Sadot Group Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES. Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the year ended December 31, 2021. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of such date our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information requested to be disclosed by us in our reports that we file or submit under the Exchange Act. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 2013 Internal Control-Integrated Framework. Our management has concluded that, as of December 31, 2021, our internal control over financial reporting is effective based on these criteria. Changes in Internal Control over Financial Reporting Expect as set forth below there were no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. ● Increased staffing in accounting allowing proper segregation of duties and the Company’s ability to gather, analyze and properly reviewed information related to financial reporting in a timely manner. ● The Company enhanced internal controls the process relating to new contracts or transactions to effective communication and recording. ITEM 9B. OTHER INFORMATION. On May 4, 2021, Mr. Southall III resigned from the compensation committee. On May 10, 2021, the Board appointed Major General (ret) Malcolm Frost to the compensation committee and added Philip Balatsos as an additional member to the compensation committee. On August 19, 2021, the Company was informed that Peter S. Petrosian, a member of the Company’s Board of Directors, passed away. Mr. Petrosian, an independent director, was a member of the audit committee at the time of his passing. Paul L. Menchik, an independent director of the Company, was appointed to the audit committee to fill the vacancy resulting from Mr. Petrosian’s death. The Company is extremely grateful for Mr. Petrosian’s dedication and service to the Company. The Company’s management and Board of Directors extends its sincerest condolences to Mr. Petrosian’s family. 52 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Board of Directors and Executive Officers Our directors hold office until their successors are elected and qualified, or until their deaths, resignations or removals. Our executive officers hold office at the pleasure of our board of directors, or until their deaths, resignations or removals. As of March 16, 2022, our current directors and executive officers and their ages are: Name Age Principal Positions Held With Us Kevin Mohan (1) 48 Chief Investment Officer and Chairman of the Board Michael J. Roper 57 Chief Executive Officer, Secretary Kenneth Miller 52 Chief Operating Officer Jennifer Black 40 Chief Financial Officer Ferdinand Groenewald 37 Chief Accounting Officer Aimee Infantee 35 Chief Marketing Officer Stephen A. Spanos (2) 59 Director A.B. Southall III (3) 60 Director Paul L. Menchik (4) 74 Director Jeff Carl (5) 66 Director Major General (Ret) Malcolm B. Frost (6) 55 Director Philip Balatsos (7) 44 Director (1) Mr. Mohan serves as the Chairman of the Board. (2) Mr. Spanos serves as the Chairman of the Audit Committee. (3) Mr. A.B. Southall III serves as a member of the Governance Committee. (4) Mr. Menchik serves as the Chairman of the Governance Committee and is a member of the Audit Committee. (5) Mr. Carl serves as the Chairman of the Compensations Committee and is a member of the Governance Committee. (6) Mr. Frost serves as a member of the Compensation Committee. (7) Mr. Balatsos serves as a member of the Compensation and Audit Committee. Executive Officers Kevin Mohan . Mr. Mohan has served as Chairman of the Board and a director of Muscle Maker, Inc. since April, 2018. From April, 2018 through May, 2018, he also served as our Interim President. He has also served as the Chief Investment Officer since May, 2018. From June 2012 through January, 2018, Mr. Mohan served as the VP of Capital Markets for American Restaurant Holdings, Inc., a company focused on acquiring and expanding fast casual restaurant brands. Based on his experience we have deemed Mr. Mohan fit to serve on the Board and as Chairman of the Board. Michael J. Roper. Mr. Roper has served as Chief Executive Officer, of Muscle Maker, Inc. since May 1, 2018. Mr. Roper has unique experience ranging from owning and operating several franchise locations through the corporate executive levels. From May 2015 through October 2017, Mr. Roper served as Chief Executive Officer of Taco Bueno where he was responsible for defining strategy and providing leadership to 162 company-owned and operated locations along with 23 franchised locations. From March 2014 through May 2015, Mr. Roper served as the Chief Operating Officer of Taco Bueno and from July 2013 through March 2014 as the Chief Development and Technology Officer of Taco Bueno. Prior to joining Taco Bueno, Mr. Roper was a franchise owner and operator of a IMS Barter franchise and held several roles with Quiznos Sub from 2000 to 2012 starting as a franchise owner and culminating in his appointment as the Chief Operating Officer/Executive Vice President of Operations in 2009. Mr. Roper received a Bachelor of Science in Business and General Management from Northern Illinois University. 53 Based on his education and extensive experience in the restaurant/franchise industry, we have deemed Mr. Roper fit to serve as our principal executive officer. Kenneth Miller. Mr. Miller has served as Chief Operating Officer of Muscle Maker, Inc. since September 2018. Mr. Miller has served in the restaurant business for an extensive portion of his career. Prior to joining us as Chief Operating Officer in September, 2018, Mr. Miller served as the Senior Vice President of Operations for Dickey’s BBQ Restaurant from April 2018 through September 2018 and in various capacities with Taco Bueno Restaurants, LP from October 2013 through April 2018 culminating in the position of Senior Vice President of Operations. Mr. Miller received a Bachelor of Arts in Business/Exercise Science from Tabor College in 1991. Based on his education and extensive experience in the restaurant/franchise industry, we have deemed Mr. Miller fit to serve as our Chief Operating Officer. Jennifer Black . Ms. Black is an experienced Chief Financial Officer with a demonstrated history of working with public and private equity backed organizations. Prior to joining the Company, from September 2018 through December 2021, Ms. Black served as the Chief Financial Officer for Eagle Pressure Control LLC (“Eagle”) and Talon Pressure Control, oilfield service companies. From October 2015 through September 2018, Ms. Black served as the Controller for AG Resource Management, a private equity backed agriculture lending company, and as the Controller for Basic Energy Services, an oil and gas services company, from January 2013 through October 2015. Ms. Black has also held various other roles including Vice President of SEC reporting with OMNI American Bank and Audit Manager with RSM McGladrey. In November 2020, Eagle, as a result of various events including an oil and gas work related incident, decline of oil and gas prices and the impact from COVID-19, filed for bankruptcy protection under Subchapter V under Chapter 11 in the US Bankruptcy Court, Southern District of Texas (Houston) (Bankruptcy Petition #: 20-35474). Ms. Black is a Certified Public Accountant and a Chartered Global Management Accountant. Ms. Black received a Master of Business Administration from Jack Welch Management Institute in 2018 and Bachelor of Science in Accounting and Finance from Texas Tech University in 2003. Based on her education and extensive experience in the financial and accounting industries, we have deemed Ms. Black fit to serve as our Chief Financial Officer. Ferdinand Groenewald. Mr. Groenewald has served as the Chief Accounting Officer of Muscle Maker, Inc. since January 2022. Mr. Groenewald previously served as our Chief Financial Officer of Muscle Maker, Inc. from September 2018 through January 2022. Mr. Groenewald had previously served as our Vice President of Finance, Principal Financial Officer and Principal Accounting Officer, Muscle Maker Development, LLC and Muscle Maker Corp., LLC from January 25, 2018 through May 29, 2018. In addition, Mr. Groenewald has served as our controller from October 2017 through May 29, 2018. Mr. Groenewald is a certified public accountant with significant experience in finance and accounting. From July 2018 through August 2018, Mr. Groenewald serves as senior financial reporting accountant of Wrinkle Gardner & Company, a full service tax, accounting and business consulting firm. From February 2017 to October 2017, Mr. Groenewald served as Senior Financial Accounting Consultant at Pharos Advisors, Inc. serving a broad range of industries. From November 2013 to February 2017, he served as a Senior Staff Accountant at Financial Consulting Strategies, LLC where he provided a broad range of accounting, financial reporting, and pre-auditing services to various industries. From August 2015 to December 2015, Mr. Groenewald served as a Financial Reporting Analyst at Valley National Bank. Mr. Groenewald holds a Bachelor of Science in accounting from the University of South Africa. 54 Based on his education and extensive experience in the financial and accounting industries, we have deemed Mr. Groenewald fit to serve as our Chief Accounting Officer. Aimee Infante. Ms. Infante has served in various roles with us since 2014 starting as Marketing and Communications Manager in October 2014 and then as a Marketing Director from February 2015 through April 2016. Ms. Infante was then promoted to Vice President of Marketing in April 2016 prior to her appointment as Chief Marketing Officer in May 2019. Prior to joining us, Ms. Infante served in various marketing roles including Regional Marketing Manager for Qdoba Mexican Grill from November 2010 through April 2014. Ms. Infante holds a Bachelor of Science in Marketing from Rider University. Based on her education and extensive experience in the restaurant/franchise industry, we have deemed MS. Infant fit to serve as our Chief Marketing Officer. Stephen A. Spanos. Mr. Spanos has served as director of Muscle Maker, Inc. since February 2020. Since 2013, Mr. Spanos has provided financial and accounting consulting services for both privately held and public companies. From 2009 to 2013, Mr. Spanos served as the Chief Financial Officer of Orion Seafood International, Inc., a marketer of frozen lobster products, and as the Controller of Reef Point Systems, a provider of security solutions for converged wireless and wireline networks in the United States, from 2005 to 2013. Mr. Spanos served as an audit manager for BDO USA, LLP and as an auditor for Ernst & Young. Mr. Spanos received his MBA and BS in Business Administration, Accounting and Financing in 1995 and 1985, respectively, from Boston University. Based on his education and extensive experience in financial and accounting matters, we have deemed that Mr. Spanos is fit to serve on the Board. A.B. Southall III . Mr. Southall has served as director of Muscle Maker, Inc. since February 2017. He has over 35 years of experience managing construction and land developing businesses. From December 1997 until December 2017 he was the President of a custom home building company. From March 2011 to current, Mr. Southall has been the President of Third Generation Builders, Inc. In addition, since 2001, Mr. Southall has been the President of Southall Landings Marina, Inc., a 189 boat slip marina complex. His involvement in the marina business led him to co-found a local Waterway Association. He has diversely invested across multiple sectors including private placements, oil & gas, real estate, restaurant businesses and commodities. Mr. Southall is an advocate of a healthy approach to the food industry and the restaurant business. Based on his vast business and financial experience with real estate and restaurants, we have deemed Mr. Southall fit to serve on the Board. Paul L. Menchik . Mr. Menchik has served as director of Muscle Maker, Inc. since February 2017. Since 1986, Mr. Menchik has been Professor of Economics at Michigan State University where he has been Department chairperson and Director of Graduate Programs. He has served as Senior Economist for Economic Policy for the White House Office of Management and Budget (where among other matters he worked on Social Security solvency issues) and served as Visiting Scholar at the Tax Analysis Division of the Congressional Budget Office. Menchik has also been on the faculty of Rutgers University and the University of Wisconsin and has served as visiting faculty at University of Pennsylvania, London School of Economics, University College London, and Victoria University in Wellington New Zealand. Over the years he has advised three state governments and five United States government agencies. He holds a Ph.D. from the Wharton School of Finance and Commerce at the University of Pennsylvania. He has over 40 publications including a book on household and family economics, made over 85 paper presentations at other universities and conferences around the world and has refereed for over 20 academic journals and is currently a member of the editorial board for the Journal of Income Distribution. He is a member of Who’s Who in Economics and Who’s Who in America. Based on his education and extensive experience in economic and financial matters, we have deemed Mr. Menchik fit to serve on the Board. Jeff Carl. Mr. Carl has served as director of Muscle Maker, Inc. since September 3, 2019. Since February, 2017, Mr. Carl has served as Executive Director of Nice & Company, an ad agency with a focus on print, TV, digital, experiential and mobile, and as an independent consultant to the restaurant industry. From June, 2013 to January, 2017, Mr. Carl served as the Chief Marketing Officer for Taco Bueno Restaurants and from 2009 to 2013 as the Chief Marketing Officer of Tavistock Restaurants LLC. Mr. Carl received a BA from Wake Forest University in 1977 and a MBA from University of North Carolina Chapel Hill in 1979. 55 Based on his experience within the restaurant industry and due to the fact that he has held senior level executive positions with a focus on advertising and marketing, we have deemed Mr. Carl a fit to serve on the Board. Major General (Ret) Malcolm B. Frost . Maj. Gen (Ret) Frost has 31 years of military experience providing large-scale strategic and operational leadership and oversight in the Indo-Asia-Pacific, Middle East, Europe, and the United States for the United States Army - successfully leading the evolution of soldier training programs in peace and war from platoon through 2-star command level. Maj. Gen. (Ret) Frost has been deployed to combat several times in a variety of leadership and command positions. Since 2019, Maj. Gen. (Ret) Frost served as Executive Consultant for Fortune 500 and larger corporations through Malcolm Frost and Associates LLC. From 2015 through 2019, Maj. Gen. (Ret) Frost served as the Commanding General for the US Army Training and Doctrine Command located at Fort Eustis, Virginia and as the Chief of Public Affairs for the US Army Headquarters based in Washington, DC. Maj. Gen. (Ret) Frost also served as the Deputy Commanding General for Support for the US Army, Deputy Director of Operations for the US Department of Defense and the Director of Operations for the US Army Pacific Headquarters. He deployed to Bosnia-Hercegovina as a company commander in 1995 and deployed twice to Iraq as commander of an 800-person Cavalry Squadron operating in Tal Afar during the Surge in 2006-7, and as commander of a 5K person Stryker Brigade Combat Team operating in Diyala, Salah ad Din, and Kirkuk provinces in 2010-11. Additionally, he deployed as Director of Operations of a 4,000-person airborne brigade task force in Afghanistan in 2002-3. In addition to a Bachelor of Science Degree in Human Resources Management from the United States Military Academy at West Point, Maj. Gen. (Ret) Frost holds advanced degrees from Webster University and the U.S. Army War College in Human Resources Development and National Security Strategy, respectively. He is the recipient of the Distinguished Service Medal x2, Defense Superior Service Medal, Legion of Merit x3, Bronze Star Medal x3, Air Medal, Army Commendation Medal x6 including one for Valor, Combat Infantryman Badge, Master Parachutist Badge and Ranger Tab. He is a Certified Project Director and is the recipient of the U.S. Department of State Meritorious Honor Award for reconstruction, civic and humanitarian achievements while serving in Iraq. Based on his vast business and financial experience with the military as well as his business experience, we have deemed Maj. Gen (Ret) Frost a fit to serve on the Board. Philip Balatsos. Since 2016, Mr. Balatsos has worked in the restaurant and hospitality industries. In 2018, Mr. Balatsos founded and has served as the owner operator of LAPH Hospitality which operates a café/catering business and also serves as a consultant providing financial, purchasing and usage analysis as well as rollout services pertaining to ordering, invoicing and inventorying systems. From 2016 through 2018, Mr. Balatsos held various positions with Barteca Restaurant Group including Assistant General Manager and Purchasing Manager. Prior to 2016, Mr. Balatsos held various position on Wall Street for 16 years including Vice President, Foreign Exchange Sales/Trading for Credit Suisse, Director, Foreign Exchange Hedge Fund Sales for Barclays Capital and Financial Advisor for Stifel Nicolaus & Co. Mr. Balatsos graduated from Skidmore College in 1999 with a Bachelor of Science in Business Administration and from Institute of Culinary Education in 2016. Family Relationships There are no family relationships among any of our executive officers and directors. Corporate Governance Board of Directors and Board Committees Our stock (symbol: GRIL) is listed on the NASDAQ capital market. Under the rules of Nasdaq, “independent” directors must make up a majority of a listed company’s board of directors. In addition, applicable Nasdaq rules require that, subject to specified exceptions, each member of a listed company’s audit and compensation committees be independent within the meaning of the applicable Nasdaq rules. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. 56 Our board of directors currently consists of seven (7) members. Our board of directors has determined that Stephen Spanos, A.B. Southall III, Paul L. Menchik, Malcolm Frost, Philip Balatsos and Jeff Carl, qualify as independent directors in accordance with the Nasdaq Capital Market, or Nasdaq listing requirements. Kevin Mohan is not considered independent. Nasdaq’s independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three (3) years, one of our employees and that neither the director nor any of his or her family members has engaged in various types of business dealings with us. In addition, as required by Nasdaq rules, our board of directors has made a subjective determination as to each independent director that no relationships exist that, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management. There are no family relationships among any of our directors or executive officers. As required under Nasdaq rules and regulations and in expectation of listing on Nasdaq, our independent directors meet in regularly scheduled executive sessions at which only independent directors are present. Board Leadership Structure and Board’s Role in Risk Oversight Kevin Mohan is the Chairman of the Board. The Chairman has authority, among other things, to preside over the Board meetings and set the agenda for the Board meetings. Accordingly, the Chairman has substantial ability to shape the work of our Board. We currently believe that separation of the roles of Chairman and Chief Executive Officer ensures appropriate oversight by the Board of our business and affairs. However, no single leadership model is right for all companies and at all times. The Board recognizes that depending on the circumstances, other leadership models, such as the appointment of a lead independent director, might be appropriate. Accordingly, the Board may periodically review its leadership structure. Our Board is generally responsible for the oversight of corporate risk in its review and deliberations relating to our activities. Our principal source of risk falls into two categories, financial and product commercialization. The audit committee oversees management of financial risks; our Board regularly reviews information regarding our cash position, liquidity and operations, as well as the risks associated with each. The Board regularly reviews plans, results and potential risks related to our system-wide restaurant growth, brand awareness and menu offerings. Our Compensation Committee is expected to oversee risk management as it relates to our compensation plans, policies and practices for all employees including executives and directors, particularly whether our compensation programs may create incentives for our employees to take excessive or inappropriate risks which could have a material adverse effect on the Company. Committees of the Board of Directors The Board of Directors has already established an audit committee (the “Audit Committee”), a Compensation Committee (the “Compensation Committee”) and a Nominating and Corporate Governance Committee (“Governance Committee”). The composition and function of each committee are described below. Audit Committee The Audit Committee has three members, including Messrs. Spanos, Balatsos and Menchik. Mr. Spanos serves as the chairman of the Audit Committee and satisfies the definition of “audit committee financial expert”. Our audit committee is authorized to: ● approve and retain the independent auditors to conduct the annual audit of our financial statements; ● review the proposed scope and results of the audit; ● review and pre-approve audit and non-audit fees and services; ● review accounting and financial controls with the independent auditors and our financial and accounting staff; ● review and approve transactions between us and our directors, officers and affiliates; ● recognize and prevent prohibited non-audit services; and ● establish procedures for complaints received by us regarding accounting matters; oversee internal audit functions, if any. Compensation Committee The Compensation Committee has three members, including Messrs. Carl, Balatsos and Frost. Mr. Carl serves as the chairman of the Compensation Committee. Our Compensation Committee is authorized to: ● review and determine the compensation arrangements for management; ● establish and review general compensation policies with the objective to attract and retain superior talent, to reward individual performance and to achieve our financial goals; ● administer our stock incentive and purchase plans; and ● review the independence of any compensation advisers. Nominating and Corporate Governance Committee The Governance Committee has three members, including Messrs. Menchik, Southall III and Carl. Mr. Menchik serves as the chairman of the Governance Committee. The functions of our Governance Committee, among other things, include: ● identifying individuals qualified to become board members and recommending director; ● nominees and board members for committee membership; ● developing and recommending to our board corporate governance guidelines; ● review and determine the compensation arrangements for directors; and ● overseeing the evaluation of our board of directors and its committees and management. Our goal is to assemble a Board that brings together a variety of skills derived from high quality business and professional experience. Compensation Committee Interlocks and Insider Participation None of the members of our Compensation Committee, at any time, has been one of our officers or employees. None of our executive officers currently serves, or in the past year has served, as a member of the Board of Directors or Compensation Committee of any entity that has one or more executive officers on our Board of Directors or Compensation Committee. For a description of transactions between us and members of our Compensation Committee and affiliates of such members, please see “Certain Relationships and Related Party Transactions”. Code of Business Conduct and Ethics We have adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires the Company’s executive officers, directors, and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of the Company’s common stock. Such officers, directors, and persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file with the SEC. To our knowledge, based solely on review of the copies of such reports and amendments to such reports with respect to the year ended December 31, 2021 filed with the SEC, all required Section 16 reports under the Exchange Act for our directors, executive officers, principal accounting officer and beneficial owners of greater than 10% of our common stock were filed on a timely basis during the year ended December 31, 2021, except for the shares issued on February 11, 2021 for Mr. Roper, Mr. Miller, Mr. Mohan, Mr. Groenewald and Ms. Infante as the Form 4’s were filed on April 1, 2021. 