EDGAR 10-K Filing

Company CIK: 1701756
Filing Year: 2024
Filename: 1701756_10-K_2024_0001701756-24-000040.json

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ITEM 1. BUSINESS
Item 1.
Business

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ITEM 1A. RISK FACTORS
Item 1A.
Risk Factors

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B.
Unresolved Staff Comments

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ITEM 2. PROPERTIES
Item 2. Properties
As of December 31, 2023, our corporate office is located at 1751 River Run, Ste 200 Fort Worth, TX 76107. We believe our current office space is suitable and adequate for its intended purposes and our near-term expansion plans. We also own 70% of farmland in the Mkushi area in Zambia Africa. Sadot Zambia owns approximately 5,000 acres of farmland in the Mkushi Region of Zambia which was acquired in August of 2023. Sadot Zambia is 100% owned by Sadot Enterprises Limited, which is 70% owned by Sadot LLC.
Currently Operating System-Wide Restaurants
As of March 20, 2024, Company-operated, franchised and total system-wide restaurants by jurisdiction are broken out below:
State Company-Owned Restaurants Franchised Restaurants Total Restaurants
Alabama - 1 1
California - 1 1
Connecticut 1 10 11
Florida 1 3 4
Kansas 1 2 3
Maryland 1 - 1
Massachusetts - 3 3
Mississippi - 1 1
New Jersey - 5 5
New York 2 3 5
Oklahoma 1 - 1
Rhode Island - 1 1
South Carolina - 1 1
Tennessee - 1 1
Texas - 3 3
Virginia - 1 1
Washington - 1 1
Kuwait - 1 1
Kingdom of Saudi Arabia - 1 1
7 39 46

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ITEM 3. LEGAL PROCEEDINGS
Item 3. 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.
We are currently involved in pending legal proceedings that have been previously disclosed in our filings with the Securities and Exchange Commission under the Securities and Exchange Act of 1934, as amended. Below is a summary of the legal proceedings that have become a reportable event, or which have had developments during the year ended December 31, 2023.
On January 23, 2020, the Company was served a judgment issued by the Judicial Council of California in the amount of $0.1 million for a breach of a lease agreement in Chicago, Illinois, in connection with a Company-owned store that was closed in 2018. As of December 31, 2023, the Company has accrued for the liability in accounts payable and accrued expenses.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
The high and low per share closing sales prices of the Company’s stock on the NASDAQ Market (ticker symbol: SDOT (f/k/a GRIL)) for each quarter for the years ended December 31, 2023 and 2022 were as follows:
Quarter Ended High Low
March 31, 2022 $ 0.76 $ 0.35
June 30, 2022 $ 0.59 $ 0.34
September 30, 2022 $ 0.46 $ 0.35
December 31, 2022 $ 0.92 $ 0.31
March 31, 2023 $ 1.51 $ 0.82
June 30, 2023 $ 1.48 $ 1.07
September 30, 2023 $ 1.36 $ 0.70
December 31, 2023 $ 0.80 $ 0.39
Transfer Agent
Our transfer agent is Computershare, Inc., located at, 462 South 4th Street, Suite 1600, Louisville, KY 40202, and its telephone number is 1-877-373-6374.
Holders
As of February 14, 2024, there were 7,566 holders of record of our common stock.
Dividends
We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.
Warrants
As of December 31, 2023 and 2022, we had warrants to purchase an aggregate of 17.4 million and 18.0 million shares of common stock, respectively, outstanding with a weighted average exercise price of $1.97 and $1.93 per share, respectively.
Securities Authorized for Issuance Under Equity Compensation Plans
Equity Compensation Plan Information
The following table provides information, as of December 31, 2023, with respect to equity securities authorized for issuance under compensation plans:
Plan category No. of securities
to be issued
upon exercise
of outstanding
options under
the plan Weighted-average
exercise price
of outstanding
options under
the plan No. of securities
remaining
available for
future issuance
$
2024 Equity compensation plans approved by security holders - - 7,500,000
2023 Equity compensation plans approved by security holders 68,928 1.51 -
2021 Equity compensation plans approved by security holders 843,572 1.10 -
Equity compensation plans not approved by security holders - - -
Total 912,500 2.61 7,500,000
Performance Graph
As a smaller reporting company, we are not required to provide the performance graph required by Item 201I of Regulation S-K.
Unregistered Sales of Equity Securities and Use of Proceeds
Issuance of Stock
On January 3, 2022, the Company issued an aggregate of 1.2 million shares of common stock in connection with the cashless exercise of the pre-funded warrants. Pursuant to the terms of the pre-funded warrants a total of 1.2 million warrants were exercised.
On January 6, 2022, the Company issued an aggregate of 39.6 thousand shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2021. The Company accrued for the liability as of December 31, 2021.
On January 18, 2022, the Company issued an aggregate of 30.0 thousand shares of common stock of the Company to a consultant that assisted with the acquisition of SuperFit Foods and Pokemoto, with an aggregate fair value amount of $15.6 thousand. The Company accrued for the liability as of December 31, 2021.
On February 24, 2022, the Company issued an aggregate of 1.2 million shares of common stock in connection with the cashless exercise of the pre-funded warrants. Pursuant to the terms of the pre-funded warrants a total of 1.2 million warrants were exercised.
On March 31, 2022, the Company issued an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2022.
On April 4, 2022, the Company issued 20.0 thousand shares of common stock to a member of the executive team per the employment agreement.
On June 8, 2022, the Company issued 5.0 thousand shares of common stock to a contractor for work done at a Company owned location.
On July 14, 2022, the Company issued an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2022.
On October 12, 2022, the Company issued an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2022.
On November 29, 2022, the Company issued an aggregate of 0.4 million shares of common stock in connection with the exercise of pre-funded warrants.
On January 5, 2023, the Company issued an aggregate of 31.3 thousand shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2022.
On March 27, 2023, the Company issued 2.8 million shares of common stock to a consultant for services rendered.
On April 5, 2023 the Company issued 29.7 thousand shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2023.
On May 10, 2023 the Company issued 0.1 million shares of common stock to a consultant for services rendered.
On May 25, 2023, the Company issued 2.7 million shares of common stock to Aggia as consulting fees earned during the first quarter of 2023.
On July 11, 2023, the Company issued of an aggregate of 32.9 thousand shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2023.
On July 14, 2023, The Company issued 8.9 million Restricted Share Awards, with an effective issuance date of April 1, 2023.
On July 27, 2023, the Company issued 2.2 million shares of common stock to Altium Growth Fund Ltd. (“Altium”) in exchange for the exercise of warrants.
On August 15, 2023, the Company issued 0.1 million shares of common stock to a consultant for services rendered.
On September 25, 2023, the Company issued 0.2 million shares of common stock in fees to a consultant for services rendered related to the SEPA.
On October 2, 2023, the Company issued an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2023.
On October 20, 2023, the Company issued 0.1 million shares of common stock to consultants for services rendered.
On November 6, 2023, the Company issued 0.1 million shares of common stock in connection with the conversion of note payables.
On November 14, 2023, the Company issued 0.2 million shares of common stock in connection with the conversion of note payables.
On November 29, 2023, the Company issued 0.2 million shares of common stock in connection with the conversion of note payables.
On December 13, 2023, the Company issued 0.3 million shares of common stock in connection with the conversion of note payables.
On December 19, 2023, the Company issued 0.3 million shares of common stock in connection with the conversion of note payables.
On December 19, 2023, the Company issued 2.0 million RSA's to certain members of the board of directors, consultants and employees. Total RSA vested as a result of the departure of certain members of the board of directors were 0.2 million for 2023. The remaining RSA vest ratably over 12 quarters with the first vesting starting on March 31, 2024.
On January 4, 2024, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2023. The Company accrued for the liability as of December 31, 2023.
On January 8, 2024, the Company authorized the issuance of $0.1 million into 0.3 million shares of the Company’s common stock.
On January 11, 2024, the Company authorized the issuance of $0.1 million into 0.3 million shares of the Company’s common stock.
On January 22, 2024, he Company authorized the issuance of $0.1 million into 0.3 million shares of the Company’s common stock.
On January 29, 2024, he Company authorized the issuance of $0.1 million into 0.3 million shares of the Company’s common stock.
On February 16, 2024, he Company authorized the issuance of $0.1 million into 0.3 million shares of the Company's common stock.
On March 15, 2024 the Company authorized the issuance of $0.2 million into 0.6 million shares of the Company's common stock.
On October 19, 2022, the Company formed Sadot LLC. On November 14, 2022, the Company, Sadot LLC and Aggia entered into the Services Agreement. The closing date of the Services Agreement was November 16, 2022. The parties entered into Addendum 1 to the Services Agreement on November 17, 2022. Further, on July 14, 2023 (the “Addendum Date”), effective April 1, 2023, the parties entered into Addendum 2 to the Services Agreement (“Addendum 2”) pursuant to which the parties amended the compensation that Aggia is entitled.
Pursuant to Addendum 2, on the Addendum Date, the Company issued 8.9 million shares of common stock of the Company (the “Shares”), which such Shares represent 14.4 million Shares that Aggia is entitled to receive pursuant to the Services Agreement less the 5.6 million Shares that have been issued to Aggia pursuant to the Services Agreement as of the Addendum Date. The Company will not issue Aggia in excess of 14.4 million Shares representing 49.9% of the number of issued and outstanding shares of common stock as of the effective date of the Services Agreement. The Shares shall be considered issued and outstanding as of the Addendum Date and Aggia shall hold all rights associated with such Shares. The Shares vest on a progressive schedule, at a rate equal to the net income of Sadot Agri-Foods, calculated quarterly divided by $3.125, which for accounting purposes shall equal 40.0% of the net income of Sadot Agri-Foods, calculated quarterly divided by $1.25. During the 30 day period after July 14, 2028 (the “Share Repurchase Date”), Aggia may purchase any Shares not vested. All Shares not vested or purchased by Aggia, shall be repurchased by the Company from Aggia at per share price of $0.0001 per share.
The offers, sales, and issuances of the securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited or sophisticated person and had adequate access, through employment, business or other relationships, to information about us.
The offers, sales, and issuances of the securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited or sophisticated person and had adequate access, through employment, business or other relationships, to information about us.
Issuer Purchases of Equity Securities
None.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved
Not applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the results of operations and financial condition of Sadot Group, Inc. (“Sadot Group”), together with its subsidiaries (collectively, the “Company”) as of December 31, 2023 and 2022 and for the years ended December 31, 2023 and 2022 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Annual Report on Form 10-K following Item 16. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us,” “we,” “our,” and similar terms refer to Sadot Group. “Muscle Maker Grill”, “SuperFit Foods” and “Pokemoto” refers to the names under which our corporate and franchised restaurants do business depending on the concept. This Annual Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Annual Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “forecast,” “model,” “proposal,” “should,” “may,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Reference is made to “Factors That May Affect Future Results and Financial Condition” in this Item 7 for a discussion of some of the uncertainties, risks and assumptions associated with these statements.
OVERVIEW
Sadot Group Inc. (f/k/a Muscle Maker, Inc.) is our parent company and is headquartered in Ft. Worth, Texas. In late 2022, Sadot Group began a transformation from a U.S.-centric restaurant business into a global organization focused on the Agri-foods supply-chain. Effective July 27, 2023, we changed our company name from Muscle Maker, Inc., to Sadot Group, Inc. As of December 31, 2023, Sadot Group consisted of two distinct operating units.
1.Sadot LLC (“Sadot Agri-Foods”): Sadot Group’s largest operating unit is a global agri-commodities company engaged in farming, trading and shipping of food and feed (e.g., soybean meal, wheat and corn) via dry bulk cargo ships to/from markets such as Argentina, Australia, Bangladesh, Brazil, Canada, China, Columbia, Ecuador, Egypt, Guinea, Honduras, India, Indonesia, Ivory Coast, Japan, Kenya, Malaysia, Morocco, Mozambique, Nigeria, Philippines, Poland, Romania, Saudi Arabia, South Korea, Sri Lanka, Ukraine United States and Vietnam, among others. Sadot Agri-Foods competes with the ABCD commodity companies (ADM, Bunge, Cargill, Louis-Dreyfus) as well as many regional organizations. Sadot Agri-Foods operates, through a joint venture, a roughly 5,000 acre crop producing farm in Zambia with a focus on major commodities such as wheat, soy and corn alongside high-value tree crops such as avocado and mango. Sadot Agri-Foods was formed as part of the Company’s diversification strategy to own and operate, through its subsidiaries, the business lines throughout the food value chain. Sadot Agri-Foods seeks to diversify over time into a sustainable and forward-looking global agri-foods company.
2.Sadot Restaurant Group ("Sadot Food Services"): has three unique “healthier for you” concepts, including two fast casual restaurant concepts, Pokémoto and Muscle Maker Grill, plus one subscription-based fresh prep meal concept, SuperFit Foods. The restaurants were founded on the belief of taking every-day menu options and converting them into “healthier for you” menu choices. Consumers are demanding healthier choices, customization, flavor and convenience. Each of our three concepts offers different menus that are tailored to specific consumer segments. We believe our concepts deliver highly differentiated customer experiences.
Through our subsidiaries, we operate within the global food-supply chain, in an effort to integrate capabilities and create a sustainable and innovative company, that enhances the social, environmental and financial value to our Company.
Key Financial Definitions
We review a number of financial and operating metrics, including the following key metrics and non-GAAP measures, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. Governmental and other economic factors affecting our operations may vary.
For the Years Ended December 31,
2023 2022
$’000 $’000
Commodity sales 717,506 150,586
Company restaurant sales, net of discounts 8,053 10,300
Franchise royalties and fees 1,041 727
Franchise advertising fund contributions 73 81
Other revenues 13 5
Cost of goods sold (716,755) (157,307)
Gross profit 9,931 4,392
Impairment of intangible asset (811) (347)
Impairment of goodwill (828) -
Depreciation and amortization expenses (1,808) (2,015)
Franchise advertising fund expenses (73) (81)
Pre-opening expenses (371) (117)
Post-closing expenses (212) (197)
Stock-based expenses (6,192) (3,716)
Sales, general and administrative expenses (9,404) (6,035)
Loss from operations (9,768) (8,116)
Adjusted EBITDA (129) (2,038)
Adjusted EBITDA attributable to Sadot Group, Inc. 89 (2,038)
The breakout of our main revenue streams by business segment is shown below:
For the Years Ended December 31,
2023 2022
Sadot agri-foods 98.7 % 93.1 %
Sadot food service 1.3 % 6.9 %
Our key business and financial metrics are explained in detail below.
Revenues
Our revenues are derived from four primary sources: Commodity sales, Company restaurant sales, Franchise revenues and vendor rebates from Franchisees. Commodity sales revenues are comprised of revenues generated from the purchase and sales of physical food and feed commodities related to our trading and farming operations. Franchise revenues are comprised of Franchise royalty revenues collected based on 2% to 6% of franchisee net sales and other franchise revenues which include initial and renewal franchisee fees. Vendor rebates are received based on volume purchases or services from franchise owned locations. In addition, we have Other revenues which consists of gift card breakage, which is recognized when we determine that there is no further legal obligation to remit the unredeemed gift card balance.
Cost of Goods Sold
Cost of goods sold includes commodity costs, labor, food and beverage cost, rent and other operating expenses.
Impairment of Intangible Assets
Impairment of intangible assets consist of an amount by which the carry amount of the intangible assets exceeds its fair value. This is recognized by us when the carry amount of an intangible asset is greater than the projected future undiscounted cash flows, as the asset is not fully recoverable.
Impairment of Goodwill
Impairment of goodwill consist of an amount by which the carry amount of the goodwill assets exceeds its fair value. This is recognized by us when the carry amount of goodwill is greater than the projected future discounted cash flows, as the asset is not fully recoverable.
Depreciation and Amortization Expenses
Depreciation and amortization expenses primarily consist of the depreciation of property and equipment and amortization of intangible assets.
Franchise Advertising Expenses
In accordance with Topic 606, the Company recognizes sales-based advertising contributions from franchisees as franchise revenue when the underlying franchisee incurs the corresponding advertising expense. The Company records the related advertising expenses as incurred under Sales, general and administrative expenses.
Pre-opening Expenses
Pre-opening expense primarily consist of expenses associated with opening a Company-operated location and expenses related to Company-operated locations or new business operations prior to the location opening or the transaction is finalized.
Post-closing Expenses
Post-closing expense primarily consist of expenses associated with closing a Company-operated location and expenses related to Company-operated locations after the location has closed.
Stock-based Expenses
Stock-based expenses include all expenses that are paid with stock. This includes stock-based consulting fees due to Aggia and other consultants, stock compensation paid to the our board of directors, and stock compensation paid to employees. The consulting fees due to Aggia related to ongoing Sadot Agri-Foods and expansion of the global agri-foods commodities business. Based on the initial Services Agreement with Aggia LLC FZ, a Company formed under the laws of United Arab Emirates (“Aggia”), the consulting fees were calculated at approximately 80.0% of the Net Income generated by Sadot Agri-Foods through March 31, 2023. As of April 1, 2023 the consulting agreement was amended to calculate consulting fees on 40.0% of the Net income generated by Sadot LLC. For the years ended December 31, 2023 and 2022, $6.2 million and $3.7 million, respectively, are recorded as Stock-based expenses in the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.
Sales, General and Administrative Expenses
Sales, general and administrative expenses include expenses associated with corporate and administrative functions that support our operations, including wages, benefits, travel expense, legal and professional fees, training, investor relations and other corporate costs. We incur incremental Sales, general and administrative expenses as a result of being a publicly listed company on the NASDAQ capital market. A certain portion of these expenses are related to the preparation of an initial stock offering and subsequent capital raises and should be considered one-time expenses.
Other (Expense) / Income
Other (expense) / income listed below the Loss from operations in the accompanying Consolidated Statements of Operations and Other Comprehensive Loss consists of Gain of fair value remeasurement, Gain in fair value of stock-based compensation, Warrant modification expense, Interest expense, net, Other income and Gain on debt extinguishment. Gain / (loss) on fair value remeasurement consists of the fair value remeasurement recorded on a recurring basis on the forward sales contract which was deemed to be a derivative within the scope of ASC 815. Warrant modification expense consists of the expense incurred and the issuance of new warrants.
Income Tax Benefit /(Expense)
Income tax benefit / (expense) represent federal, state and local current and deferred income tax expense.
Net Income Attributable to Non-controlling Interests
Net loss attributable to non-controlling interests was $0.2 million for the year ended December 31, 2023. During the year ended December 31, 2023 the Company created a joint-venture in which the Company has a 70% interest and the third-party equity ownership has a 30% Non-controlling interest.
Non-GAAP Measures
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin are non-GAAP measures. We define EBITDA as Net loss, adjusted for depreciation, amortization, interest income / (expense), and income taxes. We define Adjusted EBITDA as Net loss, adjusted for depreciation, amortization, net interest (income) expense, income taxes, impairment expenses, stock-based consulting expense, other income, change in fair value of stock-based compensation, gain on extinguishment, warrant modification expense, and gain on fair value remeasurement derived from amounts presented in the Consolidated Statement of Operations and Other Comprehensive Loss and the associated Notes to the Consolidated Financial Statements. We believe that EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin, (collectively, the “Non-GAAP Measures”) are useful metrics for investors to understand and evaluate our operating results and ongoing profitability because they permit investors to evaluate our recurring profitability from our ongoing operating activities.
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin, have certain limitations, and you should not consider them in isolation or as a substitute for analysis of our results of operations as reported under U.S. GAAP. We caution investors that amounts presented in accordance with our definitions of any of the Non-GAAP Measures may not be comparable to similar measures disclosed by other issuers, because some issuers calculate certain of the Non-GAAP Measures differently or not at all, limiting their usefulness as direct comparative measures.
Reconciliations of EBITDA, Adjusted EBITDA and Other Non-GAAP Measures
The following table presents a reconciliation of EBITDA and Adjusted EBITDA from the most comparable U.S. GAAP measure, Net loss, and the calculations of the Net loss Margin and Adjusted EBITDA Margin for the years ended December 31, 2023 and 2022:
For the Years Ended December 31,
2023 2022
$’000 $’000
Net loss (8,042) (7,962)
Adjustments to EBITDA:
Depreciation and amortization expenses 1,808 2,015
Interest expense, net 469 7
Income tax (benefit) / expense (15) 25
EBITDA (5,780) (5,915)
Adjustments to Adjusted EBITDA:
Impairment of intangible asset 811 347
Impairment of goodwill 828 -
Other income (308) (46)
Change in fair value of stock-based compensation (1,339) -
Gain on debt extinguishment - (140)
Warrant modification expense 958 -
Gain on fair value remeasurement (1,491) -
Stock-based consulting expenses 6,192 3,716
Adjusted EBITDA (129) (2,038)
Adjusted EBITDA attributable to non-controlling interest 218 -
Adjusted EBITDA attributable to Sadot Group, Inc. 89 (2,038)
Gross Profit 9,931 4,392
Gross Profit attributable to Sadot Group, Inc. 10,149 4,392
Net loss Margin attributable to Sadot Group, Inc. (1.1)% (4.9)%
Adjusted EBITDA Margin attributable to Sadot Group, Inc. -% (1.3)%
Consolidated Results of Operations - Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022
The following table represents selected items in our Consolidated Statements of Operations for the years ended December 31, 2023 and 2022, respectively:
For the Years Ended December 31, Variance
2023 2022 $ %
$’000 $’000 $’000
Commodity sales 717,506 150,586 566,920 376.5 %
Company restaurant sales, net of discounts 8,053 10,300 (2,247) (21.8) %
Franchise royalties and fees 1,041 727 314 43.2 %
Franchise advertising fund contributions 73 81 (8) (9.9) %
Other revenues 13 5 8 160.0 %
Cost of goods sold (716,755) (157,307) (559,448) 355.6 %
Gross profit 9,931 4,392 5,539 126.1 %
Impairment of intangible asset (811) (347) (464) 133.7 %
Impairment of goodwill (828) - (828) NM
Depreciation and amortization expenses (1,808) (2,015) 207 (10.3) %
Franchise advertising fund expenses (73) (81) 8 (9.9) %
Pre-opening expenses (371) (117) (254) 217.1 %
Post-closing expenses (212) (197) (15) 7.6 %
Stock-based expenses (6,192) (3,716) (2,476) 66.6 %
Sales, general and administrative expenses (9,404) (6,035) (3,369) 55.8 %
Loss from operations (9,768) (8,116) (1,652) 20.4 %
Other income 308 46 262 569.6 %
Interest expense, net (469) (7) (462) 6600.0 %
Change in fair value of stock-based compensation 1,339 - 1,339 NM
Warrant modification expense (958) - (958) NM
Gain on fair value remeasurement 1,491 - 1,491 NM
Gain on debt extinguishment - 140 (140) (100.0) %
Loss Before Income Tax (8,057) (7,937) (120) 1.5 %
Income tax benefit / (expense) 15 (25) 40 (160.0) %
Net loss (8,042) (7,962) (80) 1.0 %
Net loss attributable to non-controlling interest 218 - 218 NM
Net loss attributable to Sadot Group, Inc. (7,824) (7,962) 138 (1.7) %
NM= not meaningful
The following table sets forth our results of operations as a percentage of total revenue for each period presented preceding:
For the Years Ended December 31,
2023 2022
Commodity sales 98.8 % 93.1 %
Company restaurant sales, net of discounts 1.1 % 6.4 %
Franchise royalties and fees 0.1 % 0.4 %
Franchise advertising fund contributions - 0.1 %
Other revenues - -
Cost of goods sold (98.6) % (97.3) %
Gross profit 1.4 % 2.7 %
Impairment of intangible asset (0.1) % (0.2) %
Impairment of goodwill (0.1) % -
Depreciation and amortization expenses (0.2) % (1.2) %
Franchise advertising fund expenses - (0.1) %
Pre-opening expenses (0.1) % (0.1) %
Post-closing expenses - (0.1) %
Stock-based expenses (0.9) % (2.3) %
Sales, general and administrative expenses (1.3) % (3.7) %
Loss from operations (1.3) % (5.0) %
Other income - 1.0 %
Interest expense, net (0.1) % (0.2) %
Change in fair value of stock-based compensation 0.2 % -
Warrant modification expense (0.1) % -
Gain on fair value remeasurement 0.2 % -
Gain on debt extinguishment - 3.2 %
Loss Before Income Tax (1.1) % (4.9) %
Income tax benefit / (expense) - -
Net loss (1.1) % (4.9) %
Net loss attributable to non-controlling interest - -
Net loss attributable to Sadot Group, Inc. (1.1) % (4.9) %
Gross Profit
For the Years Ended December 31, Variance
2023 2022 $ %
$’000 $’000 $’000
Commodity sales 717,506 150,586 566,920 376.5 %
Company restaurant sales, net of discounts 8,053 10,300 (2,247) (21.8) %
Franchise royalties and fees 1,041 727 314 43.2 %
Franchise advertising fund contributions 73 81 (8) (9.9) %
Other revenues 13 5 8 160.0 %
Cost of goods sold (716,755) (157,307) (559,448) 355.6 %
Gross profit 9,931 4,392 5,539 126.1 %
NM= not meaningful
Our gross profit totaled $9.9 million for the year ended December 31, 2023, compared to $4.4 million for the year ended December 31, 2022. The $5.5 million increase is primarily attributed to an increase in Commodity sales as a direct result of a full years worth of operations of Sadot Agri-Foods.
We generated Commodity sales of $717.5 million for the year ended December 31, 2023, compared to $150.6 million for the year ended December 31, 2022. The $566.9 million increase or 376.5% is attributable to the formation of Sadot Agri-Foods in November 2022 and a full year's worth of sales generated from physical food related commodities in 2023.
We generated Company restaurant sales, net of discounts, of $8.1 million for the year ended December 31, 2023, compared to $10.3 million for the year ended December 31, 2022. This represented an decrease of $2.2 million, or 21.8%, which is mainly attributable to conversion of a number of corporate restaurant locations to franchises, thus converting total revenue of a corporate owned location to 2% - 6% royalty revenue of a franchise location, and the closures of certain unprofitable corporate restaurant locations.
Franchise royalties and fees for the years ended December 31, 2023 and 2022 totaled $1.0 million compared to $0.7 million, respectively. This represents an increase of $0.3 million, or 43.2%. which is primarily due to the sales and opening of new Pokemoto franchises and converting corporate owned and operated locations into franchise owned locations.
Franchise advertising fund contributions for the years ended December 31, 2023 and 2022 totaled $0.1 million compared to $0.1 million, respectively. In accordance with Topic 606, the Company recognizes these sales-based advertising contributions from franchisees as franchise revenue when the underlying franchisee Company incurs the corresponding advertising expense. The decrease of $8.0 thousand or 9.9%, is a direct result of the decrease in Muscle Maker Grill franchises and the national advertising services to benefit the brand as a whole.
Other revenues for the years ended December 31, 2023 and 2022 totaled $13.0 thousand and $5.0 thousand, respectively. Other revenues consisted of gift card breakage recognized.
Cost of goods sold for the years ended December 31, 2023 and 2022 totaled totaled $716.8 million and $157.3 million, respectively. The $559.4 million change was primarily due to a full years worth of operations of Sadot Agri-Foods.
Impairment of Intangible Assets
For the Years Ended December 31, Variance
2023 2022 $ %
$’000 $’000 $’000
Impairment of intangible asset (811) (347) (464) 133.7 %
Impairment of intangible assets for the years ended December 31, 2023, and 2022 totaled $0.8 million and $0.3 million, respectively. On August 4, 2023, the Company announced its intention to reduce restaurant operating expenses by closing underperforming units while refranchising (selling) most of the remaining company-owned units. Due to the structural change of the Company's operations and the closing or marketing for sale of the Company owned stores an impairment testing of the Company’s intangible assets was performed and an impairment of $0.8 million was recognized.
Impairment of Goodwill
For the Years Ended December 31, Variance
2023 2022 $ %
$’000 $’000 $’000
Impairment of goodwill (828) - (828) NM
We had Impairment of goodwill for the year ended December 31, 2023 of $0.8 million. For the year ended December 31, 2022 there was no Impairment of goodwill. On August 4, 2023, the Company announced its intention to reduce restaurant operating expenses by closing underperforming units while refranchising (selling) most of the remaining company-owned units. Due to the structural change of the Company's operations and the closing or marketing for sale of the Company owned stores an impairment testing of the Company’s goodwill was performed and an impairment of $0.8 million. was recognized.
Depreciation and Amortization Expenses
For the Years Ended December 31, Variance
2023 2022 $ %
$’000 $’000 $’000
Depreciation and amortization expenses (1,808) (2,015) 207 (10.3) %
Depreciation and amortization expenses for the years ended December 31, 2023 and 2022 totaled $1.8 million and $2.0 million, respectively. The $0.2 million decrease is mainly attributed to closing underperforming units while refranchising (selling) most of the remaining company-owned unit and the disposal of the corresponding assets partially offset by the asset purchase of the farmland and corresponding farming equipment.
Franchise Advertising Fund Expenses
For the Years Ended December 31, Variance
2023 2022 $ %
$’000 $’000 $’000
Franchise advertising fund expenses (73) (81) 8 (9.9) %
Franchise advertising fund expenses for the years ended December 31, 2023 totaled $0.1 million compared to $0.1 million for the year ended December 31, 2022. The $8.0 thousand or 9.9% decrease is mainly attributed to the decrease in Muscle Maker Grill national advertising services to benefit the brand.
Pre-opening Expenses
For the Years Ended December 31, Variance
2023 2022 $ %
$’000 $’000 $’000
Pre-opening expenses (371) (117) (254) 217.1 %
Pre-opening expenses for the years ended December 31, 2023 and 2022, totaled $0.4 million and $0.1 million, respectively. The increase in pre-opening expense resulted from expenses incurred at the farm in Zambia from the time that we signed the paper work for the purchase of the farm assets and when the purchase was finalized by the Zambian government.
Post-Closing Expenses
For the Years Ended December 31, Variance
2023 2022 $ %
$’000 $’000 $’000
Post-closing expenses (212) (197) (15) 7.6 %
Post-closing expenses for the year ended December 31, 2023 totaled $0.2 million compared to $0.2 million for the year ended December 31, 2022. The increase in Post-closing expenses resulted from expenses incurred after the closing of underperforming or refranchising Company-owned stores.
Stock-Based Expenses
For the Years Ended December 31, Variance
2023 2022 $ %
$’000 $’000 $’000
Stock-based expenses (6,192) (3,716) (2,476) 66.6 %
Stock-based consulting expenses for the year ended December 31, 2023, totaled $6.2 million compared to $3.7 million for the year ended December 31, 2022. The primary increase in Stock-based consulting expenses is the result of consulting fees due to Aggia for Sadot Agri-Foods operations. Based on the service agreement with Aggia, the consulting fees are calculated at approximately 40% of the Net income generated by the Sadot Agri-Foods business segment. The increase is also the result in an increase in stock-based compensation paid to consultant, board members and employees.
Sales, General and Administrative Expenses
For the Years Ended December 31, Variance
2023 2022 $ %
$’000 $’000 $’000
Sales, general and administrative expenses (9,404) (6,035) (3,369) 55.8 %
Sales, general and administrative expenses for the years ended December 31, 2023 and 2022 totaled $9.4 million and $6.0 million, respectively. The $3.4 million increase was primarily attributable to an increase in investor relations fees resulting from building brand awareness and changing the corporate name, an increase in professional and consulting fees as a result of the expansion of our business and acquisitions, and an increase in employee salaries and benefits due to an increase in personal to support the new business lines.
Other Income
For the Years Ended December 31, Variance
2023 2022 $ %
$’000 $’000 $’000
Total other income / (expense), net 1,711 179 1,532 855.9 %
Other income for the years ended December 31, 2023 and 2022 totaled $1.7 million and $0.2 million, respectively. The other income was primarily attributable to an increase of $1.5 million in the gain on the fair value remeasurement as a result of the mark to market adjustment of derivatives, an increase of $1.3 million in the Change in fair value of stock-based compensation due to the difference in the stock price at the time of the stock issuance and agreed upon price to Aggia, an increase of $0.3 million in Other income, an increase of $1.0 million in warrant modification expense, a $0.5 million increase in Interest expense, net , partially offset by a decrease of $0.1 million on the Gain on debt extinguishment.
The following table represents selected items in our Consolidated Statements of Operations for the year ended December 31, 2023, by our operating segments:
For the Year Ended December 31, 2023
Sadot food service Sadot agri-foods Corporate adj. Total segments
$’000 $’000 $’000 $’000
Commodity sales - 717,506 - 717,506
Company restaurant sales, net of discounts 8,053 - - 8,053
Franchise royalties and fees 1,041 - - 1,041
Franchise advertising fund contributions 73 - - 73
Other revenues 13 - - 13
Cost of goods sold (8,883) (707,872) - (716,755)
Gross profit 297 9,634 - 9,931
Impairment of intangible asset (811) - - (811)
Impairment of goodwill (828) - - (828)
Depreciation and amortization expenses (665) (151) (992) (1,808)
Franchise advertising fund expenses (73) - - (73)
Pre-opening expenses (36) (335) - (371)
Post-closing expenses (211) - (1) (212)
Stock-based expenses - - (6,192) (6,192)
Sales, general and administrative expenses (437) (1,551) (7,416) (9,404)
(Loss) / income from operations (2,764) 7,597 (14,601) (9,768)
Other income 1 - 307 308
Interest expense, net (1) (52) (416) (469)
Change in fair value of stock-based compensation - - 1,339 1,339
Warrant modification expense - - (958) (958)
Gain on fair value remeasurement - 1,491 - 1,491
Gain on debt extinguishment - - - -
Loss Before Income Tax (2,764) 9,036 (14,329) (8,057)
Income tax benefit / (expense) (1) - 16 15
Net (loss) / income (2,765) 9,036 (14,313) (8,042)
Net loss attributable to non-controlling interest - 218 - 218
Net (loss) / income attributable to Sadot Group, Inc. (2,765) 9,254 (14,313) (7,824)
Total assets 10,416 162,175 5,500 178,091
The following table represents selected items in our Consolidated Statements of Operations for the year ended December 31, 2022, by our operating segments:
For the Year Ended December 31, 2022
Sadot food service Sadot agri-foods Corporate adj. Total segments
$’000 $’000 $’000 $’000
Commodity sales - 150,586 - 150,586
Company restaurant sales, net of discounts 10,300 - - 10,300
Franchise royalties and fees 727 - - 727
Franchise advertising fund contributions 81 - - 81
Other revenues 5 - - 5
Cost of goods sold (11,270) (146,037) - (157,307)
Gross profit (157) 4,549 - 4,392
Impairment of intangible asset (347) - - (347)
Impairment of goodwill - - - -
Depreciation and amortization expenses (2,015) - - (2,015)
Franchise advertising fund expenses (81) - - (81)
Pre-opening expenses (117) - - (117)
Post-closing expenses (197) - - (197)
Stock-based expenses - - (3,716) (3,716)
Sales, general and administrative expenses (601) (97) (5,337) (6,035)
(Loss) / income from operations (3,515) 4,452 (9,053) (8,116)
Other income 80 - (34) 46
Interest expense, net 21 - (28) (7)
Change in fair value of stock-based compensation - - - -
Gain on debt extinguishment 140 - - 140
(Loss) / income before income tax (3,274) 4,452 (9,115) (7,937)
Income tax benefit / (expense) - - (25) (25)
Net (loss) income (3,274) 4,452 (9,140) (7,962)
Net loss attributable to non-controlling interest - - - -
Net (loss) / income attributable to Sadot Group, Inc. (3,274) 4,452 (9,140) (7,962)
Total assets 16,340 7,915 2,975 27,230
Liquidity and Capital Resources
Working Capital
We measure our liquidity in a number of ways, including the following:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Cash 1,354 9,898
Accounts Receivable, net 52,920 135
Inventory 2,561 298
Other current assets(1)
56,016 317
Total current assets 112,851 10,648
Accounts payable and accrued expenses 50,167 1,953
Accrued stock-based compensation expense, related party - 3,603
Notes payable, net 6,531 222
Other current liabilities(2)
47,884 837
Total current liabilities 104,582 6,615
Working capital(3)
8,269 4,033
Current ratio(4)
1.08 1.61
(1) Consists of Prepaid expenses and other current assets, Prepaid forward on carbon offsets, Forward sales derivatives and Notes receivable, current
(2) Consists of Operating lease liability, current, Deferred revenue, current and Other current liabilities
(3) Working Capital is defined as Total current assets less Total current liabilities
(4) Current ratio is defined as Total current assets divided by Total current liabilities
Availability of Additional Funds
Our main financial objectives are to prudently manage financial risk, ensure access to liquidity and minimize cost of capital in order to efficiently finance our business and maintain balance sheet strength. We generally finance our ongoing operations with cash flows generated from operations, borrowings under various credit facilities and term loans. At December 31, 2023, current ratio, which equals Total current assets divided by Total current liabilities, was 1.08, a decrease of 0.53, compared to current ratio of 1.61 at December 31, 2022. The decrease in current ratio was primarily due to an increase in Accounts payable and accrued expenses as well as an increase in Other current liabilities which was primarily driven by increased Deferred revenue, partially offset by the increase in Accounts receivable as well as Other current assets. At December 31, 2023, working capital, which equals Total current assets less Total current liabilities, was $8.3 million an increase of $4.2 million, compared to working capital of $4.0 million at December 31, 2022. The increase in working capital was primarily due to an increase in Accounts receivable, which was primarily driven by increased Commodity sales, the prepaid forward on carbon offset, partially offset by an increase in Accounts payable and Notes payable, current. In addition, the Company has access to additional liquidity if it is needed through an executed Standby Equity Purchase Agreement ("SEPA") for up to $25.0 million in capital whereby the Company, once the initial prepayment loan is fully paid off may submit advance requests to the lender and the lender will provide cash in consideration of shares of common stock subject to certain limitations and conditions set forth in the SEPA.
In the event we are required to obtain additional financing, either through borrowings, private placements, public offerings, or some type of business combination, such as a merger, or buyout, and there can be no assurance that we will be successful in such pursuits. 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.
If we need to raise additional capital, we do not know what the terms of any such capital raising would be. In addition, any future sale of our equity securities could dilute the ownership and control of your shares and could be at prices substantially
below prices at which our shares currently trade. We may seek to increase our cash reserves through the sale of additional equity or debt securities. The sale of convertible debt securities or additional equity securities could result in additional and potentially substantial dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity. In addition, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. Any failure to raise additional funds on favorable terms could have a material adverse effect on our liquidity and financial condition.
Sources and Uses of Cash for the Years Ended December 31, 2023 and December 31, 2022
For the years ended December 31, 2023 and 2022, we used Net cash of $13.4 million and $0.2 million, respectively, in operations. Our Net cash used for the year ended December 31, 2023, was primarily attributable to our Net loss of $8.1 million, adjusted for net non-cash expense in the aggregate amount of $9.5 million offset by $14.9 million of Net cash used in changes in the levels of operating assets and liabilities. Our Net cash used for the year ended December 31, 2022, was primarily attributable to our Net loss of $7.9 million, adjusted for net non-cash expenses in the aggregate amount of $6.2 million, partially offset by $1.6 million of Net cash used in changes in the levels of operating assets and liabilities.
For the year ended December 31, 2023, Net cash used in investing activities was $3.5 million, of which, $7.5 million was used to purchase Property and equipment, partially offset by $0.4 million, which was generated on the Disposal of property and equipment and by investment from non-controlling interest of $3.7 million. For the year ended December 31, 2022, Net cash used in investing activities was $5.4 million, of which $4.9 million was used on a deposit to purchase farmland, $0.6 million was used to purchase Property and equipment, partially offset by $0.1 million collected from loans to franchisees.
For the year ended December 31, 2023, Net cash provided by financing activities was $8.3 million, consisting of proceeds from notes payable of $11.9 million, proceeds from exercise of warrants of $2.2 million, partially offset by the repayments of notes payable of $5.7 million. For the year ended December 31, 2022, Net cash used in financing activities was $0.2 million, consisting of repayments of notes payable of $0.2 million.
Critical Accounting Policies and Estimates
Our accounting policies are more fully described in Note 2 - Significant accounting policies to our consolidated financial statements included as part of this Annual Report on Form 10-K. As disclosed in Note 2, the preparation of financial statements in conformity with U.S. GAAP requires management to make substantial judgment or estimation in their application that may significantly affect reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ significantly from those estimates. We believe the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management's most difficult, subjective and complex judgments.
Recently Issued Accounting Pronouncements
In February 2016, the FASB” issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which requires companies to recognize lease liabilities and corresponding right-of-use leased assets on the Balance Sheets and to disclose key information about leasing arrangements. Qualitative and quantitative disclosures will be enhanced to better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2021, with early adoption permitted.
Additionally, in 2018 and 2019, the FASB issued the following Topic 842-related ASUs:
ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842, which clarifies the applicability of Topic 842 to land easements and provides an optional transition practical expedient for existing land easements;
ASU 2018-10, Codification Improvements to Topic 842, Leases, which makes certain technical corrections to Topic 842;
ASU 2018-11, Leases (Topic 842): Targeted Improvements, which allows companies to adopt Topic 842 without revising comparative period reporting or disclosures and provides an optional practical expedient to lessors to not separate lease and non-lease components of a contract if certain criteria are met; and
ASU 2019-01, Leases (Topic 842): Codification Improvements, which provides guidance for certain lessors on determining the fair value of an underlying asset in a lease and on the cash flow statement presentation of lease payments received; ASU No. 2019-01 also clarifies disclosures required in interim periods after adoption of ASU No. 2016-02 in the year of adoption.
The Company adopted Topic 842 as of January 1, 2022 and recognized a cumulative-effect adjustment to the opening balance of accumulated deficit of $15.0 thousand as of the adoption date, and recognized an additional $7.8 thousand during the second quarter of 2022, based on updated information on two of our leases, for an aggregate cumulative-effect adjustment to accumulated deficit of $22.8 thousand.
In October 2021, the FASB issued ASU 2021-08 Business Combinations (“Topic 805”): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers”, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended subsequently by ASUs 2018-19, 2019-04, 2019-05, 2019-10, 2019-11 and 2020-03. The guidance in the ASUs requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used. The standard also establishes additional disclosures related to credit risks. This standard is effective for fiscal years beginning after December 15, 2022. The adoption of this guidance on January 1, 2023 did not have a material impact on the Company's Consolidated Financial Statements and related disclosures.
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06 Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity. Among other changes, ASU 2020-06 removes the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share and updates the disclosure requirements in ASC 470-20, making them easier to understand for financial statement preparers and improving the decision-usefulness and relevance of the information for financial statement users. The Company early adopted the new guidance from January 1, 2023, noting no material impact.
In April 2021, the FASB issued ASU 2021-04, “Earnings Per Share (Topic 260), Debt- Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” (“ASU 2021-04”) to clarify the accounting by issuers for modifications or exchanges of equity-classified warrants. The new ASU is effective for all entities in fiscal years starting after December 15, 2021. Early adoption is permitted. The Company adopted the new guidance from January 1, 2023, noting no material impact.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting-Improvements to Reportable Segment Disclosures (Topic 280). The standard requires incremental disclosures related to reportable segments, including disaggregated expense information and the title and position of the company's chief operating decision maker ("CODM"), as identified for purposes of segment determination. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Entities must adopt the changes to the segment reporting guidance on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Item 7.A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
The Financial Statements required by this Item 8 are included in this Annual Report following Item 16 hereof. As a smaller reporting company, we are not required to provide supplementary financial information.
Item 9. Changes in and Disagreements with Accountants On Accounting and Financial Disclosure
None.
Item 9.A. Controls and Procedures
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15€ promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the year ended December 31, 2023. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of such date our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information requested to be disclosed by us in our reports that we file or submit under the Exchange Act.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 2013 Internal Control-Integrated Framework. Our management has concluded that, as of December 31, 2023, our internal control over financial reporting is effective based on these criteria.
Changes in Internal Control over Financial Reporting
Our Company has added and will continue to add additional internal control procedures, additional resources and software to increase the internal control aspects of the company as we integrate our Sadot subsidiary into the overall business. Other than the above changes, there were no other changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the year ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9.B. Other information
On February 28, 2024, the Company executed an offer of employment, effective March 1, 2024, with Fausto Plaza. This employment provides Mr. Plaza the responsibility to assist in managing the day-to-day operations of the various commodity trade and farm operations of Sadot Group. Mr. Plaza previously acted as a consultant to Sadot Latam. The consulting agreement provides for $0.5 million in annual fees and 15% profit sharing once the annual fees have been earned by Sadot. Mr. Plaza will continue to operate in this role, in addition to assisting in managing the day-to-day operations of the other commodity trade and farm operations, but as an employee of Sadot Group.
Item 9.C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
During the year ended December 31, 2023, no director or officer adopted or terminated (i) any contract, instruction or written plan for the purchase or sale of securities of the Company intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or (ii) any “non-Rule 10b5-1 trading arrangement” as defined in paragraph (c) of item 408 of Regulation S-K.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Board of Directors and Executive Officers
Our directors hold office until their successors are elected and qualified, or until their deaths, resignations or removals. Our executive officers hold office at the pleasure of our board of directors, or until their deaths, resignations or removals.
As of March 20, 2024, our current directors and executive officers and their ages are:
Name Age Principal Positions
Kevin Mohan (1)
50 Chief Investment Officer and Chairman of the Board
Michael J. Roper 59 Chief Executive Officer
Kenneth Miller 54 Chief Operating Officer
Jennifer Black 42 Chief Financial Officer
Aimee Infante 37 Chief Marketing Officer
Stephen A. Spanos (2)
61 Director
Jeff Carl (3)
68 Director
Benjamin Petel (4)
45 Director, Secretary
Na Yeon (“Hannah”) Oh (5)
39 Director
Ray Shankar (6)
48 Director
Marvin Yeo (7)
52 Director
Paul Sansom (8)
59 Director
Mark McKinney (9)
61 Director
David Errington (10)
45 Director
Dr. Ahmed Khan (11)
40 Director
(1)Mr. Mohan serves as the Chairman of the Board.
(2)Mr. Spanos serves as the Chairman of the Audit Committee.
(3)Mr. Carl is a member of the Compensation Committee.
(4)Mr. Petel serves as the Chairman of the Sustainability Committee.
(5)Ms. Oh is a member of the Sustainability Committee.
(6)Mr. Shankar serves as the Chairman of the Compensation Committee and is a member of the Governance Committee.
(7)Mr. Yeo is a member of the Sustainability Committee.
(8)Mr. Sansom is a member of the Audit Committee.
(9)Mr. McKinney is a member of the Compensation Committee and of the Audit Committee.
(10)Mr. Errington serves as the Chairman of the Governance Committee.
(11)Dr. Khan is a member of the Governance Committee.
Executive Officers
Kevin Mohan. Mr. Mohan has served as the Chief Investment Officer for Sadot Group Inc. (formerly Muscle Maker Inc.) since May 2018. He was instrumental in recruiting a new executive management team, and together they led the Company’s IPO in 2019. During his tenure with the Company, Mr. Mohan developed multiple financial initiatives, including the transformative agreement with Aggia LLC FZ which resulted in the formation of Sadot LLC. Mr. Mohan has more than 15 years of experience in capital markets and strategic business management. Prior to joining the Company, he served as Vice President of Capital Markets for American Restaurant Holdings Inc., a company focused on acquiring and expanding fast casual restaurant brands.
Based on his experience we have deemed Mr. Mohan fit to serve on the Board and as Chairman of the Board.
Michael J. Roper. Mr. Roper has served as Chief Executive Officer, of Sadot Group, Inc. since May 1, 2018. Mr. Roper has unique experience ranging from owning and operating several franchise locations through the corporate executive levels. From May 2015 through October 2017, Mr. Roper served as Chief Executive Officer of Taco Bueno where he was
responsible for defining strategy and providing leadership to 162 company-owned and operated locations along with 23 franchised locations. From March 2014 through May 2015, Mr. Roper served as the Chief Operating Officer of Taco Bueno and from July 2013 through March 2014 as the Chief Development and Technology Officer of Taco Bueno. Prior to joining Taco Bueno, Mr. Roper was a franchise owner and operator of a IMS Barter franchise and held several roles with Quiznos Sub from 2000 to 2012 starting as a franchise owner and culminating in his appointment as the Chief Operating Officer/Executive Vice President of Operations in 2009. Mr. Roper received a Bachelor of Science in Business and General Management from Northern Illinois University.
Based on his education and extensive experience in the restaurant/franchise industry, we have deemed Mr. Roper fit to serve as our principal executive officer.
Kenneth Miller. Mr. Miller has served as Chief Operating Officer of Sadot Group, Inc. since September 26, 2018. Mr. Miller has served in the restaurant business for an extensive portion of his career. Prior to joining us as Chief Operating Officer in September 2018, Mr. Miller served as the Senior Vice President of Operations for Dickey’s BBQ Restaurant from April 2018 through September 2018 and in various capacities with Taco Bueno Restaurants, LP from October 2013 through April 2018 culminating in the position of Senior Vice President of Operations. Mr. Miller received a Bachelor of Arts in Business/Exercise Science from Tabor College in 1991.
Based on his education and extensive experience in the restaurant/franchise industry, we have deemed Mr. Miller fit to serve as our Chief Operating Officer.
Jennifer Black. Ms. Black has served as Chief Financial Officer of Sadot Group, Inc. since January 2, 2022. Ms. Black is an experienced Chief Financial Officer with a demonstrated history of working with public and private equity backed organizations. Prior to joining the Company, from September 2018 through December 2021, Ms. Black served as the Chief Financial Officer for Eagle Pressure Control LLC (“Eagle”) and Talon Pressure Control, oilfield service companies. From October 2015 through September 2018, Ms. Black served as the Controller for AG Resource Management, a private equity backed agriculture lending company, and as the Controller for Basic Energy Services, an oil and gas services company, from January 2013 through October 2015. Ms. Black has also held various other roles including Vice President of SEC reporting with OMNI American Bank and Audit Manager with RSM McGladrey. In November 2020, Eagle, as a result of various events including an oil and gas work related incident, decline of oil and gas prices and the impact from COVID-19, filed for bankruptcy protection under Subchapter V under Chapter 11 in the US Bankruptcy Court, Southern District of Texas (Houston) (Bankruptcy Petition #: 20-35474). Ms. Black is a Certified Public Accountant and a Chartered Global Management Accountant. Ms. Black received a Master of Business Administration from Jack Welch Management Institute in 2018 and Bachelor of Science in Accounting and Finance from Texas Tech University in 2003.
Based on her education and extensive experience in the financial and accounting industries, we have deemed Ms. Black fit to serve as our Chief Financial Officer.
Aimee Infante. Ms. Infante has served as the Chief Marketing Officer of Sadot Group, Inc. since May 6, 2019. Ms. Infante had previously served as the Vice President of Marketing of each of Muscle Maker Development, LLC and Muscle Maker Corp., LLC since August 25, 2017 and September 15, 2017, respectively. From June 6, 2017 to September 15, 2017, she was the Vice President of Marketing of Muscle Maker Brands Conversion, Inc. From February 2016 through June 5, 2017, she served as the Vice President of Marketing of Muscle Maker Brands, LLC, which converted into Muscle Maker Brands Conversion, Inc. on June 6, 2017. From January 2015 through January 2016, Ms. Infante served as our Director of Marketing of Muscle Maker Brands. Ms. Infante was Director of Marketing of Muscle Maker Franchising from October 2014 to January 2015. Ms. Infante was employed by Qdoba Mexican Grill in Denver, Colorado from November 2010 to April 2014, serving as Regional Marketing Specialist from November 2010 to October 2012 and Marketing Manager from October 2012 to April 2014. Ms. Infante holds a Bachelor of Science in Marketing from Rider University.
Based on her education and extensive experience in the restaurant/franchise industry, we have deemed Ms. Infante fit to serve as our Chief Marketing Officer.
Stephen A. Spanos. Mr. Spanos has provided financial and accounting consulting services for both privately held and public companies. From 2009 to 2013, Mr. Spanos served as the Chief Financial Officer of Orion Seafood International, Inc., a marketer of frozen lobster products, and as the Controller of Reef Point Systems, a provider of security solutions for converged wireless and wireline networks in the United States, from 2005 to 2013. Mr. Spanos served as an audit manager
for BDO USA, LLP and as an auditor for Ernst & Young. Mr. Spanos received his MBA and BS in Business Administration, Accounting and Finance from Boston University.
Based on his education and extensive experience in financial and accounting matters, we have deemed that Mr. Spanos is fit to serve on the Board.
Jeff Carl. With 30+ years of international experience in marketing/communications, digital technology and manufacturing, Mr. Carl brings a global perspective to Sadot Group. Since February 2017, Mr. Carl has been an independent brand strategy consultant in the hospitality and retail industries. He also serves as Executive Director for Nice & Company, a San Francisco based marketing firm. Mr. Carl has previously served as Chief Marketing Officer for several private and publicly-held companies including Taco Bueno Restaurants, the Tavistock Restaurant Group, and McDonald’s Corporation - Canada/Latin America. As Corporate Vice President for McDonald’s he also led sports and entertainment partnerships as well as the licensing, design and manufacturing for the Company’s global toy program, producing 1.8 billion toys annually. Earlier in his career, Mr. Carl was Managing Director of Creata Inc., a global marketing and manufacturing agency. Mr. Carl received a BA from Wake Forest University and an MBA from University of North Carolina, Chapel Hill.
Based on his experience within the restaurant industry and due to the fact that he has held senior level executive positions with a focus on advertising and marketing, we have deemed Mr. Carl a fit to serve on the Board.
Benjamin Petel. Mr. Petel has been engaged as a Business Development Specialist in the global agricultural commodity trading field for the past decade. His experience spans across the various aspects of international commodity trading, finance and operations. In addition, Mr. Petel has worked in other fields as a Business Development and strategic networking expert, initiating and executing multi-million dollar projects across the globe. Since 2019, Mr. Petel has been engaged as a Business Development Specialist and consultant to various agriculture and food companies in capacities ranging from corporate finance and M&A to commercial development and operational control. In addition, from 2015 and until 2019, Mr. Petel served as a strategic networking specialist in various fields and industries. Mr. Petel received a Bachelor of Arts in Business Administration and General Management from Bar-Ilan University in 2014.
Based on his experience within the commodity trading industry, the Company has deemed Mr. Petel as a fit to serve on the Board.
Na Yeon (“Hannah”) Oh. Ms. Oh boasts over 15 years of hands-on experience in commercial leadership and sustainability advocacy, with a distinguished career at Bayer where she held numerous leadership positions. Throughout her tenure, she served as Head of Marketing, spearheading impactful campaigns; led Data and Digitalization initiatives, driving organizational transformations; managed Supply Chain operations, ensuring efficiency and resilience; and developed Climate Strategies, addressing the future of regenerative farming practices.
Recognized as a driving force for positive change, Ms. Oh is deeply committed to fostering connections between agri-food and climate technology startups, philanthropic foundations, and impact capital. As an advisory board member to multiple startups, she provides strategic guidance and support, leveraging her extensive experience to nurture and accelerate their growth trajectory.
Currently, as the co-founder and investor at IXO, Ms. Oh is focused on setting new standards using blockchain and AI to bring transparency and integrity through high-definition impact data and outcome-focused investment strategies. Leveraging IXO's real-time digital Measurement, Reporting, and Verification capabilities, Ms. Oh and her team brings new governance models around verification and origination of carbon credits through technology- based solutions.
Based on her experience within the agri-food industry, the Company has deemed Ms. Oh as a fit to serve on the Board.
