UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the year ended December 31, 2024
OR
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| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 001-39223
Sadot Group Inc.
(Exact name of registrant as specified in its charter)
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| Nevada | | 47-2555533 |
| (State or other jurisdiction | | (I.R.S. Employer |
| of incorporation) | | Identification No.) |
295 E Renfro St., Suite 209,
Burleson, Texas 76028
(Address of principal executive offices)
Registrant’s telephone number, including area code: (832) 604-9568
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
| Common Stock, $0.0001 par value | | SDOT | | The NASDAQ Capital Market |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):
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| Large accelerated filer | o | | Accelerated filer | o |
| Non-accelerated filer | o | (Do not check if a smaller reporting company) | Smaller reporting company | x |
| 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. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the Registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the Registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
As of June 30, 2024, the last business day of the Registrant’s most recently completed second fiscal quarter, the market value of our common stock held by non-affiliates was $14,791,574.
The number of shares of the Registrant’s common stock, $0.0001 par value per share, outstanding as of March 11, 2025, was 5,865,476.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Sadot Group Inc.
Annual Report on Form 10-K
Fiscal Year Ended December 31, 2024
PART I
Forward-Looking Statements
This Annual Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Annual Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “forecast,” “model,” “proposal,” “should,” “may,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control that may influence the accuracy of the statements and the projections upon which the statements are based. Factors which may affect our results include, but are not limited to, the risks and uncertainties discussed in Item 1A of this Annual Report under “Risk Factors” and Item 7 of this Annual Report under “Management’s Discussion and Analysis of Financial Condition and Result of Operations”.
Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.
This Annual Report also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. In addition, projections, assumptions and estimates of our future performance and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk.
Item 1. Business
Our Business Overview
Sadot Group Inc. ("Sadot Group" or "SGI" or together with its subsidiaries, the “Company” or "Sadot"), a Nevada corporation was incorporated in Nevada on October 25, 2019. The principal corporate office of Sadot Group is located at 295 E Renfro St., Suite 209, Burleson, Texas, 76028, and the telephone number at that location is (832) 604-9568. Our website address is www.sadotgroupinc.com.
Sadot Group together with its subsidiaries, is referred to in this Form 10-K annual report (“Form 10-K”) as the Company. The terms “we”, “us” and “our” are also used in the Form 10-K to refer to the Company. Throughout the Form 10-K, the terms “restaurants”, “stores”, “eatery” and “locations” are used interchangeably. While Sadot Group as the parent Company, does not directly own or operate any restaurants throughout this document we may refer to restaurants that were owned or operated by our subsidiaries as being Company-owned. Sadot Group is our parent company.
In late 2022, Sadot Group transformed from a U.S.-centric restaurant business into a global organization focused on the Agri-Foods supply-chain. Effective July 27, 2023, we changed our company name from Muscle Maker, Inc., to Sadot Group Inc. Sadot Group is headquartered in Burleson, Texas with subsidiary operations throughout the United States, Brazil, Canada, Colombia, India, Israel, Singapore, Ukraine, United Arab Emirates and Zambia.
As of December 31, 2024, Sadot Group consisted of one distinct operating unit and one discontinued operations.
1.Sadot LLC (“Sadot Agri-Foods”): Sadot Group’s largest operating unit is a global Agri-Foods company engaged in farming, commodity trading and shipping of food and feed (e.g., soybean meal, wheat and corn) via dry bulk cargo ships across the globe. Sadot Agri-Foods competes with the ABCD commodity companies (ADM, Bunge, Cargill, Louis-Dreyfus) as well as many regional organizations. Sadot Agri-Foods operates, through a majority owned subsidiary, a roughly 5,000 acre crop producing farm in Zambia with a focus on major commodities such as wheat, soy and corn alongside high-value tree crops such as avocado and mango. In addition, the Company has a deposit on farmland in Indonesia. Sadot Agri-Foods was formed as part of the Company’s diversification strategy to own and operate, through its subsidiaries, the business lines throughout the food supply chain. Sadot Agri-Foods seeks to diversify over time into a sustainable and forward-looking global Agri-Foods company.
2.Sadot Restaurant Group, LLC ("Sadot Food Services"): had three unique “healthier for you” concepts, including two fast casual restaurant concepts, Pokémoto and Muscle Maker Grill, During 2024, the Company operated a subscription-based fresh prep meal concept, SuperFit Foods, which was sold in August 2024. Throughout 2024 the remaining corporate owned restaurants were sold and converted into franchise locations or closed. As of the end of 2024 the Company only operates as the franchisor for Pokémoto and Muscle Maker Grill restaurants. The restaurants were founded on the belief of taking every-day menu options and converting them into “healthier for you” menu choices with the goal of satisfying consumers demand for healthier choices, customization, flavor and convenience. This entire operating segment was identified as held for sale and reported as discontinued operations. Please see Note 3 – Assets held for sale and Note 4 – Discontinued operations for further details.
On October 9, 2024, the Company filed a Certificate of Change Pursuant to NRS 78.209 with the Nevada Secretary of State to affect a reverse stock split of the Company's common stock at a ratio of one for- ten (the "Reverse Stock Split"), which became effective 12:01 am eastern on October 18, 2024. As a result of the Reverse Stock Split, every 10 shares of the Company's common Stock issued and outstanding on the effective date were consolidated into one issued and outstanding share. All stockholders where were entitled to receive fractional share interest. There was no change in the par value of the Company's common stock.
Our Industry
Sadot Agri-Foods:
Sadot LLC, through its subsidiaries, Sadot Latam, Sadot Brazil, Sadot Canada, Sadot Dubai and Sadot Enterprises (Zambia Farm), operates to enhance global food security by establishing an integrated supply-chain within the international Agri-food commodity industry that includes shipping, sourcing, farming and production. Our current primary focus is on farming, trading and shipping food and feed commodity items such as soy meal, corn and wheat between countries via containers or cargo ships. These shipments enhance global food security by providing raw materials and ingredients to various food manufacturers as part of the overall food supply chain.
Sadot Latam LLC ("Sadot Latam"): In May 2023, the Company expanded its Sadot Agri-Foods subsidiary within the agri-commodity sourcing and trading operations into North, Central and South America. The expansion was facilitated by a 5 year consulting agreement signed on June 14, 2023, providing for an annual consulting fee of $0.5 million per year and potential profit sharing calculated on a quarterly basis, between Sadot Agri-Foods’ operations and Buenaventura Trading LLC (“Buenaventura”) based in Miami FL. Buenaventura, led by Fausto Plaza, seasoned trade and finance professional, and a team of experienced trading consultants with backgrounds from several of the largest international food supply chain organizations, provides exposure to new trade routes throughout the Americas. The Buenaventura agreement was updated on December 20, 2024, providing a new annual consulting fee of $0.9 million per year and removing the profit sharing arrangement.
Sadot Enterprises Limited Ltd ("Sadot Enterprises": Sadot Farm Operations ("Sadot Zambia" is 100% owned by Sadot Enterprises Limited, which is 70% owned by Sadot LLC) includes approximately 5,000 acres of farmland in the Mkushi Region of Zambia which was acquired in August of 2023. Farm operations are focused on the supply of grains (soy, corn and wheat) as well as tree crops (mango and avocado).
Sadot Brasil Ltda ("Sadot Brazil"): In December 2023 Sadot Agri-Foods onboarded a team of seasoned industry professionals in Brazil to form Sadot Brazil. The Brazilian subsidiary is managed by Paulo de Sa and Flavio de Campos, two well-known industry veterans, who've gathered a team of professionals in commodity farming, sourcing, financing, and logistics, to operate the Brazilian operations. Sadot Brazil provides access to new trade routes originating in North, Central, and South America with destinations to various markets in Central and South America, as well as considerably enhancing its sourcing capabilities in one of the most important agricultural production regions worldwide.
Sadot Canada Inc ("Sadot Canada"): In July and August 2024 the Company expanded its Sadot Agri-Foods operations with the expansion into Canada. This entity is focused on commodity trading in Canada.
Sadot Agri FZCO (“Sadot Dubai”): In September 2024 the Company expanded its Sadot Agri-Foods operation with the expansion into United Arab Emirates. This entity was established to expand our banking and financing opportunities and for agri-food sourcing and transition our Black Sea trading operations from Sadot LLC to Sadot Dubai. Sadot Dubai will focus on trades in Black Sea and European based originations with Southeast Asian & China destinations.
Sadot Food Service:
Over the past year, the Company converted all its corporately owned and operated locations into franchise owned locations or closed underperforming locations. This strategy helped position the division to potentially divest the restaurants allowing the Company to focus on its international Agri-Foods supply chain business segments. The division sold SuperFit Foods in August 2024 and currently only operates as the franchisor for Muscle Maker Grill and Pokémoto restaurants which are identified as Assets held for sale.
Our Strategy
With the substantial pivot in the company’s strategy over the past two years, the Company will be focusing its growth on the international Agri-Foods supply-chain, including farming, commodity trade and shipping operations and is actively selling its legacy restaurant business. Our goal is to continue enhancing the Sadot Group Inc. global operations by creating a comprehensive, global Agri-Foods company that encompasses farming, agricultural commodity shipping and trading, distribution and production.
Our Strengths
Sadot Agri-Foods
Sadot LLC (“Sadot Agri-Foods”): Sadot Group’s largest operating unit is a global Agri-Foods company engaged in farming, commodity trading and shipping of food and feed (e.g., soybean meal, wheat and corn) via dry bulk cargo ships across the globe. Sadot Agri-Foods competes with companies such as the ABCD commodity companies (ADM, Bunge, Cargill, Louis-Dreyfus) as well as many regional organizations. The environment in which Sadot operates is populated with large, multi-layered, and cumbersome companies. The Sadot Group is an efficient and agile operation, with the ability to take advantage of arising opportunities in a constantly growing and evolving industry.
Over the past two years, The Company has assembled a team of industry professionals to manage and execute the Company’s overall strategy and day-to-day operations. The teams consist of industry experts, with decades of experience working for multinational companies, bringing their reputation, industry know-how and work practices to the group. These professionals who are in charge of devising and implementing the Company’s strategy while overseeing the day-to-day operations, are all highly experienced, well-versed and recognized in the Agri-food commodity supply-chain industry. This experience enables Sadot to gain recognition amongst the Company's operational and financial counterparts. The Company is actively establishing its presence in strategically important production, financial and operational regions throughout the world.
In addition, over the past two years, the Company has established a global footprint in key financial and operational international locations, positioning itself to take advantage of the various geographies’ benefits. These separate and distinct locations enables the Company to diversify operations and avoid dependence on any single market. Each of the Company’s subsidiaries is led by a seasoned professional that has devised a specific strategy tailored to their location while our Executive team oversees the implementation into the overall Company vision.
Operating in a global industry prone to many market volatility factors, the Company’s diversification strategy is key to our entire operation. Diversifying geographically, financially and across products allows the Company to hedge operations and potentially increase profit margins over time.
As a growing company, we have the benefit of being agile and asset-light, with a goal of being well positioned to seize time-sensitive opportunities and strategically invest in certain geographies, commodities and assets based on a forward-looking market understanding.
As part of our Agri-commodities operations, the Company is currently investing in forward-looking products such as carbon credits. This will allow us to offer lower carbon or carbon neutral products in the future, as well as offsetting our own carbon emissions. This rapidly growing market segment is becoming an essential component of global supply-chains and Sadot is already engaged in this market.
Our Intellectual Property
We have registered Sadot®, Pokémoto®, Muscle Maker Grill® and other certain names used by our restaurants as trademarks or service marks with the United States Patent and Trademark Office and Muscle Maker Grill® in one foreign country. Our brand campaign, Great Food with Your Health in Mind™ and Get in the Aloha State of Mind™ have also been approved for registration with the United States Patent and Trademark Office. In addition, the Sadot, Muscle Maker Grill and Pokémoto logos, recipes, website name and addresses (www.sadotgroupinc.com, www.musclemakergrill.com and www.pokemoto.com) and Facebook, Instagram, Linkedin, Twitter and other social media and internet accounts are our intellectual property as well as Muscle Maker Grill and Pokémoto recipes and trade dress. We maintain the recipe for our healthy inspired recipes, as well as certain proprietary standards, specifications and operating procedures, as trade secrets or confidential proprietary information.
Our Competition
Sadot Agri-Foods
Sadot Agri-Foods operates in the global agri-food industry. We have significant competition in the markets in which we operate based principally on price, foreign exchange rates, quality, global supply and alternative products. Given the commodity-based nature of our business, Sadot, on an ongoing basis, expects to focus on managing unit costs and improving efficiency through technology improvements and productivity enhancements. We also compete with local farming operations within the countries we own farmland.
Our Corporate Structure
Overview: Sadot Group Inc. serves as a holding company of the following subsidiaries:
•Sadot Restaurant Group LLC, a directly wholly owned subsidiary, with was formed in Nevada on December 13, 2023 which holds the below subsidiaries:
•Muscle Maker Development, LLC, a directly wholly owned subsidiary, which was formed in Nevada on July 18, 2019, for the purpose of running our existing franchise operations and continuing to franchise the Muscle Maker Grill name and business system to qualified franchisees.
•Muscle Maker Corp. LLC, a directly wholly owned subsidiary, which was formed in Nevada on July 18, 2019, for the purposes operating corporate restaurants which currently have been closed or converted to franchise owned locations.
•Muscle Maker USA, Inc., a directly wholly owned subsidiary, which was formed in Texas on March 14, 2019, for the purposes operating corporate restaurants which currently have been closed or converted to franchise owned locations.
•Muscle Maker Development International. LLC, a directly wholly owned subsidiary, which was formed in Nevada on November 13, 2020, to franchise the Muscle Maker Grill name and business system to qualified franchisees internationally.
•Pokémoto LLC, a directly wholly owned subsidiary, which was formed in Nevada on August 19, 2021, to serve as a holding company for various company owned locations which currently have been closed or converted to franchise owned locations.
•Poke Co Holdings LLC, a directly wholly owned subsidiary, which was formed in Connecticut on July 18, 2018 to franchise the Pokémoto name and business system to qualified franchisees.
•Sadot LLC, a directly wholly owned subsidiary, which was formed in Delaware on October 19, 2022 to participate in activities such as sourcing, distributing and production of agri-food products.
•Sadot Latam LLC, a directly wholly owned subsidiary, which was formed for the purpose of its agri-food sourcing and trading operations.
•Sadot Enterprises, Ltd (Farming Operations), a directly 70% owned subsidiary, ventured into crop farm production in Southern Africa with a focus on major commodities like wheat, soy, and corn, alongside high-value tree crops such as avocado and mango.
•Sadot Brasil Ltda, a directly wholly owned subsidiary, which was formed for the purpose of its agri-food sourcing and trading operations.
•Sadot LLC of Mauritius, a directly wholly owned subsidiary, which was formed to expand our banking and financing opportunities for the agri-food businesses.
•Sadot Canada Inc., a directly wholly owned subsidiary, which was formed for the purpose of its agri-food sourcing and trading operations
•Sadot Agri FZCO, a directly wholly owned subsidiary, which was formed to expand our banking and financing opportunities and for agri-food sourcing and trading operations.
Item 1.A. Risk Factors
You should carefully review the risks described below as they identify important factors that could cause our actual results to differ materially from our forward-looking statements, expectations and historical trends. Any of the following risk factors, either by itself or together with other risk factors, could materially adversely affect our business, results of operations, cash flows and/or financial condition. The risks described below are not the only risks facing the Company. Additional risks and uncertainties not currently known or currently viewed to be immaterial may also materially and adversely affect business, financial condition or results of operations. These risks can be impacted by factors beyond management's control.
Risks Related to Our Business and Industry
We will need additional capital to fund our operations, which, if obtained, could result in substantial dilution or significant debt service obligations. We may not be able to obtain additional capital on commercially reasonable terms, which could adversely affect our liquidity and financial position.
In order to continue operating, we may need to obtain additional financing, either through borrowings, private placements, public offerings, or some type of business combination, such as a merger, or buyout, and there can be no assurance that we will be successful in such pursuits. We may be unable to acquire the additional funding necessary to continue operating. Accordingly, if we are unable to generate adequate cash from operations, and if we are unable to find sources of funding, it may be necessary for us to sell one or more lines of business or all or a portion of our assets, enter into a business combination, or reduce or eliminate operations. These possibilities, to the extent available, may be on terms that result in significant dilution to our shareholders or that result in our shareholders losing all of their investment in our Company.
We require significant capital in relation to our Sadot operations, including continuing access to credit markets, to operate our current business and fund our growth strategy. Our working capital requirements, including margin requirements on open positions on futures exchanges, are directly affected by the price of agricultural commodities, which may fluctuate significantly and change quickly. Moreover, the expansion of our business and pursuit of acquisitions or other business opportunities may require significant amounts of capital. Access to credit markets and pricing of our capital is dependent upon maintaining sufficient credit ratings from credit rating agencies. Sufficient credit ratings allow us to access cost competitive tier one commercial paper markets. If we are unable to maintain sufficiently high credit ratings, access to these commercial paper and other debt markets and costs of borrowings could be adversely affected. If we are unable to generate sufficient cash flow or maintain access to adequate external financing, including as a result of significant disruptions in the global credit markets, it could restrict our current operations and our growth opportunities. We manage this risk with constant monitoring of credit/liquidity metrics, cash forecasting, and routine communications with credit rating agencies regarding risk management practices.
If we need to raise additional capital, we do not know what the terms of any such capital raising would be. In addition, any future sale of our equity securities could dilute the ownership and control of your shares and could be at prices substantially below prices at which our shares currently trade. We may seek to increase our cash reserves through the sale of additional equity or debt securities. The sale of convertible debt securities or additional equity securities could result in additional and potentially substantial dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity. In addition, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. Any failure to raise additional funds on favorable terms could have a material adverse effect on our liquidity and financial condition.
Our indebtedness could negatively affect our financial condition, decrease our liquidity and impair our ability to operate the business.
If cash on hand is insufficient to pay our obligations or margin calls as they come due at a time when we are unable to draw on our credit facility, it could have an adverse effect on our ability to conduct our business. Our ability to make payments on and to refinance our indebtedness will depend on our ability to generate cash in the future. Our ability to generate cash is dependent on various factors. These factors include general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Certain of our long-term borrowings include provisions that require minimum levels of working capital and equity and impose limitations on additional debt. Our ability to satisfy these provisions can be affected by events beyond our control, such as the demand for and the fluctuating price of commodities. Noncompliance with these provisions could result in default and acceleration of long-term debt payments.
We are subject to global and regional economic downturns and related risks.
The level of demand for our products is affected by global and regional demographic and macroeconomic conditions, including population growth rates and changes in standards of living. A significant downturn in global economic growth, or recessionary conditions in major geographic regions, may lead to reduced demand for agricultural commodities and food products, which could adversely affect our business and results of operations. Further, deteriorating economic and political conditions in our major markets, such as inflation, increased unemployment, decreases in disposable income, declines in consumer confidence, uncertainty about economic stability, or economic slowdowns or recessions, could cause a decrease in demand for our products.
Additionally, weak global economic conditions and adverse conditions in global financial and capital markets, including rising interest rates and constraints on the availability of credit, have in the past adversely affected, and may in the future adversely affect, the financial condition and creditworthiness of the financial institutions that serve as our lenders and as counterparties to the over-the-counter derivative instruments we use to manage risks and some of our customers, suppliers, and other counterparties, which in turn may negatively impact our financial condition and results of operations. Over the course of the last year, concerns have arisen with respect to the financial condition of a number of regional banking organizations in the United States and global financial institutions. Although our exposure has been de minimis to these financial institutions, we continue to monitor our counterparty exposure across all of the financial services companies with which we conduct business. See “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Item 7.A. Quantitative and Qualitative Disclosures About Market Risk” for more information.
We expect the pressures of input cost inflation to continue into 2024. Further, the United States has reported and is continuing to report weaker GDP growth, with some economists forecasting a continuation of these conditions in 2024. Brazil is experiencing a slowing GDP growth rate coupled with relatively high interest rates, which may result in an uncertain economic and political environment that could in turn lead to reduced demand for our refined and specialty oils and milling products in the country. Argentina has experienced hyperinflation, high fiscal deficit and negative GDP growth in recent quarters, and faces additional uncertainty in connection with the newly-elected President's anticipated economic and monetary policies. Additionally, a slowdown in China's economy over a prolonged period, including as a result of population decline, real estate crisis and other factors, could lead to reduced global demand for agricultural commodities. To the extent that such economic and political conditions negatively impact consumer and business confidence and consumption patterns or volumes, our business and results of operations could be significantly and adversely affected.
We are exposed to adverse weather conditions, pandemic outbreaks, political events, war and terrorism that could disrupt business and may adversely affect the availability, quality and price of agricultural commodities and agricultural commodity products, as well as our operations and operating results.
Our headquarters, trade offices, franchised restaurant locations, and farms, as well as certain of our vendors and customers, are located in areas which have been and could be subject to natural disasters such as floods, droughts, blizzards, hurricanes, tornadoes, fires or earthquakes.
Adverse weather conditions have historically caused volatility in the agricultural commodity industry and consequently in our operating results by causing crop failures or significantly reduced harvests, which may affect the supply and pricing of the agricultural commodities that we sell and use in our business, and negatively affect the creditworthiness of agricultural producers who do business with us. Our farming operations are currently solely located in the Mkushi region of Zambia. In this region, adverse weather during the fertilizer application, planting, and harvest seasons can have negative impacts on our crop yields and planting cycles. Adverse crop conditions in the Mkushi region can increase the input costs or lower the market value of our products relative to other market participants that do not have the same geographic concentration.
Severe adverse weather conditions, such as hurricanes and severe storms, may also result in extensive property damage, extended business interruption, personal injuries, and other loss and damage to us. Our operations also rely on dependable and efficient transportation services, including transportation by ocean vessel, river barges, rail, and truck. A disruption in transportation services as a result of weather conditions, such as low river levels following periods of drought, may also have a significant adverse impact on our operations and related supply chains.
Additionally, the potential physical impacts of climate change are uncertain and may vary by region. These potential effects could include changes in rainfall patterns, water shortages, changing sea levels, changing storm patterns and intensities, and changing temperature levels that could adversely impact our costs and business operations, the location, costs and competitiveness of agricultural commodity production and related storage and processing facilities and the supply and demand for agricultural commodities.
These events also could have indirect consequences such as increases in the cost of insurance if they result in significant loss of property or other insurable damage and the effect could be material to our results of operations, liquidity or capital resources.
We are subject to economic, political, and other risks of doing business globally and in emerging markets.
We are a global business with a substantial majority of our assets and operations located outside the United States. In addition, our business strategies may involve expanding or developing our business in emerging market regions, including South American, Eastern Europe, Asia-Pacific, the Middle East, and Africa. Due to the international nature of our business, we are exposed to various risks of international operations, including:
•adverse trade policies or trade barriers on agricultural commodities and commodity products;
•new and developing requirements related to GHG emissions and other climate change initiatives and workforce diversity;
•and inclusion mandates;
•inflation, hyperinflation, and adverse economic effects resulting from governmental attempts to control inflation, such as the imposition of wage and price controls and higher interest rates. For example, inflation rates in many countries in which we operate are currently at the highest levels in decades, resulting in tighter monetary policies, including higher interest rates;
•changes in laws and regulations or their interpretation or enforcement in the countries in which we operate, including the effects of complying with tax law on us and our shareholders;
•difficulties in enforcing agreements or judgments and collecting receivables in foreign jurisdictions;
•exchange controls or other currency restrictions and limitations on the movement of funds, such as on the remittance of dividends and/or reimbursements by subsidiaries;
•inadequate infrastructure and logistics challenges;
•sovereign risk and the risk of government intervention, including through expropriation, or regulation of the economy or natural resources, including restrictions on foreign ownership of land or other assets;
•the requirement to comply with a wide variety of laws and regulations that apply to international operations, including, without limitation, economic sanctions regulations, labor laws, import and export regulations, anti-corruption and anti-bribery laws, as well as other laws or regulations discussed in this "Item 1A. Risk Factors" section;
•challenges in maintaining an effective internal control environment with operations in multiple international locations, including language differences, varying levels of U.S. GAAP expertise in international locations and multiple financial information systems;
•changes in a country’s or region’s economic or political condition; and
•labor disruptions, civil unrest, significant political instability, coup attempts, wars or other armed conflict or acts of terrorism.
These risks could adversely affect our operations, business strategies, and operating results.
As a result of our international operations, we are also exposed to currency exchange rate fluctuations. Changes in exchange rates between the U.S. dollar and other foreign currencies, particularly the Brazilian Real, Canadian dollar, Zambian Kwacha, and the euro affect our revenues and expenses that are denominated in local currencies, affect farm economics in those regions and may also have a negative impact on the value of our assets located outside of the United States.
Additionally, there continues to be a great deal of uncertainty regarding U.S. and global trade policies for companies with multinational operations like ours. In recent years, there has been an increase in populism and nationalism in various countries around the world and consequently historical free trade principles are being challenged. As we continue to operate our business globally, our success will depend, in part, on the nature and extent of any such changes and how well we are able to anticipate, respond to and effectively manage any such changes.
Our Company is subject to numerous laws, regulations, and mandates globally which could adversely affect our operating results and forward strategy.
Our Company does business globally, connecting crops and markets in various countries, and is required to comply with laws and regulations administered by the United States federal government as well as state, local, and non-U.S. governmental authorities in numerous areas including: accounting and income taxes, anti-corruption, anti-bribery, global trade, trade sanctions, environmental, product safety, and handling and production of regulated substances. Our Company might face challenges from U.S. and foreign tax authorities regarding the amount of taxes due including questions regarding the timing, amount of deductions, the allocation of income among various tax jurisdictions and further risks related to changing tax laws domestically and globally. Any failure to comply with applicable laws and regulations or appropriately resolve these challenges could subject our Company to administrative, civil, and criminal remedies, including fines, penalties, disgorgement, injunctions, and recalls of its products and damage to its reputation.
Government policies, mandates, and regulations specifically affecting the agricultural sector and related industries; regulatory policies or matters that affect a variety of businesses; taxation polices; and political instability could adversely affect our Company’s operating results.
Agricultural production and trade flows are subject to government policies, mandates, regulations and trade agreements, including taxes, tariffs, duties, subsidies, incentives, foreign exchange rates and import and export restrictions, including policies related to genetically modified organisms, traceability standards, sustainable practices, product safety and labeling, renewable fuels, and low carbon fuel mandates. These policies can influence the planting of certain crops; the location and size of crop production; whether unprocessed or processed commodity products are traded; the volume and types of imports and exports; the availability and competitiveness of feedstocks as raw materials; the viability and volume of production of certain of our products; and industry profitability. International trade regulations can adversely affect agricultural commodity trade flows by limiting or disrupting trade between countries or regions. Regulations of financial markets and instruments, including the Dodd-Frank Act, Consumer Protection Act, and the European Market Infrastructure Regulation, create uncertainty and may lead to additional risks and costs, and could adversely affect our futures commission merchant business and our agricultural commodity risk management practices. Future government policies may adversely affect the supply of, demand for, and prices of our products; adversely affect our ability to deploy adequate hedging programs; restrict our ability to do business in our existing and target markets; and adversely affect our revenues and operating results.
Our Company’s operating results could be affected by political instability and by changes in monetary, fiscal, trade, and environmental policies, laws, regulations, and acquisition approvals, creating risks including, but not limited to: changes in a country’s or region’s economic or political conditions, local labor conditions and regulations, and safety and environmental regulations; reduced protection of intellectual property rights; changes in the regulatory or legal environment; restrictions on currency exchange activities; currency exchange fluctuations; burdensome taxes and tariffs; enforceability of legal agreements and judgments; adverse tax, administrative agency or judicial outcomes; and regulation or taxation of greenhouse gases. International risks and uncertainties, including changing social and economic conditions as well as terrorism, political hostilities, and war, could limit our ability to transact business in these markets. Our Company benefits from the free flow of agricultural and food and feed ingredient products from the U.S. and other sources to markets around the world. Increases in tariff and restrictive trade activities around the world (e.g., the U.S.-China trade relations dispute, Iran sanctions) could negatively impact our ability to enter certain markets or the price of products may become less competitive in those markets. Proposed tariffs on imports into the United States, potential retaliatory tariffs on U.S. exports, and potential renegotiation of trade deals may impact our existing or planned operations or strategic ventures and could adversely affect our business, financial condition, results of operations and cash flows.
Our strategy involves expanding the volume and diversity of crops it merchandises and processes, expanding the global reach of our core model, expanding our value-added product portfolio, and expanding the sustainable agriculture programs and partnerships it participates in. Government policies including, but not limited to, antitrust and competition law, trade restrictions, food safety regulations, sustainability requirements and traceability, can impact our ability to execute this strategy successfully.
Upon the expansion of our operations internationally, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws.
We have expanded our operations outside the United States for both our restaurant divisions and Sadot. The U.S. Foreign Corrupt Practices Act, and other similar anti-bribery and anti-kickback laws and regulations, generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. We cannot assure you that we will be successful in preventing our franchisees or other agents from taking actions in violation of these laws or regulations. Such violations, or allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, results of operations and cash flows.
The availability and prices of the agricultural commodities and agricultural commodity products we procure, transport, store, process, and merchandise can be affected by climate change, weather conditions, disease, government programs, competition, and various other factors beyond our control and could adversely affect our operating results.
The availability and prices of agricultural commodities are subject to wide fluctuations, including impacts from factors outside our control, such as changes in weather conditions, climate change, rising sea levels, crop disease, plantings, government programs and policies, competition and changes in global demand, which could adversely affect our operating results. Our Company uses a global network of procurement, processing, as well as robust communications between global commodity merchandiser teams, to continually assess price and basis opportunities. Management-established limits (including a corporate wide value-at-risk metric), with robust internal reporting, help to manage risks in pursuit of driving performance. Additionally, we depend globally on agricultural producers to ensure an adequate supply of agricultural commodities.
Reduced supply of agricultural commodities could adversely affect our profitability by increasing the cost of raw materials and/or limiting our ability to procure, transport, store, process, and merchandise agricultural commodities in an efficient manner. High and volatile commodity prices can place more pressures on short-term working capital funding. Conversely, if supplies are abundant and crop production globally outpaces demand for more than one or two crop cycles, price volatility is somewhat diminished. This could result in reduced operating results due to the lack of supply chain dislocations and reduced market spread and basis opportunities.
Advances in technology, such as seed and crop protection, farming techniques, storage and logistics, and speed of information flow, may reduce the significance of dislocations and arbitrage opportunities in the agricultural global markets, which may reduce the earnings potential of agricultural merchandisers and processors.
We are required to carry significant amounts of inventory across all of our businesses. If a substantial portion of our inventory becomes damaged or obsolete, its value would decrease, and have an adverse impact on the Company’s financial results.
We are exposed to the risk of a decrease in the value of our inventories due to a variety of circumstances in all of our businesses. For example, within our Sadot Agri-Foods business, there is the risk that the quality of our inventory could deteriorate due to damage, moisture, insects, disease or foreign material. If the quality of our inventory were to deteriorate below an acceptable level, the value of our inventory could decrease significantly. In our Sadot farming operations business, planted acreage, and consequently the volume of fertilizer and crop protection products applied, is partially dependent upon government programs and the producer’s perception of demand. Technological advances in agriculture, such as genetically engineered seeds that resist disease and insects, or that meet certain nutritional requirements, could also affect the demand for our crop nutrients and crop protection products. Either of these factors could render some of our inventory obsolete or reduce its value.
We face increasing exposure to country risk in countries that face financial, political, and economic unrest through unsecured credit, inventory, forward contract risk or payment origination that could adversely affect our future results of operations, financial position, and cash flows.
We have increased our international supply chain operations and exposure. With the increased international presence comes additional country risk through trade flows around the globe with direct exposure to the counterparty, via contract mark-to-market exposure, unsecured accounts receivable or inventory in the country. In certain areas in which we trade (both origination and destination) country risk is more prevalent given the country’s political and/or economic situations. The addition of purchases and sales of grain in vessel sized quantities to support the Sadot Agri-Foods business including farming operations increases the size and potential severity of our country risk. Additionally, there could be a rapid increase in interest rates creating difficulty for our counterparties to access U.S. dollars making it difficult to collect accounts receivable timely.
We are exposed to potential business disruption including, but not limited to, disruption of transportation services, disruption in the supply, and other impacts resulting from acts of terrorism or war, natural disasters, pandemics, severe weather conditions, accidents, or other planned disruptions, which could adversely affect our operating results.
Our operations rely on dependable and efficient transportation services the disruption of which could result in difficulties supplying materials to our facilities and impair our ability to deliver products to our customers in a timely manner. Certain factors which may impact the availability of agricultural commodity raw materials are out of our control including, but not limited to, disruptions resulting from weather, high or low river water conditions, economic conditions, manufacturing delays or disruptions at suppliers, shortage of materials, interruption of energy supply and unavailable or poor supplier credit conditions.
We are continuing to enhance and deploy additional food safety and security procedures and controls to appropriately mitigate the risks of any adulteration of the Company’s products in the supply chain.
Our business is seasonal, and our results may fluctuate depending on the harvest cycle of the crops upon which we rely and seasonal fluctuations related to the sale of our consumer products.
As with any agricultural business enterprise, our business operations are seasonal in nature. For example, in our Agribusiness segment, while there is a degree of seasonality in the growing season and procurement of our principal raw materials, such as soybeans and grains, we typically do not experience material fluctuations in volume between the first and second half of the year since we are geographically diversified between the northern and southern hemispheres. This creates price fluctuations, which result in fluctuations in our inventories and a degree of seasonality in our gross profit. In addition, certain of our consumer food products are other annual events. Seasonality could have a material adverse effect on our business and financial performance. In addition, our quarterly results may vary as a result of the effects of fluctuations in commodities prices, production yields and costs.
We are vulnerable to the effects of supply and demand imbalances in our industries.
Historically, the market for some agricultural commodities and fertilizer products has been cyclical, with periods of high demand and capacity utilization stimulating new plant investment and the addition of incremental processing or production capacity by industry participants to meet the demand. The timing and extent of this expansion may then produce excess supply conditions in the market, which, until the supply/demand balance is again restored, negatively impacts product prices and operating results. During times of reduced market demand, we may suspend or reduce production at some of our facilities. The extent to which we efficiently manage available capacity at our facilities will affect our profitability.
Our Company may fail to realize the benefits of or experience delays in the execution of its growth strategy, which encompasses organic and inorganic initiatives, including those outside the U.S. and in businesses where our Company does not currently have a large presence.
As we execute our growth strategy, through both organic and inorganic growth, we may encounter risks which could result in increased costs, decreased revenues and delayed synergies. Growth in new geographies outside the U.S. can expose us to volatile economic, political and regulatory risks that may negatively impact our operations and ability to achieve our growth strategy. Expanding businesses where we have limited presence may expose us to risks related to the inability to identify an appropriate partner or target and favorable terms, inability to retain/hire strategic talent or integration risks that may require significant management resources that would have otherwise been available for ongoing growth or operational initiatives. Acquisitions may involve unanticipated delays, costs and other problems. Due diligence performed prior to an acquisition may not identify a material liability or issue that could impact our reputation or adversely affect results of operations resulting in a reduction of the anticipated acquisition benefits. Additionally, acquisitions may involve integration risks such as: internal control effectiveness, system integration risks, the risk of impairment charges related to goodwill and other intangibles, ability to retain acquired employees and other unanticipated risks.
Failure to manage our growth effectively could harm our business and operating results.
Our growth plan includes expansion into multiple verticals of the food supply chain, including expansion into new commodity trade routes and geographies, farming & warehousing, logistics & transportation, food processing, restaurant franchising, sustainability and carbon offsets. Our existing management systems, financial and management controls and information systems may be inadequate to support our planned expansion. Managing our growth effectively will require us to continue to enhance these systems, procedures and controls and to hire, train and retain managers and team members. We may not respond quickly enough to the changing demands that our expansion will impose on our management, restaurant teams and existing infrastructure, which could harm our business, financial condition and results of operations.
The Company may not be able to effectively integrate businesses it acquires.
We continuously look for opportunities to enhance our existing businesses through strategic acquisitions. The process of integrating an acquired business into our existing business and operations may result in unforeseen operating difficulties and expenditures as well as require a significant amount of management resources. There is also the risk that our due diligence efforts may not uncover significant business flaws or hidden liabilities. In addition, we may not realize the anticipated benefits of an acquisition and they may not generate the anticipated financial results. Additional risks may include the inability to effectively integrate the operations, products, technologies and personnel of the acquired companies. The inability to maintain uniform standards, controls, procedures and policies would also negatively impact operations.
Failure to manage our growth effectively could harm our business and operating results.
Our growth plan includes expansion into multiple verticals of the food supply chain, including expansion into new commodity trade routes and geographies, farming & warehousing, logistics & transportation, food processing, restaurant franchising, sustainability and carbon offsets. Our existing management systems, financial and management controls and information systems may be inadequate to support our planned expansion. Managing our growth effectively will require us to continue to enhance these systems, procedures and controls and to hire, train and retain managers and team members. We may not respond quickly enough to the changing demands that our expansion will impose on our management, restaurant teams and existing infrastructure, which could harm our business, financial condition and results of operations.
We may not realize the anticipated benefits of acquisitions, divestitures or joint ventures.
Part of our strategy involves acquisitions, alliances and joint ventures designed to expand or optimize our portfolio of businesses. Our ability to benefit from acquisitions, joint ventures, and alliances depends on many factors, including our ability to identify suitable prospects, access funding sources on acceptable terms, negotiate favorable transaction terms, and successfully consummate and integrate any businesses we acquire. In addition, we proactively review our portfolio of businesses in order to identify opportunities to enhance shareholder value and may decide as a result of such reviews or otherwise, from time to time, to divest certain of our assets or businesses by selling them or entering into joint ventures. Our ability to successfully complete a divestiture will depend on, among other things, our ability to identify buyers that are prepared to acquire such assets or businesses on acceptable terms and to adjust and optimize our retained businesses following the divestiture.
Our acquisition, joint venture, or divestiture activities may involve unanticipated delays, costs, and other problems. If we encounter unexpected problems with acquisitions, joint ventures, or divestitures, our senior management may be required to divert attention away from other aspects of our businesses to address these problems. Additionally, we may fail to consummate proposed acquisitions, joint ventures or divestitures, after incurring expenses and devoting substantial resources, including management time, to such transactions.
Acquisitions also pose the risk that we may be exposed to successor liability relating to actions by an acquired company and its management before the acquisition. The due diligence we conduct in connection with an acquisition, the controls and policies we implement at acquired companies, and any contractual guarantees or indemnities that we receive from the sellers of acquired companies, may not be sufficient to protect us from, or compensate us for, actual liabilities. A material liability associated with an acquisition could adversely affect our reputation and results of operations and reduce the benefits of the acquisition. Additionally, acquisitions involve other risks, such as differing levels of management and internal control effectiveness at the acquired entities, systems integration risks, the risk of impairment charges relating to goodwill and intangible assets recorded in connection with acquisitions, the risk of significant accounting charges and expenses resulting from the completion and integration of a sizable acquisition, the need to fund increased capital expenditures and working capital requirements, our ability to retain and motivate employees of acquired entities, compliance and reputational risks and other unanticipated problems and liabilities.