57 ITEM 11. EXECUTIVE COMPENSATION. Summary Compensation Table The following Summary Compensation Table sets forth all compensation earned in all capacities during the fiscal years ended December 31, 2021 and 2020 by (i) our principal executive officer, (ii) our two most highly compensated executive officers, other than our principal executive officer, who were serving as executive officers as of December 31, 2021 and whose total compensation for the 2021 fiscal year, as determined by Regulation S-K, Item 402, exceeded $100,000, (iii) a person who would have been included as one of our two most highly compensated executive officers, other than our principal executive officer, but for the fact that he was not serving as one of our executive officers as of December 31, 2021 (the individuals falling within categories (i), (ii) and (iii) are collectively referred to as the “Named Executive Officers”): Summary Compensation Table Non-Qualified Non-Equity Deferred Stock Option Incentive Plan Compensation All Other Year Salary Bonus Award Awards Compensation Earnings Compensation Total Michael J. Roper 2021 $ 356,077 $ - $ 287,000 $ - $ - $ - $ - $ 643,077 Chief Executive Officer of Muscle Maker, Inc. 2020 $ 360,503 $ 180,288 $ - $ - $ - $ - $ - $ 540,791 Kenneth Miller 2021 $ 283,461 $ - $ 92,248 $ - $ - $ - $ - $ 375,709 Chief Operating Officer of Muscle Maker, Inc. 2020 $ 256,442 $ 53,846 $ - $ - $ - $ - $ - $ 310,288 Kevin Mohan 2021 $ 180,384 $ 50,000 $ 184,498 $ - $ - $ - $ - $ 414,882 Chief Operating Officer of Muscle Maker, Inc. 2020 $ 185,077 $ 78,000 $ - $ - $ - $ - $ 72,327 $ 335,404 Employment Agreements Michael Roper On February 10, 2022, Muscle Maker, Inc. (the “Company”) entered into an Employment Agreement with Michael Roper effective February 14, 2022, which replaced his prior employment agreement. Pursuant to the Employment Agreement, Mr. Roper will continue to be employed as Chief Executive Officer of the Company on an at will basis. During the term of the Employment Agreement, Mr. Roper will be entitled to a base salary at the annualized rate of $350,000, which will be increased to $375,000 upon the one-year anniversary. Mr. Roper will be eligible for a discretionary performance bonus to be paid in cash or equity. Within 90 days of the effective date, the Company will issue Mr. Roper stock options to receive 100,000 shares of common stock which will vest over a term of five years. If Mr. Roper is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, Mr. Roper will be entitled to a severance package of 18 months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule, but subject to the execution of a valid release in favor of the Company and its related parties. Jennifer Black On January 2, 2022, the Company appointed Jennifer Black as Chief Financial Officer of the Company and entered into an Offer Letter with Ms. Black. Pursuant to the Offer Letter, Ms. Black will be employed as Chief Financial Officer of the Company on an at-will basis. Ms. Black will be entitled to a base salary at the annualized rate of $190,000. The Company’s previous CFO, Ferdinand Groenewald, will remain and was appointed as the Chief Accounting Officer of the Company. The Company agreed to issue Ms. Black 20,000 restricted stock units upon completion of 90 days of employment. Ms. Black will be entitled to receive stock options to acquire 20,000 shares of common stock subject to the approval of the Board of Directors and Compensation Committee and the terms and conditions will be subject to entering into a stock option agreement. 58 Kenneth Miller On February 9, 2022, the Company and Kenn Miller, Chief Operations Officer, entered a letter agreement providing that Mr. Miller will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $275,000 effective February 14, 2022. Mr. Miller will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 75% of his salary. Within 90 days of the effective date, the Company will issue Mr. Miller stock options to receive 50,000 shares of common stock which will vest over a term of five years. If Mr. Miller is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of 12 months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. Aimee Infante On February 9, 2022, the Company and Aimee Infante, Chief Marketing Officer, entered a letter agreement providing that Ms. Infante will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $175,000 effective February 14, 2022. Ms. Infante will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25% of her salary. Within 90 days of the effective date, the Company will issue Ms. Infante stock options to receive 42,500 shares of common stock which will vest over a term of five years. If Ms. Infante is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, she will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. Kevin Mohan On February 10, 2022, the Company and Kevin Mohan, Chief Investment Officer, entered a letter agreement providing that Mr. Mohan will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $200,000 effective February 14, 2022. Mr. Mohan will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 75% of his salary. Within 90 days of the effective date, the Company will issue Mr. Mohan stock options to receive 75,000 shares of common stock which will vest over a term of five years. If Mr. Mohan is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. Ferdinand Groenewald On February 9, 2022, the Company and Ferdinand Groenewald, Chief Accounting Officer, entered a letter agreement providing that Mr. Groenewald will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $175,000 effective February 14, 2022. Mr. Groenewald will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25% of his salary. Within 90 days of the effective date, the Company will issue Mr. Groenewald stock options to receive 25,000 shares of common stock which will vest over a term of five years. If Mr. Groenewald is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. 59 Elements of Compensation Base Salary Messrs. Roper, Black, Miller, Mohan, Infante and Groenewald received a fixed base salary in an amount determined in accordance with their then employment agreement with Muscle Maker Inc., and based on a number of factors, including: ● The nature, responsibilities and duties of the officer’s position; ● The officer’s expertise, demonstrated leadership ability and prior performance; ● The officer’s salary history and total compensation, including annual cash bonuses and long-term incentive compensation; and ● The competitiveness of the market for the officer’s services. Bonus Mr. Mohan and Groenewald received discretionary performance based bonuses during the year ended December 31, 2021 pursuant to their employment agreements. Stock Award In fiscal 2021, we issued an aggregate of 221,783 shares of our restricted common stock, with an aggregate fair value of $636,495, to our executive team. Equity Incentive Plans 2019 Plan Our board of directors and shareholders approved the 2019 Equity Incentive Plan or the 2019 Plan. Our shareholders approved the plan on October 28, 2019. The 2019 Plan provides incentives to eligible employees, officers, directors and consultants in the form of Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Stock Bonus Awards, Performance Compensation Awards (including cash bonus awards) or any combination of the foregoing. We have reserved a total of 214,286 shares of common stock for issuance under the 2019 Plan. As of the date of the issuance of these consolidated financial statements 188,527 shares have been issued under the 2019 Plan. Upon the adoption of our 2020 Equity Incentive Plan, we no longer issue awards under the 2019 Plan, but any existing awards granted to our management team and Board of Directors will remain outstanding under the 2019. 2020 Plan The Company’s board of directors and shareholders approved and adopted on October 27, 2020 the 2020 Equity Incentive Plan (“2020 Plan”), effective on October 27, 2020 under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock Units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2020 Plan, the Company reserved 1,750,000 shares of common stock for issuance. As of the date of the issuance of these consolidated financial statements 889,756 shares have been issued under the 2020 Plan. 2021Plan The Company’s board of directors and shareholders approved and adopted on October 7, 2021 the 2021 Equity Incentive Plan (“2021 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock Units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2021 Plan, the Company reserved 1,500,000 shares of common stock for issuance. As of the date of the issuance of these consolidated financial statements 471,348 shares have been issued under the 2021 Plan. 60 Administration The Company’s Board of Directors or a committee appointed by the Board (the “Committee”) will administer the Plan. The Committee will have the authority, without limitation (i) to designate Participants to receive Awards, (ii) determine the types of Awards to be granted to Participants, (iii) determine the number of shares of common stock to be covered by Awards, (iv) determine the terms and conditions of any Awards granted under the Plan, (v) determine to what extent and under what circumstances Awards may be settled in cash, shares of common stock, other securities, other Awards or other property, or canceled, forfeited or suspended, (vi) determine whether, to what extent, and under what circumstances the delivery of cash, Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be made; (vii) interpret, administer, reconcile any inconsistency in, settle any controversy regarding, correct any defect in and/or complete any omission in this Plan and any instrument or agreement relating to, or Award granted under, this Plan; (viii) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of this Plan; (ix) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, Awards; (x) reprice existing Awards with shareholder approval or to grant Awards in connection with or in consideration of the cancellation of an outstanding Award with a higher price; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Plan. The Committee will have full discretion to administer and interpret the Plan and to adopt such rules, regulations and procedures as it deems necessary or advisable and to determine, among other things, the time or times at which the awards may be exercised and whether and under what circumstances an award may be exercised. Eligibility Employees, directors, officers, advisors and consultants of the Company or its affiliates are eligible to participate in the Plan and are referred to as “Participants”. The Committee has the sole and complete authority to determine who will be granted an Award under the Plan, however, it may delegate such authority to one or more officers of the Company under the circumstances set forth in the Plan. Number of Shares Authorized Up to approximately 1,500,000 shares of common stock may be issued pursuant to awards granted under the Plan. If an Award is forfeited, canceled, or if any Option terminates, expires or lapses without being exercised, the Common Stock subject to such Award will again be made available for future grant. However, shares that are used to pay the exercise price of an Option or that are withheld to satisfy the Participant’s tax withholding obligation will not be available for re-grant under the Plan. If there is any change in the Company’s corporate capitalization or structure, the Committee in its sole discretion may make substitutions or adjustments to the number of shares of common stock reserved for issuance under the Plan, the number of shares covered by Awards then outstanding under the Plan, the limitations on Awards under the Plan, the exercise price of outstanding Options and such other equitable substitution or adjustments as it may determine appropriate. The Plan has a term of ten years and no further Awards may be granted under the Plan after that date. Awards Available for Grant The Committee may grant Awards of Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Stock Bonus Awards, Performance Compensation Awards (including cash bonus awards) or any combination of the foregoing. Notwithstanding, the Committee may not grant to any one person in any one calendar year Awards (i) for more than 50% of the Available Shares in the aggregate or (ii) payable in cash in an amount exceeding $10,000,000 in the aggregate. 61 Options The Committee will be authorized to grant Options to purchase Common Stock that are either “qualified,” meaning they are intended to satisfy the requirements of Code Section 422 for Incentive Stock Options, or “non-qualified,” meaning they are not intended to satisfy the requirements of Section 422 of the Code. Options granted under the Plan will be subject to the terms and conditions established by the Committee. Under the terms of the Plan, unless the Committee determines otherwise in the case of an Option substituted for another Option in connection with a corporate transaction, the exercise price of the Options will not be less than the fair market value (as determined under the Plan) of the shares of common stock on the date of grant. Options granted under the Plan will be subject to such terms, including the exercise price and the conditions and timing of exercise, as may be determined by the Committee and specified in the applicable award agreement. The maximum term of an Option granted under the Plan will be ten years from the date of grant (or five years in the case of an Incentive Stock Option granted to a 10% stockholder). Payment in respect of the exercise of an Option may be made in cash or by check, by surrender of unrestricted shares of Common Stock (at their fair market value on the date of exercise) that have been held by the participant for any period deemed necessary by the Company’s accountants to avoid an additional compensation charge or have been purchased on the open market, or the Committee may, in its discretion and to the extent permitted by law, allow such payment to be made through a broker-assisted cashless exercise mechanism, a net exercise method, or by such other method as the Committee may determine to be appropriate. Stock Appreciation Rights The Committee will be authorized to award Stock Appreciation Rights (or SARs) under the Plan. SARs will be subject to such terms and conditions as established by the Committee. A SAR is a contractual right that allows a participant to receive, either in the form of cash, shares or any combination of cash and shares, the appreciation, if any, in the value of a share over a certain period of time. A SAR granted under the Plan may be granted in tandem with an option and SARs may also be awarded to a participant independent of the grant of an Option. SARs granted in connection with an Option shall be subject to terms similar to the Option which corresponds to such SARs. SARs shall be subject to terms established by the Committee and reflected in the award agreement. Restricted Stock The Committee will be authorized to award Restricted Stock under the Plan. Unless otherwise provided by the Committee and specified in an award agreement, restrictions on Restricted Stock will lapse after three years of service with the Company. The Committee will determine the terms of such Restricted Stock awards. Restricted Stock are shares of common stock that generally are non-transferable and subject to other restrictions determined by the Committee for a specified period. Unless the Committee determines otherwise or specifies otherwise in an award agreement, if the participant terminates employment or services during the restricted period, then any unvested restricted stock will be forfeited. Restricted Stock Unit Awards The Committee will be authorized to award Restricted Stock Unit awards. Unless otherwise provided by the Committee and specified in an award agreement, Restricted Stock Units will vest after three years of service with the Company. The Committee will determine the terms of such Restricted Stock Units. Unless the Committee determines otherwise or specifies otherwise in an award agreement, if the participant terminates employment or services during the period of time over which all or a portion of the units are to be earned, then any unvested units will be forfeited. At the election of the Committee, the participant will receive a number of shares of common stock equal to the number of units earned or an amount in cash equal to the fair market value of that number of shares at the expiration of the period over which the units are to be earned or at a later date selected by the Committee. Stock Bonus Awards The Committee will be authorized to grant Awards of unrestricted shares of common stock or other Awards denominated in shares of common stock, either alone or in tandem with other Awards, under such terms and conditions as the Committee may determine. 