Ray Shankar. Mr. Shankar has been a Partner since 2019 at Oon & Bazul LLP, a prominent regional law firm where he manages the Private Wealth and Family Office Practice. He routinely advises ultra-high net worth families on the structuring of their family offices, tax and immigration incentive applications as well as legacy planning. Mr. Shankar specializes in advising on the establishment of family offices, which includes legacy and estate planning, wills, trusts, family charters/constitutions, tax efficient structures and succession planning. Prior to joining Oon & Bazul LLP, Mr. Shankar served as the Managing Director of Ring City Limited, a group of operating companies in various sectors. Mr. Shankar received his Bachelor of Laws (LLB) from the National University of Singapore.
Based on his legal, finance and business experience, the Company has deemed Mr. Shankar as a fit to serve on the Board.
Marvin Yeo. Mr. Yeo is an experienced executive with over 25 years of experience in the finance industry. From 2014 through present, Mr. Yeo has served as the founding partner of Golden Rock Capital, a pan-Asia focused strategic advisory firm that focuses on mergers and acquisitions, corporate finance and private equity. Prior to founding Golden Rock Capital, Mr. Yeo held a number of rolls with Frontier Investment & Development Partners, Asian Development Bank, Barclays Capital, Nomura International and Deutsche Bank. Mr. Yeo received his Bachelor of Engineering from Monash University, Chartered Financial Analyst certificate from the CFA Institute and an MBA from Insead.
Based on his finance and business experience, the Company has deemed Mr. Yeo as a fit to serve on the Board.
Paul Sansom. Mr. Sansom is a qualified UK Chartered Accountant and member of UK Association of Corporate Treasurers. He has over 30m years experience in blue chip finance roles in various industries, including PepsiCo and BMW plus operational partner in Private Equity funds within the Middle East. He has held CEO / General Manager roles within family owned businesses in Middle East and West Africa.
He currently is a senior partner with a Private Equity fund in the Middle East, a Board Director for a electricity generator within the UK and Board Director for portfolio companies within the Private Equity Fund. He acts as Audit Chair within one of the privately held businesses. Paul holds a BA (Hons) Economics.
Based on his start-up, finance and business experience, the Company has deemed Mr. Sansom as a fit to serve on the Board.
Mark McKinney. Mr. McKinney brings more than 30 years of domestic and international C-Level experience across various industries, six countries and three continents. Most recently, Mr. McKinney served as Chief Operating Officer of Local Bounti, a leading Ag-tech company specializing in indoor farming. During his tenure, Mr. McKinney was instrumental in the successful execution of the company’s initial public offering on the NYSE, establishing Local Bounti as a key player in the industry. Prior to Local Bounti, from 2018 to 2021, Mr. McKinney was Chief Operating Officer at Fruit Growers (Sunkist Cooperative) where he managed multiple business verticals and supply chain operations supporting 39 packing houses and thousands of Sunkist growers. From 2015 through 2017, Mr. McKinney was CEO of Al Ghurair Foods, where he managed nine business lines with operations in four countries. From 1993 to 2015, Mr. McKinney served in various senior roles at the Dole Food Company, including Senior Director positions in Dole Asia, Ltd. and Dole Europe S.A., President and Managing Director of Dole Thailand and President of Dole Packaged Foods Asia. Mr. McKinney’s career includes several Board and Advisory roles. He holds an MBA from Claremont University’s Peter F. Drucker Graduate Management Center and a Bachelor of Science degree in Chemical Engineering from California Polytechnic University, Pomona.
Based on his international, supply chain support and business experience, the Company has deemed Mr. McKinney as a fit to serve on the Board.
David Errington. Mr. Errington brings more than 20 years of experience in Sustainability and Environmental Sector with 13 years regional expertise in the Gulf Cooperation Council, including KSA, Bahrain, Qatar, Kuwait, UAE and Oman. Since January 2020, Mr. Errington has served as the Head of Engineering / Senior Technical Resource Manager for the Saudi Investment Recycling Company. From January 2014 through December 2019, Mr. Errington was employed by Ecolog International FZE, a leading provider of supply chain, construction, technology, facility management and environmental services, providing turnkey and customized solutions to governments and defense, humanitarian organizations and commercial clients in the sectors of oil & gas, mining, energy and infrastructure projects. Mr. Errington received a BSc (Hons) Chemistry from the University of Durham.
Based on his sustainability and environmental sector business experience, the Company has deemed Mr. Errington as a fit to serve on the Board.
Ahmed Khan, EngD. Dr. Khan brings more than 15 years of experience in research and development (R&D) and operations, with experience in various sectors, including waste/environmental management and the automotive sector. Most recently, Dr. Khan led a team of engineers and laboratories at Saudi Investment Recycling Company, which advises government agencies on waste management strategies and ensures compliance with regulatory bodies. Prior to Saudi Investment Recycling Company, Dr. Khan held several leadership positions including R&D Technical Director at Guilford Europe where he was responsible for ensuring planning and direction of technical and innovation programs, including design validation planning and technical oversight. He also held several positions at UtilEco Middle East including the role of R&D Director where he was responsible for planning and direction of technical and customer-led programs. Dr. Khan holds a Doctorate in Biochemical Engineering and a Masters of Research, Biochemical as well as a Bachelor of Science, Biochemistry and Bachelor of Engineering, Biochemical.
Based on his research and development and environmental management experience, the Company has deemed Dr. Khan as a fit to serve on the Board.
Family Relationships
There are no family relationships among any of our executive officers and directors.
Corporate Governance
Board of Directors and Board Committees
Our stock (symbol: SDOT) is listed on the NASDAQ capital market. Under the rules of Nasdaq, “independent” directors must make up a majority of a listed company’s board of directors. In addition, applicable NASDAQ rules require that, subject to specified exceptions, each member of a listed company’s audit and compensation committees be independent within the meaning of the applicable NASDAQ rules. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act.
Our board of directors currently consists of 11 members. Our board of directors has determined that Paul Sansom, Stephen Spanos, Jeff Carl, Hannah Oh. Ray Shankar, Marvin Yeo, Mark McKinney, David Errington and Dr. Ahmed Khan qualify as independent directors in accordance with the NASDAQ Capital Market, or NASDAQ listing requirements. Kevin Mohan and Benjamin Petel are not considered independent as they operate in the day to day operational decisions of the Company. Nasdaq’s independence definition includes a series of objective tests, such as that the director is not, and has not been for at least 3 years, one of our employees and that neither the director nor any of his or her family members has engaged in various types of business dealings with us. In addition, as required by NASDAQ rules, our board of directors has made a subjective determination as to each independent director that no relationships exist that, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us regarding each director’s business and personal activities and relationships as they may relate to us and our management. There are no family relationships among any of our directors or executive officers.
As required under NASDAQ rules and regulations and in expectation of listing on NASDAQ, our independent directors meet in regularly scheduled executive sessions at which only independent directors are present.
Board Leadership Structure and Board’s Role in Risk Oversight
Kevin Mohan is the Chairman of the Board. The Chairman has authority, among other things, to preside over the Board meetings and set the agenda for the Board meetings. Accordingly, the Chairman has substantial ability to shape the work of our Board. We currently believe that separation of the roles of Chairman and Chief Executive Officer ensures appropriate oversight by the Board of our business and affairs. However, no single leadership model is right for all companies and at all times. The Board recognizes that depending on the circumstances, other leadership models, such as the appointment of a lead Independent director, might be appropriate. Accordingly, the Board may periodically review its leadership structure.
Our Board is generally responsible for the oversight of corporate risk in its review and deliberations relating to our activities. Our principal source of risk falls into two categories, financial and product commercialization. The audit committee oversees management of financial risks; our Board regularly reviews information regarding our cash position, liquidity and operations, as well as the risks associated with each. Our Compensation Committee is expected to oversee risk management as it relates to our compensation plans, policies and practices for all employees including executives and directors, particularly whether our compensation programs may create incentives for our employees to take excessive or inappropriate risks which could have a material adverse effect on the Company.
Committees of the Board of Directors
The Board of Directors has already established an Audit Committee (the “Audit Committee”), a Compensation Committee (the “Compensation Committee”), a Sustainability Committee (the "Sustainability Committee") and a Nominating and Corporate Governance Committee (“Governance Committee”). The composition and function of each committee are described below.
Audit Committee
The Audit Committee has three members, including Messrs. McKinney, Spanos and Sansom. Mr. Spanos serves as the chairman of the Audit Committee and satisfies the definition of “audit committee financial expert”.
Our Audit committee is authorized to:
•approve and retain the independent auditors to conduct the annual audit of our financial statements;
•review the proposed scope and results of the audit;
•review and pre-approve audit and non-audit fees and services;
•review accounting and financial controls with the independent auditors and our financial and accounting staff;
•review and approve transactions between us and our directors, officers and affiliates;
•recognize and prevent prohibited non-audit services; and
•establish procedures for complaints received by us regarding accounting matters; oversee internal audit functions, if any.
Compensation Committee
The Compensation Committee has three members, including Messrs. Carl, McKinney and Shankar. Mr. Shankar serves as the chairman of the Compensation Committee.
Our Compensation Committee is authorized to:
•review and determine the compensation arrangements for management;
•establish and review general compensation policies with the objective to attract and retain superior talent, to reward individual performance and to achieve our financial goals;
•administer our stock incentive and purchase plans; and
•review the independence of any compensation advisers.
Sustainability Committee
The Sustainability Committee has three members, including Messrs. Petel, Yeo, and Ms. Oh. Mr. Patel serves as the chairman of the Sustainability Committee.
Our Sustainability Committee's duties include reviewing and making recommendations to the Board on, the Company's policy and performance in relation to sustainability-related matters, including:
•health and safety;
•process safety;
•the environment;
•climate change;
•human rights;
•historical cultural heritage and land access;
•community relations;
•ESG and impact initiatives and implementation.
Nominating and Corporate Governance Committee
The Governance Committee has three members, including Messrs. Errington, Khan and Shankar. Mr. Errington serves as the chairman of the Governance Committee.
The functions of our Governance Committee, among other things, include:
•identifying individuals qualified to become board members and recommending director;
•nominees and board members for committee membership;
•developing and recommending to our board corporate governance guidelines;
•review and determine the compensation arrangements for directors; and
•overseeing the evaluation of our board of directors and its committees and management.
Our goal is to assemble a Board that brings together a variety of skills derived from high quality business and professional experience.
Compensation Committee Interlocks and Insider Participation
None of the members of our Compensation Committee, at any time, has been one of our officers or employees. Except for Mr. Mohan, none of our executive officers currently serves, or in the past year has served, as a member of the Board of Directors or Compensation Committee of any entity that has one or more executive officers on our Board of Directors or Compensation Committee. For a description of transactions between us and members of our Compensation Committee and affiliates of such members, please see “Certain Relationships and Related Party Transactions”.
Board Diversity Matrix (as of December 31, 2023):
The Board believes that a diverse membership having a variety of skills, styles, experience and competencies is an important feature of a well-functioning board. Accordingly, the Board believes that diversity of viewpoints, backgrounds and experience (inclusive of gender, age, race and ethnicity) should be a consideration in Board succession planning and recruiting. In recent years, the Governance Committee has taken this priority to heart in its nominations process, and the diversity of the Board has grown significantly. The Nasdaq Stock Market, LLC Listing Rules’ (the “NASDAQ Listing Rules”) objective for listed companies to have at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+. The chart below provides certain information regarding the diversity of the Board as of December 31, 2023.
Total Number of Directors Male Female Gender undisclosed
Part I: Gender Identity
Directors 9 1 1
Part II: Demographic Background
White 6 - -
Asian 3 1 -
Two or more races or ethnicities - - -
Did not disclose demographic background - - 1
LGBTQ+ - - -
Code of Business Conduct and Ethics
We have adopted a code of business conduct and ethics that applies to all our employees, officers and directors, including those officers responsible for financial reporting.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s executive officers, directors, and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of the Company’s common stock. Such officers, directors, and persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file with the SEC.
To our knowledge, based solely on review of the copies of such reports and amendments to such reports with respect to the year ended December 31, 2023, filed with the SEC, all required Section 16 reports under the Exchange Act for our directors, executive officers, principal accounting officer and beneficial owners of greater than 10% of our common stock were filed on a timely basis during the year ended December 31, 2023.
During the year ended December 31, 2023, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).
Item 11. Executive Compensation
Summary Compensation Table
The following Summary Compensation Table sets forth all compensation earned in all capacities during the fiscal years ended December 31, 2023 and 2022 by (i) our principal executive officer, (ii) our two most highly compensated executive officers, other than our principal executive officer, who were serving as executive officers as of December 31, 2023 and whose total compensation for the 2023 fiscal year, as determined by Regulation S-K, Item 402, exceeded $100,000, (iii) a person who would have been included as one of our two most highly compensated executive officers, other than our principal executive officer, but for the fact that he was not serving as one of our executive officers as of December 31, 2023, (the individuals falling within categories (i), (ii) and (iii) are collectively referred to as the “Named Executive Officers”):
Year Salary Bonus1 Stock
Award Option
Awards Non-Equity
Incentive
Plan
Compensation Non-Qualified
Deferred
Compensation
Earnings All Other
Compensation Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Michael J. Roper
Chief Executive Officer of Sadot Group, Inc. 2023 350 225 131 2 76 3 - - - 782
2022 350 175 - 24 4 - - - 549
Jennifer Black
Chief Financial Officer of Sadot Group, Inc. 2023 264 225 65 5 76 6 - - - 630
2022 186 95 11 10 7 - - - 302
Kevin Mohan
Chief Investing Officer of Sadot Group, Inc. 2023 200 200 131 8 76 9 - - - 607
2022 196 150 - 18 10 - - - 364
1 Bonuses are earned in the year noted and paid out within the first three months of the subsequent year.
2 Michael Roper was granted restricted stock awards on December 19, 2023, to acquire 0.3 million shares of common stock, vesting quarterly over twelve quarters, commencing March 31, 2024.
3 Michael Roper was granted a stock options to acquire a 31.1 thousand shares and 0.1 million shares of common stock on May February 27, 2028 and March 15, 2028, respectively.
4 Michael Roper was granted a stock option to acquire 0.1 million shares of common stock on May 2, 2022.
5 Jennifer Black was granted restricted stock awards on December 19, 2023, to acquire 0.2 million shares of common stock, vesting quarterly over twelve quarters, commencing March 31, 2024.
6 Jennifer Black was granted a stock option to acquire 0.1 million shares of common stock on February 27, 2023.
7 Jennifer Black was granted a stock options to acquire 20.0 thousand shares and 25.0 thousand shares of common stock on May 2, 2022 and October 10, 2022, respectively.
8 Kevin Mohan was granted restricted stock awards on December 19, 2023, to acquire 0.3 million shares of common stock, vesting quarterly over twelve quarters, commencing March 31, 2024.
9 Kevin Mohan was granted a stock option to acquire 0.1 million shares of common stock on February 27, 2023.
10 Kevin Mohan was granted a stock option to acquire 0.1 million shares of common stock on May 2, 2022.
A summary of option activity during the years ended December 31, 2023 and 2022 is presented below:
Weighted-average
exercise
price Number of
options Weighted-average
remaining life
(in years) Aggregate intrinsic value
$ $’000
Outstanding, December 31, 2021 5.00 100,000 1.91 -
Issued 0.41 337,500 4.40 12
Exercised - - N/A -
Forfeited - (25,000) N/A -
Outstanding, December 31, 2022 1.52 412,500 3.53 -
Issued 1.51 600,000 5.42 156
Exercised - - N/A -
Forfeited 3.40 (185,000) N/A -
Outstanding, December 31, 2023 1.09 827,500 4.26 -
Expected to vest, December 31, 2023 1.14 605,609 4.23 -
Exercisable, December 31, 2023 0.98 221,891 4.34 -
On February 27, 2023, we issued options to purchase an aggregate of 0.5 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On March 15, 2023, we issued options to purchase 0.1 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On November 27, 2023, there were 0.1 million shares forfeited upon the expiration of the options.
On December 21, 2023, there were 0.1 million shares forfeited upon the departure of board members.
Employment Agreements
Michael Roper
On November 16, 2022, the Company entered into an Executive Employment Agreement with Michael Roper (the “Roper Agreement”), which replaced his prior employment agreement. Pursuant to the Roper Agreement, Mr. Roper will continue to be employed as Chief Executive Officer of the Company on an at will basis. During the term of the Roper Agreement, Mr. Roper is entitled to a base salary at the annualized rate of $0.4 million. Mr. Roper will be eligible for a discretionary performance bonus to be determined by the Board annually. Mr. Roper received an additional bonus of $0.1 million on March 2, 2023 and an additional $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Roper is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Roper is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Roper will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 18 months following the second anniversary of the Roper Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Roper Agreement will automatically terminate and the prior employment agreement will again be in full effect.
Jennifer Black
On March 21, 2023, the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement. Pursuant to the Black Agreement, Ms. Black will continue to be employed as Chief Financial Officer of the Company on an at will basis. During the term of the Black Agreement,
Ms. Black is entitled to a base salary at the annualized rate of $0.3 million. Ms. Black will be eligible for a discretionary performance bonus up to 50% of her annual salary. Ms. Black received an additional bonus of $0.1 million on March 2, 2023 and an additional $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Ms. Black is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Black is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Black will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Black Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Black Agreement will automatically terminate, and the prior employment agreement will again be in full effect.
Kenneth Miller
On November 16, 2022, the Company entered into an Executive Employment Agreement with Kenn Miller (the “Miller Agreement”), which replaced his prior employment agreement. Pursuant to the Miller Agreement, Mr. Miller will continue to be employed as Chief Operating Officer of the Company on an at will basis. During the term of the Miller Agreement, Mr. Miller is entitled to a base salary at the annualized rate of $0.3 million. Mr. Miller will be eligible for a discretionary performance bonus up to 75% of his annual salary. Further, Mr. Miller will be entitled to an additional bonus of $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Miller is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Miller is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Miller will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 12 months following the second anniversary of the Miller Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Miller Agreement will automatically terminate and the prior employment agreement will again be in full effect.
Kevin Mohan
On November 16, 2022, the Company entered into an Executive Employment Agreement with Kevin Mohan (the “Mohan Agreement”), which replaced his prior employment agreement. Pursuant to the Mohan Agreement, Mr. Mohan will continue to be employed as Chief Investment Officer of the Company on an at will basis. During the term of the Employment Agreement, Mr. Mohan is entitled to a base salary at the annualized rate of $0.2 million. Mr. Mohan will be eligible for a discretionary performance bonus up to 75% of his annual salary. Mr. Mohan received an additional bonus of $0.1 million on March 2, 2023 and an additional $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Mohan is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Mohan is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Mohan will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Mohan Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Mohan Agreement will automatically terminate, and the prior employment agreement will again be in full effect.
Aimee Infante
On November 16, 2022, the Company entered into an Executive Employment Agreement with Aimee Infante (the “Infante Agreement”), which replaced her prior employment agreement. Pursuant to the Infante Agreement, Ms. Infante will continue to be employed as Chief Marketing Officer of the Company on an at will basis. During the term of the Infante Agreement, Ms. Infante is entitled to a base salary at the annualized rate of $0.2 million. Ms. Infante will be eligible for a discretionary performance bonus up to 25% of her annual salary. Further, Ms. Infante will be entitled to an additional bonus of $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Ms. Infante is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Infante is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Infante will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Infante
Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Infante Agreement will automatically terminate, and the prior employment agreement will again be in full effect.
Elements of Compensation
Base Salary
Messrs. Roper, Miller, Mohan, and Mmes. Black and Infante received a fixed base salary in an amount determined in accordance with their then employment agreement with Sadot Group, Inc., and based on a number of factors, including:
•The nature, responsibilities and duties of the officer’s position;
•The officer’s expertise, demonstrated leadership ability and prior performance;
•The officer’s salary history and total compensation, including annual cash bonuses and long-term incentive compensation; and
•The competitiveness of the market for the officer’s services.
Bonus
Messrs. Roper, Mohan, Miller, and Mmes. Black and Infante earned discretionary performance-based bonuses during the years ended December 31, 2023, and 2022, pursuant to their employment agreements.
Restricted Stock Award
In fiscal year 2023, we issued 1.0 million shares of our restricted common stock, with a fair value of $0.3 million, to three members of our executive team.
Stock Options
On May 2, 2022, we issued options to purchase an aggregate of 0.3 million shares of our common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on June 30, 2022.
On October 10, 2022, we issued options to purchase 25.0 thousand shares of our common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on December 31, 2022.
On February 27, 2023, we issued options to purchase an aggregate of 0.5 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On March 15, 2023, we issued options to purchase 0.1 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
Equity Incentive Plans
2021 Plan
The Company’s board of directors and shareholders approved and adopted on October 7, 2021 the 2021 Equity Incentive Plan (“2021 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2021 Plan, the Company reserved 1.5 million shares of common stock for issuance. As of the date of the issuance of these Consolidated Financial Statements 0.7 million shares have been issued and 0.8 million option to purchase shares have been awarded under the 2021 Plan.
2023 Plan
The Company’s board of directors and shareholders approved and adopted on February 28, 2023 the 2023 Equity Incentive Plan (“2023 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and
consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2023 Plan, the Company reserved 2.5 million shares of common stock for issuance. As of the date of the issuance of these Consolidated Financial Statements 2.4 million shares of common stock for issuance have been issued and 0.1 million option to purchase shares have been awarded under the 2023 Plan.
2024 Plan
The Company’s board of directors and shareholders approved and adopted on October 27, 2023 the 2024 Equity Incentive Plan (“2024 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock Units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2024 Plan, the Company reserved 7.5 million shares of common stock for issuance. As of December 31, 2023, no shares have been issued under the 2024 Plan.
Administration
The Company’s Board of Directors or a committee appointed by the Board (the “Committee”) will administer the Plan. The Committee will have the authority, without limitation (i) to designate Participants to receive Awards, (ii) determine the types of Awards to be granted to Participants, (iii) determine the number of shares of common stock to be covered by Awards, (iv) determine the terms and conditions of any Awards granted under the Plan, (v) determine to what extent and under what circumstances Awards may be settled in cash, shares of common stock, other securities, other Awards or other property, or canceled, forfeited or suspended, (vi) determine whether, to what extent, and under what circumstances the delivery of cash, Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be made; (vii) interpret, administer, reconcile any inconsistency in, settle any controversy regarding, correct any defect in and/or complete any omission in this Plan and any instrument or agreement relating to, or Award granted under, this Plan; (viii) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of this Plan; (ix) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, Awards; (x) reprice existing Awards with shareholder approval or to grant Awards in connection with or in consideration of the cancellation of an outstanding Award with a higher price; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Plan. The Committee will have full discretion to administer and interpret the Plan and to adopt such rules, regulations and procedures as it deems necessary or advisable and to determine, among other things, the time or times at which the awards may be exercised and whether and under what circumstances an award may be exercised.
Eligibility
Employees, directors, officers, advisors and consultants of the Company or its affiliates are eligible to participate in the Plan and are referred to as “Participants”. The Committee has the sole and complete authority to determine who will be granted an Award under the Plan, however, it may delegate such authority to one or more officers of the Company under the circumstances set forth in the Plan.
Number of Shares Authorized
Up to approximately 1.5 million shares of common stock may be issued pursuant to awards granted under the 2021 Plan, 2.5 million under the 2023 Plan and 7.5 million under the 2024 Plan.
If an Award is forfeited, canceled, or if any Option terminates, expires or lapses without being exercised, the Common Stock subject to such Award will again be made available for future grant. However, shares that are used to pay the exercise price of an Option or that are withheld to satisfy the Participant’s tax withholding obligation will not be available for re-grant under the Plan.
If there is any change in the Company’s corporate pro or structure, the Committee in its sole discretion may make substitutions or adjustments to the number of shares of common stock reserved for issuance under the Plan, the number of shares covered by Awards then outstanding under the Plan, the limitations on Awards under the Plan, the exercise price of outstanding Options and such other equitable substitution or adjustments as it may determine appropriate.
The Plan has a term of ten years and no further Awards may be granted under the Plan after that date.
Awards Available for Grant
The Committee may grant Awards of Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Stock Bonus Awards, Performance Compensation Awards (including cash bonus awards) or any combination of the foregoing. Notwithstanding, the Committee may not grant to any one person in any one calendar year Awards (i) for more than 50% of the Available Shares in the aggregate or (ii) payable in cash in an amount exceeding $10,000,000 in the aggregate.
Options
The Committee will be authorized to grant Options to purchase Common Stock that are either “qualified,” meaning they are intended to satisfy the requirements of Code Section 422 for Incentive Stock Options, or “non-qualified,” meaning they are not intended to satisfy the requirements of Section 422 of the Code. Options granted under the Plan will be subject to the terms and conditions established by the Committee. Under the terms of the Plan, unless the Committee determines otherwise in the case of an Option substituted for another Option in connection with a corporate transaction, the exercise price of the Options will not be less than the fair market value (as determined under the Plan) of the shares of common stock on the date of grant. Options granted under the Plan will be subject to such terms, including the exercise price and the conditions and timing of exercise, as may be determined by the Committee and specified in the applicable award agreement. The maximum term of an Option granted under the Plan will be ten years from the date of grant (or five years in the case of an Incentive Stock Option granted to a 10% stockholder). Payment in respect of the exercise of an Option may be made in cash or by check, by surrender of unrestricted shares of Common Stock (at their fair market value on the date of exercise) that have been held by the participant for any period deemed necessary by the Company’s accountants to avoid an additional compensation charge or have been purchased on the open market, or the Committee may, in its discretion and to the extent permitted by law, allow such payment to be made through a broker-assisted cashless exercise mechanism, a net exercise method, or by such other method as the Committee may determine to be appropriate.
Stock Appreciation Rights
The Committee will be authorized to award Stock Appreciation Rights (or “SARs”) under the Plan. SARs will be subject to such terms and conditions as established by the Committee. A SAR is a contractual right that allows a participant to receive, either in the form of cash, shares or any combination of cash and shares, the appreciation, if any, in the value of a share over a certain period of time. A SAR granted under the Plan may be granted in tandem with an option and SARs may also be awarded to a participant independent of the grant of an Option. SARs granted in connection with an Option shall be subject to terms similar to the Option which corresponds to such SARs. SARs shall be subject to terms established by the Committee and reflected in the award agreement.
Restricted Stock
The Committee will be authorized to award Restricted Stock under the Plan. Unless otherwise provided by the Committee and specified in an award agreement, restrictions on Restricted Stock will lapse after three years of service with the Company. The Committee will determine the terms of such Restricted Stock awards. Restricted Stock are shares of common stock that generally are non-transferable and subject to other restrictions determined by the Committee for a specified period. Unless the Committee determines otherwise or specifies otherwise in an award agreement, if the participant terminates employment or services during the restricted period, then any unvested restricted stock will be forfeited.
Restricted Stock Unit Awards
The Committee will be authorized to award Restricted Stock Unit awards. Unless otherwise provided by the Committee and specified in an award agreement, Restricted Stock Units will vest after three years of service with the Company. The Committee will determine the terms of such Restricted Stock Units. Unless the Committee determines otherwise or specifies otherwise in an award agreement, if the participant terminates employment or services during the period of time over which all or a portion of the units are to be earned, then any unvested units will be forfeited. At the election of the Committee, the participant will receive a number of shares of common stock equal to the number of units earned or an amount in cash equal to the fair market value of that number of shares at the expiration of the period over which the units are to be earned or at a later date selected by the Committee.
Stock Bonus Awards
The Committee will be authorized to grant Awards of unrestricted shares of common stock or other Awards denominated in shares of common stock, either alone or in tandem with other Awards, under such terms and conditions as the Committee may determine.
Performance Compensation Awards
The Committee will be authorized to grant any Award under the Plan in the form of a Performance Compensation Award exempt from the requirements of Section 162(m) of the Code by conditioning the vesting of the Award on the attainment of specific performance criteria of the Company and/or one or more Affiliates, divisions or operational units, or any combination thereof, as determined by the Committee. The Committee will select the performance criteria based on one or more of the following factors: (i) revenue; (ii) sales; (iii) profit (net profit, gross profit, operating profit, economic profit, profit margins or other corporate profit measures); (iv) earnings (EBIT, EBITDA, earnings per share, or other corporate profit measures); (v) net income (before or after taxes, operating income or other income measures); (vi) cash (cash flow, cash generation or other cash measures); (vii) stock price or performance; (viii) total stockholder return (stock price appreciation plus reinvested dividends divided by beginning share price); (ix) economic value added; (x) return measures (including, but not limited to, return on assets, capital, equity, investments or sales, and cash flow return on assets, capital, equity, or sales); (xi) market share; (xii) improvements in capital structure; (xiii) expenses (expense management, expense ratio, expense efficiency ratios or other expense measures); (xiv) business expansion or consolidation (acquisitions and divestitures); (xv) internal rate of return or increase in net present value; (xvi) working capital targets relating to inventory and/or accounts receivable; (xvii) inventory management; (xviii) service or product delivery or quality; (xix) customer satisfaction; (xx) employee retention; (xxi) safety standards; (xxii) productivity measures; (xxiii) cost reduction measures; and/or (xxiv) strategic plan development and implementation.
Transferability
Each Award may be exercised during the Participant’s lifetime only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative and may not be otherwise transferred or encumbered by a Participant other than by will or by the laws of descent and distribution. The Committee, however, may permit Awards (other than Incentive Stock Options) to be transferred to family members, a trust for the benefit of such family members, a partnership or limited liability company whose partners or stockholders are the Participant and his or her family members or anyone else approved by it.
Amendment
The Plan will have a term of ten years. The Company’s board of directors may amend, suspend or terminate the Plan at any time; however, shareholder approval to amend the Plan may be necessary if the law or SEC so requires. No amendment, suspension or termination will materially and adversely affect the rights of any Participant or recipient of any Award without the consent of the Participant or recipient.
Change in Control
Except to the extent otherwise provided in an Award or required by applicable law, in the event of a Change in Control, upon the occurrence of a Change in Control, the Committee is authorized, but not obligated, to make any of the following adjustments (or any combination thereof) in the terms and conditions of outstanding Awards: (a) continuation or assumption of outstanding Awards by the surviving company; (b) substitution by the surviving company of equity, equity-based and/or cash awards with substantially the same terms for outstanding Awards; (c) accelerated exercisability, vesting and/or lapse of restrictions under outstanding Awards immediately prior to the occurrence of the Change in Control; (d) upon written notice, provide that any outstanding Awards must be exercised, to the extent then exercisable, during a reasonable period determined by the Committee and at the end of such period, any unexercised Awards will terminate; and I cancellation of all or any portion of outstanding Awards for fair value (in the form of cash, shares or other property) and which value may be zero.
U.S. Federal Income Tax Consequences
The following is a general summary of the material U.S. federal income tax consequences of the grant and exercise and vesting of Awards under the Plan and the disposition of shares acquired pursuant to the exercise of such Awards. This
summary is intended to reflect the current provisions of the Code and the regulations thereunder. However, this summary is not intended to be a complete statement of applicable law, nor does it address foreign, state, local and payroll tax considerations. Moreover, the U.S. federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular circumstances of such participant.
Options
There are a number of requirements that must be met for a particular Option to be treated as an Incentive Stock Option. One such requirement is that Common Stock acquired through the exercise of an Incentive Stock Option cannot be disposed of before the later of (i) two years from the date of grant of the Option, or (ii) one year from the date of its exercise. Holders of Incentive Stock Options will generally incur no federal income tax liability at the time of grant or upon exercise of those Options. However, the spread at exercise will be an “item of tax preference,” which may give rise to “alternative minimum tax” liability for the taxable year in which the exercise occurs. If the holder does not dispose of the shares before the later of two years following the date of grant and one year following the date of exercise, the difference between the exercise price and the amount realized upon disposition of the shares will constitute long-term capital gain or loss, as the case may be. Assuming both holding periods are satisfied, no deduction will be allowed to the Company for federal income tax purposes in connection with the grant or exercise of the Incentive Stock Option. If, within two years following the date of grant or within one year following the date of exercise, the holder of shares acquired through the exercise of an Incentive Stock Option disposes of those shares, the Participant will generally realize taxable compensation at the time of such disposition equal to the difference between the exercise price and the lesser of the Fair Market Value of the share on the date of exercise or the amount realized on the subsequent disposition of the shares, and that amount will generally be deductible by the Company for federal income tax purposes, subject to the possible limitations on deductibility under Sections 280G and 162(m) of the Code for compensation paid to executives designated in those Sections. Finally, if an otherwise Incentive Stock Option becomes first exercisable in any one year for shares having an aggregate value in excess of $100,000 (based on the date of grant value), the portion of the Incentive Stock Option in respect of those excess shares will be treated as a non-qualified stock option for federal income tax purposes.
Income will be realized by a Participant upon grant of a Non-Qualified Stock Option. Upon the exercise of a Non-Qualified Stock Option, the Participant will recognize ordinary compensation income in an amount equal to the excess, if any, of the Fair Market Value of the underlying exercised shares over the Option exercise price paid at the time of exercise. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income.
The Company will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Restricted Stock
A Participant will not be subject to tax upon the grant of an Award of Restricted Stock unless the Participant otherwise elects to be taxed at the time of grant pursuant to Section 83(b) of the Code. On the date an Award of Restricted Stock becomes transferable or is no longer subject to a substantial risk of forfeiture, the Participant will recognize ordinary compensation income equal to the difference between the Fair Market Value of the shares on that date over the amount the Participant paid for such shares, if any. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. If the Participant made an election under Section 83(b) of the Code, the Participant will recognize ordinary compensation income at the time of grant equal to the difference between the Fair Market Value of the shares on the date of grant over the amount the Participant paid for such shares, if any, and any subsequent appreciation in the value of the shares will be treated as a capital gain upon sale of the shares. Special rules apply to the receipt and disposition of Restricted Shares received by officers and directors who are subject to Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”). The Company will be able to deduct, at the same time as it is recognized by the Participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Restricted Stock Units
A Participant will not be subject to tax upon the grant of a Restricted Stock Unit Award. Rather, upon the delivery of shares or cash pursuant to a Restricted Stock Unit Award, the Participant will recognize ordinary compensation income
equal to the Fair Market Value of the number of shares (or the amount of cash) the Participant actually receives with respect to the Award. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. The Company will be able to deduct the amount of taxable compensation recognized by the Participant for U.S. federal income tax purposes, but the deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
SARs
No income will be realized by a Participant upon grant of an SAR. Upon the exercise of an SAR, the Participant will recognize ordinary compensation income in an amount equal to the Fair Market Value of the payment received in respect of the SAR. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. The Company will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Stock Bonus Awards
A Participant will recognize ordinary compensation income equal to the difference between the Fair Market Value of the shares on the date the shares of common stock subject to the Award are transferred to the Participant over the amount the Participant paid for such shares, if any, and any subsequent appreciation in the value of the shares will be treated as a capital gain upon sale of the shares. The Company will be able to deduct, at the same time as it is recognized by the Participant, the amount of taxable compensation to the Participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Section 162(m)
In general, Section 162(m) of the Code denies a publicly held corporation a deduction for U.S. federal income tax purposes for compensation in excess of $1,000,000 per year paid to any “covered employee.” Covered employees include any individual who served as chief executive officer or chief financial officer during the taxable year, in addition to the three most highly compensated individuals aside from the chief executive officer and chief financial officer. Additionally, covered employees include any previously covered employee for any taxable year beginning after December 31, 2016. The Plan is intended to satisfy an exception with respect to grants of Options to covered employees. In addition, the Plan was designed to permit certain Awards of Restricted Stock, Restricted Stock Units, cash bonus awards and other Awards to be awarded as performance compensation awards intended to qualify under the “performance-based compensation” exception to Section 162(m) of the Code.
On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law. The TCJA repealed the performance-based compensation exception to the Section 162(m) $1 million limitation on compensation to covered employees of publicly held corporations. This change was effective for tax years beginning after December 31, 2017. As a result of this change, any expense recognized upon exercise of stock options will be subject to the $1 million limitation under Section 162(m), even if based on performance.
New Plan Benefits
Future grants under the Plan will be made at the discretion of the Committee and, accordingly, are not yet determinable. In addition, the value of the Awards granted under the Plan will depend on a number of factors, including the Fair Market Value of the shares of common stock on future dates, the exercise decisions made by the Participants and/or the extent to which any applicable performance goals necessary for vesting or payment are achieved. Consequently, it is not possible to determine the benefits that might be received by Participants receiving discretionary grants under, or having their annual bonus paid pursuant to, the Plan.
Interests of Directors or Officers
The Company’s directors may grant Awards under the Plan to themselves as well as to the Company’s officers and other employees, consultants and advisors.
Equity Compensation Plan Information
The following table provides information, as of December 31, 2023, with respect to equity securities authorized for issuance under compensation plans:
Plan Category No. of securities
to be issued
upon exercise
of outstanding
options
under the plan Weighted-average exercise price of outstanding options under the plan No. of
securities
remaining
available
for future
issuance
$
2024 Equity compensation plans approved by security holders - - 7,500,000
2023 Equity compensation plans approved by security holders 68,928 1.51 -
2021 Equity compensation plans approved by security holders 843,572 1.10 -
Equity compensation plans not approved by security holders - - -
Total 912,500 2.61 7,500,000
Director Compensation
Through the third quarter of 2022 the board members were eligible for cash compensation of $12.0 thousand per year to be paid quarterly within 30 days of the close of each quarter. On November 11, 2022, the board of directors approved a new board compensation plan that would increase the cash compensation to $22.0 thousand to be paid quarterly within 30 days of the close of each quarter, which was retroactively applied for the full fourth quarter of 2022.
In addition, on an ongoing basis pursuant to the approved board compensation plan each director will receive $8.0 thousand in value of common stock per year for service as director, $6.0 thousand in value of shares of common stock per year for service on each committee and $4.0 thousand in value of shares of common stock per year for service as chair for such committee. The number of shares to be issued would be based upon the closing price of the last trading date of each calendar quarter. The shares of common stock for committee service will be limited to two committees.
Kevin Mohan is an employee-director and does not receive compensation for serving in his role as a director or Chairman of the Board.
The following table provides information relating to compensation of our directors for our fiscal year ended December 31, 2023:
Name Fees earned
or paid in cash Stock awards Option awards Non-equity incentive
plan compensation Non-qualified deferred
compensation
earnings All other
compensation Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000
Stephen A. Spanos 22 37 38 - - - 97
A.B. Southall III 22 33 38 - - - 93
Paul L. Menchik 22 43 38 - - - 103
Jeff Carl 22 43 38 - - - 103
Major General (Ret) Malcolm B. Frost 22 33 38 - - - 93
Phillip Balatsos 22 39 38 - - - 99
Benjamin Petel 17 58 - - - - 75
Na Yeon (“Hannah”) Oh 13 4 - - - - 17
Ray Shankar 13 4 - - - - 17
Marvin Yeo 10 4 - - - - 14
Paul Sansom 10 4 - - - - 14
Mark McKinney 7 2 - - - - 9
David Errington 7 2 - - - - 9
Dr. Ahmed Khan 7 2 - - - - 9
Executive Compensation Philosophy
Our Board of Directors determines the compensation given to our executive officers in their sole determination. Our Board of Directors reserves the right to pay our executives or any future executives a salary, and/or issue them shares of common stock issued in consideration for services rendered and/or to award incentive bonuses which are linked to our performance, as well as to the individual executive officer’s performance. This package may also include long-term stock-based compensation to certain executives, which is intended to align the performance of our executives with our long-term business strategies. Additionally, while our Board of Directors has not granted any performance base stock options to date, the Board of Directors reserves the right to grant such options in the future, if the Board in its sole determination believes such grants would be in the best interests of the Company.
Incentive Bonus
The Board of Directors may grant incentive bonuses to our executive officers and/or future executive officers in its sole discretion, if the Board of Directors believes such bonuses are in the Company’s best interest, after analyzing our current business objectives and growth, if any, and the amount of revenue we are able to generate each month, which revenue is a direct result of the actions and ability of such executives.
Long-Term, Stock-Based Compensation
In order to attract, retain and motivate executive talent necessary to support the Company’s long-term business strategy we may award our executives and any future executives with long-term, stock-based compensation in the future, at the sole discretion of our Board of Directors.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information about the beneficial ownership of our common stock at March 20, 2024, for:
•each person, or group of affiliated persons, whom we know to beneficially own more than 5% of our common stock;
•each of our named executive officers;
•each of our directors; and
•all of our executive officers and directors as a group.
We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options or warrants or upon conversion of a security that are either exercisable or convertible on or before a date that is 60 days after March 20, 2024. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
Except as otherwise noted below, the address for persons listed in the table is c/o Sadot Group, Inc., 1751 River Run, Suite 200, Fort Worth, Texas 76107.
The percentage ownership information shown in the column labeled “Percentage of shares outstanding” is based upon 51,752,691 shares of common stock outstanding as of March 20, 2024.
Name of beneficial owner Number of shares
beneficially
owned (1)
Percentage of shares
outstanding prior to
offering (1)
5% Stockholders:
Aggia LLC FZ (2)
12,492,069 24.43 %
Armistice Capital LLC (3)
3,201,897 6.26 %
Directors and Named Executive Officers:
Kevin Mohan (4)
524,537 *
Michael J. Roper (5)
523,015 *
Jennifer Black (6)
251,300 *
Kenneth Miller (7)
80,892 *
Aimee Infante (8)
40,852 *
Stephen Spanos (9)
147,515 *
Jeff Carl (10)
160,625 *
Ray Shankar (11)
10,151 *
Hannah Oh (12)
10,151 *
Benjamin Petel (13)
131,397 *
Marvin Yeo (14)
9,361 *
Paul Sansom (15)
9,361 *
Mark McKinney (16)
8,143 *
David Errington (17)
35,143 *
Dr. Ahmed Khan (18)
10,881 *
All executive officers and directors as a group (15 persons) 1,953,324 3.82 %
*Denotes less than 1%
(1)Beneficial ownership as reported in the above table has been determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended, and is not necessarily indicative of beneficial ownership for any other purpose. The number of shares of common stock shown as beneficially owned includes shares of common stock issuable upon (i) the exercise of stock options that will become exercisable within 60 days of March 20, 2024, (ii) the conversion of the convertible promissory notes into
shares of our common stock, and (iii) the exercise of warrants that will become exercisable within 60 days of March 21, 2023. Shares of common stock issuable pursuant to the foregoing methods are deemed outstanding for purposes of calculating the percentage of beneficial ownership of the person or entity holding such securities. Accordingly, the total percentages of beneficial ownership are in excess of one hundred percent (100%).
(2)Aggia LLC FZ beneficially owns 12.5 million shares of common stock of the Company.
(3)Armistice Capital LLC beneficially owns 3.2 million shares of common stock of the Company which are subject to presently exercisable purchase warrants. Armistice Capital Master Fund Ltd., a Cayman Islands exempted company (the “Master Fund”) holds 3.2 million shares of common stock issuable upon exercise of Warrants at an exercise price of $1.385. Armistice Capital, LLC (“Armistice Capital”) is the investment manager of Armistice Capital Master Fund Ltd. (the “Master Fund”), the direct holder of the Shares, and pursuant to an Investment Management Agreement, Armistice Capital exercises voting and investment power over the securities of the Issuer held by the Master Fund and thus may be deemed to beneficially own the securities of the Issuer held by the Master Fund. Mr. Boyd, as the managing member of Armistice Capital, may be deemed to beneficially own the securities of the Issuer held by the Master Fund. The Master Fund specifically disclaims beneficial ownership of the securities of the Issuer directly held by it by virtue of its inability to vote or dispose of such securities as a result of its Investment Management Agreement with Armistice Capital. The address of the Master Fund is c/o Armistice Capital, LLC, 510 Madison Ave, 7th Floor, New York, NY 10022.
(4)Kevin Mohan beneficially owns (i) indirectly 5.6 thousand shares of common stock of the Company through various family members that reside in the same household as Kevin Mohan and (ii) directly 0.4 million shares of common stock of Sadot Group Inc, for serving in various roles in the Company, (iii) 33.0 thousand shares of common stock of the Company purchased on the open market and (iv) directly 55.0 thousand shares of vested but unexercised stock options.
(5)Michael J. Roper beneficially owns directly 0.5 million shares of common stock of the Company (i) 0.4 million shares of common stock of Sadot Group Inc. for serving as the Chief Executive Officer of the Company and (ii) 58.0 thousand shares of common stock of the Company purchased on the open market and (iii) 65.0 thousand shares of vested but unexercised stock options.
(6)Jennifer Black beneficially owns directly 0.2 million shares of common stock of the Company (i) 0.2 million shares of common stock of Sadot Group Inc. for serving as the Chief Financial Officer of the Company, (ii) 41.0 thousand shares of common stock of the Company purchased on the open market and (iii) 41.0 thousand shares of vested but unexercised stock options.
(7)Kenneth Miller beneficially owns directly 80.9 thousand shares of common stock of the Company (i) 32.0 thousand shares of common stock of the Company for serving as Chief Operating Officer of the Company, (ii) 10.0 thousand shares of common stock of the Company purchased on the open market and (iii) 39.0 thousand shares of vested but unexercised stock options.
(8)Aimee Infante beneficially owns directly 40.1 thousand shares of common stock of the Company (i) 3.0 thousand shares of common stock for serving as the Chief Marketing Officer of the Company, (ii) 3.0 thousand shares of common stock of the Company purchased on the open market and (iii) 36.0 thousand shares of vested but unexercised stock options.
(9)Stephen Spanos beneficially owns directly 0.1 million shares of common stock of the Company (i) 0.1 million shares of common stock of the Company for services rendered as a board of director member, (ii) 15.0 thousand of the common stock of through purchase on the open market and (iii) 6.0 thousand shares of vested but unexercised stock options.
(10)Jeff Carl beneficially owns directly 0.2 million shares of common stock of the Company (i) 0.2 million shares of common stock of the Company for services rendered as a board of director member and (ii) 6.0 thousand shares of vested but unexercised stock options.
(11)Ray Shankar beneficially owns directly shares of common stock of the Company (i) 10.0 thousand shares of common stock of the Company (i) 10.0 thousand shares of common stock of the Company for services rendered as a board of director member.
(12)Hannah Oh beneficially owns directly shares of common stock of the Company (i) 10.0 thousand shares of common stock of the Company (i) 10.0 thousand shares of common stock of the Company for services rendered as a board of director member.
(13)Benjamin Petel beneficially owns directly shares of common stock of the Company (i) 0.1 million shares of common stock of the Company (i) 0.1 million shares of common stock of the Company for services rendered as a board of director member and consulting services.
(14)Marvin Yeo beneficially owns directly shares of common stock of the Company (i) 9.0 thousand shares of common stock of the Company (i) 9.0 thousand shares of common stock of the Company for services rendered as a board of director member.
(15)Paul Sansom beneficially owns directly shares of common stock of the Company (i) 9.0 thousand shares of common stock of the Company (i) 9.0 thousand shares of common stock of the Company for services rendered as a board of director member.
(16)Mark McKinney beneficially owns directly shares of common stock of the Company (i) 8.0 thousand shares of common stock of the Company (i) 8.0 thousand shares of common stock of the Company for services rendered as a board of director member.
(17)David Errington beneficially owns directly shares of common stock of the Company (i) 35.0 thousand shares of common stock of the Company (i) 8.0 thousand shares of common stock of the Company for services rendered as a board of director member and (ii) 27.0 thousand shares of common stock of the Company purchased on the open market.
(18)Dr. Ahmed Khan beneficially owns directly shares of common stock of the Company (i) 11.0 thousand shares of common stock of the Company (i) 8.0 thousand shares of common stock of the Company for services rendered as a board of director member and (ii) 3.0 thousand shares of common stock of the Company purchased on the open market.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Policies and Procedures for Related Party Transactions
Following this offering, pursuant to the written charter of our Audit Committee, the Audit Committee will be responsible for reviewing and approving, prior to our entry into any such transaction, all related party transactions and potential conflict of interest situations involving:
•any of our directors, director nominees or executive officers;
•any beneficial owner of more than 5% of our outstanding stock; and
•any immediate family member of any of the foregoing.
Our Audit Committee will review any financial transaction, arrangement or relationship that:
•involves or will involve, directly or indirectly, any related party identified above;
•would cast doubt on the independence of a director;
•would present the appearance of a conflict of interest between us and the related party; or
•is otherwise prohibited by law, rule or regulation.
The Audit Committee will review each such transaction, arrangement or relationship to determine whether a related party has, has had or expects to have a direct or indirect material interest. Following its review, the Audit Committee will take such action as it deems necessary and appropriate under the circumstances, including approving, disapproving, ratifying, canceling or recommending to management how to proceed if it determines a related party has a direct or indirect material interest in a transaction, arrangement or relationship with us. Any member of the Audit Committee who is a related party with respect to a transaction under review will not be permitted to participate in the discussions or evaluations of the transaction; however, the Audit Committee member will provide all material information concerning the transaction to the Audit Committee. The Audit Committee will report its action with respect to any related party transaction to the board of directors.
See Employment Agreements for Messrs. Roper, Miller, Mohan and Mmes. Black and Infante in Item 11. Executive Compensation.
Transactions with Officers, Directors and Executives of Sadot Group
On January 6, 2022, we issued an aggregate of 39.6 thousand shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2021.
On January 2, 2022, we appointed Jennifer Black as our Chief Financial Officer and entered into an Offer Letter with Ms. Black. Pursuant to the Offer Letter, Ms. Black will be employed as our Chief Financial Officer on an at-will basis. Ms. Black is entitled to a base salary at the annualized rate of $0.2 million. Our previous CFO, Ferdinand Groenewald, was appointed as our Chief Accounting Officer and subsequently the position of Chief Accounting Officer was eliminated.
On February 10, 2022, we entered into an Employment Agreement with Michael Roper effective February 14, 2022, which replaced his prior employment agreement. Pursuant to the Employment Agreement, Mr. Roper will continue to be employed as our Chief Executive Officer on an at will basis. During the term of the Employment Agreement, Mr. Roper will be entitled to a base salary at the annualized rate of $0.4 million, which will be increased to $0.4 million upon the one-year anniversary. Mr. Roper will be eligible for a discretionary performance bonus to be paid in cash or equity. Within 90 days of the effective date, we will issue Mr. Roper stock options to receive 0.1 million shares of common stock which will vest over a term of five years. If Mr. Roper is terminated by us for any reason other than cause, including termination without cause in connection with a change in control, Mr. Roper will be entitled to a severance package of 18 months of salary and health and dental benefits paid in accordance with our payroll schedule, but subject to the execution of a valid release in favor of us and our related parties.
On February 10, 2022, we entered into a letter agreement with Kevin Mohan, Chief Investment Officer, providing that Mr. Mohan will continue to be engaged by us on an at-will basis with a base salary at the annualized rate of $0.2 million effective February 14, 2022. Mr. Mohan will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 75% of his salary. Within 90 days of the effective date, we will issue Mr. Mohan stock options to receive 0.1 million shares of common stock which will vest over a term of five years. If Mr. Mohan is terminated by us for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with our payroll schedule and insurance program, but subject to the execution of a valid release in favor of us and our related parties.
On February 9, 2022, we entered into a letter agreement with Kenn Miller, Chief Operations Officer, providing that Mr. Miller will continue to be engaged by us on an at-will basis with a base salary at the annualized rate of $0.3 million effective February 14, 2022. Mr. Miller will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 75% of his salary. Within 90 days of the effective date, we will issue Mr. Miller stock options to receive 0.1 million shares of common stock which will vest over a term of five years. If Mr. Miller is terminated by us for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of 12 months of salary and health and dental benefits paid in accordance with our payroll schedule and insurance program, but subject to the execution of a valid release in favor of us and our related parties.
On February 9, 2022, we entered into a letter agreement with Aimee Infante, Chief Marketing Officer, providing that Ms. Infante will continue to be engaged by us on an at-will basis with a base salary at the annualized rate of $0.2 million effective February 14, 2022. Ms. Infante will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25% of her salary. Within 90 days of the effective date, we will issue Ms. Infante stock options to receive 42.5 thousand shares of common stock which will vest over a term of five years. If Ms. Infante is terminated us for any reason other than cause, including termination without cause in connection with a change in control, she will be entitled to
a severance package of six months of salary and health and dental benefits paid in accordance with the our payroll schedule and insurance program, but subject to the execution of a valid release in favor of us and our related parties.
On February 9, 2022, we entered into a letter agreement with Ferdinand Groenewald, Chief Accounting Officer, providing that Mr. Groenewald will continue to be engaged by us on an at-will basis with a base salary at the annualized rate of $0.2 million effective February 14, 2022. Mr. Groenewald will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25% of his salary. Within 90 days of the effective date, we will issue Mr. Groenewald stock options to receive 25.0 thousand shares of common stock which will vest over a term of five years. If Mr. Groenewald is terminated by us for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with our payroll schedule and insurance program, but subject to the execution of a valid release in favor of us and our related parties.
On March 31, 2022, we issued an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2022.
On April 4, 2022, we issued 20.0 thousand shares of common stock to a member of the executive team per the employment agreement.
On May 2, 2022, we issued options to purchase an aggregate of 0.3 million shares of common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on June 30, 2022.
On June 21, 2022, we advised Ferdinand Groenewald that the position of Chief Accounting Officer has been eliminated. Mr. Groenewald continued his employment with us through July 29, 2022, at which time he became entitled to the severance for termination without cause as outlined in the letter agreement between us and Mr. Groenewald dated February 9, 2022. Mr. Groenewald forfeited 25.0 thousand options upon his departure as an officer.
On July 14, 2022, we issued an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2022.
On October 10, 2022, we issued options to purchase 25.0 thousand shares of common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on December 31, 2022.
On October 12, 2022, we issued an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2022.
On January 5, 2023, we issued an aggregate of 31.3 thousand shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2022.
On February 27, 2023, we issued options to purchase an aggregate of 0.5 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On March 15, 2023, we issued options to purchase 0.1 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On March 21, 2023, the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement dated November 16, 2022. Pursuant to the Black Agreement, Ms. Black will continue to be employed as Chief Financial Officer of the Company on an at will basis. During the term of the Black Agreement, Ms. Black is entitled to a base salary at the annualized rate of $0.3 million. Ms. Black will be eligible for a discretionary performance bonus up to 50% of her annual salary. Further, Ms. Black will be entitled to an additional bonus of $0.1 million upon the Company obtaining approval of the Shareholder Matters and $25.0 thousand upon the Designated Directors representing a majority of the Board of Directors. If Ms. Black is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Black is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Black will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Black Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder
Matters are not approved by the shareholders, the Black Agreement will automatically terminate and the prior employment agreement will again be in full effect.
On March 27, 2023, the Company authorized the issuance of 2.8 million shares of common stock to a consultant for services rendered.
On April 5, 2023 the Company authorized the issuance of 29.7 thousand shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2023.
On May 10, 2023 the Company authorized the issuance of 0.1 million shares of common stock to a consultant for services rendered.
On May 25, 2023, the Company authorized the issuance of 2.7 million shares of common stock to a consultant for services rendered.
On June 30, 2023, the Company vested 0.9 million shares of common stock to a consultant for services rendered.
On July 11, 2023, the Company authorized the issuance of an aggregate of 32.9 thousand shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2023.
On July 14, 2023, the Company issued $8.9 million Restricted Share Awards, with an effective issuance date of April 1, 2023.
On July 27, 2023, the Company authorized the issuance of 2.2 million shares of common stock to Altium in exchange for the exercise of warrants.
