s common stock at an exercise price of $3.25 per share. 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 June 30, 2018, other convertible promissory notes with an aggregate principal amount of $951,000 were automatically converted into 951,000 shares of the Company’s common stock pursuant to the terms of the notes. Other Notes Payable 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. During April 2019, the Company repaid other notes payable in the aggregate principal amount of $710,000, of which $435,000 belong to related parties. In addition, the company issued 590,989 of the company’s common stock as payment for the interest incurred on the other notes payable repaid in the aggregate amount of $590,989. On May 14, 2019, the Company issued a $91,000 promissory note to a related party. The note has a stated interest rate of 15% over the original term of one year with monthly interest payments. The note becomes due in one year or the first day the Company trades publicly on an exchange. 15% Senior Secured Convertible Notes From September 12, 2018 through the date of the issuance of these condensed consolidated financial statements, 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 $5,138,000, 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. The Investors may elect to convert all or part of the Notes, plus accrued interest, at any time into shares of common stock of the Company at a conversion price of $1.00 (the “Fixed Conversion Price”); provided, however, in the event the per share price of a public offering multiplied by sixty percent (60%) at the time of the listing of the shares of common stock on an exchange (the “Listing Event”) is less than $1.00 (the “Discounted Public Offering Price”) then the conversion price shall be reset to equal the Discounted Public Offering Price. In the event the Investors are required to execute a Lock Up Agreement concurrent with a public offering at the time of the Listing Event, then the Fixed Conversion Price shall be $0.75 and the Discounted Public Offering Price shall be the public offering multiplied by forty five percent (45%) at the time of the Listing Event. Upon the occurrence of a Listing Event or the sale or license of all or substantially all of the Company’s assets (a “Liquidity Event”), the entire unpaid and outstanding principal amount and any accrued interest thereon under this Note shall automatically convert in whole without any further action by the Holder. In addition to the SPA Notes, the Investors also received warrants to purchase common stock of the Company (the “Warrants”) that entitles the holder to purchase a number of shares equal to 50% of the conversion shares of common stock of the Company. The Warrants are exercisable for five years at an exercise price of $1.20. In the event conversion price is adjusted as contemplated above, then the exercise price shall adjust to equal 120% of the adjusted conversion price. 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. On April 10, 2019, the Company and the investors that participated in its September 2018 Offering entered into an amendment pursuant to which the conversion price of the 15% Senior Secured Convertible Promissory Notes was amended to equal 25% of the per share offering price paid by investors in the public offering in conjunction with an uplisting to a national exchange. However, in the event the holder is required to sign a Lock-Up Agreement as part of the public offering in conjunction with an uplisting to a national exchange, then the conversion price shall be 17.5% of the per share offering price paid by investors in the public offering in conjunction with an uplisting to a national exchange. Employment Agreements 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. Pursuant to the agreement, Mr. Groenewald will be employed as Chief Financial Officer of the Company for a period of two years unless earlier terminated pursuant to the terms of the agreement. During the term of the agreement, Mr. Groenewald will be entitled to a base salary at the annualized rate of $150,000 and will be eligible for a discretionary performance cash bonuses which will include $10,000 upon completion of the audit for the year ended December 31, 2017 and $25,000 and up to 10,000 shares of common stock upon completion of a public offering of not less than $3 million together with listing on a national exchange (the “Public Offering”), which may be increased to 25,000 in the event $5 million is raised. Mr. Groenewald’s salary will increase to $175,000 upon closing of the Public Offering. Mr. Groenewald is also eligible to participate in employee benefits plans as the Company may institute from time to time that are available for full-time employees. 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. Pursuant to the agreement, Mr. Miller will be employed as Chief Operating Officer of the Company for a period of two years unless earlier terminated pursuant to the terms of the agreement. During the term of the agreement, Mr. Miller will be entitled to a base salary at the annualized rate of $200,000, which will be increased to $275,000 upon successful closing of the Public Offering. Mr. Miller is eligible for a discretionary performance cash and equity bonuses which will include cash of $50,000 and 75,000 shares of common stock upon completion of the Public Offering, which may be increased to 125,000 shares in the event $5 million is raised. Mr. Miller is also eligible to participate in employee benefits plans as the Company may institute from time to time that are available for full-time employees. 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. 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. On May 6, 2019, the Company appointed Aimee Infante as Chief Marketing Officer of the Company and entered into an Employment Agreement with Ms. Infante. Pursuant to the Employment Agreement, Ms. Infante will be employed as Chief Marketing Officer of the Company for a period of two years unless earlier terminated pursuant to the terms of the Employment Agreement. During the term of the Employment Agreement, Ms. Infante will be entitled to a base salary at the annualized rate of $125,000, which will be increased to $150,000 upon the completion of a public offering of not less than $3 million together with listing on a national exchange (the “Public Offering”). Following the closing of the Public Offering, Ms. Infante will receive an one time $10,000 cash bonus and will be entitled to an annual cash bonus based on 25% of her base salary subject to satisfying specific written criteria. The Company agreed to issue Ms. Infante 5,000 restricted stock units upon closing of the Public Offering, which may be increased to 10,000 restricted stock units if the Public Offering is in excess of $5 million. Ms. Infante is also eligible to participate in employee benefits plans as the Company may institute from time to time that are available for full-time employees. On May 5, 2019, the Company entered into an Employment Agreement with Rodney Silva. Pursuant to the Employment Agreement, Mr. Silva will be engaged as Vice President of Brand Development/Franchise Sales of the Company for a period of eighteen months 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. Silva will be entitled to a base salary at the annualized rate of $150,000. Mr. Silva will be eligible for a discretionary performance bonus to be paid in cash following the closing of the IPO. Mr. Silva is also eligible to participate in employee benefits plans as the Company may institute from time to time that are available for full-time employees. 