What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-08-13 · 213 added, 165 removed, 445 unchanged (46% of the section changed)

1 unchanged sentence

Preliminary Note

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.

The following Management’s Discussion and Analysis (“MD&A”), prepared as of November 12, 2024, should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements of Sadot Group Inc.

("Sadot Group"), for the three and nine months ended September 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", “we,” “us,” “our”, “Group” and similar terms refer to Sadot Group Inc., together with its consolidated subsidiaries.

Our website address is http://sadotgroupinc.com .

16 unchanged sentences

Sadot Group Inc.

(f/k/a Muscle Maker, Inc.) is our parent company and is headquartered in Ft.

Worth, Texas.

is our parent company and is headquartered in Burleson, Texas.

In late 2022, Sadot Group began a transformation from a U.S.-centric restaurant business into a global organization focused on the Agri-foods supply-chain.

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

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

As of September 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, 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.

4 unchanged sentences

has three unique “healthier for you” concepts, including two fast casual restaurant concepts, Pokémoto and Muscle Maker Grill, plus one subscription-based fresh prep meal concept, SuperFit Foods.

The restaurants were founded on the belief of taking every-day menu options and

converting them into “healthier for you” menu choices.

SuperFit Foods was sold in August 2024.

The restaurants were founded on the belief of taking every-day menu options and converting them into “healthier for you” menu choices.

Consumers are demanding healthier choices, customization, flavor and convenience.

Each of our three concepts offers different menus that are tailored to specific consumer segments.

We believe our concepts deliver highly differentiated customer experiences.

Each of our concepts offers different menus that are tailored to specific consumer segments.

We believe our concepts deliver highly differentiated

customer experiences.

This entire operating segment was identified as held for sale.

3 unchanged sentences

Governmental and other economic factors affecting our operations may vary.

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

7 unchanged sentences

Gross profit 2,463 2,905 4,635 10,654

Impairment of goodwill — (828) — (828)

Impairment of intangible assets — (810) — (810)

Depreciation and amortization expenses (49) (443) (421) (1,517)

5 unchanged sentences

Loss from operations (3,647) (3,972) (9,146) (5,939)

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

Adjusted EBITDA attributable to Sadot Group Inc.

EBITDA 2,864 (4,538) 6,498 (4,316)

EBITDA attributable to Sadot Group Inc.

2,933 (4,426) 6,667 (4,204)

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

4 unchanged sentences

Commodity sales, Company restaurant sales, Franchise revenues and vendor rebates from Franchisees.

Commodity sales revenues are comprised of revenues generated from the purchase and sales of physical food and feed commodities related to our trading and farming operations.

Commodity sales revenues are comprised of revenues generated from the purchase and sales of physical food and feed commodities, carbon associated commodities and other commodities related to our trading and farming operations.

Franchise revenues are comprised of Franchise royalty revenues collected based on 2% to 6% of franchisee net sales and other franchise revenues which include initial and renewal franchisee fees.

3 unchanged sentences

Cost of goods sold includes commodity costs, labor, food and beverage cost, rent and other operating expenses.

Impairment of Goodwill

Impairment of goodwill consist of an amount by which the carry amount of the goodwill assets exceeds its fair value.

This is recognized by us when the carry amount of goodwill is greater than the projected future discounted cash flows, as the asset is not fully recoverable.

Impairment of Intangible Assets

Impairment of intangible assets consist of an amount by which the carry amount of the intangible assets exceeds its fair value.

This is recognized by us when the carry amount of an intangible asset is greater than the projected future undiscounted cash flows, as the asset is not fully recoverable.

Depreciation and Amortization Expenses

13 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.

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).

Stock-based expenses were $1.7 million and $4.4 million, for the three and nine months ended September 30, 2024 and $1.1 million and $5.7 million, for the three and nine months ended September 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

8 unchanged sentences

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.

Net loss attributable to non-controlling interests were $0.1 million and $0.2 million for the three and nine months ended September 30, 2024, and $0.1 million and $0.1 million for the three and nine months ended September 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.

Non-GAAP Measures

EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin are non-GAAP measures.