On August 15, 2023, the Company authorized the issuance of 0.1 million shares of common stock to a consultant for services rendered.
On September 25, 2023, the Company authorized the issuance of 0.2 million shares of common stock in fees to a consultant for services rendered related to the SEPA.
On September 30, 2023, the Company vested 0.5 million shares of common stock to to a consultant for services rendered.
On October 2, 2023, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2023.
On October 20, 2023, the Company authorized the issuance of 0.1 million shares of common stock to consultants for services rendered.
On November 6, 2023, the Company authorized the issuance of 0.1 million shares of common stock in connection with the conversion of note payables.
On November 14, 2023, the Company authorized the issuance of 0.2 million shares of common stock in connection with the conversion of note payables.
On November 29, 2023, the Company authorized the issuance of 0.2 million shares of common stock in connection with the conversion of note payables.
On December 13, 2023, the Company authorized the issuance of 0.3 million shares of common stock in connection with the conversion of note payables.
On December 19, 2023, the Company authorized the issuance of 0.3 million shares of common stock in connection with the conversion of note payables.
On December 19, 2023, the Company issued 2.0 million RSA's to certain members of the board of directors, consultants and employees. Total RSA vested as a result of the departure of certain members of the board of directors were 0.2 million for 2023. The remaining RSA vest ratably over 12 quarters with the first vesting starting on March 31, 2024.
At December 31, 2023, there were 9.1 million restricted share awards outstanding.
On December 31, 2023, the Company vested 0.2 million shares of common stock to Aggia as consulting fees earned during the fourth quarter of 2023.
On January 4, 2024, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2023. The Company accrued for the liability as of December 31, 2023.
We have entered into indemnification agreements with each of our directors and entered into such agreements with certain of our executive officers. These agreements require us, among other things, to indemnify these individuals for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts reasonably incurred by such person in any action or proceeding, including any action by or in our right, on account of any services undertaken by such person on behalf of our Company or that person’s status as a member of our Board of Directors to the maximum extent allowed under Nevada law.
Item 14. Principal Accountant Fees and Services
Kreit & Chiu CPA LLP has served as our independent registered public accountants for the years ended December 31, 2023 and 2022.
The following is a summary of the fees billed or expected to be billed to us by our independent registered public accountants, for professional services rendered by Kreit & Chiu CPA LLP for the fiscal years ended December 31, 2023 and 2022:
December 31, 2023 December 31, 2022
$’000 $’000
Audit fees (1)
277 265
Audit-related fees (2)
- 2
277 267
(1)Audit Fees consist of fees billed and expected to be billed for services rendered for the audit of our Consolidated Financial Statements for the fiscal years ended December 31, 2023 and 2022 and in connection with the filing of our Form 10-K, Form 10-Qs and multiple Forms S-1 and Forms S-3s.
(2)Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit of our financial statements and are not reported under “Audit Fees.”
The Audit Committee is responsible for the appointment, compensation and oversight of the work of the independent registered public accountants and approves in advance any services to be performed by the independent registered public accountants, whether audit-related or not. The Audit Committee reviews each proposed engagement to determine whether the provision of services is compatible with maintaining the independence of the independent registered public accountants. The fees shown above were pre-approved either by our Board or our Audit Committee.
PART IV
Item 15. Exhibits and Financial Statement Schedules
Exhibit
No. Exhibit Description
3.1+ Articles of Incorporation of Muscle Maker, Inc., a Nevada corporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 14, 2019)
3.2+ Bylaws of Muscle Maker, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 14, 2019)
3.3+ Certificate of Change Pursuant to NRS 78.209 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on December 11, 2019)
3.4+ Certificate of Amendment to Articles of Incorporation of Muscle Maker, Inc., a Nevada corporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 16, 2020)
3.5+ Certificate of Amendment to Articles of Incorporation of Muscle Maker, Inc. (incorporated by reference to Exhibit 3.1 to the Registrants Current Report on Form 8-K filed on March 7, 2023)
3.6+ Articles of Merger (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 26, 2023).
4.1+ Form of Warrant to Purchase Common Stock dated April 9, 2021 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021)
4.2+ Form of Pre-Funded Warrant to Purchase Common Stock dated April 9, 2021 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021)
4.3+ Form of Warrant to Purchase Common Stock issued to A.G.P./Alliance Global Partners dated April 9, 2021 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021)
4.4+ Form of Warrant to Purchase Common Stock dated November 22, 2021 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021)
4.5+ Form of Pre-Funded Warrant to Purchase Common Stock dated November 22, 2021 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021)
4.6+ Form of Placement Agent Warrant to Purchase Common Stock issued to A.G.P./Alliance Global Partners dated November 22, 2021 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021)
4.7+ 2021 Equity Incentive Plan (incorporated by reference to Exhibit 4.8 to the Registrant’s Annual Report on Form 10-K filed on March 17, 2022)
4.8+ 2023 Equity Incentive Plan
4.9* Description of Securities
4.10+ Form of Additional Warrant - Altium Growth Fund Ltd. (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 27, 2023.)
10.1+ Form of Securities Purchase Agreement, dated April 7, 2021, between Muscle Maker, Inc. and the Purchaser* (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021)
10.2+ Form of Securities Purchase Agreement, dated November 17, 2021, between Muscle Maker, Inc. and the Purchasers* (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021)
10.3+ Form of Registration Rights Agreement, dated November 17, 2021, between Muscle Maker, Inc. and the Purchasers (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021)
10.4+ Form of Securities Purchase Agreement, dated April 7, 2021, between Muscle Maker, Inc. and the Purchaser* (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021)
10.5+ Form of Director Agreement dated July 16, 2019 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 10, 2019)
10.6+ Services Agreement between Muscle Maker, Inc., Sadot LLC and Aggia LLC FC dated November 14, 2022 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.7+ Addendum 1 to Services Agreement between Muscle Maker, Inc., Sadot LLC and Aggia LLC FC dated November 17, 2022 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.8+ Limited Liability Operating Agreement of Sadot LLC dated November 16, 2022 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.9+ Executive Employment Agreement between Muscle Maker, Inc. and Michael Roper dated November 16, 2022 (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.10+ Executive Employment Agreement between Muscle Maker, Inc. and Jennifer Black dated November 16, 2022 (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.11+ Executive Employment Agreement between Muscle Maker, Inc. and Kevin Mohan dated November 16, 2022 (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.12+ Executive Employment Agreement between Muscle Maker, Inc. and Kenn Miller dated November 16, 2022 (incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.13+ Executive Employment Agreement between Muscle Maker, Inc. and Aimee Infante dated November 16, 2022 (incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.14+ Standby Equity Purchase Agreement dated September 22, 2023 between Sadot Group, Inc. and YA II PN, Ltd. (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 26, 2023)
10.15+ Form of Convertible Promissory notes issued to YA II PN, Ltd. (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 26, 2023)
10.16+ Global Guaranty Agreement dated September 22, 2023 between Sadot Group, Inc. and YA II PN, Ltd. (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 26, 2023)
10.17+ Registration Rights Agreement dated September 22, 2023 between Sadot Group, Inc. and YA II PN, Ltd. (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 26, 2023)
10.18+ Addendum 2 to the Service Agreement entered between Muscle Maker Inc., Sadot LLC and Aggia LLC FX dated July 14, 2023 (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 18, 2023)
21.1* List of Subsidiaries
23.1* Consent of Kreit & Chiu CPA LLP
31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97.1* Policy for the Recovery of Erroneously Awarded Compensation adopted February 1, 2024
101.INS Inline XBRL Instance Document*
101.SCH Inline XBRL Schema Document*
101.CAL Inline XBRL Calculation Linkbase Document*
101.DEF Inline XBRL Definition Linkbase Document*
101.LAB Inline XBRL Label Linkbase Document*
101.PRE Inline XBRL Presentation Linkbase Document*
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
†Includes management contracts and compensation plans and arrangements
*Filed herewith.
+Previously filed.
Item 16. Form 10-K Summary
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SADOT GROUP, INC
By: /s/ Michael J. Roper
Michael J. Roper
Dated: March 20, 2024
Chief Executive Officer (Principal Executive Officer)
By: /s/ Jennifer Black
Jennifer Black
Chief Financial Officer (Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name Title
/s/ Michael J. Roper Chief Executive Officer
Michael J. Roper (Principal Executive Officer)
/s/ Jennifer Black Chief Financial Officer
Jennifer Black (Principal Financial Officer)
/s/ Kevin Mohan Chief Investment Officer
Kevin Mohan Chairman of the Board
/s/ Stephen A. Spanos Director
Stephen A. Spanos
/s/ Jeff Carl Director
Jeff Carl
/s/ Benjamin Petel Director
Benjamin Petel Secretary
/s/ Na Yeon Oh Director
Na Yeon Oh
/s/ Ray Shankar Director
Ray Shankar
/s/ Marvin Yeo Director
Marvin Yeo
/s/ Paul Sansom Director
Paul Sansom
/s/ Mark McKinney Director
Mark McKinney
/s/ David Errington Director
David Errington
/s/ Dr. Ahmed Khan Director
Dr. Ahmed Khan
Sadot Group, Inc.
Annual Report on Form 10-K
Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 6651)
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 2023 and 2022
Consolidated Statements of Operations and Other Comprehensive Loss for the years ended December 31, 2023 and 2022
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2023 and 2022
Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022
Notes to the Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Sadot Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Sadot Group, Inc. as of December 31, 2023 and 2022, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Sadot Group, Inc. as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to Sadot Group, Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Sadot Group, Inc. is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Kreit & Chiu CPA LLP
We have served as Sadot Group, Inc.'s auditor since 2021.
New York, NY
March 20, 2024
Sadot Group, Inc.
Consolidated Balance Sheets
December 31, 2023 December 31, 2022
$’000 $’000
ASSETS
Current assets:
Cash 1,354 9,898
Accounts receivable, net of allowance for doubtful accounts of $0.2 million and $23.4 thousand as of December 31, 2023 and 2022, respectively
52,920 135
Inventory 2,561 298
Other current assets 56,016 317
Total current assets 112,851 10,648
Right to use assets 1,284 2,433
Property and equipment, net 12,883 1,895
Goodwill 1,798 2,626
Intangible assets, net 2,833 4,611
Deposit on farmland - 4,914
Other non-current assets 46,442 103
Total assets 178,091 27,230
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses 50,167 1,953
Accrued stock-based compensation expense, related party - 3,603
Notes payable, current, net of discount of $0.2 million and nil as of December 31, 2023 and 2022, respectively
6,531 222
Operating lease liability, current 385 560
Deferred revenue, current 1,229 95
Other current liabilities 46,270 182
Total current liabilities 104,582 6,615
Contract liability, non-current 46,048 -
Notes payable, non-current 622 759
Operating lease liability, non-current 1,027 2,019
Deferred revenue, non-current 1,555 1,276
Total liabilities 153,834 10,669
Equity:
Common stock, $0.0001 par value, 200,000,000 shares authorized, 40,464,720 and 29,287,212 shares issued and outstanding as of December 31, 2023, and 2022, respectively
4 3
Additional paid-in capital 107,988 95,913
Accumulated deficit (87,179) (79,355)
Accumulated other comprehensive income 8 -
Total Sadot Group, Inc. shareholders' equity 20,821 16,561
Non-controlling interest 3,436 -
Total equity 24,257 16,561
Total liabilities and equity 178,091 27,230
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group, Inc.
Consolidated Statement of Operations and Other Comprehensive Loss
For the Years Ended December 31,
2023 2022
$’000 $’000
Commodity sales 717,506 150,586
Company restaurant sales, net of discounts 8,053 10,300
Franchise royalties and fees 1,041 727
Franchise advertising fund contributions 73 81
Other revenues 13 5
Cost of goods sold (716,755) (157,307)
Gross profit 9,931 4,392
Impairment of intangible asset (811) (347)
Impairment of goodwill (828) -
Depreciation and amortization expenses (1,808) (2,015)
Franchise advertising fund expenses (73) (81)
Pre-opening expenses (371) (117)
Post-closing expenses (212) (197)
Stock-based expenses (6,192) (3,716)
Sales, general and administrative expenses (9,404) (6,035)
Loss from operations (9,768) (8,116)
Other income 308 46
Interest expense, net (469) (7)
Change in fair value of stock-based compensation 1,339 -
Warrant modification expense (958) -
Gain on fair value remeasurement 1,491 -
Gain on debt extinguishment - 140
Loss Before Income Tax (8,057) (7,937)
Income tax benefit / (expense) 15 (25)
Net loss (8,042) (7,962)
Net loss attributable to non-controlling interest 218 -
Net loss attributable to Sadot Group, Inc. (7,824) (7,962)
Net Loss Per Share attributable to Sadot Group, Inc.:
Basic and Diluted (0.22) (0.28)
Weighted-Average Number of Common Shares Outstanding:
Basic and Diluted 34,940,559 28,558,586
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group, Inc.
Consolidated Statement of Operations and Other Comprehensive Loss (Continued)
For the Years Ended December 31,
2023 2022
$’000 $’000
Net loss (8,042) (7,962)
Other comprehensive income
Foreign exchange translation adjustment 2 -
Unrealized gain, net of income tax 6 -
Total other comprehensive income 8 -
Total comprehensive loss (8,034) (7,962)
Comprehensive loss attributable to non-controlling interest 218 -
Total Comprehensive loss attributable to Sadot Group, Inc. (7,816) (7,962)
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group, Inc.
Consolidated Statement of Changes in Equity
Common Stock Additional
Paid-in
Capital Accumulated
Deficit Accumulated Other Comprehensive Loss Non-controlling Interest Total
Shares Amount
('000
$’000 $’000 $’000 $’000 $’000 $’000
Balance - December 31, 2021 26,110 3 95,760 (71,370) - - 24,393
Cumulative effect of change in accounting principle - - - (23) - - (23)
Cash less exercise of pre-funded warrants 2,410 - - - - - -
Common stock issued as compensation to board of directors 243 - 114 - - - 114
Common stock issued as compensation for services 35 - 18 - - - 18
Common stock issued as compensation for employment 20 - 11 - - - 11
Exercise of pre-funded warrants 438 - - - - - -
Reconciliation for shares outstanding per transfer agent 31 - - - - - -
Stock-based compensation - options - - 10 - - - 10
Net loss - - - (7,962) - - (7,962)
Balance - December 31, 2022 29,287 3 95,913 (79,355) - - 16,561
Common stock compensation to board of directors 334 - 229 - - - 229
Common stock issued as compensation for services 7,675 1 8,172 - - - 8,173
Stock-based compensation - options - - 102 - - - 102
Cash exercise of warrants and warrant modification 2,153 - 3,111 - - - 3,111
Conversion of convertible loan 1,016 - 461 - - - 461
Investment in non-controlling interest - - - - - 3,654 3,654
Foreign exchange translation adjustment - - - - 2 - 2
Unrealized gain, net of income tax - - - - 6 - 6
Net loss - - - (7,824) - (218) (8,042)
Balance - December 31, 2023 40,465 4 107,988 (87,179) 8 3,436 24,257
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31,
2023 2022
$’000 $’000
Cash Flows from Operating Activities
Net loss (8,042) (7,962)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment of intangible asset 811 347
Impairment of goodwill 828 -
Depreciation and amortization expenses 1,808 2,015
Stock-based expenses 6,192 3,755
Change in fair value of stock-based compensation (1,339) -
Warrant modification expense 958 -
Gain on extinguishments of debt - (140)
Unrealized gain, net of income tax 6 -
Foreign exchange translation adjustment 2 -
Loss on disposal of assets 197 274
Bad debt expense 77 (48)
Changes in operating assets and liabilities:
Accounts receivable, net (52,863) (4)
Inventory (2,263) (39)
Operating right to use assets and lease liabilities, net (19) 124
Other current assets (55,698) 1,472
Other non-current assets (46,339) 65
Accounts payable and accrued expenses 48,723 (133)
Other current liabilities 46,089 (104)
Contract liability, non-current 46,048 -
Deferred rent - (128)
Deferred revenue 1,413 308
Total adjustments (5,369) 7,764
Net cash used in operating activities (13,411) (198)
Cash Flows from Investing Activities
Deposit on farmland - (4,914)
Investment from non-controlling interest 3,654 -
Purchases of property and equipment (7,533) (597)
Disposal of property and equipment 421 -
Collections from notes receivable - 70
Net cash used in investing activities (3,458) (5,441)
Cash Flows from Financing Activities
Proceeds from notes payable 11,865 -
Repayments of notes payables (5,693) (230)
Proceeds from exercise of warrants 2,153 -
Net cash provided by / (used in) financing activities 8,325 (230)
Net Decrease in Cash (8,544) (5,869)
Cash - beginning of period 9,898 15,767
Cash - end of period 1,354 9,898
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group, Inc.
Consolidated Statements of Cash Flows (Continued)
For the Years Ended December 31,
2023 2022
$’000 $’000
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest 600 96
Cash paid for taxes 19 26
619 122
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
1. Business Organization and Nature of Operations
Sadot Group, Inc., ("Sadot Group") or ("SGI") f/k/a Muscle Maker, Inc. (“MMI”), a Nevada corporation was incorporated in Nevada on October 25, 2019. In late 2022 SGI has transformed from a U.S.-centric restaurant business into a global, organization focused on the Agri-food commodity supply chain. Effective July 27, 2023, we changed our company name from Muscle Maker, Inc., to Sadot Group, Inc. Sadot Group is headquartered in Ft. Worth, Texas with subsidiary operations all throughout the United States, Brazil, Colombia, Dubai, India, Israel, Singapore, Ukraine and Zambia.
As of December 31, 2023, SGI consisted of two distinct segments:
1.Sadot LLC (“Sadot Agri-Foods”): Sadot Group’s largest operating unit is a global Agri-Foods company engaged in farming, commodity trading and shipping of food and feed (e.g., soybean meal, wheat and corn) via dry bulk cargo ships to/from markets such as Argentina, Australia, Bangladesh, Brazil, Canada, China, Columbia, Ecuador, Egypt, Guinea, Honduras, India, Indonesia, Ivory Coast, Japan, Kenya, Malaysia, Morocco, Mozambique, Nigeria, Philippines, Poland, Romania, Saudi Arabia, South Korea, Sri Lanka, Ukraine, United States and Vietnam, among others. Sadot Agri-Foods competes with the ABCD commodity companies (ADM, Bunge, Cargill, Louis-Dreyfus) as well as many regional organizations. Sadot Agri-Foods operates, through a joint venture, a roughly 5,000 acre crop producing farm in Zambia with a focus on major commodities such as wheat, soy and corn alongside high-value tree crops such as avocado and mango. Sadot Agri-Foods was formed as part of the Company’s diversification strategy to own and operate, through its subsidiaries, the business lines throughout the food value chain. Sadot Agri-Foods seeks to diversify over time into a sustainable and forward-looking global agri-foods company.
2.Sadot Restaurant Group, LLC ("Sadot Food Services"): has three unique “healthier for you” concepts, including two fast casual restaurant concepts, Pokémoto and Muscle Maker Grill, plus one subscription-based fresh prep meal concept, SuperFit Foods. The restaurants were founded on the belief of taking every-day menu options and converting them into “healthier for you” menu choices. Consumers are demanding healthier choices, customization, flavor and convenience. Each of our three concepts offers different menus that are tailored to specific consumer segments. We believe our concepts deliver highly differentiated customer experiences.
SGI and its subsidiaries are hereinafter referred to as the “Company”.
Recent Corporate Developments
Effective July 27, 2023, the Company changed its name from Muscle Maker, Inc. to Sadot Group Inc. The name change was made in accordance with Section 92A.180 of the Nevada Revised Statutes by merging a wholly-owned subsidiary of the Company with and into the Company, with the Company being the surviving corporation in the merger. The Company effectuated the merger by filing Articles of Merger with the Secretary of State of the State of Nevada. In connection with the merger, the Company amended Article I of its Articles of Incorporation to change the Company’s corporate name to Sadot Group Inc. With the exception of the name change, there were no other changes to the Company’s Articles of Incorporation.
Additionally, as of the opening of trading on July 27, 2023, the ticker symbol of the Company’s common stock on The Nasdaq Capital Market was changed to “SDOT” and the CUSIP number of the Company’s common stock (627333107) remained unchanged. The Company’s name and ticker symbol change do not affect the rights of the Company’s security holders, creditors, customers or suppliers. Following the name change, any stock certificates that reflect the Company’s prior name, if any, continue to be valid.
Liquidity and Capital Resources
Our main financial objectives are to prudently manage financial risk, ensure access to liquidity and minimize cost of capital in order to efficiently finance our business and maintain balance sheet strength. We generally finance our ongoing operations with cash flows generated from operations, borrowings under various credit facilities and term loans. At December 31, 2023, working capital, which equals Total current assets less Total current liabilities, was $8.3 million an increase of $4.2 million, compared to working capital of $4.0 million at December 31, 2022. The increase in working capital was primarily due to an increase in Accounts receivable, which was primarily driven by increased food and feed
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Commodity sales, the Prepaid forward on carbon offset, partially offset by an increase in Accounts payable and Notes payable, current. In addition, the Company has access to additional liquidity if it is needed through an executed Standby Equity Purchase Agreement ("SEPA") for up to $25 million in capital whereby the Company may submit advance requests to the lender and the lender will provide cash in consideration of shares of common stock subject to certain limitations and conditions set forth in the SEPA.
Working Capital
We measure our liquidity in a number of ways, including the following:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Cash 1,354 9,898
Accounts Receivable, net 52,920 135
Inventory 2,561 298
Other current assets(1)
56,016 317
Total current assets 112,851 10,648
Accounts payable and accrued expenses 50,167 1,953
Accrued stock-based compensation expense, related party - 3,603
Notes payable, net 6,531 222
Other current liabilities(2)
47,884 837
Total current liabilities 104,582 6,615
Working capital(3)
8,269 4,033
Current ratio(4)
1.08 1.61
(1) Consists of Prepaid expenses and other current assets, Prepaid forward on carbon offsets, Forward sales derivatives and Notes receivable, current
(2) Consists of Operating lease liability, current, Deferred revenue, current and Other current liabilities
(3) Working Capital is defined as Total current assets less Total current liabilities
(4) Current ratio is defined as Total current assets divided by Total current liabilities
2. Significant Accounting Policies
Basis of Presentation
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The accounting policies used to prepare these financial statements are the same as those used to prepare the consolidated financial statements in prior years, except as described in these notes or for the adoption of new standards as outlined below.
Principles of Consolidation
The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries and majority-owned subsidiary. Any intercompany transactions and balances have been eliminated in consolidation.
Reclassifications
Certain prior year balances have been reclassified in order to conform to current year presentation. These reclassifications have no effect on the previously reported results of operations or loss per share.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant estimates include:
•the assessment of recoverability of long-lived assets, including property and equipment, goodwill and intangible assets;
•the estimated useful lives of intangible and depreciable assets;
•estimates and assumptions used to value warrants and options;
•the recognition of revenue; and
•the recognition, measurement and valuation of current and deferred income taxes.
Estimates and assumptions are periodically reviewed, and the effects of any material revisions are reflected in the financial statements in the period that they are determined to be necessary. Actual results could differ from those estimates and assumptions.
Cash and Cash Equivalents
The Company considers all highly-liquid instruments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of December 31, 2023 or 2022.
Inventory
Inventory, which are stated at the lower of cost or net realizable value, related to our, perishable food items and supplies related to our Food service operations of $0.2 million and $0.3 million, and raw materials, supplies and harvested crops related to our farming operations of $2.4 million and nil as of December 31, 2023, and 2022, respectively. Cost is determined using the first-in, first-out method.
Accounts Receivable
Accounts Receivable consists of receivables related to Sadot Food Services and Sadot Agri-Foods of $53.1 million and $0.2 million net of doubtful accounts of $0.2 million and $23.4 thousand as of December 31, 2023, and 2022, respectively.
Accounts receivable is stated at historical carrying amounts net of write-offs and allowances for uncollectible accounts. The Company establishes allowances for uncollectible trade accounts receivable based on lifetime expected credit losses using an aging schedule for each pool of accounts receivable. Pools are determined based on risk characteristics such as the type of receivable and geography. A default rate is derived using a provision matrix which is evaluated on a regular basis by management and based on past experience and other factors. The default rate is then applied to the pool to determine the allowance for expected credit losses. Given the short-term nature of the Company's trade accounts receivable, the default rate is only adjusted if significant changes in the credit profile of the portfolio are identified (e.g., poor crop years, credit issues at the country level, systematic risk), resulting in historic loss rates that are not representative of forecasted losses. Uncollectible accounts are written off when a settlement is reached for an amount that is less than the outstanding historical balance or when the Company has determined that collection of the balance is unlikely.
Purchase of Farmland
On May 16, 2023, the Company through its wholly owned subsidiary, Sadot LLC, entered into a Purchase of Right and Variation Agreement (the “Variation Agreement”) with Zamproagro Limited, a Liberian corporation (“ZPG”) and Cropit Farming Limited, a Zambian corporation (“Cropit”) pursuant to which ZPG assigned all of its rights, liabilities and obligations of the Put and Call Option Agreement Over Land entered between ZPG and Cropit dated December 29, 2022 (the “Put Land Agreement”) to Sadot LLC, which provided ZPG with a one year call option to acquire 70% of 4,942 acres
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
(2,000 hectares) of producing agricultural land along with buildings and related assets located within the Mkushi Farm Block of Zambia’s Region II agricultural zone (the “Farm”) for a purchase price of approximately $8.5 million.
On May 16, 2023, Sadot LLC and Cropit entered into Joint Venture Shareholders Agreement pursuant to which the parties agreed to form a new entity in Zambia to serve as a joint venture with respect to the farming of the Farm. The joint venture is named Sadot Enterprises Limited (“Sadot Zambia”) with Sadot LLC holding 70% of the equity and Cropit holding 30% of the equity. Sadot Zambia will hold 100% of the Farm. Sadot LLC and Cropit each appointed one director to the Board of Directors of Sadot Zambia. Further, Sadot LLC contributed $3.5 million into escrow for the primary purpose of discharging a loan secured by the Farm held by ABSA Bank.
On May 16, 2023, Sadot LLC, Cropit and Chibesakunda & Co., as escrow agent (the “Escrow Agent”) entered into an Escrow Agreement pursuant to which the Escrow Agent held all documentation required to allot Sadot LLC 70% of Sadot Zambia, documentation required to transfer the Farm to Sadot Zambia and $3.5 million contributed by Sadot LLC. Upon closing and completion of the asset acquisition of the farmland and some related property equipment, on August 23, 2023, the Escrow Agent released the required funds to ABSA Bank and released the required documentation with respect to the allocation of Sadot LLC’s interest in Sadot Zambia and the transfer of the Farm.
The asset acquisition consisted of property and equipment of $8.5 million. Cropit contributed land of $3.7 million for its non-controlling interest in the joint venture. The property and equipment that were purchased in the asset acquisition are as follows:
As of
August 23, 2023
$’000
Furniture and Equipment 211
Vehicles 203
Land and Land Improvements 11,766
12,180
Property and Equipment
Property and equipment are stated at cost less accumulated Depreciation and amortization expenses. Major improvements are capitalized, and minor replacements, maintenance and repairs are charged to expense as incurred. Depreciation and amortization expenses are calculated on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the estimated useful life or the lease term of the related asset. The estimated useful lives are as follows:
Furniture and Equipment 3 - 7 years
Leasehold Improvements 1 - 8 years
Vehicles 5 - 10 years
Land Improvements 3 - 20 years
Intangible Assets
The Company accounts for recorded intangible assets in accordance with the Accounting Standards Codification (“ASC’) 350 “Intangibles - Goodwill and Other”. In accordance with ASC 350, the Company does not amortize intangible assets having indefinite useful lives. The Company’s goodwill has an indefinite life and is not amortized, but is evaluated for impairment at least annually, or more often whenever changes in facts and circumstances may indicate that the carrying value may not be recoverable. ASC 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment). Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgment is required to estimate the fair value of
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
reporting units which includes estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment.
The useful lives of the Company’s intangible assets are:
Franchise license 10 years
Trademark 5 years
Proprietary recipes 7 years
Impairment of Long-Lived Assets
When circumstances, such as adverse market conditions, indicate that the carrying value of a long-lived asset may be impaired, the Company performs an analysis to review the recoverability of the asset’s carrying value, which includes estimating the undiscounted cash flows (excluding interest charges) from the expected future operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects of demand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized to the extent that the carrying value exceeds the estimated fair value. Any impairment losses are recorded as operating expenses, which reduce net income.
Convertible Instruments
The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with Topic 815 of the Financial Accounting Standards Board (“FASB”).
If the instrument is determined not to be a derivative liability, the Company then evaluates for the existence of a beneficial conversion feature by comparing the market price of the Company’s common stock as of the commitment date to the effective conversion price of the instrument.
As of December 31, 2023 and 2022, the Company deemed the conversion feature related to notes payable was not required to be bifurcated and recorded as a derivative liability.
Related Parties
A party is considered to be related to the Company if the party directly, indirectly, or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Revenue Recognition
The Company’s revenues consist of Commodity sales, Restaurant sales, Franchise royalties and fees, Franchise advertising fund contributions, and Other revenues. The Company recognizes revenues according to Topic 606 of FASB, “Revenue from Contracts with Customers”. Under the guidance, revenue is recognized in accordance with a five-step revenue model, as follows: (1) identifying the contract with the customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations; and (5) recognizing revenue when (or as) the entity satisfies a performance obligation. In applying this five-step model, we made significant
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
judgments in identifying the promised goods or services in our contracts with franchisees that are distinct, and which represent separate performance obligations.
Commodity Sales
Commodity sale revenue is generated by Sadot Agri-Foods and is recognized when the commodity is delivered as evidenced by delivery and the invoice is prepared and submitted to the customer. During the years ended December 31, 2023 and 2022, the Company recorded Commodity sales revenues of $717.5 million and $150.6 million, respectively, which is included in Commodity sales on the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.
Restaurant Sales
Retail store revenue at Sadot Food Service is recognized when payment is tendered at the point of sale, net of sales tax, discounts and other sales related taxes. The Company recorded retail store revenues of $8.1 million and $10.3 million during the years ended December 31, 2023 and 2022, respectively, which is included in Restaurant sales on the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.
The Company sells gift cards which do not have an expiration date, and it does not deduct dormancy fees from outstanding gift card balances. The Company recognizes revenues from gift cards as restaurant revenues once the Company performs its obligation to provide food and beverage to the customer simultaneously with the redemption of the gift card or through gift card breakage, as discussed in Other revenues below.
Franchise Royalties and Fees
Franchise revenues consists of royalties, initial franchise fees and rebates. Royalties are based on a percentage of franchisee net sales revenue. The Company recognizes the royalties as the underlying sales occur. The Company recorded revenue from royalties of $1.0 million and $0.7 million during the years ended December 31, 2023 and 2022, respectively, which is included in Franchise royalties and fees on the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.
The Company provides the franchisees with management expertise, training, pre-opening assistance, and restaurant operating assistance in exchange for the multi-unit development fees and initial franchise fees. The Company capitalizes these fees upon collection from the franchisee. These initial fees are then recognized as franchise fee revenue on a straight-line basis over the life of the related franchise agreements and any exercised renewal periods. Cash payments are due upon the execution of the related franchise agreement. The Company’s performance obligation with respect to franchise fee revenues consists of a license to utilize the Company’s brand for a specified period of time, which is satisfied equally over the life of each franchise agreement. If a franchise location closes or a franchise agreement is terminated for any reason, the unrecognized revenue will be recognized in full at that time. The Company recorded revenue from initial franchise fees of $0.2 million and $0.1 million during the years ended December 31, 2023 and 2022, respectively, which is included in Franchise royalties and fees on the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.
The Company has supply agreements with certain food and beverage vendors. Pursuant to the terms of these agreements, rebates are provided to the Company based upon the dollar volume of purchases for all company-owned and franchised restaurants from these vendors. Rebates earned on purchases by franchise stores are recorded as revenue during the period in which the related food and beverage purchases are made. The Company recorded revenue from rebates of $0.1 million and $0.1 million during the years ended December 31, 2023 and 2022, respectively, which is included in Franchise royalties and fees on the accompanying Consolidated Statements of Operations. Rebates earned on purchases by Company-owned stores are recorded as a reduction of Food and beverage costs during the period in which the related food and beverage purchases are made.
Franchise Advertising Fund Contributions
Under the Company’s franchise agreements, the Company and its franchisees are required to contribute a certain percentage of revenues to a national advertising fund. The Company’s national advertising services are provided on a
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
system-wide basis and therefore, not considered distinct performance obligations for individual franchisees. In accordance with Topic 606, the Company recognizes these sales-based advertising contributions from franchisees as franchise revenue when the underlying franchisee Company incurs the corresponding advertising expense. The Company records the related advertising expenses as incurred under Sales, general and administrative expenses. When an advertising contribution fund is over-spent at year-end, advertising expenses will be reported on the Consolidated Statement of Operations and Other Comprehensive Loss in an amount that is greater than the revenue recorded for advertising contributions. Conversely, when an advertising contribution fund is under-spent at a year-end, the Company will accrue advertising costs up to advertising contributions recorded in revenue. The Company recorded contributions from franchisees of $0.1 million and $0.1 million, respectively, during the years ended December 31, 2023 and 2022, which are included in Franchise advertising fund contributions on the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.
Other Revenues
Gift card breakage is recognized when the likelihood of a gift card being redeemed by the customer is remote and the Company determines there is not a legal obligation to remit the unredeemed gift card balance to the relevant jurisdiction. The determination of the gift card breakage rate is based upon the Company’s specific historical redemption patterns. Gift card liability is recorded in other current liabilities on the Consolidated Balance Sheets. The Company recorded $13.0 thousand and $5.0 thousand for gift card breakage for the years ended December 31, 2023 and 2022, respectively.
Deferred Revenue
Deferred revenue primarily includes initial franchise fees received by the Company and revenue from forward sales contracts. Deferred revenue related to Sadot food services is recognized in income over the life of the franchise. If a franchise location closes or a franchise agreement is terminated for any reason, the remaining deferred revenue will be recognized in full at that time. Deferred revenue related to Sadot Agri-Foods is recognized at the completion of the commodity forward sales contract agreements.
Stock-Based Expenses
Stock-based expenses include all expenses that are paid with stock. This includes stock-based consulting fees due to Aggia and other consultants, stock compensation paid to the Company's board of directors, and stock compensation paid to employees. The consulting fees due to Aggia related to ongoing Sadot Agri-Foods and expansion of the global agri-commodities business. Based on the initial Services Agreement with Aggia LLC FZ, a Company formed under the laws of United Arab Emirates (“Aggia”), the consulting fees were calculated at approximately 80.0% of the Net Income generated by Sadot Agri-Foods through March 31, 2023. As of April 1, 2023 the consulting agreement was amended to calculate consulting fees on 40.0% of the Net income generated by Sadot LLC. See Note 15 - Commitments and contingencies for further details. For the years ended December 31, 2023 and 2022, $6.2 million and $3.7 million, respectively, are recorded as Stock-based expenses in the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.
The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally recorded on the grant date and re-measured on financial reporting dates and vesting dates until the service period is complete. The fair value amount of the award is then recognized over the period services are required to be provided in exchange for the award, usually the vesting period.
Advertising
Advertising costs are charged to expense as incurred. Advertising costs of $1.3 million and $0.2 million for the years ended December 31, 2023 and 2022, respectively, are included in Sales, general and administrative expenses and $0.2 million and $0.2 million, respectively, are included in Cost of goods sold in the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Net Loss per Share
Basic loss per common share is computed by dividing net loss attributable to Sadot Group, Inc. by the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding, plus the impact of potential common shares, if dilutive, resulting from the exercise of warrants, options or the conversion of convertible notes payable.
The following securities are excluded from the calculation of weighted average diluted common shares at December 31, 2023 and 2022, respectively, because their inclusion would have been anti-dilutive:
December 31,
2023 2022
('000
('000
Warrants 17,380 18,033
Options 828 413
RSAs 8,643 -
Convertible debt 9,238 24
Total potentially dilutive shares 36,089 18,470
The following table sets forth the computation of basic and dilutive net loss per share attributable to the Company’s
stockholders:
For the Years Ended December 31,
2023 2022
(In thousands, except for share count and per share data)
Net loss attributable to Sadot Group, Inc. (7,824) (7,962)
Weighted-average shares outstanding:
Basic 34,940,559 28,558,586
Effect of potentially dilutive stock options - -
Diluted 34,940,559 28,558,586
Net loss per share attributable to Sadot Group, Inc.:
Basic (0.22) (0.28)
Diluted (0.22) (0.28)
Major Vendor
The Company engages various vendors to purchase commodities for resale and distribute food products to their Company-owned restaurants. Purchases from the Company’s largest commodity supplier totaled 88% for the year ended December 31, 2023. Purchases from the Company’s largest food service supplier totaled 33% for the year ended December 31, 2022.
Derivative Instruments
The Company is exposed to market risks primarily related to the volatility in the price of carbon credits and soybeans. To manage these risks, the Company enters into forward sales contracts to sell carbon offset units from time to time. The Company evaluates its contracts to determine if such contracts qualify as derivatives under FASB Accounting ASC 815, “Derivatives and Hedging” (“ASC 815”). Derivative instruments are recorded as either assets or liabilities measured at their fair values. As the Company’s existing contracts do not qualify for hedge accounting treatment, any changes in fair value are recorded as Gain / (loss) on fair value remeasurement within “Other income / (expense)” in the Consolidated Statement of Operations and Other Comprehensive Loss for each reporting period. Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument is probable within the next 12 months from the balance sheet date. The Company does not offset its derivative assets and
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
liabilities within the Consolidated Balance Sheets. Changes in the fair value of derivative instruments are recorded as an adjustment to operating activities in the consolidated statement of cash flows.
Refer to Fair Value of Financial Instruments below, Note 15 - Commitments and contingencies and Note 18 - Financial instruments for additional information regarding the Company’s derivative instruments.
Derivatives are initially measured at fair value and then are subsequently remeasured to fair value at the reporting date. Forward sales contracts are derivatives that were purchased and sold at a later date at a fixed or determinable price for a specified period. Changes in fair value are recognized in Gain / (loss) on fair value remeasurement in the Consolidated Statement of Operations and Other Comprehensive Loss, as appropriate.
We use derivative financial instruments primarily for purposes of hedging exposures to fluctuations in agricultural commodity prices. We enter into these derivative contracts for periods consistent with the related underlying exposures, and the contracts do not constitute positions independent of those exposures. We do not enter into derivative contracts for speculative purposes and do not use leveraged instruments.
We record all open contract positions on our Consolidated Balance Sheets at fair value and typically do not offset these assets and liabilities. There were two open positions at December 31, 2023.
Cash flows from derivative contracts are included in Net cash provided by operating activities.
Fair Value of Financial Instruments
The Company measures the fair value of financial assets and liabilities based on the guidance of the FASB Accounting ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”).
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 - quoted prices in active markets for identical assets or liabilities.
Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable.
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.
See Note 17 - Fair value measurement for a summary of financial liabilities held at carrying amount including the Accrued compensation liability, Forward sales derivatives and the Derivative liability. For details related to the fair value of the Accrued compensation liability measured using Level 1 inputs, refer to Note 19 - Equity for details related to the fair value of the Forward sales derivatives and Derivative liability measured using Level 2 inputs, refer to Note 15 - Commitments and contingencies and Note 18 - Financial instruments.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes” (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Tax benefits claimed or expected to be claimed on a tax return are recorded in the Company’s financial statements. A tax benefit from an uncertain tax position is only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Uncertain tax positions have had no impact on the Company’s financial condition, results of operations or cash flows. The Company does not expect any significant changes in its unrecognized tax benefits within years of the reporting date.
The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as Sales, general and administrative expenses in the Consolidated Statements of Operations and Other Comprehensive Loss.
Currency Translation Differences
Transactions in foreign currencies are translated to the respective functional currencies of Company's at the average foreign exchange rates for income and expenses. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the foreign exchange rate ruling as of the reporting period end date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined. Foreign exchange differences arising on translation are recognized in the Consolidated Statement of Operations and Other Comprehensive Loss.
The assets and liabilities of foreign operations, including farm operations and fair value adjustments arising on consolidation, are translated to the Company’s reporting currency, United States Dollars, at foreign exchange rates at the
reporting date. On a monthly basis, for subsidiaries whose functional currency is a currency other than the U.S. dollar, subsidiary statements of income and cash flows must be translated into U.S. dollars for consolidation purposes based on weighted-average exchange rates in each monthly period. As a result, fluctuations of local currencies compared to the U.S. dollar during each monthly period impact our consolidated statements of income and cash flows for each reported period (per quarter and year-to-date) and also affect comparisons between those reported periods.
Non-controlling Interests
The Company consolidates entities in which the Company has a controlling financial interest. The Company consolidates subsidiaries in which the Company holds, directly or indirectly, more than 50% of the voting rights. Non-controlling interests represent third-party equity ownership interests in the Company’s consolidated entities. The amount of net income attributable to Non-controlling interests is disclosed in the Consolidated Statements of Income and Other Comprehensive Loss.
Recent Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which requires companies to recognize lease liabilities and corresponding right-of-use leased assets on the Balance Sheets and to disclose key information about leasing arrangements. Qualitative and quantitative disclosures will be enhanced to better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2021, with early adoption permitted.
Additionally, in 2018 and 2019, the FASB issued the following Topic 842-related ASUs:
•ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842, which clarifies the applicability of Topic 842 to land easements and provides an optional transition practical expedient for existing land easements;
•ASU 2018-10, Codification Improvements to Topic 842, Leases, which makes certain technical corrections to Topic 842;
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
•ASU 2018-11, Leases (Topic 842): Targeted Improvements, which allows companies to adopt Topic 842 without revising comparative period reporting or disclosures and provides an optional practical expedient to lessors to not separate lease and non-lease components of a contract if certain criteria are met; and
•ASU 2019-01, Leases (Topic 842): Codification Improvements, which provides guidance for certain lessors on determining the fair value of an underlying asset in a lease and on the cash flow statement presentation of lease payments received; ASU No. 2019-01 also clarifies disclosures required in interim periods after adoption of ASU No. 2016-02 in the year of adoption.
The Company adopted Topic 842 as of January 1, 2022 and recognized a cumulative-effect adjustment to the opening balance of accumulated deficit of $15.0 thousand as of the adoption date, and recognized an additional $7.8 thousand during the second quarter of 2022, based on updated information on two of our leases, for an aggregate cumulative-effect adjustment to accumulated deficit of $22.8 thousand. See Note 11 - Leases for further details.
In October 2021, the FASB issued ASU 2021-08 Business Combinations (“Topic 805”): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers”, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended subsequently by ASUs 2018-19, 2019-04, 2019-05, 2019-10, 2019-11 and 2020-03. The guidance in the ASUs requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used. The standard also establishes additional disclosures related to credit risks. This standard is effective for fiscal years beginning after December 15, 2022. The adoption of this guidance on January 1, 2023 did not have a material impact on the Company's Consolidated Financial Statements and related disclosures.
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06 Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity. Among other changes, ASU 2020-06 removes the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share and updates the disclosure requirements in ASC 470-20, making them easier to understand for financial statement preparers and improving the decision-usefulness and relevance of the information for financial statement users. The Company early adopted the new guidance from January 1, 2023, noting no material impact.
In April 2021, the FASB issued ASU 2021-04, “Earnings Per Share (Topic 260), Debt- Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” (“ASU 2021-04”) to clarify the accounting by issuers for modifications or exchanges of equity-classified warrants. The new ASU is effective for all entities in fiscal years starting after December 15, 2021. Early adoption is permitted. The Company adopted the new guidance from January 1, 2023, noting no material impact.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting-Improvements to Reportable Segment Disclosures (Topic 280). The standard requires incremental disclosures related to reportable segments, including disaggregated expense information and the title and position of the company's chief operating decision maker ("CODM"), as identified for purposes of segment determination. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Entities must adopt the changes to the segment reporting guidance on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Subsequent Events
The Company evaluated events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation and transactions, the Company did not identify any subsequent events that would have required adjustment or disclosure in the Financial Statements, except as disclosed in Note 21 - Subsequent events.
3. Allowance for Credit Losses on Accounts Receivable
At December 31, 2023 and 2022, a summary of the activity in the allowance for credit losses on accounts receivable appears below:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Balance at beginning of period 23 -
Adjustments related to Sadot food services 72 23
Adjustments related to Sadot agri-foods 78 -
Customer accounts written off, net of recoveries - -
Balance at end of period 173 23
4. Other Current Assets
At December 31, 2023 and 2022, the Company’s other current assets consists of the following:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Prepaid expenses 766 89
Other receivables 7 228
Contract assets - current 47,180 -
Forward sales derivative 1,491 -
Notes receivable, current 148 -
Prepaid forward on carbon offsets 6,424 -
Other current assets 56,016 317
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
5. Other Non-Current Assets
At December 31, 2023 and 2022, the Company’s other non-current assets consists of the following:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Security deposit 76 103
Notes receivable, non-current 26 -
Contract assets, non-current 46,340 -
Other non-current assets 46,442 103
6. Property and Equipment, Net
As of December 31, 2023, and 2022, Property and equipment consist of the following:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Furniture and equipment 1,026 1,266
Vehicles 270 55
Leasehold improvements 877 2,062
Land and land improvements 11,766 -
Construction in process - 5
Property and equipment, gross 13,939 3,388
Less: accumulated depreciation (1,056) (1,493)
Property and equipment, net 12,883 1,895
Depreciation expense amounted to $0.8 million and $0.6 million for the years ended December 31, 2023 and 2022, respectively. During the years ended December 31, 2023 and 2022, the Company wrote off Property and equipment with an original cost value of $1.6 million and $0.5 million, respectively. The Company wrote off Property and equipment related to closed locations and future locations that were terminated due to a change of business focus and recorded a loss on disposal of $0.2 million and $0.3 million, respectively, for the years ended December 31, 2023 and 2022, respectively, in the Consolidated Statement of Operations and Other Comprehensive Loss. Please refer to Note 2 - Significant accounting policies for additional information.
7. Goodwill and Other Intangible Assets, Net
The Company’s intangible assets include trademarks, franchisee agreements, franchise license, domain names, customer list, proprietary recipes and non-compete agreements. Intangible assets are amortized over useful lives ranging from 5 to 10 years.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
A summary of the intangible assets is presented below:
Intangible
assets,
net at
December 31,
2021 Impairment of
intangible assets Amortization
expense Intangible
assets,
net at
December 31,
2022 Impairment of
intangible assets Amortization
expense Intangible
assets,
net at
December 31,
$’000 $’000 $’000 $’000 $’000 $’000 $’000
Trademark Muscle Maker Grill 1,526 (347) (509) 670 (419) (251) -
Franchise Agreements Muscle Maker Grill 163 - (27) 136 (116) (20) -
Trademark SuperFit 38 - (9) 29 (22) (7) -
Domain Name SuperFit 106 - (25) 81 (62) (19) -
Customer List SuperFit 118 - (28) 90 (70) (20) -
Proprietary Recipes SuperFit 135 - (32) 103 (79) (24) -
Non-Compete Agreement SuperFit 194 - (87) 107 (43) (64) -
Trademark Pokemoto 153 - (35) 118 - (35) 83
Franchisee License Pokemoto 2,599 - (277) 2,322 - (277) 2,045
Proprietary Recipes Pokemoto 1,028 - (161) 867 - (162) 705
Non-Compete Agreement Pokemoto 328 - (240) 88 - (88) -
6,388 (347) (1,430) 4,611 (811) (967) 2,833
Amortization expense related to intangible assets was $1.0 million and $1.4 million for the years ended December 31, 2023 and 2022, respectively.
The estimated future amortization expense is as follows:
For the Year Ended December 31,
2024 2025 2026 2027 2028 Thereafter Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000
Trademark Pokemoto 35 35 13 - - - 83
Franchisee License Pokemoto 278 277 277 277 277 659 2,045
Proprietary Recipes Pokemoto 162 161 161 161 60 - 705
475 473 451 438 337 659 2,833
On August 4, 2023, the Company announced its intention to strategically pivot towards the global food supply chain sector. The Company plans to reduce Sadot Food Services operating expenses by closing underperforming units while refranchising (selling) most of the remaining company-owned units. Due to the structural change of the Company's operations and the closing or marketing for sale of the Company owned stores an impairment testing of the Company’s intangible assets was performed. Therefore, an impairment charge of $0.8 million was recorded during the year ended December 31, 2023.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
A summary of the goodwill assets is presented below:
Muscle Maker Grill Pokemoto SuperFit Food Total
$’000 $’000 $’000 $’000
Goodwill, net at December 31, 2021 570 1,798 258 2,626
Impairment of goodwill - - - -
Goodwill, net at December 31, 2022 570 1,798 258 2,626
Impairment of goodwill (570) - (258) (828)
Goodwill, net at December 31, 2023 - 1,798 - 1,798
On August 4, 2023, the Company announced its intention to strategically pivot towards the global food supply chain sector. The Company plans to reduce Sadot Food Services operating expenses by closing underperforming units while refranchising (selling) most of the remaining company-owned units. Due to the structural change of the Company's operations and the closing or marketing for sale of the Company owned stores an impairment testing of the Company’s goodwill was performed. During the year ended December 31, 2023, there was an Impairment of goodwill of $0.8 million. There was no impairment during the year ended December 31, 2022.
8. Accounts Payables and Accrued Expenses
Accounts payables and accrued expenses consist of the following:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Accounts payable 3,488 1,085
Accrued payroll and bonuses 756 551
Accrued expenses 204 87
Accrued interest expenses 77 -
Accrued professional fees 255 185
Accounts payable commodities 45,342 -
Accrued purchases 17 -
Sales taxes payable 28 45
50,167 1,953
9. Accrued Stock-Based Consulting Expenses Due to Related Party
At December 31, 2023, there were no Accrued stock-based consulting expenses and at December 31, 2022, Accrued stock-based consulting expenses were $3.6 million. Accrued stock-based consulting expenses are related to consulting fees due to Aggia, for Sadot Agri-Foods. See Note 20 - Related party transactions for details. Based on the initial Services Agreement with Aggia LLC FZ, a Company formed under the laws of United Arab Emirates (“Aggia”), the consulting fees were calculated at approximately 80% of the Net Income generated by Sadot Agri-Foods through March 31, 2023. As of April 1, 2023, the consulting agreement was amended to calculate consulting fees on 40.0% of the Net income generated by Sadot Agri-Foods. See Note 15 - Commitments and contingencies for further details. For the years ended December 31, 2023 and 2022, $5.4 million and $3.6 million, respectively, are also recorded within Stock-based expenses in the accompanying Consolidated Statements of Operations and Other Comprehensive Loss. The Stock-based consulting expenses that were due to related party were paid in stock in 2023.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
10. Notes Payable
Standby Equity Purchase Agreement
On September 22, 2023, the Company entered into the Standby Equity Purchase Agreement (“SEPA”) with YA II PN, LTD, a Cayman Islands exempt limited partnership (“Yorkville”) pursuant to which the Company has the right to sell to Yorkville up to $25 million of its shares of common stock, subject to certain limitations and conditions set forth in the SEPA, from time to time during the term of the SEPA. This freestanding financial instrument (put option) is by definition a derivative that should be accounted for under ASC 815. Since this put option is for common stock of the Company and there is no cash settlement, this instrument is considered indexed to its own stock. Additionally, under the guidance, this instrument would be classified as equity. In accordance with ASC 815, the Company should fair value this instrument on day 1 and record in this amount equity with no adjustments to fair value during its life. Since the debit and credit would both go through APIC, the Company determined it would not measure or record this option as it would have no effect on the consolidated financial statements. Sales of the shares of common stock to Yorkville under the SEPA, and the timing of any such sales, are at the Company’s option, and the Company is under no obligation to sell any shares of common stock to Yorkville under the SEPA except in connection with notices that may be submitted by Yorkville, in certain circumstances as described below.
Upon the satisfaction of the conditions to Yorkville’s purchase obligation set forth in the SEPA, including having a registration statement registering the resale of the shares of common stock issuable under the SEPA declared effective by the SEC, the Company will have the right, but not the obligation, from time to time at its discretion until the SEPA is terminated to direct Yorkville to purchase a specified number of shares of common stock (“Advance”) by delivering written notice to Yorkville (“Advance Notice”). While there is no mandatory minimum amount for any Advance, it may not exceed an amount equal to 100% of the average of the daily traded amount during the five consecutive trading days immediately preceding an Advance Notice.
The shares of common stock purchased pursuant to an Advance delivered by the Company will be purchased at a price equal to 97% of the lowest daily VWAP of the shares of common stock during the three consecutive trading days commencing on the date of the delivery of the Advance Notice, other than the daily VWAP on a day in which the daily VWAP is less than a minimum acceptable price as stated by the Company in the Advance Notice or there is no VWAP on the subject trading day. The Company may establish a minimum acceptable price in each Advance Notice below which the Company will not be obligated to make any sales to Yorkville. “VWAP” is defined as the daily volume weighted average price of the shares of common stock for such trading day on the Nasdaq Stock Market during regular trading hours as reported by Bloomberg L.P. Accordingly, as may otherwise be limited by Yorkville’s 4.99% beneficial ownership limitation, assuming the Company submits an Advance requiring Yorkville to provide $0.1 million in funding and assuming an applicable VWAP of $1.10 and, in turn, a purchase price of $1.067 (97% of the VWAP), the Company would be required to issue 0.1 million shares of common stock and Yorkville would receive a profit of approximately $0.03201 per share, or approximately $2,999.98, if it sold all of such shares at $1.10 per share.
In connection with the SEPA, and subject to the condition set forth therein, Yorkville has agreed to advance to the Company in the form of convertible promissory notes (the “Convertible Notes”) an aggregate principal amount of $4.0 million (the “Pre-Paid Advance”). The Pre-Paid Advance was disbursed on September 22, 2023 with respect to $3.0 million and the balance of $1.0 million was disbursed on October 30, 2023, upon the registration statement registering the resale of the shares of common stock issuable under the SEPA being declared effective. The purchase price for the Pre-Paid Advance is 94.0% of the principal amount of the Pre-Paid Advance. Interest shall accrue on the outstanding balance of any Pre-Paid Advance at an annual rate equal to 6.0%, subject to an increase to 18% upon an event of default as described in the Convertible Notes. The maturity date will be 12-months after the initial closing of the Pre-Paid Advance. Yorkville may convert the Convertible Notes into shares of the Company’s common stock at a conversion price equal to the lower of $1.11495 or 95% of the lowest daily VWAP during the seven consecutive trading days immediately proceeding the conversion (the “Conversion Price”), which in no event may the Conversion Price be lower than $0.33 (the “Floor Price”). In addition, upon the occurrence and during the continuation of an event of default, the Convertible Notes shall become immediately due and payable and the Company shall pay to Yorkville the principal and interest due thereunder. In no event shall Yorkville be allowed to effect a conversion if such conversion, along with all other shares of common stock beneficially owned by Yorkville and its affiliates would exceed 4.99% of the outstanding shares of the common stock of the Company. If any time on or after October 22, 2023 (i) the daily VWAP is less than the Floor Price for seven trading
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
days during a period of nine consecutive trading days (“Floor Price Trigger”), or (ii) the Company has issued in excess of 99% of the shares of common stock available under the Exchange Cap (“Exchange Cap Trigger” and collectively with the Floor Price Trigger, the “Trigger”)), then the Company shall make monthly payments to Yorkville beginning on the seventh trading day after the Trigger and continuing monthly in the amount of $0.5 million plus an 8.0% premium and accrued and unpaid interest. The Exchange Cap Trigger will not apply in the event the Company has obtained the approval from its stockholders in accordance with the rules of Nasdaq Stock Market for the issuance of shares of common stock pursuant to the transactions contemplated in the Convertible Note and the SEPA in excess of 19.99% of the aggregate number of shares of common stock issued and outstanding as of the effective date of the SEPA (the “Exchange Cap”). No triggering event occured as of December 31, 2023. As of December 31, 2023, 1.2 million shares of common stock have been converted leaving an aggregate principle balance remaining of $3.6 million.
