Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2020 | Aug. 19, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | Muscle Maker, Inc. | |
Entity Central Index Key | 0001701756 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2020 | |
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 | 7,473,861 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2020 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Current Assets: | ||
Cash | $ 3,161,195 | $ 478,854 |
Accounts receivable, net of allowance for doubtful accounts of $75,000 as of June 30, 2020 and December 31, 2019, respectively | 169,557 | 136,477 |
Inventory | 56,460 | 78,422 |
Current portion of loans receivable, net of allowance of $55,000 at June 30, 2020 and December 31, 2019, respectively | 40,364 | 38,712 |
Prepaid expenses and other current assets | 24,041 | 48,064 |
Total Current Assets | 3,451,617 | 780,529 |
Property and equipment, net | 1,642,580 | 1,646,879 |
Goodwill | 656,348 | 656,348 |
Intangible assets, net | 3,006,999 | 3,038,815 |
Loans receivable, non-current | 88,223 | 98,677 |
Security deposits and other assets | 74,062 | 39,462 |
Total Assets | 8,919,829 | 6,260,710 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 1,869,559 | 2,630,948 |
Convertible notes payable to Former Parent | 82,458 | 82,458 |
Convertible notes payable, net of debt discount of $0 and $38,918 at June 30, 2020 and December 31, 2019 | 100,000 | 536,082 |
Other notes payable | 435,733 | 351,512 |
Other notes payable, related party | 91,000 | |
Deferred revenue, current | 97,288 | 122,697 |
Deferred rent, current | 6,263 | 20,730 |
Other current liabilities | 645,673 | 652,643 |
Total Current Liabilities | 3,236,974 | 4,488,070 |
Convertible notes payable | 75,000 | |
Other notes payable | 697,131 | 240,295 |
Deferred revenue, non-current | 1,068,646 | 1,152,975 |
Deferred rent, non-current | 90,904 | 58,608 |
Total Liabilities | 5,093,655 | 6,014,948 |
Commitments and Contingencies | ||
Stockholders' Equity: | ||
Common stock, $0.0001 par value, 14,285,714 shares authorized, 7,958,534 and 5,714,464 shares issued and outstanding as of June 30, 2020, and December 31, 2019, respectively | 796 | 571 |
Additional paid-in capital | 63,913,668 | 53,339,793 |
Accumulated deficit | (60,088,290) | (53,094,602) |
Total Stockholders' Equity | 3,826,174 | (245,762) |
Total Liabilities and Stockholders' Equity | $ 8,919,829 | $ 6,260,710 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 75,000 | $ 75,000 |
Allowance for loans receivable | 55,000 | 55,000 |
Debt discount on convertible notes payable, current | $ 0 | $ 38,918 |
Common stock, no par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 14,285,714 | 14,285,714 |
Common stock, shares issued | 7,958,534 | 5,714,464 |
Common stock, shares outstanding | 7,958,534 | 5,714,464 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Revenues: | ||||
Total Revenues | $ 834,686 | $ 1,383,416 | $ 2,269,740 | $ 2,567,790 |
Restaurant operating expenses: | ||||
Total restaurant operating expenses | 838,308 | 852,764 | 2,367,659 | 1,634,997 |
Preopening expenses | 46,764 | 46,764 | ||
Depreciation and amortization | 97,245 | 62,912 | 208,502 | 131,604 |
Other expenses incurred for closed locations | 23,809 | 27,519 | ||
Franchise advertising fund expenses | 32,454 | 38,494 | 54,050 | 77,393 |
General and administrative expenses | 1,213,851 | 966,539 | 6,343,254 | 2,070,575 |
Total Costs and Expenses | 2,228,622 | 1,944,518 | 9,020,229 | 3,942,088 |
Loss from Operations | (1,393,936) | (561,102) | (6,750,489) | (1,374,298) |
Other (Expense) Income: | ||||
Other (expense) income, net | (10,360) | 2,757 | (13,548) | (108,993) |
Interest expense, net | (1,129) | (465,956) | (94,733) | (648,421) |
Change in fair value of accrued compensation | (96,000) | (96,000) | ||
Amortization of debt discounts | (518,305) | (38,918) | (894,373) | |
Total Other Expense, Net | (107,489) | (981,504) | (243,199) | (1,651,787) |
Loss Before Income Tax | (1,501,425) | (1,542,606) | (6,993,688) | (3,026,085) |
Income tax provision | ||||
Net Loss | $ (1,501,425) | $ (1,542,606) | $ (6,993,688) | $ (3,026,085) |
Net Loss Per Share: | ||||
Basic and Diluted | $ (0.21) | $ (1.03) | $ (1.01) | $ (2.02) |
Weighted Average Number of Common Shares Outstanding: | ||||
Basic and Diluted | 7,092,879 | 1,503,438 | 6,916,218 | 1,499,019 |
Company Restaurant Net Sales [Member] | ||||
Revenues: | ||||
Total Revenues | $ 659,939 | $ 815,837 | $ 1,897,366 | $ 1,616,600 |
Franchise Royalties and Fees [Member] | ||||
Revenues: | ||||
Total Revenues | 142,293 | 529,085 | 318,324 | 873,797 |
Franchise Advertising Fund Contributions [Member] | ||||
Revenues: | ||||
Total Revenues | 32,454 | 38,494 | 54,050 | 77,393 |
Food and Beverage Costs [Member] | ||||
Restaurant operating expenses: | ||||
Total restaurant operating expenses | 255,329 | 286,264 | 721,023 | 575,609 |
Labor [Member] | ||||
Restaurant operating expenses: | ||||
Total restaurant operating expenses | 342,823 | 339,221 | 929,443 | 618,234 |
Rent [Member] | ||||
Restaurant operating expenses: | ||||
Total restaurant operating expenses | 139,604 | 88,645 | 284,281 | 186,835 |
Other Restaurant Operating Expenses [Member] | ||||
Restaurant operating expenses: | ||||
Total restaurant operating expenses | $ 100,552 | $ 138,634 | $ 432,912 | $ 254,319 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Stockholders' Deficit (Unaudited) - USD ($) | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2018 | $ 148 | $ 20,990,373 | $ (23,833,656) | $ (2,843,135) |
Balance, shares at Dec. 31, 2018 | 1,489,686 | |||
Cumulative effect of change in accounting principle | (875,902) | (875,902) | ||
Issuance of restricted stock | $ 1 | (1) | ||
Issuance of restricted stock, shares | 1,988 | |||
Restricted stock issued as compensation for services | $ 2 | 139,998 | 140,000 | |
Restricted stock issued as compensation for services, shares | 20,000 | |||
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 | 165,133 | 165,133 | ||
Net loss | (1,483,479) | (1,483,479) | ||
Balance at Mar. 31, 2019 | $ 151 | 21,730,944 | (26,193,037) | (4,461,942) |
Balance, shares at Mar. 31, 2019 | 1,511,674 | |||
Balance at Dec. 31, 2018 | $ 148 | 20,990,373 | (23,833,656) | (2,843,135) |
Balance, shares at Dec. 31, 2018 | 1,489,686 | |||
Common stock issued in exchange for accrued interest | ||||
Net loss | (3,026,085) | |||
Balance at Jun. 30, 2019 | $ 160 | 22,859,426 | (27,735,643) | (4,876,057) |
Balance, shares at Jun. 30, 2019 | 1,596,101 | |||
Balance at Mar. 31, 2019 | $ 151 | 21,730,944 | (26,193,037) | (4,461,942) |
Balance, shares at Mar. 31, 2019 | 1,511,674 | |||
Common stock issued in exchange for interest earned on other notes payable | $ 7 | 479,316 | 479,323 | |
Common stock issued in exchange for interest earned on other notes payable, shares | 68,475 | |||
Common stock issued in exchange for interest earned on convertible notes payable | $ 2 | 111,664 | 111,666 | |
Common stock issued in exchange for interest earned on convertible notes payable, shares | 15,952 | |||
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: Restricted common stock | (123,431) | (123,431) | ||
Net loss | (1,542,606) | (1,542,606) | ||
Balance at Jun. 30, 2019 | $ 160 | 22,859,426 | (27,735,643) | (4,876,057) |
Balance, shares at Jun. 30, 2019 | 1,596,101 | |||
Balance at Dec. 31, 2019 | $ 571 | 53,339,793 | (53,094,602) | (245,762) |
Balance, shares at Dec. 31, 2019 | 5,714,464 | |||
Issuance of restricted stock | ||||
Issuance of restricted stock, shares | 1,226 | |||
Common stock issued upon offering on February 12, 2020, net of underwriter's discount and offering costs of $920,000 | $ 154 | 6,779,846 | 6,780,000 | |
Common stock issued upon offering on February 12, 2020, net of underwriter's discount and offering costs of $920,000, shares | 1,540,000 | |||
Restricted common stock issued as compensation to executive team upon completion of the initial public offering | $ 22 | 1,083,893 | 1,083,915 | |
Restricted common stock issued as compensation to executive team upon completion of the initial public offering, shares | 216,783 | |||
Common stock issued as compensation to board of directors | $ 3 | 128,077 | 128,080 | |
Common stock issued as compensation to board of directors, shares | 25,616 | |||
Common stock issued as compensation for services | $ 39 | 1,924,961 | 1,925,000 | |
Common stock issued as compensation for services, shares | 385,000 | |||
Stock-based compensation: Restricted common stock | 20,148 | 20,148 | ||
Stock-based compensation: Warrant | 191,000 | 191,000 | ||
Net loss | (5,492,263) | (5,492,263) | ||
Balance at Mar. 31, 2020 | $ 789 | 63,467,718 | (58,586,865) | 4,881,642 |
Balance, shares at Mar. 31, 2020 | 7,883,089 | |||
Balance at Dec. 31, 2019 | $ 571 | 53,339,793 | (53,094,602) | (245,762) |
Balance, shares at Dec. 31, 2019 | 5,714,464 | |||
Common stock issued in exchange for accrued interest | 357,735 | |||
Net loss | (6,993,688) | |||
Balance at Jun. 30, 2020 | $ 796 | 63,913,668 | (60,088,290) | 3,826,174 |
Balance, shares at Jun. 30, 2020 | 7,958,534 | |||
Balance at Mar. 31, 2020 | $ 789 | 63,467,718 | (58,586,865) | 4,881,642 |
Balance, shares at Mar. 31, 2020 | 7,883,089 | |||
Common stock issued as compensation to board of directors | 11,874 | 11,874 | ||
Common stock issued as compensation to board of directors, shares | 4,340 | |||
Common stock issued as compensation for services | $ 2 | 56,198 | 56,200 | |
Common stock issued as compensation for services, shares | 20,000 | |||
Common stock issued in exchange for accrued interest | $ 5 | 357,730 | 357,735 | |
Common stock issued in exchange for accrued interest,shares | 51,105 | |||
Stock-based compensation: Restricted common stock | 20,148 | 20,148 | ||
Net loss | (1,501,425) | (1,501,425) | ||
Balance at Jun. 30, 2020 | $ 796 | $ 63,913,668 | $ (60,088,290) | $ 3,826,174 |
Balance, shares at Jun. 30, 2020 | 7,958,534 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Changes in Stockholders' Deficit (Unaudited) (Parenthetical) - USD ($) | Feb. 12, 2020 | Jun. 30, 2020 |
Statement of Stockholders' Equity [Abstract] | ||
Offering costs | $ 920,000 | $ 920,000 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Cash Flows from Operating Activities | ||
Net loss | $ (6,993,688) | $ (3,026,085) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 208,502 | 131,604 |
Stock-based compensation | 3,625,220 | 181,702 |
Amortization of debt discounts | 38,918 | 894,373 |
Loss on change in fair value of accrued compensation | 96,000 | |
Bad debt expense | 75 | |
Deferred rent | 17,829 | 4,455 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (33,080) | (57,879) |
Inventory | 21,962 | (17,487) |
Prepaid expenses and other current assets | 24,023 | (3,399) |
Security deposits and other assets | (34,600) | 1,000 |
Accounts payable and accrued expenses | (688,509) | 252,123 |
Deferred revenue | (109,738) | (417,488) |
Other current liabilities | (6,970) | 43,608 |
Total Adjustments | 3,159,557 | 1,012,687 |
Net Cash Used in Operating Activities | (3,834,131) | (2,013,398) |
Cash Flows from Investing Activities | ||
Purchases of property and equipment | (172,387) | (305,511) |
Collections from loans receivable | 8,802 | 18,582 |
Collections from loans receivable - related party | 650 | |
Net Cash Used in Investing Activities | (163,585) | (286,279) |
Cash Flows from Financing Activities | ||