Divestitures may also expose us to potential liabilities or claims for indemnification, as we may be required to retain certain liabilities or indemnify buyers for certain matters, including legal, environmental, or litigation matters associated with the assets or businesses that we sell. The magnitude of any such retained liability or indemnification obligation may be difficult to quantify at the time of the transaction and its cost to us could ultimately exceed the proceeds we receive for the divested assets or businesses. Divestitures also have other inherent risks, including possible delays in closing transactions (including potential difficulties in obtaining regulatory approvals), the risk of lower-than-expected sales proceeds for the divested businesses and unexpected costs or other difficulties associated with the separation of the businesses to be sold from our information technology systems and other management processes, including the loss of key personnel. Further, expected cost savings or other anticipated efficiencies or benefits from divestitures may also be difficult to achieve or maximize.
Additionally, we joint ventures and investments in which we have limited control over governance, financial reporting, and operations. As a result, we face certain operating, financial, and other risks relating to these investments, including risks related to the financial strength of our joint venture partners or their willingness to provide adequate funding for the joint venture, having differing objectives from our partners, the inability to implement some actions with respect to the joint venture's activities that we may believe are favorable if the joint venture partner does not agree, compliance risks relating to actions of the joint venture or our partners, and the risk that we will be unable to effectively work with or resolve disputes with the joint venture partner. As a result, these investments may contribute significantly less than anticipated to our earnings and cash flows.
We outsource certain aspects of our business to third-party vendors and consultants which subjects us to risks, including disruptions in our business and increased costs.
We have outsourced certain administrative functions for our business to third-party service providers. We also outsource certain information technology support services and benefit plan administration. Our Sadot Agri-Foods operations rely on Aggia LLC FZ as third-party consultants to execute commodity trades and conduct farming operations. In the future, we may outsource other functions to achieve cost savings and efficiencies. If the service providers to which we outsource these functions do not perform effectively, we may not be able to achieve the expected cost savings and may have to incur additional costs in connection with such failure to perform. Depending on the function involved, such failures may also lead to business disruption, transaction errors, processing inefficiencies, the loss of sales and customers, the loss of or damage to intellectual property through security breach, and the loss of sensitive data through security breach or otherwise. Any such damage or interruption could have a material adverse effect on our business, cause us to face significant fines, customer notice obligations or costly litigation, harm our reputation with our customers or prevent us from paying our collective suppliers or employees or receiving payments on a timely basis.
In the event our consulting agreement with Aggia LLC FZ were to terminate, our food origination and trading operations would be negatively impacted and we may be forced to curtail or cease operations in this business segment.
Sadot Agri-Foods, is an international agri-commodities company engaged in the trading and shipping of food and feed (e.g., soybean meal, wheat and corn) via dry bulk cargo ships to/from markets across the globe. Sadot Agri-Foods was formed as part of our diversification strategy to own and operate, through its subsidiaries, business lines throughout the food value chain and is our largest operating unit. Sadot Agri-Foods has engaged Aggia LLC FZ, a major shareholder of Sadot Group (“Aggia”) to provide critical consulting services. On November 14, 2022, the Company, Sadot LLC and Aggia entered into the Services Agreement pursuant to which Aggia agreed to provide services with respect to the operations of Sadot Agri-Foods. In the event Aggia were to terminate their agreement, our food origination and trading operations would be negatively impacted and we may be forced to curtail or cease operations in this business segment.
We face increasing competition and pricing pressure from other companies in our industries. If we are unable to compete effectively with these companies, our sales and profit margins would decrease, and our earnings and cash flows would be adversely affected.
The markets for our products in each of our business segments are highly competitive. While we have substantial operations in certain of the regions where we operate, some of our competitors are significantly larger, compete in wider markets, have greater purchasing power, and have considerably larger financial resources. We also may enter into new markets where our brand is not recognized and in which we do not have an established customer base. Competitive pressures in all of our businesses could affect the price of, and customer demand for, our products, thereby negatively impacting our profit margins and resulting in a loss of market share.
The restaurant industry is intensely competitive, and we compete with many well-established food service companies on the basis of product choice, quality, affordability, service and location. Each of our brands also competes for qualified franchisees, suitable restaurant locations and management and personnel. Some of our competitors have substantially greater financial resources, higher revenues and greater economies of scale than we do. These advantages may allow them to implement their operational strategies more quickly or effectively than we can or benefit from changes in technologies, which could harm our competitive position. If we are unable to maintain our competitive position, we could experience lower demand for products, downward pressure on prices, reduced margins, an inability to take advantage of new business opportunities, a loss of market share, reduced franchisee profitability and an inability to attract qualified franchisees in the future. Any of these competitive factors may materially adversely affect our business, financial condition or results of operations.
The interests of our franchisees may conflict with ours or yours in the future and we could face liability from our franchisees or related to our relationship with our franchisees.
Franchisees, as independent business operators, may from time to time disagree with us and our strategies regarding the business or our interpretation of our respective rights and obligations under the franchise agreement and the terms and conditions of the franchisee/franchisor relationship. This may lead to disputes with our franchisees, and we expect such disputes to occur from time to time in the future as we continue to offer franchises. Such disputes may result in legal action against us. To the extent we have such disputes, the attention, time and financial resources of our management and our franchisees will be diverted from our restaurants, which could have a material adverse effect on our business, financial condition, results of operations and cash flows even if we have a successful outcome in the dispute.
In addition, various state and federal laws govern our relationship with our franchisees and our potential sale of a franchise. A franchisee and/or a government agency may bring legal action against us based on the franchisee/franchisor relationships that could result in the award of damages to franchisees and/or the imposition of fines or other penalties against us.
We have limited control with respect to the operations of our franchisees, which could have a negative impact on our business.
Franchisees are independent business operators and are not our employees, and we do not exercise control over the day-to-day operations of their restaurants. We provide training and support to franchisees, and set and monitor operational standards, but the quality of franchised restaurants may be diminished by any number of factors beyond our control. Consequently, franchisees may not successfully operate restaurants in a manner consistent with our standards and requirements or may not hire and train qualified managers and other restaurant personnel. If franchisees do not operate to our expectations, our image and reputation, and the image and reputation of other franchisees, may suffer materially and system-wide sales could decline significantly, which would reduce our royalty and other revenues, and the impact on profitability could be greater than the percentage decrease in royalties and fees.
The failure to enforce and maintain our trademarks and protect our other intellectual property could materially adversely affect our business, including our ability to establish and maintain brand awareness.
We have registered Sadot®, Pokémoto®, Muscle Maker Grill® and other certain names used by our restaurants as trademarks or service marks with the United States Patent and Trademark Office and Muscle Maker Grill® in one foreign country. Our brand campaign, Great Food with Your Health in Mind™ and Get in the Aloha State of Mind™ have also been approved for registration with the United States Patent and Trademark Office. In addition, the Sadot, Muscle Maker Grill and Pokémoto logos, recipes, website name and addresses (www.sadotgroupinc.com, www.musclemakergrill.com and www.pokemoto.com) and Facebook, Instagram, Linkedin, Twitter and other social media and internet accounts are our intellectual property as well as Muscle Maker Grill and Pokémoto recipes and trade dress. We maintain the recipe for our healthy inspired recipes, as well as certain proprietary standards, specifications and operating procedures, as trade secrets or confidential proprietary information. The success of our business strategy depends on our continued ability to use our existing trademarks and service marks in order to increase brand awareness and develop our branded products. If our efforts to protect our intellectual property are not adequate, or if any third-party misappropriates or infringes on our intellectual property, whether in print, on the Internet or through other media, the value of our brands may be harmed, which could have a material adverse effect on our business, including the failure of our brands and branded products to achieve and maintain market acceptance. There can be no assurance that all of the steps we have taken to protect our intellectual property in the United States and in foreign countries will be adequate. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States.
Third-party claims with respect to intellectual property assets, if decided against us, may result in competing uses or require adoption of new, non-infringing intellectual property, which may in turn adversely affect sales and revenues.
There can be no assurance that third parties will not assert infringement or misappropriation claims against us, or assert claims that our rights in our trademarks, service marks, trade dress and other intellectual property assets are invalid or unenforceable. Any such claims could have a material adverse effect on us or our franchisees if such claims were to be decided against us. If our rights in any intellectual property were invalidated or deemed unenforceable, it could permit competing uses of intellectual property which, in turn, could lead to a decline in overall or restaurant revenues. If the intellectual property became subject to third-party infringement, misappropriation or other claims, and such claims were decided against us, we may be forced to pay damages, be required to develop or adopt non-infringing intellectual property or be obligated to acquire a license to the intellectual property that is the subject of the asserted claim. There could be significant expenses associated with the defense of any infringement, misappropriation, or other third-party claims.
Our information technology systems, processes and sites may suffer interruptions, security breaches or failures that may adversely affect our ability to conduct our business
We rely on certain key information technology systems, some of which are dependent on services provided by third parties, to provide critical data and services for internal and external users, including procurement and inventory management, transaction processing, financial, commercial and operational data, human resources management, legal and tax compliance, and other information and processes necessary to operate and manage our business. If we or our third party service providers do not respond or perform effectively in connection with a cybersecurity breach or system failure, our business may be impacted.
Increased global cybersecurity vulnerabilities, threats and more sophisticated and targeted cybersecurity attacks pose a potentially significant risk to the security of our information technology systems, networks and services, as well as the confidentiality, availability and integrity of our data and the confidential data of our employees, customers, suppliers and other third parties that we may hold. Such vulnerabilities include, among other things, social engineering threats and more sophisticated computer crime, including advanced persistent threats and zero-day vulnerability exploits. We may incur significant costs in protecting against potential security breaches, cyber-based attacks, or other cybersecurity incidents. We and our third-party service providers are targeted by malicious actors and expect such incidents to continue and the frequency and severity of such attacks to increase. While we have implemented cybersecurity and data protection measures, our efforts to minimize the risks and impacts of cyberattacks and protect our information technology systems may be insufficient and we may experience significant breaches or other failures or disruptions that could compromise our systems and the information we store and, ultimately, affect our business operations and results of operations. Additionally, hybrid or remote work arrangements among our employees and employees of our third-party providers present additional operational risks to our information technology systems, including, but not limited to, increased risks of cyberattacks and security breaches. We are also exposed to the risk of insider threat attacks. New technology that could result in greater operational efficiency may further expose our computer systems to the risk of cyberattacks.
In addition, the risk of cybersecurity incidents, including cyberattacks against the Ukrainian government and other countries in the region, has increased in connection with the ongoing Ukraine-Russia war, driven by justifications such as retaliation for the sanctions imposed in conjunction with the war, or in response to certain companies’ continued operations in Russia. It is possible that these attacks could have collateral effects on additional critical infrastructure and financial institutions globally. While we no longer have operations in Russia, we do have operations in the region that, along with our operations globally, could be adversely affected by these attacks, including cyber-based attacks against our information technology systems, or be at risk to collateral effects of such attacks. While we have taken actions to mitigate such potential risks, the proliferation of malware from the war into systems unrelated to the war, or cyberattacks against U.S. companies in retaliation for U.S. sanctions against Russia, or U.S. support of Ukraine, could also adversely affect our operations.
We have implemented security policies, training programs, measures and disaster recovery plans designed to prevent, detect and mitigate cyber-based attacks, and to protect the security and continuity of our networks and critical systems. These measures may not adequately prevent adverse events such as breaches or failures from occurring, or mitigate their severity if they do occur.
If our information technology systems are breached, damaged or fail to function properly due to any number of causes, such as security breaches or cyber-based attacks, systems implementation difficulties, catastrophic events or power outages, and our security, contingency disaster recovery, or other risk mitigation plans do not effectively mitigate these occurrences on a timely basis, we may experience a material disruption in our ability to manage our business operations and produce financial reports, as well as significant costs and lost business opportunities until they are remediated. Further, our sensitive information may be compromised and we may suffer representational harm.
We are also subject to a variety of laws and regulations regarding data privacy, data protection, and data security, including laws related to the collection, storage, handling, use, disclosure, transfer, and security of personal information. Data privacy regulations continue to evolve, and non-compliance with such regulations, including as a result of adoption of emerging technologies, such as artificial intelligence, could subject the Company to legal claims or proceedings, potential regulatory fines and penalties and damage to our reputation. These factors may adversely impact our business, results of operations, and financial condition, as well as our competitive position.
Human capital requirements may not be sufficient to effectively support global operations.
Our global operations function with trained individuals necessary for the warehousing, and shipping of raw materials for products used in other areas of manufacturing or sold as inputs or products to third-party customers. Our Company has various methods and tactics to mitigate potential shortfalls.
Matters relating to employment and labor law may adversely affect our business.
Various federal and state labor laws govern our relationships with our employees and affect operating costs. These laws include employee classifications as exempt or non-exempt, minimum wage requirements, unemployment tax rates, workers’ compensation rates, citizenship requirements and other wage and benefit requirements for employees classified as non-exempt. Significant additional government regulations and new laws, including mandating increases in minimum wages, changes in exempt and non-exempt status, or mandated benefits such as health insurance could materially affect our business, financial condition, operating results or cash flow. Furthermore, if our or our franchisees’ employees unionize, it could materially affect our business, financial condition, operating results or cash flow.
We are also subject in the ordinary course of business to employee claims against us based, among other things, on discrimination, harassment, wrongful termination or violation of wage and labor laws. Such claims could also be asserted against us by employees of our franchisees. Moreover, claims asserted against franchisees may at times be made against us as a franchisor. These claims may divert our financial and management resources that would otherwise be used to benefit our operations. The ongoing expense of any resulting lawsuits, and any substantial settlement payment or damage award against us, could adversely affect our business, brand image, employee recruitment, financial condition, operating results or cash flows.
In addition, various states in which we operate are considering or have already adopted new immigration laws or enforcement programs, and the United States Congress and Department of Homeland Security from time to time consider and may implement changes to federal immigration laws, regulations or enforcement programs as well. Some of these changes may increase our obligations for compliance and oversight, which could subject us to additional costs and make our hiring process more cumbersome or reduce the availability of potential employees. Although we require all workers to provide us with government-specified documentation evidencing their employment eligibility, some of our employees may, without our knowledge, be unauthorized workers. Unauthorized workers are subject to deportation and may subject us to fines or penalties, and if any of our workers are found to be unauthorized, we could experience adverse publicity that negatively impacts our brand and may make it more difficult to hire and keep qualified employees. Termination of a significant number of employees who were unauthorized employees may disrupt our operations, cause temporary increases in our labor costs as we train new employees and result in additional adverse publicity. We could also become subject to fines, penalties and other costs related to claims that we did not fully comply with all recordkeeping obligations of federal and state immigration compliance laws. These factors could have a material adverse effect on our business, financial condition and results of operations.
Finally, the Company has employees who reside in different countries around the world who have specific labor law requirements we are subject to follow.
We depend on our executive officers, the loss of whom could materially harm our business.
We rely upon the accumulated knowledge, skills and experience of our executive officers, significant employees and expertise of our hired consultants. Our executive officers, significant employees and hired consultants have significant experience in food service, international and agri-foods industries. If they were to leave us or become incapacitated, we might suffer in our planning and execution of business strategy and operations, impacting our brand and financial results. We also do not maintain any key man life insurance policies for any of our employees.
Our risk management strategies may not be effective.
Our business is affected by fluctuations in agricultural commodity prices, transportation costs, energy prices, interest rates, and foreign currency exchange rates. We engage in hedging transactions to manage these risks. However, our exposures may not always be fully hedged, and our hedging strategies may not be successful in minimizing our exposure to these fluctuations. In addition, our risk management strategies may seek to position our overall portfolio relative to expected market movements. While we have implemented a broad range of risk monitoring and control procedures and policies to mitigate potential losses, they may not in all cases be successful in anticipating a significant risk exposure and protecting us from losses that have the potential to impair our financial position. See "Item 7.A. Quantitative and Qualitative Disclosures About Market Risk".
Risks Related to Ownership of Our Common Stock and Lack of Liquidity
As a smaller reporting company, we are exempt from certain disclosure requirements, which could make our Common Stock less attractive to the potential investors.
Rule 12b-2 of the Exchange Act defines a “smaller reporting company” as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that:
•had a public float of less than $250 million as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity; or
•in the case of an initial registration statement under the Securities Act, or the Exchange Act of 1934, as amended, which we refer to as the Exchange Act, for shares of its common equity, had a public float of less than $250 million as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated public offering price of the shares; or
•in the case of an issuer whose public float as calculated under paragraph (1) or (2) of this definition was zero, had annual revenues of less than $100 million during the most recently completed fiscal year for which audited financial statements are available.
As a smaller reporting company, we will not be required and may not include a Compensation Discussion and Analysis section in our proxy statements; we will provide only two years of financial statements; and we need not provide the table of selected financial data. We also will have other “scaled” disclosure requirements that are less comprehensive than issuers that are not smaller reporting companies which could make our Common Stock less attractive to potential investors, which could make it more difficult for our stockholders to sell their shares.
We are an emerging growth company and subject to less rigorous public reporting requirements and cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Common Stock less attractive to investors.
We are a public reporting company under the Exchange Act, and thereafter publicly report on an ongoing basis as an “emerging growth company” (as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we remain an “emerging growth company”, we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not “emerging growth companies”, including but not limited to:
•Not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
•Taking advantage of extensions of time to comply with certain new or revised financial accounting standards;
•Being permitted to comply with reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and
•Being exempt from the requirement to hold a non-binding advisory vote on executive compensations and stockholder approval of a golden parachute payments not previously approved.
We expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We could be an emerging growth company for up to five years, circumstances could cause us to lose that status earlier, including if the market value of our Common Stock held by non-affiliates exceeds $700 million, if we issue $1 billion or more in non-convertible debt during a three-year period, or if our annual gross revenues exceed $1 billion. We would cease to be an emerging growth company on the last day of the fiscal year following the date of the fifth anniversary of our first sale of common equity securities under an effective registration statement or a fiscal year in which we have $1 billion in gross revenues. Finally, at any time we may choose to opt-out of the emerging growth company reporting requirements. If we choose to opt out, we will be unable to opt back in to being an emerging growth company.
We cannot predict if investors will find our Common Stock less attractive because we may rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile.
As an emerging growth company, our auditor is not required to attest to the effectiveness of our internal controls.
Our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting while we are an emerging growth company. This means that the effectiveness of our financial operations may differ from our peer companies in that they may be required to obtain independent registered public accounting firm attestations as to the effectiveness of their internal controls over financial reporting and we are not. While our management will be required to attest to internal control over financial reporting and we will be required to detail changes to our internal controls on a quarterly basis, we cannot provide assurance that the independent registered public accounting firm’s review process in assessing the effectiveness of our internal controls over financial reporting, if obtained, would not find one or more material weaknesses or significant deficiencies. Further, once we cease to be an emerging growth company, we will be subject to independent registered public accounting firm attestation regarding the effectiveness of our internal controls over financial reporting. Even if management finds such controls to be effective, our independent registered public accounting firm may decline to attest to the effectiveness of such internal controls and issue a qualified report.
As a public company, we will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.
As a public company, we have incurred significant legal, accounting and other expenses that we did not incur as a private company. In addition, the rules of the SEC and those of The NASDAQ Stock Market LLC ("NASDAQ"), NASDAQ Capital Market has imposed various requirements on public companies including requiring establishment and maintenance of effective disclosure and financial controls. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased and will continue to increase our legal and financial compliance costs and will make some activities more time-consuming and costlier. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain directors’ and officers’ liability insurance, which could make it more difficult for us to attract and retain qualified members of our board of directors. We cannot predict or estimate the amount of additional costs we will incur as a public company or the timing of such costs.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. In addition, we will be required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting the later of our second annual report on Form 10-K or the first annual report on Form 10-K following the date on which we are no longer an emerging growth company. Our compliance with Section 404 of the Sarbanes-Oxley Act will require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the exchange we are listed on, the SEC or other regulatory authorities, which would require additional financial and management resources.
Our ability to successfully implement our business plan and comply with Section 404 requires us to be able to prepare timely and accurate financial statements. We expect that we will need to continue to improve existing, and implement new operational and financial systems, procedures and controls to manage our business effectively. Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls, may cause our operations to suffer and we may be unable to conclude that our internal control over financial reporting is effective and to obtain an unqualified report on internal controls from our auditors as required under Section 404 of the Sarbanes-Oxley Act. This, in turn, could have an adverse impact on trading prices for our common stock, and could adversely affect our ability to access the capital markets.
The Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. The FINRA requirements may make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may have the effect of reducing the level of trading activity in our Common Stock. As a result, fewer broker-dealers may be willing to make a market in our common stock, reducing a stockholder’s ability to resell shares of our Common Stock.
Our stock price may be volatile.
The market price of our Common Stock has been highly volatile and could fluctuate widely in price in response to various potential factors, many of which will be beyond our control, including the following:
•services by us or our competitors;
•additions or departures of key personnel;
•our ability to execute our business plan;
•operating results that fall below expectations;
•loss of any strategic relationship;
•industry developments;
•economic and other external factors; and
•period-to-period fluctuations in our financial results.
In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our share price and trading volume could decline.
The trading market for our common stock will, to some extent, depends on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
We do not intend to pay dividends for the foreseeable future, which could reduce the attractiveness of our stock to some investors.
We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases. In addition, we may incur debt financing to further finance our operations, the governing documents of which may contain restrictions on our ability to pay dividends.
If we are unable to maintain listing of our securities on the NASDAQ Capital Market or another reputable stock exchange, it may be more difficult for our stockholders to sell their securities.
NASDAQ requires listing issuers to comply with certain standards in order to remain listed on its exchange. If, for any reason, NASDAQ should delist our securities from trading on its exchange and we are unable to obtain listing on another reputable national securities exchange, a reduction in some or all of the following may occur, each of which could materially adversely affect our stockholders.
If our shares of Common Stock become subject to the penny stock rules, it would become more difficult to trade our shares.
The Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price per share of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not obtain or retain a listing on the NYSE American or NASDAQ Capital Market and if the price of our Common Stock is less than $5.00 per share, our Common Stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before effecting a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that, before effecting any such transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive; (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our Common Stock, and therefore stockholders may have difficulty selling their shares.
Provisions in our articles of incorporation and bylaws and Nevada law may discourage, delay or prevent a change of control of our Company and, therefore, may depress the trading price of our stock.
Our articles of incorporation and bylaws contain certain provisions that may discourage, delay or prevent a change of control that our stockholders may consider favorable. These provisions:
•prohibit stockholder action to elect or remove directors by majority written consent;
•provide that the board of directors is expressly authorized to make, alter or repeal our bylaws;
•prohibit our stockholders from calling a special meeting of stockholders; and
•establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
We may be subject to securities litigation, which is expensive and could divert management attention.
In the past companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could seriously hurt our business. Any adverse determination in litigation could also subject us to significant liabilities.
Risks Related to the SEPA Offering
Substantial blocks of our common stock may be sold into the market as a result of the shares sold to Yorkville under the SEPA, which may cause the price of our common stock to decline.
The price of our common stock could decline if there are substantial sales of shares of our common stock, if there is a large number of shares of our common stock available for sale, or if there is the perception that these sales could occur.
On September 22, 2023, we entered into the SEPA with YA II PN Ltd. (“Yorkville”). Under the SEPA, we agreed to issue and sell to Yorkville, from time to time, and Yorkville agreed to purchase from us, up to $25 million of our common stock. We shall not affect any sales under the SEPA and Yorkville shall not have any obligation to purchase shares of common stock under the SEPA to the extent that after giving effect to such purchase and sale (i) Yorkville would beneficially own more than 4.99% of the Company’s outstanding common stock at the time of such issuance (the “Ownership Limitation”), or (ii) the aggregate number of shares of common stock issued under the SEPA together with any shares of common stock issued in connection with any other related transactions that may be considered part of the same series of transactions, would exceed 19.9% of the outstanding voting common stock as of September 22, 2023 (the “Exchange Cap”). At the Company’s Annual Meeting held on December 20, 2023, the shareholders of the Company approved, for purposes of compliance with Nasdaq Listing Rules 5635(b) and 5635(d), the issuance of up to 15,000,000 shares of our Common Stock to Yorkville in connection with and pursuant to the SEPA thus increasing the Exchange Cap to 15,000,000 shares of Common Stock. Thus, we may not have access to the right to sell the full $25 million of shares of common stock to Yorkville. In connection with the SEPA, and subject to the condition set forth therein, Yorkville advanced us the Pre-Paid Advance evidenced by convertible promissory notes (the “Convertible Notes”) issued to Yorkville at a purchase price equal to 94.0% of the principal amount of each Pre-Paid Advance. On September 22, 2023, Yorkville advanced the first Pre-Paid Advance to us in the principal amount of $3.0 million and we issued a Convertible Note to Yorkville in the principal amount of $3.0 million. The balance of $1.0 million of the Pre-Paid Advance was advanced by Yorkville on October 30, 2023. The purchase price for each Convertible Note representing a Pre-Paid Advance is 94.0% of the principal amount of the Pre-Paid Advance. Interest shall accrued on the outstanding balance of any Convertible Note at an annual rate equal to 6.0%, subject to an increase to 18% upon an event of default as described in the Convertible Notes. The maturity date of each Convertible Note was September 22, 2024, 12-months after the closing of the initial Pre-Paid Advance. The Convertible Notes were paid off on October 11, 2024.
Any issuance of shares of common stock pursuant to this facility will dilute the percentage ownership of stockholders and may dilute the per share projected earnings (if any) or book value of our common stock. Sales of a substantial number of shares of our common stock in the public market or other issuances of shares of our common stock, or the perception that these sales or issuances could occur, could cause the market price of our common stock to decline and may make it more difficult for you to sell your shares at a time and price that you deem appropriate.
It is not possible to predict the actual number of shares we will sell under the SEPA to Yorkville at any one time or in total, or the actual gross proceeds resulting from those sales.
We generally have the right to control the timing and amount of any sales of our shares of common stock to Yorkville under the SEPA. Sales of our common stock, if any, to Yorkville under the SEPA will depend upon market conditions and other factors. We may ultimately decide to sell to Yorkville all, some or none of the shares of our common stock that may be available for us to sell to Yorkville pursuant to the SEPA.
Because the purchase price per share to be paid by Yorkville for the shares of common stock that we may elect to sell to Yorkville under the SEPA, if any, will fluctuate based on the market prices of our common stock during the applicable the pricing period (three consecutive trading days commencing on the date that we direct Yorkville to purchase amounts of our Common Stock), it is not possible for us to predict, as of the date of this report and prior to any such sales, the number of shares of common stock that we will sell to Yorkville under the SEPA, the purchase price per share that Yorkville will pay for shares purchased from us under the SEPA, or the aggregate gross proceeds that we will receive from those purchases by Yorkville under the SEPA, if any.
In addition, we will not be able to issue shares of common stock in excess of 15,000,000 as approved by the shareholders of the Company at its Annual Meeting under the SEPA in accordance with applicable Nasdaq rules. Depending on the market prices of our common stock in the future, this could be a significant limitation on the amount of funds we are able to raise pursuant to the SEPA. Other limitations in the SEPA, including the Ownership Limitation, and our ability to meet the conditions necessary to deliver an Advance Notice, could also prevent us from being able to raise funds up to the $25.0 million commitment amount.
Moreover, although the SEPA provides that we may sell up to an aggregate of $25.0 million of our common stock to Yorkville, only 34,315,083 shares of our common stock have been registered for resale by Yorkville under the registration statement consisting of (i) the 227,273 commitment shares that we issued to Yorkville upon execution of the SEPA as consideration for its commitment to purchase our common stock under the SEPA and (ii) up to 34,087,810 shares of common stock that we may elect to sell to Yorkville, in our sole discretion, from time to time from and after the date of, and pursuant to, the SEPA or that Yorkville may require that we sell pursuant to a Yorkville Advance. Even if we elect to sell to Yorkville all of the shares of common stock that have been registered for resale, depending on the market prices of our common stock at the time of such sales, the actual gross proceeds from the sale of all such shares may be substantially less than the $25.0 million commitment amount under the SEPA, which could materially adversely affect our liquidity.
If we desire to issue and sell to Yorkville under the SEPA more than the 34,087,810 shares registered, and the Exchange Cap provisions and other limitations in the SEPA would allow us to do so, we would need to file with the SEC one or more additional registration statements to register under the Securities Act the resale by Yorkville of any such additional shares of our common stock and the SEC would have to declare such registration statement or statements effective before we could sell additional shares.
Further, the resale by Yorkville of a significant amount of shares registered for resale at any given time, or the perception that these sales may occur, could cause the market price of our common stock to decline and to be highly volatile.
The sale and issuance of our shares of Common Stock to Yorkville will cause dilution to our existing shareholders, and the sale of the shares of Common Stock acquired by Yorkville, or the perception that such sales may occur, could cause the price of our Common Stock to fall.
The purchase price for the shares that we may sell to Yorkville under the SEPA or are required to sell pursuant to a Yorkville Advance will fluctuate based on the price of our shares of Common Stock. Depending on a number of factors, including market liquidity, sales of such shares may cause the trading price of our Common Stock to fall. If and when we do sell shares to Yorkville or when Yorkville requires a Yorkville Advance, Yorkville may resell all, some, or none of those shares at its discretion, subject to the terms of the SEPA. Therefore, sales to Yorkville by us could result in substantial dilution to the interests of other holders of our shares of Common Stock. Additionally, the sale of a substantial number of shares of Common Stock to Yorkville, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a desirable time and price. The resale of shares of Common Stock by Yorkville in the public market or otherwise, or the perception that such sales could occur, could also harm the prevailing market price of our shares of Common Stock.
Following these issuances described above and as restrictions on resale end and registration statements are available for use, the market price of our shares of Common Stock could decline if the holders of restricted shares sell them or are perceived by the market as intending to sell them. As such, sales of a substantial number of shares of Common Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our shares of Common Stock.
Investors who buy shares at different times will likely pay different prices.
Pursuant to the SEPA, we will have discretion, subject to market demand, to vary the timing, prices, and numbers of shares sold to Yorkville. If and when we do elect to sell shares of our common stock to Yorkville pursuant to the SEPA, Yorkville may resell all, some or none of such shares at any time or from time to time in its discretion and at different prices. As a result, investors who purchase shares from Yorkville in this offering at different times will likely pay different prices for those shares, and so may experience different levels of dilution and in some cases substantial dilution and different outcomes in their investment results. Investors may experience a decline in the value of the shares they purchase from Yorkville in this offering as a result of future sales made by us to Yorkville at prices lower than the prices such investors paid for their shares in this offering.
Our current business plans require a significant amount of capital. If we are unable to obtain sufficient funding or do not have access to capital, we may not be able to execute our business plans and our prospects, financial condition and results of operations could be materially adversely affected.
The extent to which we rely on Yorkville as a source of funding will depend on a number of factors, including the prevailing market price of our common stock, our ability to meet the conditions necessary to deliver Advance Notices under the SEPA, the impacts of the Exchange Cap and the Ownership Limitation and the extent to which we are able to secure funding from other sources. In addition to the amount of funds we ultimately raise under the SEPA, if any, we expect to continue to seek other sources of funding, including by offering additional equity, and/or equity-linked securities, through one or more credit facilities and potentially by offering debt securities, to finance a portion of our future expenditures.
We have experienced operating losses, and we expect to continue to incur operating losses as we implement our business plans. We expect our capital expenditures to continue to be significant in the foreseeable future as we expand our business. We expect to expend capital with significant outlays directed towards servicing our Sadot Agri-Foods, Sadot restaurant group and Sadot farming operations. The fact that we have a limited operating history with respect to the Agri-Foods and farming operations business means we have limited historical data on the demand for our services. As a result, our capital requirements are uncertain and actual capital requirements may be different from those we currently anticipate. In addition, new opportunities for growth in future product lines and markets may arise and may require additional capital.
We entered into the SEPA whereby we will have the right, but not the obligation, to sell to Yorkville up to $25.0 million of our shares of common stock. However, our right to sell shares under the SEPA is subject to certain conditions that may not be satisfied. Accordingly, we may not be able to utilize this facility to raise additional capital when, or in the amounts, we may require.
As an early-stage growth company, our ability to access capital is critical. We expect that we will need to raise additional capital in order to continue to execute our business plans in the future, and we plan to use the SEPA, if the conditions for its use are satisfied and seek additional equity and/or debt financing, including by offering additional equity, and/or equity-linked securities, through one or more credit facilities and potentially by offering debt securities, to finance a portion of our future expenditures.
The sale of additional equity or equity-linked securities could dilute our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations or our ability to pay dividends to our stockholders. Our ability to obtain the necessary additional financing to carry out our business plans or to refinance, if necessary, any outstanding debt when due is subject to a number of factors, including general market conditions and investor acceptance of our business model. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. If we are unable to raise sufficient funds on favorable terms, we may have to significantly reduce our spending, delay or cancel our planned activities or substantially change our corporate structure. We might not be able to obtain any such funding or we might not have sufficient resources to conduct our business as projected, both of which could mean that we would be forced to curtail or discontinue our operations and our prospects, financial consolidated results of operations could be materially adversely affected, in which case our investors could lose some or all of their investment.
Management will have broad discretion as to the use of the proceeds from the SEPA, and uses may not improve our financial condition or market value.
Because we have not designated the amount of net proceeds from the SEPA to be used for any particular purpose, our management will have broad discretion as to the application of such proceeds. Our management may use the proceeds for working capital and general corporate purposes that may not improve our financial condition or advance our business objectives.
Item 1.B. Unresolved Staff Comments
Not applicable.
Item 1.C. Cybersecurity
Risk Management and Strategy
Cyber criminals are becoming more sophisticated and effective every day, and they are increasingly targeting companies similar to our company operating in various part of the world. All companies utilizing technology are subject to threats of breaches of their cybersecurity programs. To mitigate the threat to our business, we take a comprehensive approach to cybersecurity risk management and make securing the data customers and other stakeholders entrust to us a top priority. Our board of directors (the “Board”) and our management are actively involved in the oversight of our risk management program, of which cybersecurity represents an important component. As described in more detail below, we have established policies, standards, processes and practices for assessing, identifying, and managing material risks from cybersecurity threats. We have devoted significant financial and personnel resources to implement and maintain security measures to meet regulatory requirements and customer expectations, and we intend to continue to make significant investments to maintain the security of our data and cybersecurity infrastructure. There can be no guarantee that our policies and procedures will be properly followed in every instance or that those policies and procedures will be effective. Although our Risk Factors include further detail about the material cybersecurity risks we face, we believe that risks from prior cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected our business to date. We can provide no assurance that there will not be incidents in the future or that they will not materially affect us, including our business strategy, results of operations, or financial condition.
Our policies, standards, processes and practices for assessing, identifying, and managing material risks from cybersecurity threats are integrated into our overall risk management program and are based industry standards. Key security, risk, and compliance stakeholders meet regularly to develop strategies for preserving the confidentiality, integrity and availability of our company and customer information, identifying, preventing and mitigating cybersecurity threats, and effectively responding to cybersecurity incidents. We maintain controls and procedures that are designed to ensure prompt escalation of certain cybersecurity incidents so that decisions regarding public disclosure and reporting of such incidents can be made by management and the Board in a timely manner.
Our cybersecurity team, are third party subject matter experts who regularly obtain cybersecurity certifications. Our program includes procedures to identify cybersecurity risks and threats of our third-party service providers. These procedures measure the maturity of third-party provider cybersecurity programs against industry best practices. The collection of this information is used to assess the use of third-party software or partnerships.
Our cybersecurity risk management program includes response plans that are aligned with our crisis response plans and outline the procedures and protocols to follow when a cybersecurity incident has or may have occurred, including to allow assessments related to disclosure and notice requirements to be timely made to regulators and affected parties. The response plan includes protocols to notify our Chief Executive Officer ("CEO"), our Chief Financial Officer ("CFO"), other members of senior management as appropriate, and, under certain circumstances, the Audit Committee of our Board, or our full Board as appropriate. We have integrated cybersecurity risk assessments into Sadot’s overall enterprise risk assessment to promote a company-wide culture of cybersecurity risk management.
Governance
Our Board, in coordination with the Audit Committee, oversees our management of cybersecurity risk. They receive regular communication from management about the prevention, detection, mitigation, and remediation of cybersecurity incidents, including material security risks and information security vulnerabilities. The Audit Committee receives regular updates from management on cybersecurity risk resulting from risk assessments, progress of risk reduction initiatives, external auditor feedback, control maturity assessments, and relevant internal and industry cybersecurity incidents.
Our CEO and CFO lead our Information Technology and cybersecurity team, which consist of third party specialist. The Information Technology team is responsible for assessing, identifying, and managing risks from cybersecurity threats. Our CEO and CFO regularly receive information on cyber security matters, and in turn communicate to the Audit Committee on such matters. Our CEO has more than 20 years of experience in leading and managing risk oversight for large organizations and our CFO has several years of experience in leading and managing risk oversight for public organizations.
Item 2. Properties
As of December 31, 2024, our corporate office is located at 295 E Renfro St., Ste 209 Burleson, TX 76028. We believe our current office space is suitable and adequate for its intended purposes and our near-term expansion plans. We also own 70% of farmland in the Mkushi area in Zambia Africa. Sadot Zambia owns approximately 5,000 acres of farmland in the Mkushi Region of Zambia which was acquired in August of 2023. Sadot Zambia is 100% owned by Sadot Enterprises Limited, which is 70% owned by Sadot LLC.
As of December 31, 2024, the Company franchised 47 restaurants throughout the United States.
Item 3. Legal Proceedings
From time to time, we are a defendant or plaintiff in various legal actions that arise in the normal course of business. We record legal costs associated with loss contingencies as incurred and have accrued for all probable and estimable settlements.
We are currently involved in pending legal proceedings that have been previously disclosed in our filings with the Securities and Exchange Commission under the Securities and Exchange Act of 1934, as amended. Below is a summary of the legal proceedings that have become a reportable event, or which have had developments during the year ended December 31, 2024.
On November 7, 2024, Lombard Trading International Corp. filed an Amended Complaint against the Company and Sadot Latam, LLC in the 11th Judicial Circuit of Florida in and for Miami-Dade County, Florida (Case No.: 2024-020971-CA-01). The Amended Complaint alleges unjust enrichment, conversion, fraud, conspiracy and civil theft related to a commodities transaction. The plaintiff claims that the Company failed to pay upon delivery of certain goods and is seeking damages in the amount of $7.4 million. The Company has not received the goods and has not received the Bills of Lading that were contractually required for the transaction to be completed. The Company denies these allegations and intends to vigorously defend against the claims. While the Company believes it has meritorious defenses, it cannot predict the outcome of this matter or reasonably estimate the potential loss at this time. Therefore, no contingent liability has been recorded as of December 31, 2024.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
The high and low per share closing sales prices of the Company’s stock on the NASDAQ Market (ticker symbol: SDOT (f/k/a GRIL)) for each quarter for the years ended December 31, 2024 and 2023 were as follows:
| | | | | | | | | | | | | | |
| Quarter Ended | | High | | Low |
| March 31, 2023 | | $ | 15.05 | | | $ | 8.20 | |
| June 30, 2023 | | $ | 14.80 | | | $ | 10.70 | |
| September 30, 2023 | | $ | 13.60 | | | $ | 6.99 | |
| December 31, 2023 | | $ | 7.97 | | | $ | 3.90 | |
| March 31, 2024 | | $ | 4.24 | | | $ | 2.89 | |
| June 30, 2024 | | $ | 4.61 | | | $ | 2.24 | |
| September 30, 2024 | | $ | 6.05 | | | $ | 3.27 | |
| December 31, 2024 | | $ | 5.25 | | | $ | 2.52 | |
Transfer Agent
Our transfer agent is Computershare, Inc., located at, 462 South 4th Street, Suite 1600, Louisville, KY 40202, and its telephone number is 1-877-373-6374.