Notes Payable
During the years ended December 31, 2023 and 2022, the Company received a total amount of $11.9 million and nil, respectively, and repaid a total amount of $5.7 million and $0.2 million, respectively, of the notes payables.
As of December 31, 2023, the Company had an aggregate amount of $7.1 million in notes payable, net of discount of $0.2 million. Other than the Yorkville note above there are various notes payable for an aggregate amount of $3.8 million with interest rates ranging between 3.75% - 12.00% per annum, due on various dates through May 2026.
The maturities of notes payable as of December 31, 2023, are as follows:
Principal Amount
$’000
1/1/24-12/31/24 6,687
1/1/25-12/31/25 79
1/1/26-12/31/26 543
1/1/27-12/31/27 -
Thereafter -
7,309
11. Leases
The Company’s leases consist of restaurant locations. We determine if a contract contains a lease at inception. The leases generally has remaining terms of 1-8 years and most leases include the option to extend the leases for an additional 5-year period.
The total lease cost associated with Right of use assets and Operating lease liabilities for the year ended December 31, 2023, was $0.7 million and has been recorded in the Consolidated Statement of Operations and Other Comprehensive Loss within Cost of goods sold.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
The Company's assets and liabilities related to the Company’s leases were as follows:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Assets
Right to use asset 1,284 2,433
Liabilities
Operating leases - current 385 560
Operating leases - non-current 1,027 2,019
Total lease liabilities 1,412 2,579
The table below presents the future minimum lease payments under the noncancellable operating leases as of December 31, 2023:
Operating Leases
$’000
Fiscal Year:
2023 -
2024 529
2025 378
2026 239
2027 245
2028 184
Thereafter 304
Total lease payments 1,879
Less imputed interest (467)
Present value of lease liabilities 1,412
The Company’s lease term and discount rates were as follows:
As of December 31, 2023
Weighted-average remaining lease term (in years)
Operating leases 4.86
Weighted-average discount rate
Operating leases 12.0 %
All remaining leases relate to the Sadot Food Services segment, and in the event the segment is sold, the remaining leases would be included in the acquisition.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
12. Deferred Revenue
At December 31, 2023 and 2022, deferred revenue consists of the following:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Deferred revenues, net 2,784 1,371
Less: deferred revenue, current (1,229) (95)
Deferred revenues, non-current 1,555 1,276
Deferred revenue related to commodity forward sales contracts of $1.4 million and nil, for the years ended December 31, 2023 and 2022, respectively. Deferred revenue related to deferred franchise fees of $1.4 million and $1.4 million, respectively, for the years ended December 31, 2023 and 2022, respectively.
13. Other Current Liabilities
Other current liabilities consist of the following:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Gift card liability 13 25
Co-op advertising fund liability 114 79
Marketing development brand liability 68 35
Advertising fund liability 29 43
Contract liabilities, current 46,046 -
46,270 182
See Note 2 - Significant accounting policies for details related to the gift card liability and advertising fund liability. See Note 17 - Fair value measurement for details related to the contract liabilities.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
14. Income Taxes
The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2023 and 2022 are presented below:
For the Years Ended December 31,
2023 2022
$’000 $’000
Deferred tax assets:
Net operating loss carryforwards 11,890 10,615
Receivable allowance 37 5
Stock-based compensation 20 15
Intangible assets 727 314
163(j) adjustment 100 -
Accrued expenses 106 -
Capitalized costs 4 -
Deferred revenues 310 204
Leases 301 32
Gross deferred tax asset 13,495 11,185
Deferred tax liabilities:
Property and equipment (60) (160)
Leases (274) -
Unrealized gains (317) -
Gross deferred tax liabilities (651) (160)
Net deferred tax assets 12,844 11,025
Valuation allowance (12,844) (11,025)
Net deferred tax asset, net of valuation allowance - -
The income tax (benefit) / expense for the periods shown consist of the following:
For the Year Ended December 31,
2023 2022
$’000 $’000
Federal:
Current - -
Deferred - -
State and local:
Current (15) 25
Deferred - -
(15) 25
Change in valuation allowance - -
Income tax (benefit) /expense (15) 25
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the periods shown, are as follows:
For the Year Ended December 31,
2023 2022
Federal income tax benefit at statutory rate 21.0 % 21.0 %
State income tax benefit, net of federal impact 1.1 % (0.5) %
Permanent differences (0.3) % (0.1) %
PPP loan forgiveness - % 0.4 %
Return to provision adjustments 0.5 % 3.3 %
Deferred tax asset true up- State - % (14.5) %
Warrant modification expense (2.5) % - %
Fair value gain/loss on share issuance 3.6 % - %
Deferred tax asset true up- Federal - % (6.8) %
Change in valuation allowance (23.2) % (3.3) %
Effective income tax rate 0.2 % (0.5) %
The Company has filing obligations in what it considers its U.S. major tax jurisdictions as follows: Nevada, California, Connecticut, Florida, New Jersey, Texas, Virginia, New York State and New York City. The earliest year that the Company is subject to examination is the year ended December 31, 2015.
The Company has approximately $71.8 million of Federal and State Net operating loss (“NOLs”) available to offset future taxable income. The net operating loss carryforwards generated prior to 2018, if not utilized, will expire from 2035 to 2037 for federal and state purposes.
As of December 31, 2023 and 2022, the Company has determined that it is more likely than not that the Company will not recognize the future tax benefit of the loss carryforwards and has recognized a valuation allowance of $12.8 million and $11.0 million, respectively. The valuation allowance increased by approximately $1.8 million.
Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, and similar state provisions. Generally, in addition to certain entity reorganizations, the limitation applies when one or more “5 percent stockholders” increase their ownership, in the aggregate, by more than 50 percentage points over a 36-month time period testing period or beginning the day after the most recent ownership change, if shorter.
15. Commitments and Contingencies
Forward Purchase and Sales Contracts
On September 12, 2023, the Company through Sadot Agri-Foods, entered into a forward purchase contract titled the Verified Emissions Reduction Purchase Agreement (“VERPA”) for the acquisition of Verified Carbon Units (“VCUs”) generated by a conservation project along the Riau coastline in Indonesia (“conservation project”). Under the VERPA, Sadot Agri-Foods will acquire 180,000 VCUs between 2025 and 2027 as issued. Delivery of VCUs to Sadot Agri-Foods is expected within 14 days from credit issuance annually, where such delivery will occur no later than December of each respective year. The acquisition price for these VCUs is $35.69 per VCU, or $6.4 million in the aggregate, which was paid on September 23, 2023. The aggregate purchase price paid of $6.4 million was recorded on the balance sheet within the “Prepaid forward on carbon offsets” account.
On September 13, 2023, the Company through Sadot Agri-Foods, entered into a separate forward sales agreement pursuant to which the purchaser agreed to acquire 180,000 VCUs between 2025 and 2026 for an acquisition price of $44.62 per VCU, or $8.0 million. The VCUs are expected to be generated as part of the conservation project. The VCUs would be delivered within 14 days from credit issuance annually, where such delivery will occur no later than December of each respective year. Payment for these VCUs would not be required until 2025 at the earliest, within 10 days of VCU issuance.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
However, Sadot Agri-Foods has the right to repurchase any VCUs during the term of this forward contract at the then current market price (based on the prices reported by an independent marketplace). This contract was determined to be a derivative in accordance with ASC 815.
On November 24, 2023, the Company through Sadot Agri-Foods, entered into a forward sale contract for the sale of 70,000 Metric Tons (“MTs”) of soybeans. Sadot Agri-Foods will provide 70,000 MTs to a third-party in May 2025, which is the executed contract date. The acquisition price for these MTs is $662 per MT, or $46.3 million in the aggregate. This contract was determined to be a derivative in accordance with ASC 815.
On December 6, 2023, the Company through Sadot Agri-Foods, entered into a forward sale contract for the sale of 70,000 Metric Tons (“MTs”) of soybeans. Sadot Agri-Foods will provide 70,000 MTs to a third-party in November/December 2024, which is the executed contract date. The acquisition price for these MTs is $674 per MT, or $47.2 million in the aggregate. This contract was determined to be a derivative in accordance with ASC 815.
Refer to Note 2 - Significant accounting policies, Note 17 - Fair value measurement and Note 18 - Financial instruments for additional information regarding the Derivative liability.
Election of Directors
On December 22, 2022, the Company held its annual shareholders meeting, and the shareholders voted on the directors to serve on the Company’s board of directors. The shareholders elected Kevin Mohan, Stephen Spanos, A.B. Southall III, Paul L. Menchik, Jeff Carl, Major General (ret) Malcolm Frost and Phillip Balatsos to serve on the Company’s board of directors.
On December 27, 2022, the Board appointed Benjamin Petel to the Board of Directors.
On February 2, 2023, the Board appointed Na Yeon (“Hannah”) Oh and Ray Shankar to the Board of Directors, effective March 1, 2023.
On April 3, 2023, the Board appointed Paul Sansom and Marvin Yeo to the Board of Directors.
On June 15, 2023 The Board appointed Dr. Ahmed Khan, David Errington and Mark McKinney to the Board of Directors.
On December 20, 2023, the Company held its annual shareholders meeting, and the shareholders voted on the directors to serve on the Company’s board of directors. The shareholders elected Kevin Mohan, Stephen Spanos, David Errington, Jeff Carl, Na Yeon ("Hannah") Oh, Ray Shankar, Mark McKinney, Marvin Yeo, Paul Sansom, Benjamin Petel and Dr. Ahmed Khan to serve on the Company’s board of directors.
Consulting Agreements
On November 14, 2022 (the “Effective Date”), the Company, Sadot LLC and Aggia LLC FC, a company formed under the laws of United Arab Emirates (“Aggia”) entered into a Services Agreement (the “Services Agreement”) whereby Sadot LLC engaged Aggia to provide certain advisory services to Sadot Agri-Food for creating, acquiring and managing Sadot Agri-Foods’s business of wholesaling food and engaging in the purchase and sale of physical food commodities.
As consideration for Aggia providing the services to Sadot Agri-Food, the Company agreed to issue shares of common stock of the Company, par value $0.0001 per share, to Aggia subject to Sadot Agri-Food generating net income measured on a quarterly basis at per share price of $1.5625, subject to equitable adjustments for any combinations or splits of the common stock occurring following the Effective Date. Upon Sadot Agri-Food generating net income for any fiscal quarter, the Company shall issue Aggia a number of shares of common stock equal to the net income for such fiscal quarter divided by the per share price (the “Shares”). The Company may only issue authorized, unreserved shares of common stock. The Company will not issue Aggia in excess of 14.4 million shares representing 49.999% of the number of issued and outstanding shares of common stock as of the Effective Date. Further, once Aggia has been issued a number of shares constituting 19.99% of the issued and outstanding shares of common stock of the Company, no additional shares shall be issued to Aggia unless and until this transaction has been approved by the shareholders of the Company. In the event that the shares cap has been reached, then the remaining portion of the net income, if any, not issued as shares shall accrue as
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
debt payable by Sadot Group to Aggia until such debt has reached a maximum of $71.5 million. The Company will prepare the shares earned calculation after the annual audit or quarter review is completed by the auditors. The shares will be issued within 10 days of the final calculation.
On July 14, 2023 (the “Addendum Date”), effective April 1, 2023, the parties entered into Addendum 2 to the Services Agreement (“Addendum 2”) pursuant to which the parties amended the compensation that Aggia is entitled.
Pursuant to Addendum 2, on the Addendum Date, the Company issued 8.9 million shares (the “Shares”) of common stock, par value $0.0001 per share, of the Company, which such Shares represent 14.4 million Shares that Aggia is entitled to receive pursuant to the Services Agreement less the 5.6 million Shares that have been issued to Aggia pursuant to the Services Agreement as of the Addendum Date. The Company will not issue Aggia in excess of 14.4 million Shares representing 49.9% of the number of issued and outstanding shares of common stock as of the effective date of the Services Agreement. The Shares shall be considered issued and outstanding as of the Addendum Date and Aggia shall hold all rights associated with such Shares. The Shares vest on a progressive schedule, at a rate equal to the net income of Sadot Agri-Foods, calculated quarterly divided by $3.125, which for accounting purposes shall equal 40% of the net income of Sadot Agri-Foods, calculated quarterly divided by $1.25. During the 30 day period after July 14, 2028 (the “Share Repurchase Date”), Aggia may purchase any Shares not vested. All Shares not vested or purchased by Aggia, shall be repurchased by the Company from Aggia at per share price of $0.001 per share. Further, the parties clarified that the Lock Up Agreement previously entered between the Company and Aggia dated November 16, 2022 shall be terminated on May 16, 2024 provided that any Shares that have not vested or been purchased by Aggia may not be transferred, offered, pledged, sold, subject to a contract to sell, granted any options for the sale of or otherwise disposed of, directly or indirectly. Following the Share Repurchase Date, in the event that there is net income for any fiscal quarter, then an amount equal to 40% of the net income shall accrue as debt payable by Sadot Group to Aggia (the “Debt”), until such Debt has reached a maximum of $71.5 million.
Additionally, for the years ended December 31, 2023 and 2022, the Company reimbursed Aggia for all operating costs related to Sadot Agri-Foods operating expenses including labor and operating expenses and general administrative expenses of $2.6 million, $0.5 million and $0.1 million, respectively and all operating costs related to Sadot Agri-Foods including labor and operating expenses of $0.5 million and $19.0 thousand, respectively.
Franchising
During the years ended December 31, 2023 and 2022, the Company entered into various Pokemoto franchise agreements for a total of 20 and 30, respectively, potentially new Pokemoto locations with various franchisees. The Franchisees paid the Company an aggregate of $0.2 million and $0.5 million and this has been recorded in deferred revenue as of December 31, 2023 and 2022, respectively.
Master Franchise Agreement
On October 25, 2021, Muscle Maker Development International LLC (“MMDI”), a wholly-owned subsidiary of Muscle Maker Inc., entered into a Master Franchise Agreement (the “Master Franchise Agreement”) with Almatrouk Catering Company - OPC (“ACC”) providing ACC with the right to grant franchises for the development of 40 “Muscle Maker Grill” restaurants through December 31, 2030 (the “Term”) in the Kingdom of Saudi Arabia (“KSA”).
Under the Master Franchise Agreement, MMDI has granted to ACC an exclusive right to establish and operate Muscle Maker restaurants in the KSA. MMDI will not own or operate restaurants in KSA, grant franchises for the restaurants in KSA, or grant Master Franchise Rights for the restaurants to other persons within the KSA. ACC will be solely responsible for the development, sales, marketing, operations, distribution and training of all franchise locations sold in the KSA.
ACC is required to pay MMDI $0.2 million pursuant to the Master Franchise Agreement upon the occurrence of various events. ACC is required to pay MMDI $20.0 thousand upon the execution of each franchise agreement for each individual restaurant and a monthly royalty fee of $1.0 thousand for each restaurant. Further, ACC is to adhere to the agreed upon development schedule as outlined in the master franchise agreement. An initial $20.0 thousand deposit was paid on the agreement. ACC has not performed against this agreement.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Sales Taxes
The Company had accrued a sales tax liability for approximately $27.8 thousand and $44.6 thousand as of December 31, 2023, and December 31, 2022, respectively. All current state and local sales taxes from January 1, 2018, for open Company-owned locations have been fully paid and in a timely manner.
Litigations, Claims and Assessments
On April 24, 2022, the Company and a convertible note holder entered into an agreement in which the Company will repay a total of $0.1 million in connection with the default judgement issued on June 22, 2018, by the Iowa District Court for Polk County #CVCV056029, filed against the Company for failure to pay the remaining balance due on a promissory note in the amount of $0.1 million, together with interest, attorney fees and other costs of $0.2 million. The Company agreed to pay $40.0 thousand on or before May 1, 2020 and to make seven installment payments of $10.0 thousand per month starting on or before June 1, 2022. As of December 30, 2022, the Company has paid this note in full.
On January 23, 2020, the Company was served a judgment issued by the Judicial Council of California in the amount of $0.1 million for a breach of a lease agreement in Chicago, Illinois, in connection with a Company-owned store that was closed in 2018. As of December 31, 2023, the Company has accrued for the liability in accounts payable and accrued expenses.
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. In the opinion of management after consulting legal counsel, such matters are currently not expected to have a material impact on the Company’s financial statements.
The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements after consulting legal counsel.
Employment Agreements
On November 16, 2022, the Company entered into an Executive Employment Agreement with Michael Roper (the “Roper Agreement”), which replaced his prior employment agreement. Pursuant to the Roper Agreement, Mr. Roper will continue to be employed as Chief Executive Officer of the Company on an at will basis. During the term of the Roper Agreement, Mr. Roper is entitled to a base salary at the annualized rate of $0.4 million. Mr. Roper will be eligible for a discretionary performance bonus to be determined by the Board annually. Mr. Roper received an additional bonus of $0.1 million on March 2, 2023 and an additional $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Roper is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Roper is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Roper will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 18 months following the second anniversary of the Roper Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Roper Agreement will automatically terminate and the prior employment agreement will again be in full effect.
On March 21, 2023, the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement. Pursuant to the Black Agreement, Ms. Black will continue to be employed as Chief Financial Officer of the Company on an at will basis. During the term of the Black Agreement, Ms. Black is entitled to a base salary at the annualized rate of $0.3 million. Ms. Black will be eligible for a discretionary performance bonus up to 50% of her annual salary. Ms. Black received an additional bonus of $0.1 million on March 2, 2023 and an additional $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Ms. Black is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Black is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Black will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Black Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
by the shareholders, the Black Agreement will automatically terminate and the prior employment agreement will again be in full effect.
On November 16, 2022, the Company entered into an Executive Employment Agreement with Kenn Miller (the “Miller Agreement”), which replaced his prior employment agreement. Pursuant to the Miller Agreement, Mr. Miller will continue to be employed as Chief Operating Officer of the Company on an at will basis. During the term of the Miller Agreement, Mr. Miller is entitled to a base salary at the annualized rate of $0.3 million. Mr. Miller will be eligible for a discretionary performance bonus up to 75% of his annual salary. Further, Mr. Miller will be entitled to an additional bonus of $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Miller is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Miller is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Miller will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 12 months following the second anniversary of the Miller Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Miller Agreement will automatically terminate and the prior employment agreement will again be in full effect.
On November 16, 2022, the Company entered into an Executive Employment Agreement with Kevin Mohan (the “Mohan Agreement”), which replaced his prior employment agreement. Pursuant to the Mohan Agreement, Mr. Mohan will continue to be employed as Chief Investment Officer of the Company on an at will basis. During the term of the Employment Agreement, Mr. Mohan is entitled to a base salary at the annualized rate of $0.2 million. Mr. Mohan will be eligible for a discretionary performance bonus up to 75% of his annual salary. Mr. Mohan received an additional bonus of $0.1 million on March 2, 2023 and an additional $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Mohan is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Mohan is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Mohan will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Mohan Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Mohan Agreement will automatically terminate and the prior employment agreement will again be in full effect.
On November 16, 2022, the Company entered into an Executive Employment Agreement with Aimee Infante (the “Infante Agreement”), which replaced her prior employment agreement. Pursuant to the Infante Agreement, Ms. Infante will continue to be employed as Chief Marketing Officer of the Company on an at will basis. During the term of the Infante Agreement, Ms. Infante is entitled to a base salary at the annualized rate of $0.2 million. Ms. Infante will be eligible for a discretionary performance bonus up to 25% of her annual salary. Further, Ms. Infante will be entitled to an additional bonus of $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Ms. Infante is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Infante is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Infante will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Infante Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Infante Agreement will automatically terminate, and the prior employment agreement will again be in full effect.
NASDAQ Notice
On November 7, 2023, the Company received notice from The Nasdaq Stock Market (“Nasdaq”) that the closing bid price for the Company’s common stock had been below $1.00 per share for the previous 30 consecutive business days, and that the Company is therefore not in compliance with the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Rule”).
Nasdaq’s notice has no immediate effect on the listing or trading of the Company’s common stock on The Nasdaq Capital Market.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
The notice indicates that the Company will have 180 calendar days, until May 6, 2024, to regain compliance with this requirement. The Company can regain compliance with the $1.00 minimum bid listing requirement if the closing bid price of its common stock is at least $1.00 per share for a minimum of ten (10) consecutive business days during the 180-day compliance period. If the Company does not regain compliance during the initial compliance period, it may be eligible for additional time of 180 calendar days to regain compliance. To qualify, the Company will be required to meet the continued listing requirement for market value of our publicly held shares and all other Nasdaq initial listing standards, except the bid price requirement, and will need to provide written notice to Nasdaq of its intention to cure the deficiency during the second compliance period. If the Company is not eligible or it appears to Nasdaq that the Company will not be able to cure the deficiency during the second compliance period, Nasdaq will provide written notice to the Company that the Company’s common stock will be subject to delisting. In the event of such notification, the Company may appeal Nasdaq’s determination to delist its securities, but there can be no assurance that Nasdaq would grant the Company’s request for continued listing.
The Company intends to actively monitor the minimum bid price of its common stock and may, as appropriate, consider available options to regain compliance with the Rule. There can be no assurance that the Company will be able to regain compliance with the Rule or will otherwise be in compliance with other Nasdaq listing criteria.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
16. Reportable Operating Segments
See Note 1 - Business organization and nature of operations for descriptions of our operating segments.
The following table sets forth the results of operations for the relevant segments for the years ended December 31, 2023 and 2022:
For the Year Ended December 31, 2023
Sadot food service Sadot agri-foods Corporate adj. Total segments
$’000 $’000 $’000 $’000
Commodity sales - 717,506 - 717,506
Company restaurant sales, net of discounts 8,053 - - 8,053
Franchise royalties and fees 1,041 - - 1,041
Franchise advertising fund contributions 73 - - 73
Other revenues 13 - - 13
Cost of goods sold (8,883) (707,872) - (716,755)
Gross profit 297 9,634 - 9,931
Impairment of intangible asset (811) - - (811)
Impairment of goodwill (828) - - (828)
Depreciation and amortization expenses (665) (151) (992) (1,808)
Franchise advertising fund expenses (73) - - (73)
Pre-opening expenses (36) (335) - (371)
Post-closing expenses (211) - (1) (212)
Stock-based expenses - - (6,192) (6,192)
Sales, general and administrative expenses (437) (1,551) (7,416) (9,404)
(Loss) / income from operations (2,764) 7,597 (14,601) (9,768)
Other income 1 - 307 308
Interest expense, net (1) (52) (416) (469)
Change in fair value of stock-based compensation - - 1,339 1,339
Warrant modification expense - - (958) (958)
Loss on fair value remeasurement - 1,491 - 1,491
Gain on debt extinguishment - - - -
(Loss) / income before income tax (2,764) 9,036 (14,329) (8,057)
Income tax benefit / (expense) (1) - 16 15
Net (loss) / income (2,765) 9,036 (14,313) (8,042)
Net loss attributable to non-controlling interest - 218 - 218
Net (loss) / income attributable to Sadot Group, Inc. (2,765) 9,254 (14,313) (7,824)
Total assets 10,416 162,175 5,500 178,091
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2022
Sadot food service Sadot agri-foods Corporate adj. Total segments
$’000 $’000 $’000 $’000
Commodity sales - 150,586 - 150,586
Company restaurant sales, net of discounts 10,300 - - 10,300
Franchise royalties and fees 727 - - 727
Franchise advertising fund contributions 81 - - 81
Other revenues 5 - - 5
Cost of goods sold (11,270) (146,037) - (157,307)
Gross profit (157) 4,549 - 4,392
Impairment of intangible asset (347) - - (347)
Impairment of goodwill - - - -
Depreciation and amortization expenses (2,015) - - (2,015)
Franchise advertising fund expenses (81) - - (81)
Pre-opening expenses (117) - - (117)
Post-closing expenses (197) - - (197)
Stock-based expenses - - (3,716) (3,716)
Sales, general and administrative expenses (601) (97) (5,337) (6,035)
(Loss) / income from operations (3,515) 4,452 (9,053) (8,116)
Other income 80 - (34) 46
Interest expense, net 21 - (28) (7)
Change in fair value of stock-based compensation - - - -
Gain on debt extinguishment 140 - - 140
(Loss) / income before income tax (3,274) 4,452 (9,115) (7,937)
Income tax benefit / (expense) - - (25) (25)
Net (loss) / income (3,274) 4,452 (9,140) (7,962)
Net loss attributable to non-controlling interest - - - -
Net (loss) / income attributable to Sadot Group, Inc. (3,274) 4,452 (9,140) (7,962)
Total assets 16,340 7,915 2,975 27,230
With the creation of our Sadot LLC subsidiary in late 2022, we began to transform from a U.S.-centric restaurant business into a global, food-focused organization with two distinct segments. As a result, we have reevaluated and changed our operating segments late in 2023 to align with our two distinct segments. Previously we split out Muscle Maker Grill, Pokemoto, and SuperFit Foods as their own restaurant operating segments. With the transformation of our business into a global, food-focused organization, we operate the business in two distinct business segments Sadot Agri-Foods and Sadot Food Service.
The operating segments have changed since the third quarter of 2023 due to a change in management's view of the business.
The Company will continue to evaluate its operating segments and update as necessary.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
17. Fair Value Measurement
The following tables presents information about the Company's assets and liabilities that are measure at fair value on a recurring basis at December 31, 2023 and December 31, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
December 31, 2023
Level 1 Level 2 Level 3 Total
Financial assets/liabilities: $’000 $’000 $’000 $’000
Contract liability - 92,094 - 92,094
Forward sales derivatives - 1,491 - 1,491
- 93,585 - 93,585
December 31, 2022
Level 1 Level 2 Level 3 Total
Financial liabilities: $’000 $’000 $’000 $’000
Accrued compensation liability 3,602 - - 3,602
3,602 - - 3,602
There were no transfers between fair value levels during the year ended December 31, 2023.
See Note 19 - Equity for details related to accrued compensation liability being fair valued using Level 1 inputs.
See Note 15 - Commitments and contingencies and Note 18 - Financial instruments for details related to the Derivative liability being fair valued using Level 2 inputs.
Forward Sales Derivative and Derivative Liability
The Forward sales derivative asset and Derivative liability relate to the forward sale contracts. The fair value of the Forward sales derivative asset and Derivative liability is based on quoted prices for similar assets and liabilities in active market or inputs that are observable which represent Level 2 measurements within the fair value hierarchy and is based on observable prices for similar assets sourced by an independent marketplace. The Forward sales derivative refers to the forward sales contracts executed in September, November and December 2023. Refer to Note 15 - Commitments and contingencies, for a more detailed discussion of the transactions. During the year ended December 31, 2023, the fair value increased by $2.9 million. Please refer to Please refer to Note 2 - Significant accounting policies for additional information on ASC 815 leveling.
18. Financial Instruments
Concentration of Credit Risk
Commodity Price Risk
The Company uses a combination of purchase orders and various long and short-term supply arrangements in connection with the purchase of corn, soybean and soybean products including certain commodities and agricultural products. We also enter into commodity futures, options and swap contracts to reduce the volatility of price fluctuations of wheat, soybean and corn. Commodity futures, options and swap contracts are either designated as cash-flow hedging instruments or are undesignated.
Changes in the fair value on the portion of the derivative included in the assessment of hedge effectiveness of cash-flow hedges are recorded in other comprehensive income (loss), until earnings are affected by the variability of cash flows. The change in fair value on undesignated instruments is recorded in Other income / (expense). There were no current contracts designated as a hedge at December 31, 2023. We net settle amounts due, if any, under the contract with our counterparty.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Additionally, the Company is exposed to market risks primarily related to the volatility in the price of carbon credits. To manage these risks, the Company enters into forward sales contracts to sell carbon offset units from time to time. The Company evaluates its contracts to determine if such contracts qualify as derivatives under ASC 815. As the Company’s existing carbon offset contracts do not qualify for hedge accounting treatment, any changes in fair value are recorded as Gain (loss) on fair value remeasurement within Other income / (expense).
The Forward sales derivative asset and Derivative liability relate to the forward sale contracts. The fair value of the Forward sales derivative asset and Derivative liability is based on quoted prices for similar assets and liabilities in active market or inputs that are observable which represent Level 2 measurements within the fair value hierarchy and is based on observable prices for similar assets sourced by an independent marketplace. The Forward sales derivative refers to the forward sales contracts executed in September, November and December 2023. Refer to Note 15 - Commitments and contingencies, for a more detailed discussion of the transactions. During the year ended December 31, 2023, the fair value increased by $2.9 million.
See Note 2 - Significant accounting policies, Note 15 - Commitments and contingencies and Note 17 - Fair value measurement for further details regarding the Derivative liability.
19. Equity
Stock Option and Stock Issuance Plan
2021 Plan
The Company’s board of directors and shareholders approved and adopted on October 7, 2021 the 2021 Equity Incentive Plan (“2021 Plan”), effective on September 16, 2020 under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2021 Plan, the Company reserved 1.5 million shares of common stock for issuance. As of December 31, 2023, 0.7 million shares have been issued and 0.8 million options to purchase shares have been awarded under the 2021 Plan.
2023 Plan
The Company’s board of directors and shareholders approved and adopted on February 28, 2023 the 2023 Equity Incentive Plan (“2023 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock Units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2023 Plan, the Company reserved 2.5 million shares of common stock for issuance. As of December 31, 2023, 2.4 million shares have been issued and 0.1 million option to purchase shares have been awarded under the 2023 Plan.
2024 Plan
The Company’s board of directors and shareholders approved and adopted on December 20, 2023 the 2024 Equity Incentive Plan (“2024 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock Units, stock bonus awards, performance compensation awards (including cash
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
bonus awards) or any combination of the foregoing. Under the 2024 Plan, the Company reserved 7.5 million shares of common stock for issuance. As of December 31, 2023, no shares have been issued under the 2024 Plan.
Common Stock Issuances
On January 3, 2022, the Company authorized the issuance of an aggregate of 1.2 million shares of common stock in connection with the cashless exercise of the pre-funded warrants. Pursuant to the terms of the pre-funded warrants a total of 1.2 million warrants were exercised.
On January 6, 2022, the Company authorized the issuance of an aggregate of 39.6 thousand shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2022. The Company accrued for the liability as of December 31, 2021.
On January 18, 2022, the Company issued an aggregate of 30.0 thousand shares of common stock of the Company to a consultant that assisted with the acquisition of SuperFit Foods and Pokemoto, with an aggregate fair value amount of $15.6 thousand. The Company accrued for the liability as of December 31, 2021.
On February 24, 2022, the Company authorized the issuance of an aggregate of 1.2 million shares of common stock in connection with the cashless exercise of the pre-funded warrants. Pursuant to the terms of the pre-funded warrants a total of 1.2 million warrants were exercised.
On March 31, 2022, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2022.
On April 4, 2022, the Company authorized the issuance of 20.0 thousand shares of common stock to a member of the executive team per the employment agreement.
On June 8, 2022, the Company authorized the issuance of 5.0 thousand shares of common stock to a contractor for work done at a Company owned location.
On June 30, 2022, the Company recognized 30.9 thousand shares of common stock for book purpose to reconcile the shares outstanding to the transfer agent report.
On July 14, 2022, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2022.
On October 12, 2022, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2022.
On November 29, 2022, the Company authorized the issuance of an aggregate of 0.4 million shares of common stock in connection with the exercise of pre-funded warrants.
On January 5, 2023, the Company authorized the issuance of an aggregate of 31.3 thousand shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2022.
On March 27, 2023, the Company authorized the issuance of 2.8 million shares of common stock to a Aggia for services rendered.
On April 5, 2023 the Company authorized the issuance of 29.7 thousand shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2023.
On May 10, 2023 the Company authorized the issuance of 0.1 million shares of common stock to a consultant for services rendered.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
On May 25, 2023, the Company authorized the issuance of 2.7 million shares of common stock to Aggia for services rendered.
On June 30, 2023, the Company vested 0.9 million shares of common stock to a consultant for services rendered.
On July 11, 2023, the Company authorized the issuance of an aggregate of 32.9 thousand shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2023.
On July 14, 2023, the Company issued 8.9 million Restricted Share Awards to Aggia, with an effective issuance date of April 1, 2023.
On July 27, 2023, the Company authorized the issuance of 2.2 million shares of common stock to Altium in exchange for the exercise of warrants.
On August 15, 2023, the Company authorized the issuance of 0.1 million shares of common stock to a consultant for services rendered.
On September 25, 2023, the Company authorized the issuance of 0.2 million shares of common stock in fees to a consultant for services rendered related to the SEPA.
On September 30, 2023, the Company vested 0.5 million shares of common stock to to a consultant for services rendered.
On October 2, 2023, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2023.
On October 20, 2023, the Company authorized the issuance of 0.1 million shares of common stock to consultants for services rendered.
On November 6, 2023, the Company authorized the issuance of 0.1 million shares of common stock in connection with the conversion of note payables.
On November 14, 2023, the Company authorized the issuance of 0.2 million shares of common stock in connection with the conversion of note payables.
On November 29, 2023, the Company authorized the issuance of 0.2 million shares of common stock in connection with the conversion of note payables.
On December 13, 2023, the Company authorized the issuance of 0.3 million shares of common stock in connection with the conversion of note payables.
On December 19, 2023, the Company authorized the issuance of 0.3 million shares of common stock in connection with the conversion of note payables.
On December 31, 2023, the Company vested 0.2 million shares of common stock to Aggia as consulting fees earned during the fourth quarter of 2023.
Change in fair value of stock-based compensation on the Consolidated Statement of Operations and Other Comprehensive Loss is made up of the difference between the agreed upon issuance price, per the servicing agreement with Aggia and the market price on the day of issuance. For the year ended December 31, 2023, Change in fair value of stock-based compensation was $1.3 million. For the year ended December 31, 2022, Change in fair value of stock-based compensation was nil.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Restricted Share Awards
Per Addendum 2, on July 14, 2023, the Company issued Restricted Share Awards ("RSA's") to Aggia. These RSA are considered issued as of the effective date on April 1, 2023. Pursuant to the Services Agreement these RSA's vest on a progressive schedule, at a rate equal to the Net Income of Sadot Agri-Foods, calculated quarterly divided by $3.125, which for accounting purposes shall equal 40% of the net income of Sadot Agri-Foods, calculated quarterly divided by $1.25. Shares shall be considered issued and outstanding as of the Addendum Date and Aggia shall hold rights associated with such Shares; provided, however, Shares not earned or purchased may not be transferred, offered, pledged, sold, subject to a contract to sell, granted any options for the sale of or otherwise disposed of, directly or indirectly. The total RSA's vested for Aggia in 2023 were 2.1 million.
On December 19, 2023, the Company issued 2.0 million RSA's to certain members of the board of directors, consultants and employees. Total RSA vested as a result of the departure of certain members of the board of directors were 0.2 million for 2023. The remaining RSA vest ratably over 12 quarters with the first vesting starting on March 31, 2024.
At December 31, 2023, there were 9.1 million restricted share awards outstanding.
A summary of the activity related to the restricted share awards is presented below:
Total Weighted-average
grant date
fair value
$
Outstanding, December 31, 2021 - -
Granted 20,000 0.54
Forfeited - -
Vested (20,000) 0.54
Outstanding at December 31, 2022 - -
Granted 10,878,052 1.25
Forfeited - -
Vested (1,779,285) 1.25
Outstanding at December 31, 2023 9,098,767 -
See Note 15 - Commitments and contingencies for further details on Restricted Share Awards.
Warrant and Option Valuation
The Company has computed the fair value of warrants and options granted using the Black-Scholes option pricing model. The expected term used for warrants and options issued to non-employees is the contractual life. The Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time, equivalent to the expected term of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.
Options
On May 2, 2022, the Company, pursuant to the employment agreements, issued options to purchase an aggregate of 0.3 million shares of the Company’s common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on June 30, 2022.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
On October 10, 2022, the Company issued options to purchase 25.0 thousand shares of the Company’s common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on December 31, 2023.
On August 29, 2022, there were 25.0 thousand shares forfeited upon the departure of an officer.
On February 27, 2023, the Company issued options to purchase an aggregate of 0.5 million shares of the Company's common stock to officers and directors. The options had an exercise price of $1.51 per share and vest ratably over 20 quarters with the first vesting occurring March 31, 2023.
On March 15, 2023, the Company issued options to purchase 0.1 million shares of the Company's common stock. The options had an exercise price of $1.51 per share and vest ratably over 20 quarters with the first vesting occurring March 31, 2023.
On November 27, 2023, there were 0.1 million shares forfeited upon the expiration of the options.
On December 21, 2023, there were 0.1 million shares forfeited upon the departure of board members.
A summary of option activity is presented below:
Weighted-average
exercise
price Number of
options Weighted-average
remaining
life (in years) Aggregate intrinsic value
$ $’000
Outstanding, December 31, 2021 5.00 100,000 1.91 -
Issued 0.41 337,500 4.40 12
Exercised - - N/A -
Forfeited - (25,000) N/A -
Outstanding, December 31, 2022 1.52 412,500 3.53 -
Expected to vest, December 31, 2022 0.41 296,875 5.21 -
Exercisable, December 31, 2022 3.59 144,375 1.98 -
Issued 1.51 600,000 5.42 156
Exercised - - N/A -
Forfeited 3.40 (185,000) N/A -
Outstanding, December 31, 2023 1.09 827,500 4.26 -
Expected to vest, December 31, 2023 1.14 605,609 4.23 -
Exercisable, December 31, 2023 0.98 221,891 4.34 -
The Company has estimated the fair value of the options using the Black-Scholes model using the following assumptions:
For the Year Ended December 31, 2023
Risk free interest rate 3.54-4.93%
Expected term (years) 5
Expected volatility 53.99-69.02%
Expected dividends -
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Warrants
On January 3, 2022, the Company issued 1.2 million shares of common stock in connection with the cashless exercise of the pre-funded warrants. Pursuant to the terms of the pre-funded warrants a total of 1.2 million warrants were exercised.
On February 24, 2022, the Company issued 1.2 million shares of common stock in connection with the cashless exercise of the pre-funded warrants. Pursuant to the terms of the pre-funded warrants a total of 1.2 million warrants were exercised.
On November 29, 2022, the Company issued 0.4 million shares of common stock in connection with the exercising of pre-funded warrants for $44.
Warrant Exercise Agreement
On July 27, 2023 (the “Closing Date”), the Company entered into a Warrant Exercise Agreement (the “Exercise Agreement”) with Altium Growth Fund Ltd. (the “Exercising Holder”), the holder of outstanding warrants to purchase 2.2 million shares of common stock of the Company issued in November 2021 (collectively, the “Original Warrants”), whereby the Exercising Holder exercised the Original Warrants in consideration of 2.2 million shares of common stock (the “Shares”). The Company received aggregate gross proceeds before expenses of approximately $2.2 million. In order to induce the Exercising Holder to exercise the Original Warrants, the Company reduced the exercise price on the Original Warrants from $1.385 to $1.00 per share.
In connection with the exercise of the Original Warrants, we issued an additional warrant to Altium that is exercisable to acquire 2.2 million shares of common stock (the “Additional Warrant”) exercisable at a per share price of $2.40.
Additional Warrants Issued
In connection with the exercise of the Original Warrants, the Company issued an additional warrant to the Exercising Holder that is exercisable for the number of shares of common stock equal to one hundred percent of the Shares purchased by the Exercising Holder (the “Additional Warrant”). The Additional Warrant is substantially identical to the Original Warrants, except that the exercise price of the Additional Warrant is $2.40. The Company is obligated to file a registration statement covering the shares of common stock underlying the warrants within 30 days and to have the registration statement declared effective within 90 days after filing with the Commission.
A summary of warrants activity is presented below:
Weighted-average
exercise
price Number of
Warrants Weighted-average
remaining life
(in years) Aggregate intrinsic value
$ $’000
Outstanding, December 31, 2021 1.66 20,284,016 4.0 -
Issued 2.01 597,819 N/A -
Exercised 0.01 (2,848,195) N/A -
Forfeited - - N/A -
Outstanding, December 31, 2022 1.93 18,033,640 3.5 -
Exercisable, December 31, 2022 1.93 18,033,640 3.5 -
Issued 2.40 2,153,309 2.9 -
Exercised 1.00 (2,153,309) 2.9 215
Forfeited 4.36 (653,750) N/A -
Outstanding, December 31, 2023 1.97 17,379,890 2.6 -
Exercisable, December 31, 2023 1.97 17,379,890 2.6 -
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Stock-Based Compensation Expense
Stock-based compensation related to restricted stock issued to employees, directors and consultants, warrants and warrants to consultants amounted to $6.2 million and $3.7 million, respectively for the years ended December 31, 2023 and 2022, of which $5.4 million and $3.6 million were stock-based consulting expenses paid to related party, $0.5 million and $36.0 thousand were given to consultants for services rendered, $0.3 million and $0.1 million were given to the board of directors and $0.1 million and $21.4 thousand were executive compensation.
20. Related Party Transactions
The Company held a Special Shareholder Meeting on February 28, 2023. Of the 29.3 million shares of Common Stock outstanding on January 19, 2023, the record date, 17.2 million shares were represented at the Special Shareholder Meeting, in person or by proxy, constituting a quorum. At the meeting, the shareholders approved (i) the Services Agreement whereby Sadot LLC engaged Aggia, to provide certain advisory services to Sadot Agri-Foods for managing Sadot Agri-Foods’ business of wholesaling food and engaging in the purchase and sale of physical food commodities (the “Sadot Agri-Foods Transaction”); (ii) an amendment of the Company’s articles of incorporation to increase the number of authorized shares of common stock from 50.0 million to 150.0 million and an additional increase from 150.0 million to 200.0 million; (iii) for purposes of complying with NASDAQ Listing Rule 5635(b), the issuance of the Shares pursuant to the Services Agreement entered between the Company, Sadot LLC and Aggia representing more than 20% of our common stock outstanding, which would result in a “change of control” of the Company under applicable Nasdaq listing rules; (iv) for purposes of complying with NASDAQ Listing Rule 5635(c), the issuance of up to 14.4 million Shares of Common Stock to Aggia pursuant to the Services Agreement and net income generated thresholds; (v) the right of Aggia to nominate up to eight directors to the Board of Directors subject to achieving net income thresholds as set forth in the Services Agreement; and (vi) the adoption of the 2023 Equity Incentive Plan.
In April of 2023, the Company recognized a related party relationship between newly appointed directors of the Company and Aggia. As of December 31, 2023, Aggia owned 25.2% of the Company's commons stock.
During the year ended December 31, 2023 and 2022, the Company recorded Stock-based consulting expense of $5.4 million and $3.6 million, respectively to its related party, Aggia for consulting services rendered.
Additionally, for the year ended December 31, 2023 and 2022, the Company reimbursed Aggia for all operating costs related to Sadot Agri-Foods of $3.2 million and $0.4 million, respectively.
The Company will continue to monitor and evaluate its related party transactions to ensure that they are conducted in accordance with applicable laws and regulations and in the best interests of the Company and its shareholders.
21. Subsequent Events
Common Stock
On January 4, 2024, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2023. The Company accrued for the liability as of December 31, 2023.
Convertible Notes
On January 8, 2024, the Company authorized the issuance of $0.1 million into 0.3 million shares of the Company’s common stock.
On January 11, 2024, the Company authorized the issuance of $0.1 million into 0.3 million shares of the Company’s common stock.
On January 22, 2024, the Company authorized the issuance of $0.1 million into 0.3 million shares of the Company’s common stock.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
On January 29, 2024, the Company authorized the issuance of $0.1 million into 0.3 million shares of the Company’s common stock.
On February 16, 2024, the Company authorized the issuance of $0.1 million into 0.3 million shares of the Company's common stock.
On March 15, 2024, the Company authorized the issuance of $0.2 million into 0.6 million shares of the Company's common stock.
Brokerage agreement
On February 23, 2024, the Company entered into an agreement with a brokerage firm to have the exclusive rights to offer and sell the Sadot food services segment of the Company.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
The Financial Statements required by this Item 8 are included in this Annual Report following Item 16 hereof. As a smaller reporting company, we are not required to provide supplementary financial information.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants On Accounting and Financial Disclosure
None.
Item 9.A. Controls and Procedures
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15€ promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the year ended December 31, 2023. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of such date our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information requested to be disclosed by us in our reports that we file or submit under the Exchange Act.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 2013 Internal Control-Integrated Framework. Our management has concluded that, as of December 31, 2023, our internal control over financial reporting is effective based on these criteria.
Changes in Internal Control over Financial Reporting
Our Company has added and will continue to add additional internal control procedures, additional resources and software to increase the internal control aspects of the company as we integrate our Sadot subsidiary into the overall business. Other than the above changes, there were no other changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the year ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9.B. Other information
On February 28, 2024, the Company executed an offer of employment, effective March 1, 2024, with Fausto Plaza. This employment provides Mr. Plaza the responsibility to assist in managing the day-to-day operations of the various commodity trade and farm operations of Sadot Group. Mr. Plaza previously acted as a consultant to Sadot Latam. The consulting agreement provides for $0.5 million in annual fees and 15% profit sharing once the annual fees have been earned by Sadot. Mr. Plaza will continue to operate in this role, in addition to assisting in managing the day-to-day operations of the other commodity trade and farm operations, but as an employee of Sadot Group.
Item 9.C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
During the year ended December 31, 2023, no director or officer adopted or terminated (i) any contract, instruction or written plan for the purchase or sale of securities of the Company intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or (ii) any “non-Rule 10b5-1 trading arrangement” as defined in paragraph (c) of item 408 of Regulation S-K.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Board of Directors and Executive Officers
Our directors hold office until their successors are elected and qualified, or until their deaths, resignations or removals. Our executive officers hold office at the pleasure of our board of directors, or until their deaths, resignations or removals.
As of March 20, 2024, our current directors and executive officers and their ages are:
Name Age Principal Positions
Kevin Mohan (1)
50 Chief Investment Officer and Chairman of the Board
Michael J. Roper 59 Chief Executive Officer
Kenneth Miller 54 Chief Operating Officer
Jennifer Black 42 Chief Financial Officer
Aimee Infante 37 Chief Marketing Officer
Stephen A. Spanos (2)
61 Director
Jeff Carl (3)
68 Director
Benjamin Petel (4)
45 Director, Secretary
Na Yeon (“Hannah”) Oh (5)
39 Director
Ray Shankar (6)
48 Director
Marvin Yeo (7)
52 Director
Paul Sansom (8)
59 Director
Mark McKinney (9)
61 Director
David Errington (10)
45 Director
Dr. Ahmed Khan (11)
40 Director
(1)Mr. Mohan serves as the Chairman of the Board.
(2)Mr. Spanos serves as the Chairman of the Audit Committee.
(3)Mr. Carl is a member of the Compensation Committee.
(4)Mr. Petel serves as the Chairman of the Sustainability Committee.
(5)Ms. Oh is a member of the Sustainability Committee.
(6)Mr. Shankar serves as the Chairman of the Compensation Committee and is a member of the Governance Committee.
(7)Mr. Yeo is a member of the Sustainability Committee.
(8)Mr. Sansom is a member of the Audit Committee.
(9)Mr. McKinney is a member of the Compensation Committee and of the Audit Committee.
(10)Mr. Errington serves as the Chairman of the Governance Committee.
(11)Dr. Khan is a member of the Governance Committee.
Executive Officers
Kevin Mohan. Mr. Mohan has served as the Chief Investment Officer for Sadot Group Inc. (formerly Muscle Maker Inc.) since May 2018. He was instrumental in recruiting a new executive management team, and together they led the Company’s IPO in 2019. During his tenure with the Company, Mr. Mohan developed multiple financial initiatives, including the transformative agreement with Aggia LLC FZ which resulted in the formation of Sadot LLC. Mr. Mohan has more than 15 years of experience in capital markets and strategic business management. Prior to joining the Company, he served as Vice President of Capital Markets for American Restaurant Holdings Inc., a company focused on acquiring and expanding fast casual restaurant brands.
Based on his experience we have deemed Mr. Mohan fit to serve on the Board and as Chairman of the Board.
Michael J. Roper. Mr. Roper has served as Chief Executive Officer, of Sadot Group, Inc. since May 1, 2018. Mr. Roper has unique experience ranging from owning and operating several franchise locations through the corporate executive levels. From May 2015 through October 2017, Mr. Roper served as Chief Executive Officer of Taco Bueno where he was
responsible for defining strategy and providing leadership to 162 company-owned and operated locations along with 23 franchised locations. From March 2014 through May 2015, Mr. Roper served as the Chief Operating Officer of Taco Bueno and from July 2013 through March 2014 as the Chief Development and Technology Officer of Taco Bueno. Prior to joining Taco Bueno, Mr. Roper was a franchise owner and operator of a IMS Barter franchise and held several roles with Quiznos Sub from 2000 to 2012 starting as a franchise owner and culminating in his appointment as the Chief Operating Officer/Executive Vice President of Operations in 2009. Mr. Roper received a Bachelor of Science in Business and General Management from Northern Illinois University.
Based on his education and extensive experience in the restaurant/franchise industry, we have deemed Mr. Roper fit to serve as our principal executive officer.
Kenneth Miller. Mr. Miller has served as Chief Operating Officer of Sadot Group, Inc. since September 26, 2018. Mr. Miller has served in the restaurant business for an extensive portion of his career. Prior to joining us as Chief Operating Officer in September 2018, Mr. Miller served as the Senior Vice President of Operations for Dickey’s BBQ Restaurant from April 2018 through September 2018 and in various capacities with Taco Bueno Restaurants, LP from October 2013 through April 2018 culminating in the position of Senior Vice President of Operations. Mr. Miller received a Bachelor of Arts in Business/Exercise Science from Tabor College in 1991.
Based on his education and extensive experience in the restaurant/franchise industry, we have deemed Mr. Miller fit to serve as our Chief Operating Officer.
Jennifer Black. Ms. Black has served as Chief Financial Officer of Sadot Group, Inc. since January 2, 2022. Ms. Black is an experienced Chief Financial Officer with a demonstrated history of working with public and private equity backed organizations. Prior to joining the Company, from September 2018 through December 2021, Ms. Black served as the Chief Financial Officer for Eagle Pressure Control LLC (“Eagle”) and Talon Pressure Control, oilfield service companies. From October 2015 through September 2018, Ms. Black served as the Controller for AG Resource Management, a private equity backed agriculture lending company, and as the Controller for Basic Energy Services, an oil and gas services company, from January 2013 through October 2015. Ms. Black has also held various other roles including Vice President of SEC reporting with OMNI American Bank and Audit Manager with RSM McGladrey. In November 2020, Eagle, as a result of various events including an oil and gas work related incident, decline of oil and gas prices and the impact from COVID-19, filed for bankruptcy protection under Subchapter V under Chapter 11 in the US Bankruptcy Court, Southern District of Texas (Houston) (Bankruptcy Petition #: 20-35474). Ms. Black is a Certified Public Accountant and a Chartered Global Management Accountant. Ms. Black received a Master of Business Administration from Jack Welch Management Institute in 2018 and Bachelor of Science in Accounting and Finance from Texas Tech University in 2003.
Based on her education and extensive experience in the financial and accounting industries, we have deemed Ms. Black fit to serve as our Chief Financial Officer.
Aimee Infante. Ms. Infante has served as the Chief Marketing Officer of Sadot Group, Inc. since May 6, 2019. Ms. Infante had previously served as the Vice President of Marketing of each of Muscle Maker Development, LLC and Muscle Maker Corp., LLC since August 25, 2017 and September 15, 2017, respectively. From June 6, 2017 to September 15, 2017, she was the Vice President of Marketing of Muscle Maker Brands Conversion, Inc. From February 2016 through June 5, 2017, she served as the Vice President of Marketing of Muscle Maker Brands, LLC, which converted into Muscle Maker Brands Conversion, Inc. on June 6, 2017. From January 2015 through January 2016, Ms. Infante served as our Director of Marketing of Muscle Maker Brands. Ms. Infante was Director of Marketing of Muscle Maker Franchising from October 2014 to January 2015. Ms. Infante was employed by Qdoba Mexican Grill in Denver, Colorado from November 2010 to April 2014, serving as Regional Marketing Specialist from November 2010 to October 2012 and Marketing Manager from October 2012 to April 2014. Ms. Infante holds a Bachelor of Science in Marketing from Rider University.
Based on her education and extensive experience in the restaurant/franchise industry, we have deemed Ms. Infante fit to serve as our Chief Marketing Officer.
Stephen A. Spanos. Mr. Spanos has provided financial and accounting consulting services for both privately held and public companies. From 2009 to 2013, Mr. Spanos served as the Chief Financial Officer of Orion Seafood International, Inc., a marketer of frozen lobster products, and as the Controller of Reef Point Systems, a provider of security solutions for converged wireless and wireline networks in the United States, from 2005 to 2013. Mr. Spanos served as an audit manager
for BDO USA, LLP and as an auditor for Ernst & Young. Mr. Spanos received his MBA and BS in Business Administration, Accounting and Finance from Boston University.
Based on his education and extensive experience in financial and accounting matters, we have deemed that Mr. Spanos is fit to serve on the Board.
Jeff Carl. With 30+ years of international experience in marketing/communications, digital technology and manufacturing, Mr. Carl brings a global perspective to Sadot Group. Since February 2017, Mr. Carl has been an independent brand strategy consultant in the hospitality and retail industries. He also serves as Executive Director for Nice & Company, a San Francisco based marketing firm. Mr. Carl has previously served as Chief Marketing Officer for several private and publicly-held companies including Taco Bueno Restaurants, the Tavistock Restaurant Group, and McDonald’s Corporation - Canada/Latin America. As Corporate Vice President for McDonald’s he also led sports and entertainment partnerships as well as the licensing, design and manufacturing for the Company’s global toy program, producing 1.8 billion toys annually. Earlier in his career, Mr. Carl was Managing Director of Creata Inc., a global marketing and manufacturing agency. Mr. Carl received a BA from Wake Forest University and an MBA from University of North Carolina, Chapel Hill.
Based on his experience within the restaurant industry and due to the fact that he has held senior level executive positions with a focus on advertising and marketing, we have deemed Mr. Carl a fit to serve on the Board.
Benjamin Petel. Mr. Petel has been engaged as a Business Development Specialist in the global agricultural commodity trading field for the past decade. His experience spans across the various aspects of international commodity trading, finance and operations. In addition, Mr. Petel has worked in other fields as a Business Development and strategic networking expert, initiating and executing multi-million dollar projects across the globe. Since 2019, Mr. Petel has been engaged as a Business Development Specialist and consultant to various agriculture and food companies in capacities ranging from corporate finance and M&A to commercial development and operational control. In addition, from 2015 and until 2019, Mr. Petel served as a strategic networking specialist in various fields and industries. Mr. Petel received a Bachelor of Arts in Business Administration and General Management from Bar-Ilan University in 2014.
Based on his experience within the commodity trading industry, the Company has deemed Mr. Petel as a fit to serve on the Board.