EBITDA and EBITDA Margin are non-GAAP measures.

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

We 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.

EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin, have certain limitations, and you should not consider them in isolation or as a substitute for analysis of our results of operations as reported under U.S.

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

EBITDA and EBITDA Margin, have certain limitations, and you should not consider them in isolation or as a substitute for analysis of our results of operations as reported under U.S.

We caution investors that amounts presented in accordance with our definitions of any of the Non-GAAP Measures may not be comparable to similar measures disclosed by other issuers, because some issuers calculate certain of the Non-GAAP Measures differently or not at all, limiting their usefulness as direct comparative measures.

Reconciliations of EBITDA, Adjusted EBITDA and Other Non-GAAP Measures

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 and six months ended June 30, 2024 and 2023:

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

Reconciliations of EBITDA and Other Non-GAAP Measures

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

GAAP measure, Net loss, and the calculations of the Net loss Margin and EBITDA Margin for the three and nine months ended September 30, 2024 and 2023:

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

6 unchanged sentences

EBITDA 2,864 (4,538) 6,498 (4,316)

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 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

Adjusted EBITDA attributable to non-controlling interest 52 — 100 —

Adjusted EBITDA attributable to Sadot Group Inc.

EBITDA attributable to non-controlling interest 69 112 169 112

EBITDA attributable to Sadot Group Inc.

2,933 (4,426) 6,667 (4,204)

4 unchanged sentences

0.5 % (2.9) % 0.6 % (1.1) %

Adjusted EBITDA margin attributable to Sadot Group Inc.

EBITDA margin attributable to Sadot Group Inc.

1.5 % (2.4) % 1.4 % (0.8) %

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

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

Three Months Ended September 30, Variance

2024 2023 $ %

4 unchanged sentences

Franchise advertising fund contributions 12 16 (4) (25.0) %

Other revenues — 13 (13) (100.0) %

Other revenues 16 — 16 NM

Cost of goods sold (199,271) (179,268) (20,003) 11.2 %

Gross profit 2,463 2,905 (442) (15.2) %

Impairment of goodwill — (828) 828 (100.0) %

Impairment of intangible assets — (810) 810 (100.0) %

Depreciation and amortization expenses (49) (443) 394 (88.9) %

Franchise advertising fund expenses (12) (16) 4 (25.0) %

Pre-opening expenses — (335) 335 (100.0) %

Post-closing expenses (91) (60) (31) 51.7 %

3 unchanged sentences

Other income — 1 (1) (100.0) %

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

Interest expense, net (1,718) (301) (1,417) 470.8 %

Change in fair value of stock-based compensation 1,001 297 704 237.0 %

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

Gain on sale of trading securities 528 — 528 NM

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

Warrant modification expense — (958) 958 (100.0) %

Gain / (loss) on fair value remeasurement 5,461 (349) 5,810 1664.8 %

Income / (Loss) Before Income Tax 1,097 (5,282) 6,379 120.8 %

Income tax expense (3) (13) 10 (76.9) %

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.

Net income / (loss) 1,094 (5,295) 6,389 120.7 %

Net loss attributable to non-controlling interest 69 112 (43) (38.4) %

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

1,163 (5,183) 6,346 122.4 %

1 unchanged sentence

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,

Three Months Ended September 30,

Commodity sales 99.6 % 98.8 %

5 unchanged sentences

Gross profit 1.2 % 1.6 %

Impairment of goodwill — % (0.5) %

Impairment of intangible assets — % (0.4) %

Depreciation and amortization expenses — % (0.2) %

7 unchanged sentences

Interest income / (expense), net (0.9) % (0.2) %

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 %

Change in fair value of stock-based compensation 0.5 % 0.2 %

Warrant modification expense — % (0.5) %

Gain / (loss) on fair value remeasurement 2.7 % (0.2) %

Income / (Loss) Before Income Tax 0.5 % (2.9) %

Income tax expense — % — %

2 unchanged sentences

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

Three Months Ended June 30, Variance

0.6 % (2.8) %

Three Months Ended September 30, Variance

2024 2023 $ %

$’000 $’000 $’000

Commodity sales 200,906 179,975 20,931 11.6 %

2 unchanged sentences

Franchise advertising fund contributions 12 16 (4) (25.0) %

Other revenues — 13 (13) (100.0) %

Other revenues 16 — 16 NM

Cost of goods sold (199,271) (179,268) (20,003) 11.2 %

1 unchanged sentence

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.