Proceeds from offering, net of underwriter's discount and offering costs of $920,000 | 6,780,000 | |
Proceeds from PPP loan | 866,300 | |
Proceeds from convertible notes payable | 5,873,000 | |
Proceeds from convertible notes payable - related parties | 100,000 | |
Repayments of convertible note payable | (550,000) | (50,000) |
Repayments of convertible note payable - related parties | (100,000) | |
Repayments of other notes payable - related party | (91,000) | (335,000) |
Repayments of other notes payables | (475,243) | (225,000) |
Proceeds from other notes payable - related party | 91,000 | |
Proceeds from other note payable | 150,000 | |
Net Cash Provided by Financing Activities | 6,680,057 | 5,354,000 |
Net Increase in Cash | 2,682,341 | 3,054,323 |
Cash - Beginning of Period | 478,854 | 357,842 |
Cash - End of Period | 3,161,195 | 3,412,165 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash paid for interest | 297,455 | 177,690 |
Supplemental disclosures of non-cash investing and financing activities | ||
Beneficial conversion feature | 548,020 | |
Warrants issued and recorded as debt discount in connection with convertible notes payable | 548,354 | |
Common stock issued in exchange for interest earned on convertible notes payable | 111,666 | |
Common stock issued in exchange for interest earned on other notes payable | 479,323 | |
Common stock issued in exchange for accrued interest | $ 357,735 |
Condensed Consolidated Statem_5
Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) - USD ($) | Feb. 12, 2020 | Jun. 30, 2020 |
Statement of Cash Flows [Abstract] | ||
Offering costs | $ 920,000 | $ 920,000 |
Business Organization and Natur
Business Organization and Nature of Operations, Going Concern and Management's Plans | 6 Months Ended |
Jun. 30, 2020 | |
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 Nevada corporation was incorporated in Nevada on October 25, 2019. MMI was a wholly owned subsidiary of Muscle Maker, Inc (“MMI-Cal”), a California corporation incorporated on December 8, 2014, but the two merged on November 13, 2019 with MMI as the surviving entity. MMI wholly owns Muscle Maker Development, LLC (“MMD”), Muscle Maker Corp, LLC (“MMC”) and Muscle Maker USA, Inc (“Muscle USA”). MMD was formed on July 18, 2017, in the State of Nevada for the purpose of running our existing franchise operations and continuing to franchise the Muscle Maker Grill name and business system to qualified franchisees. MMC was formed on July 18, 2017, in the State of Nevada for the purpose of developing new corporate stores and operating new and existing corporate stores of MMI. Muscle USA was formed on March 14, 2019 in the State of Texas for the purpose of opening additional new corporate stores. MMI is a fast-casual restaurant concept that specializes in preparing healthy-inspired, high-quality, fresh, made-to-order lean, protein-based meals featuring chicken, seafood, pasta, hamburgers, wraps and flat breads. In addition, our restaurants feature freshly prepared entrée salads and an appealing selection of sides, protein shakes and fruit smoothies. MMI operates in the fast-casual restaurant segment. MMI is the owner of the trade name and service mark Muscle Maker Grill®, Healthy Joe’s and other trademarks and intellectual property we use in connection with the operation of Muscle Maker Grill® restaurants. We license the right to use the Muscle Maker Grill® and Healthy Joe’s trademarks and intellectual property to our wholly-owned subsidiaries, MMD, MMC and Muscle USA, and to further sublicense them to our franchisees for use in connection with Muscle Maker Grill® and Healthy Joe’s restaurants. MMI and its subsidiaries are hereinafter referred to as the “Company”. The Company operates under the name Muscle Maker Grill and is a franchisor and owner operator of Muscle Maker Grill and Healthy Joe’s restaurants. As of June 30, 2020, the Company’s restaurant system included eleven company-owned restaurants, and twenty franchise restaurants. A Muscle Maker Grill restaurant offers quality food freshly prepared with the Company’s proprietary recipes created with the guest’s health in mind. The menu is protein based, and features various supplements, health food snacks, along with a nutritious children’s menu. COVID-19 In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. In response to the COVID-19 outbreak, “shelter in place” orders and other public health measures have been implemented across much of the United States. The COVID-19 global pandemic continues to rapidly evolve. The Company is continually monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread, and its impact on operations, financial position, cash flows, inventory, supply chains, purchasing trends, customer payments, and the industry in general, in addition to the impact on its employees. The pandemic has resulted in a negative impact on the Company’s operations during the quarter ended March 31, 2020. However, due to the rapid development and fluidity of this situation, the magnitude and duration of the pandemic and its impact on the Company’s operations and liquidity is uncertain as of the date of this report. While there could ultimately be an additional material impact on operations and liquidity of the Company, the full impact could not be determined, as of the date of this report. As a result of the pandemic the Company has limited its operations as mandated by each state and has temporarily closed five of our Company owned locations. Commencing in the second quarter of 2020 the Company provided royalty relief to its franchisees and the executive team has deferred a portion of their salaries. In addition, various franchisee locations had to take similar actions. As of the date of the filing of this report the Company re-opened one of the five temporarily closed locations. Going Concern and Management’s Plans As of June 30, 2020, the Company had a cash balance, a working capital surplus and an accumulated deficit of $3,161,195, $356,643, and $60,088,290, respectively. During the three and six months ended June 30, 2020, the Company incurred a pre-tax net loss of $1,501,425 and $6,993,688, 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 | 6 Months Ended |
Jun. 30, 2020 | |
Reverse Stock Split | |
Reverse Stock Split | NOTE 2 – REVERSE STOCK SPLIT Effective December 11, 2019, pursuant to authority granted by the board of directors of the Company, the Company implemented a 1-for-7 reverse split of the Company’s issued common stock (the “Third Reverse Split”). All share and per share information has been retroactively adjusted to reflect the Third Reverse Split for all periods presented. |
Significant Accounting Policies
Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of June 30, 2020, and for the three and six months ended June 30, 2020 and 2019. The results of operations for the three and six months ended June 30, 2020 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, 2019. The balance sheet as of December 31, 2019 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. 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 assessment of recoverability of long-lived assets, including property and equipment, goodwill and intangible assets; ● the estimated useful lives of intangible and depreciable assets; ● estimates and assumptions used to value warrants and options; ● the recognition of revenue; and ● the recognition, measurement and valuation of current and deferred income taxes. Estimates and assumptions are periodically reviewed, and the effects of any material revisions are reflected in the financial statements in the period that they are determined to be necessary. Actual results could differ from those estimates and assumptions. Cash and Cash Equivalents The Company considers all highly-liquid instruments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of June 30, 2020 and December 31, 2019. 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, 2020, with early adoption permitted. The Company is currently evaluating ASU 2016-02 and its impact on its condensed consolidated financial statements and disclosures. In June 2018, the FASB issued ASU No. 2018-07, “Compensation — Stock Compensation (Topic 718),” (“ASU 2018-07”). ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. Currently, the accounting requirements for nonemployee and employee share-based payment transactions are significantly different. ASU 2018-07 expands the scope of Topic 718, Compensation — Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. This ASU supersedes Subtopic 505-50, Equity — Equity-Based Payments to Nonemployees. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 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. Recent Accounting Pronouncements 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, 2020, and interim periods within those fiscal years. The Company is currently assessing the impact this guidance will have on its condensed consolidated financial statements. In March 2019, the FASB issued ASU 2019-01, “Leases (Topic 842): Codification Improvements” (“Topic 842”) (“ASU 2019-01”). These amendments align the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842 with that of existing guidance. As a result, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply. However, if there has been a significant lapse of time between when the underlying asset is acquired and when the lease commences, the definition of fair value (in Topic 820, Fair Value Measurement) should be applied. (Issue 1). The ASU also requires lessors within the scope of Topic 942, Financial Services—Depository and Lending, to present all “principal payments received under leases” within investing activities. (Issue 2). Finally, the ASU exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard. (Issue 3). The transition and effective date provisions apply to Issue 1 and Issue 2. They do not apply to Issue 3 because the amendments for that Issue are to the original transition requirements in Topic 842. This amendment will be effective for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating ASU 2019-01 and its impact on its unaudited consolidated financial statements and financial statement disclosures. 