Na Yeon (“Hannah”) Oh. Ms. Oh boasts over 15 years of hands-on experience in commercial leadership and sustainability advocacy, with a distinguished career at Bayer where she held numerous leadership positions. Throughout her tenure, she served as Head of Marketing, spearheading impactful campaigns; led Data and Digitalization initiatives, driving organizational transformations; managed Supply Chain operations, ensuring efficiency and resilience; and developed Climate Strategies, addressing the future of regenerative farming practices.
Recognized as a driving force for positive change, Ms. Oh is deeply committed to fostering connections between agri-food and climate technology startups, philanthropic foundations, and impact capital. As an advisory board member to multiple startups, she provides strategic guidance and support, leveraging her extensive experience to nurture and accelerate their growth trajectory.
Currently, as the co-founder and investor at IXO, Ms. Oh is focused on setting new standards using blockchain and AI to bring transparency and integrity through high-definition impact data and outcome-focused investment strategies. Leveraging IXO's real-time digital Measurement, Reporting, and Verification capabilities, Ms. Oh and her team brings new governance models around verification and origination of carbon credits through technology- based solutions.
Based on her experience within the agri-food industry, the Company has deemed Ms. Oh as a fit to serve on the Board.
Ray Shankar. Mr. Shankar has been a Partner since 2019 at Oon & Bazul LLP, a prominent regional law firm where he manages the Private Wealth and Family Office Practice. He routinely advises ultra-high net worth families on the structuring of their family offices, tax and immigration incentive applications as well as legacy planning. Mr. Shankar specializes in advising on the establishment of family offices, which includes legacy and estate planning, wills, trusts, family charters/constitutions, tax efficient structures and succession planning. Prior to joining Oon & Bazul LLP, Mr. Shankar served as the Managing Director of Ring City Limited, a group of operating companies in various sectors. Mr. Shankar received his Bachelor of Laws (LLB) from the National University of Singapore.
Based on his legal, finance and business experience, the Company has deemed Mr. Shankar as a fit to serve on the Board.
Marvin Yeo. Mr. Yeo is an experienced executive with over 25 years of experience in the finance industry. From 2014 through present, Mr. Yeo has served as the founding partner of Golden Rock Capital, a pan-Asia focused strategic advisory firm that focuses on mergers and acquisitions, corporate finance and private equity. Prior to founding Golden Rock Capital, Mr. Yeo held a number of rolls with Frontier Investment & Development Partners, Asian Development Bank, Barclays Capital, Nomura International and Deutsche Bank. Mr. Yeo received his Bachelor of Engineering from Monash University, Chartered Financial Analyst certificate from the CFA Institute and an MBA from Insead.
Based on his finance and business experience, the Company has deemed Mr. Yeo as a fit to serve on the Board.
Paul Sansom. Mr. Sansom is a qualified UK Chartered Accountant and member of UK Association of Corporate Treasurers. He has over 30m years experience in blue chip finance roles in various industries, including PepsiCo and BMW plus operational partner in Private Equity funds within the Middle East. He has held CEO / General Manager roles within family owned businesses in Middle East and West Africa.
He currently is a senior partner with a Private Equity fund in the Middle East, a Board Director for a electricity generator within the UK and Board Director for portfolio companies within the Private Equity Fund. He acts as Audit Chair within one of the privately held businesses. Paul holds a BA (Hons) Economics.
Based on his start-up, finance and business experience, the Company has deemed Mr. Sansom as a fit to serve on the Board.
Mark McKinney. Mr. McKinney brings more than 30 years of domestic and international C-Level experience across various industries, six countries and three continents. Most recently, Mr. McKinney served as Chief Operating Officer of Local Bounti, a leading Ag-tech company specializing in indoor farming. During his tenure, Mr. McKinney was instrumental in the successful execution of the company’s initial public offering on the NYSE, establishing Local Bounti as a key player in the industry. Prior to Local Bounti, from 2018 to 2021, Mr. McKinney was Chief Operating Officer at Fruit Growers (Sunkist Cooperative) where he managed multiple business verticals and supply chain operations supporting 39 packing houses and thousands of Sunkist growers. From 2015 through 2017, Mr. McKinney was CEO of Al Ghurair Foods, where he managed nine business lines with operations in four countries. From 1993 to 2015, Mr. McKinney served in various senior roles at the Dole Food Company, including Senior Director positions in Dole Asia, Ltd. and Dole Europe S.A., President and Managing Director of Dole Thailand and President of Dole Packaged Foods Asia. Mr. McKinney’s career includes several Board and Advisory roles. He holds an MBA from Claremont University’s Peter F. Drucker Graduate Management Center and a Bachelor of Science degree in Chemical Engineering from California Polytechnic University, Pomona.
Based on his international, supply chain support and business experience, the Company has deemed Mr. McKinney as a fit to serve on the Board.
David Errington. Mr. Errington brings more than 20 years of experience in Sustainability and Environmental Sector with 13 years regional expertise in the Gulf Cooperation Council, including KSA, Bahrain, Qatar, Kuwait, UAE and Oman. Since January 2020, Mr. Errington has served as the Head of Engineering / Senior Technical Resource Manager for the Saudi Investment Recycling Company. From January 2014 through December 2019, Mr. Errington was employed by Ecolog International FZE, a leading provider of supply chain, construction, technology, facility management and environmental services, providing turnkey and customized solutions to governments and defense, humanitarian organizations and commercial clients in the sectors of oil & gas, mining, energy and infrastructure projects. Mr. Errington received a BSc (Hons) Chemistry from the University of Durham.
Based on his sustainability and environmental sector business experience, the Company has deemed Mr. Errington as a fit to serve on the Board.
Ahmed Khan, EngD. Dr. Khan brings more than 15 years of experience in research and development (R&D) and operations, with experience in various sectors, including waste/environmental management and the automotive sector. Most recently, Dr. Khan led a team of engineers and laboratories at Saudi Investment Recycling Company, which advises government agencies on waste management strategies and ensures compliance with regulatory bodies. Prior to Saudi Investment Recycling Company, Dr. Khan held several leadership positions including R&D Technical Director at Guilford Europe where he was responsible for ensuring planning and direction of technical and innovation programs, including design validation planning and technical oversight. He also held several positions at UtilEco Middle East including the role of R&D Director where he was responsible for planning and direction of technical and customer-led programs. Dr. Khan holds a Doctorate in Biochemical Engineering and a Masters of Research, Biochemical as well as a Bachelor of Science, Biochemistry and Bachelor of Engineering, Biochemical.
Based on his research and development and environmental management experience, the Company has deemed Dr. Khan as a fit to serve on the Board.
Family Relationships
There are no family relationships among any of our executive officers and directors.
Corporate Governance
Board of Directors and Board Committees
Our stock (symbol: SDOT) is listed on the NASDAQ capital market. Under the rules of Nasdaq, “independent” directors must make up a majority of a listed company’s board of directors. In addition, applicable NASDAQ rules require that, subject to specified exceptions, each member of a listed company’s audit and compensation committees be independent within the meaning of the applicable NASDAQ rules. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act.
Our board of directors currently consists of 11 members. Our board of directors has determined that Paul Sansom, Stephen Spanos, Jeff Carl, Hannah Oh. Ray Shankar, Marvin Yeo, Mark McKinney, David Errington and Dr. Ahmed Khan qualify as independent directors in accordance with the NASDAQ Capital Market, or NASDAQ listing requirements. Kevin Mohan and Benjamin Petel are not considered independent as they operate in the day to day operational decisions of the Company. Nasdaq’s independence definition includes a series of objective tests, such as that the director is not, and has not been for at least 3 years, one of our employees and that neither the director nor any of his or her family members has engaged in various types of business dealings with us. In addition, as required by NASDAQ rules, our board of directors has made a subjective determination as to each independent director that no relationships exist that, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us regarding each director’s business and personal activities and relationships as they may relate to us and our management. There are no family relationships among any of our directors or executive officers.
As required under NASDAQ rules and regulations and in expectation of listing on NASDAQ, our independent directors meet in regularly scheduled executive sessions at which only independent directors are present.
Board Leadership Structure and Board’s Role in Risk Oversight
Kevin Mohan is the Chairman of the Board. The Chairman has authority, among other things, to preside over the Board meetings and set the agenda for the Board meetings. Accordingly, the Chairman has substantial ability to shape the work of our Board. We currently believe that separation of the roles of Chairman and Chief Executive Officer ensures appropriate oversight by the Board of our business and affairs. However, no single leadership model is right for all companies and at all times. The Board recognizes that depending on the circumstances, other leadership models, such as the appointment of a lead Independent director, might be appropriate. Accordingly, the Board may periodically review its leadership structure.
Our Board is generally responsible for the oversight of corporate risk in its review and deliberations relating to our activities. Our principal source of risk falls into two categories, financial and product commercialization. The audit committee oversees management of financial risks; our Board regularly reviews information regarding our cash position, liquidity and operations, as well as the risks associated with each. Our Compensation Committee is expected to oversee risk management as it relates to our compensation plans, policies and practices for all employees including executives and directors, particularly whether our compensation programs may create incentives for our employees to take excessive or inappropriate risks which could have a material adverse effect on the Company.
Committees of the Board of Directors
The Board of Directors has already established an Audit Committee (the “Audit Committee”), a Compensation Committee (the “Compensation Committee”), a Sustainability Committee (the "Sustainability Committee") and a Nominating and Corporate Governance Committee (“Governance Committee”). The composition and function of each committee are described below.
Audit Committee
The Audit Committee has three members, including Messrs. McKinney, Spanos and Sansom. Mr. Spanos serves as the chairman of the Audit Committee and satisfies the definition of “audit committee financial expert”.
Our Audit committee is authorized to:
•approve and retain the independent auditors to conduct the annual audit of our financial statements;
•review the proposed scope and results of the audit;
•review and pre-approve audit and non-audit fees and services;
•review accounting and financial controls with the independent auditors and our financial and accounting staff;
•review and approve transactions between us and our directors, officers and affiliates;
•recognize and prevent prohibited non-audit services; and
•establish procedures for complaints received by us regarding accounting matters; oversee internal audit functions, if any.
Compensation Committee
The Compensation Committee has three members, including Messrs. Carl, McKinney and Shankar. Mr. Shankar serves as the chairman of the Compensation Committee.
Our Compensation Committee is authorized to:
•review and determine the compensation arrangements for management;
•establish and review general compensation policies with the objective to attract and retain superior talent, to reward individual performance and to achieve our financial goals;
•administer our stock incentive and purchase plans; and
•review the independence of any compensation advisers.
Sustainability Committee
The Sustainability Committee has three members, including Messrs. Petel, Yeo, and Ms. Oh. Mr. Patel serves as the chairman of the Sustainability Committee.
Our Sustainability Committee's duties include reviewing and making recommendations to the Board on, the Company's policy and performance in relation to sustainability-related matters, including:
•health and safety;
•process safety;
•the environment;
•climate change;
•human rights;
•historical cultural heritage and land access;
•community relations;
•ESG and impact initiatives and implementation.
Nominating and Corporate Governance Committee
The Governance Committee has three members, including Messrs. Errington, Khan and Shankar. Mr. Errington serves as the chairman of the Governance Committee.
The functions of our Governance Committee, among other things, include:
•identifying individuals qualified to become board members and recommending director;
•nominees and board members for committee membership;
•developing and recommending to our board corporate governance guidelines;
•review and determine the compensation arrangements for directors; and
•overseeing the evaluation of our board of directors and its committees and management.
Our goal is to assemble a Board that brings together a variety of skills derived from high quality business and professional experience.
Compensation Committee Interlocks and Insider Participation
None of the members of our Compensation Committee, at any time, has been one of our officers or employees. Except for Mr. Mohan, none of our executive officers currently serves, or in the past year has served, as a member of the Board of Directors or Compensation Committee of any entity that has one or more executive officers on our Board of Directors or Compensation Committee. For a description of transactions between us and members of our Compensation Committee and affiliates of such members, please see “Certain Relationships and Related Party Transactions”.
Board Diversity Matrix (as of December 31, 2023):
The Board believes that a diverse membership having a variety of skills, styles, experience and competencies is an important feature of a well-functioning board. Accordingly, the Board believes that diversity of viewpoints, backgrounds and experience (inclusive of gender, age, race and ethnicity) should be a consideration in Board succession planning and recruiting. In recent years, the Governance Committee has taken this priority to heart in its nominations process, and the diversity of the Board has grown significantly. The Nasdaq Stock Market, LLC Listing Rules’ (the “NASDAQ Listing Rules”) objective for listed companies to have at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+. The chart below provides certain information regarding the diversity of the Board as of December 31, 2023.
Total Number of Directors Male Female Gender undisclosed
Part I: Gender Identity
Directors 9 1 1
Part II: Demographic Background
White 6 - -
Asian 3 1 -
Two or more races or ethnicities - - -
Did not disclose demographic background - - 1
LGBTQ+ - - -
Code of Business Conduct and Ethics
We have adopted a code of business conduct and ethics that applies to all our employees, officers and directors, including those officers responsible for financial reporting.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s executive officers, directors, and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of the Company’s common stock. Such officers, directors, and persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file with the SEC.
To our knowledge, based solely on review of the copies of such reports and amendments to such reports with respect to the year ended December 31, 2023, filed with the SEC, all required Section 16 reports under the Exchange Act for our directors, executive officers, principal accounting officer and beneficial owners of greater than 10% of our common stock were filed on a timely basis during the year ended December 31, 2023.
During the year ended December 31, 2023, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).
Item 11. Executive Compensation
Summary Compensation Table
The following Summary Compensation Table sets forth all compensation earned in all capacities during the fiscal years ended December 31, 2023 and 2022 by (i) our principal executive officer, (ii) our two most highly compensated executive officers, other than our principal executive officer, who were serving as executive officers as of December 31, 2023 and whose total compensation for the 2023 fiscal year, as determined by Regulation S-K, Item 402, exceeded $100,000, (iii) a person who would have been included as one of our two most highly compensated executive officers, other than our principal executive officer, but for the fact that he was not serving as one of our executive officers as of December 31, 2023, (the individuals falling within categories (i), (ii) and (iii) are collectively referred to as the “Named Executive Officers”):
Year Salary Bonus1 Stock
Award Option
Awards Non-Equity
Incentive
Plan
Compensation Non-Qualified
Deferred
Compensation
Earnings All Other
Compensation Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Michael J. Roper
Chief Executive Officer of Sadot Group, Inc. 2023 350 225 131 2 76 3 - - - 782
2022 350 175 - 24 4 - - - 549
Jennifer Black
Chief Financial Officer of Sadot Group, Inc. 2023 264 225 65 5 76 6 - - - 630
2022 186 95 11 10 7 - - - 302
Kevin Mohan
Chief Investing Officer of Sadot Group, Inc. 2023 200 200 131 8 76 9 - - - 607
2022 196 150 - 18 10 - - - 364
1 Bonuses are earned in the year noted and paid out within the first three months of the subsequent year.
2 Michael Roper was granted restricted stock awards on December 19, 2023, to acquire 0.3 million shares of common stock, vesting quarterly over twelve quarters, commencing March 31, 2024.
3 Michael Roper was granted a stock options to acquire a 31.1 thousand shares and 0.1 million shares of common stock on May February 27, 2028 and March 15, 2028, respectively.
4 Michael Roper was granted a stock option to acquire 0.1 million shares of common stock on May 2, 2022.
5 Jennifer Black was granted restricted stock awards on December 19, 2023, to acquire 0.2 million shares of common stock, vesting quarterly over twelve quarters, commencing March 31, 2024.
6 Jennifer Black was granted a stock option to acquire 0.1 million shares of common stock on February 27, 2023.
7 Jennifer Black was granted a stock options to acquire 20.0 thousand shares and 25.0 thousand shares of common stock on May 2, 2022 and October 10, 2022, respectively.
8 Kevin Mohan was granted restricted stock awards on December 19, 2023, to acquire 0.3 million shares of common stock, vesting quarterly over twelve quarters, commencing March 31, 2024.
9 Kevin Mohan was granted a stock option to acquire 0.1 million shares of common stock on February 27, 2023.
10 Kevin Mohan was granted a stock option to acquire 0.1 million shares of common stock on May 2, 2022.
A summary of option activity during the years ended December 31, 2023 and 2022 is presented below:
Weighted-average
exercise
price Number of
options Weighted-average
remaining life
(in years) Aggregate intrinsic value
$ $’000
Outstanding, December 31, 2021 5.00 100,000 1.91 -
Issued 0.41 337,500 4.40 12
Exercised - - N/A -
Forfeited - (25,000) N/A -
Outstanding, December 31, 2022 1.52 412,500 3.53 -
Issued 1.51 600,000 5.42 156
Exercised - - N/A -
Forfeited 3.40 (185,000) N/A -
Outstanding, December 31, 2023 1.09 827,500 4.26 -
Expected to vest, December 31, 2023 1.14 605,609 4.23 -
Exercisable, December 31, 2023 0.98 221,891 4.34 -
On February 27, 2023, we issued options to purchase an aggregate of 0.5 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On March 15, 2023, we issued options to purchase 0.1 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On November 27, 2023, there were 0.1 million shares forfeited upon the expiration of the options.
On December 21, 2023, there were 0.1 million shares forfeited upon the departure of board members.
Employment Agreements
Michael Roper
On November 16, 2022, the Company entered into an Executive Employment Agreement with Michael Roper (the “Roper Agreement”), which replaced his prior employment agreement. Pursuant to the Roper Agreement, Mr. Roper will continue to be employed as Chief Executive Officer of the Company on an at will basis. During the term of the Roper Agreement, Mr. Roper is entitled to a base salary at the annualized rate of $0.4 million. Mr. Roper will be eligible for a discretionary performance bonus to be determined by the Board annually. Mr. Roper received an additional bonus of $0.1 million on March 2, 2023 and an additional $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Roper is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Roper is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Roper will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 18 months following the second anniversary of the Roper Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Roper Agreement will automatically terminate and the prior employment agreement will again be in full effect.
Jennifer Black
On March 21, 2023, the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement. Pursuant to the Black Agreement, Ms. Black will continue to be employed as Chief Financial Officer of the Company on an at will basis. During the term of the Black Agreement,
Ms. Black is entitled to a base salary at the annualized rate of $0.3 million. Ms. Black will be eligible for a discretionary performance bonus up to 50% of her annual salary. Ms. Black received an additional bonus of $0.1 million on March 2, 2023 and an additional $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Ms. Black is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Black is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Black will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Black Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Black Agreement will automatically terminate, and the prior employment agreement will again be in full effect.
Kenneth Miller
On November 16, 2022, the Company entered into an Executive Employment Agreement with Kenn Miller (the “Miller Agreement”), which replaced his prior employment agreement. Pursuant to the Miller Agreement, Mr. Miller will continue to be employed as Chief Operating Officer of the Company on an at will basis. During the term of the Miller Agreement, Mr. Miller is entitled to a base salary at the annualized rate of $0.3 million. Mr. Miller will be eligible for a discretionary performance bonus up to 75% of his annual salary. Further, Mr. Miller will be entitled to an additional bonus of $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Miller is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Miller is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Miller will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 12 months following the second anniversary of the Miller Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Miller Agreement will automatically terminate and the prior employment agreement will again be in full effect.
Kevin Mohan
On November 16, 2022, the Company entered into an Executive Employment Agreement with Kevin Mohan (the “Mohan Agreement”), which replaced his prior employment agreement. Pursuant to the Mohan Agreement, Mr. Mohan will continue to be employed as Chief Investment Officer of the Company on an at will basis. During the term of the Employment Agreement, Mr. Mohan is entitled to a base salary at the annualized rate of $0.2 million. Mr. Mohan will be eligible for a discretionary performance bonus up to 75% of his annual salary. Mr. Mohan received an additional bonus of $0.1 million on March 2, 2023 and an additional $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Mohan is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Mohan is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Mohan will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Mohan Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Mohan Agreement will automatically terminate, and the prior employment agreement will again be in full effect.
Aimee Infante
On November 16, 2022, the Company entered into an Executive Employment Agreement with Aimee Infante (the “Infante Agreement”), which replaced her prior employment agreement. Pursuant to the Infante Agreement, Ms. Infante will continue to be employed as Chief Marketing Officer of the Company on an at will basis. During the term of the Infante Agreement, Ms. Infante is entitled to a base salary at the annualized rate of $0.2 million. Ms. Infante will be eligible for a discretionary performance bonus up to 25% of her annual salary. Further, Ms. Infante will be entitled to an additional bonus of $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Ms. Infante is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Infante is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Infante will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Infante
Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Infante Agreement will automatically terminate, and the prior employment agreement will again be in full effect.
Elements of Compensation
Base Salary
Messrs. Roper, Miller, Mohan, and Mmes. Black and Infante received a fixed base salary in an amount determined in accordance with their then employment agreement with Sadot Group, Inc., and based on a number of factors, including:
•The nature, responsibilities and duties of the officer’s position;
•The officer’s expertise, demonstrated leadership ability and prior performance;
•The officer’s salary history and total compensation, including annual cash bonuses and long-term incentive compensation; and
•The competitiveness of the market for the officer’s services.
Bonus
Messrs. Roper, Mohan, Miller, and Mmes. Black and Infante earned discretionary performance-based bonuses during the years ended December 31, 2023, and 2022, pursuant to their employment agreements.
Restricted Stock Award
In fiscal year 2023, we issued 1.0 million shares of our restricted common stock, with a fair value of $0.3 million, to three members of our executive team.
Stock Options
On May 2, 2022, we issued options to purchase an aggregate of 0.3 million shares of our common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on June 30, 2022.
On October 10, 2022, we issued options to purchase 25.0 thousand shares of our common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on December 31, 2022.
On February 27, 2023, we issued options to purchase an aggregate of 0.5 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On March 15, 2023, we issued options to purchase 0.1 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
Equity Incentive Plans
2021 Plan
The Company’s board of directors and shareholders approved and adopted on October 7, 2021 the 2021 Equity Incentive Plan (“2021 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2021 Plan, the Company reserved 1.5 million shares of common stock for issuance. As of the date of the issuance of these Consolidated Financial Statements 0.7 million shares have been issued and 0.8 million option to purchase shares have been awarded under the 2021 Plan.
2023 Plan
The Company’s board of directors and shareholders approved and adopted on February 28, 2023 the 2023 Equity Incentive Plan (“2023 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and
consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2023 Plan, the Company reserved 2.5 million shares of common stock for issuance. As of the date of the issuance of these Consolidated Financial Statements 2.4 million shares of common stock for issuance have been issued and 0.1 million option to purchase shares have been awarded under the 2023 Plan.
2024 Plan
The Company’s board of directors and shareholders approved and adopted on October 27, 2023 the 2024 Equity Incentive Plan (“2024 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock Units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2024 Plan, the Company reserved 7.5 million shares of common stock for issuance. As of December 31, 2023, no shares have been issued under the 2024 Plan.
Administration
The Company’s Board of Directors or a committee appointed by the Board (the “Committee”) will administer the Plan. The Committee will have the authority, without limitation (i) to designate Participants to receive Awards, (ii) determine the types of Awards to be granted to Participants, (iii) determine the number of shares of common stock to be covered by Awards, (iv) determine the terms and conditions of any Awards granted under the Plan, (v) determine to what extent and under what circumstances Awards may be settled in cash, shares of common stock, other securities, other Awards or other property, or canceled, forfeited or suspended, (vi) determine whether, to what extent, and under what circumstances the delivery of cash, Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be made; (vii) interpret, administer, reconcile any inconsistency in, settle any controversy regarding, correct any defect in and/or complete any omission in this Plan and any instrument or agreement relating to, or Award granted under, this Plan; (viii) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of this Plan; (ix) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, Awards; (x) reprice existing Awards with shareholder approval or to grant Awards in connection with or in consideration of the cancellation of an outstanding Award with a higher price; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Plan. The Committee will have full discretion to administer and interpret the Plan and to adopt such rules, regulations and procedures as it deems necessary or advisable and to determine, among other things, the time or times at which the awards may be exercised and whether and under what circumstances an award may be exercised.
Eligibility
Employees, directors, officers, advisors and consultants of the Company or its affiliates are eligible to participate in the Plan and are referred to as “Participants”. The Committee has the sole and complete authority to determine who will be granted an Award under the Plan, however, it may delegate such authority to one or more officers of the Company under the circumstances set forth in the Plan.
Number of Shares Authorized
Up to approximately 1.5 million shares of common stock may be issued pursuant to awards granted under the 2021 Plan, 2.5 million under the 2023 Plan and 7.5 million under the 2024 Plan.
If an Award is forfeited, canceled, or if any Option terminates, expires or lapses without being exercised, the Common Stock subject to such Award will again be made available for future grant. However, shares that are used to pay the exercise price of an Option or that are withheld to satisfy the Participant’s tax withholding obligation will not be available for re-grant under the Plan.
If there is any change in the Company’s corporate pro or structure, the Committee in its sole discretion may make substitutions or adjustments to the number of shares of common stock reserved for issuance under the Plan, the number of shares covered by Awards then outstanding under the Plan, the limitations on Awards under the Plan, the exercise price of outstanding Options and such other equitable substitution or adjustments as it may determine appropriate.
The Plan has a term of ten years and no further Awards may be granted under the Plan after that date.
Awards Available for Grant
The Committee may grant Awards of Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Stock Bonus Awards, Performance Compensation Awards (including cash bonus awards) or any combination of the foregoing. Notwithstanding, the Committee may not grant to any one person in any one calendar year Awards (i) for more than 50% of the Available Shares in the aggregate or (ii) payable in cash in an amount exceeding $10,000,000 in the aggregate.
Options
The Committee will be authorized to grant Options to purchase Common Stock that are either “qualified,” meaning they are intended to satisfy the requirements of Code Section 422 for Incentive Stock Options, or “non-qualified,” meaning they are not intended to satisfy the requirements of Section 422 of the Code. Options granted under the Plan will be subject to the terms and conditions established by the Committee. Under the terms of the Plan, unless the Committee determines otherwise in the case of an Option substituted for another Option in connection with a corporate transaction, the exercise price of the Options will not be less than the fair market value (as determined under the Plan) of the shares of common stock on the date of grant. Options granted under the Plan will be subject to such terms, including the exercise price and the conditions and timing of exercise, as may be determined by the Committee and specified in the applicable award agreement. The maximum term of an Option granted under the Plan will be ten years from the date of grant (or five years in the case of an Incentive Stock Option granted to a 10% stockholder). Payment in respect of the exercise of an Option may be made in cash or by check, by surrender of unrestricted shares of Common Stock (at their fair market value on the date of exercise) that have been held by the participant for any period deemed necessary by the Company’s accountants to avoid an additional compensation charge or have been purchased on the open market, or the Committee may, in its discretion and to the extent permitted by law, allow such payment to be made through a broker-assisted cashless exercise mechanism, a net exercise method, or by such other method as the Committee may determine to be appropriate.
Stock Appreciation Rights
The Committee will be authorized to award Stock Appreciation Rights (or “SARs”) under the Plan. SARs will be subject to such terms and conditions as established by the Committee. A SAR is a contractual right that allows a participant to receive, either in the form of cash, shares or any combination of cash and shares, the appreciation, if any, in the value of a share over a certain period of time. A SAR granted under the Plan may be granted in tandem with an option and SARs may also be awarded to a participant independent of the grant of an Option. SARs granted in connection with an Option shall be subject to terms similar to the Option which corresponds to such SARs. SARs shall be subject to terms established by the Committee and reflected in the award agreement.
Restricted Stock
The Committee will be authorized to award Restricted Stock under the Plan. Unless otherwise provided by the Committee and specified in an award agreement, restrictions on Restricted Stock will lapse after three years of service with the Company. The Committee will determine the terms of such Restricted Stock awards. Restricted Stock are shares of common stock that generally are non-transferable and subject to other restrictions determined by the Committee for a specified period. Unless the Committee determines otherwise or specifies otherwise in an award agreement, if the participant terminates employment or services during the restricted period, then any unvested restricted stock will be forfeited.
Restricted Stock Unit Awards
The Committee will be authorized to award Restricted Stock Unit awards. Unless otherwise provided by the Committee and specified in an award agreement, Restricted Stock Units will vest after three years of service with the Company. The Committee will determine the terms of such Restricted Stock Units. Unless the Committee determines otherwise or specifies otherwise in an award agreement, if the participant terminates employment or services during the period of time over which all or a portion of the units are to be earned, then any unvested units will be forfeited. At the election of the Committee, the participant will receive a number of shares of common stock equal to the number of units earned or an amount in cash equal to the fair market value of that number of shares at the expiration of the period over which the units are to be earned or at a later date selected by the Committee.
Stock Bonus Awards
The Committee will be authorized to grant Awards of unrestricted shares of common stock or other Awards denominated in shares of common stock, either alone or in tandem with other Awards, under such terms and conditions as the Committee may determine.
Performance Compensation Awards
The Committee will be authorized to grant any Award under the Plan in the form of a Performance Compensation Award exempt from the requirements of Section 162(m) of the Code by conditioning the vesting of the Award on the attainment of specific performance criteria of the Company and/or one or more Affiliates, divisions or operational units, or any combination thereof, as determined by the Committee. The Committee will select the performance criteria based on one or more of the following factors: (i) revenue; (ii) sales; (iii) profit (net profit, gross profit, operating profit, economic profit, profit margins or other corporate profit measures); (iv) earnings (EBIT, EBITDA, earnings per share, or other corporate profit measures); (v) net income (before or after taxes, operating income or other income measures); (vi) cash (cash flow, cash generation or other cash measures); (vii) stock price or performance; (viii) total stockholder return (stock price appreciation plus reinvested dividends divided by beginning share price); (ix) economic value added; (x) return measures (including, but not limited to, return on assets, capital, equity, investments or sales, and cash flow return on assets, capital, equity, or sales); (xi) market share; (xii) improvements in capital structure; (xiii) expenses (expense management, expense ratio, expense efficiency ratios or other expense measures); (xiv) business expansion or consolidation (acquisitions and divestitures); (xv) internal rate of return or increase in net present value; (xvi) working capital targets relating to inventory and/or accounts receivable; (xvii) inventory management; (xviii) service or product delivery or quality; (xix) customer satisfaction; (xx) employee retention; (xxi) safety standards; (xxii) productivity measures; (xxiii) cost reduction measures; and/or (xxiv) strategic plan development and implementation.
Transferability
Each Award may be exercised during the Participant’s lifetime only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative and may not be otherwise transferred or encumbered by a Participant other than by will or by the laws of descent and distribution. The Committee, however, may permit Awards (other than Incentive Stock Options) to be transferred to family members, a trust for the benefit of such family members, a partnership or limited liability company whose partners or stockholders are the Participant and his or her family members or anyone else approved by it.
Amendment
The Plan will have a term of ten years. The Company’s board of directors may amend, suspend or terminate the Plan at any time; however, shareholder approval to amend the Plan may be necessary if the law or SEC so requires. No amendment, suspension or termination will materially and adversely affect the rights of any Participant or recipient of any Award without the consent of the Participant or recipient.
Change in Control
Except to the extent otherwise provided in an Award or required by applicable law, in the event of a Change in Control, upon the occurrence of a Change in Control, the Committee is authorized, but not obligated, to make any of the following adjustments (or any combination thereof) in the terms and conditions of outstanding Awards: (a) continuation or assumption of outstanding Awards by the surviving company; (b) substitution by the surviving company of equity, equity-based and/or cash awards with substantially the same terms for outstanding Awards; (c) accelerated exercisability, vesting and/or lapse of restrictions under outstanding Awards immediately prior to the occurrence of the Change in Control; (d) upon written notice, provide that any outstanding Awards must be exercised, to the extent then exercisable, during a reasonable period determined by the Committee and at the end of such period, any unexercised Awards will terminate; and I cancellation of all or any portion of outstanding Awards for fair value (in the form of cash, shares or other property) and which value may be zero.
U.S. Federal Income Tax Consequences
The following is a general summary of the material U.S. federal income tax consequences of the grant and exercise and vesting of Awards under the Plan and the disposition of shares acquired pursuant to the exercise of such Awards. This
summary is intended to reflect the current provisions of the Code and the regulations thereunder. However, this summary is not intended to be a complete statement of applicable law, nor does it address foreign, state, local and payroll tax considerations. Moreover, the U.S. federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular circumstances of such participant.
Options
There are a number of requirements that must be met for a particular Option to be treated as an Incentive Stock Option. One such requirement is that Common Stock acquired through the exercise of an Incentive Stock Option cannot be disposed of before the later of (i) two years from the date of grant of the Option, or (ii) one year from the date of its exercise. Holders of Incentive Stock Options will generally incur no federal income tax liability at the time of grant or upon exercise of those Options. However, the spread at exercise will be an “item of tax preference,” which may give rise to “alternative minimum tax” liability for the taxable year in which the exercise occurs. If the holder does not dispose of the shares before the later of two years following the date of grant and one year following the date of exercise, the difference between the exercise price and the amount realized upon disposition of the shares will constitute long-term capital gain or loss, as the case may be. Assuming both holding periods are satisfied, no deduction will be allowed to the Company for federal income tax purposes in connection with the grant or exercise of the Incentive Stock Option. If, within two years following the date of grant or within one year following the date of exercise, the holder of shares acquired through the exercise of an Incentive Stock Option disposes of those shares, the Participant will generally realize taxable compensation at the time of such disposition equal to the difference between the exercise price and the lesser of the Fair Market Value of the share on the date of exercise or the amount realized on the subsequent disposition of the shares, and that amount will generally be deductible by the Company for federal income tax purposes, subject to the possible limitations on deductibility under Sections 280G and 162(m) of the Code for compensation paid to executives designated in those Sections. Finally, if an otherwise Incentive Stock Option becomes first exercisable in any one year for shares having an aggregate value in excess of $100,000 (based on the date of grant value), the portion of the Incentive Stock Option in respect of those excess shares will be treated as a non-qualified stock option for federal income tax purposes.
Income will be realized by a Participant upon grant of a Non-Qualified Stock Option. Upon the exercise of a Non-Qualified Stock Option, the Participant will recognize ordinary compensation income in an amount equal to the excess, if any, of the Fair Market Value of the underlying exercised shares over the Option exercise price paid at the time of exercise. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income.
The Company will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Restricted Stock
A Participant will not be subject to tax upon the grant of an Award of Restricted Stock unless the Participant otherwise elects to be taxed at the time of grant pursuant to Section 83(b) of the Code. On the date an Award of Restricted Stock becomes transferable or is no longer subject to a substantial risk of forfeiture, the Participant will recognize ordinary compensation income equal to the difference between the Fair Market Value of the shares on that date over the amount the Participant paid for such shares, if any. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. If the Participant made an election under Section 83(b) of the Code, the Participant will recognize ordinary compensation income at the time of grant equal to the difference between the Fair Market Value of the shares on the date of grant over the amount the Participant paid for such shares, if any, and any subsequent appreciation in the value of the shares will be treated as a capital gain upon sale of the shares. Special rules apply to the receipt and disposition of Restricted Shares received by officers and directors who are subject to Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”). The Company will be able to deduct, at the same time as it is recognized by the Participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Restricted Stock Units
A Participant will not be subject to tax upon the grant of a Restricted Stock Unit Award. Rather, upon the delivery of shares or cash pursuant to a Restricted Stock Unit Award, the Participant will recognize ordinary compensation income
equal to the Fair Market Value of the number of shares (or the amount of cash) the Participant actually receives with respect to the Award. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. The Company will be able to deduct the amount of taxable compensation recognized by the Participant for U.S. federal income tax purposes, but the deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
SARs
No income will be realized by a Participant upon grant of an SAR. Upon the exercise of an SAR, the Participant will recognize ordinary compensation income in an amount equal to the Fair Market Value of the payment received in respect of the SAR. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. The Company will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Stock Bonus Awards
A Participant will recognize ordinary compensation income equal to the difference between the Fair Market Value of the shares on the date the shares of common stock subject to the Award are transferred to the Participant over the amount the Participant paid for such shares, if any, and any subsequent appreciation in the value of the shares will be treated as a capital gain upon sale of the shares. The Company will be able to deduct, at the same time as it is recognized by the Participant, the amount of taxable compensation to the Participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Section 162(m)
In general, Section 162(m) of the Code denies a publicly held corporation a deduction for U.S. federal income tax purposes for compensation in excess of $1,000,000 per year paid to any “covered employee.” Covered employees include any individual who served as chief executive officer or chief financial officer during the taxable year, in addition to the three most highly compensated individuals aside from the chief executive officer and chief financial officer. Additionally, covered employees include any previously covered employee for any taxable year beginning after December 31, 2016. The Plan is intended to satisfy an exception with respect to grants of Options to covered employees. In addition, the Plan was designed to permit certain Awards of Restricted Stock, Restricted Stock Units, cash bonus awards and other Awards to be awarded as performance compensation awards intended to qualify under the “performance-based compensation” exception to Section 162(m) of the Code.
On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law. The TCJA repealed the performance-based compensation exception to the Section 162(m) $1 million limitation on compensation to covered employees of publicly held corporations. This change was effective for tax years beginning after December 31, 2017. As a result of this change, any expense recognized upon exercise of stock options will be subject to the $1 million limitation under Section 162(m), even if based on performance.
New Plan Benefits
Future grants under the Plan will be made at the discretion of the Committee and, accordingly, are not yet determinable. In addition, the value of the Awards granted under the Plan will depend on a number of factors, including the Fair Market Value of the shares of common stock on future dates, the exercise decisions made by the Participants and/or the extent to which any applicable performance goals necessary for vesting or payment are achieved. Consequently, it is not possible to determine the benefits that might be received by Participants receiving discretionary grants under, or having their annual bonus paid pursuant to, the Plan.
Interests of Directors or Officers
The Company’s directors may grant Awards under the Plan to themselves as well as to the Company’s officers and other employees, consultants and advisors.
Equity Compensation Plan Information
The following table provides information, as of December 31, 2023, with respect to equity securities authorized for issuance under compensation plans:
Plan Category No. of securities
to be issued
upon exercise
of outstanding
options
under the plan Weighted-average exercise price of outstanding options under the plan No. of
securities
remaining
available
for future
issuance
$
2024 Equity compensation plans approved by security holders - - 7,500,000
2023 Equity compensation plans approved by security holders 68,928 1.51 -
2021 Equity compensation plans approved by security holders 843,572 1.10 -
Equity compensation plans not approved by security holders - - -
Total 912,500 2.61 7,500,000
Director Compensation
Through the third quarter of 2022 the board members were eligible for cash compensation of $12.0 thousand per year to be paid quarterly within 30 days of the close of each quarter. On November 11, 2022, the board of directors approved a new board compensation plan that would increase the cash compensation to $22.0 thousand to be paid quarterly within 30 days of the close of each quarter, which was retroactively applied for the full fourth quarter of 2022.
In addition, on an ongoing basis pursuant to the approved board compensation plan each director will receive $8.0 thousand in value of common stock per year for service as director, $6.0 thousand in value of shares of common stock per year for service on each committee and $4.0 thousand in value of shares of common stock per year for service as chair for such committee. The number of shares to be issued would be based upon the closing price of the last trading date of each calendar quarter. The shares of common stock for committee service will be limited to two committees.
Kevin Mohan is an employee-director and does not receive compensation for serving in his role as a director or Chairman of the Board.
The following table provides information relating to compensation of our directors for our fiscal year ended December 31, 2023:
Name Fees earned
or paid in cash Stock awards Option awards Non-equity incentive
plan compensation Non-qualified deferred
compensation
earnings All other
compensation Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000
Stephen A. Spanos 22 37 38 - - - 97
A.B. Southall III 22 33 38 - - - 93
Paul L. Menchik 22 43 38 - - - 103
Jeff Carl 22 43 38 - - - 103
Major General (Ret) Malcolm B. Frost 22 33 38 - - - 93
Phillip Balatsos 22 39 38 - - - 99
Benjamin Petel 17 58 - - - - 75
Na Yeon (“Hannah”) Oh 13 4 - - - - 17
Ray Shankar 13 4 - - - - 17
Marvin Yeo 10 4 - - - - 14
Paul Sansom 10 4 - - - - 14
Mark McKinney 7 2 - - - - 9
David Errington 7 2 - - - - 9
Dr. Ahmed Khan 7 2 - - - - 9
Executive Compensation Philosophy
Our Board of Directors determines the compensation given to our executive officers in their sole determination. Our Board of Directors reserves the right to pay our executives or any future executives a salary, and/or issue them shares of common stock issued in consideration for services rendered and/or to award incentive bonuses which are linked to our performance, as well as to the individual executive officer’s performance. This package may also include long-term stock-based compensation to certain executives, which is intended to align the performance of our executives with our long-term business strategies. Additionally, while our Board of Directors has not granted any performance base stock options to date, the Board of Directors reserves the right to grant such options in the future, if the Board in its sole determination believes such grants would be in the best interests of the Company.
Incentive Bonus
The Board of Directors may grant incentive bonuses to our executive officers and/or future executive officers in its sole discretion, if the Board of Directors believes such bonuses are in the Company’s best interest, after analyzing our current business objectives and growth, if any, and the amount of revenue we are able to generate each month, which revenue is a direct result of the actions and ability of such executives.
Long-Term, Stock-Based Compensation
In order to attract, retain and motivate executive talent necessary to support the Company’s long-term business strategy we may award our executives and any future executives with long-term, stock-based compensation in the future, at the sole discretion of our Board of Directors.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information about the beneficial ownership of our common stock at March 20, 2024, for:
•each person, or group of affiliated persons, whom we know to beneficially own more than 5% of our common stock;
•each of our named executive officers;
•each of our directors; and
•all of our executive officers and directors as a group.
We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options or warrants or upon conversion of a security that are either exercisable or convertible on or before a date that is 60 days after March 20, 2024. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
Except as otherwise noted below, the address for persons listed in the table is c/o Sadot Group, Inc., 1751 River Run, Suite 200, Fort Worth, Texas 76107.
The percentage ownership information shown in the column labeled “Percentage of shares outstanding” is based upon 51,752,691 shares of common stock outstanding as of March 20, 2024.
Name of beneficial owner Number of shares
beneficially
owned (1)
Percentage of shares
outstanding prior to
offering (1)
5% Stockholders:
Aggia LLC FZ (2)
12,492,069 24.43 %
Armistice Capital LLC (3)
3,201,897 6.26 %
Directors and Named Executive Officers:
Kevin Mohan (4)
524,537 *
Michael J. Roper (5)
523,015 *
Jennifer Black (6)
251,300 *
Kenneth Miller (7)
80,892 *
Aimee Infante (8)
40,852 *
Stephen Spanos (9)
147,515 *
Jeff Carl (10)
160,625 *
Ray Shankar (11)
10,151 *
Hannah Oh (12)
10,151 *
Benjamin Petel (13)
131,397 *
Marvin Yeo (14)
9,361 *
Paul Sansom (15)
9,361 *
Mark McKinney (16)
8,143 *
David Errington (17)
35,143 *
Dr. Ahmed Khan (18)
10,881 *
All executive officers and directors as a group (15 persons) 1,953,324 3.82 %
*Denotes less than 1%
(1)Beneficial ownership as reported in the above table has been determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended, and is not necessarily indicative of beneficial ownership for any other purpose. The number of shares of common stock shown as beneficially owned includes shares of common stock issuable upon (i) the exercise of stock options that will become exercisable within 60 days of March 20, 2024, (ii) the conversion of the convertible promissory notes into
shares of our common stock, and (iii) the exercise of warrants that will become exercisable within 60 days of March 21, 2023. Shares of common stock issuable pursuant to the foregoing methods are deemed outstanding for purposes of calculating the percentage of beneficial ownership of the person or entity holding such securities. Accordingly, the total percentages of beneficial ownership are in excess of one hundred percent (100%).
(2)Aggia LLC FZ beneficially owns 12.5 million shares of common stock of the Company.
(3)Armistice Capital LLC beneficially owns 3.2 million shares of common stock of the Company which are subject to presently exercisable purchase warrants. Armistice Capital Master Fund Ltd., a Cayman Islands exempted company (the “Master Fund”) holds 3.2 million shares of common stock issuable upon exercise of Warrants at an exercise price of $1.385. Armistice Capital, LLC (“Armistice Capital”) is the investment manager of Armistice Capital Master Fund Ltd. (the “Master Fund”), the direct holder of the Shares, and pursuant to an Investment Management Agreement, Armistice Capital exercises voting and investment power over the securities of the Issuer held by the Master Fund and thus may be deemed to beneficially own the securities of the Issuer held by the Master Fund. Mr. Boyd, as the managing member of Armistice Capital, may be deemed to beneficially own the securities of the Issuer held by the Master Fund. The Master Fund specifically disclaims beneficial ownership of the securities of the Issuer directly held by it by virtue of its inability to vote or dispose of such securities as a result of its Investment Management Agreement with Armistice Capital. The address of the Master Fund is c/o Armistice Capital, LLC, 510 Madison Ave, 7th Floor, New York, NY 10022.
(4)Kevin Mohan beneficially owns (i) indirectly 5.6 thousand shares of common stock of the Company through various family members that reside in the same household as Kevin Mohan and (ii) directly 0.4 million shares of common stock of Sadot Group Inc, for serving in various roles in the Company, (iii) 33.0 thousand shares of common stock of the Company purchased on the open market and (iv) directly 55.0 thousand shares of vested but unexercised stock options.
(5)Michael J. Roper beneficially owns directly 0.5 million shares of common stock of the Company (i) 0.4 million shares of common stock of Sadot Group Inc. for serving as the Chief Executive Officer of the Company and (ii) 58.0 thousand shares of common stock of the Company purchased on the open market and (iii) 65.0 thousand shares of vested but unexercised stock options.
(6)Jennifer Black beneficially owns directly 0.2 million shares of common stock of the Company (i) 0.2 million shares of common stock of Sadot Group Inc. for serving as the Chief Financial Officer of the Company, (ii) 41.0 thousand shares of common stock of the Company purchased on the open market and (iii) 41.0 thousand shares of vested but unexercised stock options.
(7)Kenneth Miller beneficially owns directly 80.9 thousand shares of common stock of the Company (i) 32.0 thousand shares of common stock of the Company for serving as Chief Operating Officer of the Company, (ii) 10.0 thousand shares of common stock of the Company purchased on the open market and (iii) 39.0 thousand shares of vested but unexercised stock options.
(8)Aimee Infante beneficially owns directly 40.1 thousand shares of common stock of the Company (i) 3.0 thousand shares of common stock for serving as the Chief Marketing Officer of the Company, (ii) 3.0 thousand shares of common stock of the Company purchased on the open market and (iii) 36.0 thousand shares of vested but unexercised stock options.
(9)Stephen Spanos beneficially owns directly 0.1 million shares of common stock of the Company (i) 0.1 million shares of common stock of the Company for services rendered as a board of director member, (ii) 15.0 thousand of the common stock of through purchase on the open market and (iii) 6.0 thousand shares of vested but unexercised stock options.
(10)Jeff Carl beneficially owns directly 0.2 million shares of common stock of the Company (i) 0.2 million shares of common stock of the Company for services rendered as a board of director member and (ii) 6.0 thousand shares of vested but unexercised stock options.
(11)Ray Shankar beneficially owns directly shares of common stock of the Company (i) 10.0 thousand shares of common stock of the Company (i) 10.0 thousand shares of common stock of the Company for services rendered as a board of director member.
(12)Hannah Oh beneficially owns directly shares of common stock of the Company (i) 10.0 thousand shares of common stock of the Company (i) 10.0 thousand shares of common stock of the Company for services rendered as a board of director member.
(13)Benjamin Petel beneficially owns directly shares of common stock of the Company (i) 0.1 million shares of common stock of the Company (i) 0.1 million shares of common stock of the Company for services rendered as a board of director member and consulting services.
(14)Marvin Yeo beneficially owns directly shares of common stock of the Company (i) 9.0 thousand shares of common stock of the Company (i) 9.0 thousand shares of common stock of the Company for services rendered as a board of director member.
(15)Paul Sansom beneficially owns directly shares of common stock of the Company (i) 9.0 thousand shares of common stock of the Company (i) 9.0 thousand shares of common stock of the Company for services rendered as a board of director member.
(16)Mark McKinney beneficially owns directly shares of common stock of the Company (i) 8.0 thousand shares of common stock of the Company (i) 8.0 thousand shares of common stock of the Company for services rendered as a board of director member.
(17)David Errington beneficially owns directly shares of common stock of the Company (i) 35.0 thousand shares of common stock of the Company (i) 8.0 thousand shares of common stock of the Company for services rendered as a board of director member and (ii) 27.0 thousand shares of common stock of the Company purchased on the open market.
(18)Dr. Ahmed Khan beneficially owns directly shares of common stock of the Company (i) 11.0 thousand shares of common stock of the Company (i) 8.0 thousand shares of common stock of the Company for services rendered as a board of director member and (ii) 3.0 thousand shares of common stock of the Company purchased on the open market.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Policies and Procedures for Related Party Transactions
Following this offering, pursuant to the written charter of our Audit Committee, the Audit Committee will be responsible for reviewing and approving, prior to our entry into any such transaction, all related party transactions and potential conflict of interest situations involving:
•any of our directors, director nominees or executive officers;
•any beneficial owner of more than 5% of our outstanding stock; and
•any immediate family member of any of the foregoing.
Our Audit Committee will review any financial transaction, arrangement or relationship that:
•involves or will involve, directly or indirectly, any related party identified above;
•would cast doubt on the independence of a director;
•would present the appearance of a conflict of interest between us and the related party; or
•is otherwise prohibited by law, rule or regulation.
The Audit Committee will review each such transaction, arrangement or relationship to determine whether a related party has, has had or expects to have a direct or indirect material interest. Following its review, the Audit Committee will take such action as it deems necessary and appropriate under the circumstances, including approving, disapproving, ratifying, canceling or recommending to management how to proceed if it determines a related party has a direct or indirect material interest in a transaction, arrangement or relationship with us. Any member of the Audit Committee who is a related party with respect to a transaction under review will not be permitted to participate in the discussions or evaluations of the transaction; however, the Audit Committee member will provide all material information concerning the transaction to the Audit Committee. The Audit Committee will report its action with respect to any related party transaction to the board of directors.
See Employment Agreements for Messrs. Roper, Miller, Mohan and Mmes. Black and Infante in Item 11. Executive Compensation.
Transactions with Officers, Directors and Executives of Sadot Group
On January 6, 2022, we issued an aggregate of 39.6 thousand shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2021.
On January 2, 2022, we appointed Jennifer Black as our Chief Financial Officer and entered into an Offer Letter with Ms. Black. Pursuant to the Offer Letter, Ms. Black will be employed as our Chief Financial Officer on an at-will basis. Ms. Black is entitled to a base salary at the annualized rate of $0.2 million. Our previous CFO, Ferdinand Groenewald, was appointed as our Chief Accounting Officer and subsequently the position of Chief Accounting Officer was eliminated.
On February 10, 2022, we entered into an Employment Agreement with Michael Roper effective February 14, 2022, which replaced his prior employment agreement. Pursuant to the Employment Agreement, Mr. Roper will continue to be employed as our Chief Executive Officer on an at will basis. During the term of the Employment Agreement, Mr. Roper will be entitled to a base salary at the annualized rate of $0.4 million, which will be increased to $0.4 million upon the one-year anniversary. Mr. Roper will be eligible for a discretionary performance bonus to be paid in cash or equity. Within 90 days of the effective date, we will issue Mr. Roper stock options to receive 0.1 million shares of common stock which will vest over a term of five years. If Mr. Roper is terminated by us for any reason other than cause, including termination without cause in connection with a change in control, Mr. Roper will be entitled to a severance package of 18 months of salary and health and dental benefits paid in accordance with our payroll schedule, but subject to the execution of a valid release in favor of us and our related parties.
On February 10, 2022, we entered into a letter agreement with Kevin Mohan, Chief Investment Officer, providing that Mr. Mohan will continue to be engaged by us on an at-will basis with a base salary at the annualized rate of $0.2 million effective February 14, 2022. Mr. Mohan will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 75% of his salary. Within 90 days of the effective date, we will issue Mr. Mohan stock options to receive 0.1 million shares of common stock which will vest over a term of five years. If Mr. Mohan is terminated by us for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with our payroll schedule and insurance program, but subject to the execution of a valid release in favor of us and our related parties.
On February 9, 2022, we entered into a letter agreement with Kenn Miller, Chief Operations Officer, providing that Mr. Miller will continue to be engaged by us on an at-will basis with a base salary at the annualized rate of $0.3 million effective February 14, 2022. Mr. Miller will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 75% of his salary. Within 90 days of the effective date, we will issue Mr. Miller stock options to receive 0.1 million shares of common stock which will vest over a term of five years. If Mr. Miller is terminated by us for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of 12 months of salary and health and dental benefits paid in accordance with our payroll schedule and insurance program, but subject to the execution of a valid release in favor of us and our related parties.
On February 9, 2022, we entered into a letter agreement with Aimee Infante, Chief Marketing Officer, providing that Ms. Infante will continue to be engaged by us on an at-will basis with a base salary at the annualized rate of $0.2 million effective February 14, 2022. Ms. Infante will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25% of her salary. Within 90 days of the effective date, we will issue Ms. Infante stock options to receive 42.5 thousand shares of common stock which will vest over a term of five years. If Ms. Infante is terminated us for any reason other than cause, including termination without cause in connection with a change in control, she will be entitled to
a severance package of six months of salary and health and dental benefits paid in accordance with the our payroll schedule and insurance program, but subject to the execution of a valid release in favor of us and our related parties.
On February 9, 2022, we entered into a letter agreement with Ferdinand Groenewald, Chief Accounting Officer, providing that Mr. Groenewald will continue to be engaged by us on an at-will basis with a base salary at the annualized rate of $0.2 million effective February 14, 2022. Mr. Groenewald will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25% of his salary. Within 90 days of the effective date, we will issue Mr. Groenewald stock options to receive 25.0 thousand shares of common stock which will vest over a term of five years. If Mr. Groenewald is terminated by us for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with our payroll schedule and insurance program, but subject to the execution of a valid release in favor of us and our related parties.
On March 31, 2022, we issued an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2022.
On April 4, 2022, we issued 20.0 thousand shares of common stock to a member of the executive team per the employment agreement.
On May 2, 2022, we issued options to purchase an aggregate of 0.3 million shares of common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on June 30, 2022.
On June 21, 2022, we advised Ferdinand Groenewald that the position of Chief Accounting Officer has been eliminated. Mr. Groenewald continued his employment with us through July 29, 2022, at which time he became entitled to the severance for termination without cause as outlined in the letter agreement between us and Mr. Groenewald dated February 9, 2022. Mr. Groenewald forfeited 25.0 thousand options upon his departure as an officer.
On July 14, 2022, we issued an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2022.
On October 10, 2022, we issued options to purchase 25.0 thousand shares of common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on December 31, 2022.
On October 12, 2022, we issued an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2022.
On January 5, 2023, we issued an aggregate of 31.3 thousand shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2022.
On February 27, 2023, we issued options to purchase an aggregate of 0.5 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On March 15, 2023, we issued options to purchase 0.1 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On March 21, 2023, the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement dated November 16, 2022. Pursuant to the Black Agreement, Ms. Black will continue to be employed as Chief Financial Officer of the Company on an at will basis. During the term of the Black Agreement, Ms. Black is entitled to a base salary at the annualized rate of $0.3 million. Ms. Black will be eligible for a discretionary performance bonus up to 50% of her annual salary. Further, Ms. Black will be entitled to an additional bonus of $0.1 million upon the Company obtaining approval of the Shareholder Matters and $25.0 thousand upon the Designated Directors representing a majority of the Board of Directors. If Ms. Black is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Black is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Black will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Black Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder
Matters are not approved by the shareholders, the Black Agreement will automatically terminate and the prior employment agreement will again be in full effect.
