Sadot Group Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15€ promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the year ended December 31, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of such date our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information requested to be disclosed by us in our reports that we file or submit under the Exchange Act. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 2013 Internal Control-Integrated Framework. Our management has concluded that, as of December 31, 2022, our internal control over financial reporting is effective based on these criteria. Changes in Internal Control over Financial Reporting Our Company has added and will continue to add additional internal control procedures, additional resources and software to increase the internal control aspects of the company as we integrate our Sadot subsidiary into the overall business. Other than above changes, there were no other changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the year ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION On December 27, 2022, the Board appointed Benjamin Petel to the Board of Directors. 51 On February 2, 2023, the Board appointed Na Yeon (“Hannah”) Oh and Ray Shankar to the Board of Directors, effective March 1, 2023. The Company held a Special Meeting on February 28, 2023. Of the 29,318,520 shares of Common Stock outstanding on January 19, 2023, the record date, 17,201,755 shares were represented at the Special Meeting, in person or by proxy, constituting a quorum. At the meeting, the shareholders approved (i) the Services Agreement (the “Services Agreement”) whereby Sadot LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Sadot”) engaged Aggia LLC FC, a company formed under the laws of United Arab Emirates (“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 (the “Sadot Transaction”); (ii) an amendment of the Company’s articles of incorporation to increase the number of authorized shares of common stock from 50,000,000 to 150,000,000; (iii) for purposes of complying with NASDAQ Listing Rule 5635(b), the issuance of the Shares pursuant to the Services Agreement entered between the Company, Sadot and Aggia representing more than 20% of our common stock outstanding, which would result in a “change of control” of the Company under applicable Nasdaq listing rules; (iv) for purposes of complying with NASDAQ Listing Rule 5635(c), the issuance of up to 14,424,275 Shares of Common Stock to Aggia pursuant to the Services Agreement and net income generated thresholds; (v) the right of Aggia to nominate up to eight directors to the Board of Directors subject to achieving net income thresholds as set forth in the Services Agreement; and (vi) the adoption of the 2023 Equity Incentive Plan. On March 2, 2023, the Company filed a Certificate of Amendment to its Articles of Incorporation, as amended, with the Secretary of State of the State of Nevada to increase the number of authorized shares of the Company’s common stock from 50,000,000 to 150,000,000 shares. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Board of Directors and Executive Officers Our directors hold office until their successors are elected and qualified, or until their deaths, resignations or removals. Our executive officers hold office at the pleasure of our board of directors, or until their deaths, resignations or removals. As of March 21, 2023, our current directors and executive officers and their ages are: Name Age Principal Positions Held With Us Kevin Mohan (1) 49 Chief Investment Officer and Chairman of the Board Michael J. Roper 58 Chief Executive Officer, Secretary Kenneth Miller 53 Chief Operating Officer Jennifer Black 41 Chief Financial Officer Aimee Infante 36 Chief Marketing Officer Stephen A. Spanos (2) 60 Director A.B. Southall III (3) 61 Director Paul L. Menchik (4) 75 Director Jeff Carl (5) 67 Director Major General (Ret) Malcolm B. Frost (6) 56 Director Phillip Balatsos (7) 45 Director Benjamin Petel 44 Director Na Yeon (“Hannah”) Oh 37 Director Ray Shankar 47 Director (1) Mr. Mohan serves as the Chairman of the Board. (2) Mr. Spanos serves as the Chairman of the Audit Committee. (3) Mr. A.B. Southall III serves as a member of the Governance Committee. (4) Mr. Menchik serves as the Chairman of the Governance Committee and is a member of the Audit Committee. (5) Mr. Carl serves as the Chairman of the Compensations Committee and is a member of the Governance Committee. (6) Mr. Frost serves as a member of the Compensation Committee. (7) Mr. Balatsos serves as a member of the Compensation and Audit Committee. 52 Executive Officers Kevin Mohan . Mr. Mohan has served as Chairman of the Board and a director of Muscle Maker, Inc. since April 16, 2018. From April 16, 2018 through May 1, 2018, he also served as our Interim President. He has also served as the Chief Investment Officer since September 17, 2018. From June 2012 through March 2017, Mr. Mohan served as the VP of Capital Markets for American Restaurant Holdings, Inc., a company focused on acquiring and expanding fast-casual restaurant brands. Based on his experience we have deemed Mr. Mohan fit to serve on the Board and as Chairman of the Board. Michael J. Roper. Mr. Roper has served as Chief Executive Officer, of Muscle Maker, Inc. since May 1, 2018. Mr. Roper has unique experience ranging from owning and operating several franchise locations through the corporate executive levels. From May 2015 through October 2017, Mr. Roper served as Chief Executive Officer of Taco Bueno where he was responsible for defining strategy and providing leadership to 162 company-owned and operated locations along with 23 franchised locations. From March 2014 through May 2015, Mr. Roper served as the Chief Operating Officer of Taco Bueno and from July 2013 through March 2014 as the Chief Development and Technology Officer of Taco Bueno. Prior to joining Taco Bueno, Mr. Roper was a franchise owner and operator of a IMS Barter franchise and held several roles with Quiznos Sub from 2000 to 2012 starting as a franchise owner and culminating in his appointment as the Chief Operating Officer/Executive Vice President of Operations in 2009. Mr. Roper received a Bachelor of Science in Business and General Management from Northern Illinois University. Based on his education and extensive experience in the restaurant/franchise industry, we have deemed Mr. Roper fit to serve as our principal executive officer. Kenneth Miller. Mr. Miller has served as Chief Operating Officer of Muscle Maker, Inc. since September 26, 2018. Mr. Miller has served in the restaurant business for an extensive portion of his career. Prior to joining us as Chief Operating Officer in September 2018, Mr. Miller served as the Senior Vice President of Operations for Dickey’s BBQ Restaurant from April 2018 through September 2018 and in various capacities with Taco Bueno Restaurants, LP from October 2013 through April 2018 culminating in the position of Senior Vice President of Operations. Mr. Miller received a Bachelor of Arts in Business/Exercise Science from Tabor College in 1991. Based on his education and extensive experience in the restaurant/franchise industry, we have deemed Mr. Miller fit to serve as our Chief Operating Officer. Jennifer Black . Ms. Black has served as Chief Financial Officer of Muscle Maker, Inc. since January 2, 2022. Ms. Black is an experienced Chief Financial Officer with a demonstrated history of working with public and private equity backed organizations. Prior to joining the Company, from September 2018 through December 2021, Ms. Black served as the Chief Financial Officer for Eagle Pressure Control LLC (“Eagle”) and Talon Pressure Control, oilfield service companies. From October 2015 through September 2018, Ms. Black served as the Controller for AG Resource Management, a private equity backed agriculture lending company, and as the Controller for Basic Energy Services, an oil and gas services company, from January 2013 through October 2015. Ms. Black has also held various other roles including Vice President of SEC reporting with OMNI American Bank and Audit Manager with RSM McGladrey. In November 2020, Eagle, as a result of various events including an oil and gas work related incident, decline of oil and gas prices and the impact from COVID-19, filed for bankruptcy protection under Subchapter V under Chapter 11 in the US Bankruptcy Court, Southern District of Texas (Houston) (Bankruptcy Petition #: 20-35474). Ms. Black is a Certified Public Accountant and a Chartered Global Management Accountant. Ms. Black received a Master of Business Administration from Jack Welch Management Institute in 2018 and Bachelor of Science in Accounting and Finance from Texas Tech University in 2003. Based on her education and extensive experience in the financial and accounting industries, we have deemed Ms. Black fit to serve as our Chief Financial Officer. Aimee Infante. Ms. Infante has served as the Chief Marketing Officer of Muscle Maker, Inc. since May 6, 2019. Ms. Infante had previously served as the Vice President of Marketing of each of Muscle Maker Development, LLC and Muscle Maker Corp., LLC since August 25, 2017 and September 15, 2017, respectively. From June 6, 2017 to September 15, 2017, she was the Vice President of Marketing of Muscle Maker Brands Conversion, Inc. From February 2016 through June 5, 2017, she served as the Vice President of Marketing of Muscle Maker Brands, LLC, which converted into Muscle Maker Brands Conversion, Inc. on June 6, 2017. From January 2015 through January 2016, Ms. Infante served as our Director of Marketing of Muscle Maker Brands. Ms. Infante was Director of Marketing of Muscle Maker Franchising from October 2014 to January 2015. Ms. Infante was employed by Qdoba Mexican Grill in Denver, Colorado from November 2010 to April 2014, serving as Regional Marketing Specialist from November 2010 to October 2012 and Marketing Manager from October 2012 to April 2014. Ms. Infante holds a Bachelor of Science in Marketing from Rider University. Based on her education and extensive experience in the restaurant/franchise industry, we have deemed Ms. Infante fit to serve as our Chief Marketing Officer. 53 Stephen A. Spanos. Mr. Spanos has served as director of Muscle Maker, Inc. since February 2020. Since 2013, Mr. Spanos has provided financial and accounting consulting services for both privately held and public companies. From 2009 to 2013, Mr. Spanos served as the Chief Financial Officer of Orion Seafood International, Inc., a marketer of frozen lobster products, and as the Controller of Reef Point Systems, a provider of security solutions for converged wireless and wireline networks in the United States, from 2005 to 2013. Mr. Spanos served as an audit manager for BDO USA, LLP and as an auditor for Ernst & Young. Mr. Spanos received his MBA and BS in Business Administration, Accounting and Financing in 1995 and 1985, respectively, from Boston University. Based on his education and extensive experience in financial and accounting matters, we have deemed that Mr. Spanos is fit to serve on the Board. A.B. Southall III . Mr. Southall has served as director of Muscle Maker, Inc since February 2017. He has over 35 years of experience managing construction and land developing businesses. He was the President of a Custom Home Building Company for over 25 years, in addition to 20 years as President of a 189 boat slip marina complex. His involvement in the marina business led him to co-founding a local Waterway Association, where he was on the board since its inception. He has diversely invested across multiple sectors including private placements, oil & gas, real estate, restaurant businesses and commodities. Mr. Southall is an advocate of a healthy approach to the food industry and the restaurant business. Based on his vast business and financial experience with real estate and restaurants, we have deemed Mr. Southall fit to serve on the Board. Paul L. Menchik . Mr. Menchik has served as director of Muscle Maker, Inc. since February 2017. Since 1986, Mr. Menchik has been Professor of Economics at Michigan State University where he has been Department chairperson and Director of Graduate Programs. He has served as Senior Economist for Economic Policy for the White House Office of Management and Budget (where among other matters he worked on Social Security solvency issues) and served as Visiting Scholar at the Tax Analysis Division of the Congressional Budget Office. Menchik has also been on the faculty of Rutgers University and the University of Wisconsin and has served as visiting faculty at University of Pennsylvania, London School of Economics, University College London, and Victoria University in Wellington New Zealand. Over the years he has advised three state governments and five United States government agencies. He holds a Ph.D. from the Wharton School of Finance and Commerce at the University of Pennsylvania. He has over 40 publications including a book on household and family economics, made over 85 paper presentations at other universities and conferences around the world and has refereed for over 20 academic journals and is currently a member of the editorial board for the Journal of Income Distribution. He is a member of Who’s Who in Economics and Who’s Who in America. Based on his education and extensive experience in economic and financial matters, we have deemed Mr. Menchik fit to serve on the Board. Jeff Carl. Mr. Carl has served as director of Muscle Maker, Inc. since September 3, 2019. Mr. Carl has served as director of Muscle Maker, Inc. since September 3, 2019. Since 2017, Mr. Carl has served as principal of Restaurant Brandworks an independent restaurant and retail consultancy based in San Francisco. Mr. Carl also serves as Executive Director of Nice + Company, a marketing agency with a focus on digital media and creative. From 2013 to 2017, Mr. Carl served as the Chief Marketing Officer for Taco Bueno Restaurants, and from 2009 to 2013 as the Chief Marketing Officer of Tavistock Restaurants LLC. From 2001 to 2007, Mr. Carl served as Corporate Vice President of Global Marketing and Chief Marketing Officer of Latin America for McDonald’s Corporation. Mr. Carl received a BA from Wake Forest University in 1977 and an MBA from the University of North Carolina – Chapel Hill in 1979. Based on his experience within the restaurant industry and due to the fact that he has held senior level executive positions with a focus on advertising and marketing, we have deemed Mr. Carl a fit to serve on the Board. 54 Major General (Ret) Malcolm B. Frost . Major General Frost has over 35 years of leadership experience in both the U.S. Army and business. He served as a career Infantryman, commanding and leading soldiers at every level from Lieutenant to 2-star General. Throughout his military career he provided large-scale strategic and operational leadership and oversight of units in the Indo-Asia-Pacific, Middle East, Europe, and the United States - successfully leading the evolution of soldier training programs in peace and war. He led the Army’s Holistic Health and Fitness revolution from 2017-19 and was responsible for developing the first new physical fitness test for the Army in 40 years. He also led the Army’s initial entry training enterprise that annually transformed 130K civilians into soldiers and as the Army’s Director of Public Affairs, developed and led all strategic communications plans, roll-outs, and national media relations initiatives for the Army. He has been deployed to combat several times in a variety of leadership and command positions in Bosnia-Hercegovina, Iraq, and Afghanistan between 1995-2011. Since transitioning from the Army, General Frost provides keynote speaking, executive leadership consulting, training workshops, and strategic advice in public relations and integrated communications to corporate America. He also provides expert advice to companies in the health and wellness, medical, energy, cyber and other industries. He has extensive keynote and public speaking experience and has been an on-air military and national security contributor for national media outlets. Based on his vast business and financial experience with the military as well as his business experience, we have deemed Maj. Gen (Ret) Frost a fit to serve on the Board. Phillip Balatsos. From 2016, Mr. Balatsos worked in the restaurant and hospitality industries. In 2018, Mr. Balatsos founded and has served as the owner operator of LAPH Hospitality which operates a café/catering business and also serves as a consultant providing financial, purchasing and usage analysis as well as rollout services pertaining to ordering, invoicing and inventorying systems. From 2016 through 2018, Mr. Balatsos held various positions with Barteca Restaurant Group including Assistant General Manager and Purchasing Manager. Prior to 2016, Mr. Balatsos held various position on Wall Street for 16 years including Vice President, Foreign Exchange Sales/Trading for Credit Suisse, Director, Foreign Exchange Hedge Fund Sales for Barclays Capital and Financial Advisor for Stifel Nicolaus & Co. Most recently, Mr. Balatsos has returned to the financial markets in a similar role as his previous sales/trader experience with the Brazilian firm, XP Investments. Mr. Balatsos graduated from Skidmore College in 1999 with a Bachelor of Science in Business Administration and from Institute of Culinary Education in 2016. Based on his experience in the restaurant and hospitality industries, the Company has deemed Mr. Balatsos a fit to serve on the Board. Benjamin Petel. Mr. Petel has been engaged as a Business Development Specialist in the global agricultural commodity trading field for the past decade. His experience spans across the various aspects of international commodity trading, finance and operations. In addition, Mr. Petel has worked in other fields as a Business Development and strategic networking expert, initiating and executing multi-million-dollar projects across the globe. From 2019 through 2022, Mr. Petel has been engaged as a Business Development Specialist and consultant to various agriculture and food companies in capacities ranging from corporate finance and M&A to commercial development and operational control. In addition, from 2015 and until 2019, Mr. Petel served as a strategic networking specialist in various fields and industries. Mr. Petel received a Bachelor of Arts in Business Administration and General Management from Bar-Ilan University in 2014. Based on his experience within the commodity trading industry, the Company has deemed Mr. Petel as a fit to serve on the Board. Na Yeon (“Hannah”) Oh. Ms. Oh, is an experienced agri-food business leader and certified sustainability professional, with broad experiences and a proven track record in driving organizational and digital/data driven transformations; developing commercial strategies and brand campaigns; and operationalizing integrated business planning and supply chain strategies. Ms. Oh is an active member of Singapore’s agtech start-up scene, as an investor and advisor to entrepreneurs and companies in agri-food business, urban farms, and climate tech. For the past 15 years Ms. Oh has held various roles with Bayer Crop Science and Monsato Company, which was acquired by Bayer AG, including Head of Marketing Excellence, Head of Sales and Operations and Business Intelligence, and Head of Customer Analytics and Customer Experience among other roles. Ms. Oh graduated from Macalester College with a B.A. in Economics and Asian Studies in May 2007. Based on her experience within the agri-food industry, the Company has deemed Ms. Oh as a fit to serve on the Board. Ray Shankar. Mr. Shankar has been a Partner since 2019 at Oon & Bazul LLP, a prominent regional law firm where Mr. Shankar manages the Private Wealth and Family Office Practice where he routinely advises ultra-high net worth families on the structuring of their family offices, tax and immigration incentive applications as well as legacy planning. Mr. Shankar specializes in advising on the establishment of family offices, which includes legacy and estate planning, wills, trusts, family charters/constitutions, tax efficient structures and succession planning. Prior to joining Oon & Bazul LLP, Mr. Shankar served as the Managing Director of Ring City Limited, a group of operating companies in various sectors. Mr. Shankar received his Bachelor of Laws (LLB) from the National University of Singapore in 2001. 55 Based on his legal, finance and business experience, the Company has deemed Mr. Shankar as a fit to serve on the Board. Family Relationships There are no family relationships among any of our executive officers and directors. Corporate Governance Board of Directors and Board Committees Our stock (symbol: GRIL) is listed on the NASDAQ capital market. Under the rules of Nasdaq, “independent” directors must make up a majority of a listed company’s board of directors. In addition, applicable NASDAQ rules require that, subject to specified exceptions, each member of a listed company’s audit and compensation committees be independent within the meaning of the applicable NASDAQ rules. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. Our board of directors currently consists of 10 members. Our board of directors has determined that Stephen Spanos, A.B. Southall III, Paul L. Menchik, Malcolm Frost, Phillip Balatsos, Jeff Carl, Benjamin Petel, Hannah Oh and Ray Shankar qualify as independent directors in accordance with the NASDAQ Capital Market, or NASDAQ listing requirements. Kevin Mohan is not considered independent. Nasdaq’s independence definition includes a series of objective tests, such as that the director is not, and has not been for at least 3 years, one of our employees and that neither the director nor any of his or her family members has engaged in various types of business dealings with us. In addition, as required by NASDAQ rules, our board of directors has made a subjective determination as to each independent director that no relationships exist that, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us regarding each director’s business and personal activities and relationships as they may relate to us and our management. There are no family relationships among any of our directors or executive officers. As required under NASDAQ rules and regulations and in expectation of listing on NASDAQ, our independent directors meet in regularly scheduled executive sessions at which only independent directors are present. Board Leadership Structure and Board’s Role in Risk Oversight Kevin Mohan is the Chairman of the Board. The Chairman has authority, among other things, to preside over the Board meetings and set the agenda for the Board meetings. Accordingly, the Chairman has substantial ability to shape the work of our Board. We currently believe that separation of the roles of Chairman and Chief Executive Officer ensures appropriate oversight by the Board of our business and affairs. However, no single leadership model is right for all companies and at all times. The Board recognizes that depending on the circumstances, other leadership models, such as the appointment of a lead Independent director, might be appropriate. Accordingly, the Board may periodically review its leadership structure. Our Board is generally responsible for the oversight of corporate risk in its review and deliberations relating to our activities. Our principal source of risk falls into two categories, financial and product commercialization. The audit committee oversees management of financial risks; our Board regularly reviews information regarding our cash position, liquidity and operations, as well as the risks associated with each. The Board regularly reviews plans, results and potential risks related to our system-wide restaurant growth, brand awareness and menu offerings. Our Compensation Committee is expected to oversee risk management as it relates to our compensation plans, policies and practices for all employees including executives and directors, particularly whether our compensation programs may create incentives for our employees to take excessive or inappropriate risks which could have a material adverse effect on the Company. 