What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-13 compared with 2024-05-15 · 317 added, 90 removed, 293 unchanged (58% of the section changed)

1 unchanged sentence

Preliminary Note

The following Management’s Discussion and Analysis (“MD&A”), prepared as of May 15, 2024, should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements of Sadot Group Inc.

("Sadot Group"), for the three months ended March 31, 2024 together with the audited financial statements of the Company for the year ended December 31, 2023 and the accompanying MD&A for that fiscal year appearing in our Annual Report on 2023 Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 20, 2024.

The following Management’s Discussion and Analysis (“MD&A”), prepared as of August 13, 2024, should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements of Sadot Group Inc.

("Sadot Group"), for the three and six months ended June 30, 2024 together with the audited financial statements of the Company for the year ended December 31, 2023 and the accompanying MD&A for that fiscal year appearing in our Annual Report on 2023 Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 20, 2024.

Unless otherwise indicated or the context otherwise requires, all references to the terms “Company,” “company,” "Sadot", “Muscle Maker,” “we,” “us,” “our”, “Group” and similar terms refer to Sadot Group Inc., together with its consolidated subsidiaries.

21 unchanged sentences

Effective July 27, 2023, we changed our company name from Muscle Maker, Inc., to Sadot Group Inc.

As of March 31, 2024, Sadot Group consisted of two distinct operating units.

As of June 30, 2024, Sadot Group consisted of two distinct operating units.

Sadot LLC (“Sadot Agri-Foods”):

Sadot Group’s largest operating unit is a global Agri-Foods company engaged in farming, commodity trading and shipping of food and feed (e.g., soybean meal, wheat and corn) via dry bulk cargo ships to/from markets such as Argentina, Australia, Bangladesh, Brazil, Canada, China, Columbia, Ecuador, Egypt, Guinea, Honduras, India, Indonesia, Ivory Coast, Japan, Kenya, Malaysia, Morocco, Mozambique, Nigeria, Philippines, Poland, Romania, Saudi Arabia, South Korea, Sri Lanka, Ukraine, United States and Vietnam, among others.

Sadot Group’s largest operating unit is a global Agri-Foods company engaged in farming, commodity trading and shipping of food and feed (e.g., soybean meal, wheat and corn) via dry bulk cargo ships to/from markets such as Argentina, Australia, Bangladesh, Brazil, Canada, China, Columbia, Costa Rica, Dominican Republic, Ecuador, Egypt, Guinea, Honduras, India, Indonesia, Ivory Coast, Japan, Kenya, Malaysia, Morocco, Mozambique, Nigeria, Philippines, Poland, Romania, Saudi Arabia, South Korea, Sri Lanka, Ukraine, United States, Venezuela, Vietnam and Yemen, among others.

Sadot Agri-Foods competes with the ABCD commodity companies (ADM, Bunge, Cargill, Louis-Dreyfus) as well as many regional organizations.

Sadot Agri-Foods operates, through a majority owned subsidiary, a roughly 5,000 acre crop producing farm in Zambia with a focus on major commodities such as wheat, soy and corn alongside high-value tree crops such as avocado and mango.

Sadot Agri-Foods was formed as part of the Company’s diversification strategy to own and operate, through its subsidiaries, the business lines throughout the food value chain.

Sadot Agri-Foods was formed as part of the Company’s diversification strategy to own and operate, through its subsidiaries, the business lines throughout the food supply chain.

Sadot Agri-Foods seeks to diversify over time into a sustainable and forward-looking global agri-foods company.

11 unchanged sentences

Governmental and other economic factors affecting our operations may vary.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

$’000 $’000 $’000 $’000

Commodity sales 173,293 157,559 279,800 367,925

2 unchanged sentences

Franchise advertising fund contributions 13 20 28 36

Other revenues — 13 — 13

Cost of goods sold (172,527) (157,239) (280,804) (365,535)

11 unchanged sentences

The breakout of our main revenue streams by business segment is shown below:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Sadot agri-foods 99.0 % 98.3 % 98.9 % 98.6 %

24 unchanged sentences

As of April 1, 2023 the consulting agreement was amended to calculate consulting fees on 40.0% of the Net income generated by Sadot LLC.

For the three months ended March 31, 2024 and 2023, consulting fees were $0.8 million and $3.4 million, respectively, and are recorded as Stock-based expenses in the accompanying Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Loss.

Stock-based expenses were $1.9 million and $2.7 million, for the three and six months ended June 30, 2024 and $1.2 million and $4.6 million, for the three and six months ended June 30, 2023, respectively, and are recorded in the accompanying Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Income / (Loss).

Sales, General and Administrative Expenses

3 unchanged sentences

Other (Expense) / Income

Other (expense) / income listed below the Loss from operations in the accompanying Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Loss consists of Gain of fair value remeasurement, Change in fair value of stock-based compensation, Loss on sale of trading securities and Interest expense, net.

Other (expense) / income listed below the Loss from operations in the accompanying Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Income / (Loss) consists of Gain of fair value remeasurement, Change in fair value of stock-based compensation, Loss on sale of trading securities and Interest expense, net.

Gain on fair value remeasurement consists of the fair value remeasurement recorded on a recurring basis on the forward sales contract which was deemed to be a derivative within the scope of ASC 815.

