Sadot Group Inc. 10-Q

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. Lombard Trading International Corp. commenced two related proceedings against Sadot Latam, LLC and the Company and in the 11th Judicial Circuit of Florida in and for Miami-Dade County, Florida (Case No.: 2024-020971-CA-01 & 2025-021675-CA-01). In each case, plaintiff alleges a breach of contract claim related to an agricultural commodities transaction against Sadot Latam, LLC and seeks damages in the approximate amount of $7.4 million and $17 million, respectively. The plaintiff also alleges an alter ego and contract guaranty claim against the Company related to the alleged breach of contract. The original claims have been substantially narrowed through the Company’s successful motions practice. The Company denies the allegations and has filed its Answer, Affirmative Defenses, and Counterclaim, asserting a counterclaim of approximately $1.6 million against the plaintiff for amounts paid by the Company for which no goods were delivered. The Company has also filed a motion to dismiss the alter ego and contract guaranty claims. While the Company believes it has meritorious defenses, it cannot predict the outcome of this matter or reasonably estimate the range of potential loss at this time. Based on the assessment of the Company’s legal counsel, a loss in respect of the plaintiff’s claim is reasonably possible but not probable, and the amount or range of potential loss cannot be reasonably estimated at this time. Accordingly, no contingent liability has been accrued in accordance with ASC 450 as of March 31, 2026. In August 2023, the Company closed on the acquisition of approximately 5,000 acres of farmland in the Mkushi Region of Zambia through Sadot Zambia. Sadot Zambia is 100% owned by Sadot Enterprises Limited, which is 70% owned by Sadot LLC. On December 11, 2025, the High Court for Zambia (Commercial Division) delivered a judgment in the case of Cropit Farming Limited v. Sadot LLC (2025/HPC/0184). The Court declared the Pre-Conditional Offer Agreement, the Purchase of Receivables and Validation Agreement, and the Joint Venture Agreement between the parties to be invalid, non-binding, and unenforceable. As a result, the Company, has lost possession, control, and ownership of approximately 5,000 acres of farmland in Mkushi, Zambia, which had been placed in escrow pursuant to the invalidated agreements. The Court dismissed Cropit Farming Limited’s claims for monetary damages but ordered Sadot LLC, a wholly owned subsidiary of the Company, to pay Cropit Farming Limited’s litigation costs. The Company’s counterclaims were also dismissed. The Company has filed an appeal seeking recovery of $3.5 million. The appeal process is expected to take in excess of one year. There is no guarantee that the Company will be successful in such appeal. While the Court has ordered the Company to pay Cropit Farming Limited’s litigation costs, the amount of such costs has not yet been determined. Accordingly, no liability has been accrued as of March 31, 2026, as the amount of the obligation is not reasonably estimable. Zen-Noh Grain Corporation commenced commodity arbitration proceedings against Sadot Group Inc. and Sadot Latam LLC claiming non-delivery under a grain sales contract. The Company denies liability on the basis that Sadot Group Inc. was not a party to the underlying contract and that Sadot Latam LLC performed its obligations. . A further final round of submissions was allowed by the Tribunal, the final of which will be made in May 2026 by the Claimant. The Company believes it has meritorious defenses, including jurisdictional grounds for dismissal of the claim against Sadot Group Inc., but the outcome of arbitration proceedings is inherently uncertain and cannot be predicted. Based on the assessment of the Company’s legal counsel, a loss is reasonably possible but not probable, and the amount or range of potential loss cannot be reasonably estimated at this time. Accordingly, no contingent liability has been accrued in accordance with ASC 450 as of March 31, 2026. Kevin Mohan v Sadot Group Inc., formerly Muscle Maker, Inc. (AAA Case No. 01-25-0003- 4507). Former Chairman’s employment claims under Texas law exceeding $0.3 million (excluding unvested stock). The Claimant failed to pay the arbitrator’s deposit. The arbitration was suspended on 5 March 2026 (Preliminary Order No. 3) and terminated without prejudice on 31 March 2026 (Preliminary Order No. 4, Arbitrator John Allen Chalk, Sr.) pursuant to AAA Rule 56(d). No award was made and no liability was determined. The Claimant retains the right to refile until approximately March 2029 (limitation). It is too early to assess whether there would be a continuation to this claim, resulting in a loss and even if there was a loss the amount of such a loss cannot be estimated. On April 2, 2026, Mr. Mohan filed a complaint against the Company in the United States District Court for the District of Texas alleging breaches of employment contract and damages in the amount greater than $250,000 and less than $1,000,000 relating to alleged unpaid performance bonuses. The Company believes the plaintiffs’ positions are without merit and intends to vigorously defend itself in all respects. No contingent liability has been recorded as of March 31, 2026. 55 Nuval Trade S.A. v. Sadot Latam LLC (GAFTA No. 19-403) is a GAFTA arbitration arising from two soybean meal contracts. On April 17, 2026, a partial award was issued in favor of Nuval Trade S.A. against Sadot Latam LLC (not Sadot Group Inc.). The award relates to contracts dated February 27, 2024 and April 9, 2024, and grants approximately $12.0 million in damages. In addition, the award provides for interest at 5% per annum, compounded quarterly, on approximately $11.1 million from August 13, 2024 and on approximately $1.0 million from February 11, 2025 until the date of payment, as well as reimbursement of Nuval’s legal fees and arbitration costs. As of March 31, 2026, the total estimated liability, including interest and costs, was approximately $12.9 million, which has been accrued. The Andersons, Inc. v Sadot LLC. On September 26, 2025, The Andersons, Inc. filed an admiralty and maritime action in the United States District Court for the Southern District of Ohio in aid of a arbitration proceeding against the Company’s subsidiaries, Sadot LLC and Sadot Latam, alleging breach of a contract for the sale of Argentine wheat and seeking approximately $521,641 plus alleged dispatch, pre-award interest, and other fees. In February 2026, The Andersons initiated a related GAFTA arbitration against the same parties. On March 9, 2026, The Andersons amended its complaint to add the Company as a defendant. The Company intends to defend these claims. Based on the assessment of the Company’s legal counsel, a loss is reasonably possible, but not probable, and the amount or range of any potential loss cannot be reasonably estimated at this time. Accordingly, no contingent liability has been accrued under ASC 450 as of March 31, 2026. Star Fund commenced proceedings alleging that Sadot Group Inc. guaranteed Sadot Latam LLC’s obligations under a factoring agreement and claiming approximately $2.9 million. The claim against Sadot Group Inc. was based solely on a 2023 board resolution authorizing management to guarantee subsidiary debt with specified lenders. No executed guaranty document exists and Star Fund was not named in the resolution. The guaranty count was dismissed by agreement on December 9, 2025. A motion for summary judgment by a codefendant was heard on February 25, 2026 and remains under advisement. Following the dismissal by agreement of the guaranty count on December 9, 2025, the only count remaining against Sadot Group Inc. is a derivative unjust enrichment claim, in respect of which the Company maintains it has meritorious defenses on the basis that no executed guaranty document exists, no benefit was received by Sadot Group Inc., and Star Fund was not a party identified in the underlying 2023 board resolution. The matter remains pending against Sadot Group Inc. and Sadot Latam LLC. Based on the assessment of the Company’s legal counsel, a loss in respect of the residual claim against Sadot Group Inc. is reasonably possible but not probable, and the amount or range of potential loss cannot be reasonably estimated at this time. Accordingly, no contingent liability has been accrued in accordance with ASC 450 as of March 31, 2026. Rocket Capital NY LLC v. Sadot Latam LLC. The plaintiff commenced proceedings in connection with a merchant cash advance arrangement entered into by Sadot Latam LLC. The claim is against Sadot Latam LLC only. The matter is at a preliminary stage. The Company denies the allegations and will defend the proceedings. Based on the assessment of the Company’s legal counsel, a loss is reasonably possible but not probable, and the amount or range of potential loss cannot be reasonably estimated at this time. Accordingly, no contingent liability has been accrued in accordance with ASC 450 as of March 31, 2026. Centurion MPP Pte. Ltd. v. Sadot Latam LLC. The claimant commenced proceedings in Singapore arising out of an alleged breach of a commodity sale and purchase contract. The claim is against Sadot Latam LLC only. The matter is at a preliminary stage. The Company denies the allegations and will defend the proceedings. Based on the assessment of the Company’s legal counsel, a loss is reasonably possible but not probable, and the amount or range of potential loss cannot be reasonably estimated at this time. Accordingly, no contingent liability has been accrued in accordance with ASC 450 as of March 31, 2026. OSR Rotterdam BV filed a maritime attachment claim against Sadot Latam LLC on April 14, 2025 arising from an alleged breach of a charter party. OSR claims a contractual cancellation fee of $250,000 plus interest. The Company has recorded $250,000 within accounts payable as of March 31, 2026 in respect of the principal claim. Based on the assessment of the Company’s legal counsel, a loss is probable and the principal amount has been accrued; the amount of any further interest, costs, and enforcement charges in excess of the accrued sum cannot be reasonably estimated at this time. 56 On April 4, 2026, a former employee of the Company filed a complaint against the Company and its chief executive officer in the United States District Court for the District of New Jersey alleging breaches of employment contract and damages in the amount of $144,212 plus punitive damages relating to alleged unpaid performance bonuses, vacation time, and severance. The Company believes the plaintiffs’ positions are without merit and intends to vigorously defend itself in all respects. In early May 2026 the employee agreed to dismiss the complaint and move to an arbitration in Texas. On February 18, 2026, Lisiten Associates Inc. filed a complaint against the Company in the Supreme Cout of the State of New York, County of New York, alleging unpaid brokerage fees in connection with the sale of the Company’s restaurant business in the amount of $319,000 plus treble damages. The Company believes the plaintiffs’ positions are without merit and intends to vigorously defend itself in all respects. In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. In the opinion of management after consulting legal counsel, such matters are currently not expected to have a material impact on the Company’s financial statements. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements after consulting legal counsel. Item 1.A. Risk Factors In addition to the Risk Factors set forth below, 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, 2025, filed with the SEC on April 29, 2026. You should carefully review the risks described below as they identify important factors that could cause our actual results to differ materially from our forward-looking statements, expectations and historical trends. Any of the following risk factors, either by itself or together with other risk factors, could materially adversely affect our business, results of operations, cash flows and/or financial condition. The risks described below are not the only risks facing the Company. Additional risks and uncertainties not currently known or currently viewed to be immaterial may also materially and adversely affect business, financial condition or results of operations. These risks can be impacted by factors beyond management’s control. We have had limited revenue generation and will be required to engage in additional financing in order to maintain our business. We have no commodity sales revenue in the current quarter and limited current assets relative to liabilities. Our ability to continue operations depends on our success in executing management’s plans, including completing additional debt or equity financings, and pursuing strategic alternatives. There can be no assurance that these initiatives will be successful. We Face the Risk of Delisting from The Nasdaq Capital Market Due to Failure to Meet the Minimum Shareholders’ Equity Requirement and the Minimum Bid Price Requirement On May 5, 2026, we received a notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC stating that we no longer satisfy the minimum shareholders’ equity requirement under Nasdaq Listing Rule 5550(b)(1) because our shareholders’ equity as of December 31, 2025 was approximately $(54.7) million. We have 45 calendar days to submit a compliance plan and, if accepted, may receive an extension of up to 180 days to regain compliance. In addition, our common stock is currently trading below $1.00 per share, which places us at risk of failing to meet the minimum bid price requirement under Nasdaq Listing Rule 5550(a)(2). If our compliance plan is not accepted, we fail to regain compliance with either the shareholders’ equity or minimum bid price requirements within the allotted time (including any applicable grace periods or extensions), or we otherwise fail to satisfy continued listing standards, our common stock may be delisted from The Nasdaq Capital Market. Delisting would likely have a material adverse effect on the liquidity and market price of our common stock, our ability to raise additional capital, and our ability to continue as a going concern. 57 We Face Substantial Doubt About Our Ability to Continue as a Going Concern, Which May Force Us to Scale Back or Cease Operations As of March 31, 2026, we had a working capital deficit of $57.8 million and an accumulated deficit of $181.5 million. We have incurred significant net losses and negative cash flows from operations. These conditions, together with the defaults on our outstanding debt obligations (see below), raise substantial doubt about our ability to continue as a going concern within one year after the date these financial statements are issued. Our condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. If we are unable to raise additional capital on acceptable terms, we may be forced to scale back or cease operations altogether. Defaults on Our Outstanding Debt Obligations May Result in Acceleration of Indebtedness, Foreclosure on Collateral, and Additional Litigation Substantially all of our outstanding notes payable (approximately $11.1 million net of discount as of March 31, 2026) matured on December 31, 2025 and remain unpaid. These obligations are currently in default. The defaults have triggered cross-default provisions and increase the risk of acceleration of indebtedness, foreclosure on collateral (including any pledged accounts receivable under our factoring arrangement), and additional litigation. We are actively seeking to refinance or restructure these obligations, but there can be no assurance that we will be successful on acceptable terms or at all. We face significant operational challenges in our global agri-foods operations, which have resulted in a significant curtailing of our operations and could materially adversely affect our business, financial condition, results of operations, and future prospects. Our business involves farming, commodity trading, and shipping of food and feed products, such as soybean meal, wheat, and corn, via dry bulk cargo ships across global markets. We have recently encountered substantial operational issues that have severely impacted our ability to conduct these activities effectively. These challenges include, but are not limited to, disruptions in our supply chain, such as delays in sourcing raw materials, logistical bottlenecks in shipping and transportation, and inefficiencies in our farming operations due to adverse weather conditions, labor shortages, or equipment failures. Additionally, geopolitical tensions, trade restrictions, fluctuating commodity prices, and increased competition in the agri-foods sector have compounded these issues, leading to halted or suspended trading activities and an inability to fulfill contracts or secure new ones. As a result of these operational difficulties, we have had to curtail a significant portion of our operations, which has strained our liquidity, increased our reliance on external financing, and heightened the risk of default under our existing obligations. If we are unable to resolve these operational challenges in a timely manner—through measures such as restructuring our supply chain, diversifying our sourcing strategies, or investing in improved infrastructure—our business may continue to suffer prolonged periods of inactivity. This could lead to further erosion of our market position, loss of key customers and partners, regulatory scrutiny, or even insolvency. Moreover, our dependence on global markets exposes us to ongoing risks from external factors, including volatile commodity prices, changes in international trade policies, environmental regulations, and disruptions from events like pandemics, natural disasters, or political instability in key regions where we operate or source materials. There can be no assurance that we will successfully overcome these operational issues or resume revenue-generating activities. Failure to do so could result in a material adverse effect on our financial condition, stock price, and ability to continue as a going concern, potentially leading to delisting from Nasdaq or other exchanges, reduced access to capital, and diminished investor confidence. 58 We will need additional capital to fund our operations, which, if obtained, could result in substantial dilution or significant debt service obligations. We may not be able to obtain additional capital on commercially reasonable terms, which could adversely affect our liquidity and financial position. In order to continue operating, we need to obtain additional financing, either through borrowings, private placements, public offerings, or some type of business combination, such as a merger or buyout, and there can be no assurance that we will be successful in such pursuits. We may be unable to acquire the additional funding necessary to continue operating. Accordingly, if we are unable to generate adequate cash from operations, and if we are unable to find sources of funding, it may be necessary for us to sell one or more lines of business or all or a portion of our assets, enter into a business combination, or reduce or eliminate operations. These possibilities, to the extent available, may be on terms that result in significant dilution to our shareholders or that result in our shareholders losing all of their investment in our Company. We require significant capital in relation to our Sadot operations, including continuing access to credit markets, to operate our current business and fund our growth strategy. Our working capital requirements, including margin requirements on open positions on futures exchanges, are directly affected by the price of agricultural commodities, which may fluctuate significantly and change quickly. Moreover, the expansion of our business and pursuit of acquisitions or other business opportunities may require significant amounts of capital. Access to credit markets and pricing of our capital is dependent upon maintaining sufficient credit ratings from credit rating agencies. We have been unable to maintain sufficiently high credit ratings, and, as a result, access to certain tier one commercial paper and other debt markets and costs of borrowings are not currently available. If we are unable to generate sufficient cash flow or maintain access to adequate external financing, including as a result of significant disruptions in the global credit markets, it could restrict our current operations and our growth opportunities. We manage this risk with constant monitoring of credit/liquidity metrics, cash forecasting, and routine communications with credit rating agencies regarding risk management practices. We need to raise additional capital, which could result in dilution or increased debt obligations. The Company may seek to raise additional capital to fund operations, strategic initiatives, or other corporate purposes. On April 13, 2026, our shareholders approved an amendment to our Articles of Incorporation to increase the number of authorized shares of common stock from 2,000,000 to 250,000,000. This increase provides the Company with flexibility to issue additional common stock for equity financing, acquisitions, or equity compensation. Future issuances of common stock could dilute the ownership and voting power of existing shareholders and may be issued at prices substantially below the prices at which our shares currently trade. The Company may also seek to increase cash reserves through the issuance of convertible debt or other equity securities. The sale of convertible debt or additional equity securities could result