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Item 7. Management’s Discussion and Analysis

2023-03-21 compared with 2022-03-17 · 551 added, 665 removed, 18 unchanged (99% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of the results

of operations and financial condition of Muscle Maker, Inc.

(“Muscle Maker”), together with its subsidiaries (collectively,

the “Company”) as of December 31, 2021 and 2020 and for the years ended December 31, 2021 and 2020 should be read in conjunction

with our financial statements and the notes to those financial statements that are included elsewhere in this Annual Report on Form 10-K

following Item 16.

References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us,”

“we,” “our,” and similar terms refer to Muscle Maker.

“Muscle Maker Grill”, “SuperFit Foods”

and “Pokemoto” refers to the names under which our corporate and franchised restaurants do business depending on the concept.

This Annual Report contains forward-looking statements as that term is defined in the federal securities laws.

The events described in

forward-looking statements contained in this Annual Report may not occur.

Generally, these statements relate to business plans or strategies,

projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions

to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results.

The words “may,”

“will,” “expect,” “believe,” “anticipate,” “project,” “plan,”

“forecast,” “model,” “proposal,” “should,” “may,” “intend,”

“estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking

We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties,

risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections

upon which the statements are based.

Reference is made to “Factors That May Affect Future Results and Financial Condition”

in this Item 7 for a discussion of some of the uncertainties, risks and assumptions associated with these statements.

The Company operates under the names Muscle Maker

Grill, Pokemoto and SuperFit Foods and is a franchisor and owner operator of Muscle Maker Grill 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.

In addition to these restaurants, the Company also operates with the following brand names under our

ghost kitchen model:

Meal Plan AF, Muscle Maker Burger Bar, Bowls Deep, Burger Joe’s, Wrap It Up, Salad Vibes, Mr.

of Boba and Gourmet Sandwich.

Our direct mail to consumer meal prep/plan program operates under the musclemakerprep.com and superfitfoods.com

As of December 31, 2021, MMI consisted of three operating

Muscle Maker Grill Restaurant Division

Pokemoto Hawaiian Poke Restaurants Division

SuperFit Foods Meal Prep Division

Muscle Maker, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

following discussion and analysis of the results of operations and financial condition of Muscle Maker, Inc.

(“Muscle Maker”),

together with its subsidiaries (collectively, the “Company”) as of December 31, 2022 and 2021 and for the years ended December

31, 2022 and 2021 should be read in conjunction with our financial statements and the notes to those financial statements that are included

elsewhere in this Annual Report on Form 10-K following Item 16.

References in this Management’s Discussion and Analysis of Financial

Condition and Results of Operations to “us,” “we,” “our,” and similar terms refer to Muscle Maker.

“Muscle Maker Grill”, “SuperFit Foods”, “Pokemoto”, and “Sadot” refers to the names under

which our corporate and franchised restaurants do business depending on the concept.

This Annual Report contains forward-looking statements

as that term is defined in the federal securities laws.

The events described in forward-looking statements contained in this Annual Report

may not occur.

Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences

of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated

revenues, earnings or other aspects of our operating results.

The words “may,” “will,” “expect,”

“believe,” “anticipate,” “project,” “plan,” “forecast,” “model,”

“proposal,” “should,” “may,” “intend,” “estimate,” and “continue,”

and their opposites and similar expressions, are intended to identify forward-looking statements.

We caution you that these statements

are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of

which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based.

Reference is made to “Factors That May Affect Future Results and Financial Condition” in this Item 7 for a discussion of

some of the uncertainties, risks and assumptions associated with these statements.

Company operates under the name Muscle Maker Grill, Pokemoto, SuperFit Foods and Sadot and is a franchisor and owner operator of Muscle

Maker Grill restaurants, Pokemoto restaurants, SuperFit Foods Meal Prep and Sadot.

As of December 31, 2022, the Company’s restaurant

and meal prep system included 19 Company-owned restaurants, 25 franchise restaurants and 34 SuperFit Foods pick up locations.

of December 31, 2022, the Company has franchise agreements for 46 Pokemoto franchises that have sold but have not opened.

to these restaurants, the Company also operates with the following brand names under our ghost kitchen model:

Meal Plan AF, Muscle Maker

Burger Bar, Bowls Deep, Burger Joe’s, Wrap It Up, Salad Vibes, Mr.

T’s House of Boba and Gourmet Sandwich.

Our direct mail

to consumer meal prep/plan program operates under the musclemakerprep.com and superfitfoods.com websites.

of December 31, 2022, MMI consisted of five operating segments:

Maker Grill Restaurant Division

Hawaiian Poke Restaurant Division

● Non-Traditional

(Hybrid) Division

Foods Meal Prep Division

is our parent company.

operate three unique “healthier for you” restaurant concepts within our portfolio of companies:

Muscle Maker Grill restaurants,

SuperFit Foods and Pokemoto restaurants.

Our Company was founded on the belief of taking every-day menu options and converting them into

“healthier for you” menu choices.

Consumers are demanding healthier choices, customization, flavor and convenience.

our portfolio of companies directly satisfy these consumer needs.

We take focus on lean proteins, fresh fruits and vegetables, proprietary

sauces, whole grains and various other items like protein shakes, meal plans, specialty drinks and super foods.

Each of our three concepts

offers different menus that are tailored to specific consumer segments.

We operate in the fast-casual and meal prep segments of the restaurant

We believe our “healthier for you” inspired concepts deliver a highly differentiated customer experience.

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.

the year ended December 31, 2021, the decision was made not to renew the monthly license agreements 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.

existing assets at the locations were transferred to a storage unit and will be installed in future new locations.

As part of the non-traditional location growth strategy,

the Company entered into an agreement and announced on June 1, 2020, its expansion within the Northern Virginia Community College system

to open 4 locations on various campus locations.

These locations were built in 2020 with the anticipation of opening in the fall semester

However, due to covid-19 restrictions, these locations were temporarily closed and were opened during 2021 as roughly 50% of

the students were allowed back on campus.

These locations are based on a variable lease determined on monthly sales thus limiting the

ongoing costs associated with these locations.

On November 11, 2020, the Company announced an agreement

with Happy Meal Prep to offer Muscle Maker meal prep/plans to consumers via direct- to-consumer shipments of over 40 meal prep/plan options.

This program allows shipments of up to a 250-mile radius around participating locations increasing the total number of potential consumers

who can enjoy Muscle Maker Grill meals.

The Company made a greater push in the direct-to-consumer market meal prep/plan strategy in 2021

as an alternate, non-traditional approach to delivering our products to consumers.

On March 25, 2021, we acquired the assets of SuperFit

Foods, a subscription based fresh-prepared meal prep business located in Jacksonville, Florida.

With this acquisition, we are also the

owner of the trade name SuperFit Foods that we use in connection with the operations of SuperFit Foods.

In 2020 SuperFit Foods produced

over 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 and pick up their fully prepared meals from 28 Company-owned coolers located

in gyms and wellness centers.

On April 7, 2021, the Company entered into a Securities

Purchase Agreement with an accredited investor for a private placement pursuant to which the investor purchased 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 was sold together at a combined offering price of $2.43 per share and Common Warrant, and each Pre-Funded Warrant and accompanying

Common Warrant was 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 has an exercise price of $2.43 per share, are immediately exercisable and will expire five

and one-half (5.5) years from the date of issuance.

The private placement closed on April 9, 2021.

