Business Context and Reporting Period
This Form 8-K was filed by Muscle Maker, Inc. (trading symbol: GRIL) on July 14, 2023. The report details amendments to a Services Agreement involving the Company's wholly-owned subsidiary, Sadot LLC, and Aggia LLC FZ. The Company is an emerging growth company incorporated in Nevada.
Key Financial Metrics and Agreements
The filing does not provide standard financial metrics such as revenue, profit, cash flow, or debt levels for the reporting period. Instead, it outlines specific terms of a material definitive agreement:
- Equity Issuance: The Company issued 8,855,452 shares of common stock to Aggia LLC FZ on July 14, 2023.
- Total Entitlement: Aggia is entitled to a total of 14,424,275 shares, representing approximately 49.999% of the issued and outstanding shares as of the effective date of the original Services Agreement.
- Vesting Schedule: Shares vest based on Sadot's net income. The rate is calculated as quarterly net income divided by $3.125 (accounting for 40% of net income divided by $1.25).
- Repurchase Terms: Unvested shares may be purchased by Aggia within 30 days after July 14, 2028. Any remaining unvested or unpurchased shares will be repurchased by the Company at $0.001 per share.
- Future Debt Obligation: Following the Share Repurchase Date, 40% of Sadot's quarterly net income will accrue as debt payable to Aggia, capped at a maximum of $71,520,462.
Material Changes Versus Prior Period
The primary material change is the execution of Addendum 2 to the Services Agreement, effective April 1, 2023, which amended the compensation structure for Aggia. Additionally, the Lock Up Agreement dated November 16, 2022, is scheduled to terminate on May 16, 2024, though restrictions on transferring unvested shares remain in place.
Guidance, Risks, and Contingencies
Management Commentary and Risks:
- Unregistered Securities: The shares were issued under Section 4(a)(2) and/or Rule 506 of Regulation D exemptions. They are not registered under the Securities Act and cannot be offered or sold in the U.S. without registration or an applicable exemption.
- Future Liability: The Company faces a potential future debt obligation of up to $71,520,462 contingent on Sadot generating net income after July 14, 2028.
- Transfer Restrictions: Unvested shares cannot be transferred, sold, or pledged until vested or purchased by Aggia.
Unusual Items: The vesting mechanism is directly tied to the subsidiary's net income rather than a time-based schedule, creating a variable equity dilution scenario.
Investor Verification Checklist
- Verify the exact number of outstanding shares as of the effective date to confirm the 49.999% ownership cap calculation.
- Review the financial performance of Sadot LLC to assess the likelihood of share vesting and the potential accrual of the $71.5 million debt cap.
- Confirm the status of the Lock Up Agreement termination on May 16, 2024, and any remaining transfer restrictions.
- Examine the full text of Addendum 2 (Exhibit 10.1) for additional covenants or conditions not summarized in the 8-K.