12% Secured Convertible Notes During April 2019 through the date of the issuance of these condensed consolidated financial statements, Muscle USA entered into April 2019 SPA with the April 2019 Investors providing for the sale by the Company to the investors of April 2019 Notes in the aggregate amount of $3,000,000 (the “April 2019 Offering”). The April 2019 Notes bear interest at 12% per annum, paid quarterly, and mature 18 months from issuance. The April 2019 Investors may elect to convert all or part of the April 2019 Notes, plus accrued interest, at any time into shares of common stock of the Company at a conversion price of $2.00 per share (the “April 2019 Conversion Price”); provided, however, in the event the per share price of a public offering multiplied by fifty percent (50%) at the time of the Company listing on a national exchange (the “Discounted Public Offering Price”) is less than $2.00 then the April 2019 Conversion Price shall be reset to equal the lesser of (i) Discounted Public Offering Price or (ii) a price per share equal to a $20 million valuation. In addition to the April 2019 Notes, the Investors also received warrants to purchase common stock of the Company (the “Warrants”) that entitles the holder to purchase a number of shares equal to 50% of the conversion shares of common stock of the Company. The Warrants are exercisable for five years at an exercise price of 115% of the conversion price. Upon the occurrence of the listing of the Company’s common stock on a national securities exchange, the sale of all or substantially all of the Company’s stock, the sale or licensing of all or substantially all of the Company’s assets or any combination of the foregoing, the entire unpaid and outstanding principal amount and any accrued interest thereon under the April 2019 Notes shall automatically convert in whole without any further action by the holders. As long as the April 2019 Notes remain outstanding, the Company has agreed that, among other items, it will only use proceeds from the sale of the April 2019 Notes and exercise of the Warrants for specific corporate purposes as set forth in the April 2019 SPA, will not incur or permit indebtedness or liens unless permitted and will not enter into variable priced transactions. The Company, Muscle USA and the April 2019 Investors entered into Security and Pledge Agreements providing that the obligations to the April 2019 Investors are secured by substantially all of Muscle USA’s assets. The Company granted the Investors piggyback registration rights with respect to the shares of common stock underlying the Notes and the Warrants. Litigations, Claims and Assessments 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. The amount has been paid in full pursuant to the settlement agreement. On January 18, 2019, the Company entered into an expense reimbursement agreement with an employee in connection with unreimbursed expenses incurred on behalf of the Company in the amount of $81,140 recorded in accounts payable and accrued expenses as of September 30, 2018. The Company shall pay the employee as follows (a) $1,750 upon execution of the agreement, (b) $1,000 a month commencing on January 25, 2019 ending May 24, 2019, (c) a one time payment of $40,000 on the earlier of March 31, 2019 or when the Company fully received the anticipated funding from the a traunch of the 15% Senior Secured Convertible Notes and (d) on the earlier of May 31, 2019 or when the Company has fully received the anticipated funding from the second traunch of the 15% Senior Secured Convertible Notes. As of the date of the issuance of these condensed consolidated financial statements the full amount has been repaid. 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. Fountain Valley 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. The Company agreed to make the following payments (i) $15,000 on or before March 15, 2019, and (ii) ten monthly installments of $7,000 commencing on April 15, 2019 and continuing monthly on the 15th day of each month though January 15, 2020. On or about March 7, 2019, the Company was listed as a defendant to a lawsuit filed by a contractor in the State of Texas. The contractor is claiming a breach of contract and is seeking approximately $32,809 in damages for services claimed to be rendered by the contractor. The Company is working with legal counsel in order to reach a settlement. As of June 30, 2018, the Company accrued for the liability in accrued expenses. On May 6, 2019, the Company entered into a commission's payment agreement in the aggregate amount of $45,894 in connection with past due commission recorded in accounts payable and accrued expenses as of September 30, 2018. The Company shall pay the employee the outstanding commission balance as follows (a) $10,894 upon execution of the agreement and (b) $7,000 per month for five months start on May 31, 2019. As of the date of the issuance of these condensed consolidated financial statements the full amount has been repaid. Consulting Agreement During July 2019, the Company entered into a Consulting Agreement, effective as of July 1, 2019, with an advisory group to provide strategic business services in connection with a future offering. The term of the agreement is for one year. Pursuant to the terms of the agreement, the Company will issue 290,000 restricted shares of common stock on or before July 15, 2019, and agree to pay a cash fee of $75,000 upon signing the agreement. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of June 30, 2018, and for the three and six months ended June 30, 2018 and 2017. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the operating results for the full year. It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2017, included in this filing. The balance sheet as of December 31, 2017 has been derived from the Company’s audited financial statements. |
Principles of Consolidation | Principles of Consolidation The accompanying unaudited condensed 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 June 30, 2018 and December 31, 2017. |
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 June 30, 2018 and December 31, 2017, 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 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 $192,932 and $209,328 during the three and six months ended June 30, 2018, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company recorded revenue from rebates of $113,152 and $144,457 during the three and six months ended June 30, 2017, respectively, which is included in franchise royalties and fees on the accompanying condensed 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 which was sold in May 2018, the Company derived revenue from the sale of POS computer systems, cash registers 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 $93,561 and $244,633 of revenues from these technology sales and services during the three and six months ended June 30, 2018, respectively. The Company recorded $129,325 and $295,590 of revenues from these technology sales and services during the three and six months ended June 30, 2017, 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 10 – 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 $19,599 and $8,932 for the three and six months ended June 30, 2018, respectively, and approximately $224,748 and $41,460 for the three and six months ended June 30, 2017, respectively, and are included in general and administrative expenses in the accompanying condensed 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. The following securities are excluded from the calculation of weighted average diluted common shares at June 30, 2018 and 2017, respectively, because their inclusion would have been anti-dilutive: June 30, 2018 2017 Warrants 1,100,511 487,476 Options 33,750 - Convertible debt 2,025,070 332,879 MMB membership units - 1,550,964 Total potentially dilutive shares 3,159,331 2,371,319 |