62 Performance Compensation Awards The Committee will be authorized to grant any Award under the Plan in the form of a Performance Compensation Award exempt from the requirements of Section 162(m) of the Code by conditioning the vesting of the Award on the attainment of specific performance criteria of the Company and/or one or more Affiliates, divisions or operational units, or any combination thereof, as determined by the Committee. The Committee will select the performance criteria based on one or more of the following factors: (i) revenue; (ii) sales; (iii) profit (net profit, gross profit, operating profit, economic profit, profit margins or other corporate profit measures); (iv) earnings (EBIT, EBITDA, earnings per share, or other corporate profit measures); (v) net income (before or after taxes, operating income or other income measures); (vi) cash (cash flow, cash generation or other cash measures); (vii) stock price or performance; (viii) total stockholder return (stock price appreciation plus reinvested dividends divided by beginning share price); (ix) economic value added; (x) return measures (including, but not limited to, return on assets, capital, equity, investments or sales, and cash flow return on assets, capital, equity, or sales); (xi) market share; (xii) improvements in capital structure; (xiii) expenses (expense management, expense ratio, expense efficiency ratios or other expense measures); (xiv) business expansion or consolidation (acquisitions and divestitures); (xv) internal rate of return or increase in net present value; (xvi) working capital targets relating to inventory and/or accounts receivable; (xvii) inventory management; (xviii) service or product delivery or quality; (xix) customer satisfaction; (xx) employee retention; (xxi) safety standards; (xxii) productivity measures; (xxiii) cost reduction measures; and/or (xxiv) strategic plan development and implementation. Transferability Each Award may be exercised during the Participant’s lifetime only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative and may not be otherwise transferred or encumbered by a Participant other than by will or by the laws of descent and distribution. The Committee, however, may permit Awards (other than Incentive Stock Options) to be transferred to family members, a trust for the benefit of such family members, a partnership or limited liability company whose partners or stockholders are the Participant and his or her family members or anyone else approved by it. Amendment The Plan will have a term of ten years. The Company’s board of directors may amend, suspend or terminate the Plan at any time; however, shareholder approval to amend the Plan may be necessary if the law or SEC so requires. No amendment, suspension or termination will materially and adversely affect the rights of any Participant or recipient of any Award without the consent of the Participant or recipient. Change in Control Except to the extent otherwise provided in an Award or required by applicable law, in the event of a Change in Control, upon the occurrence of a Change in Control, the Committee is authorized, but not obligated, to make any of the following adjustments (or any combination thereof) in the terms and conditions of outstanding Awards: (a) continuation or assumption of outstanding Awards by the surviving company; (b) substitution by the surviving company of equity, equity-based and/or cash awards with substantially the same terms for outstanding Awards; (c) accelerated exercisability, vesting and/or lapse of restrictions under outstanding Awards immediately prior to the occurrence of the Change in Control; (d) upon written notice, provide that any outstanding Awards must be exercised, to the extent then exercisable, during a reasonable period determined by the Committee and at the end of such period, any unexercised Awards will terminate; and (e) cancellation of all or any portion of outstanding Awards for fair value (in the form of cash, shares or other property) and which value may be zero. U.S. Federal Income Tax Consequences The following is a general summary of the material U.S. federal income tax consequences of the grant and exercise and vesting of Awards under the Plan and the disposition of shares acquired pursuant to the exercise of such Awards. This summary is intended to reflect the current provisions of the Code and the regulations thereunder. However, this summary is not intended to be a complete statement of applicable law, nor does it address foreign, state, local and payroll tax considerations. Moreover, the U.S. federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular circumstances of such participant. 63 Options There are a number of requirements that must be met for a particular Option to be treated as an Incentive Stock Option. One such requirement is that Common Stock acquired through the exercise of an Incentive Stock Option cannot be disposed of before the later of (i) two years from the date of grant of the Option, or (ii) one year from the date of its exercise. Holders of Incentive Stock Options will generally incur no federal income tax liability at the time of grant or upon exercise of those Options. However, the spread at exercise will be an “item of tax preference,” which may give rise to “alternative minimum tax” liability for the taxable year in which the exercise occurs. If the holder does not dispose of the shares before the later of two years following the date of grant and one year following the date of exercise, the difference between the exercise price and the amount realized upon disposition of the shares will constitute long-term capital gain or loss, as the case may be. Assuming both holding periods are satisfied, no deduction will be allowed to the Company for federal income tax purposes in connection with the grant or exercise of the Incentive Stock Option. If, within two years following the date of grant or within one year following the date of exercise, the holder of shares acquired through the exercise of an Incentive Stock Option disposes of those shares, the Participant will generally realize taxable compensation at the time of such disposition equal to the difference between the exercise price and the lesser of the Fair Market Value of the share on the date of exercise or the amount realized on the subsequent disposition of the shares, and that amount will generally be deductible by the Company for federal income tax purposes, subject to the possible limitations on deductibility under Sections 280G and 162(m) of the Code for compensation paid to executives designated in those Sections. Finally, if an otherwise Incentive Stock Option becomes first exercisable in any one year for shares having an aggregate value in excess of $100,000 (based on the date of grant value), the portion of the Incentive Stock Option in respect of those excess shares will be treated as a non-qualified stock option for federal income tax purposes. No income will be realized by a Participant upon grant of a Non-Qualified Stock Option. Upon the exercise of a Non-Qualified Stock Option, the Participant will recognize ordinary compensation income in an amount equal to the excess, if any, of the Fair Market Value of the underlying exercised shares over the Option Exercise Price paid at the time of exercise. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. The Company will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections. Restricted Stock A Participant will not be subject to tax upon the grant of an Award of Restricted Stock unless the Participant otherwise elects to be taxed at the time of grant pursuant to Section 83(b) of the Code. On the date an Award of Restricted Stock becomes transferable or is no longer subject to a substantial risk of forfeiture, the Participant will recognize ordinary compensation income equal to the difference between the Fair Market Value of the shares on that date over the amount the Participant paid for such shares, if any. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. If the Participant made an election under Section 83(b) of the Code, the Participant will recognize ordinary compensation income at the time of grant equal to the difference between the Fair Market Value of the shares on the date of grant over the amount the Participant paid for such shares, if any, and any subsequent appreciation in the value of the shares will be treated as a capital gain upon sale of the shares. Special rules apply to the receipt and disposition of Restricted Shares received by officers and directors who are subject to Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”). The Company will be able to deduct, at the same time as it is recognized by the Participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections. Restricted Stock Units A Participant will not be subject to tax upon the grant of a Restricted Stock Unit Award. Rather, upon the delivery of shares or cash pursuant to a Restricted Stock Unit Award, the Participant will recognize ordinary compensation income equal to the Fair Market Value of the number of shares (or the amount of cash) the Participant actually receives with respect to the Award. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. The Company will be able to deduct the amount of taxable compensation recognized by the Participant for U.S. federal income tax purposes, but the deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections. 64 SARs No income will be realized by a Participant upon grant of an SAR. Upon the exercise of an SAR, the Participant will recognize ordinary compensation income in an amount equal to the Fair Market Value of the payment received in respect of the SAR. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. The Company will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections. Stock Bonus Awards A Participant will recognize ordinary compensation income equal to the difference between the Fair Market Value of the shares on the date the shares of common stock subject to the Award are transferred to the Participant over the amount the Participant paid for such shares, if any, and any subsequent appreciation in the value of the shares will be treated as a capital gain upon sale of the shares. The Company will be able to deduct, at the same time as it is recognized by the Participant, the amount of taxable compensation to the Participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections. Section 162(m) In general, Section 162(m) of the Code denies a publicly held corporation a deduction for U.S. federal income tax purposes for compensation in excess of $1,000,000 per year per person paid to its principal executive officer and the three other officers (other than the principal executive officer and principal financial officer) whose compensation is disclosed in its proxy statement/prospectus as a result of their total compensation, subject to certain exceptions. The Plan is intended to satisfy an exception with respect to grants of Options to covered employees. In addition, the Plan is designed to permit certain Awards of Restricted Stock, Restricted Stock Units, cash bonus awards and other Awards to be awarded as performance compensation awards intended to qualify under the “performance-based compensation” exception to Section 162(m) of the Code. New Plan Benefits Future grants under the Plan will be made at the discretion of the Committee and, accordingly, are not yet determinable. In addition, the value of the Awards granted under the Plan will depend on a number of factors, including the Fair Market Value of the shares of common stock on future dates, the exercise decisions made by the Participants and/or the extent to which any applicable performance goals necessary for vesting or payment are achieved. Consequently, it is not possible to determine the benefits that might be received by Participants receiving discretionary grants under, or having their annual bonus paid pursuant to, the Plan. Interests of Directors or Officers The Company’s directors may grant Awards under the Plan to themselves as well as to the Company’s officers and other employees, consultants and advisors. 65 Equity Compensation Plan Information The following table provides information, as of December 31, 2021, with respect to equity securities authorized for issuance under compensation plans: Number of Securities Remaining Available for Future Issuance Under Equity Number of Compensation Securities to be Weighted-Average Plans Issued Upon Exercise Price of excluding Exercise of Outstanding Options ( securities Outstanding Options under reflected in Plan Category under the Plan (a) The Plan (b) Column (a)) (c) Equity compensation plans approved by security holders - $ - 1,098,255 Equity compensation plans not approved by security holders - $ - - TOTAL - $ - 1,098,255 Director Compensation On December 4, 2020, the board of directors approved a new board compensation plan that would compensate the board members for their deferred compensation for the fourth quarter 2020 through the third quarter of 2021. The board members are eligible for cash compensation of $12,000 per year to be paid quarterly within 30 days of the close of each quarter. In addition, on an ongoing basis pursuant to the approved board compensation plan each director will receive $8,000 in value of common stock per year for service as director, $6,000 in value of shares of common stock per year for service on each committee and $4,000 in value of shares of common stock per year for service as chair for such committee. The number of shares to be issued would be based upon the closing price of the last trading date of each calendar quarter. The shares of common stock for committee service will be limited to two committees. Kevin Mohan is an employee-director and does not receive compensation for serving in his role as a director or Chairman of the Board. The following table provides information relating to compensation of our directors for our fiscal year ended December 31, 2021 Name Fees earned or paid in cash Stock awards Option awards Non-equity incentive plan compensation Nonqualified deferred compensation earnings All Other Compensation Total Stephen A. Spanos $ 12,000 $ 13,493 $ - $ - $ - $ - $ 25,493 A.B. Southall III 12,000 12,544 - - - - 24,544 Paul L. Menchik 12,000 14,177 - - - - 26,177 Jeff Carl 12,000 17,992 - - - - 29,992 Major General (Ret) Malcolm B. Frost 11,143 8,347 - - - - 19,490 Philip Balatsos 11,143 8,347 - - - - 19,490 66 Executive Compensation Philosophy Our Board of Directors determines the compensation given to our executive officers in their sole determination. Our Board of Directors reserves the right to pay our executives or any future executives a salary, and/or issue them shares of common stock issued in consideration for services rendered and/or to award incentive bonuses which are linked to our performance, as well as to the individual executive officer’s performance. This package may also include long-term stock-based compensation to certain executives, which is intended to align the performance of our executives with our long-term business strategies. Additionally, while our Board of Directors has not granted any performance base stock options to date, the Board of Directors reserves the right to grant such options in the future, if the Board in its sole determination believes such grants would be in the best interests of the Company. Incentive Bonus The Board of Directors may grant incentive bonuses to our executive officers and/or future executive officers in its sole discretion, if the Board of Directors believes such bonuses are in the Company’s best interest, after analyzing our current business objectives and growth, if any, and the amount of revenue we are able to generate each month, which revenue is a direct result of the actions and ability of such executives. Long-Term, Stock Based Compensation In order to attract, retain and motivate executive talent necessary to support the Company’s long-term business strategy we may award our executives and any future executives with long-term, stock-based compensation in the future, at the sole discretion of our Board of Directors. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The following table sets forth information about the beneficial ownership of our common stock at March 16, 2022, for: ● each person, or group of affiliated persons, whom we know to beneficially own more than 5% of our common stock; ● each of our named executive officers; ● each of our directors; and ● all of our executive officers and directors as a group. We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options or warrants or upon conversion of a security that are either exercisable or convertible on or before a date that is 60 days after March 16, 2022. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws. Except as otherwise noted below, the address for persons listed in the table is c/o Muscle Maker, Inc., 2600 South Shore Blvd., Suite 300, League City, Texas 77573. 67 The percentage ownership information shown in the column labeled “Percentage of Shares Outstanding” is based upon 28,531,401 shares of common stock outstanding as of March 16, 2022. Number of Shares Percentage of Shares Beneficially Outstanding Prior to Name of Beneficial Owner Owned (1) Offering (1) 5% Stockholders: Armistice Capital Master Fund LTD (2) 2,863,411 9.99 % Altuim Growth Fund, LP (3) 1,995,882 7.00 % Catalytic Holdings 1 LLC (4) 1,979,802 6.74 % Thoroughbred Diagnostics, LLC (4) 1,579,000 5.42 % Directors and Named Executive Officers: Kevin Mohan (5) 136,537 * Michael J. Roper (6) 105,000 * Ferdinand Groenewald - * Kenneth Miller (7) 32,142 * Aimee Infante (8) 2,602 * Stephen Spanos (9) 24,408 * A.B. Southall, III (10) 124,915 * Paul L. Menchik (11) 78,420 * Jeff Carl (12) 17,639 * Major General (ret) Malcolm Frost (13) 26,589 * Philip Balatsos (14) 16,607 * All executive officers and directors as a group (11 persons) 564,859 1.98 % * denotes less than 1% 1. Beneficial ownership as reported in the above table has been determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended, and is not necessarily indicative of beneficial ownership for any other purpose. The number of shares of common stock shown as beneficially owned includes shares of common stock issuable upon (i) the exercise of stock options that will become exercisable within sixty (60) days of March 16, 2022, (ii) the conversion of the convertible promissory notes into shares of our common stock, and (iii) the exercise of warrants that will become exercisable within sixty (60) days of March 16, 2022. Shares of common stock issuable pursuant to the foregoing methods are deemed outstanding for purposes of calculating the percentage of beneficial ownership of the person or entity holding such securities. Accordingly, the total percentages of beneficial ownership are in excess of one hundred percent (100%). 2. Armistice Capital Master Fund LTD beneficial owns (i) 2,728,553 shares of the common stock of the Company and (ii) 7,725,337 shares of common stock of the Company which are subject to presently exercisable purchase warrants. There is a beneficial ownership limitation on the warrants and prefunded warrants owned by the holder that limits beneficial ownership of the holder to 9.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon exercise of the warrant at any time. The beneficial ownership limitation can be increase by the holder by giving written notice to the Company, but this will not take effect until 61 days after the delivery of the notice to the Company. Armistice Capital Master Fund LTD is managed by Armistice Capital, LLC, its investment manager. Steven Boyd, the managing member of Armistice Capital, LLC has the sole voting and investment power over the securities held by Armistice Capital Master Fund LTD. Based solely on the information provided in Schedule 13G filed with the Securities and Exchange Commission dated February 14, 2022 by Armistice Capital, LLC. 68 3. Altium Growth Funds, LP beneficial owns (i) 1,995,882 shares of the common stock of the Company, (ii) 2,888,085 shares of common stock of the Company which are subject to presently exercisable purchase warrants and (iii) 438,085 shares of common stock of the Company issuable upon the exercise of pre-funded warrants. There is a beneficial ownership limitation on the warrants and prefunded warrants owned by the holder that limits beneficial ownership of the holder to 9.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon exercise of the warrant at any time. The beneficial ownership limitation can be increase by the holder by giving written notice to the Company, but this will not take effect until 61 days after the delivery of the notice to the Company. Altium Growth Fund, LP is managed by Jacob Gottlieb who has the sole voting and investment power over the securities held by Altium Growth Fund, LP. Based solely on the information provided in Schedule 13G/A filed with the Securities and Exchange Commission dated February 11, 2022 by Armistice Capital, LLC. 4. Catalytic Holdings, LLC beneficially owns (i) 1,129,052 shares of common stock of the Company (ii) 850,750 shares of Common Stock of the Company which are subject to presently exercisable purchase warrants. The natural person with voting and investment control for Catalytic Holdings, LLC is Dmitriy Shapiro. Thoroughbred Diagnostics, LLC beneficially owns (i) 979,000 shares of common stock of Muscle Maker (ii) 600,000 shares of common stock of Muscle Maker which are subject to presently exercisable purchase warrants. The natural person with voting and investment control for Thoroughbred Diagnostics, LLC is Joey Giamichael. 5. Kevin Mohan beneficially owns (i) indirectly 5,574 shares of common stock of the Company through various family members that reside in the same household as Kevin Mohan and (ii) directly 130,963 shares of common stock of Muscle Maker of which 10,714 are subject to presently exercisable purchase warrants issued to Kevin Mohan. 6. Michael J. Roper beneficial owns directly 105,000 shares of common stock of the Company (i) 100,000 shares of Common stock of Muscle Maker Inc. for serving as the Chief Executive Officer of the Company and (ii) 5,000 shares of common stock of the Company purchased on the open market. 7. Aimee Infante beneficial owns directly 2,602 shares of common stock of the Company for serving as the Chief Marketing Officer of the Company. 8. Kenneth Miller beneficial owns directly 32,142 shares of common stock of the Company for serving as Chief Operating Officer of the Company. 9. Stephen Spanos beneficially owns directly (i) 19,108 shares of common stock of the Company for serving as a director and (ii) 5,300 of the common stock of through purchase on the open market. 10. A.B. Southall III beneficially owns (i) directly 114,915 shares of common stock of Muscle Maker, and (ii) directly 10,000 shares of common stock of the Company subject to presently exercisable purchase warrants issued to A.B. Southall III. 11. Paul L. Menchik beneficially owns (i) directly 78,420 shares of common stock of Muscle Maker, and (ii) directly 10,000 shares of common stock of the Company subject to presently exercisable purchase warrants issued to Paul L. Menchik. 12. Jeff Carl beneficially owns directly 17,639 shares of common stock of the Company for services rendered as a board of director. 13. Major General (ret) Malcolm Frost beneficially owns directly (i) 11,656 shares of common stock of the Company for services rendered as a board of director and (ii) 4,951 shares of common stock of the Company through purchases on the open market.. 14. Philip Balatsos beneficially owns directly 16,607 shares of common stock of the Company for services rendered as a board of director. 