Sadot Group Inc. 10-Q

10-Q 1 form10-q.htm UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2021 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-39223 MUSCLE MAKER, INC. (Exact name of registrant as specified in its charter) Nevada 47-2555533 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 2600 South Shore Blvd., Suite 300, League City, Texas 77573 (Address of Principal Executive Offices) (Zip Code) Registrant’s telephone number, including area code: (682)-708-8250 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common stock, $0.0001 par value per share GRIL The NASDAQ Capital Market Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit). Yes [ X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] Emerging growth company [X] If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes [ ] No [X] The number of shares if the Registrant’s common stock, $0.0001 par value per share, outstanding as of May 20, 2021, was 14,867,016. MUSCLE MAKER, INC. AND SUBSIDIARIES FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021 TABLE OF CONTENTS Page PART 1 – FINANCIAL INFORMATION ITEM 1. Financial Statements. Condensed Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020 3 Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020 4 Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2020 5 Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2021 6 Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 7 Notes to Unaudited Condensed Consolidated Financial Statements 9 ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations . 25 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk . 36 ITEM 4. Controls and Procedures . 36 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings . 37 ITEM 1A. Risk Factors . 38 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds . 39 ITEM 3. Defaults Upon Senior Securities . 40 ITEM 4. Mine Safety Disclosures . 40 ITEM 5. Other Information . 40 ITEM 6. Exhibits . 41 SIGNATURES 42 2 MUSCLE MAKER, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS UNAUDITED March 31, 2021 December 31, 2020 (unaudited) Assets Current Assets: Cash $ 2,009,650 $ 4,195,932 Accounts receivable, net of allowance for doubtful accounts of $75,000 as of March 31, 2021 and December 31, 2020, respectively 144,220 140,305 Inventory 122,032 113,824 Current portion of loans receivable, net of allowance of $61,275 and $106,900 at March 31, 2021 and December 31, 2020, respectively 5,148 2,394 Prepaid expenses and other current assets 34,927 40,903 Total Current Assets 2,315,977 4,493,358 Property and equipment, net 2,356,928 2,342,723 Goodwill 939,348 656,348 Intangible assets, net 3,592,672 2,878,278 Loans receivable, non-current - 996 Security deposits and other assets 131,916 131,916 Total Assets $ 9,336,841 $ 10,503,619 Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable and accrued expenses $ 2,087,651 $ 1,500,935 Convertible notes payable to Former Parent 82,458 82,458 Convertible notes payable 100,000 100,000 Other notes payable, current 961,157 701,552 Deferred revenue, current 22,498 62,858 Deferred rent, current 27,203 20,569 Other current liabilities 638,701 641,418 Total Current Liabilities 3,919,668 3,109,790 Other notes payable, non-current 297,042 575,140 Deferred revenue, non-current 963,892 944,271 Deferred rent, non-current 76,950 79,290 Total Liabilities 5,257,552 4,708,491 Commitments and Contingencies Stockholders’ Equity: Common stock, $0.0001 par value, 25,000,000 shares authorized, 12,545,824 and 11,725,764 shares issued and outstanding as of March 31, 2021, and December 31, 2020, respectively 1,254 1,172 Additional paid-in capital 70,983,426 68,987,663 Accumulated deficit (66,905,391 ) (63,193,707 ) Total Stockholders’ Equity 4,079,289 5,795,128 Total Liabilities and Stockholders’ Equity $ 9,336,841 $ 10,503,619 See Notes to the Condensed Consolidated Financial Statements 3 MUSCLE MAKER, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) For the Three Months Ended March 31, 2021 2020 Revenues: Company restaurant sales, net of discounts $ 1,178,911 $ 1,237,427 Franchise royalties and fees 135,340 176,031 Franchise advertising fund contributions 14,087 21,596 Total Revenues 1,328,338 1,435,054 Operating Costs and Expenses: Restaurant operating expenses: Food and beverage costs 504,461 465,694 Labor 767,065 586,620 Rent 256,191 144,677 Other restaurant operating expenses 339,922 332,360 Total restaurant operating expenses 1,867,639 1,529,351 Preopening expenses 10,986 - Depreciation and amortization 169,128 111,257 Franchise advertising fund expenses 14,087 21,596 General and administrative expenses 2,966,636 5,129,403 Total Costs and Expenses 5,028,476 6,791,607 Loss from Operations (3,700,138 ) (5,356,553 ) Other Income (Expense): Other income (expense), net 2,628 (3,188 ) Interest expense, net (14,174 ) (93,604 ) Amortization of debt discounts - (38,918 ) Total Other Expense, Net (11,546 ) (135,710 ) Loss Before Income Tax (3,711,684 ) (5,492,263 ) Income tax provision - - Net Loss $ (3,711,684 ) $ (5,492,263 ) Net Loss Per Share: Basic and diluted $ (0.31 ) $ (0.84 ) Weighted Average Number of Common Shares Outstanding: Basic and diluted 11,817,591 6,531,696 See Notes to the Condensed Consolidated Financial Statements 4 MUSCLE MAKER, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) Additional Common Stock Paid-in Accumulated Shares Amount Capital Deficit Total Balance - December 31, 2019 5,714,464 $ 571 $ 53,339,793 $ (53,094,602 ) $ 245,762 Issuance of restricted stock 1,226 - - - - Common stock issued upon offering on February 12, 2020, net of underwriter’s discount and offering costs of $920,000 1,540,000 154 6,779,846 - 6,780,000 Restricted common stock issued as compensation to executive team upon completion of the initial public offering 216,783 22 1,083,893 - 1,083,915 Common stock issued as compensation to board of directors 25,616 3 128,077 - 128,080 Common stock issued as compensation for services 385,000 39 1,924,961 - 1,925,000 Stock-based compensation: Restricted common stock - - 20,148 - 20,148 Warrant - - 191,000 - 191,000 Net loss - - - (5,492,263 ) (5,492,263 ) Balance – March 31, 2020 7,883,089 $ 789 $ 63,467,718 $ (58,586,865 ) $ 4,881,642 See Notes to the Condensed Consolidated Financial Statements 5 MUSCLE MAKER, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Additional Common Stock Paid-in Accumulated Shares Amount Capital Deficit Total Balance - December 31, 2020 11,725,764 $ 1,172 $ 68,987,663 $ (63,193,707 ) $ 5,795,128 Issuance of restricted stock 1,200 - - - - Common stock issued as part of the acquisition of SuperFit Foods on March 25, 2021 268,240 27 624,973 - 625,000 Restricted common stock issued as compensation to executives and employees 221,783 22 636,495 - 636,517 Common stock issued as compensation to board of directors 28,837 3 57,199 - 57,202 Common stock issued as compensation for services 300,000 30 676,670 - 676,700 Stock-based compensation: Restricted common stock - - 426 - 426 Net loss - - - (3,711,684 ) (3,711,684 ) Balance – March 31, 2021 12,545,824 $ 1,254 $ 70,983,426 $ (66,905,391 ) $ 4,079,289 See Notes to the Condensed Consolidated Financial Statements 6 MUSCLE MAKER, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Three Months Ended March 31, 2021 2020 Cash Flows from Operating Activities Net loss $ (3,711,684 ) $ (5,492,263 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 169,128 111,257 Stock-based compensation 1,712,845 3,348,143 Amortization of debt discounts - 38,918 Write off of property and equipment 37,027 - Bad debt expense 18,676 - Deferred rent 4,294 18,375 Changes in operating assets and liabilities: Accounts receivable (24,549 ) (6,293 ) Inventory (8,208 ) 20,893 Prepaid expenses and other current assets 5,976 (17,423 ) Security deposits and other assets - (37,600 ) Accounts payable and accrued expenses 219,716 (503,985 ) Deferred revenue (20,739 ) (24,899 ) Other current liabilities (2,717 ) 2,357 Total Adjustments 2,111,449 2,949,743 Net Cash Used in Operating Activities (1,600,235 ) (2,542,520 ) Cash Flows from Investing Activities Purchases of property and equipment (67,754 ) (57,893 ) Cash paid in connection with the acquisition of SuperFit Foods (500,000 ) - Collections from loans receivables 200 8,802 Net Cash Used in Investing Activities (567,554 ) (49,091 ) Cash Flows from Financing Activities Proceeds from offerings, net of underwriter’s discount and offering costs of $920,000 - 6,780,000 Repayments of convertible note payable - (550,000 ) Repayments of convertible note payable – related parties - (91,000 ) Repayments of other notes payables (18,493 ) (468,879 ) Proceeds from other note payable - 150,000 Net Cash (Used in) Provided by Financing Activities (18,493 ) 5,820,121 Net (Decrease) Increase in Cash (2,186,282 ) 3,228,510 Cash - Beginning of Period 4,195,932 478,854 Cash - End of Period $ 2,009,650 $ 3,707,364 See Notes to the Condensed Consolidated Financial Statements 7 MUSCLE MAKER, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 2021 2020 Supplemental Disclosures of Cash Flow Information: Cash paid for interest $ 9,950 $ 297,455 See Notes to the Condensed Consolidated Financial Statements 8 MUSCLE MAKER, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 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. Muscle Maker Development International. LLC, a directly wholly owned subsidiary, which was formed in Nevada on November 13, 2020 to franchise the Muscle Maker Grill name and business system to qualified franchisees internationally. 