On May 14, 2021, MMI acquired the Pokemoto restaurant

This consisted of purchasing PKM Stamford, LLC, Poke Co., LLC, LB Holdings LLC, and TNB Holdings, LLC, Poke Co Holdings LLC, GLL

Enterprises, LLC, and TNB Holdings II, LLC, each a Connecticut limited liability company (collectively, Pokemoto”).

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.

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”).

On November 17, 2021, the

Company entered into a Securities Purchase Agreement with accredited investors for a private placement pursuant to which the investors

purchased from the Company for an aggregate purchase price of approximately $15,000,000 (i) 6,772,000 shares (the “Shares”)

of common stock of the Company, (ii) a common stock purchase warrant to purchase up to 10,830,305 shares of common stock (the “November

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

Each Share and accompanying November Common Warrant was sold together at a combined offering price of $1.385 per Share

and November Common Warrant, and each Pre-Funded Warrant and accompanying November Common Warrant was sold together at a combined offering

price of $1.3849 per Pre-Funded Warrant and accompanying November Common Warrant.

The November 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 November Pre-Funded Warrant is fully exercised.

The November 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.

During the year ended December 31, 2021, we entered

into various franchise agreements 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.

We believe our healthy-inspired restaurant concept

delivers a highly differentiated customer experience by combining the quality and hospitality that customers commonly associate with our

full service and fast casual restaurant competitors with the convenience and value customers generally expect from traditional fast food

The foundation of our brand is based on our core values of quality, empowerment, respect, service and value.

Commitment to provide high quality, healthy-inspired food for a perceived wonderful experience for our guests.

Empowerment and Respect .

We seek to empower our employees to take initiative and give their best while respecting themselves and others to maintain an environment for team work and growth.

We own and operate three unique “healthier for you” restaurant concepts within our portfolio

of companies:

Muscle Maker Grill restaurants, SuperFit Foods and Pokemoto restaurants.

Non-Traditional (Hybrid) Division is a combination

of the aforementioned brands and provides its own unique experience for the customer.

Non-Traditional (Hybrid) locations are designed

for unique locations such as universities and military bases.

Our Company was founded on the belief of taking every-day menu options

and converting them into “healthier for you” menu choices.

Consumers are demanding healthier choices, customization, flavor

and convenience.

We believe our portfolio of companies directly satisfy these consumer needs.

We take focus on lean proteins, fresh fruits

and vegetables, proprietary sauces, whole grains and various other items like protein shakes, meal plans, specialty drinks and super

Each of our three concepts offers different menus that are tailored to specific consumer segments.

We operate in the fast-casual

and meal prep segments of the restaurant industry.

We believe our “healthier for you” inspired concepts deliver a highly

differentiated customer experience.

In 2022 Muscle Maker, Inc created the Sadot Division.

Sadot is focused on international food commodity

shipping, farming, sourcing and production of key ingredients such as soy meal, corn, wheat, food oils, etc.

Sadot was formed as part

of the Company’s diversification strategy to own and operate, through its subsidiaries, the business lines throughout the whole

spectrum of the food chain.

October 19, 2022, MMI formed Sadot LLC, a Delaware limited liability company and a wholly owned subsidiary of MMI.

Sadot is focused on

international food commodity shipping, farming, sourcing and production of key ingredients such as soy meal, corn, wheat, food oils,

A typical shipment contains 25,000 to 75,000 metric tons of product, although some transactions can be smaller.

Sadot was formed

as part of the Company’s diversification strategy to own and operate, through its subsidiaries, the business lines throughout the

whole spectrum of the food chain.

November 14, 2022, MMI, Sadot and Aggia LLC FC, a company formed under the laws of United Arab Emirates (“Aggia”) entered

into a Services Agreement whereby Sadot engaged Aggia to provide certain advisory services to Sadot for creating, acquiring and managing

Sadot’s business of wholesaling food and engaging in the purchase and sale of physical food commodities.

consideration for Aggia providing the services to Sadot, the Company agreed to issue shares of common stock of the Company, par value

$0.0001 per share, to Aggia subject to Sadot generating net income measured on a quarterly basis at per share price of $1.5625, subject

to equitable adjustments for any combinations or splits of the Common Stock.

The Company may only issue authorized, unreserved Shares

of Common Stock.

The Company will not issue Aggia in excess of 14,424,275 shares representing 49.999% of the number of issued and outstanding

shares of Common Stock.

Further, once Aggia has been issued a number of Shares constituting 19.99% of the issued and outstanding shares

of Common Stock of the Company, no additional Shares shall be issued to Aggia unless and until this transaction has been approved by

the shareholders of the Company.

In the event that the Shares Cap has been reached, then the remaining portion of the net income, if

any, not issued as Shares shall accrue as debt payable by Sadot to Aggia until such Debt has reached a maximum of $71,520,462.

believe our healthy-inspired restaurant concept delivers a highly differentiated customer experience by combining the quality and hospitality

that customers commonly associate with our full service and fast-casual restaurant competitors with the convenience and value customers

generally expect from traditional fast-food restaurants.

The foundation of our brand is based on our core values of quality, empowerment,

respect, service and value.

Commitment to provide high quality, healthy-inspired food for a perceived wonderful experience

for our guests.

● Empowerment

and Respect .

We seek to empower our employees to take initiative and give their best

while respecting themselves and others to maintain an environment for teamwork and growth.

Provide world class service to achieve excellence each passing day.

Our combination of high-quality, healthy-inspired food, empowerment of our employees, world class service, all delivered at an affordable price, strengthens the value proposition for our customers.

In striving for these goals, we aspire to connect

with our target market and create a great brand with a strong and loyal customer base.

We are the owner of the trade name and service mark

Muscle Maker Grill®, SuperFit Foods®, Pokemoto®, Healthy Joe’s, MMG Burger Bar®, Meal Plan AF® and other

trademarks and intellectual property we use in connection with the operation of Muscle Maker Grill® restaurants.

We license the right

to use the Muscle Maker Grill®, Pokemoto®, and SuperFit Foods trademarks and intellectual property to our wholly owned subsidiaries,

Muscle Maker Development, Poke Co Holdings LLC and Muscle Maker Corp., and to further sublicense them to our franchisees for use in connection

with Muscle Maker Grill® and Pokemoto® restaurants.

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.

Key Financial Definitions

Total Revenues

Our revenues are derived from three primary sources:

Company restaurant sales, franchise revenues and vendor rebates from Franchisees.

Franchise revenues are comprised of franchise royalty

revenues collected based on 2% to 6% of franchisee net sales and other franchise revenues which include initial and renewal franchisee

Vendor rebates are received based on volume purchases or services from franchise owned locations.

In addition, we have other revenues

which consists of gift card breakage which is recognized when we determine that there is no further legal obligation to remit the unredeemed

gift card balance.

Food and Beverage Costs

Food and beverage costs include the direct costs associated

with food, beverage and packaging of our menu items at Company-operated restaurants partially offset by vendor rebates from Company-owned

The components of food, beverages and supplies are variable in nature, change with sales volume, are affected by menu mix and

are subject to fluctuations in commodity costs.

Restaurant labor costs, including preopening labor,

consists of Company-operated restaurant-level management and hourly labor costs, including salaries, wages, payroll taxes, workers’

compensation expense, benefits and bonuses paid to our Company-operated restaurant-level team members.