69 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Policies and Procedures for Related Party Transactions Following this offering, pursuant to the written charter of our Audit Committee, the Audit Committee will be responsible for reviewing and approving, prior to our entry into any such transaction, all related party transactions and potential conflict of interest situations involving: ● any of our directors, director nominees or executive officers; ● any beneficial owner of more than 5% of our outstanding stock; and ● any immediate family member of any of the foregoing. Our Audit Committee will review any financial transaction, arrangement or relationship that: ● involves or will involve, directly or indirectly, any related party identified above and is in an amount greater than $0; ● would cast doubt on the independence of a director; ● would present the appearance of a conflict of interest between us and the related party; or ● is otherwise prohibited by law, rule or regulation. The Audit Committee will review each such transaction, arrangement or relationship to determine whether a related party has, has had or expects to have a direct or indirect material interest. Following its review, the Audit Committee will take such action as it deems necessary and appropriate under the circumstances, including approving, disapproving, ratifying, canceling or recommending to management how to proceed if it determines a related party has a direct or indirect material interest in a transaction, arrangement or relationship with us. Any member of the Audit Committee who is a related party with respect to a transaction under review will not be permitted to participate in the discussions or evaluations of the transaction; however, the Audit Committee member will provide all material information concerning the transaction to the Audit Committee. The Audit Committee will report its action with respect to any related party transaction to the board of directors. Transactions with Officers, Directors and Executives of Muscle Maker On February 17, 2020 the Company authorized the issuance of an aggregate of 25,616 shares of common stock to the members of the board of directors as compensation earned through the end of the fourth quarter of 2019. On 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 November 10, 2020 the Company authorized the issuance of an aggregate of 5,944 shares of common stock to the members of the board of directors as compensation earned for the second and third quarter of 2020 On December 4, 2020, the board of directors approved a new board compensation plan that would compensate the board members for their deferred compensation for the fourth quarter 2020 through the third quarter of 2021. The board members are eligible for cash compensation of $12,000 per year to be paid quarterly within 30 days of the close of each quarter. In addition, on an ongoing basis pursuant to the approved board compensation plan each director will receive $8,000 in value of common stock per year for service as director, $6,000 in value of shares of common stock per year for service on each committee and $4,000 in value of shares of common stock per year for service as chair for such committee. The number of shares to be issued would be based upon the closing price of the last trading date of each calendar quarter. The shares of common stock for committee service will be limited to two committees. 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. 70 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 August 24, 2021, the Company authorized the issuance of an aggregate of 20,829 shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2021. On October 21, 2021, the Company authorized the issuance of an aggregate of 24,275 shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2021. As of December 31, 2021, the Company accrued a total of $39,573 related to board compensation for stock issuance and $18,000 for their portion of cash compensation earned during the fourth quarter of 2021. On February 10, 2022, the Company entered into an Employment Agreement with Michael Roper effective February 14, 2022, which replaced his prior employment agreement. Pursuant to the Employment Agreement, Mr. Roper will continue to be employed as Chief Executive Officer of the Company on an at will basis. During the term of the Employment Agreement, Mr. Roper will be entitled to a base salary at the annualized rate of $350,000, which will be increased to $375,000 upon the one-year anniversary. Mr. Roper will be eligible for a discretionary performance bonus to be paid in cash or equity. Within 90 days of the effective date, the Company will issue Mr. Roper stock options to receive 100,000 shares of common stock which will vest over a term of five years. If Mr. Roper is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, Mr. Roper will be entitled to a severance package of 18 months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule, but subject to the execution of a valid release in favor of the Company and its related parties. On February 10, 2022, the Company and Kevin Mohan, Chief Investment Officer, entered a letter agreement providing that Mr. Mohan will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $200,000 effective February 14, 2022. Mr. Mohan will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 75% of his salary. Within 90 days of the effective date, the Company will issue Mr. Mohan stock options to receive 75,000 shares of common stock which will vest over a term of five years. If Mr. Mohan is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. On February 9, 2022, the Company and Kenn Miller, Chief Operations Officer, entered a letter agreement providing that Mr. Miller will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $275,000 effective February 14, 2022. Mr. Miller will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 75% of his salary. Within 90 days of the effective date, the Company will issue Mr. Miller stock options to receive 50,000 shares of common stock which will vest over a term of five years. If Mr. Miller is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of 12 months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. On February 9, 2022, the Company and Aimee Infante, Chief Marketing Officer, entered a letter agreement providing that Ms. Infante will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $175,000 effective February 14, 2022. Ms. Infante will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25% of her salary. Within 90 days of the effective date, the Company will issue Ms. Infante stock options to receive 42,500 shares of common stock which will vest over a term of five years. If Ms. Infante is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, she will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. 71 On February 9, 2022, the Company and Ferdinand Groenewald, Chief Accounting Officer, entered a letter agreement providing that Mr. Groenewald will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $175,000 effective February 14, 2022. Mr. Groenewald will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25% of his salary. Within 90 days of the effective date, the Company will issue Mr. Groenewald stock options to receive 25,000 shares of common stock which will vest over a term of five years. If Mr. Groenewald is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. We have entered into indemnification agreements with each of our directors and entered into such agreements with certain of our executive officers. These agreements require us, among other things, to indemnify these individuals for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts reasonably incurred by such person in any action or proceeding, including any action by or in our right, on account of any services undertaken by such person on behalf of our Company or that person’s status as a member of our Board of Directors to the maximum extent allowed under Nevada law. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES . Paris Kreit & Chiu CPA LLP (formerly known as Benjamin and Ko) has served as our independent registered public accountants for the year ended December 31, 2021. Marcum LLP has served as our independent registered public accountants for the year ended December 31, 2020. The following is a summary of the fees billed or expected to be billed to us by our independent registered public accountants, for professional services rendered by Paris Kreit & Chiu CPA (formerly known as Benjamin and Ko) for the fiscal year ended December 31, 2021 and Marcum LLP for the year ended December 31, 2020: 2021 2020 Audit fees (1) $ 58,000 $ 312,390 Audit-related fees (2) 75,000 - Tax fees (3) - - All other fees (4) - - $ 133,000 $ 312,390 Audit Fees consist of fees billed and expected to be billed for services rendered for the audit of our consolidated financial statements for the fiscal years ended December 31, 2021 and 2020 and in connection with the filing of our Form 10-K, Form 10-Qs and multiple Forms S-1 and Forms S-3s. 1. Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit of our financial statements and are not reported under “Audit Fees.” 2. Tax Fees consist of fees billed for professional services related to preparation of our U.S. federal and state income tax returns and tax advice. 3. All Other Fees consist of fees billed for products and services provided by our independent registered public accountants, other than those disclosed above. The Audit Committee is responsible for the appointment, compensation and oversight of the work of the independent registered public accountants and approves in advance any services to be performed by the independent registered public accountants, whether audit-related or not. The Audit Committee reviews each proposed engagement to determine whether the provision of services is compatible with maintaining the independence of the independent registered public accountants. The fees shown above were pre-approved either by our Board or our Audit Committee. 72 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. Exhibit No. Exhibit Description 3.1+ Articles of Incorporation of Muscle Maker, Inc., a Nevada corporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 14, 2019) 3.2+ Bylaws of Muscle Maker, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 14, 2019) 3.3+ Certificate of Change Pursuant to NRS 78.209 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on December 11, 2019) 3.4+ Certificate of Amendment to Articles of Incorporation of Muscle Maker, Inc., a Nevada corporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 16, 2020) 4.1+ Form of Warrant to Purchase Common Stock dated April 9, 2021 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021) 4.2 + Form of Pre-Funded Warrant to Purchase Common Stock dated April 9, 2021 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021) 4.3+ Form of Warrant to Purchase Common Stock issued to A.G.P./Alliance Global Partners dated April 9, 2021 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021) 4.4+ Form of Warrant to Purchase Common Stock dated November 22, 2021 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021) 4.5+ Form of Pre-Funded Warrant to Purchase Common Stock dated November 22, 2021(incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021) 4.6+ Form of Placement Agent Warrant to Purchase Common Stock issued to A.G.P./Alliance Global Partners dated November 22, 2021(incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021) 4.7 2021 Equity Incentive Plan 4.8 Description of Securities 10.1† Muscle Maker 2017 Stock Option and Stock Issuance Plan and form of award agreements (incorporated by reference to Exhibit 6.1 to Amendment No 1 to the Offering Statement Report on Form 1-A/A filed on September 21, 2017) 10.2† Form of Restricted Stock Agreement under Muscle Maker 2017 Stock Option and Stock Issuance Plan (incorporated by reference to Exhibit 6.5 to Amendment No 1 to the Offering Statement Report on Form 1-A/A filed on September 21, 2017) 10.3 Assignment and Assumption Agreement, dated August 25, 2017, between Muscle Maker Brands Conversion, Inc. and Muscle Maker Development, LLC (incorporated by reference to Exhibit 6.7 to Amendment No 1 to the Offering Statement Report on Form 1-A/A filed on September 21, 2017) 73 10.4 Agreement of Conveyance, Transfer and Assigning of Assets and Assumptions of Obligations, dated September 15, 2017, between Muscle Maker, Inc. and Muscle Maker Corp., LLC (incorporated by reference to Exhibit 6.8 to the Registrant’s Amendment No 1 to the Offering Statement Report on Form 1-A/A filed on September 21, 2017) 10.5 Form of Securities Purchase Agreement, dated April 7, 2021, between Muscle Maker, Inc. and the Purchaser* (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021) 10.6 Placement Agency Agreement between Muscle Maker, Inc. and A.G.P./Alliance Global Partners dated April 6, 2021 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021) 10.7 Form of Securities Purchase Agreement, dated November 17, 2021, between Muscle Maker, Inc. and the Purchasers*(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021) 10.8 Form of Registration Rights Agreement, dated November 17, 2021, between Muscle Maker, Inc. and the Purchasers(incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021) 10.9 Placement Agency Agreement between Muscle Maker, Inc. and A.G.P./Alliance Global Partners dated November 17, 2021(incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021) 10.10† Employment Agreement between Muscle Maker, Inc. and Michael Roper dated February 10, 2022 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 11, 2022) 10.11† Letter Agreement between Muscle Maker, Inc. and Kevin Mohan dated February 10, 2022(incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 11, 2022) 10.12† Letter Agreement between Muscle Maker, Inc. and Aimee Infante dated February 9, 2022 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on February 11, 2022) 10.13† Letter Agreement between Muscle Maker, Inc. and Kenn Miller dated February 9, 2022 (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on February 11, 2022) 10.14† Letter Agreement between Muscle Maker, Inc. and Ferdinand Groenewald dated February 9, 2022 (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on February 11, 2022) 10.15† Form of Director Agreement dated July 16, 2019 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 10, 2019) 10.16 Form of Conversion Agreement (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on December 10, 2019) 10.17 Form of Addendum to Conversion Agreement (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on December 10, 2019) 21.1* List of Subsidiaries 23.1* Consent of Paris Kreit & Chiu CPA LLP 74 23.2* Consent of Marcum LLP 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 32.3 Certification of Chief Financial Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance Document* 101.SCH Inline XBRL Schema Document* 101.CAL Inline XBRL Calculation Linkbase Document* 101.DEF Inline XBRL Definition Linkbase Document* 101.LAB Inline XBRL Label Linkbase Document* 101.PRE Inline XBRL Presentation Linkbase Document* 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) † Includes management contracts and compensation plans and arrangements *Filed herewith. +Previously filed. ITEM 16. FORM 10-K SUMMARY. Not applicable. 75 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. MUSCLE MAKER, INC By: /s/ Michael J. Roper Michael J. Roper Dated: March 17, 2022 Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Title /s/ Michael J. Roper Chief Executive Officer, and Michael J. Roper Secretary (Principal Executive Officer) /s/ Jennifer Black Chief Financial Officer Jennifer Black (Principal Financial Officer) /s/ Ferdinand Groenewald Chief Accounting Officer Ferdinand Groenewald (Principal Accounting Officer) /s/ Kevin Mohan Chief Investment Officer and Chairman of the Board Kevin Mohan /s/ Stephen A. Spanos Director Stephen A. Spanos /s/ A.B. Southall III Director A.B. Southall III /s/ Paul L. Menchik Director Paul L. Menchik /s/ Jeff Carl Director Jeff Carl /s/ Malcolm Frost Director Major General (Ret) Malcolm B. Frost /s/ Philip Balatsos Director Philip Balatsos 76 MUSCLE MAKER, INC AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm 2021 (PCAOB ID: 6651 ) F-2 Prior year report of Independent Registered Public Accounting Firm 2020 (PCAOB ID: 34446 ) F-3 Consolidated Financial Statements Balance Sheets as of December 31, 2021 and 2020 F-4 Statements of Operations for the years ended December 31, 2021 and 2020 F-5 Statements of Changes in Stockholders’ Equity for the years ended December 31, 2021 and 2020 F-6 Statements of Cash Flows for the years ended December 31, 2021 and 2020 F-8 Notes to Consolidated Financial Statements F-10 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 2021 Board of Directors and Shareholders Muscle Maker, Inc. and Subsidiaries Opinion on the Financial Statements We have audited the accompanying balance sheet of Muscle Maker, Inc. and Subsidiaries (the “Company”) as of December 31, 2021, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on the entity’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion. 4 Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ Paris, Kreit & Chiu CPA LLP (formerly Benjamin & Ko) We have served as Muscle Maker Inc.’s auditor since 2021. New York, NY March 16, 2022 F- 2 PRIOR YEAR REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 2020 To the Stockholders and Board of Directors of Muscle Maker, Inc. and Subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Muscle Maker, Inc. and Subsidiaries (the “Company”) as of December 31, 2020, the related consolidated statements of operations , changes in stockholders’ equity and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. Explanatory Paragraph – Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has incurred significant losses and net cash used in operations and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion. /s/ Marcum LLP We have served as the Company’s auditor from 2016 to May 2021. Melville, NY April 15, 2021 Marcum LLP ■ 10 Melville Park Road ■ Melville, New York 11747 ■ Phone 631.414.4000 ■ Fax 631.414.4001 ■ marcumllp.com F- 3 MUSCLE MAKER, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, December 31, 2021 2020 Assets Current Assets: Cash $ 15,766,703 $ 4,195,932 Accounts receivable, net of allowance for doubtful accounts of $ 23,693 and $ 75,000 as of December 31, 2021 and December 31, 2020, respectively 155,167 140,305 Inventory 258,785 113,824 Current portion of loans receivable, net of allowance of $ 71,184 and $ 106,900 at December 31, 2021 and 2020, respectively - 2,394 Prepaid expenses and other current assets 1,789,328 40,903 Total Current Assets 17,969,983 4,493,358 Property and equipment, net 2,280,267 2,342,723 Goodwill 2,626,399 656,348 Intangible assets, net 6,387,464 2,878,278 Loans receivable, non-current - 996 Security deposits and other assets 167,770 131,916 Total Assets $ 29,431,883 $ 10,503,619 Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable and accrued expenses $ 2,208,523 $ 1,500,935 Convertible note payable to Former Parent 82,458 82,458 Convertible note payable 100,000 100,000 Other notes payable 165,052 701,552 Deferred revenue, current 49,728 62,858 Deferred rent, current 36,800 20,569 Other current liabilities 286,088 641,418 Total Current Liabilities 2,928,649 3,109,790 Other notes payable 1,005,027 575,140 Deferred revenue, non-current 1,013,645 944,271 Deferred rent, non-current 91,295 79,290 Total Liabilities 5,038,616 4,708,491 Commitments and Contingencies - - Stockholders’ Equity: Common stock, $ 0.0001 par value, 50,000,000 shares authorized, 26,110,268 and 11,725,764 shares issued and outstanding as of December 31, 2021, and December 31, 2020, respectively 2,611 1,172 Additional paid-in capital 95,760,493 68,987,663 Accumulated deficit ( 71,369,837 ) ( 63,193,707 ) Total Stockholders’ Equity 24,393,267 5,795,128 Total Liabilities and Stockholders’ Equity $ 29,431,883 $ 10,503,619 See Notes to the Consolidated Financial Statements F- 4 MUSCLE MAKER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 2021 2020 Revenues: Company restaurant sales, net of discounts $ 9,320,920 $ 3,672,944 Franchise royalties and fees 778,181 739,450 Franchise advertising fund contributions 188,539 61,053 Other revenue 61,996 - Total Revenues 10,349,636 4,473,447 Operating Costs and Expenses: Restaurant operating expenses: Food and beverage costs 3,532,907 1,467,799 Labor 1,917,979 1,908,476 Rent 1,261,096 691,986 Other restaurant operating expenses 2,362,687 1,146,443 Total restaurant operating expenses 9,074,669 5,214,704 Impairment of intangible asset 1,139,908 100,000 Impairment of goodwill 86,348 - Depreciation and amortization 1,206,505 422,546 Franchise advertising fund expenses 188,539 61,053 Preopening expenses 31,829 56,362 General and administrative expenses 8,094,509 8,576,231 Total Costs and Expenses 19,822,307 14,430,896 Loss from Operations ( 9,472,671 ) ( 9,957,449 ) Other Expenses (Income): Other income ( 9,097 ) 27,143 Interest income, net ( 50,170 ) ( 115,881 ) Change in fair value of accrued compensation 127,500 ( 14,000 ) Gain on debt extinguishment 1,228,308 - Amortization of debt discounts - ( 38,918 ) Total Other Expenses, Net 1,296,541 ( 141,656 ) Loss Before Income Tax ( 8,176,130 ) ( 10,099,105 ) Income tax provision - - Net Loss $ ( 8,176,130 ) $ ( 10,099,105 ) Net Loss Per Share: Basic and Diluted $ ( 0.50 ) $ ( 1.33 ) Weighted Average Number of Common Shares Outstanding: Basic and Diluted 16,467,393 7,579,905 See Notes to the Consolidated Financial Statements F- 5 MUSCLE MAKER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Common Stock Additional 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 upon offering on February 12, 2020, net of underwriter’s discount and offering costs Common stock issued upon offering on February 12, 2020, net of underwriter's discount and offering costs, shares Common stock issued in exchange for accrued interest Common stock issued in exchange for accrued interest, shares Restricted common stock cancelled by executive team Restricted Common stock cancelled by executive team, shares Common stock issued as compensation for services as part of settlement Common stock issued as compensation for