Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 19, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | Muscle Maker, Inc. | |
Entity Central Index Key | 0001701756 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | 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 | 11,836,425 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2019 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Current Assets: | ||
Cash | $ 1,983,306 | $ 357,842 |
Accounts receivable, net of allowance for doubtful accounts of $75,000 and $45,000 as of September 30, 2019 and December 31, 2018, respectively | 157,826 | 180,768 |
Inventory | 78,701 | 45,067 |
Current portion of loans receivable, net of allowance of $55,000 at September 30, 2019 and December 31, 2018, respectively | 19,092 | 37,155 |
Current portion of loan receivable from related party | 650 | |
Prepaid expenses and other current assets | 48,664 | 16,412 |
Total Current Assets | 2,287,589 | 637,894 |
Property and equipment, net | 1,393,940 | 637,287 |
Goodwill | 86,348 | |
Intangible assets, net | 3,054,898 | 3,102,621 |
Loans receivable, non-current | 127,324 | 75,756 |
Security deposits and other assets | 35,007 | 33,532 |
Total Assets | 6,985,106 | 4,487,090 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 2,720,598 | 2,887,380 |
Convertible notes payable | 100,000 | 100,000 |
Convertible notes payable to Former Parent, net of debt discount of $10,883 and $43,178 at September 30, 2019 and December 31, 2018, respectively | 71,574 | 39,280 |
Convertible notes payable, net of debt discount of $760,723 at September 30, 2019 | 3,638,328 | |
Convertible notes payable, related parties, net of debt discount of $70,806 at September 30, 2019 | 329,194 | |
Other notes payable, related party | 91,000 | |
Deferred revenue, current | 131,631 | 907,948 |
Deferred rent, current | 10,143 | 14,243 |
Other current liabilities | 679,243 | 607,486 |
Total Current Liabilities | 7,771,711 | 4,556,337 |
Convertible notes payable, net of debt discount of $498,178 and $1,313,259 at September 30, 2019 and December 31, 2018, respectively | 4,740,772 | 2,015,007 |
Convertible notes payable, related parties, net of debt discount of $0 and $233,462 at September 30, 2019 and December 31, 2018, respectively | 153,566 | |
Other notes payable | 225,000 | |
Other notes payable, related parties | 335,000 | |
Deferred revenue, non-current | 902,778 | |
Deferred rent, non-current | 55,738 | 45,315 |
Total Liabilities | 13,470,999 | 7,330,225 |
Commitments and Contingencies | ||
Stockholders' Deficit: | ||
Common stock, $0.0001 par value, 100,000,000 shares authorized, 11,585,226 and 10,427,803 shares issued and outstanding as of September 30, 2019, and December 31, 2018, respectively | 1,159 | 1,043 |
Additional paid-in capital | 23,290,058 | 20,989,478 |
Accumulated deficit | (29,777,110) | (23,833,656) |
Total Stockholders' Deficit | (6,485,893) | (2,843,135) |
Total Liabilities and Stockholders' Deficit | $ 6,985,106 | $ 4,487,090 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 75,000 | $ 45,000 |
Allowance for loans receivable | 55,000 | 55,000 |
Debt discount on convertible notes payable, former parent | 10,883 | 43,178 |
Debt discount on convertible notes payable | 760,723 | |
Debt discount on convertible notes payable, related parties | 70,806 | |
Debt discount on convertible notes payable | 498,178 | 1,313,259 |
Debt discount on convertible notes payable related party | $ 0 | $ 233,462 |
Common stock, no par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 11,585,226 | 10,427,803 |
Common stock, shares outstanding | 11,585,226 | 10,427,803 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Revenues: | ||||
Total Revenues | $ 1,113,458 | $ 1,045,380 | $ 3,681,248 | $ 4,620,646 |
Restaurant operating expenses: | ||||
Total restaurant operating expenses | 897,364 | 660,178 | 2,532,361 | 3,736,749 |
Costs of other revenues | 114,388 | |||
Depreciation and amortization | 59,033 | 47,663 | 190,637 | 145,615 |
Other expenses incurred for closed locations | 269,659 | 27,519 | 473,378 | |
Franchise advertising fund expenses | 39,030 | 116,423 | ||
General and administrative expenses | 1,514,123 | 916,268 | 3,584,698 | 3,713,743 |
Total Costs and Expenses | 2,509,550 | 1,893,768 | 6,451,638 | 8,183,873 |
Loss from Operations | (1,396,092) | (848,388) | (2,770,390) | (3,563,227) |
Other Income (Expense): | ||||
Other income, net | 112,673 | 65,933 | 3,680 | 60,314 |
Interest expense, net | (614,100) | (94,655) | (1,262,521) | (826,155) |
Loss on sale of CTI | (456,169) | |||
Amortization of debt discounts | (451,310) | (267,358) | (1,345,683) | (1,914,038) |
Total Other Expense, Net | (952,737) | (296,080) | (2,604,524) | (3,136,048) |
Loss Before Income Tax | (2,348,829) | (1,144,468) | (5,374,914) | (6,699,275) |
Income tax provision | ||||
Net Loss | (2,348,829) | (1,144,468) | (5,374,914) | (6,699,275) |
Net loss attributable to the non-controlling interest | (2,071) | |||
Net Loss Attributable to Controlling Interest | $ (2,348,829) | $ (1,144,468) | $ (5,374,914) | $ (6,697,204) |
Net Loss Attributable to Controlling Interest Per Share: | ||||
Basic and Diluted | $ (0.22) | $ (0.14) | $ (0.5) | $ (0.81) |
Weighted Average Number of Common Shares Outstanding: | ||||
Basic and Diluted | 10,913,984 | 8,342,481 | 10,750,468 | 8,229,176 |
Restaurant Sales [Member] | ||||
Revenues: | ||||
Total Revenues | $ 821,684 | $ 721,300 | $ 2,438,284 | $ 3,246,041 |
Franchise Royalties and Fees [Member] | ||||
Revenues: | ||||
Total Revenues | 252,744 | 324,080 | 1,126,541 | 1,129,972 |
Franchise Advertising Fund Contributions [Member] | ||||
Revenues: | ||||
Total Revenues | 39,030 | 116,423 | ||
Other Revenues [Member] | ||||
Revenues: | ||||
Total Revenues | 244,633 | |||
Food and Beverage Costs [Member] | ||||
Restaurant operating expenses: | ||||
Total restaurant operating expenses | 339,454 | 266,678 | 915,063 | 1,193,908 |
Labor [Member] | ||||
Restaurant operating expenses: | ||||
Total restaurant operating expenses | 347,786 | 266,817 | 966,020 | 1,383,941 |
Rent [Member] | ||||
Restaurant operating expenses: | ||||
Total restaurant operating expenses | 96,832 | 66,599 | 283,667 | 537,588 |
Other Restaurant Operating Expenses [Member] | ||||
Restaurant operating expenses: | ||||
Total restaurant operating expenses | $ 113,292 | $ 60,084 | $ 367,611 | $ 621,312 |
Condensed Consolidated Statem_2
Condensed Consolidated Statement of Changes in Stockholders' Deficit (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, 2017 | $ 764 | $ 13,919,455 | $ (17,052,086) | $ (3,131,867) | $ (69,928) | $ (3,201,795) |
Balance, shares at Dec. 31, 2017 | 7,637,855 | |||||
Beneficial conversion feature - Convertible Notes | 2,537,008 | 2,537,008 | 2,537,008 | |||
Warrants issued in connection with convertible debt | 12,332 | 12,332 | 12,332 | |||
Offering on March 29, 2018, net of underwriter's discount and offering cost of $58,798 | $ 4 | 85,572 | 85,576 | 85,576 | ||
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 | $ 53 | 899,287 | 899,340 | 899,340 | ||
Conversion of convertible notes payable into common stock, shares | 553,425 | |||||
Stock-based compensation: Amortization of restricted common stock | 39,091 | 39,091 | 39,091 | |||
Common stock issued in exchange for interest earned on other notes payable | 305,055 | 305,055 | 305,055 | |||
Common stock issued in exchange for interest earned on other notes payable, shares | ||||||
Net loss | (3,183,726) | (3,183,726) | (7,257) | (3,190,983) | ||
Balance at Mar. 31, 2018 | $ 821 | 17,797,800 | (20,235,812) | (2,437,191) | (77,185) | (2,514,376) |
Balance, shares at Mar. 31, 2018 | 8,235,433 | |||||
Balance at Dec. 31, 2017 | $ 764 | 13,919,455 | (17,052,086) | (3,131,867) | (69,928) | (3,201,795) |
Balance, shares at Dec. 31, 2017 | 7,637,855 | |||||
Warrants issued and recorded as debt discount in connection with convertible notes payable | 343,818 | |||||
Net loss | (6,699,275) | |||||
Balance at Sep. 30, 2018 | $ 945 | 19,525,102 | (23,328,391) | (3,802,344) | (3,802,344) | |
Balance, shares at Sep. 30, 2018 | 9,476,803 | |||||
Balance at Dec. 31, 2017 | $ 764 | 13,919,455 | (17,052,086) | (3,131,867) | (69,928) | (3,201,795) |
Balance, shares at Dec. 31, 2017 | 7,637,855 | |||||
Balance at Dec. 31, 2018 | $ 1,043 | 20,989,478 | (23,833,656) | (2,843,135) | ||
Balance, shares at Dec. 31, 2018 | 10,427,803 | |||||
Balance at Mar. 31, 2018 | $ 821 | 17,797,800 | (20,235,812) | (2,437,191) | (77,185) | (2,514,376) |
Balance, shares at Mar. 31, 2018 | 8,235,433 | |||||
Beneficial conversion feature - Convertible Notes | 39,072 | 39,072 | 39,072 | |||
Warrants issued and recorded as debt discount in connection with convertible notes payable | 38,763 | 38,763 | 38,763 | |||
Stock-based compensation: Amortization of restricted common stock | 27,133 | 27,133 | 27,133 | |||
Issuance of restricted stock | $ 3 | (3) | ||||
Issuance of restricted stock, shares | 26,286 | |||||
Shares issued for common stock | $ 18 | 179,982 | 180,000 | 180,000 | ||
Shares issued for common stock, shares | 180,000 | |||||
Beneficial conversion feature - Convertible Note to Former Parent | 475,000 | 475,000 | 475,000 | |||
Warrants issued in connection with common stock and convertible debt | 3,750 | 3,750 | 3,750 | |||
Conversion of convertible note payable to Former Parent into common stock | $ 78 | 392,464 | 392,542 | 392,542 | ||
Conversion of convertible note payable to Former Parent into common stock, shares | 785,084 | |||||
Sale of interest in CTI | 420,899 | 420,899 | 71,999 | 492,898 | ||
Net loss | (2,368,921) | (2,368,321) | 5,186 | (2,363,735) | ||
Balance at Jun. 30, 2018 | $ 920 | 18,953,961 | (22,183,834) | (3,228,953) | (3,228,953) | |
Balance, shares at Jun. 30, 2018 | 9,226,803 | |||||
Beneficial conversion feature - Convertible Notes | 143,591 | 143,591 | 143,591 | |||
Stock-based compensation: Amortization of restricted common stock | 33,876 | 33,876 | 33,876 | |||
Warrants issued in connection with common stock and convertible debt | 143,699 | 143,699 | 143,699 | |||
Restricted stock issued as compensation for services | $ 25 | 249,975 | 250,000 | 250,000 | ||
Restricted stock issued as compensation for services, shares | 250,000 | |||||
Net loss | (1,144,557) | (1,144,557) | (1,144,468) | |||
Balance at Sep. 30, 2018 | $ 945 | 19,525,102 | (23,328,391) | $ (3,802,344) | (3,802,344) | |
Balance, shares at Sep. 30, 2018 | 9,476,803 | |||||
Balance at Dec. 31, 2018 | $ 1,043 | 20,989,478 | (23,833,656) | (2,843,135) | ||
Balance, shares at Dec. 31, 2018 | 10,427,803 | |||||
Beneficial conversion feature - Convertible Notes | 217,800 | 217,800 | ||||
Warrants issued and recorded as debt discount in connection with convertible notes payable | 217,641 | 217,641 | ||||
Stock-based compensation: Amortization of restricted common stock | 16 | 165,117 | 165,133 | |||
Issuance of restricted stock | $ 1 | (1) | ||||
Issuance of restricted stock, shares | 13,918 | |||||
Cumulative effect of change in accounting principle | (568,540) | (568,540) | ||||
Restricted stock issued as compensation for services | $ 14 | 139,986 | 140,000 | |||
Restricted stock issued as compensation for services, shares | 140,000 | |||||
Net loss | (1,483,479) | (1,483,479) | ||||
Balance at Mar. 31, 2019 | $ 1,074 | 21,730,021 | (25,885,675) | (4,154,580) | ||
Balance, shares at Mar. 31, 2019 | 10,581,721 | |||||
Balance at Dec. 31, 2018 | $ 1,043 | 20,989,478 | (23,833,656) | (2,843,135) | ||
Balance, shares at Dec. 31, 2018 | 10,427,803 | |||||
Warrants issued and recorded as debt discount in connection with convertible notes payable | ||||||
Net loss | (5,374,914) | |||||
Balance at Sep. 30, 2019 | $ 1,174 | 23,290,043 | (29,777,110) | (6,485,893) | ||
Balance, shares at Sep. 30, 2019 | 11,585,256 | |||||
Balance at Mar. 31, 2019 | $ 1,074 | 21,730,021 | (25,885,675) | (4,154,580) | ||
Balance, shares at Mar. 31, 2019 | 10,581,721 | |||||
Beneficial conversion feature - Convertible Notes | 330,220 | 330,220 | ||||
Warrants issued and recorded as debt discount in connection with convertible notes payable | 330,713 | 330,713 | ||||
Stock-based compensation: Amortization of restricted common stock | (123,431) | (123,431) | ||||
Common stock issued in exchange for interest earned on other notes payable | $ 11 | 111,655 | 111,666 | |||
Common stock issued in exchange for interest earned on other notes payable, shares | 111,666 | |||||
Common stock issued in exchange for interest earned on convertible notes payable | $ 48 | 479,275 | 479,323 | |||
Common stock issued in exchange for interest earned on convertible notes payable, shares | 479,323 | |||||
Net loss | (1,542,606) | (1,542,606) | ||||
Balance at Jun. 30, 2019 | $ 1,133 | 22,858,453 | (27,428,281) | (4,568,695) | ||
Balance, shares at Jun. 30, 2019 | 11,172,710 | |||||
Stock-based compensation: Amortization of restricted common stock | 19,085 | 19,085 | ||||
Restricted stock issued as compensation for services | $ 29 | 289,971 | 290,000 | |||