in substantial dilution to existing shareholders. The incurrence of indebtedness would result in additional debt service obligations and could include operating and financial covenants that restrict our operations and liquidity. Additionally, our ability to obtain financing on acceptable terms is subject to market conditions, investor demand, and other uncertainties. There can be no assurance that financing, whether through equity or debt, will be available in amounts or on terms acceptable to the Company, if at all. Any failure to raise additional funds on favorable terms could materially adversely affect our liquidity, financial condition, and results of operations. Our indebtedness could negatively affect our financial condition, decrease our liquidity and impair our ability to operate the business. If cash on hand is insufficient to pay our obligations, it could have an adverse effect on our ability to conduct our business. As we were not presented with cash generating opportunities in the supply chain, we are seeking alternative lines of businesses. While we still maintain Sadot LLC and are scrutinizing occasional sporadic trading offers, our focus on alternative sectors is picking up speed. Our ability to raise capital in the future will depend on a shareholder approval to increase the authorized shares of common stock, and to acquire an additional operating entity should we decide to spin off the supply chain activity. There is no guarantee that the Company will successfully engage in such transactions in the commodity trading business or if it does engage in such transactions that they will result in generating a profit. Further, there is no guarantee that the Company will be able to acquire a new operating entity or if it does acquire such entity it will operate profitably. 59 We are subject to global and regional economic downturns and related risks. The level of demand for our products is affected by global and regional demographic and macroeconomic conditions, including population growth rates and changes in standards of living. A significant downturn in global economic growth, or recessionary conditions in major geographic regions, may lead to reduced demand for agricultural commodities and food products, which could adversely affect our business and results of operations. Further, deteriorating economic and political conditions in our major markets, such as inflation, increased unemployment, decreases in disposable income, declines in consumer confidence, uncertainty about economic stability, or economic slowdowns or recessions, could cause a decrease in demand for our products. Additionally, weak global economic conditions and adverse conditions in global financial and capital markets, including rising interest rates and constraints on the availability of credit, have in the past adversely affected, and may in the future adversely affect, the financial condition and creditworthiness of the financial institutions that serve as our lenders and as counterparties to the over-the-counter derivative instruments we use to manage risks and some of our customers, suppliers, and other counterparties, which in turn may negatively impact our financial condition and results of operations. Over the course of the last year, concerns have arisen with respect to the financial condition of a number of regional banking organizations in the United States and global financial institutions. Although our exposure has been de minimis to these financial institutions, we continue to monitor our counterparty exposure across all of the financial services companies with which we conduct business. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 7.A. Quantitative and Qualitative Disclosures About Market Risk” for more information. We expect the pressures of input cost inflation to continue into 2026. Further, the various conflicts and wars in the Middle East and Europe have had a negative impact on the price per barrel. United States has reported and is continuing to report weaker GDP growth, with some economists forecasting a continuation of these conditions in 2026. We are exposed to adverse weather conditions, pandemic outbreaks, political events, war and terrorism that could disrupt business and may adversely affect the availability, quality and price of agricultural commodities and agricultural commodity products, as well as our operations and operating results. Our headquarters, trade offices, and farms, as well as certain of our vendors and customers, are located in areas which have been and could be subject to natural disasters such as floods, droughts, blizzards, hurricanes, tornadoes, fires or earthquakes. Adverse weather conditions have historically caused volatility in the agricultural commodity industry and consequently in our operating results by causing crop failures or significantly reduced harvests, which may affect the supply and pricing of the agricultural commodities that we sell and use in our business, and negatively affect the creditworthiness of agricultural producers who do business with us. Our farming operations have solely been located in the Mkushi region of Zambia. In this region, adverse weather during the fertilizer application, planting, and harvest seasons can have negative impacts on our crop yields and planting cycles. Adverse crop conditions in the Mkushi region can increase the input costs or lower the market value of our products relative to other market participants that do not have the same geographic concentration. Furthermore we learned the hard way, that entering transactions in Zambia are full of complexities and outcomes which are either unfavorable or at a minimum stretching into many months and years. Severe adverse weather conditions, such as hurricanes and severe storms, may also result in extensive property damage, extended business interruption, personal injuries, and other loss and damage to us. Our operations also rely on dependable and efficient transportation services, including transportation by ocean vessel, river barges, rail, and truck. A disruption in transportation services as a result of weather conditions, such as low river levels following periods of drought, may also have a significant adverse impact on our operations and related supply chains. Additionally, the potential physical impacts of climate change are uncertain and may vary by region. These potential effects could include changes in rainfall patterns, water shortages, changing sea levels, changing storm patterns and intensities, and changing temperature levels that could adversely impact our costs and business operations, the location, costs and competitiveness of agricultural commodity production and related storage and processing facilities and the supply and demand for agricultural commodities. 60 These events also could have indirect consequences such as increases in the cost of insurance if they result in significant loss of property or other insurable damage and the effect could be material to our results of operations, liquidity or capital resources. We are subject to economic, political, and other risks of doing business globally and in emerging markets. We were trying to build a global business with a substantial majority of our assets and operations located outside the United States. In addition, our business strategies may involve expanding or developing our business in emerging market regions, including South American, Eastern Europe, Asia-Pacific, the Middle East, and Africa. Due to the international nature of our business, we are exposed to various risks of international operations, including: ● adverse trade policies or trade barriers on agricultural commodities and commodity products; ● new and developing requirements related to GHG emissions and other climate change initiatives and workforce diversity; ● and inclusion mandates; ● inflation, hyperinflation, and adverse economic effects resulting from governmental attempts to control inflation, such as the imposition of wage and price controls and higher interest rates. For example, inflation rates in many countries in which we operate are currently at the highest levels in decades, resulting in tighter monetary policies, including higher interest rates; ● changes in laws and regulations or their interpretation or enforcement in the countries in which we operate, including the effects of complying with tax law on us and our shareholders; ● difficulties in enforcing agreements or judgments and collecting receivables in foreign jurisdictions; ● exchange controls or other currency restrictions and limitations on the movement of funds, such as on the remittance of dividends and/or reimbursements by subsidiaries; ● inadequate infrastructure and logistics challenges; ● sovereign risk and the risk of government intervention, including through expropriation, or regulation of the economy or natural resources, including restrictions on foreign ownership of land or other assets; ● the requirement to comply with a wide variety of laws and regulations that apply to international operations, including, without limitation, economic sanctions regulations, labor laws, import and export regulations, anti-corruption and anti-bribery laws, as well as other laws or regulations discussed in this “Item 1A. Risk Factors” section; ● challenges in maintaining an effective internal control environment with operations in multiple international locations, including language differences, varying levels of U.S. GAAP expertise in international locations and multiple financial information systems; ● changes in a country’s or region’s economic or political condition; and ● labor disruptions, civil unrest, significant political instability, coup attempts, wars or other armed conflict or acts of terrorism. These risks could adversely affect our operations, business strategies, and operating results. As a result of our international operations, we are also exposed to currency exchange rate fluctuations. Changes in exchange rates between the U.S. dollar and other foreign currencies, particularly the Brazilian Real, Canadian dollar, Zambian Kwacha, and the euro affect our revenues and expenses that are denominated in local currencies, affect farm economics in those regions and may also have a negative impact on the value of our assets located outside of the United States. Additionally, there continues to be a great deal of uncertainty regarding U.S. and global trade policies for companies with multinational operations like ours. In recent years, there has been an increase in populism and nationalism in various countries around the world and consequently historical free trade principles are being challenged. As we continue to operate our business globally, our success will depend, in part, on the nature and extent of any such changes and how well we are able to anticipate, respond to and effectively manage any such changes. 