On March 27, 2023, the Company authorized the issuance of 2.8 million shares of common stock to a consultant for services rendered.
On April 5, 2023 the Company authorized the issuance of 29.7 thousand shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2023.
On May 10, 2023 the Company authorized the issuance of 0.1 million shares of common stock to a consultant for services rendered.
On May 25, 2023, the Company authorized the issuance of 2.7 million shares of common stock to a consultant for services rendered.
On June 30, 2023, the Company vested 0.9 million shares of common stock to a consultant for services rendered.
On July 11, 2023, the Company authorized the issuance of an aggregate of 32.9 thousand shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2023.
On July 14, 2023, the Company issued $8.9 million Restricted Share Awards, with an effective issuance date of April 1, 2023.
On July 27, 2023, the Company authorized the issuance of 2.2 million shares of common stock to Altium in exchange for the exercise of warrants.
On August 15, 2023, the Company authorized the issuance of 0.1 million shares of common stock to a consultant for services rendered.
On September 25, 2023, the Company authorized the issuance of 0.2 million shares of common stock in fees to a consultant for services rendered related to the SEPA.
On September 30, 2023, the Company vested 0.5 million shares of common stock to to a consultant for services rendered.
On October 2, 2023, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2023.
On October 20, 2023, the Company authorized the issuance of 0.1 million shares of common stock to consultants for services rendered.
On November 6, 2023, the Company authorized the issuance of 0.1 million shares of common stock in connection with the conversion of note payables.
On November 14, 2023, the Company authorized the issuance of 0.2 million shares of common stock in connection with the conversion of note payables.
On November 29, 2023, the Company authorized the issuance of 0.2 million shares of common stock in connection with the conversion of note payables.
On December 13, 2023, the Company authorized the issuance of 0.3 million shares of common stock in connection with the conversion of note payables.
On December 19, 2023, the Company authorized the issuance of 0.3 million shares of common stock in connection with the conversion of note payables.
On December 19, 2023, the Company issued 2.0 million RSA's to certain members of the board of directors, consultants and employees. Total RSA vested as a result of the departure of certain members of the board of directors were 0.2 million for 2023. The remaining RSA vest ratably over 12 quarters with the first vesting starting on March 31, 2024.
At December 31, 2023, there were 9.1 million restricted share awards outstanding.
On December 31, 2023, the Company vested 0.2 million shares of common stock to Aggia as consulting fees earned during the fourth quarter of 2023.
On January 4, 2024, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2023. The Company accrued for the liability as of December 31, 2023.
We have entered into indemnification agreements with each of our directors and entered into such agreements with certain of our executive officers. These agreements require us, among other things, to indemnify these individuals for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts reasonably incurred by such person in any action or proceeding, including any action by or in our right, on account of any services undertaken by such person on behalf of our Company or that person’s status as a member of our Board of Directors to the maximum extent allowed under Nevada law.
Item 14. Principal Accountant Fees and Services
Kreit & Chiu CPA LLP has served as our independent registered public accountants for the years ended December 31, 2023 and 2022.
The following is a summary of the fees billed or expected to be billed to us by our independent registered public accountants, for professional services rendered by Kreit & Chiu CPA LLP for the fiscal years ended December 31, 2023 and 2022:
December 31, 2023 December 31, 2022
$’000 $’000
Audit fees (1)
277 265
Audit-related fees (2)
- 2
277 267
(1)Audit Fees consist of fees billed and expected to be billed for services rendered for the audit of our Consolidated Financial Statements for the fiscal years ended December 31, 2023 and 2022 and in connection with the filing of our Form 10-K, Form 10-Qs and multiple Forms S-1 and Forms S-3s.
(2)Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit of our financial statements and are not reported under “Audit Fees.”
The Audit Committee is responsible for the appointment, compensation and oversight of the work of the independent registered public accountants and approves in advance any services to be performed by the independent registered public accountants, whether audit-related or not. The Audit Committee reviews each proposed engagement to determine whether the provision of services is compatible with maintaining the independence of the independent registered public accountants. The fees shown above were pre-approved either by our Board or our Audit Committee.
PART IV
Item 15. Exhibits and Financial Statement Schedules
Exhibit
No. Exhibit Description
3.1+ Articles of Incorporation of Muscle Maker, Inc., a Nevada corporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 14, 2019)
3.2+ Bylaws of Muscle Maker, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 14, 2019)
3.3+ Certificate of Change Pursuant to NRS 78.209 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on December 11, 2019)
3.4+ Certificate of Amendment to Articles of Incorporation of Muscle Maker, Inc., a Nevada corporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 16, 2020)
3.5+ Certificate of Amendment to Articles of Incorporation of Muscle Maker, Inc. (incorporated by reference to Exhibit 3.1 to the Registrants Current Report on Form 8-K filed on March 7, 2023)
3.6+ Articles of Merger (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 26, 2023).
4.1+ Form of Warrant to Purchase Common Stock dated April 9, 2021 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021)
4.2+ Form of Pre-Funded Warrant to Purchase Common Stock dated April 9, 2021 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021)
4.3+ Form of Warrant to Purchase Common Stock issued to A.G.P./Alliance Global Partners dated April 9, 2021 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021)
4.4+ Form of Warrant to Purchase Common Stock dated November 22, 2021 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021)
4.5+ Form of Pre-Funded Warrant to Purchase Common Stock dated November 22, 2021 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021)
4.6+ Form of Placement Agent Warrant to Purchase Common Stock issued to A.G.P./Alliance Global Partners dated November 22, 2021 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021)
4.7+ 2021 Equity Incentive Plan (incorporated by reference to Exhibit 4.8 to the Registrant’s Annual Report on Form 10-K filed on March 17, 2022)
4.8+ 2023 Equity Incentive Plan
4.9* Description of Securities
4.10+ Form of Additional Warrant - Altium Growth Fund Ltd. (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 27, 2023.)
10.1+ Form of Securities Purchase Agreement, dated April 7, 2021, between Muscle Maker, Inc. and the Purchaser* (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021)
10.2+ Form of Securities Purchase Agreement, dated November 17, 2021, between Muscle Maker, Inc. and the Purchasers* (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021)
10.3+ Form of Registration Rights Agreement, dated November 17, 2021, between Muscle Maker, Inc. and the Purchasers (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021)
10.4+ Form of Securities Purchase Agreement, dated April 7, 2021, between Muscle Maker, Inc. and the Purchaser* (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021)
10.5+ Form of Director Agreement dated July 16, 2019 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 10, 2019)
10.6+ Services Agreement between Muscle Maker, Inc., Sadot LLC and Aggia LLC FC dated November 14, 2022 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.7+ Addendum 1 to Services Agreement between Muscle Maker, Inc., Sadot LLC and Aggia LLC FC dated November 17, 2022 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.8+ Limited Liability Operating Agreement of Sadot LLC dated November 16, 2022 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.9+ Executive Employment Agreement between Muscle Maker, Inc. and Michael Roper dated November 16, 2022 (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.10+ Executive Employment Agreement between Muscle Maker, Inc. and Jennifer Black dated November 16, 2022 (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.11+ Executive Employment Agreement between Muscle Maker, Inc. and Kevin Mohan dated November 16, 2022 (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.12+ Executive Employment Agreement between Muscle Maker, Inc. and Kenn Miller dated November 16, 2022 (incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.13+ Executive Employment Agreement between Muscle Maker, Inc. and Aimee Infante dated November 16, 2022 (incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.14+ Standby Equity Purchase Agreement dated September 22, 2023 between Sadot Group, Inc. and YA II PN, Ltd. (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 26, 2023)
10.15+ Form of Convertible Promissory notes issued to YA II PN, Ltd. (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 26, 2023)
10.16+ Global Guaranty Agreement dated September 22, 2023 between Sadot Group, Inc. and YA II PN, Ltd. (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 26, 2023)
10.17+ Registration Rights Agreement dated September 22, 2023 between Sadot Group, Inc. and YA II PN, Ltd. (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 26, 2023)
10.18+ Addendum 2 to the Service Agreement entered between Muscle Maker Inc., Sadot LLC and Aggia LLC FX dated July 14, 2023 (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 18, 2023)
21.1* List of Subsidiaries
23.1* Consent of Kreit & Chiu CPA LLP
31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97.1* Policy for the Recovery of Erroneously Awarded Compensation adopted February 1, 2024
101.INS Inline XBRL Instance Document*
101.SCH Inline XBRL Schema Document*
101.CAL Inline XBRL Calculation Linkbase Document*
101.DEF Inline XBRL Definition Linkbase Document*
101.LAB Inline XBRL Label Linkbase Document*
101.PRE Inline XBRL Presentation Linkbase Document*
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
†Includes management contracts and compensation plans and arrangements
*Filed herewith.
+Previously filed.
Item 16. Form 10-K Summary
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SADOT GROUP, INC
By: /s/ Michael J. Roper
Michael J. Roper
Dated: March 20, 2024
Chief Executive Officer (Principal Executive Officer)
By: /s/ Jennifer Black
Jennifer Black
Chief Financial Officer (Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name Title
/s/ Michael J. Roper Chief Executive Officer
Michael J. Roper (Principal Executive Officer)
/s/ Jennifer Black Chief Financial Officer
Jennifer Black (Principal Financial Officer)
/s/ Kevin Mohan Chief Investment Officer
Kevin Mohan Chairman of the Board
/s/ Stephen A. Spanos Director
Stephen A. Spanos
/s/ Jeff Carl Director
Jeff Carl
/s/ Benjamin Petel Director
Benjamin Petel Secretary
/s/ Na Yeon Oh Director
Na Yeon Oh
/s/ Ray Shankar Director
Ray Shankar
/s/ Marvin Yeo Director
Marvin Yeo
/s/ Paul Sansom Director
Paul Sansom
/s/ Mark McKinney Director
Mark McKinney
/s/ David Errington Director
David Errington
/s/ Dr. Ahmed Khan Director
Dr. Ahmed Khan
Sadot Group, Inc.
Annual Report on Form 10-K
Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 6651)
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 2023 and 2022
Consolidated Statements of Operations and Other Comprehensive Loss for the years ended December 31, 2023 and 2022
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2023 and 2022
Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022
Notes to the Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Sadot Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Sadot Group, Inc. as of December 31, 2023 and 2022, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Sadot Group, Inc. as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to Sadot Group, Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Sadot Group, Inc. is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Kreit & Chiu CPA LLP
We have served as Sadot Group, Inc.'s auditor since 2021.
New York, NY
March 20, 2024
Sadot Group, Inc.
Consolidated Balance Sheets
December 31, 2023 December 31, 2022
$’000 $’000
ASSETS
Current assets:
Cash 1,354 9,898
Accounts receivable, net of allowance for doubtful accounts of $0.2 million and $23.4 thousand as of December 31, 2023 and 2022, respectively
52,920 135
Inventory 2,561 298
Other current assets 56,016 317
Total current assets 112,851 10,648
Right to use assets 1,284 2,433
Property and equipment, net 12,883 1,895
Goodwill 1,798 2,626
Intangible assets, net 2,833 4,611
Deposit on farmland - 4,914
Other non-current assets 46,442 103
Total assets 178,091 27,230
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses 50,167 1,953
Accrued stock-based compensation expense, related party - 3,603
Notes payable, current, net of discount of $0.2 million and nil as of December 31, 2023 and 2022, respectively
6,531 222
Operating lease liability, current 385 560
Deferred revenue, current 1,229 95
Other current liabilities 46,270 182
Total current liabilities 104,582 6,615
Contract liability, non-current 46,048 -
Notes payable, non-current 622 759
Operating lease liability, non-current 1,027 2,019
Deferred revenue, non-current 1,555 1,276
Total liabilities 153,834 10,669
Equity:
Common stock, $0.0001 par value, 200,000,000 shares authorized, 40,464,720 and 29,287,212 shares issued and outstanding as of December 31, 2023, and 2022, respectively
4 3
Additional paid-in capital 107,988 95,913
Accumulated deficit (87,179) (79,355)
Accumulated other comprehensive income 8 -
Total Sadot Group, Inc. shareholders' equity 20,821 16,561
Non-controlling interest 3,436 -
Total equity 24,257 16,561
Total liabilities and equity 178,091 27,230
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group, Inc.
Consolidated Statement of Operations and Other Comprehensive Loss
For the Years Ended December 31,
2023 2022
$’000 $’000
Commodity sales 717,506 150,586
Company restaurant sales, net of discounts 8,053 10,300
Franchise royalties and fees 1,041 727
Franchise advertising fund contributions 73 81
Other revenues 13 5
Cost of goods sold (716,755) (157,307)
Gross profit 9,931 4,392
Impairment of intangible asset (811) (347)
Impairment of goodwill (828) -
Depreciation and amortization expenses (1,808) (2,015)
Franchise advertising fund expenses (73) (81)
Pre-opening expenses (371) (117)
Post-closing expenses (212) (197)
Stock-based expenses (6,192) (3,716)
Sales, general and administrative expenses (9,404) (6,035)
Loss from operations (9,768) (8,116)
Other income 308 46
Interest expense, net (469) (7)
Change in fair value of stock-based compensation 1,339 -
Warrant modification expense (958) -
Gain on fair value remeasurement 1,491 -
Gain on debt extinguishment - 140
Loss Before Income Tax (8,057) (7,937)
Income tax benefit / (expense) 15 (25)
Net loss (8,042) (7,962)
Net loss attributable to non-controlling interest 218 -
Net loss attributable to Sadot Group, Inc. (7,824) (7,962)
Net Loss Per Share attributable to Sadot Group, Inc.:
Basic and Diluted (0.22) (0.28)
Weighted-Average Number of Common Shares Outstanding:
Basic and Diluted 34,940,559 28,558,586
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group, Inc.
Consolidated Statement of Operations and Other Comprehensive Loss (Continued)
For the Years Ended December 31,
2023 2022
$’000 $’000
Net loss (8,042) (7,962)
Other comprehensive income
Foreign exchange translation adjustment 2 -
Unrealized gain, net of income tax 6 -
Total other comprehensive income 8 -
Total comprehensive loss (8,034) (7,962)
Comprehensive loss attributable to non-controlling interest 218 -
Total Comprehensive loss attributable to Sadot Group, Inc. (7,816) (7,962)
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group, Inc.
Consolidated Statement of Changes in Equity
Common Stock Additional
Paid-in
Capital Accumulated
Deficit Accumulated Other Comprehensive Loss Non-controlling Interest Total
Shares Amount
('000
$’000 $’000 $’000 $’000 $’000 $’000
Balance - December 31, 2021 26,110 3 95,760 (71,370) - - 24,393
Cumulative effect of change in accounting principle - - - (23) - - (23)
Cash less exercise of pre-funded warrants 2,410 - - - - - -
Common stock issued as compensation to board of directors 243 - 114 - - - 114
Common stock issued as compensation for services 35 - 18 - - - 18
Common stock issued as compensation for employment 20 - 11 - - - 11
Exercise of pre-funded warrants 438 - - - - - -
Reconciliation for shares outstanding per transfer agent 31 - - - - - -
Stock-based compensation - options - - 10 - - - 10
Net loss - - - (7,962) - - (7,962)
Balance - December 31, 2022 29,287 3 95,913 (79,355) - - 16,561
Common stock compensation to board of directors 334 - 229 - - - 229
Common stock issued as compensation for services 7,675 1 8,172 - - - 8,173
Stock-based compensation - options - - 102 - - - 102
Cash exercise of warrants and warrant modification 2,153 - 3,111 - - - 3,111
Conversion of convertible loan 1,016 - 461 - - - 461
Investment in non-controlling interest - - - - - 3,654 3,654
Foreign exchange translation adjustment - - - - 2 - 2
Unrealized gain, net of income tax - - - - 6 - 6
Net loss - - - (7,824) - (218) (8,042)
Balance - December 31, 2023 40,465 4 107,988 (87,179) 8 3,436 24,257
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31,
2023 2022
$’000 $’000
Cash Flows from Operating Activities
Net loss (8,042) (7,962)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment of intangible asset 811 347
Impairment of goodwill 828 -
Depreciation and amortization expenses 1,808 2,015
Stock-based expenses 6,192 3,755
Change in fair value of stock-based compensation (1,339) -
Warrant modification expense 958 -
Gain on extinguishments of debt - (140)
Unrealized gain, net of income tax 6 -
Foreign exchange translation adjustment 2 -
Loss on disposal of assets 197 274
Bad debt expense 77 (48)
Changes in operating assets and liabilities:
Accounts receivable, net (52,863) (4)
Inventory (2,263) (39)
Operating right to use assets and lease liabilities, net (19) 124
Other current assets (55,698) 1,472
Other non-current assets (46,339) 65
Accounts payable and accrued expenses 48,723 (133)
Other current liabilities 46,089 (104)
Contract liability, non-current 46,048 -
Deferred rent - (128)
Deferred revenue 1,413 308
Total adjustments (5,369) 7,764
Net cash used in operating activities (13,411) (198)
Cash Flows from Investing Activities
Deposit on farmland - (4,914)
Investment from non-controlling interest 3,654 -
Purchases of property and equipment (7,533) (597)
Disposal of property and equipment 421 -
Collections from notes receivable - 70
Net cash used in investing activities (3,458) (5,441)
Cash Flows from Financing Activities
Proceeds from notes payable 11,865 -
Repayments of notes payables (5,693) (230)
Proceeds from exercise of warrants 2,153 -
Net cash provided by / (used in) financing activities 8,325 (230)
Net Decrease in Cash (8,544) (5,869)
Cash - beginning of period 9,898 15,767
Cash - end of period 1,354 9,898
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group, Inc.
Consolidated Statements of Cash Flows (Continued)
For the Years Ended December 31,
2023 2022
$’000 $’000
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest 600 96
Cash paid for taxes 19 26
619 122
See Accompanying Notes to the Consolidated Financial Statements
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
1. Business Organization and Nature of Operations
Sadot Group, Inc., ("Sadot Group") or ("SGI") f/k/a Muscle Maker, Inc. (“MMI”), a Nevada corporation was incorporated in Nevada on October 25, 2019. In late 2022 SGI has transformed from a U.S.-centric restaurant business into a global, organization focused on the Agri-food commodity supply chain. Effective July 27, 2023, we changed our company name from Muscle Maker, Inc., to Sadot Group, Inc. Sadot Group is headquartered in Ft. Worth, Texas with subsidiary operations all throughout the United States, Brazil, Colombia, Dubai, India, Israel, Singapore, Ukraine and Zambia.
As of December 31, 2023, SGI consisted of two distinct segments:
1.Sadot LLC (“Sadot Agri-Foods”): Sadot Group’s largest operating unit is a global Agri-Foods company engaged in farming, commodity trading and shipping of food and feed (e.g., soybean meal, wheat and corn) via dry bulk cargo ships to/from markets such as Argentina, Australia, Bangladesh, Brazil, Canada, China, Columbia, Ecuador, Egypt, Guinea, Honduras, India, Indonesia, Ivory Coast, Japan, Kenya, Malaysia, Morocco, Mozambique, Nigeria, Philippines, Poland, Romania, Saudi Arabia, South Korea, Sri Lanka, Ukraine, United States and Vietnam, among others. Sadot Agri-Foods competes with the ABCD commodity companies (ADM, Bunge, Cargill, Louis-Dreyfus) as well as many regional organizations. Sadot Agri-Foods operates, through a joint venture, a roughly 5,000 acre crop producing farm in Zambia with a focus on major commodities such as wheat, soy and corn alongside high-value tree crops such as avocado and mango. Sadot Agri-Foods was formed as part of the Company’s diversification strategy to own and operate, through its subsidiaries, the business lines throughout the food value chain. Sadot Agri-Foods seeks to diversify over time into a sustainable and forward-looking global agri-foods company.
2.Sadot Restaurant Group, LLC ("Sadot Food Services"): has three unique “healthier for you” concepts, including two fast casual restaurant concepts, Pokémoto and Muscle Maker Grill, plus one subscription-based fresh prep meal concept, SuperFit Foods. The restaurants were founded on the belief of taking every-day menu options and converting them into “healthier for you” menu choices. Consumers are demanding healthier choices, customization, flavor and convenience. Each of our three concepts offers different menus that are tailored to specific consumer segments. We believe our concepts deliver highly differentiated customer experiences.
SGI and its subsidiaries are hereinafter referred to as the “Company”.
Recent Corporate Developments
Effective July 27, 2023, the Company changed its name from Muscle Maker, Inc. to Sadot Group Inc. The name change was made in accordance with Section 92A.180 of the Nevada Revised Statutes by merging a wholly-owned subsidiary of the Company with and into the Company, with the Company being the surviving corporation in the merger. The Company effectuated the merger by filing Articles of Merger with the Secretary of State of the State of Nevada. In connection with the merger, the Company amended Article I of its Articles of Incorporation to change the Company’s corporate name to Sadot Group Inc. With the exception of the name change, there were no other changes to the Company’s Articles of Incorporation.
Additionally, as of the opening of trading on July 27, 2023, the ticker symbol of the Company’s common stock on The Nasdaq Capital Market was changed to “SDOT” and the CUSIP number of the Company’s common stock (627333107) remained unchanged. The Company’s name and ticker symbol change do not affect the rights of the Company’s security holders, creditors, customers or suppliers. Following the name change, any stock certificates that reflect the Company’s prior name, if any, continue to be valid.
Liquidity and Capital Resources
Our main financial objectives are to prudently manage financial risk, ensure access to liquidity and minimize cost of capital in order to efficiently finance our business and maintain balance sheet strength. We generally finance our ongoing operations with cash flows generated from operations, borrowings under various credit facilities and term loans. At December 31, 2023, working capital, which equals Total current assets less Total current liabilities, was $8.3 million an increase of $4.2 million, compared to working capital of $4.0 million at December 31, 2022. The increase in working capital was primarily due to an increase in Accounts receivable, which was primarily driven by increased food and feed
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Commodity sales, the Prepaid forward on carbon offset, partially offset by an increase in Accounts payable and Notes payable, current. In addition, the Company has access to additional liquidity if it is needed through an executed Standby Equity Purchase Agreement ("SEPA") for up to $25 million in capital whereby the Company may submit advance requests to the lender and the lender will provide cash in consideration of shares of common stock subject to certain limitations and conditions set forth in the SEPA.
Working Capital
We measure our liquidity in a number of ways, including the following:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Cash 1,354 9,898
Accounts Receivable, net 52,920 135
Inventory 2,561 298
Other current assets(1)
56,016 317
Total current assets 112,851 10,648
Accounts payable and accrued expenses 50,167 1,953
Accrued stock-based compensation expense, related party - 3,603
Notes payable, net 6,531 222
Other current liabilities(2)
47,884 837
Total current liabilities 104,582 6,615
Working capital(3)
8,269 4,033
Current ratio(4)
1.08 1.61
(1) Consists of Prepaid expenses and other current assets, Prepaid forward on carbon offsets, Forward sales derivatives and Notes receivable, current
(2) Consists of Operating lease liability, current, Deferred revenue, current and Other current liabilities
(3) Working Capital is defined as Total current assets less Total current liabilities
(4) Current ratio is defined as Total current assets divided by Total current liabilities
2. Significant Accounting Policies
Basis of Presentation
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The accounting policies used to prepare these financial statements are the same as those used to prepare the consolidated financial statements in prior years, except as described in these notes or for the adoption of new standards as outlined below.
Principles of Consolidation
The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries and majority-owned subsidiary. Any intercompany transactions and balances have been eliminated in consolidation.
Reclassifications
Certain prior year balances have been reclassified in order to conform to current year presentation. These reclassifications have no effect on the previously reported results of operations or loss per share.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant estimates include:
•the assessment of recoverability of long-lived assets, including property and equipment, goodwill and intangible assets;
•the estimated useful lives of intangible and depreciable assets;
•estimates and assumptions used to value warrants and options;
•the recognition of revenue; and
•the recognition, measurement and valuation of current and deferred income taxes.
Estimates and assumptions are periodically reviewed, and the effects of any material revisions are reflected in the financial statements in the period that they are determined to be necessary. Actual results could differ from those estimates and assumptions.
Cash and Cash Equivalents
The Company considers all highly-liquid instruments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of December 31, 2023 or 2022.
Inventory
Inventory, which are stated at the lower of cost or net realizable value, related to our, perishable food items and supplies related to our Food service operations of $0.2 million and $0.3 million, and raw materials, supplies and harvested crops related to our farming operations of $2.4 million and nil as of December 31, 2023, and 2022, respectively. Cost is determined using the first-in, first-out method.
Accounts Receivable
Accounts Receivable consists of receivables related to Sadot Food Services and Sadot Agri-Foods of $53.1 million and $0.2 million net of doubtful accounts of $0.2 million and $23.4 thousand as of December 31, 2023, and 2022, respectively.
Accounts receivable is stated at historical carrying amounts net of write-offs and allowances for uncollectible accounts. The Company establishes allowances for uncollectible trade accounts receivable based on lifetime expected credit losses using an aging schedule for each pool of accounts receivable. Pools are determined based on risk characteristics such as the type of receivable and geography. A default rate is derived using a provision matrix which is evaluated on a regular basis by management and based on past experience and other factors. The default rate is then applied to the pool to determine the allowance for expected credit losses. Given the short-term nature of the Company's trade accounts receivable, the default rate is only adjusted if significant changes in the credit profile of the portfolio are identified (e.g., poor crop years, credit issues at the country level, systematic risk), resulting in historic loss rates that are not representative of forecasted losses. Uncollectible accounts are written off when a settlement is reached for an amount that is less than the outstanding historical balance or when the Company has determined that collection of the balance is unlikely.
Purchase of Farmland
On May 16, 2023, the Company through its wholly owned subsidiary, Sadot LLC, entered into a Purchase of Right and Variation Agreement (the “Variation Agreement”) with Zamproagro Limited, a Liberian corporation (“ZPG”) and Cropit Farming Limited, a Zambian corporation (“Cropit”) pursuant to which ZPG assigned all of its rights, liabilities and obligations of the Put and Call Option Agreement Over Land entered between ZPG and Cropit dated December 29, 2022 (the “Put Land Agreement”) to Sadot LLC, which provided ZPG with a one year call option to acquire 70% of 4,942 acres
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
(2,000 hectares) of producing agricultural land along with buildings and related assets located within the Mkushi Farm Block of Zambia’s Region II agricultural zone (the “Farm”) for a purchase price of approximately $8.5 million.
On May 16, 2023, Sadot LLC and Cropit entered into Joint Venture Shareholders Agreement pursuant to which the parties agreed to form a new entity in Zambia to serve as a joint venture with respect to the farming of the Farm. The joint venture is named Sadot Enterprises Limited (“Sadot Zambia”) with Sadot LLC holding 70% of the equity and Cropit holding 30% of the equity. Sadot Zambia will hold 100% of the Farm. Sadot LLC and Cropit each appointed one director to the Board of Directors of Sadot Zambia. Further, Sadot LLC contributed $3.5 million into escrow for the primary purpose of discharging a loan secured by the Farm held by ABSA Bank.
On May 16, 2023, Sadot LLC, Cropit and Chibesakunda & Co., as escrow agent (the “Escrow Agent”) entered into an Escrow Agreement pursuant to which the Escrow Agent held all documentation required to allot Sadot LLC 70% of Sadot Zambia, documentation required to transfer the Farm to Sadot Zambia and $3.5 million contributed by Sadot LLC. Upon closing and completion of the asset acquisition of the farmland and some related property equipment, on August 23, 2023, the Escrow Agent released the required funds to ABSA Bank and released the required documentation with respect to the allocation of Sadot LLC’s interest in Sadot Zambia and the transfer of the Farm.
The asset acquisition consisted of property and equipment of $8.5 million. Cropit contributed land of $3.7 million for its non-controlling interest in the joint venture. The property and equipment that were purchased in the asset acquisition are as follows:
As of
August 23, 2023
$’000
Furniture and Equipment 211
Vehicles 203
Land and Land Improvements 11,766
12,180
Property and Equipment
Property and equipment are stated at cost less accumulated Depreciation and amortization expenses. Major improvements are capitalized, and minor replacements, maintenance and repairs are charged to expense as incurred. Depreciation and amortization expenses are calculated on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the estimated useful life or the lease term of the related asset. The estimated useful lives are as follows:
Furniture and Equipment 3 - 7 years
Leasehold Improvements 1 - 8 years
Vehicles 5 - 10 years
Land Improvements 3 - 20 years
Intangible Assets
The Company accounts for recorded intangible assets in accordance with the Accounting Standards Codification (“ASC’) 350 “Intangibles - Goodwill and Other”. In accordance with ASC 350, the Company does not amortize intangible assets having indefinite useful lives. The Company’s goodwill has an indefinite life and is not amortized, but is evaluated for impairment at least annually, or more often whenever changes in facts and circumstances may indicate that the carrying value may not be recoverable. ASC 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment). Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgment is required to estimate the fair value of
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
reporting units which includes estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment.
The useful lives of the Company’s intangible assets are:
Franchise license 10 years
Trademark 5 years
Proprietary recipes 7 years
Impairment of Long-Lived Assets
When circumstances, such as adverse market conditions, indicate that the carrying value of a long-lived asset may be impaired, the Company performs an analysis to review the recoverability of the asset’s carrying value, which includes estimating the undiscounted cash flows (excluding interest charges) from the expected future operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects of demand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized to the extent that the carrying value exceeds the estimated fair value. Any impairment losses are recorded as operating expenses, which reduce net income.
Convertible Instruments
The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with Topic 815 of the Financial Accounting Standards Board (“FASB”).
If the instrument is determined not to be a derivative liability, the Company then evaluates for the existence of a beneficial conversion feature by comparing the market price of the Company’s common stock as of the commitment date to the effective conversion price of the instrument.
As of December 31, 2023 and 2022, the Company deemed the conversion feature related to notes payable was not required to be bifurcated and recorded as a derivative liability.
Related Parties
A party is considered to be related to the Company if the party directly, indirectly, or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Revenue Recognition
The Company’s revenues consist of Commodity sales, Restaurant sales, Franchise royalties and fees, Franchise advertising fund contributions, and Other revenues. The Company recognizes revenues according to Topic 606 of FASB, “Revenue from Contracts with Customers”. Under the guidance, revenue is recognized in accordance with a five-step revenue model, as follows: (1) identifying the contract with the customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations; and (5) recognizing revenue when (or as) the entity satisfies a performance obligation. In applying this five-step model, we made significant
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
judgments in identifying the promised goods or services in our contracts with franchisees that are distinct, and which represent separate performance obligations.
Commodity Sales
Commodity sale revenue is generated by Sadot Agri-Foods and is recognized when the commodity is delivered as evidenced by delivery and the invoice is prepared and submitted to the customer. During the years ended December 31, 2023 and 2022, the Company recorded Commodity sales revenues of $717.5 million and $150.6 million, respectively, which is included in Commodity sales on the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.
Restaurant Sales
Retail store revenue at Sadot Food Service is recognized when payment is tendered at the point of sale, net of sales tax, discounts and other sales related taxes. The Company recorded retail store revenues of $8.1 million and $10.3 million during the years ended December 31, 2023 and 2022, respectively, which is included in Restaurant sales on the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.
The Company sells gift cards which do not have an expiration date, and it does not deduct dormancy fees from outstanding gift card balances. The Company recognizes revenues from gift cards as restaurant revenues once the Company performs its obligation to provide food and beverage to the customer simultaneously with the redemption of the gift card or through gift card breakage, as discussed in Other revenues below.
Franchise Royalties and Fees
Franchise revenues consists of royalties, initial franchise fees and rebates. Royalties are based on a percentage of franchisee net sales revenue. The Company recognizes the royalties as the underlying sales occur. The Company recorded revenue from royalties of $1.0 million and $0.7 million during the years ended December 31, 2023 and 2022, respectively, which is included in Franchise royalties and fees on the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.
The Company provides the franchisees with management expertise, training, pre-opening assistance, and restaurant operating assistance in exchange for the multi-unit development fees and initial franchise fees. The Company capitalizes these fees upon collection from the franchisee. These initial fees are then recognized as franchise fee revenue on a straight-line basis over the life of the related franchise agreements and any exercised renewal periods. Cash payments are due upon the execution of the related franchise agreement. The Company’s performance obligation with respect to franchise fee revenues consists of a license to utilize the Company’s brand for a specified period of time, which is satisfied equally over the life of each franchise agreement. If a franchise location closes or a franchise agreement is terminated for any reason, the unrecognized revenue will be recognized in full at that time. The Company recorded revenue from initial franchise fees of $0.2 million and $0.1 million during the years ended December 31, 2023 and 2022, respectively, which is included in Franchise royalties and fees on the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.
The Company has supply agreements with certain food and beverage vendors. Pursuant to the terms of these agreements, rebates are provided to the Company based upon the dollar volume of purchases for all company-owned and franchised restaurants from these vendors. Rebates earned on purchases by franchise stores are recorded as revenue during the period in which the related food and beverage purchases are made. The Company recorded revenue from rebates of $0.1 million and $0.1 million during the years ended December 31, 2023 and 2022, respectively, which is included in Franchise royalties and fees on the accompanying Consolidated Statements of Operations. Rebates earned on purchases by Company-owned stores are recorded as a reduction of Food and beverage costs during the period in which the related food and beverage purchases are made.
Franchise Advertising Fund Contributions
Under the Company’s franchise agreements, the Company and its franchisees are required to contribute a certain percentage of revenues to a national advertising fund. The Company’s national advertising services are provided on a
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
system-wide basis and therefore, not considered distinct performance obligations for individual franchisees. In accordance with Topic 606, the Company recognizes these sales-based advertising contributions from franchisees as franchise revenue when the underlying franchisee Company incurs the corresponding advertising expense. The Company records the related advertising expenses as incurred under Sales, general and administrative expenses. When an advertising contribution fund is over-spent at year-end, advertising expenses will be reported on the Consolidated Statement of Operations and Other Comprehensive Loss in an amount that is greater than the revenue recorded for advertising contributions. Conversely, when an advertising contribution fund is under-spent at a year-end, the Company will accrue advertising costs up to advertising contributions recorded in revenue. The Company recorded contributions from franchisees of $0.1 million and $0.1 million, respectively, during the years ended December 31, 2023 and 2022, which are included in Franchise advertising fund contributions on the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.
Other Revenues
Gift card breakage is recognized when the likelihood of a gift card being redeemed by the customer is remote and the Company determines there is not a legal obligation to remit the unredeemed gift card balance to the relevant jurisdiction. The determination of the gift card breakage rate is based upon the Company’s specific historical redemption patterns. Gift card liability is recorded in other current liabilities on the Consolidated Balance Sheets. The Company recorded $13.0 thousand and $5.0 thousand for gift card breakage for the years ended December 31, 2023 and 2022, respectively.
Deferred Revenue
Deferred revenue primarily includes initial franchise fees received by the Company and revenue from forward sales contracts. Deferred revenue related to Sadot food services is recognized in income over the life of the franchise. If a franchise location closes or a franchise agreement is terminated for any reason, the remaining deferred revenue will be recognized in full at that time. Deferred revenue related to Sadot Agri-Foods is recognized at the completion of the commodity forward sales contract agreements.
Stock-Based Expenses
Stock-based expenses include all expenses that are paid with stock. This includes stock-based consulting fees due to Aggia and other consultants, stock compensation paid to the Company's board of directors, and stock compensation paid to employees. The consulting fees due to Aggia related to ongoing Sadot Agri-Foods and expansion of the global agri-commodities business. Based on the initial Services Agreement with Aggia LLC FZ, a Company formed under the laws of United Arab Emirates (“Aggia”), the consulting fees were calculated at approximately 80.0% of the Net Income generated by Sadot Agri-Foods through March 31, 2023. As of April 1, 2023 the consulting agreement was amended to calculate consulting fees on 40.0% of the Net income generated by Sadot LLC. See Note 15 - Commitments and contingencies for further details. For the years ended December 31, 2023 and 2022, $6.2 million and $3.7 million, respectively, are recorded as Stock-based expenses in the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.
The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally recorded on the grant date and re-measured on financial reporting dates and vesting dates until the service period is complete. The fair value amount of the award is then recognized over the period services are required to be provided in exchange for the award, usually the vesting period.
Advertising
Advertising costs are charged to expense as incurred. Advertising costs of $1.3 million and $0.2 million for the years ended December 31, 2023 and 2022, respectively, are included in Sales, general and administrative expenses and $0.2 million and $0.2 million, respectively, are included in Cost of goods sold in the accompanying Consolidated Statements of Operations and Other Comprehensive Loss.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Net Loss per Share
Basic loss per common share is computed by dividing net loss attributable to Sadot Group, Inc. by the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding, plus the impact of potential common shares, if dilutive, resulting from the exercise of warrants, options or the conversion of convertible notes payable.
The following securities are excluded from the calculation of weighted average diluted common shares at December 31, 2023 and 2022, respectively, because their inclusion would have been anti-dilutive:
December 31,
2023 2022
('000
('000
Warrants 17,380 18,033
Options 828 413
RSAs 8,643 -
Convertible debt 9,238 24
Total potentially dilutive shares 36,089 18,470
The following table sets forth the computation of basic and dilutive net loss per share attributable to the Company’s
stockholders:
For the Years Ended December 31,
2023 2022
(In thousands, except for share count and per share data)
Net loss attributable to Sadot Group, Inc. (7,824) (7,962)
Weighted-average shares outstanding:
Basic 34,940,559 28,558,586
Effect of potentially dilutive stock options - -
Diluted 34,940,559 28,558,586
Net loss per share attributable to Sadot Group, Inc.:
Basic (0.22) (0.28)
Diluted (0.22) (0.28)
Major Vendor
The Company engages various vendors to purchase commodities for resale and distribute food products to their Company-owned restaurants. Purchases from the Company’s largest commodity supplier totaled 88% for the year ended December 31, 2023. Purchases from the Company’s largest food service supplier totaled 33% for the year ended December 31, 2022.
Derivative Instruments
The Company is exposed to market risks primarily related to the volatility in the price of carbon credits and soybeans. To manage these risks, the Company enters into forward sales contracts to sell carbon offset units from time to time. The Company evaluates its contracts to determine if such contracts qualify as derivatives under FASB Accounting ASC 815, “Derivatives and Hedging” (“ASC 815”). Derivative instruments are recorded as either assets or liabilities measured at their fair values. As the Company’s existing contracts do not qualify for hedge accounting treatment, any changes in fair value are recorded as Gain / (loss) on fair value remeasurement within “Other income / (expense)” in the Consolidated Statement of Operations and Other Comprehensive Loss for each reporting period. Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument is probable within the next 12 months from the balance sheet date. The Company does not offset its derivative assets and
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
liabilities within the Consolidated Balance Sheets. Changes in the fair value of derivative instruments are recorded as an adjustment to operating activities in the consolidated statement of cash flows.
Refer to Fair Value of Financial Instruments below, Note 15 - Commitments and contingencies and Note 18 - Financial instruments for additional information regarding the Company’s derivative instruments.
Derivatives are initially measured at fair value and then are subsequently remeasured to fair value at the reporting date. Forward sales contracts are derivatives that were purchased and sold at a later date at a fixed or determinable price for a specified period. Changes in fair value are recognized in Gain / (loss) on fair value remeasurement in the Consolidated Statement of Operations and Other Comprehensive Loss, as appropriate.
We use derivative financial instruments primarily for purposes of hedging exposures to fluctuations in agricultural commodity prices. We enter into these derivative contracts for periods consistent with the related underlying exposures, and the contracts do not constitute positions independent of those exposures. We do not enter into derivative contracts for speculative purposes and do not use leveraged instruments.
We record all open contract positions on our Consolidated Balance Sheets at fair value and typically do not offset these assets and liabilities. There were two open positions at December 31, 2023.
Cash flows from derivative contracts are included in Net cash provided by operating activities.
Fair Value of Financial Instruments
The Company measures the fair value of financial assets and liabilities based on the guidance of the FASB Accounting ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”).
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 - quoted prices in active markets for identical assets or liabilities.
Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable.
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.
See Note 17 - Fair value measurement for a summary of financial liabilities held at carrying amount including the Accrued compensation liability, Forward sales derivatives and the Derivative liability. For details related to the fair value of the Accrued compensation liability measured using Level 1 inputs, refer to Note 19 - Equity for details related to the fair value of the Forward sales derivatives and Derivative liability measured using Level 2 inputs, refer to Note 15 - Commitments and contingencies and Note 18 - Financial instruments.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes” (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Tax benefits claimed or expected to be claimed on a tax return are recorded in the Company’s financial statements. A tax benefit from an uncertain tax position is only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Uncertain tax positions have had no impact on the Company’s financial condition, results of operations or cash flows. The Company does not expect any significant changes in its unrecognized tax benefits within years of the reporting date.
The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as Sales, general and administrative expenses in the Consolidated Statements of Operations and Other Comprehensive Loss.
Currency Translation Differences
Transactions in foreign currencies are translated to the respective functional currencies of Company's at the average foreign exchange rates for income and expenses. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the foreign exchange rate ruling as of the reporting period end date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined. Foreign exchange differences arising on translation are recognized in the Consolidated Statement of Operations and Other Comprehensive Loss.
The assets and liabilities of foreign operations, including farm operations and fair value adjustments arising on consolidation, are translated to the Company’s reporting currency, United States Dollars, at foreign exchange rates at the
reporting date. On a monthly basis, for subsidiaries whose functional currency is a currency other than the U.S. dollar, subsidiary statements of income and cash flows must be translated into U.S. dollars for consolidation purposes based on weighted-average exchange rates in each monthly period. As a result, fluctuations of local currencies compared to the U.S. dollar during each monthly period impact our consolidated statements of income and cash flows for each reported period (per quarter and year-to-date) and also affect comparisons between those reported periods.
Non-controlling Interests
The Company consolidates entities in which the Company has a controlling financial interest. The Company consolidates subsidiaries in which the Company holds, directly or indirectly, more than 50% of the voting rights. Non-controlling interests represent third-party equity ownership interests in the Company’s consolidated entities. The amount of net income attributable to Non-controlling interests is disclosed in the Consolidated Statements of Income and Other Comprehensive Loss.
Recent Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which requires companies to recognize lease liabilities and corresponding right-of-use leased assets on the Balance Sheets and to disclose key information about leasing arrangements. Qualitative and quantitative disclosures will be enhanced to better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2021, with early adoption permitted.
Additionally, in 2018 and 2019, the FASB issued the following Topic 842-related ASUs:
•ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842, which clarifies the applicability of Topic 842 to land easements and provides an optional transition practical expedient for existing land easements;
•ASU 2018-10, Codification Improvements to Topic 842, Leases, which makes certain technical corrections to Topic 842;
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
•ASU 2018-11, Leases (Topic 842): Targeted Improvements, which allows companies to adopt Topic 842 without revising comparative period reporting or disclosures and provides an optional practical expedient to lessors to not separate lease and non-lease components of a contract if certain criteria are met; and
•ASU 2019-01, Leases (Topic 842): Codification Improvements, which provides guidance for certain lessors on determining the fair value of an underlying asset in a lease and on the cash flow statement presentation of lease payments received; ASU No. 2019-01 also clarifies disclosures required in interim periods after adoption of ASU No. 2016-02 in the year of adoption.
The Company adopted Topic 842 as of January 1, 2022 and recognized a cumulative-effect adjustment to the opening balance of accumulated deficit of $15.0 thousand as of the adoption date, and recognized an additional $7.8 thousand during the second quarter of 2022, based on updated information on two of our leases, for an aggregate cumulative-effect adjustment to accumulated deficit of $22.8 thousand. See Note 11 - Leases for further details.
In October 2021, the FASB issued ASU 2021-08 Business Combinations (“Topic 805”): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers”, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended subsequently by ASUs 2018-19, 2019-04, 2019-05, 2019-10, 2019-11 and 2020-03. The guidance in the ASUs requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used. The standard also establishes additional disclosures related to credit risks. This standard is effective for fiscal years beginning after December 15, 2022. The adoption of this guidance on January 1, 2023 did not have a material impact on the Company's Consolidated Financial Statements and related disclosures.
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06 Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity. Among other changes, ASU 2020-06 removes the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share and updates the disclosure requirements in ASC 470-20, making them easier to understand for financial statement preparers and improving the decision-usefulness and relevance of the information for financial statement users. The Company early adopted the new guidance from January 1, 2023, noting no material impact.
In April 2021, the FASB issued ASU 2021-04, “Earnings Per Share (Topic 260), Debt- Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” (“ASU 2021-04”) to clarify the accounting by issuers for modifications or exchanges of equity-classified warrants. The new ASU is effective for all entities in fiscal years starting after December 15, 2021. Early adoption is permitted. The Company adopted the new guidance from January 1, 2023, noting no material impact.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting-Improvements to Reportable Segment Disclosures (Topic 280). The standard requires incremental disclosures related to reportable segments, including disaggregated expense information and the title and position of the company's chief operating decision maker ("CODM"), as identified for purposes of segment determination. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Entities must adopt the changes to the segment reporting guidance on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Subsequent Events
The Company evaluated events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation and transactions, the Company did not identify any subsequent events that would have required adjustment or disclosure in the Financial Statements, except as disclosed in Note 21 - Subsequent events.
3. Allowance for Credit Losses on Accounts Receivable
At December 31, 2023 and 2022, a summary of the activity in the allowance for credit losses on accounts receivable appears below:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Balance at beginning of period 23 -
Adjustments related to Sadot food services 72 23
Adjustments related to Sadot agri-foods 78 -
Customer accounts written off, net of recoveries - -
Balance at end of period 173 23
4. Other Current Assets
At December 31, 2023 and 2022, the Company’s other current assets consists of the following:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Prepaid expenses 766 89
Other receivables 7 228
Contract assets - current 47,180 -
Forward sales derivative 1,491 -
Notes receivable, current 148 -
Prepaid forward on carbon offsets 6,424 -
Other current assets 56,016 317
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
5. Other Non-Current Assets
At December 31, 2023 and 2022, the Company’s other non-current assets consists of the following:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Security deposit 76 103
Notes receivable, non-current 26 -
Contract assets, non-current 46,340 -
Other non-current assets 46,442 103
6. Property and Equipment, Net
As of December 31, 2023, and 2022, Property and equipment consist of the following:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Furniture and equipment 1,026 1,266
Vehicles 270 55
Leasehold improvements 877 2,062
Land and land improvements 11,766 -
Construction in process - 5
Property and equipment, gross 13,939 3,388
Less: accumulated depreciation (1,056) (1,493)
Property and equipment, net 12,883 1,895
Depreciation expense amounted to $0.8 million and $0.6 million for the years ended December 31, 2023 and 2022, respectively. During the years ended December 31, 2023 and 2022, the Company wrote off Property and equipment with an original cost value of $1.6 million and $0.5 million, respectively. The Company wrote off Property and equipment related to closed locations and future locations that were terminated due to a change of business focus and recorded a loss on disposal of $0.2 million and $0.3 million, respectively, for the years ended December 31, 2023 and 2022, respectively, in the Consolidated Statement of Operations and Other Comprehensive Loss. Please refer to Note 2 - Significant accounting policies for additional information.
7. Goodwill and Other Intangible Assets, Net
The Company’s intangible assets include trademarks, franchisee agreements, franchise license, domain names, customer list, proprietary recipes and non-compete agreements. Intangible assets are amortized over useful lives ranging from 5 to 10 years.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
A summary of the intangible assets is presented below:
Intangible
assets,
net at
December 31,
2021 Impairment of
intangible assets Amortization
expense Intangible
assets,
net at
December 31,
2022 Impairment of
intangible assets Amortization
expense Intangible
assets,
net at
December 31,
$’000 $’000 $’000 $’000 $’000 $’000 $’000
Trademark Muscle Maker Grill 1,526 (347) (509) 670 (419) (251) -
Franchise Agreements Muscle Maker Grill 163 - (27) 136 (116) (20) -
Trademark SuperFit 38 - (9) 29 (22) (7) -
Domain Name SuperFit 106 - (25) 81 (62) (19) -
Customer List SuperFit 118 - (28) 90 (70) (20) -
Proprietary Recipes SuperFit 135 - (32) 103 (79) (24) -
Non-Compete Agreement SuperFit 194 - (87) 107 (43) (64) -
Trademark Pokemoto 153 - (35) 118 - (35) 83
Franchisee License Pokemoto 2,599 - (277) 2,322 - (277) 2,045
Proprietary Recipes Pokemoto 1,028 - (161) 867 - (162) 705
Non-Compete Agreement Pokemoto 328 - (240) 88 - (88) -
6,388 (347) (1,430) 4,611 (811) (967) 2,833
Amortization expense related to intangible assets was $1.0 million and $1.4 million for the years ended December 31, 2023 and 2022, respectively.
The estimated future amortization expense is as follows:
For the Year Ended December 31,
2024 2025 2026 2027 2028 Thereafter Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000
Trademark Pokemoto 35 35 13 - - - 83
Franchisee License Pokemoto 278 277 277 277 277 659 2,045
Proprietary Recipes Pokemoto 162 161 161 161 60 - 705
475 473 451 438 337 659 2,833
On August 4, 2023, the Company announced its intention to strategically pivot towards the global food supply chain sector. The Company plans to reduce Sadot Food Services operating expenses by closing underperforming units while refranchising (selling) most of the remaining company-owned units. Due to the structural change of the Company's operations and the closing or marketing for sale of the Company owned stores an impairment testing of the Company’s intangible assets was performed. Therefore, an impairment charge of $0.8 million was recorded during the year ended December 31, 2023.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
A summary of the goodwill assets is presented below:
Muscle Maker Grill Pokemoto SuperFit Food Total
$’000 $’000 $’000 $’000
Goodwill, net at December 31, 2021 570 1,798 258 2,626
Impairment of goodwill - - - -
Goodwill, net at December 31, 2022 570 1,798 258 2,626
Impairment of goodwill (570) - (258) (828)
Goodwill, net at December 31, 2023 - 1,798 - 1,798
On August 4, 2023, the Company announced its intention to strategically pivot towards the global food supply chain sector. The Company plans to reduce Sadot Food Services operating expenses by closing underperforming units while refranchising (selling) most of the remaining company-owned units. Due to the structural change of the Company's operations and the closing or marketing for sale of the Company owned stores an impairment testing of the Company’s goodwill was performed. During the year ended December 31, 2023, there was an Impairment of goodwill of $0.8 million. There was no impairment during the year ended December 31, 2022.
8. Accounts Payables and Accrued Expenses
Accounts payables and accrued expenses consist of the following:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Accounts payable 3,488 1,085
Accrued payroll and bonuses 756 551
Accrued expenses 204 87
Accrued interest expenses 77 -
Accrued professional fees 255 185
Accounts payable commodities 45,342 -
Accrued purchases 17 -
Sales taxes payable 28 45
50,167 1,953
9. Accrued Stock-Based Consulting Expenses Due to Related Party
At December 31, 2023, there were no Accrued stock-based consulting expenses and at December 31, 2022, Accrued stock-based consulting expenses were $3.6 million. Accrued stock-based consulting expenses are related to consulting fees due to Aggia, for Sadot Agri-Foods. See Note 20 - Related party transactions for details. Based on the initial Services Agreement with Aggia LLC FZ, a Company formed under the laws of United Arab Emirates (“Aggia”), the consulting fees were calculated at approximately 80% of the Net Income generated by Sadot Agri-Foods through March 31, 2023. As of April 1, 2023, the consulting agreement was amended to calculate consulting fees on 40.0% of the Net income generated by Sadot Agri-Foods. See Note 15 - Commitments and contingencies for further details. For the years ended December 31, 2023 and 2022, $5.4 million and $3.6 million, respectively, are also recorded within Stock-based expenses in the accompanying Consolidated Statements of Operations and Other Comprehensive Loss. The Stock-based consulting expenses that were due to related party were paid in stock in 2023.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
10. Notes Payable
Standby Equity Purchase Agreement
On September 22, 2023, the Company entered into the Standby Equity Purchase Agreement (“SEPA”) with YA II PN, LTD, a Cayman Islands exempt limited partnership (“Yorkville”) pursuant to which the Company has the right to sell to Yorkville up to $25 million of its shares of common stock, subject to certain limitations and conditions set forth in the SEPA, from time to time during the term of the SEPA. This freestanding financial instrument (put option) is by definition a derivative that should be accounted for under ASC 815. Since this put option is for common stock of the Company and there is no cash settlement, this instrument is considered indexed to its own stock. Additionally, under the guidance, this instrument would be classified as equity. In accordance with ASC 815, the Company should fair value this instrument on day 1 and record in this amount equity with no adjustments to fair value during its life. Since the debit and credit would both go through APIC, the Company determined it would not measure or record this option as it would have no effect on the consolidated financial statements. Sales of the shares of common stock to Yorkville under the SEPA, and the timing of any such sales, are at the Company’s option, and the Company is under no obligation to sell any shares of common stock to Yorkville under the SEPA except in connection with notices that may be submitted by Yorkville, in certain circumstances as described below.
Upon the satisfaction of the conditions to Yorkville’s purchase obligation set forth in the SEPA, including having a registration statement registering the resale of the shares of common stock issuable under the SEPA declared effective by the SEC, the Company will have the right, but not the obligation, from time to time at its discretion until the SEPA is terminated to direct Yorkville to purchase a specified number of shares of common stock (“Advance”) by delivering written notice to Yorkville (“Advance Notice”). While there is no mandatory minimum amount for any Advance, it may not exceed an amount equal to 100% of the average of the daily traded amount during the five consecutive trading days immediately preceding an Advance Notice.
The shares of common stock purchased pursuant to an Advance delivered by the Company will be purchased at a price equal to 97% of the lowest daily VWAP of the shares of common stock during the three consecutive trading days commencing on the date of the delivery of the Advance Notice, other than the daily VWAP on a day in which the daily VWAP is less than a minimum acceptable price as stated by the Company in the Advance Notice or there is no VWAP on the subject trading day. The Company may establish a minimum acceptable price in each Advance Notice below which the Company will not be obligated to make any sales to Yorkville. “VWAP” is defined as the daily volume weighted average price of the shares of common stock for such trading day on the Nasdaq Stock Market during regular trading hours as reported by Bloomberg L.P. Accordingly, as may otherwise be limited by Yorkville’s 4.99% beneficial ownership limitation, assuming the Company submits an Advance requiring Yorkville to provide $0.1 million in funding and assuming an applicable VWAP of $1.10 and, in turn, a purchase price of $1.067 (97% of the VWAP), the Company would be required to issue 0.1 million shares of common stock and Yorkville would receive a profit of approximately $0.03201 per share, or approximately $2,999.98, if it sold all of such shares at $1.10 per share.