Restricted stock issued as compensation for services, shares | 290,000 | |||||
Common stock issued as compensation to board of directors | $ 12 | 119,034 | 119,046 | |||
Common stock issued as compensation to board of directors, shares | 119,046 | |||||
Common stock issued as compensation for services | 3,500 | 3,500 | ||||
Common stock issued as compensation for services, shares | 3,500 | |||||
Net loss | (2,348,829) | (2,348,829) | ||||
Balance at Sep. 30, 2019 | $ 1,174 | $ 23,290,043 | $ (29,777,110) | $ (6,485,893) | ||
Balance, shares at Sep. 30, 2019 | 11,585,256 |
Condensed Consolidated Statem_3
Condensed Consolidated Statement of Changes in Stockholders' Deficit (Unaudited) (Parenthetical) | Mar. 29, 2018USD ($) |
Statement of Stockholders' Equity [Abstract] | |
Offering costs | $ 58,798 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash Flows from Operating Activities | ||
Net loss | $ (5,374,914) | $ (6,699,275) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 190,637 | 145,615 |
Accretion of interest expense | 234,044 | |
Interest expense related to issuances of warrants | 305,055 | |
Stock-based compensation | 613,333 | 350,100 |
Loss on sale of CTI | 456,169 | |
Amortization of debt discounts | 1,345,683 | 1,914,038 |
Bad debt expense | 147,922 | 52,170 |
Deferred rent | 6,323 | (2,969) |
Expenses paid by Former Parent | 620,464 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (125,274) | (149,510) |
Inventory | (33,634) | 51,786 |
Prepaid expenses and other current assets | (32,252) | (1,257) |
Security deposits and other assets | (1,475) | (12,131) |
Accounts payable and accrued expenses | 337,859 | 698,984 |
Deferred revenue | (442,079) | 53,312 |
Other current liabilities | 71,757 | 230,527 |
Total Adjustments | 2,078,800 | 4,946,397 |
Net Cash Used in Operating Activities | (3,296,114) | (1,752,878) |
Cash Flows from Investing Activities | ||
Purchases of property and equipment | (864,451) | (78,754) |
Issuance of loans receivable | (60,186) | (9,689) |
Cash paid in connection with the acquisition of Midtown franchise store | (35,116) | |
Collections from loans receivable | 26,681 | 48,655 |
Collections from loans receivable - related party | 650 | 6,667 |
Net Cash Used in Investing Activities | (932,422) | (33,121) |
Cash Flows from Financing Activities | ||
Proceeds from issuance of restricted stock | 180,000 | |
Proceeds from offering, net of underwriter's discount and offering costs | 85,576 | |
Repayments to Former Parent, net | (132,459) | |
Repayments of convertible note payable | (50,000) | (50,000) |
Proceeds from other notes payable - related party | 91,000 | (50,000) |
Proceeds from convertible notes payable | 6,373,000 | 1,331,000 |
Proceeds from convertible notes payable - related parties | 100,000 | 650,000 |
Repayments of convertible notes payable - related party | (100,000) | |
Repayments of other notes payable - related parties | (335,000) | |
Repayments of other notes payables | (225,000) | |
Proceeds from other notes payable | 460,000 | |
Net Cash Provided by Financing Activities | 5,854,000 | 2,474,117 |
Net Increase in Cash | 1,625,464 | 688,118 |
Cash - Beginning of Period | 357,842 | 78,683 |
Cash - End of Period | 1,983,306 | 766,801 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash paid for interest | 471,774 | 39,129 |
Supplemental disclosures of non-cash investing and financing activities | ||
Beneficial conversion feature | 548,020 | 3,194,671 |
Warrants issued in connection with convertible debt | 548,354 | 159,781 |
Conversion of convertible notes payable to Former Parent into common stock | 392,542 | |
Conversion of notes payable into common stock | 899,340 | |
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 | |
Common stock issued in exchange for interest earned on other notes payable | 111,666 | |
Common stock issued in exchange for interest earned on convertible notes payable | $ 479,323 |
Business Organization and Natur
Business Organization and Nature of Operations, Going Concern and Management's Plans | 9 Months Ended |
Sep. 30, 2019 | |
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 included 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 among John Guild, JohnG Solutions LLC and CTI in which the Company agreed to sell its 70% ownership in CTI for a total purchase price of $1.00. On March 14, 2019, MMI formed a wholly owned subsidiary, Muscle Maker USA, Inc. (“Muscle USA.”), in the State of Texas. In November 2019, MMI formed Muscle Maker Inc., LLC (“MMI NV.”) in the state of Nevada. Pursuant to the Articles of Incorporation filed in the state of Nevada, MMI NV has authorized capital stock consisting of 100,000,000 shares of common stock, with a $0.0001 par value per share. On November 13, 2019, Muscle Maker, Inc., a California corporation, merged with and into its wholly owned subsidiary, Muscle Maker, Inc., a Nevada corporation, pursuant to an Agreement and Plan of Merger between Muscle Maker, Inc., a California corporation, and Muscle Maker, Inc., a Nevada corporation. Muscle Maker, Inc., a Nevada corporation, continued as the surviving entity of the migratory merger. Pursuant to the migratory merger, the Company changed its state of incorporation from California to Nevada and each share of its common stock converted into one share of common stock of the surviving entity in the migratory merger. No dissenters’ rights were exercised by any of the Company’s stockholders in connection with the migratory merger. All share and per share information has been retroactively adjusted to reflect merger with a $0.0001 par value per share. 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 September 30, 2019, the Company’s restaurant system included eight company-owned restaurants, and thirty-one franchise restaurants. A Muscle Maker Grill restaurants 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 September 30, 2019, the Company had a cash balance, a working capital deficiency and an accumulated deficit of $1,983,306, $5,484,122, and $29,777,110, respectively. During the three and nine months ended September 30, 2019, the Company incurred a pre-tax net loss of $2,348,829 and $5,374,914, respectively. These conditions indicate that there is substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date of the issuance of these condensed consolidated financial statements. Although management believes that the Company has access to capital resources, there are no commitments, other than aforementioned, in place for new financing as of the date of the issuance of these condensed consolidated financial statements and there can be no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all. The Company expects to have ongoing needs for working capital in order to (a) fund operations; plus (b) expand operations by opening additional corporate-owned restaurants. To that end, the Company may be required to raise additional funds through equity or debt financing. However, there can be no assurance that the Company will be successful in securing additional capital. If the Company is unsuccessful, the Company may need to (a) initiate cost reductions; (b) forego business development opportunities; (c) seek extensions of time to fund its liabilities, or (d) seek protection from creditors. The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“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 Split
Reverse Stock Split | 9 Months Ended |
Sep. 30, 2019 | |
Reverse Stock Split | |
Reverse Stock Split | NOTE 2 – REVERSE STOCK SPLIT Effective January 31, 2018, pursuant to authority granted by the stockholders of the Company, the Company implemented a 3-for-4 reverse split of the Company’s issued common stock (the “Second Reverse Split”). All share and per share information has been retroactively adjusted to reflect the Second Reverse Split for all periods presented. |
Significant Accounting Policies
Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2019 | |
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 September 30, 2019, and for the three and nine months ended September 30, 2019 and 2018. The results of operations for the three and nine months ended September 30, 2019 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, 2018, included in this filing. The balance sheet as of December 31, 2018 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. 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 September 30, 2019 and December 31, 2018. 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 September 30, 2019, and December 31, 2018, the Company did not have any derivative liabilities on its balance sheets. 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, 2019, with early adoption permitted. The Company is currently evaluating ASU 2016-02 and its impact on its condensed consolidated financial statements and disclosures. 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, 2019, and interim periods within those fiscal years. Early adoption is permitted. The guidance can be applied using a full or modified retrospective approach. The Company does not believe the adoption of the standard will have a material impact on its condensed consolidated financial statements or 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 adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures. 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. Revenue Recognition During the first quarter 2019, the Company adopted Topic 606 “Revenue from Contracts with Customers” for revenue recognition related to contracts with customers and applied the guidance modified retrospectively. Under the new guidance, revenue is recognized in accordance with a five-step revenue model, as follows: (1) identifying the contract with the customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations; and (5) recognizing revenue when (or as) the entity satisfies a performance obligation. In applying this five-step model, we have made significant judgments in identifying the promised goods or services in our contracts with franchisees that are distinct, and which represent separate performance obligations. The change between Topic 605 and Topic 606, primarily impacted the way the Company recognized franchise fees. Under Topic 605 franchise fees were recognized upon opening of a restaurant or granting of a new franchise term while under Topic 606 franchise fees are recognizes on a straight-line basis over the life of the related franchise agreements and any exercised renewal periods. The impact of the adoption of Topic 606 resulted in an adjustment of $568,540 in retained earnings and deferred revenues. Restaurant Sales Retail store revenue at Company operated restaurants is recognized when payment is tendered at the point of sale, net of sales tax, discount and other sales related taxes. The Company recorded retail store revenues of $821,684 and $2,438,284 during the three and nine months ended September 30, 2019, respectively. The Company recorded retail store revenues of $721,300 and $3,246,041 during the three and nine months ended September 30, 2018, respectively. The Company sells gift cards which do not have an expiration date, and it does not deduct dormancy fees from outstanding gift card balances. The Company recognize revenues form gift cards as restaurant revenues once the Company performs obligation to provide food and beverage to the customer is satisfies upon redemption of the gift card. Franchise Royalties and Fees Franchise revenues consists of royalties, franchise fees and rebates. Royalties are based on a percentage of franchisee net sales revenue. The Company recognizes the royalties as the underlying sales occur. The Company recorded revenue from royalties of $165,412 and $563,772 during the three and nine months ended September 30, 2019, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company recorded revenue from royalties of $244,820 and $736,384 during the three and nine months ended September 30, 2018, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company provides the franchisees with management expertise, training, pre-opening assistance, and restaurant operating assistance in exchange for the multi-unit development fees and franchise fees. The Company capitalizes these fees upon collection from the franchisee, which then recognizes franchise fee revenue on a straight-line basis over the life of the related franchise agreements and any exercised renewal periods. Cash payments are due upon the execution of the related franchise agreement. The Company’s performance obligation with respect to franchise fee revenues consists of a license to utilize the Company’s brand for a specified period of time, which is satisfied equally over the life of each franchise agreement. The Company recorded revenue from franchise fees of $16,132 and $342,649 during the three and nine months ended September 30, 2019, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company recorded revenue from franchise fees of $20,000 and $125,000 during the three and nine months ended September 30, 2018, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company has supply agreements with certain food and beverage vendors. Pursuant to the terms of these agreements, rebates are provided to the Company based upon the dollar volume of purchases for all company-owned and franchised restaurants from these vendors. Rebates earned on purchases by franchise stores are recorded as revenue during the period in which the related food and beverage purchases are made. The Company recorded revenue from rebates of $71,200 and $220,120 during the three and nine months ended September 30, 2019, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company recorded revenue from rebates of $59,260 and $268,588 during the three and nine months ended September 30, 2018, 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. The Company recognized revenue when persuasive evidence of an arrangement existed, delivery of the product or service has occurred, the fee was fixed or determinable and collectability was reasonably assured. The Company recorded $0 and $244,633, respectively, of revenues from these technology sales and services during the three and nine months ended September 30, 2018. Deferred Revenue Deferred revenue primarily includes initial franchise fees received by the Company, which are being amortized over the life of the Company’s franchise agreements, as well as unearned vendor rebates and customer deposits received in connection with technology sales and services by CTI (see Note 10 – Deferred Revenue). 