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 80% and 77% of the Company’s purchases for the three and six months ended June 30, 2018, respectively. Purchases from the Company’s largest supplier totaled 85% and 84% of the Company’s purchases for the three and six months ended June 30, 2017, 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 used to own a 70% controlling interest in CTI. The profits and losses of CTI were 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. |
Reclassification | Reclassification Certain amounts in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no effect on previously reported net loss. |
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 15 – Subsequent Events. |
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 condensed 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 condensed consolidated financial statements. 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 condensed 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 July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815),” which addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in any interim period. The Company is currently evaluating the impact of the adoption of this standard on its condensed 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 on the Company’s condensed 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 condensed 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 condensed 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 condensed consolidated financial statements. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” (“ASU 2018-11”). The amendments in ASU 2018-11 related to transition relief on comparative reporting at adoption affect all entities with lease contracts that choose the additional transition method and separating components of a contract affect only lessors whose lease contracts qualify for the practical expedient. The amendments in ASU 2018-11 are effective for emerging growth companies for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently assessing the impact this guidance will have on its condensed consolidated financial statements. |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
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 June 30, 2018 and 2017, respectively, because their inclusion would have been anti-dilutive: June 30, 2018 2017 Warrants 1,100,511 487,476 Options 33,750 - Convertible debt 2,025,070 332,879 MMB membership units - 1,550,964 Total potentially dilutive shares 3,159,331 2,371,319 |
Sale of CTI (Tables)
Sale of CTI (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Schedule of Sale of Subsidiary | Cash $ (1,973 ) Accounts receivable, net (84,653 ) Accounts receivable from CTI (429,171 ) Property and equipment, net (2,912 ) Intangible assets, net (13,086 ) Loans receivable from related party, net (2,387 ) Security deposits and other assets (300 ) Accounts payable and accrued expenses 133,930 Deferred revenue 8,110 Net fair value of assets and liabilities sold (392,442 ) Accumulated deficit 8,272 Subtotal (384,170 ) Non-controlling interest (71,999 ) Loss on sale of CTI $ (456,169 ) |
Loans Receivable (Tables)
Loans Receivable (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Receivables [Abstract] | |
Schedule of Loans Receivables | At June 30, 2018 and December 31, 2017, the Company’s loans receivable consists of the following: June 30, December 31, 2018 2017 Loans receivable, net $ 145,649 $ 170,668 Less: current portion (23,814 ) (20,146 ) Loans receivable, non-current $ 121,835 $ 150,522 |
Loans Receivable from Related_2
Loans Receivable from Related Parties (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Receivables [Abstract] | |
Schedule of Loans Receivable from Related Parties | At June 30, 2018 and December 31, 2017, the Company’s loans receivable from related parties consist of the following: June 30, December 31, 2018 2017 Loans receivable from related parties, net $ 650 $ 9,704 Less: current portion (650 ) (9,704 ) Loans receivable from related parties, non-current $ - $ - |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment, Net | As of June 30, 2018, and December 31, 2017 property and equipment consists of the following: June 30, December 31, 2018 2017 Furniture and equipment $ 200,401 $ 189,401 Leasehold improvements 500,052 472,218 700,453 661,619 Less: accumulated depreciation and amortization (202,548 ) (144,617 ) Property and equipment, net $ 497,905 $ 517,002 |
Intangible Assets, Net (Tables)
Intangible Assets, Net (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | A summary of the intangible assets is presented below: Intangible Assets Trademark Franchise Non-Compete Total Intangible assets, net at December 31, 2017 $ 2,524,000 $ 642,429 $ 15,451 $ 3,181,880 Amortization expense - (31,641 ) (2,365 ) (34,006 ) Sale of CTI - - (13,086 ) (13,086 ) Intangible assets, net at June 30, 2018 $ 2,524,000 $ 610,788 $ - $ 3,134,788 Weighted average remaining amortization period at June 30, 2018 (in years) 9.6 0.0 |
Accounts Payables and Accrued_2
Accounts Payables and Accrued Expenses (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Payables and Accruals [Abstract] | |
Schedule of Accounts Payables and Accrued Expenses | Accounts payables and accrued expenses consist of the following: June 30, December 31, 2018 2017 Accounts payable $ 912,946 $ 1,425,281 Accrued payroll 191,572 150,709 Accrued vacation 62,055 93,477 Accrued professional fees 508,422 318,379 Accrued board members fees 100,500 31,500 Accrued rent expense 667,016 284,999 Sales taxes payable (1) 363,852 355,692 Accrued interest 189,737 24,275 Other accrued expenses 175,299 25,881 $ 3,171,399 $ 2,710,193 (1) See Note 13 – Commitments and Contingencies –Taxes for detailed related to delinquent sales taxes. |
Deferred Revenue (Tables)
Deferred Revenue (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Revenue Recognition and Deferred Revenue [Abstract] | |
Schedule of Deferred Revenue | At June 30, 2018 and December 31, 2017, deferred revenue consists of the following: June 30, December 31, 2018 2017 Customer deposits $ - $ 18,179 Franchise fees 1,363,607 1,223,608 Unearned vendor rebates 124,060 150,073 $ 1,487,667 $ 1,391,860 |
Other Current Liabilities (Tabl
Other Current Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Other Current Liabilities | Other current liabilities consist of the following: June 30, December 31, 2018 2017 Gift card liability $ 118,192 $ 107,568 Marketing and co-op advertising fund liability 416,305 261,555 $ 534,497 $ 369,123 |
Equity (Tables)
Equity (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Schedule of Activity Related to Restricted Common Stock | A summary of the activity related to the restricted common stock for the six months ended June 30, 2018 is presented below: Weighted Average Grant Total Date Fair Value Outstanding at January 1, 2018 97,177 $ 6.82 Granted - - Forfeited (27,164 ) 9.33 Vested (26,286 ) 9.12 Outstanding at June 30, 2018 43,727 $ 7.95 |
Schedule of Warrants Activity | A summary of warrants activity during the six months ended June 30, 2018 is presented below: Weighted Weighted Average Average Remaining Number of Exercise Life Warrants Price In Years Outstanding, December 31, 2017 521,045 $ 9.52 1.9 Issued 579,466 2.81 Exercised - - Outstanding, June 30, 2018 1,100,511 5.76 2.2 Exercisable, June 30, 2018 1,100,511 $ 5.76 2.2 |
Schedule of Stock Options Assumptions | In applying the Black-Scholes option pricing model, the Company used the following assumptions: For the Three Months Ended For the Six Months Ended June 30, June 30, 2018 2017 2018 2017 Risk free interest rate 2.51 - 3.13 % 1.57 - 1.59 % 2.20 - 3.13 % 1.57 - 1.59 % Expected term (years) 3.00 3.00 3.00 3.00 Expected volatility 55.37 % 43.50 % 53.68 - 55.37 % 43.50 % Expected dividends 0.00 % 0.00 % 0.00 % 0.00 % |
Business Organization and Nat_2
Business Organization and Nature of Operations, Going Concern and Management's Plans (Details Narrative) - USD ($) | Mar. 14, 2019 | Sep. 15, 2017 | Jul. 18, 2017 | Mar. 23, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | May 24, 2018 | Dec. 31, 2017 | Jan. 23, 2015 |
Cash balance | $ 283,903 | $ 283,903 | $ 78,683 | ||||||||
Working capital deficiency | 4,777,953 | 4,777,953 | |||||||||
Accumulated deficit | (22,183,834) | (22,183,834) | $ (17,052,086) | ||||||||
Net loss before income tax | $ 2,363,735 | $ 1,771,392 | 5,554,718 | $ 6,929,514 | |||||||
Debt conversion of converted instruments | 3,051,080 | $ 1,060,967 | |||||||||
Subsequent to June 30, 2018 [Member] | Convertible Promissory Notes Payable and Warrants [Member] | |||||||||||
Debt conversion of converted instruments | 4,731,000 | ||||||||||
Common Stock [Member] | Subsequent to June 30, 2018 [Member] | |||||||||||
Debt conversion of converted instruments | $ 137,000 | ||||||||||
Agreement of Merger [Member] | MMBC Common Stock [Member] | |||||||||||
Stock converted to shares | 796 | ||||||||||
Accredited Investors [Member] | Subsequent to June 30, 2018 [Member] | SPA Notes [Member] | |||||||||||
Interest rate | 12.00% | 12.00% | |||||||||
Debt principal amount | $ 3,000,000 | $ 3,000,000 | |||||||||
Muscle Maker Brands, LLC [Member] | |||||||||||
Acquisition percentage | 74.00% | ||||||||||
Equity ownership percentage | 74.00% | 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% | 70.00% | |||||||||
CTI [Member] | Agreement of Merger [Member] | |||||||||||
Equity ownership percentage | 70.00% | ||||||||||
CTI [Member] | Stock Purchase Agreement [Member] | |||||||||||
Equity ownership percentage | 70.00% | ||||||||||
Total purchase price share | $ 1 | ||||||||||
Muscle USA [Member] | Sole Member and Manager [Member] | |||||||||||
Number of membership unit issued | 1,000 |
Reverse Stock Splits (Details N
Reverse Stock Splits (Details Narrative) | 6 Months Ended |
Jun. 30, 2018 | |
January 31, 2018 [Member] | |
Reverse split | The Company implemented a 3-for-4 reverse split of the Company's issued common stock (the "Second Reverse Split") |
Significant Accounting Polici_4
Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Cash equivalents | |||||
Revenues | 1,536,963 | $ 1,925,322 | 3,575,266 | $ 3,890,822 | |
Advertising costs | $ 19,599 | $ 224,748 | $ 8,932 | $ 41,460 | |
Muscle Maker Brands, LLC [Member] | |||||
Equity ownership percentage | 74.00% | 74.00% | |||
CTI [Member] | |||||
Equity ownership percentage | 70.00% | 70.00% | |||
Supplier Concentration Risk [Member] | Purchases [Member] | |||||
Concentration risk percentage | 80.00% | 85.00% | 77.00% | 84.00% | |
Rebates [Member] | |||||
Revenues | $ 192,932 | $ 113,152 | $ 209,328 | $ 144,457 | |
Technology Sales and Services [Member] | |||||
Other revenues | $ 93,561 | $ 129,325 | $ 244,633 | $ 295,590 |
Significant Accounting Polici_5
Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Total potentially dilutive shares | 3,159,331 | 2,371,319 |
Warrants [Member] | ||
Total potentially dilutive shares | 1,100,511 | 487,476 |
Options [Member] | ||
Total potentially dilutive shares | 33,750 | |
Convertible Debt [Member] | ||
Total potentially dilutive shares | 2,025,070 | 332,879 |
MMB Membership Units [Member] | ||
Total potentially dilutive shares | 1,550,964 |
Sale of CTI (Details Narrative)
Sale of CTI (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | May 24, 2018 | |
Loss on sale of business | $ (456,169) | $ (456,169) | |||
CTI [Member] | |||||
Equity ownership percentage | 70.00% | 70.00% | |||
Loss on sale of business | $ 456,169 | ||||
Stock Purchase Agreement [Member] | CTI [Member] | |||||
Equity ownership percentage | 70.00% | ||||
Total purchase price share | $ 1 |
Sale of CTI - Schedule of Sale
Sale of CTI - Schedule of Sale of Subsidiary (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Equity [Abstract] | ||||
Cash | $ (1,973) | |||
Accounts receivable, net | (84,653) | |||
Accounts receivable from CTI | (429,171) | |||
Property and equipment, net | (2,912) | |||
Intangible assets, net | (13,086) | |||
Loans receivable from related party, net | (2,387) | |||
Security deposits and other assets | (300) | |||
Accounts payable and accrued expenses | 133,930 | |||
Deferred revenue | 8,110 | |||
Net fair value of assets and liabilities sold | (392,442) | |||
Accumulated deficit | 8,272 | |||
Subtotal | (384,170) | |||
Non-controlling interest | (71,999) | |||
Loss on sale of CTI | $ (456,169) | $ (456,169) |
Loans Receivable (Details Narra
Loans Receivable (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Loans receivable | $ 145,649 | $ 170,668 |
Net of reserves for uncollectible loans | $ 55,000 | $ 55,000 |
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 ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Receivables [Abstract] | ||
Loans receivable, net | $ 145,649 | $ 170,668 |
Less: current portion | (23,814) | (20,146) |
Loans receivable, non-current | $ 121,835 | $ 150,522 |
Loans Receivable from Related_3
Loans Receivable from Related Parties (Details Narrative) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Receivables [Abstract] | ||
Loans receivable from related parties | $ 650 | $ 9,704 |
Net of reserve for uncollectible related party loans | $ 0 | $ 45,000 |
Loans Receivable from Related_4
Loans Receivable from Related Parties - Schedule of Loans Receivable from Related Parties (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Receivables [Abstract] | ||
Loans receivable from related parties, net | $ 650 | $ 9,704 |
Less: current portion | (650) | (9,704) |
Loans receivable from related parties, non-current |
Property and Equipment, Net (De
Property and Equipment, Net (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 32,226 | $ 57,672 | $ 63,946 | $ 110,892 |
Property and Equipment, Net - S
Property and Equipment, Net - Schedule of Property and Equipment, Net (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Property, Plant and Equipment [Abstract] | ||
Furniture and equipment | $ 200,401 | $ 189,401 |
Leasehold improvements | 500,052 | 472,218 |
Property and equipment, gross | 700,453 | 661,619 |
Less: accumulated depreciation and amortization | (202,548) | (144,617) |
Property and equipment, net | $ 497,905 | $ 517,002 |
Intangible Assets, Net (Details
Intangible Assets, Net (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Amortization expense | $ 16,795 | $ 29,724 | $ 34,006 | $ 56,980 |
Franchise Agreements [Member] | ||||
Intangible asset, useful life | 13 years | |||
Non-compete Agreements [Member] | ||||
Intangible asset, useful life | 5 years |
Intangible Assets, Net - Schedu