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 at a point in time while under Topic 606 franchise fees are recognized 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 $875,902 in accumulated deficit 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 $659,939 and $1,897,366 during the three and six months ended June 30, 2020, respectively. The Company recorded retail store revenues of $815,837 and $1,616,600 during the three and six months ended June 30, 2019, 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 from gift cards as restaurant revenues once the Company performs its obligation to provide food and beverage to the customer simultaneously with the redemption of the gift card or through gift card breakage, as discussed in Other Revenues below. Franchise Royalties and Fees Franchise revenues consists of royalties, franchise fees and rebates. Royalties are based on a percentage of franchisee net sales revenue. The Company recognizes the royalties as the underlying sales occur. The Company recorded revenue from royalties of $52,870 and $173,779 during the three and six months ended June 30, 2020, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company recorded revenue from royalties of $191,810 and $398,360 during the three and six months ended June 30, 2019, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. Franchise Royalties and Fees The Company provides the franchisees with management expertise, training, pre-opening assistance, and restaurant operating assistance in exchange for the multi-unit development fees and franchise fees. The Company capitalizes these fees upon collection from the franchisee, these fees are then recognized as franchise fee revenue on a straight-line basis over the life of the related franchise agreements and any exercised renewal periods. Cash payments are due upon the execution of the related franchise agreement. The Company’s performance obligation with respect to franchise fee revenues consists of a license to utilize the Company’s brand for a specified period of time, which is satisfied equally over the life of each franchise agreement. The Company recorded revenues from franchise fees of $75,190 and $89,630, respectively, during the three and six months ended June 30, 2020, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company recorded revenues from franchise fees of $273,336 and $326,517, respectively, during the three and six months ended June 30, 2019, 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 $14,233 and $54,915 during the three and six months ended June 30, 2020, respectively, which is included in franchise royalties and fees on the accompanying consolidated statements of operations. The Company recorded revenue from rebates of $63,939 and $148,920 during the three and six months ended June 30, 2019, 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 food and beverage costs during the period in which the related food and beverage purchases are made. Other Revenues Gift card breakage is recognized when the likelihood of a gift card being redeemed by the customer is remote and the Company determines there is not a legal obligation to remit the unredeemed gift card balance to the relevant jurisdiction. The determination of the gift card breakage rate is based upon the Company’s specific historical redemption patterns. The Company recognizes gift card breakage by applying its estimate of the rate of gift card breakage on a pro rata basis over the period of estimated redemption. Gift card liability is recoded in other current liabilities on the condensed consolidated balance sheet. For the three and six months ended June 30, 2020, the Company determined that no gift card breakage is necessary based on current redemption rates. Deferred Revenue Deferred revenue primarily includes initial franchise fees received by the Company, which are being amortized over the life of the Company’s franchise agreements, as well as unearned vendor rebates. Deferred revenue is recognized in income over the life of the franchise agreements and vendor rebates are recognized in income as performance obligations are satisfied. Franchise Advertising Fund Contributions Under the Company’s franchise agreements, the Company and its franchisees are required to contribute a certain percentage of revenues to a national advertising fund. The Company’s national advertising services are provided on a system-wide basis and, therefore, not considered distinct performance obligations for individual franchisees. In accordance with Topic 606, the Company recognizes these sales-based advertising contributions from franchisees as franchise revenue when the underlying franchisee Company incurs the corresponding advertising expense. The Company records the related advertising expenses as incurred under general and administrative expenses. When an advertising contribution fund is over-spent at year end, advertising expenses will be reported on the consolidated statement of operations in an amount that is greater than the revenue recorded for advertising contributions. Conversely, when an advertising contribution fund is under-spent at a period end, the Company will accrue advertising costs up to advertising contributions recorded in revenue. The Company recorded contributions from franchisees of $32,454 and $54,050, respectively, during the three and six months ended June 30, 2020, respectively, which are included in franchise advertising fund contributions on the accompanying condensed consolidated statements of operations. The Company recorded contributions from franchisees of $38,494 and $77,393, respectively, during the three and six months ended June 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 Standard Adjustment January 1, 2019 Deferred revenues $ 907,948 $ 875,902 $ 1,783,850 Accumulated deficit 23,833,656 875,902 24,709,588 Advertising Advertising costs are charged to expense as incurred. Advertising costs were approximately $25,092 and $128,735 for the three and six months ended June 30, 2020, and approximately $196 and $3,613 for the three and six months ended June 30, 2019 respectively, 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, options or the conversion of convertible notes payable. The following securities are excluded from the calculation of weighted average diluted common shares at June 30, 2020 and 2019, respectively, because their inclusion would have been anti-dilutive: June 30, 2020 2019 Warrants 2,537,264 738,721 Options 4,821 4,821 Convertible debt 32,350 1,108,109 Total potentially dilutive shares 2,574,435 1,851,651 Major Vendor The Company engages various vendors to distribute food products to their Company-owned restaurants. Purchases from the Company’s largest supplier totaled 82.95% and 84.41% of the Company’s purchases for the three and six months ended June 30, 2020, respectively. Purchases from the Company’s largest supplier totaled 75% and 84% of the Company’s purchases for the three and six months ended June 30, 2019, respectively. Fair Value of Financial Instruments The Company measures the fair value of financial assets and liabilities based on the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 — quoted prices in active markets for identical assets or liabilities Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions) The carrying amounts of accrued liabilities approximate fair value due to the short-term nature of these instruments. The carrying amounts of our short–term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates, taken together with other features such as concurrent issuance of common stock and warrants, are comparable to rates of returns for instruments of similar credit risk. See Note 12 – Equity – Warrant and Options Valuation for details related to a accrued compensation liability being fair valued using Level 1 inputs. Reclassifications Certain amounts in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no effect on previously reported net loss. 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 13 – Subsequent Events. |
Loans Receivable
Loans Receivable | 6 Months Ended |
Jun. 30, 2020 | |
Receivables [Abstract] | |
Loans Receivable | NOTE 4 - LOANS RECEIVABLE At June 30, 2020 and December 31, 2019, the Company’s loans receivable consists of the following: June 30, 2020 December 31, 2019 Loans receivable, net $ 128,587 $ 137,389 Less: current portion (40,364 ) (38,712 ) Loans receivable, non-current $ 88,223 $ 98,677 Loans receivable includes loans to franchisees and a former franchisee totaling, in the aggregate, $128,587 and $137,389, net of reserves for uncollectible loans of $55,000 at June 30, 2020 and December 31, 2019, respectively. 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. |
Property and Equipment, Net
Property and Equipment, Net | 6 Months Ended |
Jun. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | NOTE 5 – PROPERTY AND EQUIPMENT, NET As of June 30, 2020 and December 31, 2019 property and equipment consists of the following: June 30, 2020 December 31, 2019 Furniture and equipment $ 727,218 $ 617,712 Leasehold improvements 1,581,174 1,518,293 2,308,392 2,136,005 Less: accumulated depreciation and amortization (665,812 ) (489,126 ) Property and equipment, net $ 1,642,580 $ 1,646,879 Depreciation expense amounted to $81,337 and $176,686 for the three and six months ended June 30, 2020, respectively. Depreciation expense amounted to $47,004 and $99,964 for the three and six months ended June 30, 2019, respectively. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets, Net | 6 Months Ended |
Jun. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangible Assets, Net | NOTE 6 – GOODWILL AND OTHER INTANGIBLE ASSETS, NET The Company’s intangible assets include a trademark with an indefinite useful life as well as franchise agreements which are amortized over useful lives of thirteen years. A summary of the intangible assets is presented below: Intangible Assets Trademark Franchise Agreements Total Intangible assets, net at December 31, 2019 $ 2,524,000 $ 514,815 $ 3,038,815 Amortization expense - (31,816 ) (31,816 ) Intangible assets, net at June 30, 2020 $ 2,524,000 $ 482,999 $ 3,006,999 Weighted average remaining amortization period at June 30, 2020 (in years) 7.6 Amortization expense related to intangible assets amounted to $15,908 and $31,816 for the three and six months ended June 30, 2020, respectively. Amortization expense related to intangible assets amounted to $15,908 and $31,640 for the three and six months ended June 30, 2019, respectively. |
Accounts Payable and Accrued Ex
Accounts Payable and Accrued Expenses | 6 Months Ended |
Jun. 30, 2020 | |
Payables and Accruals [Abstract] | |
Accounts Payable and Accrued Expenses | NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payables and accrued expenses consist of the following: June 30, 2020 December 31, 2019 Accounts payable $ 737,363 $ 857,846 Accrued payroll 81,729 139,320 Accrued professional fees 248,324 329,826 Accrued board members fees 8,054 59,864 Accrued rent expense 192,644 269,644 Accrued compensation expense (1)(2) 284,855 - Sales taxes payable (3) 253,831 329,089 Accrued interest 21,752 520,682 Accrued interest, related parties - 79,523 Other accrued expenses 41,007 45,154 Total Accounts Payable and Accrued Expenses $ 1,869,559 $ 2,630,948 (1) The Company accrued a liability of $142,855 related to an aggregate of 28,571 shares of common stock earned by a consultant upon the completion of the initial public offering pursuant to their consulting agreement entered into on September 12, 2018, which has not been issued by the Company to date due to an administrative delay. (2) Included within accrued compensation expense is a liability of $142,000 related to 200,000 stock options to be issued by the Company. See Note 11 – Commitments and Contingencies – Consulting Agreements for details related to the Options. (3) See Note 11 – Commitments and Contingencies –Taxes for detailed related to delinquent sales taxes. |
Deferred Revenue
Deferred Revenue | 6 Months Ended |
Jun. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Deferred Revenue | NOTE 8 – DEFERRED REVENUE At June 30, 2020 and December 31, 2019, deferred revenue consists of the following: June 30, 2020 December 31, 2019 Franchise fees $ 1,121,899 $ 1,210,719 Unearned vendor rebates 44,035 64,953 Less: Unearned vendor rebates, current (44,035 ) (64,953 ) Less: Franchise fees, current (53,253 ) (57,744 ) Deferred revenues, non-current $ 1,068,646 $ 1,152,975 |
Other Current Liabilities
Other Current Liabilities | 6 Months Ended |
Jun. 30, 2020 | |
Other Liabilities Disclosure [Abstract] | |