Holders
As of November 4, 2024, there were 49,599 holders of record of our common stock.
Dividends
We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.
Warrants
As of December 31, 2024 and 2023, we had warrants to purchase an aggregate of 1,593,020 and 1,738,002 shares of common stock, respectively, outstanding with a weighted average exercise price of $18.62 and $19.69 per share, respectively.
Securities Authorized for Issuance Under Equity Compensation Plans
Equity Compensation Plan Information
The following table provides information, as of December 31, 2024, with respect to equity securities authorized for issuance under compensation plans:
| | | | | | | | | | | | | | | | | | | | |
| Plan category | | No. of securities
to be issued
upon exercise
of outstanding
options under
the plan | | Weighted-average
exercise price
of outstanding
options under
the plan | | No. of securities
remaining
available for
future issuance |
| | | | $ | | |
| 2024 Equity compensation plans approved by security holders | | — | | — | | | 348,064 |
| 2023 Equity compensation plans approved by security holders | | 6,893 | | 15.05 | | | — |
| 2021 Equity compensation plans approved by security holders | | 74,357 | | 10.45 | | | — |
| | | | | | |
| Total | | 81,250 | | 10.84 | | | 348,064 |
Performance Graph
As a smaller reporting company, we are not required to provide the performance graph required by Item 201I of Regulation S-K.
Unregistered Sales of Equity Securities and Use of Proceeds
Issuance of Stock
On January 5, 2023, the Company authorized the issuance of an aggregate of 3,131 shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2022.
On March 27, 2023, the Company authorized the issuance of 284,881 shares of common stock to a Aggia for services rendered.
On April 5, 2023 the Company authorized the issuance of 2,974 shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2023.
On May 10, 2023 the Company authorized the issuance of 13,965 shares of common stock to a consultant for services rendered.
On May 25, 2023, the Company authorized the issuance of 272,002 shares of common stock to Aggia for services rendered.
On June 30, 2023, the Company vested 85,472 shares of common stock to a consultant for services rendered.
On July 11, 2023, the Company authorized the issuance of an aggregate of 3,298 shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2023.
On July 14, 2023, the Company issued 885,545 Restricted Share Awards to Aggia, with an effective issuance date of April 1, 2023.
On July 27, 2023, the Company authorized the issuance of 215,331 shares of common stock to Altium in exchange for the exercise of warrants.
On August 15, 2023, the Company authorized the issuance of 5,000 shares of common stock to a consultant for services rendered.
On September 25, 2023, the Company authorized the issuance of 22,727 shares of common stock in fees to a consultant for services rendered related to the SEPA.
On September 30, 2023, the Company vested 53,831 shares of common stock to to a consultant for services rendered.
On October 2, 2023, the Company authorized the issuance of an aggregate of 6,365 shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2023.
On October 20, 2023, the Company authorized the issuance of 8,550 shares of common stock to consultants for services rendered.
On November 6, 2023, the Company authorized the issuance of 8,043 shares of common stock in connection with the conversion of notes payables.
On November 14, 2023, the Company authorized the issuance of 15,911 shares of common stock in connection with the conversion of notes payables.
On November 29, 2023, the Company authorized the issuance of 23,732 shares of common stock in connection with the conversion of notes payables.
On December 13, 2023, the Company authorized the issuance of 27,132 shares of common stock in connection with the conversion of notes payables.
On December 19, 2023, the Company authorized the issuance of 26,791 shares of common stock in connection with the conversion of notes payables.
On December 19, 2023, the Company issued 202,260 RSA's to certain members of the board of directors, consultants and employees. Total RSA vested as a result of the departure of certain members of the board of directors were 17,640 shares for 2023. The remaining RSA vest ratably over 12 quarters with the first vesting starting on March 31, 2024.
On December 31, 2023, the Company vested 20,986 shares of common stock to Aggia as consulting fees earned during the fourth quarter of 2023.
On January 4, 2024 the Company authorized the issuance of 10,564 shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2023. The Company accrued for the liability as of December 31, 2023.
On January 8, 2024, the Company authorized the issuance of 27,694 shares of common stock in connection with the conversion of notes payable.
On January 11, 2024, the Company authorized the issuance of 27,891 shares of common stock in connection with the conversion of notes payable.
On January 22, 2024, the Company authorized the issuance of 30,577 shares of common stock in connection with the conversion of notes payable.
On January 29, 2024, the Company authorized the issuance of 30,443 shares of common stock in connection with the conversion of notes payable.
On February 16, 2024 the Company authorized the issuance of 300 shares of common stock to a consultant for services rendered.
On February 16, 2024, the Company authorized the issuance of 30,572 shares of common stock in connection with the conversion of notes payable.
On March 15, 2024, the Company authorized the issuance of 60,885 shares of common stock in connection with the conversion of notes payable.
On March 20, 2024, the Company authorized the issuance of 76,077 shares of common stock in connection with the conversion of notes payable.
On March 28, 2024 the Company authorized the issuance of 7,950 shares of common stock to a consultant for services rendered.
On March 31, 2024, the Company vested 50,094 shares of common stock to Aggia as consulting fees earned during the first quarter of 2024.
On June 30, 2024, the Company vested 139,899 shares of common stock to Aggia as consulting fees earned during the second quarter of 2024.
On August 14, 2024, the Company authorized the issuance of 54,981 shares of common stock in connection with the conversion of notes payable.
On August 19, 2024, the Company authorized the issuance of 104,249 shares of common stock in connection with the conversion of notes payable.
On August 26, 2024 the Company authorized the issuance of 47,500 shares of common stock to a consultant for services rendered.
On September 27, 2024, the Company authorized the issuance of 62,549 shares of common stock in connection with the conversion of notes payable.
On September 30, 2024, the Company vested 121,149 shares of common stock to Aggia as consulting fees earned during the third quarter of 2024.
On December 3, 2024, the Company entered into a Purchase Agreement (the “Purchase Agreement”) and Registration Rights Agreement (the “Registration Rights Agreement”) with institutional investors (“Purchasers”) and issued an aggregate of $3.75 million aggregate principal amount of convertible senior notes due in 2025 (the “Notes”) for aggregate gross proceeds of approximately $3.0 million, before deducting fees to the placement agent and other expenses payable by the Company (the “Offering”). RBW Capital Partners LLC, offering all securities through Dominari Securities LLC, served as the exclusive placement agent for the Offering. The Offering closed on December 4, 2024. Pursuant to the Purchase Agreement, the Notes were issued with an original issue discount of 20%. The Notes will mature on December 4, 2025, unless earlier converted upon the satisfaction of certain conditions. The conversion price of the Notes is $4.10 per share of common stock. The Notes include a “Most Favored Nation” clause which grants to the Purchasers the right to claim better conversion terms should the Company provide such to any as long as the Notes are outstanding. The Purchasers will be prohibited from effecting a conversion of the Notes to the extent that, as a result of such conversion, a Purchaser would beneficially own more than 9.99% of the shares of common stock outstanding immediately after giving effect to such conversion. The Company agreed to register the shares of common stock underlying the Notes for resale under a Registration Statement on Form S-3, pursuant the Securities Act of 1933. The Notes contain a covenant prohibiting the Company to incur, guarantee or assume any indebtedness, other than certain permitted indebtedness, create or allow or suffer any mortgage, lien, security interest or other encumbrance on its property or assets , other than permitted liens, redeem, defease, repurchase, repay or make any payments in respect of any indebtedness if at the time such payment is due or is otherwise made or, after giving effect to such payment, an event of default under the Notes has occurred and is continuing, declare or pay any cash dividend or distribution on any stock or other equity interest of the Company, or make, any change in the nature of its business or modify its corporate structure or purpose. The Notes contain customary events of default and customary penalties for the Company’s failure to issue conversion shares on a timely basis. The Registration Rights Agreement contains customary penalties for our failure to file the registration statement or cause it to become effective on a timely basis and for certain other events.
On December 31, 2024, the Company vested 160,413 shares of common stock to Aggia as consulting fees earned during the forth quarter of 2024.
The Company issued and sold the above securities in reliance on the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) by virtue of Section 4(a)(2) thereof and/or Rule 506 of Regulation D thereunder.
Issuer Purchases of Equity Securities
None.
Item 6. Reserved
Not applicable.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the results of operations and financial condition of Sadot Group Inc. (“Sadot Group”), together with its subsidiaries (collectively, the “Company”) as of December 31, 2024 and 2023 and for the years ended December 31, 2024 and 2023 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Annual Report on Form 10-K following Item 16. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us,” “we,” “our,” and similar terms refer to Sadot Group. refers to the names under which our corporate and franchised restaurants do business depending on the concept. This Annual Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Annual Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “forecast,” “model,” “proposal,” “should,” “may,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Reference is made to “Factors That May Affect Future Results and Financial Condition” in this Item 7 for a discussion of some of the uncertainties, risks and assumptions associated with these statements.
OVERVIEW
Sadot Group Inc. is our parent company and is headquartered in Burleson, Texas. In late 2022, Sadot Group began a transformation from a U.S.-centric restaurant business into a global organization focused on the Agri-foods supply-chain.
As of December 31, 2024, Sadot Group consisted of one distinct operating unit and one discontinued operations.
1.Sadot LLC (“Sadot Agri-Foods”): Sadot Group’s largest operating unit is a global Agri-Foods company engaged in farming, commodity trading and shipping of food and feed (e.g., soybean meal, wheat and corn) via dry bulk cargo ships across the globe. Sadot Agri-Foods competes with the ABCD commodity companies (ADM, Bunge, Cargill, Louis-Dreyfus) as well as many regional organizations. Sadot Agri-Foods operates, through a majority owned subsidiary, a roughly 5,000 acre crop producing farm in Zambia with a focus on major commodities such as wheat, soy and corn alongside high-value tree crops such as avocado and mango. In addition, the Company has a deposit on farmland in Indonesia. Sadot Agri-Foods was formed as part of the Company’s diversification strategy to own and operate, through its subsidiaries, the business lines throughout the food supply chain. Sadot Agri-Foods seeks to diversify over time into a sustainable and forward-looking global agri-foods company.
2.Sadot Restaurant Group, LLC ("Sadot Food Services"): had three unique “healthier for you” concepts, including two fast casual restaurant concepts, Pokémoto and Muscle Maker Grill, During 2024, the Company operated a subscription-based fresh prep meal concept, SuperFit Foods, which was sold in August 2024. Throughout 2024 the remaining corporate owned restaurants were sold and converted into franchise locations or closed. As of the end of 2024 the Company only operates as the franchisor for Pokémoto and Muscle Maker Grill restaurants. The restaurants were founded on the belief of taking every-day menu options and converting them into “healthier for you” menu choices with the goal of satisfying consumers demand for healthier choices, customization, flavor and convenience. This entire operating segment was identified as held for sale and reported as discontinued operations.
On October 9, 2024, the Company filed a Certificate of Change Pursuant to NRS 78.209 with the Nevada Secretary of State to effect a reverse stock split of the Company’s common stock at a ratio of one for- ten (the “Reverse Stock Split”), which became effective 12:01 am eastern on October 18, 2024. As a result of the Reverse Stock Split, every 10 shares of the Company’s common Stock issued and outstanding on the effective date were consolidated into one issued and outstanding share. All stockholders where were entitled to receive fractional share interest. There was no change in the par value of the Company’s common stock.
Key Financial Definitions
We review a number of financial and operating metrics, including the following key metrics and non-GAAP measures, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. Governmental and other economic factors affecting our operations may vary.
| | | | | | | | | | | |
| For the Years Ended December 31, |
| 2024 | | 2023 |
| $’000 | | $’000 |
| Commodity sales | 700,937 | | | 717,506 | |
| | | |
| | | |
| | | |
| | | |
| Cost of goods sold | (695,821) | | | (707,871) | |
| Gross profit | 5,116 | | | 9,635 | |
| | | |
| | | |
| Depreciation and amortization expenses | (259) | | | (1,143) | |
| | | |
| Pre-opening expenses | — | | | (336) | |
| | | |
| Stock-based expenses | (6,662) | | | (6,192) | |
| Sales, general and administrative expenses | (9,659) | | | (8,968) | |
| Loss from operations | (11,464) | | | (7,004) | |
| | | |
| EBITDA | 8,647 | | | (6,446) | |
| EBITDA attributable to Sadot Group Inc. | 8,903 | | | (6,228) | |
Our key business and financial definitions are explained in detail below.
Revenues
Our revenues are derived from Commodity sales. Commodity sales revenues are comprised of revenues generated from the purchase and sales of physical food and feed commodities related to our trading and farming operations.
Cost of Goods Sold
Cost of goods sold includes commodity costs, labor, rent and other operating expenses.
Depreciation and Amortization Expenses
Depreciation and amortization expenses primarily consist of the depreciation of property and equipment.
Pre-opening Expenses
Pre-opening expense primarily consist of expenses associated with expenses related to new business operations prior to the location opening or the transaction is finalized.
Stock-based Expenses
Stock-based expenses include all expenses that are paid with stock. This includes stock-based consulting fees due to Aggia and other consultants, stock compensation paid to our board of directors, and stock compensation paid to employees. The consulting fees due to Aggia related to ongoing Sadot Agri-Foods and expansion of the global Agri-Foods commodities business. Based on the initial Services Agreement with Aggia LLC FZ, a Company formed under the laws of United Arab Emirates (“Aggia”), the consulting fees were calculated at approximately 80.0% of the Net Income generated by Sadot Agri-Foods through March 31, 2023. As of April 1, 2023 the consulting agreement was amended to calculate consulting fees on 40.0% of the Net income generated by Sadot LLC. For the years ended December 31, 2024 and 2023, $6.7 million and $6.2 million, respectively, are recorded as Stock-based expenses in the accompanying Consolidated Statements of Operations and Other Comprehensive Income / (Loss).
Sales, General and Administrative Expenses
Sales, general and administrative expenses include expenses associated with corporate and administrative functions that support our operations, including wages, benefits, travel expense, legal and professional fees, training, investor relations and other corporate costs. We incur incremental Sales, general and administrative expenses as a result of being a publicly listed company on the NASDAQ capital market.
Total Other (Expense) / Income Accounts
Total Other (expense) / income listed below the Loss from operations in the accompanying Consolidated Statements of Operations and Other Comprehensive Income / (Loss) consists of Gain of fair value remeasurement, Other income / (expense), Change in fair value of stock-based compensation, Gain on sale of trading securities and Interest expense, net. Gain on fair value remeasurement consists of the fair value remeasurement recorded on a recurring basis on the forward sales contract which was deemed to be a derivative within the scope of ASC 815.
Income Tax Benefit /(Expense)
Income tax benefit / (expense) represent federal, state and local current and deferred income tax expense.
Net Loss Attributable to Non-controlling Interests
Net loss attributable to non-controlling interests was $0.3 million for the year ended December 31, 2024. During the year ended December 31, 2023 the Company created a joint-venture in which the Company has a 70% interest and the third-party equity ownership has a 30% Non-controlling interest.
Non-GAAP Measures
EBITDA and EBITDA Margin are non-GAAP measures. We define EBITDA as Net loss, adjusted for depreciation, amortization, interest income / (expense), and income taxes. We believe that EBITDA and EBITDA Margin, (collectively, the “Non-GAAP Measures”) are useful metrics for investors to understand and evaluate our operating results and ongoing profitability because they permit investors to evaluate our recurring profitability from our ongoing operating activities.
EBITDA and EBITDA Margin, have certain limitations, and you should not consider them in isolation or as a substitute for analysis of our results of operations as reported under U.S. GAAP. We caution investors that amounts presented in accordance with our definitions of any of the Non-GAAP Measures may not be comparable to similar measures disclosed by other issuers, because some issuers calculate certain of the Non-GAAP Measures differently or not at all, limiting their usefulness as direct comparative measures.
Reconciliations of EBITDA and Other Non-GAAP Measures
The following table presents a reconciliation of EBITDA from the most comparable U.S. GAAP measure, Net loss, and the calculations of the Net loss Margin and EBITDA Margin for the years ended December 31, 2024 and 2023:
| | | | | | | | | | | |
| For the Years Ended December 31, |
| 2024 | | 2023 |
| $’000 | | $’000 |
| Net income / (loss) | 3,736 | | | (8,042) | |
| Adjustments to EBITDA: | | | |
| Depreciation and amortization expenses | 259 | | | 1,143 | |
| Interest expense, net | 4,649 | | | 468 | |
| Income tax (benefit) / expense | 3 | | | (15) | |
| EBITDA | 8,647 | | | (6,446) | |
| EBITDA attributable to non-controlling interest | 256 | | | 218 | |
| EBITDA attributable to Sadot Group Inc. | 8,903 | | | (6,228) | |
| | | |
| Gross Profit | 5,116 | | | 9,635 | |
| Gross Profit attributable to Sadot Group Inc. | 5,372 | | | 9,853 | |
| | | |
| Net income / (loss) Margin attributable to Sadot Group Inc. | 0.5% | | (1.1)% |
| EBITDA Margin attributable to Sadot Group Inc. | 1.3% | | (0.9)% |
Consolidated Results of Operations - Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023
The following table represents selected items in our Consolidated Statements of Operations for the years ended December 31, 2024 and 2023, respectively:
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, | | Variance |
| 2024 | | 2023 | | $ | | % |
| $’000 | | $’000 | | $’000 | | |
| Commodity sales | 700,937 | | | 717,506 | | | (16,569) | | | (2.3) | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Cost of goods sold | (695,821) | | | (707,871) | | | 12,050 | | | (1.7) | % |
| Gross profit | 5,116 | | | 9,635 | | | (4,519) | | | (46.9) | % |
| | | | | | | |
| | | | | | | |
| Depreciation and amortization expenses | (259) | | | (1,143) | | | 884 | | | (77.3) | % |
| | | | | | | |
| Pre-opening expenses | — | | | (336) | | | 336 | | | (100.0) | % |
| | | | | | | |
| Stock-based expenses | (6,662) | | | (6,192) | | | (470) | | | 7.6 | % |
| Sales, general and administrative expenses | (9,659) | | | (8,968) | | | (691) | | | 7.7 | % |
| Loss from continuing operations | (11,464) | | | (7,004) | | | (4,460) | | | 63.7 | % |
| Other income | — | | | 308 | | | (308) | | | (100.0) | % |
| Interest expense, net | (4,649) | | | (468) | | | (4,181) | | | 893.4 | % |
| Change in fair value of stock-based compensation | 4,116 | | | 1,339 | | | 2,777 | | | 207.4 | % |
| Warrant modification expense | — | | | (958) | | | 958 | | | (100.0) | % |
| Gain on fair value remeasurement | 17,111 | | | 1,491 | | | 15,620 | | | 1047.6 | % |
| Gain on sale of trading securities | 518 | | | — | | | 518 | | | NM |
| Income / (loss) for continuing operations before income tax | 5,632 | | | (5,292) | | | 10,924 | | | (206.4) | % |
| Income tax benefit / (expense) | (3) | | | 15 | | | (18) | | | (120.0) | % |
| Net income / (loss) for continuing operations | 5,629 | | | (5,277) | | | 10,906 | | | (206.7) | % |
| Net loss for discontinued operations | (1,893) | | | (2,765) | | | 872 | | | (31.5) | % |
| Net loss attributable to non-controlling interest | 256 | | | 218 | | | 38 | | | 17.4 | % |
| Net income / (loss) attributable to Sadot Group Inc. | 3,992 | | | (7,824) | | | 11,816 | | | (151.0) | % |
| | | | | | | |
| NM= not meaningful | | | | | | | |
The following table sets forth our results of operations as a percentage of total revenue for each period presented preceding:
| | | | | | | | | | | | | | | |
| For the Years Ended December 31, | | | | |
| 2024 | | 2023 | | | | |
| Commodity sales | 100.0 | % | | 100.0 | % | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Cost of goods sold | (99.3) | % | | (98.7) | % | | | | |
| Gross profit | 0.7 | % | | 1.3 | % | | | | |
| | | | | | | |
| | | | | | | |
| Depreciation and amortization expenses | — | | | (0.2) | % | | | | |
| | | | | | | |
| Pre-opening expenses | — | | | — | | | | | |
| | | | | | | |
| Stock-based expenses | (1.0) | % | | (0.9) | % | | | | |
| Sales, general and administrative expenses | (1.4) | % | | (1.2) | % | | | | |
| Loss from continuing operations | (1.7) | % | | (1.0) | % | | | | |
| Other income | — | | | — | | | | | |
| Interest expense, net | (0.7) | % | | (0.1) | % | | | | |
| Change in fair value of stock-based compensation | 0.6 | % | | 0.2 | % | | | | |
| Warrant modification expense | — | | | (0.1) | % | | | | |
| Gain on fair value remeasurement | 2.4 | % | | 0.2 | % | | | | |
| Gain on sale of trading securities | 0.1 | % | | — | | | | | |
| Income / (loss) for continuing operations before income tax | 0.7 | % | | (0.7) | % | | | | |
| Income tax benefit / (expense) | — | | | — | | | | | |
| Net income / (loss) for continuing operations | 0.7 | % | | (0.7) | % | | | | |
| Net loss for discontinued operations | (0.3) | % | | (0.4) | % | | | | |
| Net loss attributable to non-controlling interest | — | | | — | | | | | |
| Net income / (loss) attributable to Sadot Group Inc. | 0.4 | % | | (1.1) | % | | | | |
Gross Profit
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, | | Variance |
| 2024 | | 2023 | | $ | | % |
| $’000 | | $’000 | | $’000 | | |
| Commodity sales | 700,937 | | | 717,506 | | | (16,569) | | | (2.3) | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Cost of goods sold | (695,821) | | | (707,871) | | | 12,050 | | | (1.7) | % |
| Gross profit | 5,116 | | | 9,635 | | | (4,519) | | | (46.9) | % |
| | | | | | | |
| NM= not meaningful | | | | | | | |
Our gross profit totaled $5.1 million for the year ended December 31, 2024, compared to $9.6 million for the year ended December 31, 2023. The $4.5 million decrease is primarily attributed to a decrease in Commodity sales and corresponding decrease in Cost of goods sold.
We generated Commodity sales of $700.9 million for the year ended December 31, 2024, compared to $717.5 million for the year ended December 31, 2023. The $16.6 million decrease or 2.3% is attributable to a which is attributable to a decline in global prices of staple commodities, market seasonality, the largest global consumer being out of the market for the beginning of 2024.
Cost of goods sold for the years ended December 31, 2024 and 2023 totaled $695.8 million and $707.9 million, respectively. The $12.1 million change is a direct result of the decrease in sales.
Depreciation and Amortization Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, | | Variance |
| 2024 | | 2023 | | $ | | % |
| $’000 | | $’000 | | $’000 | | |
| Depreciation and amortization expenses | (259) | | | (1,143) | | | 884 | | | (77.3) | % |
Depreciation and amortization expenses for the years ended December 31, 2024 and 2023 totaled $0.3 million and $1.1 million, respectively. The $0.9 million decrease is mainly attributed to moving Sadot Food Service assets to Assets Held For Sale and no longer amortizing or depreciating the assets and the closing and refranchising of corporate locations and the disposal of the corresponding assets.
Pre-opening Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, | | Variance |
| 2024 | | 2023 | | $ | | % |
| $’000 | | $’000 | | $’000 | | |
| Pre-opening expenses | — | | | (336) | | | 336 | | | (100.0) | % |
Pre-opening expenses for the years ended December 31, 2024 and 2023, totaled nil and $0.3 million, respectively. The decrease in pre-opening expense resulted from expenses incurred in 2023 at the farm in Zambia from the time that we signed the paper work for the purchase of the farm assets and when the purchase was finalized by the Zambian government.
Stock-Based Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, | | Variance |
| 2024 | | 2023 | | $ | | % |
| $’000 | | $’000 | | $’000 | | |
| Stock-based expenses | (6,662) | | | (6,192) | | | (470) | | | 7.6 | % |
Stock-based expenses for the year ended December 31, 2024, totaled $6.7 million compared to $6.2 million for the year ended December 31, 2023. The increase in Stock-based consulting expenses is primarily the result of consulting fees due to Aggia for Sadot Agri-Foods and Farming operations and the vesting of restricted stock for employees, board of directors and consultants. Based on the servicing agreement with Aggia, the consulting fees are calculated at approximately 40.0% of the Net income generated by Sadot LLC which is a decrease from 80.0% in the first quarter of 2023.
Sales, General and Administrative Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, | | Variance |
| 2024 | | 2023 | | $ | | % |
| $’000 | | $’000 | | $’000 | | |
| Sales, general and administrative expenses | (9,659) | | | (8,968) | | | (691) | | | 7.7 | % |
Sales, general and administrative expenses for the years ended December 31, 2024 and 2023 totaled $9.7 million and $9.0 million, respectively. The $0.7 million increase was primarily attributable to an increase in consulting fees due to trades in Latin America, entering the Brazil and Canada markets and increases due to increases in normal operating activities.
Total Other Income / (Expense) Accounts, Net
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, | | Variance |
| 2024 | | 2023 | | $ | | % |
| $’000 | | $’000 | | $’000 | | |
| Total other income / (expense), net | 17,096 | | | 1,712 | | | 15,384 | | | 898.6 | % |
Other income for the years ended December 31, 2024 and 2023 totaled $17.1 million and $1.7 million, respectively. The other income was primarily attributable to an increase of $15.6 million in the gain on the fair value remeasurement as a result of the mark to market adjustment of derivatives, an increase of $2.8 million in the Change in fair value of stock-based compensation due to the difference in the stock price at the time of the stock issuance and agreed upon price to Aggia, a decrease of $1.0 million in warrant modification expense, and an increase of $0.5 million on the Gain on sale of trading securities, partially offset by a decrease of $0.3 million in Other income and a $4.2 million increase in Interest expense, net.
The following table represents selected items in our Consolidated Statements of Operations for the year ended December 31, 2024, by our operating segments:
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2024 |
| Sadot food service | | Sadot agri-foods | | Corporate adj. | | Total segments |
| $’000 | | $’000 | | $’000 | | $’000 |
| Commodity sales | — | | | 700,937 | | | — | | | 700,937 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Cost of goods sold | — | | | (695,821) | | | — | | | (695,821) | |
| Gross profit | — | | | 5,116 | | | — | | | 5,116 | |
| | | | | | | |
| | | | | | | |
| Depreciation and amortization expenses | — | | | (256) | | | (3) | | | (259) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Stock-based expenses | — | | | — | | | (6,662) | | | (6,662) | |
| Sales, general and administrative expenses | — | | | (5,219) | | | (4,440) | | | (9,659) | |
| (Loss) / income from operations | — | | | (359) | | | (11,105) | | | (11,464) | |
| | | | | | | |
| Interest expense, net | — | | | (2,370) | | | (2,279) | | | (4,649) | |
| Change in fair value of stock-based compensation | — | | | — | | | 4,116 | | | 4,116 | |
| | | | | | | |
| Gain on fair value remeasurement | — | | | 17,111 | | | — | | | 17,111 | |
| Gain on sale of trading securities | — | | | 518 | | | — | | | 518 | |
| Income / (loss) for continuing operations before income tax | — | | | 14,900 | | | (9,268) | | | 5,632 | |
| Income tax (expense) benefit | — | | | (3) | | | — | | | (3) | |
| Net Income / (loss) from continuing operations | — | | | 14,897 | | | (9,268) | | | 5,629 | |
| Loss on discontinued operations | (1,893) | | | — | | | — | | | (1,893) | |
| Net (loss) / income | (1,893) | | | 14,897 | | | (9,268) | | | 3,736 | |
| Net loss attributable to non-controlling interest | — | | | 256 | | | — | | | 256 | |
| Net (loss) / income attributable to Sadot Group Inc. | (1,893) | | | 15,153 | | | (9,268) | | | 3,992 | |
| Total assets | 5,196 | | | 157,881 | | | 1,577 | | | 164,654 | |
The following table represents selected items in our Consolidated Statements of Operations for the year ended December 31, 2023, by our operating segments:
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2023 |
| Sadot food service | | Sadot agri-foods | | Corporate adj. | | Total segments |
| $’000 | | $’000 | | $’000 | | $’000 |
| Commodity sales | — | | | 717,506 | | | — | | | 717,506 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Cost of goods sold | — | | | (707,871) | | | — | | | (707,871) | |
| Gross profit | — | | | 9,635 | | | — | | | 9,635 | |
| | | | | | | |
| | | | | | | |
| Depreciation and amortization expenses | — | | | (151) | | | (992) | | | (1,143) | |
| | | | | | | |
| Pre-opening expenses | — | | | (336) | | | — | | | (336) | |
| | | | | | | |
| Stock-based expenses | — | | | — | | | (6,192) | | | (6,192) | |
| Sales, general and administrative expenses | — | | | (1,552) | | | (7,416) | | | (8,968) | |
| (Loss) / income from operations | — | | | 7,596 | | | (14,600) | | | (7,004) | |
| Other income | — | | | — | | | 308 | | | 308 | |
| Interest expense, net | — | | | (52) | | | (416) | | | (468) | |
| Change in fair value of stock-based compensation | — | | | — | | | 1,339 | | | 1,339 | |
| Warrant modification expense | — | | | — | | | (958) | | | (958) | |
| Gain on fair value remeasurement | — | | | 1,491 | | | — | | | 1,491 | |
| | | | | | | |
| (Loss) / income before income tax | — | | | 9,035 | | | (14,327) | | | (5,292) | |
| Income tax (expense) benefit | — | | | — | | | 15 | | | 15 | |
| Net Income / (loss) from continuing operations | — | | | 9,035 | | | (14,312) | | | (5,277) | |
| Loss on discontinued operations | (2,765) | | | — | | | — | | | (2,765) | |
| Net (loss) / income | (2,765) | | | 9,035 | | | (14,312) | | | (8,042) | |
| Net loss attributable to non-controlling interest | — | | | 218 | | | — | | | 218 | |
| Net (loss) / income attributable to Sadot Group Inc. | (2,765) | | | 9,253 | | | (14,312) | | | (7,824) | |
| Total assets | 10,416 | | | 162,175 | | | 5,500 | | | 178,091 | |
Liquidity and Capital Resources
Working Capital
We measure our liquidity in a number of ways, including the following:
| | | | | | | | | | | |
| As of |
| December 31, 2024 | | December 31, 2023 |
| $’000 | | $’000 |
| Cash | 1,786 | | | 1,354 | |
| Accounts Receivable, net | 18,014 | | | 52,920 | |
| Inventory | 717 | | | 2,561 | |
Other current assets(1) | 126,966 | | | 56,016 | |
Assets held for sale(2) | 5,196 | | | — | |
| Total current assets | 152,679 | | | 112,851 | |
| Accounts payable and accrued expenses | 28,019 | | | 50,167 | |
| | | |
| Notes payable, net | 7,390 | | | 6,531 | |
Other current liabilities(3) | 94,428 | | | 47,884 | |
Liabilities held for sale(4) | 2,333 | | | — | |
| Total current liabilities | 132,170 | | | 104,582 | |
Working capital(5) | 20,509 | | | 8,269 | |
Current ratio(6) | 1.16 | | | 1.08 | |
(1) See Note 6 for full list of items in Other current assets.
(2) See Note 3 for additional information
(3) Consists of Deferred revenue, current and Other current liabilities. See Note 14 for full list of items in Other current liabilities.
(4) See Note 3 for additional information
(5) Working Capital is defined as Total current assets less Total current liabilities
(6) Current ratio is defined as Total current assets divided by Total current liabilities
Availability of Additional Funds
Our main financial objectives are to prudently manage financial risk, ensure access to liquidity and minimize cost of capital in order to efficiently finance our business and maintain balance sheet strength. We generally finance our ongoing operations with cash flows generated from operations, borrowings under various credit facilities and term loans. At December 31, 2024, current ratio, which equals Total current assets divided by Total current liabilities, was 1.16, an increase of 0.08, compared to current ratio of 1.08 at December 31, 2023. At December 31, 2024, working capital, which equals Total current assets less Total current liabilities, was $20.5 million, a increase of $12.2 million, compared to working capital of $8.3 million at December 31, 2023. The increase in current ratio and working capital was primarily due to an increase in Other current assets, an increase in Assets held for sale, and a decrease in accounts payable, partially offset by a decrease in Accounts receivable, a decrease in Inventory, an increase in Other current liabilities and an increase in Liabilities held for sale. The Company believes that our existing cash on hand, current accounts receivable and future cash flows from our commodity trading, and farming will be sufficient to fund our operations, anticipated capital expenditures and repayment obligations over the next 12 months.
In the event we are required to obtain additional financing, either through borrowings, private placements, public offerings, or some type of business combination, such as a merger, or buyout, there can be no assurance that we will be successful in such pursuits. We may be unable to acquire the additional funding necessary to continue operating. Accordingly, if we are unable to generate adequate cash from operations, and if we are unable to find sources of funding, it may be necessary for us to sell one or more lines of business, all or a portion of our assets, enter into a business combination or reduce or eliminate operations. These possibilities, to the extent available, may be on terms that result in significant dilution to our shareholders or that result in our shareholders losing all of their investment in our Company.
We will need to raise additional capital. Such additional capital may not be available nor may the terms of such capital be generally acceptable. In addition, any future sale of our equity securities could dilute the ownership and control of your shares and could be at prices substantially below prices at which our shares currently trade. We may seek to increase our cash reserves through the sale of additional equity or debt securities. The sale of convertible debt securities or additional equity securities could result in additional and potentially substantial dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity. In addition, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. Any failure to raise additional funds on favorable terms could have a material adverse effect on our liquidity and financial condition.
Sources and Uses of Cash for the Years Ended December 31, 2024 and December 31, 2023
For the years ended December 31, 2024 and 2023, Net cash used in continuing operating activities was $2.8 million and $13.7 million, respectively, in operations and $0.5 million was used in and $0.1 million was provided by operations, respectively, in discontinued operations. Our Net cash used for the year ended December 31, 2024, was primarily attributable to our Net income of $3.7 million, adjusted for net non-cash expense in the aggregate amount of $14.0 million offset by $7.5 million of Net cash used in changes in the levels of operating assets and liabilities. Our Net cash used for the year ended December 31, 2023, was primarily attributable to our Net loss of $8.0 million, adjusted for net non-cash expenses in the aggregate amount of $5.6 million, partially offset by $11.2 million of Net cash used in changes in the levels of operating assets and liabilities.
For the year ended December 31, 2024, Net cash used in investing activities was $4.0 thousand, of which, $37.0 thousand was used to purchase Property and equipment, partially offset by $33.0 thousand, which was generated on the Disposal of property and equipment. Net cash provided by investing activities for discontinued operations was $1.0 million for year ended December 31, 2024. For the year ended December 31, 2023, Net cash used in investing activities was $3.6 million, of which $7.3 million was used to purchase Property and equipment partially offset by investment from non-controlling interest of $3.7 million, and disposal of property and equipment of $25.0 thousand. Net cash provided by investing activities for discontinued operations was $0.1 million for the year ended December 31, 2023.
For the year ended December 31, 2024, Net cash provided by financing activities was $2.8 million, consisting of proceeds from notes payable of $11.1 million, partially offset by the repayments of notes payable of $8.3 million. Net cash used in financing activities for discontinued operations was $0.1 million for the year ended December 31, 2024. For the year ended December 31, 2023, Net cash provided by financing activities was $8.6 million, consisting of proceeds from notes payable of $12.1 million and proceeds from exercise of warrants of $2.2 million partially offset by the repayments of notes payable of $5.7 million. Net cash used in financing activities for discontinued operations was $0.1 million for the year ended December 31, 2023.
Derivative Financial Instruments
Inherent in our business is the risk of matching the timing of our purchase and sales contracts. The prices of food and feed commodities (e.g., soybeans, wheat, corn, etc) and carbon offset units we buy and sell are based on a constantly moving terminal market price determined by various exchanges (e.g., Chicago Board of Trade, Dalian Commodity, Exchange, etc.). Were we not to hedge such exposures, we could be exposed to significant losses due to the continually changing commodity prices.
We use commodity futures contracts to manage our exposure to this commodity price risk. It is generally our policy to hedge such risks to the extent practicable. We enter into hedges to limit our exposure to volatile price fluctuations that we believe would impact our gross margins on firm purchase and sales commitments. As an example, if we enter into fixed price contracts with our suppliers and variable priced sales contracts with our customers, we will generally enter into a futures contract to sell the commodity for future delivery in the month when we expect the commodity price to be fixed according to the sales contract terms. We repurchase this position once the pricing has been fixed with our customer. If the underlying commodity price increases, we suffer a hedging loss and have a unrealized loss on derivative contracts, but the sales price to the customer is based on a higher market price and offsets the loss. Conversely, if the commodity price decreases, we have a hedging gain and recognize a unrealized gain on derivative contracts, but the sales price to the customer is based on the lower market price and offsets the gain. At December 31, 2024 and 2023 we had a unrealized loss on derivative contracts of $0.1 million and nil, respectively, on the books related to our hedging policy to manage our exposure to commodity price risk.
In accordance with generally accepted accounting principles in the U.S., we designate these derivative contracts as fair value hedges and recognize them on our balance sheet at fair value. We also recognize offsetting changes in the fair value of the related firm purchase and sales commitment to which the hedge is attributable in earnings upon revenue recognition, which occurs at the time of delivery to our customers.
As further described under “Risk Factors,” the potential for losses related to our hedging activities, given our hedging methodology, arises from the exchanges for our commodity hedges or customer defaults. In the event of a customer default, we might be forced to sell the commodities in the open market and absorb losses for the commodities. Our results of operations could be materially impacted by any counterparty or customer default, as we might not be able to collect money owed to us and/or our hedge might effectively be cancelled.
We use hedges for no purpose other than to avoid exposure to changes in commodity prices between when we buy a shipment of commodities from a supplier and when we deliver it to a customer. Our derivatives are not for purposes of trading in the futures market. We earn our gross profit margin through our business operations and not from the movement of commodity prices.
From time to time we may enter into forward sales contract that do not meet the definition or qualify for hedge accounting. Forward sales contracts are derivatives that were entered into to sell goods at a later date at a fixed or determinable price for a specific period. Forward sales contracts are recognized on the balance sheet at the value of the contract and the difference in the fair value and derivative liability is recorded as a unrealized gain on derivative contracts or unrealized loss on derivative contracts. If the underlying commodity price increases, we suffer a mark to market loss and have a unrealized loss on derivative contracts. Conversely, if the commodity price decreases, we have a hedging gain and recognize a unrealized gain on derivative contracts. At December 31, 2024 and 2023 we had derivative liabilities of $92.1 million and $92.1 million, with a corresponding unrealized gain on derivative contracts of $18.6 million and $1.5 million, respectively.