56 Committees of the Board of Directors The Board of Directors has already established an audit committee (the “Audit Committee”), a Compensation Committee (the “Compensation Committee”) and a Nominating and Corporate Governance Committee (“Governance Committee”). The composition and function of each committee are described below. Audit Committee The Audit Committee has three members, including Messrs. Spanos, Balatsos and Menchik. Mr. Spanos serves as the chairman of the Audit Committee and satisfies the definition of “audit committee financial expert”. Our audit committee is authorized to: ● approve and retain the independent auditors to conduct the annual audit of our financial statements; ● review the proposed scope and results of the audit; ● review and pre-approve audit and non-audit fees and services; ● review accounting and financial controls with the independent auditors and our financial and accounting staff; ● review and approve transactions between us and our directors, officers and affiliates; ● recognize and prevent prohibited non-audit services; and ● establish procedures for complaints received by us regarding accounting matters; oversee internal audit functions, if any. Compensation Committee The Compensation Committee has three members, including Messrs. Carl, Balatsos and Frost. Mr. Carl serves as the chairman of the Compensation Committee. Our Compensation Committee is authorized to: ● review and determine the compensation arrangements for management; ● establish and review general compensation policies with the objective to attract and retain superior talent, to reward individual performance and to achieve our financial goals; ● administer our stock incentive and purchase plans; and ● review the independence of any compensation advisers. Nominating and Corporate Governance Committee The Governance Committee has three members, including Messrs. Menchik, Southall III and Carl. Mr. Menchik serves as the chairman of the Governance Committee. The functions of our Governance Committee, among other things, include: ● identifying individuals qualified to become board members and recommending director; ● nominees and board members for committee membership; ● developing and recommending to our board corporate governance guidelines; ● review and determine the compensation arrangements for directors; and ● overseeing the evaluation of our board of directors and its committees and management. 57 Our goal is to assemble a Board that brings together a variety of skills derived from high quality business and professional experience. Compensation Committee Interlocks and Insider Participation None of the members of our Compensation Committee, at any time, has been one of our officers or employees. Except for Mr. Mohan, none of our executive officers currently serves, or in the past year has served, as a member of the Board of Directors or Compensation Committee of any entity that has one or more executive officers on our Board of Directors or Compensation Committee. For a description of transactions between us and members of our Compensation Committee and affiliates of such members, please see “Certain Relationships and Related Party Transactions”. Board Diversity Matrix (as of December 31, 2022): The Board believes that a diverse membership having a variety of skills, styles, experience and competencies is an important feature of a well-functioning board. Accordingly, the Board believes that diversity of viewpoints, backgrounds and experience (inclusive of gender, age, race and ethnicity) should be a consideration in Board succession planning and recruiting. In recent years, the Governance Committee has taken this priority to heart in its nominations process, and the diversity of the Board has grown significantly. The Nasdaq Stock Market, LLC Listing Rules’ (the “NASDAQ Listing Rules”) objective for listed companies to have at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+. The chart below provides certain information regarding the diversity of the Board as of December 31, 2022. Total Number of Directors Male Female Gender undisclosed Part I: Gender Identity Directors 7 — 1 Part II: Demographic Background White 6 — — Two or more races or ethnicities 1 — — Did not disclose demographic background — — 1 Directors who are Veterans 1 — — Code of Business Conduct and Ethics We have adopted a code of business conduct and ethics that applies to all our employees, officers and directors, including those officers responsible for financial reporting. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires the Company’s executive officers, directors, and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of the Company’s common stock. Such officers, directors, and persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file with the SEC. To our knowledge, based solely on review of the copies of such reports and amendments to such reports with respect to the year ended December 31, 2022, filed with the SEC, all required Section 16 reports under the Exchange Act for our directors, executive officers, principal accounting officer and beneficial owners of greater than 10% of our common stock were filed on a timely basis during the year ended December 31, 2022. 58 ITEM 11. EXECUTIVE COMPENSATION Summary Compensation Table The following Summary Compensation Table sets forth all compensation earned in all capacities during the fiscal years ended December 31, 2022 and 2021 by (i) our principal executive officer, (ii) our two most highly compensated executive officers, other than our principal executive officer, who were serving as executive officers as of December 31, 2022 and whose total compensation for the 2022 fiscal year, as determined by Regulation S-K, Item 402, exceeded $100,000, (iii) a person who would have been included as one of our two most highly compensated executive officers, other than our principal executive officer, but for the fact that he was not serving as one of our executive officers as of December 31, 2022 (the individuals falling within categories (i), (ii) and (iii) are collectively referred to as the “Named Executive Officers”): Non-Equity Non-Qualified Incentive Deferred Stock Option Plan Compensation All Other Year Salary Bonus (a) Award Awards Compensation Earnings Compensation Total Michael J. Roper Chief Executive Officer of 2022 $ 350,000 $ 175,000 $ — $ 24,000 (b) $ 549,000 Muscle Maker, Inc. 2021 $ 356,077 $ 100,000 $ 287,000 $ — $ — $ — $ — $ 743,077 Kenneth Miller Chief Operating Officer of 2022 $ 275,000 $ 75,000 $ — $ 12,000 (c) $ — $ — $ — $ 362,000 Muscle Maker, Inc. 2021 $ 283,461 $ 55,000 $ 92,248 $ — $ — $ — $ — $ 430,709 Kevin Mohan Chief Operating Officer of 2022 $ 196,634 $ 150,000 $ — $ 18,000 (d) $ — $ — $ — $ 364,634 Muscle Maker, Inc. 2021 $ 180,384 $ 137,500 $ 184,498 $ — $ — $ — $ — $ 502,382 (a) Bonuses are earned in the year noted and paid out within the first three months of the subsequent year. This schedule has been adjusted for 2021 to reflect the bonus earned in 2022 but paid out in 2023. (b) On May 2, 2022, Michael Roper was granted a stock option to acquire 100,000 shares of common stock at an exercise price of $0.41 per share. The options vest ratably over 20 quarters. (c) On May 2, 2022, Kenneth Miller was granted a stock option to acquire 50,000 shares of common stock at an exercise price of $0.41 per share. The options vest ratably over 20 quarters. (d) On May 2, 2022, Kevin Mohan was granted a stock option to acquire 75,000 shares of common stock at an exercise price of $0.41 per share. The options vest ratably over 20 quarters. On October 10, 2022, the Company issued options to purchase 25,000 shares of the Company’s common stock to a member of the executive team. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on December 31, 2022. A summary of option activity during the years ended December 31, 2022 and 2021 is presented below: Weighted-average Weighted-average Number of exercise remaining life options price (in years) Outstanding, January 1, 2021 300,000 $ 3.33 1.10 Issued — — Exercised — — Forfeited (200,000 ) 2.50 Outstanding, December 31, 2021 100,000 $ 5.00 1.92 Issued 337,500 0.41 4.40 Exercised — — Forfeited (25,000 ) 0.41 Outstanding, December 31, 2022 412,500 $ 1.52 3.56 Exercisable, December 31, 2022 144,375 $ 3.59 1.98 On February 27, 2023, we issued options to purchase an aggregate of 531,072 shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023. On March 15, 2023, we issued options to purchase 68,928 shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023. 59 Employment Agreements Michael Roper On November 16, 2022, the Company entered into an Executive Employment Agreement with Michael Roper (the “Roper Agreement”), which replaced his prior employment agreement. Pursuant to the Roper Agreement, Mr. Roper will continue to be employed as Chief Executive Officer of the Company on an at will basis. During the term of the Roper Agreement, Mr. Roper is entitled to a base salary at the annualized rate of $350,000. Mr. Roper will be eligible for a discretionary performance bonus to be determined by the Board annually. Further, Mr. Roper will be entitled to an additional bonus of $50,000 upon the Company obtaining approval of the Shareholder Matters and $25,000 upon the Designated Directors representing a majority of the Board of Directors. If Mr. Roper is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Roper is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Roper will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 18 months following the second anniversary of the Roper Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Roper Agreement will automatically terminate and the prior employment agreement will again be in full effect. Jennifer Black On March 21, 2023, the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement. Pursuant to the Black Agreement, Ms. Black will continue to be employed as Chief Financial Officer of the Company on an at will basis. During the term of the Black Agreement, Ms. Black is entitled to a base salary at the annualized rate of $250,000. Ms. Black will be eligible for a discretionary performance bonus up to 50% of her annual salary. Further, Ms. Black will be entitled to an additional bonus of $50,000 upon the Company obtaining approval of the Shareholder Matters and $25,000 upon the Designated Directors representing a majority of the Board of Directors. If Ms. Black is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Black is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Black will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Black Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Black Agreement will automatically terminate, and the prior employment agreement will again be in full effect. Kenneth Miller On November 16, 2022, the Company entered into an Executive Employment Agreement with Kenn Miller (the “Miller Agreement”), which replaced his prior employment agreement. Pursuant to the Miller Agreement, Mr. Miller will continue to be employed as Chief Operating Officer of the Company on an at will basis. During the term of the Miller Agreement, Mr. Miller is entitled to a base salary at the annualized rate of $275,000. Mr. Miller will be eligible for a discretionary performance bonus up to 75% of his annual salary. Further, Mr. Miller will be entitled to an additional bonus of $25,000 upon the Designated Directors representing a majority of the Board of Directors. If Mr. Miller is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Miller is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Miller will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 12 months following the second anniversary of the Miller Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Miller Agreement will automatically terminate and the prior employment agreement will again be in full effect. Kevin Mohan On November 16, 2022, the Company entered into an Executive Employment Agreement with Kevin Mohan (the “Mohan Agreement”), which replaced his prior employment agreement. Pursuant to the Mohan Agreement, Mr. Mohan will continue to be employed as Chief Investment Officer of the Company on an at will basis. During the term of the Employment Agreement, Mr. Mohan is entitled to a base salary at the annualized rate of $200,000. Mr. Mohan will be eligible for a discretionary performance bonus up to 75% of his annual salary. Further, Mr. Mohan will be entitled to an additional bonus of $50,000 upon the Company obtaining approval of the Shareholder Matters and $25,000 upon the Designated Directors representing a majority of the Board of Directors. If Mr. Mohan is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Mohan is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Mohan will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Mohan Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Mohan Agreement will automatically terminate, and the prior employment agreement will again be in full effect. 60 Aimee Infante On November 16, 2022, the Company entered into an Executive Employment Agreement with Aimee Infante (the “Infante Agreement”), which replaced her prior employment agreement. Pursuant to the Infante Agreement, Ms. Infante will continue to be employed as Chief Marketing Officer of the Company on an at will basis. During the term of the Infante Agreement, Ms. Infante is entitled to a base salary at the annualized rate of $175,000. Ms. Infante will be eligible for a discretionary performance bonus up to 25% of her annual salary. Further, Ms. Infante will be entitled to an additional bonus of $25,000 upon the Designated Directors representing a majority of the Board of Directors. If Ms. Infante is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Infante is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Infante will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Infante Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Infante Agreement will automatically terminate, and the prior employment agreement will again be in full effect. Ferdinand Groenewald On February 9, 2022, the Company and Ferdinand Groenewald, Chief Accounting Officer, entered a letter agreement providing that Mr. Groenewald will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $175,000 effective February 14, 2022. Mr. Groenewald will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25% of his salary. Within 90 days of the effective date, the Company will issue Mr. Groenewald stock options to receive 25,000 shares of common stock which will vest over a term of five years. If Mr. Groenewald is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. Departure of Officer On June 21, 2022, the Company advised Ferdinand Groenewald that the position of Chief Accounting Officer has been eliminated. Mr. Groenewald continued his employment with the Company through July 29, 2022, at which time he became entitled to the severance for termination without cause as outlined in the letter agreement between the Company and Mr. Groenewald dated February 9, 2022. Elements of Compensation Base Salary Messrs. Roper, Black, Miller, Mohan, Infante and Groenewald received a fixed base salary in an amount determined in accordance with their then employment agreement with Muscle Maker Inc., and based on a number of factors, including: ● The nature, responsibilities and duties of the officer’s position; ● The officer’s expertise, demonstrated leadership ability and prior performance; ● The officer’s salary history and total compensation, including annual cash bonuses and long-term incentive compensation; and ● The competitiveness of the market for the officer’s services. Bonus Messrs. Roper, Mohan, Miller, Black and Infante earned discretionary performance-based bonuses during the year ended December 31, 2022, pursuant to their employment agreements. Messrs. Roper, Mohan, Miller and Ms. Infante earned discretionary performance-based bonuses during the year ended December 31, 2021, pursuant to their employment agreements. 61 Stock Award In fiscal year 2022, we issued 20,000 shares of our restricted common stock, with a fair value of $10,800, to a member of our executive team. Stock Options On May 2, 2022, we issued options to purchase an aggregate of 312,500 shares of our common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on June 30, 2022. On October 10, 2022, we issued options to purchase 25,000 shares of our common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on December 31, 2022. On February 27, 2023, we issued options to purchase an aggregate of 531,072 shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023. On March 15, 2023, we issued options to purchase 68,928 shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023. There were 25,000 options to purchase shares forfeited upon the departure of an officer. Equity Incentive Plans 2020 Plan The Company’s board of directors and shareholders approved and adopted on October 27, 2020 the 2020 Equity Incentive Plan (“2020 Plan”), effective on October 27, 2020 under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2020 Plan, the Company reserved 1,750,000 shares of common stock for issuance. As of the date of the issuance of these Consolidated Financial Statements 889,756 shares have been issued under the 2020 Plan. 2021 Plan The Company’s board of directors and shareholders approved and adopted on October 7, 2021 the 2021 Equity Incentive Plan (“2021 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2021 Plan, the Company reserved 1,500,000 shares of common stock for issuance. As of the date of the issuance of these Consolidated Financial Statements 656,428 shares have been issued and 843,572 option to purchase shares have been awarded under the 2021 Plan. 2023 Plan The Company’s board of directors and shareholders approved and adopted on February 28, 2023 the 2023 Equity Incentive Plan (“2023 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2023 Plan, the Company reserved 2,500,000 shares of common stock for issuance. As of the date of the issuance of these Consolidated Financial Statements no shares have been issued and 68,928 option to purchase shares have been awarded under the 2023 Plan. Administration The Company’s Board of Directors or a committee appointed by the Board (the “Committee”) will administer the Plan. The Committee will have the authority, without limitation (i) to designate Participants to receive Awards, (ii) determine the types of Awards to be granted to Participants, (iii) determine the number of shares of common stock to be covered by Awards, (iv) determine the terms and conditions of any Awards granted under the Plan, (v) determine to what extent and under what circumstances Awards may be settled in cash, shares of common stock, other securities, other Awards or other property, or canceled, forfeited or suspended, (vi) determine whether, to what extent, and under what circumstances the delivery of cash, Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be made; (vii) interpret, administer, reconcile any inconsistency in, settle any controversy regarding, correct any defect in and/or complete any omission in this Plan and any instrument or agreement relating to, or Award granted under, this Plan; (viii) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of this Plan; (ix) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, Awards; (x) reprice existing Awards with shareholder approval or to grant Awards in connection with or in consideration of the cancellation of an outstanding Award with a higher price; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Plan. The Committee will have full discretion to administer and interpret the Plan and to adopt such rules, regulations and procedures as it deems necessary or advisable and to determine, among other things, the time or times at which the awards may be exercised and whether and under what circumstances an award may be exercised. 62 Eligibility Employees, directors, officers, advisors and consultants of the Company or its affiliates are eligible to participate in the Plan and are referred to as “Participants”. The Committee has the sole and complete authority to determine who will be granted an Award under the Plan, however, it may delegate such authority to one or more officers of the Company under the circumstances set forth in the Plan. Number of Shares Authorized Up to approximately 1,500,000 shares of common stock may be issued pursuant to awards granted under the 2021 Plan and 2,500,000 under the 2023 Plan. If an Award is forfeited, canceled, or if any Option terminates, expires or lapses without being exercised, the Common Stock subject to such Award will again be made available for future grant. However, shares that are used to pay the exercise price of an Option or that are withheld to satisfy the Participant’s tax withholding obligation will not be available for re-grant under the Plan. If there is any change in the Company’s corporate pro or structure, the Committee in its sole discretion may make substitutions or adjustments to the number of shares of common stock reserved for issuance under the Plan, the number of shares covered by Awards then outstanding under the Plan, the limitations on Awards under the Plan, the exercise price of outstanding Options and such other equitable substitution or adjustments as it may determine appropriate. The Plan has a term of ten years and no further Awards may be granted under the Plan after that date. Awards Available for Grant The Committee may grant Awards of Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Stock Bonus Awards, Performance Compensation Awards (including cash bonus awards) or any combination of the foregoing. Notwithstanding, the Committee may not grant to any one person in any one calendar year Awards (i) for more than 50% of the Available Shares in the aggregate or (ii) payable in cash in an amount exceeding $10,000,000 in the aggregate. Options The Committee will be authorized to grant Options to purchase Common Stock that are either “qualified,” meaning they are intended to satisfy the requirements of Code Section 422 for Incentive Stock Options, or “non-qualified,” meaning they are not intended to satisfy the requirements of Section 422 of the Code. Options granted under the Plan will be subject to the terms and conditions established by the Committee. Under the terms of the Plan, unless the Committee determines otherwise in the case of an Option substituted for another Option in connection with a corporate transaction, the exercise price of the Options will not be less than the fair market value (as determined under the Plan) of the shares of common stock on the date of grant. Options granted under the Plan will be subject to such terms, including the exercise price and the conditions and timing of exercise, as may be determined by the Committee and specified in the applicable award agreement. The maximum term of an Option granted under the Plan will be ten years from the date of grant (or five years in the case of an Incentive Stock Option granted to a 10% stockholder). Payment in respect of the exercise of an Option may be made in cash or by check, by surrender of unrestricted shares of Common Stock (at their fair market value on the date of exercise) that have been held by the participant for any period deemed necessary by the Company’s accountants to avoid an additional compensation charge or have been purchased on the open market, or the Committee may, in its discretion and to the extent permitted by law, allow such payment to be made through a broker-assisted cashless exercise mechanism, a net exercise method, or by such other method as the Committee may determine to be appropriate. 