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Item 3. Legal Proceedings

2021-04-15 compared with 2020-05-29 · 22 added, 64 removed, 32 unchanged (73% of the section changed)

3 unchanged sentences

are not currently involved in any material disputes and do not have any material litigation matters pending except:

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

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

In May 2018, Muscle Maker, ARH and Robert E.

Morgan (the former CEO of the Company) were listed as defendants to a lawsuit

filed by Crownhall Realty, LLC (“Crownhall”) in the Supreme Court of the State of New York county of New York, #154467.

Crownhall is seeking $1,034,087 in damages for rent, interest and other expenses.

The original lease was for a 10-year period

of time and commenced on January 1, 2016.

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 December

31, 2019, the Company has accrued $52,500 for the remaining liability in accounts payable and accrued expenses.

March 27, 2018 a convertible note holder filed a complaint in the Iowa District Court for Polk County #CVCV056029 against the

4 unchanged sentences

As of December 31, 2020, the Company has accrued for the liability in convertible notes payable in the amount of $100,000

and accrued interest of $18,045 is included in accounts payable and accrued expenses on the consolidated balance sheet.

April 2018, the Company and Former Parent was listed as a defendant in a lawsuit filed by a landlord (“Former Landlord”)

in the Superior Court of the State of California.

The Former Landlord is seeking $531,594 in damages for rent, interest and other

The original lease was for a 5-year period and commenced on or about September 30, 2015.

On January 15, 2019, the Company

and the Former Landlord entered a settlement and release agreement.

Pursuant to the settlement the Company shall pay the amount

of $531,594 as follows (i) first payment of $49,815, net of security deposit of $11,185, on or before January 23, 2019, (ii) second

payment of $25,000 on or before February 28, 2019 and (iii) thereafter sixty-nine payments of $6,400 on or before the 15th of

each month beginning on March 15, 2019.

Conditioned on the Company making twelve timely installment payments of $6,400, the Company

would be released of the remaining liability pursuant to the judgement.

As of December 31,

2019, the Company has met all their obligations and the full amount has been paid.

May 4, 2018, Stratford Road Partners, LLC (“Stratford”) filed suit against the Company’s subsidiary for non-payment

of rent in the small Claims court in the State of North Carolina.

Since then the property has been vacated and the landlord offered

a settlement of $10,000 with no further lease obligation.

On June 5, 2019 the Company signed the settlement agreement and made

the payment to the landlord.

As of December 31, 2019, the Company has met all their obligations

and the full amount has been paid.

and accrued interest of $23,056 is included in accounts payable and accrued expenses.

May 2018, Resolute Contractors, Inc., Quality Tile, MTL Construction, Genesis Electric, JNB Interiors and Captive Aire filed a

2 unchanged sentences

payment plans with these vendors.

As of December 31, 2019, the Company has accrued for the liability in accounts payable and accrued

As of December 31, 2020, the Company has accrued for the liability in accounts payable and

accrued expenses.

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

7 unchanged sentences

accounts payable and accrued expenses and has been making repayments pursuant to the settlement agreement.

January 18, 2019, the Company entered into an expense reimbursement agreement with an employee in connection with unreimbursed

expenses incurred on behalf of the Company in the amount of $81,140 recorded in accounts payable and accrued expenses as of March

The Company shall pay the employee as follows (a) $1,750 upon execution of the agreement, (b) $1,000 a week commencing

on January 25, 2019 ending May 24, 2019, (c) a onetime payment of $40,000 on the earlier of March 31, 2019 or when the Company

fully received the anticipated funding from the a tranche of the 15% Senior Secured Convertible Notes and (d) a onetime payment

of $21,390 on the earlier of May 31, 2019 or when the Company has fully received the anticipated funding from the second tranche

of the 15% Senior Secured Convertible Notes.

As of December 31, 2019, the full amount of

$ 81,140 has been repaid.

As of January 15,

2020, the Company has met all their obligations and the full amount has been paid.

or about March 7, 2019, the Company was listed as a defendant to a lawsuit filed by a contractor in the State of Texas.

4 unchanged sentences

for the liability in accounts payable and accrued expenses.

May 6, 2019, the Company entered into a commission’s payment agreement in the aggregate amount of $45,894 in connection

with past due commission recorded in accounts payable and accrued expenses as of March 31, 2019.

The Company shall pay the employee

the outstanding commission balance as follows (a) $10,894 upon execution of the agreement and (b) $7,000 per month for five months

starting on May 31, 2019.

As of December 31, 2019, the full amount of $45,894 has been repaid.

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 December 31, 2020, the Company has accrued for the liability

in accounts payable and accrued expenses.

March 2021, the Company participated in a mediation concerning an investor who invested with American Restaurant

Holdings, Inc and/or American Restaurants, LLC, our former parent company, from 2013 through 2015 in the total amount of $531,250.

The Company does not believe the dispute concerns Muscle Maker, Inc.

and intends to defend itself vigorously if the

matter is not settled.

As of the filing of this report, the company has not accrued for any potential liability pending the outcome

of continued mediation.

Maker or its subsidiaries failed in certain instances in paying past state and local sales taxes collected from customers in specific

states that impose a tax on sales of the Company’s products during 2017 and 2018.

The Company had accrued a liability for

approximately $329,089 as of December 31, 2019 related to this matter.

All current state and local sales taxes from January 1,

2018 for open company owned locations have been fully paid and in a timely manner.

The Company has completed or is in discussions

on payment plans with the various state or local entities for these past owed amounts.

The Company had accrued

a liability for approximately $231,177 as of December 31, 2020 related to this matter.

All current state and local sales taxes

from January 1, 2018 for open company owned locations have been fully paid and in a timely manner.

The Company has completed or

is in discussions on payment plans with the various state or local entities for these past owed amounts.

SAFETY DISCLOSURES.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 3. Legal Proceedings