As part of our business we also engage in the purchase, sale and distribution of food and feed products. If we do not have a matching sales contract related to such products, (for example, any commodity products that are unsold in our inventory), we have price risk that we currently do not or are unable to hedge. As such, any decline in pricing for such products may adversely impact our profitability.
Critical Accounting Policies and Estimates
We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. We have not identified any critical accounting estimates.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended subsequently by ASUs 2018-19, 2019-04, 2019-05, 2019-10, 2019-11 and 2020-03. The guidance in the ASUs requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used. The standard also establishes additional disclosures related to credit risks. This standard is effective for fiscal years beginning after December 15, 2022. The adoption of this guidance on January 1, 2023 did not have a material impact on the Company's Consolidated Financial Statements and related disclosures.
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06 Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity. Among other changes, ASU 2020-06 removes the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share and updates the disclosure requirements in ASC 470-20, making them easier to understand for financial statement preparers and improving the decision-usefulness and relevance of the information for financial statement users. The Company early adopted the new guidance from January 1, 2023, noting no material impact.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (Topic 280). The standard requires incremental disclosures related to reportable segments, including disaggregated expense information and the title and position of the company's chief operating decision maker ("CODM"), as identified for purposes of segment determination. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Entities must adopt the changes to the segment reporting guidance on a retrospective basis. Early adoption is permitted. The adoption of this guidance on December 31, 2024 did not have a material impact on the Company's Consolidated Financial Statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, which focuses on income tax disclosures by requiring public business entities, on an annual basis, to disclose specific categories in the rate reconciliation, provide information for reconciling items that meet a quantitative threshold, and certain information about income taxes paid. The standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The amendments should be applied on a prospective basis. Retrospective application is permitted. The adoption of this guidance on December 31, 2024 did not have a material impact on the Company's Consolidated Financial Statements and related disclosures.
Seasonality
There is a degree of seasonality in the growing cycles, procurement and transportation of crops. The farming industry historically experiences seasonal fluctuations in revenues and net income. Typically, the Company has lower sales and net income during the non-harvest seasons and higher sales and net income during the harvest season and as such, must have sufficient working capital to fund its operations at a reduced level. Failure to generate or obtain sufficient working capital during the winter may have a material adverse effect on the Company.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Item 7.A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
The Financial Statements required by this Item 8 are included in this Annual Report following Item 16 hereof. As a smaller reporting company, we are not required to provide supplementary financial information.
Item 9. Changes in and Disagreements with Accountants On Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15€ promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the year ended December 31, 2024. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of such date our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information requested to be disclosed by us in our reports that we file or submit under the Exchange Act.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended). Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 2013 Internal Control-Integrated Framework. Our management has concluded that, as of December 31, 2024, our internal control over financial reporting is effective based on these criteria.
Changes in Internal Control over Financial Reporting
Our Company has added and will continue to add additional internal control procedures, additional resources and software to increase the internal control aspects of the company as we integrate our Sadot subsidiary into the overall business. Other than the above changes, there were no other changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the year ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other information
On February 28, 2024, the Company executed an offer of employment, effective March 1, 2024, with Fausto Plaza. This employment provides Mr. Plaza the responsibility to assist in managing the day-to-day operations of the various commodity trade and farm operations of Sadot Group. Mr. Plaza previously acted as a consultant to Sadot Latam. The consulting agreement provides for $0.5 million in annual fees and 15% profit sharing once the annual fees have been earned by Sadot. The agreement was updated on December 20, 2024, providing a new annual consulting fee of $0.9 million per year and removing the profit sharing arrangement. Mr. Plaza will continue to operate in this role, in addition to assisting in managing the day-to-day operations of the other commodity trade and farm operations, but as an employee of Sadot Group.
Mark McKinney has been appointed as Chairman of the Board, effective March 6, 2025, succeeding Kevin Mohan who will remain as a Director.
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
During the year ended December 31, 2024, no director or officer adopted or terminated (i) any contract, instruction or written plan for the purchase or sale of securities of the Company intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or (ii) any “non-Rule 10b5-1 trading arrangement” as defined in paragraph (c) of item 408 of Regulation S-K.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Board of Directors and Executive Officers
Our directors hold office until their successors are elected and qualified, or until their deaths, resignations or removals. Our executive officers hold office at the pleasure of our board of directors, or until their deaths, resignations or removals.
As of March 11, 2025, our current directors and executive officers and their ages are:
| | | | | | | | | | | | | | |
| Name | | Age | | Principal Positions |
| Catia L. Jorge | | 52 | | Chief Executive Officer |
| Jennifer Black | | 43 | | Chief Financial Officer |
| Michael J. Roper | | 60 | | Chief Governance and Compliance Officer |
| Kevin Mohan | | 51 | | Chief Investment Officer and Director |
| Kenneth Miller | | 55 | | Chief Operating Officer |
| Aimee Infante | | 38 | | Chief Marketing Officer |
Mark McKinney (1) | | 62 | | Director and Chairman of the Board |
Stephen A. Spanos (2) | | 62 | | Director |
Benjamin Petel (3) | | 46 | | Director, Secretary |
Na Yeon (“Hannah”) Oh (4) | | 40 | | Director |
Ray Shankar (5) | | 48 | | Director |
Marvin Yeo (6) | | 53 | | Director |
Paul Sansom (7) | | 59 | | Director |
David Errington (8) | | 46 | | Director |
Dr. Ahmed Khan (9) | | 41 | | Director |
| Claudio Torres | | 58 | | Director |
(1)Mr. McKinney is a member of the Compensation Committee, Audit Committee and serves as the Chairman of the Board.
(2)Mr. Spanos serves as the Chairman of the Audit Committee.
(3)Mr. Petel serves as the Chairman of the Sustainability Committee.
(4)Ms. Oh is a member of the Sustainability Committee.
(5)Mr. Shankar serves as the Chairman of the Compensation Committee and is a member of the Governance Committee.
(6)Mr. Yeo is a member of the Sustainability Committee.
(7)Mr. Sansom is a member of the Audit Committee.
(8)Mr. Errington serves as the Chairman of the Governance Committee.
(9)Dr. Khan is a member of the Governance Committee.
Executive Officers
Catia L. Jorge. Ms. Jorge joined Sadot Group Inc. as Chief Executive Office in February of 2025. She brings nearly 30 years in the global agri-commodity trading industry. Prior to joining Sadot, Ms. Jorge was with Olam International in Sao Paulo, Brazil where she started as the Company’s head of grains and was quickly elevated to Olam’s regional head of grain operations across Latin America with additional responsibilities as country head for Brazil, handling more than US$1 billion in trading volume. In this role she supported all business units with risk management solutions and structured financing. At Olam, Ms. Jorge crafted the requisite business strategies, organizational structure and capital assets to develop the Company’s robust origination and trading operations. She also led all hedging including grain pricing and currencies as well as ocean freight contracting. Prior to Olam, Ms. Jorge served as a Senior Grains Trader for Cargill Agricola S/A in Brazil where she managed trading operations and the P&L for wheat and corn. At Cargill, Ms. Jorge led the logistics for more than 7 million metric tons of grains across numerous grain elevators and 10 ports in Brazil to maximize supply chain efficiencies. She was also responsible for hedging decisions across domestic cash purchases as well as daily pricing strategies for the origination team based on the international and local price parities. Earlier in her career, she worked J. Macedo S/A in their agricultural importing business. Ms. Jorge earned a Bachelor’s degree in Business Administration from the Universidade de Osasco in Brazil and an MBA in Global Trade from the University of Dallas. She also earned a Masters degree in Agri-Business from Kansas State University.
Jennifer Black. Ms. Black has served as Chief Financial Officer of Sadot Group, Inc. since January 2, 2022. Ms. Black is an experienced Chief Financial Officer with a demonstrated history of working with public and private equity backed organizations. Prior to joining the Company, from September 2018 through December 2021, Ms. Black served as the Chief Financial Officer for Eagle Pressure Control LLC (“Eagle”) and Talon Pressure Control, oilfield service companies. From October 2015 through September 2018, Ms. Black served as the Controller for AG Resource Management, a private equity backed agriculture lending company, and as the Controller for Basic Energy Services, an oil and gas services company, from January 2013 through October 2015. Ms. Black has also held various other roles including Vice President of SEC reporting with OMNI American Bank and Audit Manager with RSM McGladrey. In November 2020, Eagle, as a result of various events including an oil and gas work related incident, decline of oil and gas prices and the impact from COVID-19, filed for bankruptcy protection under Subchapter V under Chapter 11 in the US Bankruptcy Court, Southern District of Texas (Houston) (Bankruptcy Petition #: 20-35474). Ms. Black is a Certified Public Accountant. Ms. Black received a Master of Business Administration from Jack Welch Management Institute in 2018 and Bachelor of Science in Accounting and Finance from Texas Tech University in 2003. Based on her education and extensive experience in the financial and accounting industries, we have deemed Ms. Black fit to serve as our Chief Financial Officer.
Michael J. Roper. Mr. Roper is currently our Chief Governance and Compliance Officer since February 10, 2025. Mr Roper served as Chief Executive Officer, of Sadot Group Inc since May 1, 2018 to February 9, 2025. Mr. Roper, along with the executive management team, led the Company’s IPO in 2019. In 2022, he led the efforts in a transformational strategic shift of the company operations from a US centric restaurant brand operator and franchisor to a growing participant in the global agri-commodity supply chain. Mr. Roper has unique experience ranging from owning and operating several franchise locations through the corporate executive levels. From May 2015 through October 2017, Mr. Roper served as Chief Executive Officer of Taco Bueno where he was responsible for defining strategy and providing leadership to 162 company-owned and operated locations along with 23 franchised locations. From March 2014 through May 2015, Mr. Roper served as the Chief Operating Officer of Taco Bueno and from July 2013 through March 2014 as the Chief Development and Technology Officer of Taco Bueno. Prior to joining Taco Bueno, Mr. Roper was a franchise owner and operator of a IMS Barter franchise and held several roles with Quiznos Sub from 2000 to 2012 starting as a franchise owner and culminating in his appointment as the Chief Operating Officer/Executive Vice President of Operations in 2009. Mr. Roper received a Bachelor of Science in Business and General Management from Northern Illinois University. Based on his education and extensive experience in the restaurant/franchise industry, we have deemed Mr. Roper fit to serve as our principal executive officer.
Kevin Mohan. Mr. Mohan has served on the board and been Chief Investment Officer of the Company since May 2018, where he was pivotal in transforming the company's leadership and strategic direction. He successfully recruited a new executive management team and guided the company through its Initial Public Offering (IPO) in 2019. During his tenure, Mr. Mohan initiated several financial strategies, including the landmark agreement with Aggia LLC FZ, resulting in the formation of Sadot LLC. Under this new structure, the Company achieved extraordinary growth, with topline sales increasing from $10 million to over $550 million and net income surpassing $11 million in the first year. Mr. Mohan brings over two decades of experience in C-level roles across various industries, including capital markets, real estate, private equity, and commodities trading, where he was a licensed trader in the early 2000s. His diverse background, combined with his strategic leadership, positions him as an invaluable asset in driving long-term success and growth for Sadot Group. Based on his experience as an entrepreneur and as a result of his role as an executive with Sadot Group, we have deemed Mr. Mohan fit to serve on the Board.
Kenneth Miller. Mr. Miller has served as Chief Operating Officer of Sadot Group, Inc. since September 26, 2018. Mr. Miller has served in the restaurant business for an extensive portion of his career. Prior to joining us as Chief Operating Officer in September 2018, Mr. Miller served as the Senior Vice President of Operations for Dickey’s BBQ Restaurant from April 2018 through September 2018 and in various capacities with Taco Bueno Restaurants, LP from October 2013 through April 2018 culminating in the position of Senior Vice President of Operations. Mr. Miller received a Bachelor of Arts in Business/Exercise Science from Tabor College in 1991. Based on his education and extensive experience in the restaurant/franchise industry, we have deemed Mr. Miller fit to serve as our Chief Operating Officer.
Aimee Infante. Ms. Infante has served as the Chief Marketing Officer of Sadot Group, Inc. since May 6, 2019. Ms. Infante had previously served as the Vice President of Marketing of each of Muscle Maker Development, LLC and Muscle Maker Corp., LLC since August 25, 2017 and September 15, 2017, respectively. From June 6, 2017 to September 15, 2017, she was the Vice President of Marketing of Muscle Maker Brands Conversion, Inc. From February 2016 through June 5, 2017, she served as the Vice President of Marketing of Muscle Maker Brands, LLC, which converted into Muscle Maker Brands Conversion, Inc. on June 6, 2017. From January 2015 through January 2016, Ms. Infante served as our Director of Marketing of Muscle Maker Brands. Ms. Infante was Director of Marketing of Muscle Maker Franchising from October 2014 to January 2015. Ms. Infante was employed by Qdoba Mexican Grill in Denver, Colorado from November 2010 to April 2014, serving as Regional Marketing Specialist from November 2010 to October 2012 and Marketing Manager from October 2012 to April 2014. Ms. Infante holds a Bachelor of Science in Marketing from Rider University. Based on her education and extensive experience in the restaurant/franchise industry, we have deemed Ms. Infante fit to serve as our Chief Marketing Officer.
Mark McKinney. Mr. McKinney brings more than 30 years of domestic and international C-Level experience across various industries, six countries and three continents. Most recently, Mr. McKinney served as Chief Operating Officer of Local Bounti, a leading Ag-tech company specializing in indoor farming. During his tenure, Mr. McKinney was instrumental in the successful execution of the company’s initial public offering on the NYSE, establishing Local Bounti as a key player in the industry. Prior to Local Bounti, from 2018 to 2021, Mr. McKinney was Chief Operating Officer at Fruit Growers (Sunkist Cooperative) where he managed multiple business verticals and supply chain operations supporting 39 packing houses and thousands of Sunkist growers. From 2015 through 2017, Mr. McKinney was CEO of Al Ghurair Foods, where he managed nine business lines with operations in four countries. From 1993 to 2015, Mr. McKinney served in various senior roles at the Dole Food Company, including Senior Director positions in Dole Asia, Ltd. and Dole Europe S.A., President and Managing Director of Dole Thailand and President of Dole Packaged Foods Asia. Mr. McKinney’s career includes several Board and Advisory roles. He holds an MBA from Claremont University’s Peter F. Drucker Graduate Management Center and a Bachelor of Science degree in Chemical Engineering from California Polytechnic University, Pomona. Based on his international, supply chain support and business experience, the Company has deemed Mr. McKinney as a fit to serve on the Board and as Chairman of the Board.
Stephen A. Spanos. Mr. Spanos has provided financial and accounting consulting services for both privately held and public companies. From 2009 to 2013, Mr. Spanos served as the Chief Financial Officer of Orion Seafood International, Inc., a marketer of frozen lobster products, and as the Controller of Reef Point Systems, a provider of security solutions for converged wireless and wireline networks in the United States, from 2005 to 2013. Mr. Spanos served as an audit manager for BDO USA, LLP and as an auditor for Ernst & Young. Mr. Spanos received his MBA and BS in Business Administration, Accounting and Finance from Boston University.
Benjamin Petel. Mr. Petel has been engaged as a Business Development Specialist in the global agricultural commodity trading field for the past decade. His experience spans across the various aspects of international commodity trading, finance and operations. In addition, Mr. Petel has worked in other fields as a Business Development and strategic networking expert, initiating and executing multi-million dollar projects across the globe. Since 2019, Mr. Petel has been engaged as a Business Development Specialist and consultant to various agriculture and food companies in capacities ranging from corporate finance and M&A to commercial development and operational control. In addition, from 2015 and until 2019, Mr. Petel served as a strategic networking specialist in various fields and industries. Mr. Petel received a Bachelor of Arts in Business Administration and General Management from Bar-Ilan University in 2014. Based on his experience within the commodity trading industry, the Company has deemed Mr. Petel as a fit to serve on the Board.
Na Yeon (“Hannah”) Oh. Ms. Oh is an expert strategist, advisor and an investor across climate and agri-food-water sector, after having spent 15 years as corporate executive at Bayer where she held various roles in public affairs, marketing, supply chain and commercial operations. She also serves as a board member to sustainable mineral fertilizer company listed in TSX. Her expertise includes sustainability, impact investing, blockchain and AI led decarbonization measurement reporting and verification, go-to-market and commercialization strategies. Ms. Oh graduated from Macalester College with a BA in Economics and Asian Studies. Based on her experience within the agri-food industry, the Company has deemed Ms. Oh as a fit to serve on the Board.
Ray Shankar. Mr. Shankar has been a Partner since 2019 at Oon & Bazul LLP, a prominent regional law firm where he manages the Private Wealth and Family Office Practice. He routinely advises ultra-high net worth families on the structuring of their family offices, tax and immigration incentive applications as well as legacy planning. Mr. Shankar specializes in advising on the establishment of family offices, which includes legacy and estate planning, wills, trusts, family charters/constitutions, tax efficient structures and succession planning. Prior to joining Oon & Bazul LLP, Mr. Shankar served as the Managing Director of Ring City Limited, a group of operating companies in various sectors. Mr. Shankar received his Bachelor of Laws (LLB) from the National University of Singapore. Based on his legal, finance and business experience, the Company has deemed Mr. Shankar as a fit to serve on the Board.
Marvin Yeo. Mr. Yeo is an experienced executive with over 25 years of experience in finance, strategy and entrepreneurship. From 2014 through present, Mr. Yeo has served as the founding partner of Golden Rock Capital, a pan-Asia focused strategic advisory firm that focuses on mergers and acquisitions, corporate finance and private equity. Prior to founding Golden Rock Capital, Mr. Yeo held a number of rolls with Frontier Investment & Development Partners, Asian Development Bank, Barclays Capital, Nomura International and Deutsche Bank. Mr. Yeo received his Bachelor of Engineering from Monash University, Chartered Financial Analyst certificate from the CFA Institute and an MBA from Insead. Based on his finance and business experience, the Company has deemed Mr. Yeo as a fit to serve on the Board.
Paul Sansom. Mr. Sansom is an experienced international executive with recent achievements in high growth business start-ups, Series A fund raising and restructuring. Currently Mr. Sansom serves as a Board member and Chief Financial Officer of InterGen Limited a privately owned power producing business in the UK. In addition he is senior partner with Energy Captal Group a Private Equity business based in the Middle East. Previously Mr. Sansom has served as the Chief Financial Officer and Chief Operating Officer for HMS Services Sarl, a single-family office. From 2016 through 2019, Mr. Sansom served as the General Manager for Al Ghurair Projects based in Dubai. Prior to 2016, Mr. Sansom held roles with Viking Services, Brightpoint Inc. and PepsiCo International. Mr. Sansom serves as the Audit Chair for Immensa International. Mr. Sansom received a BA in Economics from the City of London and is a qualified UK Chartered Management Accountant. Based on his start-up, finance and business experience, the Company has deemed Mr. Sansom as a fit to serve on the Board.
David Errington. Mr. Errington brings more than 20 years of experience in Sustainability and Environmental Sector with 13 years regional expertise in the Gulf Cooperation Council, including KSA, Bahrain, Qatar, Kuwait, UAE and Oman. Since January 2020, Mr. Errington has worked in various senior management roles within the Saudi Investment Recycling Company and is currently providing executive support as an operations consultant. From January 2014 through December 2019, Mr. Errington was employed by Ecolog International FZE, a leading provider of supply chain, construction, technology, facility management and environmental services, providing turnkey and customized solutions to governments and defense, humanitarian organizations and commercial clients in the sectors of oil & gas, mining, energy and infrastructure projects. Mr. Errington received a BSc (Hons) Chemistry from the University of Durham. Based on his sustainability and environmental sector business experience, the Company has deemed Mr. Errington as a fit to serve on the Board.
Ahmed Khan, EngD. Dr. Khan brings more than 15 years of experience in research and development (R&D) and operations, with experience in various sectors, including environment & sustainability management & the automotive sector. Most recently, Dr. Khan led a team of engineers and laboratories at Saudi Investment Recycling Company, which advises government agencies on waste management strategies and ensures compliance with regulatory bodies, and is responsible for developing and executing sustainability, carbon reduction and circular economy initiatives and programs. Currently Dr Khan has a particular focus on solutions that address water scarcity, food security, resource recovery and carbon capture as well as having an in-depth knowledge in GHG Emissions Accounting and Carbon Credits. Dr. Khan holds a Doctorate in Biochemical Engineering. Based on his research and development and environmental management experience, the Company has deemed Dr. Khan as a fit to serve on the Board.
Claudio Torres, Mr. Torres brings extensive experience in global agriculture having served in various executive roles at several international organizations. Since January 2021, Mr. Torres has served as a private consultant to European agriculture companies as well as investment funds focused on agriculture tech. From July 2017 to July 2020, Mr. Torres served as Managing Director Syngenta Seeds – LATAM and Syngenta Seeds – China. Prior to 2017, Mr. Torres served as President in SEWU Segar Nusantara, Global CEO at Advanta Seeds, Managing Director at Monsanto Singapore and various executive roles at Monsanto Chile. Mr. Torres received his Master of Applied Finances from the School of Business Economic, Universidad Del Desarrollo, Santiago, Chile, Master of Business Administration (MBA) from A. B. Freeman School of Business, Tulane University, New Orleans, Louisiana and Agricultural Engineer (B.Sc. 5 Years) from the Pontificia Universidad Católica, Santiago, Chile. Based on his global agricultural business experience, the Company has deemed Mr. Torres as fit to serve on the Board.
Family Relationships
There are no family relationships among any of our executive officers and directors.
Corporate Governance
Board of Directors and Board Committees
Our stock (symbol: SDOT) is listed on the NASDAQ capital market. Under the rules of Nasdaq, “independent” directors must make up a majority of a listed company’s board of directors. In addition, applicable NASDAQ rules require that, subject to specified exceptions, each member of a listed company’s audit and compensation committees be independent within the meaning of the applicable NASDAQ rules. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act.
Our board of directors currently consists of eleven (11) members. Our board of directors has determined that Stephen Spanos, Ray Shankar, Mark McKinney, David Errington, Marvin Yeo, Paul Sansom, Dr. Ahmed Kahn and Claudio Torres, qualify as independent directors in accordance with the Nasdaq Capital Market (“Nasdaq”) listing requirements. Kevin Mohan, Benjamin Petel, and Hannah Oh are not considered independent. Nasdaq’s independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three (3) years, one of our employees and that neither the director nor any of his or her family members has engaged in various types of business dealings with us. In addition, as required by Nasdaq rules, our board of directors has made a subjective determination as to each independent director that no relationships exist that, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management. There are no family relationships among any of our directors or executive officers.
As required under NASDAQ rules and regulations and in expectation of listing on NASDAQ, our independent directors meet in regularly scheduled executive sessions at which only independent directors are present.
Board Leadership Structure and Board’s Role in Risk Oversight
Mark McKinney is the Chairman of the Board. The Chairman has authority, among other things, to preside over the Board meetings and set the agenda for the Board meetings. Accordingly, the Chairman has substantial ability to shape the work of our Board. We currently believe that separation of the roles of Chairman and Chief Executive Officer ensures appropriate oversight by the Board of our business and affairs. However, no single leadership model is right for all companies and at all times. The Board recognizes that depending on the circumstances, other leadership models, such as the appointment of a lead Independent director, might be appropriate. Accordingly, the Board may periodically review its leadership structure. In addition, following the qualification of the offering, the Board will hold executive sessions in which only independent directors are present.
Our Board is generally responsible for the oversight of corporate risk in its review and deliberations relating to our activities. Our principal source of risk falls into two categories, financial and product commercialization. The audit committee oversees management of financial risks; our Board regularly reviews information regarding our cash position, liquidity and operations, as well as the risks associated with each. Our Compensation Committee is expected to oversee risk management as it relates to our compensation plans, policies and practices for all employees including executives and directors, particularly whether our compensation programs may create incentives for our employees to take excessive or inappropriate risks which could have a material adverse effect on the Company.
Committees of the Board of Directors
The Board of Directors has already established an Audit Committee (the “Audit Committee”), a Compensation Committee (the “Compensation Committee”), a Sustainability Committee (the "Sustainability Committee") and a Nominating and Corporate Governance Committee (“Governance Committee”). The composition and function of each committee are described below.
Audit Committee
The Audit Committee has three members, including Messrs. McKinney, Spanos and Sansom. Mr. Spanos serves as the chairman of the Audit Committee and satisfies the definition of “audit committee financial expert”.
Our Audit committee is authorized to:
•approve and retain the independent auditors to conduct the annual audit of our financial statements;
•review the proposed scope and results of the audit;
•review and pre-approve audit and non-audit fees and services;
•review accounting and financial controls with the independent auditors and our financial and accounting staff;
•review and approve transactions between us and our directors, officers and affiliates;
•recognize and prevent prohibited non-audit services; and
•establish procedures for complaints received by us regarding accounting matters; oversee internal audit functions, if any.
Compensation Committee
The Compensation Committee has two members, including Messrs. McKinney and Shankar. Mr. Shankar serves as the chairman of the Compensation Committee.
Our Compensation Committee is authorized to:
•review and determine the compensation arrangements for management;
•establish and review general compensation policies with the objective to attract and retain superior talent, to reward individual performance and to achieve our financial goals;
•administer our stock incentive and purchase plans; and
•review the independence of any compensation advisers.
Sustainability Committee
The Sustainability Committee has three members, including Messrs. Petel, Yeo, and Ms. Oh. Mr. Patel serves as the chairman of the Sustainability Committee.
Our Sustainability Committee's duties include reviewing and making recommendations to the Board on, the Company's policy and performance in relation to sustainability-related matters, including:
•health and safety;
•process safety;
•the environment;
•climate change;
•human rights;
•historical cultural heritage and land access;
•community relations;
•ESG and impact initiatives and implementation.
Nominating and Corporate Governance Committee
The Governance Committee has three members, including Messrs. Errington, Khan and Shankar. Mr. Errington serves as the chairman of the Governance Committee.
The functions of our Governance Committee, among other things, include:
•identifying individuals qualified to become board members and recommending director;
•nominees and board members for committee membership;
•developing and recommending to our board corporate governance guidelines;
•review and determine the compensation arrangements for directors; and
•overseeing the evaluation of our board of directors and its committees and management.
Our goal is to assemble a Board that brings together a variety of skills derived from high quality business and professional experience.
Compensation Committee Interlocks and Insider Participation
None of the members of our Compensation Committee, at any time, has been one of our officers or employees. Except for Mr. Mohan, none of our executive officers currently serves, or in the past year has served, as a member of the Board of Directors or Compensation Committee of any entity that has one or more executive officers on our Board of Directors or Compensation Committee. For a description of transactions between us and members of our Compensation Committee and affiliates of such members, please see “Certain Relationships and Related Party Transactions”.
Board Diversity Matrix (as of December 31, 2024):
The Board believes that a diverse membership having a variety of skills, styles, experience and competencies is an important feature of a well-functioning board. Accordingly, the Board believes that diversity of viewpoints, backgrounds and experience (inclusive of gender, age, race and ethnicity) should be a consideration in Board succession planning and recruiting. In recent years, the Governance Committee has taken this priority to heart in its nominations process, and the diversity of the Board has grown significantly. The Nasdaq Stock Market, LLC Listing Rules’ (the “NASDAQ Listing Rules”) objective for listed companies to have at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+. The chart below provides certain information regarding the diversity of the Board as of December 31, 2024.
| | | | | | | | | | | | | | | | | | | | |
| Total Number of Directors | | Male | | Female | | Gender undisclosed |
| Part I: Gender Identity | | | | | | |
| Directors | | 10 | | 1 | | — |
| Part II: Demographic Background | | | | | | |
| White | | 6 | | — | | — |
| Asian | | 2 | | 1 | | — |
| Two or more races or ethnicities | | 1 | | — | | — |
| Did not disclose demographic background | | 1 | | — | | — |
| LGBTQ+ | | — | | — | | — |
Code of Business Conduct and Ethics
We have adopted a code of business conduct and ethics that applies to all our employees, officers and directors, including those officers responsible for financial reporting.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s executive officers, directors, and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of the Company’s common stock. Such officers, directors, and persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file with the SEC.
To our knowledge, based solely on review of the copies of such reports and amendments to such reports with respect to the year ended December 31, 2024, filed with the SEC, all required Section 16 reports under the Exchange Act for our directors, executive officers, principal accounting officer and beneficial owners of greater than 10% of our common stock were filed on a timely basis during the year ended December 31, 2024.
During the year ended December 31, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).
Item 11. Executive Compensation
Summary Compensation Table
The following Summary Compensation Table sets forth all compensation earned in all capacities during the fiscal years ended December 31, 2024 and 2023 by (i) our principal executive officer, (ii) our two most highly compensated executive officers, other than our principal executive officer, who were serving as executive officers as of December 31, 2024 and whose total compensation for the 2024 fiscal year, as determined by Regulation S-K, Item 402, exceeded $100,000, (iii) a person who would have been included as one of our two most highly compensated executive officers, other than our principal executive officer, but for the fact that he was not serving as one of our executive officers as of December 31, 2024, (the individuals falling within categories (i), (ii) and (iii) are collectively referred to as the “Named Executive Officers”):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | Salary | | Bonus (a) | | Stock
Award | | Option
Awards | | Non-Equity
Incentive
Plan
Compensation | | Non-Qualified
Deferred
Compensation
Earnings | | All Other
Compensation | | Total |
| | | $’000 | | $’000 | | $’000 | | $’000 | | $’000 | | $’000 | | $’000 | | $’000 |
| Michael J. Roper | | | | | | | | | | | | | | | | | |
| Chief Executive Officer of Sadot Group Inc. | 2024 | | 350 | | | 165 | | | 210 | | (b) | — | | (c) | — | | | — | | | — | | | 725 | |
| 2023 | | 350 | | | 225 | | | 131 | | | 76 | | (d) | — | | | — | | | — | | | 782 | |
| | | | | | | | | | | | | | | | | |
| Jennifer Black | | | | | | | | | | | | | | | | | |
| Chief Financial Officer of Sadot Group Inc. | 2024 | | 300 | | | 160 | | | 165 | | (e) | — | | (f) | — | | | — | | | — | | | 625 | |
| 2023 | | 264 | | | 225 | | | 65 | | | 76 | | (g) | — | | | — | | | — | | | 630 | |
| | | | | | | | | | | | | | | | | |
| Kevin Mohan | | | | | | | | | | | | | | | | | |
| Chief Investing Officer of Sadot Group Inc. | 2024 | | 200 | | | 150 | | | 185 | | (h) | — | | (i) | — | | | — | | | — | | | 535 | |
| 2023 | | 200 | | | 200 | | | 131 | | | 76 | | (j) | — | | | — | | | — | | | 607 | |
(a) Bonuses are earned in the year noted and paid out subsequently.
(b) Michael Roper was granted restricted stock awards on March 25, 2024 to acquire 20,000 shares of common stock, vesting quarterly over twelve quarters, commencing June 30, 2024. Michael was also granted restricted stock awards on November 18, 2024 to acquire 44,642 shares of common stock, vesting quarterly over twelve quarters, commencing December 31, 2024.
(c) Michael Roper was granted restricted stock awards on December 19, 2023, to acquire 30,000 shares of common stock, vesting quarterly over twelve quarters, commencing March 31, 2024.
(d) Jennifer Black was granted restricted stock awards on March 25, 2024 to acquire 10,000 shares of common stock, vesting quarterly over twelve quarters, commencing June 30, 2024. Jennifer was also granted restricted stock awards on November 18, 2024 to acquire 40,178 shares of common stock, vesting quarterly over twelve quarters, commencing December 31, 2024.
(e) Jennifer Black was granted restricted stock awards on December 19, 2023, to acquire 15,000 shares of common stock, vesting quarterly over twelve quarters, commencing March 31, 2024.
(f) Kevin Mohan was granted restricted stock awards on March 25, 2024 to acquire 20,000 shares of common stock, vesting quarterly over twelve quarters, commencing June 30, 2024. Kevin was also granted restricted stock awards on November 18, 2024 to acquire 37,202 shares of common stock, vesting quarterly over twelve quarters, commencing December 31, 2024.
(g) Kevin Mohan was granted restricted stock awards on December 19, 2023, to acquire 30,000 shares of common stock, vesting quarterly over twelve quarters, commencing March 31, 2024.
(h) Michael Roper was granted a stock options to acquire 3,107 shares and 6,893 shares of common stock on February 27, 2023 and March 15, 2023, respectively.
(i) Jennifer Black was granted a stock option to acquire 10,000 shares of common stock on February 27, 2023.
(j) Kevin Mohan was granted a stock option to acquire 10,000 shares of common stock on February 27, 2023.
A summary of option activity during the years ended December 31, 2024 and 2023 is presented below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Weighted-average
exercise
price | | Number of
options | | Weighted-average
remaining life
(in years) | | Aggregate intrinsic value |
| $ | | | | | | $’000 |
| Outstanding, December 31, 2022 | 15.23 | | | 41,250 | | 3.53 | | 156 | |
| Granted | 15.05 | | | 60,000 | | 5.42 | | — | |
| Exercised | — | | | — | | N/A | | — | |
| Forfeited | 33.94 | | | (18,500) | | N/A | | — | |
| Outstanding, December 31, 2023 | 10.91 | | | 82,750 | | 4.26 | | — | |
| Granted | — | | | — | | N/A | | — | |
| Exercised | — | | | — | | N/A | | — | |
| Forfeited | 15.05 | | | (1,500) | | N/A | | — | |
| Outstanding, December 31, 2024 | 10.84 | | | 81,250 | | 3.17 | | — | |
| Exercisable and vested, December 31, 2024 | 10.03 | | | 36,926 | | 3.07 | | — | |
On February 27, 2023, we issued options to purchase an aggregate of 38,107 shares of our common stock. The options had an exercise price of $15.05 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On March 15, 2023, we issued options to purchase 6,893 shares of our common stock. The options had an exercise price of $15.05 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On November 27, 2023, there were 10,000 shares forfeited upon the expiration of the options.
On December 21, 2023, there were 8,500 shares forfeited upon the departure of board members.
On January 21, 2024 there were 1,500 shares forfeited upon the expiration of the options.
Employment Agreements
Catia Jorge
On February 10, 2025, the Company and Sadot Brasil Ltda. (“Sadot Brasil”), the Company’s wholly owned subsidiary, entered into an Employment Agreement with Ms. Jorge effective February 10, 2025. During the term of the Employment Agreement, Ms. Jorge will serve as Chief Executive Officer for both the Company and Sadot Brasil and will be entitled to a base salary at the annualized rate of $0.3 million. In addition, Ms. Jorge will be entitled to a one time bonus of $0.5 million of which half will be payable upon the 90 day anniversary of her engagement and the balance to be paid on the 180 day anniversary (the “Bonus”). Ms. Jorge will also receive a one time grant of $0.1 million in restricted stock grants. Further, the Company will make a contribution of up to $16.0 thousand per annum contribution to a private pension plan. The restricted stock grant vests quarterly over one year in equal quarterly installments commencing January 1, 2025, which shall be priced and issued on the third trading day immediately following the filling the Form 10K Annual Report for such applicable year. The per share price will be the closing price immediately prior to the date of each grant. If Ms. Jorge is terminated by the Company for any reason other than cause Ms. Jorge will be entitled to a severance package of 18 months of salary. Ms. Jorge’s compensation, which, except for the Bonus, is denominated in Brazilian Real, has been converted to U.S. Dollars for the purpose of this disclosure. Please note that the conversion rate used for disclosure purposes is is 6 Reais to every 1 U. S. Dollar as of February 10, 2025. Actual payments to Ms. Jorge will be made in Brazilian Real, and the amounts received may vary based on fluctuations in the exchange rate at the time of payment. This disclosure is intended to provide transparency regarding the compensation agreed upon in the Brazilian Real currency, which is the operational currency for Mr. Jorge’s compensation unless noted otherwise.
Jennifer Black
On February 9, 2025 the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement. Pursuant to the Executive Employment Agreement entered with Ms. Black (the “Black Agreement”), Ms. Black will continue to serve as Chief Financial Officer, reporting directly to the Company’s Chief Executive Officer. During the term of the Black Agreement, Ms. Black is entitled to a base salary at the annualized rate of $0.4 million consisting of an annual cash salary of $0.3 million and an annual restricted stock grant of $0.1 million vesting quarterly over one year in equal quarterly installments commencing January 1, 2025 which shall be priced and issued on the third trading day immediately following the filing of the Form 10K Annual Report for such applicable year. Ms. Black will be eligible for a discretionary performance bonus to be determined by the Board annually with the annual bonus for the year ended December 31, 2025 to be equal to 75% of the cash salary. If Ms. Black is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such equity grant. If Ms. Black is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Black will be entitled to a severance payment equal 12 months of the annual compensation, all bonuses earned and all equity compensation shall be fully accelerated.
Michael Roper
On February 9, 2025 the Company entered into an Executive Employment Agreement with Michael Roper (the “Roper Agreement”), which replaced his prior employment agreement. Pursuant to the Roper Agreement, Mr. Roper will transition to the role of Chief Governance and Compliance Officer, reporting directly to the Company’s Chief Executive Officer. During the term of the Roper Agreement, Mr. Roper is entitled to a base salary at the annualized rate of $0.4 million consisting of an annual cash salary of $0.3 million and an annual restricted stock grant of $0.1 million vesting quarterly over one year in equal quarterly installments commencing January 1, 2025 which shall be priced and issued on the third trading day immediately following the filing of the Form 10K Annual Report for such applicable year. Mr. Roper will be eligible for a discretionary performance bonus to be determined by the Board annually with the annual bonus for the year ended December 31, 2025 to be equal to 75% of the cash salary. If Mr. Roper is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such equity grant. If Mr. Roper is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Roper will be entitled to a severance payment equal 18 months of the annual compensation, all bonuses earned and all equity compensation shall be fully accelerated.
Kevin Mohan
On November 16, 2022, the Company entered into an Executive Employment Agreement with Kevin Mohan (the “Mohan Agreement”), which replaced his prior employment agreement. Pursuant to the Mohan Agreement, Mr. Mohan will continue to be employed as Chief Investment Officer of the Company on an at will basis. During the term of the Employment Agreement, Mr. Mohan is entitled to a base salary at the annualized rate of $0.2 million. Mr. Mohan will be eligible for a discretionary performance bonus up to 75% of his annual salary. If Mr. Mohan is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Mohan is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Mohan will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Mohan Agreement, and all equity compensation shall be fully accelerated.
Kenn Miller
On November 16, 2022, the Company entered into an Executive Employment Agreement with Kenn Miller (the “Miller Agreement”), which replaced his prior employment agreement. Pursuant to the Miller Agreement, Mr. Miller will continue to be employed as Chief Operating Officer of the Company on an at will basis. During the term of the Miller Agreement, Mr. Miller is entitled to a base salary at the annualized rate of $0.3 million. Mr. Miller will be eligible for a discretionary performance bonus up to 75% of his annual salary. If Mr. Miller is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Miller is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Miller will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 12 months following the second anniversary of the Miller Agreement, and all equity compensation shall be fully accelerated.