services as part of settlement, shares Common stock cancelled by consultant issued for prior services Common stock cancelled by consultant issued for prior services, shares Offering on September 10, 2020, net of underwriter’s discount and offering cost of $660,000 Offering on September 10, 2020, net of underwriter's discount and offering cost, shares Over-allotment exercised on October 27, 2020, net of underwriter’s discount and offering cost Over-allotment exercised on October 27, 2020, net of underwriter’s discount and offering cost, shares Common stock issued in connection of the acquisition of SuperFit Foods on March 25, 2021 268,240 27 624,973 - 625,000 Common stock, pre-funded warrants and warrant issued in private placement on April 7, 2021, net of fees $ 790,000 1,250,000 125 9,181,224 - 9,181,349 Common stock, pre-funded warrants and warrant issued in private placement on April 7, 2021 1,250,000 125 9,181,224 - 9,181,349 Common stock issued in connection of the acquisition of Pokemoto on May 14, 2021 880,282 88 1,249,912 - 1,250,000 Common stock, pre-funded warrants and warrant issued in private placement on November 22, 2021, net of fees $ 1,289,965 6,772,000 677 13,708,924 - 13,709,601 Common stock, pre-funded warrants and warrant issued in private placement on November 22, 2021 6,772,000 677 13,708,924 - 13,709,601 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 73,941 7 114,029 - 114,036 Common stock issued as compensation for services 852,500 86 1,326,941 - 1,327,027 Exercise of pre-funded warrants 4,075,337 408 28,365 - 28,773 Cancellation of share per agreement with shareholder ( 11,879 ) ( 1 ) ( 99,999 ) - ( 100,000 ) Common stock issued to investor 1,100 - 1,540 - 1,540 Amortization of restricted common stock - - 426 - 426 Stock-based compensation: Restricted common stock Stock-based compensation: Warrants - Issued as compensation for services Stock-based compensation: Warrants - Cancelled by consultant for prior services Stock-based compensation: Options Net loss - - - ( 8,176,130 ) ( 8,176,130 ) Balance - December 31, 2021 26,110,268 $ 2,611 $ 95,760,493 $ ( 71,369,837 ) $ 24,393,267 See Notes to the Consolidated Financial Statements F- 6 MUSCLE MAKER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY Common Stock Additional Paid-in Accumulated Shares Amount Capital Deficit Total Balance - December 31, 2019 5,714,464 $ 571 $ 53,339,793 $ ( 53,094,602 ) $ 245,762 Beginning balance, value 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 Common stock issued upon offering on February 12, 2020, net of underwriter’s discount and offering costs 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 Restricted common stock issued as compensation to executives and employees 216,783 22 1,083,893 - 1,083,915 Common stock issued as compensation to board of directors 35,900 4 149,817 - 149,821 Common stock issued as compensation for services 594,834 60 2,457,983 - 2,458,043 Common stock issued in exchange for accrued interest 51,105 5 357,730 - 357,735 Restricted common stock cancelled by executive team ( 216,783 ) ( 22 ) ( 1,083,893 ) - ( 1,083,915 ) Common stock issued as compensation for services as part of settlement 300,000 30 - - 30 Common stock cancelled by consultant issued for prior services ( 300,000 ) ( 30 ) - - ( 30 ) Offering on September 10, 2020, net of underwriter’s discount and offering cost of $ 660,000 3,294,118 329 4,939,672 - 4,940,001 Offering on September 10, 2020, net of underwriter’s discount and offering cost 3,294,118 329 4,939,672 - 4,940,001 Over-allotment exercised on October 27, 2020, net of underwriter’s discount and offering cost of $ 75,600 494,117 49 764,350 - 764,399 Over-allotment exercised on October 27, 2020, net of underwriter’s discount and offering cost 494,117 49 764,350 - 764,399 Stock-based compensation: Restricted common stock - - 80,472 - 80,472 Stock-based compensation: Restricted common stock - - 80,472 - 80,472 Warrants - Issued as compensation for services - - 191,000 - 191,000 Stock-based compensation: Warrants - Issued as compensation for services - - 191,000 - 191,000 Warrants - Cancelled by consultant for prior services - ( 191,000 ) - ( 191,000 ) Stock-based compensation: Warrants - Cancelled by consultant for prior services - - ( 191,000 ) - ( 191,000 ) Options - - 118,000 - 118,000 Stock-based compensation: Options - - 118,000 - 118,000 Net loss - - - ( 10,099,105 ) ( 10,099,105 ) Balance - December 31, 2020 11,725,764 $ 1,172 $ 68,987,663 $ ( 63,193,707 ) $ 5,795,128 Ending balance, value 11,725,764 $ 1,172 $ 68,987,663 $ ( 63,193,707 ) $ 5,795,128 See Notes to the Consolidated Financial Statements F- 7 MUSCLE MAKER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2021 2020 Cash Flows from Operating Activities Net loss $ ( 8,176,130 ) $ ( 10,099,105 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,206,505 422,546 Stock-based compensation 2,207,046 2,806,336 Gain on extinguishments of debt ( 1,228,308 ) - Impairment of intangible asset 1,139,908 100,000 Impairment of goodwill 86,348 - Amortization of debt discounts - 38,918 Change in fair value of compensation ( 127,500 ) 14,000 Write off of property and equipment 193,405 41,480 Bad debt expense 6,663 112,715 Changes in operating assets and liabilities: Accounts receivable, net ( 21,525 ) ( 56,543 ) Inventory ( 125,461 ) ( 35,402 ) Prepaid expenses and other current assets ( 1,748,425 ) 7,161 Security deposits and other assets ( 274 ) ( 92,454 ) Accounts payable and accrued expenses 622,828 ( 786,278 ) Deferred rent ( 3,081 ) 20,521 Deferred revenue ( 69,380 ) ( 268,543 ) Other current liabilities ( 355,330 ) ( 11,225 ) Total Adjustments 1,783,419 2,313,232 Net Cash Used in Operating Activities ( 6,392,711 ) ( 7,785,873 ) Cash Flows from Investing Activities Purchases of property and equipment ( 262,019 ) ( 781,041 ) Cash paid in connection with the acquisition of SuperFit Foods ( 500,000 ) - Cash paid in connection with the acquisition of Pokemoto, net of cash acquired ( 2,815,390 ) - Cash paid in connection with the acquisition of Philadelphia - ( 75,000 ) Cash paid in connection with the acquisition - ( 75,000 ) Collections from loans receivable 1,600 5,707 Net Cash Used in Investing Activities ( 3,575,809 ) ( 850,334 ) Cash Flows from Financing Activities Proceeds from offerings, net of underwriter’s discount and offering costs of $ 1,580,000 - 11,720,001 Proceeds from over-allotment, net of underwriter’s discount and offering costs of $ 75,600 - 764,399 Proceeds from PPP loan - 866,300 Repayments of convertible note payable - ( 550,000 ) Proceeds from Private Placement Offering, net of underwriter’s discount and offering costs of $ 2,079,965 22,890,950 - Proceeds from exercise of pre-funded warrants 28,773 - Cash paid in connection with cancellation of shares ( 100,000 ) - Repayments of other notes payable - related parties - ( 91,000 ) Repayments of other notes payables ( 1,280,432 ) ( 506,415 ) Proceeds from other notes payable - 150,000 Net Cash Provided by Financing Activities 21,539,291 12,353,285 Net Increase in Cash 11,570,771 3,717,078 Cash - Beginning of Period 4,195,932 478,854 Cash - End of Period $ 15,766,703 $ 4,195,932 See Notes to the Consolidated Financial Statements F- 8 MUSCLE MAKER, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS – CONTINUED For the Years Ended December 31, 2021 2020 Supplemental Disclosures of Cash Flow Information: Cash paid for interest $ 80,697 $ 395,695 Supplemental disclosures of non-cash investing and financing activities Common stock issued in exchange for accrued interest $ - $ 357,735 Acquisition of Chelsea NY - loans receivable settled as consideration for the acquisition of Chelsea $ - $ 68,292 F- 9 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 1 – BUSINESS ORGANIZATION AND NATURE OF OPERATIONS 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, MMI 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. On May 14, 2021, MMI acquired PKM Stamford, LLC, Poke Co., LLC, LB Holdings LLC, TNB Holdings, LLC, Poke Co Holdings LLC, GLL Enterprises, LLC, and TNB Holdings II, LLC, each a Connecticut limited liability company (collectively, Pokemoto”), a healthier modern culinary twist on the traditional Hawaiian poke classic. Pokemoto had thirteen locations in four states – Connecticut, Rhode Island, Massachusetts, and Georgia and offers up chef-driven contemporary flavors with fresh delectable and healthy ingredients such as Atlantic salmon, sushi-grade tuna, fresh mango, roasted cashews and black caviar tobiko that appeals to foodies, health enthusiasts, and sushi-lovers everywhere. The colorful dishes and modern chic dining rooms provide an uplifting dining experience for guests of all ages. Customers can dine in-store or order online via third party delivery apps for contactless delivery. MMI and its subsidiaries are hereinafter referred to as the “Company”. As of December 31, 2021, MMI consisted of three operating segments: ● Muscle Maker Grill Division ● Pokemoto Division ● SuperFit Foods Division F- 10 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 1 – BUSINESS ORGANIZATION AND NATURE OF OPERATIONS The Company operates under the name Muscle Maker Grill, Pokemoto and SuperFit Foods and is a franchisor and owner operator of Muscle Maker Grill, Healthy Joe’s and Pokemoto restaurants. As of December 31, 2021, the Company’s restaurant system included twenty-two Company-owned restaurants, including the SuperFit Foods kitchen, and twenty franchise restaurants. COVID-19 In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. In response to the COVID-19 outbreak, “shelter in place” orders and other public health measures have been implemented across much of the United States. The COVID-19 global pandemic continues to rapidly evolve. The Company is continually monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread, and its impact on operations, financial position, cash flows, inventory, supply chains, labor shortages resulting from various factors including mandatory vaccination requirements, 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 year ended December 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. Liquidity Our primary source of liquidity is cash on hand. As of December 31, 2021, the Company had a cash balance, a working capital surplus and an accumulated deficit of $ 15,766,703 , $ 15,041,334 , and $ 71,369,837 , respectively. During the year ended December 31, 2021, the Company incurred a pre-tax net loss of $ 8,176,130 and net cash used in operations of $ 6,392,711 . The Company believes that our existing cash on hand and future cash flows from our franchise operations, will be sufficient to fund our operations, anticipated capital expenditures and repayment obligations over the next twelve months. NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and majority-owned subsidiary. Any intercompany transactions and balances have been eliminated in consolidation. Reclassifications Certain prior year balances have been reclassified in order to conform to current year presentation. These reclassifications have no effect on the previously reported results of operations or loss per share. F- 11 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued 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 December 31, 2021 or 2020. Inventory Inventories, which are stated at the lower of cost or net realizable value, consist primarily of perishable food items and supplies. Cost is determined using the first-in, first out method. 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: SCHEDULE OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT Furniture and equipment 5 - 7 years Leasehold improvements 1 - 11 years F- 12 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued Intangible Assets The Company accounts for recorded intangible assets in accordance with ASC 350 “Intangibles - Goodwill and Other”. In accordance with ASC 350, the Company does not amortize intangible assets having indefinite useful lives. The Company’s 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 original useful lives are as follows: SCHEDULE OF OTHER INTANGIBLE ASSETS USEFUL LIVES Franchisee agreements 13 years Franchise license 10 years Trademark – SuperFit, Trademark – Pokemoto Domain name, customer list and Proprietary recipes 5 – 7 years Non-compete agreement 2 – 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, the Company performs 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. F- 13 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued Convertible Instruments The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with Topic 815 of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). If the instrument is determined not to be a derivative liability, the Company then evaluates for the existence of a beneficial conversion feature by comparing the market price of the Company’s common stock as of the commitment date to the effective conversion price of the instrument. As of December 31, 2021 and December 31, 2020, the Company deemed the conversion feature was not required to be bifurcated and recorded as a derivative liability. Revenue Recognition The Company’s revenues consist of restaurant sales, franchise royalties and fees, franchise advertising fund contributions, and other revenues. The Company recognized revenues according to Topic 606 “Revenue from Contracts with Customers”. Under the guidance, revenue is recognized in accordance with a five-step revenue model, as follows: (1) identifying the contract with the customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations; and (5) recognizing revenue when (or as) the entity satisfies a performance obligation. In applying this five-step model, we 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, discounts and other sales related taxes. The Company recorded retail store revenues of $ 9,320,920 and $ 3,672,944 during the years ended December 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 $ 434,849 and $ 331,694 during the years ended December 31, 2021 and 2020, respectively, which is included in franchise royalties and fees on the accompanying consolidated statements of operations. F- 14 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued Franchise Royalties and Fees, continued 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 revenue from franchise fees of $ 263,215 and $ 277,255 during the years ended December 31, 2021 and 2020, respectively, which is included in franchise royalties and fees on the accompanying 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 $ 80,117 and $ 130,501 during the years ended December 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. 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 $ 188,539 and $ 61,053 , respectively, during the years ended December 31, 2021 and 2020, which are included in franchise advertising fund contributions on the accompanying consolidated statements of operations. 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. Gift card liability is recorded in other current liabilities on the consolidated balance sheet. The Company recorded $ 61,996 gift card breakage for the year ended December 31, 2021. For the year ended December 31, 2020, the Company did not record any gift card breakage. F- 15 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued 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. Advertising Advertising costs are charged to expense as incurred. Advertising costs were approximately $ 134,073 and $ 175,378 for the years ended December 31, 2021 and 2020, and are included in general and administrative expenses in the accompanying consolidated statements of operations. Net Loss per Share Basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding, plus the impact of potential common shares, if dilutive, resulting from the exercise of warrants, options or the conversion of convertible notes payable. The following securities are excluded from the calculation of weighted average diluted common shares at December 31, 2021 and 2020, respectively, because their inclusion would have been anti-dilutive: SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE December 31, 2021 2020 Warrants 20,284,016 2,582,857 Options 100,000 300,000 Convertible debt 32,350 32,350 Total potentially dilutive shares 20,416,366 2,915,207 Major Vendor The Company engages various vendors to distribute food products to their Company-owned restaurants. Purchases from the Company’s largest supplier totaled 54 % and 87 % of the Company’s purchases for the years ended December 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: F- 16 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued Fair Value of Financial Instruments, continued 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 16 – Equity – Warrant and Options Valuation for details related to accrued compensation liability being fair valued using Level 1 inputs. Income Taxes The Company accounts 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. 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 the Company’s 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. Uncertain tax positions have had no impact on the Company’s financial condition, results of operations or cash flows. The Company does not expect any significant changes in its unrecognized tax benefits within years of the reporting date. The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the consolidated statements of operations. Stock-Based Compensation The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally recorded on the grant date and re-measured on financial reporting dates and vesting dates until the service period is complete. The fair value amount of the award is then recognized over the period services are required to be provided in exchange for the award, usually the vesting period. F- 17 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which requires companies to recognize lease liabilities and corresponding right-of-use leased assets on the balance sheets and to disclose key information about leasing arrangements. Qualitative and quantitative disclosures will be enhanced to better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2022, with early adoption permitted. Additionally, in 2018 and 2019, the FASB issued the following Topic 842–related ASUs: ● ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842, which clarifies the applicability of Topic 842 to land easements and provides an optional transition practical expedient for existing land easements; ● ASU 2018-10, Codification Improvements to Topic 842, Leases, which makes certain technical corrections to Topic 842; ● ASU 2018-11, Leases (Topic 842): Targeted Improvements, which allows companies to adopt Topic 842 without revising comparative period reporting or disclosures and provides an optional practical expedient to lessors to not separate lease and non-lease components of a contract if certain criteria are met; and ● ASU 2019-01, Leases (Topic 842): Codification Improvements, which provides guidance for certain lessors on determining the fair value of an underlying asset in a lease and on the cash flow statement presentation of lease payments received; ASU No. 2019-01 also clarifies disclosures required in interim periods after adoption of ASU No. 2016-02 in the year of adoption. The Company will adopt Topic 842 as of December 31, 2022 and will recognize a cumulative-effect adjustment to the opening balance of accumulated deficit as of the adoption date. The Company is still currently evaluating the aforementioned ASUs and its impact on its consolidated financial statements and disclosure. 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 adoption of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures. F- 18 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES, continued Recent Accounting Pronouncements, continued In October 2021, the FASB issued ASU 2021-08 Business Combinations (“Topic 805”): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. We are currently evaluating the extent of the impact of this ASU, but do not expect the adoption of this standard to have a significant impact on our consolidated financial statements. 