Other Current Liabilities | NOTE 9 – OTHER CURRENT LIABILITIES Other current liabilities consist of the following: June 30, 2020 December 31, 2019 Gift card liability $ 90,004 $ 88,673 Co-op advertising fund liability 294,844 298,662 Advertising fund liability 260,825 265,308 $ 645,673 $ 652,643 |
Notes Payable
Notes Payable | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTE 10 – NOTES PAYABLE Convertible Notes Convertible Note Payable to Former Parent As of June 30, 2020, the Company had an amount of $82,458 in convertible notes payable to Former Parent outstanding. 15% Senior Secured Convertible Promissory Notes During the six months ended June 30, 2020, the Company repaid an aggregate of $450,000 in 15% senior secured convertible promissory notes. 12% Secured Convertible Note During the six months ended July 30, 2020, the Company repaid the $75,000 12% secured convertible promissory note. Other Convertible Notes During the six months ended June 30, 2020, the Company repaid a $25,000 other convertible note payable. As of June 30, 2020 and December 31, 2019, the Company has another convertible note payable in the amount of $100,000 which is included within convertible notes payable. See Note 11 – Commitments and Contingencies – Litigation, Claims and Assessments for details related to the $100,000 other convertible note payable. Other Notes Payable On May 9, 2020, the Company entered into a Paycheck Protection Program Promissory Note and Agreement with Greater Nevada Credit Union, pursuant to which the Company received loan proceeds of $866,300 (the “PPP Loan”). The PPP Loan was made under, and is subject to the terms and conditions of, the PPP which was established under the CARES Act and is administered by the U.S. Small Business Administration. The current term of the PPP Loan is two years with a maturity date of May 9, 2022 and contains a favorable fixed annual interest rate of 1.00%. Payments of principal and interest on the PPP Loan will be deferred for the first six months of the term of the PPP Loan until November 9, 2020. Principal and interest are payable monthly and may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Under the terms of the CARES Act, recipients can apply for and receive forgiveness for all, or a portion of loans granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for certain permissible purposes as set forth in the PPP, including, but not limited to, payroll costs (as defined under the PPP) and mortgage interest, rent or utility costs (collectively, “Qualifying Expenses”), and on the maintenance of employee and compensation levels during the eight-week period following the funding of the PPP Loan. The Company believes that it has been using the proceeds of the PPP Loan, for Qualifying Expenses. However, no assurance is provided that the Company will be able to obtain forgiveness of the PPP Loan in whole or in part. 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. This note was repaid in full during the first quarter of 2020. On October 10, 2019, the Company issued a $300,000 five-year promissory note to a former franchisee with an eight percent interest rate. During the three and six months ended June 30, 2020, the Company repaid $13,377 and $25,873, respectively, of the five-year promissory note. During December 2019, the Company issued a note payable in the principal amount of $300,000. The note has an original issue discount of 20%. The note become due in full on or before February 21, 2020. The note has been repaid during the first quarter of 2020. On February 3, 2020, the Company issued a note payable in the principal amount of $150,000. The note has an original issue discount of 20%. The note become due in full on or before February 21, 2020. The note has been repaid during the first quarter of 2020. As of June 30, 2020, the Company had an aggregate amount of $1,132,864 and $0 in other notes payable and other notes payable, related party, respectively. The notes had interest rates ranging between 1% - 8% per annum, due on various dates through October 10, 2024. The maturities of other notes payable as of June 30, 2020, are as follows: Principal Repayments due as of Amount 06/30/2021 $ 435,733 06/30/2022 542,231 06/30/2023 62,875 06/30/2024 68,094 06/30/2025 23,931 $ 1,132,864 |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 11 – COMMITMENTS AND CONTINGENCIES Consulting Agreements On February 18, 2020, the Company entered into a professional services agreement with a company to provide advice on business development of food stores and delivery kitchen operations. In addition, they will review and advise the Company on potential acquisition targets, including financial analytics for post-merger entities and provide assistance in preparing pro-forma financial information. The term of the agreement commences from the effective date on February 18, 2020 and expires on February 18, 2021. Pursuant to the terms of the agreement, the Company agreed to issue 300,000 shares of the Company’s common stock and 100,000 three-year cashless warrants with an exercise price of $5.00 per share upon signing of the agreement as payment. The grant date fair value of the warrants of $191,000 was recorded in general and administrative expense as stock-based compensation. The Company rescinded the issuance of 100,000 warrants and 300,000 shares of the Company’s common stock in July 2020. See Note 13 – Subsequent Events – Consulting Agreement Settlement for more details. On February 24, 2020, the Company entered into a Consulting Agreement with consultants with experience in the area of corporate finance, investor communication and financial and investor public relations. The term of the agreement is for two months from the effective date on February 27, 2020 and expires on April 27, 2020. Pursuant to the terms of the agreement, the Company agreed to pay $215,000 in cash and to issue 10,000 shares of the Company’s common stock. In the event the Company elects to not extend the term of the agreement, it is to notify the consultants within five days of the conclusion of the 60-day term. As of June 30, 2020, the company issued the 10,000 shares of common stock and paid the $215,000 in cash pursuant to the terms of the agreement. On April 8, 2020, the Company entered into a professional service agreement with a consultant to provide advice on investor outreach and institutional engagements The Consultants will also provide continuous market insight and interpret our trading activity. The term of the agreement commenced from the execution date and ends on April 1, 2021. Pursuant to the terms, the Company agreed to pay the consultant in the form of non-qualified stock options to acquire 200,000 shares of the Company’s common stock, exercisable at $2.50 per share for a period of one year. The Options are fully vested upon the signing of this agreement. In addition, the option is callable by the Company in the event the market price of its shares close above $3.50 per share for five consecutive dates upon which the consultant will have three days to elect to exercise or forfeit the options. The Company has not issued the options pursuant to the original terms of the agreement and on August 11, 2020, the Company and the consultant entered into an amendment and agreed that the 200,000 non-qualified stock options shall be issued upon the Company’s shareholders approval of its 2020 Incentive Stock Plan. See Note 12 – Equity – Warrants and Options Valuation for details related to the accrued compensation expense. 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 the date of the filing of these condensed consolidated financial statements the settlement has been paid in full. On March 27, 2018 a convertible note holder filed a complaint in the Iowa District Court for Polk County #CVCV056029 against the Company for failure to pay the remaining balance due on a promissory note in the amount of $100,000, together with interest, attorney fees and other costs of $171,035. On June 6, 2018 a default judgement was entered against the Company for the amount of $171,035. The Company repaid an aggregate amount of $71,035, consisting of principal and interest, as of the date of the filing of this report. As of June 30, 2020, the Company has accrued for the liability in convertible notes payable in the amount of $100,000 and accrued interest of $21,031 is included in accounts payable and accrued expenses. In May 2018, Resolute Contractors, Inc., Quality Tile, MTL Construction, Genesis Electric, JNB Interiors and Captive Aire filed a Mechanics Lien for labor, service, equipment and materials in the total amount of $98,005. The Company intends to set up various payment plans with these vendors. As of June 30, 2020, 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. As of January 15, 2020, the Company has met all their obligations and the full amount has been paid. On or about March 7, 2019, the Company was listed as a defendant to a lawsuit filed by a contractor in the State of Texas. The contractor is claiming a breach of contract and is seeking approximately $32,809 in damages for services claimed to be rendered by the contractor. The Company is working with legal counsel in order to reach a settlement. As of June 30, 2020, the Company accrued $30,000 for the liability in accounts payable and accrued expenses. On January 23, 2020, the Company was served a judgment in the amount of $130,185 for a breach of a lease agreement in Chicago, Illinois, in connection with a Company owned store that was closed in 2018. As of June 30, 2020, the Company has accrued for the liability in accounts payable and accrued expenses. 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 after consulting legal counsel, such matters are currently not expected to have a material impact on the Company’s financial statements. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements after consulting legal counsel. Operation Lease On June 26, 2020, the Company was informed that one of their leases for a future military location was terminated due to the current economic environment as a result of COVID-19. Kitchen Service Agreement On February 26, 2020, the Company entered into a Kitchen Services Agreement with a major delivery-only kitchen concept. The Kitchen Services Agreement provides for five initial locations starting in the Chicago market. In addition, the Company has placed deposits for an additional five locations to be determined. The Kitchen Services Agreement provide the Company with access to the delivery-only locations for a one-year term with an automatic one-year renewal unless terminated by either party. The delivery-only locations are set up for third party delivery and provide that the Company must pay monthly license fees, processing service fees and storage service fees. The monthly license fees for the five initial locations range from $3,000 to $4,000. The monthly license fees become due 14 days after the Company is granted access to the location. 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 $253,831 and $329,089 which includes penalties and interest as of June 30, 2020 and December 31, 2019, respectively, related to this matter. |
Equity
Equity | 6 Months Ended |
Jun. 30, 2020 | |
Equity [Abstract] | |