Aimee Infante
On November 16, 2022, the Company entered into an Executive Employment Agreement with Aimee Infante (the “Infante Agreement”), which replaced her prior employment agreement. Pursuant to the Infante Agreement, Ms. Infante will continue to be employed as Chief Marketing Officer of the Company on an at will basis. During the term of the Infante Agreement, Ms. Infante is entitled to a base salary at the annualized rate of $0.2 million. Ms. Infante will be eligible for a discretionary performance bonus up to 25% of her annual salary. If Ms. Infante is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Infante is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Infante will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Infante Agreement, and all equity compensation shall be fully accelerated.
Elements of Compensation
Base Salary
Messrs. Roper, Miller, Mohan, and Mmes. Jorge, Black and Infante received a fixed base salary in an amount determined in accordance with their then employment agreement with Sadot Group Inc., and based on a number of factors, including:
•The nature, responsibilities and duties of the officer’s position;
•The officer’s expertise, demonstrated leadership ability and prior performance;
•The officer’s salary history and total compensation, including annual cash bonuses and long-term incentive compensation; and
•The competitiveness of the market for the officer’s services.
Bonus
Messrs. Roper, Mohan and Mrs. Black earned discretionary performance-based bonuses during the years ended December 31, 2024, and 2023, pursuant to their employment agreements.
Restricted Stock Award
In fiscal year 2023, we issued 75,000 shares of our restricted common stock, with a fair value of $0.3 million, to three members of our executive team.
In fiscal year 2024, we issued172,022 shares of our restricted common stock, with a fair value of $0.6 million, to three members of our executive team.
Stock Options
On February 27, 2023, we issued options to purchase an aggregate of 38,107 shares of our common stock. The options had an exercise price of $15.05 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On March 15, 2023, we issued options to purchase 6,893 shares of our common stock. The options had an exercise price of $15.05 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On December 21, 2023, there were 8,500 shares forfeited upon the departure of board members.
On January 21, 2024 there were 1,500 shares forfeited upon the expiration of the options.
Equity Incentive Plans
2021 Plan
The Company’s board of directors and shareholders approved and adopted on October 7, 2021 the 2021 Equity Incentive Plan (“2021 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2021 Plan, the Company reserved 150,000 shares of common stock for issuance. As of the date of the issuance of these Consolidated Financial Statements 65,643 shares have been issued and 74,357 option to purchase shares have been awarded under the 2021 Plan.
2023 Plan
The Company’s board of directors and shareholders approved and adopted on February 28, 2023 the 2023 Equity Incentive Plan (“2023 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2023 Plan, the Company reserved 250,000 shares of common stock for issuance. As of the date of the issuance of these Consolidated Financial Statements 242,404 shares of common stock for issuance have been issued and 6,893 option to purchase shares have been awarded under the 2023 Plan.
2024 Plan
The Company’s board of directors and shareholders approved and adopted on October 27, 2023 the 2024 Equity Incentive Plan (“2024 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock Units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2024 Plan, the Company reserved 750,000 shares of common stock for issuance. As of December 31, 2024, 401,936 shares have been issued under the 2024 Plan.
Administration
The Company’s Board of Directors or a committee appointed by the Board (the “Committee”) will administer the Plan. The Committee will have the authority, without limitation (i) to designate Participants to receive Awards, (ii) determine the types of Awards to be granted to Participants, (iii) determine the number of shares of common stock to be covered by Awards, (iv) determine the terms and conditions of any Awards granted under the Plan, (v) determine to what extent and under what circumstances Awards may be settled in cash, shares of common stock, other securities, other Awards or other property, or canceled, forfeited or suspended, (vi) determine whether, to what extent, and under what circumstances the delivery of cash, Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be made; (vii) interpret, administer, reconcile any inconsistency in, settle any controversy regarding, correct any defect in and/or complete any omission in this Plan and any instrument or agreement relating to, or Award granted under, this Plan; (viii) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of this Plan; (ix) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, Awards; (x) reprice existing Awards with shareholder approval or to grant Awards in connection with or in consideration of the cancellation of an outstanding Award with a higher price; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Plan. The Committee will have full discretion to administer and interpret the Plan and to adopt such rules, regulations and procedures as it deems necessary or advisable and to determine, among other things, the time or times at which the awards may be exercised and whether and under what circumstances an award may be exercised.
Eligibility
Employees, directors, officers, advisors and consultants of the Company or its affiliates are eligible to participate in the Plan and are referred to as “Participants”. The Committee has the sole and complete authority to determine who will be granted an Award under the Plan, however, it may delegate such authority to one or more officers of the Company under the circumstances set forth in the Plan.
Number of Shares Authorized
Up to approximately 150,000 shares of common stock may be issued pursuant to awards granted under the 2021 Plan, 250,000 under the 2023 Plan and 750,000 under the 2024 Plan.
If an Award is forfeited, canceled, or if any Option terminates, expires or lapses without being exercised, the Common Stock subject to such Award will again be made available for future grant. However, shares that are used to pay the exercise price of an Option or that are withheld to satisfy the Participant’s tax withholding obligation will not be available for re-grant under the Plan.
If there is any change in the Company’s corporate pro or structure, the Committee in its sole discretion may make substitutions or adjustments to the number of shares of common stock reserved for issuance under the Plan, the number of shares covered by Awards then outstanding under the Plan, the limitations on Awards under the Plan, the exercise price of outstanding Options and such other equitable substitution or adjustments as it may determine appropriate.
The Plan has a term of ten years and no further Awards may be granted under the Plan after that date.
Awards Available for Grant
The Committee may grant Awards of Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Stock Bonus Awards, Performance Compensation Awards (including cash bonus awards) or any combination of the foregoing. Notwithstanding, the Committee may not grant to any one person in any one calendar year Awards (i) for more than 50% of the Available Shares in the aggregate or (ii) payable in cash in an amount exceeding $10,000,000 in the aggregate.
Options
The Committee will be authorized to grant Options to purchase Common Stock that are either “qualified,” meaning they are intended to satisfy the requirements of Code Section 422 for Incentive Stock Options, or “non-qualified,” meaning they are not intended to satisfy the requirements of Section 422 of the Code. Options granted under the Plan will be subject to the terms and conditions established by the Committee. Under the terms of the Plan, unless the Committee determines otherwise in the case of an Option substituted for another Option in connection with a corporate transaction, the exercise price of the Options will not be less than the fair market value (as determined under the Plan) of the shares of common stock on the date of grant. Options granted under the Plan will be subject to such terms, including the exercise price and the conditions and timing of exercise, as may be determined by the Committee and specified in the applicable award agreement. The maximum term of an Option granted under the Plan will be ten years from the date of grant (or five years in the case of an Incentive Stock Option granted to a 10% stockholder). Payment in respect of the exercise of an Option may be made in cash or by check, by surrender of unrestricted shares of Common Stock (at their fair market value on the date of exercise) that have been held by the participant for any period deemed necessary by the Company’s accountants to avoid an additional compensation charge or have been purchased on the open market, or the Committee may, in its discretion and to the extent permitted by law, allow such payment to be made through a broker-assisted cashless exercise mechanism, a net exercise method, or by such other method as the Committee may determine to be appropriate.
Stock Appreciation Rights
The Committee will be authorized to award Stock Appreciation Rights (or “SARs”) under the Plan. SARs will be subject to such terms and conditions as established by the Committee. A SAR is a contractual right that allows a participant to receive, either in the form of cash, shares or any combination of cash and shares, the appreciation, if any, in the value of a share over a certain period of time. A SAR granted under the Plan may be granted in tandem with an option and SARs may also be awarded to a participant independent of the grant of an Option. SARs granted in connection with an Option shall be subject to terms similar to the Option which corresponds to such SARs. SARs shall be subject to terms established by the Committee and reflected in the award agreement.
Restricted Stock
The Committee will be authorized to award Restricted Stock under the Plan. Unless otherwise provided by the Committee and specified in an award agreement, restrictions on Restricted Stock will lapse after three years of service with the Company. The Committee will determine the terms of such Restricted Stock awards. Restricted Stock are shares of common stock that generally are non-transferable and subject to other restrictions determined by the Committee for a specified period. Unless the Committee determines otherwise or specifies otherwise in an award agreement, if the participant terminates employment or services during the restricted period, then any unvested restricted stock will be forfeited.
Restricted Stock Unit Awards
The Committee will be authorized to award Restricted Stock Unit awards. Unless otherwise provided by the Committee and specified in an award agreement, Restricted Stock Units will vest after three years of service with the Company. The Committee will determine the terms of such Restricted Stock Units. Unless the Committee determines otherwise or specifies otherwise in an award agreement, if the participant terminates employment or services during the period of time over which all or a portion of the units are to be earned, then any unvested units will be forfeited. At the election of the Committee, the participant will receive a number of shares of common stock equal to the number of units earned or an amount in cash equal to the fair market value of that number of shares at the expiration of the period over which the units are to be earned or at a later date selected by the Committee.
Stock Bonus Awards
The Committee will be authorized to grant Awards of unrestricted shares of common stock or other Awards denominated in shares of common stock, either alone or in tandem with other Awards, under such terms and conditions as the Committee may determine.
Performance Compensation Awards
The Committee will be authorized to grant any Award under the Plan in the form of a Performance Compensation Award exempt from the requirements of Section 162(m) of the Code by conditioning the vesting of the Award on the attainment of specific performance criteria of the Company and/or one or more Affiliates, divisions or operational units, or any combination thereof, as determined by the Committee. The Committee will select the performance criteria based on one or more of the following factors: (i) revenue; (ii) sales; (iii) profit (net profit, gross profit, operating profit, economic profit, profit margins or other corporate profit measures); (iv) earnings (EBIT, EBITDA, earnings per share, or other corporate profit measures); (v) net income (before or after taxes, operating income or other income measures); (vi) cash (cash flow, cash generation or other cash measures); (vii) stock price or performance; (viii) total stockholder return (stock price appreciation plus reinvested dividends divided by beginning share price); (ix) economic value added; (x) return measures (including, but not limited to, return on assets, capital, equity, investments or sales, and cash flow return on assets, capital, equity, or sales); (xi) market share; (xii) improvements in capital structure; (xiii) expenses (expense management, expense ratio, expense efficiency ratios or other expense measures); (xiv) business expansion or consolidation (acquisitions and divestitures); (xv) internal rate of return or increase in net present value; (xvi) working capital targets relating to inventory and/or accounts receivable; (xvii) inventory management; (xviii) service or product delivery or quality; (xix) customer satisfaction; (xx) employee retention; (xxi) safety standards; (xxii) productivity measures; (xxiii) cost reduction measures; and/or (xxiv) strategic plan development and implementation.
Transferability
Each Award may be exercised during the Participant’s lifetime only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative and may not be otherwise transferred or encumbered by a Participant other than by will or by the laws of descent and distribution. The Committee, however, may permit Awards (other than Incentive Stock Options) to be transferred to family members, a trust for the benefit of such family members, a partnership or limited liability company whose partners or stockholders are the Participant and his or her family members or anyone else approved by it.
Amendment
The Plan will have a term of ten years. The Company’s board of directors may amend, suspend or terminate the Plan at any time; however, shareholder approval to amend the Plan may be necessary if the law or SEC so requires. No amendment, suspension or termination will materially and adversely affect the rights of any Participant or recipient of any Award without the consent of the Participant or recipient.
Change in Control
Except to the extent otherwise provided in an Award or required by applicable law, in the event of a Change in Control, upon the occurrence of a Change in Control, the Committee is authorized, but not obligated, to make any of the following adjustments (or any combination thereof) in the terms and conditions of outstanding Awards: (a) continuation or assumption of outstanding Awards by the surviving company; (b) substitution by the surviving company of equity, equity-based and/or cash awards with substantially the same terms for outstanding Awards; (c) accelerated exercisability, vesting and/or lapse of restrictions under outstanding Awards immediately prior to the occurrence of the Change in Control; (d) upon written notice, provide that any outstanding Awards must be exercised, to the extent then exercisable, during a reasonable period determined by the Committee and at the end of such period, any unexercised Awards will terminate; and I cancellation of all or any portion of outstanding Awards for fair value (in the form of cash, shares or other property) and which value may be zero.
U.S. Federal Income Tax Consequences
The following is a general summary of the material U.S. federal income tax consequences of the grant and exercise and vesting of Awards under the Plan and the disposition of shares acquired pursuant to the exercise of such Awards. This summary is intended to reflect the current provisions of the Code and the regulations thereunder. However, this summary is not intended to be a complete statement of applicable law, nor does it address foreign, state, local and payroll tax considerations. Moreover, the U.S. federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular circumstances of such participant.
Options
There are a number of requirements that must be met for a particular Option to be treated as an Incentive Stock Option. One such requirement is that Common Stock acquired through the exercise of an Incentive Stock Option cannot be disposed of before the later of (i) two years from the date of grant of the Option, or (ii) one year from the date of its exercise. Holders of Incentive Stock Options will generally incur no federal income tax liability at the time of grant or upon exercise of those Options. However, the spread at exercise will be an “item of tax preference,” which may give rise to “alternative minimum tax” liability for the taxable year in which the exercise occurs. If the holder does not dispose of the shares before the later of two years following the date of grant and one year following the date of exercise, the difference between the exercise price and the amount realized upon disposition of the shares will constitute long-term capital gain or loss, as the case may be. Assuming both holding periods are satisfied, no deduction will be allowed to the Company for federal income tax purposes in connection with the grant or exercise of the Incentive Stock Option. If, within two years following the date of grant or within one year following the date of exercise, the holder of shares acquired through the exercise of an Incentive Stock Option disposes of those shares, the Participant will generally realize taxable compensation at the time of such disposition equal to the difference between the exercise price and the lesser of the Fair Market Value of the share on the date of exercise or the amount realized on the subsequent disposition of the shares, and that amount will generally be deductible by the Company for federal income tax purposes, subject to the possible limitations on deductibility under Sections 280G and 162(m) of the Code for compensation paid to executives designated in those Sections. Finally, if an otherwise Incentive Stock Option becomes first exercisable in any one year for shares having an aggregate value in excess of $100,000 (based on the date of grant value), the portion of the Incentive Stock Option in respect of those excess shares will be treated as a non-qualified stock option for federal income tax purposes.
No income will be realized by a Participant upon grant of a Non-Qualified Stock Option. Upon the exercise of a Non-Qualified Stock Option, the Participant will recognize ordinary compensation income in an amount equal to the excess, if any, of the Fair Market Value of the underlying exercised shares over the Option exercise price paid at the time of exercise. Such income will be subject to income tax withholding, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income.
The Company will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Restricted Stock
A Participant will not be subject to tax upon the grant of an Award of Restricted Stock unless the Participant otherwise elects to be taxed at the time of grant pursuant to Section 83(b) of the Code. On the date an Award of Restricted Stock becomes transferable or is no longer subject to a substantial risk of forfeiture, the Participant will recognize ordinary compensation income equal to the difference between the Fair Market Value of the shares on that date over the amount the Participant paid for such shares, if any. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. If the Participant made an election under Section 83(b) of the Code, the Participant will recognize ordinary compensation income at the time of grant equal to the difference between the Fair Market Value of the shares on the date of grant over the amount the Participant paid for such shares, if any, and any subsequent appreciation in the value of the shares will be treated as a capital gain upon sale of the shares. Special rules apply to the receipt and disposition of Restricted Shares received by officers and directors who are subject to Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”). The Company will be able to deduct, at the same time as it is recognized by the Participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Restricted Stock Units
A Participant will not be subject to tax upon the grant of a Restricted Stock Unit Award. Rather, upon the delivery of shares or cash pursuant to a Restricted Stock Unit Award, the Participant will recognize ordinary compensation income equal to the Fair Market Value of the number of shares (or the amount of cash) the Participant actually receives with respect to the Award. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. The Company will be able to deduct the amount of taxable compensation recognized by the Participant for U.S. federal income tax purposes, but the deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
SARs
No income will be realized by a Participant upon grant of an SAR. Upon the exercise of an SAR, the Participant will recognize ordinary compensation income in an amount equal to the Fair Market Value of the payment received in respect of the SAR. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. The Company will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Stock Bonus Awards
A Participant will recognize ordinary compensation income equal to the difference between the Fair Market Value of the shares on the date the shares of common stock subject to the Award are transferred to the Participant over the amount the Participant paid for such shares, if any, and any subsequent appreciation in the value of the shares will be treated as a capital gain upon sale of the shares. The Company will be able to deduct, at the same time as it is recognized by the Participant, the amount of taxable compensation to the Participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Section 162(m)
In general, Section 162(m) of the Code denies a publicly held corporation a deduction for U.S. federal income tax purposes for compensation in excess of $1,000,000 per year paid to any “covered employee.” Covered employees include any individual who served as chief executive officer or chief financial officer during the taxable year, in addition to the three most highly compensated individuals aside from the chief executive officer and chief financial officer. Additionally, covered employees include any previously covered employee for any taxable year beginning after December 31, 2016. The Plan is intended to satisfy an exception with respect to grants of Options to covered employees. In addition, the Plan was designed to permit certain Awards of Restricted Stock, Restricted Stock Units, cash bonus awards and other Awards to be awarded as performance compensation awards intended to qualify under the “performance-based compensation” exception to Section 162(m) of the Code.
On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law. The TCJA repealed the performance-based compensation exception to the Section 162(m) $1 million limitation on compensation to covered employees of publicly held corporations. This change was effective for tax years beginning after December 31, 2017. As a result of this change, any expense recognized upon exercise of stock options will be subject to the $1 million limitation under Section 162(m), even if based on performance.
New Plan Benefits
Future grants under the Plan will be made at the discretion of the Committee and, accordingly, are not yet determinable. In addition, the value of the Awards granted under the Plan will depend on a number of factors, including the Fair Market Value of the shares of common stock on future dates, the exercise decisions made by the Participants and/or the extent to which any applicable performance goals necessary for vesting or payment are achieved. Consequently, it is not possible to determine the benefits that might be received by Participants receiving discretionary grants under, or having their annual bonus paid pursuant to, the Plan.
Interests of Directors or Officers
The Company’s directors may grant Awards under the Plan to themselves as well as to the Company’s officers and other employees, consultants and advisors.
Equity Compensation Plan Information
The following table provides information, as of December 31, 2024, with respect to equity securities authorized for issuance under compensation plans:
| | | | | | | | | | | | | | | | | | | | |
| Plan Category | | No. of securities
to be issued
upon exercise
of outstanding
options
under the plan | | Weighted-average exercise price of outstanding options under the plan | | No. of
securities
remaining
available
for future
issuance |
| | | | $ | | |
| 2024 Equity compensation plans approved by security holders | | — | | — | | | 348,064 |
| 2023 Equity compensation plans approved by security holders | | 6,893 | | 15.05 | | — |
| 2021 Equity compensation plans approved by security holders | | 74,357 | | 10.45 | | — |
| Total | | 81,250 | | 10.84 | | | 348,064 |
Director Compensation
On November 11, 2022, the board of directors approved a new board compensation plan that would increase the cash compensation to $22.0 thousand to be paid quarterly within 30 days of the close of each quarter, which was retroactively applied for the full fourth quarter of 2022.
In addition, on an ongoing basis pursuant to the approved board compensation plan each director will receive $8.0 thousand in value of common stock per year for service as director, $6.0 thousand in value of shares of common stock per year for service on each committee and $4.0 thousand in value of shares of common stock per year for service as chair for such committee. The number of shares to be issued would be based upon the closing price of the last trading date of each calendar quarter. The shares of common stock for committee service will be limited to two committees.
On March 26, 2024, the Board of Directors approved an updated compensation structure for members of the Board. The updated compensation structure provides that each member will receive $22.0 thousand in annual cash compensation as well as 10,000 shares of common stock. Further, each committee member will receive an additional $6.0 thousand per year. The chairperson of the below committees will receive additional annual compensation:
•Chairperson of the Audit Committee will receive an additional $4.0 thousand in cash and 1,000 shares of common.
•Chairperson of the Compensation Committee will receive an additional $4.0 thousand in cash and 600 shares of
common stock.
•Chairperson of the Governance and ESG Committees will receive an additional $4.0 thousand in cash and 400 shares of common stock.
Kevin Mohan is an employee-director and does not receive compensation for serving in his role as a director.
The following table provides information relating to compensation of our directors for our fiscal year ended December 31, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Fees earned
or paid in cash | | Stock awards(a) | | | | Option awards | | Non-equity incentive
plan compensation | | Non-qualified deferred
compensation
earnings | | All other
compensation | | Total |
| | $’000 | | $’000 | | | | $’000 | | $’000 | | $’000 | | $’000 | | $’000 |
| Mark McKinney | | 34 | | | 31 | | (b) | | — | | | — | | | — | | | — | | | 65 | |
| Stephen A. Spanos | | 32 | | | 36 | | (e) | | — | | | — | | | — | | | — | | | 68 | |
| Benjamin Petel | | 32 | | | 32 | | (c) | | — | | | — | | | — | | | — | | | 64 | |
| Na Yeon (“Hannah”) Oh | | 28 | | | 31 | | (c) | | — | | | — | | | — | | | — | | | 59 | |
| Ray Shankar | | 38 | | | 33 | | (d) | | — | | | — | | | — | | | — | | | 71 | |
| Marvin Yeo | | 28 | | | 31 | | (b) | | — | | | — | | | — | | | — | | | 59 | |
| Paul Sansom | | 28 | | | 31 | | (b) | | — | | | — | | | — | | | — | | | 59 | |
| David Errington | | 32 | | | 32 | | (c) | | — | | | — | | | — | | | — | | | 64 | |
| Dr. Ahmed Khan | | 28 | | | 31 | | (b) | | — | | | — | | | — | | | — | | | 59 | |
(a) On January 4, 2024 the Board of Directors were granted restricted stock awards at a price of $4.01 per share. The restricted stock awards were accrued and earned in 2023 and fully vested upon issuance. There were four previous directors that received a total of 3,954 shares that are not included in the number above. The current directors share issued are included in the individual totals above.(b) On March 26, 2024 10,000 shares of restricted stock awards were granted at a price of $2.899 per share. The restricted stock awards vest ratably over 12 quarters starting March 31, 2024.
(c) On March 26, 2024 10,400 shares of restricted stock awards were granted at a price of $2.899 per share. The restricted stock awards vest ratably over 12 quarters starting March 31, 2024.
(d) On March 26, 2024 10,600 shares of restricted stock awards were granted at a price of $2.899 per share. The restricted stock awards vest ratably over 12 quarters starting March 31, 2024.
(e) On March 26, 2024 11,000 shares of restricted stock awards were granted at a price of $2.899 per share. The restricted stock awards vest ratably over 12 quarters starting March 31, 2024.
Executive Compensation Philosophy
Our Board of Directors determines the compensation given to our executive officers in their sole determination. Our Board of Directors reserves the right to pay our executives or any future executives a salary, and/or issue them shares of common stock issued in consideration for services rendered and/or to award incentive bonuses which are linked to our performance, as well as to the individual executive officer’s performance. This package may also include long-term stock-based compensation to certain executives, which is intended to align the performance of our executives with our long-term business strategies. Additionally, while our Board of Directors has not granted any performance base stock options to date, the Board of Directors reserves the right to grant such options in the future, if the Board in its sole determination believes such grants would be in the best interests of the Company.
Incentive Bonus
The Board of Directors may grant incentive bonuses to our executive officers and/or future executive officers in its sole discretion, if the Board of Directors believes such bonuses are in the Company’s best interest, after analyzing our current business objectives and growth, if any, and the amount of revenue we are able to generate each month, which revenue is a direct result of the actions and ability of such executives.
Long-Term, Stock-Based Compensation
In order to attract, retain and motivate executive talent necessary to support the Company’s long-term business strategy we may award our executives and any future executives with long-term, stock-based compensation in the future, at the sole discretion of our Board of Directors.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information about the beneficial ownership of our common stock at March 11, 2025, for:
•each person, or group of affiliated persons, whom we know to beneficially own more than 5% of our common stock;
•each of our named executive officers;
•each of our directors; and
•all of our executive officers and directors as a group.
We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options or warrants or upon conversion of a security that are either exercisable or convertible on or before a date that is 60 days after March 11, 2025. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
Except as otherwise noted below, the address for persons listed in the table is c/o Sadot Group Inc., 295 E Renfro, Suite 209, Burleson, TX 76028.
The percentage ownership information shown in the column labeled “Percentage of shares outstanding” is based upon 5,865,476 shares of common stock outstanding as of March 11, 2025.
| | | | | | | | | | | |
| Name of beneficial owner | Number of shares beneficially owned (1) | | Percentage of shares outstanding prior to offering (1) |
| 5% Stockholders: | | | |
Aggia LLC FZ (2) | 675,163 | | 11.51 | % |
Raymond and Beck Graf (3) | 346,751 | | 5.91 | % |
Armistice Capital Master Fund Ltd. (4) | 411,523 | | 7.02 | % |
| Directors and Named Executive Officers: | | | |
Michael J. Roper (5) | 117,365 | | 2.00 | % |
Kevin Mohan (6) | 109,763 | | 1.87 | % |
Jennifer Black (7) | 75,965 | | 1.30 | % |
Kenneth Miller (8) | 10,590 | | * |
Aimee Infante (9) | 6,437 | | * |
Stephen Spanos (10) | 26,252 | | * |
Ray Shankar (11) | 11,616 | | | * |
Hannah Oh (12) | 11,016 | | | * |
Benjamin Petel (13) | 31,540 | | | * |
Marvin Yeo (14) | 10,937 | | | * |
Paul Sansom (15) | 10,937 | | | * |
Mark McKinney (16) | 10,815 | | | * |
David Errington (17) | 13,915 | | | * |
Dr. Ahmed Khan (18) | 11,089 | | | * |
| All executive officers and directors as a group (14 persons) | 458,237 | | 7.81 | % |
*Denotes less than 1%
(1)Beneficial ownership as reported in the above table has been determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended, and is not necessarily indicative of beneficial ownership for any other purpose. The number of shares of common stock shown as beneficially owned includes shares of common stock issuable upon (i) the exercise of stock options that will become exercisable within 60 days of March 11, 2025, (ii) the conversion of the convertible promissory notes into shares of our common stock, and (iii) the exercise of warrants that will become exercisable within 60 days of March 11, 2025 Shares of common stock issuable pursuant to the foregoing methods are deemed outstanding for purposes of calculating the percentage of beneficial ownership of the person or entity holding such securities. Accordingly, the total percentages of beneficial ownership are in excess of one hundred percent (100%).
(2)Aggia LLC FZ beneficially owns 675,163 shares of common stock of the Company.
(3)Raymond and Becky Graf beneficially owns 346,751 shares of common stock of the Company.
(4)Armistice Capital, LLC ("Armistice Capital") is the investment manager of Armistice Capital Master Fund Ltd. (the "Master Fund"), the direct holder of the Shares, and pursuant to an Investment Management Agreement, Armistice Capital exercises voting and investment power over the securities of the Issuer held by the Master Fund and thus may be deemed to beneficially own the securities of the Issuer held by the Master Fund. Mr. Boyd, as the managing member of Armistice Capital, may be deemed to beneficially own the securities of the Issuer held by the Master Fund. The Master Fund specifically disclaims beneficial ownership of the securities of the Issuer directly held by it by virtue of its inability to vote or dispose of such securities as a result of its Investment Management Agreement with Armistice Capital. Master Fund holds (i) a Common Stock Purchase Warrant dated November 22, 2021 to acquire 361,011 shares of common stock at an exercise price of $13.85 which includes a beneficial ownership limitation limiting Master Fund’s ability to acquire in excess of 4.9% of the outstanding shares of common stock and (ii) a Common Stock Purchase Warrant dated April 9, 2021 to acquire 411,523 shares of common stock at an exercise price of $24.30 which includes a beneficial ownership limitation limiting Master Fund’s ability to acquire in excess of 9.9% of the outstanding shares of common stock.
(5)Michael J. Roper beneficially owns directly 117,365 shares of common stock of the Company (i) 101,063 shares of common stock of Sadot Group Inc. for serving as the Chief Executive Officer of the Company and (ii) 5,800 shares of common stock of the Company purchased on the open market and (iii) 10,502 shares of vested but unexercised stock options.
(6)Kevin Mohan beneficially owns (i) indirectly 559 shares of common stock of the Company through various family members that reside in the same household as Kevin Mohan and (ii) directly 96,904 shares of common stock of Sadot Group Inc, for serving in various roles in the Company, (iii) 3,300 shares of common stock of the Company purchased on the open market and (iv) directly 9,000 shares of vested but unexercised stock options.
(7)Jennifer Black beneficially owns directly 75,965 shares of common stock of the Company (i) 64,935 shares of common stock of Sadot Group Inc. for serving as the Chief Financial Officer of the Company, (ii) 4,080 shares of common stock of the Company purchased on the open market and (iii) 6,950 shares of vested but unexercised stock options.
(8)Kenneth Miller beneficially owns directly 10,590 shares of common stock of the Company (i) 3,215 shares of common stock of the Company for serving as Chief Operating Officer of the Company, (ii) 1,000 shares of common stock of the Company purchased on the open market and (iii) 6,375 shares of vested but unexercised stock options.
(9)Aimee Infante beneficially owns directly 6,437 shares of common stock of the Company (i) 261 shares of common stock for serving as the Chief Marketing Officer of the Company, (ii) 250 shares of common stock of the Company purchased on the open market and (iii) 5,926 shares of vested but unexercised stock options.
(10)Stephen Spanos beneficially owns directly 26,252 shares of common stock of the Company (i) 23,597 shares of common stock of the Company for services rendered as a board of director member, (ii) 1,530 of the common stock of through purchase on the open market and (iii) 1,125 shares of vested but unexercised stock options.
(11)Ray Shankar beneficially owns directly shares of common stock of the Company (i) 11,616 shares of common stock of the Company (i) 11,616 shares of common stock of the Company for services rendered as a board of director member.
(12)Hannah Oh beneficially owns directly shares of common stock of the Company (i) 11,016 shares of common stock of the Company (i) 11,016 shares of common stock of the Company for services rendered as a board of director member.
(13)Benjamin Petel beneficially owns directly shares of common stock of the Company (i) 31,540 shares of common stock of the Company (i) 31,540 shares of common stock of the Company for services rendered as a board of director member and consulting services.
(14)Marvin Yeo beneficially owns directly shares of common stock of the Company (i) 10,937 shares of common stock of the Company (i) 10,937 shares of common stock of the Company for services rendered as a board of director member.
(15)Paul Sansom beneficially owns directly shares of common stock of the Company (i) 10,937 shares of common stock of the Company (i) 10,937 shares of common stock of the Company for services rendered as a board of director member.
(16)Mark McKinney beneficially owns directly shares of common stock of the Company (i) 10,815 shares of common stock of the Company (i) 10,815 shares of common stock of the Company for services rendered as a board of director member.
(17)David Errington beneficially owns directly shares of common stock of the Company (i) 13,915 shares of common stock of the Company (i) 11,215 shares of common stock of the Company for services rendered as a board of director member and (ii) 2,700 shares of common stock of the Company purchased on the open market.
(18)Dr. Ahmed Khan beneficially owns directly shares of common stock of the Company (i) 11,089 shares of common stock of the Company (i) 10,815 shares of common stock of the Company for services rendered as a board of director member and (ii) 274 shares of common stock of the Company purchased on the open market.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Policies and Procedures for Related Party Transactions
Following this offering, pursuant to the written charter of our Audit Committee, the Audit Committee will be responsible for reviewing and approving, prior to our entry into any such transaction, all related party transactions and potential conflict of interest situations involving:
•any of our directors, director nominees or executive officers;
•any beneficial owner of more than 5% of our outstanding stock; and
•any immediate family member of any of the foregoing.
Our Audit Committee will review any financial transaction, arrangement or relationship that:
•involves or will involve, directly or indirectly, any related party identified above;
•would cast doubt on the independence of a director;
•would present the appearance of a conflict of interest between us and the related party; or
•is otherwise prohibited by law, rule or regulation.
The Audit Committee will review each such transaction, arrangement or relationship to determine whether a related party has, has had or expects to have a direct or indirect material interest. Following its review, the Audit Committee will take such action as it deems necessary and appropriate under the circumstances, including approving, disapproving, ratifying, canceling or recommending to management how to proceed if it determines a related party has a direct or indirect material interest in a transaction, arrangement or relationship with us. Any member of the Audit Committee who is a related party with respect to a transaction under review will not be permitted to participate in the discussions or evaluations of the transaction; however, the Audit Committee member will provide all material information concerning the transaction to the Audit Committee. The Audit Committee will report its action with respect to any related party transaction to the board of directors.
See Employment Agreements for Messrs. Roper, Miller, Mohan and Mmes. Jorge, Black and Infante in Item 11. Executive Compensation.
Transactions with Officers, Directors, and Executives of Sadot Group
On January 5, 2023, we issued an aggregate of 3,131 shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2022.
On February 27, 2023, we issued options to purchase an aggregate of 53,108 shares of our common stock. The options had an exercise price of $15.05 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On March 15, 2023, we issued options to purchase 6,893 shares of our common stock. The options had an exercise price of $15.05 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On April 5, 2023 the Company authorized the issuance of 2,974 shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2023.
On July 11, 2023, the Company authorized the issuance of an aggregate of 3,289 shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2023.
On December 19, 2023, the Company issued 101,460 RSA's to certain members of the board of directors and employees. Total RSA vested as a result of the departure of certain members of the board of directors were 17,640 shares for 2023. The remaining RSA vest ratably over 12 quarters with the first vesting starting on March 31, 2024.
On January 4, 2024, the Company authorized the issuance of an aggregate of 10,559 shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2023. The Company accrued for the liability as of December 31, 2023.
On March 25, 2024, the Company issued 50,000 RSA's to certain executives. Total RSA vest ratably over 12 quarters with the first vesting starting on June 30, 2024.
On March 26, 2024, the Company issued 102,400 RSA's to members of the board of directors. Total RSA vest ratably over 12 quarters with the first vesting starting on March 31, 2024.
On November 18, 2024, the Company issued 122,022 RSA's to certain executives. Total RSA vest ratably over 12 quarters with the first vesting starting on December 31, 2024.
On February 9, 2025 the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement. Pursuant to the Executive Employment Agreement entered with Ms. Black (the “Black Agreement”), Ms. Black will continue to serve as Chief Financial Officer, reporting directly to the Company’s Chief Executive Officer. During the term of the Black Agreement, Ms. Black is entitled to a base salary at the annualized rate of $0.4 million consisting of an annual cash salary of $0.3 million and an annual restricted stock grant of $0.1 million vesting quarterly over one year in equal quarterly installments commencing January 1, 2025 which shall be priced and issued on the third trading day immediately following the filing of the Form 10K Annual Report for such applicable year. Ms. Black will be eligible for a discretionary performance bonus to be determined by the Board annually with the annual bonus for the year ended December 31, 2025 to be equal to 75% of the cash salary. If Ms. Black is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such equity grant. If Ms. Black is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Black will be entitled to a severance payment equal 12 months of the annual compensation, all bonuses earned and all equity compensation shall be fully accelerated.
On February 9, 2025 the Company entered into an Executive Employment Agreement with Michael Roper (the “Roper Agreement”), which replaced his prior employment agreement. Pursuant to the Roper Agreement, Mr. Roper will transition to the role of Chief Governance and Compliance Officer, reporting directly to the Company’s Chief Executive Officer. During the term of the Roper Agreement, Mr. Roper is entitled to a base salary at the annualized rate of $0.4 million consisting of an annual cash salary of $0.3 million and an annual restricted stock grant of $0.1 million vesting quarterly over one year in equal quarterly installments commencing January 1, 2025 which shall be priced and issued on the third trading day immediately following the filing of the Form 10K Annual Report for such applicable year. Mr. Roper will be eligible for a discretionary performance bonus to be determined by the Board annually with the annual bonus for the year ended December 31, 2025 to be equal to 75% of the cash salary. If Mr. Roper is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such equity grant. If Mr. Roper is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Roper will be entitled to a severance payment equal 18 months of the annual compensation, all bonuses earned and all equity compensation shall be fully accelerated.
On February 10, 2025, the Company and Sadot Brasil Ltda. (“Sadot Brasil”), the Company’s wholly owned subsidiary, entered into an Employment Agreement with Ms. Jorge effective February 10, 2025. During the term of the Employment Agreement, Ms. Jorge will serve as Chief Executive Officer for both the Company and Sadot Brasil and will be entitled to a base salary at the annualized rate of $0.3 million. In addition, Ms. Jorge will be entitled to a one time bonus of $0.5 million of which half will be payable upon the 90 day anniversary of her engagement and the balance to be paid on the 180 day anniversary (the “Bonus”). Ms. Jorge will also receive a one time grant of $0.1 million in restricted stock grants. Further, the Company will make a contribution of up to $16.0 thousand per annum contribution to a private pension plan. The restricted stock grant vests quarterly over one year in equal quarterly installments commencing January 1, 2025, which shall be priced and issued on the third trading day immediately following the filling the Form 10K Annual Report for such applicable year. The per share price will be the closing price immediately prior to the date of each grant. If Ms. Jorge is terminated by the Company for any reason other than cause Ms. Jorge will be entitled to a severance package of 18 months of salary. Ms. Jorge’s compensation, which, except for the Bonus, is denominated in Brazilian Real, has been converted to U.S. Dollars for the purpose of this disclosure. Please note that the conversion rate used for disclosure purposes is is 6 Reais to every 1 U. S. Dollar as of February 10, 2025. Actual payments to Ms. Jorge will be made in Brazilian Real, and the amounts received may vary based on fluctuations in the exchange rate at the time of payment. This disclosure is intended to provide transparency regarding the compensation agreed upon in the Brazilian Real currency, which is the operational currency for Mr. Jorge’s compensation unless noted otherwise.
We have entered into indemnification agreements with each of our directors and entered into such agreements with certain of our executive officers. These agreements require us, among other things, to indemnify these individuals for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts reasonably incurred by such person in any action or proceeding, including any action by or in our right, on account of any services undertaken by such person on behalf of our Company or that person’s status as a member of our Board of Directors to the maximum extent allowed under Nevada law.
Item 14. Principal Accountant Fees and Services
Kreit & Chiu CPA LLP has served as our independent registered public accountants for the years ended December 31, 2024 and 2023.
The following is a summary of the fees billed or expected to be billed to us by our independent registered public accountants, for professional services rendered by Kreit & Chiu CPA LLP for the fiscal years ended December 31, 2024 and 2023:
| | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| $’000 | | $’000 |
Audit fees (1) | 314 | | | 277 | |
Audit-related fees (2) | — | | | — | |
| | | |
| | | |
| 314 | | | 277 | |
(1)Audit Fees consist of fees billed and expected to be billed for services rendered for the audit of our Consolidated Financial Statements for the fiscal years ended December 31, 2024 and 2023 and in connection with the filing of our Form 10-K, Form 10-Qs and multiple Forms S-1 and Forms S-3s.
(2)Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit of our financial statements and are not reported under “Audit Fees.”
The Audit Committee is responsible for the appointment, compensation and oversight of the work of the independent registered public accountants and approves in advance any services to be performed by the independent registered public accountants, whether audit-related or not. The Audit Committee reviews each proposed engagement to determine whether the provision of services is compatible with maintaining the independence of the independent registered public accountants. The fees shown above were pre-approved either by our Board or our Audit Committee.