Like other cost items, we expect

total restaurant labor costs at our Company-operated restaurants to increase due to inflation and as our Company restaurant revenues grow.

Factors that influence labor costs include minimum wage and employer payroll tax legislation, mandated health care costs and operational

productivity established by the management team.

Our labor costs in 2021 have been partially offset by employee retention tax credits

provided by the Internal Revenue Service due to the impact of Covid-19.

Restaurant rent, including preopening rental charges,

consist of Company-operated restaurant-level rental or lease payments applicable to executed rental or lease agreements.

In many cases

these rental payments may include payments for common area maintenance as well as property tax assessments.

Our rent strategy in some

locations consists of a variable rent structure calculated on net sales of the restaurant.

While this can have a negative effect on higher

volume locations where we cannot leverage a fixed rent, it provides downside protection for lower volume locations.

Other Restaurant Operating Expenses

Other restaurant operating expenses, including preopening

operating expenses, consist of Company-operated restaurant-level ancillary expenses not inclusive of food and beverage, labor and rent

These expenses are generally marketing, advertising, merchant and bank fees, utilities, leasehold and equipment repairs, insurance

and maintenance.

A portion of these costs are associated with third party delivery services such as Uber Eats, Grub Hub, DoorDash and

Our combination of high-quality, healthy-inspired food, empowerment of our employees, world

class service, all delivered at an affordable price, strengthens the value proposition for

our customers.

striving for these goals, we aspire to connect with our target market and create a great brand with a strong and loyal customer base.

of December 31, 2022, the Company had a cash balance, a working capital surplus and an accumulated deficit of $9,898,420, $4,032,888,

and $79,355,064, respectively.

During the year ended December 31, 2022, the Company incurred a Pre-tax net loss of $7,937,657 and Net

cash used in operations of $198,629.

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 12 months.

Financial Definitions

revenues are derived from four primary sources:

Physical Commodity sales, Company restaurant sales, Franchise revenues and vendor rebates

from Franchisees.

Franchise revenues are comprised of Franchise royalty revenues collected based on 2% to 6% of franchisee net sales

and other franchise revenues which include initial and renewal franchisee fees.

Vendor rebates are received based on volume purchases

or services from franchise owned locations.

In addition, we have Other revenues which consists of gift card breakage, which is recognized

when we determine that there is no further legal obligation to remit the unredeemed gift card balance.

Operating Expenses

cost include the direct cost associated with purchasing the physical food commodities.

The cost includes cost of the inventory, insurance,

shipping and other cost associated with transporting the physical food commodity.

The components of Commodity cost are variable in nature,

change with sales volume, logistics and are subject to fluctuations in Commodity costs.

labor cost consists of consulting fees paid for traders, logistics, and operations personal to perform the purchases and sale of physical

food commodities.

Similar to other cost items, we expect total Commodity labor costs to increase as our Commodity sales revenues grows.

Commodity Operating Expenses

commodity operating expenses, consist of food commodity purchase and sales expenses not inclusive of Commodity cost and Labor.

expenses are generally travel and office expense.

Operating Expenses

and Beverage Costs

and beverage costs include the direct costs associated with food, beverage and packaging of our menu items at Company-operated restaurants

partially offset by vendor rebates from Company-owned stores.

The components of food, beverages and supplies are variable in nature,

change with sales volume, are affected by menu mix and are subject to fluctuations in Commodity costs.

labor costs, consists of Company-operated restaurant-level management and hourly labor costs, including salaries, wages, payroll taxes,

workers’ compensation expense, benefits and bonuses paid to our Company-operated restaurant-level team members.

Like other cost

items, we expect total restaurant labor costs at our Company-operated restaurants to increase due to inflation and as our Company restaurant

revenues grow.

Factors that influence labor costs include minimum wage and employer payroll tax legislation, mandated health care costs

and operational productivity established by the management team.

Our labor costs in 2021 was partially offset by employee retention tax

credits provided by the Internal Revenue Service due to the impact of COVID-19.

rent, consist of Company-operated restaurant-level rental or lease payments applicable to executed rental or lease agreements.

cases these rental payments may include payments for common area maintenance as well as property tax assessments.

Our rent strategy in

some locations consists of a variable rent structure calculated on net sales of the restaurant.

While this can have a negative effect

on higher volume locations where we cannot leverage a fixed rent, it provides downside protection for lower volume locations.

Restaurant Operating Expenses

restaurant operating expenses, consist of Company-operated restaurant-level ancillary expenses not inclusive of Food and beverage, Labor

and Rent expense.

These expenses are generally marketing, advertising, merchant and bank fees, utilities, leasehold and equipment repairs,

insurance and maintenance.

A portion of these costs are associated with third party delivery services such as Uber Eats, Grub Hub, DoorDash

The fees associated with these third-party delivery services can range up to 25% of the total order being delivered.

2 unchanged sentences

partially offset these rising costs of delivery.

Impairment of Intangible Assets

Impairment of intangible assets consist of an amount

by which the carry amount of the intangible assets exceeds its fair value.

This is recognized by us when the carry amount of an intangible

asset is greater than the projected future undiscounted cash flows, as the asset is not fully recoverable.

Impairment of Goodwill

Impairment of goodwill consist of an amount by which

the carry amount of the goodwill assets exceeds its fair value.

This is recognized by us when the carry amount of goodwill is greater

than the projected future discounted cash flows, as the asset is not fully recoverable.

Depreciation and Amortization

Depreciation and amortization primarily consist of

the depreciation of property and equipment and amortization of intangible assets.

Franchise Advertising Expenses

In accordance with Topic 606, the Company recognizes

sales-based advertising contributions from franchisees as franchise revenue when the underlying franchisee incurs the corresponding advertising

The Company records the related advertising expenses as incurred under general and administrative expenses.

of Intangible Assets

of intangible assets consist of an amount by which the carry amount of the intangible assets exceeds its fair value.

This is recognized

by us when the carry amount of an intangible asset is greater than the projected future undiscounted cash flows, as the asset is not

fully recoverable.

of goodwill consist of an amount by which the carry amount of the goodwill assets exceeds its fair value.

This is recognized by us when

the carry amount of goodwill is greater than the projected future discounted cash flows, as the asset is not fully recoverable.

and Amortization Expenses

and amortization expenses primarily consist of the depreciation of property and equipment and amortization of intangible assets.

Advertising Expenses

accordance with Topic 606, the Company recognizes sales-based advertising contributions from franchisees as franchise revenue when the

underlying franchisee incurs the corresponding advertising expense.

The Company records the related advertising expenses as incurred

under Sales, general and administrative expenses.

expense primarily consist of expenses associated with opening a Company-operated location and expenses related to Company-operated locations

prior to the location opening.

expense primarily consist of expenses associated with closing a Company-operated location and expenses related to Company-operated locations

after the location has closed.

Consulting Expenses

consulting expenses are related to consulting fees due to Aggia for Sadot operations.

Based on the servicing agreement with Aggia,

the consulting fees are calculated at approximately 80% of the Net income generated by the Sadot business segment.

ended December 31, 2022, $3,601,987 is recorded as Stock-based consulting expense in the accompanying Consolidated Statements of

Operations and a corresponding liability is recorded as Accrued stock-based consulting expense in the accompanying Consolidated

Balance Sheets.

This expense is expected to be paid in stock in 2023.

General and Administrative Expenses

General and administrative expenses include expenses

associated with corporate and administrative functions that support our operations, including wages, benefits, travel expense, stock-based

compensation expense, legal and professional fees, training, investor relations and other corporate costs.