1 unchanged sentence

Income tax benefit / (expense) represent federal, state and local current and deferred income tax expense.

Net Income Attributable to Non-controlling Interests

Net loss attributable to non-controlling interests was $48.0 thousand and nil for the three months ended March 31, 2024 and 2023.

Net Income (Loss) Attributable to Non-controlling Interests

Net loss attributable to non-controlling interests were $0.1 million and $0.1 million for the three and six months ended June 30, 2024, and nil for the three and six months ended June 30, 2023, respectively.

During the year ended December 31, 2023 the Company created a joint-venture in which the Company has a 70% interest and the third-party equity ownership has a 30% Non-controlling interest.

2 unchanged sentences

We define EBITDA as Net loss, adjusted for depreciation, amortization, interest income / (expense), and income taxes.

We define Adjusted EBITDA as Net loss, adjusted for depreciation, amortization, net interest (income) expense, income taxes, impairment expenses, stock-based consulting expense, other income, change in fair value of stock-based compensation, gain on extinguishment, warrant modification expense, and gain on fair value remeasurement derived from amounts presented in the Unaudited Condensed Consolidated Statement of Operations and Other Comprehensive Loss and the associated Notes to the Unaudited Condensed Consolidated Financial Statements.

We define Adjusted EBITDA as Net loss, adjusted for depreciation, amortization, net interest (income) expense, income taxes, impairment expenses, stock-based consulting expense, other income, change in fair value of stock-based compensation, gain on extinguishment, warrant modification expense, and gain on fair value remeasurement derived from amounts presented in the Unaudited Condensed Consolidated Statement of Operations and Other Comprehensive Income / (Loss) and the associated Notes to the Unaudited Condensed Consolidated Financial Statements.

We believe that EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin, (collectively, the “Non-GAAP Measures”) are useful metrics for investors to understand and evaluate our operating results and ongoing profitability because they permit investors to evaluate our recurring profitability from our ongoing operating activities.

3 unchanged sentences

The following table presents a reconciliation of EBITDA and Adjusted EBITDA from the most comparable U.S.

GAAP measure, Net loss, and the calculations of the Net loss Margin and Adjusted EBITDA Margin for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

GAAP measure, Net loss, and the calculations of the Net loss Margin and Adjusted EBITDA Margin for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

$’000 $’000 $’000 $’000

Net income / (loss) 2,317 190 2,004 (876)

5 unchanged sentences

Adjustments to Adjusted EBITDA:

Other income (19) (251) (19) (251)

Change in fair value of stock-based compensation (1,214) (324) (1,691) (865)

Gain on fair value remeasurement (3,275) — (6,534) —

Stock-based consulting expenses 796 3,359

Loss on sale of trading securities 11 —

Stock-based expenses 1,921 1,175 2,717 4,593

Gain on sale of trading securities (528) — (518) —

Adjusted EBITDA 60 1,256 (2,411) 3,700

4 unchanged sentences

Gross Profit attributable to Sadot Group Inc.

Net loss Margin attributable to Sadot Group Inc.

2,564 3,078 2,270 7,749

Net income / (loss) margin attributable to Sadot Group Inc.

1.3 % 0.1 % 0.7 % (0.2) %

Adjusted EBITDA margin attributable to Sadot Group Inc.

0.1 % 0.8 % (0.8) % 1.0 %

Unaudited Condensed Consolidated Results of Operations - Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

The following table represents selected items in our Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Loss for the three months ended March 31, 2024 and 2023, respectively:

Three Months Ended March 31, Variance

Unaudited Condensed Consolidated Results of Operations - Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023

The following table represents selected items in our Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Income / (Loss) for the three months ended June 30, 2024 and 2023, respectively:

Three Months Ended June 30, Variance

2024 2023 $ %

4 unchanged sentences

Franchise advertising fund contributions 13 20 (7) (35.0) %

Other revenues — 13 (13) (100.0) %

Cost of goods sold (172,527) (157,239) (15,288) 9.7 %

Gross (loss) profit (340) 4,673 (5,013) (107.3) %

Gross profit 2,512 3,078 (566) (18.4) %

Depreciation and amortization expenses (92) (441) 349 (79.1) %

Franchise advertising fund expenses (13) (20) 7 (35.0) %

Pre-opening expenses — (36) 36 (100.0) %

Post-closing expenses (10) (19) 9 (47.4) %

2 unchanged sentences

Loss from operations (1,953) (360) (1,593) 442.5 %

Interest (expense) / income, net (490) 3 (493) (16433.3) %

Other income 19 251 (232) (92.4) %

Interest expense (761) (22) (739) 3359.1 %

Change in fair value of stock-based compensation 1,214 324 890 274.7 %

Gain on fair value remeasurement 3,275 — 3,275 NM

Loss on sale of trading securities (11) — (11) NM

Gain on sale of trading securities 528 — 528 NM

Income Before Income Tax 2,322 193 2,129 1103.1 %

Income tax expense (5) (3) (2) 66.7 %

Net income 2,317 190 2,127 1119.5 %

Net loss attributable to non-controlling interest 52 — 52 NM

Net loss attributable to Sadot Group Inc.