61 Our Company is subject to numerous laws, regulations, and mandates globally which could adversely affect our operating results and forward strategy. Our Company does business globally, connecting crops and markets in various countries, and is required to comply with laws and regulations administered by the United States federal government as well as state, local, and non-U.S. governmental authorities in numerous areas including: accounting and income taxes, anti-corruption, anti-bribery, global trade, trade sanctions, environmental, product safety, and handling and production of regulated substances. Our Company might face challenges from U.S. and foreign tax authorities regarding the amount of taxes due including questions regarding the timing, amount of deductions, the allocation of income among various tax jurisdictions and further risks related to changing tax laws domestically and globally. Any failure to comply with applicable laws and regulations or appropriately resolve these challenges could subject our Company to administrative, civil, and criminal remedies, including fines, penalties, disgorgement, injunctions, and recalls of its products and damage to its reputation. Government policies, mandates, and regulations specifically affecting the agricultural sector and related industries; regulatory policies or matters that affect a variety of businesses; taxation polices; and political instability could adversely affect our Company’s operating results. Agricultural production and trade flows are subject to government policies, mandates, regulations and trade agreements, including taxes, tariffs, duties, subsidies, incentives, foreign exchange rates and import and export restrictions, including policies related to genetically modified organisms, traceability standards, sustainable practices, product safety and labeling, renewable fuels, and low carbon fuel mandates. These policies can influence the planting of certain crops; the location and size of crop production; whether unprocessed or processed commodity products are traded; the volume and types of imports and exports; the availability and competitiveness of feedstocks as raw materials; the viability and volume of production of certain of our products; and industry profitability. International trade regulations can adversely affect agricultural commodity trade flows by limiting or disrupting trade between countries or regions. Regulations of financial markets and instruments, including the Dodd-Frank Act, Consumer Protection Act, and the European Market Infrastructure Regulation, create uncertainty and may lead to additional risks and costs, and could adversely affect our futures commission merchant business and our agricultural commodity risk management practices. Future government policies may adversely affect the supply of, demand for, and prices of our products; adversely affect our ability to deploy adequate hedging programs; restrict our ability to do business in our existing and target markets; and adversely affect our revenues and operating results. Our Company’s operating results could be affected by political instability and by changes in monetary, fiscal, trade, and environmental policies, laws, regulations, and acquisition approvals, creating risks including, but not limited to: changes in a country’s or region’s economic or political conditions, local labor conditions and regulations, and safety and environmental regulations; reduced protection of intellectual property rights; changes in the regulatory or legal environment; restrictions on currency exchange activities; currency exchange fluctuations; burdensome taxes and tariffs; enforceability of legal agreements and judgments; adverse tax, administrative agency or judicial outcomes; and regulation or taxation of greenhouse gases. International risks and uncertainties, including changing social and economic conditions as well as terrorism, political hostilities, and war, could limit our ability to transact business in these markets. Our Company benefits from the free flow of agricultural and food and feed ingredient products from the U.S. and other sources to markets around the world. Increases in tariff and restrictive trade activities around the world (e.g., the U.S.-China trade relations dispute, Iran sanctions) could negatively impact our ability to enter certain markets or the price of products may become less competitive in those markets. Proposed tariffs on imports into the United States, potential retaliatory tariffs on U.S. exports, and potential renegotiation of trade deals may impact our existing or planned operations or strategic ventures and could adversely affect our business, financial condition, results of operations and cash flows. Our strategy involves expanding the volume and diversity of crops it merchandises and processes, expanding the global reach of our core model, expanding our value-added product portfolio, and expanding the sustainable agriculture programs and partnerships it participates in. Government policies including, but not limited to, antitrust and competition law, trade restrictions, food safety regulations, sustainability requirements and traceability, can impact our ability to execute this strategy successfully. Upon the expansion of our operations internationally, we have been and could continue to be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws. We have expanded our operations outside the United States. The U.S. Foreign Corrupt Practices Act, and other similar anti-bribery and anti-kickback laws and regulations, generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. We cannot assure you that we will be successful in preventing our franchisees or other agents from taking actions in violation of these laws or regulations. Such violations, or allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, results of operations and cash flows. 62 The availability and prices of the agricultural commodities and agricultural commodity products we procure, transport, store, process, and merchandise can be affected by climate change, weather conditions, disease, government programs, competition, and various other factors beyond our control and could adversely affect our operating results . The availability and prices of agricultural commodities are subject to wide fluctuations, including impacts from factors outside our control, such as changes in weather conditions, climate change, rising sea levels, crop disease, plantings, government programs and policies, competition and changes in global demand, which could adversely affect our operating results. Our Company uses a global network of procurement, processing, as well as robust communications between global commodity merchandiser teams, to continually assess price and basis opportunities. Management-established limits (including a corporate wide value-at-risk metric), with robust internal reporting, help to manage risks in pursuit of driving performance. Additionally, we depend globally on agricultural producers to ensure an adequate supply of agricultural commodities. Reduced supply of agricultural commodities could adversely affect our profitability by increasing the cost of raw materials and/or limiting our ability to procure, transport, store, process, and merchandise agricultural commodities in an efficient manner. High and volatile commodity prices can place more pressures on short-term working capital funding. Conversely, if supplies are abundant and crop production globally outpaces demand for more than one or two crop cycles, price volatility is somewhat diminished. This could result in reduced operating results due to the lack of supply chain dislocations and reduced market spread and basis opportunities. Advances in technology, such as seed and crop protection, farming techniques, storage and logistics, and speed of information flow, may reduce the significance of dislocations and arbitrage opportunities in the agricultural global markets, which may reduce the earnings potential of agricultural merchandisers and processors. We are required to carry significant amounts of inventory across all of our businesses. If a substantial portion of our inventory becomes damaged or obsolete, its value would decrease, and have an adverse impact on the Company’s financial results. We are exposed to the risk of a decrease in the value of our inventories due to a variety of circumstances in all of our businesses. For example, within our Sadot Agri-Foods business, there is the risk that the quality of our inventory could deteriorate due to damage, moisture, insects, disease or foreign material. If the quality of our inventory were to deteriorate below an acceptable level, the value of our inventory could decrease significantly. In our Sadot farming operations business, planted acreage, and consequently the volume of fertilizer and crop protection products applied, is partially dependent upon government programs and the producer’s perception of demand. Technological advances in agriculture, such as genetically engineered seeds that resist disease and insects, or that meet certain nutritional requirements, could also affect the demand for our crop nutrients and crop protection products. Either of these factors could render some of our inventory obsolete or reduce its value. We face increasing exposure to country risk in countries that face financial, political, and economic unrest through unsecured credit, inventory, forward contract risk or payment origination that could adversely affect our future results of operations, financial position, and cash flows. We have increased our international supply chain operations and exposure. With the increased international presence comes additional country risk through trade flows around the globe with direct exposure to the counterparty, via contract mark-to-market exposure, unsecured accounts receivable or inventory in the country. In certain areas in which we trade (both origination and destination) country risk is more prevalent given the country’s political and/or economic situations. The addition of purchases and sales of grain in vessel sized quantities to support the Sadot Agri-Foods business including farming operations increases the size and potential severity of our country risk. Additionally, there could be a rapid increase in interest rates creating difficulty for our counterparties to access U.S. dollars making it difficult to collect accounts receivable timely. We are exposed to potential business disruption including, but not limited to, disruption of transportation services, disruption in the supply, and other impacts resulting from acts of terrorism or war, natural disasters, pandemics, severe weather conditions, accidents, or other planned disruptions, which could adversely affect our operating results. Our operations rely on dependable and efficient transportation services the disruption of which could result in difficulties supplying materials to our facilities and impair our ability to deliver products to our customers in a timely manner. Certain factors which may impact the availability of agricultural commodity raw materials are out of our control including, but not limited to, disruptions resulting from weather, high or low river water conditions, economic conditions, manufacturing delays or disruptions at suppliers, shortage of materials, interruption of energy supply and unavailable or poor supplier credit conditions. 