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 17 – Subsequent Events. NOTE 3 – ACQUISITIONS Chelsea Acquisition On October 19, 2020, the Company acquired a franchisee store in Chelsea, New York, as a corporate store (the “Chelsea Acquisition”). The purchase price of the store was $ 68,292 , of which $ 34,146 related to equipment purchased and the remaining $ 34,146 was attributed to leasehold improvements. The Company agreed to forgive a promissory note in the amount of $ 68,292 that was owed from the franchisee in exchange for the purchase of the location. In addition, the Company became obligated for payments pursuant to a five-year lease, exclusive of options to renew. Monthly rent payments pursuant to this lease agreement range from $ 11,000 to $ 16,105 with a straight-line rent expense of $ 13,431 per month. The unaudited pro-forma financial information in the table below summarizes the consolidated results of operations of the Company and the Chelsea franchisee store 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. SCHEDULE OF BUSINESS ACQUISITION PRO FORMA INFORMATION Pro Forma (Unaudited) For the Year Ended December 31, 2020 Revenues $ 4,723,815 Restaurant operating expenses 5,440,040 Total cost and expenses 14,650,196 Loss from Operations ( 9,926,382 ) F- 19 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 3 – ACQUISITIONS, continued Philadelphia Acquisition On November 2, 2020, the Company acquired a franchisee store in Philadelphia, Pennsylvania, as a corporate store (the “Philadelphia Acquisition”). The purchase price of the store was $ 250,000 , of which $ 125,000 related to equipment purchased and the remaining $ 125,000 relates to leasehold improvements. The Company paid cash of $ 75,000 to the seller on the closing date and agreed to a $ 175,000 7 % promissory note over the next sixty months with the first payment being due and payable on December 2, 2020. As part of the acquisition the Company agreed to a lease assignment and assumed the remaining commitment under the lease upon the closing date. The unaudited pro-forma financial information in the table below summarizes the combined results of operations of the Company and the Philadelphia franchisee store 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. SCHEDULE OF BUSINESS ACQUISITION PRO FORMA INFORMATION Pro Forma (Unaudited) For the Year Ended December 31, 2020 Revenues $ 4,877,003 Restaurant operating expenses 5,548,238 Total cost and expenses 14,758,430 Loss from Operations ( 9,881,427 ) SuperFit Foods Acquisition 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 was 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. The remaining $25,000, which was to be issued in the Company’s common stock, was forfeited as the Company and former owner agreed that not all obligations were met. The Company acquired the following assets as part of the purchase agreement, adjusted for purchase accounting adjustments to reflect our estimate of the fair value of the net assets acquired during the year ended December 31, 2021: SCHEDULE OF ASSETS ACQUIRED IN BUSINESS COMBINATIONS 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 258,000 Total assets acquired $ 1,125,000 F- 20 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 3 – ACQUISITIONS, continued SuperFit Foods Acquisition, continued The adjustment to the estimate identifiable net assets acquired resulted in a corresponding $ 25,000 decrease in estimated goodwill due to the Company having no further obligation to issue the $ 25,000 shares of common stock as mentioned above. The unaudited pro-forma financial information in the table below summarizes the consolidated results of operations of the Company and SuperFit 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. SCHEDULE OF BUSINESS ACQUISITION PRO FORMA INFORMATION 2021 2020 Pro Forma (Unaudited) For the Year Ended December 31, 2021 2020 Revenues $ 10,857,136 $ 5,335,297 Restaurant operating expenses 9,663,874 9,981,409 Total cost and expenses 20,277,080 15,203,204 Loss from Operations ( 9,419,944 ) ( 9,867,907 ) Pokemoto Acquisition On May 14, 2021, the Company entered into 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”). 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 on May 14, 2021. The price per share was determined by using the 10-day trading average preceding the date of closing. The closing occurred on May 14, 2021. Poke Entities and Poke Entities II are hereinafter referred to as “Pokemoto”. As of the date of the acquisition Pokemoto operated a total of thirteen locations, six Company-owned restaurants and 8 franchised restaurants, in four states, offering up chef-driven contemporary flavors with fresh delectable and healthy ingredients such as Atlantic salmon, sushi-grade tuna, fresh mango, roasted cashews and black caviar tobiko that appeals to foodies, health enthusiasts, and sushi-lovers everywhere. F- 21 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 3 – ACQUISITIONS, continued Pokemoto Acquisition, continued The Company acquired the following assets as part of the purchase agreement, adjusted for purchase accounting adjustments to reflect our estimate of the fair value of the net assets acquired during the year ended December 31, 2021: SCHEDULE OF ASSETS ACQUIRED IN BUSINESS COMBINATIONS Purchase Price $ 5,980,000 Assets Cash $ 1,184,610 Accounts Receivables - Inventory 19,500 Property and Equipment 297,529 Intangible assets, net 4,560,000 Operating lease right-of-use assets, net 719,941 Security deposits and other assets 35,580 $ 6,817,160 Liabilities Accounts payable and accrued expenses $ 296,224 Other notes payable 1,462,453 Deferred revenue 125,624 Operating lease liability 751,258 $ 2,635,559 Fair value of identifiable net assets acquired 4,181,601 Goodwill $ 1,798,399 The adjustment to the estimated identifiable net assets acquired resulted in a corresponding $ 76,183 increase in estimated goodwill due to the following changes to the purchase price allocation. SCHEDULE OF INCREASE DECREASE IN GOODWILL Increase (Decrease) in Goodwill Assets Accounts Receivables $ ( 60,208 ) Assets $ ( 60,208 ) Liabilities Accounts payable and accrued expenses $ 13,767 Deferred revenue 2,208 Liabilities $ 15,975 Total increase in Goodwill $ 76,183 F- 22 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 3 – ACQUISITIONS, continued Pokemoto Acquisition, continued Identifiable intangible assets acquired include the following: SCHEDULE OF IDENTIFIABLE INTANGIBLE ASSETS Fair Value Weighted average amortization period Tradename $ 175,000 5.00 Franchise License 2,775,000 10.00 Proprietary Recipes 1,130,000 7.00 Non-Compete 480,000 2.00 $ 4,560,000 8.22 The unaudited pro-forma financial information in the table below summarizes the consolidated results of operations of the Company and Pokemoto, 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. SCHEDULE OF BUSINESS ACQUISITION PRO FORMA INFORMATION 2021 2020 Pro Forma (Unaudited) For the Years Ended December 31, 2021 2020 Revenues $ 11,646,468 $ 8,126,925 Restaurant operating expenses 10,074,110 7,883,343 Total cost and expenses 20,959,940 17,676,026 Loss from Operations ( 9,313,472 ) ( 9,549,101 ) NOTE 4 - LOANS RECEIVABLE At December 31, 2021 the Company’s loan receivable balance was $ 0 . At December 31, 2020 the Company’s loans receivable consists of the following: SCHEDULE OF LOANS RECEIVABLES December 31, December 31, 2021 2020 Loans receivable, net $ - $ 3,390 Less: current portion - ( 2,394 ) Loans receivable, non-current $ - $ 996 Loans receivable includes loans to franchisees totaling, in the aggregate, $ 0 and $ 3,390 , net of reserves for uncollectible loans of $ 71,184 and $ 106,900 at December 31, 2021 and 2020, respectively. F- 23 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 5 - PREPAID EXENSES AND OTHER CURRENT ASSETS At December 31, 2021 and 2020, the Company’s prepaid expenses and other current assets consists of the following: SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS December 31, December 31, 2021 2020 Prepaid expenses $ 83,975 $ 23,446 Preopening expenses 602 17,457 Other receivables 1,704,751 - Prepaid and Other Current Assets $ 1,789,328 $ 40,903 Include in prepaid and other current assets is a receivable of $ 1,704,751 , which reduced labor expense included in restaurant operating expenses, related to the employee retention tax credits receivable from the Internal Revenue Services (“IRS”) that was made available to companies effected by Covid-19. The Company started to early access the credit in the fourth quarter of 2021 as allowed by the IRS. NOTE 6 – PROPERTY AND EQUIPMENT, NET As of December 31, 2021, and 2020, property and equipment consist of the following: SCHEDULE OF PROPERTY AND EQUIPMENT, NET December 31, December 31, 2021 2020 Furniture and equipment $ 1,397,098 $ 1,143,320 Vehicles 55,000 - Leasehold improvements 1,981,019 1,940,907 Property and equipment, gross 3,433,117 3,084,227 Less: accumulated depreciation and amortization ( 1,152,850 ) ( 741,504 ) Property and equipment, net $ 2,280,267 $ 2,342,723 Depreciation expense amounted to $ 565,599 and $ 362,009 for the years ended December 31, 2021 and 2020, respectively. During the years ended December 31, 2021 and 2020, the Company wrote off property and equipment with an original cost value of $ 347,658 and $ 151,111 , respectively, related to closed locations and future locations that were terminated due to the economic environment as a result of COVID-19 and recorded a loss on disposal of $ 193,405 and $ 41,480 , respectively, after accumulated depreciation of $ 154,253 and $ 109,631 , respectively, in the consolidated statement of operations. F- 24 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 7 – 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: SCHEDULE OF INTANGIBLE ASSETS Intangible Assets Intangible assets, net at December 31, 2021 Acquisitions Impairment of intangible assets Amortization expense Intangible assets, net at December 31, 2020 Impairment of intangible assets Amortization expense Intangible assets, net at December 31, 2019 Trademark Muscle Maker Grill $ 1,425,653 $ - $ ( 998,347 ) $ - $ 2,424,000 $ - $ - $ 2,524,000 Franchise Agreements 262,439 - ( 141,561 ) ( 50,278 ) 454,278 ( 100,000 ) ( 60,537 ) 514,815 Trademark SuperFit 38,075 45,000 - ( 6,925 ) - - - - Domain Name SuperFit 105,764 125,000 - ( 19,236 ) - - - - Customer List SuperFit 118,455 140,000 - ( 21,545 ) - - - - Proprietary Recipes SuperFit 135,378 160,000 - ( 24,622 ) - - - - Non-Compete Agreement SuperFit 193,339 260,000 - ( 66,661 ) - - - - Trademark Pokemoto 152,862 175,000 - ( 22,138 ) - - - - Franchisee License Pokemoto 2,599,473 2,775,000 - ( 175,527 ) - - - - Proprietary Recipes Pokemoto 1,027,916 1,130,000 - ( 102,084 ) - - - - Non-Compete Agreement Pokemoto 328,110 480,000 - ( 151,890 ) - - - - - $ 6,387,464 $ 5,290,000 $ (1,139,908 ) $ (640,906 ) $ 2,878,278 $ ( 100,000 ) $ (60,537 ) $ 3,038,815 Amortization expense related to intangible assets was $ 640,906 and $ 60,537 for the years ended December 31, 2021 and 2020, respectively. The estimated future amortization expense is as follows: SCHEDULE OF FUTURE AMORTIZATION EXPENSE For the year ended December 31, 2022 2023 2024 2025 2026 Thereafter Total Franchise Agreements $ 26,780 $ 26,780 $ 26,853 $ 26,780 $ 26,780 $ 28,466 $ 162,439 Trademark SuperFit 8,995 8,995 9,020 8,995 2,070 - 38,075 Domain Name SuperFit 24,986 24,986 25,054 24,986 5,752 - 105,764 Customer List SuperFit 27,985 27,985 28,062 27,985 6,438 - 118,455 Proprietary Recipes SuperFit 31,982 31,982 32,070 31,982 7,362 - 135,378 Non-Compete Agreement SuperFit 86,588 86,588 19,927 236 - - 193,339 Trademark Pokemoto 34,981 34,981 35,077 34,981 12,842 - 152,862 Franchisee License Pokemoto 277,348 277,348 278,108 277,348 277,348 1,211,973 2,599,473 Proprietary Recipes Pokemoto 161,302 161,302 161,744 161,302 161,302 220,964 1,027,916 Non-Compete Agreement Pokemoto 240,000 88,110 - - - - 328,110 Total $ 920,947 $ 769,057 $ 615,915 $ 594,595 $ 499,894 $ 1,461,403 4,861,811 The Company sustained operating and cash flow losses from inception which formed a basis for performing an impairment test of its Intangible Assets. The Company performed a recoverability test on the Company’s intangible assets based on its projected future undiscounted cash flows. As a result of a failed recoverability test the Company proceeded to measure the fair value of those assets based on the future discounted cash flows and recorded an impairment charge in the aggregate amount of $ 1,139,908 and $ 100,000 during the year ended December 31, 2021 and 2020, respectively. The key assumptions used in the estimates of projected cash flows utilized in both the test and measurement steps of the impairment analysis were projected revenues and royalty payments. These forecasts were based on actual revenues and take into account recent developments as well as the Company’s plans and intentions. A summary of the goodwill assets is presented below: SCHEDULE OF GOODWILL ASSETS Goodwill Muscle Maker Grill Pokemoto SuperFit Food Total Goodwill, net at December 31, 2019 $ 656,348 $ - $ - $ 656,348 Acquisitions - - - - Impairment of goodwill - - - - Goodwill, net at December 31, 2020 656,348 - - 656,348 Goodwill, net 656,348 - - 656,348 Acquisitions - 1,798,399 258,000 2,056,399 Impairment of goodwill ( 86,348 ) - - ( 86,348 ) Goodwill, net at December 31, 2021 $ 570,000 $ 1,798,399 $ 258,000 $ 2,626,399 Goodwill, net $ 570,000 $ 1,798,399 $ 258,000 $ 2,626,399 During the year ended December 31, 2021, we performed a quantitative goodwill assessment and determined the fair value of Muscle Maker Grill restaurant using a discounted cash flow model. The discounted cash flow model relied on making assumptions, such as the extent of the economic downturn related to the COVID-19 pandemic, the expected timing of recovery, expected growth in profitability and discount rate, which we believed were appropriate. The results of our 2021 goodwill impairment test indicated that the estimated carry value of Muscle Maker Grill exceeded its fair value amount. As a result, we recorded a goodwill impairment charge of $ 86,348 during the year ended December 31, 2021. F- 25 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 8 – ACCOUNTS PAYABLES AND ACCRUED EXPENSES Accounts payables and accrued expenses consist of the following: SCHEDULE OF ACCOUNTS PAYABLES AND ACCRUED EXPENSES December, 31, December 31, 2021 2020 Accounts payable $ 734,688 $ 692,966 Accrued payroll 758,732 78,667 Accrued professional fees 185,872 224,028 Accrued board members fees 57,573 36,697 Accrued rent expense 176,727 171,266 Accrued compensation expense 36,600 - Sales taxes payable (1) 125,550 231,177 Sales taxes payable 125,550 231,177 Accrued interest 28,426 25,222 Other accrued expenses 104,355 40,912 Total Accounts Payable and Accrued Expenses $ 2,208,523 $ 1,500,935 (1) See Note 14 – Commitments and Contingencies –Taxes for detailed related to delinquent sales taxes. NOTE 9 – CONVERTIBLE NOTE PAYABLE TO FORMER PARENT On April 6, 2018, the Company issued a $ 475,000 convertible promissory note (the “2018 ARH Note”) to the Former Parent for services rendered and expense paid on behalf of the Company. The 2018 ARH Note has no stated interest rate or maturity date and is convertible into shares of the Company’s common stock at a conversion price of $ 3.50 per share at a time to be determined by the lender. On April 11, 2018, the Former Parent elected to partially convert the 2018 ARH Note for the principal of $ 392,542 into 112,154 shares of the Company’s common stock. The Company had an aggregate gross amount of $ 82,458 , as of December 31, 2021 and 2020, respectively, in convertible notes payable to Former Parent outstanding. NOTE 10 – NOTES PAYABLE 15% Senior Secured Convertible Promissory Notes During the year ended December 31, 2020, the Company repaid an aggregate of $ 450,000 in 15% senior secured convertible promissory notes. 12% Secured Convertible Promissory Notes During the year ended December 31, 2020, the Company repaid the $ 75,000 12% secured convertible promissory note. F- 26 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 10 –NOTES PAYABLE, continued Convertible Notes During the year ended December 31, 2020, the Company repaid an convertible note payable in the amount of $ 25,000 . As of December 31, 2021 and 2020, the Company has another convertible note payable in the amount of $ 100,000 which is included within convertible notes payable. See Note 14 – Commitments and Contingencies – Litigation, Claims and Assessments for details related to the $ 100,000 convertible note payable. Other Notes Payable On October 10, 2019, the Company issued a note payable in connection with the acquisition of the franchisee location in the amount of $ 300,000 . The note has a stated interest rate of 8 % with monthly payments payable over 5 years. On February 3, 2020, the Company issued a note payable in the principal amount of $ 150,000 . The note has an original issue discount of 20 %. The note became due in full on or before February 21, 2020 . The note has been repaid during the year ended December 31, 2020. On May 9, 2020, the Company entered into a Paycheck Protection Program Promissory Note and Agreement with Greater Nevada Credit Union, pursuant to which the Company received loan proceeds of $ 866,300 (the “PPP Loan”). The PPP Loan was made under, and is subject to the terms and conditions of, the PPP which was established under the CARES Act and is administered by the U.S. Small Business Administration. On June 21, 2021 the U.S. Small Business Administration (the “SBA”) forgave the Company’s first Paycheck Promissory Note (“PPP loan”) entered into on May 9, 2020. The aggregate amount forgiven is $ 875,974 , consisting of $ 866,300 in principal and $ 9,674 in interest expenses. The forgiven amount was accounted for as a gain on debt extinguishment of $ 875,974 and was recorded in our condensed consolidated statement of operations. During the year ended December 31, 2021, as part of the Pokemoto acquisition, the Company acquired $ 1,171,400 loans issued by the Small Business Administration under its Economic Injury Disaster Loans (“EIDL”). The Company repaid all the loans in full during the year ended December 31, 2021. During the year ended December 31, 2021, as part of the Pokemoto acquisition the Company acquired $ 291,053 in paycheck protection loans second draw (the “PPP 2 Loan”). The SBA forgave $ 151,176 in principal and $ 1,589 in interest expense as of December 31, 2021. The remaining balance on the PPP 2 Loan was still pending forgiveness as of December 31, 2021. The PPP 2 Loan is administered by the SBA. The interest rate of the loan is 1.00 % per annum and accrues on the unpaid principal balance computed on the basis of the actual number of days elapsed in a year of 360 days. Commencing ten months after the effective date of the PPP 2 Loan, the Company is required to pay the Lender equal monthly payments of principal and interest as required to fully amortize any unforgiven principal balance of the loan by the five-year anniversary of the effective date of the PPP 2 Loan (the “Maturity Date”). The PPP 2 Loan contains customary events of default relating to, among other things, payment defaults, making materially false or misleading representations to the SBA or the Lender, or breaching the terms of the PPP 2 Loan. The occurrence of an event of default may result in the repayment of all amounts outstanding under the PPP 2 Loan, collection of all amounts owing from the Company, or filing suit and obtaining judgment against the Company. Under the terms of the CARES Act, PPP 2 loan recipients can apply for and be granted forgiveness for all, or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. F- 27 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 10 –NOTES PAYABLE, continued Other Notes Payable, continued During the year ended December 31, 2021 and 2020, the Company repaid a total amount of $ 1,280,432 and $ 597,415 , respectively, of the other notes payable and other notes payable, related party. As of December 31, 2021, the Company had an aggregate amount of $ 1,170,079 in other notes payable. The notes had interest rates ranging between 1 % - 8 % per annum, due on various dates through March 2026. The maturities of other notes payable as of December 31, 2021, are as follows: SCHEDULE OF OUTSTANDING DEBT Principal Repayments due as of Amount 12/31/2022 $ 165,052 12/31/2023 173,469 12/31/2024 170,730 12/31/2025 112,885 12/31/2026 547,943 Total debt $ 1,170,079 NOTE 11 – DEFERRED REVENUE At December 31, 2021 and 2020, deferred revenue consists of the following: SCHEDULE OF DEFERRED REVENUE December 31, December 31, 2021 2020 Deferred revenues, net $ 1,063,373 $ 1,007,129 Less: Unearned vendor rebates, current ( 49,728 ) ( 62,858 ) Deferred revenues, non-current $ 1,013,645 $ 944,271 Deferred revenue of $ 263,215 at December 31, 2020 was recognized in revenue in 2021 within franchise royalties and fees on the consolidated statement of operations. Deferred revenue of $ 49,728 at December 31, 2021 is expected to be recognized during 2022. Deferred revenue as of December 31, 2020, included unearned vendor rebates of $ 23,171 , which was fully earned during the year ended December 31, 2021. F- 28 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 12 – OTHER CURRENT LIABILITIES Other current liabilities consist of the following: SCHEDULE OF OTHER CURRENT LIABILITIES December 31, December 31, 2021 2020 Gift card liability $ 27,633 $ 91,034 Co-op advertising fund liability 126,564 299,490 Advertising fund liability 131,891 250,894 Other current liabilities $ 286,088 $ 641,418 See Note 2 – Significant Accounting Policies – Revenue Recognition for details related to the gift card liability and advertising fund liability. NOTE 13 – INCOME TAXES The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2021 and 2020 are presented below: SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES 2021 2020 For the Years Ended December 31, 2021 2020 Deferred tax assets: Net operating loss carryforwards $ 10,918,652 $ 7,692,505 Receivable allowance 19,932 22,932 Stock-based compensation - 289,758 Accruals - 16,266 Intangible assets 697,115 269,562 Property and equipment - 10,292 Deferred Rent 13,652 5,746 Deferred revenues 187,009 267,996 Gross deferred tax asset 11,836,360 8,575,057 Deferred tax liabilities: Property and equipment ( 447,944 ) - Gross deferred tax liabilities ( 447,944 ) - Net deferred tax assets 10,768,846 8,575,057 Valuation allowance ( 10,768,846 ) ( 8,575,057 ) Net deferred tax asset, net of valuation allowance $ - $ - F- 29 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 13 – INCOME TAXES, continued The income tax benefit for the periods shown consist of the following: SCHEDULE OF INCOME TAX BENEFIT 2021 2020 For the Years Ended December 31, 2021 2020 Federal: Current $ - $ - Deferred 1,645,342 2,054,947 State and local: Current - - Deferred 548,447 684,982 Federal, State and local, tax expense 2,193,789 2,739,929 Change in valuation allowance ( 2,193,789 ) ( 2,739,929 ) Income tax benefit $ - $ - A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the periods shown, are as follows: SCHEDULE OF RECONCILIATION OF STATUTORY FEDERAL INCOME TAX RATE 2021 2020 For the Years Ended December 31, 2021 2020 Federal income tax benefit at statutory rate 21.0 % 21.0 % State income tax benefit, net of federal impact 7.0 % 7.0 % Permanent differences ( 0.0 )% ( 0.0 )% Other 1.7 % ( 0.4 )% Change in valuation allowance 26.3 % ( 27.6 )% Effective income tax rate 0.0 % ( 0.0 )% The Company has filing obligations in what it considers its U.S. major tax jurisdictions as follows: Nevada, California, New Jersey, Texas, New York State and New York City. The Company’s tax returns filed for the years ending December 31, 2020, 2019, 2018 and 2017 remain subject to examination. The Company has approximately $ 38.9 million of Federal and State NOLs available to offset future taxable income. The net operating