63 Stock Appreciation Rights The Committee will be authorized to award Stock Appreciation Rights (or “SARs”) under the Plan. SARs will be subject to such terms and conditions as established by the Committee. A SAR is a contractual right that allows a participant to receive, either in the form of cash, shares or any combination of cash and shares, the appreciation, if any, in the value of a share over a certain period of time. A SAR granted under the Plan may be granted in tandem with an option and SARs may also be awarded to a participant independent of the grant of an Option. SARs granted in connection with an Option shall be subject to terms similar to the Option which corresponds to such SARs. SARs shall be subject to terms established by the Committee and reflected in the award agreement. Restricted Stock The Committee will be authorized to award Restricted Stock under the Plan. Unless otherwise provided by the Committee and specified in an award agreement, restrictions on Restricted Stock will lapse after three years of service with the Company. The Committee will determine the terms of such Restricted Stock awards. Restricted Stock are shares of common stock that generally are non-transferable and subject to other restrictions determined by the Committee for a specified period. Unless the Committee determines otherwise or specifies otherwise in an award agreement, if the participant terminates employment or services during the restricted period, then any unvested restricted stock will be forfeited. Restricted Stock Unit Awards The Committee will be authorized to award Restricted Stock Unit awards. Unless otherwise provided by the Committee and specified in an award agreement, Restricted Stock Units will vest after three years of service with the Company. The Committee will determine the terms of such Restricted Stock Units. Unless the Committee determines otherwise or specifies otherwise in an award agreement, if the participant terminates employment or services during the period of time over which all or a portion of the units are to be earned, then any unvested units will be forfeited. At the election of the Committee, the participant will receive a number of shares of common stock equal to the number of units earned or an amount in cash equal to the fair market value of that number of shares at the expiration of the period over which the units are to be earned or at a later date selected by the Committee. Stock Bonus Awards The Committee will be authorized to grant Awards of unrestricted shares of common stock or other Awards denominated in shares of common stock, either alone or in tandem with other Awards, under such terms and conditions as the Committee may determine. Performance Compensation Awards The Committee will be authorized to grant any Award under the Plan in the form of a Performance Compensation Award exempt from the requirements of Section 162(m) of the Code by conditioning the vesting of the Award on the attainment of specific performance criteria of the Company and/or one or more Affiliates, divisions or operational units, or any combination thereof, as determined by the Committee. The Committee will select the performance criteria based on one or more of the following factors: (i) revenue; (ii) sales; (iii) profit (net profit, gross profit, operating profit, economic profit, profit margins or other corporate profit measures); (iv) earnings (EBIT, EBITDA, earnings per share, or other corporate profit measures); (v) net income (before or after taxes, operating income or other income measures); (vi) cash (cash flow, cash generation or other cash measures); (vii) stock price or performance; (viii) total stockholder return (stock price appreciation plus reinvested dividends divided by beginning share price); (ix) economic value added; (x) return measures (including, but not limited to, return on assets, capital, equity, investments or sales, and cash flow return on assets, capital, equity, or sales); (xi) market share; (xii) improvements in capital structure; (xiii) expenses (expense management, expense ratio, expense efficiency ratios or other expense measures); (xiv) business expansion or consolidation (acquisitions and divestitures); (xv) internal rate of return or increase in net present value; (xvi) working capital targets relating to inventory and/or accounts receivable; (xvii) inventory management; (xviii) service or product delivery or quality; (xix) customer satisfaction; (xx) employee retention; (xxi) safety standards; (xxii) productivity measures; (xxiii) cost reduction measures; and/or (xxiv) strategic plan development and implementation. Transferability Each Award may be exercised during the Participant’s lifetime only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative and may not be otherwise transferred or encumbered by a Participant other than by will or by the laws of descent and distribution. The Committee, however, may permit Awards (other than Incentive Stock Options) to be transferred to family members, a trust for the benefit of such family members, a partnership or limited liability company whose partners or stockholders are the Participant and his or her family members or anyone else approved by it. 64 Amendment The Plan will have a term of ten years. The Company’s board of directors may amend, suspend or terminate the Plan at any time; however, shareholder approval to amend the Plan may be necessary if the law or SEC so requires. No amendment, suspension or termination will materially and adversely affect the rights of any Participant or recipient of any Award without the consent of the Participant or recipient. Change in Control Except to the extent otherwise provided in an Award or required by applicable law, in the event of a Change in Control, upon the occurrence of a Change in Control, the Committee is authorized, but not obligated, to make any of the following adjustments (or any combination thereof) in the terms and conditions of outstanding Awards: (a) continuation or assumption of outstanding Awards by the surviving company; (b) substitution by the surviving company of equity, equity-based and/or cash awards with substantially the same terms for outstanding Awards; (c) accelerated exercisability, vesting and/or lapse of restrictions under outstanding Awards immediately prior to the occurrence of the Change in Control; (d) upon written notice, provide that any outstanding Awards must be exercised, to the extent then exercisable, during a reasonable period determined by the Committee and at the end of such period, any unexercised Awards will terminate; and I cancellation of all or any portion of outstanding Awards for fair value (in the form of cash, shares or other property) and which value may be zero. U.S. Federal Income Tax Consequences The following is a general summary of the material U.S. federal income tax consequences of the grant and exercise and vesting of Awards under the Plan and the disposition of shares acquired pursuant to the exercise of such Awards. This summary is intended to reflect the current provisions of the Code and the regulations thereunder. However, this summary is not intended to be a complete statement of applicable law, nor does it address foreign, state, local and payroll tax considerations. Moreover, the U.S. federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular circumstances of such participant. Options There are a number of requirements that must be met for a particular Option to be treated as an Incentive Stock Option. One such requirement is that Common Stock acquired through the exercise of an Incentive Stock Option cannot be disposed of before the later of (i) two years from the date of grant of the Option, or (ii) one year from the date of its exercise. Holders of Incentive Stock Options will generally incur no federal income tax liability at the time of grant or upon exercise of those Options. However, the spread at exercise will be an “item of tax preference,” which may give rise to “alternative minimum tax” liability for the taxable year in which the exercise occurs. If the holder does not dispose of the shares before the later of two years following the date of grant and one year following the date of exercise, the difference between the exercise price and the amount realized upon disposition of the shares will constitute long-term capital gain or loss, as the case may be. Assuming both holding periods are satisfied, no deduction will be allowed to the Company for federal income tax purposes in connection with the grant or exercise of the Incentive Stock Option. If, within two years following the date of grant or within one year following the date of exercise, the holder of shares acquired through the exercise of an Incentive Stock Option disposes of those shares, the Participant will generally realize taxable compensation at the time of such disposition equal to the difference between the exercise price and the lesser of the Fair Market Value of the share on the date of exercise or the amount realized on the subsequent disposition of the shares, and that amount will generally be deductible by the Company for federal income tax purposes, subject to the possible limitations on deductibility under Sections 280G and 162(m) of the Code for compensation paid to executives designated in those Sections. Finally, if an otherwise Incentive Stock Option becomes first exercisable in any one year for shares having an aggregate value in excess of $100,000 (based on the date of grant value), the portion of the Incentive Stock Option in respect of those excess shares will be treated as a non-qualified stock option for federal income tax purposes. Income will be realized by a Participant upon grant of a Non-Qualified Stock Option. Upon the exercise of a Non-Qualified Stock Option, the Participant will recognize ordinary compensation income in an amount equal to the excess, if any, of the Fair Market Value of the underlying exercised shares over the Option exercise price paid at the time of exercise. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. 65 The Company will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections. Restricted Stock A Participant will not be subject to tax upon the grant of an Award of Restricted Stock unless the Participant otherwise elects to be taxed at the time of grant pursuant to Section 83(b) of the Code. On the date an Award of Restricted Stock becomes transferable or is no longer subject to a substantial risk of forfeiture, the Participant will recognize ordinary compensation income equal to the difference between the Fair Market Value of the shares on that date over the amount the Participant paid for such shares, if any. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. If the Participant made an election under Section 83(b) of the Code, the Participant will recognize ordinary compensation income at the time of grant equal to the difference between the Fair Market Value of the shares on the date of grant over the amount the Participant paid for such shares, if any, and any subsequent appreciation in the value of the shares will be treated as a capital gain upon sale of the shares. Special rules apply to the receipt and disposition of Restricted Shares received by officers and directors who are subject to Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”). The Company will be able to deduct, at the same time as it is recognized by the Participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections. Restricted Stock Units A Participant will not be subject to tax upon the grant of a Restricted Stock Unit Award. Rather, upon the delivery of shares or cash pursuant to a Restricted Stock Unit Award, the Participant will recognize ordinary compensation income equal to the Fair Market Value of the number of shares (or the amount of cash) the Participant actually receives with respect to the Award. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. The Company will be able to deduct the amount of taxable compensation recognized by the Participant for U.S. federal income tax purposes, but the deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections. SARs No income will be realized by a Participant upon grant of an SAR. Upon the exercise of an SAR, the Participant will recognize ordinary compensation income in an amount equal to the Fair Market Value of the payment received in respect of the SAR. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. The Company will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections. Stock Bonus Awards A Participant will recognize ordinary compensation income equal to the difference between the Fair Market Value of the shares on the date the shares of common stock subject to the Award are transferred to the Participant over the amount the Participant paid for such shares, if any, and any subsequent appreciation in the value of the shares will be treated as a capital gain upon sale of the shares. The Company will be able to deduct, at the same time as it is recognized by the Participant, the amount of taxable compensation to the Participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections. 66 Section 162(m) In general, Section 162(m) of the Code denies a publicly held corporation a deduction for U.S. federal income tax purposes for compensation in excess of $1,000,000 per year paid to any “covered employee.” Covered employees include any individual who served as chief executive officer or chief financial officer during the taxable year, in addition to the three most highly compensated individuals aside from the chief executive officer and chief financial officer. Additionally, covered employees include any previously covered employee for any taxable year beginning after December 31, 2016. The Plan is intended to satisfy an exception with respect to grants of Options to covered employees. In addition, the Plan was designed to permit certain Awards of Restricted Stock, Restricted Stock Units, cash bonus awards and other Awards to be awarded as performance compensation awards intended to qualify under the “performance-based compensation” exception to Section 162(m) of the Code. On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law. The TCJA repealed the performance-based compensation exception to the Section 162(m) $1 million limitation on compensation to covered employees of publicly held corporations. This change was effective for tax years beginning after December 31, 2017. As a result of this change, any expense recognized upon exercise of stock options will be subject to the $1 million limitation under Section 162(m), even if based on performance. New Plan Benefits Future grants under the Plan will be made at the discretion of the Committee and, accordingly, are not yet determinable. In addition, the value of the Awards granted under the Plan will depend on a number of factors, including the Fair Market Value of the shares of common stock on future dates, the exercise decisions made by the Participants and/or the extent to which any applicable performance goals necessary for vesting or payment are achieved. Consequently, it is not possible to determine the benefits that might be received by Participants receiving discretionary grants under, or having their annual bonus paid pursuant to, the Plan. Interests of Directors or Officers The Company’s directors may grant Awards under the Plan to themselves as well as to the Company’s officers and other employees, consultants and advisors. Equity Compensation Plan Information The following table provides information, as of December 31, 2022, with respect to equity securities authorized for issuance under compensation plans: No. of securities No. of to be issued Weighted-average securities upon exercise exercise price of remaining of outstanding options outstanding options available for future Plan Category under the plan under the plan issuance Equity compensation plans approved by security holders 312,500 $ 0.41 562,380 Equity compensation plans not approved by security holders — $ — — Total 312,500 $ 0.41 562,380 Director Compensation For the year ended December 31, 2021, through the third quarter of 2022 the board members were eligible for cash compensation of $12,000 per year to be paid quarterly within 30 days of the close of each quarter. On November 11, 2022, the board of directors approved a new board compensation plan that would increase the cash compensation to $22,000 to be paid quarterly within 30 days of the close of each quarter, which was retroactively applied for the full fourth quarter of 2022. In addition, on an ongoing basis pursuant to the approved board compensation plan each director will receive $8,000 in value of common stock per year for service as director, $6,000 in value of shares of common stock per year for service on each committee and $4,000 in value of shares of common stock per year for service as chair for such committee. The number of shares to be issued would be based upon the closing price of the last trading date of each calendar quarter. The shares of common stock for committee service will be limited to two committees. Kevin Mohan is an employee-director and does not receive compensation for serving in his role as a director or Chairman of the Board. 67 The following table provides information relating to compensation of our directors for our fiscal year ended December 31, 2022: Name Fees earned or paid in cash Stock awards Option awards Non-equity incentive plan compensation Non-qualified deferred compensation earnings All other compensation Total Stephen A. Spanos $ 14,500 $ 37,117 $ — $ — $ — $ — $ 51,617 A.B. Southall III 14,500 28,870 — — — — 43,370 Paul L. Menchik 14,500 49,490 — — — — 63,990 Jeff Carl 14,500 49,490 — — — — 63,990 Major General (Ret) Malcolm B. Frost 14,500 28,870 — — — — 43,370 Phillip Balatsos 14,500 41,243 — — — — 55,743 Executive Compensation Philosophy Our Board of Directors determines the compensation given to our executive officers in their sole determination. Our Board of Directors reserves the right to pay our executives or any future executives a salary, and/or issue them shares of common stock issued in consideration for services rendered and/or to award incentive bonuses which are linked to our performance, as well as to the individual executive officer’s performance. This package may also include long-term stock-based compensation to certain executives, which is intended to align the performance of our executives with our long-term business strategies. Additionally, while our Board of Directors has not granted any performance base stock options to date, the Board of Directors reserves the right to grant such options in the future, if the Board in its sole determination believes such grants would be in the best interests of the Company. Incentive Bonus The Board of Directors may grant incentive bonuses to our executive officers and/or future executive officers in its sole discretion, if the Board of Directors believes such bonuses are in the Company’s best interest, after analyzing our current business objectives and growth, if any, and the amount of revenue we are able to generate each month, which revenue is a direct result of the actions and ability of such executives. Long-Term, Stock-Based Compensation In order to attract, retain and motivate executive talent necessary to support the Company’s long-term business strategy we may award our executives and any future executives with long-term, stock-based compensation in the future, at the sole discretion of our Board of Directors. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth information about the beneficial ownership of our common stock at March 21, 2023, for: ● each person, or group of affiliated persons, whom we know to beneficially own more than 5% of our common stock; ● each of our named executive officers; ● each of our directors; and ● all of our executive officers and directors as a group. We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options or warrants or upon conversion of a security that are either exercisable or convertible on or before a date that is 60 days after March 21, 2023. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws. 68 Except as otherwise noted below, the address for persons listed in the table is c/o Muscle Maker, Inc., 1751 River Run, Suite 200, Fort Worth, Texas 76107. The percentage ownership information shown in the column labeled “Percentage of shares outstanding” is based upon 29,318,520 shares of common stock outstanding as of March 21, 2023. Number of shares Percentage of shares beneficially outstanding prior to Name of beneficial owner owned (1) offering (1) 5% Stockholders: Armistice Capital LLC (2) 3,201,897 9.85 % Catalytic Holdings 1 LLC (3) 1,129,052 6.56 % Thoroughbred Diagnostics, LLC (4) 979,000 5.28 % Joey Giamichael (5) 1,622,908 5.54 % Directors and Named Executive Officers: Kevin Mohan (6) 189,537 * Michael J. Roper (7) 183,000 * Jennifer Black (8) 59,500 * Kenneth Miller (9) 49,192 * Aimee Infante (10) 16,352 * Stephen Spanos (11) 75,959 * A.B. Southall, III (12) 155,035 * Paul L. Menchik (13) 123,723 * Jeff Carl (14) 77,339 * Malcolm Frost (15) 71,083 * Phillip Balatsos (16) 60,132 * All executive officers and directors as a group (11 persons) 1,066,849 3.63 % * Denotes less than 1% (1) Beneficial ownership as reported in the above table has been determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended, and is not necessarily indicative of beneficial ownership for any other purpose. The number of shares of common stock shown as beneficially owned includes shares of common stock issuable upon (i) the exercise of stock options that will become exercisable within 60 days of March 21, 2023, (ii) the conversion of the convertible promissory notes into shares of our common stock, and (iii) the exercise of warrants that will become exercisable within 60 days of March 21, 2023. Shares of common stock issuable pursuant to the foregoing methods are deemed outstanding for purposes of calculating the percentage of beneficial ownership of the person or entity holding such securities. Accordingly, the total percentages of beneficial ownership are in excess of one hundred percent (100%). (2) Armistice Capital LLC beneficially owns 3,201,897 shares of common stock of the Company which are subject to presently exercisable purchase warrants. Armistice Capital Master Fund Ltd., a Cayman Islands exempted company (the “Master Fund”) holds 3,201,897 shares of common stock issuable upon exercise of Warrants at an exercise price of $1.385. Armistice Capital, LLC (“Armistice Capital”) is the investment manager of Armistice Capital Master Fund Ltd. (the “Master Fund”), the direct holder of the Shares, and pursuant to an Investment Management Agreement, Armistice Capital exercises voting and investment power over the securities of the Issuer held by the Master Fund and thus may be deemed to beneficially own the securities of the Issuer held by the Master Fund. Mr. Boyd, as the managing member of Armistice Capital, may be deemed to beneficially own the securities of the Issuer held by the Master Fund. The Master Fund specifically disclaims beneficial ownership of the securities of the Issuer directly held by it by virtue of its inability to vote or dispose of such securities as a result of its Investment Management Agreement with Armistice Capital. The address of the Master Fund is c/o Armistice Capital, LLC, 510 Madison Ave, 7 th Floor, New York, NY 10022. 