63 We are continuing to enhance and deploy additional food safety and security procedures and controls to appropriately mitigate the risks of any adulteration of the Company’s products in the supply chain. Our business is seasonal, and our results may fluctuate depending on the harvest cycle of the crops upon which we rely and seasonal fluctuations related to the sale of our consumer products. As with any agricultural business enterprise, our business operations are seasonal in nature. This creates price fluctuations, which result in fluctuations in our inventories and a degree of seasonality in our gross profit. In addition, certain of our consumer food products are other annual events. Seasonality could have a material adverse effect on our business and financial performance. In addition, our quarterly results may vary as a result of the effects of fluctuations in commodities prices, production yields and costs. We are vulnerable to the effects of supply and demand imbalances in our industries. Historically, the market for some agricultural commodities and fertilizer products has been cyclical, with periods of high demand and capacity utilization stimulating new plant investment and the addition of incremental processing or production capacity by industry participants to meet the demand. The timing and extent of this expansion may then produce excess supply conditions in the market, which, until the supply/demand balance is again restored, negatively impacts product prices and operating results. During times of reduced market demand, we may suspend or reduce production at some of our facilities. The extent to which we efficiently manage available capacity at our facilities will affect our profitability. Our Company may fail to realize the benefits of or experience delays in the execution of its growth strategy, which encompasses organic and inorganic initiatives, including those outside the U.S. and in businesses where our Company does not currently have a large presence . As we began executing our growth strategy, through both organic and inorganic growth, we have encountered and may encounter risks which could result in increased costs, decreased revenues and delayed synergies. Growth in new geographies outside the U.S. can expose us to volatile economic, political and regulatory risks that may negatively impact our operations and ability to achieve our growth strategy. Expanding businesses where we have limited presence may expose us to risks related to the inability to identify an appropriate partner or target and favorable terms, inability to retain/hire strategic talent or integration risks that may require significant management resources that would have otherwise been available for ongoing growth or operational initiatives. Acquisitions may involve unanticipated delays, costs and other problems. Due diligence performed prior to an acquisition may not identify a material liability or issue that could impact our reputation or adversely affect results of operations resulting in a reduction of the anticipated acquisition benefits. Additionally, acquisitions may involve integration risks such as: internal control effectiveness, system integration risks, the risk of impairment charges related to goodwill and other intangibles, ability to retain acquired employees and other unanticipated risks. Failure to manage our growth effectively could harm our business and operating results. Our growth plan included expansion into multiple verticals of the food supply chain, including expansion into new commodity trade routes and geographies, farming & warehousing, logistics & transportation, food processing, sustainability and carbon offsets. Our existing management systems, financial and management controls and information systems may be inadequate to support our planned expansion. Managing our growth effectively will require us to continue to enhance these systems, procedures and controls and to hire, train and retain managers and team members. We may not respond quickly enough to the changing demands that our expansion will impose on our management, which could harm our business, financial condition and results of operations. The Company may not be able to effectively integrate businesses it acquires. We continuously look for opportunities to enhance our existing businesses through strategic acquisitions. The process of integrating an acquired business into our existing business and operations may result in unforeseen operating difficulties and expenditures as well as require a significant amount of management resources. There is also the risk that our due diligence efforts may not uncover significant business flaws or hidden liabilities. In addition, we may not realize the anticipated benefits of an acquisition and they may not generate the anticipated financial results. Additional risks may include the inability to effectively integrate the operations, products, technologies and personnel of the acquired companies. The inability to maintain uniform standards, controls, procedures and policies would also negatively impact operations. 64 Failure to manage our growth effectively could harm our business and operating results. Our growth plan included expansion into multiple verticals of the food supply chain, including expansion into new commodity trade routes and geographies, farming & warehousing, logistics & transportation, food processing, sustainability and carbon offsets. Our existing management systems, financial and management controls and information systems may be inadequate to support our planned expansion. Managing our growth effectively will require us to continue to enhance these systems, procedures and controls and to hire, train and retain managers and team members. We may not respond quickly enough to the changing demands that our expansion will impose on our management, and existing infrastructure, which could harm our business, financial condition and results of operations. We may not realize the anticipated benefits of acquisitions, divestitures or joint ventures. Part of our strategy involves acquisitions, alliances and joint ventures designed to expand or optimize our portfolio of businesses. Our ability to benefit from acquisitions, joint ventures, and alliances depends on many factors, including our ability to identify suitable prospects, access funding sources on acceptable terms, negotiate favorable transaction terms, and successfully consummate and integrate any businesses we acquire. In addition, we proactively review our portfolio of businesses in order to identify opportunities to enhance shareholder value and may decide as a result of such reviews or otherwise, from time to time, to divest certain of our assets or businesses by selling them or entering into joint ventures. Our ability to successfully complete a divestiture will depend on, among other things, our ability to identify buyers that are prepared to acquire such assets or businesses on acceptable terms and to adjust and optimize our retained businesses following the divestiture. Our acquisition, joint venture, or divestiture activities may involve unanticipated delays, costs, and other problems. If we encounter unexpected problems with acquisitions, joint ventures, or divestitures, our senior management may be required to divert attention away from other aspects of our businesses to address these problems. Additionally, we may fail to consummate proposed acquisitions, joint ventures or divestitures, after incurring expenses and devoting substantial resources, including management time, to such transactions. Acquisitions also pose the risk that we may be exposed to successor liability relating to actions by an acquired company and its management before the acquisition. The due diligence we conduct in connection with an acquisition, the controls and policies we implement at acquired companies, and any contractual guarantees or indemnities that we receive from the sellers of acquired companies, may not be sufficient to protect us from, or compensate us for, actual liabilities. A material liability associated with an acquisition could adversely affect our reputation and results of operations and reduce the benefits of the acquisition. Additionally, acquisitions involve other risks, such as differing levels of management and internal control effectiveness at the acquired entities, systems integration risks, the risk of impairment charges relating to goodwill and intangible assets recorded in connection with acquisitions, the risk of significant accounting charges and expenses resulting from the completion and integration of a sizable acquisition, the need to fund increased capital expenditures and working capital requirements, our ability to retain and motivate employees of acquired entities, compliance and reputational risks and other unanticipated problems and liabilities. Although the Company does not currently carry material goodwill or intangible assets on its balance sheet, this risk factor is relevant to the extent the Company completes future acquisitions that give rise to such assets. Divestitures may also expose us to potential liabilities or claims for indemnification, as we may be required to retain certain liabilities or indemnify buyers for certain matters, including legal, environmental, or litigation matters associated with the assets or businesses that we sell. The magnitude of any such retained liability or indemnification obligation may be difficult to quantify at the time of the transaction and its cost to us could ultimately exceed the proceeds we receive for the divested assets or businesses. Divestitures also have other inherent risks, including possible delays in closing transactions (including potential difficulties in obtaining regulatory approvals), the risk of lower-than-expected sales proceeds for the divested businesses and unexpected costs or other difficulties associated with the separation of the businesses to be sold from our information technology systems and other management processes, including the loss of key personnel. Further, expected cost savings or other anticipated efficiencies or benefits from divestitures may also be difficult to achieve or maximize. Additionally, we entered into joint ventures and investments in which we have limited control over governance, financial reporting, and operations. As a result, we face certain operating, financial, and other risks relating to these investments, including risks related to the financial strength of our joint venture partners or their willingness to provide adequate funding for the joint venture, having differing objectives from our partners, the inability to implement some actions with respect to the joint venture’s activities that we may believe are favorable if the joint venture partner does not agree, compliance risks relating to actions of the joint venture or our partners, and the risk that we will be unable to effectively work with or resolve disputes with the joint venture partner. As a result, these investments may contribute significantly less than anticipated to our earnings and cash flows. 