UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-39223

MUSCLE MAKER, INC.

(Exact name of registrant as specified in its charter)

Nevada

47-2555533

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

2600 South Shore Blvd., Suite 300,

League City, Texas

77573

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (682)-708-8250

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, $0.0001 par value per share		GRIL		The NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☒

Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes ☐ No ☒

The number of shares if the Registrant’s common stock, $0.0001 par value per share, outstanding as of November 15, 2021, was 17,812,293.

MUSCLE MAKER, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

		Page

PART 1 – FINANCIAL INFORMATION

ITEM 1. Financial Statements.

	Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	1

	Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020	2

	Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Deficit for the Nine Months Ended September 30, 2020	3

	Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2021	4

	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	5

	Notes to Unaudited Condensed Consolidated Financial Statements	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	25

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk.	39

ITEM 4.	Controls and Procedures.	39

PART II - OTHER INFORMATION

ITEM 1.	Legal Proceedings.	40

ITEM 1A.	Risk Factors.	41

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	42

ITEM 3.	Defaults Upon Senior Securities.	42

ITEM 4.	Mine Safety Disclosures.	42

ITEM 5.	Other Information.	42

ITEM 6.	Exhibits.	43

SIGNATURES		44

MUSCLE MAKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2021			December 31, 2020

Assets
Current Assets:
Cash	$	3,616,845		$	4,195,932
Accounts receivable, net of allowance for doubtful accounts of $75,000 as of September 30, 2021 and December 31, 2020, respectively		345,518			140,305
Inventory		178,344			113,824
Current portion of loans receivable, net of allowance of $61,275 and $106,900 at September 30, 2021 and December 31, 2020, respectively		8,209			2,394
Prepaid expenses and other current assets		1,068,732			40,903
Total Current Assets		5,217,648			4,493,358
Property and equipment, net		2,488,665			2,342,723
Goodwill		2,661,564			656,348
Intangible assets, net		7,765,252			2,878,278
Loans receivable, non-current		-			996
Security deposits and other assets		229,799			131,916
Total Assets	$	18,362,928		$	10,503,619

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable and accrued expenses	$	1,978,933		$	1,500,935
Convertible notes payable to Former Parent		82,458			82,458
Convertible notes payable		100,000			100,000
Other notes payable, current		186,037			701,552
Deferred revenue, current		44,437			62,858
Deferred rent, current		21,117			20,569
Other current liabilities		674,651			641,418
Total Current Liabilities		3,087,633			3,109,790
Other notes payable, non-current		1,167,267			575,140
Deferred revenue, non-current		845,763			944,271
Deferred rent, non-current		96,903			79,290
Total Liabilities		5,197,566			4,708,491

Commitments and Contingencies		-

Stockholders’ Equity:
Common stock, $0.0001 par value, 50,000,000 shares authorized, 17,726,383 and 11,725,764 shares issued and outstanding as of September 30, 2021, and December 31, 2020, respectively		1,773			1,172
Additional paid-in capital		81,623,811			68,987,663
Accumulated deficit		(68,460,222	)		(63,193,707	)
Total Stockholders’ Equity		13,165,362			5,795,128
Total Liabilities and Stockholders’ Equity	$	18,362,928		$	10,503,619

See Notes to the Unaudited Condensed Consolidated Financial Statements

MUSCLE MAKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	2021			2020			2021			2020
	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020

Revenues:
Company restaurant sales, net of discounts	$	2,976,255		$	887,922		$	6,720,030		$	2,785,288
Franchise royalties and fees		373,180			251,491			629,643			569,815
Franchise advertising fund contributions		670			13,132			19,499			45,587
Total Revenues		3,350,105			1,152,545			7,369,172			3,400,690