69 (3) Catalytic Holdings, LLC beneficially owns (i) 1,129,052 shares of common stock of the Company (ii) 850,750 shares of common stock of the Company which issuable upon exercise of warrant at an exercise price of $2.40. The natural person with voting and investment control for Catalytic Holdings, LLC is Dmitriy Shapiro. (4) Thoroughbred Diagnostics, LLC beneficially owns (i) 979,000 shares of common stock of Muscle Maker (ii) 600,000 shares of common stock of Muscle Maker issuable upon exercise of warrant at an exercise price of $2.88. The natural person with voting and investment control for Thoroughbred Diagnostics, LLC is Joey Giamichael. (5) Joey Giamichael beneficially owns 1,622,908 shares of common stock of the Company. (6) Kevin Mohan beneficially owns (i) indirectly 5,574 shares of common stock of the Company through various family members that reside in the same household as Kevin Mohan and (ii) directly 130,963 shares of common stock of Muscle Maker Inc, for serving in various roles in the Company, (iii) 33,000 shares of common stock of the Company purchased on the open market and (iv) directly 20,000 shares of vested but unexercised stock options. (7) Michael J. Roper beneficially owns directly 183,000 shares of common stock of the Company (i) 100,000 shares of common stock of Muscle Maker Inc. for serving as the Chief Executive Officer of the Company and (ii) 58,000 shares of common stock of the Company purchased on the open market and (iii) 25,000 shares of vested but unexercised stock options. (8) Jennifer Black beneficially owns directly 59,500 shares of common stock of the Company (i) 20,000 shares of common stock of Muscle Maker Inc. for serving as the Chief Financial Officer of the Company, (ii) 28,000 shares of common stock of the Company purchased on the open market and (iii) 11,500 shares of vested but unexercised stock options. (9) Kenneth Miller beneficially owns directly 49,192 shares of common stock of the Company (i) 32,142 shares of common stock of the Company for serving as Chief Operating Officer of the Company, (ii) 3,300 shares of common stock of the Company purchased on the open market and (iii) 13,750 shares of vested but unexercised stock options. (10) Aimee Infante beneficially owns directly 16,352 shares of common stock of the Company (i) 2,602 shares of common stock for serving as the Chief Marketing Officer of the Company, (ii) 1,500 shares of common stock of the Company purchased on the open market and (iii) 12,250 shares of vested but unexercised stock options. (11) Stephen Spanos beneficially owns directly 75,956 shares of common stock of the Company (i) 56,225 shares of common stock of the Company for services rendered as a board of director member, (ii) 18,481 of the common stock of through purchase on the open market and (iii) 1,250 shares of vested but unexercised stock options. (12) A.B. Southall III beneficially owns directly 155,035 shares of common stock of the Company (i) 143,785 shares of common stock of Muscle Maker, (ii) 10,000 shares of common stock of the Company subject to presently exercisable purchase warrants issued to A.B. Southall III and (iii) 1,250 shares of vested but unexercised stock options. (13) Paul L. Menchik beneficially owns directly 129,723 shares of common stock of the Company (i) 118,473 shares of common stock of Muscle Maker, (ii) 10,000 shares of common stock of the Company subject to presently exercisable purchase warrants issued to Paul L. Menchik and (iii) 1,250 shares of vested but unexercised stock options. (14) Jeff Carl beneficially owns directly 77,339 shares of common stock of the Company (i) 76,089 shares of common stock of the Company for services rendered as a board of director member and (ii) 1,250 shares of vested but unexercised stock options. (15) Major General (ret) Malcolm Frost beneficially owns directly 71,083 shares of common stock of the Company (i) 40,526 shares of common stock of the Company for services rendered as a board of director member, (ii) 29,307 shares of common stock of the Company through purchases on the open market and (iii) 1,250 shares of vested but unexercised stock options. (16) Phillip Balatsos beneficially owns directly 60,132 shares of common stock of the Company (i) directly 58,882 shares of common stock of the Company for services rendered as a board of director member and (ii) 1,250 shares of vested but unexercised stock options. 70 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Policies and Procedures for Related Party Transactions Following this offering, pursuant to the written charter of our Audit Committee, the Audit Committee will be responsible for reviewing and approving, prior to our entry into any such transaction, all related party transactions and potential conflict of interest situations involving: ● any of our directors, director nominees or executive officers; ● any beneficial owner of more than 5% of our outstanding stock; and ● any immediate family member of any of the foregoing. Our Audit Committee will review any financial transaction, arrangement or relationship that: ● involves or will involve, directly or indirectly, any related party identified above; ● would cast doubt on the independence of a director; ● would present the appearance of a conflict of interest between us and the related party; or ● is otherwise prohibited by law, rule or regulation. The Audit Committee will review each such transaction, arrangement or relationship to determine whether a related party has, has had or expects to have a direct or indirect material interest. Following its review, the Audit Committee will take such action as it deems necessary and appropriate under the circumstances, including approving, disapproving, ratifying, canceling or recommending to management how to proceed if it determines a related party has a direct or indirect material interest in a transaction, arrangement or relationship with us. Any member of the Audit Committee who is a related party with respect to a transaction under review will not be permitted to participate in the discussions or evaluations of the transaction; however, the Audit Committee member will provide all material information concerning the transaction to the Audit Committee. The Audit Committee will report its action with respect to any related party transaction to the board of directors. Transactions with Officers, Directors and Executives of Muscle Maker On January 6, 2022, we issued an aggregate of 39,573 shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2021. On January 2, 2022, we appointed Jennifer Black as our Chief Financial Officer and entered into an Offer Letter with Ms. Black. Pursuant to the Offer Letter, Ms. Black will be employed as our Chief Financial Officer on an at-will basis. Ms. Black is entitled to a base salary at the annualized rate of $190,000. Our previous CFO, Ferdinand Groenewald, was appointed as our Chief Accounting Officer and subsequently the position of Chief Accounting Officer was eliminated. On February 10, 2022, we entered into an Employment Agreement with Michael Roper effective February 14, 2022, which replaced his prior employment agreement. Pursuant to the Employment Agreement, Mr. Roper will continue to be employed as our Chief Executive Officer on an at will basis. During the term of the Employment Agreement, Mr. Roper will be entitled to a base salary at the annualized rate of $350,000, which will be increased to $375,000 upon the one-year anniversary. Mr. Roper will be eligible for a discretionary performance bonus to be paid in cash or equity. Within 90 days of the effective date, we will issue Mr. Roper stock options to receive 100,000 shares of common stock which will vest over a term of five years. If Mr. Roper is terminated by us for any reason other than cause, including termination without cause in connection with a change in control, Mr. Roper will be entitled to a severance package of 18 months of salary and health and dental benefits paid in accordance with our payroll schedule, but subject to the execution of a valid release in favor of us and our related parties. 71 On February 10, 2022, we entered into a letter agreement with Kevin Mohan, Chief Investment Officer, providing that Mr. Mohan will continue to be engaged by us on an at-will basis with a base salary at the annualized rate of $200,000 effective February 14, 2022. Mr. Mohan will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 75% of his salary. Within 90 days of the effective date, we will issue Mr. Mohan stock options to receive 75,000 shares of common stock which will vest over a term of five years. If Mr. Mohan is terminated by us for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with our payroll schedule and insurance program, but subject to the execution of a valid release in favor of us and our related parties. On February 9, 2022, we entered into a letter agreement with Kenn Miller, Chief Operations Officer, providing that Mr. Miller will continue to be engaged by us on an at-will basis with a base salary at the annualized rate of $275,000 effective February 14, 2022. Mr. Miller will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 75% of his salary. Within 90 days of the effective date, we will issue Mr. Miller stock options to receive 50,000 shares of common stock which will vest over a term of five years. If Mr. Miller is terminated by us for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of 12 months of salary and health and dental benefits paid in accordance with our payroll schedule and insurance program, but subject to the execution of a valid release in favor of us and our related parties. On February 9, 2022, we entered into a letter agreement with Aimee Infante, Chief Marketing Officer, providing that Ms. Infante will continue to be engaged by us on an at-will basis with a base salary at the annualized rate of $175,000 effective February 14, 2022. Ms. Infante will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25% of her salary. Within 90 days of the effective date, we will issue Ms. Infante stock options to receive 42,500 shares of common stock which will vest over a term of five years. If Ms. Infante is terminated us for any reason other than cause, including termination without cause in connection with a change in control, she will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with the our payroll schedule and insurance program, but subject to the execution of a valid release in favor of us and our related parties. On February 9, 2022, we entered into a letter agreement with Ferdinand Groenewald, Chief Accounting Officer, providing that Mr. Groenewald will continue to be engaged by us on an at-will basis with a base salary at the annualized rate of $175,000 effective February 14, 2022. Mr. Groenewald will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25% of his salary. Within 90 days of the effective date, we will issue Mr. Groenewald stock options to receive 25,000 shares of common stock which will vest over a term of five years. If Mr. Groenewald is terminated by us for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with our payroll schedule and insurance program, but subject to the execution of a valid release in favor of us and our related parties. On March 31, 2022, we issued an aggregate of 53,961 shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2022. On April 4, 2022, we issued 20,000 shares of common stock to a member of the executive team per the employment agreement. On May 2, 2022, we issued options to purchase an aggregate of 312,500 shares of common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on June 30, 2022. On June 21, 2022, we advised Ferdinand Groenewald that the position of Chief Accounting Officer has been eliminated. Mr. Groenewald continued his employment with us through July 29, 2022, at which time he became entitled to the severance for termination without cause as outlined in the letter agreement between us and Mr. Groenewald dated February 9, 2022. Mr. Groenewald forfeited 25,000 options upon his departure as an officer. On July 14, 2022, we issued an aggregate of 74,019 shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2022. On October 10, 2022, we issued options to purchase 25,000 shares of common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on December 31, 2022. On October 12, 2022, we issued an aggregate of 75,792 shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2022. 72 On November 16, 2022, the Company entered into an Executive Employment Agreement with Michael Roper (the “Roper Agreement”), which replaced his prior employment agreement. Pursuant to the Roper Agreement, Mr. Roper will continue to be employed as Chief Executive Officer of the Company on an at will basis. During the term of the Roper Agreement, Mr. Roper is entitled to a base salary at the annualized rate of $350,000. Mr. Roper will be eligible for a discretionary performance bonus to be determined by the Board annually. Further, Mr. Roper will be entitled to an additional bonus of $50,000 upon the Company obtaining approval of the Shareholder Matters and $25,000 upon the Designated Directors representing a majority of the Board of Directors. If Mr. Roper is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Roper is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Roper will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 18 months following the second anniversary of the Roper Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Roper Agreement will automatically terminate and the prior employment agreement will again be in full effect. On November 16, 2022, the Company entered into an Executive Employment Agreement with Kenn Miller (the “Miller Agreement”), which replaced his prior employment agreement. Pursuant to the Miller Agreement, Mr. Miller will continue to be employed as Chief Operating Officer of the Company on an at will basis. During the term of the Miller Agreement, Mr. Miller is entitled to a base salary at the annualized rate of $275,000. Mr. Miller will be eligible for a discretionary performance bonus up to 75% of his annual salary. Further, Mr. Miller will be entitled to an additional bonus of $25,000 upon the Designated Directors representing a majority of the Board of Directors. If Mr. Miller is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Miller is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Miller will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 12 months following the second anniversary of the Miller Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Miller Agreement will automatically terminate and the prior employment agreement will again be in full effect. On November 16, 2022, the Company entered into an Executive Employment Agreement with Kevin Mohan (the “Mohan Agreement”), which replaced his prior employment agreement. Pursuant to the Mohan Agreement, Mr. Mohan will continue to be employed as Chief Investment Officer of the Company on an at will basis. During the term of the Employment Agreement, Mr. Mohan is entitled to a base salary at the annualized rate of $200,000. Mr. Mohan will be eligible for a discretionary performance bonus up to 75% of his annual salary. Further, Mr. Mohan will be entitled to an additional bonus of $50,000 upon the Company obtaining approval of the Shareholder Matters and $25,000 upon the Designated Directors representing a majority of the Board of Directors. If Mr. Mohan is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Mohan is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Mohan will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Mohan Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Mohan Agreement will automatically terminate and the prior employment agreement will again be in full effect. On November 16, 2022, the Company entered into an Executive Employment Agreement with Aimee Infante (the “Infante Agreement”), which replaced her prior employment agreement. Pursuant to the Infante Agreement, Ms. Infante will continue to be employed as Chief Marketing Officer of the Company on an at will basis. During the term of the Infante Agreement, Ms. Infante is entitled to a base salary at the annualized rate of $175,000. Ms. Infante will be eligible for a discretionary performance bonus up to 25% of her annual salary. Further, Ms. Infante will be entitled to an additional bonus of $25,000 upon the Designated Directors representing a majority of the Board of Directors. If Ms. Infante is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Infante is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Infante will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Infante Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Infante Agreement will automatically terminate and the prior employment agreement will again be in full effect. 73 On January 5, 2023, we issued an aggregate of 31,308 shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2022. On February 27, 2023, we issued options to purchase an aggregate of 531,072 shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023. On March 15, 2023, we issued options to purchase 68,928 shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023. On March 21, 2023, the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement dated November 16, 2022. Pursuant to the Black Agreement, Ms. Black will continue to be employed as Chief Financial Officer of the Company on an at will basis. During the term of the Black Agreement, Ms. Black is entitled to a base salary at the annualized rate of $250,000. Ms. Black will be eligible for a discretionary performance bonus up to 50% of her annual salary. Further, Ms. Black will be entitled to an additional bonus of $50,000 upon the Company obtaining approval of the Shareholder Matters and $25,000 upon the Designated Directors representing a majority of the Board of Directors. If Ms. Black is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Black is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Black will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Black Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Black Agreement will automatically terminate and the prior employment agreement will again be in full effect. We have entered into indemnification agreements with each of our directors and entered into such agreements with certain of our executive officers. These agreements require us, among other things, to indemnify these individuals for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts reasonably incurred by such person in any action or proceeding, including any action by or in our right, on account of any services undertaken by such person on behalf of our Company or that person’s status as a member of our Board of Directors to the maximum extent allowed under Nevada law. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Kreit & Chiu CPA LLP (formerly known as Paris Kreit & Chiu CPA LLP) has served as our independent registered public accountants for the years ended December 31, 2022 and 2021. The following is a summary of the fees billed or expected to be billed to us by our independent registered public accountants, for professional services rendered by Kreit & Chiu CPA LLP (formerly known as Paris Kreit & Chiu CPA LLP) for the fiscal years ended December 31, 2022 and 2021: 2022 2021 Audit fees (1) $ 265,000 $ 58,000 Audit-related fees (2) 2,150 75,000 Tax fees (3) — — All other fees (4) — — $ 267,150 $ 133,000 (1) Audit Fees consist of fees billed and expected to be billed for services rendered for the audit of our Consolidated Financial Statements for the fiscal years ended December 31, 2022 and 2021 and in connection with the filing of our Form 10-K, Form 10-Qs and multiple Forms S-1 and Forms S-3s. (2) Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit of our financial statements and are not reported under “Audit Fees.” ( 3) Tax Fees consist of fees billed for professional services related to preparation of our U.S. federal and state income tax returns and tax advice. (4) All Other Fees consist of fees billed for products and services provided by our independent registered public accountants, other than those disclosed above. The Audit Committee is responsible for the appointment, compensation and oversight of the work of the independent registered public accountants and approves in advance any services to be performed by the independent registered public accountants, whether audit-related or not. The Audit Committee reviews each proposed engagement to determine whether the provision of services is compatible with maintaining the independence of the independent registered public accountants. The fees shown above were pre-approved either by our Board or our Audit Committee. 