2,369 190 2,179 1146.8 %

NM= not meaningful

The following table sets forth our results of operations as a percentage of total revenue for each period presented preceding:

Three Months Ended June 30,

Commodity sales 99.0 % 98.3 %

Company restaurant sales, net of discounts 0.6 % 1.6 %

Franchise royalties and fees 0.4 % 0.1 %

Franchise advertising fund contributions — % — %

Other revenues — % — %

Cost of goods sold (98.6) % (98.1) %

Gross profit 1.4 % 1.9 %

Depreciation and amortization expenses (0.1) % (0.3) %

Franchise advertising fund expenses — % — %

Pre-opening expenses — % — %

Post-closing expenses — % — %

Stock-based expenses (1.1) % (0.7) %

Sales, general and administrative expenses (1.4) % (1.1) %

Loss from operations (1.1) % (0.2) %

Other income — % 0.2 %

Interest income / (expense), net (0.4) % — %

Change in fair value of accrued compensation 0.7 % 0.2 %

Loss on fair value remeasurement 1.9 % — %

Gain on sale of trading securities 0.3 % — %

Gain on debt extinguishment — % — %

Loss Before Income Tax 1.3 % 0.1 %

Income tax expense — % — %

Net loss (313) (1,066) 753 (70.6) %

Net income / (loss) 1.3 % 0.1 %

Net income / (loss) attributable to non-controlling interest — % — %

Net income / (loss) attributable to Sadot Group Inc.

Three Months Ended June 30, Variance

2024 2023 $ %

$’000 $’000 $’000

Commodity sales 173,293 157,559 15,734 10.0 %

Company restaurant sales, net of discounts 992 2,487 (1,495) (60.1) %

Franchise royalties and fees 741 238 503 211.3 %

Franchise advertising fund contributions 13 20 (7) (35.0) %

Other revenues — 13 (13) (100.0) %

Cost of goods sold (172,527) (157,239) (15,288) 9.7 %

Gross profit 2,512 3,078 (566) (18.4) %

NM= not meaningful

Our gross (loss) profit totaled $2.5 million profit for the three months ended June 30, 2024, compared to $3.1 million profit for the three months ended June 30, 2023.

The $0.6 million decrease is primarily attributed to a decrease in Company restaurant sales, net of discount partially offset by an increase in Commodity sales.

We generated Commodity sales of $173.3 million for the three months ended June 30, 2024 compared to $157.6 million for the three months ended June 30, 2023.

This represented an increase of $15.7 million, which is attributable to an increase in operations in 2024 as a direct result of our Latin American trade operations and farming activity, which was not operating in 2023.

We generated Company restaurant sales, net of discounts, of $1.0 million for the three months ended June 30, 2024, compared to $2.5 million for the three months ended June 30, 2023.

This represented an decrease of $1.5 million, or 60.1%, which is mainly attributable to the conversion of certain corporate owned Pokemoto locations to franchise locations and closing underperforming locations.

Franchise royalties and fees for the three months ended June 30, 2024 totaled $0.7 million compared to $0.2 million for the three months ended June 30, 2023.

This represents a increase of $0.5 million, or 211.3%.

In 2024, the franchise fees were higher, primarily due to a termination of a Muscle Maker Grill development agreement in 2024 that escalated the revenue recognition.

Franchise advertising fund contributions for the three months ended June 30, 2024 totaled $13.0 thousand compared to $20.0 thousand for the three months ended June 30, 2023.

The Company recognizes these sales-based advertising contributions from franchisees as franchise revenue when the underlying franchisee Company incurs the corresponding advertising expense.

The decrease of $7.0 thousand or 35.0%, is a direct result of the decrease in Muscle Maker Grill restaurant national advertising services.

There were no other revenues for the three months ended June 30, 2024.

Other revenue for the three months ended June 30, 2023 were $13.0 thousand.

Other revenues consisted of gift card breakage recognized.

Cost of goods sold for the three months ended June 30, 2024 totaled $172.5 million compared to $157.2 million for the three months ended June 30, 2023.

The $15.3 million or 9.7% change is a direct result of the increase in sales.

Depreciation and Amortization Expenses

Three Months Ended June 30, Variance

2024 2023 $ %

$’000 $’000 $’000

Depreciation and amortization expenses (92) (441) 349 (79.1) %

Depreciation and amortization expenses for the three months ended June 30, 2024 totaled $0.1 million compared to $0.4 million, for the three months ended June 30, 2023.

The $0.3 million decrease is mainly attributed to moving Sadot food service assets to Assets Held For Sale and no longer amortizing or depreciating the assets and the closing and refranchising of corporate locations and the disposal of the corresponding assets.

Franchise Advertising Fund Expenses

Three Months Ended June 30, Variance

2024 2023 $ %

$’000 $’000 $’000

Franchise advertising fund expenses (13) (20) 7 (35.0) %

Franchise advertising fund expenses for the three months ended June 30, 2024 totaled $13.0 thousand compared to $20.0 thousand , for the three months ended June 30, 2023.

The $7.0 thousand or 35.0% decrease is mainly attributed to the decrease in Muscle Maker Grill restaurant national advertising services.

Post-Closing Expenses

Three Months Ended June 30, Variance

2024 2023 $ %

$’000 $’000 $’000

Post-closing expenses (10) (19) 9 (47.4) %

Post-closing expenses for the three months ended June 30, 2024 totaled $10.0 thousand compared to $19.0 thousand for the three months ended June 30, 2023.

