Sadot Group Inc. 10-Q

Item 1. Financial Statements Muscle Maker, Inc. Condensed Consolidated Balance Sheets (Unaudited) June 30, 2023 December 31, 2022 $’000 $’000 Assets Current assets: Cash 5,090 9,898 Accounts receivable, net of allowance for doubtful accounts of $ 34.2 thousand and $ 23.4 thousand as of June 30, 2023 and December 31, 2022, respectively 47,502 135 Inventory 307 298 Prepaid expenses and other current assets 319 317 Total current assets 53,218 10,648 Right to use assets 2,059 2,433 Property and equipment, net 1,497 1,895 Goodwill 2,626 2,626 Intangible assets, net 4,019 4,611 Deposit on farmland 8,802 4,914 Security deposits and other assets 102 103 Total assets 72,323 27,230 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable and accrued expenses 40,967 1,953 Accrued stock-based compensation expense - related party — 3,603 Notes payable, current 3,727 222 Operating lease liability, current 511 560 Deferred revenue, current 93 95 Other current liabilities 204 182 Total current liabilities 45,502 6,615 Notes payable, non-current 685 759 Operating lease liability, non-current 1,673 2,019 Deferred revenue, non-current 1,295 1,276 Total liabilities 49,155 10,669 Commitments and Contingencies Stockholders’ equity: Common stock, $ 0.0001 par value, 150 million shares authorized, 36.0 million and 29.3 million shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively 4 3 Additional paid-in capital 103,395 95,913 Accumulated deficit ( 80,231 ) ( 79,355 ) Total stockholders’ equity 23,168 16,561 Total liabilities and stockholders’ equity 72,323 27,230 See Accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited) 4 Table of Contents Muscle Maker, Inc. Condensed Consolidated Statement of Operations (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 $’000 $’000 $’000 $’000 Revenues: Commodity sales 157,559 — 367,925 — Company restaurant sales, net of discounts 2,487 2,751 4,788 5,445 Franchise royalties and fees 238 163 522 371 Franchise advertising fund contributions 20 16 36 34 Other revenues 13 — 13 — Total revenues 160,317 2,930 373,284 5,850 Operating Costs and Expenses: Commodity operating expenses: Commodity cost 153,240 — 358,295 — Labor 852 — 1,472 — Other commodity operating expenses 485 — 639 — Total commodity operating expenses 154,577 — 360,406 — Restaurant operating expenses: Food and beverage costs 867 1,117 1,706 2,143 Labor 956 903 1,836 1,976 Rent 290 327 564 667 Other restaurant operating expenses 551 688 1,023 1,338 Total restaurant operating expenses 2,664 3,035 5,129 6,124 Depreciation and amortization expenses 441 489 1,074 965 Franchise advertising fund expenses 20 16 36 34 Pre-opening expenses — — 36 — Post-closing expenses 19 — 113 — Stock-based consulting expenses 1,068 — 4,427 — Sales, general and administrative expenses 1,888 1,127 4,030 2,451 Total costs and expenses 160,677 4,667 375,251 9,574 Loss from operations ( 360 ) ( 1,737 ) ( 1,967 ) ( 3,724 ) Other Income / (Expense): Other income / (expense) 251 ( 15 ) 251 ( 34 ) Interest income / (expense), net ( 22 ) ( 10 ) ( 19 ) ( 28 ) Change in fair value of accrued compensation 324 — 865 — Gain on debt extinguishment — — — 140 Total other income / (expense), net 553 ( 25 ) 1,097 78 Income / (Loss) Before Income Tax 193 ( 1,762 ) ( 870 ) ( 3,646 ) Income tax 3 12 6 14 Net income / (loss) 190 ( 1,774 ) ( 876 ) ( 3,660 ) Net Income / (Loss) Per Share: Basic 0.01 ( 0.06 ) ( 0.03 ) ( 0.13 ) Diluted 0.01 ( 0.06 ) ( 0.03 ) ( 0.13 ) Weighted-Average # of Common Shares Outstanding: Basic 33,362,887 28,668,116 31,407,362 28,235,052 Diluted 33,567,719 28,668,116 31,407,362 28,235,052 See Accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited) 5 Table of Contents Muscle Maker, Inc. Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) Common Stock Additional Paid-in Capital Accumulated Deficit Total Shares Amount ( '000 $’000 $’000 $’000 $’000 Balance at December 31, 2021 26,110 3 95,760 ( 71,370 ) 24,393 Cumulative effect of change in accounting principal — — — ( 15 ) ( 15 ) Cashless exercise of pre-funded warrants 2,410 — — — — Common stock compensation to board of directors 94 — 57 — 57 Common stock issued as compensation for services 30 — 16 — 16 Net loss — — — ( 1,886 ) ( 1,886 ) Balance at March 31, 2022 28,644 3 95,833 ( 73,271 ) 22,565 Cumulative effect of change in accounting principal — — — ( 8 ) ( 8 ) Stock-based compensation - options — — 4 — 4 Reconciliation for shares outstanding per transfer agent 31 — — — — Common stock issued as compensation for services 5 — 2 — 2 Common stock issued as compensation for employment 20 — 11 — 11 Net loss — — — ( 1,774 ) ( 1,774 ) Balance at June 30, 2022 28,700 3 95,850 ( 75,053 ) 20,800 Balance at December 31, 2022 29,287 3 95,913 ( 79,355 ) 16,561 Common stock compensation to board of directors 31 — 28 — 28 Common stock issued as compensation for services 2,849 — 3,020 — 3,020 Stock-based compensation - options — — 27 — 27 Net loss — — — ( 1,066 ) ( 1,066 ) Balance at March 31, 2023 32,167 3 98,988 ( 80,421 ) 18,570 Common stock compensation to board of directors 30 — 32 — 32 Common stock issued as compensation for services 3,714 1 4,348 — 4,349 Stock-based compensation - options — — 27 — 27 Net income — — — 190 190 Balance at June 30, 2023 35,911 4 103,395 ( 80,231 ) 23,168 See Accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited) 6 Table of Contents Muscle Maker, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2023 2022 $’000 $’000 Cash Flows from Operating Activities Net loss ( 876 ) ( 3,660 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,074 965 Stock-based compensation 318 89 Gain on extinguishments of debt — ( 140 ) Stock-based consulting expenses 4,427 — Change in fair value of compensation ( 865 ) — Loss on disposal of assets 53 267 Bad debt expense 34 ( 59 ) Changes in operating assets and liabilities: Accounts receivable, net ( 47,401 ) ( 123 ) Inventory ( 9 ) 45 Prepaid expenses and other current assets ( 2 ) 1,194 Security deposits and other assets 1 ( 12 ) Accounts payable and accrued expenses 39,014 ( 611 ) Deferred rent — ( 128 ) Operating right of use asset and liability, net ( 21 ) 131 Deferred revenue 17 228 Other current liabilities 22 ( 91 ) Total adjustments ( 3,338 ) 1,755 Net cash used in operating activities ( 4,214 ) ( 1,905 ) Cash Flows from Investing Activities Deposit on farmland ( 3,888 ) — Purchases of property and equipment ( 247 ) ( 283 ) Disposal of property and equipment 110 — Net cash used in investing activities ( 4,025 ) ( 283 ) Cash Flows from Financing Activities Repayments of convertible note — ( 50 ) Proceeds from other notes payable 3,500 — Repayments of notes payables ( 69 ) ( 63 ) Net cash provided by (used in) financing activities 3,431 ( 113 ) Net Decrease in Cash ( 4,808 ) ( 2,301 ) Cash – beginning of period 9,898 15,767 Cash – end of period 5,090 13,466 See Accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited) 7 Table of Contents Muscle Maker, Inc. Condensed Consolidated Statements of Cash Flows (Continued) (Unaudited) Six Months Ended June 30, 2023 2022 $’000 $’000 Supplemental Disclosures of Cash Flow Information: Cash paid for interest 20 87 See Accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited) 8 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 1. Business Organization and Nature of Operations Muscle Maker, Inc. (“MMI”), a Nevada corporation was incorporated in Nevada on October 25, 2019. MMI was a wholly owned subsidiary of Muscle Maker, Inc (“MMI-Cal”), a California corporation incorporated on December 8, 2014, but the two merged on November 13, 2019, with MMI as the surviving entity. MMI wholly owns Muscle Maker Development, LLC (“MMD”), Muscle Maker Corp, LLC (“MMC”) and Muscle Maker USA, Inc (“Muscle USA”). MMD was formed on July 18, 2017, in the State of Nevada for the purpose of running our existing franchise operations and continuing to franchise the Muscle Maker Grill name and business system to qualified franchisees. MMC was formed on July 18, 2017, in the State of Nevada for the purpose of developing new corporate stores and operating new and existing corporate stores of MMI. Muscle USA was formed on March 14, 2019, in the State of Texas for the purpose of opening additional new corporate stores. Muscle Maker Development International LLC, a directly wholly owned subsidiary of MMI, which was formed in Nevada on November 13, 2020, to franchise the Muscle Maker Grill® name, trademarks and business system to qualified franchisees internationally. On March 25, 2021, MMI acquired the assets and trademarks of SuperFit Foods™, a subscription based fresh-prepared meal prep business located in Jacksonville, Florida. On May 14, 2021, MMI acquired the assets and trademarks of PKM Stamford, LLC, Poke Co., LLC, LB Holdings LLC, TNB Holdings, LLC, Poke Co Holdings LLC, GLL Enterprises, LLC, and TNB Holdings II, LLC, each a Connecticut limited liability company, an operator and franchisor of a fast casual restaurant chain concept, collectively known as “Pokémoto®.” On October 19, 2022, MMI formed Sadot LLC, a Delaware limited liability company and a wholly-owned subsidiary of MMI, ("Sadot Agri-Foods"), for the purpose of shipping and trading agri-commodities on a global basis. With the formation of Sadot Agri-Foods in late 2022, MMI has evolved from a U.S.-centric restaurant business into a global, food-focused organization. As of June 30, 2023, MMI consisted of two distinct operating units: 1. SADOT LLC: MMI’s largest operating unit is a global agri-commodities company engaged in trading and shipping of food and feed (e.g., soybean meal, wheat, corn, etc.) via dry bulk cargo ships to/from markets such as Brazil, Canada, China, India, Japan, Malaysia, Philippines, Poland, Romania, Ukraine and Vietnam. Sadot Agri-Foods competes with the ABCD commodity companies (ADM, Bunge, Cargill, Louis-Dreyfus) as well as many regional organizations. Sadot Agri-Foods seeks to diversify over time into a sustainable and forward-looking global agri-foods company. 