Equity | NOTE 12 – EQUITY Common Stock On February 17, 2020 the Company authorized the issuance of an aggregate of 25,616 shares of common stock to the members of the board of directors as compensation earned through the end of the fourth quarter of 2019. On March 31, 2020, the Company issued 75,000 shares of common stock of the Company to a consultant that assisted the Company in the area of investor relations and capital introduction. On April 21, 2020, the Company issued an aggregate of 51,105 shares of common stock in exchange for accrued interest related to convertible notes that where converted in 2019 in the amount of $357,735. On June 1, 2020, the Company issued 5,000 shares of common stock of the Company to a consultant with an aggregate fair value of $10,150. On June 5, 2020, the Company issued 15,000 shares of common stock of the Company to a digital marketing consultant with an aggregate fair value of $46,050. On June 24, 2020 the Company authorized the issuance of an aggregate of 4,340 shares of common stock to the members of the board of directors as compensation earned through the end of the first quarter of 2020. See Note 11 – Commitments and Contingencies – Consulting Agreements for details related to additional stock issuances during the six months ended June 30, 2020. Closing of Offering On February 12, 2020, the Company priced its initial public offering of 1,540,000 shares of common stock at a price of $5.00 per share. The Company started trading on the Nasdaq Capital Market on February 13, 2020 under the ticker symbol “GRIL”. The Company closed on the offering on February 18, 2020, yielding proceeds of $6,780,000, net of underwriters and other fees of $920,000. Upon closing of the offering the Company issued 123,200 warrants to the underwriters as part of their agreement. Restricted Common Stock On February 18, 2020, the Company issued an aggregate of 216,783 shares of restricted common stock of the Company, with an aggregate value fair value of $1,083,915, to the executive team pursuant to their employment agreements as part of completing the initial public offering. Subsequent to the June quarter the Company and the employees agreed to cancel the restricted common stock. See Note 13 – Subsequent Events – Restricted Common Stock Cancellations for more details related to the cancellations. At June 30, 2020, the unrecognized value of the restricted common stock was $40,602. The unamortized amount will be expensed over a weighted average period of 0.51 years. A summary of the activity related to the restricted common stock for the six months ended June 30, 2020 is presented below: Weighted Total Date Fair Value Outstanding at January 1, 2020 2,426 $ 65.33 Granted 216,783 5.00 Forfeited - - Vested (218,009 ) (5.34 ) Outstanding at June 30, 2020 1,200 $ 65.33 Stock-Based Compensation Expense Stock-based compensation related to restricted stock issued to employees, directors and consultants and warrants issued to consultants amounted to $277,077 and $3,625,220 for the three and six months ended June 30, 2020, respectively, of which $276,525 and $3,624,116, respectively, was recorded in general and administrative expenses and $552 and $1,104, respectively, was recorded in labor expense within restaurant operating expenses. Stock-based compensation related to restricted stock issued to employees, directors and consultants amounted to $(123,431) and $181,702 for the three and six months ended June 30, 2019, respectively, of which $(124,019) and $177,246 was recorded in general and administrative expenses and $588 and $4,457 was recorded in labor expense within restaurant operating expenses. Warrant and Options Valuation The Company has computed the fair value of warrants granted and options accrued for as accrued compensation expense using the Black-Scholes option pricing model. The expected term used for warrants and options issued to non-employees is the contractual life. The Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time, equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued. The options accrued for in accrued compensation expense had a grant date fair value of $46,000 on April 8, 2020. The Company recorded a mark to market fair value adjustment of $96,000 on the consolidated statement of operations during the three and six months ended June 30, 2020. The Company has estimated the fair value of the options using the Black-Scholes model using the following assumptions: expected volatility of 66.77%, risk-free rate of 0.16-0.23%, expected term of 1 year, expected dividends of 0%, and stock price of $1.70 – 2.71. Warrants See Note 11 – Commitments and Contingencies – Closing of Offering Agreements for details related to additional warrants issuances during the six months ended June 30, 2020. A summary of warrants activity during the six months ended June 30, 2020 is presented below: Number of Warrants Weighted Weighted Outstanding, December 31, 2019 2,450,287 $ 5.51 3.7 Issued 223,200 6.00 - Exercised - - - Forfeited (194,514 ) 19.92 - Outstanding, June 30, 2020 2,478,973 $ 4.38 3.5 Exercisable, June 30, 2020 2,478,973 $ 4.38 3.5 The grant date fair value of warrants granted during the three and six months ended June 30, 2020 and 2019 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 warrants 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 warrants. Due to the lack of historical information, the Company determined the expected term of its warrant awards issued using the simplified method. In applying the Black-Scholes option pricing model, the Company used the following assumptions: For the Three Months Ended For the Six Months Ended June 30, June 30, 2020 2019 2020 2019 Risk free interest rate - % 2.11 - 2.32 % 1.37 % 2.11 - 2.62 % Contractual term (years) - 5.00 3.00 5.00 Expected volatility - % 58.24 % 55.33 % 52.64 - 58.24 % Expected dividend - % 0.00 % 0.00 % 0.00 % |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 13 – SUBSEQUENT EVENTS Delivery-only location Subsequent to June 30, 2020, the Company opened two delivery-only location pursuant to the Kitchen Services Agreement. Restricted Common Stock Cancellations On August 11, 2020, various members of the executive team entered into an agreement individually with the Company to cancel an aggregate of 216,783 shares of restricted common stock of the Company previously issued in the first quarter of 2020 and acknowledge that no further compensation is due under their employment agreements. Consulting Agreement Settlement The Company rescinded the issuance of 100,000 warrants and 300,000 shares of the Company’s common stock in July 2020 that were issued in the first quarter of 2020, pursuant to a consulting agreement. Although the shares were duly authorized and validly issued, the Company rescinded the stock and warrants as it did not have the required amount of equity authorized under its 2019 Incentive Stock Plan. Following the rescission of the warrants and shares of common stock, the consultant threatened to commence legal proceedings against the Company and demanded the Company to re-issue the 300,000 shares of common stock and 100,000 warrants and to provide the Consultant registration rights. In order to settle and avoid the time commitment and expense associated with potential litigation, the Company and the Consultant entered into a Settlement Agreement (“Settlement Agreement”) on August 11, 2020 whereby the Company agreed to issue 300,000 shares of common stock within 5 five days of entering into the Settlement Agreement. These shares will not be issued subject to any equity plan. The Company agreed to register the shares of common stock in consideration of a release by the Consultant. In addition, as part of the Settlement Agreement the Company will issue 100,000 stock options upon the approval of the 2020 Equity Incentive Plan. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of June 30, 2020, and for the three and six months ended June 30, 2020 and 2019. The results of operations for the three and six months ended June 30, 2020 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, 2019. The balance sheet as of December 31, 2019 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. 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 assessment of recoverability of long-lived assets, including property and equipment, goodwill and intangible assets; ● the estimated useful lives of intangible and depreciable assets; ● estimates and assumptions used to value warrants and options; ● the recognition of revenue; and ● the recognition, measurement and valuation of current and deferred income taxes. Estimates and assumptions are periodically reviewed, and the effects of any material revisions are reflected in the financial statements in the period that they are determined to be necessary. Actual results could differ from those estimates and assumptions. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly-liquid instruments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of June 30, 2020 and December 31, 2019. |
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, 2020, with early adoption permitted. The Company is currently evaluating ASU 2016-02 and its impact on its condensed consolidated financial statements and disclosures. In June 2018, the FASB issued ASU No. 2018-07, “Compensation — Stock Compensation (Topic 718),” (“ASU 2018-07”). ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. Currently, the accounting requirements for nonemployee and employee share-based payment transactions are significantly different. ASU 2018-07 expands the scope of Topic 718, Compensation — Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. This ASU supersedes Subtopic 505-50, Equity — Equity-Based Payments to Nonemployees. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 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. 2018-10, “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, 2020, and interim periods within those fiscal years. The Company is currently assessing the impact this guidance will have on its condensed consolidated financial statements. In March 2019, the FASB issued ASU 2019-01, “Leases (Topic 842): Codification Improvements” (“Topic 842”) (“ASU 2019-01”). These amendments align the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842 with that of existing guidance. As a result, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply. However, if there has been a significant lapse of time between when the underlying asset is acquired and when the lease commences, the definition of fair value (in Topic 820, Fair Value Measurement) should be applied. (Issue 1). The ASU also requires lessors within the scope of Topic 942, Financial Services—Depository and Lending, to present all “principal payments received under leases” within investing activities. (Issue 2). Finally, the ASU exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard. (Issue 3). The transition and effective date provisions apply to Issue 1 and Issue 2. They do not apply to Issue 3 because the amendments for that Issue are to the original transition requirements in Topic 842. This amendment will be effective for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating ASU 2019-01 and its impact on its unaudited consolidated financial statements and financial statement disclosures. |