Operating Costs and Expenses:
Restaurant operating expenses:
Food and beverage costs		1,165,607			346,808			2,542,333			1,067,831
Labor		1,230,776			420,804			2,901,613			1,350,247
Rent		343,637			184,309			904,758			468,590
Other restaurant operating expenses		713,224			286,689			1,705,397			719,601
Total restaurant operating expenses		3,453,244			1,238,610			8,054,101			3,606,269
Preopening expenses		11,393			-			22,379			46,764
Depreciation and amortization		384,673			80,113			838,447			288,615
Impairment of intangible asset		-			100,000			-			100,000
Franchise advertising fund expenses		670			13,132			19,499			45,587
General and administrative expenses		1,136,424			457,282			6,098,379			6,800,536
Total Costs and Expenses		4,986,404			1,889,137			15,032,805			10,887,771
Loss from Operations		(1,636,299	)		(736,592	)		(7,663,633	)		(7,487,081	)

Other Income (Expense):
Other (expense) income, net		1,006,152			(5,360	)		1,232,461			(18,908	)
Interest expense, net		(2,483	)		(20,128	)		(38,817	)		(114,861	)
Change in fair value of accrued compensation		-			100,000			127,500			4,000
Gain on debt extinguishment		200,000			-			1,075,974			-
Amortization of debt discounts		-			-			-			(38,918	)
Total Other Income (Expense), Net		1,203,669			74,512			2,397,118			(168,687	)

Loss Before Income Tax		(432,630	)		(662,080	)		(5,266,515	)		(7,655,768	)
Income tax provision		-			-			-			-
Net Loss	$	(432,630	)	$	(662,080	)	$	(5,266,515	)	$	(7,655,768	)

Net Loss Per Share:
Basic and diluted	$	(0.02	)	$	(0.09	)	$	(0.35	)	$	(1.06	)

Weighted Average Number of Common Shares Outstanding:
Basic and diluted		17,704,445			7,633,347			14,991,168			7,217,767

See Notes to the Unaudited Condensed Consolidated Financial Statements

MUSCLE MAKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

	Shares		Amount		Capital		Deficit			Total
					Additional
	Common Stock				Paid-in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance - December 31, 2019		5,714,464	$	571	$	53,339,793	$	(53,094,602	)	$	245,762
Issuance of restricted stock		1,226		-		-
Common stock issued upon offering on February 12, 2020, net of underwriter’s discount and offering costs of $920,000		1,540,000		154		6,779,846		-			6,780,000
Restricted stock issued as compensation to executive team upon completion of the initial public offering		216,783		22		1,083,893		-			1,083,915
Common stock issued as compensation to board of directors		25,616		3		128,077		-			128,080
Stock-based compensation
Restricted common stock		-		-		20,148		-			20,148
Warrant		-		-		191,000		-			191,000
Common stock issued as compensation for services
Common stock issued as compensation for services, shares
Common stock issued in exchange for accrued interest
Common stock issued in exchange for accrued interest, shares
Restricted common stock cancelled by executive team
Restricted common stock cancelled by executive team, shares
Common stock cancelled by consultant issued for prior services
Common stock cancelled by consultant issued for prior services, shares
Common stock issued as compensation for services as per settlement
Common stock issued as compensation for services as per settlement, shares
Warrant expense – Reclassed to accrued compensation for future options
Offering on September 10, 2020, net of underwriter’s discount and offering cost of $660,000
Offering on September 10, 2020, net of underwriter’s discount and offering cost of $660,000, shares
Restricted common stock issued as compensation to executives and employees
Restricted common stock issued as compensation to executives and employees, shares
Common stock, pre-funded warrants and warrant issued in private placement on April 7, 2021, net of fees $790,000
Common stock, pre-funded warrants and warrant issued in private placement on April 7, 2021, net of fees $790,000, shares
Exercise of pre-funding warrants
Exercise of pre-funding warrants, shares
Cancellation of share per agreement with shareholder
Cancellation of share per agreement with shareholder, shares
Common stock issued to investor
Common stock issued to investor, shares
Common stock issued as part of the acquisition
Common stock issued as part of the acquisition, shares
Net loss		-		-		-		(5,492,263	)		(5,492,263	)

Balance - March 31, 2020		7,883,089	$	789	$	63,467,718	$	(58,586,865	)	$	4,881,642
Common stock issued as compensation for services		20,000		2

SEC Form 10-Q filed by Muscle Maker, Inc