Our gross (loss) profit totaled $2.5 million profit for the three months ended September 30, 2024, compared to $2.9 million profit for the three months ended September 30, 2023.

The $0.4 million decrease is primarily attributed to a decrease in

Company restaurant sales, net of discount partially offset by an increase in Commodity sales, and increase in Cost of goods sold.

We generated Commodity sales of $200.9 million for the three months ended September 30, 2024 compared to $180.0 million for the three months ended September 30, 2023.

This represented an increase of $20.9 million, which is attributable to an increase in operations in 2024 as a direct result of our expansion into new markets, which were not operating in 2023.

We generated Company restaurant sales, net of discounts, of $0.5 million for the three months ended September 30, 2024, compared to $1.9 million for the three months ended September 30, 2023.

This represented an decrease of $1.5 million, or 75.3%, which is mainly attributable to the conversion of certain corporate owned locations to franchise locations and closing underperforming locations.

Franchise royalties and fees for the three months ended September 30, 2024 totaled $0.3 million compared to $0.2 million for the three months ended September 30, 2023.

This represents an increase of $0.1 million, or 31.0%.

In 2024, the franchise fees were higher, primarily due to an increase in Pokemoto franchises.

Franchise advertising fund contributions for the three months ended September 30, 2024 totaled $12.0 thousand compared to $16.0 thousand for the three months ended September 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 $4.0 thousand or 25.0%, 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.

There were $16.0 thousand other revenues for the three months ended September 30, 2024.

There were no Other revenues for the three months ended September 30, 2023.

Other revenues consisted of gift card breakage recognized and Ad-fund liability that was forfeited when a franchise closed.

Cost of goods sold for the three months ended September 30, 2024 totaled $199.3 million compared to $179.3 million for the three months ended September 30, 2023.

The $20.0 million or 11.2% change is a direct result of the increase in sales.

Impairment of Goodwill

Three Months Ended September 30, Variance

2024 2023 $ %

$’000 $’000 $’000

Impairment of goodwill — (828) 828 (100.0) %

There was no Impairment of goodwill for the three months ended September 30, 2024.

We had an Impairment of goodwill for the three months ended September 30, 2023 of $0.8 million.

The Impairment of goodwill in the prior period was due to the structural change of the company's operations and the closing or marketing for sale our company owned restaurant stores.

Impairment of Intangible Assets

Three Months Ended September 30, Variance

2024 2023 $ %

$’000 $’000 $’000

Impairment of intangible assets — (810) 810 (100.0) %

There was no Impairment of intangible assets for the three months ended September 30, 2024.

We had an Impairment of intangible assets for the three months ended September 30, 2023 of $0.8 million.

The Impairment of intangible assets in the prior period was due to the structural change of the company's operations and the closing or marketing for sale our company owned restaurant stores.

Depreciation and Amortization Expenses

Three Months Ended June 30, Variance

Three Months Ended September 30, Variance

2024 2023 $ %

1 unchanged sentence

Depreciation and amortization expenses (49) (443) 394 (88.9) %

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.

Depreciation and amortization expenses for the three months ended September 30, 2024 totaled $49.0 thousand compared to $0.4 million, for the three months ended September 30, 2023.

The $0.4 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

Three Months Ended September 30, Variance

2024 2023 $ %

1 unchanged sentence

Franchise advertising fund expenses (12) (16) 4 (25.0) %

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.

Franchise advertising fund expenses for the three months ended September 30, 2024 totaled $12.0 thousand compared to $16.0 thousand , for the three months ended September 30, 2023.

The $4.0 thousand or 25.0% decrease is mainly attributed to the decrease in Muscle Maker Grill restaurant national advertising services.