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. On March 25, 2021, we acquired the assets of Superfit Foods, a subscription based fresh-prepared meal prep business located in Jacksonville, Florida. With this acquisition, we are also the owner of the trade name Superfit Foods that we use in connection with the operations of Superfit Foods. In 2020 Superfit foods produced overs 220,000 fresh-prepared meals. Superfit Foods is differentiated from other meal prep services by allowing customers in the Jacksonville Florida market to order online via the company’s website or mobile app and pick up their fully prepared meals from 28 company owned coolers located in gyms and wellness centers. MMI and its subsidiaries are hereinafter referred to as the “Company”. The Company operates under the name SuperFit Foods and Muscle Maker Grill and is a franchisor and owner operator of Muscle Maker Grill and Healthy Joe’s restaurants. As of March 31, 2021, the Company’s restaurant system included eighteen company-owned restaurants, and fourteen franchise restaurants. Seven of the company-owned restaurants are delivery-only locations. In addition, the Company built four new locations on university campuses but due to Covid-19 restrictions have not yet opened these locations but incurred expenses during the twelve months ended December 31, 2020. 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 and meal plans. SuperFit Foods is a healthy meal prep Company that offers subscription meal services to customers in the Northeast Florida market with 100 meals to choose from. COVID-19 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 year ended December 31, 2020 and continued into the first three months of March 31, 2021. 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. 9 MUSCLE MAKER, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE 1 – BUSINESS ORGANIZATION AND NATURE OF OPERATIONS, GOING CONCERN AND MANAGEMENT’S PLANS, continued Going Concern and Management’s Plans As of March 31, 2021, the Company had a cash balance, a working capital deficit and an accumulated deficit of $2,009,650, $1,603,691, and $66,905,391, respectively. During the three months ended March 31, 2021, the Company incurred a pre-tax net loss of $3,711,684. 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. Subsequent to March 31, 2021, the Company received an aggregate of $9,181,355, net of underwriters’ costs and other fees of $790,000, upon closing of a private placement. (See Note 13 - Subsequent Events – Private Placement) Although management believes that the Company has access to capital resources, there are no commitments 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. NOTE 2 – 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 March 31, 2021, and for the three months ended March 31, 2021, and 2020. The results of operations for the three months ended March 31, 2021 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, 2020. The balance sheet as of December 31, 2020 has been derived from the Company’s audited financial statements. 10 MUSCLE MAKER, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES 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 March 31, 2021 and December 31, 2020. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Major improvements are capitalized, and minor replacements, maintenance and repairs are charged to expense as incurred. Depreciation and amortization are calculated on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the estimated useful life or the lease term of the related asset. The estimated useful lives are as follows: Furniture and equipment 5 - 7 years Vehicles 5 years Leasehold improvements 0.5 – 10.38 years Smallware, which consists of pots, pans and other cooking utensils, is carried at cost and any replacements are expensed when acquired. 11 MUSCLE MAKER, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued Intangible Assets We account for recorded intangible assets in accordance with ASC 350 “Intangibles - Goodwill and Other”. In accordance with ASC 350, we do not amortize intangible assets with indefinite useful lives. Our goodwill and trademarks are deemed to have indefinite lives, and accordingly are not amortized, but are evaluated for impairment at least annually, or more often whenever changes in facts and circumstances may indicate that the carrying value may not be recoverable. The Accounting Standards Codification (“ASC”) requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment). Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgment is required to estimate the fair value of reporting units which includes estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment. Other intangible assets include a trademark with an indefinite useful life. The other intangible assets estimated useful lives are as follows: Franchisee agreements 13 years Trademark – SuperFit, domain name, customer list and proprietary recipes 5 years Non-compete agreement 3 years 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, 2021, 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, 2021. 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. 12 MUSCLE MAKER, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued Recent Accounting Pronouncements, continued 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, 2021, 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, 2021, 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. On June 3, 2020, the FASB issued ASU 2020-05 that extended the adoption to fiscal years beginning after December 15, 2021, with interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating ASU 2019-01 and its impact on its unaudited condensed consolidated financial statements and financial statement disclosures. 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. 13 MUSCLE MAKER, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued Revenue Recognition In accordance with the Accounting Standards Codification Topic 606 “Revenue from Contracts with Customers”, the Company recognized revenue 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. 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 $1,178,911 and $1,237,427 during the three months ended March 31, 2021 and 2020, 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 recognizes 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 $81,469 and $120,909 during the three months ended March 31, 2021 and 2020, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company provides the franchisees with management expertise, training, pre-opening assistance, and restaurant operating assistance in exchange for the multi-unit development fees and franchise fees. The Company capitalizes these fees upon collection from the franchisee, 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 $9,786 and $14,440, respectively, during the three months ended March 31, 2021 and 2020, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. 14 MUSCLE MAKER, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued Franchise Royalties and Fees, continued 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 $44,085 and $40,682 during the three months ended March 31, 2021 and 2020, respectively, which is included in franchise royalties and fees on the accompanying consolidated statements of operations. Rebates earned on purchases by Company owned stores are recorded as a reduction of 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 recorded in other current liabilities on the condensed consolidated balance sheet. For the three months ended March 31, 2021 and 2020, respectively, 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 $25,140 and $32,536, respectively, during the three months ended March 31, 2021 and 2020, respectively, which are included in franchise advertising fund contributions on the accompanying condensed consolidated statements of operations. Advertising Advertising costs are charged to expense as incurred. Advertising costs were approximately $13,615 and $103,643 for the three months ended March 31, 2021 and 2020, respectively, and are included in general and administrative expenses in the accompanying condensed consolidated statements of operations. 15 MUSCLE MAKER, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued 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 March 31, 2021 and 2020, respectively, because their inclusion would have been anti-dilutive: March 31, 2021 2020 Warrants 2,560,361 2,537,264 Options 300,000 4,821 Convertible debt 32,350 32,350 Total potentially dilutive shares 2,892,711 2,574,435 Major Vendor The Company engages various vendors to distribute food products to their Company-owned restaurants. Purchases from the Company’s largest supplier totaled 84% and 85% of the Company’s purchases for the three months ended March 31, 2021 and 2020, 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. 16 MUSCLE MAKER, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE 3 – ACQUISITIONS On March 25, 2021, the Company entered into an asset purchase agreement with Superfit Foods, LLC, a Florida limited liability company and Superfit Foods, LLC, a Nevada limited liability company (the “Superfit Acquisition”). The purchase price of the assets and rights was $1,150,000. The purchase price is payable as follows: $500,000 that was paid at closing, of which $25,000 was released from an escrow account held by our attorney, and $625,000 paid in 268,240 shares of common stock to be held for six months before being registered. The remaining $25,000 shall be paid in shares of common stock provided that the seller meets various obligation, within 60 days, as outline in the purchase agreement. As of March 31, 2021 the Company has accrued for the liability in accounts payable and accrued expenses. The Company acquired the following assets as part of the purchase agreement: Furniture and equipment $ 82,000 Vehicles 55,000 Tradename 45,000 Customer list 140,000 Domain name 125,000 Proprietary Recipes 160,000 Non-compete agreement 260,000 Goodwill 283,000 Total assets acquired $ 1,150,000 The unaudited pro-forma financial information in the table below summarizes the consolidated results of operations of the Company and SuperFits Foods, LLC as though the acquisition had occurred as of January 1, 2020. The pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the earliest period presented, nor does it intend to be a projection of future results. Pro Forma (Unaudited) For the Three Months Ended March 31, 2021 2020 Revenues $ 1,835,838 $ 1,865,979 Restaurant operating expenses 