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. Franchise Advertising Fund Contributions Under the Company’s franchise agreements, the Company and its franchisees are required to contribute a certain percentage of revenues to a national advertising fund. The Company’s national advertising services are provided on a system-wide basis and, therefore, not considered distinct performance obligations for individual franchisees. In accordance with Topic 606, the Company recognizes these sales-based advertising contributions from franchisees as franchise revenue when the underlying franchisee sales occur. The Company records the related advertising expenses as incurred under general and administrative expenses. When an advertising contribution fund is over-spent at year end, advertising expenses will be reported on the condensed consolidated statement of operations in an amount that is greater than the revenue recorded for advertising contributions. Conversely, when an advertising contribution fund is under-spent at a period end, the Company will accrue advertising costs up to advertising contributions recorded in revenue. The Company recorded contributions from franchisees of $39,030 and $116,423, respectively, during the three and nine months ended September 30, 2019, which is included in franchise advertising fund contributions on the accompanying condensed consolidated statements of operations. Impacts on Financial Statements The following table summarized the impact of the adoption of the new revenue standard on the Company’s previously reported consolidated financial statements: December 31, 2018 New Revenue January 1, 2019 Deferred revenues $ 907,948 $ 568,540 $ 1,476,488 Accumulated deficit 23,833,656 568,540 24,402,196 Advertising Advertising costs are charged to expense as incurred. Advertising costs were approximately $14,624 and $18,237 for the three and nine months ended September 30, 2019, and approximately $3,638 and $23,237 for the three and nine months ended September 30, 2018 and are included in general and administrative expenses in the accompanying condensed consolidated statements of operations. 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. The following securities are excluded from the calculation of weighted average diluted common shares at September 30, 2019 and 2018, respectively, because their inclusion would have been anti-dilutive: September 30, 2019 2018 Warrants 5,296,048 1,507,048 Options 33,750 33,750 Convertible debt 7,841,846 2,972,070 Total potentially dilutive shares 13,171,644 4,512,868 Major Vendor The Company engages various vendors to distribute food products to their Company-owned restaurants. Purchases from the Company’s largest supplier totaled 75% and 81% of the Company’s purchases for the three and nine months ended September 30, 2019, respectively. Purchases from the Company’s largest supplier totaled 81% and 77% of the Company’s purchases for the three and nine months ended September 30, 2018, respectively. Controlling and Non-Controlling Interest 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 from January 1, 2018 through May 24, 2018. Reclassifications Certain amounts in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no effect on previously reported net loss. 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. |
Acquisition
Acquisition | 9 Months Ended |
Sep. 30, 2019 | |
Business Combinations [Abstract] | |
Acquisition | NOTE 4 – ACQUISITION Midtown Acquisition On August 22, 2019, the Company acquired a franchisee store in Midtown, New York, as a corporate store (the “Midtown Acquisition”). The purchase price of the store was $121,464, of which $35,116 related to equipment purchased and the remaining $86,348 was accounted for as goodwill. The Company paid cash of approximately $35,000 and also assumed a liability of approximately $86,000 which is recorded in accounts payable and accrued expenses. |
Loans Receivable
Loans Receivable | 9 Months Ended |
Sep. 30, 2019 | |
Receivables [Abstract] | |
Loans Receivable | NOTE 5 - LOANS RECEIVABLE At September 30, 2019 and December 31, 2018, the Company’s loans receivable consists of the following: September 30, 2019 December 31, 2018 Loans receivable, net $ 146,416 $ 112,911 Less: current portion (19,092 ) (37,155 ) Loans receivable, non-current $ 127,324 $ 75,756 During August 2019, the company advanced money to a former franchisee and issued a loan receivable in the amount of $60,186. The loan is payable in 120 monthly payments consisting of principal and interest of 12%, with the payments becoming due as of December 1, 2019. Loans receivable includes loans to franchisees totaling, in the aggregate, $146,416 and $112,911, net of reserves for uncollectible loans of $55,000 and $55,000 at September 30, 2019 and December 31, 2018. The loans have original terms ranging up to 10 years, earn interest at rates ranging from 2% to 12%, and are being repaid on a weekly or monthly basis. |
Loan Receivable from Related Pa
Loan Receivable from Related Party | 9 Months Ended |
Sep. 30, 2019 | |
Receivables [Abstract] | |
Loan Receivable from Related Party | NOTE 6 – LOAN RECEIVABLE FROM RELATED PARTY At September 30, 2019 and December 31, 2018, the Company’s loan receivable from related party consisted of the following: September 30, 2019 December 31, 2018 Loans receivable from related party, net $ - 650 Less: current portion - (650 ) Loans receivable from related party, non-current $ - - |
Property and Equipment, Net
Property and Equipment, Net | 9 Months Ended |
Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | NOTE 7 – PROPERTY AND EQUIPMENT, NET As of September 30, 2019, and December 31, 2018 property and equipment consists of the following: September 30, 2019 December 31, 2018 Furniture and equipment $ 559,203 $ 282,896 Leasehold improvements 1,249,628 626,368 1,808,831 909,264 Less: accumulated depreciation and amortization (414,891 ) (271,977 ) Property and equipment, net $ 1,393,940 $ 637,287 Depreciation expense amounted to $42,950 and $142,914 for the three and nine months ended September 30, 2019, respectively. Depreciation expense amounted to $31,580 and $95,526 for the three and nine months ended September 30, 2018, respectively. |
Intangible Assets, Net
Intangible Assets, Net | 9 Months Ended |
Sep. 30, 2019 | |
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 Agreements Total Intangible assets, net at December 31, 2018 $ 2,524,000 $ 578,621 $ 3,102,621 Amortization expense - (47,723 ) (47,723 ) Intangible assets, net at September 30, 2019 $ 2,524,000 $ 530,898 $ 3,054,898 Weighted average remaining amortization period at September 30, 2019 (in years) 8.6 Amortization expense related to intangible assets amounted to $16,083 and $47,723 for the three and nine months ended September 30, 2019, respectively. Amortization expense related to intangible assets amounted to $16,083 and $50,089 for the three and nine months ended September 30, 2018, respectively. |
Accounts Payables and Accrued E
Accounts Payables and Accrued Expenses | 9 Months Ended |
Sep. 30, 2019 | |
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: September 30, 2019 December 31, 2018 Accounts payable $ 935,432 $ 841,334 Accrued payroll 186,063 181,452 Accrued vacation 18,757 - Accrued professional fees 257,994 296,518 Accrued board members fees 125,187 143,108 Accrued rent expense 307,769 618,120 Sales taxes payable (1) 224,717 297,160 Accrued interest 647,173 433,494 Accrued interest, related parties 1,795 - Other accrued expenses 15,711 76,194 $ 2,720,598 $ 2,887,380 (1) See Note 13 – Commitments and Contingencies –Taxes for detailed related to delinquent sales taxes. |
Deferred Revenue
Deferred Revenue | 9 Months Ended |
Sep. 30, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Deferred Revenue | NOTE 10 – DEFERRED REVENUE At September 30, 2019 and December 31, 2018, deferred revenue consists of the following: September 30, 2019 December 31, 2018 Franchise fees $ 958,998 $ 801,107 Unearned vendor rebates 75,411 106,841 Less: Unearned vendor rebates, current (75,411) (106,841 ) Less: Franchise fees, current (56,220) (801,107 ) Deferred revenues, non-current $ 902,778 $ - |
Other Current Liabilities
Other Current Liabilities | 9 Months Ended |
Sep. 30, 2019 | |
Other Liabilities Disclosure [Abstract] | |
Other Current Liabilities | NOTE 11 – OTHER CURRENT LIABILITIES Other current liabilities consist of the following: September 30, 2019 December 31, 2018 Gift card liability $ 126,089 $ 122,221 Co-op advertising fund liability 287,927 240,226 Advertising fund liability 265,227 245,039 $ 679,243 $ 607,486 |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTE 12 – NOTES PAYABLE Convertible Notes 15% Senior Secured Convertible Promissory Notes From January 1, 2019 through September 30, 2019, 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 $2,973,000, of which a $100,000 was to related parties. The SPA Notes bear interest at 15% per annum paid quarterly and mature 18 months from issuance. As amended on April 10, 2019, the Investors may elect to convert all or part of the SPA 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 twenty five percent (25%) 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 17.5% of the per share offering price paid by the investors in the public offering in conjunction with an uplisting to a national exchange. - In addition to the SPA Notes, the Investors also received warrants to purchase common stock of 1,486,500 shares of the Company (the “SPA Warrants”). The Investors are entitled to purchase a number of shares equal to 50% of the conversion shares of common stock of the Company. The SPA Warrants are exercisable for five years at an exercise price of $1.20. In the event the 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 SPA Warrants on a cashless basis. The Company granted the Investors piggyback registration rights with respect to the shares of common stock underlying the SPA Notes and the SPA Warrants. 12% Secured Convertible Notes During April 2019, Muscle USA entered into security purchase agreement (“April 2019 SPA”) with the several accredited investors (“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 $3,500,000 (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 “April 2019 Discounted Public Offering Price”) is less than $2.00 then the April 2019 Conversion Price shall be reset to equal the lesser of (i) April 2019 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 875,000 warrants to purchase common stock of the Company (the “April 2019 Warrants”) that entitle the holders to purchase a number of shares equal to 50% of the conversion shares of common stock of the Company. The April 2019 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 April 2019 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 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 April 2019 Investors piggyback registration rights with respect to the shares of common stock underlying the April 2019 Notes and the April 2019 Warrants. Other 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 convertible notes payable, as amended and extended on or about August 2018, in the aggregate principal amount of $1,550,000, of which $400,000 was to related parties, 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 convertible notes payable in the aggregate principal amount of $150,000, of which $100,000 belong to related parties. In addition, the company issued 111,666 of the company’s common stock as payment for the interest incurred on the convertible notes payable repaid in the aggregate amount of $111,666. 