74 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Exhibit No. Exhibit Description 3.1+ Articles of Incorporation of Muscle Maker, Inc., a Nevada corporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 14, 2019) 3.2+ Bylaws of Muscle Maker, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 14, 2019) 3.3+ Certificate of Change Pursuant to NRS 78.209 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on December 11, 2019) 3.4+ Certificate of Amendment to Articles of Incorporation of Muscle Maker, Inc., a Nevada corporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 16, 2020) 3.5+ Certificate of Amendment to Articles of Incorporation of Muscle Maker, Inc. (incorporated by reference to Exhibit 3.1 to the Registrants Current Report on Form 8-K filed on March 7, 2023) 4.1+ Form of Warrant to Purchase Common Stock dated April 9, 2021 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021) 4.2 + Form of Pre-Funded Warrant to Purchase Common Stock dated April 9, 2021 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021) 4.3+ Form of Warrant to Purchase Common Stock issued to A.G.P./Alliance Global Partners dated April 9, 2021 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021) 4.4+ Form of Warrant to Purchase Common Stock dated November 22, 2021 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021) 4.5+ Form of Pre-Funded Warrant to Purchase Common Stock dated November 22, 2021 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021) 4.6+ Form of Placement Agent Warrant to Purchase Common Stock issued to A.G.P./Alliance Global Partners dated November 22, 2021 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021) 4.7 2021 Equity Incentive Plan (incorporated by reference to Exhibit 4.8 to the Registrant’s Annual Report on Form 10-K filed on March 17, 2022) 4.8* 2023 Equity Incentive Plan 4.9* Description of Securities 10.1 Form of Securities Purchase Agreement, dated April 7, 2021, between Muscle Maker, Inc. and the Purchaser* (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021) 10.2 Form of Securities Purchase Agreement, dated November 17, 2021, between Muscle Maker, Inc. and the Purchasers* (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021) 10.3 Form of Registration Rights Agreement, dated November 17, 2021, between Muscle Maker, Inc. and the Purchasers (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021) 75 10.4 Form of Securities Purchase Agreement, dated April 7, 2021, between Muscle Maker, Inc. and the Purchaser* (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021) 10.5 Form of Director Agreement dated July 16, 2019 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 10, 2019) 10.6 Services Agreement between Muscle Maker, Inc., Sadot LLC and Aggia LLC FC dated November 14, 2022 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022) 10.7 Addendum 1 to Services Agreement between Muscle Maker, Inc., Sadot LLC and Aggia LLC FC dated November 17, 2022 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022) 10.8 Limited Liability Operating Agreement of Sadot LLC dated November 16, 2022 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022) 10.9 Executive Employment Agreement between Muscle Maker, Inc. and Michael Roper dated November 16, 2022 (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022) 10.10 Executive Employment Agreement between Muscle Maker, Inc. and Jennifer Black dated November 16, 2022 (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022) 10.11 Executive Employment Agreement between Muscle Maker, Inc. and Kevin Mohan dated November 16, 2022 (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022) 10.12 Executive Employment Agreement between Muscle Maker, Inc. and Kenn Miller dated November 16, 2022 (incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022) 10.13 Executive Employment Agreement between Muscle Maker, Inc. and Aimee Infante dated November 16, 2022 (incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022) 21.1* List of Subsidiaries 23.1* Consent of Kreit & Chiu CPA LLP 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance Document* 101.SCH Inline XBRL Schema Document* 101.CAL Inline XBRL Calculation Linkbase Document* 101.DEF Inline XBRL Definition Linkbase Document* 101.LAB Inline XBRL Label Linkbase Document* 101.PRE Inline XBRL Presentation Linkbase Document* 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) † Includes management contracts and compensation plans and arrangements *Filed herewith. +Previously filed. ITEM 16. FORM 10-K SUMMARY Not applicable. 76 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MUSCLE MAKER, INC By: /s/ Michael J. Roper Michael J. Roper Dated: March 21, 2023 Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Title /s/ Michael J. Roper Chief Executive Officer, and Michael J. Roper Secretary (Principal Executive Officer) /s/ Jennifer Black Chief Financial Officer Jennifer Black (Principal Financial Officer) /s/ Kevin Mohan Chief Investment Officer and Chairman of the Board Kevin Mohan /s/ Stephen A. Spanos Director Stephen A. Spanos /s/ A.B. Southall III Director A.B. Southall III /s/ Paul L. Menchik Director Paul L. Menchik /s/ Jeff Carl Director Jeff Carl /s/ Malcolm Frost Director Major General (Ret) Malcolm B. Frost /s/ Phillip Balatsos Director Phillip Balatsos /s/ Benjamin Petel Director Benjamin Petel /s/ Na Yeon Oh Director Na Yeon Oh /s/ Ray Shankar Director Ray Shankar 77 MUSCLE MAKER, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 6651 ) F-2 Consolidated Financial Statements Consolidated Balance Sheets as of December 31, 2022 and 2021 F-3 Consolidated Statements of Operations for the years ended December 31, 2022 and 2021 F-4 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2022 and 2021 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021 F-6 Notes to the Consolidated Financial Statements F-8 F- 1 Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders Muscle Maker, Inc. and Subsidiaries Opinion on the Financial Statements We have audited the accompanying balance sheets of Muscle Maker, Inc. and Subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the consolidated statements of operations, changes in stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Kreit & Chiu CPA LLP (formerly Paris, Kreit & Chiu CPA LLP) We have served as Muscle Maker Inc.’s auditor since 2021. New York, NY March 21, 2023 F- 2 MUSCLE MAKER, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, December 31, 2022 2021 Assets Current Assets: Cash $ 9,898,420 $ 15,766,703 Accounts receivable, net of allowance for doubtful accounts of $ 23,400 and $ 23,693 as of December 31, 2022 and December 31, 2021, respectively 134,914 155,167 Inventory 297,178 258,785 Current portion of loans receivable, net of allowance of $ — and $ 71,184 at December 31, 2022 and 2021, respectively — — Prepaid expenses and other current assets 317,439 1,789,328 Total Current Assets 10,647,951 17,969,983 Right to use assets 2,432,894 — Property and equipment, net 1,894,962 2,280,267 Goodwill 2,626,399 2,626,399 Intangible assets, net 4,610,856 6,387,464 Deposit on farmland 4,914,191 — Security deposits and other assets 102,273 167,770 Total Assets $ 27,229,526 $ 29,431,883 Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable and accrued expenses $ 1,953,269 $ 2,208,523 Accrued stock-based consulting expenses 3,601,987 — Notes payable, current 222,356 347,510 Operating lease liability, current 560,444 — Deferred revenue, current 95,392 49,728 Deferred rent, current — 36,800 Other current liabilities 181,615 286,088 Total Current Liabilities 6,615,063 2,928,649 Notes payable, non-current 758,822 1,005,027 Operating lease liability, non-current 2,018,851 — Deferred revenue, non-current 1,275,778 1,013,645 Deferred rent, non-current — 91,295 Total Liabilities 10,668,514 5,038,616 Commitments and Contingencies — Stockholders’ Equity: Common stock, $ 0.0001 par value, 50,000,000 shares authorized, 29,287,212 and 26,110,268 shares issued and outstanding as of December 31, 2022, and December 31, 2021, respectively 2,929 2,611 Additional paid-in capital 95,913,147 95,760,493 Accumulated deficit ( 79,355,064 ) ( 71,369,837 ) Total Stockholders’ Equity 16,561,012 24,393,267 Total Liabilities and Stockholders’ Equity $ 27,229,526 $ 29,431,883 See Accompanying Notes to the Consolidated Financial Statements F- 3 MUSCLE MAKER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 2022 2021 Revenues: Commodity sales $ 150,585,644 $ — Company restaurant sales, net of discounts 10,300,394 9,320,920 Franchise royalties and fees 726,854 778,181 Franchise advertising fund contributions 80,536 188,539 Other revenues 4,989 61,996 Total revenues 161,698,417 10,349,636 Operating Costs and Expenses: Commodity operating expenses: Commodity cost 145,671,454 — Labor 346,750 — Other commodity operating expenses 19,000 — Total commodity operating expenses 146,037,204 — Restaurant operating expenses: Food and beverage costs 3,940,321 3,532,907 Labor 3,844,140 1,917,979 Rent 1,190,903 1,261,096 Other restaurant operating expenses 2,294,688 2,343,137 Total restaurant operating expenses 11,270,052 9,055,119 Impairment of intangible asset 347,110 1,139,908 Impairment of goodwill — 86,348 Depreciation and amortization expenses 2,015,048 1,206,505 Franchise advertising fund expenses 80,536 188,539 Preopening expenses 116,728 31,829 Post-closing expenses 197,101 — Stock-based consulting expenses 3,601,987 — Sales, general and administrative expenses 6,149,801 8,088,682 Total costs and expenses 169,815,567 19,796,930 Loss from operations ( 8,117,150 ) ( 9,447,294 ) Other Income: Other income / (expense) 44,944 ( 9,097 ) Interest expense, net ( 6,730 ) ( 69,514 ) Change in fair value of accrued compensation — 127,500 Gain on debt extinguishment 141,279 1,228,308 Total other income, net 179,493 1,277,197 Loss Before Income Tax ( 7,937,657 ) ( 8,170,097 ) Income tax 24,771 6,033 Net loss $ ( 7,962,428 ) $ ( 8,176,130 ) Net Loss Per Share: Basic and Diluted $ ( 0.28 ) $ ( 0.50 ) Weighted average Number of Common Shares Outstanding: Basic and Diluted $ 28,558,586 $ 16,467,393 See Accompanying Notes to the Consolidated Financial Statements F- 4 MUSCLE MAKER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Additional Common Stock Paid-in Accumulated Shares Amount Capital Deficit Total Balance – December 31, 2020 11,725,764 $ 1,172 $ 68,987,663 $ ( 63,193,707 ) $ 5,795,128 Issuance of restricted stock 1,200 — — — — Common stock issued in connection of the acquisition of SuperFit Foods on March 25, 2021 268,240 27 624,973 — 625,000 Common stock, pre-funded warrants and warrants issued in private placement on April 7, 2021, net of fees $ 790,000 1,250,000 125 9,181,224 — 9,181,349 Common stock issued in connection of the acquisition of Pokemoto on May 14, 2021 880,282 88 1,249,912 — 1,250,000 Common stock, pre-funded warrants and warrants issued in private placement on November 22, 2021, net of fees $ 1,289,965 6,772,000 677 13,708,924 — 13,709,601 Restricted common stock issued as compensation to executives and employees 221,783 22 636,495 — 636,517 Common stock issued as compensation to board of directors 73,941 7 114,029 — 114,036 Common stock issued as compensation for services 852,500 86 1,326,941 — 1,327,027 Exercise of pre-funded warrants 4,075,337 408 28,365 — 28,773 Cancellation of share per agreement with shareholder ( 11,879 ) ( 1 ) ( 99,999 ) — ( 100,000 ) Common stock issued to investor 1,100 — 1,540 — 1,540 Amortization of restricted common stock — — 426 — 426 Net loss — — — ( 8,176,130 ) ( 8,176,130 ) Balance – December 31, 2021 26,110,268 $ 2,611 $ 95,760,493 $ ( 71,369,837 ) $ 24,393,267 Beginning balance 26,110,268 $ 2,611 $ 95,760,493 $ ( 71,369,837 ) $ 24,393,267 Cumulative effect of change in accounting principal — — — ( 22,799 ) ( 22,799 ) Cash less exercise of pre-funded warrants 2,409,604 241 ( 241 ) — — Common stock issued as compensation to board of directors 243,345 24 113,952 — 113,976 Common stock issued as compensation for services 35,000 7 17,545 — 17,552 Common stock issued as compensation for employment 20,000 2 10,798 — 10,800 Exercise of pre-funded warrants 438,085 44 — — 44 Reconciliation for shares outstanding per transfer agent 30,910 — — — — Stock-based compensation – options — — 10,600 — 10,600 Net loss — — — ( 7,962,428 ) ( 7,962,428 ) Balance – December 31, 2022 29,287,212 $ 2,929 $ 95,913,147 $ ( 79,355,064 ) $ 16,561,012 Ending balance 29,287,212 $ 2,929 $ 95,913,147 $ ( 79,355,064 ) $ 16,561,012 See Accompanying Notes to the Consolidated Financial Statements F- 5 MUSCLE MAKER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2022 2021 Cash Flows from Operating Activities Net loss $ ( 7,962,428 ) $ ( 8,176,130 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,015,048 1,206,505 Stock-based compensation 152,928 2,207,046 Gain on extinguishments of debt ( 141,279 ) ( 1,228,308 ) Impairment of intangible asset 347,110 1,139,908 Impairment of goodwill — 86,348 Stock-based consulting expenses 3,601,987 — Change in fair value of compensation — ( 127,500 ) Loss on disposal of assets 274,097 193,405 Bad debt expense ( 47,555 ) 6,663 Changes in operating assets and liabilities: Accounts receivable, net ( 3,376 ) ( 21,525 ) Inventory ( 38,393 ) ( 125,461 ) Prepaid expenses and other current assets 1,471,889 ( 1,748,425 ) Security deposits and other assets 65,497 ( 274 ) Accounts payable and accrued expenses ( 132,985 ) 622,828 Deferred rent ( 128,095 ) ( 3,081 ) Operating right of use asset and liability, net 123,602 — Deferred revenue 307,797 ( 69,380 ) Other current liabilities ( 104,473 ) ( 355,330 ) Total adjustments 7,763,799 1,783,419 Net cash used in operating activities ( 198,629 ) ( 6,392,711 ) Cash Flows from Investing Activities Deposit on farmland ( 4,914,191 ) — Purchases of property and equipment ( 596,611 ) ( 262,019 ) Cash paid-in connection with the acquisition of SuperFit Foods — ( 500,000 ) Cash paid-in connection with the acquisition of Pokemoto, net of cash acquired — ( 2,815,390 ) Collections from loans receivable 71,184 1,600 Net cash used in investing activities ( 5,439,618 ) ( 3,575,809 ) Cash Flows from Financing Activities Proceeds from Private Placement Offering, net of underwriter’s discount and offering costs of $ 2,079,965 — 22,890,950 Proceeds from exercise of pre-funded warrants 44 28,773 Cash paid-in connection with cancellation of shares — ( 100,000 ) Repayments of notes payables ( 230,080 ) ( 1,280,432 ) Net cash (used in) / provided by financing activities ( 230,036 ) 21,539,291 Net (Decrease) / Increase in Cash ( 5,868,283 ) 11,570,771 Cash – beginning of period 15,766,703 4,195,932 Cash – end of period $ 9,898,420 $ 15,766,703 See Accompanying Notes to the Consolidated Financial Statements F- 6 MUSCLE MAKER, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) For the Years Ended December 31, 2022 2021 Supplemental Disclosures of Cash Flow Information: Cash paid for interest $ 95,926 $ 80,697 Cash paid for taxes $ 26,567 $ — Supplemental Disclosures of Non-Cash Investing and Financing Activities Cash less exercise of pre-funded warrants $ 241 $ — See Accompanying Notes to the Consolidated Financial Statements F- 7 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – BUSINESS ORGANIZATION AND NATURE OF OPERATIONS Muscle Maker, Inc. (“MMI”), a Nevada corporation was incorporated in Nevada on October 25, 2019. MMI was a wholly owned subsidiary of Muscle Maker, Inc (“MMI-Cal”), a California corporation incorporated on December 8, 2014, but the two merged on November 13, 2019, with MMI as the surviving entity. MMI wholly owns Muscle Maker Development, LLC (“MMD”), Muscle Maker Corp, LLC (“MMC”) and Muscle Maker USA, Inc (“Muscle USA”). MMD was formed on July 18, 2017, in the State of Nevada for the purpose of running our existing franchise operations and continuing to franchise the Muscle Maker Grill name and business system to qualified franchisees. MMC was formed on July 18, 2017, in the State of Nevada for the purpose of developing new corporate stores and operating new and existing corporate stores of MMI. Muscle USA was formed on March 14, 2019, in the State of Texas for the purpose of opening additional new corporate stores. Muscle Maker Development International LLC, a directly wholly owned subsidiary of MMI, which was formed in Nevada on November 13, 2020, to franchise the Muscle Maker Grill name and business system to qualified franchisees internationally. MMI is the owner of the trade name and service mark Muscle Maker Grill ® 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 ® trademark and intellectual property to our wholly-owned subsidiaries, MMD, MMC and Muscle USA, and to further sublicense them to our franchisees for use in connection with Muscle Maker Grill ® . Muscle Maker Grill is a fast-casual restaurant concept that specializes in preparing healthy-inspired, high-quality, fresh, made-to-order lean, protein-based meals featuring chicken, seafood, pasta, hamburgers, wraps and flat breads. In addition, our restaurants feature freshly prepared entrée salads and an appealing selection of sides, protein shakes and fruit smoothies. Muscle Maker Grill operates in the fast-casual restaurant segment. On March 25, 2021, MMI acquired the assets of SuperFit Foods, a subscription based fresh-prepared meal prep business located in Jacksonville, Florida. With this acquisition, we are also the owner of the trade name SuperFit Foods that we use in connection with the operations of SuperFit Foods. SuperFit Foods is differentiated from other meal prep services by allowing customers in the Jacksonville Florida market to order online via the Company’s website or mobile app and pick up their fully prepared meals from 34 Company-owned coolers located in gyms and wellness centers. On May 14, 2021, MMI acquired PKM Stamford, LLC, Poke Co., LLC, LB Holdings LLC, TNB Holdings, LLC, Poke Co Holdings LLC, GLL Enterprises, LLC, and TNB Holdings II, LLC, each a Connecticut limited liability company (collectively, Pokemoto”), a healthier modern culinary twist on the traditional Hawaiian poke classic. Pokemoto had, at acquisition, 14 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. Pokemoto Orange Park FL LLC and Pokemoto Kansas LLC (included in “Pokemoto”) were formed in 2022 for the purposes of developing new corporate Pokemoto stores. On 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, etc. 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. MMI and its subsidiaries are hereinafter referred to as the “Company”. As of December 31, 2022, MMI consisted of five operating segments: ● Muscle Maker Grill Restaurant Division ● Pokemoto Hawaiian Poke Restaurant Division ● Non-Traditional (Hybrid) Division ● SuperFit Foods Meal Prep Division ● Sadot Division F- 8 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Non-Traditional (Hybrid) Division is a combination of the aforementioned brands and provides its own unique experience for the consumer. Non-Traditional (Hybrid) locations are designed for unique locations such as universities and military bases. The 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. As of December 31, 2022, the Company has franchise agreements for 46 Pokemoto franchises that have sold but have not opened. Liquidity Our primary source of liquidity is cash on hand. As 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. NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries and majority-owned subsidiary. Any intercompany transactions and balances have been eliminated in consolidation. Reclassifications Certain prior year balances have been reclassified in order to conform to current year presentation. These reclassifications have no effect on the previously reported results of operations or loss per share. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant estimates include: ● the assessment of recoverability of long-lived assets, including property and equipment, goodwill and intangible assets; ● the estimated useful lives of intangible and depreciable assets; ● estimates and assumptions used to value warrants and options; ● the recognition of revenue; and ● the recognition, measurement and valuation of current and deferred income taxes. F- 9 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Estimates and assumptions are periodically reviewed, and the effects of any material revisions are reflected in the financial statements in the period that they are determined to be necessary. Actual results could differ from those estimates and assumptions. Cash and Cash Equivalents The Company considers all highly-liquid instruments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of December 31, 2022 or 2021. Inventory Inventories, which are stated at the lower of cost or net realizable value, consist primarily of perishable food items and supplies. Cost is determined using the first-in, first-out method. Deposit on Farmland Deposit on farmland consists of funds paid as a deposit with the intent to acquire farmland in Africa by our Sadot subsidiary. As of December 31, 2022, the Company recorded a deposit of $ 4,914,191 . The Company has entered into a letter of intent with a deposit to purchase undeveloped farmland. The Company is still in final negotiations with the intent to finalize the agreement by the end of the second quarter of 2023. Property and Equipment Property and equipment are stated at cost less accumulated Depreciation and amortization expenses. Major improvements are capitalized, and minor replacements, maintenance and repairs are charged to expense as incurred. Depreciation and amortization expenses are calculated on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the estimated useful life or the lease term of the related asset. The estimated useful lives are as follows: SCHEDULE OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT Furniture and equipment 3 – 7 years Leasehold improvements 1 – 11 years Intangible Assets The Company accounts for recorded intangible assets in accordance with the Accounting Standards Codification (“ASC’) 350 “Intangibles – Goodwill and Other”. In accordance with ASC 350, the Company does not amortize intangible assets having indefinite useful lives. The Company’s trademark – Muscle Maker had an indefinite life as of December 31, 2021. The Company determined that as of January 1, 2022, – the trademark – Muscle Maker had a finite life of 3 years and will be amortizing the value over the new estimated life. The Company’s goodwill has an indefinite life and is not amortized, but are evaluated for impairment at least annually, or more often whenever changes in facts and circumstances may indicate that the carrying value may not be recoverable. ASC 350 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. The useful lives of the Company’s intangible assets are: SCHEDULE OF OTHER INTANGIBLE ASSETS USEFUL LIVES Franchisee agreements 13 years Franchise license 10 years Trademarks 3 – 5 years Domain name, Customer list and Proprietary recipes 3 – 7 years Non-compete agreements 2 – 3 years F- 10 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Impairment of Long-Lived Assets When circumstances, such as adverse market conditions, indicate that the carrying value of a long-lived asset may be impaired, the Company performs an analysis to review the recoverability of the asset’s carrying value, which includes estimating the undiscounted cash flows (excluding interest charges) from the expected future operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects of demand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized to the extent that the carrying value exceeds the estimated fair value. Any impairment losses are recorded as operating expenses, which reduce net income. Convertible Instruments The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with Topic 815 of the Financial Accounting Standards Board (“FASB”). If the instrument is determined not to be a derivative liability, the Company then evaluates for the existence of a beneficial conversion feature by comparing the market price of the Company’s common stock as of the commitment date to the effective conversion price of the instrument. As of December 31, 2022 and 2021, the Company deemed the conversion feature was not required to be bifurcated and recorded as a derivative liability. Revenue Recognition The Company’s revenues consist of Commodity sales, Restaurant sales, Franchise royalties and fees, Franchise advertising fund contributions, and Other revenues. The Company recognized revenues according to Topic 606 of FASB, “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. Commodity Sales Commodity sale revenue is generated by our Sadot subsidiary and is recognized when the commodity is delivered as evidenced by the bill of lading and the invoice is prepared and submitted to the customer. During the year ended December 31, 2022, the Company recorded Commodity sales revenues of $ 150,585,644 . The Company did not have any Commodity sales revenue during the year ended December 31, 2021. 