We incur incremental

general and administrative expenses as a result of being a publicly listed company on the Nasdaq capital market.

A certain portion of

these expenses are related to the preparation of an initial stock offering and subsequent capital raises and should be considered one-time

Other (Expense) Income

Other (expenses) income consists of amortization of

debt discounts on the convertible notes, interest expense related to convertible notes payable, change in fair value of accrued compensation

and gains on debt extinguishments in connection with the PPP loan forgiveness.

Income taxes represent federal, state, and local current

and deferred income tax expense.

Consolidated Results of Operations

The following table represents selected items in our

consolidated statements of operations for the years ended December 31, 2021 and 2020, respectively:

For the Years Ended

Company restaurant sales, net of discounts

Franchise royalties and fees

Franchise advertising fund contributions

Other revenue

Total Revenues

Operating Costs and Expenses:

general and administrative expenses include expenses associated with corporate and administrative functions that support our operations,

including wages, benefits, travel expense, stock-based compensation expense, legal and professional fees, training, investor relations

and other corporate costs.

We incur incremental Sales, general and administrative expenses as a result of being a publicly listed company

on the NASDAQ capital market.

A certain portion of these expenses are related to the preparation of an initial stock offering and subsequent

capital raises and should be considered one-time expenses.

(Expense) / Income

(expense) / income consists of amortization of debt discounts on the convertible notes, interest expense related to notes payable, Change

in fair value of accrued compensation and gains on debt extinguishments in connection with the Paycheck Protection Program, (“PPP”) loan forgiveness.

taxes represent federal, state and local current and deferred income tax expense.

Results of Operations

following table represents selected items in our Consolidated Statements of Operations for the years ended December 31, 2022 and 2021,

respectively:

the Years Ended

$ 150,585,644

restaurant sales, net of discounts

royalties and fees

advertising fund contributions

Costs and Expenses:

Commodity operating expenses:

Commodity cost

Other commodity operating expenses

Total commodity operating expenses

operating expenses:

and beverage costs

restaurant operating expenses

Food and beverage costs

Other restaurant operating expenses

Total restaurant operating expenses

Impairment of intangible asset

Impairment of goodwill

Depreciation and amortization

Franchise advertising fund expenses

Preopening expenses

restaurant operating expenses

of intangible asset

and amortization expenses

advertising fund expenses

consulting expenses

general and administrative expenses

Total Costs and Expenses

Loss from Operations

Other Expenses (Income):

Interest income, net

Change in fair value of accrued compensation

Gain on debt extinguishment

Amortization of debt discounts

Total Other Expenses, Net

Loss Before Income Tax

Income tax provision

Year Ended December 31, 2021Compared with Year

costs and expenses

from Operations

income / (expense)

in fair value of accrued compensation

on debt extinguishment

other income, net

Before Income Tax

$ (7,962,428 )

$ (8,176,130 )

Ended December 31, 2022 Compared with Year Ended December 31, 2021

revenues totaled $161,698,417 for the year ended December 31, 2022, compared to $10,349,636 for the year ended December 31, 2021.

$151,348,781 increase is primarily attributed to an increase in Commodity sales as a direct result of the formation of Sadot.

generated Commodity sales of $150,585,644 for the year ended December 31, 2022.

We did not have any Commodity sales for the year ended

December 31, 2021.

This represented an increase of $150,585,644, or 100%, which is attributable to the formation of Sadot, and the sales

generated from physical food related commodities.

generated Company restaurant sales, net of discounts, of $10,300,394 for the year ended December 31, 2022, compared to $9,320,920 for

the year ended December 31, 2021.

This represented an increase of $979,474, or 10.51%, which is mainly attributable to a full year of

sales for Pokemoto restaurants and SuperFit Foods compared to 2021.

royalties and fees for the years ended December 31, 2022 and 2021 totaled $726,854 compared to $778,181, respectively.

This represents

a decrease of $51,327, or 6.60%.

In 2021, the franchise fees were higher, primarily due to the closing of several Muscle Maker Grill

Franchise restaurants, which corresponds to accelerating the recognition of initial franchise fees.

advertising fund contributions for the years ended December 31, 2022 and 2021 totaled $80,536 compared to $188,539, respectively.

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 decrease of $108,003 or 57.28%, is a direct

result of the decrease in Muscle Maker Grill franchises and the national advertising services to benefit the brand as a

revenues for the years ended December 31, 2022 and 2021 totaled $4,989 and $61,996, respectively.

Other revenues consisted of gift card

breakage recognized.

Costs and Expenses

costs and expenses primarily consist of Commodity costs, Restaurant food and beverage costs, Restaurant labor expense, Restaurant

rent expense, Other restaurant operating expenses, Depreciation and amortization expenses and Sales, general and

administrative expenses.

costs for the year ended December 31, 2022, totaled $145,671,454 or 96.74% as a percentage of Commodity sales.

There was no Commodity

cost for the year ended December 31, 2021.

The $145,671,454 increase resulted from a new line of business operated by Sadot.

labor costs for the year ended December 31, 2022, totaled $346,750 or 0.23% as a percentage of Commodity sales.

There were no Commodity

labor costs for the year ended December 31, 2021.

The $346,750 increase resulted from a new line of business operated by Sadot.

commodity operating expenses for the year ended December 31, 2022 totaled $19,000 or 0.01% as a percentage of Commodity sales There was

no Other commodity operating expenses for the year ended December 31, 2021.

The $19,000 increase resulted from a new line of business

operated by Sadot.

food and beverage costs for the years ended December 31, 2022 and 2021 totaled $3,940,321 or 38.25% as a percentage of Company restaurant

net sales, and $3,532,907 or 37.90%, as a percentage of Company restaurant net sales, respectively.

The $407,414 increase resulted from

a full year of sales for Pokemoto restaurants and SuperFit Foods during the current year as compared to the prior year resulting in higher

Total restaurant food and beverage cost as a percentage of sales increased by 0.35% as a result of higher commodity prices in

labor expense for the years ended December 31, 2022 and 2021 totaled $3,844,140, or 37.32%, as a percentage of Company restaurant net

sales, and $1,917,979, or 20.58%, as a percentage of Company restaurant net sales, respectively.

The $1,926,161 increase resulted from

a reduction in Labor expense in 2021 as a result of approximately $1,920,000 in employee retention credits that were made available to

us due to the effects of COVID-19.

Without the employee retention credit restaurant labor for the year ended December 31, 2021, totaled

$3,837,979 or 41.17% as a percentage of Company restaurant net sales.

Notwithstanding the positive effect of the tax credits on our 2021

Labor costs we were able to reduce our overall labors as a percentage of sales by 3.85% due to increased sales and also due to improvements

in operations.

rent expense for the years ended December 31, 2022 and 2021 totaled $1,190,903, or 11.56% as a percentage of restaurant sales, and $1,261,096,

or 13.53%, as a percentage of restaurant sales, respectively.

The decrease of $70,193 is directly attributed to the closure of nonperforming

corporate location.

The percent of total sales decreased by 1.97% as sales increased overall, and we are able to leverage fixed rent

against these higher sales levels in conjunction with closing underperforming stores.

restaurant operating expenses for the years ended December 31, 2022 and 2021 totaled $2,294,688, or 22.28% as a percentage of restaurant

sales, and $2,343,137, or 25.14% as a percentage of restaurant sales, respectively.