65 We face increasing competition and pricing pressure from other companies in Sadot Agri-Foods operations. If we are unable to compete effectively with these companies, our sales and profit margins would decrease, and our earnings and cash flows would be adversely affected. The markets for our products in the Sadot Agri-Foods operations is highly competitive. Our competitors are significantly larger, compete in wider markets, have greater purchasing power, and have considerably larger financial resources. Competitive pressures could affect the price of, and customer demand for, our products, thereby negatively impacting our profit margins and resulting in a loss of market share. The failure to enforce and maintain our trademarks and protect our other intellectual property could materially adversely affect our business, including our ability to establish and maintain brand awareness. We have registered Sadot ® as trademarks or service marks with the United States Patent and Trademark Office. In addition, the Sadot logos, website name and addresses ( www.sadotgroupinc.com ) and Facebook, Instagram, Linkedin, Twitter and other social media and internet accounts are our intellectual property. The success of our business strategy depends on our continued ability to use our existing trademarks and service marks. If our efforts to protect our intellectual property are not adequate, or if any third-party misappropriates or infringes on our intellectual property, whether in print, on the Internet or through other media, the value of our brands may be harmed, which could have a material adverse effect on our business, including the failure of our brands and branded products to achieve and maintain market acceptance. There can be no assurance that all of the steps we have taken to protect our intellectual property in the United States and in foreign countries will be adequate. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. Third-party claims with respect to intellectual property assets, if decided against us, may result in competing uses or require adoption of new, non-infringing intellectual property, which may in turn adversely affect sales and revenues. There can be no assurance that third parties will not assert infringement or misappropriation claims against us, or assert claims that our rights in our trademarks, service marks, trade dress and other intellectual property assets are invalid or unenforceable. Any such claims could have a material adverse effect on us if such claims were to be decided against us. If our rights in any intellectual property were invalidated or deemed unenforceable, it could permit competing uses of intellectual property which, in turn, could lead to a decline in overall revenues. If the intellectual property became subject to third-party infringement, misappropriation or other claims, and such claims were decided against us, we may be forced to pay damages, be required to develop or adopt non-infringing intellectual property or be obligated to acquire a license to the intellectual property that is the subject of the asserted claim. There could be significant expenses associated with the defense of any infringement, misappropriation, or other third-party claims. We are subject to significant pending litigation that, if resolved unfavorably, could result in substantial monetary damages exceeding our current financial resources and potentially lead to bankruptcy. We are involved in multiple material legal proceedings with aggregate claimed damages that would exceed our cash availability (excluding interest, punitive damages, and counterclaim-related exposures). We are involved in material litigation and regulatory proceedings, including but not limited to: - An adverse judgment in Zambian courts regarding our majority-owned farm operations resulting in the loss of our interest in approximately 5,000 acres; we have appealed the judgment and are seeking recovery of approximately $3.5 million. The appeals process is ongoing and the ultimate outcome is uncertain. ● A dispute with our factoring company regarding amounts owed under a recourse factoring arrangement secured by $3.9 million of accounts receivable, which is the subject of pending litigation. ● Other claims, including those related to former executives and service providers. These matters could result in significant monetary judgments, loss of assets, or other adverse outcomes that would materially adversely affect our financial condition, results of operations, and liquidity. Although we believe we have meritorious defenses and have asserted substantial counterclaims, litigation outcomes are inherently uncertain. An adverse judgment or series of judgments in one or more of these matters could require payments that exceed our available cash, insurance coverage, and access to capital, which could materially impair our liquidity, force us to seek additional financing on unfavorable terms, or result in insolvency or bankruptcy proceedings. 66 Our information technology systems, processes and sites may suffer interruptions, security breaches or failures that may adversely affect our ability to conduct our business We rely on certain key information technology systems, some of which are dependent on services provided by third parties, to provide critical data and services for internal and external users, including procurement and inventory management, transaction processing, financial, commercial and operational data, human resources management, legal and tax compliance, and other information and processes necessary to operate and manage our business. If we or our third party service providers do not respond or perform effectively in connection with a cybersecurity breach or system failure, our business may be impacted. Increased global cybersecurity vulnerabilities, threats and more sophisticated and targeted cybersecurity attacks pose a potentially significant risk to the security of our information technology systems, networks and services, as well as the confidentiality, availability and integrity of our data and the confidential data of our employees, customers, suppliers and other third parties that we may hold. Such vulnerabilities include, among other things, social engineering threats and more sophisticated computer crime, including advanced persistent threats and zero-day vulnerability exploits. We may incur significant costs in protecting against potential security breaches, cyber-based attacks, or other cybersecurity incidents. We and our third-party service providers are targeted by malicious actors and expect such incidents to continue and the frequency and severity of such attacks to increase. While we have implemented cybersecurity and data protection measures, our efforts to minimize the risks and impacts of cyberattacks and protect our information technology systems may be insufficient and we may experience significant breaches or other failures or disruptions that could compromise our systems and the information we store and, ultimately, affect our business operations and results of operations. Additionally, hybrid or remote work arrangements among our employees and employees of our third-party providers present additional operational risks to our information technology systems, including, but not limited to, increased risks of cyberattacks and security breaches. We are also exposed to the risk of insider threat attacks. New technology that could result in greater operational efficiency may further expose our computer systems to the risk of cyberattacks. In addition, the risk of cybersecurity incidents, including cyberattacks against the Ukrainian government and other countries in the region, has increased in connection with the ongoing Ukraine-Russia war, driven by justifications such as retaliation for the sanctions imposed in conjunction with the war, or in response to certain companies’ continued operations in Russia. It is possible that these attacks could have collateral effects on additional critical infrastructure and financial institutions globally. While we no longer have operations in Russia, we do have operations in the region that, along with our operations globally, could be adversely affected by these attacks, including cyber-based attacks against our information technology systems, or be at risk to collateral effects of such attacks. While we have taken actions to mitigate such potential risks, the proliferation of malware from the war into systems unrelated to the war, or cyberattacks against U.S. companies in retaliation for U.S. sanctions against Russia, or U.S. support of Ukraine, could also adversely affect our operations. We have implemented security policies, training programs, measures and disaster recovery plans designed to prevent, detect and mitigate cyber-based attacks, and to protect the security and continuity of our networks and critical systems. These measures may not adequately prevent adverse events such as breaches or failures from occurring, or mitigate their severity if they do occur. If our information technology systems are breached, damaged or fail to function properly due to any number of causes, such as security breaches or cyber-based attacks, systems implementation difficulties, catastrophic events or power outages, and our security, contingency disaster recovery, or other risk mitigation plans do not effectively mitigate these occurrences on a timely basis, we may experience a material disruption in our ability to manage our business operations and produce financial reports, as well as significant costs and lost business opportunities until they are remediated. Further, our sensitive information may be compromised and we may suffer representational harm. We are also subject to a variety of laws and regulations regarding data privacy, data protection, and data security, including laws related to the collection, storage, handling, use, disclosure, transfer, and security of personal information. Data privacy regulations continue to evolve, and non-compliance with such regulations, including as a result of adoption of emerging technologies, such as artificial intelligence, could subject the Company to legal claims or proceedings, potential regulatory fines and penalties and damage to our reputation. These factors may adversely impact our business, results of operations, and financial condition, as well as our competitive position. 