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 $ 10,300,394 and $ 9,320,920 during the years ended December 31, 2022 and 2021, 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. F- 11 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Franchise Royalties and Fees Franchise revenues consists of royalties, initial franchise fees and rebates. Royalties are based on a percentage of franchisee net sales revenue. The Company recognizes the royalties as the underlying sales occur. The Company recorded revenue from royalties of $ 485,316 and $ 434,849 during the years ended December 31, 2022 and 2021, 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 initial franchise fees. The Company capitalizes these fees upon collection from the franchisee. These initial fees are then recognized as franchise fee revenue on a straight-line basis over the life of the related franchise agreements and any exercised renewal periods. Cash payments are due upon the execution of the related franchise agreement. The Company’s performance obligation with respect to franchise fee revenues consists of a license to utilize the Company’s brand for a specified period of time, which is satisfied equally over the life of each franchise agreement. If a franchise location closes or a franchise agreement is terminated for any reason, the unrecognized revenue will be recognized in full at that time. The Company recorded revenue from initial franchise fees of $ 117,205 and $ 263,215 during the years ended December 31, 2022 and 2021, 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 $ 124,333 and $ 80,117 during the years ended December 31, 2022 and 2021, respectively, which is included in Franchise royalties and fees on the accompanying Consolidated Statements of Operations. Rebates earned on purchases by Company-owned stores are recorded as a reduction of Food and beverage costs during the period in which the related food and beverage purchases are made. Franchise Advertising Fund Contributions Under the Company’s franchise agreements, the Company and its franchisees are required to contribute a certain percentage of revenues to a national advertising fund. The Company’s national advertising services are provided on a system-wide basis and therefore, not considered distinct performance obligations for individual franchisees. In accordance with Topic 606, the Company recognizes these sales-based advertising contributions from franchisees as franchise revenue when the underlying franchisee Company incurs the corresponding advertising expense. The Company records the related advertising expenses as incurred under Sales, 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 year-end, the Company will accrue advertising costs up to advertising contributions recorded in revenue. The Company recorded contributions from franchisees of $ 80,536 and $ 188,539 , respectively, during the years ended December 31, 2022 and 2021, 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 Sheets. The Company recorded $ 4,989 and $ 61,996 for gift card breakage for the years ended December 31, 2022 and 2021, respectively. F- 12 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Deferred revenue is recognized in income over the life of the franchise agreements. If a franchise location closes or a franchise agreement is terminated for any reason, the remaining deferred revenue will be recognized in full at that time. Stock-Based Consulting Expense Stock-based consulting expense 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. For the year 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. Advertising Advertising costs are charged to expense as incurred. Advertising costs were $ 346,932 and $ 244,186 for the years ended December 31, 2022 and 2021, respectively. For the years ended December 31, 2022 and 2021, advertising cost of $ 168,574 and $ 137,054 , respectively, are included in Sales, general and administrative expenses and $ 178,358 and $ 107,122 , respectively, are included in Other restaurant operating expenses in the accompanying Consolidated Statements of Operations. Net Loss per Share Basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding, plus the impact of potential common shares, if dilutive, resulting from the exercise of warrants, options or the conversion of convertible notes payable. The following securities are excluded from the calculation of weighted average diluted common shares at December 31, 2022 and 2021, respectively, because their inclusion would have been anti-dilutive: SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE December 31, 2022 2021 Warrants 18,033,640 20,284,016 Options 412,500 100,000 Convertible debt 23,559 32,350 Total potentially dilutive shares 18,469,699 20,416,366 Major Vendor The Company engages various vendors to distribute food products to their Company-owned restaurants. Purchases from the Company’s largest supplier totaled 33 % and 54 % of the Company’s purchases for the years ended December 31, 2022 and 2021, respectively. Fair Value of Financial Instruments The Company measures the fair value of financial assets and liabilities based on the guidance of the FASB Accounting ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”). F- 13 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 — quoted prices in active markets for identical assets or liabilities. Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable. Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement. The carrying amounts of accrued liabilities approximate fair value due to the short-term nature of these instruments. The carrying amounts of our short–term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates, taken together with other features such as concurrent issuance of common stock and warrants, are comparable to rates of returns for instruments of similar credit risk. See Note 17 – Equity – Warrant and Options Valuation for details related to accrued compensation liability being fair valued using Level 1 inputs. Income Taxes The Company accounts for income taxes under ASC 740, “Income Taxes” (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Tax benefits claimed or expected to be claimed on a tax return are recorded in the Company’s financial statements. A tax benefit from an uncertain tax position is only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Uncertain tax positions have had no impact on the Company’s financial condition, results of operations or cash flows. The Company does not expect any significant changes in its unrecognized tax benefits within years of the reporting date. The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as Sales, general and administrative expenses in the Consolidated Statements of Operations. Stock-Based Compensation The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally recorded on the grant date and re-measured on financial reporting dates and vesting dates until the service period is complete. The fair value amount of the award is then recognized over the period services are required to be provided in exchange for the award, usually the vesting period. F- 14 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Recent Accounting Pronouncements In 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. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2021, with early adoption permitted. Additionally, in 2018 and 2019, the FASB issued the following Topic 842–related ASUs: ● ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842, which clarifies the applicability of Topic 842 to land easements and provides an optional transition practical expedient for existing land easements; ● ASU 2018-10, Codification Improvements to Topic 842, Leases, which makes certain technical corrections to Topic 842; ● ASU 2018-11, Leases (Topic 842): Targeted Improvements, which allows companies to adopt Topic 842 without revising comparative period reporting or disclosures and provides an optional practical expedient to lessors to not separate lease and non-lease components of a contract if certain criteria are met; and ● ASU 2019-01, Leases (Topic 842): Codification Improvements, which provides guidance for certain lessors on determining the fair value of an underlying asset in a lease and on the cash flow statement presentation of lease payments received; ASU No. 2019-01 also clarifies disclosures required in interim periods after adoption of ASU No. 2016-02 in the year of adoption. The Company 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 . See Note 11 – Leases for further details. In October 2021, the FASB issued ASU 2021-08 Business Combinations (“Topic 805”): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers”, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements and related disclosures. Subsequent Events The Company evaluated events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation and transactions, the Company did not identify any subsequent events that would have required adjustment or disclosure in the Financial Statements, except as disclosed in Note 18 – Subsequent Events. NOTE 3 – LOANS RECEIVABLE The Company had no loan receivable balance at December 31, 2022 and 2021. Loans receivable includes loans to franchisees totaling, in the aggregate, net of reserves for uncollectible loans. There were no reserves for uncollectible loans at December 31, 2022 and $ 71,184 at December 31, 2021. Loans receivable was paid in full during the third quarter of 2022 and the corresponding reserve for loan loss was reversed. NOTE 4 – PREPAID EXENSES AND OTHER CURRENT ASSETS At December 31, 2022 and 2021, the Company’s prepaid expenses and other current assets consists of the following: SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS December 31, December 31, 2022 2021 Prepaid expenses $ 89,197 $ 83,975 Preopening expenses — 602 Other receivables 228,242 1,704,751 Prepaid and Other Current Assets $ 317,439 $ 1,789,328 F- 15 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Included in prepaid and other current assets is a receivable of $ 228,242 and $ 1,704,751 for the years ended December 31, 2022 and 2021, respectively. The receivable reduced Labor expense for 2021 is included in Restaurant operating expenses, related to the employee retention tax credits receivable from the Internal Revenue Services (“IRS”) that was made available to companies effected by COVID-19. The Company started to early access the credit in the fourth quarter of 2021 as allowed by the IRS. NOTE 5 – DEPOSIT ON FARMLAND At December 31, 2022, the Company’s deposit on farmland balance was $ 4,914,191 . Deposit on farmland consists of funds paid as a deposit with the intent to acquire farmland in Africa by our Sadot subsidiary. The Company has entered into a letter of intent with a deposit to purchase undeveloped farmland. The Company is still in final negotiations with the intent to finalize the agreement by the end of the second quarter of 2023. NOTE 6 – PROPERTY AND EQUIPMENT, NET As of December 31, 2022, and 2021, Property and equipment consist of the following: SCHEDULE OF PROPERTY AND EQUIPMENT, NET December 31, December 31, 2022 2021 Furniture and equipment $ 1,266,008 $ 1,397,098 Vehicles 55,000 55,000 Leasehold improvements 2,061,888 1,981,019 Construction in process 5,000 — Property and equipment, gross 3,387,896 3,433,117 Less: accumulated depreciation ( 1,492,934 ) ( 1,152,850 ) Property and equipment, net $ 1,894,962 $ 2,280,267 Depreciation expense amounted to $ 585,550 and $ 565,599 for the years ended December 31, 2022 and 2021, respectively. During the years ended December 31, 2022 and 2021, the Company wrote off Property and equipment with an original cost value of $ 519,563 and $ 347,658 , respectively, related to closed locations and future locations that were terminated due to the economic environment as a result of COVID-19 and increased Labor and Food cost and recorded a loss on disposal of $ 274,098 and $ 193,405 , respectively, after accumulated depreciation of $ 245,465 and $ 154,253 , respectively, in the Consolidated Statement of Operations. NOTE 7 – GOODWILL AND OTHER INTANGIBLE ASSETS, NET The Company’s intangible assets include trademarks, franchisee agreements, franchise license, domain names, customer list, proprietary recipes and non-compete agreements. The Company’s trademark – Muscle Maker had an indefinite life as of December 31, 2021. The Company determined that as of January 1, 2022, the trademark – Muscle Maker had a finite life of 3 years and will be amortizing the value over the new estimate life. The other intangible assets are amortized over useful lives ranging from 2 to 13 years. F- 16 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A summary of the intangible assets is presented below: SCHEDULE OF INTANGIBLE ASSETS Intangible Assets Intangible assets, net at December 31, 2022 Acquisitions Impairment of intangible assets Amortization expense Intangible assets, net at December 31, 2021 Acquisitions Impairment of intangible assets Amortization expense Intangible assets, net at December 31, 2020 Trademark Muscle Maker Grill $ 669,992 $ — $ ( 347,110 ) $ ( 508,551 ) $ 1,525,653 $ — $ ( 998,347 ) $ — $ 2,524,000 Franchise Agreements 135,659 — — ( 26,780 ) 162,439 — ( 141,561 ) ( 50,278 ) 354,278 Trademark SuperFit 29,080 — — ( 8,995 ) 38,075 45,000 — ( 6,925 ) — Domain Name SuperFit 80,778 — — ( 24,986 ) 105,764 125,000 — ( 19,236 ) — Customer List SuperFit 90,470 — — ( 27,985 ) 118,455 140,000 — ( 21,545 ) — Proprietary Recipes SuperFit 103,396 — — ( 31,982 ) 135,378 160,000 — ( 24,622 ) — Non-Compete Agreement SuperFit 106,751 — — ( 86,588 ) 193,339 260,000 — ( 66,661 ) — Trademark Pokemoto 117,881 — — ( 34,981 ) 152,862 175,000 — ( 22,138 ) — Franchisee License Pokemoto 2,322,125 — — ( 277,348 ) 2,599,473 2,775,000 — ( 175,527 ) — Proprietary Recipes Pokemoto 866,614 — — ( 161,302 ) 1,027,916 1,130,000 — ( 102,084 ) — Non-Compete Agreement Pokemoto 88,110 — — ( 240,000 ) 328,110 480,000 — ( 151,890 ) — $ 4,610,856 $ — $ ( 347,110 ) $ ( 1,429,498 ) $ 6,387,464 $ 5,290,000 $ ( 1,139,908 ) $ ( 640,906 ) $ 2,878,278 Amortization expense related to intangible assets was $ 1,429,498 and $ 640,906 for the years ended December 31, 2022 and 2021, respectively. The estimated future amortization expense is as follows: SCHEDULE OF FUTURE AMORTIZATION EXPENSE For the year ended December 31, 2023 2024 2025 2026 2027 Thereafter Total Trademark Muscle Maker Grill $ 334,997 $ 334,996 $ — $ — $ — $ — $ 669,992 Franchise Agreements 26,780 26,853 26,780 26,780 26,780 1,686 135,659 Trademark SuperFit 8,995 9,020 8,995 2,070 — — 29,080 Domain Name SuperFit 24,986 25,055 24,986 5,751 — — 80,778 Customer List SuperFit 27,985 28,061 27,985 6,439 — — 90,470 Proprietary Recipes SuperFit 31,982 32,071 31,982 7,361 — — 103,396 Non-Compete Agreement SuperFit 86,588 20,163 — — — — 106,751 Trademark Pokemoto 34,981 35,077 34,981 12,842 — — 117,881 Franchisee License Pokemoto 277,348 278,108 277,348 277,348 277,348 934,625 2,322,125 Proprietary Recipes Pokemoto 161,303 161,744 161,303 161,303 161,303 59,658 866,614 Non-Compete Agreement Pokemoto 88,110 — — — — — 88,110 Total $ 1,104,055 $ 1,124,702 $ 594,359 $ 499,893 $ 465,430 $ 995,972 $ 4,610,856 The Company sustained operating and cash flow losses from inception which formed a basis for performing an impairment test of its Intangible Assets. The Company performed a recoverability test on the Company’s intangible assets based on its projected future undiscounted cash flows. As a result of a failed recoverability test the Company proceeded to measure the fair value of those assets based on the future discounted cash flows and recorded an impairment charge in the aggregate amount of $ 347,110 and $ 1,139,908 during the years ended December 31, 2022 and 2021, respectively. The key assumptions used in the estimates of projected cash flows utilized in both the test and measurement steps of the impairment analysis were projected revenues and royalty payments. These forecasts were based on actual revenues and take into account recent developments as well as the Company’s plans and intentions. F- 17 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A summary of the goodwill assets is presented below: SCHEDULE OF GOODWILL ASSETS Goodwill Muscle Maker Grill Pokemoto SuperFit Food Total Goodwill, net at January 1, 2021 $ 656,348 $ — $ — $ 656,348 Acquisitions — 1,798,399 258,000 2,056,399 Impairment of goodwill ( 86,348 ) — — ( 86,348 ) Goodwill, net at December 31, 2021 $ 570,000 $ 1,798,399 $ 258,000 $ 2,626,399 Goodwill net $ 570,000 $ 1,798,399 $ 258,000 $ 2,626,399 Acquisitions — — — — Impairment of goodwill — — — — Goodwill, net at December 31, 2022 $ 570,000 $ 1,798,399 $ 258,000 $ 2,626,399 Goodwill, net $ 570,000 $ 1,798,399 $ 258,000 $ 2,626,399 During the years ended December 31, 2022 and 2021, the Company performed a quantitative goodwill assessment and determined the fair value of Muscle Maker Grill restaurant using a discounted cash flow model. The discounted cash flow model relied on making assumptions, such as the extent of the economic downturn related to the COVID-19 pandemic, the expected timing of recovery, and the expected growth in profitability and discount rate, which we believed were appropriate. The results of our 2021 goodwill impairment test indicated that the estimated carrying value of Muscle Maker Grill exceeded its fair value amount. As a result, we recorded a goodwill impairment charge of $ 86,348 during the year ended December 31, 2021. No impairment charge was recorded during the year ended December 31, 2022. NOTE 8 – ACCOUNTS PAYABLES AND ACCRUED EXPENSES Accounts payables and accrued expenses consist of the following: SCHEDULE OF ACCOUNTS PAYABLES AND ACCRUED EXPENSES December 31, December 31, 2022 2021 Accounts payable $ 1,085,143 $ 911,415 Accrued payroll and bonuses 551,129 758,732 Accrued expenses 87,382 226,954 Accrued professional fees 185,000 185,872 Sales taxes payable (1) 44,615 125,550 Total Accounts Payable and Accrued Expenses $ 1,953,269 $ 2,208,523 (1) See Note 15 – Commitments and Contingencies – Taxes for details related to delinquent sales taxes in 2021. NOTE 9 – ACCRUED STOCK-BASED CONSULTING EXPENSES At December 31, 2022, Accrued stock-based consulting expenses was $ 3,601,987 . Accrued stock-based 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. For the year ended December 31, 2022, $ 3,601,987 is also recorded as Stock-based consulting expense in the accompanying Consolidated Statements of Operations. The Stock-based consulting expense is expected to be paid in stock in 2023. F- 18 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 – NOTES PAYABLE Convertible Notes Payable On April 6, 2018, the Company issued a $ 475,000 convertible promissory note (the “2018 ARH Note”) to the Former Parent for services rendered and expense paid on behalf of the Company. The 2018 ARH Note has no stated interest rate or maturity date and is convertible into shares of the Company’s common stock at a conversion price of $ 3.50 per share at a time to be determined by the lender. On April 11, 2018, the Former Parent elected to partially convert the 2018 ARH Note for the principal of $ 392,542 into 112,154 shares of the Company’s common stock. The Company had an aggregate gross amount of $ 82,458 , as of December 31, 2022 and 2021, respectively, included in notes payable. As of December 31, 2021, the Company had another convertible note payable in the amount of $ 100,000 , which is included within notes payable. This note was paid in full as of December 31, 2022. See Note 15 – Commitments and Contingencies – Litigation, Claims and Assessments for details related to the convertible note payable. Other Notes Payable On October 10, 2019, the Company issued a note payable in connection with the acquisition of the franchisee location in the amount of $ 300,000 . The note has a stated interest rate of 8 % with monthly payments payable over 5 years. On May 9, 2020, the Company entered into a Paycheck Protection Program Promissory Note and Agreement with Greater Nevada Credit Union, pursuant to which the Company received loan proceeds of $ 866,300 (the “PPP Loan”). The PPP Loan was made under, and is subject to the terms and conditions of, the PPP which was established under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and is administered by the U.S. Small Business Administration. On June 21, 2021, the U.S. Small Business Administration (the “SBA”) forgave the Company’s first PPP loan entered into on May 9, 2020. The aggregate amount forgiven is $ 875,974 , consisting of $ 866,300 in principal and $ 9,674 in interest expenses during the year ended December 31, 2021. The forgiven amount was accounted for as a Gain on debt extinguishment and was recorded in our Consolidated Statements of Operations. During the year ended December 31, 2021, as part of the Pokemoto acquisition, the Company acquired $ 1,171,400 loans issued by the Small Business Administration under its Economic Injury Disaster Loans (“EIDL”). The Company repaid all the loans in full during the year ended December 31, 2021. During the year ended December 31, 2021, as part of the Pokemoto acquisition the Company acquired $ 291,053 in paycheck protection loans second draw (the “PPP 2 Loan”). The SBA forgave $ 151,176 in principal and $ 1,589 in interest expense during the year ended December 31, 2021. The SBA forgave $ 139,877 in principal and $ 1,402 in interest expense during the year ended December 31, 2022. The forgiven amount was accounted for as a Gain on debt extinguishment and was recorded in our Consolidated Statements of Operations. During the years ended December 31, 2022 and 2021, the Company repaid a total amount of $ 130,080 and $ 1,280,432 , respectively, of the other notes payables. As of December 31, 2022, the Company had an aggregate amount of $ 898,721 in other notes payable. The notes had interest rates ranging between 3.75 % - 8 % per annum, due on various dates through May 2026. F- 19 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The maturities of notes payable as of December 31, 2022, are as follows: SCHEDULE OF OUTSTANDING DEBT Principal Repayments due as of Amount 12/31/2023 $ 222,356 12/31/2024 137,159 12/31/2025 79,315 12/31/2026 542,348 Total debt $ 981,178 NOTE 11 – LEASES The Company adopted Topic 842 as of January 1, 2022. The Company’s leases consist of restaurant locations. We determine if a contract contains a lease at inception. The lease generally has remaining terms of 1-10 years and most lease included the option to extend the lease for an additional 5-year period. The total lease cost associated with right of use assets and operating lease liabilities for the year ended December 31, 2022, was $ 945,133 and has been recorded in the Consolidated Statement of Operations as Rent expense within Restaurant operating expenses. As of December 31, 2022, assets and liabilities related to the Company’s leases were as follows: SCHEDULE OF OPERATING LEASE ASSETS AND LIABILITIES December 31, 2022 Assets Right to use asset $ 2,432,894 Liabilities Operating leases – current $ 560,444 Operating leases – non-current 2,018,851 Total lease liabilities $ 2,579,295 As of December 31, 2022, the Company’s lease liabilities mature as follows: SCHEDULE OF OPERATING LEASE LIABILITY MATURITY Operating Leases Fiscal Year: 2023 $ 833,562 2024 769,663 2025 621,298 2026 413,364 2027 248,123 Thereafter 567,519 Total lease payments $ 3,453,529 Less imputed interest ( 874,234 ) Present value of lease liabilities $ 2,579,295 F- 20 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company’s lease term and discount rates were as follows: SCHEDULE OF LEASE TERM AND DISCOUNT RATE December 31, 2022 Weighted-average remaining lease term (in years) Operating leases 4.92 Weighted-average discount rate Operating leases 12 % NOTE 12 – DEFERRED REVENUE At December 31, 2022 and 