loss carryforwards generated prior to 2018, if not utilized, will expire from 2031 to 2037 for federal and state purposes . In accordance with Section 382 of the Internal Revenue Code, the utilization of the Company’s net operating loss carryforwards could be subject to annual limitations if there has been greater than 50% ownership change. F- 30 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 14 – COMMITMENTS AND CONTINGENCIES Operating Leases The leases are subject to certain annual escalations as defined in the agreements. The Company recognizes rent on a straight-line basis. The cumulative difference between the rent payments and the rent expense since the inception of the leases was $ 128,095 at December 31, 2021. On June 26, 2020, the Company was informed that one of their leases for a future military location was terminated due to the current economic environment as a result of COVID-19. Due to the economic effect of COVID-19 the Company made the decision to close one of their Company-owned stores permanently during the third quarter of 2020. As a result, the Company was able to negotiate a sublease on October 29, 2020, for the remainder of the lease term in which the subtenant agreed to make lease payments to the Company until the lease terminates on February 28, 2021. During the year ended December 31, 2020, the Company became obligated for payments pursuant to two new lease agreements in connection with the acquisition of the Chelsea and Philadelphia location with terms ranging from 4 to 5 years, exclusive of options to renew. These lease agreements have a monthly rent expense ranging from $ 3,666 to $ 13,431 per month. During the year ended December 31, 2021, the Company became obligated for payments pursuant to seven new assumed lease agreements though acquisitions for restaurant spaces with lease terms ranging from of 1.5 years to 10 years, exclusive of options to renew. These lease agreements have a monthly rent expense ranging from $ 2,153 to $ 8,600 per month. During the year ended December 31, 2021, the Company became obligated for payments pursuant to four new lease agreements for newly opened restaurant spaces with lease terms of 5 years, exclusive of options to renew. These lease agreements have monthly rent expenses, calculated using a percentage fee ranging from four percent to ten percent of the annual gross sales. The Company has recorded security deposits, totaling, in the aggregate, approximately $ 167,770 and $ 131,790 as of December 31, 2021 and 2020, respectively. Future aggregate minimum lease payments for these leases and others as of December 31, 2021 are: SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS Future Minimum Lease Payments 2022 $ 897,381 2023 769,266 2024 712,591 2025 541,684 2026 403,452 Thereafter 783,391 Future Minimum Lease Payments $ 4,107,765 F- 31 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 14 – COMMITMENTS AND CONTINGENCIES, continued Operating Leases, continued Total rent expense was $ 1,304,369 and $ 726,242 for the years ended December 31, 2021 and 2020, respectively. Of which $ 1,261,096 and $ 691,986 is recognized as rent expense under operating costs and expenses on the consolidated statement of operations and the remaining $ 43,273 and $ 34,256 is recognized within general and administrative expenses on the consolidated statement of operations for the years ended December 31, 2021 and 2020, respectively. Election of Directors On October 27, 2020, the Company held its annual shareholders meeting and the shareholders voted on the directors to serve on the Company’s board of directors. The shareholders elected Kevin Mohan, Stephan Spanos, A.B. Southall III, Paul L. Menchik, Peter Petrosian, Jeff Carl, Major General (ret) Malcom Frost and Phillip Balatsos to serve on the Company’s board of directors. On October 7, 2021, the Company held its annual shareholders meeting and the shareholders voted on the directors to serve on the Company’s board of directors. The shareholders elected Kevin Mohan, Stephan Spanos, A.B. Southall III, Paul L. Menchik, Jeff Carl, Major General (ret) Malcom Frost and Phillip Balatsos to serve on the Company’s board of directors. Consulting Agreements On February 18, 2020, the Company entered into a professional services agreement with a company to provide advice on business development of food stores and delivery kitchen operations. In addition, they will review and advise the Company on potential acquisition targets, including financial analytics for post-merger entities and provide assistance in preparing pro-forma financial information. The term of the agreement commences from the effective date on February 18, 2020 and expires on February 18, 2021. Pursuant to the terms of the agreement, the Company agreed to issue 300,000 shares of the Company’s common stock and 100,000 three-year cashless warrants with an exercise price of $ 5.00 per share upon signing of the agreement as payment. The grant date fair value of the warrants of $ 191,000 was recorded in general and administrative expense as stock-based compensation. The Company rescinded the issuance of 100,000 warrants and 300,000 shares of the Company’s common stock in July 2020 that were issued in the first quarter of 2020, pursuant to a consulting agreement. Although the shares were duly authorized and validly issued, the Company rescinded the stock and warrants as it did not have the required amount of equity authorized under its 2019 Incentive Stock Plan. Following the rescission of the warrants and shares of common stock, the consultant threatened to commence legal proceedings against the Company and demanded the Company to re-issue the 300,000 shares of common stock and 100,000 warrants and to provide the Consultant registration rights. In order to settle and avoid the time commitment and expense associated with potential litigation, the Company and the Consultant entered into a Settlement Agreement (“Settlement Agreement”) on August 11, 2020 whereby the Company agreed to issue 300,000 shares of common stock within 5 five days of entering into the Settlement Agreement. These shares are not 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 issued 100,000 stock options upon the approval of the 2020 Equity Incentive Plan with a grant date fair value of $ 187,000 . See Note 16 – Equity – Options for more details related to the issuance of the stock options. F- 32 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 14 – COMMITMENTS AND CONTINGENCIES, continued Consulting Agreements, continued On February 24, 2020, the Company entered into a Consulting Agreement with consultants with experience in the area of corporate finance, investor communication and financial and investor public relations. The term of the agreement is for two months from the effective date on February 27, 2020 and expires on April 27, 2020 . Pursuant to the terms of the agreement, the Company agreed to pay $ 215,000 in cash and to issue 10,000 shares of the Company’s common stock. In the event the Company elects to not extend the term of the agreement, it is to notify the consultants within five days of the conclusion of the 60-day term. The Company did not extend the term of the original agreement. As of December 31, 2021, the company issued the 10,000 shares of common stock and paid the $ 215,000 in cash pursuant to the terms of the agreement. On April 8, 2020, the Company entered into a professional service agreement with a consultant to provide advice on investor outreach and institutional engagements. The Consultants will also provide continuous market insight and interpret our trading activity. The term of the agreement commenced from the execution date and ends on April 1, 2021. Pursuant to the terms, the Company agreed to pay the consultant in the form of non-qualified stock options to acquire 200,000 shares of the Company’s common stock, exercisable at $ 2.50 per share for a period of one year. The Options are fully vested upon the signing of this agreement. In addition, the option is callable by the Company in the event the market price of its shares close above $ 3.50 per share for five consecutive dates upon which the consultant will have three days to elect to exercise or forfeit the options. The Company has not issued the options pursuant to the original terms of the agreement and on August 11, 2020, the Company and the consultant entered into an amendment and agreed that the 200,000 non-qualified stock options shall be issued upon the Company’s shareholders approval of its 2020 Incentive Stock Plan. As of December 31, 2021 as part of the Settlement Agreement the Company issued the 200,000 stock options upon the approval of the 2020 Equity Incentive Plan with a grant date fair value of $ 60,000 . See Note 16 – Equity – Options for more details related to the issuance of the stock options. On July 28, 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 one month from the effective date on July 28, 2020 and expires on August 28, 2020 . Pursuant to the terms of the agreement, the Company agreed to pay $ 253,500 in cash and to issue 15,000 shares of the Company’s common stock. As of December 31, 2021, the Company issued the 15,000 shares of common stock and paid the $ 253,500 in cash pursuant to the terms of the agreement. 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. As of December 31, 2021, the Company issued the remaining 40,000 shares of common with a grant date fair value of $ 42,400 pursuant to the terms 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. As of December 31, 2021, the Company issued the remaining 30,000 shares of common with a grant date fair value of $ 31,800 pursuant to the terms of the agreement. F- 33 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 14 – COMMITMENTS AND CONTINGENCIES, continued Consulting Agreements, continued 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 paid $ 250,000 in cash and issued 150,000 shares of the Company’s common stock. Board Compensation On February 17, 2020 the Company authorized the issuance of an aggregate of 25,616 shares of common stock to the members of the board of directors as compensation earned through the end of the fourth quarter of 2019. On 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 November 10, 2020 the Company authorized the issuance of an aggregate of 5,944 shares of common stock to the members of the board of directors as compensation earned for the second and third quarter of 2020 On December 4, 2020, the board of directors approved a new board compensation plan that would compensate the board members for their deferred compensation for the fourth quarter 2020 through the third quarter of 2021. The board members are eligible for cash compensation of $ 12,000 per year to be paid quarterly within 30 days of the close of each quarter. In addition, on an ongoing basis pursuant to the approved board compensation plan each director will receive $ 8,000 in value of common stock per year for service as director, $ 6,000 in value of shares of common stock per year for service on each committee and $ 4,000 in value of shares of common stock per year for service as chair for such committee. The number of shares to be issued would be based upon the closing price of the last trading date of each calendar quarter. The shares of common stock for committee service will be limited to two committees. 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. On August 24, 2021, the Company authorized the issuance of an aggregate of 20,829 shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2021. On October 21, 2021, the Company authorized the issuance of an aggregate of 24,275 shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2021. As of December 31, 2021, the Company accrued a total of $ 39,573 related to board compensation for stock issuance and $ 18,000 for their portion of cash compensation earned during the fourth quarter of 2021. F- 34 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 14 – COMMITMENTS AND CONTINGENCIES, continued Franchising During the year ended December 31, 2021, the Company entered into a various franchise agreement for a total of seventeen potentially new Pokemoto locations with various franchisees. The Franchisees paid the Company an aggregate of $ 217,500 and this has been recorded in deferred revenue as of December 31, 2021. Master Franchise Agreement On October 25, 2021, Muscle Maker Development International LLC (“MMDI”), a wholly-owned subsidiary of Muscle Maker Inc., entered into a Master Franchise Agreement (the “Master Franchise Agreement”) with Almatrouk Catering Company – OPC (“ACC”) providing ACC with the right to grant franchises for the development of 40 “Muscle Maker Grill” restaurants through December 31, 2030 (the “Term”) in the Kingdom of Saudi Arabia (“KSA”). Under the Master Franchise Agreement, MMDI has granted to ACC an exclusive right to establish and operate Muscle Maker restaurants in the KSA. MMDI will not own or operate restaurants in KSA, grant franchises for the restaurants in KSA, or grant Master Franchise Rights for the restaurants to other persons within the KSA. ACC will be solely responsible for the development, sales, marketing, operations, distribution and training of all franchise locations sold in the KSA. ACC is required to pay MMDI $ 150,000 pursuant to the Master Franchise Agreement upon the occurrence of various events. ACC is required to pay MMDI $ 20,000 upon the execution of each franchise agreement for each individual restaurant and a monthly royalty fee of $ 1,000 for each restaurant. Further, ACC is to adhere to the agreed upon development schedule as outlined in the master franchise agreement. 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 2017 and 2018. The Company had accrued for approximate $ 125,550 and $ 231,177 , which includes interest as of December 31, 2021 and 2020, respectively, related to this matter. 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 December 31, 2021, the Company has accrued for the liability in convertible notes payable in the amount of $ 100,000 and accrued interest of $ 27,210 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 in Orange County, California for labor, service, equipment and materials in the total amount of $ 98,005 . As of December 31, 2021, the Company has accrued for the liability in accounts payable and accrued expenses. F- 35 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 14 – COMMITMENTS AND CONTINGENCIES, continued Litigations, Claims and Assessments, continued 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 in El Paso County #2019DCV0824. 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. As of December 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 issued by the Judicial Council of California in the amount of $ 130,185 for a breach of a lease agreement in Chicago, Illinois, in connection with a Company-owned store that was closed in 2018. As of December 31, 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 . The Company paid $ 100,000 as part of the settlement, including legal fees, while the remaining balance was paid by the insurance carrier and American Restaurants, LLC. 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. Corporate Address Change During October 2020, the Company relocated its corporate office address from 308 East Renfro Street, Suite 101, Burleson, Texas, 76028 to 2600 South Shore Blvd. Suite 300, League City, Texas, 77573. Kitchen Service Agreement On February 26, 2020, the Company entered into a Kitchen Services Agreement with a major delivery-only kitchen concept. The Kitchen Services Agreement provides for ten locations in total with four initial locations starting in the Chicago market, two locations in the Philadelphia market, one location in the Providence market, two locations in the Miami market and one location in the New York market. The Kitchen Services Agreement provide the Company with access to the delivery-only locations for a one-year term with an automatic one-year renewal unless terminated by either party. The delivery-only locations are set up for third party delivery and provide that the Company must pay monthly license fees, processing service fees and storage service fees. The monthly license fees for the locations range from $ 3,000 to $ 6,000 . The monthly license fees become due 14 days after the Company is granted access to the location. As of December 31, 2021, the Company had opened seven of the ten locations. One Miami location opened in February 2022 and the second Miami location is anticipated to open in April 2022. During the year ended December 31, 2021, the decision was made not to renew the monthly license agreement at the seven delivery-only kitchen locations after their initial one-year term as a cost saving measure due to the locations not performing as anticipated. The existing assets at the location were transfer to a storage unit and will be installed in future new locations. F- 36 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 15 – REPORTABLE OPERATING SEGMENTS See Note 1 – Business Organization and Nature of Operations for descriptions of our operating segments. SUMMARY OF OPERATING SEGMENTS December, 31, 2021 Revenues Muscle Maker Grill Division $ 6,037,403 Pokemoto Division 2,844,782 SuperFit Foods Division 1,467,451 Revenues $ 10,349,636 Operating Loss Muscle Maker Grill Division $ ( 303,439 ) Pokemoto Division 492,026 SuperFit Division 300,138 Corporate and unallocated G&A expenses (a) ( 8,094,509 ) Unallocated operating other income (expense) (b) ( 1,866,887 ) Operating Loss $ ( 9,472,671 ) Gain in debt extinguishment 1,228,308 Interest expense, net ( 50,170 ) Other non-operating income (expense) (c) 118,403 Loss before income taxes $ ( 8,176,130 ) (a) Includes charges related to corporate expense that the Company does not allocateto the respective divisions. The largest portion of this expense relates to payroll, benefits and other compensation expense of $ 3,454,492 , professional fees of $ 1,785,665 , and consulting fees of $ 1,611,045 . (b) Includes charges of $ 1,139,908 and $ 86,348 related to the impairment of intangible assets and goodwill, respectively, related to Muscle Maker Grill intangible assets and good will. This also includes amortization of intangible assets. See Note 7. (c) Includes changes in the fair value of accrued compensation of $ 127,500 . F- 37 NOTE 16 – EQUITY Authorized Capital On October 27, 2020, the shareholders approved to amend the Company’s articles of incorporation to increase the number of authorized shares of common stock from 14,285,714 to 25,000,000 shares of $ 0.0001 par value share common stock. As of December 31, 2020, the Company was authorized to issue 25,000,000 shares of $ 0.0001 par value per share common stock. The holders of the Company’s common stock are entitled to one vote per share. On October 7, 2021, the shareholders approved to amend the Company’s articles of incorporation to increase the number of authorized shares of common stock from 25,000,000 to 50,000,000 shares of $ 0.0001 par value share common stock. As of December 31, 2021, the Company was authorized to issue 50,000,000 shares of $ 0.0001 par value per share common stock. The holders of the Company’s common stock are entitled to one vote per share. Stock Option and Stock Issuance Plan 2019 Plan The Company’s board of directors and shareholders approved and adopted on October 28, 2019 the 2019 Equity Incentive Plan (“2019 Plan”), effective on October 28, 2019 under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, , stock appreciation rights, restricted stock awards, restricted stock Units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2019 Plan, the Company reserved 214,286 shares of common stock for issuance. As of the date of the issuance of these consolidated financial statements 188,527 shares have been issued under the 2019 Plan. Upon the adoption of our 2020 Equity Incentive Plan, we will no longer issue awards under the 2019 Plan, but any existing awards granted to our management team and Board of Directors will remain outstanding under the 2019 Plan. 2020 Plan The Company’s board of directors and shareholders approved and adopted on October 27, 2020 the 2020 Equity Incentive Plan (“2020 Plan”), effective on October 27, 2020 under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock Units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2020 Plan, the Company reserved 1,750,000 shares of common stock for issuance. As of the date of the issuance of these consolidated financial statements 889,756 shares have been issued under the 2020 Plan. 2021 Plan The Company’s board of directors and shareholders approved and adopted on October 7,2021 the 2021 Equity Incentive Plan (“2021 Plan”), effective on September 16, 2020 under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock Units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2021 Plan, the Company reserved 1,500,000 shares of common stock for issuance. As of the date of the issuance of these consolidated financial statements 471,348 shares have been issued under the 2021 Plan. F- 38 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 16 – EQUITY, continued Common Stock Issuances On February 17, 2020 the Company authorized the issuance of an aggregate of 25,616 shares of common stock to the members of the board of directors as compensation earned through the end of the fourth quarter of 2019. On March 31, 2020, the Company issued 75,000 shares of common stock of the Company to a consultant that assisted the Company in the area of investor relations and capital introduction. On April 21, 2020, the Company issued an aggregate of 51,105 shares of common stock in exchange for accrued interest related to convertible notes that where converted in 2019 in the amount of $ 357,735 . On June 1, 2020, the Company issued 5,000 shares of common stock of the Company to a consultant with an aggregate fair value of $ 10,150 . On June 5, 2020, the Company issued 15,000 shares of common stock of the Company to a digital marketing consultant with an aggregate fair value of $ 46,050 . On June 24, 2020 the Company authorized the issuance of an aggregate of 4,340 shares of common stock to the members of the board of directors as compensation earned through the end of the first quarter of 2020. 