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 at a point in time while under Topic 606 franchise fees are recognized 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 $875,902 in accumulated deficit 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 $659,939 and $1,897,366 during the three and six months ended June 30, 2020, respectively. The Company recorded retail store revenues of $815,837 and $1,616,600 during the three and six months ended June 30, 2019, 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 from gift cards as restaurant revenues once the Company performs its obligation to provide food and beverage to the customer simultaneously with the redemption of the gift card or through gift card breakage, as discussed in Other Revenues below. Franchise Royalties and Fees Franchise revenues consists of royalties, franchise fees and rebates. Royalties are based on a percentage of franchisee net sales revenue. The Company recognizes the royalties as the underlying sales occur. The Company recorded revenue from royalties of $52,870 and $173,779 during the three and six months ended June 30, 2020, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company recorded revenue from royalties of $191,810 and $398,360 during the three and six months ended June 30, 2019, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. Franchise Royalties and Fees The Company provides the franchisees with management expertise, training, pre-opening assistance, and restaurant operating assistance in exchange for the multi-unit development fees and franchise fees. The Company capitalizes these fees upon collection from the franchisee, these fees are then recognized as franchise fee revenue on a straight-line basis over the life of the related franchise agreements and any exercised renewal periods. Cash payments are due upon the execution of the related franchise agreement. The Company’s performance obligation with respect to franchise fee revenues consists of a license to utilize the Company’s brand for a specified period of time, which is satisfied equally over the life of each franchise agreement. The Company recorded revenues from franchise fees of $75,190 and $89,630, respectively, during the three and six months ended June 30, 2020, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company recorded revenues from franchise fees of $273,336 and $326,517, respectively, during the three and six months ended June 30, 2019, 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 $14,233 and $54,915 during the three and six months ended June 30, 2020, respectively, which is included in franchise royalties and fees on the accompanying consolidated statements of operations. The Company recorded revenue from rebates of $63,939 and $148,920 during the three and six months ended June 30, 2019, 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 food and beverage costs during the period in which the related food and beverage purchases are made. Other Revenues Gift card breakage is recognized when the likelihood of a gift card being redeemed by the customer is remote and the Company determines there is not a legal obligation to remit the unredeemed gift card balance to the relevant jurisdiction. The determination of the gift card breakage rate is based upon the Company’s specific historical redemption patterns. The Company recognizes gift card breakage by applying its estimate of the rate of gift card breakage on a pro rata basis over the period of estimated redemption. Gift card liability is recoded in other current liabilities on the condensed consolidated balance sheet. For the three and six months ended June 30, 2020, the Company determined that no gift card breakage is necessary based on current redemption rates. Deferred Revenue Deferred revenue primarily includes initial franchise fees received by the Company, which are being amortized over the life of the Company’s franchise agreements, as well as unearned vendor rebates. Deferred revenue is recognized in income over the life of the franchise agreements and vendor rebates are recognized in income as performance obligations are satisfied. Franchise Advertising Fund Contributions Under the Company’s franchise agreements, the Company and its franchisees are required to contribute a certain percentage of revenues to a national advertising fund. The Company’s national advertising services are provided on a system-wide basis and, therefore, not considered distinct performance obligations for individual franchisees. In accordance with Topic 606, the Company recognizes these sales-based advertising contributions from franchisees as franchise revenue when the underlying franchisee Company incurs the corresponding advertising expense. The Company records the related advertising expenses as incurred under general and administrative expenses. When an advertising contribution fund is over-spent at year end, advertising expenses will be reported on the consolidated statement of operations in an amount that is greater than the revenue recorded for advertising contributions. Conversely, when an advertising contribution fund is under-spent at a period end, the Company will accrue advertising costs up to advertising contributions recorded in revenue. The Company recorded contributions from franchisees of $32,454 and $54,050, respectively, during the three and six months ended June 30, 2020, respectively, which are included in franchise advertising fund contributions on the accompanying condensed consolidated statements of operations. The Company recorded contributions from franchisees of $38,494 and $77,393, respectively, during the three and six months ended June 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 Standard Adjustment January 1, 2019 Deferred revenues $ 907,948 $ 875,902 $ 1,783,850 Accumulated deficit 23,833,656 875,902 24,709,588 |
Advertising | Advertising Advertising costs are charged to expense as incurred. Advertising costs were approximately $25,092 and $128,735 for the three and six months ended June 30, 2020, and approximately $196 and $3,613 for the three and six months ended June 30, 2019 respectively, 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, options or the conversion of convertible notes payable. The following securities are excluded from the calculation of weighted average diluted common shares at June 30, 2020 and 2019, respectively, because their inclusion would have been anti-dilutive: June 30, 2020 2019 Warrants 2,537,264 738,721 Options 4,821 4,821 Convertible debt 32,350 1,108,109 Total potentially dilutive shares 2,574,435 1,851,651 |
Major Vendor | Major Vendor The Company engages various vendors to distribute food products to their Company-owned restaurants. Purchases from the Company’s largest supplier totaled 82.95% and 84.41% of the Company’s purchases for the three and six months ended June 30, 2020, respectively. Purchases from the Company’s largest supplier totaled 75% and 84% of the Company’s purchases for the three and six months ended June 30, 2019, respectively. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company measures the fair value of financial assets and liabilities based on the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 — quoted prices in active markets for identical assets or liabilities Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions) The carrying amounts of accrued liabilities approximate fair value due to the short-term nature of these instruments. The carrying amounts of our short–term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates, taken together with other features such as concurrent issuance of common stock and warrants, are comparable to rates of returns for instruments of similar credit risk. See Note 12 – Equity – Warrant and Options Valuation for details related to a accrued compensation liability being fair valued using Level 1 inputs. |
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 13 – Subsequent Events. |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
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 Standard Adjustment January 1, 2019 Deferred revenues $ 907,948 $ 875,902 $ 1,783,850 Accumulated deficit 23,833,656 875,902 24,709,588 |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following securities are excluded from the calculation of weighted average diluted common shares at June 30, 2020 and 2019, respectively, because their inclusion would have been anti-dilutive: June 30, 2020 2019 Warrants 2,537,264 738,721 Options 4,821 4,821 Convertible debt 32,350 1,108,109 Total potentially dilutive shares 2,574,435 1,851,651 |
Loans Receivable (Tables)
Loans Receivable (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Receivables [Abstract] | |
Schedule of Loans Receivables | At June 30, 2020 and December 31, 2019, the Company’s loans receivable consists of the following: June 30, 2020 December 31, 2019 Loans receivable, net $ 128,587 $ 137,389 Less: current portion (40,364 ) (38,712 ) Loans receivable, non-current $ 88,223 $ 98,677 |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment, Net | As of June 30, 2020 and December 31, 2019 property and equipment consists of the following: June 30, 2020 December 31, 2019 Furniture and equipment $ 727,218 $ 617,712 Leasehold improvements 1,581,174 1,518,293 2,308,392 2,136,005 Less: accumulated depreciation and amortization (665,812 ) (489,126 ) Property and equipment, net $ 1,642,580 $ 1,646,879 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets, Net (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
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, 2019 $ 2,524,000 $ 514,815 $ 3,038,815 Amortization expense - (31,816 ) (31,816 ) Intangible assets, net at June 30, 2020 $ 2,524,000 $ 482,999 $ 3,006,999 Weighted average remaining amortization period at June 30, 2020 (in years) 7.6 |
Accounts Payable and Accrued _2
Accounts Payable and Accrued Expenses (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Payables and Accruals [Abstract] | |
Schedule of Accounts Payables and Accrued Expenses | Accounts payables and accrued expenses consist of the following: June 30, 2020 December 31, 2019 Accounts payable $ 737,363 $ 857,846 Accrued payroll 81,729 139,320 Accrued professional fees 248,324 329,826 Accrued board members fees 8,054 59,864 Accrued rent expense 192,644 269,644 Accrued compensation expense (1)(2) 284,855 - Sales taxes payable (3) 253,831 329,089 Accrued interest 21,752 520,682 Accrued interest, related parties - 79,523 Other accrued expenses 41,007 45,154 Total Accounts Payable and Accrued Expenses $ 1,869,559 $ 2,630,948 (1) The Company accrued a liability of $142,855 related to an aggregate of 28,571 shares of common stock earned by a consultant upon the completion of the initial public offering pursuant to their consulting agreement entered into on September 12, 2018, which has not been issued by the Company to date due to an administrative delay. (2) Included within accrued compensation expense is a liability of $142,000 related to 200,000 stock options to be issued by the Company. See Note 11 – Commitments and Contingencies – Consulting Agreements for details related to the Options. (3) See Note 11 – Commitments and Contingencies –Taxes for detailed related to delinquent sales taxes. |
Deferred Revenue (Tables)
Deferred Revenue (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Deferred Revenue | At June 30, 2020 and December 31, 2019, deferred revenue consists of the following: June 30, 2020 December 31, 2019 Franchise fees $ 1,121,899 $ 1,210,719 Unearned vendor rebates 44,035 64,953 Less: Unearned vendor rebates, current (44,035 ) (64,953 ) Less: Franchise fees, current (53,253 ) (57,744 ) Deferred revenues, non-current $ 1,068,646 $ 1,152,975 |
Other Current Liabilities (Tabl