2021, deferred revenue consists of the following: SCHEDULE OF DEFERRED REVENUE December 31, December 31, 2022 2021 Deferred revenues, net $ 1,371,170 $ 1,063,373 Less: deferred revenue, current ( 95,392 ) ( 49,728 ) Deferred revenues, non-current $ 1,275,778 $ 1,013,645 Deferred revenue of $ 91,881 at December 31, 2021, was recognized in revenue in 2022 within Franchise royalties and fees on the Consolidated Statement of Operations. Deferred revenue of $ 95,392 at December 31, 2022, is expected to be recognized during 2023. NOTE 13 – OTHER CURRENT LIABILITIES Other current liabilities consist of the following: SCHEDULE OF OTHER CURRENT LIABILITIES December 31, December 31, 2022 2021 Gift card liability $ 25,432 $ 27,633 Co-op advertising fund liability 77,811 126,564 Marketing development brand liability 35,424 14,330 Advertising fund liability 42,948 117,561 Other current liabilities $ 181,615 $ 286,088 See Note 2 – Significant Accounting Policies – Revenue Recognition for details related to the gift card liability and advertising fund liability. F- 21 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 14 – INCOME TAXES The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2022 and 2021 are presented below: SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES 2022 2021 For the Years Ended December 31, 2022 2021 Deferred tax assets: Net operating loss carryforwards $ 10,614,916 $ 10,345,422 Receivable allowance 5,057 18,885 Stock-based compensation 14,825 — Intangible assets 313,546 662,357 Property and equipment — — Deferred rent — 12,935 Other carryforwards 279 — Deferred revenues 204,473 177,191 Leases 31,638 — Gross deferred tax asset 11,184,734 11,216,790 Deferred tax liabilities: Property and equipment ( 159,762 ) ( 447,944 ) Gross deferred tax liabilities ( 159,762 ) ( 447,944 ) Net deferred tax assets 11,024,972 10,768,846 Valuation allowance ( 11,024,972 ) ( 10,768,846 ) Net deferred tax asset, net of valuation allowance $ — $ — The income tax expense for the periods shown consist of the following: SCHEDULE OF INCOME TAX Expense 2022 2021 For the Years Ended December 31, 2022 2021 Federal: Current $ — $ — Deferred — — State and local: Current 24,771 6,033 Deferred — — Federal, State and local, tax expense 24,771 6,033 Change in valuation allowance — — Income tax expense $ 24,771 $ 6,033 F- 22 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the periods shown, are as follows: SCHEDULE OF RECONCILIATION OF STATUTORY FEDERAL INCOME TAX RATE 2022 2021 For the Years Ended December 31, 2022 2021 Federal income tax benefit at statutory rate 21.0 % 21.0 % State income tax benefit, net of federal impact ( 0.5 )% 7.0 % Permanent differences ( 0.1 )% ( 0.0 )% PPP loan forgiveness 0.4 % — Return to provision adjustments 3.3 % — Deferred tax asset true up- State ( 14.5 )% — Deferred tax asset true up- Federal ( 6.8 )% — Other — ( 1.7 )% Change in valuation allowance ( 3.3 )% ( 26.3 )% Effective income tax rate ( 0.5 )% 0.0 % The Company has filing obligations in what it considers its U.S. major tax jurisdictions as follows: Nevada, California, Connecticut, Florida, New Jersey, Texas, Virginia, New York State and New York City. The earliest year that the Company is subject to examination is the year ended December 31, 2015. The Company has approximately $ 63.2 million of Federal and State Net operating loss (“NOLs”) available to offset future taxable income. The net operating loss carryforwards generated prior to 2018, if not utilized, will expire from 2035 to 2037 for federal and state purposes. As of December 31, 2022 and 2021, the Company has determined that it is more likely than not that the Company will not recognize the future tax benefit of the loss carryforwards and has recognized a valuation allowance of $ 11,024,972 and $ 10,768,846 , respectively. The valuation allowance increased by approximately $ 256,126 . Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, and similar state provisions. Generally, in addition to certain entity reorganizations, the limitation applies when one or more “5 percent stockholders” increase their ownership, in the aggregate, by more than 50 percentage points over a 36-month time period testing period or beginning the day after the most recent ownership change, if shorter. NOTE 15 – COMMITMENTS AND CONTINGENCIES Election of Directors On October 7, 2021, the Company held its annual shareholders meeting, and the shareholders voted on the directors to serve on the Company’s board of directors. The shareholders elected Kevin Mohan, Stephan Spanos, A.B. Southall III, Paul L. Menchik, Jeff Carl, Major General (ret) Malcolm Frost and Phillip Balatsos to serve on the Company’s board of directors. On December 22, 2022, the Company held its annual shareholders meeting, and the shareholders voted on the directors to serve on the Company’s board of directors. The shareholders elected Kevin Mohan, Stephan Spanos, A.B. Southall III, Paul L. Menchik, Jeff Carl, Major General (ret) Malcolm Frost and Phillip Balatsos to serve on the Company’s board of directors. On December 27, 2022, the Board appointed Benjamin Petel to the Board of Directors. F- 23 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Consulting Agreements On February 7, 2021, the Company entered into a Consulting Agreement with consultants as a strategy business consultant to provide the Company with business and marketing advice as needed. The term of the agreement is for five months from the effective date on February 7, 2021. Pursuant to the terms of the agreement the Company agreed to pay the consultant a total of 100,000 shares of the Company’s common stock. The Company issued 60,000 shares of common stock upon the effective date of the agreement with the remaining 40,000 to be issued upon the successful completion of the agreement. As of December 31, 2021, the Company issued the remaining 40,000 shares of common with a grant date fair value of $ 42,400 pursuant to the terms of the agreement. On March 8, 2021, the Company entered into a Consulting Agreement with consultants as a strategy business consultant to provide the Company with financial and business advice. The term of the agreement was for five months from the effective date on March 8, 2021. Pursuant to the terms of the agreement the Company agreed to pay the consultant a total of 100,000 shares of the Company’s common stock. The Company issued 70,000 shares of common stock upon the effective date of the agreement with the remaining 30,000 to be issued upon the successful completion of the agreement. As of December 31, 2022, the Company issued the remaining 30,000 shares of common with a grant date fair value of $ 31,800 pursuant to the terms of the agreement. On March 22, 2021, the Company entered into a Consulting Agreement with consultants with experience in the area of investor relations and capital introductions. The term of the agreement is for six months from the effective date on March 22, 2021. Pursuant to the terms of the agreement the Company paid $ 250,000 in cash and issued 150,000 shares of the Company’s common stock. On November 14, 2022 (the “Effective Date”), the Company, Sadot and Aggia LLC FC, a company formed under the laws of United Arab Emirates (“Aggia”) entered into a Services Agreement (the “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. As 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 occurring following the Effective Date. Upon Sadot generating net income for any fiscal quarter, the Company shall issue Aggia a number of shares of common stock equal to the net income for such fiscal quarter divided by the per share price (the “Shares”). 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 49.9 99% of the number of issued and outstanding shares of common stock as of the Effective Date. 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 . The Company will prepare the shares earned calculation after the annual audit or quarter review is completed by the auditors. The shares will be issued within 10 days of the final calculation. Board Compensation For the year ended December 31, 2021, through the third quarter of 2022 the board members were eligible for cash compensation of $ 12,000 per year to be paid quarterly within 30 days of the close of each quarter. On November 11, 2022, the board of directors approved a new board compensation plan that would increase the cash compensation to $ 22,000 to be paid quarterly within 30 days of the close of each quarter, which was retroactively applied for the full fourth quarter of 2022. In addition, on an ongoing basis pursuant to the approved board compensation plan each director will receive $ 8,000 in value of common stock per year for service as director, $ 6,000 in value of shares of common stock per year for service on each committee and $ 4,000 in value of shares of common stock per year for service as chair for such committee. The number of shares to be issued would be based upon the closing price of the last trading date of each calendar quarter. The shares of common stock for committee service will be limited to two committees. On February 3, 2021, the Company issued an aggregate of 16,126 shares of common stock of the Company to the members of the board of directors as compensation earned through the end of the fourth quarter of 2020. F- 24 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On March 31, 2021, the Company authorized the issuance of an aggregate of 12,711 shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2021. On August 24, 2021, the Company authorized the issuance of an aggregate of 20,829 shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2021. On October 21, 2021, the Company authorized the issuance of an aggregate of 24,275 shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2021. On January 6, 2022, the Company authorized the issuance of an aggregate of 39,573 shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2021. The Company accrued for the liability as of December 31, 2021. On March 31, 2022, the Company authorized the issuance of an aggregate of 53,961 shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2022. On July 14, 2022, the Company authorized the issuance of an aggregate of 74,019 shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2022. On October 12, 2022, the Company authorized the issuance of an aggregate of 75,792 shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2022. As of December 31, 2022, the Company accrued a total of $ 28,487 related to board compensation for stock issuance and $ 33,000 for their portion of cash compensation earned during the fourth quarter of 2022. Franchising During the years ended December 31, 2022 and 2021, the Company entered into various Pokemoto franchise agreements for a total of 30 and 17, respectively, potentially new Pokemoto locations with various franchisees. The Franchisees paid the Company an aggregate of $ 425,222 and $ 217,500 and this has been recorded in deferred revenue as of December 31, 2022 and 2021, respectively. Master Franchise Agreement On October 25, 2021, Muscle Maker Development International LLC (“MMDI”), a wholly-owned subsidiary of Muscle Maker Inc., entered into a Master Franchise Agreement (the “Master Franchise Agreement”) with Almatrouk Catering Company – OPC (“ACC”) providing ACC with the right to grant franchises for the development of 40 “Muscle Maker Grill” restaurants through December 31, 2030 (the “Term”) in the Kingdom of Saudi Arabia (“KSA”). Under the Master Franchise Agreement, MMDI has granted to ACC an exclusive right to establish and operate Muscle Maker restaurants in the KSA. MMDI will not own or operate restaurants in KSA, grant franchises for the restaurants in KSA, or grant Master Franchise Rights for the restaurants to other persons within the KSA. ACC will be solely responsible for the development, sales, marketing, operations, distribution and training of all franchise locations sold in the KSA. ACC is required to pay MMDI $ 150,000 pursuant to the Master Franchise Agreement upon the occurrence of various events. ACC is required to pay MMDI $ 20,000 upon the execution of each franchise agreement for each individual restaurant and a monthly royalty fee of $ 1,000 for each restaurant. Further, ACC is to adhere to the agreed upon development schedule as outlined in the master franchise agreement. An initial $ 50,000 deposit was paid on the agreement and no other amount is due at this time. F- 25 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Taxes The Company failed in certain instances in paying past state and local sales taxes collected from customers in specific states that impose a tax on sales of the Company’s products during 2017 and 2018. As of the second quarter 2022, all past due tax on sales from 2017 and 2018 has been paid in full. The Company had accrued a sales tax liability for approximately $ 44,615 and $ 125,550 as of December 31, 2022, and December 31, 2021, respectively. All current state and local sales taxes from January 1, 2018, for open Company-owned locations have been fully paid and in a timely manner. The Company has completed all the payment plans with the various state or local entities for these past owed amounts. Litigations, Claims and Assessments On April 24, 2022, the Company and a convertible note holder entered into an agreement in which the Company will repay a total of $ 110,000 in connection with the default judgement issued on June 22, 2018, by the Iowa District Court for Polk County #CVCV056029, filed against the Company for failure to pay the remaining balance due on a promissory note in the amount of $ 100,000 , together with interest, attorney fees and other costs of $ 171,035 . The Company agreed to pay $ 40,000 on or before May 1, 2020 and to make seven installment payments of $ 10,000 per month starting on or before June 1, 2022. As of December 30, 2022, the Company has paid this note in full. On or about March 7, 2019, the Company was listed as a defendant to a lawsuit filed by a contractor in the State of Texas in El Paso County #2019DCV0824. The contractor is claiming a breach of contract and is seeking $ 32,809 in damages for services claimed to be rendered by the contractor. The Company accrued $ 30,000 for the liability in accounts payable and accrued expenses as of December 31, 2022 and 2021. On January 23, 2020, the Company was served a judgment issued by the Judicial Council of California in the amount of $ 130,185 for a breach of a lease agreement in Chicago, Illinois, in connection with a Company-owned store that was closed in 2018. As of December 31, 2022, the Company has accrued for the liability in accounts payable and accrued expenses. In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. In the opinion of management after consulting legal counsel, such matters are currently not expected to have a material impact on the Company’s financial statements. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements after consulting legal counsel. Corporate Address Change During August 2022 the Company relocated its corporate office address from 2600 South Shore Blvd. Suite 300, League City, Texas, to 1751 River Run, Ste 200, Fort Worth, TX 76107. Employment Agreements On November 16, 2022, the Company entered into an Executive Employment Agreement with Michael Roper (the “Roper Agreement”), which replaced his prior employment agreement. Pursuant to the Roper Agreement, Mr. Roper will continue to be employed as Chief Executive Officer of the Company on an at will basis. During the term of the Roper Agreement, Mr. Roper is entitled to a base salary at the annualized rate of $ 350,000 . Mr. Roper will be eligible for a discretionary performance bonus to be determined by the Board annually. Further, Mr. Roper will be entitled to an additional bonus of $ 50,000 upon the Company obtaining approval of the Shareholder Matters and $ 25,000 upon the Designated Directors representing a majority of the Board of Directors. If Mr. Roper is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Roper is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Roper will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 18 months following the second anniversary of the Roper Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Roper Agreement will automatically terminate and the prior employment agreement will again be in full effect. F- 26 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On November 16, 2022, the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement. Pursuant to the Black Agreement, Ms. Black will continue to be employed as Chief Financial Officer of the Company on an at will basis. During the term of the Black Agreement, Ms. Black is entitled to a base salary at the annualized rate of $ 190,000 . Ms. Black will be eligible for a discretionary performance bonus up to 50 % of her annual salary. Further, Ms. Black will be entitled to an additional bonus of $ 50,000 upon the Company obtaining approval of the Shareholder Matters and $ 25,000 upon the Designated Directors representing a majority of the Board of Directors. If Ms. Black is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Black is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Black will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Black Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Black Agreement will automatically terminate and the prior employment agreement will again be in full effect. On November 16, 2022, the Company entered into an Executive Employment Agreement with Kenn Miller (the “Miller Agreement”), which replaced his prior employment agreement. Pursuant to the Miller Agreement, Mr. Miller will continue to be employed as Chief Operating Officer of the Company on an at will basis. During the term of the Miller Agreement, Mr. Miller is entitled to a base salary at the annualized rate of $ 275,000 . Mr. Miller will be eligible for a discretionary performance bonus up to 75 % of his annual salary. Further, Mr. Miller will be entitled to an additional bonus of $ 25,000 upon the Designated Directors representing a majority of the Board of Directors. If Mr. Miller is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Miller is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Miller will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 12 months following the second anniversary of the Miller Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Miller Agreement will automatically terminate and the prior employment agreement will again be in full effect. On November 16, 2022, the Company entered into an Executive Employment Agreement with Kevin Mohan (the “Mohan Agreement”), which replaced his prior employment agreement. Pursuant to the Mohan Agreement, Mr. Mohan will continue to be employed as Chief Investment Officer of the Company on an at will basis. During the term of the Employment Agreement, Mr. Mohan is entitled to a base salary at the annualized rate of $ 200,000 . Mr. Mohan will be eligible for a discretionary performance bonus up to 75 % of his annual salary. Further, Mr. Mohan will be entitled to an additional bonus of $ 50,000 upon the Company obtaining approval of the Shareholder Matters and $ 25,000 upon the Designated Directors representing a majority of the Board of Directors. If Mr. Mohan is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Mohan is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Mohan will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Mohan Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Mohan Agreement will automatically terminate and the prior employment agreement will again be in full effect. On November 16, 2022, the Company entered into an Executive Employment Agreement with Aimee Infante (the “Infante Agreement”), which replaced her prior employment agreement. Pursuant to the Infante Agreement, Ms. Infante will continue to be employed as Chief Marketing Officer of the Company on an at will basis. During the term of the Infante Agreement, Ms. Infante is entitled to a base salary at the annualized rate of $ 175,000 . Ms. Infante will be eligible for a discretionary performance bonus up to 25 % of her annual salary. Further, Ms. Infante will be entitled to an additional bonus of $ 25,000 upon the Designated Directors representing a majority of the Board of Directors. If Ms. Infante is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Infante is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Infante will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Infante Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Infante Agreement will automatically terminate, and the prior employment agreement will again be in full effect. F- 27 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On February 9, 2022, the Company and Ferdinand Groenewald, the former Chief Accounting Officer, entered a letter agreement providing that Mr. Groenewald will continue to be engaged by the Company on an at-will basis with a base salary at the annualized rate of $ 175,000 effective February 14, 2022. Mr. Groenewald was entitled to a discretionary performance bonus to be paid in cash or equity of up to 25 % of his salary. Within 90 days of the effective date, the Company issued Mr. Groenewald stock options to receive 25,000 shares of common stock which will over a term of five years . If Mr. Groenewald is terminated by the Company for any reason other than cause, including termination without cause in connection with a change in control, he was entitled to a severance package of six months of salary and health and dental benefits paid in accordance with the Company’s payroll schedule and insurance program, but subject to the execution of a valid release in favor of the Company and its related parties. See Note 17 – Equity – Options for details related to the issuance of the stock options. Departure of Officer On June 21, 2022, the Company advised Ferdinand Groenewald that the position of Chief Accounting Officer has been eliminated. Mr. Groenewald continued his employment with the Company through July 29, 2022, at which time he became entitled to the severance for termination without cause as outlined in the letter agreement between the Company and Mr. Groenewald dated February 9, 2022. NASDAQ Notice On February 1, 2022, the Company received a letter from the Staff therein indicating that, based upon the closing bid price of the Company’s common stock for the prior 30 consecutive business days, the Company was not in compliance with the requirement to the Minimum Bid Price Requirement. Pursuant to NASDAQ Listing Rule 5810(c)(3)(A), the Company was granted 180 calendar days, or until August 1, 2022, to regain compliance. On August 2, 2022, the Company received a second letter from the Staff advising that the Company had been granted an additional 180 calendar days, or to January 30, 2023, to regain compliance with the Minimum Bid Price Requirement, in accordance with NASDAQ Listing Rule 5810(c)(3)(A). The Company intends to actively monitor the minimum bid price of its common stock and may, as appropriate, consider available options to regain compliance with the Rule. There can be no assurance that the Company will be able to regain compliance with the Rule or will otherwise be in compliance with other NASDAQ listing criteria. F- 28 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 16 – REPORTABLE OPERATING SEGMENTS See Note 1 – Business Organization and Nature of Operations for descriptions of our operating segments. The following table