The $48,449 decrease is primarily due to a decrease

in insurance cost resulting from a consolidation in insurance companies and a decrease in third party processing fees, partially offset

by an increase in delivery orders and a full year of sales for Pokemoto restaurants and SuperFit Foods during the year as compared to

the prior year.

The Other restaurant operating expenses as a percent of total sales reduced by 2.86%.

of intangible assets for the years ended December 31, 2022, and 2021 totaled $347,110 and $1,139,908, respectively.

We performed a recoverability

test on the Muscle Maker Grill trademark and franchise agreements based on its projected future undiscounted cash flows.

was based on actual revenues, and we also considered recent developments as well as our strategic plans and intentions.

forecasts we recorded an aggregate impairment charge.

The impairment charges are directly attributed to the closure of our Muscle Maker

Grill Company-owned restaurants and our franchise locations as compared to the prior periods.

had no Impairment of goodwill for the years ended December 31, 2022.

For the year ended December 31, 2021 Impairment of goodwill totaled

We performed an impairment test on the Muscle Maker Grill goodwill based on its projected future undiscounted cash flows.

forecast was based on actual revenues of the location the goodwill was recorded on.

The 2021 impairment charge was directly attributed

to the Muscle Maker Grill Midtown location that was closed in late 2022.

and amortization expenses for the years ended December 31, 2022 and 2021 totaled $2,015,048 and $1,206,505, respectively.

increase is mainly attributed to amortization expense due to the transition of the trademark of Muscle Maker Grill from an infinite

life asset to a finite life asset and a full year of amortization expense of intangibles acquired in 2021 of approximately $788,867.

expenses for the years ended December 31, 2022 and 2021, totaled $116,728 and $31,829, respectively.

The increase in preopening expense

resulted from expenses incurred prior to the opening of our new Company-owned stores.

expenses for the year ended December 31, 2022 totaled $197,101.

There were no Post-closing expenses for the year ended December 31,

The increase in Post-closing expenses resulted from expenses incurred after the closing of underperforming

Company-owned stores.

consulting expenses for the year ended December 31, 2022, totaled $3,601,987.

There were no Stock-based consulting expenses for the year

ended December 31, 2021.

Our revenues totaled $10,349,636 for the year ended

December 31, 2021 compared to $4,473,447 for the year ended December 31, 2020.

The $5,876,189 increase is primarily attributed to an increase

in restaurant sales as a direct result of the acquisition of Pokemoto and SuperFit Foods.

We generated Company restaurant sales, net of discounts,

of $9,320,920 for the year ended December 31, 2021 compared to $3,672,944 for the year ended December 31, 2020.

This represented an increase

of $5,647,976, or 153.8%, which is mainly attributable to the Pokemoto restaurants sales and SupferFit Foods sales generated during the

current year since their dates of acquisition.

Franchise royalties and fees for the year ended December

31, 2021 and 2020 totaled $778,181 compared to $739,450, respectively.

This represents an increase of $38,731, or 5.24%.

As the Company

executes against its franchising strategy and expands its efforts to sell franchise locations, management is anticipating that this number

will likely increase over the coming years.

Franchise advertising fund contributions for the years

ended December 31, 2021 and 2020 totaled $188,539 compared to $61,053, respectively.

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.

Thus the increase has been a direct result of us increasing our expenses incurred related to our national advertising

services to benefit our franchisees and the brands as a whole.

Other revenues for the year ended December 31, 2021

totaled $61,996.

Other revenues consisted of gift card breakage recognized.

Operating Costs and Expenses

Operating costs and expenses primarily consist of

restaurant food and beverage costs, restaurant labor expense, restaurant rent expense, other restaurant operating expenses, depreciation

and amortization expenses and general and administrative expenses.

Restaurant food and beverage costs for the year ended

December 31, 2021 and 2020 totaled $3,532,907 or 37.90% as a percentage of Company restaurant net sales, and $1,467,799 or 39.96%, as

a percentage of Company restaurant net sales, respectively.

The $2,065,108 increase resulted from higher store counts during the current

year as compared to the prior year resulting in higher sales with an overall decrease (improvement) of (2.06%) in restaurant and

food beverage cost as a percentage of sales.

Restaurant labor for the year ended December 31,

2021 and 2020 totaled $1,917,979, or 20.58%, as a percentage of Company restaurant net sales, and $1,908,476, or 51.96%, as a percentage

of Company restaurant net sales, respectively.

The $9,503 increase resulted due a higher store count during the current year as compared

to the prior year as the Company opened and acquired more stores as compared to the prior period, offset by the reduction in labor expense

as a result of approximately $1,920,000 in employee retention credits that were made available to us due to the effects of Covid-19.

Without the employee retention credit restaurant labor for the year ended December 31, 2021 totaled $3,837,979 or 41.17% as a percentage

of Company restaurant net sales.

Notwithstanding the positive effect of the tax credits on our labor costs we were able

to reduce (improve) our overall labor as a percentage of sales by (10.79%) due to increased sales and also due to

improvements in operations.

Restaurant rent expense for the year ended December

31, 2021 and December 31, 2020 totaled $1,261,096, or 13.53% as a percentage of restaurant sales, and $691,986, or 18.84%, as a percentage

of restaurant sales, respectively.

The increase of $569,110 is directly attributed to the new Company-owned locations acquired during

the current period as compared to the prior period thus increasing the store count from sixteen stores to twenty-two stores.

of total sales reduced (improved) by (5.31%) as sales increased overall and we are able to leverage fixed rent against these higher

sales levels.

Other restaurant operating expenses for the year

ended December 31, 2021 and December 31, 2020 totaled $2,362,687, or 25.35% as a percentage of restaurant sales, and $1,146,443, or

31.21% as a percentage of restaurant sales, respectively.

The $1,216,244 increase is due to higher third-party merchant fees

resulting from an increase in delivery orders and a higher store count during the year as compared to the prior year.

The increased

store count also resulted in an increase in utility fees and insurance expenses.

The other restaurant operating expenses as a

percent of total sales reduced (improved) by (5.86%).

Depreciation and amortization expense for the year

ended December 31, 2021 and December 31, 2020 totaled $1,206,505 and $422,546, respectively.

The $783,959 increase is mainly attributed

to amortization expense attributed to the additions of definite life intangible assets of approximately $4,150,000 acquired through the

various acquisitions during the current year as compared to the prior year.

The remaining of the variance is attributable to depreciation

expense related to additional property and equipment of approximately $435,000 acquired through acquisitions and additional property and

equipment purchased of approximately $262,000 for new store build outs and the remodeling of an existing and acquired Company-owned restaurant

compared to the prior year.

Impairment of intangible assets for the year ended

December 31, 2021 and 2020 totaled $1,139,908 and $100,000.

We performed a recoverability test on the Muscle Maker Grill trademark and

franchise agreements based on its projected future undiscounted cash flows.

The forecast was based on actual revenues and we also considered

recent developments as well as our strategic plans and intentions.

Based on the forecasts we recorded an aggregate impairment charge.

The increase in our impairment charge is directly attributed to the closure of our Muscle Maker Grill Company-owned restaurants and our

franchise locations as compared to the prior period.

Preopening expense for the years ended December 31,

2021 and 2020, totaled $31,829 and $56,362 resulted from expense incurred prior to the opening of our new Company-owned store that opened

during the year ended December 31, 2021 and 2020, respectively.

