Business Context and Reporting Period
Company: Muscle Maker, Inc. (Note: Request metadata listed "Sadot Group Inc.", but the filing text identifies the issuer as Muscle Maker, Inc.)
Filing Type: Form 8-K (Current Report)
Date of Report: May 21, 2019
Reporting Period: Events occurring from September 12, 2018, through May 23, 2019.
Status: Emerging Growth Company.
Key Financial Metrics and Capital Structure
This filing details unregistered sales of equity securities and the creation of direct financial obligations rather than standard operating performance metrics.
- Debt Obligations (September 2018 Notes): Aggregate principal amount of $2,410,000 issued to accredited investors. This includes $635,000 converted from prior notes and two additional closings of $1,000,000 each.
- Recent Funding: An additional $688,000 received from September 2018 Investors between May 21, 2019, and May 23, 2019.
- Debt Obligations (April 2019 Notes): The company is obligated on $5,098,000 in face amount of notes issued to April 2019 Investors.
- Interest Rate: September 2018 Notes bear interest at 15% per annum, paid quarterly.
- Maturity: September 2018 Notes mature 18 months from issuance.
- Warrants Issued: Investors received warrants to purchase 2,549,000 shares of common stock at an exercise price of $1.20, exercisable for five years.
Revenue, profit, cash flow, and margin data are not provided in this filing text.
Material Changes and Agreements
The filing reports the entry into material definitive agreements and amendments regarding the September 2018 Offering:
- Conversion Price Amendment: On April 11, 2019, the conversion price for the September 2018 Notes was amended. It is now set at 25.0% of the per share offering price in a future public offering. If the holder signs a Lock-Up Agreement, the conversion price reduces to 17.5% of the offering price.
- Board Composition: Until the company lists on a national exchange, Catalytic Capital LLC holds the right to designate one board member and one observer.
- Consulting Requirements: The company must engage Insight Advisory for business and financial advice and an investor relations firm mutually agreed upon with Catalytic Capital LLC for six months post-listing.
- Registration Rights: Investors were granted piggy-back registration rights for shares underlying the notes and warrants.
Outlook, Risks, and Contingencies
- Listing Contingency: Several terms, including board observer rights and specific conversion price adjustments, are contingent upon the company listing on a national exchange.
- Lock-Up Provisions: The conversion price and warrant share adjustments are subject to whether investors are required to sign Lock-Up Agreements during a public offering.
- Exemption Claim: The company claims an exemption from registration requirements under Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D.
- Financial Obligations: The April 2019 Notes constitute a direct financial obligation arising outside the ordinary course of business.
Investor Verification Checklist
- Verify the total outstanding debt load, specifically the $5,098,000 in April 2019 Notes and the $2,410,000+ in September 2018 Notes.
- Confirm the company's progress toward listing on a national exchange, as this triggers specific governance and conversion terms.
- Review the full text of the Securities Purchase Agreements (Exhibits 4.1 and 4.2) for complete terms regarding the 15% interest rate and maturity dates.
- Assess the dilution impact of the 2,549,000 warrants and the potential conversion of notes at 17.5% to 25.0% of a future offering price.
- Check for any subsequent filings regarding the engagement of the required investor relations firm and Insight Advisory.