UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): April 11, 2019
Commission File Number 000-55918
MUSCLE MAKER, INC.
(Exact name of small business issuer as specified in its charter)
| California | 47-2555533 | |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
308 East Renfro Street, Suite 101, Burleson, Texas 76028
(Address of principal executive offices)
732-669-1200
(Issuer’s telephone number)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [X]
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. [ ]
On April 16, 2019, Muscle Maker, Inc. (the “Company”) and its newly formed wholly owned subsidiary, Muscle Maker USA, Inc., a Texas corporation (“Muscle USA”), entered into Securities Purchase Agreements with several accredited April 2019 Investors (the “April 2019 Investors”) providing for the sale by the Company to the April 2019 Investors of 12% Secured Convertible Promissory April 2019 Notes in the aggregate amount of $3,000,000 (the “April 2019 Notes”).
In addition to the April 2019 Notes, the April 2019 Investors also received Warrants to Purchase Common Stock of the Company (the “Warrants”) to acquire an amount of shares of common stock of the Company equal to 50% of the shares of common stock issuable upon conversion of the April 2019 Notes. The Warrants are exercisable for five years at an exercise price equal to 115% of the April 2019 Conversion Price (as defined below).
The April 2019 Notes bear interest at 12% per annum paid quarterly and mature 18 months from issuance. The April 2019 Investors may elect to convert all or part of the April 2019 Notes, plus accrued interest, at any time into shares of common stock of the Company at a conversion price of $2.00 per share (the “April 2019 Conversion Price”); provided, however, in the event the per share price of a public offering multiplied by fifty percent (50%) at the time of the Company listing on a national exchange (the “Discounted Public Offering Price”) is less than $2.00 then the April 2019 Conversion Price shall be reset to equal the lesser of (i) Discounted Public Offering Price or (ii) a price per share equal to a $20 million valuation.
As long as the April 2019 Notes remain outstanding, the Company has agreed that, among other items, it will only use proceeds from the sale of the April 2019 Notes and exercise of the Warrants for specific corporate purposes as set forth in the Securities Purchase Agreement, will not incur or permit indebtedness or liens unless permitted and will not enter into variable priced transactions. The Company, Muscle USA and the April 2019 Investors entered into Security and Pledge Agreements providing that the obligations to the April 2019 Investors are secured by substantially all of Muscle USA’s assets.
The Company granted the April 2019 Investors piggy back registration rights with respect to the shares of common stock underlying the April 2019 Notes and the Warrants.
The Company claims an exemption from the registration requirements of the Securities Act of 1933 (the “Securities Act”) for the private placement of these securities pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act. The April 2019 Investors are accredited investors as defined in Rule 501 of Regulation D promulgated under the Securities Act. As of the date hereof, the Company is obligated on $3,000,000 in face amount of April 2019 Notes issued to the April 2019 Investors. The April 2019 Notes are a debt obligation arising other than in the ordinary course of business which constitute a direct financial obligation of the Company.
On April 11, 2019, the Company and the investors that participated in its September 2018 Offering entered into an amendment pursuant to which the conversion price of the 15% Senior Secured Convertible Promissory Notes was amended to equal 25.0% of the per share offering price paid by investors in the public offering in conjunction with an uplisting to a national exchange. However, in the event the holder is required to sign a Lock-Up Agreement as part of the public offering in conjunction with an uplisting to a national exchange, then the conversion price shall be 17.5% of the per share offering price paid by investors in the public offering in conjunction with an uplisting to a national exchange.
The foregoing information is a summary of each of the agreements involved in the transactions described above, is not complete, and is qualified in its entirety by reference to the full text of those agreements, each of which is attached an exhibit to this Current Report on Form 8-K. Readers should review those agreements for a complete understanding of the terms and conditions associated with this transaction.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MUSCLE MAKER, INC. | ||
| By: | /s/ Michael Roper | |
| Name: | Michael Roper | |
| Title: | Chief Executive Officer | |
Date: April 17, 2019
FIRST AMENDMENT TO 15% SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
This Amendment, dated as of April 10, 2019 (this “Amendment”), made and entered into by and between Muscle Maker, Inc., a California corporation (the “Company”), the holders (the “Holders”) of the Notes (as defined below) and Catalytic Holdings 1 LLC, as agent of the Holders (the “Agent”).
WHEREAS , the Company issued the 15% Senior Secured Convertible Promissory Note (the “Note”) to the Holders;
WHEREAS , the Company, the Holders and the Agent have determined that it is necessary, desirable and in the best interest of the Company and the Holder to amend the Note as set forth in this Amendment; and
NOW THEREFORE , in consideration of the foregoing and the representations, warranties, covenants and agreements herein contained, the Company and the Holder hereby agree as follows:
1. Definitions. Capitalized terms used and not defined in this Amendment shall have the respective meanings assigned to them in the Note.
2. Effective Date. This Amendment is effective as of the date hereof (the “Effective Date”), and all references to the Note from and after such time will be deemed to be references to the Note as amended hereby.
3. Amendments to the Note:
Section 4.3 of the Note shall be deleted and replaced with the following
4.3 Conversion Price .
The “Conversion Price” is the price equal to a 25.0% of the per share offering price paid by investors in the public offering in conjunction with a Listing Event (the “Discounted Offering Price”). However, in the event the Holder is required to sign a Lock-Up Agreement as contemplated as part of Section 4(s) of the Agreement as part of the public offering in conjunction with a Listing Event, then the Discounted Offering Price shall be 17.5% of the per share offering price paid by investors in the public offering in conjunction with a Listing Event.
4. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the choice of law principles thereof. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Amendment and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Amendment. Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AMENDMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
5. This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. A signature to this Amendment transmitted electronically shall have the same authority, effect, and enforceability as an original signature.
6. If any term, provision, covenant or restriction of this Amendment or applicable to this Amendment is held by a court of competent jurisdiction or other authority to be invalid, null and void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
[ Signature Page to Follow ]
IN WITNESS WHEREOF, the Holder and the Company have caused this Amendment to the Note to be duly executed as of the date first above written.
| MUSCLE MAKER, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| CATALYTIC HOLDINGS 1 LLC | ||
| By: | ||
| Name: | ||
| Title: | ||