67 Human capital requirements may not be sufficient to effectively support global operations. Our global operations were intended to function with trained individuals necessary for the warehousing, and shipping of raw materials for products used in other areas of manufacturing or sold as inputs or products to third-party customers. Our Company may lack the necessary methods and tactics to mitigate potential shortfalls. Matters relating to employment and labor law may adversely affect our business. Various federal and state labor laws govern our relationships with our employees and affect operating costs. These laws include employee classifications as exempt or non-exempt, minimum wage requirements, unemployment tax rates, workers’ compensation rates, citizenship requirements and other wage and benefit requirements for employees classified as non-exempt. Significant additional government regulations and new laws, including mandating increases in minimum wages, changes in exempt and non-exempt status, or mandated benefits such as health insurance could materially affect our business, financial condition, operating results or cash flow. Furthermore, if our or our franchisees’ employees unionize, it could materially affect our business, financial condition, operating results or cash flow. We are also subject in the ordinary course of business to employee claims against us based, among other things, on discrimination, harassment, wrongful termination or violation of wage and labor laws. Such claims could also be asserted against us by employees of our franchisees. Moreover, claims asserted against franchisees may at times be made against us as a franchisor. These claims may divert our financial and management resources that would otherwise be used to benefit our operations. The ongoing expense of any resulting lawsuits, and any substantial settlement payment or damage award against us, could adversely affect our business, brand image, employee recruitment, financial condition, operating results or cash flows. In addition, various states in which we operate are considering or have already adopted new immigration laws or enforcement programs, and the United States Congress and Department of Homeland Security from time to time consider and may implement changes to federal immigration laws, regulations or enforcement programs as well. Some of these changes may increase our obligations for compliance and oversight, which could subject us to additional costs and make our hiring process more cumbersome or reduce the availability of potential employees. Although we require all workers to provide us with government-specified documentation evidencing their employment eligibility, some of our employees may, without our knowledge, be unauthorized workers. Unauthorized workers are subject to deportation and may subject us to fines or penalties, and if any of our workers are found to be unauthorized, we could experience adverse publicity that negatively impacts our brand and may make it more difficult to hire and keep qualified employees. Termination of a significant number of employees who were unauthorized employees may disrupt our operations, cause temporary increases in our labor costs as we train new employees and result in additional adverse publicity. We could also become subject to fines, penalties and other costs related to claims that we did not fully comply with all recordkeeping obligations of federal and state immigration compliance laws. These factors could have a material adverse effect on our business, financial condition and results of operations. Finally, the Company has employees who reside in different countries around the world who have specific labor law requirements we are subject to follow. We depend on our executive officers, the loss of whom could materially harm our business. We rely upon the accumulated knowledge, skills and experience of our executive officers, significant employees and expertise of our hired consultants. Our executive officers, significant employees and hired consultants have significant experience in international and agri-foods industries. If they were to leave us or become incapacitated, we might suffer in our planning and execution of business strategy and operations, impacting our brand and financial results. We also do not maintain any key man life insurance policies for any of our employees. Our risk management strategies may not be effective. Our business is affected by fluctuations in agricultural commodity prices, transportation costs, energy prices, interest rates, and foreign currency exchange rates. We engage in hedging transactions to manage these risks. However, our exposures may not always be fully hedged, and our hedging strategies may not be successful in minimizing our exposure to these fluctuations. In addition, our risk management strategies may seek to position our overall portfolio relative to expected market movements. While we have implemented a broad range of risk monitoring and control procedures and policies to mitigate potential losses, they may not in all cases be successful in anticipating a significant risk exposure and protecting us from losses that have the potential to impair our financial position. See “Item 7.A. Quantitative and Qualitative Disclosures About Market Risk”. 68 Approval of the Amendment to Increase Authorized Common Stock Enhances Our Ability to Finance Operations and Pursue Strategic Transactions. On April 13, 2026, at our Annual Meeting of Shareholders, our shareholders approved an amendment to our Articles of Incorporation to increase the number of authorized shares of our common stock from 2,000,000 to 250,000,000. This approval provides the Company with significantly greater flexibility to raise capital, explore M&A opportunities, issue equity for strategic initiatives, and grant equity awards under our equity incentive plans. As of the date of the annual meeting, a substantial portion of our previously authorized shares was either issued and outstanding or reserved for issuance under our equity incentive plans, outstanding warrants, or other commitments. With the increase in authorized shares, the Company now has sufficient capacity to issue new common stock in connection with future equity financings, including public offerings, at-the-market programs, private placements, or other capital-raising transactions. While this approval enhances strategic and financing flexibility, future issuances of common stock, whether for financing, acquisitions, or equity compensation, may result in substantial dilution to existing shareholders. Such dilution could materially reduce net income (loss) per share and impact shareholder ownership percentages. In addition, the increase in authorized shares strengthens our ability to pursue mergers, acquisitions, joint ventures, strategic partnerships, or other business combinations that may enhance our market position, expand our product or service offerings, or generate long-term shareholder value. The availability of additional shares allows the Company to use equity as consideration in transactions where potential targets or partners require or prefer equity, improving our competitiveness for such opportunities. Overall, the shareholder approval of this amendment materially enhances the Company’s ability to finance operations and pursue strategic initiatives, while also introducing potential dilution that shareholders should consider. Risks Related to Ownership of Our Common Stock and Lack of Liquidity As a smaller reporting company, we are exempt from certain disclosure requirements, which could make our Common Stock less attractive to the potential investors. Rule 12b-2 of the Exchange Act defines a “smaller reporting company” as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that: ● had a public float of less than $250 million as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity; or ● in the case of an initial registration statement under the Securities Act, or the Exchange Act of 1934, as amended, which we refer to as the Exchange Act, for shares of its common equity, had a public float of less than $250 million as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated public offering price of the shares; or ● in the case of an issuer whose public float as calculated under paragraph (1) or (2) of this definition was zero, had annual revenues of less than $100 million during the most recently completed fiscal year for which audited financial statements are available. As a smaller reporting company, we will not be required and may not include a Compensation Discussion and Analysis section in our proxy statements; we will provide only two years of financial statements; and we need not provide the table of selected financial data. We also will have other “scaled” disclosure requirements that are less comprehensive than issuers that are not smaller reporting companies which could make our Common Stock less attractive to potential investors, which could make it more difficult for our shareholders to sell their shares. 69 As a public company, we will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives. As a public company, we have incurred significant legal, accounting and other expenses that we did not incur as a private company. In addition, the rules of the SEC and those of The NASDAQ Stock Market LLC (“NASDAQ”), NASDAQ Capital Market has imposed various requirements on public companies including requiring establishment and maintenance of effective disclosure and financial controls. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased and will continue to increase our legal and financial compliance costs and will make some activities more time-consuming and costlier. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain directors’ and officers’ liability insurance, which could make it more difficult for us to attract and retain qualified members of our board of directors. We cannot predict or estimate the amount of additional costs we will incur as a public company or the timing of such costs. The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. In addition, we will be required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting the later of our second annual report on Form 10-K or the first annual report on Form 10-K following the date on which we are no longer an emerging growth company. Our compliance with Section 404 of the Sarbanes-Oxley Act will require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the exchange we are listed on, the SEC or other regulatory authorities, which would require additional financial and management resources. Our ability to successfully implement our business plan and comply with Section 404 requires us to be able to prepare timely and accurate financial statements. We expect that we will need to continue to improve existing, and implement new operational and financial systems, procedures and controls to manage our business effectively. Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls, may cause our operations to suffer and we may be unable to conclude that our internal control over financial reporting is effective and to obtain an unqualified report on internal controls from our auditors as required under Section 404 of the Sarbanes-Oxley Act. This, in turn, could have an adverse impact on trading prices for our common stock, and could adversely affect our ability to access the capital markets. The Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may limit a shareholder’s ability to buy and sell our stock. In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. The FINRA requirements may make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may have the effect of reducing the level of trading activity in our Common Stock. As a result, fewer broker-dealers may be willing to make a market in our common stock, reducing a shareholder’s ability to resell shares of our Common Stock. Our stock price may be volatile. The market price of our Common Stock has been highly volatile and could fluctuate widely in price in response to various potential factors, many of which will be beyond our control, including the following: ● services by us or our competitors; ● additions or departures of key personnel; ● our ability to execute our business plan; ● operating results that fall below expectations; ● loss of any strategic relationship; 70 ● industry developments; ● economic and other external factors; and ● period-to-period fluctuations in our financial results. In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock. If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our share price and trading volume could decline. The trading market for our common stock will, to some extent, depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline. We do not intend to pay dividends for the foreseeable future, which could reduce the attractiveness of our stock to some investors. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases. In addition, we may incur debt financing to further finance our operations, the governing documents of which may contain restrictions on our ability to pay dividends. If we are unable to maintain listing of our securities on the NASDAQ Capital Market or another reputable stock exchange, it may be more difficult for our shareholders to sell their securities. NASDAQ requires listing issuers to comply with certain standards in order to remain listed on its exchange. The Company has received two notices from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) as follows: ● On January 8, 2026, the Company received a letter from Nasdaq notifying the Company that it is no longer in compliance with Nasdaq Listing Rule 5620(a), which requires the Company to hold an annual meeting of shareholders within twelve months of the end of the Company’s fiscal year end. The Company submitted a plan of compliance on February 16, 2026. On March 9, 2026, Nasdaq advised the Company that it granted the Company an extension until June 29, 2026, to regain compliance with Nasdaq Listing Rule 5620(a) by holding an annual meeting of shareholders. ● On March 9, 2026, the Company received a letter from Nasdaq notifying it of non-compliance with Listing Rule 5640 arising from the voting rights of the Series A Preferred Stock issued February 11, 2026. On March 2, 2026, the Company filed the First Amendment to Stock Purchase Agreement and Certificate of Amendment reducing the stated value to $5.1596 per share and voting rights to 5.1596 votes per share. On March 13, 2026, Nasdaq confirmed the Company had regained compliance and closed the matter. Following the approval of the amendment to increase the number of authorized shares of common stock at the Annual Meeting on April 13, 2026, the Company has additional flexibility to issue common stock for financing, strategic transactions, or equity compensation. While this approval strengthens the Company’s ability to maintain compliance with Nasdaq listing requirements related to capital structure and shareholder transactions, if, for any reason, Nasdaq should delist our securities from trading on its exchange and we are unable to obtain listing on another reputable national securities exchange, a reduction in some or all of the following may occur, each of which could materially adversely affect our shareholders. 71 If our shares of Common Stock become subject to the penny stock rules, it would become more difficult to trade our shares. The Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price per share of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not obtain or retain a listing on the NYSE American or NASDAQ Capital Market and if the price of our Common Stock is less than $5.00 per share, our Common Stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before effecting a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that, before effecting any such transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive; (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our Common Stock, and therefore shareholders may have difficulty selling their shares. Provisions in our articles of incorporation and bylaws and Nevada law may discourage, delay or prevent a change of control of our Company and, therefore, may depress the trading price of our stock. Our articles of incorporation and bylaws contain certain provisions that may discourage, delay or prevent a change of control that our shareholders may consider favorable. These provisions: ● prohibit shareholders action to elect or remove directors by majority written consent; ● provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; ● prohibit our shareholders from calling a special meeting of shareholders; and ● establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by shareholders at shareholder meetings. We may be subject to securities litigation, which is expensive and could divert management attention. In the past companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could seriously hurt our business. Any adverse determination in litigation could also subject us to significant liabilities. We Face Material Liquidated Damages Obligations and Dilution Risk Under the Purchase Agreement with Helena Global Investment Opportunities I Ltd., Which Could Adversely Affect Our Liquidity, Financial Condition, and Stock Price. On September 23, 2025, the Company entered into a Purchase Agreement (the “Helena Purchase Agreement”) with Helena Global Investment Opportunities I Ltd. (“Helena”), pursuant to which the Company has the right, but not the obligation, to sell up to $10,000,000 (the “Commitment Amount”) of its common stock to Helena from time to time, subject to certain limitations and conditions. Sales occur through Advance Notices at a purchase price equal to 97% of the lowest daily closing VWAP during the Pricing Period (subject to further downward adjustments if intra-day VWAP volatility exceeds 7%), resulting in immediate dilution to existing shareholders. Pursuant to the Helena Purchase Agreement, if the Company has not submitted Advance Notices in an aggregate amount of at least $2,000,000 (the “Threshold Amount”) prior to the date that is six (6) months following the effective date of the registration statement covering the shares, the Company shall pay Helena liquidated damages of $100,000 for every 30-day period thereafter until the Threshold Amount is met. Additionally, if the registration statement is not filed by the Filing Deadline or declared effective by the Effectiveness Deadline, the Company must pay Helena partial liquidated damages equal to 2.0% of the Commitment Amount on each such Event Date and on each monthly anniversary thereafter. These liquidated damages are payable in cash and are not penalties, but they represent non-operating cash outflows that could materially strain the Company’s already limited liquidity and exacerbate the substantial doubt about its ability to continue as a going concern The Helena Purchase Agreement also contains strict limitations, including an Ownership Limitation (Helena cannot exceed 4.99% beneficial ownership), a Registration Limitation, and an Exchange Cap (19.99% of outstanding shares unless shareholder approval is obtained). Failure to satisfy these conditions or the registration requirements could prevent the Company from accessing the facility entirely, forcing it to seek alternative (and potentially more expensive) financing. Moreover, the issuance of 13,849 Commitment Fee Shares (plus potential Make-Whole Shares if the post-effectiveness closing price is below the reference price) and the 1.25% cash fee to the Placement Agent further dilute existing shareholders. 72 Any payment of liquidated damages, inability to draw on the facility, or perception of ongoing dilution could have a material adverse effect on the Company’s liquidity, financial condition, results of operations, and the market price of its common stock. There can be no assurance that the Company will meet the Threshold Amount or registration deadlines, or that it will be able to utilize the facility on favorable terms. Defaults Under Our Debt Obligations Could Adversely Affect Our Financial Condition and Result in Significant Dilution to Shareholders The Company is currently in default under certain of its debt obligations. As a result of these defaults, the applicable lenders may impose default interest rates, penalties, and other charges, which could significantly increase the Company’s outstanding indebtedness. In addition, such defaults may accelerate repayment obligations and limit the Company’s ability to access additional financing. Certain of the Company’s debt instruments also provide creditors with the ability to convert outstanding amounts, including accrued interest and penalties, into shares of the Company’s common stock. Any such conversions could result in substantial dilution to existing shareholders, particularly if conversions occur at discounted prices relative to the market price of the Company’s common stock. The Company is actively evaluating alternatives to address its outstanding debt, including potential restructurings, settlements, or exchanges; however, there can be no assurance that such efforts will be successful or on terms acceptable to the Company. If the Company is unable to effectively manage or resolve its debt defaults, its financial condition, liquidity, and results of operations could be materially adversely affected.