Other Current Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Other Current Liabilities | Other current liabilities consist of the following: June 30, 2020 December 31, 2019 Gift card liability $ 90,004 $ 88,673 Co-op advertising fund liability 294,844 298,662 Advertising fund liability 260,825 265,308 $ 645,673 $ 652,643 |
Notes Payable (Tables)
Notes Payable (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of outstanding debt | The maturities of other notes payable as of June 30, 2020, are as follows: Principal Repayments due as of Amount 06/30/2021 $ 435,733 06/30/2022 542,231 06/30/2023 62,875 06/30/2024 68,094 06/30/2025 23,931 $ 1,132,864 |
Equity (Tables)
Equity (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Equity [Abstract] | |
Schedule of Activity Related to Restricted Common Stock | A summary of the activity related to the restricted common stock for the six months ended June 30, 2020 is presented below: Weighted Total Date Fair Value Outstanding at January 1, 2020 2,426 $ 65.33 Granted 216,783 5.00 Forfeited - - Vested (218,009 ) (5.34 ) Outstanding at June 30, 2020 1,200 $ 65.33 |
Schedule of Warrants Activity | A summary of warrants activity during the six months ended June 30, 2020 is presented below: Number of Warrants Weighted Weighted Outstanding, December 31, 2019 2,450,287 $ 5.51 3.7 Issued 223,200 6.00 - Exercised - - - Forfeited (194,514 ) 19.92 - Outstanding, June 30, 2020 2,478,973 $ 4.38 3.5 Exercisable, June 30, 2020 2,478,973 $ 4.38 3.5 |
Schedule of Stock Options Assumptions | In applying the Black-Scholes option pricing model, the Company used the following assumptions: For the Three Months Ended For the Six Months Ended June 30, June 30, 2020 2019 2020 2019 Risk free interest rate - % 2.11 - 2.32 % 1.37 % 2.11 - 2.62 % Contractual term (years) - 5.00 3.00 5.00 Expected volatility - % 58.24 % 55.33 % 52.64 - 58.24 % Expected dividend - % 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 ($) | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | Jan. 02, 2019 | Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||
Cash balance | $ 3,161,195 | $ 3,161,195 | $ 478,854 | ||||
Working capital surplus | 214,643 | 214,643 | |||||
Accumulated deficit | (60,088,290) | (60,088,290) | $ (53,094,602) | $ (24,709,588) | $ (23,833,656) | ||
Net loss before income tax | $ (1,501,425) | $ (1,542,606) | $ (6,993,688) | $ (3,026,085) |
Reverse Stock Split (Details Na
Reverse Stock Split (Details Narrative) | Dec. 11, 2019 |
Reverse Stock Split | |
Reverse split | The Company implemented a 1-for-7 reverse split of the Company's issued common stock (the "Third Reverse Split"). |
Significant Accounting Polici_4
Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | Jan. 02, 2019 | Dec. 31, 2018 | |
Cash equivalents | |||||||
Accumulated deficit | 60,088,290 | 60,088,290 | $ 53,094,602 | $ 24,709,588 | $ 23,833,656 | ||
Deferred revenue | $ 1,783,850 | $ 907,948 | |||||
Revenues | 834,686 | $ 1,383,416 | 2,269,740 | $ 2,567,790 | |||
Franchise advertising fund expenses | 32,454 | 38,494 | 54,050 | 77,393 | |||
Advertising costs | $ 25,092 | $ 196 | $ 128,735 | $ 3,613 | |||
Supplier Concentration Risk [Member] | Purchases [Member] | |||||||
Concentration risk percentage | 2.95% | 75.00% | 8.441% | 84.00% | |||
Company Restaurant Net Sales [Member] | |||||||
Revenues | $ 659,939 | $ 815,837 | $ 1,897,366 | $ 1,616,600 | |||
Royalties [Member] | |||||||
Revenues | 173,779 | 191,810 | 52,870 | 398,360 | |||
Franchise [Member] | |||||||
Revenues | 75,190 | 273,336 | 189,630 | 326,517 | |||
Rebates [Member] | |||||||
Revenues | $ 14,233 | 63,939 | $ 154,915 | 148,920 | |||
New Revenue Standard Adjustment [Member] | |||||||
Accumulated deficit | 875,902 | 875,902 | |||||
Deferred revenue | $ 875,902 | $ 875,902 |
Significant Accounting Polici_5
Significant Accounting Policies - Schedule of the Impact of the Adoption of the New Revenue Standard (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2019 | Jan. 02, 2019 | Dec. 31, 2018 |
Deferred revenue | $ 1,783,850 | $ 907,948 | |||
Accumulated deficit | $ 60,088,290 | $ 53,094,602 | $ 24,709,588 | $ 23,833,656 | |
New Revenue Standard Adjustment [Member] | |||||
Deferred revenue | $ 875,902 | ||||
Accumulated deficit | $ 875,902 |
Significant Accounting Polici_6
Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Total potentially dilutive shares | 2,574,435 | 1,851,651 |
Warrants [Member] | ||
Total potentially dilutive shares | 2,537,264 | 738,721 |
Options [Member] | ||
Total potentially dilutive shares | 4,821 | 4,821 |
Convertible Debt [Member] | ||
Total potentially dilutive shares | 32,350 | 1,108,109 |
Loans Receivable (Details Narra
Loans Receivable (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Dec. 31, 2019 | |
Loans receivable | $ 128,587 | $ 137,389 |
Net of reserves for uncollectible loans | $ 55,000 | 55,000 |
Maximum [Member] | ||
Loan original term | 10 years | |
Debt instrument interest rate | 12.00% | |
Minimum [Member] | ||
Debt instrument interest rate | 2.00% | |
Former Franchisee [Member] | ||
Loans receivable | $ 128,587 | 137,389 |
Net of reserves for uncollectible loans | $ 55,000 | $ 55,000 |
Loans Receivable - Schedule of
Loans Receivable - Schedule of Loans Receivables (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Loans receivable, net | $ 128,587 | $ 137,389 |
Less: current portion | (40,364) | (38,712) |
Loans receivable, non-current | $ 88,223 | $ 98,677 |
Property and Equipment, Net (De
Property and Equipment, Net (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 81,337 | $ 47,004 | $ 176,686 | $ 99,964 |
Property and Equipment, Net - S
Property and Equipment, Net - Schedule of Property and Equipment, Net (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Property, Plant and Equipment [Abstract] | ||
Furniture and equipment | $ 727,218 | $ 617,712 |
Leasehold improvements | 1,581,174 | 1,518,293 |
Property and equipment, gross | 2,308,392 | 2,136,005 |
Less: accumulated depreciation and amortization | (665,812) | (489,126) |
Property and equipment, net | $ 1,642,580 | $ 1,646,879 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets, Net (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Amortization expense | $ 15,908 | $ 15,908 | $ 31,816 | $ 31,640 |
Franchise Agreements [Member] | ||||
Intangible asset, useful life | 13 years |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets, Net - Schedule of Intangible Assets (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Intangible assets, net beginning balance | $ 3,038,815 | |||
Amortization expense | $ (15,908) | $ (15,908) | (31,816) | $ (31,640) |
Intangible assets, net ending balance | 3,006,999 | 3,006,999 | ||
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 | 514,815 | |||
Amortization expense | (31,816) | |||
Intangible assets, net ending balance | $ 482,999 | $ 482,999 | ||
Weighted average remaining amortization period at March 31, 2020 (in years) | 7 years 7 months 6 days |
Accounts Payable and Accrued _3
Accounts Payable and Accrued Expenses - Schedule of Accounts Payables and Accrued Expenses (Details) - USD ($) | Jun. 30, 2020 | Apr. 08, 2020 | Dec. 31, 2019 | |||
Payables and Accruals [Abstract] | ||||||
Accounts payable | $ 737,363 | $ 857,846 | ||||
Accrued payroll | 81,729 | 139,320 | ||||
Accrued professional fees | 248,324 | 329,826 | ||||
Accrued board members fees | 8,054 | 59,864 | ||||
Accrued rent expense | 192,644 | 269,644 | ||||
Accrued compensation expense | 284,855 | [1],[2] | $ 46,000 | [1],[2] | ||
Sales taxes payable | [3] | 253,831 | 329,089 | |||
Accrued interest | 21,752 | 520,682 | ||||
Accrued interest, related parties | 79,523 | |||||
Other accrued expenses | 41,007 | 45,154 | ||||
Accounts payables and accrued expenses | $ 1,869,559 | $ 2,630,948 | ||||
[1] | Included within accrued compensation expense is a liability of $142,000 related to 200,000 stock options to be issued by the Company. See Note 11 - Commitments and Contingencies - Consulting Agreements for details related to the Options. | |||||
[2] | The Company accrued a liability of $142,855 related to an aggregate of 28,571 shares of common stock earned by a consultant upon the completion of the initial public offering pursuant to their consulting agreement entered into on September 12, 2018, which has not been issued by the Company to date due to an administrative delay. | |||||
[3] | See Note 11 - Commitments and Contingencies -Taxes for detailed related to delinquent sales taxes. |
Deferred Revenue - Schedule of
Deferred Revenue - Schedule of Deferred Revenue (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Revenue from Contract with Customer [Abstract] | ||
Franchise fees | $ 1,121,899 | $ 1,210,719 |
Unearned vendor rebates | 44,035 | 64,953 |
Less: Unearned vendor rebates, current | (44,035) | (64,953) |
Less: Franchise fees, current | (53,253) | (57,744) |
Deferred revenues, non-current | $ 1,068,646 | $ 1,152,975 |
Other Current Liabilities - Sch
Other Current Liabilities - Schedule of Other Current Liabilities (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Other Liabilities Disclosure [Abstract] | ||
Gift card liability | $ 90,004 | $ 88,673 |
Co-op advertising fund liability | 294,844 | 298,662 |
Advertising fund liability | 260,825 | 265,308 |
Other current liabilities | $ 645,673 | $ 652,643 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | May 09, 2020 | Feb. 03, 2020 | Oct. 10, 2019 | May 14, 2019 | Jun. 30, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 |
Debt Instrument [Line Items] | ||||||||
Convertible notes payable | $ 100,000 | $ 100,000 | $ 536,082 | |||||
Repayment of debt | 550,000 | $ 50,000 | ||||||
Convertible note payable, current | 82,458 | 82,458 | 82,458 | |||||
Proceeds from promissory notes | 150,000 | |||||||
Debt instrument face value | 1,132,864 | 1,132,864 | ||||||
Other notes payable | 1,132,864 | 1,132,864 | ||||||
Other notes payable, related party | $ 0 | 0 | ||||||
Company received loan proceeds | $ 866,300 | |||||||
Minimum [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt interest percentage | 2.00% | 2.00% | ||||||
Maximum [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt interest percentage | 12.00% | 12.00% | ||||||
Debt instrument, term | 10 years | |||||||
Paycheck Protection Program [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt instrument maturity date | May 9, 2022 | |||||||
Company received loan proceeds | $ 866,300 | |||||||
Fixed annual interest rate | 1.00% | |||||||
15% Senior Secured Convertible Promissory Notes [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Repayment of debt | $ 450,000 | |||||||
12% Secured Convertible Promissory Note [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Repayment of debt | 75,000 | |||||||
Other Convertible Notes [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Repayment of debt | 25,000 | |||||||
Another Convertible Notes Payable [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Convertible note payable, current | $ 100,000 | 100,000 | 100,000 | |||||
Promissory Note [Member] | Related Party [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Proceeds from promissory notes | $ 91,000 | |||||||
Debt interest percentage | 15.00% | |||||||
Promissory Note [Member] | Former Franchisee [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Proceeds from promissory notes | $ 300,000 | |||||||
Debt interest percentage | 8.00% | |||||||
Repayment of promissory notes | $ 13,377 | $ 25,873 | ||||||