General and administrative expenses for the year ended

December 31, 2021 and 2020 totaled $8,094,509, or 78.21% of total revenue, and $8,576,231, or 191.70 % of total revenue, respectively.

The $481,722 decrease was mainly attributed to a reduction in consulting expenses of approximately

$1,433,000 which is mainly due to stock-based compensation expense for stock issued to various consultants for various services rendered

in the prior year as compared to the current year, a decrease in bad debt expenses of approximately $106,000, a decrease in professional

fees of approximately $42,300 which resulted from changing our auditing firm during the current year.

The decrease was offset with increase

in salaries and wages of approximately $1,189,415 which resulted from additional staff members due to our acquisitions, in addition,

included in the increase is stock-based compensation for shares issued to employees of approximately $637,000 as part of their employment

The remainder of the variance was attributed to various other expenses including recruiting, marketing, computer expenses

Loss from Operations

Our loss from operations

for the year ended December 31, 2021 and 2020 totaled $9,472,671, or 91.53% of total revenues and $9,957,449, or 222.59% of total revenue,

respectively.

The decrease of $484,778 in loss from operations is primarily attributable to the increase of total revenues of $5,876,189,

partially offset by the increase in total cost and expenses of $5,391,411 as discussed above.

Other Income (Expense)

Other income (expense) for the year ended December

31, 2021 and 2020 totaled $1,296,541 and ($141,656), respectively.

The $1,438,197 increase in other income (expense) was primarily attributable

to a gain on extinguishment of debt of $1,228,308 due mainly to the forgiveness of our PPP loans, an

increase of $141,500 in the change in fair value of accrued compensation issued during the current year as compared to the prior year

due to administrative delays by the Company as the shares were earned by the consultant but not issued in the correct period.

to the increase in other income (expense) is a decrease in interest expense of $65,711 due to the reduction of interest-bearing instrument

in the current year as compared to the prior year and a decrease in amortization of debt discounts of $38,918.

Our net loss for the year ended December 31, 2021

was $8,176,130 which was an improvement of $1,922,975 as compared to a net loss of $10,099,105 for the year ended December 31, 2020, resulting

from an increase in our total revenue of $5,876,189 and an increase in our other income (expense) of $1,438,197, partially offset by an

increase of our total cost and expenses of $5,391,411.

The following table represents selected items in our

consolidated statements of operations for the years ended December 31, 2021, respectively by our operating segments:

SuperFit Foods

The increase in Stock-based consulting expenses is the result of consulting fees due to Aggia for Sadot operations.

Based on the servicing agreement with Aggia, the consulting fees are calculated at approximately 80% of the Net income generated by the

Sadot business segment.

This expense is expected to be paid in stock in 2023.

general and administrative expenses for the years ended December 31, 2022 and 2021 totaled $6,149,801, or 3.80% of total revenue,

and $8,088,682, or 78.15% of total revenue, respectively.

The $1,938,881 decrease was primarily attributable to a reduction in consulting

expenses of approximately $1,471,056 , which is mainly due to stock-based compensation

expense recorded for services rendered in the prior year as compared to the current

year and a decrease in professional fees of approximately $ 1,173,900.

The decrease was offset by an increase in salaries,

wages and benefits of approximately $483,762 due to a full year of salary for additional staff members as a result of our

acquisitions in 2021.

The remainder of the variance was attributed to various other expenses including insurance, recruiting,

marketing and computer expenses.

from Operations

loss from operations for the years ended December 31, 2022 and 2021 totaled $8,117,150, or 5.02% of total revenues and $9,447,294,

or 91.28% of total revenue, respectively.

The decrease of $1,330,144 in Loss from operations is primarily attributable to the

increase of Total revenues of $151,348,781, partially offset by the increase in Total cost and expenses of $150,018,637 as discussed

income for the years ended December 31, 2022 and 2021 totaled $179,493 and $1,277,197, respectively.

The $1,097,704 decrease in Other

income was primarily attributable to a decrease in the Gain on extinguishment of debt of $1,087,028 due to the forgiveness of

our PPP loans, a decrease of $127,500 in the Change in fair value of accrued compensation, partially

offset by a $62,783 decrease in Interest expense and a $54,041 increase in Other income.

Net loss for the year ended December 31, 2022, was $7,962,428 which was an improvement of $213,702 as compared to a Net loss of $8,176,130

for the year ended December 31, 2021, resulting from an increase in our Total revenue of $151,348,781, partially offset by an increase

of our Total cost and expenses of $150,018,637 and a decrease in Other income of $1,097,704.

following table represents selected items in our Consolidated Statements of Operations for the year ended December 31, 2022, by our operating

Grill Division

Company restaurant sales, net of discounts

Franchise royalties and fees

Franchise advertising fund contributions

Other Revenue

Total Revenues

Operating Costs and Expenses:

Non-Traditional

(Hybrid) Division

$ 150,585,644

restaurant sales, net of discounts

royalties and fees

advertising fund contributions

Costs and Expenses:

commodity operating expenses

operating expenses:

and beverage costs

restaurant operating expenses

Food and beverage costs

Other restaurant operating expenses

Total restaurant operating expenses

Impairment of intangible assets

restaurant operating expenses

of intangible assets

and amortization expenses

advertising fund expenses

consulting expenses

general and administrative expenses

costs and expenses

/ income from operations

(11,529,521 )

on debt extinguishment

other income, net

Before Income Tax

(11,350,028 )

(loss) / income

$ (7,962,428 )

$ (11,374,799 )

Division – Statement of operations for the period from November 14, 2022 (agreement

date with Aggia) through December 31, 2022.

charges of $347,110 related to the Impairment of intangible assets, related to Muscle Maker

Grill restaurants intangible assets.

This also includes amortization of intangible assets

and depreciation of corporate assets.

charges related to locations that have not opened yet or charges related to locations that

have already closed.

charges related to corporate expense that the Company does not allocate to the respective

The largest portion of this expense relates to payroll, benefits and other compensation

expense of $3,682,605 and professional fees of $922,828.

following table represents selected items in our Consolidated Statements of Operations for the year ended December 31, 2021, by our operating

Grill Division

Non-Traditional

(Hybrid) Division

restaurant sales, net of discounts

royalties and fees

advertising fund contributions

Costs and Expenses:

operating expenses:

beverage costs

restaurant operating expenses

of intangible assets

Impairment of goodwill

Depreciation and amortization

Franchise advertising fund expenses

Preopening expenses

and amortization expenses

advertising fund expenses

general and administrative expenses

Total Costs and Expenses

(Loss) Income from Operations

costs and expenses

/ income from operations

Other Income:

Interest expense, net

Change in fair value of accrued compensation

Gain on debt extinguishment

Amortization of debt discounts

Total Other Income, Net

Loss Before Income Tax

Income tax provision

Net (Loss) Income

Includes charges related to corporate expense that the Company does not allocate to the respective divisions.

The largest portion of this expense relates to payroll, benefits and other compensation expense of $3,320,061, professional fees of $1,818,998, and consulting fees of $1,611,045.

Includes charges of $1,135,448 and $86,348 related to the impairment of intangible assets and goodwill, respectively, related to Muscle Maker Grill restaurants intangible assets and good will.

This also includes amortization of intangible assets.

Includes changes in the fair value of accrued compensation of $127,500.