Pre-Opening Expenses

Three Months Ended September 30, Variance

2024 2023 $ %

$’000 $’000 $’000

Pre-opening expenses — (335) 335 (100.0) %

There were no Pre-opening expenses for the three months ended September 30, 2024 compared to $0.3 million for the three months ended September 30, 2023.

The increase in Pre-opening expenses resulted from expenses incurred at the farm from the time that the purchase documents were signed and local government approval was obtained.

Post-Closing Expenses

Three Months Ended June 30, Variance

Three Months Ended September 30, Variance

2024 2023 $ %

1 unchanged sentence

Post-closing expenses (91) (60) (31) 51.7 %

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.

Post-closing expenses for the three months ended September 30, 2024 totaled $91.0 thousand compared to $60.0 thousand for the three months ended September 30, 2023.

The increase in Post-closing expenses resulted from closing more corporate owned locations in the third quarter of 2024 compared to 2023.

Stock-Based Expenses

Three Months Ended June 30, Variance

Three Months Ended September 30, Variance

2024 2023 $ %

1 unchanged sentence

Stock-based expenses (1,713) (1,075) (638) 59.3 %

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.

Stock-based expenses for the three months ended September 30, 2024, totaled $1.7 million compared to $1.1 million for the three months ended September 30, 2023.

The $0.6 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.

2 unchanged sentences

Sales, General and Administrative Expenses

Three Months Ended June 30, Variance

Three Months Ended September 30, Variance

2024 2023 $ %

1 unchanged sentence

Sales, general and administrative expenses (4,245) (3,310) (935) 28.2 %

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.

Sales, general and administrative expenses for the three months ended September 30, 2024 totaled $4.2 million compared to $3.3 million for the three months ended September 30, 2023.

The $0.9 million increase was primarily attributable to an increase in consulting fees due to trades in Latin America, entering the Brazil and Canada markets and increases due to increases in normal operating activities.

Other Income / (Expense)

Three Months Ended June 30, Variance

Three Months Ended September 30, Variance

2024 2023 $ %

1 unchanged sentence

Total other income / (expense), net 4,744 (1,310) 6,054 (462) %

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

Other income for the three months ended September 30, 2024 totaled $4.7 million compared to $1.3 million loss for the three months ended September 30, 2023.

The $6.1 million increase was primarily attributable to a $5.8 million increase in the gain on the fair value remeasurement as a result of the mark to market adjustment of derivatives, a $1.0 million decrease in warrant modification expense, and a $0.7 million increase in change in fair value of stock-based compensation partially offset by a $1.4 million increase in interest expense.

Three Months Ended September 30, 2024

Sadot food service Sadot agri-foods Corporate adj.

12 unchanged sentences

Income / (loss) from operations (659) (325) (2,663) (3,647)

Other income 19 — — 19

Interest income / (expense), net (6) (1,267) (445) (1,718)

1 unchanged sentence

Gain on fair value remeasurement — 5,461 — 5,461

Gain on sale of trading securities — 528 — 528

Income / (Loss) Before Income Tax (665) 3,869 (2,107) 1,097

2 unchanged sentences

Total assets 5,431 164,638 958 171,027

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Sadot food service Sadot agri-foods Corporate adj.

7 unchanged sentences

Gross profit 31 2,874 — 2,905

Impairment of goodwill (828) — — (828)

Impairment of intangible assets (810) — — (810)

Depreciation and amortization expenses (382) (61) — (443)

Franchise advertising fund expenses (16) — — (16)

Pre-opening expenses — (335) — (335)

Post-closing expenses (60) — — (60)

5 unchanged sentences

Change in fair value of stock-based compensation — — 297 297

Warrant modification expense — — (958) (958)

Loss on fair value remeasurement — (349) — (349)

Income / (Loss) Before Income Tax (2,344) 1,571 (4,509) (5,282)

