Item 1. Legal Proceedings
Item 1. Legal Proceedings
From time to time, we are a defendant or plaintiff in various legal actions that arise in the normal course of business. We record legal costs associated with loss contingencies as incurred and have accrued for all probable and estimable settlements.
On March 21, 2025, Cropit Farming Limited ("Cropit") commenced legal proceedings against our subsidiary, Sadot LLC, in the Commercial Registry of the High Court of Zambia. The complaint alleges that certain agreements between the parties are invalid under Zambian law, and seeks rescission of these agreements, return of assets, and damages of approximately $6.7 million USD and 181,003 Zambian Kwacha.
Sadot LLC has filed a response denying all allegations and has asserted substantial counterclaims. The counterclaims seek a declaration that the agreements are valid and enforceable, specific performance of the agreements, injunctive relief to protect contractual rights, damages for breach of contract, reputational damages, damages for loss of use of land, punitive damages of 5 million Zambian Kwacha, interest, and costs.
As of August 2, 2025, the Company considers that all attempts of mediation were considered failed. The without prejudice mediation proceedings have therefore concluded. Sadot LLC filed for an injunction seeking court injunctions against their joint venture partner Cropit over serious breaches of their 2023 Joint Venture Agreement. Sadot asked the court to stop Cropit from: misappropriating company funds (approximately $0.4 million already spent without authorization), blocking access to farms and financial records, unilaterally hiring/firing staff, and making unauthorized high-value commitments. Sadot is demanding Cropit transfer five parcels of farmland to the joint venture company as contractually obligated - land transfers that Cropit has withheld despite Sadot already paying to discharge ABSA Bank's charges per the terms of the Joint Venture Agreement. Sadot claims these breaches have caused losses exceeding $1.6 million, prevented bank financing, and resulted in the loss of a potential investment funds. Sadot also intends to pursue damages under arbitration pursuant the ICC rules.
Management, in consultation with legal counsel, believes Sadot LLC has strong defensible positions with respect to this matter and intends to vigorously defend against the claims while pursuing its counterclaims. Based on current information, management does not believe that the ultimate resolution of this matter will have a material adverse effect on the Company's financial position or results of operations. However, litigation is inherently unpredictable, and we cannot provide assurances regarding the outcome.
The Company has not recorded any material liabilities in connection with this matter as a loss is neither probable nor reasonably estimable at this time. The Company will continue to evaluate this matter and will establish reserves if and when appropriate.
On November 7, 2024, Lombard Trading International Corp. filed an Amended Complaint against the Company and Sadot Latam, LLC in the 11th Judicial Circuit of Florida in and for Miami-Dade County, Florida (Case No.: 2024-020971-CA-01). The Amended Complaint alleges unjust enrichment, conversion, fraud, conspiracy and civil theft related to a commodities transaction. The plaintiff claims that the Company failed to pay upon delivery of certain goods and is seeking damages in the amount of $7.4 million. The Company denies these allegations and intends to vigorously defend against the claims. On August 1, 2025, the court dismissed Lombard’s third motion in its entirety and the case will now be fixed for a hearing to deal with Sadot’s motion to dismiss the claims advanced by Lombard. While the Company believes it has meritorious defenses, it cannot predict the outcome of this matter or reasonably estimate the potential loss at this time.
Item 1.A. Risk Factors
See Item 7 ("Management's Discussion and Analysis of Financial Condition and Results of Operations - Factors that May Affect Future Results and Financial Condition") of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 11, 2025.
67
Table of Contents
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.