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 warrants at the date of grant is also recorded as a debt discount. For the nine months ended September 30, 2019 the Company recorded aggregate debt discounts of $548,354 and $548,020, related to the warrants and the beneficial conversion feature, respectively, on the convertible notes and for the nine months ended September 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. 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 $560,000, of which $335,000 belong to related parties. In addition, the company issued 479,323 of the company’s common stock as payment for the interest incurred on the other notes payable repaid in the aggregate amount of $479,323. 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. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 13 – COMMITMENTS AND CONTINGENCIES Employment Agreements 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. During the term of the agreement, Mr. Roper will be entitled to a base salary at the annualized rate of $250,000 and will be eligible for a discretionary performance bonus to be paid in cash or equity. Mr. Roper is also entitled to 100,000 shares of common stock of the Company that will be issued upon a Public offering of at least $3,000,000. 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 the Company that he is resigning from his positions with the Company and its subsidiaries effective May 29, 2018. On September 26, 2018, the Company rehired 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. In addition, pursuant to board approval, Mr. Groenewald is entitled to 110,000 shares of common stock of the Company that will be issued upon a Public Offering of at least $3,000,000. 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 also entitled to 100,000 shares of common stock of the Company that will be issued upon a Public offering of at least $3,000,000. 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 was increased to $275,000 upon achieving various milestones required by the Investors that participated in the September 2018 Offering and will be increased 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. Mr. Roper is also entitled to 100,000 shares of common stock of the Company that will be issued upon a Public offering of at least $3,000,000. In addition, pursuant to board approval on June 29, 2019, Mr. Roper is entitled to 250,000 shares of common stock of the Company that will be issued upon a Public Offering of at least $3,000,000. In the event the Company raises $3 million or $5 million upon completion of a public offering together with listing on a national exchange, 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. 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. In addition, pursuant to board approval on June 29, 2019, Mr. Mohan is entitled to 250,000 shares of common stock of the Company that will be issued upon a Public Offering of at least $3,000,000. 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. 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 a 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. Consulting Agreements On September 12, 2018, the Company entered into a Consulting Agreement with a professional business and financial expert to provide the Company financial and business advice including, but not limited, to discussing financing, potential business opportunities and potential acquisition. In addition, the consultant will help the Company select an underwriter to conduct an offering and will work with Company to prepare for the offering. Pursuant to the terms of the agreement the Company agreed to pay $140,000 in cash and to issue 250,000 restricted shares of the Company’s common stock on or before September 30, 2018. In addition, the Company agrees to pay the following additional fees (i) $70,000 in cash and 70,000 in restricted shares upon performance of the first milestones per the SPA, (ii) $70,000 in cash and 70,000 in restricted shares upon performance of the second milestones per the SPA and (iii)$150,000 in cash and 200,000 in restricted shares upon the completion of both the contract and the Company’s offering. As of September 30, 2019, the company issued an aggregate of 390,000 shares of common stock pursuant to the agreement, paid a $280,000 in cash pursuant to the terms of the agreement. On May 24, 2019, the Company entered into a Consulting Agreement with a project management group to assist with various financial matters, documentation and presentations as needed. Pursuant to the terms of the agreement, the Company will pay $5,000 per month until the contract is cancelled by either party with written notice. 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 issued 290,000 restricted shares of common stock and agreed to pay a cash fee of $75,000 upon signing the agreement. During July 2019, the Company entered into a Consulting Agreement with a consultant with a background in menu and recipe development to develop a new menu and recipes for a new healthy restaurant concept called Healthy Joe’s. The Company will issue an aggregate of 11,500 shares of common stock as payment pursuant to the terms of the agreement and reimburse the consultant for any out of pocket expenses in connection with the services provided pursuant to the agreement. As of September 30, 2019, the Company issued 3,500 shares to the consultant pursuant to the agreement. Board Compensation On July 16, 2019, the board of directors approved a board compensation plan that would compensate the board members for their deferred compensation for 2019, 2018 and 2017. The board members are eligible for cash compensation of $4,500 or $9,000 per year. To be paid as follows: (i) directors serving on the board during 2018 and 2017, will be granted shares is lieu of payment as the letter agreements set forth certain terms pursuant to which the directors will serve as directors of the Company. In addition, on an ongoing basis pursuant to the approved board compensation plan each director will receive 10,000 shares of common stock per year for service as director, 1,300 shares of common stock per year for service on each committee and 1,000 shares of common stock per year for service as chair for such committee. The shares of common stock for committee service will be limited to two committees. The Company will issue shares of common stock as follows, which shall be prorated for a partial year: (i) directors that served as directors during the year ended December 31, 2017 will each receive 5,000 shares of common stock, (ii) directors that served as directors during the year ended December 31, 2018 will each receive 10,000 shares of common stock and (iii) directors that served as directors during the year ended December 31, 2019 will each receive 10,000 shares of common stock. As directors have not received compensation for services to date, the Company agreed to provide equity in lieu of cash compensation and equity compensation for services rendered during 2017, 2018 and 2019. For past director services in lieu of cash unpaid to date: (i) directors that served as directors during the year ended December 31, 2017 will each receive shares of common stock valued at $4,500 to be priced at the price per share of the Company’s public offering in connection with its uplisting (the “Uplisting Offering”), (ii) directors that served as directors during the year ended December 31, 2018 will each receive shares of common stock valued at $9,000, which shall be prorated for a partial year of service, to be priced at the price per share of the Uplisting Offering and (iii) directors that served as directors during the year ended December 31, 2019 through the date of the Uplisting Offering will each receive shares of common stock valued at $9,000, which shall be prorated for a partial year of service, to be priced at the price per share of the Uplisting Offering. Following the public offering, directors will be paid cash for the balance of 2019. On August 5, 2019 the Company authorized the issuances of an aggregate of 119,046 shares of common stock, valued at a $1.00 per share, to the members of the board of directors. As of September 30, 2019 the Company accrued a total of $125,187 related to board compensation. 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 Robert E. Morgan (the former CEO of the Company) 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 Mr. Morgan 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. As of September 30, 2019, the Company has accrued for the liability in accounts payable and accrued expenses. On March 27, 2018 a convertible note holder filed a complaint in the Iowa District Court for Polk County #CVCV056029 against the Company for failure to pay the remaining balance due on a promissory note in the amount of $100,000, together with interest, attorney fees and other costs of $171,035. On June 6, 2018 a default judgement was entered against the Company for the amount of $171,035. The Company repaid an aggregate amount of $71,035, consisting of principal and interest, as of the date of the filing of this report. As of September 30, 2019, the Company has accrued for the liability in convertible notes payable in the amount of $100,000 and accrued interest of $18,045 is included in accounts payable and accrued expenses. 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 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. As of September 30, 2019, the Company has accrued for the liability in accounts payable and accrued expenses. In May 2018, Resolute Contractors, Inc., Quality Tile, MTL Construction, Genesis Electric, JNB Interiors and Captive Aire filed a Mechanics Lien for labor, service, equipment and materials in the total amount of $98,005. The Company intends to set up various payment plans with these vendors. As of September 30, 2019, the Company has accrued for the liability in accounts payable and accrued expenses. 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. The company has accrued for the liability in accounts payable and accrued expenses and has been making repayments 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 March 31, 2019. The Company shall pay the employee as follows (a) $1,750 upon execution of the agreement, (b) $1,000 a week commencing on January 25, 2019 ending May 24, 2019, (c) a onetime payment of $40,000 on the earlier of March 31, 2019 or when the Company fully received the anticipated funding from the a tranche of the 15% Senior Secured Convertible Notes and (d) a onetime payment of $21,390 on the earlier of May 31, 2019 or when the Company has fully received the anticipated funding from the second tranche of the 15% Senior Secured Convertible Notes. As of September 30, 2019, the full amount has been repaid. 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 September 30, 2019, the Company accrued $30,000 for the liability in accounts payable and 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 March 31, 2019. 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 starting on May 31, 2019. As of September 30, 2019, the full amount has been repaid. 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. Operating Lease On August 1, 2019, the Company entered into a settlement agreement with a landlord in connection with the prior executive office in Houston, Texas as the Company vacated the property on April 30, 2018. The Company owed the landlord the sum of $58,522. The landlord agreed to accept $32,283 as full payment of the damages. Pursuant to the settlement we will make three equal payments of $10,761 with the first payment to be made on August 2, 2019, the second payment is to be made on September 1, 2019 and the final payment is to be made on October 1, 2019. As of September 30, 2019, the remaining unpaid amount of $10,761, is included in accounts payable and accrued expenses. Trademark During July 2019 the Company filed an application to register a trade name and service mark for “Healthy Joe’s” that will be used in connection with the development and operating of potential Healthy Joe’s restaurants. If the trademark is approved, the Company will license the rights to use the Healthy Joe’s trademark and intellectual property to its wholly-owned subsidiaries, Muscle Maker Development and Muscle Maker Corp., and to further sublicense them to our franchisees for use in connection with Healthy Joe’s restaurants. 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 $224,717 and $297,160 which includes penalties and interest as of September 30, 2019 and December 31, 2018, respectively, related to this matter. |
Equity
Equity | 9 Months Ended |
Sep. 30, 2019 | |
Equity [Abstract] | |