2. MMI RESTAURANT GROUP: This is MMI’s legacy business with two fast casual restaurant concepts, Pokémoto Hawaiian Poké® and Muscle Maker Grill®, plus a fresh-prep meal service, SuperFit Foods™, with 34 points of distribution plus in-home and national delivery. As of June 30, 2023, the MMI Restaurant Group included 19 company-owned restaurants, including the SuperFit Foods™ kitchen, and 29 franchise restaurants. The MMI Restaurant Group seeks to develop Pokémoto® into a national restaurant brand through franchising. MMI and its subsidiaries are hereinafter referred to as the “Company”. On May 19, 2023, the Company has expanded its Sadot Agri-Foods subsidiary within the agri-commodity sourcing and trading operations into North, Central and South America, further diversifying the Company’s geographic reach beyond its existing operations in Europe, Asia, the Middle East and Africa. The expansion was facilitated by a 5 year consulting agreement signed on June 14, 2023, with a fixed cost of 0.5 million per year and potential profit sharing calculated on a quarterly basis, between Sadot Agri-Foods’ operations and newly-formed Buenaventura Trading LLC (“Buenaventura”) based in Miami FL. Buenaventura’s team brings a wealth of experience and exposure to new trade routes throughout the Americas by adding multiple sourcing and trading consultants to Sadot Agri-Foods with backgrounds from several of the largest international food supply chain organizations. In order to support the expansion into the Americas and our agreement with Buenaventura, Sadot LLC has formed a new subsidiary, Sadot Latam LLC. This agreement marks a significant milestone for Sadot Agri-Foods as it provides access to new trade routes originating in North America to markets in Central and South America. The planned Americas trade routes are intended to generate accretive value for the Company by tapping into the thriving market demand for agricultural products across Central and South America. This planned expansion is expected to further enhance Sadot Agri-Foods’ position as an emerging entity in the global commodity trading industry. 9 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) Liquidity Our primary source of liquidity is cash on hand. As of June 30, 2023, the Company had a cash balance, a working capital surplus and an accumulated deficit of $ 5.1 million, $ 7.7 million, and $ 80.2 million, respectively. During the three and six months ended June 30, 2023, the Company incurred a Pre-tax net income of $ 0.2 million and a Pre-tax net loss of $ 0.9 million, respectively. The Company had Net cash used in operations of $ 4.2 million for the six months ended June 30, 2023. The Company believes that our existing cash on hand and future cash flows from our commodity trading and franchise operations, will be sufficient to fund our operations, anticipated capital expenditures and repayment obligations over the next 12 months. 2. Significant Accounting Policies Basis of Presentation The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the Unaudited Condensed Consolidated Financial Statements of the Company as of June 30, 2023, and for the three and six months ended June 30, 2023, and 2022. The results of operations for the three and six months ended June 30, 2023, and 2022 are not necessarily indicative of the operating results for the full year. It is suggested that these Unaudited Condensed Consolidated Financial Statements be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2022. The Balance Sheet as of December 31, 2022, has been derived from the Company’s audited Financial Statements. Principles of Consolidation The accompanying Unaudited Condensed 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 period balances have been reclassified in order to conform to current period presentation. These reclassifications have no effect on the previously reported results of operations or loss per share. 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. 10 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 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 June 30, 2023 or December 31, 2022. Inventory Inventory, which are stated at the lower of cost or net realizable value, consist primarily of commodity trade shipments in-transit, perishable food items and supplies. Cost is determined using the first-in, first-out method. Deposit on Farmland Deposit on farmland consists of funds paid as a deposit with the intent to acquire farmland in Africa by our Sadot Agri-Foods subsidiary. As of June 30, 2023, the Company recorded a deposit of $ 8.8 million and $ 4.9 million as of December 31, 2022. The Company has entered into a letter of intent with a deposit to purchase developed farmland. The Company is still in final negotiations, awaiting government approval to finalize the agreement. On May 16, 2023, the Company through its wholly owned subsidiary, Sadot Agri-Foods, entered into a Purchase of Right and Variation Agreement (the “Variation Agreement”) with Zamproagro Limited, a Liberian corporation (“ZPG”) and Cropit Farming Limited, a Zambian corporation (“Cropit”) pursuant to which ZPG assigned all of its rights, liabilities and obligations of the Put and Call Option Agreement Over Land entered between ZPG and Cropit dated December 29, 2022 (the “Put Land Agreement”) to Sadot Agri-Foods, which provided ZPG with a one year call option to acquire 70 % of 4,942 acres ( 2000 hectares) of producing agricultural land along with buildings and related assets located within the Mkushi Farm Block of Zambia’s Region II agricultural zone (the “Farm”) for a purchase price of approximately $ 8.5 million USD. The Put Land Agreement further provides that Cropit will continue to retain 30 % of the Farm and that following closing, Cropit and the purchaser will form a special purpose vehicle in which both parties will contribute their ownership interest in the Farm to the special purpose vehicle for their respective percentage interest. On May 16, 2023, Sadot Agri-Foods and Cropit entered into Joint Venture Shareholders Agreement pursuant to which the parties agreed to form a new entity in Zambia to serve as a joint venture with respect to the farming of the Farm. The joint venture is expected to be named Sadot Enterprises Limited (“Sadot Zambia”) with Sadot Agri-Foods holding 70 % of the equity and Cropit holding 30 % of the equity. Following its formation, Sadot Zambia will hold 100 % of the Farm. Sadot Agri-Foods and Cropit will each have the right to appoint one director to the Board of Directors of Sadot Zambia. Further, upon formation, Sadot Agri-Foods contributed $ 3.5 million into escrow for the primary purpose of discharging a loan secured by the Farm held by ABSA Bank. On May 16, 2023, Sadot Agri-Foods, Cropit and Chibesakunda & Co., as escrow agent (the “Escrow Agent”) entered into an Escrow Agreement pursuant to which the Escrow Agent is holding all documentation required to allot Sadot Agri-Foods 70 % of Sadot Zambia, documentation required to transfer the Farm to Sadot Zambia and USD $ 3.5 million contributed by Sadot Agri-Foods. At closing, the Escrow Agent will release the required funds to ABSA Bank and release the required documentation with respect to the allocation of Sadot Agri-Foods’ interest in Sadot Zambia and the transfer of the Farm. Closing is subject to obtaining clearance from the Zambian Competition and Consumer Protection Commission. 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 11 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 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 – 11 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 determined that as of January 1, 2022, – the trademark – Muscle Maker had a finite life of 3 years and is amortizing the value over the new estimated life. The Company’s goodwill has an indefinite life and is not amortized, but 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 be tested for impairment at the reporting unit level (operating segment or one level below an operating segment). Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill 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 goodwill impairment. The useful lives of the Company’s intangible assets are: Franchisee agreements 13 years Franchise license 10 years Trademarks 3 – 5 years Domain name, Customer list and Proprietary recipes 3 – 7 years Non-compete agreements 2 – 3 years 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 June 30, 2023 and December 31, 2022, the Company deemed the conversion feature was not required to be bifurcated and recorded as a derivative liability. Related Parties 12 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 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, Restaurant sales, Franchise royalties and fees, Franchise advertising fund contributions, 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. Commodity Sales Commodity sale revenue is generated by our Sadot Agri-Foods subsidiary and is recognized when the commodity is delivered as evidenced by the bill of lading and the invoice is prepared and submitted to the customer. During the three and six months ended June 30, 2023, the Company recorded Commodity sales revenues of $ 157.6 million and $ 367.9 million, respectively. The Company did not have any Commodity sales revenue during the three and six months ended June 30, 2022. Restaurant Sales Retail store revenue at Company-operated restaurants is recognized when payment is tendered at the point of sale, net of sales tax, discounts and other sales-related taxes. The Company recorded retail store revenues of $ 2.5 million and $ 4.8 million during the three and six months ended June 30, 2023 and $ 2.8 million and $ 5.4 million for the three and six months ended June 30, 2022, respectively. The Company sells gift cards which do not have an expiration date, and it does not deduct dormancy fees from outstanding gift card balances. The Company recognizes revenues from gift cards as restaurant revenues once the Company performs its obligation to provide food and beverage to the customer simultaneously with the redemption of the gift card or through gift card breakage, as discussed in Other revenues below. 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 $ 0.2 million and $ 0.3 million during the three and six months ended June 30, 2023 and $ 0.1 million and $ 0.2 million during the three and six months ended June 30, 2022, respectively, which is included in Franchise royalties and fees on the accompanying Unaudited Condensed Consolidated Statements of Operations. 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 13 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 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 $ 23.0 thousand and $ 0.1 million during the three and six months ended June 30, 2023 and $ 15.3 thousand and $ 0.1 million for the three and six months ended June 30, 2022, respectively, which is included in Franchise royalties and fees on the accompanying Unaudited Condensed Consolidated Statements of Operations. 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 $ 30.0 thousand and $ 0.1 million during the three and six months ended June 30, 2023 and $ 26.2 thousand and $ 0.1 million for the three and six months ended June 30, 2022, respectively, which is included in Franchise royalties and fees on the accompanying Unaudited Condensed Consolidated Statements of Operations. 