2,322,412 1,915,505 Total cost and expenses 5,482,877 7,177,761 Loss from Operations (3,647,039 ) (5,311,782 ) NOTE 4 - LOANS RECEIVABLE At March 31, 2021 and December 31, 2020, the Company’s loans receivable consists of the following: March 31, 2021 December 31, 2020 Loans receivable, net $ 5,148 $ 3,390 Less: current portion (5,148 ) (2,394 ) Loans receivable, non-current $ - $ 996 Loans receivable includes loans to franchisees and a former franchisee totaling, in the aggregate, $5,148 and $3,390, net of reserves for uncollectible loans of $61,275 and $106,900 at March 31, 2021 and December 31, 2020, respectively. The loans have original terms ranging up to 10 years, earn interest at rates ranging from 5% to 12%, and are being repaid on a weekly or monthly basis. NOTE 5 – PROPERTY AND EQUIPMENT, NET As of March 31, 2021 and December 31, 2020 property and equipment consists of the following: March 31, 2021 December 31, 2020 Furniture and equipment $ 1,221,313 $ 1,143,320 Vehicles 55,000 - Leasehold improvements 1,913,355 1,940,907 3,189,668 3,084,227 Less: accumulated depreciation and amortization (832,740 ) (741,504 ) Property and equipment, net $ 2,356,928 $ 2,342,723 Depreciation expense amounted to $153,522 and $362,009 for the three months ended March 31, 2021 and 2020, respectively. During the three months ended March 31, 2021, the Company wrote off property and equipment with an original cost value of $99,313 related to a closed location and a future location that was terminated due to the economic environment as a result of COVID-19 and recorded a loss on disposal of $37,027 after accumulated depreciation of $62,286 in the unaudited condensed consolidated statement of operations. 17 MUSCLE MAKER, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 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 Trademark - SuperFit Domain Name Customer List Proprietary Recipes Non-Compete Agreement Total Intangible assets, net at December 31, 2020 $ 2,524,000 $ 354,278 $ - $ - $ - $ - $ - $ 2,878,278 SuperFit acquisition - - 45,000 125,000 140,000 160,000 260,000 730,000 Amortization expense - (12,638 ) (148 ) (411 ) (460 ) (526 ) (1,423 ) (15,606 ) Intangible assets, net at March 31, 2021 $ 2,524,000 $ 341,640 $ 44,852 $ 124,589 $ 139,540 $ 159,474 $ 258,577 $ 3,592,672 Weighted average remaining amortization period at March 31, 2021 (in years) 7.06 4.98 4.98 4.98 4.98 2.98 Amortization expense related to intangible assets amounted to $15,606 and $15,732 for the three months ended March 31, 2021 and 2020, respectively. NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payables and accrued expenses consist of the following: March 31, 2021 December 31, 2020 Accounts payable $ 675,863 $ 692,966 Accrued payroll 204,486 78,667 Accrued professional fees 275,522 224,028 Accrued board members fees 21,000 36,697 Accrued rent expense 196,066 171,266 Accrued compensation expense (1) 342,000 - Sales taxes payable (2) 233,713 231,177 Accrued interest 29,446 25,222 Other accrued expenses 109,555 40,912 Total Accounts Payable and Accrued Expenses $ 2,087,651 $ 1,500,935 (1) Included within accrued compensation expense is a liability of $342,000 related to 150,000 shares of common stock to be issued by the Company to a consultant for services. See Note 13 – Subsequent events – Common Stock for details related to the issuance of the stock. (2) See Note 11 – Commitments and Contingencies –Taxes for detail related to delinquent sales taxes. NOTE 8 – DEFERRED REVENUE At March 31, 2021 and December 31, 2020, deferred revenue consists of the following: March 31, 2021 December 31, 2020 Franchise fees $ 973,678 $ 983,958 Unearned vendor rebates 12,712 23,171 Less: Unearned vendor rebates, current (12,712 ) (23,171 ) Less: Franchise fees, current (9,786 ) (39,687 ) Deferred revenues, non-current $ 963,892 $ 944,271 NOTE 9 – OTHER CURRENT LIABILITIES At March 31, 2021 and December 31, 2020, other current liabilities consist of the following: March 31, 2021 December 31, 2020 Gift card liability $ 93,163 $ 91,034 Co-op advertising fund liability 295,407 299,490 Advertising fund liability 250,131 250,894 $ 638,701 $ 641,418 18 MUSCLE MAKER, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE 10 – NOTES PAYABLE Convertible Notes Convertible Note Payable to Former Parent As of March 31, 2021, the Company had an amount of $82,458 in convertible notes payable to Former Parent outstanding. Other Convertible Notes As of March 31, 2021 and December 31, 2020, 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 During the three months ended March 31, 2021, the Company repaid $18,493 of the other notes payable. As of March 31, 2021, the Company had an aggregate amount of $1,258,199 in other notes payable. The notes had interest rates ranging between 1% - 8% per annum, due on various dates through October 31, 2025. The maturities of other notes payable as of March 31, 2021, are as follows: Principal Repayments due as of Amount 03/31/2022 $ 88,993 03/31/2023 960,914 03/31/2024 102,114 03/31/2025 82,668 03/31/2026 23,510 $ 1,258,199 19 MUSCLE MAKER, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE 11 – COMMITMENTS AND CONTINGENCIES Consulting Agreements On February 7, 2021, the Company entered into a Consulting Agreement with consultants as a strategy business consultant to provide the Company with business and marketing advice as needed. The term of the agreement is for five months from the effective date on February 7, 2021. Pursuant to the terms of the agreement the Company agreed to pay the consultant a total of 100,000 shares of the Company’s common stock. The Company issued 60,000 shares of common stock upon the effective date of the agreement with the remaining 40,000 to be issued upon the successful completion of the agreement. On March 8, 2021, the Company entered into a Consulting Agreement with consultants as a strategy business consultant to provide the Company with financial and business advice. The term of the agreement is for five months from the effective date on March 8, 2021. Pursuant to the terms of the agreement the Company agreed to pay the consultant a total of 100,000 shares of the Company’s common stock. The Company issued 70,000 shares of common stock upon the effective date of the agreement with the remaining 30,000 to be issued upon the successful completion of the agreement. On March 22, 2021, the Company entered into a Consulting Agreement with consultants with experience in the area of investor relations and capital introductions. The term of the agreement is for six months from the effective date on March 22, 2021. Pursuant to the terms of the agreement the Company agreed to pay $250,000 in cash for ancillary marketing, to be paid out at the Company’s discretion. In addition, the Company issued 150,000 shares of the Company’s common stock as a commencement incentive which is fully earned by entering into the agreement. Litigations, Claims and Assessments On March 27, 2018 a convertible note holder filed a complaint in the Iowa District Court for Polk County #CVCV056029 against the Company for failure to pay the remaining balance due on a promissory note in the amount of $100,000, together with interest, attorney fees and other costs of $171,035. On June 6, 2018 a default judgement was entered against the Company for the amount of $171,035. 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 March 31, 2021, the Company has accrued for the liability in convertible notes payable in the amount of $100,000 and accrued interest of $24,082 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 March 31, 2021, the Company has accrued for the liability in accounts payable and accrued expenses. 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 March 31, 2021, 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 March 31, 2021, the Company has accrued for the liability in accounts payable and accrued expenses. In 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. As of the filing of this report, the company entered into a settlement with American Restaurant, LLC and the investor in the amount of $160,000. 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. 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 during 2018 and 2019. The Company had accrued $233,713 and $231,177 which includes penalties and interest as of March 31, 2021 and December 31, 2020, respectively, related to this matter. 20 MUSCLE MAKER, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE 12 – EQUITY Common Stock On February 3, 2021, the Company issued an aggregate of 20,000 shares of common stock of the Company to a digital marketing consultant with an aggregate fair value of $42,600. On February 3, 2021, the Company issued an aggregate of 16,126 shares of common stock of the Company to the members of the board of directors as compensation earned through the end of the fourth quarter of 2020. On March 31, 2021, the Company authorized the issuance of an aggregate of 12,711 shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2021. See Note 11 – Commitments and Contingencies – Consulting Agreements for details related to additional stock issuances during the three months ended March 31, 2021. Restricted Common Stock On February 11, 2021, the Company issued an aggregate of 221,783 shares of restricted common stock of the Company to various executives and an employee. A summary of the activity related to the restricted common stock for the three months ended March 31, 2021 is presented below: Weighted Average Grant Total Date Fair Value Outstanding at January 1, 2021 1,200 $ 65.33 Granted 221,783 2.87 Forfeited - - Vested (222,983 ) (3.21 ) Outstanding at March 31, 2021 - $ - Stock-Based Compensation Expense Stock-based compensation related to restricted stock issued to employees, directors and consultants and warrants issued to consultants amounted to $1,712,845 and $3,348,143 for the three months ended March 31, 2021 and 2020, respectively, of which $1,712,845 and $3,347,591, respectively, was recorded in general and administrative expenses and $248 and $552, respectively, was recorded in labor expense within restaurant operating expenses. 