Intangible Assets, Net - Schedule of Intangible Assets (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Intangible assets, net beginning balance | $ 3,181,880 | |||
Amortization expense | $ (16,795) | $ (29,724) | (34,006) | $ (56,980) |
Sale of CTI | (13,086) | |||
Intangible assets, net ending balance | 3,134,788 | 3,134,788 | ||
Trademark [Member] | ||||
Intangible assets, net beginning balance | 2,524,000 | |||
Amortization expense | ||||
Sale of CTI | ||||
Intangible assets, net ending balance | 2,524,000 | 2,524,000 | ||
Franchise Agreements [Member] | ||||
Intangible assets, net beginning balance | 642,429 | |||
Amortization expense | (31,641) | |||
Sale of CTI | ||||
Intangible assets, net ending balance | 610,788 | $ 610,788 | ||
Weighted average remaining amortization period at at June 30, 2018 (in years) | 9 years 7 months 6 days | |||
Non-Compete Agreement [Member] | ||||
Intangible assets, net beginning balance | $ 15,451 | |||
Amortization expense | (2,365) | |||
Sale of CTI | (13,086) | |||
Intangible assets, net ending balance | ||||
Weighted average remaining amortization period at at June 30, 2018 (in years) | 0 years |
Accounts Payables and Accrued_3
Accounts Payables and Accrued Expenses - Schedule of Accounts Payables and Accrued Expenses (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 | |
Payables and Accruals [Abstract] | |||
Accounts payable | $ 912,946 | $ 1,425,281 | |
Accrued payroll | 191,572 | 150,709 | |
Accrued vacation | 62,055 | 93,477 | |
Accrued professional fees | 508,422 | 318,379 | |
Accrued board members fees | 100,500 | 31,500 | |
Accrued rent expense | 667,016 | 284,999 | |
Sales taxes payable | [1] | 363,852 | 355,692 |
Accrued interest | 189,737 | 24,275 | |
Other accrued expenses | 175,299 | 25,881 | |
Accounts payables and accrued expenses | $ 3,171,399 | $ 2,710,193 | |
[1] | See Note 13 - Commitments and Contingencies - Taxes for detailed related to delinquent sales taxes. |
Deferred Revenue - Schedule of
Deferred Revenue - Schedule of Deferred Revenue (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Revenue Recognition and Deferred Revenue [Abstract] | ||
Customer deposits | $ 18,179 | |
Franchise fees | 1,363,607 | 1,223,608 |
Unearned vendor rebates | 124,060 | 150,073 |
Deferred revenue | $ 1,487,667 | $ 1,391,860 |
Other Current Liabilities - Sch
Other Current Liabilities - Schedule of Other Current Liabilities (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Other Liabilities Disclosure [Abstract] | ||
Gift card liability | $ 118,192 | $ 107,568 |
Marketing and co-op advertising fund liability | 416,305 | 261,555 |
Other current liabilities | $ 534,497 | $ 369,123 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | May 14, 2019 | Jan. 23, 2019 | Apr. 11, 2018 | Mar. 30, 2018 | Mar. 15, 2018 | Feb. 07, 2018 | Jan. 29, 2018 | Jan. 25, 2018 | Jan. 24, 2018 | Jan. 04, 2018 | Jan. 31, 2018 | Jun. 30, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Apr. 06, 2018 |
Proceeds from issuance of convertible debt | $ 384,000 | $ 975,000 | |||||||||||||
Proceeds from convertible debt related party | 650,000 | 100,000 | |||||||||||||
Debt conversion amount | 3,051,080 | 1,060,967 | |||||||||||||
Warrants issued in connection with convertible debt | 16,082 | 145,940 | |||||||||||||
Beneficial conversion feature | 1,060,967 | ||||||||||||||
Warrants [Member] | |||||||||||||||
Warrants term | 3 years | ||||||||||||||
Warrants number of shares | 78,733 | ||||||||||||||
Warrants exercise price, description | Exercise price per share at 50% of initial public offering price. | ||||||||||||||
Warrants grant date fair value | $ 155,104 | ||||||||||||||
Company and Certain Note Holders [Member] | Subsequent Event [Member] | |||||||||||||||
Debt instrument face value | $ 560,000 | ||||||||||||||
Debt instrument conversion price | $ 1 | ||||||||||||||
Debt instrument maturity description | The earlier of (a) January 24, 2020 or (b) the first day the company's stock is publicly traded. | ||||||||||||||
Convertible Promissory Note [Member] | |||||||||||||||
Debt instrument face value | $ 100,000 | ||||||||||||||
Debt conversion description | 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 | 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 | 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. | ||||||||||||
Proceeds from issuance of convertible debt | $ 150,000 | $ 784,000 | |||||||||||||
Proceeds from convertible debt related party | $ 100,000 | $ 550,000 | |||||||||||||
Debt instrument stated interest percentage | 10.00% | ||||||||||||||
Debt instrument maturity period | 60 days | ||||||||||||||
Debt instrument conversion price | $ 1.625 | ||||||||||||||
Debt conversion amount | $ 899,340 | ||||||||||||||
Debt conversion, shares issued | 553,425 | ||||||||||||||
Warrants issued in connection with convertible debt | $ 359,900 | 145,940 | |||||||||||||
Beneficial conversion feature | $ 3,051,080 | $ 1,060,967 | |||||||||||||
Convertible Promissory Note [Member] | Warrants [Member] | |||||||||||||||
Warrants term | 3 years | 3 years | |||||||||||||
Warrants number of shares | 407,000 | 407,000 | |||||||||||||
Warrant exercise price | $ 3.25 | $ 3.25 | |||||||||||||
Convertible Promissory Note [Member] | Company and Certain Note Holders [Member] | |||||||||||||||
Debt instrument face value | $ 1,591,800 | ||||||||||||||
Debt instrument maturity description | Earlier of the closing of the initial public offering, but no later than July 29, 2018. | ||||||||||||||
Convertible Promissory Note [Member] | Company and Note Holder [Member] | Amendment To Promissory Note [Member] | |||||||||||||||
Debt instrument face value | $ 170,000 | ||||||||||||||
Proceeds from issuance of convertible debt | $ 100,000 | $ 70,000 | |||||||||||||
Debt instrument maturity date | Mar. 15, 2018 | ||||||||||||||
Convertible Promissory Note [Member] | Former Parent [Member] | |||||||||||||||
Proceeds from convertible debt related party | $ 30,000 | ||||||||||||||
Two Thousand Eighteen ARH Note [Member] | |||||||||||||||
Debt instrument face value | $ 475,000 | ||||||||||||||
Debt instrument conversion price | $ 0.50 | ||||||||||||||
Debt conversion amount | $ 392,542 | ||||||||||||||
Debt conversion, shares issued | 785,084 | ||||||||||||||
Promissory Note [Member] | Subsequent Event [Member] | |||||||||||||||
Proceeds from convertible debt related party | $ 91,000 | ||||||||||||||
Debt instrument stated interest percentage | 15.00% | ||||||||||||||
Debt instrument maturity period | 1 year | ||||||||||||||
Promissory Note [Member] | Default In Exercise Of Warrants [Member] | |||||||||||||||
Debt instrument face value | $ 153,529 | ||||||||||||||
Warrants term | 3 years | ||||||||||||||
Warrants number of shares | 78,733 | 78,733 | |||||||||||||
Warrants exercise price, description | Exercise price per share at 50% of initial public offering price. | ||||||||||||||
Warrants grant date fair value | $ 149,951 | ||||||||||||||
Promissory Note [Member] | Related Party [Member] | |||||||||||||||
Debt instrument face value | $ 25,000 | ||||||||||||||
Debt instrument stated interest percentage | 10.00% | ||||||||||||||
Debt instrument maturity period | 60 days | ||||||||||||||
Debt instrument maturity description | Payable upon the earlier of (a) six month following the date of extension or (b) the approval of the Form 1-A Registration Statement. | ||||||||||||||
Promissory Note [Member] | Unrelated Third Party [Member] | |||||||||||||||
Debt instrument face value | $ 511,765 | ||||||||||||||