Equity | NOTE 14 – EQUITY Common Stock See Note 12 – Notes Payable – Convertible Notes, and Notes Payable – Other Notes Payable. See Note 13 – Commitments and Contingencies – Board Compensation and Commitments and Contingencies – Consulting Agreements for details related to stock issuances for the nine months ended September 30, 2019. 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 September 30, 2019, the unamortized value of the restricted common stock was $101,265. The unamortized amount will be expensed over a weighted average period of 1.26 years. A summary of the activity related to the restricted common stock for the nine months ended September 30, 2019 is presented below: Weighted Total Date Fair Value Outstanding at January 1, 2019 42,442 $ 6.34 Granted 430,000 1.00 Forfeited (11,470 ) 9.33 Vested (443,918 ) 1.23 Outstanding at September 30, 2019 17,054 $ 5.94 Stock-Based Compensation Expense Stock-based compensation related to restricted stock issued to employees, directors and consultants amounted to $431,631 and $613,333 for the three and nine months ended September 30, 2019, respectively, of which $429,315 and $611,191 was recorded in general and administrative expenses and $2,316 and $2,142 was recorded in labor expense within restaurant operating expenses. Stock-based compensation related to restricted stock issued to employees, directors and consultants amounted to $33,876 and $350,100 for the three and nine months ended September 30, 2018, respectively, of which $33,102 and $347,779 was recorded in general and administrative expenses and $774 and $2,321 was recorded in labor expense within restaurant operating expenses. Warrants A summary of warrants activity during the nine months ended September 30, 2019 is presented below: Number of Warrants Weighted Average Weighted Average Outstanding, December 31, 2018 2,184,548 $ 3.38 3.3 Issued 2,361,500 1.61 5.0 Exercised - - - Forfeited - - - Outstanding, September 30, 2019 4,546,048 $ 2.46 3.6 Exercisable, September 30, 2019 4,546,048 $ 2.46 3.6 The grant date fair value of warrants granted during the nine months ended September 30, 2019 and 2018 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 Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Risk free interest rate 1.61 - 2.32 % 2.67 - 2.96 % 1.61 - 2.62 % 2.20 - 3.13 % Contractual term (years) 5.00 3.00-5.00 5.00 5.00-3.00 Expected volatility 58.24-88.10 % 51.50-53.60 % 52.64 – 88.10 % 51.50 - 55.37 % Expected dividend 0.00 % 0.00 % 0.00 % 0.00 % |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 15 – SUBSEQUENT EVENTS Acquisition of Bronx On October 10, 2019, the Company acquired a former franchisee location in the Bronx, New York, as a corporate store (the “Bronx Acquisition”). The purchase price of the store was $600,000, of which $30,000 related to equipment purchased and the remaining $570,000 was accounted for as goodwill. The purchase price is payable as follows: $300,000 that was paid at closing and the remaining $300,000 is payable pursuant to a five year promissory note with an eight percent interest rate. Board Compensation On October 19, 2019 the Company authorized the issuances of an aggregate of 26,242 share of common stock to the members of the board of directors. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
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 September 30, 2019, and for the three and nine months ended September 30, 2019 and 2018. The results of operations for the three and nine months ended September 30, 2019 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, 2018, included in this filing. The balance sheet as of December 31, 2018 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 September 30, 2019 and December 31, 2018. |
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 September 30, 2019, and December 31, 2018, the Company did not have any derivative liabilities on its balance sheets. |
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, 2019, with early adoption permitted. The Company is currently evaluating ASU 2016-02 and its impact on its condensed consolidated financial statements and disclosures. 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, 2019, and interim periods within those fiscal years. Early adoption is permitted. The guidance can be applied using a full or modified retrospective approach. The Company does not believe the adoption of the standard will have a material impact on its condensed consolidated financial statements or 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 adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures. 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. |
Revenue Recognition | Revenue Recognition During the first quarter 2019, the Company adopted Topic 606 “Revenue from Contracts with Customers” for revenue recognition related to contracts with customers and applied the guidance modified retrospectively. Under the new guidance, revenue is recognized in accordance with a five-step revenue model, as follows: (1) identifying the contract with the customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations; and (5) recognizing revenue when (or as) the entity satisfies a performance obligation. In applying this five-step model, we have made significant judgments in identifying the promised goods or services in our contracts with franchisees that are distinct, and which represent separate performance obligations. The change between Topic 605 and Topic 606, primarily impacted the way the Company recognized franchise fees. Under Topic 605 franchise fees were recognized upon opening of a restaurant or granting of a new franchise term while under Topic 606 franchise fees are recognizes on a straight-line basis over the life of the related franchise agreements and any exercised renewal periods. The impact of the adoption of Topic 606 resulted in an adjustment of $568,540 in retained earnings and deferred revenues. Restaurant Sales Retail store revenue at Company operated restaurants is recognized when payment is tendered at the point of sale, net of sales tax, discount and other sales related taxes. The Company recorded retail store revenues of $821,684 and $2,438,284 during the three and nine months ended September 30, 2019, respectively. The Company recorded retail store revenues of $721,300 and $3,246,041 during the three and nine months ended September 30, 2018, respectively. The Company sells gift cards which do not have an expiration date, and it does not deduct dormancy fees from outstanding gift card balances. The Company recognize revenues form gift cards as restaurant revenues once the Company performs obligation to provide food and beverage to the customer is satisfies upon redemption of the gift card. Franchise Royalties and Fees Franchise revenues consists of royalties, franchise fees and rebates. Royalties are based on a percentage of franchisee net sales revenue. The Company recognizes the royalties as the underlying sales occur. The Company recorded revenue from royalties of $165,412 and $563,772 during the three and nine months ended September 30, 2019, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company recorded revenue from royalties of $244,820 and $736,384 during the three and nine months ended September 30, 2018, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company provides the franchisees with management expertise, training, pre-opening assistance, and restaurant operating assistance in exchange for the multi-unit development fees and franchise fees. The Company capitalizes these fees upon collection from the franchisee, which then recognizes franchise fee revenue on a straight-line basis over the life of the related franchise agreements and any exercised renewal periods. Cash payments are due upon the execution of the related franchise agreement. The Company’s performance obligation with respect to franchise fee revenues consists of a license to utilize the Company’s brand for a specified period of time, which is satisfied equally over the life of each franchise agreement. The Company recorded revenue from franchise fees of $16,132 and $342,649 during the three and nine months ended September 30, 2019, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company recorded revenue from franchise fees of $20,000 and $125,000 during the three and nine months ended September 30, 2018, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company has supply agreements with certain food and beverage vendors. Pursuant to the terms of these agreements, rebates are provided to the Company based upon the dollar volume of purchases for all company-owned and franchised restaurants from these vendors. Rebates earned on purchases by franchise stores are recorded as revenue during the period in which the related food and beverage purchases are made. The Company recorded revenue from rebates of $71,200 and $220,120 during the three and nine months ended September 30, 2019, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company recorded revenue from rebates of $59,260 and $268,588 during the three and nine months ended September 30, 2018, 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. The Company recognized revenue when persuasive evidence of an arrangement existed, delivery of the product or service has occurred, the fee was fixed or determinable and collectability was reasonably assured. The Company recorded $0 and $244,633, respectively, of revenues from these technology sales and services during the three and nine months ended September 30, 2018. Deferred Revenue Deferred revenue primarily includes initial franchise fees received by the Company, which are being amortized over the life of the Company’s franchise agreements, as well as unearned vendor rebates and customer deposits received in connection with technology sales and services by CTI (see Note 10 – Deferred Revenue). 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. Franchise Advertising Fund Contributions Under the Company’s franchise agreements, the Company and its franchisees are required to contribute a certain percentage of revenues to a national advertising fund. The Company’s national advertising services are provided on a system-wide basis and, therefore, not considered distinct performance obligations for individual franchisees. In accordance with Topic 606, the Company recognizes these sales-based advertising contributions from franchisees as franchise revenue when the underlying franchisee sales occur. The Company records the related advertising expenses as incurred under general and administrative expenses. When an advertising contribution fund is over-spent at year end, advertising expenses will be reported on the condensed consolidated statement of operations in an amount that is greater than the revenue recorded for advertising contributions. Conversely, when an advertising contribution fund is under-spent at a period end, the Company will accrue advertising costs up to advertising contributions recorded in revenue. The Company recorded contributions from franchisees of $39,030 and $116,423, respectively, during the three and nine months ended September 30, 2019, which is included in franchise advertising fund contributions on the accompanying condensed consolidated statements of operations. Impacts on Financial Statements The following table summarized the impact of the adoption of the new revenue standard on the Company’s previously reported consolidated financial statements: December 31, 2018 New Revenue January 1, 2019 Deferred revenues $ 907,948 $ 568,540 $ 1,476,488 Accumulated deficit 23,833,656 568,540 24,402,196 |
Advertising | Advertising Advertising costs are charged to expense as incurred. Advertising costs were approximately $14,624 and $18,237 for the three and nine months ended September 30, 2019, and approximately $3,638 and $23,237 for the three and nine months ended September 30, 2018 and are included in general and administrative expenses in the accompanying condensed consolidated statements of operations. |
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. The following securities are excluded from the calculation of weighted average diluted common shares at September 30, 2019 and 2018, respectively, because their inclusion would have been anti-dilutive: September 30, 2019 2018 Warrants 5,296,048 1,507,048 Options 33,750 33,750 Convertible debt 7,841,846 2,972,070 Total potentially dilutive shares 13,171,644 4,512,868 |
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 75% and 81% of the Company’s purchases for the three and nine months ended September 30, 2019, respectively. Purchases from the Company’s largest supplier totaled 81% and 77% of the Company’s purchases for the three and nine months ended September 30, 2018, respectively. |
Controlling and Non-Controlling Interest | Controlling and Non-Controlling Interest 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 from January 1, 2018 through May 24, 2018. |
Reclassifications | Reclassifications Certain amounts in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no effect on previously reported net loss. |