21 MUSCLE MAKER, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE 12 – EQUITY, continued Options A summary of option activity during the three months ended March 31, 2021 is presented below: Weighted Weighted Average Average Remaining Number of Exercise Life Options Price In Years Outstanding, December 31, 2020 300,000 $ 3.33 1.1 Issued - - Exercised - - Forfeited - - Outstanding, March 31, 2021 300,000 $ 3.33 0.9 Exercisable, March 31, 2021 300,000 $ 3.33 0.9 Warrants A summary of warrants activity during the three months ended March 31, 2021 is presented below: Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Life In Years Outstanding, December 31, 2020 2,582,857 $ 4.08 3.3 Issued - - - Exercised - - - Forfeited/cancelled (22,496 ) 11.38 - Outstanding, March 31, 2021 2,560,361 $ 4.02 3.1 Exercisable, March 31, 2021 2,560,361 $ 4.08 3.1 22 MUSCLE MAKER, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE 13 – SUBSEQUENT EVENTS Private Placement On April 7, 2021, the Company entered into a Securities Purchase Agreement with an accredited investor (the “Securities Purchase Agreement”) for a private placement (the “Private Placement”) pursuant to which the investor agreed to purchase from the Company for an aggregate purchase price of approximately $10,000,000 (i) 1,250,000 shares of common stock of the Company (ii) a common stock purchase warrant to purchase up to 4,115,227 shares of Common Stock (the “Common Warrant”) and (iii) a pre-funded common stock purchase warrant to purchase up to 2,865,227 shares of Common Stock (the “Pre-Funded Warrant”). Each share is being sold together at a combined offering price of $2.43 per share and Common Warrant, and each Pre-Funded Warrant and accompanying Common Warrant is being sold together at a combined offering price of $2.42 per Pre-Funded Warrant and accompanying Common Warrant. The Pre-Funded Warrant is immediately exercisable, at a nominal exercise price of $0.01 per share, and may be exercised at any time until the Pre-Funded Warrant is fully exercised. The Common Warrant will have an exercise price of $2.43 per share, are immediately exercisable and will expire five and one-half (5.5) years from the date of issuance. The Private Placement closed on April 9, 2021. The Securities Purchase Agreement contains customary representations, warranties and agreements of the Company and the Purchaser and customary indemnification rights and obligations of the parties thereto. Pursuant to the Securities Purchase Agreement, the Company is required to register the resale of the Shares and the shares issuable upon exercise of the Common Warrant and the Pre-Funded Warrant. The Company is required to prepare and file a registration statement with the Securities and Exchange Commission within 30 days of the date of the Securities Purchase Agreement and to use commercially reasonable efforts to have the registration statement declared effective within 90 days of the closing of the Private Placement. Pursuant to a placement agency agreement, dated April 6, 2021, between the Company and A.G.P./Alliance Global Partners (the “Placement Agent”) entered into in connection with the Private Offering, the Placement Agent acted as the sole placement agent for the Private Placement and the Company has paid customary placement fees to the Placement Agent, including a cash fee equal to 8% of the gross proceeds raised in the Private Placement and a 164,609 common stock purchase warrant to purchase shares of Common Stock in an amount equal to 4% of the Shares and shares of Common Stock issuable upon exercise of the Warrants sold in the Private Placement, the warrant has an exercise price of $2.916 per share and is exercisable commencing six months from the date of the pricing of the Private Placement for a period of five years after such date. Pursuant to the Placement Agency Agreement, the Company has also agreed to reimburse certain expenses of the placement agent incurred in connection with the Private Placement. Common Stock On April 30, 2021, the Company issued an aggregate of 10,000 shares of common stock of the Company to a digital marketing consultant, pursuant to their service agreement, with an aggregate fair value of $14,700. On May 6, 2021, the Company issued an aggregate of 150,000 shares of common stock of the Company to a digital marketing consultant with an aggregate fair value of $214,500. The Company accrued for the liability as accrued compensation expense on the books as of March 31, 2021, as the share were fully earned pursuant to their service agreement. 23 MUSCLE MAKER, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE 13 – SUBSEQUENT EVENTS, continued Members Interest Purchase Agreement On May 14, 2021, Muscle Maker, Inc. (the “Company”) entered into a Membership Interest Purchase Agreement with the members (the (“Poke Sellers”) of PKM Stamford, LLC, Poke Co., LLC, LB Holdings LLC, and TNB Holdings, LLC, each a Connecticut limited liability company (collectively, the “Poke Entities”) pursuant to which the Company acquired all of the issued and outstanding membership interest of the Poke Entities in consideration of $4,000,000 in cash and $730,000 payable in the form of a promissory note (the “Poke Note”). The closing occurred on May 14, 2021. Within 90 days of the closing, the purchase price will be adjusted to reflect credit card payments and third-party delivery vendors of the Poke Entities prior to the closing and the aggregate amount of expenses and liabilities incurred by the Poke Entities after the Closing but accrued or attributable to the period prior to the closing. If the Adjustment Amount is a positive amount, the Company shall remit the adjustment amount to the Sellers. If the adjustment amount is a negative amount, the Sellers shall remit the adjustment amount to the Company. The Poke Note provides for the payment of principal and interest to be paid in 60 monthly installments consisting of 59 installments of $5,308.73 commencing June 1, 2021 and one installment of $535,855.79 due and payable in May 1, 2026. In a related transaction, on May 14, 2021, the Company and the Poke Sellers entered into a Membership Interest Exchange Agreement pursuant to which the Company acquired Poke Co Holdings LLC, GLL Enterprises, LLC, and TNB Holdings II, LLC, each a Connecticut limited liability company (collectively, the Poke Entities II”) in exchange for shares of common stock of the Company valued at $1,250,000. The Company issued 880,282 shares of common stock of the Company. The price per share was determine by using the 10-day trading average preceding the date of closing. The closing occurred on May 14, 2021. On May 14, 2021, between Saladco Holdings, LLC and Poke Co Holdings, LLC, a wholly owned subsidiary of the Compay (“Poke Co”), entered into an Intellectual Property License Agreement providing Poke Co with a license to use certain intellectual property in connection with the preparation of Saladcraft®branded fruit and vegetable salads and related items for a term of one year in consideration of a fee of 10% of the restaurant’s net sales of Saladcraft® Products with respect to Pokémoto Restaurants owned and operated by Poke Co or its affiliates and 50% of the license revenue collected by Poke Co from such franchisees that is directly attributable to the sale of Saladcraft® Products in or from franchisees’ Pokémoto Restaurants. As a result of the above transactions, the Company has acquired PokeMoto (www.pokemoto.com), a thirteen-location concept known for its healthier modern culinary twist on a traditional Hawaiian poke classic. The Company claims an exemption from the registration requirements of the Securities Act of 1933 (the “Securities Act”) for the private placement of these securities pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act. 24 ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis of the results of operations and financial condition of Muscle Maker, Inc. (“Muscle Maker”), together with its subsidiaries (collectively, the “Company”) as of March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and 2020 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us,” “we,” “our,” and similar terms refer to Muscle Maker. “Muscle Maker Grill” refers to the name under which our corporate and franchised restaurants do business. This Quarterly Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “forecast,” “model,” “proposal,” “should,” “may,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. For a detailed discussion of risk factors affecting us, see “Part I – Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 OVERVIEW We operate under the name SuperFit Foods and Muscle Maker Grill as a franchisor and owner-operator of Muscle Maker Grill restaurants and Healthy Joe’s restaurants. As of March 31, 2021, our restaurant system included eighteen Company-owned restaurants and fourteen franchised restaurants. In addition, the Company built four new locations on university campuses but due to Covid-19 restrictions have not yet opened these locations but incurred expenses during the twelve months ended December 31, 2020. We believe our healthy-inspired restaurant concept delivers a highly differentiated customer experience. We combine the quality and hospitality that customers commonly associate with our full service and fast casual restaurant competitors with the convenience and value customers generally expect from traditional fast food restaurants, but in a healthy-inspired way. The following core values form the foundation of our brand: ● Quality . Commitment to provide high quality, healthy-inspired food for a perceived wonderful experience for our guests. ● Empowerment and Respect . We seek to empower our employees to take initiative and give their best while respecting themselves and others to maintain an environment for team work and growth. ● Service. Provide world class service to achieve excellence each passing day. ● Value . Our combination of high-quality, healthy-inspired food, empowerment of our employees, world class service, all delivered at an affordable price, strengthens the value proposition for our customers. In striving for these goals, we aspire to connect with our target market and create a great brand with a strong and loyal customer base. We are the owner of the trade name and service mark Muscle Maker Grill®, Healthy Joe’s, MMG Burger Bar, Meal Plan AF 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, Muscle Maker Development and Muscle Maker Corp., and to further sublicense them to our franchisees for use in connection with Muscle Maker Grill® and Healthy Joe’s restaurants. On March 25, 2021, we acquired the assets of Superfit Foods, a subscription based fresh-prepared meal prep business located in Jacksonville, Florida. With this acquisition, we are also the owner of the trade name Superfit Foods that we use in connection with the operations of Superfit Foods. In 2020 Superfit foods produced overs 220,000 fresh-prepared meals. Superfit Foods is differentiated from other meal prep services by allowing customers in the Jacksonville Florida market to order online via the company’s website or mobile app and pick up their fully prepared meals from 28 company owned coolers located in gyms and wellness centers. As of March 31, 2021, we had an accumulated deficit of $66,905,391 and expect to continue to incur operating and net losses for the foreseeable future. In its report on our consolidated financial statements for the fiscal year ended December 31, 2020, our independent registered public accounting firm included an explanatory paragraph relating to our ability to continue as a going concern. See “Liquidity and Capital Resources – Availability of Additional Funds and Going Concern” and Note 1 – Business Organization and Nature of Operations, Going Concern and Management’s Plans to Notes to Consolidated Financial Statements for additional information describing the circumstances that led to the inclusion of this explanatory paragraph. 25 Key Financial Definitions Total Revenues Our revenues are derived from three primary sources: company restaurant sales, franchise revenues and vendor rebates from Franchisees. Franchise revenues are comprised of franchise royalty revenues collected based on 5% of franchisee net sales and other franchise revenues which include initial and renewal franchisee fees. Vendor rebates are received based on volume purchases or services from franchise owned locations. Food and Beverage Costs Food and beverage costs include the direct costs associated with food, beverage and packaging of our menu items at company-operated restaurants partially offset by vendor rebates from company-owned stores. The components of food, beverages and supplies are variable in nature, change with sales volume, are affected by menu mix and are subject to fluctuations in commodity costs. Labor Restaurant labor costs, including preopening labor, consists of company-operated restaurant-level management and hourly labor costs, including salaries, wages, payroll taxes, workers’ compensation expense, benefits and bonuses paid to our company-operated restaurant-level team members. Like other cost items, we expect restaurant labor costs at our company-operated restaurants to increase due to inflation and as our company restaurant revenues grow. Factors that influence labor costs include minimum wage and employer payroll tax legislation, mandated health care costs and operational productivity established by the management team. Rent Restaurant rent, including preopening rental charges, consist of company-operated restaurant-level rental or lease payments applicable to executed rental or lease agreements. In many cases these rental payments may include payments for common area maintenance as well as property tax assessments. Our rent strategy mostly consists of a variable rent structure calculated on net sales of the restaurant. While this can have a negative effect on higher volume locations where we cannot leverage a fixed rent, it provides downside protection for lower volume locations. While we cannot guarantee a favorable variable rent expense in all future leases, we have forecasted average rental costs as a percentage of total sales at 8%. Other restaurant operating expenses Other restaurant operating expenses, including preopening operating expenses, consist of company-operated restaurant-level ancillary expenses not inclusive of food and beverage, labor and rent expense. These expenses are generally marketing, advertising, merchant and bank fees, utilities, leasehold and equipment repairs, insurance and maintenance. A portion of these costs are associated with third party delivery services such as Uber Eats, Grub Hub, DoorDash, Seamless, and others. The fees associated with these third-party delivery services can range up to 25% of the total order being delivered. Management believes delivery is a critical component of our business model and industry trends will continue to push consumers towards delivery. Our cost structure will need to be adjusted to reflect a different pricing model, portion sizes, menu offerings, and other considerations to potentially offset these rising costs of delivery. 26 Other Expenses Incurred for Closed Locations Other expenses incurred for closed locations consists primarily of restaurant operating expenses incurred subsequent to store closures as the Company still has to certain obligations to vendors due to signed agreements. Depreciation and Amortization Depreciation and amortization primarily consist of the depreciation of property and equipment and amortization of intangible assets. General and Administrative Expenses General and administrative expenses include expenses associated with corporate and administrative functions that support our operations, including wages, benefits, travel expense, stock-based compensation expense, legal and professional fees, training, and other corporate costs. We expect to incur incremental general and administrative expenses as a result of becoming a public listed company on the Nasdaq capital market. A certain portion of these expenses are related to the preparation of an initial stock offering and should be considered one-time expenses. Other Income (Expense), net Other expenses primarily consist of amortization of debt discounts on the convertible notes payable and interest expense related to other notes payable and convertible notes payable. Income Taxes Income taxes represent federal, state, and local current and deferred income tax expense. 27 Consolidated Results of Operations Three Months Ended March 31, 2021 Compared with Three Months Ended March 31, 2020 The following table represents selected items in our condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020, respectively: For the Three Months Ended March 31, 2021 2020 Revenues: Company restaurant sales, net of discounts $ 1,178,911 $ 1,237,427 Franchise royalties and fees 135,340 176,031 Franchise advertising fund contributions 14,087 21,596 Total Revenues 1,328,338 1,435,054 Operating Costs and Expenses: Restaurant operating expenses: Food and beverage costs 504,461 465,694 Labor 767,065 586,620 Rent 256,191 144,677 Other restaurant operating expenses 339,922 332,360 Total restaurant operating expenses 1,867,639 1,529,351 Preopening expenses 10,986 - Depreciation and amortization 169,128 111,257 Franchise advertising fund expenses 14,087 21,596 General and administrative expenses 2,966,636 5,129,403 Total Costs and Expenses 5,028,476 6,791,607 Loss from Operations (3,700,138 ) (5,356,553 ) Other Income (Expense): Other income (expense), net 2,628 (3,188 ) Interest expense, net (14,174 ) (93,604 ) Amortization of debt discounts - (38,918 ) Total Other Expense, Net (11,546 ) (135,710 ) Loss Before Income Tax (3,711,684 ) (5,492,263 ) Income tax provision - - Net Loss $ (3,711,684 ) $ (5,492,263 ) 28 Revenues Company total revenues totaled $1,328,338 for the three months ended March 31, 2021 compared to $1,435,054 for the three months ended March 31, 2020. The $106,716 decrease was primarily attributable to a in franchise royalties and fees and restaurant sales. We generated restaurant sales, net of discounts, of $1,178,911 for the three months ended March 31, 2021 compared to $1,237,427, for the three months ended March 31, 2020. This represented a decrease of $58,516 which is a direct result of the impact of Covid-19 on our stores. Franchise royalties and fees for the three months ended March 31, 2021 and 2020 totaled $135,340 compared to $176,031, respectively. The $40,691 decrease is primarily attributable to a decrease in royalty income of $39,440 due to fewer franchisee locations and the fact that the Company purchased two franchisee location resulting in lower royalty income, and lower sales volumes and closures of franchised locations due to Covid-19. Franchise advertising fund contributions for the three months ended March 31, 2021 and 2020 totaled $14,087 compared to $21,596, respectively. Operating Costs and Expenses Operating costs and expenses primarily consist of restaurant food and beverage costs, restaurant labor expense, restaurant rent expense, other restaurant operating expenses, depreciation and amortization expenses and general and administrative expenses. Restaurant food and beverage costs for the three months ended March 31, 2021 and 2020 totaled $504,461, or 42.8%, as a percentage of restaurant sales, and $465,694, or 37.6% as a percentage of restaurant sales, respectively. The $38,767 increase was primarily due to the six new cloud kitchens opened and the acquisition of the two-franchisee location compared to the prior period and the impact of decreased restaurant sales due to the impact of Covid-19. Restaurant labor for the three months ended March 31, 2021 and 2020 totaled $767,065, or 65.1%, as a percentage of restaurant sales, and $586,620, or 47.4%, as a percentage of restaurant sales, respectively. The $180,445 increase, as a percentage of restaurant sales, is a direct result of inefficiencies that is typically attributed to opening or acquiring new locations as it takes time to establish operational efficiencies as compared to the prior period. In addition, the increase, as a percentage of restaurant sales, is due to the impact of Covid-19 which resulted in decrease restaurant sales while we still have to maintain minimum labor to ensure our company owned store are effectively staffed. Restaurant rent expense for the three months ended March 31, 2021 and 2020 totaled $256,191, or 21.7%, as a percentage of restaurant sales, and $144,677, or 11.7%, as a percentage of restaurant sales, respectively. The increase in rent expense is a direct result of us opening the six new cloud kitchens and the acquisition of the two-franchisee location compared to the prior period. Other restaurant operating expenses for the three months ended March 31, 2021 and 2020 totaled $339,922, or 28.8% as a percentage of restaurant sales, and $332,360, or 26.9% as a percentage of restaurant sales, respectively. 