Pokemoto Division – Statement of operations for the period from May 14, 2021 (acquisition date) through December 31, 2021.

SuperFit Foods Division - Statement of operations for the period from March 25, 2021 (acquisition date) through December 31, 2021.

Liquidity and Capital Resources

We measure our liquidity in a number of ways, including

the following:

in fair value of accrued compensation

on debt extinguishment

other income, net

(loss) / income

$ (8,176,130 )

$ (1,009,774 )

$ (7,498,439 )

Division – Statement of operations for the period from May 14, 2021 (acquisition date)

through December 31, 2022.

Foods Division – Statement of operations for the period from March 25, 2021 (acquisition

date) through December 31, 2022.

charges of $1,139,908 and $86,348 related to the Impairment of intangible assets and goodwill,

respectively, related to Muscle Maker Grill restaurants intangible assets and goodwill.

also includes amortization of intangible assets and depreciation of corporate assets.

charges related to locations that have not opened yet.

charges related to corporate expense that the Company does not allocate to the respective

The largest portion of this expense relates to payroll, benefits and other compensation

expense of $3,198,884 and professional fees and consulting fees of $3,707,773.

and Capital Resources

measure our liquidity in a number of ways, including the following:

Working capital surplus

Convertible notes payable, including related parties and Former Parent, net

Other notes payable, including related parties

Availability of Additional Funds

Although we have a working capital surplus of $15,041,334,

we presently have an accumulated deficit of $71,369,837, as of December 31, 2021, and we utilized $6,392,711 of cash in operating activities

during the year ended December 31, 2021.

We believe 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.

In the event we are required to obtain additional

financing, either through borrowings, private placements, public offerings, or some type of business combination, such as a merger, or

buyout, and there can be no assurance that we will be successful in such pursuits.

We may be unable to acquire the additional funding

necessary to continue operating.

Accordingly, if we are unable to generate adequate cash from operations, and if we are unable to find

sources of funding, it may be necessary for us to sell one or more lines of business or all or a portion of our assets, enter into a business

combination, or reduce or eliminate operations.

These possibilities, to the extent available, may be on terms that result in significant

dilution to our shareholders or that result in our shareholders losing all of their investment in our Company.

If we need to raise additional capital, we do not

know what the terms of any such capital raising would be.

In addition, any future sale of our equity securities could dilute the ownership

and control of your shares and could be at prices substantially below prices at which our shares currently trade.

We may seek to increase

our cash reserves through the sale of additional equity or debt securities.

The sale of convertible debt securities or additional equity

securities could result in additional and potentially substantial dilution to our shareholders.

The incurrence of indebtedness would result

in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity.

In addition, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties.

We cannot assure you

that financing will be available in amounts or on terms acceptable to us, if at all.

Any failure to raise additional funds on favorable

terms could have a material adverse effect on our liquidity and financial condition.

On April 7, 2021, the Company entered into a Securities

Purchase Agreement with an accredited investor for a private placement pursuant to which the investor purchased 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 was sold together at a combined offering price of $2.43 per share and Common Warrant, and each Pre-Funded Warrant and accompanying

Common Warrant was 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 has an exercise price of $2.43 per share, are immediately exercisable and will expire five

and one-half (5.5) years from the date of issuance.

The private placement closed on April 9, 2021.

On November 17, 2021, the Company entered into a Securities

Purchase Agreement with accredited investors for a private placement pursuant to which the investors purchased from the Company for an

aggregate purchase price of approximately $15,000,000 (i) 6,772,000 shares (the “Shares”) of common stock of the Company,

(ii) a common stock purchase warrant to purchase up to 10,830,305 shares of common stock (the “November 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 November Common Warrant was sold together at a combined offering price of $1.385 per Share and November Common

Warrant, and each Pre-Funded Warrant and accompanying November Common Warrant was sold together at a combined offering price of $1.3849

per Pre-Funded Warrant and accompanying November Common Warrant.

The November 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 November Pre-Funded Warrant is fully exercised.

Common Warrant will have an exercise price of $1.385 per share, are immediately exercisable and will expire five (5) years from the date

Notes payable

of Additional Funds

we have a working capital surplus of $4,032,888, we presently have an accumulated deficit of $79,355,064, as of December 31, 2022, and

we utilized $198,629 of cash in operating activities during the year ended December 31, 2022.

We believe that our existing cash on

hand and future cash flows from our franchise operations and commodity trading operations, will be sufficient to fund our operations,

anticipated capital expenditures and repayment obligations over the next 12 months.

the event we are required to obtain additional financing, either through borrowings, private placements, public offerings, or some type

of business combination, such as a merger, or buyout, and there can be no assurance that we will be successful in such pursuits.

be unable to acquire the additional funding necessary to continue operating.

Accordingly, if we are unable to generate adequate cash

from operations, and if we are unable to find sources of funding, it may be necessary for us to sell one or more lines of business or

all or a portion of our assets, enter into a business combination or reduce or eliminate operations.

These possibilities, to the extent

available, may be on terms that result in significant dilution to our shareholders or that result in our shareholders losing all of their

investment in our Company.

we need to raise additional capital, we do not know what the terms of any such capital raising would be.

In addition, any future sale

of our equity securities could dilute the ownership and control of your shares and could be at prices substantially below prices at which

our shares currently trade.

We may seek to increase our cash reserves through the sale of additional equity or debt securities.

of convertible debt securities or additional equity securities could result in additional and potentially substantial dilution to our

shareholders.

The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing

covenants that would restrict our operations and liquidity.

In addition, our ability to obtain additional capital on acceptable terms

is subject to a variety of uncertainties.

We cannot assure you that financing will be available in amounts or on terms acceptable to

us, if at all.

Any failure to raise additional funds on favorable terms could have a material adverse effect on our liquidity and financial

April 7, 2021, the Company entered into a Securities Purchase Agreement with an accredited investor for a private placement pursuant

to which the investor purchased 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

Each share and accompanying common warrant were sold together at a combined offering price of $2.43 per share and common

warrant, and each pre-funded warrant and accompanying common warrant was 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 has an exercise price of

$2.43 per share, are immediately exercisable and will expire 5.5 years from the date of issuance.

The private placement

closed on April 9, 2021.

November 17, 2021, the Company entered into a Securities Purchase Agreement with accredited investors for a private placement pursuant

to which the investors purchased from the Company for an aggregate purchase price of approximately $15,000,000 (i) 6,772,000 shares (the

“shares”) of common stock of the Company, (ii) a common stock purchase warrant to purchase up to 10,830,305 shares of common

stock (the “November 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 November common warrant was sold together at a combined

offering price of $1.385 per share and November common warrant, and each pre-funded warrant and accompanying November common warrant

was sold together at a combined offering price of $1.3849 per pre-funded warrant and accompanying November common warrant.

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 November pre-funded warrant is fully exercised.

The November common warrant will have an exercise price of $1.385 per share, are

immediately exercisable and will expire 5 years from the date of issuance.

The private placement closed on November 22, 2021.

Sources and Uses of Cash for the Years Ended December

31, 2021 and December 31, 2020

For the year ended December 31, 2021 and 2020, we

used cash of $6,392,711 and $7,785,873, respectively, in operations.

Our cash used for the year ended December 31, 2021 was primarily

attributable to our net loss of $8,176,130, adjusted for net non-cash income in the aggregate amount of $3,484,067, partially offset by

$1,700,648 of net cash provided by changes in the levels of operating assets and liabilities.