Debt instrument, term | 5 years | 5 years | ||||||
Notes Payable [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt instrument face value | $ 150,000 | $ 300,000 | ||||||
Original issue discount percentage | 20.00% | 20.00% | ||||||
Debt instrument maturity date | Feb. 21, 2020 | Oct. 10, 2024 | Feb. 21, 2020 | |||||
Notes Payable [Member] | Minimum [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt interest percentage | 1.00% | 1.00% | ||||||
Notes Payable [Member] | Maximum [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt interest percentage | 8.00% | 8.00% | ||||||
Former Parent [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Convertible notes payable | $ 82,458 | $ 82,458 |
Notes Payable - Schedule of out
Notes Payable - Schedule of outstanding debt (Details) | Jun. 30, 2020USD ($) |
Total debt | $ 1,132,864 |
06/30/2021 [Member] | |
Total debt | 435,733 |
06/30/2022 [Member] | |
Total debt | 542,231 |
06/30/2023 [Member] | |
Total debt | 62,875 |
06/30/2024 [Member] | |
Total debt | 68,094 |
06/30/2025 [Member] | |
Total debt | $ 23,931 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) | Apr. 08, 2020 | Feb. 26, 2020 | Feb. 24, 2020 | Feb. 18, 2020 | Feb. 18, 2020 | Feb. 12, 2020 | Jan. 23, 2020 | Nov. 19, 2019 | Apr. 15, 2019 | Mar. 15, 2019 | Mar. 07, 2019 | Feb. 15, 2019 | Dec. 12, 2018 | Oct. 03, 2018 | Jun. 06, 2018 | Mar. 27, 2018 | Jul. 31, 2020 | Jun. 01, 2020 | Mar. 31, 2020 | May 31, 2018 | Jun. 30, 2020 | Dec. 31, 2017 | Dec. 31, 2019 |
Number of common stock shares issued | 216,783 | 1,540,000 | |||||||||||||||||||||
Number of warrants issued | 123,200 | ||||||||||||||||||||||
Convertible promissory notes | $ 100,000 | $ 536,082 | |||||||||||||||||||||
Debt instrument accrued interest | 21,752 | 520,682 | |||||||||||||||||||||
Litigation settlement amount | $ 130,185 | ||||||||||||||||||||||
Accrued tax | 253,831 | $ 329,089 | |||||||||||||||||||||
Robert E. Morgan [Member] | |||||||||||||||||||||||
Loss contingency seeking damages | $ 2,391,330 | $ 1,357,243 | |||||||||||||||||||||
Upfront amount | 25,000 | ||||||||||||||||||||||
Additional upfront fee | $ 175,000 | ||||||||||||||||||||||
Note Holder [Member] | |||||||||||||||||||||||
Repayment of debt | $ 71,035 | ||||||||||||||||||||||
Convertible promissory notes | $ 100,000 | 100,000 | |||||||||||||||||||||
Other costs | $ 171,035 | $ 171,035 | |||||||||||||||||||||
Debt instrument accrued interest | $ 21,031 | ||||||||||||||||||||||
Fountain Valley [Member] | |||||||||||||||||||||||
Loss contingency seeking damages | $ 121,000 | ||||||||||||||||||||||
Paid of litigation settlement amount | $ 85,000 | ||||||||||||||||||||||
Consultant [Member] | |||||||||||||||||||||||
Number of common stock shares issued | 5,000 | 75,000 | |||||||||||||||||||||
Consultant [Member] | 2020 Incentive Stock Plan [Member] | |||||||||||||||||||||||
Amendment Agreement Term | $ 200,000 | ||||||||||||||||||||||
Limestone Associates LLC [Member] | |||||||||||||||||||||||
Rent expense | $ 25,748 | ||||||||||||||||||||||
Crownhall Realty, LLC [Member] | Robert E. Morgan [Member] | |||||||||||||||||||||||
Loss contingency seeking damages | 1,034,087 | ||||||||||||||||||||||
Resolute Contractors, Inc [Member] | |||||||||||||||||||||||
Litigation settlement amount | $ 98,005 | ||||||||||||||||||||||
Subsequent Event [Member] | |||||||||||||||||||||||
Number of warrants rescinded | 300,000 | ||||||||||||||||||||||
Number of shares rescinded | 100,000 | ||||||||||||||||||||||
Profession Service Agreement [Member] | |||||||||||||||||||||||
Agreement term, description | The term of the agreement commences from the effective date on February 18, 2020 and expires on February 18, 2021. | ||||||||||||||||||||||
Number of common stock shares issued | 300,000 | ||||||||||||||||||||||
Number of warrants issued | 100,000 | ||||||||||||||||||||||
Warrant term | 3 years | 3 years | |||||||||||||||||||||
Warrant exercise price | $ 5 | $ 5 | |||||||||||||||||||||
Consulting Agreement [Member] | |||||||||||||||||||||||
Agreement term, description | The term of the agreement is for two months from the effective date on February 27, 2020 and expires on April 27, 2020. | ||||||||||||||||||||||
Number of common stock shares issued | 10,000 | 10,000 | |||||||||||||||||||||
Repayment of debt | $ 215,000 | $ 215,000 | |||||||||||||||||||||
Settlement Agreement [Member] | Fountain Valley [Member] | |||||||||||||||||||||||
Paid of litigation settlement amount | $ 7,000 | $ 15,000 | |||||||||||||||||||||
Payments for legal settlements, description | 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. As of January 15, 2020, the Company has met all their obligations and the full amount has been paid. | ||||||||||||||||||||||
Litigations, Claims and Assessments [Member] | |||||||||||||||||||||||
Loss contingency seeking damages | $ 32,809 | ||||||||||||||||||||||
Accounts payable and accrued expenses | $ 30,000 | ||||||||||||||||||||||
Kitchen Services Agreement [Member] | Minimum [Member] | |||||||||||||||||||||||
Monthly license fees | $ 3,000 | ||||||||||||||||||||||
Kitchen Services Agreement [Member] | Maximum [Member] | |||||||||||||||||||||||
Monthly license fees | $ 4,000 |
Equity (Details Narrative)
Equity (Details Narrative) - USD ($) | Jun. 24, 2020 | Jun. 05, 2020 | Feb. 18, 2020 | Feb. 12, 2020 | Jun. 01, 2020 | Mar. 31, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Apr. 21, 2020 | Apr. 08, 2020 | Feb. 17, 2020 | Dec. 31, 2019 | [1],[2] | ||
Stock issued during the period new issue | 216,783 | 1,540,000 | ||||||||||||||||
Stock issued during the period new issue value | $ 1,083,915 | $ 6,780,000 | ||||||||||||||||
Shares issued price per share | $ 5 | |||||||||||||||||
Proceeds from initial public offering | $ 6,780,000 | |||||||||||||||||
Payments underwriters and other fees | $ 920,000 | $ 920,000 | ||||||||||||||||
Number of warrants issued | 123,200 | |||||||||||||||||
Unrecognized value | $ 40,602 | |||||||||||||||||
Unamortized value weighted average period | 6 months 3 days | |||||||||||||||||
Stock-based compensation | $ 3,625,220 | 181,702 | ||||||||||||||||
General and administrative expenses | $ 1,213,851 | $ 6,343,254 | ||||||||||||||||
Risk-Free Rate | 1.37% | |||||||||||||||||
Accrued compensation expense | $ 284,855 | [1],[2] | $ 284,855 | [1],[2] | $ 46,000 | |||||||||||||
Change in fairvalue of accrued compensation | (96,000) | $ (96,000) | ||||||||||||||||
Minimum [Member] | ||||||||||||||||||
Risk-Free Rate | 2.11% | 2.11% | ||||||||||||||||
Stock Price For Dividend | 1.70 | |||||||||||||||||
Maximum [Member] | ||||||||||||||||||
Risk-Free Rate | 2.32% | 2.62% | ||||||||||||||||
Stock Price For Dividend | 2.71 | |||||||||||||||||
Board of Directors [Member] | ||||||||||||||||||
Number of shares authorized for issuance | 51,105 | 25,616 | ||||||||||||||||
Stock issued during the period new issue | 4,340 | 15,000 | ||||||||||||||||
Accrued interest amount | $ 357,735 | |||||||||||||||||
Aggregate Fair Value | $ 46,050 | |||||||||||||||||
Consultant [Member] | ||||||||||||||||||
Stock issued during the period new issue | 5,000 | 75,000 | ||||||||||||||||
Employees Directors and Consultants [Member] | Restricted Common Stock [Member] | ||||||||||||||||||
Stock-based compensation | 277,077 | $ (123,431) | $ 3,625,220 | $ 181,702 | ||||||||||||||
General and administrative expenses | 276,525 | (124,019) | 624,116 | 177,246 | ||||||||||||||
Labor expense | $ 552 | $ 588 | $ 1,104 | $ 4,457 | ||||||||||||||
Black-Scholes model [Member] | Minimum [Member] | ||||||||||||||||||
Risk-Free Rate | 1.60% | |||||||||||||||||
Black-Scholes model [Member] | Maximum [Member] | ||||||||||||||||||
Risk-Free Rate | 2.30% | |||||||||||||||||
[1] | Included within accrued compensation expense is a liability of $142,000 related to 200,000 stock options to be issued by the Company. See Note 11 - Commitments and Contingencies - Consulting Agreements for details related to the Options. | |||||||||||||||||
[2] | The Company accrued a liability of $142,855 related to an aggregate of 28,571 shares of common stock earned by a consultant upon the completion of the initial public offering pursuant to their consulting agreement entered into on September 12, 2018, which has not been issued by the Company to date due to an administrative delay. |
Equity - Schedule of Activity R
Equity - Schedule of Activity Related to Restricted Common Stock (Details) - Restricted Common Stock [Member] | 6 Months Ended |
Jun. 30, 2020$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Restricted Common Stock, Outstanding Beginning | shares | 2,426 |
Restricted Common Stock, Granted | shares | 216,783 |
Restricted Common Stock, Forfeited | shares | |
Restricted Common Stock, Vested | shares | (218,009) |
Restricted Common Stock, Outstanding Ending | shares | 1,200 |
Weighted Average Grant Date Fair Value, Outstanding Beginning | $ / shares | $ 65.33 |
Weighted Average Grant Date Fair Value, Granted | $ / shares | 5 |
Weighted Average Grant Date Fair Value, Forfeited | $ / shares | |
Weighted Average Grant Date Fair Value, Vested | $ / shares | (5.34) |
Weighted Average Grant Date Fair Value, Outstanding Ending | $ / shares | $ 65.33 |
Equity - Schedule of Warrants A
Equity - Schedule of Warrants Activity (Details) | 6 Months Ended |
Jun. 30, 2020$ / sharesshares | |
Equity [Abstract] | |
Number of Warrants, Outstanding Beginning | shares | 2,450,287 |
Number of Warrants, Issued | shares | 223,200 |
Number of Warrants, Exercised | shares | |
Number of Warrants, Forfeited | shares | (194,514) |
Number of Warrants, Outstanding Ending | shares | 2,478,973 |
Number of Warrants, Exercisable | shares | 2,478,973 |
Weighted Average Exercise Price, Outstanding Beginning | $ / shares | $ 5.51 |
Weighted Average Exercise Price, Issued | $ / shares | 6 |
Weighted Average Exercise Price, Exercised | $ / shares | |
Weighted Average Exercise Price, Forfeited | $ / shares | 19.92 |
Weighted Average Exercise Price, Outstanding Ending | $ / shares | 4.38 |
Weighted Average Exercise Price, Exercisable | $ / shares | $ 4.38 |
Weighted Average Remaining Life In Years, Outstanding Beginning | 3 years 8 months 12 days |
Weighted Average Remaining Life In Years, Outstanding Ending | 3 years 6 months |
Weighted Average Remaining Life In Years, Exercisable | 3 years 6 months |
Equity - Schedule of Stock Opti
Equity - Schedule of Stock Options Assumptions (Details) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Risk free interest rate | 1.37% | |||
Contractual term (years) | 0 years | 5 years | 3 years | 5 years |
Expected volatility | 0.00% | 58.24% | 55.33% | |
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 | 2.11% | 2.11% | ||
Expected volatility | 52.64% | |||
Maximum [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Risk free interest rate | 2.32% | 2.62% | ||
Expected volatility | 58.24% |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Aug. 11, 2020 | Jul. 31, 2020 | Jun. 30, 2020 |
Consulting Agreement Settlement [Member] | |||
Reissuance of Warrants | $ 100,000 | ||
Reissuance of Commonstock | 300,000 | ||
2020 Equity Incentive Plan [Member] | |||
Company will issue stock options | $ 100,000 | ||
Subsequent Event [Member] | Restricted Common Stock Cancellations [Member] | |||
Company Cancel an Aggregate Shares | $ 216,783 | ||
Subsequent Event [Member] | Consulting Agreement Settlement [Member] | |||
Issuance of Warrants | $ 100,000 | ||
Issuance of Common stock | 300,000 |