2 unchanged sentences

Total assets 8,798 80,166 1,704 90,668

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

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

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

Nine Months Ended September 30, Variance

2024 2023 $ %

7 unchanged sentences

Gross profit 4,635 10,654 (6,019) (56.5) %

Impairment of goodwill — (828) 828 (100.0) %

Impairment of intangible assets — (810) 810 (100.0) %

Depreciation and amortization expenses (421) (1,517) 1,096 (72.2) %

6 unchanged sentences

Other income 19 252 (233) (92.5) %

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

Interest expense, net (2,969) (320) (2,649) 827.8 %

Change in fair value of stock-based compensation 2,691 1,161 1,530 131.8 %

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

Warrant modification expense — (958) 958 (100.0) %

Gain / (loss) on fair value remeasurement 11,995 (349) 12,344 3537.0 %

Gain on sale of trading securities 518 — 518 NM

2 unchanged sentences

Net income / (loss) 3,099 (6,171) 9,270 150.2 %

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

Net loss attributable to Sadot Group Inc.

Net loss attributable to non-controlling interest 169 112 57 50.9 %

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

3,268 (6,059) 9,327 153.9 %

1 unchanged sentence

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

Six Months Ended June 30,

Nine Months Ended September 30,

Commodity sales 99.3 % 98.7 %

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Gross profit 1.0 % 1.9 %

Impairment of goodwill — % (0.1) %

Impairment of intangible assets — % (0.1) %

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

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Change in fair value of accrued compensation 0.6 % 0.2 %

Loss on fair value remeasurement 2.3 % — %

Warrant modification expense — % (0.2) %

Gain / (Loss) on fair value remeasurement 2.5 % (0.1) %

Gain on sale of trading securities 0.1 % — %

6 unchanged sentences

Gross Profits

Six Months Ended June 30, Variance

Nine Months Ended September 30, Variance

2024 2023 $ %

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NM= not meaningful

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

Our gross profit totaled $4.6 million for the nine months ended September 30, 2024, compared to $10.7 million for the nine months ended September 30, 2023.

The $6.0 million decrease is primarily attributed to a decrease in Company restaurant sales, net of discount and a decrease in Commodity sales, partially offset by a decrease in Cost of goods sold.

We generated Commodity sales of $480.7 million for the nine months ended September 30, 2024.

Commodity sales for the nine months ended September 30, 2023 was $547.9 million.

This represented a decrease of $67.2 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.

We generated Company restaurant sales, net of discounts, of $2.6 million for the nine months ended September 30, 2024, compared to $6.7 million for the nine months ended September 30, 2023.

This represented an decrease of $4.1 million, or 60.9%, which is mainly attributable to the conversion of certain corporate owned locations to franchise locations and closing underperforming locations.

Franchise royalties and fees for the nine months ended September 30, 2024 totaled $1.3 million compared to $0.8 million for the nine months ended September 30, 2023.

This represents an increase of $0.6 million, or 72.0%.

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.

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 and an increase in Pokemoto franchises.

Franchise advertising fund contributions for the nine months ended September 30, 2024 totaled $40.0 thousand compared to $52.0 thousand for the nine months ended September 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 $12.0 thousand or 23.1%, is a direct result of the decrease in Muscle Maker Grill restaurant national advertising services.

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.

Other revenues for the nine months ended September 30, 2024 were $16.0 thousand.

Other revenues for the nine months ended September 30, 2023 were $13.0 thousand.

Other revenues consisted of gift card breakage recognized and Ad-fund liability that was forfeited when a franchise closed.

Cost of goods sold for the nine months ended September 30, 2024, totaled $480.1 million.

The Cost of goods sold for the nine months ended September 30, 2023 was $544.8 million.

The $64.7 million change is primarily due to a direct result of the decrease in sales.

Impairment of Goodwill

Nine Months Ended September 30, Variance

2024 2023 $ %

$’000 $’000 $’000

Impairment of goodwill — (828) 828 (100.0) %

There was no Impairment of goodwill for the nine months ended September 30, 2024.

We had an Impairment of goodwill for the nine months ended September 30, 2023 of $0.8 million.

The Impairment of goodwill in the prior period was due to the structural change of the company's operations and the closing or marketing for sale our company owned restaurant stores.