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. 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 Unaudited Condensed Consolidated Statement of Operations in an amount that is greater than the revenue recorded for advertising contributions. Conversely, when an advertising contribution fund is under-spent at a period-end, the Company will accrue advertising costs up to advertising contributions recorded in revenue. The Company recorded contributions from franchisees of $ 20.0 thousand and $ 36.0 thousand, respectively, during the three and six months ended June 30, 2023 and $ 16.2 thousand and $ 34.3 thousand for the three and six months ended June 30, 2022, which are included in Franchise advertising fund contributions on the accompanying Unaudited Condensed Consolidated Statements of Operations. Other Revenues Gift card breakage is recognized when the likelihood of a gift card being redeemed by the customer is remote and the Company determines there is not a legal obligation to remit the unredeemed gift card balance to the relevant jurisdiction. The determination of the gift card breakage rate is based upon the Company’s specific historical redemption patterns. Gift card liability is recorded in other current liabilities on the Unaudited Condensed Consolidated Balance Sheets The Company had Other revenues of $ 13.0 thousand and $ 13.0 thousand for the three and six months ended June 30, 2023. Deferred Revenue Deferred revenue primarily includes initial franchise fees received by the Company, which are being amortized over the life of the Company’s franchise agreements. Deferred revenue is recognized in income over the life of the franchise agreements. 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. Stock-Based Consulting Expense Stock-based consulting expenses are for consulting fees due to Aggia related to ongoing Sadot Agri-Foods operations 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 the Sadot Agri-Foods business segment 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 the Sadot Agri-Foods business segment. See Note 15 – Commitments and contingencies for further details. For the three and 14 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) six months ended June 30, 2023, $ 1.1 million and $ 4.4 million, respectively, are recorded as Stock-based consulting expense in the accompanying Unaudited Condensed Consolidated Statements of Operations. Advertising Advertising costs are charged to expense as incurred. Advertising costs of $ 32.0 thousand and $ 0.1 million for the three and six months ended June 30, 2023 and $ 0.8 thousand and $ 0.1 million for the three and six months ended June 30, 2022, respectively, are included in Sales, general and administrative expenses. For the three and six months ended June 30, 2023 and 2022, $ 76.0 thousand, $ 0.1 million, $ 0.1 million and $ 0.2 million, respectively, are included in Other restaurant operating expenses in the accompanying Unaudited Condensed Consolidated Statements of Operations. Net Income / Loss per Share Basic earnings per common share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed using the weighted average number of common shares outstanding during the period plus any potentially dilutive common shares, resulting from the exercise of warrants, options or the conversion of convertible notes payable, calculated using the treasury stock method. The following securities are excluded from the calculation of weighted average diluted common shares at June 30, 2023 and 2022, respectively, because their inclusion would have been anti-dilutive: June 30, 2023 2022 ( '000 ( '000 Warrants 18,034 17,874 Options 1,013 413 Restricted stock awards 8,001 — Convertible debt 24 27 Total potentially dilutive shares 27,072 18,314 The following table sets forth the computation of basic and dilutive net loss per share attributable to the Company’s stockholders: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (In thousands, except for share count and per share data) Net income / (loss) 190 ( 1,774 ) ( 876 ) ( 3,660 ) Weighted-average shares outstanding: Basic 33,362,887 28,668,116 31,407,362 28,235,052 Effect of potentially dilutive stock options 204,832 — — — Diluted 33,567,719 28,668,116 31,407,362 28,235,052 Net income / (loss) per share: Basic 0.01 ( 0.06 ) ( 0.03 ) ( 0.13 ) Diluted 0.01 ( 0.06 ) ( 0.03 ) ( 0.13 ) Major Vendor The Company engages various vendors to purchase commodities for resale and distribute food products to their Company-owned restaurants. Purchases from the Company’s three largest commodity suppliers totaled 96 % for the three months ended June 30, 2023 and Purchases from the Company’s four largest commodity suppliers totaled 92 % of the Company’s 15 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) purchases for the six months ended June 30, 2023. Purchases from the Company’s largest supplier totaled 19 % and 30 % for the three and six months ended June 30, 2022, respectively. Fair Value of Financial Instruments The Company measures the fair value of financial assets and liabilities based on the guidance of the FASB Accounting 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. The carrying amounts of accrued liabilities approximate fair value due to the short-term nature of these instruments. The carrying amounts of our short–term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates, taken together with other features such as concurrent issuance of common stock and warrants, are comparable to rates of returns for instruments of similar credit risk. See Note 17 – Equity for details related to accrued compensation liability being fair valued using Level 1 inputs. 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. 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 Unaudited Condensed Consolidated Statements of Operations. Stock-Based Compensation The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally recorded on the grant date and re-measured on financial reporting dates 16 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) and vesting dates until the service period is complete. The fair value amount of the award is then recognized over the period services are required to be provided in exchange for the award, usually the vesting period. Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires companies to recognize lease liabilities and corresponding right-of-use leased assets on the Balance Sheets and to disclose key information about leasing arrangements. Qualitative and quantitative disclosures will be enhanced to better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2021, with early adoption permitted. Additionally, in 2018 and 2019, the FASB issued the following Topic 842–related ASUs: • ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842, which clarifies the applicability of Topic 842 to land easements and provides an optional transition practical expedient for existing land easements; • ASU 2018-10, Codification Improvements to Topic 842, Leases, which makes certain technical corrections to Topic 842; • ASU 2018-11, Leases (Topic 842): Targeted Improvements, which allows companies to adopt Topic 842 without revising comparative period reporting or disclosures and provides an optional practical expedient to lessors to not separate lease and non-lease components of a contract if certain criteria are met; and • ASU 2019-01, Leases (Topic 842): Codification Improvements, which provides guidance for certain lessors on determining the fair value of an underlying asset in a lease and on the cash flow statement presentation of lease payments received; ASU No. 2019-01 also clarifies disclosures required in interim periods after adoption of ASU No. 2016-02 in the year of adoption. The Company adopted Topic 842 as of January 1, 2022 and recognized a cumulative-effect adjustment to the opening balance of accumulated deficit of $ 15.0 thousand as of the adoption date, and recognized an additional $ 7.8 thousand during the second quarter of 2022, based on updated information on two of our leases, for an aggregate cumulative-effect adjustment to accumulated deficit of $ 22.8 thousand. See Note 11 – Leases for further details. In October 2021, the FASB issued ASU 2021-08 Business Combinations (“Topic 805”): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers”, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The adoption of this guidance did not have a material impact on the Company’s Unaudited Condensed Consolidated Financial Statements and related disclosures. 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 Unaudited Condensed 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 19 – Subsequent events . 17 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 3. Loans Receivable The Company had no loan receivable balance at June 30, 2023 and December 31, 2022. Loans receivable include loans to franchisees totaling, in the aggregate, net of reserves for uncollectible loans. There were no reserves for uncollectible loans at June 30, 2023 and December 31, 2022. Loans receivable were paid in full during the third quarter of 2022 and the corresponding reserve for loan loss was reversed. 4. Prepaid Expenses and Other Current Assets At June 30, 2023 and December 31, 2022, the Company’s prepaid expenses and other current assets consists of the following: As of June 30, 2023 December 31, 2022 $’000 $’000 Prepaid expenses 314 89 Other receivables 5 228 Prepaid and Other Current Assets 319 317 Included in prepaid and other current assets is a receivable of $ 5.0 thousand and $ 0.2 million as of June 30, 2023 and December 31, 2022, respectively. 