In connection with the SEPA, and subject to the condition set forth therein, Yorkville has agreed to advance to the Company in the form of convertible promissory notes (the “Convertible Notes”) an aggregate principal amount of $4.0 million (the “Pre-Paid Advance”). The Pre-Paid Advance was disbursed on September 22, 2023 with respect to $3.0 million and the balance of $1.0 million was disbursed on October 30, 2023, upon the registration statement registering the resale of the shares of common stock issuable under the SEPA being declared effective. The purchase price for the Pre-Paid Advance is 94.0% of the principal amount of the Pre-Paid Advance. Interest shall accrue on the outstanding balance of any Pre-Paid Advance at an annual rate equal to 6.0%, subject to an increase to 18% upon an event of default as described in the Convertible Notes. The maturity date will be 12-months after the initial closing of the Pre-Paid Advance. Yorkville may convert the Convertible Notes into shares of the Company’s common stock at a conversion price equal to the lower of $1.11495 or 95% of the lowest daily VWAP during the seven consecutive trading days immediately proceeding the conversion (the “Conversion Price”), which in no event may the Conversion Price be lower than $0.33 (the “Floor Price”). In addition, upon the occurrence and during the continuation of an event of default, the Convertible Notes shall become immediately due and payable and the Company shall pay to Yorkville the principal and interest due thereunder. In no event shall Yorkville be allowed to effect a conversion if such conversion, along with all other shares of common stock beneficially owned by Yorkville and its affiliates would exceed 4.99% of the outstanding shares of the common stock of the Company. If any time on or after October 22, 2023 (i) the daily VWAP is less than the Floor Price for seven trading
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
days during a period of nine consecutive trading days (“Floor Price Trigger”), or (ii) the Company has issued in excess of 99% of the shares of common stock available under the Exchange Cap (“Exchange Cap Trigger” and collectively with the Floor Price Trigger, the “Trigger”)), then the Company shall make monthly payments to Yorkville beginning on the seventh trading day after the Trigger and continuing monthly in the amount of $0.5 million plus an 8.0% premium and accrued and unpaid interest. The Exchange Cap Trigger will not apply in the event the Company has obtained the approval from its stockholders in accordance with the rules of Nasdaq Stock Market for the issuance of shares of common stock pursuant to the transactions contemplated in the Convertible Note and the SEPA in excess of 19.99% of the aggregate number of shares of common stock issued and outstanding as of the effective date of the SEPA (the “Exchange Cap”). No triggering event occured as of December 31, 2023. As of December 31, 2023, 1.2 million shares of common stock have been converted leaving an aggregate principle balance remaining of $3.6 million.
Notes Payable
During the years ended December 31, 2023 and 2022, the Company received a total amount of $11.9 million and nil, respectively, and repaid a total amount of $5.7 million and $0.2 million, respectively, of the notes payables.
As of December 31, 2023, the Company had an aggregate amount of $7.1 million in notes payable, net of discount of $0.2 million. Other than the Yorkville note above there are various notes payable for an aggregate amount of $3.8 million with interest rates ranging between 3.75% - 12.00% per annum, due on various dates through May 2026.
The maturities of notes payable as of December 31, 2023, are as follows:
Principal Amount
$’000
1/1/24-12/31/24 6,687
1/1/25-12/31/25 79
1/1/26-12/31/26 543
1/1/27-12/31/27 -
Thereafter -
7,309
11. Leases
The Company’s leases consist of restaurant locations. We determine if a contract contains a lease at inception. The leases generally has remaining terms of 1-8 years and most leases include the option to extend the leases for an additional 5-year period.
The total lease cost associated with Right of use assets and Operating lease liabilities for the year ended December 31, 2023, was $0.7 million and has been recorded in the Consolidated Statement of Operations and Other Comprehensive Loss within Cost of goods sold.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
The Company's assets and liabilities related to the Company’s leases were as follows:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Assets
Right to use asset 1,284 2,433
Liabilities
Operating leases - current 385 560
Operating leases - non-current 1,027 2,019
Total lease liabilities 1,412 2,579
The table below presents the future minimum lease payments under the noncancellable operating leases as of December 31, 2023:
Operating Leases
$’000
Fiscal Year:
2023 -
2024 529
2025 378
2026 239
2027 245
2028 184
Thereafter 304
Total lease payments 1,879
Less imputed interest (467)
Present value of lease liabilities 1,412
The Company’s lease term and discount rates were as follows:
As of December 31, 2023
Weighted-average remaining lease term (in years)
Operating leases 4.86
Weighted-average discount rate
Operating leases 12.0 %
All remaining leases relate to the Sadot Food Services segment, and in the event the segment is sold, the remaining leases would be included in the acquisition.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
12. Deferred Revenue
At December 31, 2023 and 2022, deferred revenue consists of the following:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Deferred revenues, net 2,784 1,371
Less: deferred revenue, current (1,229) (95)
Deferred revenues, non-current 1,555 1,276
Deferred revenue related to commodity forward sales contracts of $1.4 million and nil, for the years ended December 31, 2023 and 2022, respectively. Deferred revenue related to deferred franchise fees of $1.4 million and $1.4 million, respectively, for the years ended December 31, 2023 and 2022, respectively.
13. Other Current Liabilities
Other current liabilities consist of the following:
As of
December 31, 2023 December 31, 2022
$’000 $’000
Gift card liability 13 25
Co-op advertising fund liability 114 79
Marketing development brand liability 68 35
Advertising fund liability 29 43
Contract liabilities, current 46,046 -
46,270 182
See Note 2 - Significant accounting policies for details related to the gift card liability and advertising fund liability. See Note 17 - Fair value measurement for details related to the contract liabilities.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
14. Income Taxes
The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2023 and 2022 are presented below:
For the Years Ended December 31,
2023 2022
$’000 $’000
Deferred tax assets:
Net operating loss carryforwards 11,890 10,615
Receivable allowance 37 5
Stock-based compensation 20 15
Intangible assets 727 314
163(j) adjustment 100 -
Accrued expenses 106 -
Capitalized costs 4 -
Deferred revenues 310 204
Leases 301 32
Gross deferred tax asset 13,495 11,185
Deferred tax liabilities:
Property and equipment (60) (160)
Leases (274) -
Unrealized gains (317) -
Gross deferred tax liabilities (651) (160)
Net deferred tax assets 12,844 11,025
Valuation allowance (12,844) (11,025)
Net deferred tax asset, net of valuation allowance - -
The income tax (benefit) / expense for the periods shown consist of the following:
For the Year Ended December 31,
2023 2022
$’000 $’000
Federal:
Current - -
Deferred - -
State and local:
Current (15) 25
Deferred - -
(15) 25
Change in valuation allowance - -
Income tax (benefit) /expense (15) 25
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the periods shown, are as follows:
For the Year Ended December 31,
2023 2022
Federal income tax benefit at statutory rate 21.0 % 21.0 %
State income tax benefit, net of federal impact 1.1 % (0.5) %
Permanent differences (0.3) % (0.1) %
PPP loan forgiveness - % 0.4 %
Return to provision adjustments 0.5 % 3.3 %
Deferred tax asset true up- State - % (14.5) %
Warrant modification expense (2.5) % - %
Fair value gain/loss on share issuance 3.6 % - %
Deferred tax asset true up- Federal - % (6.8) %
Change in valuation allowance (23.2) % (3.3) %
Effective income tax rate 0.2 % (0.5) %
The Company has filing obligations in what it considers its U.S. major tax jurisdictions as follows: Nevada, California, Connecticut, Florida, New Jersey, Texas, Virginia, New York State and New York City. The earliest year that the Company is subject to examination is the year ended December 31, 2015.
The Company has approximately $71.8 million of Federal and State Net operating loss (“NOLs”) available to offset future taxable income. The net operating loss carryforwards generated prior to 2018, if not utilized, will expire from 2035 to 2037 for federal and state purposes.
As of December 31, 2023 and 2022, the Company has determined that it is more likely than not that the Company will not recognize the future tax benefit of the loss carryforwards and has recognized a valuation allowance of $12.8 million and $11.0 million, respectively. The valuation allowance increased by approximately $1.8 million.
Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, and similar state provisions. Generally, in addition to certain entity reorganizations, the limitation applies when one or more “5 percent stockholders” increase their ownership, in the aggregate, by more than 50 percentage points over a 36-month time period testing period or beginning the day after the most recent ownership change, if shorter.
15. Commitments and Contingencies
Forward Purchase and Sales Contracts
On September 12, 2023, the Company through Sadot Agri-Foods, entered into a forward purchase contract titled the Verified Emissions Reduction Purchase Agreement (“VERPA”) for the acquisition of Verified Carbon Units (“VCUs”) generated by a conservation project along the Riau coastline in Indonesia (“conservation project”). Under the VERPA, Sadot Agri-Foods will acquire 180,000 VCUs between 2025 and 2027 as issued. Delivery of VCUs to Sadot Agri-Foods is expected within 14 days from credit issuance annually, where such delivery will occur no later than December of each respective year. The acquisition price for these VCUs is $35.69 per VCU, or $6.4 million in the aggregate, which was paid on September 23, 2023. The aggregate purchase price paid of $6.4 million was recorded on the balance sheet within the “Prepaid forward on carbon offsets” account.
On September 13, 2023, the Company through Sadot Agri-Foods, entered into a separate forward sales agreement pursuant to which the purchaser agreed to acquire 180,000 VCUs between 2025 and 2026 for an acquisition price of $44.62 per VCU, or $8.0 million. The VCUs are expected to be generated as part of the conservation project. The VCUs would be delivered within 14 days from credit issuance annually, where such delivery will occur no later than December of each respective year. Payment for these VCUs would not be required until 2025 at the earliest, within 10 days of VCU issuance.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
However, Sadot Agri-Foods has the right to repurchase any VCUs during the term of this forward contract at the then current market price (based on the prices reported by an independent marketplace). This contract was determined to be a derivative in accordance with ASC 815.
On November 24, 2023, the Company through Sadot Agri-Foods, entered into a forward sale contract for the sale of 70,000 Metric Tons (“MTs”) of soybeans. Sadot Agri-Foods will provide 70,000 MTs to a third-party in May 2025, which is the executed contract date. The acquisition price for these MTs is $662 per MT, or $46.3 million in the aggregate. This contract was determined to be a derivative in accordance with ASC 815.
On December 6, 2023, the Company through Sadot Agri-Foods, entered into a forward sale contract for the sale of 70,000 Metric Tons (“MTs”) of soybeans. Sadot Agri-Foods will provide 70,000 MTs to a third-party in November/December 2024, which is the executed contract date. The acquisition price for these MTs is $674 per MT, or $47.2 million in the aggregate. This contract was determined to be a derivative in accordance with ASC 815.
Refer to Note 2 - Significant accounting policies, Note 17 - Fair value measurement and Note 18 - Financial instruments for additional information regarding the Derivative liability.
Election of Directors
On December 22, 2022, the Company held its annual shareholders meeting, and the shareholders voted on the directors to serve on the Company’s board of directors. The shareholders elected Kevin Mohan, Stephen Spanos, A.B. Southall III, Paul L. Menchik, Jeff Carl, Major General (ret) Malcolm Frost and Phillip Balatsos to serve on the Company’s board of directors.
On December 27, 2022, the Board appointed Benjamin Petel to the Board of Directors.
On February 2, 2023, the Board appointed Na Yeon (“Hannah”) Oh and Ray Shankar to the Board of Directors, effective March 1, 2023.
On April 3, 2023, the Board appointed Paul Sansom and Marvin Yeo to the Board of Directors.
On June 15, 2023 The Board appointed Dr. Ahmed Khan, David Errington and Mark McKinney to the Board of Directors.
On December 20, 2023, the Company held its annual shareholders meeting, and the shareholders voted on the directors to serve on the Company’s board of directors. The shareholders elected Kevin Mohan, Stephen Spanos, David Errington, Jeff Carl, Na Yeon ("Hannah") Oh, Ray Shankar, Mark McKinney, Marvin Yeo, Paul Sansom, Benjamin Petel and Dr. Ahmed Khan to serve on the Company’s board of directors.
Consulting Agreements
On November 14, 2022 (the “Effective Date”), the Company, Sadot LLC and Aggia LLC FC, a company formed under the laws of United Arab Emirates (“Aggia”) entered into a Services Agreement (the “Services Agreement”) whereby Sadot LLC engaged Aggia to provide certain advisory services to Sadot Agri-Food for creating, acquiring and managing Sadot Agri-Foods’s business of wholesaling food and engaging in the purchase and sale of physical food commodities.
As consideration for Aggia providing the services to Sadot Agri-Food, the Company agreed to issue shares of common stock of the Company, par value $0.0001 per share, to Aggia subject to Sadot Agri-Food generating net income measured on a quarterly basis at per share price of $1.5625, subject to equitable adjustments for any combinations or splits of the common stock occurring following the Effective Date. Upon Sadot Agri-Food generating net income for any fiscal quarter, the Company shall issue Aggia a number of shares of common stock equal to the net income for such fiscal quarter divided by the per share price (the “Shares”). The Company may only issue authorized, unreserved shares of common stock. The Company will not issue Aggia in excess of 14.4 million shares representing 49.999% of the number of issued and outstanding shares of common stock as of the Effective Date. Further, once Aggia has been issued a number of shares constituting 19.99% of the issued and outstanding shares of common stock of the Company, no additional shares shall be issued to Aggia unless and until this transaction has been approved by the shareholders of the Company. In the event that the shares cap has been reached, then the remaining portion of the net income, if any, not issued as shares shall accrue as
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
debt payable by Sadot Group to Aggia until such debt has reached a maximum of $71.5 million. The Company will prepare the shares earned calculation after the annual audit or quarter review is completed by the auditors. The shares will be issued within 10 days of the final calculation.
On July 14, 2023 (the “Addendum Date”), effective April 1, 2023, the parties entered into Addendum 2 to the Services Agreement (“Addendum 2”) pursuant to which the parties amended the compensation that Aggia is entitled.
Pursuant to Addendum 2, on the Addendum Date, the Company issued 8.9 million shares (the “Shares”) of common stock, par value $0.0001 per share, of the Company, which such Shares represent 14.4 million Shares that Aggia is entitled to receive pursuant to the Services Agreement less the 5.6 million Shares that have been issued to Aggia pursuant to the Services Agreement as of the Addendum Date. The Company will not issue Aggia in excess of 14.4 million Shares representing 49.9% of the number of issued and outstanding shares of common stock as of the effective date of the Services Agreement. The Shares shall be considered issued and outstanding as of the Addendum Date and Aggia shall hold all rights associated with such Shares. The Shares vest on a progressive schedule, at a rate equal to the net income of Sadot Agri-Foods, calculated quarterly divided by $3.125, which for accounting purposes shall equal 40% of the net income of Sadot Agri-Foods, calculated quarterly divided by $1.25. During the 30 day period after July 14, 2028 (the “Share Repurchase Date”), Aggia may purchase any Shares not vested. All Shares not vested or purchased by Aggia, shall be repurchased by the Company from Aggia at per share price of $0.001 per share. Further, the parties clarified that the Lock Up Agreement previously entered between the Company and Aggia dated November 16, 2022 shall be terminated on May 16, 2024 provided that any Shares that have not vested or been purchased by Aggia may not be transferred, offered, pledged, sold, subject to a contract to sell, granted any options for the sale of or otherwise disposed of, directly or indirectly. Following the Share Repurchase Date, in the event that there is net income for any fiscal quarter, then an amount equal to 40% of the net income shall accrue as debt payable by Sadot Group to Aggia (the “Debt”), until such Debt has reached a maximum of $71.5 million.
Additionally, for the years ended December 31, 2023 and 2022, the Company reimbursed Aggia for all operating costs related to Sadot Agri-Foods operating expenses including labor and operating expenses and general administrative expenses of $2.6 million, $0.5 million and $0.1 million, respectively and all operating costs related to Sadot Agri-Foods including labor and operating expenses of $0.5 million and $19.0 thousand, respectively.
Franchising
During the years ended December 31, 2023 and 2022, the Company entered into various Pokemoto franchise agreements for a total of 20 and 30, respectively, potentially new Pokemoto locations with various franchisees. The Franchisees paid the Company an aggregate of $0.2 million and $0.5 million and this has been recorded in deferred revenue as of December 31, 2023 and 2022, respectively.
Master Franchise Agreement
On October 25, 2021, Muscle Maker Development International LLC (“MMDI”), a wholly-owned subsidiary of Muscle Maker Inc., entered into a Master Franchise Agreement (the “Master Franchise Agreement”) with Almatrouk Catering Company - OPC (“ACC”) providing ACC with the right to grant franchises for the development of 40 “Muscle Maker Grill” restaurants through December 31, 2030 (the “Term”) in the Kingdom of Saudi Arabia (“KSA”).
Under the Master Franchise Agreement, MMDI has granted to ACC an exclusive right to establish and operate Muscle Maker restaurants in the KSA. MMDI will not own or operate restaurants in KSA, grant franchises for the restaurants in KSA, or grant Master Franchise Rights for the restaurants to other persons within the KSA. ACC will be solely responsible for the development, sales, marketing, operations, distribution and training of all franchise locations sold in the KSA.
ACC is required to pay MMDI $0.2 million pursuant to the Master Franchise Agreement upon the occurrence of various events. ACC is required to pay MMDI $20.0 thousand upon the execution of each franchise agreement for each individual restaurant and a monthly royalty fee of $1.0 thousand for each restaurant. Further, ACC is to adhere to the agreed upon development schedule as outlined in the master franchise agreement. An initial $20.0 thousand deposit was paid on the agreement. ACC has not performed against this agreement.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Sales Taxes
The Company had accrued a sales tax liability for approximately $27.8 thousand and $44.6 thousand as of December 31, 2023, and December 31, 2022, respectively. All current state and local sales taxes from January 1, 2018, for open Company-owned locations have been fully paid and in a timely manner.
Litigations, Claims and Assessments
On April 24, 2022, the Company and a convertible note holder entered into an agreement in which the Company will repay a total of $0.1 million in connection with the default judgement issued on June 22, 2018, by the Iowa District Court for Polk County #CVCV056029, filed against the Company for failure to pay the remaining balance due on a promissory note in the amount of $0.1 million, together with interest, attorney fees and other costs of $0.2 million. The Company agreed to pay $40.0 thousand on or before May 1, 2020 and to make seven installment payments of $10.0 thousand per month starting on or before June 1, 2022. As of December 30, 2022, the Company has paid this note in full.
On January 23, 2020, the Company was served a judgment issued by the Judicial Council of California in the amount of $0.1 million for a breach of a lease agreement in Chicago, Illinois, in connection with a Company-owned store that was closed in 2018. As of December 31, 2023, the Company has accrued for the liability in accounts payable and accrued expenses.
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. In the opinion of management after consulting legal counsel, such matters are currently not expected to have a material impact on the Company’s financial statements.
The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements after consulting legal counsel.
Employment Agreements
On November 16, 2022, the Company entered into an Executive Employment Agreement with Michael Roper (the “Roper Agreement”), which replaced his prior employment agreement. Pursuant to the Roper Agreement, Mr. Roper will continue to be employed as Chief Executive Officer of the Company on an at will basis. During the term of the Roper Agreement, Mr. Roper is entitled to a base salary at the annualized rate of $0.4 million. Mr. Roper will be eligible for a discretionary performance bonus to be determined by the Board annually. Mr. Roper received an additional bonus of $0.1 million on March 2, 2023 and an additional $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Roper is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Roper is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Roper will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 18 months following the second anniversary of the Roper Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Roper Agreement will automatically terminate and the prior employment agreement will again be in full effect.
On March 21, 2023, the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement. Pursuant to the Black Agreement, Ms. Black will continue to be employed as Chief Financial Officer of the Company on an at will basis. During the term of the Black Agreement, Ms. Black is entitled to a base salary at the annualized rate of $0.3 million. Ms. Black will be eligible for a discretionary performance bonus up to 50% of her annual salary. Ms. Black received an additional bonus of $0.1 million on March 2, 2023 and an additional $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Ms. Black is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Black is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Black will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Black Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
by the shareholders, the Black Agreement will automatically terminate and the prior employment agreement will again be in full effect.
On November 16, 2022, the Company entered into an Executive Employment Agreement with Kenn Miller (the “Miller Agreement”), which replaced his prior employment agreement. Pursuant to the Miller Agreement, Mr. Miller will continue to be employed as Chief Operating Officer of the Company on an at will basis. During the term of the Miller Agreement, Mr. Miller is entitled to a base salary at the annualized rate of $0.3 million. Mr. Miller will be eligible for a discretionary performance bonus up to 75% of his annual salary. Further, Mr. Miller will be entitled to an additional bonus of $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Miller is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Miller is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Miller will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 12 months following the second anniversary of the Miller Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Miller Agreement will automatically terminate and the prior employment agreement will again be in full effect.
On November 16, 2022, the Company entered into an Executive Employment Agreement with Kevin Mohan (the “Mohan Agreement”), which replaced his prior employment agreement. Pursuant to the Mohan Agreement, Mr. Mohan will continue to be employed as Chief Investment Officer of the Company on an at will basis. During the term of the Employment Agreement, Mr. Mohan is entitled to a base salary at the annualized rate of $0.2 million. Mr. Mohan will be eligible for a discretionary performance bonus up to 75% of his annual salary. Mr. Mohan received an additional bonus of $0.1 million on March 2, 2023 and an additional $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Mohan is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Mohan is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Mohan will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Mohan Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Mohan Agreement will automatically terminate and the prior employment agreement will again be in full effect.
On November 16, 2022, the Company entered into an Executive Employment Agreement with Aimee Infante (the “Infante Agreement”), which replaced her prior employment agreement. Pursuant to the Infante Agreement, Ms. Infante will continue to be employed as Chief Marketing Officer of the Company on an at will basis. During the term of the Infante Agreement, Ms. Infante is entitled to a base salary at the annualized rate of $0.2 million. Ms. Infante will be eligible for a discretionary performance bonus up to 25% of her annual salary. Further, Ms. Infante will be entitled to an additional bonus of $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Ms. Infante is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Infante is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Infante will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Infante Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Infante Agreement will automatically terminate, and the prior employment agreement will again be in full effect.
NASDAQ Notice
On November 7, 2023, the Company received notice from The Nasdaq Stock Market (“Nasdaq”) that the closing bid price for the Company’s common stock had been below $1.00 per share for the previous 30 consecutive business days, and that the Company is therefore not in compliance with the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Rule”).
Nasdaq’s notice has no immediate effect on the listing or trading of the Company’s common stock on The Nasdaq Capital Market.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
The notice indicates that the Company will have 180 calendar days, until May 6, 2024, to regain compliance with this requirement. The Company can regain compliance with the $1.00 minimum bid listing requirement if the closing bid price of its common stock is at least $1.00 per share for a minimum of ten (10) consecutive business days during the 180-day compliance period. If the Company does not regain compliance during the initial compliance period, it may be eligible for additional time of 180 calendar days to regain compliance. To qualify, the Company will be required to meet the continued listing requirement for market value of our publicly held shares and all other Nasdaq initial listing standards, except the bid price requirement, and will need to provide written notice to Nasdaq of its intention to cure the deficiency during the second compliance period. If the Company is not eligible or it appears to Nasdaq that the Company will not be able to cure the deficiency during the second compliance period, Nasdaq will provide written notice to the Company that the Company’s common stock will be subject to delisting. In the event of such notification, the Company may appeal Nasdaq’s determination to delist its securities, but there can be no assurance that Nasdaq would grant the Company’s request for continued listing.
The Company intends to actively monitor the minimum bid price of its common stock and may, as appropriate, consider available options to regain compliance with the Rule. There can be no assurance that the Company will be able to regain compliance with the Rule or will otherwise be in compliance with other Nasdaq listing criteria.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
16. Reportable Operating Segments
See Note 1 - Business organization and nature of operations for descriptions of our operating segments.
The following table sets forth the results of operations for the relevant segments for the years ended December 31, 2023 and 2022:
For the Year Ended December 31, 2023
Sadot food service Sadot agri-foods Corporate adj. Total segments
$’000 $’000 $’000 $’000
Commodity sales - 717,506 - 717,506
Company restaurant sales, net of discounts 8,053 - - 8,053
Franchise royalties and fees 1,041 - - 1,041
Franchise advertising fund contributions 73 - - 73
Other revenues 13 - - 13
Cost of goods sold (8,883) (707,872) - (716,755)
Gross profit 297 9,634 - 9,931
Impairment of intangible asset (811) - - (811)
Impairment of goodwill (828) - - (828)
Depreciation and amortization expenses (665) (151) (992) (1,808)
Franchise advertising fund expenses (73) - - (73)
Pre-opening expenses (36) (335) - (371)
Post-closing expenses (211) - (1) (212)
Stock-based expenses - - (6,192) (6,192)
Sales, general and administrative expenses (437) (1,551) (7,416) (9,404)
(Loss) / income from operations (2,764) 7,597 (14,601) (9,768)
Other income 1 - 307 308
Interest expense, net (1) (52) (416) (469)
Change in fair value of stock-based compensation - - 1,339 1,339
Warrant modification expense - - (958) (958)
Loss on fair value remeasurement - 1,491 - 1,491
Gain on debt extinguishment - - - -
(Loss) / income before income tax (2,764) 9,036 (14,329) (8,057)
Income tax benefit / (expense) (1) - 16 15
Net (loss) / income (2,765) 9,036 (14,313) (8,042)
Net loss attributable to non-controlling interest - 218 - 218
Net (loss) / income attributable to Sadot Group, Inc. (2,765) 9,254 (14,313) (7,824)
Total assets 10,416 162,175 5,500 178,091
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2022
Sadot food service Sadot agri-foods Corporate adj. Total segments
$’000 $’000 $’000 $’000
Commodity sales - 150,586 - 150,586
Company restaurant sales, net of discounts 10,300 - - 10,300
Franchise royalties and fees 727 - - 727
Franchise advertising fund contributions 81 - - 81
Other revenues 5 - - 5
Cost of goods sold (11,270) (146,037) - (157,307)
Gross profit (157) 4,549 - 4,392
Impairment of intangible asset (347) - - (347)
Impairment of goodwill - - - -
Depreciation and amortization expenses (2,015) - - (2,015)
Franchise advertising fund expenses (81) - - (81)
Pre-opening expenses (117) - - (117)
Post-closing expenses (197) - - (197)
Stock-based expenses - - (3,716) (3,716)
Sales, general and administrative expenses (601) (97) (5,337) (6,035)
(Loss) / income from operations (3,515) 4,452 (9,053) (8,116)
Other income 80 - (34) 46
Interest expense, net 21 - (28) (7)
Change in fair value of stock-based compensation - - - -
Gain on debt extinguishment 140 - - 140
(Loss) / income before income tax (3,274) 4,452 (9,115) (7,937)
Income tax benefit / (expense) - - (25) (25)
Net (loss) / income (3,274) 4,452 (9,140) (7,962)
Net loss attributable to non-controlling interest - - - -
Net (loss) / income attributable to Sadot Group, Inc. (3,274) 4,452 (9,140) (7,962)
Total assets 16,340 7,915 2,975 27,230
With the creation of our Sadot LLC subsidiary in late 2022, we began to transform from a U.S.-centric restaurant business into a global, food-focused organization with two distinct segments. As a result, we have reevaluated and changed our operating segments late in 2023 to align with our two distinct segments. Previously we split out Muscle Maker Grill, Pokemoto, and SuperFit Foods as their own restaurant operating segments. With the transformation of our business into a global, food-focused organization, we operate the business in two distinct business segments Sadot Agri-Foods and Sadot Food Service.
The operating segments have changed since the third quarter of 2023 due to a change in management's view of the business.
The Company will continue to evaluate its operating segments and update as necessary.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
17. Fair Value Measurement
The following tables presents information about the Company's assets and liabilities that are measure at fair value on a recurring basis at December 31, 2023 and December 31, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
December 31, 2023
Level 1 Level 2 Level 3 Total
Financial assets/liabilities: $’000 $’000 $’000 $’000
Contract liability - 92,094 - 92,094
Forward sales derivatives - 1,491 - 1,491
- 93,585 - 93,585
December 31, 2022
Level 1 Level 2 Level 3 Total
Financial liabilities: $’000 $’000 $’000 $’000
Accrued compensation liability 3,602 - - 3,602
3,602 - - 3,602
There were no transfers between fair value levels during the year ended December 31, 2023.
See Note 19 - Equity for details related to accrued compensation liability being fair valued using Level 1 inputs.
See Note 15 - Commitments and contingencies and Note 18 - Financial instruments for details related to the Derivative liability being fair valued using Level 2 inputs.
Forward Sales Derivative and Derivative Liability
The Forward sales derivative asset and Derivative liability relate to the forward sale contracts. The fair value of the Forward sales derivative asset and Derivative liability is based on quoted prices for similar assets and liabilities in active market or inputs that are observable which represent Level 2 measurements within the fair value hierarchy and is based on observable prices for similar assets sourced by an independent marketplace. The Forward sales derivative refers to the forward sales contracts executed in September, November and December 2023. Refer to Note 15 - Commitments and contingencies, for a more detailed discussion of the transactions. During the year ended December 31, 2023, the fair value increased by $2.9 million. Please refer to Please refer to Note 2 - Significant accounting policies for additional information on ASC 815 leveling.
18. Financial Instruments
Concentration of Credit Risk
Commodity Price Risk
The Company uses a combination of purchase orders and various long and short-term supply arrangements in connection with the purchase of corn, soybean and soybean products including certain commodities and agricultural products. We also enter into commodity futures, options and swap contracts to reduce the volatility of price fluctuations of wheat, soybean and corn. Commodity futures, options and swap contracts are either designated as cash-flow hedging instruments or are undesignated.
Changes in the fair value on the portion of the derivative included in the assessment of hedge effectiveness of cash-flow hedges are recorded in other comprehensive income (loss), until earnings are affected by the variability of cash flows. The change in fair value on undesignated instruments is recorded in Other income / (expense). There were no current contracts designated as a hedge at December 31, 2023. We net settle amounts due, if any, under the contract with our counterparty.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Additionally, the Company is exposed to market risks primarily related to the volatility in the price of carbon credits. To manage these risks, the Company enters into forward sales contracts to sell carbon offset units from time to time. The Company evaluates its contracts to determine if such contracts qualify as derivatives under ASC 815. As the Company’s existing carbon offset contracts do not qualify for hedge accounting treatment, any changes in fair value are recorded as Gain (loss) on fair value remeasurement within Other income / (expense).
The Forward sales derivative asset and Derivative liability relate to the forward sale contracts. The fair value of the Forward sales derivative asset and Derivative liability is based on quoted prices for similar assets and liabilities in active market or inputs that are observable which represent Level 2 measurements within the fair value hierarchy and is based on observable prices for similar assets sourced by an independent marketplace. The Forward sales derivative refers to the forward sales contracts executed in September, November and December 2023. Refer to Note 15 - Commitments and contingencies, for a more detailed discussion of the transactions. During the year ended December 31, 2023, the fair value increased by $2.9 million.
See Note 2 - Significant accounting policies, Note 15 - Commitments and contingencies and Note 17 - Fair value measurement for further details regarding the Derivative liability.
19. Equity
Stock Option and Stock Issuance Plan
2021 Plan
The Company’s board of directors and shareholders approved and adopted on October 7, 2021 the 2021 Equity Incentive Plan (“2021 Plan”), effective on September 16, 2020 under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2021 Plan, the Company reserved 1.5 million shares of common stock for issuance. As of December 31, 2023, 0.7 million shares have been issued and 0.8 million options to purchase shares have been awarded under the 2021 Plan.
2023 Plan
The Company’s board of directors and shareholders approved and adopted on February 28, 2023 the 2023 Equity Incentive Plan (“2023 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock Units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2023 Plan, the Company reserved 2.5 million shares of common stock for issuance. As of December 31, 2023, 2.4 million shares have been issued and 0.1 million option to purchase shares have been awarded under the 2023 Plan.
2024 Plan
The Company’s board of directors and shareholders approved and adopted on December 20, 2023 the 2024 Equity Incentive Plan (“2024 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock Units, stock bonus awards, performance compensation awards (including cash
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
bonus awards) or any combination of the foregoing. Under the 2024 Plan, the Company reserved 7.5 million shares of common stock for issuance. As of December 31, 2023, no shares have been issued under the 2024 Plan.
Common Stock Issuances
On January 3, 2022, the Company authorized the issuance of an aggregate of 1.2 million shares of common stock in connection with the cashless exercise of the pre-funded warrants. Pursuant to the terms of the pre-funded warrants a total of 1.2 million warrants were exercised.
On January 6, 2022, the Company authorized the issuance of an aggregate of 39.6 thousand shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2022. The Company accrued for the liability as of December 31, 2021.
On January 18, 2022, the Company issued an aggregate of 30.0 thousand shares of common stock of the Company to a consultant that assisted with the acquisition of SuperFit Foods and Pokemoto, with an aggregate fair value amount of $15.6 thousand. The Company accrued for the liability as of December 31, 2021.
On February 24, 2022, the Company authorized the issuance of an aggregate of 1.2 million shares of common stock in connection with the cashless exercise of the pre-funded warrants. Pursuant to the terms of the pre-funded warrants a total of 1.2 million warrants were exercised.
On March 31, 2022, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2022.
On April 4, 2022, the Company authorized the issuance of 20.0 thousand shares of common stock to a member of the executive team per the employment agreement.
On June 8, 2022, the Company authorized the issuance of 5.0 thousand shares of common stock to a contractor for work done at a Company owned location.
On June 30, 2022, the Company recognized 30.9 thousand shares of common stock for book purpose to reconcile the shares outstanding to the transfer agent report.
On July 14, 2022, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2022.
On October 12, 2022, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2022.
On November 29, 2022, the Company authorized the issuance of an aggregate of 0.4 million shares of common stock in connection with the exercise of pre-funded warrants.
On January 5, 2023, the Company authorized the issuance of an aggregate of 31.3 thousand shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2022.
On March 27, 2023, the Company authorized the issuance of 2.8 million shares of common stock to a Aggia for services rendered.
On April 5, 2023 the Company authorized the issuance of 29.7 thousand shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2023.
On May 10, 2023 the Company authorized the issuance of 0.1 million shares of common stock to a consultant for services rendered.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
On May 25, 2023, the Company authorized the issuance of 2.7 million shares of common stock to Aggia for services rendered.
On June 30, 2023, the Company vested 0.9 million shares of common stock to a consultant for services rendered.
On July 11, 2023, the Company authorized the issuance of an aggregate of 32.9 thousand shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2023.
On July 14, 2023, the Company issued 8.9 million Restricted Share Awards to Aggia, with an effective issuance date of April 1, 2023.
On July 27, 2023, the Company authorized the issuance of 2.2 million shares of common stock to Altium in exchange for the exercise of warrants.
On August 15, 2023, the Company authorized the issuance of 0.1 million shares of common stock to a consultant for services rendered.
On September 25, 2023, the Company authorized the issuance of 0.2 million shares of common stock in fees to a consultant for services rendered related to the SEPA.
On September 30, 2023, the Company vested 0.5 million shares of common stock to to a consultant for services rendered.
On October 2, 2023, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2023.
On October 20, 2023, the Company authorized the issuance of 0.1 million shares of common stock to consultants for services rendered.
On November 6, 2023, the Company authorized the issuance of 0.1 million shares of common stock in connection with the conversion of note payables.
On November 14, 2023, the Company authorized the issuance of 0.2 million shares of common stock in connection with the conversion of note payables.
On November 29, 2023, the Company authorized the issuance of 0.2 million shares of common stock in connection with the conversion of note payables.
On December 13, 2023, the Company authorized the issuance of 0.3 million shares of common stock in connection with the conversion of note payables.
On December 19, 2023, the Company authorized the issuance of 0.3 million shares of common stock in connection with the conversion of note payables.
On December 31, 2023, the Company vested 0.2 million shares of common stock to Aggia as consulting fees earned during the fourth quarter of 2023.
Change in fair value of stock-based compensation on the Consolidated Statement of Operations and Other Comprehensive Loss is made up of the difference between the agreed upon issuance price, per the servicing agreement with Aggia and the market price on the day of issuance. For the year ended December 31, 2023, Change in fair value of stock-based compensation was $1.3 million. For the year ended December 31, 2022, Change in fair value of stock-based compensation was nil.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Restricted Share Awards
Per Addendum 2, on July 14, 2023, the Company issued Restricted Share Awards ("RSA's") to Aggia. These RSA are considered issued as of the effective date on April 1, 2023. Pursuant to the Services Agreement these RSA's vest on a progressive schedule, at a rate equal to the Net Income of Sadot Agri-Foods, calculated quarterly divided by $3.125, which for accounting purposes shall equal 40% of the net income of Sadot Agri-Foods, calculated quarterly divided by $1.25. Shares shall be considered issued and outstanding as of the Addendum Date and Aggia shall hold rights associated with such Shares; provided, however, Shares not earned or purchased may not be transferred, offered, pledged, sold, subject to a contract to sell, granted any options for the sale of or otherwise disposed of, directly or indirectly. The total RSA's vested for Aggia in 2023 were 2.1 million.
On December 19, 2023, the Company issued 2.0 million RSA's to certain members of the board of directors, consultants and employees. Total RSA vested as a result of the departure of certain members of the board of directors were 0.2 million for 2023. The remaining RSA vest ratably over 12 quarters with the first vesting starting on March 31, 2024.
At December 31, 2023, there were 9.1 million restricted share awards outstanding.
A summary of the activity related to the restricted share awards is presented below:
Total Weighted-average
grant date
fair value
$
Outstanding, December 31, 2021 - -
Granted 20,000 0.54
Forfeited - -
Vested (20,000) 0.54
Outstanding at December 31, 2022 - -
Granted 10,878,052 1.25
Forfeited - -
Vested (1,779,285) 1.25
Outstanding at December 31, 2023 9,098,767 -
See Note 15 - Commitments and contingencies for further details on Restricted Share Awards.
Warrant and Option Valuation
The Company has computed the fair value of warrants and options granted using the Black-Scholes option pricing model. The expected term used for warrants and options issued to non-employees is the contractual life. The Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time, equivalent to the expected term of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.
Options
On May 2, 2022, the Company, pursuant to the employment agreements, issued options to purchase an aggregate of 0.3 million shares of the Company’s common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on June 30, 2022.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
On October 10, 2022, the Company issued options to purchase 25.0 thousand shares of the Company’s common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on December 31, 2023.
On August 29, 2022, there were 25.0 thousand shares forfeited upon the departure of an officer.
On February 27, 2023, the Company issued options to purchase an aggregate of 0.5 million shares of the Company's common stock to officers and directors. The options had an exercise price of $1.51 per share and vest ratably over 20 quarters with the first vesting occurring March 31, 2023.
On March 15, 2023, the Company issued options to purchase 0.1 million shares of the Company's common stock. The options had an exercise price of $1.51 per share and vest ratably over 20 quarters with the first vesting occurring March 31, 2023.
On November 27, 2023, there were 0.1 million shares forfeited upon the expiration of the options.
On December 21, 2023, there were 0.1 million shares forfeited upon the departure of board members.
A summary of option activity is presented below:
Weighted-average
exercise
price Number of
options Weighted-average
remaining
life (in years) Aggregate intrinsic value
$ $’000
Outstanding, December 31, 2021 5.00 100,000 1.91 -
Issued 0.41 337,500 4.40 12
Exercised - - N/A -
Forfeited - (25,000) N/A -
Outstanding, December 31, 2022 1.52 412,500 3.53 -
Expected to vest, December 31, 2022 0.41 296,875 5.21 -
Exercisable, December 31, 2022 3.59 144,375 1.98 -
Issued 1.51 600,000 5.42 156
Exercised - - N/A -
Forfeited 3.40 (185,000) N/A -
Outstanding, December 31, 2023 1.09 827,500 4.26 -
Expected to vest, December 31, 2023 1.14 605,609 4.23 -
Exercisable, December 31, 2023 0.98 221,891 4.34 -
The Company has estimated the fair value of the options using the Black-Scholes model using the following assumptions:
For the Year Ended December 31, 2023
Risk free interest rate 3.54-4.93%
Expected term (years) 5
Expected volatility 53.99-69.02%
Expected dividends -
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Warrants
On January 3, 2022, the Company issued 1.2 million shares of common stock in connection with the cashless exercise of the pre-funded warrants. Pursuant to the terms of the pre-funded warrants a total of 1.2 million warrants were exercised.
On February 24, 2022, the Company issued 1.2 million shares of common stock in connection with the cashless exercise of the pre-funded warrants. Pursuant to the terms of the pre-funded warrants a total of 1.2 million warrants were exercised.
On November 29, 2022, the Company issued 0.4 million shares of common stock in connection with the exercising of pre-funded warrants for $44.
Warrant Exercise Agreement
On July 27, 2023 (the “Closing Date”), the Company entered into a Warrant Exercise Agreement (the “Exercise Agreement”) with Altium Growth Fund Ltd. (the “Exercising Holder”), the holder of outstanding warrants to purchase 2.2 million shares of common stock of the Company issued in November 2021 (collectively, the “Original Warrants”), whereby the Exercising Holder exercised the Original Warrants in consideration of 2.2 million shares of common stock (the “Shares”). The Company received aggregate gross proceeds before expenses of approximately $2.2 million. In order to induce the Exercising Holder to exercise the Original Warrants, the Company reduced the exercise price on the Original Warrants from $1.385 to $1.00 per share.
In connection with the exercise of the Original Warrants, we issued an additional warrant to Altium that is exercisable to acquire 2.2 million shares of common stock (the “Additional Warrant”) exercisable at a per share price of $2.40.
Additional Warrants Issued
In connection with the exercise of the Original Warrants, the Company issued an additional warrant to the Exercising Holder that is exercisable for the number of shares of common stock equal to one hundred percent of the Shares purchased by the Exercising Holder (the “Additional Warrant”). The Additional Warrant is substantially identical to the Original Warrants, except that the exercise price of the Additional Warrant is $2.40. The Company is obligated to file a registration statement covering the shares of common stock underlying the warrants within 30 days and to have the registration statement declared effective within 90 days after filing with the Commission.
A summary of warrants activity is presented below:
Weighted-average
exercise
price Number of
Warrants Weighted-average
remaining life
(in years) Aggregate intrinsic value
$ $’000
Outstanding, December 31, 2021 1.66 20,284,016 4.0 -
Issued 2.01 597,819 N/A -
Exercised 0.01 (2,848,195) N/A -
Forfeited - - N/A -
Outstanding, December 31, 2022 1.93 18,033,640 3.5 -
Exercisable, December 31, 2022 1.93 18,033,640 3.5 -
Issued 2.40 2,153,309 2.9 -
Exercised 1.00 (2,153,309) 2.9 215
Forfeited 4.36 (653,750) N/A -
Outstanding, December 31, 2023 1.97 17,379,890 2.6 -
Exercisable, December 31, 2023 1.97 17,379,890 2.6 -
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
Stock-Based Compensation Expense
Stock-based compensation related to restricted stock issued to employees, directors and consultants, warrants and warrants to consultants amounted to $6.2 million and $3.7 million, respectively for the years ended December 31, 2023 and 2022, of which $5.4 million and $3.6 million were stock-based consulting expenses paid to related party, $0.5 million and $36.0 thousand were given to consultants for services rendered, $0.3 million and $0.1 million were given to the board of directors and $0.1 million and $21.4 thousand were executive compensation.
20. Related Party Transactions
The Company held a Special Shareholder Meeting on February 28, 2023. Of the 29.3 million shares of Common Stock outstanding on January 19, 2023, the record date, 17.2 million shares were represented at the Special Shareholder Meeting, in person or by proxy, constituting a quorum. At the meeting, the shareholders approved (i) the Services Agreement whereby Sadot LLC engaged Aggia, to provide certain advisory services to Sadot Agri-Foods for managing Sadot Agri-Foods’ business of wholesaling food and engaging in the purchase and sale of physical food commodities (the “Sadot Agri-Foods Transaction”); (ii) an amendment of the Company’s articles of incorporation to increase the number of authorized shares of common stock from 50.0 million to 150.0 million and an additional increase from 150.0 million to 200.0 million; (iii) for purposes of complying with NASDAQ Listing Rule 5635(b), the issuance of the Shares pursuant to the Services Agreement entered between the Company, Sadot LLC and Aggia representing more than 20% of our common stock outstanding, which would result in a “change of control” of the Company under applicable Nasdaq listing rules; (iv) for purposes of complying with NASDAQ Listing Rule 5635(c), the issuance of up to 14.4 million Shares of Common Stock to Aggia pursuant to the Services Agreement and net income generated thresholds; (v) the right of Aggia to nominate up to eight directors to the Board of Directors subject to achieving net income thresholds as set forth in the Services Agreement; and (vi) the adoption of the 2023 Equity Incentive Plan.
In April of 2023, the Company recognized a related party relationship between newly appointed directors of the Company and Aggia. As of December 31, 2023, Aggia owned 25.2% of the Company's commons stock.
During the year ended December 31, 2023 and 2022, the Company recorded Stock-based consulting expense of $5.4 million and $3.6 million, respectively to its related party, Aggia for consulting services rendered.
Additionally, for the year ended December 31, 2023 and 2022, the Company reimbursed Aggia for all operating costs related to Sadot Agri-Foods of $3.2 million and $0.4 million, respectively.
The Company will continue to monitor and evaluate its related party transactions to ensure that they are conducted in accordance with applicable laws and regulations and in the best interests of the Company and its shareholders.
21. Subsequent Events
Common Stock
On January 4, 2024, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2023. The Company accrued for the liability as of December 31, 2023.
Convertible Notes
On January 8, 2024, the Company authorized the issuance of $0.1 million into 0.3 million shares of the Company’s common stock.
On January 11, 2024, the Company authorized the issuance of $0.1 million into 0.3 million shares of the Company’s common stock.
On January 22, 2024, the Company authorized the issuance of $0.1 million into 0.3 million shares of the Company’s common stock.
Sadot Group, Inc.
Notes to the Consolidated Financial Statements
On January 29, 2024, the Company authorized the issuance of $0.1 million into 0.3 million shares of the Company’s common stock.
On February 16, 2024, the Company authorized the issuance of $0.1 million into 0.3 million shares of the Company's common stock.
On March 15, 2024, the Company authorized the issuance of $0.2 million into 0.6 million shares of the Company's common stock.
Brokerage agreement
On February 23, 2024, the Company entered into an agreement with a brokerage firm to have the exclusive rights to offer and sell the Sadot food services segment of the Company.

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ITEM 9A. CONTROLS AND PROCEDURES

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ITEM 9B. OTHER INFORMATION

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Board of Directors and Executive Officers
Our directors hold office until their successors are elected and qualified, or until their deaths, resignations or removals. Our executive officers hold office at the pleasure of our board of directors, or until their deaths, resignations or removals.
As of March 20, 2024, our current directors and executive officers and their ages are:
Name Age Principal Positions
Kevin Mohan (1)
50 Chief Investment Officer and Chairman of the Board
Michael J. Roper 59 Chief Executive Officer
Kenneth Miller 54 Chief Operating Officer
Jennifer Black 42 Chief Financial Officer
Aimee Infante 37 Chief Marketing Officer
Stephen A. Spanos (2)
61 Director
Jeff Carl (3)
68 Director
Benjamin Petel (4)
45 Director, Secretary
Na Yeon (“Hannah”) Oh (5)
39 Director
Ray Shankar (6)
48 Director
Marvin Yeo (7)
52 Director
Paul Sansom (8)
59 Director
Mark McKinney (9)
61 Director
David Errington (10)
45 Director
Dr. Ahmed Khan (11)
40 Director
(1)Mr. Mohan serves as the Chairman of the Board.
(2)Mr. Spanos serves as the Chairman of the Audit Committee.
(3)Mr. Carl is a member of the Compensation Committee.
(4)Mr. Petel serves as the Chairman of the Sustainability Committee.
(5)Ms. Oh is a member of the Sustainability Committee.
(6)Mr. Shankar serves as the Chairman of the Compensation Committee and is a member of the Governance Committee.
(7)Mr. Yeo is a member of the Sustainability Committee.
(8)Mr. Sansom is a member of the Audit Committee.
(9)Mr. McKinney is a member of the Compensation Committee and of the Audit Committee.
(10)Mr. Errington serves as the Chairman of the Governance Committee.
(11)Dr. Khan is a member of the Governance Committee.
Executive Officers
Kevin Mohan. Mr. Mohan has served as the Chief Investment Officer for Sadot Group Inc. (formerly Muscle Maker Inc.) since May 2018. He was instrumental in recruiting a new executive management team, and together they led the Company’s IPO in 2019. During his tenure with the Company, Mr. Mohan developed multiple financial initiatives, including the transformative agreement with Aggia LLC FZ which resulted in the formation of Sadot LLC. Mr. Mohan has more than 15 years of experience in capital markets and strategic business management. Prior to joining the Company, he served as Vice President of Capital Markets for American Restaurant Holdings Inc., a company focused on acquiring and expanding fast casual restaurant brands.
Based on his experience we have deemed Mr. Mohan fit to serve on the Board and as Chairman of the Board.
Michael J. Roper. Mr. Roper has served as Chief Executive Officer, of Sadot Group, Inc. since May 1, 2018. Mr. Roper has unique experience ranging from owning and operating several franchise locations through the corporate executive levels. From May 2015 through October 2017, Mr. Roper served as Chief Executive Officer of Taco Bueno where he was
responsible for defining strategy and providing leadership to 162 company-owned and operated locations along with 23 franchised locations. From March 2014 through May 2015, Mr. Roper served as the Chief Operating Officer of Taco Bueno and from July 2013 through March 2014 as the Chief Development and Technology Officer of Taco Bueno. Prior to joining Taco Bueno, Mr. Roper was a franchise owner and operator of a IMS Barter franchise and held several roles with Quiznos Sub from 2000 to 2012 starting as a franchise owner and culminating in his appointment as the Chief Operating Officer/Executive Vice President of Operations in 2009. Mr. Roper received a Bachelor of Science in Business and General Management from Northern Illinois University.
Based on his education and extensive experience in the restaurant/franchise industry, we have deemed Mr. Roper fit to serve as our principal executive officer.
Kenneth Miller. Mr. Miller has served as Chief Operating Officer of Sadot Group, Inc. since September 26, 2018. Mr. Miller has served in the restaurant business for an extensive portion of his career. Prior to joining us as Chief Operating Officer in September 2018, Mr. Miller served as the Senior Vice President of Operations for Dickey’s BBQ Restaurant from April 2018 through September 2018 and in various capacities with Taco Bueno Restaurants, LP from October 2013 through April 2018 culminating in the position of Senior Vice President of Operations. Mr. Miller received a Bachelor of Arts in Business/Exercise Science from Tabor College in 1991.
Based on his education and extensive experience in the restaurant/franchise industry, we have deemed Mr. Miller fit to serve as our Chief Operating Officer.
Jennifer Black. Ms. Black has served as Chief Financial Officer of Sadot Group, Inc. since January 2, 2022. Ms. Black is an experienced Chief Financial Officer with a demonstrated history of working with public and private equity backed organizations. Prior to joining the Company, from September 2018 through December 2021, Ms. Black served as the Chief Financial Officer for Eagle Pressure Control LLC (“Eagle”) and Talon Pressure Control, oilfield service companies. From October 2015 through September 2018, Ms. Black served as the Controller for AG Resource Management, a private equity backed agriculture lending company, and as the Controller for Basic Energy Services, an oil and gas services company, from January 2013 through October 2015. Ms. Black has also held various other roles including Vice President of SEC reporting with OMNI American Bank and Audit Manager with RSM McGladrey. In November 2020, Eagle, as a result of various events including an oil and gas work related incident, decline of oil and gas prices and the impact from COVID-19, filed for bankruptcy protection under Subchapter V under Chapter 11 in the US Bankruptcy Court, Southern District of Texas (Houston) (Bankruptcy Petition #: 20-35474). Ms. Black is a Certified Public Accountant and a Chartered Global Management Accountant. Ms. Black received a Master of Business Administration from Jack Welch Management Institute in 2018 and Bachelor of Science in Accounting and Finance from Texas Tech University in 2003.
Based on her education and extensive experience in the financial and accounting industries, we have deemed Ms. Black fit to serve as our Chief Financial Officer.
Aimee Infante. Ms. Infante has served as the Chief Marketing Officer of Sadot Group, Inc. since May 6, 2019. Ms. Infante had previously served as the Vice President of Marketing of each of Muscle Maker Development, LLC and Muscle Maker Corp., LLC since August 25, 2017 and September 15, 2017, respectively. From June 6, 2017 to September 15, 2017, she was the Vice President of Marketing of Muscle Maker Brands Conversion, Inc. From February 2016 through June 5, 2017, she served as the Vice President of Marketing of Muscle Maker Brands, LLC, which converted into Muscle Maker Brands Conversion, Inc. on June 6, 2017. From January 2015 through January 2016, Ms. Infante served as our Director of Marketing of Muscle Maker Brands. Ms. Infante was Director of Marketing of Muscle Maker Franchising from October 2014 to January 2015. Ms. Infante was employed by Qdoba Mexican Grill in Denver, Colorado from November 2010 to April 2014, serving as Regional Marketing Specialist from November 2010 to October 2012 and Marketing Manager from October 2012 to April 2014. Ms. Infante holds a Bachelor of Science in Marketing from Rider University.
Based on her education and extensive experience in the restaurant/franchise industry, we have deemed Ms. Infante fit to serve as our Chief Marketing Officer.
Stephen A. Spanos. Mr. Spanos has provided financial and accounting consulting services for both privately held and public companies. From 2009 to 2013, Mr. Spanos served as the Chief Financial Officer of Orion Seafood International, Inc., a marketer of frozen lobster products, and as the Controller of Reef Point Systems, a provider of security solutions for converged wireless and wireline networks in the United States, from 2005 to 2013. Mr. Spanos served as an audit manager
for BDO USA, LLP and as an auditor for Ernst & Young. Mr. Spanos received his MBA and BS in Business Administration, Accounting and Finance from Boston University.
Based on his education and extensive experience in financial and accounting matters, we have deemed that Mr. Spanos is fit to serve on the Board.
Jeff Carl. With 30+ years of international experience in marketing/communications, digital technology and manufacturing, Mr. Carl brings a global perspective to Sadot Group. Since February 2017, Mr. Carl has been an independent brand strategy consultant in the hospitality and retail industries. He also serves as Executive Director for Nice & Company, a San Francisco based marketing firm. Mr. Carl has previously served as Chief Marketing Officer for several private and publicly-held companies including Taco Bueno Restaurants, the Tavistock Restaurant Group, and McDonald’s Corporation - Canada/Latin America. As Corporate Vice President for McDonald’s he also led sports and entertainment partnerships as well as the licensing, design and manufacturing for the Company’s global toy program, producing 1.8 billion toys annually. Earlier in his career, Mr. Carl was Managing Director of Creata Inc., a global marketing and manufacturing agency. Mr. Carl received a BA from Wake Forest University and an MBA from University of North Carolina, Chapel Hill.
Based on his experience within the restaurant industry and due to the fact that he has held senior level executive positions with a focus on advertising and marketing, we have deemed Mr. Carl a fit to serve on the Board.
Benjamin Petel. Mr. Petel has been engaged as a Business Development Specialist in the global agricultural commodity trading field for the past decade. His experience spans across the various aspects of international commodity trading, finance and operations. In addition, Mr. Petel has worked in other fields as a Business Development and strategic networking expert, initiating and executing multi-million dollar projects across the globe. Since 2019, Mr. Petel has been engaged as a Business Development Specialist and consultant to various agriculture and food companies in capacities ranging from corporate finance and M&A to commercial development and operational control. In addition, from 2015 and until 2019, Mr. Petel served as a strategic networking specialist in various fields and industries. Mr. Petel received a Bachelor of Arts in Business Administration and General Management from Bar-Ilan University in 2014.
Based on his experience within the commodity trading industry, the Company has deemed Mr. Petel as a fit to serve on the Board.
Na Yeon (“Hannah”) Oh. Ms. Oh boasts over 15 years of hands-on experience in commercial leadership and sustainability advocacy, with a distinguished career at Bayer where she held numerous leadership positions. Throughout her tenure, she served as Head of Marketing, spearheading impactful campaigns; led Data and Digitalization initiatives, driving organizational transformations; managed Supply Chain operations, ensuring efficiency and resilience; and developed Climate Strategies, addressing the future of regenerative farming practices.