Impairment of Intangible Assets

Nine Months Ended September 30, Variance

2024 2023 $ %

$’000 $’000 $’000

Impairment of intangible assets — (810) 810 (100.0) %

There was no Impairment of intangible assets for the nine months ended September 30, 2024.

We had an Impairment of intangible assets for the nine months ended September 30, 2023 of $0.8 million.

The Impairment of intangible assets in the prior period was due to the structural change of the company's operations and the closing or marketing for sale our company owned restaurant stores.

Depreciation and Amortization Expenses

Six Months Ended June 30, Variance

Nine Months Ended September 30, Variance

2024 2023 $ %

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Depreciation and amortization expenses (421) (1,517) 1,096 (72.2) %

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.

Depreciation and amortization expenses for the nine months ended September 30, 2024 totaled $0.4 million compared to $1.5 million, for the nine months ended September 30, 2023.

The $1.1 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

Six Months Ended June 30, Variance

Nine Months Ended September 30, Variance

2024 2023 $ %

1 unchanged sentence

Franchise advertising fund expenses (40) (52) 12 (23.1) %

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.

Franchise advertising fund expenses for the nine months ended September 30, 2024 totaled $40.0 thousand compared to $52.0 thousand , for the nine months ended September 30, 2023.

The $12.0 thousand decrease or 23.1% is mainly attributed to the decrease in Muscle Maker Grill national advertising services.

Pre-Opening Expenses

Six Months Ended June 30, Variance

Nine Months Ended September 30, Variance

2024 2023 $ %

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Pre-opening expenses — (371) 371 (100.0) %

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.

Pre-opening expenses for the nine months ended September 30, 2024 totaled nil, a $371.0 thousand decrease when compared to $371.0 thousand for the nine months ended September 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

Six Months Ended June 30, Variance

Nine Months Ended September 30, Variance

2024 2023 $ %

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Post-closing expenses (120) (173) 53 (30.6) %

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.

Post-closing expenses for the nine months ended September 30, 2024 totaled $120.0 thousand, a $0.1 million decrease when compared to $0.2 million for the nine months ended September 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

Six Months Ended June 30, Variance

Nine Months Ended September 30, Variance

2024 2023 $ %

1 unchanged sentence

Stock-based expenses (4,430) (5,667) 1,237 (21.8) %

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.

Stock-based expenses for the nine months ended September 30, 2024, totaled $4.4 million compared to $5.7 million for the nine months ended September 30, 2023.

The $1.2 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

Six Months Ended June 30, Variance

Nine Months Ended September 30, Variance

2024 2023 $ %

1 unchanged sentence

Sales, general and administrative expenses (8,770) (7,175) (1,595) 22.2 %

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.

Sales, general and administrative expenses for the nine months ended September 30, 2024 totaled $8.8 million, compared to $7.2 million, for the nine months ended September 30, 2023.

The $1.6 million increase was primarily attributable to an increase in consulting fees due to trades in Latin America, entering the Brazil and Canada markets and increases due to increases in normal operating activities.

Total Other Income, Net

Six Months Ended June 30, Variance

Nine Months Ended September 30, Variance

2024 2023 $ %

1 unchanged sentence

Total other income / (expense), net 12,254 (214) 12,468 (5826.2) %

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.

Total other income / (expense), net for the nine months ended September 30, 2024 totaled $12.3 million compared to $0.2 million loss, for the nine months ended September 30, 2023.

The $12.5 million increase in Total other income / (expense), net was attributable to a $12.3 million increase in Gain on fair value remeasurement, $1.5 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 $2.6 million increase in Interest expense, and a $0.2 million decrease in Other income.

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Sadot food service Sadot agri-foods Corporate adj.

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Total assets 5,431 164,638 958 171,027

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Sadot food service Sadot agri-foods Corporate adj.