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 . 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 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 originally accrued for the liability as accrued compensation expense on the books, as the share were fully earned pursuant to their service agreement. On the date of issues of the shares the Company recorded a gain on the change in fair value of the accrued compensation of $ 127,500 in the condensed consolidated statement of operations. On May 27, 2021, the Company cancelled 11,879 shares of common stock previously issued to an investor pursuant to a settlement. The cancellation of the 11,879 shares was part of the settlement agreement. See Note 14 – Commitments and Contingencies – Litigation, Claims and Assessments for further details related to the settlement. On August 24, 2021, the Company issued an aggregate of 15,000 shares of common stock of the Company to a digital marketing consultant, pursuant to their service agreement, with an aggregate fair value of $ 20,999 . On August 26, 2021, the Company issued an aggregate of 1,100 shares of common stock of the Company to an investor in the Company, with an aggregate fair value of $ 1,540 . F- 39 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 16 – EQUITY, continued Common Stock Issuances, continued On October 11, 2021, the Company issued an aggregate of 40,000 shares of common stock of the Company to a consultant for general consulting services, pursuant to their service agreement, with an aggregate fair value of $ 40,800 . On October 22, 2021, the Company issued an aggregate of 15,000 shares of common stock of the Company to a digital marketing consultant, pursuant to their service agreement, with an aggregate fair value of $ 15,150 . On December 3, 2021, the Company issued 82,500 shares of common stock of the Company to a consultant for business strategy consulting with a fair value of $ 84,975 . On December 7, 2021, the Company issued an aggregate of 160,000 shares of common stock of the Company to a consultant for strategic advisory and digital marketing services with an aggregate fair value of $ 177,600 . On December 27, 2021, the Company issued 10,000 shares of common stock of the Company to a consultant with a fair value of $ 7,400 . See Note 3 – Acquisitions – Pokemoto Acquisition and SuperFit Foods Acquisition for details related to the stock issuance in connection with the acquisitions. See Note 14 – Commitments and Contingencies – Consulting Agreements and Board Compensation for details related to additional stock issuances during the year ended December 31, 2021. See Note 15 – Equity – warrants, Closing of Offerings and Private placement for details related to various stock issuances. Closing of Offerings On February 12, 2020, the Company priced its initial public offering of 1,540,000 shares of common stock at a price of $ 5.00 per share. The Company started trading on the Nasdaq Capital Market on February 13, 2020 under the ticker symbol “GRIL”. The Company closed on the offering on February 18, 2020, yielding proceeds of $ 6,780,000 , net of underwriters and other fees of $ 920,000 . Upon closing of the offering the Company issued 123,200 warrants to the underwriters as part of their agreement. On September 10, 2020, the Company priced its public offering (“September Offering”) of 3,294,118 shares of common stock at a price of $ 1.70 per share. The Company closed on the September Offering on September 15, 2020, yielding net proceeds of $ 4,940,001 , net of underwriters and other fees of $ 660,000 . Upon closing of the September Offering the Company issued 263,529 warrants to the underwriters as part of their agreement. Pursuant to the underwriting agreement for the September Offering the Company granted the underwriters an option to exercise for 45 days, to purchase up to an additional 494,177 shares of common stock to cover the over-allotment. On October 27, 2020, the Company closed on the over-allotment yielding proceeds of $ 764,399 , net of underwrites and other fees of $ 75,600 and the Company issued the 494,177 shares of common stock. F- 40 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 16 – EQUITY, continued Private Placements 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 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 was 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 prepared and filed a registration statement with the Securities and Exchange Commission within 30 days of the date of the Securities Purchase Agreement and to used 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 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. On November 17, 2021, the Company entered into a Securities Purchase Agreement with accredited investors (the “Securities Purchase Agreement”) for a private placement (the “Private Placement”) pursuant to which the investors (the “Purchasers”) agreed to purchase from the Company for an aggregate purchase price of approximately $ 15,000,000 (i) 6,772,000 shares (the “Shares”) of common stock, par value $ 0.0001 per share, of the Company (the “Common Stock”) (ii) a common stock purchase warrant to purchase up to 10,830,305 shares of Common Stock (the “Common Warrant”) and (iii) a pre-funded common stock purchase warrant to purchase up to 4,058,305 shares of Common Stock (the “Pre-Funded Warrant”). Each Share and accompanying Common Warrant is being sold together at a combined offering price of $ 1.385 per Share and Common Warrant, and each Pre-Funded Warrant and accompanying Common Warrant is being sold together at a combined offering price of $ 1.3849 per Pre-Funded Warrant and accompanying Common Warrant. The Pre-Funded Warrant is immediately exercisable, at a nominal exercise price of $ 0.0001 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 $ 1.385 per share, are immediately exercisable and will expire five ( 5 ) years from the date of issuance. The Private Placement closed on November 22, 2021. F- 41 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 16 – EQUITY, continued Private Placements, continued 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 was 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 used 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 November 17, 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 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, which warrant has an exercise price of $ 1.662 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. Warrant and Option Valuation The Company has computed the fair value of warrants granted and options accrued for as accrued compensation expense using the Black-Scholes option pricing model. The expected term used for warrants and options issued to non-employees is the contractual life. The Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time, equivalent to the expected term of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued. The options accrued for in accrued compensation expense had a grant date fair value of $ 46,000 on April 8, 2020. The Company recorded a mark to market fair value adjustment of $ 14,000 on the statement of operations during the years ended December 31, 2020. The Company has estimated the fair value of the options using the Black-Scholes model using the following assumptions: expected volatility of 66.77 - 112.17 %, risk-free rate of 0.12 - 0.23 %, expected term of 0.34 - 1 year, expected dividends of 0 %, and stock price of $ 1.42 – 2.71 . See Note 16 – Equity – Options for the issuance of the stock option during the fourth quarter of 2020. F- 42 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 16 – EQUITY, continued Restricted Common Stock On February 18, 2020, the Company issued an aggregate of 216,783 shares of restricted common stock of the Company, with an aggregate value fair value of $ 1,083,915 , to the executive team pursuant to their employment agreements as part of completing the initial public offering. On August 11, 2020, the executive team entered into an agreement individually with the Company to cancel an aggregate of 216,783 vested shares of restricted common stock of the Company previously issued in the first quarter of 2020 and acknowledge that no further compensation is due under their employment agreements. As a result of the cancelled restricted common stock, the Company reversed $ 1,083,893 in stock-based compensation during the quarter ended September 30, 2020, that was originally recorded during the three months ended March 31, 2020, within general and administrative expenses related to the cancelled shares in the unaudited consolidated statement of operations. On January 1, 2021, the remaining tranche of 1,200 shares of restricted common stock vested that was originally issued to employees and consultants in May 2017. 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. The restricted common stock is fully vested upon the date of grant. At December 31, 2021, there was no restricted common stock outstanding. A summary of the activity related to the restricted common stock for the years ended December 31, 2021 and 2020, respectively, is presented below: SCHEDULE OF ACTIVITY RELATED TO RESTRICTED COMMON STOCK Weighted Average Grant Total Date Fair Value Outstanding at January 1, 2020 2,426 65.33 Granted 216,783 5.00 Forfeited - - Vested ( 218,009 ) 5.34 Outstanding at December 31, 2020 1,200 65.33 Granted 221,783 2.87 Forfeited - - Vested ( 222,983 ) 3.21 Outstanding at December 31, 2021 - $ - F- 43 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 16 – EQUITY, continued Options On November 27, 2020, the Company issued an aggregate of 300,000 fully vested stock options to consultants with an aggregate fair value of $ 118,000 . See Note 14 – Commitments and Contingencies – Consulting Agreements for details related to the stock options issued for the year ended December 31, 2020. A summary of option activity during the years ended December 31, 2021 and 2020 is presented below: SCHEDULE OF OPTION ACTIVITY Weighted Weighted Average Average Remaining Number of Exercise Life Options Price In Years Outstanding, January 1, 2020 33,750 $ 9.33 0.60 Issued 300,000 3.33 Exercised - - Forfeited ( 33,750 ) 9.33 Outstanding, December 31, 2020 300,000 $ 3.33 1.10 Issued - - Exercised - - Forfeited ( 200,000 ) 2.50 Outstanding, December 31, 2021 100,000 $ 5.00 1.92 Exercisable, December 31, 2021 100,000 $ 5.00 1.92 The Company has estimated the fair value of the options using the Black-Scholes model using the following assumptions: SCHEDULE OF STOCK OPTIONS ASSUMPTIONS For the Year Ended December 31, 2020 Risk free interest rate 0.10 – 0.23 % Expected term (years) 0.34 - 5.00 Expected volatility 66.77 - 112.17 % Expected dividends 0.00 % Warrants See Note 16 – Equity – Private Placements for details related to the warrants issued during the year ended December 31, 2021. On May 24, 2021, the Company issued 1,465,227 shares of common stock in connection with the exercising of the Pre-Funded Warrant for $ 14,652 . F- 44 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 16 – EQUITY, continued Warrants, continued On May 28, 2021, the Company issued 1,400,000 shares of common stock in connection with the exercising of the Pre-Funded Warrant for $ 14,000 . On December 23, 2021, the Company issued 1,210,110 shares of common stock in connection with the exercising of the Pre-Funded Warrant for $121. A summary of warrants activity during the years ended December 31, 2021 and 2020 is presented below: SCHEDULE OF WARRANTS ACTIVITY Weighted Weighted Average Average Remaining Number of Exercise Life Warrants Price In Years Outstanding, January 1, 2020 2,450,287 $ 5.51 3.7 Issued 486,729 3.65 Exercised ( 354,159 ) 6.74 Outstanding, December 31, 2020 2,582,857 $ 4.08 3.3 Issued 21,869,064 0.46 Exercised ( 4,075,337 ) 0.01 Forfeited ( 92,568 ) 19.99 Outstanding, December 31, 2021 20,284,016 $ 1.66 4.0 Exercisable, December 31, 2021 20,284,016 $ 1.66 4.0 The grant date fair value of warrants granted during the years ended December 31, 2021 was established during the Private Placement. The grant date fair value of warrants granted during the year ended December 31, 2020 was determined on the date of issuance using the Black-Scholes option pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate and the expected life. The Company calculates the expected volatility using the historical volatility of comparable companies over the most recent period equal to the expected term and evaluates the extent to which available information indicates that future volatility may differ from historical volatility. The expected dividend rate is zero as the Company does not expect to pay or declare any cash dividends on common stock. The risk-free rates for the expected terms of the stock warrants are based on the U.S. Treasury yield curve in effect at the time of the grant. The Company has not experienced significant exercise activity on warrants. Due to the lack of historical information, the Company determined the expected term of its warrant awards issued using the simplified method. In applying the Black-Scholes option pricing model, the Company used the following assumptions: SCHEDULE OF WARRANTS ASSUMPTIONS For the Year Ended December 31, 2020 Risk free interest rate 1.37 % Expected term (years) 3.00 Expected volatility 55.33 % Expected dividends 0.00 % F- 45 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 16 – EQUITY, continued Stock-Based Compensation Expense Stock-based compensation related to restricted stock issued to employees, directors and consultants, warrants and warrants to consultants amounted to $ 2,207,046 and $ 2,806,336 for the years ended December 31, 2021 and 2020, respectively, of which $ 2,200,274 and $ 2,803,716 , respectively, was recorded in general and administrative expenses and $ 6,772 and $ 2,620 , respectively, was recorded in labor expense within restaurant operating expenses. NOTE 17 – SUBSEQUENT EVENTS Company-Owned Restaurants Subsequent to December 31, 2021, and through the date of the issuance of these consolidated financial statements, the Company closed two Company-owned Muscle Maker Grill restaurants. The decision to close the locations was made as a cost saving measure due to the locations not performing as anticipated. The Company opened one new Company-owned Pokemoto location in Miami. See Note 14 – Commitments and Contingencies, Kitchen Service Agreement. Common Stock On January 3, 2022, the Company authorized the issuance of an aggregate of 1,200,000 shares of common stock in connection with the cashless exercise of the Pre-Funded Warrants. Pursuant to the terms of the Pre-Funded Warrants a total of 1,200,215 warrants were exercised. On January 6, 2022, the Company authorized the issuance of an aggregate of 39,573 shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2021. The Company accrued for the liability as of December 31, 2021. On January 18, 2022, the Company issued an aggregate of 30,000 shares of common stock of the Company to a consultant that assisted with the acquisition of SuperFit Foods and Pokemoto, with an aggregate fair value amount of $ 15,600 . The Company accrued for the liability as of December 31, 2021. Employment Agreements On January 2, 2022, the Company appointed Jennifer Black as Chief Financial Officer of the Company and entered into an Offer Letter with Ms. Black. Pursuant to the Offer Letter, Ms. Black will be employed as Chief Financial Officer of the Company on an at-will basis. Ms. Black will be entitled to a base salary at the annualized rate of $ 190,000 . The Company’s previous CFO, Ferdinand Groenewald, will remain and was appointed as the Chief Accounting Officer of the Company. The Company agreed to issue Ms. Black 20,000 restricted stock units upon completion of 90 days of employment. Ms. Black will be entitled to receive stock options to acquire 20,000 shares of common stock subject to the approval of the Board of Directors and Compensation Committee and the terms and conditions will be subject to entering into a stock option agreement. F- 46 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 17 – SUBSEQUENT EVENTS, continued Employment Agreements, continued On February 10, 2022, the Company entered into an Employment Agreement with Michael Roper effective February 14, 2022, which replaced his prior employment agreement. Pursuant to the Employment Agreement, Mr. Roper will continue to be employed as Chief Executive Officer of the Company on an at will basis. During the term of the Employment Agreement, Mr. Roper will be entitled to a base salary at the annualized rate of $ 350,000 , will be increased to $ 375,000 upon the one-year anniversary. Mr. Roper will be eligible for a discretionary performance bonus to be paid in cash or equity. Within 90 days of the effective date, the Company will issue Mr. Roper stock options to receive 100,000 shares of common stock which will vest over a term of five years . If Mr. Roper is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, Mr. Roper will be entitled to a severance package of 18 months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule, but subject to the execution of a valid release in favor of the Company and its related parties. On February 10, 2022, the Company and Kevin Mohan, Chief Investment Officer, entered a letter agreement providing that Mr. Mohan will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $ 200,000 effective February 14, 2022. Mr. Mohan will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 75 % of his salary. Within 90 days of the effective date, the Company will issue Mr. Mohan stock options to receive 75,000 shares of common stock which will vest over a term of five years . If Mr. Mohan is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. On February 9, 2022, the Company and Kenn Miller, Chief Operations Officer, entered a letter agreement providing that Mr. Miller will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $ 275,000 effective February 14, 2022. Mr. Miller will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 75 % of his salary. Within 90 days of the effective date, the Company will issue Mr. Miller stock options to receive 50,000 shares of common stock which will vest over a term of five years . If Mr. Miller is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of 12 months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. On February 9, 2022, the Company and Aimee Infante, Chief Marketing Officer, entered a letter agreement providing that Ms. Infante will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $ 175,000 effective February 14, 2022. Ms. Infante will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25 % of her salary. Within 90 days of the effective date, the Company will issue Ms. Infante stock options to receive 42,500 shares of common stock which will vest over a term of five years . If Ms. Infante is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, she will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. F- 47 MUSCLE MAKER, INC. & SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 17 – SUBSEQUENT EVENTS, continued Employment Agreements, continued On February 9, 2022, the Company and Ferdinand Groenewald, Chief Accounting Officer, entered a letter agreement providing that Mr. Groenewald will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $ 175,000 effective February 14, 2022. Mr. Groenewald will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25 % of his salary. Within 90 days of the effective date, the Company will issue Mr. Groenewald stock options to receive 25,000 shares of common stock which will vest over a term of five years . If Mr. Groenewald is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. Nasdaq Notice On February 1, 2022, the Company received notice from The Nasdaq Stock Market (“Nasdaq”) that the closing bid price for the Company’s common stock had been below $ 1.00 per share for the previous 30 consecutive business days, and that the Company is therefore not in compliance with the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Rule”). Nasdaq’s notice has no immediate effect on the listing or trading of the Company’s common stock on The Nasdaq Capital Market. The notice indicates that the Company will have 180 calendar days, until August 1, 2022, to regain compliance with this requirement. The Company can regain compliance with the $ 1.00 minimum bid listing requirement if the closing bid price of its common stock is at least $ 1.00 per share for a minimum of ten (10) consecutive business days during the 180-day compliance period. If the Company does not regain compliance during the initial compliance period, it may be eligible for additional time of 180 calendar days to regain compliance. To qualify, the Company will be required to meet the continued listing requirement for market value of our publicly held shares and all other Nasdaq initial listing standards, except the bid price requirement, and will need to provide written notice to Nasdaq of its intention to cure the deficiency during the second compliance period. If the Company is not eligible or it appears to Nasdaq that the Company will not be able to cure the deficiency during the second compliance period, Nasdaq will provide written notice to the Company that the Company’s common stock will be subject to delisting. In the event of such notification, the Company may appeal Nasdaq’s determination to delist its securities, but there can be no assurance that Nasdaq would grant the Company’s request for continued listing. The Company intends to actively monitor the minimum bid price of its common stock and may, as appropriate, consider available options to regain compliance with the Rule. There can be no assurance that the Company will be able to regain compliance with the Rule or will otherwise be in compliance with other Nasdaq listing criteria. F- 48