Proceeds from issuance of convertible debt | $ 435,000 | ||||||||||||||
Debt instrument maturity date | Mar. 30, 2018 | ||||||||||||||
Percentage on original issue discount | 15.00% |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) | Jun. 06, 2018 | May 25, 2018 | May 04, 2018 | May 02, 2018 | Apr. 05, 2018 | Mar. 29, 2018 | Mar. 27, 2018 | May 31, 2018 | Apr. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Loss contingency damages | $ 98,005 | |||||||||||||
Number of issued shares of common stock | 44,153 | |||||||||||||
Shares issued price per share | $ 3.25 | |||||||||||||
Gross proceeds from offering | $ 85,000 | $ 85,576 | ||||||||||||
Accrued sales taxes | [1] | 363,852 | $ 355,692 | |||||||||||
Convertible Note Holder [Member] | ||||||||||||||
Loss contingency seeking damages | $ 100,000 | |||||||||||||
Interest, attorney fees and other costs sought as damages | $ 171,035 | |||||||||||||
Loss contingency damages | $ 171,035 | |||||||||||||
Former Landlord [Member] | ||||||||||||||
Loss contingency seeking damages | $ 531,594 | |||||||||||||
Lease term | 5 years | |||||||||||||
Settlement Agreement [Member] | ||||||||||||||
Settlements to third party | $ 55,891 | |||||||||||||
Settlement Agreement [Member] | Forecast [Member] | ||||||||||||||
Loss contingency seeking damages | 2,391,330 | |||||||||||||
Payments to upfront amount | 25,000 | |||||||||||||
Settlement Agreement [Member] | Forecast [Member] | Paid Over 20 Months [Member] | ||||||||||||||
Payments to upfront amount | 175,000 | |||||||||||||
Settlement Agreement [Member] | May 31, 2018 [Member] | ||||||||||||||
Settlements to third party | 15,000 | |||||||||||||
Settlement Agreement [Member] | September 4, 2018 [Member] | ||||||||||||||
Settlements to third party | 40,891 | |||||||||||||
Settlement and Release Agreement [Member] | Former Landlord [Member] | ||||||||||||||
Settlements to third party | 531,594 | |||||||||||||
Settlement and Release Agreement [Member] | March 15, 2019 [Member] | Former Landlord [Member] | ||||||||||||||
Payments on settlement, thereafter | $ 6,400 | |||||||||||||
Payments on settlement, description | Thereafter sixty-nine payments of $6,400 on or before the 15th of each month beginning on March 15, 2019. Conditioned on the Company making twelve timely installment payments of $6,400, the Company would be released of the remaining liability pursuant to the judgement. | |||||||||||||
Settlement and Release Agreement [Member] | January 23, 2019 [Member] | Former Landlord [Member] | ||||||||||||||
Settlements to third party | $ 49,815 | |||||||||||||
Security deposits | 11,185 | |||||||||||||
Settlement and Release Agreement [Member] | February 28, 2019 [Member] | Former Landlord [Member] | ||||||||||||||
Settlements to third party | $ 25,000 | |||||||||||||
Employment Agreements [Member] | ||||||||||||||
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. | |||||||||||||
Employment Agreements [Member] | Minimum [Member] | ||||||||||||||
Gross proceeds from offering | $ 5,000,000 | |||||||||||||
Crownhall Realty, LLC [Member] | ||||||||||||||
Loss contingency seeking damages | 1,034,087 | |||||||||||||
Imperial Bag & Paper [Member] | ||||||||||||||
Loss contingency seeking damages | $ 44,585 | |||||||||||||
Stratford Road Partners, LLC [Member] | ||||||||||||||
Settlements to third party | $ 10,000 | |||||||||||||
Limestone Associates LLC [Member] | American Restaurant Holdings [Member] | ||||||||||||||
Non-payment of rent | $ 25,748 | |||||||||||||
Loss contingency seeking damages | $ 1,357,243 | |||||||||||||
Belmont LLC [Member] | Settlement Agreement [Member] | ||||||||||||||
Settlements to third party | $ 100,000 | $ 8,333 | ||||||||||||
[1] | See Note 13 - Commitments and Contingencies - Taxes for detailed related to delinquent sales taxes. |
Equity (Details Narrative)
Equity (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Mar. 29, 2018 | |
Shares issued for common stock | $ 180,000 | ||||
Shares issued price per share | $ 3.25 | ||||
Stock-based compensation | 66,224 | $ 270,788 | |||
General and administrative expenses | $ 1,442,328 | $ 1,705,940 | 2,834,574 | 3,532,587 | |
Restricted Common Stock [Member] | |||||
Unamortized value of restricted common stock | $ 347,535 | ||||
Unamortized value weighted average period | 2 years 6 months 3 days | ||||
Employees Directors and Consultants [Member] | Restricted Common Stock [Member] | |||||
Stock-based compensation | 27,133 | 270,788 | $ 66,224 | 270,788 | |
General and administrative expenses | 26,879 | 262,360 | 64,677 | 262,360 | |
Labor expense | $ 254 | $ 8,428 | 1,547 | $ 8,428 | |
Common Stock [Member] | |||||
Shares issued for common stock | 180,000 | ||||
Common Stock [Member] | Investors [Member] | |||||
Shares issued for common stock | $ 180,000 | ||||
Shares issued price per share | $ 1 | $ 1 | |||
Proceeds from issuance of common stock | $ 180,000 |
Equity - Schedule of Activity R
Equity - Schedule of Activity Related to Restricted Common Stock (Details) - Restricted Common Stock [Member] | 6 Months Ended |
Jun. 30, 2018$ / sharesshares | |
Restricted Common Stock, Outstanding Beginning | shares | 97,177 |
Restricted Common Stock, Granted | shares | |
Restricted Common Stock, Forfeited | shares | (27,164) |
Restricted Common Stock, Vested | shares | (26,286) |
Restricted Common Stock, Outstanding Ending | shares | 43,727 |
Weighted Average Grant Date Fair Value, Outstanding Beginning | $ / shares | $ 6.82 |
Weighted Average Grant Date Fair Value, Granted | $ / shares | |
Weighted Average Grant Date Fair Value, Forfeited | $ / shares | 9.33 |
Weighted Average Grant Date Fair Value, Vested | $ / shares | 9.12 |
Weighted Average Grant Date Fair Value, Outstanding Ending | $ / shares | $ 7.95 |
Equity - Schedule of Warrants A
Equity - Schedule of Warrants Activity (Details) | 6 Months Ended |
Jun. 30, 2018$ / sharesshares | |
Equity [Abstract] | |
Number of Warrants, Outstanding Beginning | shares | 521,045 |
Number of Warrants, Issued | shares | 579,466 |
Number of Warrants, Exercised | shares | |
Number of Warrants, Outstanding Ending | shares | 1,100,511 |
Number of Warrants, Exercisable | shares | 1,100,511 |
Weighted Average Exercise Price, Outstanding Beginning | $ / shares | $ 9.52 |
Weighted Average Exercise Price, Issued | $ / shares | 2.81 |
Weighted Average Exercise Price, Exercised | $ / shares | |
Weighted Average Exercise Price, Outstanding Ending | $ / shares | 5.76 |
Weighted Average Exercise Price, Exercisable | $ / shares | $ 5.76 |
Weighted Average Remaining Life In Years, Outstanding Beginning | 1 year 10 months 25 days |
Weighted Average Remaining Life In Years, Outstanding Ending | 2 years 2 months 12 days |
Weighted Average Remaining Life In Years, Exercisable | 2 years 2 months 12 days |
Equity - Schedule of Stock Opti
Equity - Schedule of Stock Options Assumptions (Details) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Expected term (years) | 3 years | 3 years | 3 years | 3 years |
Expected volatility | 55.37% | 43.50% | 43.50% | |
Expected dividends | 0.00% | 0.00% | 0.00% | 0.00% |
Minimum [Member] | ||||
Risk free interest rate | 2.51% | 1.57% | 2.20% | 1.57% |
Expected volatility | 53.68% | |||
Maximum [Member] | ||||
Risk free interest rate | 3.13% | 1.59% | 3.13% | 1.59% |
Expected volatility | 55.37% |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Jul. 15, 2019 | May 14, 2019 | May 06, 2019 | May 05, 2019 | Apr. 10, 2019 | Mar. 07, 2019 | Feb. 15, 2019 | Jan. 23, 2019 | Jan. 18, 2019 | Dec. 12, 2018 | Oct. 26, 2018 | Oct. 26, 2018 | Oct. 22, 2018 | Sep. 26, 2018 | Sep. 25, 2018 | Sep. 12, 2018 | May 25, 2018 | Mar. 29, 2018 | Apr. 30, 2019 | Apr. 30, 2019 | Jul. 31, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | May 31, 2019 | Sep. 30, 2018 | Dec. 31, 2017 |