The decrease in Post-closing expenses resulted from closing fewer corporate owned locations in 2024 compared to 2023.

Stock-Based Expenses

Three Months Ended June 30, Variance

2024 2023 $ %

$’000 $’000 $’000

Stock-based expenses (1,921) (1,175) (746) 63.5 %

Stock-based expenses for the three months ended June 30, 2024, totaled $1.9 million compared to $1.2 million for the three months ended June 30, 2023.

The $0.7 million increase in Stock-based expenses is primarily the result of consulting fees due to Aggia for Sadot Agri-Foods and Farming operations and the vesting of restricted stock for employees, board of directors and consultants.

Based on the servicing agreement with Aggia, the consulting fees are calculated at approximately 40.0% of the Net income generated by Sadot LLC which is a decrease from 80.0% in 2023.

Thi s expense is paid in the vesting in restricted stock that was issued to Aggia in 2024.

Sales, General and Administrative Expenses

Three Months Ended June 30, Variance

2024 2023 $ %

$’000 $’000 $’000

Sales, general and administrative expenses (2,429) (1,783) (646) 36.2 %

Sales, general and administrative expenses for the three months ended June 30, 2024 totaled $2.4 million compared to $1.8 million for the three months ended June 30, 2023.

The $0.6 million increase was primarily attributable to a increase in consulting fees due to trades in Latin America, entering the Brazil market and increases due to increases in normal operating activities.

Other Income / (Expense)

Three Months Ended June 30, Variance

2024 2023 $ %

$’000 $’000 $’000

Total other income / (expense), net 4,275 553 3,722 673 %

Other income for the three months ended June 30, 2024 totaled $4.3 million compared to $0.6 million for the three months ended June 30, 2023.

The $3.7 million increase was primarily attributable to a $3.3 million increase in the gain on the fair value remeasurement as a result of the mark to market adjustment of derivatives and an $0.7 million increase in interest expense, a $0.9 million increase in change in fair value of stock-based compensation and a $0.1 million increase in loss on sale of trading securities.

Three Months Ended June 30, 2024

Sadot food service Sadot agri-foods Corporate adj.

$’000 $’000 $’000 $’000

Commodity sales — 173,293 — 173,293

Company restaurant sales, net of discounts 992 — — 992

Franchise royalties and fees 741 — — 741

Franchise advertising fund contributions 13 — — 13

Cost of goods sold (1,219) (171,308) — (172,527)

Gross profit 527 1,985 — 2,512

Depreciation and amortization expenses — (92) — (92)

Franchise advertising fund expenses (13) — — (13)

Post-closing expenses (10) — — (10)

Stock-based expenses — — (1,921) (1,921)

Sales, general and administrative expenses (728) (847) (854) (2,429)

Income / (loss) from operations (224) 1,046 (2,775) (1,953)

Other income 19 — — 19

Interest income / (expense), net (757) (407) 403 (761)

Change in fair value of stock-based compensation — — 1,214 1,214

Gain on fair value remeasurement — 3,275 — 3,275

Gain on sale of trading securities — 528 — 528

Income / (Loss) Before Income Tax (962) 4,442 (1,158) 2,322

Income tax expense — — (5) (5)

Net income / (loss) (962) 4,442 (1,163) 2,317

Total assets 6,335 152,503 6,936 165,774

Three Months Ended June 30, 2023

Sadot food service Sadot agri-foods Corporate adj.

$’000 $’000 $’000 $’000

Commodity sales — 157,559 — 157,559

Company restaurant sales, net of discounts 2487 — — 2,487

Franchise royalties and fees 238 — — 238

Franchise advertising fund contributions 20 — — 20

Other revenues 13 — — 13

Cost of goods sold (2663) (154,576) — (157,239)

Gross profit 95 2,983 — 3,078

Depreciation and amortization expenses (441) — — (441)

Franchise advertising fund expenses (20) — — (20)

Post-closing expenses (19) — — (19)

Stock-based expenses — — (1,175) (1,175)

Sales, general and administrative expenses (88) (301) (1,394) (1,783)

Income / (loss) from operations (473) 2,682 (2,569) (360)

Other income — — 251 251

Interest expense, net (1) (21) — (22)

Change in fair value of stock-based compensation — — 324 324

Income / (Loss) Before Income Tax (474) 2,661 (1,994) 193

Income tax expense (1) — (2) (3)

Net (loss) / income (475) 2,661 (1,996) 190

Total assets 5,947 56,204 10,172 72,323

Unaudited Condensed Consolidated Results of Operations - Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

The following table represents selected items in our Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Income / (Loss) for the six months ended June 30, 2024 and 2023, respectively:

Six Months Ended June 30, Variance

2024 2023 $ %

$’000 $’000 $’000

Commodity sales 279,800 367,925 (88,125) (24.0) %

Company restaurant sales, net of discounts 2,149 4,788 (2,639) (55.1) %

Franchise royalties and fees 997 522 475 91.0 %

Franchise advertising fund contributions 28 36 (8) (22.2) %

Other revenues — 13 (13) (100.0) %

Cost of goods sold (280,804) (365,535) 84,731 (23.2) %

Gross profit 2,170 7,749 (5,579) (72.0) %

Depreciation and amortization expenses (372) (1,074) 702 (65.4) %

Franchise advertising fund expenses (28) (36) 8 (22.2) %

Pre-opening expenses — (36) 36 (100.0) %

Post-closing expenses (29) (113) 84 (74.3) %

Stock-based expenses (2,717) (4,593) 1,876 (40.8) %

Sales, general and administrative expenses (4,524) (3,864) (660) 17.1 %

Loss from operations (5,500) (1,967) (3,533) 179.6 %

Other income 19 251 (232) (92.4) %

Interest expense (1,251) (19) (1,232) 6484.2 %

Change in fair value of stock-based compensation 1,691 865 826 95.5 %

Gain on fair value remeasurement 6,534 — 6,534 NM

Gain on sale of trading securities 518 — 518 NM

Income / (Loss) Before Income Tax 2,011 (870) 2,881 (331.1) %

Income tax expense (7) (6) (1) 16.7 %

Net income / (loss) 2,004 (876) 2,880 (328.8) %

Net loss attributable to non-controlling interest 100 — 100 NM

Net loss attributable to Sadot Group Inc.

2,104 (876) 2,980 (340.2) %

NM= not meaningful

The following table sets forth our results of operations as a percentage of total revenue for each period presented preceding:

Three Months Ended March 31, Variance

Six Months Ended June 30,

Commodity sales 98.9 % 98.6 %

Company restaurant sales, net of discounts 0.8 % 1.3 %

Franchise royalties and fees 0.3 % 0.1 %

Franchise advertising fund contributions — % — %

Other revenues — % — %

Cost of goods sold (99.2) % (97.9) %

Gross profit 0.8 % 2.1 %

Depreciation and amortization expenses (0.1) % (0.3) %

Franchise advertising fund expenses — % — %

Pre-opening expenses — % — %

Post-closing expenses — % — %

Stock-based expenses (1.0) % (1.2) %

Sales, general and administrative expenses (1.6) % (1.0) %

Loss from operations (1.9) % (0.5) %

Other income — % 0.1 %

Interest income / (expense), net (0.4) % — %

Change in fair value of accrued compensation 0.6 % 0.2 %

Loss on fair value remeasurement 2.3 % — %

Gain on sale of trading securities 0.2 % — %

Income / (Loss) Before Income Tax 0.7 % (0.2) %

Income tax expense — % — %

Net income / (loss) 0.7 % (0.2) %

Net income / (loss) attributable to non-controlling interest — % — %

Net income / (loss) attributable to Sadot Group Inc.

0.7 % (0.2) %

Gross Profits

Six Months Ended June 30, Variance

2024 2023 $ %

$’000 $’000 $’000

Commodity sales 279,800 367,925 (88,125) (24.0) %

2 unchanged sentences

Franchise advertising fund contributions 28 36 (8) (22.2) %

Other revenues — 13 (13) (100.0) %

Cost of goods sold (280,804) (365,535) 84,731 (23.2) %

Gross (loss) profit (340) 4,673 (5,013) (107.3) %

Gross profit 2,170 7,749 (5,579) (72.0) %

NM= not meaningful

Our gross (loss) profit totaled $0.3 million loss for the three months ended March 31, 2024, compared to $4.7 million profit for the three months ended March 31, 2023.

Our gross profit totaled $2.2 million for the six months ended June 30, 2024, compared to $7.7 million for the six months ended June 30, 2023.

The $5.6 million decrease is primarily attributed to a decrease in Commodity sales which is attributable to a decline in global prices of staple commodities, market seasonality and the largest global consumer being out of the market for the beginning of 2024.

We generated Commodity sales of $106.5 million for the three months ended March 31, 2024 compared to $210.4 million for the three months ended March 31, 2023.

This represented a decrease of $103.9 million, which is attributable to a decline in global prices of staple commodities, market seasonality and the largest global consumer being out of the market for the beginning of 2024.

We generated Company restaurant sales, net of discounts, of $1.2 million for the three months ended March 31, 2024, compared to $2.3 million for the three months ended March 31, 2023.

We generated Commodity sales of $279.8 million for the six months ended June 30, 2024.

Commodity sales for the six months ended June 30, 2023 was $367.9 million.

This represented a decrease of $88.1 million, which is attributable to a decline in global prices of staple commodities, market seasonality, the largest global consumer being out of the market for the beginning of 2024 and current harvest season less discounts and shipping delays given.

We generated Company restaurant sales, net of discounts, of $2.1 million for the six months ended June 30, 2024, compared to $4.8 million for the six months ended June 30, 2023.

This represented an decrease of $2.6 million, or 55.1%, which is mainly attributable to the conversion of certain corporate owned Pokemoto locations to franchise locations and closing underperforming locations.

Franchise royalties and fees for the three months ended March 31, 2024 totaled $0.3 million compared to $0.3 million for the three months ended March 31, 2023.

This represents a decrease of $27.0 thousand, or 9.5%.

In 2024, the franchise fees were lower, primarily due to a termination of a Muscle Maker Grill development agreement in 2023 that escalated the revenue recognition.

Franchise advertising fund contributions for the three months ended March 31, 2024 totaled $15.0 thousand compared to $16.0 thousand for the three months ended March 31, 2023.

Franchise royalties and fees for the six months ended June 30, 2024 totaled $1.0 million compared to $0.5 million for the six months ended June 30, 2023.