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Gross profit 262 10,392 — 10,654

Impairment of goodwill (828) — — (828)

Impairment of intangible assets (810) — — (810)

Depreciation and amortization expenses (1,456) (61) — (1,517)

8 unchanged sentences

Change in fair value of stock-based compensation — — 1,161 1,161

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

Warrant modification expense — — (958) (958)

Loss on fair value remeasurement — (349) — (349)

Income / (Loss) Before Income Tax (3,540) 8,480 (11,093) (6,153)

Income tax expense (2) — (16) (18)

4 unchanged sentences

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Cash 962 1,354

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

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.

At September 30, 2024, current ratio, which equals Total current assets divided by Total current liabilities, was 1.14, an increase of 0.06, 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 Assets held for sale, partially offset by an increase in other current liabilities and a decrease in Accounts receivable.

At September 30, 2024, working capital, which equals Total current assets less Total current liabilities, was $18.9 million an increase of $10.7 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 an increase in cash, partially offset by an increase in other current liabilities and a decrease in Accounts receivable.

The Company believes that our existing cash on hand, current accounts receivable and future cash flows from our commodity trading, farming and franchise operations, will be sufficient to fund our operations, anticipated capital expenditures and repayment obligations over the next 12 months.

In the event we are required to obtain additional financing, either through borrowings, private placements, public offerings, or some type of business combination, such as a merger, or buyout, and there can be no assurance that we will be successful in such pursuits.

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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 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.

Sources and Uses of Cash for the Nine Months Ended September 30, 2024 and 2023

For the nine months ended September 30, 2024, Net cash provided by operating activities was $7.0 million compared to a use of $8.7 million for the nine months ended September 30, 2023.

Our Net cash provided for the nine months ended September 30, 2024, was primarily attributable to our Net income of $3.1 million, adjusted for net non-cash income in the aggregate amount of $1.8 million and $2.1 million of Net cash used by changes in the levels of operating assets and liabilities.

Our Net cash used for the nine months ended September 30, 2023, was primarily attributable to our Net loss of $6.2 million, adjusted for net non-cash income in the aggregate amount of $9.0 million and $11.5 million of Net cash used in changes in the levels of operating assets and liabilities.

For the nine months ended September 30, 2024, Net cash used in investing activities was $5.4 million, of which $5.9 million was the deposit on farmland and $38.0 thousand used in the purchase of property and equipment, partially offset by $0.5 million from the disposal of property and equipment.

For the nine months ended September 30, 2023, Net cash used in investing activities was $3.7 million, of which $12.4 million was used to purchase Property and equipment, partially offset by $4.9 million provided by the closing out of the deposit of the farmland and an Investment in a non-controlling interest of $3.7 million for the farm.

For the nine months ended September 30, 2024, Net cash used in financing activities was $1.9 million, consisting of repayments of various other notes payable of $6.5 million partially offset by proceeds from notes payable of $4.6 million.

For the nine months ended September 30, 2023, Net cash provided by financing activities was $4.9 million, consisting of $7.7 million of proceeds from notes payable and $2.2 million proceeds from exercise of warrants, partially offset by repayments of various other notes payable of $5.0 million.

Critical Accounting Policies and Estimates

5 unchanged sentences

Recently Issued Accounting Pronouncements

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):

3 unchanged sentences

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.

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.

In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06 Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity.

Among other changes, ASU 2020-06 removes the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt.

Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument.

Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the

Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium.

1 unchanged sentence

The Company early adopted the new guidance from January 1, 2023, noting no material impact.

In April 2021, the FASB issued ASU 2021-04, “Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” (“ASU 2021-04”) to clarify the accounting by issuers for modifications or exchanges of equity-classified warrants.

The new ASU is effective for all entities in fiscal years starting after December 15, 2021.

Early adoption is permitted.

The Company adopted the new guidance from January 1, 2022, noting no material impact.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (Topic 280).

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The Company is currently evaluating the impact of this standard on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, which focuses on income tax disclosures by requiring public business entities, on an annual basis, to disclose specific categories in the rate reconciliation, provide information for reconciling items that meet a quantitative threshold, and certain information about income taxes paid.

The standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The amendments should be applied on a prospective basis.

Retrospective application is permitted.

There is a degree of seasonality in the growing cycles, procurement and transportation of crops.

7 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