Proceeds from issuance of convertible notes payable | $ 384,000 | $ 975,000 | ||||||||||||||||||||||||
Proceeds from related party debt | 650,000 | 100,000 | ||||||||||||||||||||||||
Debt conversion of converted instruments | 3,051,080 | 1,060,967 | ||||||||||||||||||||||||
Proceeds from public offering | $ 85,000 | 85,576 | ||||||||||||||||||||||||
Number of shares issued in public offering, shares | 44,153 | |||||||||||||||||||||||||
Number of shares issued in public offering | 85,576 | |||||||||||||||||||||||||
Stock issued for restricted stock, value | ||||||||||||||||||||||||||
Maximum [Member] | ||||||||||||||||||||||||||
Debt instrument stated interest rate | 5.00% | |||||||||||||||||||||||||
Debt instrument maturity term | 5 years | |||||||||||||||||||||||||
Minimum [Member] | ||||||||||||||||||||||||||
Debt instrument stated interest rate | 0.00% | |||||||||||||||||||||||||
Debt instrument maturity term | 6 months | |||||||||||||||||||||||||
Securities Purchase Agreements [Member] | Investor [Member] | ||||||||||||||||||||||||||
Promissory notes, offering price percentage, description | The conversion price of the 15% Senior Secured Convertible Promissory Notes was amended to equal 25% of the per share offering price paid by investors in the public offering in conjunction with an uplisting to a national exchange. However, in the event the holder is required to sign a Lock-Up Agreement as part of the public offering in conjunction with an uplisting to a national exchange, then the conversion price shall be 17.5% of the per share offering price paid by investors in the public offering in conjunction with an uplisting to a national exchange. | |||||||||||||||||||||||||
Employment Agreements [Member] | Minimum [Member] | ||||||||||||||||||||||||||
Proceeds from public offering | $ 5,000,000 | |||||||||||||||||||||||||
Employment Agreements [Member] | Ferdinand Groenewald [Member] | ||||||||||||||||||||||||||
Employee bonus | $ 10,000 | |||||||||||||||||||||||||
Settlement Agreement [Member] | ||||||||||||||||||||||||||
Litigation settlement amount | $ 55,891 | |||||||||||||||||||||||||
Forecast [Member] | Settlement Agreement [Member] | ||||||||||||||||||||||||||
Damages expenses | 2,391,330 | |||||||||||||||||||||||||
Convertible Notes [Member] | Forecast [Member] | ||||||||||||||||||||||||||
Debt principal amount | $ 951,000 | |||||||||||||||||||||||||
Number of shares issued for conversion of debt | 951,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | ||||||||||||||||||||||||||
Repayment of other notes principal payment | $ 710,000 | |||||||||||||||||||||||||
Repayment of related party debt | $ 435,000 | |||||||||||||||||||||||||
Number of shares issued for interest on other notes payable | 590,989 | |||||||||||||||||||||||||
Number of shares issued for interest on other notes payable, value | $ 590,989 | |||||||||||||||||||||||||
Litigation settlement amount | $ 85,000 | $ 69,367 | ||||||||||||||||||||||||
Damages expenses | $ 121,000 | |||||||||||||||||||||||||
Paid of litigation settlement amount | $ 32,809 | |||||||||||||||||||||||||
Subsequent Event [Member] | April 15, 2019 [Member] | ||||||||||||||||||||||||||
Litigation settlement amount | $ 7,000 | |||||||||||||||||||||||||
Payment of litigation description | Continuing monthly on the 15th day of each month though January 15, 2020. | |||||||||||||||||||||||||
Subsequent Event [Member] | Upon One and Two Year Anniversaries [Member] | ||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 100,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Kevin Mohan [Member] | ||||||||||||||||||||||||||
Base salary | $ 156,000 | |||||||||||||||||||||||||
Employee bonus | 50,000 | $ 50,000 | ||||||||||||||||||||||||
Proceeds from public offering | $ 175,000 | |||||||||||||||||||||||||
Stock issued for restricted stock, shares | 200,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Securities Purchase Agreements [Member] | Investor [Member] | ||||||||||||||||||||||||||
Conversion price per share | $ 1 | |||||||||||||||||||||||||
Debt instrument maturity description | Mature 18 months from issuance. | |||||||||||||||||||||||||
Debt instrument stated interest rate | 15.00% | |||||||||||||||||||||||||
Secured convertible notes debt | $ 5,138,000 | |||||||||||||||||||||||||
Debt conversion of converted instruments | $ 635,000 | |||||||||||||||||||||||||
Percentage of discounted public offering | 60.00% | |||||||||||||||||||||||||
Conversion price per share | $ 1 | |||||||||||||||||||||||||
Subsequent Event [Member] | Securities Purchase Agreements [Member] | Investor [Member] | Warrants [Member] | ||||||||||||||||||||||||||
Warrant exercise price per share | $ 1.20 | |||||||||||||||||||||||||
Number of warrants conversion shares of common stock percentage | 50.00% | |||||||||||||||||||||||||
Warrant exercisable period | 5 years | |||||||||||||||||||||||||
Percentage for warrant exercise price adjusted conversion price | 120.00% | |||||||||||||||||||||||||
Subsequent Event [Member] | Lock Up Agreement [Member] | Investor [Member] | ||||||||||||||||||||||||||
Conversion price per share | $ 0.75 | |||||||||||||||||||||||||
Percentage of discounted public offering | 45.00% | |||||||||||||||||||||||||
Subsequent Event [Member] | Employment Agreements [Member] | ||||||||||||||||||||||||||
Proceeds from public offering | $ 3,000,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Employment Agreements [Member] | Ferdinand Groenewald [Member] | ||||||||||||||||||||||||||
Base salary | $ 150,000 | |||||||||||||||||||||||||
Employee bonus | 25,000 | |||||||||||||||||||||||||
Proceeds from public offering | $ 3,000,000 | |||||||||||||||||||||||||
Salary description | During the term of the agreement, Mr. Groenewald will be entitled to a base salary at the annualized rate of $150,000 and will be eligible for a discretionary performance cash bonuses which will include $10,000 upon completion of the audit for the year ended December 31, 2017 and $25,000 and up to 10,000 shares of common stock upon completion of a public offering of not less than $3 million together with listing on a national exchange (the "Public Offering"), which may be increased to 25,000 in the event $5 million is raised. | |||||||||||||||||||||||||
Subsequent Event [Member] | Employment Agreements [Member] | Ferdinand Groenewald [Member] | Maximum [Member] | ||||||||||||||||||||||||||
Base salary | $ 175,000 | |||||||||||||||||||||||||
Number of shares issued in public offering, shares | 25,000 | |||||||||||||||||||||||||
Number of shares issued in public offering | $ 500,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Employment Agreements [Member] | Kenneth Miller [Member] | ||||||||||||||||||||||||||
Base salary | $ 200,000 | |||||||||||||||||||||||||
Number of shares issued in public offering, shares | 75,000 | |||||||||||||||||||||||||
Number of shares issued in public offering | $ 50,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Employment Agreements [Member] | Kenneth Miller [Member] | Maximum [Member] | ||||||||||||||||||||||||||
Base salary | $ 275,000 | |||||||||||||||||||||||||
Number of shares issued in public offering, shares | 125,000 | |||||||||||||||||||||||||
Number of shares issued in public offering | $ 500,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Employment Agreements [Member] | Michael Roper [Member] | ||||||||||||||||||||||||||