This represents an increase of $0.5 million, or 91.0%.

In 2024, the franchise fees were higher, primarily due to a termination of one Muscle Maker Grill development agreement in 2024 that escalated the revenue recognition.

Franchise advertising fund contributions for the six months ended June 30, 2024 totaled $28.0 thousand compared to $36.0 thousand for the six months ended June 30, 2023.

The Company recognizes these sales-based advertising contributions from franchisees as franchise revenue when the underlying franchisee Company incurs the corresponding advertising expense.

The decrease of $8.0 thousand or 22.2%, is a direct result of the decrease in Muscle Maker Grill restaurant national advertising services.

Cost of goods sold for the three months ended March 31, 2024 totaled $108.3 million compared to $208.3 million for the three months ended March 31, 2023.

This represented a decrease of $100.0 million or 48.0% which is a direct result of the decrease in sales.

There were no Other revenues for the six months ended June 30, 2024.

Other revenues for the six months ended June 30, 2023 were $13.0 thousand.

Other revenues consisted of gift card breakage recognized.

Cost of goods sold for the six months ended June 30, 2024, totaled $280.8 million.

The Cost of goods sold for the six months ended June 30, 2023 was $365.5 million.

The $84.7 million change is primarily due to a direct result of the decrease in sales.

Depreciation and Amortization Expenses

Three Months Ended March 31, Variance

Six Months Ended June 30, Variance

2024 2023 $ %

1 unchanged sentence

Depreciation and amortization expenses (372) (1,074) 702 (65.4) %

Depreciation and amortization expenses for the three months ended March 31, 2024 totaled $0.3 million compared to $0.6 million, for the three months ended March 31, 2023.

The $0.4 million decrease is mainly attributed to the closing and refranchising of corporate locations and the disposal of the corresponding assets.

Depreciation and amortization expenses for the six months ended June 30, 2024 totaled $0.4 million compared to $1.1 million, for the six months ended June 30, 2023.

The $0.7 million decrease is mainly attributed to moving Sadot food service assets to Assets Held For Sale and no longer amortizing or depreciating the assets and the closing and refranchising of corporate locations and the disposal of the corresponding assets.

Franchise Advertising Fund Expenses

Three Months Ended March 31, Variance

Six Months Ended June 30, Variance

2024 2023 $ %

1 unchanged sentence

Franchise advertising fund expenses (28) (36) 8 (22.2) %

Franchise advertising fund expenses for the three months ended March 31, 2024 totaled $15.0 thousand compared to $16.0 thousand , for the three months ended March 31, 2023.

The $1.0 thousand or 6.3% decrease is mainly attributed to the decrease in Muscle Maker Grill restaurant national advertising services.

Franchise advertising fund expenses for the six months ended June 30, 2024 totaled $28.0 thousand compared to $36.0 thousand , for the six months ended June 30, 2023.

The $8.0 thousand decrease or 22.2% is mainly attributed to the decrease in Muscle Maker Grill national advertising services.

Pre-Opening Expenses

Three Months Ended March 31, Variance

Six Months Ended June 30, Variance

2024 2023 $ %

1 unchanged sentence

Pre-opening expenses — (36) 36 (100.0) %

There were no Pre-opening expenses for the three months ended March 31, 2024, compared to $36.0 thousand for the three months ended March 31, 2023.

The decrease in Pre-opening expenses resulted from no locations or operations that were open or preparing to open during the three months ended March 31, 2024.

Pre-opening expenses for the six months ended June 30, 2024 totaled nil, a $36.0 thousand decrease when compared to $36.0 thousand for the six months ended June 30, 2023.

The decrease in pre-opening expense resulted from expenses incurred at the farm in 2023 from the time that the purchase documents were signed and local government approval was obtained and expenses incurred prior to the opening of our new Company-owned stores.

Post-Closing Expenses

Three Months Ended March 31, Variance

Six Months Ended June 30, Variance

2024 2023 $ %

1 unchanged sentence

Post-closing expenses (29) (113) 84 (74.3) %

Post-closing expenses for the three months ended March 31, 2024 totaled $19.0 thousand compared to $0.1 million for the three months ended March 31, 2023.

The decrease in Post-closing expenses resulted from closing fewer corporate owned locations in 2024 compared to 2023.

Post-closing expenses for the six months ended June 30, 2024 totaled $29.0 thousand, a $0.1 million decrease when compared to $0.1 million for the six months ended June 30, 2023.

The decrease in Post-closing expenses resulted from expenses incurred after the closing of underperforming Company-owned stores in 2023.

Stock-Based Expenses

Three Months Ended March 31, Variance

Six Months Ended June 30, Variance

2024 2023 $ %

1 unchanged sentence

Stock-based expenses (2,717) (4,593) 1,876 (40.8) %

Stock-based expenses for the three months ended March 31, 2024, totaled $0.8 million compared to $3.4 million for the three months ended March 31, 2023.

The $2.6 million decrease in Stock-based expenses is primarily the result of consulting fees due to Aggia for Sadot Agri-Foods and Farming operations.

Based on the servicing agreement with Aggia, the consulting fees are calculated at approximately 40.0% of the Net income generated by Sadot LLC which is a decrease from 80.0% in 2023.