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. |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Schedule of the Impact of the Adoption of the New Revenue Standard | The following table summarized the impact of the adoption of the new revenue standard on the Company’s previously reported consolidated financial statements: December 31, 2018 New Revenue January 1, 2019 Deferred revenues $ 907,948 $ 568,540 $ 1,476,488 Accumulated deficit 23,833,656 568,540 24,402,196 |
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 September 30, 2019 and 2018, respectively, because their inclusion would have been anti-dilutive: September 30, 2019 2018 Warrants 5,296,048 1,507,048 Options 33,750 33,750 Convertible debt 7,841,846 2,972,070 Total potentially dilutive shares 13,171,644 4,512,868 |
Loans Receivable (Tables)
Loans Receivable (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Receivables [Abstract] | |
Schedule of Loans Receivables | At September 30, 2019 and December 31, 2018, the Company’s loans receivable consists of the following: September 30, 2019 December 31, 2018 Loans receivable, net $ 146,416 $ 112,911 Less: current portion (19,092 ) (37,155 ) Loans receivable, non-current $ 127,324 $ 75,756 |
Loan Receivable from Related _2
Loan Receivable from Related Party (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Receivables [Abstract] | |
Schedule of Loans Receivable from Related Party | At September 30, 2019 and December 31, 2018, the Company’s loan receivable from related party consisted of the following: September 30, 2019 December 31, 2018 Loans receivable from related party, net $ - 650 Less: current portion - (650 ) Loans receivable from related party, non-current $ - - |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment, Net | As of September 30, 2019, and December 31, 2018 property and equipment consists of the following: September 30, 2019 December 31, 2018 Furniture and equipment $ 559,203 $ 282,896 Leasehold improvements 1,249,628 626,368 1,808,831 909,264 Less: accumulated depreciation and amortization (414,891 ) (271,977 ) Property and equipment, net $ 1,393,940 $ 637,287 |
Intangible Assets, Net (Tables)
Intangible Assets, Net (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | A summary of the intangible assets is presented below: Intangible Assets Trademark Franchise Agreements Total Intangible assets, net at December 31, 2018 $ 2,524,000 $ 578,621 $ 3,102,621 Amortization expense - (47,723 ) (47,723 ) Intangible assets, net at September 30, 2019 $ 2,524,000 $ 530,898 $ 3,054,898 Weighted average remaining amortization period at September 30, 2019 (in years) 8.6 |
Accounts Payables and Accrued_2
Accounts Payables and Accrued Expenses (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Payables and Accruals [Abstract] | |
Schedule of Accounts Payables and Accrued Expenses | Accounts payables and accrued expenses consist of the following: September 30, 2019 December 31, 2018 Accounts payable $ 935,432 $ 841,334 Accrued payroll 186,063 181,452 Accrued vacation 18,757 - Accrued professional fees 257,994 296,518 Accrued board members fees 125,187 143,108 Accrued rent expense 307,769 618,120 Sales taxes payable (1) 224,717 297,160 Accrued interest 647,173 433,494 Accrued interest, related parties 1,795 - Other accrued expenses 15,711 76,194 $ 2,720,598 $ 2,887,380 (1) See Note 13 – Commitments and Contingencies –Taxes for detailed related to delinquent sales taxes. |
Deferred Revenue (Tables)
Deferred Revenue (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Deferred Revenue | At September 30, 2019 and December 31, 2018, deferred revenue consists of the following: September 30, 2019 December 31, 2018 Franchise fees $ 958,998 $ 801,107 Unearned vendor rebates 75,411 106,841 Less: Unearned vendor rebates, current (75,411) (106,841 ) Less: Franchise fees, current (56,220) (801,107 ) Deferred revenues, non-current $ 902,778 $ - |
Other Current Liabilities (Tabl
Other Current Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Other Current Liabilities | Other current liabilities consist of the following: September 30, 2019 December 31, 2018 Gift card liability $ 126,089 $ 122,221 Co-op advertising fund liability 287,927 240,226 Advertising fund liability 265,227 245,039 $ 679,243 $ 607,486 |
Equity (Tables)
Equity (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Equity [Abstract] | |
Schedule of Activity Related to Restricted Common Stock | A summary of the activity related to the restricted common stock for the nine months ended September 30, 2019 is presented below: Weighted Total Date Fair Value Outstanding at January 1, 2019 42,442 $ 6.34 Granted 430,000 1.00 Forfeited (11,470 ) 9.33 Vested (443,918 ) 1.23 Outstanding at September 30, 2019 17,054 $ 5.94 |
Schedule of Warrants Activity | A summary of warrants activity during the nine months ended September 30, 2019 is presented below: Number of Warrants Weighted Average Weighted Average Outstanding, December 31, 2018 2,184,548 $ 3.38 3.3 Issued 2,361,500 1.61 5.0 Exercised - - - Forfeited - - - Outstanding, September 30, 2019 4,546,048 $ 2.46 3.6 Exercisable, September 30, 2019 4,546,048 $ 2.46 3.6 |
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 Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Risk free interest rate 1.61 - 2.32 % 2.67 - 2.96 % 1.61 - 2.62 % 2.20 - 3.13 % Contractual term (years) 5.00 3.00-5.00 5.00 5.00-3.00 Expected volatility 58.24-88.10 % 51.50-53.60 % 52.64 – 88.10 % 51.50 - 55.37 % Expected dividend 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 ($) | Sep. 15, 2017 | Jul. 18, 2017 | Mar. 23, 2017 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Nov. 30, 2019 | Jan. 02, 2019 | Dec. 31, 2018 | May 24, 2018 | Jan. 23, 2015 |
Acquisition percentage | 74.00% | |||||||||||
Common stock, shares authorized | 100,000,000 | 100,000,000 | 100,000,000 | |||||||||
Common stock, no par value | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||||||||
Cash balance | $ 1,983,306 | $ 1,983,306 | $ 357,842 | |||||||||
Working capital deficiency | (5,484,122) | (5,484,122) | ||||||||||
Accumulated deficit | (29,777,110) | (29,777,110) | $ (24,402,196) | $ (23,833,656) | ||||||||
Net loss before income tax | $ (2,348,829) | $ (1,144,468) | $ (5,374,914) | $ (6,699,275) | ||||||||
Agreement of Merger [Member] | MMBC Common Stock [Member] | ||||||||||||
Stock converted to shares | 796 | |||||||||||
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] | 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 Makers Inc.,LLC [Member] | Subsequent Event [Member] | ||||||||||||
Common stock, shares authorized | 100,000,000 | |||||||||||
Common stock, no par value | $ 0.0001 |
Reverse Stock Split (Details Na
Reverse Stock Split (Details Narrative) | Jan. 31, 2018 |
Reverse Stock Split | |
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 | 9 Months Ended | ||||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Jan. 02, 2019 | Dec. 31, 2018 | |
Cash equivalents | ||||||
Derivative liabilities | ||||||
Deferred revenue | $ 1,476,488 | 907,948 | ||||
Accumulated deficit | 29,777,110 | 29,777,110 | $ 24,402,196 | 23,833,656 | ||
Revenues | 1,113,458 | $ 1,045,380 | 3,681,248 | $ 4,620,646 | ||
Franchise advertising fund expenses | 39,030 | 116,423 | ||||
Advertising costs | $ 14,624 | $ 3,638 | $ 18,237 | $ 23,237 | ||
Supplier Concentration Risk [Member] | Purchases [Member] | ||||||
Concentration risk percentage | 75.00% | 81.00% | 81.00% | 77.00% | ||
Restaurant Sales [Member] | ||||||
Revenues | $ 821,684 | $ 721,300 | $ 2,438,284 | $ 3,246,041 | ||
Royalties [Member] | ||||||
Revenues | 165,412 | 244,820 | 563,772 | 736,384 | ||
Franchise [Member] | ||||||
Revenues | 16,132 | 20,000 | 342,649 | 125,000 | ||
Rebates [Member] | ||||||
Revenues | $ 71,200 | 59,260 | $ 220,120 | 268,588 | ||
Technology Sales and Services [Member] | ||||||
Other revenues | $ 0 | $ 244,633 | ||||
New Revenue Standard Adjustment [Member] | ||||||
Deferred revenue | 568,540 | |||||
Accumulated deficit | $ 568,540 |
Significant Accounting Polici_5
Significant Accounting Policies - Schedule of the Impact of the Adoption of the New Revenue Standard (Details) - USD ($) | Sep. 30, 2019 | Jan. 02, 2019 | Dec. 31, 2018 |
Deferred revenue | $ 1,476,488 | $ 907,948 | |
Accumulated deficit | $ 29,777,110 | $ 24,402,196 | 23,833,656 |
New Revenue Standard Adjustment [Member] | |||
Deferred revenue | 568,540 | ||
Accumulated deficit | $ 568,540 |
Significant Accounting Polici_6
Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Total potentially dilutive shares | 13,171,644 | 4,512,868 |
Warrants [Member] | ||
Total potentially dilutive shares | 5,296,048 | 1,507,048 |
Options [Member] | ||
Total potentially dilutive shares | 33,750 | 33,750 |
Convertible Debt [Member] | ||
Total potentially dilutive shares | 7,841,846 | 2,972,070 |
Acquisition (Details Narrative)
Acquisition (Details Narrative) - USD ($) | Aug. 22, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 |
Purchase epuipment | $ 864,451 | $ 78,754 | ||
Goodwill | 86,348 | |||
Cash payment | $ 35,116 | |||
Midtown Acquisition [Member] | ||||
Purchase price | $ 121,464 | |||
Purchase epuipment | 35,116 | |||
Goodwill | 86,348 | |||
Cash payment | 35,000 | |||
Assumed liability | $ 86,000 |
Loans Receivable (Details Narra
Loans Receivable (Details Narrative) - USD ($) | Aug. 30, 2019 | Sep. 30, 2019 | Dec. 31, 2018 |
Loans receivable | $ 146,416 | $ 112,911 | |
Net of reserves for uncollectible loans | $ 55,000 | $ 55,000 | |
Maximum [Member] | |||
Interest rate | 12.00% | ||
Loan original term | 10 years | ||
Minimum [Member] | |||
Interest rate | 2.00% | ||
Former Franchisee [Member] | |||
Loans receivable | $ 60,186 | ||
Debt instrument, payment terms | The loan is payable in 120 monthly payments consisting of principal and interest of 12%, with the payments becoming due as of December 1, 2019. | ||
Interest rate | 12.00% | ||
Maturity date | Dec. 1, 2019 |
Loans Receivable - Schedule of
Loans Receivable - Schedule of Loans Receivables (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Receivables [Abstract] | ||
Loans receivable, net | $ 146,416 | $ 112,911 |
Less: current portion | (19,092) | (37,155) |
Loans receivable, non-current | $ 127,324 | $ 75,756 |
Loan Receivable from Related _3
Loan Receivable from Related Party - Schedule of Loans Receivable from Related Party (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Receivables [Abstract] | ||
Loans receivable from related party, net | $ 650 | |
Less: current portion | (650) | |
Loans receivable from related party, non-current |
Property and Equipment, Net (De
Property and Equipment, Net (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 42,950 | $ 31,580 | $ 142,914 | $ 95,526 |
Property and Equipment, Net - S
Property and Equipment, Net - Schedule of Property and Equipment, Net (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment [Abstract] | ||
Furniture and equipment | $ 559,203 | $ 282,896 |
Leasehold improvements | 1,249,628 | 626,368 |
Property and equipment, gross | 1,808,831 | 909,264 |
Less: accumulated depreciation and amortization | (414,891) | (271,977) |
Property and equipment, net | $ 1,393,940 | $ 637,287 |
Intangible Assets, Net (Details
Intangible Assets, Net (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Amortization expense | $ 16,083 | $ 16,083 | $ 47,723 | $ 50,089 |
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 | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Intangible assets, net beginning balance | $ 3,102,621 | |||
Amortization expense | $ (16,083) | $ (16,083) | (47,723) | $ (50,089) |
Intangible assets, net ending balance | 3,054,898 | 3,054,898 | ||
Trademark [Member] | ||||
Intangible assets, net beginning balance | 2,524,000 | |||
Amortization expense | ||||
Intangible assets, net ending balance | 2,524,000 | 2,524,000 | ||
Franchise Agreements [Member] | ||||
Intangible assets, net beginning balance | 578,621 | |||
Amortization expense | (47,723) | |||
Intangible assets, net ending balance | $ 530,898 | $ 530,898 | ||
Weighted average remaining amortization period at June 30, 2019 (in years) | 8 years 7 months 6 days |
Accounts Payables and Accrued_3
Accounts Payables and Accrued Expenses - Schedule of Accounts Payables and Accrued Expenses (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |||
Accounts payable | $ 935,432 | $ 841,334 | |
Accrued payroll | 186,063 | 181,452 | |
Accrued vacation | 18,757 | ||
Accrued professional fees | 257,994 | 296,518 | |
Accrued board members fees | 125,187 | 143,108 | |
Accrued rent expense | 307,769 | 618,120 | |
Sales taxes payable | [1] | 224,717 | 297,160 |
Accrued interest | 647,173 | 433,494 | |
Accrued interest, related parties | 1,795 | ||
Other accrued expenses | 15,711 | 76,194 | |
Accounts payables and accrued expenses | $ 2,720,598 | $ 2,887,380 | |
[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 ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Revenue from Contract with Customer [Abstract] | ||
Franchise fees | $ 958,998 | $ 801,107 |