5. Deposit on Farmland At December 31, 2022, the Company's deposit on farmland balance was $ 4.9 million. During the six months ended June 30, 2023, the Company gave an additional $ 3.9 million deposit, totaling $ 8.8 million deposit on farmland balance. Deposit on farmland consists of funds paid as a deposit with the intent to acquire farmland in Africa by our Sadot Agri-Foods subsidiary. The Company has entered into a letter of intent with a deposit to purchase developed farmland. The Company is still in final negotiations awaiting government approval with the intent to finalize the agreement by the end of the third quarter of 2023. On May 16, 2023, the Company through its wholly owned subsidiary, Sadot Agri-Foods, entered into the “Variation Agreement with ZPG and Cropit pursuant to which ZPG assigned all of its rights, liabilities and obligations of the Put Land Agreement to Sadot Agri-Foods, which provided ZPG with a one year call option to acquire 70 % of the Farm for a purchase price of approximately $ 8.5 million USD. The Put Land Agreement further provides that Cropit will continue to retain 30 % of the Farm and that following closing, Cropit and the purchaser will form a special purpose vehicle in which both parties will contribute their ownership interest in the Farm to the special purpose vehicle for their respective percentage interest. On May 16, 2023, Sadot Agri-Foods and Cropit entered into Joint Venture Shareholders Agreement pursuant to which the parties agreed to form Sadot Zambia with Sadot Agri-Foods holding 70 % of the equity and Cropit holding 30 % of the equity. Following its formation, Sadot Zambia will hold 100 % of the Farm. Sadot Agri-Foods and Cropit will each have the right to appoint one director to the Board of Directors of Sadot Zambia. Further, upon formation, Sadot Agri-Foods contributed $ 3.5 million into escrow for the primary purpose of discharging a loan secured by the Farm held by ABSA Bank. On May 16, 2023, Sadot Agri-Foods and the Escrow Agent entered into an Escrow Agreement pursuant to which the Escrow Agent will hold all documentation required to allot Sadot Agri-Foods 70 % of Sadot Zambia, documentation required to transfer the Farm to Sadot Zambia and USD $ 3.5 million contributed by Sadot Agri-Foods. At closing, the Escrow Agent will release the required funds to ABSA Bank and release the required documentation with respect to the allocation of Sadot Agri-Foods’ interest in Sadot Zambia and the transfer of the Farm. Closing is subject to obtaining clearance from the Zambian Competition and Consumer Protection Commission. 18 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 6. Property and Equipment, Net As of June 30, 2023 and December 31, 2022, Property and equipment consist of the following: As of June 30, 2023 December 31, 2022 $’000 $’000 Furniture and equipment 1,170 1,266 Vehicles 55 55 Leasehold improvements 1,774 2,062 Construction in process — 5 Property and equipment, gross 2,999 3,388 Less: accumulated depreciation ( 1,502 ) ( 1,493 ) Property and equipment, net 1,497 1,895 Depreciation expense amounted to $ 0.2 million and $ 0.5 million for the three and six months ended June 30, 2023 and $ 0.1 million and $ 0.3 million during the three and six months ended June 30, 2022, respectively. During the three and six months ended June 30, 2023 the Company wrote off property and equipment with an original cost value of $ 0.5 million and $ 0.5 million, respectively and $ 36.7 thousand and $ 0.4 million for the three and six months ended June 30, 2022. For the three and six months ended June 30, 2022, the Company wrote off Property and equipment related to closed locations and future locations that were terminated due to the economic environment as a result of COVID-19 and recorded a loss on disposal of $ 26.9 thousand and $ 0.3 million, respectively, and $ 0.1 million and $ 0.1 million for the three and six months ended June 30, 2023, respectively, in the Unaudited Condensed Consolidated Statement of Operations. 7. 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 2 to 13 years. 19 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) A summary of the intangible assets is presented below: Intangible assets, net at December 31, 2021 Impairment of intangible assets Amortization expense Intangible assets, net at June 30, 2022 Intangible assets, net at December 31, 2022 Impairment of intangible assets Amortization expense Intangible assets, net at June 30, 2023 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Trademark Muscle Maker Grill 1,526 — ( 252 ) 1,274 670 — ( 167 ) 503 Franchise Agreements Muscle Maker Grill 162 — ( 13 ) 149 136 — ( 13 ) 123 Trademark SuperFit 38 — ( 4 ) 34 29 — ( 4 ) 25 Domain Name SuperFit 106 — ( 12 ) 94 81 — ( 12 ) 69 Customer List SuperFit 118 — ( 14 ) 104 90 — ( 14 ) 76 Proprietary Recipes SuperFit 135 — ( 16 ) 119 103 — ( 16 ) 87 Non-Compete Agreement SuperFit 193 — ( 43 ) 150 107 — ( 43 ) 64 Trademark Pokemoto 153 — ( 17 ) 136 118 — ( 17 ) 101 Franchisee License Pokemoto 2,599 — ( 138 ) 2,461 2,322 — ( 138 ) 2,184 Proprietary Recipes Pokemoto 1,029 — ( 80 ) 949 867 — ( 80 ) 787 Non-Compete Agreement Pokemoto 328 — ( 119 ) 209 88 — ( 88 ) — 6,387 — ( 708 ) 5,679 4,611 — ( 592 ) 4,019 Amortization expense related to intangible assets was $ 0.3 million and $ 0.6 million for the three and six months ended June 30, 2023 and $ 0.4 million and $ 0.7 million for the three and six months ended June 30, 2022, respectively. 20 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) The estimated future amortization expense is as follows: Six Months Ended June 30, 2024 2025 2026 2027 2028 Thereafter Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 Trademark Muscle Maker Grill 169 334 — — — — 503 Franchise Agreements Muscle Maker Grill 14 27 27 27 27 1 123 Trademark SuperFit 5 9 9 2 — — 25 Domain Name SuperFit 13 25 25 6 — — 69 Customer List SuperFit 14 28 28 6 — — 76 Proprietary Recipes SuperFit 16 32 32 7 — — 87 Non-Compete Agreement SuperFit 44 20 — — — — 64 Trademark Pokemoto 18 35 35 13 — — 101 Franchisee License Pokemoto 140 278 277 277 277 935 2,184 Proprietary Recipes Pokemoto 81 162 161 161 161 61 787 Non-Compete Agreement Pokemoto — — — — — — — 514 950 594 499 465 997 4,019 The Company determined that no impairment testing of the Company’s intangible assets was required as of June 30, 2023. Therefore, no impairment charge was recorded. A summary of the goodwill assets is presented below: Muscle Maker Grill Pokemoto SuperFit Food Total $’000 $’000 $’000 $’000 Goodwill, net at December 31 2021 570 1,798 258 2,626 Impairment of goodwill — — — — Goodwill, net at June 30, 2022 570 1,798 258 2,626 Goodwill, net at December 31 2022 570 1,798 258 2,626 Impairment of goodwill — — — — Goodwill, net at June 30, 2023 570 1,798 258 2,626 The Company determined that no impairment testing of the Company’s goodwill was required as of June 30, 2023. Therefore, no impairment charge was recorded. 21 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 8. Accounts Payables and Accrued Expenses Accounts payables and accrued expenses consist of the following: As of June 30, 2023 December 31, 2022 $’000 $’000 Accounts payable 860 1,085 Accrued payroll and bonuses 95 551 Accrued expenses 170 87 Accrued interest expenses 21 — Accrued professional fees 166 185 Accounts payable commodities 39,615 — Sales taxes payable (1) 40 45 40,967 1,953 (1) See Note 15 – Commitments and contingencies for details related to delinquent sales taxes. 9. Accrued Stock-Based Consulting Expenses Due to Related Party At June 30, 2023, there were no Accrued stock-based consulting expenses due to related party. At December 31, 2022, Accrued stock-based consulting expenses were $ 3.6 million. Accrued stock-based consulting expenses were related to consulting fees due to our newly established related party, Aggia, for Sadot Agri-Foods operations. See Note 18 – Related party transactions for details. Based on the servicing agreement with Aggia, the consulting fees were calculated at approximately 80.0 % of the Net income generated by the Sadot Agri-Foods business segment. For the three and six months ended June 30, 2023, $ 1.1 million and $ 4.4 million are also recorded as Stock-based consulting expense in the accompanying Unaudited Condensed Consolidated Statements of Operations. The Stock-based consulting expense that was due to related party was paid in stock in 2023. 10. Notes Payable Line of Credit On April 28, 2023 the Company entered into a line of credit agreement with a bank whereby it may borrow up to $ 3.5 million at 3.00 % per year. The line of credit commitment expires August 2023. At June 30, 2023, the balance outstanding on the line of credit was $ 3.5 million. Convertible Notes Payable On April 6, 2018, the Company issued a $ 0.5 million convertible promissory note (the “2018 ARH Note”) to the Former Parent for services rendered and expense paid on behalf of the Company. The 2018 ARH Note has no stated interest rate or maturity date and is convertible into shares of the Company’s common stock at a conversion price of $ 3.50 per share at a time to be determined by the lender. On April 11, 2018, the Former Parent elected to partially convert the 2018 ARH Note for the principal of $ 0.4 million into 0.1 million shares of the Company’s common stock. The Company had an aggregate gross amount of $ 0.1 million and $ 0.1 million of convertible notes payable as of June 30, 2023 and December 31, 2022, respectively. Other Notes Payable 22 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) During the three and six months ended June 30, 2023, the Company repaid a total amount of $ 0.1 million and $ 0.1 million, and $ 0.1 million and $ 1.2 million for the three and six months ended June 30, 2022, respectively, of the other notes payable. As of June 30, 2023, the Company had an aggregate amount of $ 4.4 million in other notes payable. The notes had interest rates ranging between 3.00 % - 8.00 % per annum, due on various dates through May 2027. The maturities of notes payable as of June 30, 2023, are as follows: Principal Amount $’000 2023 3,727 2024 105 2025 580 2026 — Thereafter — 4,412 11. Leases The Company’s leases consist of restaurant locations. We determine if a contract contains a lease at inception. The leases generally have remaining terms of 1 - 10 years and most leases included the option to extend the lease for an additional 5 years. The total lease cost associated with right of use assets and operating lease liabilities for the three and six months ended June 30, 2023, was $ 0.2 million and $ 0.4 million and $ 0.2 million and $ 0.5 million for the three and six months ended June 30, 2022, respectively, and has been recorded in the Unaudited Condensed Consolidated Statement of Operations as Rent expense within Restaurant operating expenses. The assets and liabilities related to the Company’s leases were as follows: As of June 30, 2023 December 31, 2022 $’000 $’000 Assets Right to use asset 2,059 2,433 Liabilities Operating leases – current 511 560 Operating leases – non-current 1,673 2,019 Total lease liabilities 2,184 2,579 23 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) The table below presents the future minimum lease payments under the noncancellable operating leases as of June 30, 2023: Operating Leases $’000 Fiscal Year: 2023 378 2024 706 2025 556 2026 386 2027 300 2028 222 Thereafter 367 Total lease payments 2,915 Less imputed interest ( 731 ) Present value of lease liabilities 2,184 The Company’s lease term and discount rates were as follows: As of June 30, 2023 Weighted-average remaining lease term (in years) Operating leases 4.89 Weighted-average discount rate Operating leases 12.0 % 12. Deferred Revenue The Company's deferred revenue consists of the following: As of June 30, 2023 December 31, 2022 $’000 $’000 Deferred revenues, net 1,388 1,371 Less: deferred revenue, current ( 93 ) ( 95 ) Deferred revenues, non-current 1,295 1,276 24 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 13. Other Current Liabilities Other current liabilities consist of the following: As of June 30, 2023 December 31, 2022 $’000 $’000 Gift card liability 13 25 Co-op advertising fund liability 99 79 Marketing development brand liability 55 35 Advertising fund liability 37 43 204 182 See Note 2 – Significant accounting policies for details related to the gift card liability and advertising fund liability. 