29 Depreciation and amortization expense for the three months ended March 31, 2021 and 2020 totaled $169,128 and $111,257, respectively. The $57,871 increase is primarily attributable to depreciation expense related to additional property and equipment acquired for new store build outs and stores acquired. General and administrative expenses for the three months ended March 31, 2021 and 2020 totaled $2,966,636, or 223.3% of total revenues, and $5,129,403, or 357.4% of total revenues, respectively. The $2,162,767 decrease is primarily attributable to a decrease in salaries and bonus of $563,968 and a decrease in consulting expenses of $2,061,799 which is attribute to less stock-based compensation expense and bonus payments in the current period as compared to the prior period that we issued in connection with our public offering. Included in the general and administration expense for the three months ended March 31, 2021 is $1,712,845 non-cash stock-based compensation issued in connection with various employees, the board and services providers as compared to $3,348,143 non-cash compensation issued to employees, the board and consultants upon completion of our public offering. Loss from Operations Our loss from operations for the three months ended March 31, 2021 and 2020 totaled $3,700,138 or 278.6% of total revenues and $5,356,553 or 373.3% of total revenues, respectively. The decrease of $1,656,415 in loss from operations is primarily attributable to a decrease in total costs and expenses of approximately $1,763,131 partially offset by a decrease in our total revenues of approximately $106,716. Other (Expense) Income, net Other (expense) income, net for the three months ended March 31, 2021 and 2020 totaled $11,546 and ($135,710), respectively. The $124,164 decrease in other expense was primarily attributable to a decrease in amortization of debt discounts of $38,918, a $79,430 decrease in interest expense, net as we repaid other notes and convertible notes during the prior period therefore no further interest expense is being incurred, partially offset by an increase in other income (expense) of $5,816. Net Loss Our net loss for the three months ended March 31, 2021 decreased by $1,780,579 to $3,711,684 as compared to $5,492,263 for the three months ended March 31, 2021 resulting from a decrease in our loss from operations and other expense, net as discussed above. 30 Liquidity and Capital Resources Liquidity We measure our liquidity in a number of ways, including the following: March 31, 2021 December 31, 2020 Cash $ 2,009,650 $ 4,195,932 Working Capital (Deficiency) Surplus $ (1,603,691 ) $ 1,383,568 Convertible notes payable $ 182,458 $ 182,458 Other notes payable, including related party $ 1,258,199 $ 1,276,692 Availability of Additional Funds and Going Concern Although we have a working capital deficit of $1,603,691, we presently have an accumulated deficit of $66,905,391, as of March 31, 2021, and we utilized $1,600,235 of cash in operating activities during the three months ended March 31, 2021, therefore we require additional equity and/or debt financing to continue our operations. These conditions raise substantial doubt about our ability to continue as a going concern for at least one year from the date of this filing. Our principal source of liquidity to date has been provided by loans and convertible loans from related and unrelated third parties, (ii) the sale of common stock through private placements and the (iii) and public offerings. The pandemic novel coronavirus (COVID-19) outbreak, federal, state and local government responses to COVID-19 and our Company’s responses to the outbreak have all disrupted and will continue to disrupt our business. In the United States, individuals are being encouraged to practice social distancing, restricted from gathering in groups and in some areas during the first quarter of 2020 continuing through the third quarter of 2020. As a result of the disruption and volatility in the global capital markets, we have seen an increase in the cost of capital which adversely impacts access to capital. On April 7, 2021, the Company entered into a Securities Purchase Agreement with an accredited investor (the “Securities Purchase Agreement”) for a private placement (the “Private Placement”) pursuant to which the investor agreed to purchase from the Company for an aggregate purchase price of approximately $10,000,000 (i) 1,250,000 shares of common stock of the Company (ii) a common stock purchase warrant to purchase up to 4,115,227 shares of Common Stock (the “Common Warrant”) and (iii) a pre-funded common stock purchase warrant to purchase up to 2,865,227 shares of Common Stock (the “Pre-Funded Warrant”). Each share and accompanying Common Warrant are being sold together at a combined offering price of $2.43 per share and Common Warrant, and each Pre-Funded Warrant and accompanying Common Warrant is being sold together at a combined offering price of $2.42 per Pre-Funded Warrant and accompanying Common Warrant. The Pre-Funded Warrant is immediately exercisable, at a nominal exercise price of $0.01 per share, and may be exercised at any time until the Pre-Funded Warrant is fully exercised. The Common Warrant will have an exercise price of $2.43 per share, are immediately exercisable and will expire five and one-half (5.5) years from the date of issuance. The Private Placement closed on April 9, 2021. We expect 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, we may be required to raise additional funds through equity or debt financing. However, there can be no assurance that we will be successful in securing additional capital. If we are unsuccessful, we may need to (a) initiate cost reductions; (b) forego business development opportunities; (c) seek extensions of time to fund our liabilities, or (d) seek protection from creditors. In addition, if we are unable to generate adequate cash from operations, and if we are unable to find sources of funding, it may be necessary for us to sell one or more lines of business or all or a portion of our assets, enter into a business combination, or reduce or eliminate operations. These possibilities, to the extent available, may be on terms that result in significant dilution to our shareholders or that result in our shareholders losing all of their investment in our Company. If we are able to raise additional capital, we do not know what the terms of any such capital raising would be. In addition, any future sale of our equity securities would dilute the ownership and control of your shares and could be at prices substantially below prices at which our shares currently trade. Our inability to raise capital could require us to significantly curtail or terminate our operations. We may seek to increase our cash reserves through the sale of additional equity or debt securities. The sale of convertible debt securities or additional equity securities could result in additional and potentially substantial dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity. In addition, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties. 31 Our condensed consolidated financial statements included elsewhere in this 10-Q document have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplate our continuation as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. Sources and Uses of Cash for the three months ended March 31, 2021 and March 31, 2020 During the three months ended March 31, 2021 and 2020, we used cash of $1,600,235 and $2,542,520, respectively, in operations. Our net cash used in operating activities for the three months ended March 31, 2021 was primarily attributable to our net loss of $3,711,684, adjusted for net non-cash items in the aggregate amount of $1,941,970 and $169,479 of net cash provided by changes in the levels of operating assets and liabilities. During the three months ended March 31, 2021, net cash used in investing activities was $567,554, of which $67,754 was used to purchase property, $500,000 used in connection with acquisition of SuperFit foods a healthy meal prep Company and, partially offset by $200 of loans collections from a former franchisee. During the three months ended March 31, 2020, net cash used in investing activities was $49,091, of which $57,893 was used to purchase property and equipment, partially offset by $8,802 of loans repayments by franchisees. Net cash used by financing activities for the three months ended March 31, 2021 was $18,493 for repayments of various other notes payable. Net cash provided by financing activities for the three months ended March 31, 2020 was $5,820,121 of which $6,780,000 proceeds from the offering, net of underwriter’s discount and offering costs, $150,000 proceeds from other notes payable, partially offset by repayments of various convertible notes of $550,000 and $559,879 of repayments of other notes payables, including a related party. 