Thi s expense is paid in the vesting in restricted stock that was issued to Aggia in 2024.

Stock-based expenses for the six months ended June 30, 2024, totaled $2.7 million compared to $4.6 million for the six months ended June 30, 2023.

The $1.9 million decrease in Stock-based expenses is primarily the result of consulting fees

due to Aggia for Sadot Agri-Foods and Farming operations.

Based on the servicing agreement with Aggia, the consulting fees are calculated at approxim ately 80.0% and 40.0% of the Net income generated by Sadot LLC for the first quarter of 2023 and the second and third quarter of 2023, respectively.

Sales, General and Administrative Expenses

Three Months Ended March 31, Variance

Six Months Ended June 30, Variance

2024 2023 $ %

1 unchanged sentence

Sales, general and administrative expenses (4,524) (3,864) (660) 17.1 %

Sales, general and administrative expenses for the three months ended March 31, 2024 totaled $2.1 million compared to $2.1 million for the three months ended March 31, 2023.

The $46.0 thousand decrease was primarily attributable to a decrease in normal operating activities.

Other Income / (Expense)

Three Months Ended March 31, Variance

Sales, general and administrative expenses for the six months ended June 30, 2024 totaled $4.5 million, compared to $3.9 million, for the six months ended June 30, 2023.

The $0.7 million increase was primarily attributable to a increase in consulting fees due to trades in Latin America, entering the Brazil market and increases due to increases in normal operating activities.

Total Other Income, Net

Six Months Ended June 30, Variance

2024 2023 $ %

1 unchanged sentence

Total other income / (expense), net 7,511 1,097 6,414 584.7 %

Other income for the three months ended March 31, 2024 totaled $3.2 million compared to $0.5 million for the three months ended March 31, 2023.

The $2.7 million increase was primarily attributable to a $3.3 million increase in the gain on the fair value remeasurement as a result of the mark to market adjustment of derivatives partially offset by a $0.5 million increase in interest expense, a $0.1 million decrease in change in fair value of stock-based compensation and a less than $0.1 million increase in loss on sale of trading securities.

Three Months Ended March 31, 2024

Total other income / (expense), net for the six months ended June 30, 2024 totaled $7.5 million compared to $1.1 million, for the six months ended June 30, 2023.

The $6.4 million increase in Total other income / (expense), net was attributable to a $6.5 million increase in Gain on fair value remeasurement, $0.8 million in the Change in fair value of accrued compensation and a $0.5 million increase in Gain on sale of trading securities, partially offset by a $1.2 million increase in Interest expense, and a $0.2 million decrease in Other income.

Six Months Ended June 30, 2024

Sadot food service Sadot agri-foods Corporate adj.

4 unchanged sentences

Franchise advertising fund contributions 28 — — 28

Other revenues — — — —

Cost of goods sold (2,550) (278,254) — (280,804)

Gross Profit (loss) 98 (438) — (340)

Gross profit 624 1,546 — 2,170

Depreciation and amortization expenses (189) (183) — (372)

Franchise advertising fund expenses (28) — — (28)

Pre-opening expenses — — — —

Post-closing expenses (29) — — (29)

2 unchanged sentences

Loss from operations (1,053) (214) (4,233) (5,500)

Interest expense, net (262) (407) 179 (490)

Other income 19 — — 19

Interest income / (expense), net (511) (813) 73 (1,251)

Change in fair value of stock-based compensation — — 1,691 1,691

Gain on fair value remeasurement — 6,534 — 6,534

Loss on sale of trading securities — (11) — (11)

(Loss) / Income Before Income Tax (1,090) 1,581 (803) (312)

Income tax (benefit) / expense — — 1 1

Net (loss) / income (1,090) 1,581 (804) (313)

Gain on sale of trading securities — 518 — 518

Income / (Loss) Before Income Tax (1,545) 6,025 (2,469) 2,011

Income tax expense — — (7) (7)

Net income / (loss) (1,545) 6,025 (2,476) 2,004

Total assets 6,335 152,503 6,936 165,774

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

Sadot food service Sadot agri-foods Corporate adj.

4 unchanged sentences

Franchise advertising fund contributions 36 — — 36

Other revenues 13 — — 13

Cost of goods sold (5,129) (360,406) — (365,535)

6 unchanged sentences

Sales, general and administrative expenses (171) (587) (3,106) (3,864)

(Loss) / income from operations (725) 4,251 (5,133) (1,607)

Interest income, net 3 — — 3

Change in fair value of accrued compensation — — 541 541

Income / (loss) from operations (1,199) 6,932 (7,700) (1,967)

Other income — — 251 251

Interest income / (expense), net 2 — (21) (19)

Change in fair value of stock-based compensation — — 865 865

(Loss) / Income Before Income Tax (1,197) 6,932 (6,605) (870)

Income tax (benefit) / expense 1 — 2 3

Net (loss) income (723) 4,251 (4,594) (1,066)

Income tax expense (2) — (4) (6)

Net income / (loss) (1,199) 6,932 (6,609) (876)

Total assets 5,947 56,204 10,172 72,323

2 unchanged sentences

We measure our liquidity in a number of ways, including the following:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Cash 9,956 1,354

2 unchanged sentences

Other current assets 110,004 56,016

58,584 56,016

Assets held for sale (4)

8 unchanged sentences

Current ratio (3)

(1) Consists of Prepaid expenses and other current assets, Prepaid forward on carbon offsets, Forward sales derivatives and Notes receivable, current

(1) Consists of Operating lease liability, current, Deferred revenue, current and Other current liabilities

6 unchanged sentences

We generally finance our ongoing operations with cash flows generated from operations, borrowings under various credit facilities and term loans.