14. Income Taxes The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of June 30, 2023 and December 31, 2022 are presented below: As of June 30, 2023 December 31, 2022 $’000 $’000 Deferred tax assets: Net operating loss carryforwards 10,690 10,615 Receivable allowance 7 5 Stock-based compensation 17 15 Intangible assets 386 314 Right to use asset 471 — Deferred revenues 267 204 Leases — 32 Gross deferred tax asset 11,838 11,185 Deferred tax liabilities: Property and equipment ( 163 ) ( 160 ) Right to use liability ( 442 ) — Gross deferred tax liabilities ( 605 ) ( 160 ) Net deferred tax assets 11,233 11,025 Valuation allowance ( 11,233 ) ( 11,025 ) Net deferred tax asset, net of valuation allowance — — 25 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) The income tax expense for the periods shown consist of the following: As of June 30, 2023 December 31, 2022 $’000 $’000 Federal: Current — — Deferred — — State and local: Current 6 25 Deferred — — 6 25 Change in valuation allowance — — Income tax expense 6 25 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 June 30, 2023 December 31, 2022 Federal income tax benefit at statutory rate 21.0 % 21.0 % State income tax benefit, net of federal impact ( 0.6 ) % ( 0.5 ) % Permanent differences ( 4.7 ) % ( 0.1 ) % PPP loan forgiveness — % 0.4 % Return to provision adjustments — % 3.3 % Deferred tax asset true up- State — % ( 14.5 ) % Deferred tax asset true up- Federal — % ( 6.8 ) % Other 0.1 % — % Change in valuation allowance ( 20.1 ) % ( 3.3 ) % Effective income tax rate ( 4.3 ) % ( 0.5 ) % The Company has filing obligations in what it considers its U.S. major tax jurisdictions as follows: Nevada, California, Connecticut, Florida, New Jersey, 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 $ 63.6 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 June 30, 2023 and December 31, 2022, 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 $ 11.2 million and $ 11.0 million, respectively. The valuation allowance increased by approximately $ 0.2 million. 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. 26 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 15. Commitments and Contingencies Farmland Purchase Agreement On May 16, 2023, the Company through its wholly owned subsidiary, Sadot Agri-Foods, entered into the Variation Agreement with ZPG and Cropit pursuant to which ZPG assigned all of its rights, liabilities and obligations of the Put Land Agreement to Sadot Agri-Foods, which provided ZPG with a one year call option to acquire 70 % of the Farm for a purchase price of approximately $ 8.5 million USD. The Put Land Agreement further provides that Cropit will continue to retain 30 % of the Farm and that following closing, Cropit and the purchaser will form a special purpose vehicle in which both parties will contribute their ownership interest in the Farm to the special purpose vehicle for their respective percentage interest. On May 16, 2023, Sadot Agri-Foods and Cropit entered into 70 % of the equity and Cropit holding 30 % of the equity. Following its formation, Sadot Zambia will hold 100 % of the Farm. Sadot Agri-Foods and Cropit will each have the right to appoint one director to the Board of Directors of Sadot Zambia. Further, upon formation, Sadot Agri-Foods contributed $ 3.5 million into escrow for the primary purpose of discharging a loan secured by the Farm held by ABSA Bank. On May 16, 2023, Sadot Agri-Foods, the Escrow Agent entered into an Escrow Agreement pursuant to which the Escrow Agent will hold all documentation required to allot Sadot Agri-Foods 70 % of Sadot Zambia, documentation required to transfer the Farm to Sadot Zambia and USD $ 3.5 million contributed by Sadot Agri-Foods. At closing, the Escrow Agent will release the required funds to ABSA Bank and release the required documentation with respect to the allocation of Sadot Agri-Foods’ interest in Sadot Zambia and the transfer of the Farm. Closing is subject to obtaining clearance from the Zambian Competition and Consumer Protection Commission. Consulting Agreements On November 14, 2022 (the “Effective Date”), the Company, Sadot Agri-Foods and Aggia entered into a Services Agreement (the “Services Agreement”) whereby Sadot Agri-Foods engaged Aggia to provide certain advisory services to Sadot Agri-Foods for creating, acquiring and managing Sadot Agri-Foods’ business of wholesaling food and engaging in the purchase and sale of physical food commodities. As consideration for Aggia providing the services to Sadot Agri-Foods, the Company agreed to issue shares of common stock of the Company, par value $ 0.0001 per share, to Aggia subject to Sadot Agri-Foods generating net income measured on a quarterly basis at per share price of $ 1.5625 , subject to equitable adjustments for any combinations or splits of the common stock occurring following the Effective Date. Upon Sadot Agri-Foods 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 14.4 million shares representing 49.9 % 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. The shareholders approved the Services Agreement on February 28, 2023. 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 Agri-Foods 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 8.9 million shares (the “Shares”) of common stock, par value $ 0.0001 per share, of the Company, which such Shares represent 14.4 million Shares that Aggia is entitled to receive pursuant to the Services Agreement less the 5.6 million 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 14.4 million 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 27 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 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 $ 3.125 , which for accounting purposes shall equal 40 % of the net income of Sadot Agri-Foods, calculated quarterly divided by $ 1.25 . 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 Agri-Foods to Aggia (the “Debt”), until such Debt has reached a maximum of $ 71.5 million. Additionally, for the three months ended June 30, 2023, the Company reimbursed Aggia for all operating costs related to Sadot Agri-Foods operating expenses related to Sadot Agri-Foods including labor and operating expenses of $ 0.8 million and $ 0.2 million, respectively. For the six months ended June 30, 2023, the Company reimbursed Aggia for all operating costs related to Sadot Agri-Foods including labor, operating and general administrative expenses of $ 1.4 million, $ 0.3 million and $ 0.1 million, respectively. Franchising During the three and six months ended June 30, 2023, the Company entered into various Pokemoto franchise agreements for a total of 8 and 13 , respectively, compared to 4 and 17 during the three and six months ended June 30, 2022, respectively. potentially new Pokemoto locations with various franchisees. The Franchisees paid the Company an aggregate of $ 0.1 million and $ 0.1 million for the three and six months ended June 30, 2023 and this has been recorded in deferred revenue as of June 30, 2023. Master Franchise Agreement On October 25, 2021, Muscle Maker Development International LLC (“MMDI”), a wholly-owned subsidiary of Muscle Maker Inc., entered into a Master Franchise Agreement (the “Master Franchise Agreement”) with Almatrouk Catering Company – OPC (“ACC”) providing ACC with the right to grant franchises for the development of 40 “Muscle Maker Grill” restaurants through December 31, 2030 (the “Term”) in the Kingdom of Saudi Arabia (“KSA”). Under the Master Franchise Agreement, MMDI has granted to ACC an exclusive right to establish and operate Muscle Maker restaurants in the KSA. MMDI will not own or operate restaurants in KSA, grant franchises for the restaurants in KSA, or grant Master Franchise Rights for the restaurants to other persons within the KSA. ACC will be solely responsible for the development, sales, marketing, operations, distribution and training of all franchise locations sold in the KSA. ACC is required to pay MMDI $ 0.2 million pursuant to the Master Franchise Agreement upon the occurrence of various events. ACC is required to pay MMDI $ 20.0 thousand upon the execution of each franchise agreement for each individual restaurant and a monthly royalty fee of $ 1.0 thousand for each restaurant. Further, ACC is to adhere to the agreed upon development schedule as outlined in the master franchise agreement. An initial $ 20.0 thousand deposit was paid on the agreement and no other amount is due at this time. ACC has not performed against this agreement. Taxes The Company failed in certain instances in paying past state and local sales taxes collected from customers in specific states that impose a tax on sales of the Company’s products during 2017 and 2018. As of the second quarter 2022, all past due tax on sales from 2017 and 2018 has been paid in full. The Company had accrued a sales tax liability for approximately $ 0.1 million and $ 44.6 thousand as of June 30, 2023, and December 31, 2022, respectively. All current state and local sales taxes from January 1, 2018, for open Company-owned locations have been fully paid and in a timely manner. The Company has completed all the payment plans with the various state or local entities for these past owed amounts. 