32 Critical Accounting Policies 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. Intangible Assets We account for recorded intangible assets in accordance with ASC 350 “Intangibles - Goodwill and Other”. In accordance with ASC 350, we do not amortize intangible assets with indefinite useful lives. Our goodwill and trademarks are deemed to have indefinite lives, and accordingly are not amortized, but are evaluated for impairment at least annually, or more often whenever changes in facts and circumstances may indicate that the carrying value may not be recoverable. The Accounting Standards Codification (“ASC”) requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment). Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgment is required to estimate the fair value of reporting units which includes estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment. Other intangible assets include a trademark with an indefinite useful life. The other intangible assets estimated useful lives are as follows: Franchisee agreements 13 years Trademark – SuperFit, domain name, customer list and proprietary recipes 5 years Non-compete agreement 3 years Impairment of Long-Lived Assets When circumstances, such as adverse market conditions, indicate that the carrying value of a long-lived asset may be impaired, we perform an analysis to review the recoverability of the asset’s carrying value, which includes estimating the undiscounted cash flows (excluding interest charges) from the expected future operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects of demand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized to the extent that the carrying value exceeds the estimated fair value. Any impairment losses are recorded as operating expenses, which reduce net income. 33 Revenue Recognition In accordance with the Accounting Standards Codification Topic 606 “Revenue from Contracts with Customers”, the Company recognized revenue 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. 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 $1,178,911 and $1,237,427 during the three months ended March 31, 2021 and 2020, 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 recognizes 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 $81,469 and $120,909 during the three months ended March 31, 2021 and 2020, respectively, which is included in franchise royalties and fees on the accompanying condensed consolidated statements of operations. The Company provides the franchisees with management expertise, training, pre-opening assistance, and restaurant operating assistance in exchange for the multi-unit development fees and franchise fees. The Company capitalizes these fees upon collection from the franchisee, 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 $9,786 and $14,440, respectively, during the three months ended March 31, 2021 and 2020, 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 $44,085 and $40,682 during the three months ended March 31, 2021 and 2020, respectively, which is included in franchise royalties and fees on the accompanying consolidated statements of operations. Rebates earned on purchases by Company owned stores are recorded as a reduction of food and beverage costs during the period in which the related food and beverage purchases are made. 34 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 recorded in other current liabilities on the condensed consolidated balance sheet. For the three months ended March 31, 2021 and 2020, respectively, 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 $25,140 and $32,536, respectively, during the three months ended March 31, 2021 and 2020, respectively, which are included in franchise advertising fund contributions on the accompanying condensed consolidated statements of operations. Income Taxes We account for income taxes under Accounting Standards Codification (“ASC”) 740 Income Taxes (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary, to reduce deferred tax assets to the amounts expected to be realized. 35 ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Tax benefits claimed or expected to be claimed on a tax return are recorded in our financial statements. A tax benefit from an uncertain tax position is only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Our policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the condensed consolidated statements of operations. Recently Issued Accounting Pronouncements See Note 3 to our condensed consolidated financial statements for the three months ended March 31, 2021. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. ITEM 3 . QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . Not applicable. ITEM 4. CONTROLS AND PROCEDURES . Evaluation of Disclosure Controls and Procedures Pursuant to Rules 13a-15(b) and 15-d-15(b) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. The term “disclosure controls and procedures”, as defined under Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective due to material weaknesses in our internal control over financial reporting that existed as of March 31, 2021, as discussed below. As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, we identified the following material weaknesses: ● The Company does not have sufficient resources in its accounting function, which restricts the Company’s ability to gather, analyze and properly review information related to financial reporting in a timely manner. In addition, due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. ● The Company has inadequate controls to ensure that information necessary to properly record transactions is adequately communicated on a timely basis from non-financial personnel to those responsible for financial reporting. ● The Company has significant deficiencies in the design and implementation of IT controls, specifically in the following areas: data center and network operations, access security and change management. As a company with limited resources, the Company does not have the resources to fund sufficient staff to ensure a complete segregation of responsibilities within the accounting function. However, Company management does review, and will increase the review of the financial statements. This action, in addition to future improvements identified above, will minimize any risk of a potential material misstatement occurring. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 36 PART II - OTHER INFORMATION Item 1. Legal Proceedings. From time to time, we are a defendant or plaintiff in various legal actions that arise in the normal course of business. We record legal costs associated with loss contingencies as incurred and have accrued for all probable and estimable settlements. We are currently involved in material pending legal proceedings that have been previously disclosed in our filings with the Securities and Exchange Commission under the Securities and Exchange Act of 1934, as amended. Below is a summary of the material legal proceedings that have become a reportable event, or which have had material developments during the quarter ended March 31, 2021. 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 March 31, 2021, the Company has accrued for the liability in convertible notes payable in the amount of $100,000 and accrued interest of $24,082 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 March 31, 2021, the Company has accrued for the liability in accounts payable and accrued expenses. 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 March 31, 2021, 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 March 31, 2021, the Company has accrued for the liability in accounts payable and accrued expenses. In 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. As of the filing of this report, the company entered into a settlement with American Restaurant, LLC and the investor in the amount of $160,000. 37 In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. In the opinion of management, such matters are currently not expected to have a material impact on the Company’s financial statements. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements after consulting legal counsel. Muscle 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 $233,713 and $231,177 which includes penalties and interest as of March 31, 2021 and December 31, 2020, respectively, related to this matter. The Company has completed or is in discussions on payment plans with the various state or local entities for these past owed amounts. Item 1A. Risk Factors. Not applicable. See, however, Item 7 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors That May Affect Future Results and Financial Condition”) of our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on April 15, 2021. We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Form 10-K for the year ended December 31, 2020. In addition to our discussion in the MD&A, and other sections of this report, to address effects of the COVID-19 pandemic, we have provided an additional risk factor regarding COVID-19 below. The impact of COVID-19 can also exacerbate other risks discussed in the “Risk Factors” sections of our Form 10-K for the year ended December 31, 2020 and this Report, which could in turn have a material adverse effect on us. The risks discussed below and in the “Risk Factors” section in our Form 10-K for the year ended December 31, 2020 do not identify all risks that we face—our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. The COVID-19 pandemic has affected our business and could materially adversely affect our financial condition and results of operations and ability to continue as a going concern. 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, 2021. 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. 38 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 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 validity 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. 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 $107,500 in cash per month 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. On February 17, 2020 the Company authorized the issuance of an aggregate of 25,616 share of common stock to the members of the board of directors as compensation earned through the end of the fourth quarter of 2019. On February 18, 2020, the Company issued an aggregate of 216,783 shares of common stock of the Company to the executive team pursuant to their employment agreements as part of completing the initial public offering. On August 11, 2020, the shares were returned to the Company for cancellation. On March 31, 2020, the Company issued 75,000 shares of common stock of the Company to a consultant that assisted the Company in area of investor relations and capital introduction. On April 21, 2020 the Company authorized the issuance of an aggregate of 25,616 share of common stock to the members of the board of directors as compensation earned through the end of the fourth quarter of 2019. On April 21, 2020, the Company issued an aggregate of 51,105 shares of common stock in exchange for accrued interest earned on convertible debt with an aggregate fair value of $357,735. On June 1, 2020, the Company issued 5,000 shares of common stock of the Company to a consultant. On June 5, 2020, the Company issued 15,000 shares of common stock of the Company to a digital marketing consultant in exchange for certain services 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. On August 21, 2020, the Company issued an aggregate of 53,571 shares of common stock of the Company to various consultants with an aggregate fair value of $200,705. On November 5, 2020, the Company issued 53,763 shares of common stock of the Company to a consultant with a fair value of $100,000. On November 30, 2020, the Company issued 82,500 shares of common stock of the Company to a consultant with a fair value of $176,138. The offers, sales, and issuances of the securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited or sophisticated person and had adequate access, through employment, business or other relationships, to information about us. On February 3, 2021, the Company issued an aggregate of 20,000 shares of common stock of the Company to a digital marketing consultant with an aggregate fair value of $42,600. On February 3, 2021, the Company issued an aggregate of 16,126 shares of common stock of the Company to the members of the board of directors as compensation earned through the end of the fourth quarter of 2020. On February 7, 2021, the Company entered into a Consulting Agreement with consultants as a strategy business consultant to provide the Company with business and marketing advice as needed. The term of the agreement is for five months from the effective date on February 7, 2021. Pursuant to the terms of the agreement the Company agreed to pay the consultant a total of 100,000 shares of the Company’s common stock. The Company issued 60,000 shares of common stock upon the effective date of the agreement with the remaining 40,000 to be issued upon the successful completion of the agreement. 39 On February 11, 2021, the Company issued an aggregate of 221,783 shares of common stock the Company to various executives and an employee pursuant to the approval of the compensation committee under the 2020 Plan. On March 8, 2021, the Company entered into a Consulting Agreement with consultants as a strategy business consultant to provide the Company with financial and business. The term of the agreement is for five months from the effective date on March 8, 2021. Pursuant to the terms of the agreement the Company agreed to pay the consultant a total of 100,000 shares of the Company’s common stock. The Company issued 70,000 shares of common stock upon the effective date of the agreement with the remaining 30,000 to be issued upon the successful completion of the agreement. On March 22, 2021, the Company entered into a Consulting Agreement with consultants with experience in the area of investor relations and capital introductions. The term of the agreement is for six months from the effective date on March 22, 2021. Pursuant to the terms of the agreement the Company agreed to pay $250,000 in cash for ancillary marketing, to be paid out at the Company’s discretion. In addition, the Company issued 150,000 shares of the Company’s common stock as a commencement incentive which is fully earned by entering into the agreement. On March 25, 2021, the Company entered into an asset purchase agreement with Superfit Foods, LLC a Florida limited liability company and Superfit Foods LLC, a Nevada limited liability company (the “Superfit Acquisition”). The purchase price of the assets and rights was $1,150,000. The purchase price is payable as follows: $475,000 that was paid at closing and the remaining $625,000 paid in 268,240 shares of common stock to be held for six months before being registered. On March 31, 2021, the Company authorized the issuance of an aggregate of 12,711 shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2021. On April 7, 2021, the Company entered into a Securities Purchase Agreement with an accredited investor (the “Securities Purchase Agreement”) for a private placement (the “Private Placement”) pursuant to which the investor agreed to purchase from the Company for an aggregate purchase price of approximately $10,000,000 (i) 1,250,000 shares of common stock of the Company (ii) a common stock purchase warrant to purchase up to 4,115,227 shares of Common Stock (the “Common Warrant”) and (iii) a pre-funded common stock purchase warrant to purchase up to 2,865,227 shares of Common Stock (the “Pre-Funded Warrant”). Each share and accompanying Common Warrant are being sold together at a combined offering price of $2.43 per share and Common Warrant, and each Pre-Funded Warrant and accompanying Common Warrant is being sold together at a combined offering price of $2.42 per Pre-Funded Warrant and accompanying Common Warrant. The Pre-Funded Warrant is immediately exercisable, at a nominal exercise price of $0.01 per share, and may be exercised at any time until the Pre-Funded Warrant is fully exercised. The Common Warrant will have an exercise price of $2.43 per share, are immediately exercisable and will expire five and one-half (5.5) years from the date of issuance. The Private Placement closed on April 9, 2021. On April 30, 2021, the Company issued an aggregate of 10,000 shares of common stock of the Company to a digital marketing consultant, pursuant to their service agreement, with an aggregate fair value of $14,700. On May 6, 2021, the Company issued an aggregate of 150,000 shares of common stock of the Company to a digital marketing consultant with an aggregate fair value of $214,500. The Company accrued for the liability as accrued compensation expense on the books as of March 31, 2021, as the share were fully earned pursuant to their service agreement. On May 14, 2021, the Company and the Poke Sellers entered into a Membership Interest Exchange Agreement pursuant to which the Company acquired Poke Co Holdings LLC, GLL Enterprises, LLC, and TNB Holdings II, LLC, each a Connecticut limited liability company (collectively, the Poke Entities II”) in exchange for shares of common stock of the Company valued at $1,250,000. The Company issued 880,282 shares of common stock of the Company. The price per share was determine by using the 10-day trading average preceding the date of closing. The closing occurred on May 14, 2021. The offers, sales, and issuances of the securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited or sophisticated person and had adequate access, through employment, business or other relationships, to information about us. Item 3. Defaults Upon Senior Securities. None. Item 4. Mine Safety Disclosures. Not applicable. Item 5. Other Information. On May 4, 2021, Mr. Southall resigned from the compensation committee. On May 10, 2021, the governance committee took action and appointed Major General (ret) Malcolm Frost to replace him and added Philip Balatsos as an addition member to the committee. 40 Item 6. Exhibits. Exhibit No. Exhibit Description 4.1+ Promissory Note in the principal amount of $730,000 dated May 14, 2021 (Incorporated by reference to Exhibit 4.1 to the Registrant’s current report on Form 8-K filed on May 14, 2021) 10.1* Asset Purchase Agreement dated March 25, 2021 between Muscle Maker, Inc and SuperFit Foods, LLC 10.2+ Membership Interest Purchase Agreement dated May 14, 2021 between Muscle Maker, Inc. and Thienson Nguyen, Dennis Bok, William Bok, Lisa Bok and Gladys Longwa for the purchase of PKM Stamford, LLC, Poke Co., LLC, LB Holdings LLC, and TNB Holdings, LLC (Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on May 14, 2021) 10.3+ Membership Interest Exchange Agreement dated May 14, 2021 between Muscle Maker, Inc. and Thienson Nguyen, Dennis Bok, William Bok, Lisa Bok and Gladys Longwa for the purchase of Poke Co Holdings LLC, GLL Enterprises, LLC, and TNB Holdings II, LLC (Incorporated by reference to Exhibit 10.2 to the Registrant’s current report on Form 8-K filed on May 14, 2021) 10.4+ Intellectual Property License Agreement by and between Saladco Holdings, LLC and Poke Co Holdings, LLC dated May 14, 2021 (Incorporated by reference to Exhibit 10.3.1 to the Registrant’s current report on Form 8-K filed on May 14, 2021) 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 . 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 . 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance Document* 101.SCH XBRL Schema Document* 101.CAL XBRL Calculation Linkbase Document* 101.DEF XBRL Definition Linkbase Document* 101.LAB XBRL Label Linkbase Document* 101.PRE XBRL Presentation Linkbase Document* † Includes management contracts and compensation plans and arrangements. *Filed herewith. +Previously filed. 41 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: May 20, 2021 MUSCLE MAKER, INC. By: /s/ Michael J. Roper Michael J. Roper Chief Executive Officer (Principal Executive Officer) By: /s/ Ferdinand Groenewald Ferdinand Groenewald Chief Financial Officer (Principal Financial and Accounting Officer) 42