PART IV
Item 15. Exhibits and Financial Statement Schedules
| | | | | | | | |
Exhibit
No. | | Exhibit Description |
| 3.1+ | | |
| | |
| 3.2+ | | |
| | |
| 3.3+ | | |
| | |
| 3.4+ | | |
| | |
| 3.5+ | | |
| | |
| 3.6+ | | |
| | |
| 3.7+ | | |
| | |
| 4.1+ | | |
| | |
| 4.2+ | | |
| | |
| 4.3+ | | |
| | |
| 4.4+ | | |
| | |
| 4.5+ | | |
| | |
| 4.6+ | | |
| | |
| 4.7+ | | |
| | |
| | | | | | | | |
| 4.8+ | | |
| | |
| 4.9* | | |
| | |
| 4.10+ | | |
| | |
| 10.1+ | | |
| | |
| 10.2+ | | |
| | |
| 10.3+ | | |
| | |
| 10.4+ | | |
| | |
| 10.5+ | | |
| | |
| 10.6+ | | |
| | |
| 10.7+ | | |
| | |
| 10.8+ | | |
| | |
| 10.9+ | | |
| | |
| 10.10+ | | |
| | |
| 10.11+ | | |
| | |
| 10.12+ | | |
| | | | | | | | |
| | |
| 10.13+ | | |
| | |
| 10.14+ | | |
| | |
| 10.15+ | | |
| | |
| 10.16+ | | |
| | |
| 10.17+ | | |
| | |
| 10.18+ | | |
| | |
| 10.19+ | | |
| | |
| 10.20+ | | |
| | |
| 10.21+ | | |
| | |
| 19.1* | | |
| | |
| 21.1* | | |
| | |
| 23.1* | | |
| | |
| 31.1* | | |
| | |
| 31.2* | | |
| | |
| 32.1* | | |
| | |
| | | | | | | | |
| 32.2* | | |
| | |
| 97.1+ | | |
| | |
| 101.INS | | Inline XBRL Instance Document* |
| 101.SCH | | Inline XBRL Schema Document* |
| 101.CAL | | Inline XBRL Calculation Linkbase Document* |
| 101.DEF | | Inline XBRL Definition Linkbase Document* |
| 101.LAB | | Inline XBRL Label Linkbase Document* |
| 101.PRE | | Inline XBRL Presentation Linkbase Document* |
| 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
†Includes management contracts and compensation plans and arrangements
*Filed herewith.
+Previously filed.
Item 16. Form 10-K Summary
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | |
| SADOT GROUP INC |
| |
| By: | /s/ Catia Jorge |
| | Catia Jorge |
| Dated: March 11, 2025 | | Chief Executive Officer (Principal Executive Officer) |
| | |
| By: | /s/ Jennifer Black |
| | Jennifer Black |
| | Chief Financial Officer (Principal Financial Officer) |
| | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | | | | |
| Name | | Title |
| | |
| /s/ Catia Jorge | | Chief Executive Officer |
| Catia Jorge | | (Principal Executive Officer) |
| | |
| /s/ Jennifer Black | | Chief Financial Officer |
| Jennifer Black | | (Principal Financial Officer) |
| | |
| /s/ Kevin Mohan | | Chief Investment Officer and Director |
| Kevin Mohan | | |
| | |
| /s/ Mark McKinney | | Director |
| Mark McKinney | | Chairman of the Board |
| | |
| /s/ Stephen A. Spanos | | Director |
| Stephen A. Spanos | | |
| | |
| /s/ Benjamin Petel | | Director |
| Benjamin Petel | | Secretary |
| | |
| /s/ Na Yeon Oh | | Director |
| Na Yeon Oh | | |
| | |
| /s/ Ray Shankar | | Director |
| Ray Shankar | | |
| | |
| /s/ Marvin Yeo | | Director |
| Marvin Yeo | | |
| | |
| /s/ Paul Sansom | | Director |
| Paul Sansom | | |
| | |
| /s/ David Errington | | Director |
| David Errington | | |
| | |
| /s/ Dr. Ahmed Khan | | Director |
| Dr. Ahmed Khan | | |
| | |
| /s/ Claudio Torres | | Director |
| Claudio Torres | | |
| | |
Sadot Group Inc.
Annual Report on Form 10-K
Consolidated Financial Statements
| | | | | | | | |
| | Page |
| | |
| | |
| | |
| Consolidated Financial Statements | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Sadot Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Sadot Group, Inc. as of December 31, 2024 and 2023, and the related consolidated statements of operations and other comprehensive income / (loss), changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Sadot Group, Inc. as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to Sadot Group, Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Sadot Group, Inc. is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Kreit & Chiu CPA LLP
We have served as Sadot Group, Inc.'s auditor since 2021.
New York, NY
March 11, 2025
Sadot Group Inc.
Consolidated Balance Sheets
| | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| $’000 | | $’000 |
| ASSETS | | | |
| Current assets: | | | |
| Cash | 1,786 | | | 1,354 | |
| Accounts receivable, net of allowance for doubtful accounts of $0.1 million and $0.2 million as of December 31, 2024 and 2023, respectively | 18,014 | | | 52,920 | |
| Inventory | 717 | | | 2,561 | |
| Assets held for sale | 5,196 | | | — | |
| Other current assets | 126,966 | | | 56,016 | |
| Total current assets | 152,679 | | | 112,851 | |
| | | |
| Property and equipment, net | 11,820 | | | 12,883 | |
| Goodwill | — | | | 1,798 | |
| Intangible assets, net | — | | | 2,833 | |
| Other non-current assets | 155 | | | 47,726 | |
| Total assets | 164,654 | | | 178,091 | |
| LIABILITIES AND EQUITY | | | |
| Current liabilities: | | | |
| Accounts payable and accrued expenses | 28,019 | | | 50,167 | |
| Notes payable, current, net of discount of $0.9 million and $0.2 million as of December 31, 2024 and 2023, respectively | 7,390 | | | 6,531 | |
| | | |
| Deferred revenue, current | 2,251 | | | 1,229 | |
| Liabilities held for sale | 2,333 | | | — | |
| Other current liabilities | 92,177 | | | 46,655 | |
| Total current liabilities | 132,170 | | | 104,582 | |
| | | |
| Notes payable, non-current | — | | | 622 | |
| | | |
| Deferred revenue, non-current | — | | | 1,555 | |
| Other non-current liabilities | 111 | | | 47,075 | |
| Total liabilities | 132,281 | | | 153,834 | |
| Equity: | | | |
| Common stock, $0.0001 par value, 20,000,000 shares authorized, 5,225,147 and 4,046,472 shares issued and outstanding as of December 31, 2024, and 2023, respectively | 1 | | | — | |
| Additional paid-in capital | 112,406 | | | 107,992 | |
| Accumulated deficit | (83,187) | | | (87,179) | |
| Accumulated other comprehensive income / (loss) | (27) | | | 8 | |
| Total Sadot Group Inc. shareholders' equity | 29,193 | | | 20,821 | |
| Non-controlling interest | 3,180 | | | 3,436 | |
| Total equity | 32,373 | | | 24,257 | |
| Total liabilities and equity | 164,654 | | | 178,091 | |
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group Inc.
Consolidated Statement of Operations and Other Comprehensive Income / (Loss)
| | | | | | | | | | | |
| For the Years Ended December 31, |
| 2024 | | 2023 |
| $’000 | | $’000 |
| Commodity sales | 700,937 | | | 717,506 | |
| Cost of goods sold | (695,821) | | | (707,871) | |
| Gross profit | 5,116 | | | 9,635 | |
| Depreciation and amortization expenses | (259) | | | (1,143) | |
| Pre-opening expenses | — | | | (336) | |
| | | |
| Stock-based expenses | (6,662) | | | (6,192) | |
| Sales, general and administrative expenses | (9,659) | | | (8,968) | |
| Loss from continuing operations | (11,464) | | | (7,004) | |
| Other income | — | | | 308 | |
| Interest expense, net | (4,649) | | | (468) | |
| Change in fair value of stock-based compensation | 4,116 | | | 1,339 | |
| Warrant modification expense | — | | | (958) | |
| Gain on fair value remeasurement | 17,111 | | | 1,491 | |
| Gain on sale of trading securities | 518 | | | — | |
| Income / (loss) for continuing operations before income tax | 5,632 | | | (5,292) | |
| Income tax (expense) benefit | (3) | | | 15 | |
| Net income / (loss) for continuing operations | 5,629 | | | (5,277) | |
| Discontinued Operations: | | | |
| Loss from discontinued operations, net of income taxes | (1,893) | | | (2,765) | |
| Net loss for discontinued operations | (1,893) | | | (2,765) | |
| Net income / (loss) | 3,736 | | | (8,042) | |
| Net loss attributable to non-controlling interest | 256 | | | 218 | |
| Net income / (loss) attributable to Sadot Group Inc. | 3,992 | | | (7,824) | |
| | | |
| Net income / (loss) from continuing operations per share attributable to Sadot Group Inc.: | | | |
| Basic | 1.28 | | | (1.45) | |
| Diluted | 1.26 | | | (1.45) | |
| | | |
| Net loss from discontinued operations per share attributable to Sadot Group Inc.: | | | |
| Basic | (0.41) | | | (0.79) | |
| Diluted | (0.41) | | | (0.79) | |
| | | |
| Weighted-average number of common shares outstanding: | | | |
| Basic | 4,583,389 | | | 3,494,056 | |
| Diluted | 4,665,689 | | | 3,494,056 | |
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group Inc.
Consolidated Statement of Operations and Other Comprehensive Income / (Loss) (Continued)
| | | | | | | | | | | |
| For the Years Ended December 31, |
| 2024 | | 2023 |
| $’000 | | $’000 |
| Net income / (loss) | 3,736 | | | (8,042) | |
| Other comprehensive income / (loss) | | | |
| Foreign exchange translation adjustment | 20 | | | 2 | |
| Unrealized gain / (loss), net of income tax | (55) | | | 6 | |
| Total other comprehensive income / (loss) | (35) | | | 8 | |
| Total comprehensive income / (loss) | 3,701 | | | (8,034) | |
| Comprehensive loss attributable to non-controlling interest | 256 | | | 218 | |
| Total comprehensive income / (loss) attributable to Sadot Group Inc. | 3,957 | | | (7,816) | |
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group Inc.
Consolidated Statement of Changes in Stockholders' Equity
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional
Paid-in
Capital | | Accumulated
Deficit | | Accumulated Other Comprehensive Income / (Loss) | | Non-controlling Interest | | Total |
| Shares | | Amount | | |
| | | $’000 | | $’000 | | $’000 | | $’000 | | $’000 | | $’000 |
| Balance – December 31, 2022 | 2,928,721 | | — | | | 95,916 | | | (79,355) | | | — | | | — | | | 16,561 | |
| Stock-based compensation - options | — | | — | | | 102 | | | — | | | — | | | — | | | 102 | |
| Cash exercise of warrants and warrant modification | 215,331 | | — | | | 3,111 | | | — | | | — | | | — | | | 3,111 | |
| Common stock issued as compensation to board of directors | 33,399 | | — | | | 229 | | | — | | | — | | | — | | | 229 | |
| Common stock issued as compensation for services | 767,413 | | — | | | 8,173 | | | — | | | — | | | — | | | 8,173 | |
| Conversion of convertible loan | 101,608 | | — | | | 461 | | | — | | | — | | | — | | | 461 | |
| Investment in non-controlling interest | — | | — | | | — | | | — | | | — | | | 3,654 | | | 3,654 | |
| Unrealized gain, net of income tax | — | | — | | | — | | | — | | | 6 | | | — | | | 6 | |
| Foreign exchange translation adjustment | — | | — | | | — | | | — | | | 2 | | | — | | | 2 | |
| Net loss | — | | — | | | — | | | (7,824) | | | — | | | (218) | | | (8,042) | |
| Balance – December 31, 2023 | 4,046,472 | | — | | | 107,992 | | | (87,179) | | | 8 | | 3,436 | | 24,257 | |
| Common stock compensation to board of directors | 10,564 | | — | | | 42 | | | — | | | — | | | — | | | 42 | |
| Common stock issued as compensation for services | 527,305 | | — | | | 2,014 | | | — | | | — | | | — | | | 2,014 | |
| Stock-based compensation - options | 133,615 | | — | | | 574 | | | — | | | — | | | — | | | 574 | |
| Rounding of post-split shares outstanding per transfer agent | 1,273 | | — | | | — | | | — | | | — | | | — | | | — | |
| Conversion of convertible loan | 505,918 | | 1 | | | 1,784 | | | — | | | — | | | — | | | 1,785 | |
| Foreign exchange translation adjustment | — | | — | | | — | | | — | | | 20 | | | — | | | 20 | |
| Unrealized loss, net of income tax | — | | — | | | — | | | — | | | (55) | | | — | | | (55) | |
| Net income / (loss) | — | | — | | | — | | | 3,992 | | | — | | | (256) | | | 3,736 | |
| Balance – December 31, 2024 | 5,225,147 | | 1 | | | 112,406 | | | (83,187) | | | (27) | | | 3,180 | | | 32,373 | |
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group Inc.
Consolidated Statements of Cash Flows
| | | | | | | | | | | |
| For the Years Ended December 31, |
| 2024 | | 2023 |
| $’000 | | $’000 |
| Cash Flows from Operating Activities | | | |
| Net income / (loss) | 3,736 | | | (8,042) | |
| Adjustments to reconcile net income / (loss) to net cash used in operating activities: | | | |
| | | |
| Depreciation and amortization expenses | 258 | | | 1,143 | |
| Gain / (loss) on fair value remeasurement | (17,111) | | | (1,491) | |
| Stock-based expenses | 6,662 | | | 6,192 | |
| Change in fair value of stock-based compensation | (4,116) | | | (1,339) | |
| Warrant modification expense | — | | | 958 | |
| | | |
| Unrealized gain / (loss), net of income tax | (55) | | | 6 | |
| Foreign exchange translation adjustment | 20 | | | 2 | |
| | | |
| Bad debt expense | 341 | | | 81 | |
| Changes in operating assets and liabilities: | | | |
| Accounts receivable, net | 34,483 | | | (52,879) | |
| Inventory | 1,639 | | | (2,355) | |
| Operating right to use assets and lease liabilities, net | 2 | | | — | |
| Other current assets | (53,944) | | | (52,593) | |
| Other non-current assets | 46,323 | | | (44,144) | |
| Accounts payable and accrued expenses | (21,884) | | | 48,709 | |
| Other current liabilities | 46,095 | | | 44,543 | |
| | | |
| Other non-current liabilities | (46,048) | | | 46,048 | |
| Deferred revenue | 824 | | | 1,426 | |
| Total adjustments | (6,511) | | | (5,693) | |
| Net cash used in operating activities | (2,775) | | | (13,735) | |
| Net cash (used in) / provided by operating activities - discontinued operations | (450) | | | 96 | |
| Cash Flows from Investing Activities | | | |
| Investment from non-controlling interest | — | | | 3,654 | |
| Purchases of property and equipment | (37) | | | (7,278) | |
| Disposal of property and equipment | 33 | | | 25 | |
| Net cash used in investing activities | (4) | | | (3,599) | |
| Net cash provided by investing activities - discontinued operations | 1,017 | | | 136 | |
| Cash Flows from Financing Activities | | | |
| Proceeds from notes payable | 11,051 | | | 12,141 | |
| Repayments of notes payables | (8,270) | | | (5,670) | |
| Proceeds from exercise of warrants | — | | | 2,153 | |
| Net cash provided by financing activities | 2,781 | | | 8,624 | |
| Net cash used in financing activities - discontinued operations | (137) | | | (66) | |
| Net Change in Cash | 432 | | | (8,544) | |
| Cash – beginning of period | 1,354 | | | 9,898 | |
| Cash – end of period | 1,786 | | | 1,354 | |
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group Inc.
Consolidated Statements of Cash Flows (Continued)
| | | | | | | | | | | |
| For the Years Ended December 31, |
| 2024 | | 2023 |
| $’000 | | $’000 |
| Supplemental Disclosures of Cash Flow Information: | | | |
| Cash paid for interest | 3,116 | | | 600 | |
| Cash paid for taxes | 4 | | | 19 | |
| 3,120 | | | 619 | |
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group Inc.
Notes to the Consolidated Financial Statements
1. Business Organization and Nature of Operations
Sadot Group Inc. ("Sadot Group" or "SGI" or together with its subsidiaries, the “Company”), a Nevada corporation was incorporated in Nevada on October 25, 2019. In late 2022, SGI transformed from a U.S.-centric restaurant business into a global organization focused on the Agri-food commodity supply chain. Effective July 27, 2023, we changed our company name from Muscle Maker, Inc., to Sadot Group Inc. Sadot Group is headquartered in Burleson, Texas with subsidiary operations throughout the United States, Brazil, Canada, Colombia, India, Israel, Singapore, Ukraine, United Arab Emirates and Zambia.
As of December 31, 2024, Sadot Group consisted of one distinct operating unit and one discontinued operations.
1.Sadot LLC (“Sadot Agri-Foods”): Sadot Group’s largest operating unit is a global Agri-Foods company engaged in farming, commodity trading and shipping of food and feed (e.g., soybean meal, wheat and corn) via dry bulk cargo ships across the globe. Sadot Agri-Foods competes with the ABCD commodity companies (ADM, Bunge, Cargill, Louis-Dreyfus) as well as many regional organizations. Sadot Agri-Foods operates, through a majority owned subsidiary, a roughly 5,000 acre crop producing farm in Zambia with a focus on major commodities such as wheat, soy and corn alongside high-value tree crops such as avocado and mango. In addition, the Company has a deposit on farmland in Indonesia. Sadot Agri-Foods was formed as part of the Company’s diversification strategy to own and operate, through its subsidiaries, the business lines throughout the food supply chain. Sadot Agri-Foods seeks to diversify over time into a sustainable and forward-looking global agri-foods company.
2.Sadot Restaurant Group, LLC ("Sadot Food Services"): had three unique “healthier for you” concepts, including two fast casual restaurant concepts, Pokémoto and Muscle Maker Grill, During 2024, the Company operated a subscription-based fresh prep meal concept, SuperFit Foods, which was sold in August 2024. Throughout 2024 the remaining corporate owned restaurants were sold and converted into franchise locations or closed. As of the end of 2024 the Company only operates as the franchisor for Pokémoto and Muscle Maker Grill restaurants. The restaurants were founded on the belief of taking every-day menu options and converting them into “healthier for you” menu choices with the goal of satisfying consumers demand for healthier choices, customization, flavor and convenience. This entire operating segment was identified as held for sale and reported as discontinued operations. Please see Note 3 – Assets held for sale and Note 4 – Discontinued operations for further details.
Sadot Group Inc. and its subsidiaries are hereinafter referred to as the “Company”.
Recent Corporate Developments
On October 9, 2024, the Company filed a Certificate of Change Pursuant to NRS 78.209 with the Nevada Secretary of State to effect a reverse stock split of the Company’s common stock at a ratio of one for- ten (the “Reverse Stock Split”), which became effective 12:01 am eastern on October 18, 2024. As a result of the Reverse Stock Split, every 10 shares of the Company’s common stock issued and outstanding on the effective date were consolidated into one issued and outstanding share. All stockholders who were entitled to receive fractional shares as a result of the Reverse Stock Split received one whole share for their fractional share interest. There was no change in the par value of the Company's common stock.
Liquidity and Capital Resources
The Company's primary source of liquidity is cash on hand, working capital and borrowings. At December 31, 2024, working capital, which equals Total current assets less Total current liabilities, was $20.5 million an increase of $12.2 million, compared to working capital of $8.3 million at December 31, 2023. The Company believes that our existing cash on hand, current accounts receivable and future cash flows from our commodity trading and farming will be sufficient to fund our operations, anticipated capital expenditures and repayment obligations over the next 12 months.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
Working Capital
We measure our liquidity in a number of ways, including the following:
| | | | | | | | | | | |
| As of |
| December 31, 2024 | | December 31, 2023 |
| $’000 | | $’000 |
| Cash | 1,786 | | | 1,354 | |
| Accounts Receivable, net | 18,014 | | | 52,920 | |
| Inventory | 717 | | | 2,561 | |
Other current assets(1) | 126,966 | | | 56,016 | |
Assets held for sale(2) | 5,196 | | | — | |
| Total current assets | 152,679 | | | 112,851 | |
| Accounts payable and accrued expenses | 28,019 | | | 50,167 | |
| | | |
| Notes payable, net | 7,390 | | | 6,531 | |
Other current liabilities(3) | 94,428 | | | 47,884 | |
Liabilities held for sale(4) | 2,333 | | | — | |
| Total current liabilities | 132,170 | | | 104,582 | |
Working capital(5) | 20,509 | | | 8,269 | |
Current ratio(6) | 1.16 | | | 1.08 | |
(1) Consists of VAT, prepaid expenses, derivative assets, unrealized gain on derivative contracts and deposit on farmland
(2) See Note 3 for additional information
(3) Consists of Operating lease liability, current, Deferred revenue, current and Other current liabilities
(4) See Note 3 for additional information
(5) Working Capital is defined as Total current assets less Total current liabilities
(6) Current ratio is defined as Total current assets divided by Total current liabilities
2. Significant Accounting Policies
Basis of Presentation
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The accounting policies used to prepare these financial statements are the same as those used to prepare the consolidated financial statements in prior years, except as described in these notes or for the adoption of new standards as outlined below.
Principles of Consolidation
The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries and majority-owned subsidiary. Any intercompany transactions and balances have been eliminated in consolidation.
Reclassifications
Certain prior year balances have been reclassified in order to conform to current year presentation. These reclassifications have no effect on the previously reported results of operations or loss per share.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant estimates include:
•the assessment of recoverability of long-lived assets, including property and equipment, goodwill and intangible assets;
•the estimated useful lives of intangible and depreciable assets;
•estimates and assumptions used to value warrants and options;
•the recognition of revenue; and
•the recognition, measurement and valuation of current and deferred income taxes.
Estimates and assumptions are periodically reviewed, and the effects of any material revisions are reflected in the financial statements in the period that they are determined to be necessary. Actual results could differ from those estimates and assumptions.
Cash and Cash Equivalents
The Company considers all highly-liquid instruments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of December 31, 2024 or 2023.
Accounts Receivable
Accounts Receivable consists of receivables related to Sadot Food Services and Sadot Agri-Foods of $18.0 million and $53.1 million net of doubtful accounts of $0.1 million and $0.2 million as of December 31, 2024, and 2023, respectively.
From time to time the Company may set aside and/or assign accounts receivables towards the acquisition of various assets. The net Accounts Receivable balance of $18.0 million at December 31, 2024 includes $13.4 million in receivables that the Company plans to assign to a third party, which is expected to be paid in assets other than cash. The Company and the third party are in negotiations regarding the timing and nature of the assets to be received, and the Company continues to evaluate the balance for expected losses. As of December 31, 2024, the Company deemed it would receive assets valued at the full balance.
Accounts receivable is stated at historical carrying amounts net of write-offs and allowances for uncollectible accounts. The Company establishes allowances for uncollectible trade accounts receivable based on lifetime expected credit losses using an aging schedule for each pool of accounts receivable. Pools are determined based on risk characteristics such as the type of receivable and geography. A default rate is derived using a provision matrix which is evaluated on a regular basis by management and based on past experience and other factors. The default rate is then applied to the pool to determine the allowance for expected credit losses. Given the short-term nature of the Company's trade accounts receivable, the default rate is only adjusted if significant changes in the credit profile of the portfolio are identified (e.g., poor crop years, credit issues at the country level, systematic risk), resulting in historic loss rates that are not representative of forecasted losses. Uncollectible accounts are written off when a settlement is reached for an amount that is less than the outstanding historical balance or when the Company has determined that collection of the balance is unlikely.
Inventory
Inventory, stated at the lower of cost or net realizable value related to Sadot Agri-foods was $0.7 million and $2.4 million as of December 31, 2024, and 2023, respectively and nil and $0.2 million related to Sadot Food Services as of December 31, 2024, and 2023, respectively. Cost is determined using the first-in, first-out method.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
Assets held for sale
In the first quarter of 2024, the Company classified its Sadot Food Services segment as held for sale.
Assets and liabilities of disposal group(s) are classified as held for sale when:
•management, having the authority to approve action, commits to a plan to sell,
•the disposal group(s) are available for immediate sale in present condition,
•an active program to locate a buyer and other actions required to complete the plan to sell have been initiated,
•the sale is probable and expected to be completed within one year,
•the sale is actively marketed at a reasonable price reflecting its current fair value,
•and it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
The Company initially measures a disposal group that is classified as held for sale at the lower of its carrying value or fair value less cost to sell. Any impairment loss resulting from this initial measurement is recognized in the period in which the held for sale criteria described above, is met. Conversely, gains are not recognized on the sale of a disposal group until the date of sale. The Company assesses the fair value of a disposal group, less costs to sell, at each reporting period that it remains as held for sale, with any changes as a result of the assessment adjusting the carrying value of the disposal group, but not in excess of the cumulative loss previously recognized on the disposal group.
Following their classification as held for sale, assets are not depreciated or amortized. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognized. Refer to Note 3 – Assets held for sale for more details.
Property and Equipment
Property and equipment are stated at cost less accumulated Depreciation and amortization expenses. Major improvements are capitalized, and minor replacements, maintenance and repairs are charged to expense as incurred. Depreciation and amortization expenses are calculated on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the estimated useful life or the lease term of the related asset. The estimated useful lives are as follows:
| | | | | |
| Furniture and Equipment | 3 – 7 years |
| Leasehold Improvements | 1 – 8 years |
| Vehicles | 5 – 10 years |
| Land Improvements | 3 – 20 years |
Intangible Assets
The Company accounts for recorded intangible assets in accordance with the Accounting Standards Codification (“ASC’) 350 “Intangibles – Goodwill and Other”. In accordance with ASC 350, the Company does not amortize intangible assets having indefinite useful lives. The Company’s goodwill has an indefinite life and is not amortized. The Company's goodwill and intangible assets with a finite life are evaluated for impairment at least annually, or more often whenever changes in facts and circumstances may indicate that the carrying value may not be recoverable. ASC 350 requires that goodwill and intangible assets be tested for impairment at the reporting unit level (operating segment or one level below an operating segment). Application of the impairment testing requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill and intangible assets to reporting units, and determining the fair value. Significant judgment is required to estimate the fair value of reporting units which includes estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or impairment. In the first quarter of 2024, the intangible assets were moved to assets held for sale. See Note 3 – Assets held for sale for additional information.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
Impairment of Long-Lived Assets
When circumstances, such as adverse market conditions, indicate that the carrying value of a long-lived asset may be impaired, the Company performs an analysis to review the recoverability of the asset’s carrying value, which includes estimating the undiscounted cash flows (excluding interest charges) from the expected future operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects of demand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized to the extent that the carrying value exceeds the estimated fair value. Any impairment losses are recorded as operating expenses, which reduce net income.
Convertible Instruments
The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with Topic 815 of the Financial Accounting Standards Board (“FASB”).
If the instrument is determined not to be a derivative liability, the Company then evaluates for the existence of a beneficial conversion feature by comparing the market price of the Company’s common stock as of the commitment date to the effective conversion price of the instrument.
As of December 31, 2024 and 2023, the Company deemed the conversion feature related to notes payable was not required to be bifurcated and recorded as a derivative liability.
Related Parties
A party is considered to be related to the Company if the party directly, indirectly, or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Revenue Recognition
The Company’s revenues consist of Commodity sales and Other revenues. The Company recognizes revenues according to Topic 606 of FASB, “Revenue from Contracts with Customers”. Under the guidance, revenue is recognized in accordance with a five-step revenue model, as follows: (1) identifying the contract with the customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations; and (5) recognizing revenue when (or as) the entity satisfies a performance obligation. In applying this five-step model, we made significant judgments in identifying the promised goods or services in our contracts with franchisees that are distinct, and which represent separate performance obligations.
Seasonality
There is a degree of seasonality in the growing cycles, procurement and transportation of crops. The farming industry historically experiences seasonal fluctuations in revenues and net income. Typically, the Company has lower sales and net income during the non-harvest seasons and higher sales and net income during the harvest season.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
Commodity Sales
Commodity sale revenue is generated by Sadot Agri-Foods and is recognized when the commodity is delivered as evidenced by delivery and the invoice is prepared and submitted to the customer. During the years ended December 31, 2024 and 2023, the Company recorded Commodity sales revenues of $700.9 million and $717.5 million, respectively, which is included in Commodity sales on the accompanying Consolidated Statements of Operations and Other Comprehensive Income / (Loss).
Restaurant Sales
Retail store revenue derived from company owned and operated locations at Sadot Food Service is recognized when payment is tendered at the point of sale, net of sales tax, discounts and other sales-related taxes. During the year ended December 31, 2024 and 2023, the Company recorded retail store revenues of $2.6 million and $8.1 million, respectively, which is included in Discontinued operations on the accompanying Consolidated Statements of Operations and Other Comprehensive Income / (Loss). See Note 3 – Assets held for sale and Note 4 – Discontinued operations for additional information.
Franchise Royalties and Fees
Franchise revenues consists of royalties, initial franchise fees and rebates. Royalties are based on a percentage of franchisee net sales revenue. The Company recognizes the royalties as the underlying sales occur. The Company recorded revenue from royalties of $1.0 million and $1.0 million during the years ended December 31, 2024 and 2023, respectively, which is included in Discontinued operations on the accompanying Consolidated Statements of Operations and Other Comprehensive Income /(Loss). See Note 3 – Assets held for sale and Note 4 – Discontinued operations for additional information.
The Company provides the franchisees with management expertise, training, pre-opening assistance, and restaurant operating assistance in exchange for the multi-unit development fees and initial franchise fees. The Company capitalizes these fees upon collection from the franchisee. These initial fees are then recognized as franchise fee revenue on a straight-line basis over the life of the related franchise agreements and any exercised renewal periods. Cash payments are due upon the execution of the related franchise agreement. The Company’s performance obligation with respect to franchise fee revenues consists of a license to utilize the Company’s brand for a specified period of time, which is satisfied equally over the life of each franchise agreement. If a franchise location closes or a franchise agreement is terminated for any reason, the unrecognized revenue will be recognized in full at that time. The Company recorded revenue from initial franchise fees of $0.6 million and $0.2 million during the years ended December 31, 2024 and 2023, respectively, which is included in Discontinued operations on the accompanying Consolidated Statements of Operations and Other Comprehensive Income /(Loss). See Note 3 – Assets held for sale and Note 4 – Discontinued operations for additional information.
The Company has supply agreements with certain food and beverage vendors. Pursuant to the terms of these agreements, rebates are provided to the Company based upon the dollar volume of purchases for all company-owned and franchised restaurants from these vendors. Rebates earned on purchases by franchise stores are recorded as revenue during the period in which the related food and beverage purchases are made. The Company recorded revenue from rebates of $0.1 million and $0.1 million during the years ended December 31, 2024 and 2023, respectively, which is included in Discontinued operations on the accompanying Consolidated Statements of Operations and Other Comprehensive Income /(Loss). Rebates earned on purchases by Company-owned stores are recorded as a reduction of Food and beverage costs during the period in which the related food and beverage purchases are made. See Note 3 – Assets held for sale and Note 4 – Discontinued operations for additional information.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
Franchise Advertising Fund Contributions
Under the Company’s franchise agreements, the Company and its franchisees are required to contribute a certain percentage of revenues to a national advertising fund. The Company’s national advertising services are provided on a system-wide basis and therefore, not considered distinct performance obligations for individual franchisees. In accordance with Topic 606, the Company recognizes these sales-based advertising contributions from franchisees as franchise revenue when the underlying franchisee Company incurs the corresponding advertising expense. The Company records the related advertising expenses as incurred under Sales, general and administrative expenses. When an advertising contribution fund is over-spent at year-end, advertising expenses will be reported on the Consolidated Statement of Operations and Other Comprehensive Loss in an amount that is greater than the revenue recorded for advertising contributions. Conversely, when an advertising contribution fund is under-spent at a year-end, the Company will accrue advertising costs up to advertising contributions recorded in revenue. The Company recorded contributions from franchisees of $0.1 million and $0.1 million, respectively, during the years ended December 31, 2024 and 2023, which are included in Discontinued operations on the accompanying Consolidated Statements of Operations and Other Comprehensive Income /(Loss). See Note 3 – Assets held for sale and Note 4 – Discontinued operations for additional information.
Deferred Revenue
Deferred revenue primarily includes revenue from forward sales contracts and prepayments on incomplete trades. Deferred revenue related to Sadot Food Services includes initial franchise fees received by the Company and is recorded in Liabilities held for sale. Sadot Food Services Deferred revenue is recognized in income over the life of the franchise. If a franchise location closes or a franchise agreement is terminated for any reason, the remaining deferred revenue will be recognized in full at that time. Deferred revenue related to Sadot Agri-Foods is recognized at the completion of the commodity forward sales contract agreements. See Note 3 – Assets held for sale and Note 4 – Discontinued operations for additional information.
Stock-Based Expenses
Stock-based expenses include all expenses that are paid with stock. This includes stock-based consulting fees due to Aggia and other consultants, stock compensation paid to the Company's board of directors, and stock compensation paid to employees. The consulting fees due to Aggia related to ongoing Sadot Agri-Foods and expansion of the global agri-commodities business. Based on the initial Services Agreement with Aggia LLC FZ, a Company formed under the laws of United Arab Emirates (“Aggia”), the consulting fees were calculated at approximately 80.0% of the Net Income generated by Sadot Agri-Foods through March 31, 2023. As of April 1, 2023 the consulting agreement was amended to calculate consulting fees on 40.0% of the Net income generated by Sadot LLC. See Note 17 – Commitments and contingencies for further details. For the years ended December 31, 2024 and 2023, $6.7 million and $6.2 million, respectively, are recorded as Stock-based expenses in the accompanying Consolidated Statements of Operations and Other Comprehensive Income /(Loss).
Net Income / (Loss) per Share
Basic income / (loss) per common share is computed by dividing net income / (loss/ attributable to Sadot Group Inc. by the weighted average number of common shares outstanding during the period. Diluted income / (loss) per common share is computed by dividing net income / (loss) attributable to common stockholders by the weighted average number of common shares outstanding, plus the impact of potential common shares, if dilutive, resulting from the exercise of warrants, options or the conversion of convertible notes payable.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
The following securities are excluded from the calculation of weighted average diluted common shares at December 31, 2024 and 2023, respectively, because their inclusion would have been anti-dilutive:
| | | | | | | | | | | |
| December 31, |
| 2024 | | 2023 |
| Warrants | 1,635,974 | | 1,615,883 |
| Options | 81,259 | | 81,299 |
| RSAs | 891,139 | | 398,262 | |
| Convertible debt | — | | 175,815 |
| Total potentially dilutive shares | 2,608,372 | | 2,271,259 |
Sadot Group Inc.
Notes to the Consolidated Financial Statements
The following table sets forth the computation of basic and dilutive net income / (loss) per share attributable to the Company’s stockholders:
| | | | | | | | | | | |
| For the Years Ended December 31, |
| 2024 | | 2023 |
| (In thousands, except for share count and per share data) | | | |
| Net income / (loss) attributable to Sadot Group Inc. | 3,992 | | | (7,824) | |
| Weighted-average shares outstanding: | | | |
| Basic | 4,583,389 | | | 3,494,056 | |
| | | |
| Effect of potentially dilutive RSAs | 14,642 | | | — | |
| Effect of potentially dilutive convertible debt | 67,658 | | | — | |
| Diluted | 4,665,689 | | | 3,494,056 | |
| | | |
| Net income / (loss) for continuing operations per share attributable to Sadot Group Inc.: | | | |
| Basic | 1.28 | | | (1.45) | |
| Diluted | 1.26 | | | (1.45) | |
| | | |
| Net loss from discontinued operations per share attributable to Sadot Group Inc.: | | | |
| Basic | (0.41) | | | (0.79) | |
| Diluted | (0.41) | | | (0.79) | |
| | | |
| Net income / (loss) per share attributable to Sadot Group Inc.: | | | |
| Basic | 0.87 | | | (2.24) | |
| Diluted | 0.86 | | | (2.24) | |
Major Vendor
The following table sets forth the major vendors to purchase commodities for resale, purchase inputs for farming operations and distribute food products to their Company-owned restaurants:
| | | | | | | | | | | |
| For the Years Ended December 31, |
| 2024 | | 2023 |
| Number of vendors | 3 | | 1 |
| Type | Commodities | | Commodities |
| % of purchases | 75 | % | | 88 | % |
Major Customers
The following table sets forth the major customers:
| | | | | | | | | | | |
| For the Years Ended December 31, |
| 2024 | | 2023 |
| Number of customers | 5 | | 6 |
| Type | Commodities | | Commodities |
| % of sales | 74 | % | | 86 | % |
Sadot Group Inc.
Notes to the Consolidated Financial Statements
Derivative Instruments
The Company recognizes all derivatives in the balance sheet at fair value. During the years ended December 31, 2024 and 2023, the Company’s derivatives were comprised of Forward sales contracts for soybeans, carbon offset units, and futures and options of food and feed related commodities, traded on the Chicago Mercantile Exchange ("CME"). Derivatives that do not meet the requirements for hedge accounting to be applied per FASB ASC 815, Derivatives and Hedging, are adjusted to fair value through earnings. If the derivative does meet the criteria in ASC 815 to use hedge accounting, depending upon the nature of the hedge, the effective portion of changes in the fair value of the hedged assets, liabilities or firm commitments through earnings (fair value hedge), or recognized in other comprehensive income until the hedged item is recognized in earnings (cash flow hedge). The ineffective portion of a derivative’s change in fair value, if any, is immediately recognized in earnings. When a hedged item in a fair value hedge is sold, the adjustment in the carrying amount of the hedged item is recognized in earnings.
Refer to Fair Value of Financial Instruments below, Note 17 – Commitments and contingencies and Note 20 – Financial instruments for additional information regarding the Company’s derivative instruments.
Fair Value of Financial Instruments
The Company measures the fair value of financial assets and liabilities based on the guidance of the FASB ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”).
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets or liabilities.
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable.
Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement.
See Note 19 – Fair value measurement for a summary of financial liabilities held at carrying amount including unrealized gain on derivative contracts and the unrealized loss on derivative contracts. For details related to the fair value of the unrealized gain on derivative contracts and unrealized loss on derivative contracts measured using Level 2 inputs, refer to Note 17 – Commitments and contingencies and Note 20 – Financial instruments.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes” (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
Tax benefits claimed or expected to be claimed on a tax return are recorded in the Company’s financial statements. A tax benefit from an uncertain tax position is only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Uncertain tax positions have had no impact on the Company’s financial condition, results of operations or cash flows. The Company does not expect any significant changes in its unrecognized tax benefits within years of the reporting date.
The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as Sales, general and administrative expenses in the Consolidated Statements of Operations and Other Comprehensive Income / (Loss).
Currency Translation Differences
Transactions in foreign currencies are remeasured in the functional currency of the related consolidated company at the average foreign exchange rates for income and expenses. Monetary assets and liabilities denominated in foreign currencies at the reporting date are remeasured to the functional currency at the foreign exchange rate ruling as of the reporting period end date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are remeasured to the functional currency at foreign exchange rates ruling at the dates the fair value was determined. Foreign exchange differences arising on remeasurement are recognized in the Consolidated Statement of Operations and Other Comprehensive Income / (Loss) under Foreign exchange translation adjustment.
The assets and liabilities of foreign operations, including farm operations and fair value adjustments arising on consolidation, are translated to the Company’s reporting currency, United States Dollars, at foreign exchange rates at the reporting date. On a monthly basis, for subsidiaries whose functional currency is a currency other than the U.S. dollar, subsidiary statements of income and cash flows must be translated into U.S. dollars for consolidation purposes based on weighted-average exchange rates in each monthly period. As a result, fluctuations of local currencies compared to the U.S. dollar during each monthly period impact our consolidated statements of income and cash flows for each reported period (per quarter and year-to-date) and also affect comparisons between those reported periods.
Non-controlling Interests
The Company consolidates entities in which the Company has a controlling financial interest. The Company consolidates subsidiaries in which the Company holds, directly or indirectly, more than 50% of the voting rights. Non-controlling interests represent third-party equity ownership interests in the Company’s farming consolidated entity. The Company evaluates its ownership, contractual and other interests in entities to determine if it has any variable interest in a VIE (“variable interest entities”). These evaluations are complex and involve judgment and the use of estimates and assumptions based on available historical information, among other factors. The Company considers itself to control an entity if it is the majority owner of or has voting control over such entity. The Company also assesses control through means other than voting rights (“variable interest entities” or “VIEs”) and determines which business entity is the primary beneficiary of the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively. The Company has no VIEs at December 31, 2024 and 2023. The amount of net loss attributable to Non-controlling interests is disclosed in the Consolidated Statements of Income and Other Comprehensive Income / (Loss).
Discontinued Operations
As part of the Company’s stated strategy to pivot its focus to the global food supply chain sector, we spent 2024 fully engaged in the restructuring of Sadot Food Services. By refranchising company-owned units and closing underperforming locations while growing Pokémoto through franchising, the Company continued its restructuring efforts with the goal of reducing annualized restaurant operating expenses and overhead while potentially increasing franchise royalty revenue at Pokémoto. In early Q4 of 2024 the Company was able to close its last two corporate owned stores and reclassified the rest of Sadot Food Services to discontinued operations. The amount of loss from discontinued operations is disclosed in the Consolidated Statements of Income and Other Comprehensive Income / (Loss). For details related to Discontinued operations, see Note 4 – Discontinued operations.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended subsequently by ASUs 2018-19, 2019-04, 2019-05, 2019-10, 2019-11 and 2020-03. The guidance in the ASUs requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used. The standard also establishes additional disclosures related to credit risks. This standard is effective for fiscal years beginning after December 15, 2022. The adoption of this guidance on January 1, 2023 did not have a material impact on the Company's Consolidated Financial Statements and related disclosures.
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06 Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity. Among other changes, ASU 2020-06 removes the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share and updates the disclosure requirements in ASC 470-20, making them easier to understand for financial statement preparers and improving the decision-usefulness and relevance of the information for financial statement users. The Company early adopted the new guidance from January 1, 2023, noting no material impact.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (Topic 280). The standard requires incremental disclosures related to reportable segments, including disaggregated expense information and the title and position of the company's chief operating decision maker ("CODM"), as identified for purposes of segment determination. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Entities must adopt the changes to the segment reporting guidance on a retrospective basis. Early adoption is permitted. The adoption of this guidance on December 31, 2024 did not have a material impact on the Company's Consolidated Financial Statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, which focuses on income tax disclosures by requiring public business entities, on an annual basis, to disclose specific categories in the rate reconciliation, provide information for reconciling items that meet a quantitative threshold, and certain information about income taxes paid. The standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The amendments should be applied on a prospective basis. Retrospective application is permitted. The adoption of this guidance on December 31, 2024 did not have a material impact on the Company's Consolidated Financial Statements and related disclosures.
Subsequent Events
The Company evaluated events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation and transactions, the Company did not identify any subsequent events that would have required adjustment or disclosure in the Financial Statements, except as disclosed in Note 23 – Subsequent events.
3. Assets Held For Sale
2024 Disposal group held for sale
After launching Sadot Agri-Foods, the Company made the decision to explore the option of selling a portion of our restaurant operations. During the first quarter of 2024, the Company entered into an agreement with a brokerage firm to have the exclusive rights to offer and sell the Muscle Maker Grill and Pokemoto franchise business and potentially some of the corporate-owned restaurants. Accordingly, the assets and liabilities related to the restaurant operations were classified as held for sale in the Company’s Consolidated Balance Sheets. Throughout most of 2024, the Company considered retaining some Company owned stores due to location and potential training centers that posed challenges for sale.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
However, in the fourth quarter of 2024, the Company closed its last two corporate owned stores, and have a sale pending for the franchise business. Given the sale or pending sale of all of the restaurant operations as of December 31, 2024, we have deemed this to be a strategic shift in business structure as it will eliminate one of our two business segments, which triggered accounting for the restaurant operations as discontinued operations. The Company performed an impairment test on the net assets of the restaurant operations as of December 31, 2024, noting the carrying amount was less than the fair value less cost to sell.
The following presents the major classes of assets and liabilities for the Sadot Food Services reporting unit held for sale as of December 31, 2024:
| | | | | |
| As of |
| December 31, 2024 |
| $’000 |
| Cash | 266 | |
| |
| Accounts receivable, net of allowance for doubtful accounts of $0.2 million | 170 | |
| Other current assets | 52 | |
| |
| Property and equipment, net | 6 | |
| Goodwill | 1,798 | |
| Other non-current assets | 189 | |
| Intangible assets, net | 2,715 | |
| Assets held for sale | 5,196 | |
| |
| Accounts payable and accrued expenses | 149 | |
| Notes payable, current | 79 | |
| Operating lease liability, current | 138 | |
| Deferred revenue, current | 125 | |
| Other current liabilities | 243 | |
| Notes payable, non-current | 542 | |
| |
| Deferred revenue, non-current | 1,057 | |
| Liabilities held for sale | 2,333 | |
Sadot Food Services had the following pre-tax losses:
| | | | | | | | | | | |
| For the Years Ended December 31, |
| 2024 | | 2023 |
| $’000 | | $’000 |
| Sadot Food Services Net Loss Before Income Tax | (1,893) | | | (2,765) | |
Sadot Food Services was comprised of two fast casual restaurant concepts, Pokémoto and Muscle Maker Grill, as well as a subscription-based fresh prep meal concept. On August 1, 2024 SuperFit foods was sold for $0.2 million with a minimal gain on the sale.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
4. Discontinued Operations
After launching Sadot Agri-Foods, the Company made the decision to explore the option of selling a portion of our restaurant operations. During the first quarter of 2024, the Company entered into an agreement with a brokerage firm to have the exclusive rights to offer and sell the Muscle Maker Grill and Pokemoto franchise business and potentially some of the corporate-owned restaurants. Accordingly, the assets and liabilities related to the restaurant operations were classified as held for sale in the Company’s Consolidated Balance Sheets. Throughout most of 2024, the Company considered retaining some Company owned stores due to location and potential training centers that posed challenges for sale.
However, in the fourth quarter of 2024, the Company closed its last two corporate owned stores, and have a sale pending for the franchise business. Given the sale or pending sale of all of the restaurant operations as of December 31, 2024, we have deemed this to be a strategic shift in business structure as it will eliminate one of our two business segments, which triggered accounting for the restaurant operations as discontinued operations. The Company performed an impairment test on the net assets of the restaurant operations as of December 31, 2024, noting the carrying amount was less than the fair value less cost to sell. The amount of loss from discontinued operations is disclosed in the Consolidated Statements of Income and Other Comprehensive Income / (Loss).
Discontinued operations were as follows:
| | | | | | | | | | | |
| For the Years Ended December 31, |
| 2024 | | 2023 |
| $’000 | | $’000 |
| Revenues | 4,321 | | | 9,180 | |
| Cost of goods sold | (3,113) | | | (8,883) | |
| Gross profit | 1,208 | | | 297 | |
| Impairment of intangible asset | — | | | (811) | |
| Impairment of goodwill | — | | | (828) | |
| Depreciation and amortization expenses | (189) | | | (665) | |
| Franchise advertising fund expenses | (54) | | | (73) | |
| Pre-opening expenses | — | | | (36) | |
| Post-closing expenses | (155) | | | (211) | |
| Sales, general and administrative expenses | (2,703) | | | (437) | |
| Loss from discontinued operations | (1,893) | | | (2,764) | |
| Other income | 19 | | | 1 | |
| Interest expense, net | (19) | | | (1) | |
| Loss from discontinued operations before income tax | (1,893) | | | (2,764) | |
| Income tax benefit / (expense) from discontinued operations | — | | | (1) | |
| Loss from discontinued operations | (1,893) | | | (2,765) | |
Sadot Group Inc.
Notes to the Consolidated Financial Statements
5. Allowance for Credit Losses on Accounts Receivable
For the periods ended December 31, 2024 and 2023, a summary of the activity in the allowance for credit losses on accounts receivable appears below:
| | | | | | | | | | | |
| As of |
| December 31, 2024 | | December 31, 2023 |
| $’000 | | $’000 |
| Balance at beginning of period | 173 | | | 23 | |
| Adjustments related to Sadot food services | 54 | | | 72 | |
| Adjustments related to Sadot agri-foods | 28 | | | 78 | |
| Transferred to assets held for sale | (150) | | | — | |
| Balance at end of period | 105 | | | 173 | |
6. Other Current Assets
During the year ended December 31, 2024, the Company transferred $0.1 million of other current assets to Assets held for sale. See Note 3 – Assets held for sale for additional information.
At December 31, 2024 and 2023, the Company’s other current assets consists of the following:
| | | | | | | | | | | |
| As of |
| December 31, 2024 | | December 31, 2023 |
| $’000 | | $’000 |
| Prepaid expenses | 1,911 | | | 766 | |
| Other receivables | 82 | | | 7 | |
| | | |
| Derivative assets - current | 93,520 | | | 47,180 | |
| Unrealized gain on derivative contracts | 18,602 | | | 1,491 | |
| Notes receivable, current | 6,999 | | | 148 | |
| Deposit on farmland | 5,852 | | | — | |
| Prepaid forward on carbon offsets | — | | | 6,424 | |
| Other current assets | 126,966 | | | 56,016 | |
Deposit on farmland consists of funds paid as a deposit with the intent to acquire farmland in Indonesia by Sadot Agri-Foods.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
7. Other Non-Current Assets
During the year ended December 31, 2024, the Company transferred $0.2 million of other non-current assets to Assets held for sale. See Note 3 – Assets held for sale for additional information.
At December 31, 2024 and 2023, the Company’s other non-current assets consists of the following:
| | | | | | | | | | | |
| As of |
| December 31, 2024 | | December 31, 2023 |
| $’000 | | $’000 |
| Security deposit | 23 | | | 76 | |
| Notes receivable, non-current | — | | | 26 | |
| Derivative assets, non-current | — | | | 46,340 | |
| | | |
| Right to use asset | 132 | | | 1,284 | |
| Other non-current assets | 155 | | | 47,726 | |
8. Property and Equipment, Net
During the year ended December 31, 2024, the Company transferred $6.0 thousand of property and equipment to Assets held for sale. See Note 3 – Assets held for sale for additional information.
As of December 31, 2024, and 2023, Property and equipment consist of the following:
| | | | | | | | | | | |
| As of |
| December 31, 2024 | | December 31, 2023 |
| $’000 | | $’000 |
| Furniture and equipment | 232 | | | 1,026 | |
| Vehicles | 215 | | | 270 | |
| Leasehold improvements | 11 | | | 877 | |
| Land and land improvements | 11,766 | | | 11,766 | |
| Construction in process | 6 | | | — | |
| Property and equipment, gross | 12,230 | | | 13,939 | |
| Less: accumulated depreciation | (410) | | | (1,056) | |
| Property and equipment, net | 11,820 | | | 12,883 | |
Depreciation expense amounted to $0.3 million and $0.8 million for the years ended December 31, 2024 and 2023, respectively. During the years ended December 31, 2024 and 2023, the Company wrote off Property and equipment with an original cost value of $0.5 million and $1.6 million, respectively. The Company wrote off Property and equipment related to closed locations and future locations that were terminated due to a change of business focus and recorded a loss on disposal of nil and $0.2 million, respectively, for the years ended December 31, 2024 and 2023, respectively, in the Consolidated Statement of Operations and Other Comprehensive Income / (Loss).
9. Goodwill and Other Intangible Assets, Net
The Company’s intangible assets include trademarks, franchisee agreements, franchise license, domain names, customer list, proprietary recipes and non-compete agreements. Intangible assets are amortized over useful lives ranging from 5 to 10 years. During the year ended 2024, the Company moved the remaining intangible assets to assets held for sale and as a result of the reclassification, the Company stopped amortizing these assets. See Note 3 – Assets held for sale for additional information.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
A summary of the intangible assets is presented below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Intangible
assets,
net at
December 31,
2022 | | Impairment of
intangible assets | | Amortization
expense | | Intangible
assets,
net at
December 31,
2023 | | Impairment of
intangible assets | | Amortization
expense | | Transfer to assets held for sale | | Intangible
assets,
net at
December 31,
2024 |
| $’000 | | $’000 | | $’000 | | $’000 | | $’000 | | $’000 | | $’000 | | $’000 |
| Trademark Muscle Maker Grill | 670 | | | (419) | | | (251) | | | — | | | — | | | — | | | — | | | — | |
| Franchise Agreements Muscle Maker Grill | 136 | | | (116) | | | (20) | | | — | | | — | | | — | | | — | | | — | |
| Trademark SuperFit | 29 | | | (22) | | | (7) | | | — | | | — | | | — | | | — | | | — | |
| Domain Name SuperFit | 81 | | | (62) | | | (19) | | | — | | | — | | | — | | | — | | | — | |
| Customer List SuperFit | 90 | | | (70) | | | (20) | | | — | | | — | | | — | | | — | | | — | |
| Proprietary Recipes SuperFit | 103 | | | (79) | | | (24) | | | — | | | — | | | — | | | — | | | — | |
| Non-Compete Agreement SuperFit | 107 | | | (43) | | | (64) | | | — | | | — | | | — | | | — | | | — | |
| Trademark Pokémoto | 118 | | | — | | | (35) | | | 83 | | | — | | | (9) | | | (74) | | | — | |
| Franchisee License Pokémoto | 2,322 | | | — | | | (277) | | | 2,045 | | | — | | | (69) | | | (1,976) | | | — | |
| Proprietary Recipes Pokémoto | 867 | | | — | | | (162) | | | 705 | | | — | | | (40) | | | (665) | | | — | |
| Non-Compete Agreement Pokémoto | 88 | | | — | | | (88) | | | — | | | — | | | — | | | — | | | — | |
| 4,611 | | | (811) | | | (967) | | | 2,833 | | | — | | | (118) | | | (2,715) | | | — | |
Amortization expense related to intangible assets was $0.1 million and $1.0 million for the years ended December 31, 2024 and 2023, respectively.
A summary of the goodwill assets is presented below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Muscle Maker Grill | | Pokémoto | | SuperFit Food | | Total |
| $’000 | | $’000 | | $’000 | | $’000 |
| Goodwill, net at December 31, 2022 | 570 | | | 1,798 | | | 258 | | | 2,626 | |
| Impairment of goodwill | (570) | | | — | | | (258) | | | (828) | |
| Goodwill, net at December 31, 2023 | — | | | 1,798 | | | — | | | 1,798 | |
| Transfer to assets held for sale | — | | | (1,798) | | | — | | | (1,798) | |
| Goodwill, net at December 31, 2024 | — | | | — | | | — | | | — | |
Sadot Group Inc.
Notes to the Consolidated Financial Statements
10. Accounts Payables and Accrued Expenses
During the year ended December 31, 2024, the Company transferred $0.1 million of Accounts payables and accrued expenses to Assets held for sale. See Note 3 – Assets held for sale for additional information.
Accounts payables and accrued expenses consist of the following:
| | | | | | | | | | | |
| As of |
| December 31, 2024 | | December 31, 2023 |
| $’000 | | $’000 |
| Accounts payable | 2,187 | | | 3,488 | |
| Accrued payroll and bonuses | 690 | | | 756 | |
| Accrued expenses | 51 | | | 204 | |
| Accrued interest expenses | 7 | | | 77 | |
| Accrued professional fees | 249 | | | 255 | |
| Accounts payable commodities | 24,833 | | | 45,342 | |
| Accrued purchases | — | | | 17 | |
| Sales taxes payable | 2 | | | 28 | |
| 28,019 | | | 50,167 | |
11. Notes Payable
Line of Credit
On September 22, 2023, the Company entered into the Standby Equity Purchase Agreement (“SEPA”) with YA II PN, LTD, a Cayman Islands exempt limited partnership (“Yorkville”) pursuant to which the Company has the right to sell to Yorkville up to $25 million of its shares of common stock, subject to certain limitations and conditions set forth in the SEPA, from time to time during the term of the SEPA. Sales of the shares of common stock to Yorkville under the SEPA, and the timing of any such sales, are at the Company’s option, and the Company is under no obligation to sell any shares of common stock to Yorkville under the SEPA except in connection with notices that may be submitted by Yorkville, in certain circumstances as described below.
Upon the satisfaction of the conditions to Yorkville’s purchase obligation set forth in the SEPA, including having a registration statement registering the resale of the shares of common stock issuable under the SEPA declared effective by the SEC, the Company will have the right, but not the obligation, from time to time at its discretion until the SEPA is terminated to direct Yorkville to purchase a specified number of shares of common stock (“Advance”) by delivering written notice to Yorkville ( “Advance Notice”). While there is no mandatory minimum amount for any Advance, it may not exceed an amount equal to 100% of the average of the daily traded amount during the five consecutive trading days immediately preceding an Advance Notice.
The shares of common stock purchased pursuant to an Advance delivered by the Company will be purchased at a price equal to 97% of the lowest daily VWAP of the shares of common stock during the three consecutive trading days commencing on the date of the delivery of the Advance Notice, other than the daily VWAP on a day in which the daily VWAP is less than a minimum acceptable price as stated by the Company in the Advance Notice or there is no VWAP on the subject trading day. The Company may establish a minimum acceptable price in each Advance Notice below which the Company will not be obligated to make any sales to Yorkville. “VWAP” is defined as the daily volume weighted average price of the shares of common stock for such trading day on the Nasdaq Stock Market during regular trading hours as reported by Bloomberg L.P. Accordingly, as may otherwise be limited by Yorkville’s 4.99% beneficial ownership limitation, assuming the Company submits an Advance requiring Yorkville to provide $100,000 in funding and assuming an applicable VWAP of $11.00 and, in turn, a purchase price of $10.67 (97% of the VWAP), the Company would be required to issue 9,372 shares of common stock and Yorkville would receive a profit of approximately $0.3201 per share, or approximately $2,999.98, if it sold all of such shares at $11.00 per share.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
In connection with the SEPA, and subject to the condition set forth therein, Yorkville agreed to advance to the Company in the form of convertible promissory notes (the “Convertible Notes”) an aggregate principal amount of $4.0 million (the “Pre-Paid Advance”). The Pre-Paid Advance was disbursed on September 22, 2023 in the principal amount of $3.0 million and the balance of $1.0 million on October 30, 2023. The purchase price for the Pre-Paid Advance is 94.0% of the principal amount of the Pre-Paid Advance. Interest shall accrue on the outstanding balance of any Pre-Paid Advance at an annual rate equal to 6.0%, subject to an increase to 18% upon an event of default as described in the Convertible Notes. The maturity date is 12-months after the initial closing of the Pre-Paid Advance. Yorkville may convert the Convertible Notes into shares of the Company’s common stock at a conversion price equal to the lower of $11.1495 or 95% of the lowest daily VWAP during the seven consecutive trading days immediately preceding the conversion (the “Conversion Price”), which in no event may the Conversion Price be lower than $3.30 (the “Floor Price”). In addition, upon the occurrence and during the continuation of an event of default, the Convertible Notes shall become immediately due and payable and the Company shall pay to Yorkville the principal and interest due thereunder. In no event shall Yorkville be allowed to effect a conversion if such conversion, along with all other shares of common stock beneficially owned by Yorkville and its affiliates would exceed 49.9% of the outstanding shares of the common stock of the Company. If any time on or after October 22, 2023 (i) the daily VWAP is less than the Floor Price for seven trading days during a period of nine consecutive trading days (“Floor Price Trigger”), or (ii) the Company has issued in excess of 99% of the shares of common stock available under the Exchange Cap (“Exchange Cap Trigger” and collectively with the Floor Price Trigger, the “Trigger”)), then the Company shall make monthly payments to Yorkville beginning on the seventh trading day after the Trigger and continuing monthly in the amount of $500,000 plus an 8.0% premium and accrued and unpaid interest. The Exchange Cap Trigger will not apply in the event the Company has obtained the approval from its stockholders in accordance with the rules of Nasdaq Stock Market for the issuance of shares of common stock pursuant to the transactions contemplated in the Convertible Note and the SEPA in excess of 19.99% of the aggregate number of shares of common stock issued and outstanding as of the effective date of the SEPA (the “Exchange Cap”). No triggering event occurred as of December 31, 2024. As of December 31, 2024, 607,527 shares of common stock have been converted and the note has been paid in full.
Notes Payable
The Company repaid a total amount of $10.5 million, $8.8 million in cash and $1.7 million were converted stock during the year ended December 31, 2024, and $5.7 million during the year ended December 31, 2023, respectively, of the notes payable. The company entered into new loans in the amount of $11.1 million and $12.1 million for the year ended December 31, 2024 and December 31, 2023, respectively.
As of December 31, 2024, the Company had an aggregate amount of $7.4 million in notes payable, net. The notes had interest rates ranging between 3.75% - 25.80% per annum, due on various dates through May 2025.
As of December 31, 2024, the Company has outstanding short-term secured debt in the form of notes payable totaling $1.9 million, which is included in the $7.4 million in notes payable, net. The effective interest rate on the short-term secured debt is 21.2%.
During the year ended December 31, 2024, the Company transferred $0.6 million of notes payable to Liabilities held for sale. See Note 3 – Assets held for sale for additional information.
The maturities of notes payable as of December 31, 2024, are as follows:
| | | | | |
| Principal Amount |
| $’000 |
| 1/1/25-12/31/25 | 8,309 | |
| |
| |
| |
| |
| Total maturities | 8,309 | |
| Less discount | (919) | |
| Notes payable, net | 7,390 | |
Sadot Group Inc.
Notes to the Consolidated Financial Statements
12. Leases
The Company’s leases consist of restaurant locations and a corporate office. We determine if a contract contains a lease at inception. The leases generally have remaining terms of 1-5 years and most leases include the option to extend the leases for an additional 5 years.
The total lease cost associated with Right of use assets and Operating lease liabilities for the year ended December 31, 2024, was $0.2 million and has been recorded in the Consolidated Statement of Operations and Other Comprehensive Loss within Cost of goods sold.
During the year ended December 31, 2024, all of the Company's lease liabilities of $0.1 million were moved to Liabilities held for sale. See Note 3 – Assets held for sale and Note 4 – Discontinued operations for additional information. Right to use asset and operating lease liabilities decreased due to the refranchising, sale and closure of all corporate owned locations by December 31, 2024.
The Company's assets and liabilities related to the Company’s leases were as follows:
| | | | | | | | | | | |
| As of |
| December 31, 2024 | | December 31, 2023 |
| $’000 | | $’000 |
| Assets | | | |
| Total lease assets | 132 | | | — | |
| | | |
| Right to use asset | 132 | | | — | |
| Liabilities | | | |
| Total lease liabilities | 272 | | | 1,412 | |
| Transferred to liabilities held for sale | (138) | | | — | |
| Operating leases – current | 23 | | | — | |
| Operating leases – non-current | 111 | | | — | |
The table below presents the future minimum lease payments under the noncancellable operating leases as of December 31, 2024:
| | | | | | | | | | | | | | | | | |
| Total | | Operating Leases Held for Sale | | Current Operating Leases |
| $’000 | | $’000 | | $’000 |
| Fiscal Year: | | | | | |
| 1/1/2025-12/31/2025 | 190 | | | 145 | | | 45 | |
| 1/1/2026-12/31/2026 | 45 | | | — | | | 45 | |
| 1/1/2027-12/31/2028 | 45 | | | — | | | 45 | |
| 1/1/2028-12/31/2028 | 45 | | | — | | | 45 | |
| 1/1/2029-12/31/2029 | 11 | | | — | | | 11 | |
| Thereafter | — | | | — | | | — | |
| Total lease payments | 336 | | | 145 | | | 191 | |
| Less imputed interest | (64) | | | (7) | | | (57) | |
| Present value of lease liabilities | 272 | | | 138 | | | 134 | |
Sadot Group Inc.
Notes to the Consolidated Financial Statements
The Company’s lease term and discount rates were as follows:
| | | | | |
| As of December 31, 2024 |
| Weighted-average remaining lease term (in years) | |
| Operating leases | 2.53 |
| Weighted-average discount rate | |
| Operating leases | 15.4 | % |
13. Deferred Revenue
During the year ended December 31, 2024, the Company transferred $1.2 million of deferred revenue to Liabilities held for sale. See Note 3 – Assets held for sale for additional information.
The Company's deferred revenue consists of the following:
| | | | | | | | | | | |
| As of |
| December 31, 2024 | | December 31, 2023 |
| $’000 | | $’000 |
| Deferred revenues, net | 2,251 | | | 2,784 | |
| Less: deferred revenue, current | (2,251) | | | (1,229) | |
| Deferred revenues, non-current | — | | | 1,555 | |
Deferred revenue related to commodity forward sales contracts and prepayments received on incomplete trade of $2.3 million and $1.4 million, for the years ended December 31, 2024 and 2023, respectively. Deferred revenue related to deferred franchise fees of nil and $1.4 million, respectively, for the years ended December 31, 2024 and 2023, respectively.
14. Other Current Liabilities
During the year ended December 31, 2024, the Company transferred $0.2 million of other current liabilities to Liabilities held for sale. See Note 3 – Assets held for sale for additional information.
Other current liabilities consist of the following:
| | | | | | | | | | | |
| As of |
| December 31, 2024 | | December 31, 2023 |
| $’000 | | $’000 |
| Gift card liability | — | | | 13 | |
| Co-op advertising fund liability | — | | | 114 | |
| Marketing development brand liability | — | | | 68 | |
| Advertising fund liability | — | | | 29 | |
| Unrealized loss on derivative contracts | 60 | | | — | |
| Operating lease liability, current | 23 | | | 385 | |
| Derivative liability, current | 92,094 | | | 46,046 | |
| 92,177 | | | 46,655 | |
Sadot Group Inc.
Notes to the Consolidated Financial Statements
15. Other Non-Current Liabilities
During the year ended December 31, 2024, the Company transferred nil of other non-current liabilities to Liabilities held for sale. See Note 3 – Assets held for sale for additional information.
Other non-current liabilities consist of the following:
| | | | | | | | | | | |
| As of |
| December 31, 2024 | | December 31, 2023 |
| $’000 | | $’000 |
| Derivative liability, non-current | — | | | 46,048 | |
| Operating lease liability, non-current | 111 | | | 1,027 | |
| 111 | | | 47,075 | |
16. Income Taxes
The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2024 and 2023 are presented below:
| | | | | | | | | | | |
| As of |
| December 31, 2024 | | December 31, 2023 |
| $’000 | | $’000 |
| Deferred tax assets: | | | |
| Net operating loss carryforwards | 14,525 | | | 11,890 | |
| Receivable allowance | 10 | | | 37 | |
| Stock-based compensation | 58 | | | 20 | |
| Intangible assets | — | | | 727 | |
| 163(j) adjustment | 1,091 | | | 100 | |
| Loss on discontinued operations | — | | | 4 | |
| Accrued expenses | 159 | | | 106 | |
| Other carryforwards | 158 | | | — | |
| Deferred revenues | — | | | 310 | |
| Leases | 58 | | | 301 | |
| Gross deferred tax asset | 16,059 | | | 13,495 | |
| Deferred tax liabilities: | | | |
| Property and equipment | (46) | | | (60) | |
| Leases | (28) | | | (274) | |
| Unrealized gains | (3,969) | | | (317) | |
| Receivable allowance | — | | | — | |
| Gross deferred tax liabilities | (4,043) | | | (651) | |
| Net deferred tax assets | 12,016 | | | 12,844 | |
| Valuation allowance | (12,016) | | | (12,844) | |
| Net deferred tax asset, net of valuation allowance | — | | | — | |
Sadot Group Inc.
Notes to the Consolidated Financial Statements
The income tax (benefit) / expense for the periods shown consist of the following:
| | | | | | | | | | | |
| For the Year Ended December 31, |
| 2024 | | 2023 |
| $’000 | | $’000 |
| Federal: | | | |
| Current | — | | | — | |
| Deferred | — | | | — | |
| State and local: | | | |
| Current | — | | | (15) | |
| Deferred | — | | | — | |
| Foreign: | | | |
| Current | 3 | | | — | |
| Deferred | — | | | — | |
| 3 | | | (15) | |
| Change in valuation allowance | — | | | — | |
| Income tax (benefit) /expense | 3 | | | (15) | |
A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the periods shown, are as follows:
| | | | | | | | | | | |
| As of |
| December 31, 2024 | | December 31, 2023 |
| Federal income tax benefit at statutory rate | 21.0 | % | | 21.0 | % |
| State income tax benefit, net of federal impact | 2.2 | % | | 1.1 | % |
| Permanent differences | 0.6 | % | | (0.3) | % |
| | | |
| Return to provision adjustments | 2.8 | % | | 0.5 | % |
| | | |
| Foreign Tax | (1.1) | % | | — | % |
| Fair value gain/loss on share issuance | (21.8) | % | | 3.6 | % |
| Deferred adjustments due to discontinued operations | 14.8 | % | | — | % |
| Other | — | % | | (2.5) | % |
| | | |
| Change in valuation allowance | (18.4) | % | | (23.2) | % |
| Effective income tax rate | 0.1 | % | | 0.2 | % |
The Company has filing obligations in what it considers its U.S. major tax jurisdictions as follows: Connecticut, Kansas, Texas, Virginia, New York State and New York City. The earliest year that the Company is subject to examination is the year ended December 31, 2015.
The Company has approximately $81.9 million of Federal and State Net operating loss (“NOLs”) available to offset future taxable income. The net operating loss carryforwards generated prior to 2018, if not utilized, will expire from 2035 to 2037 for federal and state purposes.
As of December 31, 2024 and 2023, the Company has determined that it is more likely than not that the Company will not recognize the future tax benefit of the loss carryforwards and has recognized a valuation allowance of $12.0 million and $12.8 million, respectively. The valuation allowance decreased by approximately $0.8 million.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, and similar state provisions. Generally, in addition to certain entity reorganizations, the limitation applies when one or more “5 percent stockholders” increase their ownership, in the aggregate, by more than 50 percentage points over a 36-month time period testing period or beginning the day after the most recent ownership change, if shorter.
17. Commitments and Contingencies
Forward Purchase and Sales Contracts
On September 12, 2023, the Company through Sadot Agri-Foods, entered into a forward purchase contract titled the Verified Emissions Reduction Purchase Agreement (“VERPA”) for the acquisition of 180,000 Verified Carbon Units (“VCUs”) generated by a conservation project along the Riau coastline in Indonesia (“conservation project”). Under the VERPA, Sadot Agri-Foods will acquire the VCUs between 2025 and 2027 at a price of $35.69 per VCU, or $6.4 million in total, which was paid on September 23, 2023, and recorded as “Prepaid forward on carbon offsets” on the balance sheet. Delivery of the VCUs is expected within 14 days from credit issuance annually, with delivery to occur no later than December each year. On September 13, 2023, the Company also entered into a separate forward sales agreement, where the purchaser agreed to acquire 180,000 VCUs between 2025 and 2026 at a price of $44.62 per VCU, or $8.0 million. These VCUs were expected to be generated from the same conservation project, with payment due by 2025. Additionally, Sadot Agri-Foods had the right to repurchase any VCUs during the contract term at the current market price, determined by an independent marketplace, and this contract was classified as a derivative under ASC 815. On September 20, 2024, the Company sold the right to both contracts for $9.3 million, recorded in Commodity sales, and the $6.4 million prepaid amount was recorded in Cost of goods sold. Partially offsetting the $2.9 million gain on the prepaid asset, the Company derecognized the $1.4 million derivative asset related to the fair value of the forward contract and recorded a loss for that amount in the line item Gain on fair value remeasurement on the Consolidated Statement of Operations and Other Comprehensive Income / (Loss).
On November 24, 2023, the Company through Sadot Agri-Foods, entered into a forward sale contract for the sale of 70,000 Metric Tons (“MTs”) of soybeans. Sadot Agri-Foods will provide 70,000 MTs to a third-party in May 2025, which is the executed contract date. The acquisition price for these MTs is $662 per MT, or $46.3 million in the aggregate. This contract was determined to be a derivative in accordance with ASC 815. The Gain on fair value remeasurement recorded during the years ended December 31, 2024 and 2023 were $8.6 million and $0.7 million, respectively.
On December 6, 2023, the Company through Sadot Agri-Foods, entered into a forward sale contract for the sale of 70,000 Metric Tons (“MTs”) of soybeans. Sadot Agri-Foods will provide 70,000 MTs to a third-party in July 2025, which is the executed contract date. The acquisition price for these MTs is $674 per MT, or $47.2 million in the aggregate. This contract was determined to be a derivative in accordance with ASC 815. The Gain on fair value remeasurement recorded during the years ended December 31, 2024 and 2023 were $9.1 million and $0.2 million, respectively.
Refer to Note 2 – Significant accounting policies, Note 19 – Fair value measurement and Note 20 – Financial instruments for additional information regarding the Unrealized gain on derivative contracts.
Consulting Agreements
On November 14, 2022 (the “Effective Date”), the Company, Sadot LLC and Aggia LLC FC, a company formed under the laws of United Arab Emirates (“Aggia”) entered into a Services Agreement (the “Services Agreement”) whereby Sadot LLC engaged Aggia to provide certain advisory services to Sadot Agri-Food for creating, acquiring and managing Sadot Agri-Foods’s business of wholesaling food and engaging in the purchase and sale of physical food commodities.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
As consideration for Aggia providing the services to Sadot Agri-Food, the Company agreed to issue shares of common stock of the Company, par value $0.0001 per share, to Aggia subject to Sadot Agri-Food generating net income measured on a quarterly basis at per share price of $15.6250, subject to equitable adjustments for any combinations or splits of the common stock occurring following the Effective Date. Upon Sadot Agri-Food generating net income for any fiscal quarter, the Company shall issue Aggia a number of shares of common stock equal to the net income for such fiscal quarter divided by the per share price (the “Shares”). The Company may only issue authorized, unreserved shares of common stock. The Company will not issue Aggia in excess of 1,442,428 shares representing 49.999% of the number of issued and outstanding shares of common stock as of the Effective Date. Further, once Aggia has been issued a number of shares constituting 19.99% of the issued and outstanding shares of common stock of the Company, no additional shares shall be issued to Aggia unless and until this transaction has been approved by the shareholders of the Company. In the event that the shares cap has been reached, then the remaining portion of the net income, if any, not issued as shares shall accrue as debt payable by Sadot Group to Aggia until such debt has reached a maximum of $71.5 million. The Company will prepare the shares earned calculation after the annual audit or quarter review is completed by the auditors. The shares will be issued within 10 days of the final calculation.
On July 14, 2023 (the “Addendum Date”), effective April 1, 2023, the parties entered into Addendum 2 to the Services Agreement (“Addendum 2”) pursuant to which the parties amended the compensation that Aggia is entitled.
Pursuant to Addendum 2, on the Addendum Date, the Company issued 885,546 shares (the “Shares”) of common stock, par value $0.0001 per share, of the Company, which such Shares represent 1,442,428 Shares that Aggia is entitled to receive pursuant to the Services Agreement less the 556,882 Shares that have been issued to Aggia pursuant to the Services Agreement as of the Addendum Date. The Company will not issue Aggia in excess of 1,442,428 Shares representing 49.9% of the number of issued and outstanding shares of common stock as of the effective date of the Services Agreement. The Shares shall be considered issued and outstanding as of the Addendum Date and Aggia shall hold all rights associated with such Shares. The Shares vest on a progressive schedule, at a rate equal to the net income of Sadot Agri-Foods, calculated quarterly divided by $31.25, which for accounting purposes shall equal 40% of the net income of Sadot Agri-Foods, calculated quarterly divided by $12.50. During the 30 day period after July 14, 2028 (the “Share Repurchase Date”), Aggia may purchase any Shares not vested. All Shares not vested or purchased by Aggia, shall be repurchased by the Company from Aggia at per share price of $0.001 per share. Further, the parties clarified that the Lock Up Agreement previously entered between the Company and Aggia dated November 16, 2022 shall be terminated on May 16, 2024 provided that any Shares that have not vested or been purchased by Aggia may not be transferred, offered, pledged, sold, subject to a contract to sell, granted any options for the sale of or otherwise disposed of, directly or indirectly. Following the Share Repurchase Date, in the event that there is net income for any fiscal quarter, then an amount equal to 40% of the net income shall accrue as debt payable by Sadot Group to Aggia (the “Debt”), until such Debt has reached a maximum of $71.5 million.
Additionally, for the years ended December 31, 2024 and 2023, the Company reimbursed Aggia for all operating costs related to Sadot Agri-Foods operating expenses including labor, operating expenses and general administrative expenses of $1.8 million, $0.3 million and $1.7 million, respectively and all operating costs related to Sadot Agri-Foods including labor, operating expenses and general administrative expenses of $2.6 million and $0.5 million and $0.1 million respectively.
Franchising
During the years ended December 31, 2024 and 2023, the Company entered into various Pokémoto franchise agreements for a total of 27 and 20, respectively, potentially new Pokémoto locations with various franchisees. The Franchisees paid the Company an aggregate of $0.4 million and $0.2 million and this has been recorded in liabilities held for sale as of December 31, 2024 and 2023, respectively. See Note 3 – Assets held for sale for additional information.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
Sales Taxes
The Company had accrued a sales tax liability for approximately $2.0 thousand and $27.8 thousand as of December 31, 2024, and December 31, 2023, respectively. As of December 31, 2024 and December 31, 2023, the Company has accrued for the liability in accounts payable and accrued expenses.
Litigations, Claims and Assessments
On November 7, 2024, Lombard Trading International Corp. filed an Amended Complaint against the Company and Sadot Latam, LLC in the 11th Judicial Circuit of Florida in and for Miami-Dade County, Florida (Case No.: 2024-020971-CA-01). The Amended Complaint alleges unjust enrichment, conversion, fraud, conspiracy and civil theft related to a commodities transaction. The plaintiff claims that the Company failed to pay upon delivery of certain goods and is seeking damages in the amount of $7.4 million. The Company has not received the goods and has not received the Bills of Lading that were contractually required for the transaction to be completed. The Company denies these allegations and intends to vigorously defend against the claims. While the Company believes it has meritorious defenses, it cannot predict the outcome of this matter or reasonably estimate the potential loss at this time. Therefore, no contingent liability has been recorded as of December 31, 2024.
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. In the opinion of management after consulting legal counsel, such matters are currently not expected to have a material impact on the Company’s financial statements.
The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements after consulting legal counsel.
Employment Agreements
On February 10, 2025, the Company and Sadot Brasil Ltda. (“Sadot Brasil”), the Company’s wholly owned subsidiary, entered into an Employment Agreement with Catia Jorge effective February 10, 2025. During the term of the Employment Agreement, Ms. Jorge will serve as Chief Executive Officer for both the Company and Sadot Brasil and will be entitled to a base salary at the annualized rate of $0.3 million. In addition, Ms. Jorge will be entitled to a one time bonus of $0.5 million of which half will be payable upon the 90 day anniversary of her engagement and the balance to be paid on the 180 day anniversary (the “Bonus”). Ms. Jorge will also receive a one time grant of $0.1 million in restricted stock grants. Further, the Company will make a contribution of up to $16.0 thousand per annum contribution to a private pension plan. The restricted stock grant vests quarterly over one year in equal quarterly installments commencing January 1, 2025, which shall be priced and issued on the third trading day immediately following the filling the Form 10K Annual Report for such applicable year. The per share price will be the closing price immediately prior to the date of each grant. If Ms. Jorge is terminated by the Company for any reason other than cause Ms. Jorge will be entitled to a severance package of 18 months of salary. Ms. Jorge’s compensation, which, except for the Bonus, is denominated in Brazilian Real, has been converted to U.S. Dollars for the purpose of this disclosure. Please note that the conversion rate used for disclosure purposes is is 6 Reais to every 1 U. S. Dollar as of February 10, 2025. Actual payments to Ms. Jorge will be made in Brazilian Real, and the amounts received may vary based on fluctuations in the exchange rate at the time of payment. This disclosure is intended to provide transparency regarding the compensation agreed upon in the Brazilian Real currency, which is the operational currency for Mr. Jorge’s compensation unless noted otherwise.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
On February 9, 2025 the Company entered into an Executive Employment Agreement with Michael Roper (the “Roper Agreement”), which replaced his prior employment agreement. Pursuant to the Roper Agreement, Mr. Roper will transition to the role of Chief Governance and Compliance Officer, reporting directly to the Company’s Chief Executive Officer. During the term of the Roper Agreement, Mr. Roper is entitled to a base salary at the annualized rate of $0.4 million consisting of an annual cash salary of $0.3 million and an annual restricted stock grant of $0.1 million vesting quarterly over one year in equal quarterly installments commencing January 1, 2025 which shall be priced and issued on the third trading day immediately following the filing of the Form 10K Annual Report for such applicable year. Mr. Roper will be eligible for a discretionary performance bonus to be determined by the Board annually with the annual bonus for the year ended December 31, 2025 to be equal to 75% of the cash salary. If Mr. Roper is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such equity grant. If Mr. Roper is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Roper will be entitled to a severance payment equal 18 months of the annual compensation, all bonuses earned and all equity compensation shall be fully accelerated.
On February 9, 2025 the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement. Pursuant to the Executive Employment Agreement entered with Ms. Black (the “Black Agreement”), Ms. Black will continue to serve as Chief Financial Officer, reporting directly to the Company’s Chief Executive Officer. During the term of the Black Agreement, Ms. Black is entitled to a base salary at the annualized rate of $0.4 million consisting of an annual cash salary of $0.3 million and an annual restricted stock grant of $0.1 million vesting quarterly over one year in equal quarterly installments commencing January 1, 2025 which shall be priced and issued on the third trading day immediately following the filing of the Form 10K Annual Report for such applicable year. Ms. Black will be eligible for a discretionary performance bonus to be determined by the Board annually with the annual bonus for the year ended December 31, 2025 to be equal to 75% of the cash salary. If Ms. Black is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such equity grant. If Ms. Black is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Black will be entitled to a severance payment equal 12 months of the annual compensation, all bonuses earned and all equity compensation shall be fully accelerated.
On November 16, 2022, the Company entered into an Executive Employment Agreement with Kenn Miller (the “Miller Agreement”), which replaced his prior employment agreement. Pursuant to the Miller Agreement, Mr. Miller will continue to be employed as Chief Operating Officer of the Company on an at will basis. During the term of the Miller Agreement, Mr. Miller is entitled to a base salary at the annualized rate of $0.3 million. Mr. Miller will be eligible for a discretionary performance bonus up to 75% of his annual salary. Further, Mr. Miller will be entitled to an additional bonus of $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Miller is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Miller is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Miller will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 12 months following the second anniversary of the Miller Agreement, and all equity compensation shall be fully accelerated.
On November 16, 2022, the Company entered into an Executive Employment Agreement with Kevin Mohan (the “Mohan Agreement”), which replaced his prior employment agreement. Pursuant to the Mohan Agreement, Mr. Mohan will continue to be employed as Chief Investment Officer of the Company on an at will basis. During the term of the Employment Agreement, Mr. Mohan is entitled to a base salary at the annualized rate of $0.2 million. Mr. Mohan will be eligible for a discretionary performance bonus up to 75% of his annual salary. Mr. Mohan received an additional bonus of $0.1 million on March 2, 2023 and an additional $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Mohan is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Mohan is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Mohan will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Mohan Agreement, and all equity compensation shall be fully accelerated.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
On November 16, 2022, the Company entered into an Executive Employment Agreement with Aimee Infante (the “Infante Agreement”), which replaced her prior employment agreement. Pursuant to the Infante Agreement, Ms. Infante will continue to be employed as Chief Marketing Officer of the Company on an at will basis. During the term of the Infante Agreement, Ms. Infante is entitled to a base salary at the annualized rate of $0.2 million. Ms. Infante will be eligible for a discretionary performance bonus up to 25% of her annual salary. Further, Ms. Infante will be entitled to an additional bonus of $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Ms. Infante is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Infante is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Infante will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Infante Agreement, and all equity compensation shall be fully accelerated.
NASDAQ Notice
On November 7, 2023, the Company received notice from The Nasdaq Stock Market (“Nasdaq”) that the closing bid price for the Company’s common stock had been below $1.00 per share for the previous 30 consecutive business days, and that the Company is therefore not in compliance with the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Rule”).
Nasdaq’s notice has no immediate effect on the listing or trading of the Company’s common stock on The Nasdaq Capital Market.
The notice indicated that the Company will have 180 calendar days, until May 6, 2024, to regain compliance with this requirement. On April 29, 2024, the Company submitted a request to Nasdaq requesting an additional 180 days to regain compliance. On May 7, 2024, the Company received notice from Nasdaq that the request for an additional 180 days to regain compliance was approved. The Company was eligible to regain compliance with the $1.00 minimum bid listing requirement if the closing bid price of its common stock is at least $1.00 per share for a minimum of ten (10) consecutive business days during the 180-day compliance period. To qualify, the Company was required to meet the continued listing requirement for market value of the Company's publicly held shares and all other Nasdaq initial listing standards, except the bid price requirement, and was required to provide written notice to Nasdaq of its intention to cure the deficiency during the second compliance period.
On October 9, 2024, the Company filed a Certificate of Change Pursuant to NRS 78.209 with the Nevada Secretary of State to effect the Reverse Stock Split, which became effective 12:01 am eastern on October 18, 2024. As a result of the Reverse Stock Split, every 10 shares of the Company’s common stock issued and outstanding on the effective date were consolidated into one issued and outstanding share. All stockholders who would be entitled to receive fractional shares as a result of the Reverse Stock Split received one whole share for their fractional share interest. There was no change in the par value of our common stock.
The Company effectuated a Reverse Stock Split to raise the per share bid price of the Company’s Common Stock above $1.00 per share with the goal of bringing the Company back into compliance with Nasdaq Listing Rule 5550(a)(2). The Company received notice from Nasdaq on November 1, 2024, indicating that the Company regained compliance with the minimum bid price requirement under the Rule.
The Company’s common stock began trading on a split-adjusted basis on Nasdaq at the commencement of trading on October 18, 2024 under the Company’s existing symbol “SDOT.” The Company’s common stock has been assigned a new CUSIP number of 627333305 in connection with the Reverse Stock Split.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
18. Reportable Operating Segments
See Note 1 – Business organization and nature of operations for descriptions of our operating segments.
The Company’s reportable segments are determined based on the management approach, consistent with the way the Chief Operating Decision Maker (CODM) evaluates financial performance and allocates resources. The CODM, identified as the Chief Executive Officer, regularly reviews discrete financial information for the Sadot Food Services and Sadot Agri-Foods segments to assess performance and make operational decisions.
The following table sets forth the results of operations for the relevant segments for the years ended December 31, 2024 and 2023:
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2024 |
| Sadot food service | | Sadot agri-foods | | Corporate adj. | | Total segments |
| $’000 | | $’000 | | $’000 | | $’000 |
| Commodity sales | — | | | 700,937 | | | — | | | 700,937 | |
| Cost of goods sold | — | | | (695,821) | | | — | | | (695,821) | |
| Gross profit | — | | | 5,116 | | | — | | | 5,116 | |
| | | | | | | |
| | | | | | | |
| Depreciation and amortization expenses | — | | | (256) | | | (3) | | | (259) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Stock-based expenses | — | | | — | | | (6,662) | | | (6,662) | |
| Sales, general and administrative expenses | — | | | (5,219) | | | (4,440) | | | (9,659) | |
| (Loss) / income from operations | — | | | (359) | | | (11,105) | | | (11,464) | |
| | | | | | | |
| Interest expense, net | — | | | (2,370) | | | (2,279) | | | (4,649) | |
| Change in fair value of stock-based compensation | — | | | — | | | 4,116 | | | 4,116 | |
| | | | | | | |
| Gain on fair value remeasurement | — | | | 17,111 | | | — | | | 17,111 | |
| Gain on sale of trading securities | — | | | 518 | | | — | | | 518 | |
| (Loss) / income before income tax | — | | | 14,900 | | | (9,268) | | | 5,632 | |
| Income tax (expense) benefit | — | | | (3) | | | — | | | (3) | |
| Net Income / (loss) from continuing operations | — | | | 14,897 | | | (9,268) | | | 5,629 | |
| Loss on discontinued operations | (1,893) | | | — | | | — | | | (1,893) | |
| Net (loss) / income | (1,893) | | | 14,897 | | | (9,268) | | | 3,736 | |
| Net loss attributable to non-controlling interest | — | | | 256 | | | — | | | 256 | |
| Net (loss) / income attributable to Sadot Group Inc. | (1,893) | | | 15,153 | | | (9,268) | | | 3,992 | |
| Total assets | 5,196 | | | 157,881 | | | 1,577 | | | 164,654 | |
Sadot Group Inc.
Notes to the Consolidated Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2023 |
| Sadot food service | | Sadot agri-foods | | Corporate adj. | | Total segments |
| $’000 | | $’000 | | $’000 | | $’000 |
| Commodity sales | — | | | 717,506 | | | — | | | 717,506 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Cost of goods sold | — | | | (707,871) | | | — | | | (707,871) | |
| Gross profit | — | | | 9,635 | | | — | | | 9,635 | |
| | | | | | | |
| | | | | | | |
| Depreciation and amortization expenses | — | | | (151) | | | (992) | | | (1,143) | |
| | | | | | | |
| Pre-opening expenses | — | | | (336) | | | — | | | (336) | |
| | | | | | | |
| Stock-based expenses | — | | | — | | | (6,192) | | | (6,192) | |
| Sales, general and administrative expenses | — | | | (1,552) | | | (7,416) | | | (8,968) | |
| (Loss) / income from operations | — | | | 7,596 | | | (14,600) | | | (7,004) | |
| Other income | — | | | — | | | 308 | | | 308 | |
| Interest expense, net | — | | | (52) | | | (416) | | | (468) | |
| Change in fair value of stock-based compensation | — | | | — | | | 1,339 | | | 1,339 | |
| Warrant modification expense | — | | | — | | | (958) | | | (958) | |
| Gain on fair value remeasurement | — | | | 1,491 | | | — | | | 1,491 | |
| | | | | | | |
| (Loss) / income before income tax | — | | | 9,035 | | | (14,327) | | | (5,292) | |
| Income tax (expense) benefit | — | | | — | | | 15 | | | 15 | |
| Net Income / (loss) from continuing operations | — | | | 9,035 | | | (14,312) | | | (5,277) | |
| Loss on discontinued operations | (2,765) | | | — | | | — | | | (2,765) | |
| Net (loss) / income | (2,765) | | | 9,035 | | | (14,312) | | | (8,042) | |
| Net loss attributable to non-controlling interest | — | | | 218 | | | — | | | 218 | |
| Net (loss) / income attributable to Sadot Group Inc. | (2,765) | | | 9,253 | | | (14,312) | | | (7,824) | |
| Total assets | 10,416 | | | 162,175 | | | 5,500 | | | 178,091 | |
During the year ended December 31, 2024, assets related to our Sadot Food Services segment met the criteria for classification as Assets Held for Sale. See Note 2 – Significant accounting policies and Note 3 – Assets held for sale and Note 4 – Discontinued operations for additional information.
In late 2022, Sadot Group transformed from a U.S.-centric restaurant business into a global organization focused on the Agri-Foods supply-chain. As a result, we have reevaluated and changed our operating segments late in 2023 to align with our two distinct segments. Previously we split out Muscle Maker Grill, Pokémoto, and SuperFit Foods as their own restaurant operating segments. With the transformation of our business into a global, food-focused organization, we operate the business in two distinct business segments Sadot Agri-Foods and Sadot Food Service.
The Company will continue to evaluate its operating segments and update as necessary.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
19. Fair Value Measurement
The following tables presents information about the Company's assets and liabilities that are measure at fair value on a recurring basis at December 31, 2024 and 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2024 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| $’000 | | $’000 | | $’000 | | $’000 |
| Financial assets: | | | | | | | |
| Derivative asset | — | | | 93,520 | | | — | | | 93,520 | |
| Unrealized gain on derivative contracts | — | | | 18,602 | | | — | | | 18,602 | |
| — | | | 112,122 | | | — | | | 112,122 | |
| Financial liabilities: | | | | | | | |
| Derivative liability | — | | | 92,094 | | | — | | | 92,094 | |
| Unrealized loss on derivative contracts | — | | | 60 | | | — | | | 60 | |
| | | | | | | |
| — | | | 92,154 | | | — | | | 92,154 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| $’000 | | $’000 | | $’000 | | $’000 |
| Financial assets: | | | | | | | |
| Derivative asset | — | | | 93,520 | | | — | | | 93,520 | |
| Unrealized gain on derivative contracts | — | | | 1,491 | | | — | | | 1,491 | |
| — | | | 95,011 | | | — | | | 95,011 | |
| Financial liabilities: | | | | | | | |
| Derivative liability | — | | | 92,094 | | | — | | | 92,094 | |
| | | | | | | |
| — | | | 92,094 | | | — | | | 92,094 | |
| | | | | | | |
There were no transfers between fair value levels during the year ended December 31, 2024.
See Note 17 – Commitments and contingencies and Note 20 – Financial instruments for details related to the unrealized gain on derivative contracts being fair valued using Level 2 inputs.
The fair value of the unrealized loss on derivative contracts, unrealized gain on derivative contracts, derivative asset and derivative liability is based on quoted prices for similar assets and liabilities in active market or inputs that are observable which represent Level 2 measurements within the fair value hierarchy and is based on observable prices for similar assets sourced by an independent marketplace. Please refer to Note 2 – Significant accounting policies for additional information on ASC 815 leveling.
20. Financial Instruments
Inherent in our business is the risk of matching the timing of our purchase and sales contracts. The prices of food and feed commodities (e.g., soybeans, wheat, corn, etc.) and carbon offset units we buy and sell are based on a constantly moving terminal market price determined by various exchanges (e.g., CME, Chicago Board of Trade ("CBOT") and Dalian Commodity Exchange ("DCE"), etc.). Were we not to hedge such exposures, we could be exposed to significant losses due to the continually changing commodity prices.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
We use commodity futures contracts to manage our exposure to this commodity price risk. It is generally our policy to hedge such risks to the extent practicable. We enter into hedges to limit our exposure to volatile price fluctuations that we believe would impact our gross margins on firm purchase and sales commitments. As an example, if we enter into fixed price contracts with our suppliers and variable priced sales contracts with our customers, we will generally enter into a futures contract to sell the commodity for future delivery in the month when we expect the commodity price to be fixed according to the sales contract terms. We repurchase this position once the pricing has been fixed with our customer. If the underlying commodity price increases, we suffer a hedging loss and have an unrealized loss on derivative contracts, but the sales price to the customer is based on a higher market price and offsets the loss. Conversely, if the commodity price decreases, we have a hedging gain and recognize an unrealized gain on derivative contracts, but the sales price to the customer is based on the lower market price and offsets the gain.
In accordance with FASB ASC 815, Derivatives and Hedging, we designate these derivative contracts as fair value hedges and recognize them on our balance sheet at fair value. We also recognize offsetting changes in the fair value of the related firm purchase and sales commitment to which the hedge is attributable in earnings upon revenue recognition, which occurs at the time of delivery to our customers.
The potential for losses related to our hedging activities, given our hedging methodology, arises from the exchanges for our commodity hedges or customer defaults. In the event of a customer default, we might be forced to sell the commodities in the open market and absorb losses for the commodities. Our results of operations could be materially impacted by any counterparty or customer default, as we might not be able to collect money owed to us and/or our hedge might effectively be cancelled.
We use hedges for no purpose other than to avoid exposure to changes in commodity prices between when we buy a shipment of commodities from a supplier and when we deliver it to a customer. Our derivatives are not for purposes of trading in the futures market. We earn our gross profit margin through our business operations and not from the movement of commodity prices.
The Company’s assets and liabilities related to unrealized gains or losses on fair value hedges measured at fair value at December 31, 2024 and 2023 are as follows:
| | | | | | | | | | | | | | | | | |
| Derivatives designated as fair value hedges | Balance Sheet Location | | December 31, 2024 | | December 31, 2023 |
| Asset (liability) derivatives: | | | $’000 | | $’000 |
| Unrealized loss on derivative contracts | Other current liabilities | | (60) | | | — | |
| Total | | | (60) | | | — | |
The table below summarizes the realized gain or (loss) on the Company’s derivative instruments and their location in the Consolidated Statement of Operations and Other Comprehensive Income / (Loss):
| | | | | | | | | | | | | | | | | |
| | | For the Years Ended |
| Derivatives in hedging relationships | Location of Gain / (Loss) Recognized | | December 31, 2024 | | December 31, 2023 |
| | | $’000 | | $’000 |
| Unrealized loss on derivative contracts | Cost of goods sold | | (275) | | | — | |
| Total | | | (275) | | | — | |
From time to time we may enter into forward sales contracts that do not meet the definition or qualify for hedge accounting. Forward sales contracts are derivatives that were entered into to sell goods at a later date at a fixed or determinable price for a specific period. Forward sales contracts are recognized on the balance sheet at the value of the contract and the difference in the fair value and derivative liability is recorded as an unrealized gain on derivative contracts or unrealized loss on derivative contracts. If the underlying commodity price increases, we suffer a mark to market loss and have a derivative liability. Conversely, if the commodity price decreases, we have a hedging gain and recognize a unrealized gain on derivative contract.
As part of our business we also engage in the purchase, sale and distribution of food and feed products. If we do not have a matching sales contract related to such products, (for example, any commodity products that are unsold in our inventory), we have price risk that we currently do not or are unable to hedge. As such, any decline in pricing for such products may adversely impact our profitability.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
The follow table sets forth the fair value of derivatives not designated as hedging instruments as of at December 31, 2024 and 2023:
| | | | | | | | | | | | | | | | | |
| Derivatives | Balance Sheet Location | | December 31, 2024 | | December 31, 2023 |
| Asset (liability) derivatives: | | | $’000 | | $’000 |
| Unrealized gain on derivative contracts | Other current assets | | 18,602 | | | 1,491 | |
| Derivative asset | Other current assets | | 93,520 | | | 47,180 | |
| Derivative asset | Other non-current assets | | — | | | 46,340 | |
| Derivative liability | Other current liabilities | | (92,094) | | | (46,046) | |
| Derivative liability | Other non-current liabilities | | — | | | (46,048) | |
| Total | | | 20,028 | | | 2,917 | |
The table below summarizes the realized gain or (loss) on the Company’s derivative instruments and their location in the Consolidated Statement of Operations and Other Comprehensive Income / (Loss):
| | | | | | | | | | | | | | | | | |
| | | For the Years Ended |
| Derivatives | Location of Gain / (Loss) Recognized | | December 31, 2024 | | December 31, 2023 |
| | | $’000 | | $’000 |
| Unrealized gain on derivative contracts | Gain / (loss) on fair value remeasurement | | 17,111 | | | 1,491 | |
| Total | | | 17,111 | | | 1,491 | |
21. Equity
Stock Option and Stock Issuance Plan
2021 Plan
The Company’s board of directors and shareholders approved and adopted on October 7, 2021 the 2021 Equity Incentive Plan (“2021 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2021 Plan, the Company reserved 150,000 shares of common stock for issuance. As of December 31, 2024, 65,643 shares have been issued and 74,357 options to purchase shares have been awarded under the 2021 Plan.
2023 Plan
The Company’s board of directors and shareholders approved and adopted on February 28, 2023 the 2023 Equity Incentive Plan (“2023 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2023 Plan, the Company reserved 250,000 shares of common stock for issuance. As of December 31, 2024, 242,404 shares have been issued and 6,893 option to purchase shares have been awarded under the 2023 Plan.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
2024 Plan
The Company’s board of directors and shareholders approved and adopted on October 27, 2023 the 2024 Equity Incentive Plan (“2024 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2024 Plan, the Company reserved 750,000 shares of common stock for issuance. As of December 31, 2024, 401,936 shares have been issued under the 2024 Plan and nil option to purchase shares have been awarded under the 2024 Plan.
Common Stock Issuances
On January 5, 2023, the Company authorized the issuance of an aggregate of 3,131 shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2022.
On March 27, 2023, the Company authorized the issuance of 284,881 shares of common stock to a Aggia for services rendered.
On April 5, 2023 the Company authorized the issuance of 2,974 shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2023.
On May 10, 2023 the Company authorized the issuance of 13,965 shares of common stock to a consultant for services rendered.
On May 25, 2023, the Company authorized the issuance of 272,002 shares of common stock to Aggia for services rendered.
On June 30, 2023, the Company vested 85,472 shares of common stock to a consultant for services rendered.
On July 11, 2023, the Company authorized the issuance of an aggregate of 3,298 shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2023.
On July 14, 2023, the Company issued 885,545 Restricted Share Awards to Aggia, with an effective issuance date of April 1, 2023.
On July 27, 2023, the Company authorized the issuance of 215,331 shares of common stock to Altium in exchange for the exercise of warrants.
On August 15, 2023, the Company authorized the issuance of 5,000 shares of common stock to a consultant for services rendered.
On September 25, 2023, the Company authorized the issuance of 22,727 shares of common stock in fees to a consultant for services rendered related to the SEPA.
On September 30, 2023, the Company vested 53,831 shares of common stock to to a consultant for services rendered.
On October 2, 2023, the Company authorized the issuance of an aggregate of 6,365 shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2023.
On October 20, 2023, the Company authorized the issuance of 8,550 shares of common stock to consultants for services rendered.
On November 6, 2023, the Company authorized the issuance of 8,043 shares of common stock in connection with the conversion of notes payables.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
On November 14, 2023, the Company authorized the issuance of 15,911 shares of common stock in connection with the conversion of notes payables.
On November 29, 2023, the Company authorized the issuance of 23,732 shares of common stock in connection with the conversion of notes payables.
On December 13, 2023, the Company authorized the issuance of 27,132 shares of common stock in connection with the conversion of notes payables.
On December 19, 2023, the Company authorized the issuance of 26,791 shares of common stock in connection with the conversion of notes payables.
On December 19, 2023, the Company issued 202,260 RSA's to certain members of the board of directors, consultants and employees. Total RSA vested as a result of the departure of certain members of the board of directors were 17,640 shares for 2023. The remaining RSA vest ratably over 12 quarters with the first vesting starting on March 31, 2024.
On December 31, 2023, the Company vested 20,986 shares of common stock to Aggia as consulting fees earned during the fourth quarter of 2023.
On January 4, 2024 the Company authorized the issuance of 10,564 shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2023. The Company accrued for the liability as of December 31, 2023.
On January 8, 2024, the Company authorized the issuance of 27,694 shares of common stock in connection with the conversion of notes payable.
On January 11, 2024, the Company authorized the issuance of 27,891 shares of common stock in connection with the conversion of notes payable.
On January 22, 2024, the Company authorized the issuance of 30,577 shares of common stock in connection with the conversion of notes payable.
On January 29, 2024, the Company authorized the issuance of 30,443 shares of common stock in connection with the conversion of notes payable.
On February 16, 2024 the Company authorized the issuance of 300 shares of common stock to a consultant for services rendered.
On February 16, 2024, the Company authorized the issuance of 30,572 shares of common stock in connection with the conversion of notes payable.
On March 15, 2024, the Company authorized the issuance of 60,885 shares of common stock in connection with the conversion of notes payable.
On March 20, 2024, the Company authorized the issuance of 76,077 shares of common stock in connection with the conversion of notes payable.
On March 28, 2024 the Company authorized the issuance of 7,950 shares of common stock to a consultant for services rendered.
On March 31, 2024, the Company vested 50,094 shares of common stock to Aggia as consulting fees earned during the first quarter of 2024.
On June 30, 2024, the Company vested 139,899 shares of common stock to Aggia as consulting fees earned during the second quarter of 2024.
On August 14, 2024, the Company authorized the issuance of 54,981 shares of common stock in connection with the conversion of notes payable.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
On August 19, 2024, the Company authorized the issuance of 104,249 shares of common stock in connection with the conversion of notes payable.
On August 26, 2024 the Company authorized the issuance of 47,500 shares of common stock to a consultant for services rendered.
On September 27, 2024, the Company authorized the issuance of 62,549 shares of common stock in connection with the conversion of notes payable.
On September 30, 2024, the Company vested 121,149 shares of common stock to Aggia as consulting fees earned during the third quarter of 2024.
On December 3, 2024, the Company entered into a Purchase Agreement (the “Purchase Agreement”) and Registration Rights Agreement (the “Registration Rights Agreement”) with institutional investors (“Purchasers”) and issued an aggregate of $3.75 million aggregate principal amount of convertible senior notes due in 2025 (the “Notes”) for aggregate gross proceeds of approximately $3.0 million, before deducting fees to the placement agent and other expenses payable by the Company (the “Offering”). RBW Capital Partners LLC, offering all securities through Dominari Securities LLC, served as the exclusive placement agent for the Offering. The Offering closed on December 4, 2024. Pursuant to the Purchase Agreement, the Notes were issued with an original issue discount of 20%. The Notes will mature on December 4, 2025, unless earlier converted upon the satisfaction of certain conditions. The conversion price of the Notes is $4.10 per share of common stock. The Notes include a “Most Favored Nation” clause which grants to the Purchasers the right to claim better conversion terms should the Company provide such to any as long as the Notes are outstanding. The Purchasers will be prohibited from effecting a conversion of the Notes to the extent that, as a result of such conversion, a Purchaser would beneficially own more than 9.99% of the shares of common stock outstanding immediately after giving effect to such conversion. The Company agreed to register the shares of common stock underlying the Notes for resale under a Registration Statement on Form S-3, pursuant the Securities Act of 1933. The Notes contain a covenant prohibiting the Company to incur, guarantee or assume any indebtedness, other than certain permitted indebtedness, create or allow or suffer any mortgage, lien, security interest or other encumbrance on its property or assets , other than permitted liens, redeem, defease, repurchase, repay or make any payments in respect of any indebtedness if at the time such payment is due or is otherwise made or, after giving effect to such payment, an event of default under the Notes has occurred and is continuing, declare or pay any cash dividend or distribution on any stock or other equity interest of the Company, or make, any change in the nature of its business or modify its corporate structure or purpose. The Notes contain customary events of default and customary penalties for the Company’s failure to issue conversion shares on a timely basis. The Registration Rights Agreement contains customary penalties for our failure to file the registration statement or cause it to become effective on a timely basis and for certain other events.
On December 31, 2024, the Company vested 160,413 shares of common stock to Aggia as consulting fees earned during the fourth quarter of 2024.
Preferred Stock
Our authorized preferred stock consists of 10,000,000 shares of preferred stock, $0.0001 par value per share. As of December 31, 2024 there are no shares of preferred stock currently issued and outstanding.
Restricted Share Awards
Per Addendum 2, on July 14, 2023, the Company issued Restricted Share Awards ("RSA's") to Aggia. These RSA are considered issued as of the effective date on April 1, 2023. Pursuant to the Services Agreement these RSA's vest on a progressive schedule, at a rate equal to the Net Income of Sadot Agri-Foods, calculated quarterly divided by $3.125, which for accounting purposes shall equal 40% of the net income of Sadot Agri-Foods, calculated quarterly divided by $1.25. Shares shall be considered issued and outstanding as of the Addendum Date and Aggia shall hold rights associated with such Shares; provided, however, Shares not earned or purchased may not be transferred, offered, pledged, sold, subject to a contract to sell, granted any options for the sale of or otherwise disposed of, directly or indirectly. The total RSA's vested for Aggia in 2024 were 471,555.
At December 31, 2024, there were 640,329 restricted share awards outstanding awarded to employees, consultants and the board of directors.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
A summary of the activity related to the restricted share awards is presented below:
| | | | | | | | | | | |
| | Total | | Weighted-average
grant date
fair value |
| | | $ |
| Unvested, December 31, 2022 | — | | — | |
| Granted | 1,087,806 | | 12.50 | |
| Forfeited | — | | — | |
| Vested | (177,929) | | 12.50 | |
| Unvested at December 31, 2023 | 909,877 | | 10.85 | |
| Granted | 335,622 | | 1.88 | |
| Forfeited | — | | — | |
| Vested | (605,170) | | 10.49 | |
| Unvested at December 31, 2024 | 640,329 | | 6.49 | |
Change in fair value of stock-based compensation on the Consolidated Statement of Operations and Other Comprehensive Loss is made up of the difference between the agreed upon issuance price, per the servicing agreement with Aggia and the market price on the day of issuance. For the year ended December 31, 2024, Change in fair value of stock-based compensation was a gain of $4.1 million. For the year ended December 31, 2023, Change in fair value of stock-based compensation was a gain of $1.3 million.
See Note 17 – Commitments and contingencies for further details on Restricted Share Awards.
Warrant and Option Valuation
The Company has computed the fair value of warrants and options granted using the Black-Scholes option pricing model. The expected term used for warrants and options issued to non-employees is the contractual life. The Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time, equivalent to the expected term of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.
Options
On February 27, 2023, we issued options to purchase an aggregate of 53,107 shares of our common stock. The options had an exercise price of $15.05 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On March 15, 2023, we issued options to purchase 6,893 shares of our common stock. The options had an exercise price of $15.05 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On November 27, 2023, there were 10,000 shares forfeited upon the expiration of the options.
On December 21, 2023, there were 8,500 shares forfeited upon the departure of board members.
On January 21, 2024 there were 1,500 shares forfeited upon the expiration of the options.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
A summary of option activity is presented below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Weighted-average
exercise
price | | Number of
options | | Weighted-average
remaining
life (in years) | | Aggregate intrinsic value |
| $ | | | | | | $’000 |
| Outstanding, December 31, 2022 | 15.23 | | | 41,250 | | 3.53 | | 156 | |
| Granted | 15.05 | | | 60,000 | | 5.42 | | — | |
| Exercised | — | | | — | | N/A | | — | |
| Forfeited | 33.94 | | | (18,500) | | N/A | | — | |
| Outstanding, December 31, 2023 | 10.91 | | | 82,750 | | | 4.26 | | — | |
| Exercisable and vested, December 31, 2023 | 9.97 | | | 22,190 | | | 4.34 | | — | |
| Granted | — | | | — | | N/A | | — | |
| Exercised | — | | | — | | N/A | | — | |
| Forfeited | 15.05 | | | (1,500) | | N/A | | — | |
| Outstanding, December 31, 2024 | 10.84 | | | 81,250 | | 3.17 | | — | |
| Exercisable and vested, December 31, 2024 | 10.03 | | | 36,926 | | 3.07 | | — | |
The Company has estimated the fair value of the options using the Black-Scholes model using the following assumptions:
| | | | | |
| | For the Year Ended December 31, 2024 |
| Risk free interest rate | 1.53-4.33% |
| Expected term (years) | 5.00 |
| Expected volatility | 59.10-156.87% |
| Expected dividends | — | |
Warrant Exercise Agreement
On July 27, 2023 (the “Closing Date”), the Company entered into a Warrant Exercise Agreement (the “Exercise Agreement”) with Altium Growth Fund Ltd. (the “Exercising Holder”), the holder of outstanding warrants to purchase 215,331 shares of common stock of the Company issued in November 2021 (collectively, the “Original Warrants”), whereby the Exercising Holder exercised the Original Warrants in consideration of 215,331 shares of common stock (the “Shares”). The Company received aggregate gross proceeds before expenses of approximately $2.2 million. In order to induce the Exercising Holder to exercise the Original Warrants, the Company reduced the exercise price on the Original Warrants from $13.85 to $10.00 per share.
In connection with the exercise of the Original Warrants, we issued an additional warrant to Altium that is exercisable to acquire 215,331 shares of common stock (the “Additional Warrant”) exercisable at a per share price of $24.00.
Additional Warrants Issued
In connection with the exercise of the Original Warrants, the Company issued an additional warrant to the Exercising Holder that is exercisable for the number of shares of common stock equal to one hundred percent of the Shares purchased by the Exercising Holder (the “Additional Warrant”). The Additional Warrant is substantially identical to the Original Warrants, except that the exercise price of the Additional Warrant is $24.00. The Company is obligated to file a registration statement covering the shares of common stock underlying the warrants within 30 days and to have the registration statement declared effective within 90 days after filing with the Commission.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
A summary of warrants activity is presented below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Weighted-average
exercise
price | | Number of
Warrants | | Weighted-average
remaining life
(in years) | | Aggregate intrinsic value |
| $ | | | | | | $’000 |
| Outstanding, December 31, 2022 | 19.30 | | | 1,803,364 | | 3.51 | | — |
| Granted | 24.00 | | | 215,331 | | 2.88 | | — |
| Exercised | 10.00 | | | (215,331) | | 2.90 | | 215 |
| Forfeited | 43.60 | | | (65,362) | | N/A | | — |
| Outstanding, December 31, 2023 | 19.69 | | | 1,738,002 | | 2.61 | | — |
| Exercisable, December 31, 2023 | 19.69 | | | 1,738,002 | | 2.61 | | — |
| Granted | — | | | — | | N/A | | — |
| Exercised | — | | | — | | N/A | | — |
| Forfeited | 31.47 | | | (144,982) | | N/A | | — |
| Outstanding, December 31, 2024 | 18.62 | | | 1,593,020 | | 1.82 | | — |
| Exercisable, December 31, 2024 | 18.62 | | | 1,593,020 | | 1.82 | | — |
Stock-Based Compensation Expense
Stock-based compensation related to restricted stock issued to employees, directors and consultants, warrants and warrants to consultants amounted to $6.7 million and $6.2 million, respectively for the years ended December 31, 2024 and 2023, of which $5.9 million and $5.4 million were stock-based consulting expenses paid to related party, $0.4 million and $0.5 million were given to consultants for services rendered, $0.1 million and $0.3 million were given to the board of directors and $0.3 million and $0.1 million were executive compensation.
22. Related Party Transactions
The Company held a Special Shareholder Meeting on February 28, 2023. At the meeting, the shareholders approved (i) the Services Agreement whereby Sadot LLC engaged Aggia, to provide certain advisory services to Sadot Agri-Food for managing Sadot Agri-Food’s business of wholesaling food and engaging in the purchase and sale of physical food commodities; (ii) an amendment of the Company’s articles of incorporation to increase the number of authorized shares of common stock from 5,000,000 to 15,000,000; (iii) for purposes of complying with NASDAQ Listing Rule 5635(b), the issuance of the Shares pursuant to the Services Agreement entered between the Company, Sadot LLC and Aggia representing more than 20% of our common stock outstanding, which would result in a “change of control” of the Company under applicable Nasdaq listing rules; (iv) for purposes of complying with NASDAQ Listing Rule 5635(c), the issuance of up to 1,442,428 Shares of Common Stock to Aggia pursuant to the Services Agreement and net income generated thresholds; (v) the right of Aggia to nominate up to eight directors to the Board of Directors subject to achieving net income thresholds as set forth in the Services Agreement; and (vi) the adoption of the 2023 Equity Incentive Plan. The shareholders of the Company subsequently approved an increase in the authorized shares of common stock from 15,000,000 to 20,000,000 at the Company’s Annual Meeting held on December 20, 2023.
As of December 31, 2024, Aggia owned 11.5% of the Company's common stock.
During the year ended December 31, 2024 and 2023, the Company recorded Stock-based consulting expense of $5.9 million and $5.4 million, respectively to its related party, Aggia for consulting services rendered.
Additionally, for the year ended December 31, 2024 and 2023, the Company reimbursed Aggia for all operating costs related to Sadot Agri-Foods of $3.8 million and $3.2 million, respectively. See Note 17 – Commitments and contingencies for additional information.
Sadot Group Inc.
Notes to the Consolidated Financial Statements
On September 19, 2024, the Company received a loan from a related party, in an arms length transaction, of $0.6 million, with a discount of $0.1 million, that matures in six months.
The Company will continue to monitor and evaluate its related party transactions to ensure that they are conducted in accordance with applicable laws and regulations and in the best interests of the Company and its shareholders.
23. Subsequent Events
Board of Directors
On February 4, 2025, Jeff Carl resigned from the Board of Directors due to his professional experience being primarily focused on the restaurant industry. This will allow the Company to appoint a new director to the Board with experience that would better reflect the Company’s new business focus.
On February 20, 2025, the Company appointed Claudio Torres to its Board of Directors to fill a vacancy. Mr. Torres brings over 25 years of experience in the global agriculture industry, including senior leadership roles at Syngenta Group, Advanta Seeds and Monsanto.
On March 7, 2025, Kevin Mohan stepped down from his position as Chairman of the Board to allow Mark McKinney to assume the role of Chairman of the Board. Mr. McKinney has over 30 years of executive experience across multiple industries, having served as CEO, CFO and President for global organizations such as Local Bounti, Fruit Growers (Sunkist Cooperative), Dole Food Company and Al Ghurair Foods spanning six countries and three continents.
Employment Agreements
On February 10, 2025, the Company and Sadot Brasil Ltda. (“Sadot Brasil”), the Company’s wholly owned subsidiary, entered into an Employment Agreement with Catia Jorge effective February 10, 2025, to serve as Chief Executive Officer of both the Company and Sadot Brasil. See Note 17 – Commitments and contingencies for further details.
On February 9, 2025 the Company entered into an Executive Employment Agreement with Michael Roper (the “Roper Agreement”), which replaced his prior employment agreement. Pursuant to the Roper Agreement, Mr. Roper will transition to the role of Chief Governance and Compliance Officer, reporting directly to the Company’s Chief Executive Officer. See Note 17 – Commitments and contingencies for further details.
On February 9, 2025 the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement. See Note 17 – Commitments and contingencies for further details.