At March 31, 2024, current ratio, which equals Total current assets divided by Total current liabilities, was 1.17, an increase of 0.09, compared to current ratio of 1.08 at December 31, 2023.

The increase in current ratio was primarily due to a decrease in Accounts payable and accrued expenses partially offset by the decrease in Accounts receivable.

At March 31, 2024, working capital, which equals Total current assets less Total current liabilities, was $13.2 million an increase of $4.9 million, compared to working capital of $8.3 million at December 31, 2023.

The increase in working capital was primarily due to a decrease in Accounts payable and accrued expenses and Notes payable, current.

At June 30, 2024, current ratio, which equals Total current assets divided by Total current liabilities, was 1.12, an increase of 0.04, compared to current ratio of 1.08 at December 31, 2023.

The increase in current ratio was primarily due to an increase in other current assets, a decrease in Accounts payable and accrued expenses and increase in cash, partially offset by an increase in other current liabilities and a decrease in Accounts receivable.

At June 30, 2024, working capital, which equals Total current assets less Total current liabilities, was $16.1 million an increase of $7.9 million, compared to working capital of $8.3 million at December 31, 2023.

The increase in working capital was primarily due to an increase in other current assets, a decrease in Accounts payable and accrued expenses and and increase in cash, partially offset by an increase in other current liabilities and a decrease in Accounts receivable.

In addition, the Company has access to additional liquidity if it is needed through an executed Standby Equity Purchase Agreement ("SEPA") for up to $25.0 million in capital whereby the Company, once the initial prepayment loan is fully paid off may submit advance requests to the lender and the lender will provide cash in consideration of shares of common stock subject to certain limitations and conditions set forth in the SEPA.

12 unchanged sentences

Any failure to raise additional funds on favorable terms could have a material adverse effect on our liquidity and financial condition.

Sources and Uses of Cash for the Three Months Ended March 31, 2024 and 2023

For the three months ended March 31, 2024, Net cash provided by operating activities was $2.6 million compared to a use of $3.3 million for the three months ended March 31, 2023.

Our Net cash provided for the three months ended March 31, 2024, was primarily attributable to our Net loss of $0.3 million, adjusted for net non-cash income in the aggregate amount of $1.3 million offset by $1.6 million of Net cash provided by changes in the levels of operating assets and liabilities.

Our Net cash used for the three months ended March 31, 2023, was primarily attributable to our Net loss of $1.1 million, adjusted for net non-cash income in the aggregate amount of $4.6 million, partially offset by $6.8 million of Net cash used in changes in the levels of operating assets and liabilities.

For the three months ended March 31, 2024, Net cash provided by investing activities was $0.1 million, of which $11.0 thousand was used to purchase Property and equipment, $0.1 million was provided by the Disposal of property and equipment For the three months ended March 31, 2023, Net cash used in investing activities was $0.2 million, of which $0.1 million was used to purchase Property and equipment and $0.1 million was used on the deposit of farmland.

For the three months ended March 31, 2024, Net cash used in financing activities was $2.8 million, consisting of repayments of various other notes payable of $4.3 million and proceeds from notes payable of $1.5 million.

For the three months ended March 31, 2023, Net cash used in financing activities was $34.0 thousand, consisting of repayments of various other notes payable of $34.0 thousand.

Sources and Uses of Cash for the Six Months Ended June 30, 2024 and 2023

For the six months ended June 30, 2024, Net cash provided by operating activities was $11.0 million compared to a use of $4.2 million for the six months ended June 30, 2023.

Our Net cash provided for the six months ended June 30, 2024, was primarily attributable to our Net income of $2.0 million, adjusted for net non-cash income in the aggregate amount of $1.2 million and $7.8 million of Net cash provided by changes in the levels of operating assets and liabilities.

Our Net cash used for the six months ended June 30, 2023, was primarily attributable to our Net loss of $0.9 million, adjusted for net non-cash income in the aggregate amount of $4.9 million, partially offset by $8.2 million of Net cash used in changes in the levels of operating assets and liabilities.

For the six months ended June 30, 2024, Net cash used in investing activities was $0.6 million, of which $0.7 million was used on the deposit of farmland, $31.0 thousand was used in the purchase of property and equipment, partially offset by $0.1 million provided by the disposal of property and equipment.

For the six months ended June 30, 2023, Net cash used in investing activities was $4.0 million, of which $0.2 million was used to purchase Property and equipment and $3.9 million was used on the deposit of farmland.

For the six months ended June 30, 2024, Net cash used in financing activities was $1.8 million, consisting of repayments of various other notes payable of $5.4 million partially offset by proceeds from notes payable of $3.6 million.

For the six months ended June 30, 2023, Net cash provided by financing activities was $3.4 million, consisting of $3.5 million of proceeds from notes payable, partially offset by repayments of various other notes payable of $0.1 million.

Critical Accounting Policies and Estimates

44 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis