Q4 2022 Muscle Maker Inc Earnings Call

Creation of two new directors at $3 3 million and net income.

Two additional new directors at $6 6 million and net income in the final three new directors at $9 9 million of net income generated into Sudan.

The fact that AGA is paid in shares and can nominate board positions. Upon performance reflects <unk> confidence in his abilities to perform as well as its confidence in muscle makers knowledge and management.

More than a consultancy agreement. This is really a joining of forces with a common goal.

Because argue it could all more than 20% of the outstanding shares as well as potential future control. The board of directors. The agreement required that we hold the shareholder meeting to have each of these items approved by our shareholders on February 28, 2023, the shareholders have muscle maker approved the transaction and all accompanying provisions.

We view the formation of <unk> and the agreement with Ikea with the approval of our shareholders as our official launch of our diversification strategy.

Upon execution of our agreement with Avia, we began implementing our new strategy by starting with the agro commodity shipping and trading portion of the food supply chain to.

To be clear, we're not sitting around with the computer trading electronic commodities, instead, we're actually shipping and trading physical commodities, such as corn wheat, and rice, which are loaded onto cargo ships and transported between countries. A typical shipment may contain 25000 to 75000 metric tons with associated revenue Val.

We use that range between 5 million to $40 million per shipment.

First shipment was executed in the second half of November 2022.

From mid November through the end of December basically half of Q4 Sadat with Augie is day to day management generated a $150 million $586000 in revenue.

To put that into perspective, the entire prior year revenue for muscle maker as a whole was 9.321 million.

And then the final six weeks of Q4 alone so not generated $150 million $586000 in revenue.

This $150 million 586000 in revenue generated $4 million $548000 in net income or a 3% profit margin.

By achieving this net income threshold and the execution of the agreement IGN nominated in muscle maker approved. The addition of two new board members, who bring extensive experience in the food supply chain and international business.

I would like to welcome Benjamin Patel, who was originally nominated to the board of directors upon execution of the agreement with Ikea as well as Hana and Ray Schenker to the board of directors.

Benjamin has worked in the global agricultural commodity trading field broker a decade and his experience spans across commodity trading finance M&A and operations.

Donna is an experienced agri food business leader and certified sustainability professional with over 15 Years' experience with Bayer crop science and Monsanto.

Ray brings international legal expertise as a partner in a law firm, where he manages the private wealth and family office practice.

These three new members of our board of directors bring a wealth of knowledge to muscle maker and help elevate the expertise of the new subsidiary subsidiary.

The aggregate commodity shipping business is centered on high revenue lower margin transactions. We believe we can improve on these margins over time by owning and managing sustainable farms. This will allow us to control the sustainability and quality of products at the farm level and enjoyed increased margins from supplying our own products through the supply chain and <unk>.

<unk>, we're in the process of cultivating our banking relationships with international finance years with the goal of developing more elaborate financial instruments, allowing us to conduct different types of transactions by taking possession of the physical commodities for longer periods of time or even owning their own cargo ships. There are many ways to increase margins in this era.

He alone and we believe we have plans to address these areas in the future.

In 2023 through the end of February so that has generated over $100 million in additional revenue.

This brings the total revenue generated since mid November 2022 through February 2023 to over $250 million.

Now that shareholders have approved the transaction. We believe we can begin executing at a faster pace moving forward.

Our next phase with Saddam will be focused on entering farming and sustainable farm management with the goal of increasing margins and controlled commodities at the initial stage as well as enhancing the social environmental and financial value to our company.

As part of our agreement all net income proceeds generated by Sadat will be reinvested in growing and executing against the food supply chain strategy.

Recently by using proceeds from the $4 million $548000 in net income generated in Q4, we placed the deposit on undeveloped farmland in Africa, representing over 27000 acres of future development.

While this transaction is still in negotiation our intent is to either develop this specific land or use a deposit on a more fully developed property, which could potentially generate revenue in 2023 versus farther down the road, while also providing a potential opportunity to improve the profit margins in the core agri commodity shipping business we.

We're excited about the potential of <unk> in our company's advancement in the global food supply chain. We believe our results to date have been very encouraging and we look forward to further building out our supply chain strategy and executing against potentially improving margins.

Now I'd like to turn the call over to our CFO , Jennifer Black to review the financial performance of the company for 2020 to.

Jennifer.

Thanks, Mike and thank you everyone for joining us here today.

Before I begin I would like to note that our financial results on Form 10-K filed with the SEC on March 21, and in our press release that Enbrel.

With that I'd like to give an overview of the financials for 2020.

For the year ended December 31st 2022, our company wide revenue significantly increased and totaled $161 million 690000, compared to 10 nine 350000 for the prior year ending December 31st 2021.

Sanjay and $51.348 million entry is mainly due to the commodity sales revenue generated back Tonight and servicing agreement with Azure.

But arent generated commodity sales revenue of 150 $586000 for the year ended December 31 2020.

The commodity sales revenue was attributable to the formation.

<unk> itself is generating from physical state related commodities.

This $150 million was generated from November 14th 2022, which was the basis everything payment was finalized with Ags <unk>.

For the year.

The restaurant Division generated company restaurants out net of discounts at $10.300 million for the year ended December 31 2022.

Compared to $9.321 million for the year ended December 31 2021.

This represented an increase of $979000 or 11%, which is mainly due to a full year sales for poking at a restaurant into perfect day compared to 2029. When these segments were acquired.

Franchise royalties and fees for the year ended December 31, 2022 and 2021.

$727000 and $778000 respectively.

This represents a decrease of $31000 or 7%.

Franchise fees are recognized the income over the life of the franchise agreement.

If a franchise location closes our franchise agreement is terminated for any reason the remaining deferred revenue will be recognized in full at that time.

In 2021, there are several macro micro grill franchises that closed resulting in higher franchise fees recognized.

Overall, our 2022 lots from operations narrowed it by 1 million 300.

$30000. This is mainly due this July.

However, our results were impacted by onetime expenses in 2022, or one time gains in 2021.

The one time transactions that affected our net income for 2021 and 2020 are solid.

In 2021, we recorded $1 million $920000.

And employee retention retention credits that reduced our labor expenses.

In 2022, we recorded $670000 of amortization expense there were not recorded in 2021 data transitioning as the trademark and muscle maker grill from an infinite life asset to a finite life asset, resulting in an increase in amortization expense.

If you remove the effect of these one time event the company's loss from operations would've improved by $3 million $920000 compared to the $1.330 million that was disclosed.

The most significant change in expenses from prior year as the stock based consulting expense at 3 million 600 in $2000 for the year ended December 31 2022.

The stock based consulting expense as a result of the consulting fees due to aes for <unk> operations.

Just on the service agreement with IBM that consulting fees are calculated at approximately 80% of net income generated by business segment.

This expense is expected to be paid in stock in 2023.

To elaborate a little further on the <unk> segment generated net income of $4 million $548000. However, this net income was offset by the expense of the issuance of shares to Ikea as per the terms of the agreement between the filmmaker and Ags <unk> for the management of <unk>.

<unk> service agreement with that yet.

And smartphone makers' shares at a premium share price.

15625 per share and can earn up to $14 million 424275 shares which is the equivalent to generating $22.538 million and net income instead.

Once we have reached the maximum number of shares they can acquire it consulting fees due to aes will accrue as debt payable by <unk> to Ikea.

As Mike previously mentioned.

We view the agreement with the di and joining forces towards a common goal. Therefore, we clearly see how the extent to Azure is actually an investment towards our future growth.

As of December 31, 2022, we had cash balance of $9 million $898000 and a working capital surplus of $4.033 million.

With that I'd like to turn the call back over to Michael rubber.

Thanks, Jennifer for that financial overview, and kind of Amazes me you go through all the numbers and didn't get tongue twisters.

So that's actually good.

So.

We believe our new diversification strategy. Okay. We will have a significant impact on our company to date. So that has generated over $250 million in revenue and reported net income in the <unk> division in Q4 of $4 million $548000.

Also maker as a food based company simply put as an example, we feed people and our company is evolving our strategy is changing we like to think of muscle maker, Inc, which is our parent company as more of a holding company with multiple operational divisions basically we have the newly created supply chain divisions Sadat.

And then our restaurant division we've spoken about so that now let me walk everyone through an overview of how the restaurant Division has performed.

Our restaurant division to see continued improvements in our key performance metrics as a percentage of company restaurant net sales our revenue is up by $10 five 1% or.

Our labor percent expense after adjusting for the 2021 ERC credits was reduced by $3 eight 5% our rent expense percent reduced by a 197% are other restaurant operating expenses as a percent were reduced by $2, 86% and our food.

Per cost, although they're up slightly increased by three 5%.

However, I actually consider the considering the inflationary pressures on food and paper products in the industry that we face. This year I think we did a pretty good job managing our costs here. So were up slightly in food and paper costs and then finally, our SG&A was reduced by 27.08%. So all of our key performance metrics are improving.

<unk> are basically flat in the inflationary environment, So a pretty good stuff that's happening there not only excited about the potential and performance of Sudan, we remain focused on growing the restaurant Division. Our restaurant Division consists of three brands muscle maker grill restaurants, Super fit foods meal prep and pokey modal Hawaiian poky.

All of our restaurant bands brands focus on healthier for you menu options muscle maker Grill is our legacy brand and has been in business for over 25 years. We currently have 16 locations opened with one new franchise location under construction.

Super fit foods as a meal prep company based in the Jacksonville, Florida market.

Super fit as a subscription based model that focuses on pre made meals.

Yields are pre purchase and assembled in a temperature controlled facility and delivered the branded coolers placed in fitness facilities in 34 pickup locations throughout the Jacksonville market.

We believe the key to our growth and performance in the restaurant Division is directly tied into growing the poky modal brand and leveraging the corporate teams background and growth through franchising we.

We currently have 28 pokey modal locations open and operating today. We also have an additional 50 new franchise agreements that have been sold and not yet open.

In addition to these 50 new franchise agreements were also excited to be working on several combo stores, where we will operate both a muscle maker grill restaurant and a pokey modal restaurant in the same location under the same roof, leveraging the existing infrastructure and reducing overall costs, while offering a wide variety of options to our consumers are firm.

To test locations will be in Chelsea, New York and Fort Sill in Lawton, Oklahoma, our strategy is to become the largest Hawaiian poking chain in the industry through our franchising model and strategic placement of corporate owned locations.

Multi modal franchise locations generate initial franchise fees of up to $25000 per location upon signing the franchise agreement and then additional franchise royalty fee revenue of up to 6% of franchisee net sales each month once they are opened.

Typical franchise agreement is 10 years with one five year renewal option.

Some additional highlights I'd like to point out is poky Modo has now opened are coming soon in 16 States. These states include Connecticut, Rhode Island, Texas, Florida, New York, Massachusetts, Tennessee, South Carolina, Virginia, Mississippi, Kansas.

New Jersey, Maryland, California, Oklahoma and Pennsylvania.

It's going to be easier to say, where we're not and then where we are at <unk>.

Okay modal franchises are now available to be sold in all states aside from Hawaii and 2022, we added, California, Illinois, Indiana, Maryland, Minnesota, North Dakota, South Dakota, Virginia, and Washington, We are also able to sell in the district of Columbia and printer Rico.

We expanded the Super pit food's pickup locations to get up to 30 for pickup locations. We launched our fully refrigerated production facility at Super pit foods, we rolled out multiple menu items across pokey, Moto, including lobsters seafood salad is a new protein option, which actually provides for a lower food cost option and boba teas.

To enhance our dessert and beverage options.

We created a new interior design package for pokey modal focusing on our Hawaiian theme, we expanded our franchise sales team and we completed the full transition of the accounting and finance teams moving offices and personnel to the new location near Fort Worth, Texas and.

And finally, we integrated the muscle maker grill meal plan menu into the Super fit foods meal plan menu expanding consumer choices, so a lot of things happening throughout the year.

Our restaurant division is growing through our <unk> motor franchising efforts and I'm proud of the team and what they've accomplished so far I look forward to continuing to focus on pokey modal franchising and what the team can do in 2023.

To conclude I think we've done a great job executing on our diversified growth strategy and look forward to what the future brings we believe the messaging around our new strategy and evolution of muscle maker into the global food supply chain is just now being received we've hired investor relations companies to assist in getting this messaging out to the masses.

I look forward to building new relationships from these efforts.

I want to thank our shareholders and stakeholders for their support of the company and our initiatives.

Finally, I want to thank our employees for all they do.

Got an incredible team here, who deserve credit for our success and will be proud to be part of what we have built here.

Frank.

Thank you, ladies and gentlemen for joining us today that we will conclude managements prepared comments on today's call if.

If you have any comments or questions. Please direct them to us through the company's new IR website at www Dot IR dot muscle maker grill, dot com or reach out to us via phone or email.