28 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) Litigations, Claims and Assessments On April 24, 2022, the Company and a convertible note holder entered into an agreement in which the Company will repay a total of $ 0.1 million in connection with the default judgement issued on June 22, 2018, by the Iowa District Court for Polk County #CVCV056029, filed against the Company for failure to pay the remaining balance due on a promissory note in the amount of $ 0.1 million, together with interest, attorney fees and other costs of $ 0.2 million. The Company agreed to pay $ 40.0 thousand on or before May 1, 2022 and to make seven installment payments of $ 10.0 thousand per month starting on or before June 1, 2022. As of December 30, 2022, the Company had paid this note in full. On or about March 7, 2019, the Company was listed as a defendant to a lawsuit filed by a contractor in the State of Texas in El Paso County #2019DCV0824. The contractor is claiming a breach of contract and is seeking $ 33.0 thousand in damages for services claimed to be rendered by the contractor. The Company accrued $ 30.0 thousand for the liability in accounts payable and accrued expenses as of June 30, 2023 and December 31, 2022. On January 23, 2020, the Company was served a judgment issued by the Judicial Council of California in the amount of $ 0.1 million for a breach of a lease agreement in Chicago, Illinois, in connection with a Company-owned store that was closed in 2018. As of June 30, 2023 and December 31, 2022, the Company has accrued for the liability in accounts payable and accrued expenses. 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 November 16, 2022, , 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 continue to be employed as Chief Executive Officer of the Company on an at-will-basis. During the term of the Roper Agreement, Mr. Roper is entitled to a base salary at the annualized rate of $ 0.4 million. Mr. Roper will be eligible for a discretionary performance bonus to be determined by the Board annually. Further, Mr. Roper will be entitled to an additional bonus of $ 0.1 million upon the Company obtaining approval of the Shareholder Matters and $ 25.0 thousand upon the Designated Directors representing a majority of the Board of Directors. 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 stock option. 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 to 36 months of salary, which will be reduced to 18 months following the second anniversary of the Roper Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Roper Agreement will automatically terminate and the prior employment agreement will again be in full effect. On March 21, 2023, the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement. Pursuant to the Black Agreement, Ms. Black will continue to be employed as Chief Financial Officer of the Company on an at-will-basis. During the term of the Black Agreement, Ms. Black is entitled to a base salary at the annualized rate of $ 0.2 million. Ms. Black will be eligible for a discretionary performance bonus up to 50 % of her annual salary. Further, Ms. Black will be entitled to an additional bonus of $ 0.1 million upon the Company obtaining approval of the Shareholder Matters and $ 25.0 thousand upon the Designated Directors representing a majority of the Board of Directors. 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 stock option. 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 to 36 months of salary, which will be reduced to six months following the second anniversary of the Black Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not 29 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) approved by the shareholders, the Black Agreement will automatically terminate and the prior employment agreement will again be in full effect. On November 16, 2022, the Company entered into an Executive Employment Agreement with Kenneth 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 upon the Designated Directors representing a majority of the Board of Directors. 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. In the event the Shareholder Matters are not approved by the shareholders, the Miller Agreement will automatically terminate and the prior employment agreement will again be in full effect. 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. Further, Mr. Mohan will be entitled to an additional bonus of $ 0.1 million upon the Company obtaining approval of the Shareholder Matters and $ 25.0 thousand upon the Designated Directors representing a majority of the Board of Directors. 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. In the event the Shareholder Matters are not approved by the shareholders, the Mohan Agreement will automatically terminate and the prior employment agreement will again be in full effect. 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 upon the Designated Directors representing a majority of the Board of Directors. 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. In the event the Shareholder Matters are not approved by the shareholders, the Infante Agreement will automatically terminate, and the prior employment agreement will again be in full effect. 30 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 16. Reportable Operating Segments See Note 1 – Business organization and nature of operations for descriptions of our operating segments. The following table sets forth the results of operations for the relevant segments for the three and six months ended June 30, 2023: For the Three Months Ended June 30, 2023 Restaurant division Sadot agri-foods Corporate adj. Total segments $’000 $’000 $’000 $’000 Revenues: Commodity sales — 157,559 — 157,559 Company restaurant sales, net of discounts 2,487 — — 2,487 Franchise royalties and fees 238 — — 238 Franchise advertising fund contributions 20 — — 20 Other revenues 13 — — 13 Total revenues 2,758 157,559 — 160,317 Operating Costs and Expenses: Commodity operating expenses: Commodity cost — 153,240 — 153,240 Labor — 852 — 852 Other commodity operating expenses — 485 — 485 Total commodity operating expenses — 154,577 — 154,577 Restaurant operating expenses: Food and beverage costs 867 — — 867 Labor 956 — — 956 Rent 290 — — 290 Other restaurant operating expenses 551 — — 551 Total restaurant operating expenses 2,664 — — 2,664 Depreciation and amortization expenses 153 — 288 441 Franchise advertising fund expenses 20 — — 20 Pre-opening expenses — — — — Post-closing expenses 19 — — 19 Stock-based consulting expenses — — 1,068 1,068 Sales, general and administrative expenses 88 301 1,499 1,888 Total costs and expenses 2,944 154,878 2,855 160,677 (Loss) / income from operations ( 186 ) 2,681 ( 2,855 ) ( 360 ) Other Income / (Expense): Other income — — 251 251 Interest expense, net ( 1 ) ( 20 ) ( 1 ) ( 22 ) Change in fair value of accrued compensation — — 324 324 Total other income / (expense), net ( 1 ) ( 20 ) 574 553 (Loss) / Income Before Income Tax ( 187 ) 2,661 ( 2,281 ) 193 Income tax 1 — 2 3 Net (loss) / income ( 188 ) 2,661 ( 2,283 ) 190 31 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Six Months Ended June 30, 2023 Restaurant division Sadot agri-foods Corporate adj. Total segments $’000 $’000 $’000 $’000 Revenues: Commodity sales — 367,925 — 367,925 Company restaurant sales, net of discounts 4,788 — — 4,788 Franchise royalties and fees 522 — — 522 Franchise advertising fund contributions 36 — — 36 Other revenues 13 — — 13 Total revenues 5,359 367,925 — 373,284 Operating Costs and Expenses: Commodity operating expenses: Commodity cost — 358,295 — 358,295 Labor — 1,472 — 1,472 Other commodity operating expenses — 639 — 639 Total commodity operating expenses — 360,406 — 360,406 Restaurant operating expenses: Food and beverage costs 1,706 — — 1,706 Labor 1,836 — — 1,836 Rent 564 — — 564 Other restaurant operating expenses 1,023 — — 1,023 Total restaurant operating expenses 5,129 — — 5,129 Depreciation and amortization expenses 469 — 605 1,074 Franchise advertising fund expenses 36 — — 36 Pre-opening expenses 36 — — 36 Post-closing expenses 112 — 1 113 Stock-based consulting expenses — — 4,427 4,427 Sales, general and administrative expenses 171 587 3,272 4,030 Total costs and expenses 5,953 360,993 8,305 375,251 (Loss) / income from operations ( 594 ) 6,932 ( 8,305 ) ( 1,967 ) Other Income: Other income — — 251 251 Interest income / (expense), net 2 ( 21 ) — ( 19 ) Change in fair value of accrued compensation — — 865 865 Total other income, net 2 ( 21 ) 1,116 1,097 (Loss) / Income Before Income Tax ( 592 ) 6,911 ( 7,189 ) ( 870 ) Income tax 2 — 4 6 Net (loss) / income ( 594 ) 6,911 ( 7,193 ) ( 876 ) 32 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) The following table sets forth the results of operations for the relevant segments for the three and six months ended June 30, 2022: For the Three Months Ended June 30, 2022 Restaurant division Sadot agri-foods Corporate adj. Total segments $’000 $’000 $’000 $’000 Revenues: Company restaurant sales, net of discounts 2,751 — — 2,751 Franchise royalties and fees 70 — 93 163 Franchise advertising fund contributions — — 16 16 Total revenues 2,821 — 109 2,930 Operating Costs and Expenses: Restaurant operating expenses: Food and beverage costs 1,137 — ( 20 ) 1,117 Labor 903 — — 903 Rent 327 — — 327 Other restaurant operating expenses 688 — — 688 Total restaurant operating expenses 3,055 — ( 20 ) 3,035 Depreciation and amortization expenses 124 — 365 489 Franchise advertising fund expenses — — 16 16 Sales, general and administrative expenses 30 — 1,097 1,127 Total costs and expenses 3,209 — 1,458 4,667 Loss from operations ( 388 ) — ( 1,349 ) ( 1,737 ) Other Income / (Expense): Other income / (expense) 10 — ( 25 ) ( 15 ) Interest expense, net ( 5 ) — ( 5 ) ( 10 ) Total other income / (expense), net 5 — ( 30 ) ( 25 ) Loss Before Income Tax ( 383 ) — ( 1,379 ) ( 1,762 ) Income tax — — 12 12 Net loss ( 383 ) — ( 1,391 ) ( 1,774 ) 33 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Six Months Ended June 30, 2022 Restaurant division Sadot agri-foods Corporate adj. Total segments $’000 $’000 $’000 $’000 Revenues: Company restaurant sales, net of discounts 5,445 — — 5,445 Franchise royalties and fees 132 — 239 371 Franchise advertising fund contributions — — 34 34 Total revenues 5,577 — 273 5,850 Operating Costs and Expenses: Restaurant operating expenses: Food and beverage costs 2,145 — ( 2 ) 2,143 Labor 1,976 — — 1,976 Rent 667 — — 667 Other restaurant operating expenses 1,338 — — 1,338 Total restaurant operating expenses 6,126 — ( 2 ) 6,124 Depreciation and amortization expenses 243 — 722 965 Franchise advertising fund expenses — — 34 34 Sales, general and administrative expenses 287 — 2,164 2,451 Total costs and expenses 6,656 — 2,918 9,574 Loss from operations ( 1,079 ) — ( 2,645 ) ( 3,724 ) Other Income: Other income / (expense) 12 — ( 46 ) ( 34 ) Interest expense, net ( 2 ) — ( 26 ) ( 28 ) Gain on debt extinguishment 140 — — 140 Total other income, net 150 — ( 72 ) 78 Loss Before Income Tax ( 929 ) — ( 2,717 ) ( 3,646 ) Income tax — — 14 14 Net loss ( 929 ) — ( 2,731 ) ( 3,660 ) With the creation of our Sadot Agri-Foods subsidiary in late 2022, we began to transform from a U.S.