Business context and reporting period
This is Muscle Maker, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2022—not a filing under the Sadot Group Inc. name in the request metadata. The registrant operated Muscle Maker Grill, Pokemoto and SuperFit Foods, with 19 company-owned locations (including the SuperFit Foods kitchen) and 19 franchised restaurants at quarter-end. The company’s common stock traded as GRIL on Nasdaq.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $2.920 million | $1.328 million |
| Operating loss | $(1.993) million | $(3.700) million |
| Net loss | $(1.886) million | $(3.712) million |
| Loss per share, basic and diluted | $(0.07) | $(0.31) |
| Cash used in operating activities | $(0.930) million | $(1.600) million |
- Revenue grew 120% year over year, primarily reflecting the inclusion of Pokemoto and SuperFit Foods, acquired in 2021, and new company-owned locations.
- Restaurant operating expenses were $3.093 million, exceeding company restaurant sales of $2.694 million. Food and beverage costs were 38.1% of company restaurant sales, labor 39.9%, rent 12.7%, and other restaurant operating expenses 24.3%.
- Cash was $14.771 million at March 31, down from $15.767 million at year-end. Working capital surplus was $13.441 million; accumulated deficit was $73.271 million.
- Total liabilities were $7.329 million. Debt included $997,818 of other notes payable and $182,458 of convertible notes, including the former-parent note. Operating lease liabilities were $2.812 million following adoption of lease accounting in January 2022.
- Investing cash outflow was $34,412 and financing cash outflow was $30,982. Capital expenditures were $34,812. The quarter included a $141,279 gain on debt extinguishment related to PPP loan forgiveness.
Material changes versus the prior comparable period
- Company restaurant sales rose 128.5%, to $2.694 million. Franchise royalties and fees increased 53.8%, to $208,141.
- Management attributed lower operating losses mainly to higher revenue and a $1.640 million reduction in selling, general and administrative expense. The prior-year period included substantially higher consultant, professional-fee and stock-compensation costs.
- Costs increased alongside the larger operating footprint. Depreciation and amortization rose to $475,729 from $169,128, including amortization of acquired intangible assets.
- Loss narrowed by $1.826 million; the improvement included the $141,279 debt-forgiveness gain and should not be read as operating profitability. The company continued to report an operating loss.
- Common shares outstanding increased from 26.110 million at December 31, 2021 to 28.643 million at March 31, 2022, largely following cashless warrant exercises and stock issuances.
Outlook, risks, contingencies and unusual items
- Management said existing cash and expected franchise cash flows should fund operations, anticipated capital expenditures and repayment obligations for the next 12 months. It also warned that additional financing may not be available on acceptable terms and could cause dilution or constrain operations.
- No specific revenue, earnings or margin guidance was provided.
- During the quarter, the company signed franchise agreements for 11 potential new Pokemoto locations and received $205,000, recorded as deferred revenue. One company-owned Pokemoto location opened after quarter-end.
- Nasdaq notified the company that its share price had failed the $1.00 minimum bid requirement; the initial compliance period ran through August 1, 2022. The filing said continued listing was not assured.
- After quarter-end, the company settled a note-holder judgment for $110,000, with $40,000 paid by May 1 and the balance scheduled in seven monthly installments. The filing also reports sales-tax liabilities related to older periods and says the outstanding past-due state and local taxes were paid after quarter-end.
- The company wrote off property and equipment associated with closed or terminated locations, recording a $239,637 loss on disposal. It reported no goodwill or intangible-asset impairment at quarter-end.
- Potential dilution is notable: 17.874 million warrants and 100,000 options were outstanding at March 31; the filing also disclosed convertible debt. Subsequent to quarter-end, 312,500 options were issued at $0.41 per share.
Important facts for investors to verify
- Confirm the issuer identity: this filing is for Muscle Maker, Inc. (GRIL), not Sadot Group Inc.
- Assess whether acquired-brand sales and franchise growth can produce positive operating results, given restaurant-level costs and continuing corporate expenses.
- Track operating cash burn, cash balances, scheduled debt repayments, and management’s 12-month liquidity assessment.
- Check Nasdaq bid-price compliance and the potential effect of warrants, options and other equity issuances on dilution.
- Review the status of the post-quarter settlement, historical sales-tax matters and any other legal or listing contingencies.