Our cash used for the year ended December

31, 2020 was primarily attributable to our net loss of $10,099,105, adjusted for net non-cash income in the aggregate amount of $3,535,995,

partially offset by $1,222,763 of net cash provided by changes in the levels of operating assets and liabilities.

During the year ended December 31, 2021, cash used

in investing activities was $3,575,809, of which $262,019 was used to purchase property and equipment, $3,315,390 used in connection with

the acquisition of SuperFit Foods and Pokemoto and $1,600 was collected from loans to franchisees loan issuances.

During the year ended

December 31, 2020, cash used in investing activities was $850,334, of which $781,041 was used to purchase property and equipment, $75,000

used in connection with the acquisition of new Company stores from former franchisees and $5,707 was collected from loans to franchisees

and related parties net of loan issuances.

Net cash provided by financing activities for the

year ended December 31, 2021 was $21,539,291, consisting of $22,890,950 proceeds from Private Placement offerings, net of underwriter’s

discount and offering costs, and proceeds from the exercising of the pre-funded warrants of $28,773,

partially offset by repayments of various other notes payable of $1,280,43, which consisted

mainly of SBA loans that was acquired through the Pokemoto acquisition and $100,000 cash paid to a former investor in connection with

the cancellation of their shares.

Net cash provided by financing activities for the year ended December 31, 2020 was $12,353,285,

consisting of $11,720,001 in proceeds from the offerings, net of underwriter’s discount and offering costs, $764,399 proceeds from

the over-allotment, net of underwriter’s discount and offering costs, $150,000 proceeds from other note payable, $866,300 proceeds

from the PPP loan, partially offset by repayments of various convertible notes of $550,000 and $597,415 of repayments of other notes payables,

including a related party.

Critical Accounting Policies

Use of Estimates

The preparation of financial statements in conformity

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

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 issued in connection with notes payable;

the recognition of revenue;

the recognition, measurement and valuation of current and deferred income taxes.

Estimates and assumptions are periodically reviewed,

and the effects of any material revisions are reflected in the financial statements in the period that they are determined to be necessary.

Actual results could differ from those estimates and assumptions.

Intangible Assets

We account for recorded intangible assets in accordance

with ASC 350 “Intangibles - Goodwill and Other”.

In accordance with ASC 350, we do not amortize intangible assets with indefinite

useful lives.

Our goodwill and trademarks are deemed to have indefinite lives, and accordingly are not amortized, but are evaluated for

impairment at least annually, or more often whenever changes in facts and circumstances may indicate that the carrying value may not be

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:

Franchisee agreements

Franchise license

Trademark – SuperFit, Trademark – Pokemoto

Domain name, customer list and

Proprietary recipes

Non-compete agreement

Impairment of Long-Lived Assets

When circumstances, such as adverse market conditions,

indicate that the carrying value of a long-lived asset may be impaired, we perform an analysis to review the recoverability of the asset’s

carrying value, which includes estimating the undiscounted cash flows (excluding interest charges) from the expected future operations

of the asset.

These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the

effects of demand, competition and other factors.

If the analysis indicates that the carrying value is not recoverable from future cash

flows, an impairment loss is recognized to the extent that the carrying value exceeds the estimated fair value.

Any impairment losses

are recorded as operating expenses, which reduce net income.

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

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

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.

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

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

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

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.

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.

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.

We account for income taxes under Accounting Standards

Codification (“ASC”) 740 Income Taxes (“ASC 740”).

Under ASC 740, deferred tax assets and liabilities are determined

based on the difference between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards

using enacted tax rates in effect for the year in which the differences are expected to impact taxable income.

Valuation allowances are

established when necessary to reduce deferred tax assets to the amounts expected to be realized.

ASC 740 also clarifies the accounting for uncertainty

in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process

for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

Tax benefits claimed or expected to be claimed on

a tax return are recorded in our financial statements.

A tax benefit from an uncertain tax position is only recognized if it is more likely

than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater

than fifty percent likelihood of being realized upon ultimate resolution.

Our policy is to classify assessments, if any, for

tax related interest as interest expense and penalties as general and administrative expenses in the consolidated statements of operations.

Recently Issued Accounting Pronouncements

See Note 2 to our consolidated financial statements

for the year ended December 31, 2021.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have

or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses,

results of operations, liquidity, capital expenditures or capital resources that is material to investors.

and Uses of Cash for the Years Ended December 31, 2022 and December 31, 2021

the years ended December 31, 2022 and 2021, we used Net cash of $198,629 and $6,392,711, respectively, in operations.

used for the year ended December 31, 2022, was primarily attributable to our Net loss of $7,962,428, adjusted for net non-cash

income in the aggregate amount of $6,202,336 offset by $1,561,463 of Net cash provided by changes in the levels of operating assets

and liabilities.

Our Net cash used for the year ended December 31, 2021, was primarily attributable to our Net loss of $8,176,130,

adjusted for net non-cash income in the aggregate amount of $3,484,067, partially offset by $1,700,648 of Net cash used in

changes in the levels of operating assets and liabilities.

the year ended December 31, 2022, Net cash used in investing activities was $5,439,618, of which $4,914,191 was used for a Deposit

on farmland, $596,611 was used to purchase Property and equipment and $71,184 was collected from loans to franchisees loan

For the year ended December 31, 2021, Net cash used in investing activities was $3,575,809, of which $262,019 was used to

purchase Property and equipment, $3,315,390 used in connection with the acquisition of new Company stores from former franchisees

and $1,600 was collected from loans to franchisees and related parties net of loan issuances.

the year ended December 31, 2022, Net cash used in financing activities was $230,036, consisting of repayments of various other

notes payable of $230,080 and $44 of proceeds from the exercise of pre-funded warrants.

For the year ended December 31, 2021, Net

cash provided by financing activities was $21,539,291, consisting of $22,890,950 in proceeds

from Private Placement offerings, net of underwriter’s discount and offering costs, and the proceeds from the exercising of

the pre-funded warrants of $28,773, partially offset by repayments of various other notes payable of $1,280,432, which consisted

mainly of U.S.

Small Business Administration (the “SBA”) loans that was acquired through the Pokemoto acquisition and

$100,000 cash paid to a former investor in connection with the cancellation of their shares.

Issued Accounting Pronouncements

February 2016, the 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.

2016-02 is effective for annual periods beginning after December 15, 2021, with early adoption

Additionally,

in 2018 and 2019, the FASB issued the following Topic 842–related ASUs:

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;

2018-10, Codification Improvements to Topic 842, Leases, which makes certain technical corrections to Topic 842;

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;

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;

2019-01 also clarifies

disclosures required in interim periods after adoption of ASU No.

2016-02 in the year of adoption.

Company adopted Topic 842 as of January 1, 2022 and recognized a cumulative-effect adjustment to the opening balance of accumulated deficit

of $15,010 as of the adoption date, and recognized an additional $7,789 during the second quarter of 2022, based on updated information

on two of our leases, for an aggregate cumulative-effect adjustment to accumulated deficit of $22,799.

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.

The adoption of this guidance did not have a material

impact on the Company’s Consolidated Financial Statements and related disclosures.

Sheet Arrangements

have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,

changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that

is material to investors.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Statements required by this Item 8 are included in this Annual Report following Item 16 hereof.

As a smaller reporting company,

we are not required to provide supplementary financial information.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 7. Management’s Discussion and Analysis