-centric restaurant business into a global, food-focused organization with two distinct segments. As a result, we have reevaluated and changed our operating segments early in 2023. Previously we split out Muscle Maker Grill, Pokemoto, and SuperFit Foods as their own restaurant operating segments. Since Sadot Agri-Foods' operations is primarily in commodities trading and is such a large portion of the Company’s business, the Company segregated it into its own segment and combined all restaurant operations into a segment. On June 22, 2023, the Company created the new subsidiary, Sadot Latam LLC, which has e xpanded its agri-commodity sourcing and trading operations into North, Central and South America, further diversifying the Company’s geographic reach beyond its existing operations in Europe, Asia, the Middle East and Africa. This new line of business is included within the Sadot Agri-Foods segment in the tables above. The Company will continue to evaluate its operating segments and update as necessary. 34 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 17. 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”), effective on September 16, 2020 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 1.5 million shares of common stock for issuance. As of June 30, 2023, 0.7 million shares have been issued and 0.8 million 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 2.5 million shares of common stock for issuance. As of June 30, 2023 0.2 million shares have been issued and 0.1 million option to purchase shares have been awarded under the 2023 Plan. Common Stock Issuances On January 6, 2022, the Company authorized the issuance of an aggregate of 39.6 thousand shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2022. The Company accrued for the liability as of June 30, 2022. On January 18, 2022, the Company issued an aggregate of 30.0 thousand shares of common stock of the Company to a consultant that assisted with the acquisition of SuperFit Foods and Pokemoto, with an aggregate fair value amount of $ 15.6 thousand. The Company accrued for the liability as of June 30, 2022. On March 31, 2022, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2022. On April 4, 2022, the Company authorized the issuance of 20.0 thousand shares of common stock to a member of the executive team per the employment agreement. The stock was not fully earned until April 4, 2022. On June 8, 2022, the Company authorized the issuance of 5.0 thousand shares of common stock to a contractor for work done at a Company owned location. On June 30, 2022, the Company recognized 30.9 thousand shares of common stock for book purpose to reconcile the shares outstanding to the transfer agent report. On July 14, 2022, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2022. On October 12, 2022, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2022. On November 29, 2022, the Company authorized the issuance of an aggregate of 0.4 million shares of common stock in connection with the exercise of pre-funded warrants. 35 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) On January 5, 2023, the Company authorized the issuance of an aggregate of 31.3 thousand 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 2.8 million shares of common stock to Aggia as consulting fees earned during the fourth quarter of 2022. On May 25, 2023, the Company authorized the issuance of 2.7 million shares of common stock to Aggia as consulting fees earned during the first quarter of 2023. Change in fair value of accrued compensation on the Unaudited Condensed Consolidated Statement of Operations 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 three and six months ended June 30, 2023, Change in fair value of accrued compensation was $ 0.3 million and $ 0.9 million, respectively. Private Placements On April 7, 2021, the Company entered into a Securities Purchase Agreement with an accredited investor (the “Securities Purchase Agreement”) for a private placement (the “Private Placement”) pursuant to which the investor agreed to purchase from the Company for an aggregate purchase price of approximately $ 10.0 million (i) 1.3 million shares of common stock of the Company (ii) a common stock purchase warrant to purchase up to 4.1 million shares of common stock (the “Common Warrant”) and (iii) a pre-funded common stock purchase warrant to purchase up to 2.9 million shares of common stock (the “pre-funded warrant”). Each share and accompanying common warrant is being sold together at a combined offering price of $ 2.43 per share and Common Warrant, and each pre-funded warrant and accompanying common warrant is being sold together at a combined offering price of $ 2.42 per pre-funded warrant and accompanying common warrant. The pre-funded warrant is immediately exercisable, at a nominal exercise price of $ 0.01 per share, and may be exercised at any time until the pre-funded warrant are fully exercised. The common warrant will have an exercise price of $ 2.43 per share, are immediately exercisable and will expire 5.5 years from the date of issuance. The Private Placement closed on April 9, 2021. The Securities Purchase Agreement contains customary representations, warranties and agreements of the Company and the Purchaser and customary indemnification rights and obligations of the parties thereto. Pursuant to the Securities Purchase Agreement, the Company was required to register the resale of the shares and the shares issuable upon exercise of the common warrant and the pre-funded warrant. The Company prepared and filed a registration statement with the Securities and Exchange Commission within 30 days of the date of the Securities Purchase Agreement and to used commercially reasonable efforts to have the registration statement declared effective within 90 days of the closing of the Private Placement. Pursuant to a placement agency agreement, dated April 6, 2021, between the Company and A.G.P./Alliance Global Partners (the “Placement Agent”) entered into in connection with the Private Offering, the Placement Agent acted as the sole placement agent for the Private Placement and the Company has paid customary placement fees to the Placement Agent, including a cash fee equal to 8.0 % of the gross proceeds raised in the Private Placement and a common stock purchase warrant to purchase shares of common stock in an amount equal to 4.0 % of the Shares and shares of common stock issuable upon exercise of the warrants sold in the Private Placement, the warrant has an exercise price of $ 2.916 per share and is exercisable commencing six months from the date of the pricing of the Private Placement for a period of five years after such date. Pursuant to the Placement Agency Agreement, the Company has also agreed to reimburse certain expenses of the placement agent incurred in connection with the Private Placement. On November 17, 2021, the Company entered into a Securities Purchase Agreement with accredited investors (the “Securities Purchase Agreement”) for a private placement (the “Private Placement”) pursuant to which the investors (the “Purchasers”) agreed to purchase from the Company for an aggregate purchase price of approximately $ 15.0 million (i) 6.8 million shares (the “Shares”) of common stock, par value $ 0.0001 per share, of the Company (the “common stock”) (ii) a common stock purchase warrant to purchase up to 10.8 million shares of common stock (the “common warrant”) and (iii) a pre-funded common stock purchase warrant to purchase up to 4.1 million shares of common stock (the “pre-funded warrant”). Each share and accompanying common warrant were being sold together at a combined offering price of $ 1.385 per share and common warrant, and each pre-funded warrant and accompanying Common Warrant is being sold together at 36 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) a combined offering price of $ 1.3849 per pre-funded warrant and accompanying common warrant. The pre-funded warrant is immediately exercisable, at a nominal exercise price of $ 0.0001 per share, and may be exercised at any time until the pre-funded warrant is fully exercised. The common warrant will have an exercise price of $ 1.385 per share, are immediately exercisable and will expire 5 years from the date of issuance. The Private Placement closed on November 22, 2021. The Securities Purchase Agreement contains customary representations, warranties and agreements of the Company and the Purchaser and customary indemnification rights and obligations of the parties thereto. Pursuant to the Securities Purchase Agreement, the Company is required to register the resale of the shares and the shares issuable upon exercise of the common warrant and the pre-funded warrant. The Company was required to prepare and file a registration statement with the Securities and Exchange Commission within 30 days of the date of the Securities Purchase Agreement and used commercially reasonable efforts to have the registration statement declared effective within 90 days of the closing of the Private Placement. Pursuant to a placement agency agreement, dated November 17, 2021, between the Company and A.G.P./Alliance Global Partners (the “Placement Agent”) entered into in connection with the Private Offering, the Placement Agent acted as the sole placement agent for the Private Placement and the Company has paid customary placement fees to the Placement Agent, including a cash fee equal to 8.0 % of the gross proceeds raised in the Private Placement and a common stock purchase warrant to purchase shares of Common Stock in an amount equal to 4.0 % of the Shares and shares of common stock issuable upon exercise of the warrants sold in the Private Placement, which warrant has an exercise price of $ 1.662 per share and is exercisable commencing six months from the date of the pricing of the Private Placement for a period of five years after such date. Pursuant to the Placement Agency Agreement, the Company has also agreed to reimburse certain expenses of the placement agent incurred in connection with the Private Placement. The warrants for the November 17, 2021, private placement for the Placement Agents were issued in the fourth quarter of 2022. Restricted Stock Awards Per Addendum 2, on July 14, 2023, the Company issued Restricted Share Awards ("RSA's") to Aggia. For further information see Note 19 – Subsequent events. 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. 