Unearned vendor rebates | 75,411 | 106,841 |
Less: Unearned vendor rebates, current | (75,411) | (106,841) |
Less: Franchise fees, current | (56,220) | (801,107) |
Deferred revenues, non-current | $ 902,778 |
Other Current Liabilities - Sch
Other Current Liabilities - Schedule of Other Current Liabilities (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Other Liabilities Disclosure [Abstract] | ||
Gift card liability | $ 126,089 | $ 122,221 |
Co-op advertising fund liability | 287,927 | 240,226 |
Advertising fund liability | 265,227 | 245,039 |
Other current liabilities | $ 679,243 | $ 607,486 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | May 14, 2019 | Apr. 10, 2019 | Jan. 23, 2019 | Apr. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 |
Debt Instrument [Line Items] | |||||||||
Repayment of related party debt | $ 50,000 | $ 50,000 | |||||||
Warrants issued in connection with convertible debt | $ 330,713 | $ 217,641 | $ 38,763 | 343,818 | |||||
Proceeds from related party debt | $ 100,000 | 650,000 | |||||||
15% Senior Secured Convertible Promissory Notes [Member] | Accredited Investor [Member] | Securities Purchase Agreements [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt interest percentage | 15.00% | ||||||||
Secured convertible notes debt | $ 2,973,000 | ||||||||
Notes payable, related parties | $ 100,000 | ||||||||
Debt instrument maturity description | Mature 18 months from issuance | ||||||||
Debt instrument conversion price | $ 1 | ||||||||
Debt conversion description | The Investors may elect to convert all or part of the SPA 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 twenty five percent (25%) 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 17.5% of the per share offering price paid by the investors in the public offering in conjunction with an uplisting to a national exchange. | ||||||||
15% Senior Secured Convertible Promissory Notes [Member] | Accredited Investor [Member] | Securities Purchase Agreements [Member] | Warrants [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Warrants to purchase common stock | 1,486,500 | ||||||||
Warrants term | 5 years | ||||||||
Warrant exercise price | $ 1.20 | ||||||||
Number of warrants conversion shares of common stock percentage | 50.00% | ||||||||
Percentage for warrant exercise price adjusted conversion price | 120.00% | ||||||||
12% Secured Convertible Notes [Member] | Accredited Investor [Member] | Securities Purchase Agreements [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt interest percentage | 12.00% | ||||||||
Secured convertible notes debt | $ 3,500,000 | ||||||||
Debt instrument maturity description | Mature 18 months from issuance | ||||||||
Debt instrument conversion price | $ 2 | ||||||||
Debt conversion description | 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. | ||||||||
12% Secured Convertible Notes [Member] | Accredited Investor [Member] | Securities Purchase Agreements [Member] | Warrants [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Warrants to purchase common stock | 875,000 | ||||||||
Warrants term | 5 years | ||||||||
Number of warrants conversion shares of common stock percentage | 50.00% | ||||||||
Percentage for warrant exercise price adjusted conversion price | 115.00% | ||||||||
Securities Purchase Agreements [Member] | Accredited Investor [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Secured convertible notes debt | $ 1,550,000 | ||||||||
Notes payable, related parties | $ 400,000 | ||||||||
Debt instrument maturity description | 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, of which $400,000 was to related parties, 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. | ||||||||
Debt instrument conversion price | $ 1 | ||||||||
Other Convertible Notes [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Repayment of other debt | $ 150,000 | ||||||||
Repayment of related party debt | $ 100,000 | ||||||||
Number of shares issued for interest on other notes payable | 111,666 | ||||||||
Number of shares issued for interest on other notes payable, value | $ 111,666 | ||||||||
Convertible Promissory Note [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Warrants issued in connection with convertible debt | $ 548,354 | 359,900 | |||||||
Beneficial conversion feature | $ 548,020 | $ 3,051,080 | |||||||
Other Notes Payable [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument maturity description | 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. | ||||||||
Debt instrument conversion price | $ 1 | ||||||||
Repayment of other debt | 560,000 | ||||||||
Repayment of related party debt | $ 335,000 | ||||||||
Number of shares issued for interest on other notes payable | 479,323 | ||||||||
Number of shares issued for interest on other notes payable, value | $ 479,323 | ||||||||
Other notes payable | $ 560,000 | ||||||||
Promissory Note [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt interest percentage | 15.00% | ||||||||
Proceeds from related party debt | $ 91,000 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) | Nov. 19, 2019 | Oct. 01, 2019 | Sep. 30, 2019 | Sep. 01, 2019 | Aug. 05, 2019 | Aug. 02, 2019 | Aug. 01, 2019 | Jul. 16, 2019 | Jul. 02, 2019 | Jun. 29, 2019 | Jun. 29, 2019 | May 24, 2019 | May 06, 2019 | May 05, 2019 | Apr. 15, 2019 | Mar. 15, 2019 | Mar. 07, 2019 | Feb. 28, 2019 | Feb. 15, 2019 | Jan. 23, 2019 | Jan. 18, 2019 | Jan. 15, 2019 | Dec. 12, 2018 | Oct. 26, 2018 | Oct. 03, 2018 | Sep. 26, 2018 | Sep. 26, 2018 | Sep. 12, 2018 | Jun. 06, 2018 | May 01, 2018 | Mar. 27, 2018 | Oct. 26, 2018 | May 31, 2018 | Apr. 30, 2018 | Mar. 31, 2019 | Jun. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | May 04, 2018 |
Gross proceeds from offering | $ 85,576 | |||||||||||||||||||||||||||||||||||||||||
Value of issued shares of common stock | $ 180,000 | |||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, value | ||||||||||||||||||||||||||||||||||||||||||
Accounts payable and accrued expenses | $ 2,720,598 | 2,720,598 | $ 2,887,380 | |||||||||||||||||||||||||||||||||||||||
Taxes on penalties and interest | 224,717 | 224,717 | $ 297,160 | |||||||||||||||||||||||||||||||||||||||
Limestone Associates LLC [Member] | ||||||||||||||||||||||||||||||||||||||||||
Rent expense | $ 25,748 | |||||||||||||||||||||||||||||||||||||||||
Stratford Road Partners, LLC [Member] | ||||||||||||||||||||||||||||||||||||||||||
Lease obligation | $ 10,000 | |||||||||||||||||||||||||||||||||||||||||
Resolute Contractors, Inc [Member] | ||||||||||||||||||||||||||||||||||||||||||
Litigation settlement amount | $ 98,005 | |||||||||||||||||||||||||||||||||||||||||
Board Compensation Plan [Member] | ||||||||||||||||||||||||||||||||||||||||||
Number of common stock shares issued | 119,046 | 10,000 | 10,000 | 5,000 | ||||||||||||||||||||||||||||||||||||||
Agreements term description | The board of directors approved a board compensation plan that would compensate the board members for their deferred compensation for 2019, 2018 and 2017. The board members are eligible for cash compensation of $4,500 or $9,000 per year. To be paid as follows: (i) directors serving on the board during 2018 and 2017, will be granted shares is lieu of payment as the letter agreements set forth certain terms pursuant to which the directors will serve as directors of the Company. | |||||||||||||||||||||||||||||||||||||||||
Value of issued shares of common stock | $ 9,000 | $ 9,000 | $ 4,500 | |||||||||||||||||||||||||||||||||||||||
Cash compensation | $ 125,187 | 125,187 | ||||||||||||||||||||||||||||||||||||||||
Shares issued price per share | $ 1 | |||||||||||||||||||||||||||||||||||||||||
Board Compensation Plan [Member] | Service as Director [Member] | ||||||||||||||||||||||||||||||||||||||||||
Number of common stock shares issued for services | 10,000 | |||||||||||||||||||||||||||||||||||||||||
Board Compensation Plan [Member] | Service on Each Committee [Member] | ||||||||||||||||||||||||||||||||||||||||||
Number of common stock shares issued for services | 1,300 | |||||||||||||||||||||||||||||||||||||||||
Board Compensation Plan [Member] | Service as Chair [Member] | ||||||||||||||||||||||||||||||||||||||||||
Number of common stock shares issued for services | 1,000 | |||||||||||||||||||||||||||||||||||||||||
Minimum [Member] | Board Compensation Plan [Member] | ||||||||||||||||||||||||||||||||||||||||||
Cash compensation | $ 4,500 | |||||||||||||||||||||||||||||||||||||||||
Maximum [Member] | Board Compensation Plan [Member] | ||||||||||||||||||||||||||||||||||||||||||
Cash compensation | $ 9,000 | |||||||||||||||||||||||||||||||||||||||||
Employment Agreements [Member] | ||||||||||||||||||||||||||||||||||||||||||
Gross proceeds from offering | $ 3,000,000 | $ 5,000,000 | ||||||||||||||||||||||||||||||||||||||||
Consulting Agreement [Member] | ||||||||||||||||||||||||||||||||||||||||||
Number of common stock shares issued | 3,500 | 11,500 | ||||||||||||||||||||||||||||||||||||||||
Agreement term | 1 year | |||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 290,000 | |||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, value | $ 75,000 | |||||||||||||||||||||||||||||||||||||||||
Consulting fees | $ 5,000 | |||||||||||||||||||||||||||||||||||||||||
Consulting Agreement [Member] | Underwriter [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 250,000 | |||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, value | $ 140,000 | |||||||||||||||||||||||||||||||||||||||||
Securities Purchase Agreements [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||||||||||||||||||||||||||||||||||
Number of common stock shares issued | 390,000 | |||||||||||||||||||||||||||||||||||||||||
Payment of cash for potential business opportunities and potential acquisition | $ 280,000 | |||||||||||||||||||||||||||||||||||||||||
Securities Purchase Agreements [Member] | Restricted Stock Units (RSUs) [Member] | First Milestones [Member] | ||||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 70,000 | |||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, value | $ 70,000 | |||||||||||||||||||||||||||||||||||||||||
Securities Purchase Agreements [Member] | Restricted Stock Units (RSUs) [Member] | Second Milestones [Member] | ||||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 70,000 | |||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, value | $ 70,000 | |||||||||||||||||||||||||||||||||||||||||
Securities Purchase Agreements [Member] | Restricted Stock Units (RSUs) [Member] | Upon Completion of Both Contract [Member] | ||||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 200,000 | |||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, value | $ 150,000 | |||||||||||||||||||||||||||||||||||||||||
Reimbursement Agreement [Member] | ||||||||||||||||||||||||||||||||||||||||||
Accounts payable and accrued expenses | $ 81,140 | |||||||||||||||||||||||||||||||||||||||||
Expense reimbursement description | The Company shall pay the employee as follows (a) $1,750 upon execution of the agreement, (b) $1,000 a week commencing on January 25, 2019 ending May 24, 2019, (c) a onetime payment of $40,000 on the earlier of March 31, 2019 or when the Company fully received the anticipated funding from the a traunche of the 15% Senior Secured Convertible Notes and (d) a onetime payment of $21,390 on the earlier of May 31, 2019 or when the Company has fully received the anticipated funding from the second traunche of the 15% Senior Secured Convertible Notes. As of September 30, 2019 the full amount has been repaid. | |||||||||||||||||||||||||||||||||||||||||
Litigations, Claims and Assessments [Member] | ||||||||||||||||||||||||||||||||||||||||||
Accounts payable and accrued expenses | $ 30,000 | 30,000 | ||||||||||||||||||||||||||||||||||||||||
Loss contingency seeking damages | $ 32,809 | |||||||||||||||||||||||||||||||||||||||||
Commission's Payment Agreement [Member] | ||||||||||||||||||||||||||||||||||||||||||
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 starting on May 31, 2019. As of September 30, 2019 the full amount has been repaid. | |||||||||||||||||||||||||||||||||||||||||
Michael J. Roper [Member] | ||||||||||||||||||||||||||||||||||||||||||
Base salary | $ 250,000 | |||||||||||||||||||||||||||||||||||||||||
Number of common stock shares issued | 100,000 | |||||||||||||||||||||||||||||||||||||||||
Gross proceeds from offering | $ 3,000,000 | |||||||||||||||||||||||||||||||||||||||||
Michael J. Roper [Member] | Upon One and Two Year Anniversaries [Member] | ||||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 100,000 | |||||||||||||||||||||||||||||||||||||||||
Michael J. Roper [Member] | Employment Agreements [Member] | ||||||||||||||||||||||||||||||||||||||||||
Base salary | $ 250,000 | |||||||||||||||||||||||||||||||||||||||||
Gross proceeds from offering | $ 3,000,000 | |||||||||||||||||||||||||||||||||||||||||
Agreement term | 2 years | |||||||||||||||||||||||||||||||||||||||||
Employment salary increased upon achieving various milestones by investors | $ 350,000 | |||||||||||||||||||||||||||||||||||||||||