Base salary | 250,000 | |||||||||||||||||||||||||
Employment salary increased upon achieving various milestones by investors | 350,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Employment Agreements [Member] | Michael Roper [Member] | September 2018 Offering [Member] | ||||||||||||||||||||||||||
Employment salary increased upon achieving various milestones by investors | 275,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Employment Agreements [Member] | Michael Roper [Member] | IPO [Member] | ||||||||||||||||||||||||||
Employee bonus | $ 100,000 | $ 100,000 | ||||||||||||||||||||||||
Subsequent Event [Member] | Employment Agreements [Member] | Michael Roper [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 350,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Employment Agreements [Member] | Michael Roper [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] | Employment Agreements [Member] | Michael Roper [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] | Employment Agreements [Member] | Michael Roper [Member] | Restricted Stock Units (RSUs) One [Member] | ||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 250,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Employment Agreements [Member] | Kevin Mohan [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] | Employment Agreements [Member] | Kevin Mohan [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] | Employment Agreements [Member] | Rodney Silva [Member] | ||||||||||||||||||||||||||
Base salary | $ 150,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Employment Agreement [Member] | Aimee Infante [Member] | ||||||||||||||||||||||||||
Base salary | $ 125,000 | |||||||||||||||||||||||||
Employee bonus | 10,000 | |||||||||||||||||||||||||
Proceeds from public offering | $ 3,000,000 | |||||||||||||||||||||||||
Percentage for base salary | 25.00% | |||||||||||||||||||||||||
Subsequent Event [Member] | Employment Agreement [Member] | Aimee Infante [Member] | Maximum [Member] | ||||||||||||||||||||||||||
Base salary | $ 150,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Employment Agreement [Member] | Aimee Infante [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 5,000 | |||||||||||||||||||||||||
Stock issued for restricted stock, value | $ 5,000,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Employment Agreement [Member] | Aimee Infante [Member] | Restricted Stock Units (RSUs) [Member] | Maximum [Member] | ||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 10,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Settlement Agreement [Member] | Before November 16, 2018 [Member] | ||||||||||||||||||||||||||
Litigation settlement amount | $ 36,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Reimbursement Agreement [Member] | ||||||||||||||||||||||||||
Accounts payable and accrued expenses | $ 1,750 | $ 81,140 | ||||||||||||||||||||||||
Agreement payment, description | (a) $1,750 upon execution of the agreement, (b) $1,000 a month commencing on January 25, 2019 ending May 24, 2019, (c) a one time payment of $40,000 on the earlier of March 31, 2019 or when the Company fully received the anticipated funding from the a traunch of the 15% Senior Secured Convertible Notes and (d) on the earlier of May 31, 2019 or when the Company has fully received the anticipated funding from the second traunch of the 15% Senior Secured Convertible Notes. | |||||||||||||||||||||||||
Subsequent Event [Member] | Commission's Payment Agreement [Member] | ||||||||||||||||||||||||||
Employee bonus | $ 10,894 | |||||||||||||||||||||||||
Accounts payable and accrued expenses | $ 45,894 | |||||||||||||||||||||||||
Agreement payment, description | (a) $10,894 upon execution of the agreement and (b) $7,000 per month for five months start on May 31, 2019. As of the date of the issuance of these condensed consolidated financial statements the full amount has been repaid. | |||||||||||||||||||||||||
Subsequent Event [Member] | Consulting Agreement [Member] | ||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 290,000 | |||||||||||||||||||||||||
Agreement, term | 1 year | |||||||||||||||||||||||||
Payment of cash fee upon signing the agreement | $ 75,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Company and Certain Note Holders [Member] | ||||||||||||||||||||||||||
Conversion price per share | $ 1 | |||||||||||||||||||||||||
Debt principal amount | $ 560,000 | |||||||||||||||||||||||||
Debt instrument maturity description | The earlier of (a) January 24, 2020 or (b) the first day the company's stock is publicly traded. | |||||||||||||||||||||||||
Subsequent Event [Member] | Installment One [Member] | Securities Purchase Agreements [Member] | Investor [Member] | ||||||||||||||||||||||||||
Secured convertible notes debt | $ 1,000,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Installment Two [Member] | Securities Purchase Agreements [Member] | Investor [Member] | ||||||||||||||||||||||||||
Secured convertible notes debt | $ 1,000,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | January 25, 2019 Ending May 24, 2019 [Member] | Reimbursement Agreement [Member] | ||||||||||||||||||||||||||
Accounts payable and accrued expenses | $ 1,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Ten Monthly Installments [Member] | March 15, 2019 [Member] | ||||||||||||||||||||||||||
Litigation settlement amount | $ 15,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Five Monthly Payments [Member] | Commission's Payment Agreement [Member] | ||||||||||||||||||||||||||
Employee bonus | $ 7,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Convertible Notes [Member] | ||||||||||||||||||||||||||
Proceeds from issuance of convertible notes payable | $ 137,000 | |||||||||||||||||||||||||
Warrant term | 3 years | |||||||||||||||||||||||||
Warrant to purchase shares of common stock | 68,500 | |||||||||||||||||||||||||
Warrant exercise price per share | $ 3.25 | |||||||||||||||||||||||||
Debt note extended date | Aug. 31, 2018 | |||||||||||||||||||||||||
Conversion price per share | $ 1 | |||||||||||||||||||||||||
Debt principal amount | $ 1,550,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | Promissory Note [Member] | ||||||||||||||||||||||||||
Proceeds from related party debt | $ 91,000 | |||||||||||||||||||||||||
Debt instrument stated interest rate | 15.00% | |||||||||||||||||||||||||
Debt instrument maturity term | 1 year | |||||||||||||||||||||||||
Subsequent Event [Member] | April 2019 Offering [Member] | ||||||||||||||||||||||||||
Debt instrument maturity description | Mature 18 months from issuance. | |||||||||||||||||||||||||
Debt instrument stated interest rate | 12.00% | 12.00% | ||||||||||||||||||||||||
Percentage of discounted public offering | 50.00% | |||||||||||||||||||||||||
Conversion price per share | $ 2 | |||||||||||||||||||||||||
Promissory notes, offering price percentage, description | (i) Discounted Public Offering Price or (ii) a price per share equal to a $20 million valuation. | |||||||||||||||||||||||||
Proceeds from public offering | $ 3,000,000 | |||||||||||||||||||||||||
Subsequent Event [Member] | April 2019 Notes [Member] | Investors [Member] | Warrants [Member] | ||||||||||||||||||||||||||
Number of warrants conversion shares of common stock percentage | 50.00% | |||||||||||||||||||||||||
Warrant exercisable period | 5 years | |||||||||||||||||||||||||
Percentage for warrant exercise price adjusted conversion price | 115.00% |