37 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) At June 30, 2023, there was $ 8.0 million restricted stock awards outstanding. A summary of the activity related to the restricted stock awards, is presented below: Total RSA's Weighted-average grant date fair value $ Outstanding at December 31, 2022 — — Granted 8,855,452 1.25 Forfeited — — Vested ( 854,714 ) 1.25 Outstanding at June 30, 2023 8,000,738 1.25 See Note 15 – Commitments and contingencies for further details on Restricted Share Awards. Warrant and Option Valuation The Company has computed the fair value of warrants granted and options accrued for as accrued compensation expense 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, the Company issued options to purchase an aggregate of 0.5 million shares of the Company's common stock to officers and directors. The options had an exercise price of $ 1.51 per share and vest ratably over 20 quarters with the first vesting occurring June 30, 2023. On March 15, 2023, the Company issued options to purchase 0.1 million shares of the Company's common stock. The options had an exercise price of $ 1.51 per share and vest ratably over 20 quarters with the first vesting occurring June 30, 2023. 38 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 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, 2021 5.00 100,000 1.91 — Granted 0.41 312,500 5.21 12 Exercised — — N/A — Forfeited — — N/A — Outstanding, June 30, 2022 1.52 412,500 4.29 — Expected to vest, June 30, 2022 0.41 296,875 5.21 — Exercisable and vested, June 30, 2022 4.38 115,625 1.93 — Outstanding, December 31, 2022 1.52 412,500 3.53 156 Granted 1.51 600,000 5.92 — Exercised — — N/A — Forfeited — — N/A — Outstanding, June 30, 2023 1.51 1,012,500 4.75 244 Expected to vest, June 30, 2023 1.17 776,857 5.30 195 Exercisable and vested, June 30, 2023 2.64 235,643 2.92 59 The Company has estimated the fair value of the options using the Black-Scholes model using the following assumptions: Six Months Ended June 30, 2023 Risk free interest rate 3.54 - 4.93 % Expected term (years) 5.63 Expected volatility 53.99 - 69.02 % Expected dividends — Warrants On January 3, 2022, the Company issued 1.2 million shares of common stock in connection with the cashless exercise of the pre-funded warrants. Pursuant to the terms of the pre-funded warrants a total of 1.2 million warrants were exercised. On February 24, 2022, the Company issued 1.2 million shares of common stock in connection with the cashless exercise of the pre-funded warrants. Pursuant to the terms of the pre-funded warrants a total of 1.2 million warrants were exercised. On November 29, 2022, the Company issued 0.4 million shares of common stock in connection with the exercising of pre-funded warrants for $ 44 . 39 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) A summary of warrants activity during the six months ended June 30, 2023 and 2022 is presented below: Number of warrants Weighted-average exercise price Weighted-average remaining life (in years) $ Outstanding, December 31, 2021 20,284,016 1.66 3.99 Granted — — N/A Exercised ( 2,410,110 ) — N/A Forfeited — — N/A Outstanding, June 30, 2022 17,873,906 1.89 4.03 Exercisable, June 30, 2022 17,873,906 1.89 4.03 Outstanding, December 31, 2022 18,033,640 1.93 3.51 Granted — — N/A Exercised — — N/A Forfeited — — N/A Outstanding, June 30, 2023 18,033,640 1.93 3.01 Exercisable, June 30, 2023 18,033,640 1.93 3.01 Stock-Based Compensation Expense Stock-based compensation related to restricted stock issued to employees, directors and consultants, warrants and warrants to consultants amounted to $ 1.1 million and $ 4.6 million for the three and six months ended June 30, 2023 respectively, of which $ 0.1 million and $ 0.1 million, respectively, was recorded in Sales, general and administrative expenses. Stock-based compensation related to restricted stock issued to employees, directors and consultants, warrants and warrants to consultants amounted to $ 44.9 thousand and $ 0.1 million, respectively, for the three and six months ended June 30, 2022 of which $ 44.9 thousand and $ 0.1 million was recorded in Sales, general and administrative expenses. There was $ 1.1 million and $ 4.4 million recorded in Stock-based consulting expense for the three and six months ended June 30, 2023. There were no expenses recorded in Stock-based consulting expense for the three and six months ended June 30, 2022. 40 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 18. Related Party Transactions The Company held a Special Meeting on February 28, 2023. Of the 29.3 million shares of Common Stock outstanding on January 19, 2023, the record date, 17.2 million shares were represented at the Special Meeting, in person or by proxy, constituting a quorum. At the meeting, the shareholders approved (i) the Services Agreement whereby Sadot Agri-Foods engaged Aggia, to provide certain advisory services to Sadot Agri-Foods for managing Sadot Agri-Foods’ business of wholesaling food and engaging in the purchase and sale of physical food commodities (the “Sadot Agri-Foods Transaction”); (ii) an amendment of the Company’s articles of incorporation to increase the number of authorized shares of common stock from 50.0 million to 150.0 million; (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 Agri-Foods 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 14.4 million 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. In April of 2023, the Company recognized a related party relationship between newly appointed directors of the Company and Aggia. As of June 30, 2023, Aggia owned 24.7 % of the Company's commons stock. During the three and six months ended June 30, 2023, the Company recorded Stock-based consulting expense of $ 1.1 million and $ 4.4 million to its related party, Aggia for consulting services rendered. Additionally, for the three and six months ended June 30, 2023, the Company reimbursed Aggia for all operating costs related to Sadot Agri-Foods of $ 1.0 million and $ 1.8 million, respectively. 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. 41 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 19. Subsequent Events Board Issued Stock On July 11, 2023, the Company authorized the issuance of an aggregate of 32.9 thousand shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2023. Aggia Deal On July 14, 2023 with an effective date of April 1, 2023, the Company amended its current Services Agreement with AGGIA. The new addendum, among other features, modifies the formula by which the Company will issue shares of common stock earned by AGGIA for net income generated through the Company’s Sadot Agri-Foods division from 80 % of net income to 40 % of net income. The overall intended effect will be to reduce, by 50 %, the quarterly non-cash expenses related to stock issuances to AGGIA, streamline the reporting processes and is expected to have a favorable impact the Company’s financial performance. On October 19, 2022, the Company formed Sadot Agri-Foods. On November 14, 2022, the Company, Sadot Agri-Foods and Aggia entered into a Services Agreement (the “Services Agreement”) whereby Sadot Agri-Foods engaged Aggia to provide certain advisory services to Sadot Agri-Foods for creating, acquiring and managing Sadot Agri-Foods’ business of wholesaling food and engaging in the purchase and sale of physical food commodities. The closing date of the Services Agreement was November 16, 2022. The parties entered into Addendum 1 to the Services Agreement on November 17, 2022. Further, 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 8.9 million shares (the “Shares”) of common stock, par value $ 0.0001 per share, of the Company, which such Shares represent 14.4 million Shares that Aggia is entitled to receive pursuant to the Services Agreement less the 5.6 million 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 14.4 million 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 $ 3.125 , which for accounting purposes shall equal 40 % of the net income of Sadot Agri-Foods, calculated quarterly divided by $ 1.25 . 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 Agri-Foods to Aggia (the “Debt”), until such Debt has reached a maximum of $ 71.5 million. Company Name Change Effective July 27, 2023, the Company changed its name to Sadot Group Inc. The name change was made in accordance with Section 92A.180 of the Nevada Revised Statutes by merging a wholly-owned subsidiary of the Company with and into the Company, with the Company being the surviving corporation in the merger. The Company effectuated the merger by filing Articles of Merger with the Secretary of State of the State of Nevada. In connection with the merger, the Company amended Article I of its Articles of Incorporation to change the Company’s corporate name to Sadot Group Inc. With the exception of the name change, there were no other changes to the Company’s Articles of Incorporation. Additionally, as of the opening of trading on July 27, 2023, the ticker symbol of the Company’s common stock on The Nasdaq Capital Market will be “SDOT” and the CUSIP number of the Company’s common stock (627333107) will remain unchanged. The Company’s name and ticker symbol change do not affect the rights of the Company’s security holders, creditors, customers or suppliers. Following the name change, any stock certificates that reflect the Company’s prior name, if any, will continue to be valid. 42 Table of Contents Muscle Maker, Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited) 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 2.2 million 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 2.2 million 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 $ 1.385 to $ 1.00 per share. 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 $ 2.40 . 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. Line of Credit On August 1, 2023, the Company paid off its line of credit in the amount of $ 3.5 million. Promissory Notes On July 12, 2023, the Company issued a Convertible Promissory Note in the principal amount of $ 0.6 million in consideration of cash in the amount of $ 0.5 million. The Convertible Promissory Note was paid off in full on July 31, 2023. On July 18, 2023, the Company issued a Convertible Promissory Note in the principal amount of $ 0.2 million in consideration of cash in the amount of $ 0.2 million. The Convertible Promissory Note was paid off in full on July 31, 2023. On July 18, 2023, the Company issued a Convertible Promissory Note in the principal amount of $ 0.2 million in consideration of cash in the amount of $ 0.2 million. The Convertible Promissory Note was paid off in full on August 2, 2023. Strategic Restructuring On August 4, 2023 the Company announced its intention to strategically pivot towards the global food supply chain sector. The Company plans to reduce restaurant operating expenses by closing underperforming units while refranchising (selling) most of our remaining company-owned units. We will shift to a franchise, royalty-generating model focused on our successful Pokémoto concept. 43 Table of Contents