Michael J. Roper [Member] | Employment Agreements [Member] | Restricted Stock Units (RSUs) One [Member] | Minimum [Member] | ||||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 150,000 | |||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, value | $ 3,000,000 | |||||||||||||||||||||||||||||||||||||||||
Michael J. Roper [Member] | Employment Agreements [Member] | Restricted Stock Units (RSUs) One [Member] | Maximum [Member] | ||||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 250,000 | |||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, value | $ 5,000,000 | |||||||||||||||||||||||||||||||||||||||||
Michael J. Roper [Member] | Employment Agreements [Member] | Public Offering [Member] | ||||||||||||||||||||||||||||||||||||||||||
Number of common stock shares issued | 250,000 | 100,000 | ||||||||||||||||||||||||||||||||||||||||
Value of issued shares of common stock | $ 3,000,000 | $ 3,000,000 | ||||||||||||||||||||||||||||||||||||||||
Employee bonus | 100,000 | 100,000 | ||||||||||||||||||||||||||||||||||||||||
Michael J. Roper [Member] | Employment Agreements [Member] | September 2018 Offering [Member] | ||||||||||||||||||||||||||||||||||||||||||
Employment salary increased upon achieving various milestones by investors | 275,000 | |||||||||||||||||||||||||||||||||||||||||
Ferdinand Groenewald [Member] | ||||||||||||||||||||||||||||||||||||||||||
Base salary | $ 150,000 | |||||||||||||||||||||||||||||||||||||||||
Number of common stock shares issued | 10,000 | |||||||||||||||||||||||||||||||||||||||||
Gross proceeds from offering | $ 3,000,000 | |||||||||||||||||||||||||||||||||||||||||
Cash bonuses | $ 10,000 | |||||||||||||||||||||||||||||||||||||||||
Ferdinand Groenewald [Member] | Employment Agreements [Member] | ||||||||||||||||||||||||||||||||||||||||||
Base salary | $ 25,000 | |||||||||||||||||||||||||||||||||||||||||
Agreements term description | 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. | |||||||||||||||||||||||||||||||||||||||||
Agreement term | 2 years | |||||||||||||||||||||||||||||||||||||||||
Ferdinand Groenewald [Member] | Employment Agreements [Member] | Public Offering [Member] | ||||||||||||||||||||||||||||||||||||||||||
Base salary | $ 175,000 | |||||||||||||||||||||||||||||||||||||||||
Number of common stock shares issued | 110,000 | |||||||||||||||||||||||||||||||||||||||||
Value of issued shares of common stock | $ 3,000,000 | |||||||||||||||||||||||||||||||||||||||||
Kenneth Miller [Member] | Employment Agreements [Member] | ||||||||||||||||||||||||||||||||||||||||||
Base salary | $ 200,000 | |||||||||||||||||||||||||||||||||||||||||
Agreements term description | 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. | |||||||||||||||||||||||||||||||||||||||||
Cash bonuses | $ 50,000 | |||||||||||||||||||||||||||||||||||||||||
Agreement term | 2 years | |||||||||||||||||||||||||||||||||||||||||
Kenneth Miller [Member] | Employment Agreements [Member] | Public Offering [Member] | ||||||||||||||||||||||||||||||||||||||||||
Base salary | $ 275,000 | |||||||||||||||||||||||||||||||||||||||||
Number of common stock shares issued | 100,000 | |||||||||||||||||||||||||||||||||||||||||
Value of issued shares of common stock | $ 3,000,000 | |||||||||||||||||||||||||||||||||||||||||
Equity bonuses | 75,000 | |||||||||||||||||||||||||||||||||||||||||
Kevin Mohan [Member] | Employment Agreement [Member] | ||||||||||||||||||||||||||||||||||||||||||
Base salary | 156,000 | |||||||||||||||||||||||||||||||||||||||||
Number of common stock shares issued | 250,000 | |||||||||||||||||||||||||||||||||||||||||
Gross proceeds from offering | 175,000 | |||||||||||||||||||||||||||||||||||||||||
Value of issued shares of common stock | $ 3,000,000 | |||||||||||||||||||||||||||||||||||||||||
Employee bonus | $ 50,000 | $ 50,000 | ||||||||||||||||||||||||||||||||||||||||
Kevin Mohan [Member] | Employment Agreement [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 | |||||||||||||||||||||||||||||||||||||||||
Kevin Mohan [Member] | Employment Agreement [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 | |||||||||||||||||||||||||||||||||||||||||
Rodney Silva [Member] | Employment Agreement [Member] | ||||||||||||||||||||||||||||||||||||||||||
Base salary | $ 150,000 | |||||||||||||||||||||||||||||||||||||||||
Aimee Infante [Member] | Employment Agreement [Member] | ||||||||||||||||||||||||||||||||||||||||||
Base salary | $ 125,000 | |||||||||||||||||||||||||||||||||||||||||
Gross proceeds from offering | 3,000,000 | |||||||||||||||||||||||||||||||||||||||||
Employee bonus | $ 10,000 | |||||||||||||||||||||||||||||||||||||||||
Cash bonus percentage | 25.00% | |||||||||||||||||||||||||||||||||||||||||
Aimee Infante [Member] | Employment Agreement [Member] | Maximum [Member] | ||||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 10,000 | |||||||||||||||||||||||||||||||||||||||||
Aimee Infante [Member] | Employment Agreement [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, shares | 5,000 | |||||||||||||||||||||||||||||||||||||||||
Stock issued for restricted stock, value | $ 5,000,000 | |||||||||||||||||||||||||||||||||||||||||
Aimee Infante [Member] | Employment Agreement [Member] | Restricted Stock Units (RSUs) [Member] | Maximum [Member] | ||||||||||||||||||||||||||||||||||||||||||
Base salary | $ 150,000 | |||||||||||||||||||||||||||||||||||||||||
Robert E. Morgan [Member] | ||||||||||||||||||||||||||||||||||||||||||
Loss contingency seeking damages | $ 2,391,330 | 1,357,243 | ||||||||||||||||||||||||||||||||||||||||
Upfront amount | 25,000 | |||||||||||||||||||||||||||||||||||||||||
Additional upfront fee | $ 175,000 | |||||||||||||||||||||||||||||||||||||||||
Robert E. Morgan [Member] | Crownhall Realty, LLC [Member] | ||||||||||||||||||||||||||||||||||||||||||
Loss contingency seeking damages | $ 1,034,087 | |||||||||||||||||||||||||||||||||||||||||
Note Holder [Member] | ||||||||||||||||||||||||||||||||||||||||||
Convertible promissory notes | 100,000 | $ 100,000 | 100,000 | |||||||||||||||||||||||||||||||||||||||
Other costs | $ 171,035 | $ 171,035 | ||||||||||||||||||||||||||||||||||||||||
Debt instrument accrued interest | 18,045 | |||||||||||||||||||||||||||||||||||||||||
Note Holder [Member] | Subsequent Event [Member] | ||||||||||||||||||||||||||||||||||||||||||
Repayment of debt | $ 71,035 | |||||||||||||||||||||||||||||||||||||||||
Former Landlord [Member] | ||||||||||||||||||||||||||||||||||||||||||
Loss contingency seeking damages | $ 531,594 | |||||||||||||||||||||||||||||||||||||||||
Original lease term | 5 years | |||||||||||||||||||||||||||||||||||||||||
Paid of litigation settlement amount | $ 6,400 | $ 25,000 | $ 49,815 | $ 531,594 | ||||||||||||||||||||||||||||||||||||||
Security deposits | $ 11,185 | |||||||||||||||||||||||||||||||||||||||||
Payments for legal settlements, description | Thereafter sixty-nine payments of $6,400 on or before the 15th of each month beginning on March 15, 2019. | |||||||||||||||||||||||||||||||||||||||||
Payments of settlement in twelve timely installment payments | $ 6,400 | |||||||||||||||||||||||||||||||||||||||||
Fountain Valley [Member] | ||||||||||||||||||||||||||||||||||||||||||
Loss contingency seeking damages | $ 121,000 | |||||||||||||||||||||||||||||||||||||||||
Paid of litigation settlement amount | $ 85,000 | |||||||||||||||||||||||||||||||||||||||||
Fountain Valley [Member] | Settlement Agreement [Member] | ||||||||||||||||||||||||||||||||||||||||||
Paid of litigation settlement amount | $ 7,000 | $ 15,000 | ||||||||||||||||||||||||||||||||||||||||
Payments for legal settlements, description | 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. | |||||||||||||||||||||||||||||||||||||||||
Landlord [Member] | Settlement Agreement [Member] | ||||||||||||||||||||||||||||||||||||||||||
Sum of lease costs | $ 58,522 | |||||||||||||||||||||||||||||||||||||||||
Payment for damages on operating leases | $ 32,283 | |||||||||||||||||||||||||||||||||||||||||
Accounts payable and accrued expenses | $ 10,761 | $ 10,761 | ||||||||||||||||||||||||||||||||||||||||
Landlord [Member] | Settlement Agreement [Member] | First Payment [Member] | ||||||||||||||||||||||||||||||||||||||||||
Payment for damages on operating leases | $ 10,761 | |||||||||||||||||||||||||||||||||||||||||
Landlord [Member] | Settlement Agreement [Member] | Second Payment [Member] | ||||||||||||||||||||||||||||||||||||||||||
Payment for damages on operating leases | $ 10,761 | |||||||||||||||||||||||||||||||||||||||||
Landlord [Member] | Settlement Agreement [Member] | Final Payment [Member] | Subsequent Event [Member] | ||||||||||||||||||||||||||||||||||||||||||
Payment for damages on operating leases | $ 10,761 |
Equity (Details Narrative)
Equity (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Stock-based compensation | $ 613,333 | $ 350,100 | ||
General and administrative expenses | $ 1,514,123 | $ 916,268 | 3,584,698 | 3,713,743 |
Restricted Common Stock [Member] | ||||
Unamortized value | $ 101,265 | |||
Unamortized value weighted average period | 1 year 3 months 4 days | |||
Employees Directors and Consultants [Member] | Restricted Common Stock [Member] | ||||
Stock-based compensation | 431,631 | 33,876 | $ 613,333 | 350,100 |
General and administrative expenses | 429,315 | 33,102 | 611,191 | 347,779 |
Labor expense | $ 2,316 | $ 774 | $ 2,142 | $ 2,321 |
Equity - Schedule of Activity R
Equity - Schedule of Activity Related to Restricted Common Stock (Details) - Restricted Common Stock [Member] | 9 Months Ended |
Sep. 30, 2019$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Restricted Common Stock, Outstanding Beginning | shares | 42,442 |
Restricted Common Stock, Granted | shares | 430,000 |
Restricted Common Stock, Forfeited | shares | (11,470) |
Restricted Common Stock, Vested | shares | (443,918) |
Restricted Common Stock, Outstanding Ending | shares | 17,054 |
Weighted Average Grant Date Fair Value, Outstanding Beginning | $ / shares | $ 6.34 |
Weighted Average Grant Date Fair Value, Granted | $ / shares | 1 |
Weighted Average Grant Date Fair Value, Forfeited | $ / shares | 9.33 |
Weighted Average Grant Date Fair Value, Vested | $ / shares | 1.23 |
Weighted Average Grant Date Fair Value, Outstanding Ending | $ / shares | $ 5.94 |
Equity - Schedule of Warrants A
Equity - Schedule of Warrants Activity (Details) | 9 Months Ended |
Sep. 30, 2019$ / sharesshares | |
Equity [Abstract] | |
Number of Warrants, Outstanding Beginning | shares | 2,184,548 |
Number of Warrants, Issued | shares | 2,361,500 |
Number of Warrants, Exercised | shares | |
Number of Warrants, Forfeited | shares | |
Number of Warrants, Outstanding Ending | shares | 4,546,048 |
Number of Warrants, Exercisable | shares | 4,546,048 |
Weighted Average Exercise Price, Outstanding Beginning | $ / shares | $ 3.38 |
Weighted Average Exercise Price, Issued | $ / shares | 1.61 |
Weighted Average Exercise Price, Exercised | $ / shares | |
Weighted Average Exercise Price, Forfeited | $ / shares | |
Weighted Average Exercise Price, Outstanding Ending | $ / shares | 2.46 |
Weighted Average Exercise Price, Exercisable | $ / shares | $ 2.46 |
Weighted Average Remaining Life In Years, Outstanding Beginning | 3 years 3 months 19 days |
Weighted Average Remaining Life In Years, Issued | 5 years |
Weighted Average Remaining Life In Years, Outstanding Ending | 3 years 7 months 6 days |
Weighted Average Remaining Life In Years, Exercisable | 3 years 7 months 6 days |
Equity - Schedule of Stock Opti
Equity - Schedule of Stock Options Assumptions (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Contractual term (years) | 5 years | 5 years | ||
Expected dividends | 0.00% | 0.00% | 0.00% | 0.00% |
Minimum [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Risk free interest rate | 1.61% | 2.67% | 1.61% | 2.20% |
Contractual term (years) | 3 years | 3 years | ||
Expected volatility | 58.24% | 51.50% | 52.64% | 51.50% |
Maximum [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Risk free interest rate | 2.32% | 2.96% | 2.62% | 3.13% |
Contractual term (years) | 5 years | 5 years | ||
Expected volatility | 88.10% | 53.60% | 88.10% | 55.37% |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Oct. 19, 2019 | Oct. 10, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 |
Subsequent Event [Line Items] | |||||
Goodwill | $ 86,348 | ||||
Payment paid | $ 35,116 | ||||
Subsequent Event [Member] | Board of Directors [Member] | |||||
Subsequent Event [Line Items] | |||||
Number of common stock shares issued | 26,242 | ||||
Subsequent Event [Member] | Bronx Acquisition [Member] | |||||
Subsequent Event [Line Items] | |||||
Purchase price | $ 600,000 | ||||
Payment to acquire equipment | 30,000 | ||||
Goodwill | 570,000 | ||||
Payment paid | 300,000 | ||||
Subsequent Event [Member] | Bronx Acquisition [Member] | Five Promissory Note [Member] | |||||
Subsequent Event [Line Items] | |||||
Remaining amount payable | $ 300,000 | ||||
Debt instruement interest rate | 8.00% |