sets forth the results of operations for the relevant segments for the years ended December 31, 2022 and 2021: SUMMARY OF OPERATING SEGMENTS December, 31, December, 31, 2022 2021 Revenues Muscle Maker Grill Division $ 4,443,177 $ 5,530,803 Pokemoto Division 4,952,959 2,685,498 Non-Traditional (Hybrid) Division 383,270 665,884 SuperFit Foods Division 1,333,367 1,467,451 Sadot Division 150,585,644 — Revenues $ 161,698,417 $ 10,349,636 Operating Loss Muscle Maker Grill Division $ ( 938,261 ) $ ( 493,635 ) Pokemoto Division 92,884 632,929 Non-Traditional (Hybrid) Division ( 328,577 ) ( 1,009,774 ) SuperFit Division 37,885 192,789 Sadot Division 4,548,440 — Corporate and unallocated sales, general and administrative expenses (a) ( 6,149,801 ) ( 8,088,682 ) Stock-based consulting expenses ( 3,601,987 ) — Unallocated operating other income/ (expense) (b) ( 1,777,733 ) ( 680,921 ) Operating Loss $ ( 8,117,150 ) $ ( 9,447,294 ) Other income/ (expense) 44,944 ( 9,097 ) Interest expense, net ( 6,730 ) ( 69,514 ) Change in fair value of accrued compensation — 127,500 Gain on debt extinguishment 141,279 1,228,308 Loss before income taxes $ ( 7,937,657 ) $ ( 8,170,097 ) (a) Includes charges related to corporate expense that the Company does not allocate to the respective divisions. For the years ended December 31, 2022 and 2021, the largest portion of this expense related to corporate payroll, benefits and other compensation expenses of $ 3,682,605 and $ 3,198,844 , respectively, and professional and consulting expense of $ 1,010,866 and $ 3,707,773 , respectively. (b) Includes charges related to the Impairment of intangible assets and goodwill, related to Muscle Maker Grill intangible assets and goodwill, amortization of intangible asset, corporate depreciation of fixed assets, Preopening expenses and Post-closing expenses. NOTE 17 – EQUITY Authorized Capital On October 7, 2021, the shareholders approved to amend the Company’s articles of incorporation to increase the number of authorized shares of common stock from 25,000,000 to 50,000,000 shares of $ 0.0001 par value share common stock. As of December 31, 2021, the Company was authorized to issue 50,000,000 shares of $ 0.0001 par value per share common stock. The holders of the Company’s common stock are entitled to one vote per share. F- 29 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Stock Option and Stock Issuance Plan 2020 Plan The Company’s board of directors and shareholders approved and adopted on October 27, 2020 the 2020 Equity Incentive Plan (“2020 Plan”), effective on October 27, 2020 under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock Units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2020 Plan, the Company reserved 1,750,000 shares of common stock for issuance. As of December 31, 2022, 889,756 shares have been issued under the 2020 Plan. 2021 Plan The Company’s board of directors and shareholders approved and adopted on October 7, 2021 the 2021 Equity Incentive Plan (“2021 Plan”), effective on September 16, 2020 under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2021 Plan, the Company reserved 1,500,000 shares of common stock for issuance. As of December 31, 2022, 625,120 shares have been issued and 312,500 options to purchase shares have been awarded under the 2021 Plan. Common Stock Issuances On February 3, 2021, the Company issued an aggregate of 20,000 shares of common stock of the Company to a digital marketing consultant with an aggregate fair value of $ 42,600 . On April 30, 2021, the Company issued an aggregate of 10,000 shares of common stock of the Company to a digital marketing consultant, pursuant to their service agreement, with an aggregate fair value of $ 14,700 . On May 6, 2021, the Company issued an aggregate of 150,000 shares of common stock of the Company to a digital marketing consultant with an aggregate fair value of $ 214,500 . The Company originally accrued for the liability as accrued compensation expense on the books, as the share were fully earned pursuant to their service agreement. On the date of issues of the shares the Company recorded a gain on the change in fair value of the accrued compensation of $ 127,500 in the Consolidated Statement of Operations. On May 27, 2021, the Company cancelled 11,879 shares of common stock previously issued to an investor pursuant to a settlement. The cancellation of the 11,879 shares was part of the settlement agreement. See Note 15 – Commitments and Contingencies – Litigation, Claims and Assessments for further details related to the settlement. On August 24, 2021, the Company issued an aggregate of 15,000 shares of common stock of the Company to a digital marketing consultant, pursuant to their service agreement, with an aggregate fair value of $ 20,999 . On August 26, 2021, the Company issued an aggregate of 1,100 shares of common stock of the Company to an investor in the Company, with an aggregate fair value of $ 1,540 . On October 11, 2021, the Company issued an aggregate of 40,000 shares of common stock of the Company to a consultant for general consulting services, pursuant to their service agreement, with an aggregate fair value of $ 40,800 . On October 22, 2021, the Company issued an aggregate of 15,000 shares of common stock of the Company to a digital marketing consultant, pursuant to their service agreement, with an aggregate fair value of $ 15,150 . On December 3, 2021, the Company issued 82,500 shares of common stock of the Company to a consultant for business strategy consulting with a fair value of $ 84,975 . On December 7, 2021, the Company issued an aggregate of 160,000 shares of common stock of the Company to a consultant for strategic advisory and digital marketing services with an aggregate fair value of $ 177,600 . F- 30 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On December 27, 2021, the Company issued 10,000 shares of common stock of the Company to a consultant with a fair value of $ 7,400 . On January 3, 2022, the Company authorized the issuance of an aggregate of 1,200,000 shares of common stock in connection with the cashless exercise of the pre-funded warrants. Pursuant to the terms of the pre-funded warrants a total of 1,200,215 warrants were exercised. On January 6, 2022, the Company authorized the issuance of an aggregate of 39,573 shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2021. The Company accrued for the liability as of December 31, 2021. On January 18, 2022, the Company issued an aggregate of 30,000 shares of common stock of the Company to a consultant that assisted with the acquisition of SuperFit Foods and Pokemoto, with an aggregate fair value amount of $ 15,600 . The Company accrued for the liability as of December 31, 2021. On February 24, 2022, the Company authorized the issuance of an aggregate of 1,209,604 shares of common stock in connection with the cashless exercise of the pre-funded warrants. Pursuant to the terms of the pre-funded warrants a total of 1,210,110 warrants were exercised. On March 31, 2022, the Company authorized the issuance of an aggregate of 53,961 shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2022. On April 4, 2022, the Company authorized the issuance of 20,000 shares of common stock to a member of the executive team per the employment agreement. The stock was not fully earned until April 4, 2022. On June 8, 2022, the Company authorized the issuance of 5,000 shares of common stock to a contractor for work done at a Company owned location. On June 30, 2022, the Company recognized 30,910 shares of common stock for book purpose to reconcile the shares outstanding to the transfer agent report. On July 14, 2022, the Company authorized the issuance of an aggregate of 74,019 shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2022. On October 12, 2022, the Company authorized the issuance of an aggregate of 75,792 shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2022. On November 29, 2022, the Company authorized the issuance of an aggregate of 438,085 shares of common stock in connection with the exercise of pre-funded warrants. See Note 15 – Commitments and Contingencies – Consulting Agreements and Board Compensation for details related to additional stock issuances during the years ended December 31, 2022 and 2021. Private Placements On April 7, 2021, the Company entered into a Securities Purchase Agreement with an accredited investor (the “Securities Purchase Agreement”) for a private placement (the “Private Placement”) pursuant to which the investor agreed to purchase from the Company for an aggregate purchase price of approximately $ 10,000,000 (i) 1,250,000 shares of common stock of the Company (ii) a common stock purchase warrant to purchase up to 4,115,227 shares of common stock (the “Common Warrant”) and (iii) a pre-funded common stock purchase warrant to purchase up to 2,865,227 shares of common stock (the “pre-funded warrant”). Each share and accompanying common warrant is being sold together at a combined offering price of $ 2.43 per share and Common Warrant, and each pre-funded warrant and accompanying common warrant is being sold together at a combined offering price of $ 2.42 per pre-funded warrant and accompanying common warrant. The pre-funded warrant is immediately exercisable, at a nominal exercise price of $ 0.01 per share, and may be exercised at any time until the pre-funded warrant is fully exercised. The common warrant will have an exercise price of $ 2.43 per share, are immediately exercisable and will expire 5.5 years from the date of issuance. The Private Placement closed on April 9, 2021. F- 31 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Securities Purchase Agreement contains customary representations, warranties and agreements of the Company and the Purchaser and customary indemnification rights and obligations of the parties thereto. Pursuant to the Securities Purchase Agreement, the Company was required to register the resale of the shares and the shares issuable upon exercise of the common warrant and the pre-funded warrant. The Company prepared and filed a registration statement with the Securities and Exchange Commission within 30 days of the date of the Securities Purchase Agreement and to used commercially reasonable efforts to have the registration statement declared effective within 90 days of the closing of the Private Placement. Pursuant to a placement agency agreement, dated April 6, 2021, between the Company and A.G.P./Alliance Global Partners (the “Placement Agent”) entered into in connection with the Private Offering, the Placement Agent acted as the sole placement agent for the Private Placement and the Company has paid customary placement fees to the Placement Agent, including a cash fee equal to 8 % of the gross proceeds raised in the Private Placement and a common stock purchase warrant to purchase shares of common stock in an amount equal to 4 % of the Shares and shares of common stock issuable upon exercise of the warrants sold in the Private Placement, the warrant has an exercise price of $ 2.916 per share and is exercisable commencing six months from the date of the pricing of the Private Placement for a period of five years after such date. Pursuant to the Placement Agency Agreement, the Company has also agreed to reimburse certain expenses of the placement agent incurred in connection with the Private Placement. On November 17, 2021, the Company entered into a Securities Purchase Agreement with accredited investors (the “Securities Purchase Agreement”) for a private placement (the “Private Placement”) pursuant to which the investors (the “Purchasers”) agreed to purchase from the Company for an aggregate purchase price of approximately $ 15,000,000 (i) 6,772,000 shares (the “Shares”) of common stock, par value $ 0.0001 per share, of the Company (the “common stock”) (ii) a common stock purchase warrant to purchase up to 10,830,305 shares of common stock (the “common warrant”) and (iii) a pre-funded common stock purchase warrant to purchase up to 4,058,305 shares of common stock (the “pre-funded warrant”). Each share and accompanying common warrant were being sold together at a combined offering price of $ 1.385 per share and common warrant, and each pre-funded warrant and accompanying Common Warrant is being sold together at a combined offering price of $ 1.3849 per pre-funded warrant and accompanying common warrant. The pre-funded warrant is immediately exercisable, at a nominal exercise price of $ 0.0001 per share, and may be exercised at any time until the pre-funded warrant is fully exercised. The common warrant will have an exercise price of $ 1.385 per share, are immediately exercisable and will expire 5 years from the date of issuance. The Private Placement closed on November 22, 2021. The Securities Purchase Agreement contains customary representations, warranties and agreements of the Company and the Purchaser and customary indemnification rights and obligations of the parties thereto. Pursuant to the Securities Purchase Agreement, the Company is required to register the resale of the shares and the shares issuable upon exercise of the common warrant and the pre-funded warrant. The Company was required to prepare and file a registration statement with the Securities and Exchange Commission within 30 days of the date of the Securities Purchase Agreement and used commercially reasonable efforts to have the registration statement declared effective within 90 days of the closing of the Private Placement. Pursuant to a placement agency agreement, dated November 17, 2021, between the Company and A.G.P./Alliance Global Partners (the “Placement Agent”) entered into in connection with the Private Offering, the Placement Agent acted as the sole placement agent for the Private Placement and the Company has paid customary placement fees to the Placement Agent, including a cash fee equal to 8 % of the gross proceeds raised in the Private Placement and a common stock purchase warrant to purchase shares of Common Stock in an amount equal to 4 % of the Shares and shares of common stock issuable upon exercise of the warrants sold in the Private Placement, which warrant has an exercise price of $ 1.662 per share and is exercisable commencing six months from the date of the pricing of the Private Placement for a period of five years after such date. Pursuant to the Placement Agency Agreement, the Company has also agreed to reimburse certain expenses of the placement agent incurred in connection with the Private Placement. The warrants for the November 17, 2021, private placement for the Placement Agents were issued in the fourth quarter of 2022. F- 32 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Restricted Common Stock On January 1, 2021, 1,200 shares of restricted common stock vested that was originally issued to employees and consultants in May 2017. On February 11, 2021, the Company issued an aggregate of 221,783 shares of restricted common stock of the Company to various executives and an employee. The restricted common stock is fully vested upon the date of grant. On April 4, 2022, the Company authorized the issuance of 20,000 shares of common stock to a member of the executive team per the employment agreement. At December 31, 2022, there was no restricted common stock outstanding. A summary of the activity related to the restricted common stock for the years ended December 31, 2022 and 2021, respectively, is presented below: SCHEDULE OF ACTIVITY RELATED TO RESTRICTED COMMON STOCK Weighted-average grant date Total fair value Outstanding at January 1, 2021 1,200 $ 65.33 Granted 221,783 2.87 Forfeited — — Vested ( 222,983 ) 3.21 Outstanding at December 31, 2021 — — Granted 20,000 0.54 Forfeited — — Vested ( 20,000 ) 0.54 Outstanding at December 31, 2022 — $ — Warrant and Option Valuation The Company has computed the fair value of warrants granted and options accrued for as accrued compensation expense using the Black-Scholes option pricing model. The expected term used for warrants and options issued to non-employees is the contractual life. The Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time, equivalent to the expected term of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued. Options On May 2, 2022, the Company, pursuant to the employment agreements, issued options to purchase an aggregate of 312,500 shares of the Company’s common stock. The options had an exercise price of $ 0.41 per share and vest ratably over 20 quarters with the first vesting occurring on June 30, 2022. On October 10, 2022, the Company issued options to purchase 25,000 shares of the Company’s common stock. The options had an exercise price of $ 0.41 per share and vest ratably over 20 quarters with the first vesting occurring on December 31, 2022. F- 33 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS There were 25,000 shares forfeited upon the departure of an officer. A summary of option activity during the years ended December 31, 2022 and 2021 is presented below: SCHEDULE OF OPTION ACTIVITY Number of Weighted-average Weighted-average remaining options exercise price life (in years) Outstanding, January 1, 2021 300,000 $ 3.33 1.10 Issued — — Exercised — — Forfeited ( 200,000 ) 2.50 Outstanding, December 31, 2021 100,000 $ 5.00 1.92 Issued 337,500 0.41 4.40 Exercised — — Forfeited ( 25,000 ) 0.41 Outstanding, December 31, 2022 412,500 $ 1.52 3.56 Exercisable, December 31, 2022 144,375 $ 3.59 1.98 The Company has estimated the fair value of the options using the Black-Scholes model using the following assumptions: SCHEDULE OF STOCK OPTIONS ASSUMPTIONS For the Year Ended December 31,2022 Risk free interest rate 1.53 - 4.33 % Expected term (years) 5 Expected volatility 59.10 - 156.87 % Expected dividends — Warrants On May 24, 2021, the Company issued 1,465,227 shares of common stock in connection with the exercising of the pre-funded warrant for $ 14,652 . On May 28, 2021, the Company issued 1,400,000 shares of common stock in connection with the exercising of the pre-funded warrant for $ 14,000 . On December 23, 2021, the Company issued 1,210,110 shares of common stock in connection with the exercising of the pre-funded warrant for $ 121 . On January 3, 2022, the Company issued 1,200,000 shares of common stock in connection with the cashless exercise of the pre-funded warrants. Pursuant to the terms of the pre-funded warrants a total of 1,200,215 warrants were exercised. F- 34 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On February 24, 2022, the Company issued 1,209,604 shares of common stock in connection with the cashless exercise of the pre-funded warrants. Pursuant to the terms of the pre-funded warrants a total of 1,210,110 warrants were exercised. On November 29, 2022, the Company issued 438,085 shares of common stock in connection with the exercising of pre-funded warrants for $ 44 . A summary of warrants activity during the years ended December 31, 2022 and 2021 is presented below: SCHEDULE OF WARRANTS ACTIVITY Weighted-average Weighted-average Number of exercise remaining life Warrants price (in years) Outstanding, January 1, 2021 2,582,857 $ 4.08 3.3 Issued 21,869,064 0.46 Exercised ( 4,075,337 ) 0.01 Forfeited ( 92,568 ) 19.99 Outstanding, December 31, 2021 20,284,016 $ 1.66 4.0 Issued 597,819 2.01 Exercised ( 2,848,195 ) 0.01 Forfeited — — Outstanding, December 31, 2022 18,033,640 $ 1.93 3.5 Exercisable, December 31, 2022 18,033,640 $ 1.93 3.5 The grant date fair value of warrants granted during the years ended December 31, 2022 and 2021 was established during the Private Placement. Stock-Based Compensation Expense Stock-based compensation related to restricted stock issued to employees, directors and consultants, warrants and warrants to consultants amounted to $ 140,377 and $ 2,207,046 for the years ended December 31, 2022 and 2021, respectively, of which $ 140,377 and $ 2,200,274 , respectively, was recorded in Sales, general and administrative expenses and $— and $ 6,772 , respectively, was recorded in Labor expense within Restaurant operating expenses. NOTE 18 – SUBSEQUENT EVENTS Common Stock On January 5, 2023, the Company authorized the issuance of an aggregate of 31,308 shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2022. The Company accrued for the liability as of December 31, 2022. Stock Options On February 27, 2023, the Company issued options to purchase an aggregate of 531,072 shares of our common stock. The options had an exercise price of $ 1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023. On March 15, 2023, the Company issued options to purchase 68,928 shares of our common stock. The options had an exercise price of $ 1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023. Appointment of Directors On February 2, 2023, the Board appointed Na Yeon (“Hannah”) Oh and Ray Shankar to the Board of Directors, effective March 1, 2023. F- 35 MUSCLE MAKER, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NASDAQ Notice On January 31, 2023, the Company received a letter from the Listing Qualifications Department (the “Staff”) of The NASDAQ Stock Market LLC (“NASDAQ”) notifying the Company that, based upon the Company’s non-compliance with the requirement to maintain a minimum bid price of $ 1.00 per share for continued listing on NASDAQ as set forth in NASDAQ Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”) as of January 31, 2023, the Company would need to request a hearing to appeal the determination. The Company requested a hearing before a NASDAQ Hearings Panel (the “Panel”) on February 7, 2023. The hearing was scheduled for March 23, 2023. On March 2, 2023, the Company received notice from Nasdaq confirming that the Company has cured its bid price deficiency and has fully regained compliance with the Minimum Bid Price Rule. Authorized Capital Stock The Company’s board of directors and shareholders approved on February 28, 2023 an increase in the authorized capital stock to 150,000,000 shares of common stock, par value of $ 0.0001 . 2023 Equity Incentive Plan The Company’s board of directors and shareholders approved and adopted on February 28, 2023 the 2023 Equity Incentive Plan (“2023 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock Units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2023 Plan, the Company reserved 2,500,000 shares of common stock for issuance. As of the date of the issuance of these Consolidated Financial Statements no shares have been issued and 68,928 option to purchase shares have been awarded under the 2023 Plan. Employment Agreement On March 21, 2023, the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement. Pursuant to the Black Agreement, Ms. Black will continue to be employed as Chief Financial Officer of the Company on an at will basis. During the term of the Black Agreement, Ms. Black is entitled to a base salary at the annualized rate of $ 250,000 . Ms. Black will be eligible for a discretionary performance bonus up to 50 % of her annual salary. Further, Ms. Black will be entitled to an additional bonus of $ 50,000 upon the Company obtaining approval of the Shareholder Matters and $ 25,000 upon the Designated Directors representing a majority of the Board of Directors. If Ms. Black is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Black is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Black will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Black Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Black Agreement will automatically terminate and the prior employment agreement will again be in full effect. F- 36