Recognized as a driving force for positive change, Ms. Oh is deeply committed to fostering connections between agri-food and climate technology startups, philanthropic foundations, and impact capital. As an advisory board member to multiple startups, she provides strategic guidance and support, leveraging her extensive experience to nurture and accelerate their growth trajectory.
Currently, as the co-founder and investor at IXO, Ms. Oh is focused on setting new standards using blockchain and AI to bring transparency and integrity through high-definition impact data and outcome-focused investment strategies. Leveraging IXO's real-time digital Measurement, Reporting, and Verification capabilities, Ms. Oh and her team brings new governance models around verification and origination of carbon credits through technology- based solutions.
Based on her experience within the agri-food industry, the Company has deemed Ms. Oh as a fit to serve on the Board.
Ray Shankar. Mr. Shankar has been a Partner since 2019 at Oon & Bazul LLP, a prominent regional law firm where he manages the Private Wealth and Family Office Practice. He routinely advises ultra-high net worth families on the structuring of their family offices, tax and immigration incentive applications as well as legacy planning. Mr. Shankar specializes in advising on the establishment of family offices, which includes legacy and estate planning, wills, trusts, family charters/constitutions, tax efficient structures and succession planning. Prior to joining Oon & Bazul LLP, Mr. Shankar served as the Managing Director of Ring City Limited, a group of operating companies in various sectors. Mr. Shankar received his Bachelor of Laws (LLB) from the National University of Singapore.
Based on his legal, finance and business experience, the Company has deemed Mr. Shankar as a fit to serve on the Board.
Marvin Yeo. Mr. Yeo is an experienced executive with over 25 years of experience in the finance industry. From 2014 through present, Mr. Yeo has served as the founding partner of Golden Rock Capital, a pan-Asia focused strategic advisory firm that focuses on mergers and acquisitions, corporate finance and private equity. Prior to founding Golden Rock Capital, Mr. Yeo held a number of rolls with Frontier Investment & Development Partners, Asian Development Bank, Barclays Capital, Nomura International and Deutsche Bank. Mr. Yeo received his Bachelor of Engineering from Monash University, Chartered Financial Analyst certificate from the CFA Institute and an MBA from Insead.
Based on his finance and business experience, the Company has deemed Mr. Yeo as a fit to serve on the Board.
Paul Sansom. Mr. Sansom is a qualified UK Chartered Accountant and member of UK Association of Corporate Treasurers. He has over 30m years experience in blue chip finance roles in various industries, including PepsiCo and BMW plus operational partner in Private Equity funds within the Middle East. He has held CEO / General Manager roles within family owned businesses in Middle East and West Africa.
He currently is a senior partner with a Private Equity fund in the Middle East, a Board Director for a electricity generator within the UK and Board Director for portfolio companies within the Private Equity Fund. He acts as Audit Chair within one of the privately held businesses. Paul holds a BA (Hons) Economics.
Based on his start-up, finance and business experience, the Company has deemed Mr. Sansom as a fit to serve on the Board.
Mark McKinney. Mr. McKinney brings more than 30 years of domestic and international C-Level experience across various industries, six countries and three continents. Most recently, Mr. McKinney served as Chief Operating Officer of Local Bounti, a leading Ag-tech company specializing in indoor farming. During his tenure, Mr. McKinney was instrumental in the successful execution of the company’s initial public offering on the NYSE, establishing Local Bounti as a key player in the industry. Prior to Local Bounti, from 2018 to 2021, Mr. McKinney was Chief Operating Officer at Fruit Growers (Sunkist Cooperative) where he managed multiple business verticals and supply chain operations supporting 39 packing houses and thousands of Sunkist growers. From 2015 through 2017, Mr. McKinney was CEO of Al Ghurair Foods, where he managed nine business lines with operations in four countries. From 1993 to 2015, Mr. McKinney served in various senior roles at the Dole Food Company, including Senior Director positions in Dole Asia, Ltd. and Dole Europe S.A., President and Managing Director of Dole Thailand and President of Dole Packaged Foods Asia. Mr. McKinney’s career includes several Board and Advisory roles. He holds an MBA from Claremont University’s Peter F. Drucker Graduate Management Center and a Bachelor of Science degree in Chemical Engineering from California Polytechnic University, Pomona.
Based on his international, supply chain support and business experience, the Company has deemed Mr. McKinney as a fit to serve on the Board.
David Errington. Mr. Errington brings more than 20 years of experience in Sustainability and Environmental Sector with 13 years regional expertise in the Gulf Cooperation Council, including KSA, Bahrain, Qatar, Kuwait, UAE and Oman. Since January 2020, Mr. Errington has served as the Head of Engineering / Senior Technical Resource Manager for the Saudi Investment Recycling Company. From January 2014 through December 2019, Mr. Errington was employed by Ecolog International FZE, a leading provider of supply chain, construction, technology, facility management and environmental services, providing turnkey and customized solutions to governments and defense, humanitarian organizations and commercial clients in the sectors of oil & gas, mining, energy and infrastructure projects. Mr. Errington received a BSc (Hons) Chemistry from the University of Durham.
Based on his sustainability and environmental sector business experience, the Company has deemed Mr. Errington as a fit to serve on the Board.
Ahmed Khan, EngD. Dr. Khan brings more than 15 years of experience in research and development (R&D) and operations, with experience in various sectors, including waste/environmental management and the automotive sector. Most recently, Dr. Khan led a team of engineers and laboratories at Saudi Investment Recycling Company, which advises government agencies on waste management strategies and ensures compliance with regulatory bodies. Prior to Saudi Investment Recycling Company, Dr. Khan held several leadership positions including R&D Technical Director at Guilford Europe where he was responsible for ensuring planning and direction of technical and innovation programs, including design validation planning and technical oversight. He also held several positions at UtilEco Middle East including the role of R&D Director where he was responsible for planning and direction of technical and customer-led programs. Dr. Khan holds a Doctorate in Biochemical Engineering and a Masters of Research, Biochemical as well as a Bachelor of Science, Biochemistry and Bachelor of Engineering, Biochemical.
Based on his research and development and environmental management experience, the Company has deemed Dr. Khan as a fit to serve on the Board.
Family Relationships
There are no family relationships among any of our executive officers and directors.
Corporate Governance
Board of Directors and Board Committees
Our stock (symbol: SDOT) is listed on the NASDAQ capital market. Under the rules of Nasdaq, “independent” directors must make up a majority of a listed company’s board of directors. In addition, applicable NASDAQ rules require that, subject to specified exceptions, each member of a listed company’s audit and compensation committees be independent within the meaning of the applicable NASDAQ rules. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act.
Our board of directors currently consists of 11 members. Our board of directors has determined that Paul Sansom, Stephen Spanos, Jeff Carl, Hannah Oh. Ray Shankar, Marvin Yeo, Mark McKinney, David Errington and Dr. Ahmed Khan qualify as independent directors in accordance with the NASDAQ Capital Market, or NASDAQ listing requirements. Kevin Mohan and Benjamin Petel are not considered independent as they operate in the day to day operational decisions of the Company. Nasdaq’s independence definition includes a series of objective tests, such as that the director is not, and has not been for at least 3 years, one of our employees and that neither the director nor any of his or her family members has engaged in various types of business dealings with us. In addition, as required by NASDAQ rules, our board of directors has made a subjective determination as to each independent director that no relationships exist that, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us regarding each director’s business and personal activities and relationships as they may relate to us and our management. There are no family relationships among any of our directors or executive officers.
As required under NASDAQ rules and regulations and in expectation of listing on NASDAQ, our independent directors meet in regularly scheduled executive sessions at which only independent directors are present.
Board Leadership Structure and Board’s Role in Risk Oversight
Kevin Mohan is the Chairman of the Board. The Chairman has authority, among other things, to preside over the Board meetings and set the agenda for the Board meetings. Accordingly, the Chairman has substantial ability to shape the work of our Board. We currently believe that separation of the roles of Chairman and Chief Executive Officer ensures appropriate oversight by the Board of our business and affairs. However, no single leadership model is right for all companies and at all times. The Board recognizes that depending on the circumstances, other leadership models, such as the appointment of a lead Independent director, might be appropriate. Accordingly, the Board may periodically review its leadership structure.
Our Board is generally responsible for the oversight of corporate risk in its review and deliberations relating to our activities. Our principal source of risk falls into two categories, financial and product commercialization. The audit committee oversees management of financial risks; our Board regularly reviews information regarding our cash position, liquidity and operations, as well as the risks associated with each. Our Compensation Committee is expected to oversee risk management as it relates to our compensation plans, policies and practices for all employees including executives and directors, particularly whether our compensation programs may create incentives for our employees to take excessive or inappropriate risks which could have a material adverse effect on the Company.
Committees of the Board of Directors
The Board of Directors has already established an Audit Committee (the “Audit Committee”), a Compensation Committee (the “Compensation Committee”), a Sustainability Committee (the "Sustainability Committee") and a Nominating and Corporate Governance Committee (“Governance Committee”). The composition and function of each committee are described below.
Audit Committee
The Audit Committee has three members, including Messrs. McKinney, Spanos and Sansom. Mr. Spanos serves as the chairman of the Audit Committee and satisfies the definition of “audit committee financial expert”.
Our Audit committee is authorized to:
•approve and retain the independent auditors to conduct the annual audit of our financial statements;
•review the proposed scope and results of the audit;
•review and pre-approve audit and non-audit fees and services;
•review accounting and financial controls with the independent auditors and our financial and accounting staff;
•review and approve transactions between us and our directors, officers and affiliates;
•recognize and prevent prohibited non-audit services; and
•establish procedures for complaints received by us regarding accounting matters; oversee internal audit functions, if any.
Compensation Committee
The Compensation Committee has three members, including Messrs. Carl, McKinney and Shankar. Mr. Shankar serves as the chairman of the Compensation Committee.
Our Compensation Committee is authorized to:
•review and determine the compensation arrangements for management;
•establish and review general compensation policies with the objective to attract and retain superior talent, to reward individual performance and to achieve our financial goals;
•administer our stock incentive and purchase plans; and
•review the independence of any compensation advisers.
Sustainability Committee
The Sustainability Committee has three members, including Messrs. Petel, Yeo, and Ms. Oh. Mr. Patel serves as the chairman of the Sustainability Committee.
Our Sustainability Committee's duties include reviewing and making recommendations to the Board on, the Company's policy and performance in relation to sustainability-related matters, including:
•health and safety;
•process safety;
•the environment;
•climate change;
•human rights;
•historical cultural heritage and land access;
•community relations;
•ESG and impact initiatives and implementation.
Nominating and Corporate Governance Committee
The Governance Committee has three members, including Messrs. Errington, Khan and Shankar. Mr. Errington serves as the chairman of the Governance Committee.
The functions of our Governance Committee, among other things, include:
•identifying individuals qualified to become board members and recommending director;
•nominees and board members for committee membership;
•developing and recommending to our board corporate governance guidelines;
•review and determine the compensation arrangements for directors; and
•overseeing the evaluation of our board of directors and its committees and management.
Our goal is to assemble a Board that brings together a variety of skills derived from high quality business and professional experience.
Compensation Committee Interlocks and Insider Participation
None of the members of our Compensation Committee, at any time, has been one of our officers or employees. Except for Mr. Mohan, none of our executive officers currently serves, or in the past year has served, as a member of the Board of Directors or Compensation Committee of any entity that has one or more executive officers on our Board of Directors or Compensation Committee. For a description of transactions between us and members of our Compensation Committee and affiliates of such members, please see “Certain Relationships and Related Party Transactions”.
Board Diversity Matrix (as of December 31, 2023):
The Board believes that a diverse membership having a variety of skills, styles, experience and competencies is an important feature of a well-functioning board. Accordingly, the Board believes that diversity of viewpoints, backgrounds and experience (inclusive of gender, age, race and ethnicity) should be a consideration in Board succession planning and recruiting. In recent years, the Governance Committee has taken this priority to heart in its nominations process, and the diversity of the Board has grown significantly. The Nasdaq Stock Market, LLC Listing Rules’ (the “NASDAQ Listing Rules”) objective for listed companies to have at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+. The chart below provides certain information regarding the diversity of the Board as of December 31, 2023.
Total Number of Directors Male Female Gender undisclosed
Part I: Gender Identity
Directors 9 1 1
Part II: Demographic Background
White 6 - -
Asian 3 1 -
Two or more races or ethnicities - - -
Did not disclose demographic background - - 1
LGBTQ+ - - -
Code of Business Conduct and Ethics
We have adopted a code of business conduct and ethics that applies to all our employees, officers and directors, including those officers responsible for financial reporting.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s executive officers, directors, and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of the Company’s common stock. Such officers, directors, and persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file with the SEC.
To our knowledge, based solely on review of the copies of such reports and amendments to such reports with respect to the year ended December 31, 2023, filed with the SEC, all required Section 16 reports under the Exchange Act for our directors, executive officers, principal accounting officer and beneficial owners of greater than 10% of our common stock were filed on a timely basis during the year ended December 31, 2023.
During the year ended December 31, 2023, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Summary Compensation Table
The following Summary Compensation Table sets forth all compensation earned in all capacities during the fiscal years ended December 31, 2023 and 2022 by (i) our principal executive officer, (ii) our two most highly compensated executive officers, other than our principal executive officer, who were serving as executive officers as of December 31, 2023 and whose total compensation for the 2023 fiscal year, as determined by Regulation S-K, Item 402, exceeded $100,000, (iii) a person who would have been included as one of our two most highly compensated executive officers, other than our principal executive officer, but for the fact that he was not serving as one of our executive officers as of December 31, 2023, (the individuals falling within categories (i), (ii) and (iii) are collectively referred to as the “Named Executive Officers”):
Year Salary Bonus1 Stock
Award Option
Awards Non-Equity
Incentive
Plan
Compensation Non-Qualified
Deferred
Compensation
Earnings All Other
Compensation Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Michael J. Roper
Chief Executive Officer of Sadot Group, Inc. 2023 350 225 131 2 76 3 - - - 782
2022 350 175 - 24 4 - - - 549
Jennifer Black
Chief Financial Officer of Sadot Group, Inc. 2023 264 225 65 5 76 6 - - - 630
2022 186 95 11 10 7 - - - 302
Kevin Mohan
Chief Investing Officer of Sadot Group, Inc. 2023 200 200 131 8 76 9 - - - 607
2022 196 150 - 18 10 - - - 364
1 Bonuses are earned in the year noted and paid out within the first three months of the subsequent year.
2 Michael Roper was granted restricted stock awards on December 19, 2023, to acquire 0.3 million shares of common stock, vesting quarterly over twelve quarters, commencing March 31, 2024.
3 Michael Roper was granted a stock options to acquire a 31.1 thousand shares and 0.1 million shares of common stock on May February 27, 2028 and March 15, 2028, respectively.
4 Michael Roper was granted a stock option to acquire 0.1 million shares of common stock on May 2, 2022.
5 Jennifer Black was granted restricted stock awards on December 19, 2023, to acquire 0.2 million shares of common stock, vesting quarterly over twelve quarters, commencing March 31, 2024.
6 Jennifer Black was granted a stock option to acquire 0.1 million shares of common stock on February 27, 2023.
7 Jennifer Black was granted a stock options to acquire 20.0 thousand shares and 25.0 thousand shares of common stock on May 2, 2022 and October 10, 2022, respectively.
8 Kevin Mohan was granted restricted stock awards on December 19, 2023, to acquire 0.3 million shares of common stock, vesting quarterly over twelve quarters, commencing March 31, 2024.
9 Kevin Mohan was granted a stock option to acquire 0.1 million shares of common stock on February 27, 2023.
10 Kevin Mohan was granted a stock option to acquire 0.1 million shares of common stock on May 2, 2022.
A summary of option activity during the years ended December 31, 2023 and 2022 is presented below:
Weighted-average
exercise
price Number of
options Weighted-average
remaining life
(in years) Aggregate intrinsic value
$ $’000
Outstanding, December 31, 2021 5.00 100,000 1.91 -
Issued 0.41 337,500 4.40 12
Exercised - - N/A -
Forfeited - (25,000) N/A -
Outstanding, December 31, 2022 1.52 412,500 3.53 -
Issued 1.51 600,000 5.42 156
Exercised - - N/A -
Forfeited 3.40 (185,000) N/A -
Outstanding, December 31, 2023 1.09 827,500 4.26 -
Expected to vest, December 31, 2023 1.14 605,609 4.23 -
Exercisable, December 31, 2023 0.98 221,891 4.34 -
On February 27, 2023, we issued options to purchase an aggregate of 0.5 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On March 15, 2023, we issued options to purchase 0.1 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On November 27, 2023, there were 0.1 million shares forfeited upon the expiration of the options.
On December 21, 2023, there were 0.1 million shares forfeited upon the departure of board members.
Employment Agreements
Michael Roper
On November 16, 2022, the Company entered into an Executive Employment Agreement with Michael Roper (the “Roper Agreement”), which replaced his prior employment agreement. Pursuant to the Roper Agreement, Mr. Roper will continue to be employed as Chief Executive Officer of the Company on an at will basis. During the term of the Roper Agreement, Mr. Roper is entitled to a base salary at the annualized rate of $0.4 million. Mr. Roper will be eligible for a discretionary performance bonus to be determined by the Board annually. Mr. Roper received an additional bonus of $0.1 million on March 2, 2023 and an additional $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Roper is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Roper is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Roper will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 18 months following the second anniversary of the Roper Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Roper Agreement will automatically terminate and the prior employment agreement will again be in full effect.
Jennifer Black
On March 21, 2023, the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement. Pursuant to the Black Agreement, Ms. Black will continue to be employed as Chief Financial Officer of the Company on an at will basis. During the term of the Black Agreement,
Ms. Black is entitled to a base salary at the annualized rate of $0.3 million. Ms. Black will be eligible for a discretionary performance bonus up to 50% of her annual salary. Ms. Black received an additional bonus of $0.1 million on March 2, 2023 and an additional $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Ms. Black is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Black is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Black will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Black Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Black Agreement will automatically terminate, and the prior employment agreement will again be in full effect.
Kenneth Miller
On November 16, 2022, the Company entered into an Executive Employment Agreement with Kenn Miller (the “Miller Agreement”), which replaced his prior employment agreement. Pursuant to the Miller Agreement, Mr. Miller will continue to be employed as Chief Operating Officer of the Company on an at will basis. During the term of the Miller Agreement, Mr. Miller is entitled to a base salary at the annualized rate of $0.3 million. Mr. Miller will be eligible for a discretionary performance bonus up to 75% of his annual salary. Further, Mr. Miller will be entitled to an additional bonus of $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Miller is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Miller is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Miller will be entitled to a severance payment equal to 36 months of salary, which will be reduced to 12 months following the second anniversary of the Miller Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Miller Agreement will automatically terminate and the prior employment agreement will again be in full effect.
Kevin Mohan
On November 16, 2022, the Company entered into an Executive Employment Agreement with Kevin Mohan (the “Mohan Agreement”), which replaced his prior employment agreement. Pursuant to the Mohan Agreement, Mr. Mohan will continue to be employed as Chief Investment Officer of the Company on an at will basis. During the term of the Employment Agreement, Mr. Mohan is entitled to a base salary at the annualized rate of $0.2 million. Mr. Mohan will be eligible for a discretionary performance bonus up to 75% of his annual salary. Mr. Mohan received an additional bonus of $0.1 million on March 2, 2023 and an additional $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Mr. Mohan is terminated for any reason, he will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Mr. Mohan is terminated by the Company for any reason other than cause or resigns for a good reason, Mr. Mohan will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Mohan Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Mohan Agreement will automatically terminate, and the prior employment agreement will again be in full effect.
Aimee Infante
On November 16, 2022, the Company entered into an Executive Employment Agreement with Aimee Infante (the “Infante Agreement”), which replaced her prior employment agreement. Pursuant to the Infante Agreement, Ms. Infante will continue to be employed as Chief Marketing Officer of the Company on an at will basis. During the term of the Infante Agreement, Ms. Infante is entitled to a base salary at the annualized rate of $0.2 million. Ms. Infante will be eligible for a discretionary performance bonus up to 25% of her annual salary. Further, Ms. Infante will be entitled to an additional bonus of $25.0 thousand which is accrued and unpaid, relating to the appointment of certain directors pursuant to the agreement with Aggia. If Ms. Infante is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Infante is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Infante will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Infante
Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder Matters are not approved by the shareholders, the Infante Agreement will automatically terminate, and the prior employment agreement will again be in full effect.
Elements of Compensation
Base Salary
Messrs. Roper, Miller, Mohan, and Mmes. Black and Infante received a fixed base salary in an amount determined in accordance with their then employment agreement with Sadot Group, Inc., and based on a number of factors, including:
•The nature, responsibilities and duties of the officer’s position;
•The officer’s expertise, demonstrated leadership ability and prior performance;
•The officer’s salary history and total compensation, including annual cash bonuses and long-term incentive compensation; and
•The competitiveness of the market for the officer’s services.
Bonus
Messrs. Roper, Mohan, Miller, and Mmes. Black and Infante earned discretionary performance-based bonuses during the years ended December 31, 2023, and 2022, pursuant to their employment agreements.
Restricted Stock Award
In fiscal year 2023, we issued 1.0 million shares of our restricted common stock, with a fair value of $0.3 million, to three members of our executive team.
Stock Options
On May 2, 2022, we issued options to purchase an aggregate of 0.3 million shares of our common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on June 30, 2022.
On October 10, 2022, we issued options to purchase 25.0 thousand shares of our common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on December 31, 2022.
On February 27, 2023, we issued options to purchase an aggregate of 0.5 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On March 15, 2023, we issued options to purchase 0.1 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
Equity Incentive Plans
2021 Plan
The Company’s board of directors and shareholders approved and adopted on October 7, 2021 the 2021 Equity Incentive Plan (“2021 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2021 Plan, the Company reserved 1.5 million shares of common stock for issuance. As of the date of the issuance of these Consolidated Financial Statements 0.7 million shares have been issued and 0.8 million option to purchase shares have been awarded under the 2021 Plan.
2023 Plan
The Company’s board of directors and shareholders approved and adopted on February 28, 2023 the 2023 Equity Incentive Plan (“2023 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and
consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2023 Plan, the Company reserved 2.5 million shares of common stock for issuance. As of the date of the issuance of these Consolidated Financial Statements 2.4 million shares of common stock for issuance have been issued and 0.1 million option to purchase shares have been awarded under the 2023 Plan.
2024 Plan
The Company’s board of directors and shareholders approved and adopted on October 27, 2023 the 2024 Equity Incentive Plan (“2024 Plan”) under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, stock appreciation rights, restricted stock awards, restricted stock Units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2024 Plan, the Company reserved 7.5 million shares of common stock for issuance. As of December 31, 2023, no shares have been issued under the 2024 Plan.
Administration
The Company’s Board of Directors or a committee appointed by the Board (the “Committee”) will administer the Plan. The Committee will have the authority, without limitation (i) to designate Participants to receive Awards, (ii) determine the types of Awards to be granted to Participants, (iii) determine the number of shares of common stock to be covered by Awards, (iv) determine the terms and conditions of any Awards granted under the Plan, (v) determine to what extent and under what circumstances Awards may be settled in cash, shares of common stock, other securities, other Awards or other property, or canceled, forfeited or suspended, (vi) determine whether, to what extent, and under what circumstances the delivery of cash, Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be made; (vii) interpret, administer, reconcile any inconsistency in, settle any controversy regarding, correct any defect in and/or complete any omission in this Plan and any instrument or agreement relating to, or Award granted under, this Plan; (viii) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of this Plan; (ix) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, Awards; (x) reprice existing Awards with shareholder approval or to grant Awards in connection with or in consideration of the cancellation of an outstanding Award with a higher price; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Plan. The Committee will have full discretion to administer and interpret the Plan and to adopt such rules, regulations and procedures as it deems necessary or advisable and to determine, among other things, the time or times at which the awards may be exercised and whether and under what circumstances an award may be exercised.
Eligibility
Employees, directors, officers, advisors and consultants of the Company or its affiliates are eligible to participate in the Plan and are referred to as “Participants”. The Committee has the sole and complete authority to determine who will be granted an Award under the Plan, however, it may delegate such authority to one or more officers of the Company under the circumstances set forth in the Plan.
Number of Shares Authorized
Up to approximately 1.5 million shares of common stock may be issued pursuant to awards granted under the 2021 Plan, 2.5 million under the 2023 Plan and 7.5 million under the 2024 Plan.
If an Award is forfeited, canceled, or if any Option terminates, expires or lapses without being exercised, the Common Stock subject to such Award will again be made available for future grant. However, shares that are used to pay the exercise price of an Option or that are withheld to satisfy the Participant’s tax withholding obligation will not be available for re-grant under the Plan.
If there is any change in the Company’s corporate pro or structure, the Committee in its sole discretion may make substitutions or adjustments to the number of shares of common stock reserved for issuance under the Plan, the number of shares covered by Awards then outstanding under the Plan, the limitations on Awards under the Plan, the exercise price of outstanding Options and such other equitable substitution or adjustments as it may determine appropriate.
The Plan has a term of ten years and no further Awards may be granted under the Plan after that date.
Awards Available for Grant
The Committee may grant Awards of Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Stock Bonus Awards, Performance Compensation Awards (including cash bonus awards) or any combination of the foregoing. Notwithstanding, the Committee may not grant to any one person in any one calendar year Awards (i) for more than 50% of the Available Shares in the aggregate or (ii) payable in cash in an amount exceeding $10,000,000 in the aggregate.
Options
The Committee will be authorized to grant Options to purchase Common Stock that are either “qualified,” meaning they are intended to satisfy the requirements of Code Section 422 for Incentive Stock Options, or “non-qualified,” meaning they are not intended to satisfy the requirements of Section 422 of the Code. Options granted under the Plan will be subject to the terms and conditions established by the Committee. Under the terms of the Plan, unless the Committee determines otherwise in the case of an Option substituted for another Option in connection with a corporate transaction, the exercise price of the Options will not be less than the fair market value (as determined under the Plan) of the shares of common stock on the date of grant. Options granted under the Plan will be subject to such terms, including the exercise price and the conditions and timing of exercise, as may be determined by the Committee and specified in the applicable award agreement. The maximum term of an Option granted under the Plan will be ten years from the date of grant (or five years in the case of an Incentive Stock Option granted to a 10% stockholder). Payment in respect of the exercise of an Option may be made in cash or by check, by surrender of unrestricted shares of Common Stock (at their fair market value on the date of exercise) that have been held by the participant for any period deemed necessary by the Company’s accountants to avoid an additional compensation charge or have been purchased on the open market, or the Committee may, in its discretion and to the extent permitted by law, allow such payment to be made through a broker-assisted cashless exercise mechanism, a net exercise method, or by such other method as the Committee may determine to be appropriate.
Stock Appreciation Rights
The Committee will be authorized to award Stock Appreciation Rights (or “SARs”) under the Plan. SARs will be subject to such terms and conditions as established by the Committee. A SAR is a contractual right that allows a participant to receive, either in the form of cash, shares or any combination of cash and shares, the appreciation, if any, in the value of a share over a certain period of time. A SAR granted under the Plan may be granted in tandem with an option and SARs may also be awarded to a participant independent of the grant of an Option. SARs granted in connection with an Option shall be subject to terms similar to the Option which corresponds to such SARs. SARs shall be subject to terms established by the Committee and reflected in the award agreement.
Restricted Stock
The Committee will be authorized to award Restricted Stock under the Plan. Unless otherwise provided by the Committee and specified in an award agreement, restrictions on Restricted Stock will lapse after three years of service with the Company. The Committee will determine the terms of such Restricted Stock awards. Restricted Stock are shares of common stock that generally are non-transferable and subject to other restrictions determined by the Committee for a specified period. Unless the Committee determines otherwise or specifies otherwise in an award agreement, if the participant terminates employment or services during the restricted period, then any unvested restricted stock will be forfeited.
Restricted Stock Unit Awards
The Committee will be authorized to award Restricted Stock Unit awards. Unless otherwise provided by the Committee and specified in an award agreement, Restricted Stock Units will vest after three years of service with the Company. The Committee will determine the terms of such Restricted Stock Units. Unless the Committee determines otherwise or specifies otherwise in an award agreement, if the participant terminates employment or services during the period of time over which all or a portion of the units are to be earned, then any unvested units will be forfeited. At the election of the Committee, the participant will receive a number of shares of common stock equal to the number of units earned or an amount in cash equal to the fair market value of that number of shares at the expiration of the period over which the units are to be earned or at a later date selected by the Committee.
Stock Bonus Awards
The Committee will be authorized to grant Awards of unrestricted shares of common stock or other Awards denominated in shares of common stock, either alone or in tandem with other Awards, under such terms and conditions as the Committee may determine.
Performance Compensation Awards
The Committee will be authorized to grant any Award under the Plan in the form of a Performance Compensation Award exempt from the requirements of Section 162(m) of the Code by conditioning the vesting of the Award on the attainment of specific performance criteria of the Company and/or one or more Affiliates, divisions or operational units, or any combination thereof, as determined by the Committee. The Committee will select the performance criteria based on one or more of the following factors: (i) revenue; (ii) sales; (iii) profit (net profit, gross profit, operating profit, economic profit, profit margins or other corporate profit measures); (iv) earnings (EBIT, EBITDA, earnings per share, or other corporate profit measures); (v) net income (before or after taxes, operating income or other income measures); (vi) cash (cash flow, cash generation or other cash measures); (vii) stock price or performance; (viii) total stockholder return (stock price appreciation plus reinvested dividends divided by beginning share price); (ix) economic value added; (x) return measures (including, but not limited to, return on assets, capital, equity, investments or sales, and cash flow return on assets, capital, equity, or sales); (xi) market share; (xii) improvements in capital structure; (xiii) expenses (expense management, expense ratio, expense efficiency ratios or other expense measures); (xiv) business expansion or consolidation (acquisitions and divestitures); (xv) internal rate of return or increase in net present value; (xvi) working capital targets relating to inventory and/or accounts receivable; (xvii) inventory management; (xviii) service or product delivery or quality; (xix) customer satisfaction; (xx) employee retention; (xxi) safety standards; (xxii) productivity measures; (xxiii) cost reduction measures; and/or (xxiv) strategic plan development and implementation.
Transferability
Each Award may be exercised during the Participant’s lifetime only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative and may not be otherwise transferred or encumbered by a Participant other than by will or by the laws of descent and distribution. The Committee, however, may permit Awards (other than Incentive Stock Options) to be transferred to family members, a trust for the benefit of such family members, a partnership or limited liability company whose partners or stockholders are the Participant and his or her family members or anyone else approved by it.
Amendment
The Plan will have a term of ten years. The Company’s board of directors may amend, suspend or terminate the Plan at any time; however, shareholder approval to amend the Plan may be necessary if the law or SEC so requires. No amendment, suspension or termination will materially and adversely affect the rights of any Participant or recipient of any Award without the consent of the Participant or recipient.
Change in Control
Except to the extent otherwise provided in an Award or required by applicable law, in the event of a Change in Control, upon the occurrence of a Change in Control, the Committee is authorized, but not obligated, to make any of the following adjustments (or any combination thereof) in the terms and conditions of outstanding Awards: (a) continuation or assumption of outstanding Awards by the surviving company; (b) substitution by the surviving company of equity, equity-based and/or cash awards with substantially the same terms for outstanding Awards; (c) accelerated exercisability, vesting and/or lapse of restrictions under outstanding Awards immediately prior to the occurrence of the Change in Control; (d) upon written notice, provide that any outstanding Awards must be exercised, to the extent then exercisable, during a reasonable period determined by the Committee and at the end of such period, any unexercised Awards will terminate; and I cancellation of all or any portion of outstanding Awards for fair value (in the form of cash, shares or other property) and which value may be zero.
U.S. Federal Income Tax Consequences
The following is a general summary of the material U.S. federal income tax consequences of the grant and exercise and vesting of Awards under the Plan and the disposition of shares acquired pursuant to the exercise of such Awards. This
summary is intended to reflect the current provisions of the Code and the regulations thereunder. However, this summary is not intended to be a complete statement of applicable law, nor does it address foreign, state, local and payroll tax considerations. Moreover, the U.S. federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular circumstances of such participant.
Options
There are a number of requirements that must be met for a particular Option to be treated as an Incentive Stock Option. One such requirement is that Common Stock acquired through the exercise of an Incentive Stock Option cannot be disposed of before the later of (i) two years from the date of grant of the Option, or (ii) one year from the date of its exercise. Holders of Incentive Stock Options will generally incur no federal income tax liability at the time of grant or upon exercise of those Options. However, the spread at exercise will be an “item of tax preference,” which may give rise to “alternative minimum tax” liability for the taxable year in which the exercise occurs. If the holder does not dispose of the shares before the later of two years following the date of grant and one year following the date of exercise, the difference between the exercise price and the amount realized upon disposition of the shares will constitute long-term capital gain or loss, as the case may be. Assuming both holding periods are satisfied, no deduction will be allowed to the Company for federal income tax purposes in connection with the grant or exercise of the Incentive Stock Option. If, within two years following the date of grant or within one year following the date of exercise, the holder of shares acquired through the exercise of an Incentive Stock Option disposes of those shares, the Participant will generally realize taxable compensation at the time of such disposition equal to the difference between the exercise price and the lesser of the Fair Market Value of the share on the date of exercise or the amount realized on the subsequent disposition of the shares, and that amount will generally be deductible by the Company for federal income tax purposes, subject to the possible limitations on deductibility under Sections 280G and 162(m) of the Code for compensation paid to executives designated in those Sections. Finally, if an otherwise Incentive Stock Option becomes first exercisable in any one year for shares having an aggregate value in excess of $100,000 (based on the date of grant value), the portion of the Incentive Stock Option in respect of those excess shares will be treated as a non-qualified stock option for federal income tax purposes.
Income will be realized by a Participant upon grant of a Non-Qualified Stock Option. Upon the exercise of a Non-Qualified Stock Option, the Participant will recognize ordinary compensation income in an amount equal to the excess, if any, of the Fair Market Value of the underlying exercised shares over the Option exercise price paid at the time of exercise. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income.
The Company will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Restricted Stock
A Participant will not be subject to tax upon the grant of an Award of Restricted Stock unless the Participant otherwise elects to be taxed at the time of grant pursuant to Section 83(b) of the Code. On the date an Award of Restricted Stock becomes transferable or is no longer subject to a substantial risk of forfeiture, the Participant will recognize ordinary compensation income equal to the difference between the Fair Market Value of the shares on that date over the amount the Participant paid for such shares, if any. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. If the Participant made an election under Section 83(b) of the Code, the Participant will recognize ordinary compensation income at the time of grant equal to the difference between the Fair Market Value of the shares on the date of grant over the amount the Participant paid for such shares, if any, and any subsequent appreciation in the value of the shares will be treated as a capital gain upon sale of the shares. Special rules apply to the receipt and disposition of Restricted Shares received by officers and directors who are subject to Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”). The Company will be able to deduct, at the same time as it is recognized by the Participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Restricted Stock Units
A Participant will not be subject to tax upon the grant of a Restricted Stock Unit Award. Rather, upon the delivery of shares or cash pursuant to a Restricted Stock Unit Award, the Participant will recognize ordinary compensation income
equal to the Fair Market Value of the number of shares (or the amount of cash) the Participant actually receives with respect to the Award. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. The Company will be able to deduct the amount of taxable compensation recognized by the Participant for U.S. federal income tax purposes, but the deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
SARs
No income will be realized by a Participant upon grant of an SAR. Upon the exercise of an SAR, the Participant will recognize ordinary compensation income in an amount equal to the Fair Market Value of the payment received in respect of the SAR. Such income will be subject to income tax withholdings, and the Participant will be required to pay to the Company the amount of any required withholding taxes in respect to such income. The Company will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Stock Bonus Awards
A Participant will recognize ordinary compensation income equal to the difference between the Fair Market Value of the shares on the date the shares of common stock subject to the Award are transferred to the Participant over the amount the Participant paid for such shares, if any, and any subsequent appreciation in the value of the shares will be treated as a capital gain upon sale of the shares. The Company will be able to deduct, at the same time as it is recognized by the Participant, the amount of taxable compensation to the Participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Section 162(m)
In general, Section 162(m) of the Code denies a publicly held corporation a deduction for U.S. federal income tax purposes for compensation in excess of $1,000,000 per year paid to any “covered employee.” Covered employees include any individual who served as chief executive officer or chief financial officer during the taxable year, in addition to the three most highly compensated individuals aside from the chief executive officer and chief financial officer. Additionally, covered employees include any previously covered employee for any taxable year beginning after December 31, 2016. The Plan is intended to satisfy an exception with respect to grants of Options to covered employees. In addition, the Plan was designed to permit certain Awards of Restricted Stock, Restricted Stock Units, cash bonus awards and other Awards to be awarded as performance compensation awards intended to qualify under the “performance-based compensation” exception to Section 162(m) of the Code.
On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law. The TCJA repealed the performance-based compensation exception to the Section 162(m) $1 million limitation on compensation to covered employees of publicly held corporations. This change was effective for tax years beginning after December 31, 2017. As a result of this change, any expense recognized upon exercise of stock options will be subject to the $1 million limitation under Section 162(m), even if based on performance.
New Plan Benefits
Future grants under the Plan will be made at the discretion of the Committee and, accordingly, are not yet determinable. In addition, the value of the Awards granted under the Plan will depend on a number of factors, including the Fair Market Value of the shares of common stock on future dates, the exercise decisions made by the Participants and/or the extent to which any applicable performance goals necessary for vesting or payment are achieved. Consequently, it is not possible to determine the benefits that might be received by Participants receiving discretionary grants under, or having their annual bonus paid pursuant to, the Plan.
Interests of Directors or Officers
The Company’s directors may grant Awards under the Plan to themselves as well as to the Company’s officers and other employees, consultants and advisors.
Equity Compensation Plan Information
The following table provides information, as of December 31, 2023, with respect to equity securities authorized for issuance under compensation plans:
Plan Category No. of securities
to be issued
upon exercise
of outstanding
options
under the plan Weighted-average exercise price of outstanding options under the plan No. of
securities
remaining
available
for future
issuance
$
2024 Equity compensation plans approved by security holders - - 7,500,000
2023 Equity compensation plans approved by security holders 68,928 1.51 -
2021 Equity compensation plans approved by security holders 843,572 1.10 -
Equity compensation plans not approved by security holders - - -
Total 912,500 2.61 7,500,000
Director Compensation
Through the third quarter of 2022 the board members were eligible for cash compensation of $12.0 thousand per year to be paid quarterly within 30 days of the close of each quarter. On November 11, 2022, the board of directors approved a new board compensation plan that would increase the cash compensation to $22.0 thousand to be paid quarterly within 30 days of the close of each quarter, which was retroactively applied for the full fourth quarter of 2022.
In addition, on an ongoing basis pursuant to the approved board compensation plan each director will receive $8.0 thousand in value of common stock per year for service as director, $6.0 thousand in value of shares of common stock per year for service on each committee and $4.0 thousand in value of shares of common stock per year for service as chair for such committee. The number of shares to be issued would be based upon the closing price of the last trading date of each calendar quarter. The shares of common stock for committee service will be limited to two committees.
Kevin Mohan is an employee-director and does not receive compensation for serving in his role as a director or Chairman of the Board.
The following table provides information relating to compensation of our directors for our fiscal year ended December 31, 2023:
Name Fees earned
or paid in cash Stock awards Option awards Non-equity incentive
plan compensation Non-qualified deferred
compensation
earnings All other
compensation Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000
Stephen A. Spanos 22 37 38 - - - 97
A.B. Southall III 22 33 38 - - - 93
Paul L. Menchik 22 43 38 - - - 103
Jeff Carl 22 43 38 - - - 103
Major General (Ret) Malcolm B. Frost 22 33 38 - - - 93
Phillip Balatsos 22 39 38 - - - 99
Benjamin Petel 17 58 - - - - 75
Na Yeon (“Hannah”) Oh 13 4 - - - - 17
Ray Shankar 13 4 - - - - 17
Marvin Yeo 10 4 - - - - 14
Paul Sansom 10 4 - - - - 14
Mark McKinney 7 2 - - - - 9
David Errington 7 2 - - - - 9
Dr. Ahmed Khan 7 2 - - - - 9
Executive Compensation Philosophy
Our Board of Directors determines the compensation given to our executive officers in their sole determination. Our Board of Directors reserves the right to pay our executives or any future executives a salary, and/or issue them shares of common stock issued in consideration for services rendered and/or to award incentive bonuses which are linked to our performance, as well as to the individual executive officer’s performance. This package may also include long-term stock-based compensation to certain executives, which is intended to align the performance of our executives with our long-term business strategies. Additionally, while our Board of Directors has not granted any performance base stock options to date, the Board of Directors reserves the right to grant such options in the future, if the Board in its sole determination believes such grants would be in the best interests of the Company.
Incentive Bonus
The Board of Directors may grant incentive bonuses to our executive officers and/or future executive officers in its sole discretion, if the Board of Directors believes such bonuses are in the Company’s best interest, after analyzing our current business objectives and growth, if any, and the amount of revenue we are able to generate each month, which revenue is a direct result of the actions and ability of such executives.
Long-Term, Stock-Based Compensation
In order to attract, retain and motivate executive talent necessary to support the Company’s long-term business strategy we may award our executives and any future executives with long-term, stock-based compensation in the future, at the sole discretion of our Board of Directors.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information about the beneficial ownership of our common stock at March 20, 2024, for:
•each person, or group of affiliated persons, whom we know to beneficially own more than 5% of our common stock;
•each of our named executive officers;
•each of our directors; and
•all of our executive officers and directors as a group.
We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options or warrants or upon conversion of a security that are either exercisable or convertible on or before a date that is 60 days after March 20, 2024. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
Except as otherwise noted below, the address for persons listed in the table is c/o Sadot Group, Inc., 1751 River Run, Suite 200, Fort Worth, Texas 76107.
The percentage ownership information shown in the column labeled “Percentage of shares outstanding” is based upon 51,752,691 shares of common stock outstanding as of March 20, 2024.
Name of beneficial owner Number of shares
beneficially
owned (1)
Percentage of shares
outstanding prior to
offering (1)
5% Stockholders:
Aggia LLC FZ (2)
12,492,069 24.43 %
Armistice Capital LLC (3)
3,201,897 6.26 %
Directors and Named Executive Officers:
Kevin Mohan (4)
524,537 *
Michael J. Roper (5)
523,015 *
Jennifer Black (6)
251,300 *
Kenneth Miller (7)
80,892 *
Aimee Infante (8)
40,852 *
Stephen Spanos (9)
147,515 *
Jeff Carl (10)
160,625 *
Ray Shankar (11)
10,151 *
Hannah Oh (12)
10,151 *
Benjamin Petel (13)
131,397 *
Marvin Yeo (14)
9,361 *
Paul Sansom (15)
9,361 *
Mark McKinney (16)
8,143 *
David Errington (17)
35,143 *
Dr. Ahmed Khan (18)
10,881 *
All executive officers and directors as a group (15 persons) 1,953,324 3.82 %
*Denotes less than 1%
(1)Beneficial ownership as reported in the above table has been determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended, and is not necessarily indicative of beneficial ownership for any other purpose. The number of shares of common stock shown as beneficially owned includes shares of common stock issuable upon (i) the exercise of stock options that will become exercisable within 60 days of March 20, 2024, (ii) the conversion of the convertible promissory notes into
shares of our common stock, and (iii) the exercise of warrants that will become exercisable within 60 days of March 21, 2023. Shares of common stock issuable pursuant to the foregoing methods are deemed outstanding for purposes of calculating the percentage of beneficial ownership of the person or entity holding such securities. Accordingly, the total percentages of beneficial ownership are in excess of one hundred percent (100%).
(2)Aggia LLC FZ beneficially owns 12.5 million shares of common stock of the Company.
(3)Armistice Capital LLC beneficially owns 3.2 million shares of common stock of the Company which are subject to presently exercisable purchase warrants. Armistice Capital Master Fund Ltd., a Cayman Islands exempted company (the “Master Fund”) holds 3.2 million shares of common stock issuable upon exercise of Warrants at an exercise price of $1.385. Armistice Capital, LLC (“Armistice Capital”) is the investment manager of Armistice Capital Master Fund Ltd. (the “Master Fund”), the direct holder of the Shares, and pursuant to an Investment Management Agreement, Armistice Capital exercises voting and investment power over the securities of the Issuer held by the Master Fund and thus may be deemed to beneficially own the securities of the Issuer held by the Master Fund. Mr. Boyd, as the managing member of Armistice Capital, may be deemed to beneficially own the securities of the Issuer held by the Master Fund. The Master Fund specifically disclaims beneficial ownership of the securities of the Issuer directly held by it by virtue of its inability to vote or dispose of such securities as a result of its Investment Management Agreement with Armistice Capital. The address of the Master Fund is c/o Armistice Capital, LLC, 510 Madison Ave, 7th Floor, New York, NY 10022.
(4)Kevin Mohan beneficially owns (i) indirectly 5.6 thousand shares of common stock of the Company through various family members that reside in the same household as Kevin Mohan and (ii) directly 0.4 million shares of common stock of Sadot Group Inc, for serving in various roles in the Company, (iii) 33.0 thousand shares of common stock of the Company purchased on the open market and (iv) directly 55.0 thousand shares of vested but unexercised stock options.
(5)Michael J. Roper beneficially owns directly 0.5 million shares of common stock of the Company (i) 0.4 million shares of common stock of Sadot Group Inc. for serving as the Chief Executive Officer of the Company and (ii) 58.0 thousand shares of common stock of the Company purchased on the open market and (iii) 65.0 thousand shares of vested but unexercised stock options.
(6)Jennifer Black beneficially owns directly 0.2 million shares of common stock of the Company (i) 0.2 million shares of common stock of Sadot Group Inc. for serving as the Chief Financial Officer of the Company, (ii) 41.0 thousand shares of common stock of the Company purchased on the open market and (iii) 41.0 thousand shares of vested but unexercised stock options.
(7)Kenneth Miller beneficially owns directly 80.9 thousand shares of common stock of the Company (i) 32.0 thousand shares of common stock of the Company for serving as Chief Operating Officer of the Company, (ii) 10.0 thousand shares of common stock of the Company purchased on the open market and (iii) 39.0 thousand shares of vested but unexercised stock options.
(8)Aimee Infante beneficially owns directly 40.1 thousand shares of common stock of the Company (i) 3.0 thousand shares of common stock for serving as the Chief Marketing Officer of the Company, (ii) 3.0 thousand shares of common stock of the Company purchased on the open market and (iii) 36.0 thousand shares of vested but unexercised stock options.
(9)Stephen Spanos beneficially owns directly 0.1 million shares of common stock of the Company (i) 0.1 million shares of common stock of the Company for services rendered as a board of director member, (ii) 15.0 thousand of the common stock of through purchase on the open market and (iii) 6.0 thousand shares of vested but unexercised stock options.
(10)Jeff Carl beneficially owns directly 0.2 million shares of common stock of the Company (i) 0.2 million shares of common stock of the Company for services rendered as a board of director member and (ii) 6.0 thousand shares of vested but unexercised stock options.
(11)Ray Shankar beneficially owns directly shares of common stock of the Company (i) 10.0 thousand shares of common stock of the Company (i) 10.0 thousand shares of common stock of the Company for services rendered as a board of director member.
(12)Hannah Oh beneficially owns directly shares of common stock of the Company (i) 10.0 thousand shares of common stock of the Company (i) 10.0 thousand shares of common stock of the Company for services rendered as a board of director member.
(13)Benjamin Petel beneficially owns directly shares of common stock of the Company (i) 0.1 million shares of common stock of the Company (i) 0.1 million shares of common stock of the Company for services rendered as a board of director member and consulting services.
(14)Marvin Yeo beneficially owns directly shares of common stock of the Company (i) 9.0 thousand shares of common stock of the Company (i) 9.0 thousand shares of common stock of the Company for services rendered as a board of director member.
(15)Paul Sansom beneficially owns directly shares of common stock of the Company (i) 9.0 thousand shares of common stock of the Company (i) 9.0 thousand shares of common stock of the Company for services rendered as a board of director member.
(16)Mark McKinney beneficially owns directly shares of common stock of the Company (i) 8.0 thousand shares of common stock of the Company (i) 8.0 thousand shares of common stock of the Company for services rendered as a board of director member.
(17)David Errington beneficially owns directly shares of common stock of the Company (i) 35.0 thousand shares of common stock of the Company (i) 8.0 thousand shares of common stock of the Company for services rendered as a board of director member and (ii) 27.0 thousand shares of common stock of the Company purchased on the open market.
(18)Dr. Ahmed Khan beneficially owns directly shares of common stock of the Company (i) 11.0 thousand shares of common stock of the Company (i) 8.0 thousand shares of common stock of the Company for services rendered as a board of director member and (ii) 3.0 thousand shares of common stock of the Company purchased on the open market.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
Policies and Procedures for Related Party Transactions
Following this offering, pursuant to the written charter of our Audit Committee, the Audit Committee will be responsible for reviewing and approving, prior to our entry into any such transaction, all related party transactions and potential conflict of interest situations involving:
•any of our directors, director nominees or executive officers;
•any beneficial owner of more than 5% of our outstanding stock; and
•any immediate family member of any of the foregoing.
Our Audit Committee will review any financial transaction, arrangement or relationship that:
•involves or will involve, directly or indirectly, any related party identified above;
•would cast doubt on the independence of a director;
•would present the appearance of a conflict of interest between us and the related party; or
•is otherwise prohibited by law, rule or regulation.
The Audit Committee will review each such transaction, arrangement or relationship to determine whether a related party has, has had or expects to have a direct or indirect material interest. Following its review, the Audit Committee will take such action as it deems necessary and appropriate under the circumstances, including approving, disapproving, ratifying, canceling or recommending to management how to proceed if it determines a related party has a direct or indirect material interest in a transaction, arrangement or relationship with us. Any member of the Audit Committee who is a related party with respect to a transaction under review will not be permitted to participate in the discussions or evaluations of the transaction; however, the Audit Committee member will provide all material information concerning the transaction to the Audit Committee. The Audit Committee will report its action with respect to any related party transaction to the board of directors.
See Employment Agreements for Messrs. Roper, Miller, Mohan and Mmes. Black and Infante in Item 11. Executive Compensation.
Transactions with Officers, Directors and Executives of Sadot Group
On January 6, 2022, we issued an aggregate of 39.6 thousand shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2021.
On January 2, 2022, we appointed Jennifer Black as our Chief Financial Officer and entered into an Offer Letter with Ms. Black. Pursuant to the Offer Letter, Ms. Black will be employed as our Chief Financial Officer on an at-will basis. Ms. Black is entitled to a base salary at the annualized rate of $0.2 million. Our previous CFO, Ferdinand Groenewald, was appointed as our Chief Accounting Officer and subsequently the position of Chief Accounting Officer was eliminated.
On February 10, 2022, we entered into an Employment Agreement with Michael Roper effective February 14, 2022, which replaced his prior employment agreement. Pursuant to the Employment Agreement, Mr. Roper will continue to be employed as our Chief Executive Officer on an at will basis. During the term of the Employment Agreement, Mr. Roper will be entitled to a base salary at the annualized rate of $0.4 million, which will be increased to $0.4 million upon the one-year anniversary. Mr. Roper will be eligible for a discretionary performance bonus to be paid in cash or equity. Within 90 days of the effective date, we will issue Mr. Roper stock options to receive 0.1 million shares of common stock which will vest over a term of five years. If Mr. Roper is terminated by us for any reason other than cause, including termination without cause in connection with a change in control, Mr. Roper will be entitled to a severance package of 18 months of salary and health and dental benefits paid in accordance with our payroll schedule, but subject to the execution of a valid release in favor of us and our related parties.
On February 10, 2022, we entered into a letter agreement with Kevin Mohan, Chief Investment Officer, providing that Mr. Mohan will continue to be engaged by us on an at-will basis with a base salary at the annualized rate of $0.2 million effective February 14, 2022. Mr. Mohan will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 75% of his salary. Within 90 days of the effective date, we will issue Mr. Mohan stock options to receive 0.1 million shares of common stock which will vest over a term of five years. If Mr. Mohan is terminated by us for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with our payroll schedule and insurance program, but subject to the execution of a valid release in favor of us and our related parties.
On February 9, 2022, we entered into a letter agreement with Kenn Miller, Chief Operations Officer, providing that Mr. Miller will continue to be engaged by us on an at-will basis with a base salary at the annualized rate of $0.3 million effective February 14, 2022. Mr. Miller will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 75% of his salary. Within 90 days of the effective date, we will issue Mr. Miller stock options to receive 0.1 million shares of common stock which will vest over a term of five years. If Mr. Miller is terminated by us for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of 12 months of salary and health and dental benefits paid in accordance with our payroll schedule and insurance program, but subject to the execution of a valid release in favor of us and our related parties.
On February 9, 2022, we entered into a letter agreement with Aimee Infante, Chief Marketing Officer, providing that Ms. Infante will continue to be engaged by us on an at-will basis with a base salary at the annualized rate of $0.2 million effective February 14, 2022. Ms. Infante will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25% of her salary. Within 90 days of the effective date, we will issue Ms. Infante stock options to receive 42.5 thousand shares of common stock which will vest over a term of five years. If Ms. Infante is terminated us for any reason other than cause, including termination without cause in connection with a change in control, she will be entitled to
a severance package of six months of salary and health and dental benefits paid in accordance with the our payroll schedule and insurance program, but subject to the execution of a valid release in favor of us and our related parties.
On February 9, 2022, we entered into a letter agreement with Ferdinand Groenewald, Chief Accounting Officer, providing that Mr. Groenewald will continue to be engaged by us on an at-will basis with a base salary at the annualized rate of $0.2 million effective February 14, 2022. Mr. Groenewald will be eligible for a discretionary performance bonus to be paid in cash or equity of up to 25% of his salary. Within 90 days of the effective date, we will issue Mr. Groenewald stock options to receive 25.0 thousand shares of common stock which will vest over a term of five years. If Mr. Groenewald is terminated by us for any reason other than cause, including termination without cause in connection with a change in control, he will be entitled to a severance package of six months of salary and health and dental benefits paid in accordance with our payroll schedule and insurance program, but subject to the execution of a valid release in favor of us and our related parties.
On March 31, 2022, we issued an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2022.
On April 4, 2022, we issued 20.0 thousand shares of common stock to a member of the executive team per the employment agreement.
On May 2, 2022, we issued options to purchase an aggregate of 0.3 million shares of common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on June 30, 2022.
On June 21, 2022, we advised Ferdinand Groenewald that the position of Chief Accounting Officer has been eliminated. Mr. Groenewald continued his employment with us through July 29, 2022, at which time he became entitled to the severance for termination without cause as outlined in the letter agreement between us and Mr. Groenewald dated February 9, 2022. Mr. Groenewald forfeited 25.0 thousand options upon his departure as an officer.
On July 14, 2022, we issued an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2022.
On October 10, 2022, we issued options to purchase 25.0 thousand shares of common stock. The options had an exercise price of $0.41 per share and vest ratably over 20 quarters with the first vesting occurring on December 31, 2022.
On October 12, 2022, we issued an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2022.
On January 5, 2023, we issued an aggregate of 31.3 thousand shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2022.
On February 27, 2023, we issued options to purchase an aggregate of 0.5 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On March 15, 2023, we issued options to purchase 0.1 million shares of our common stock. The options had an exercise price of $1.505 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.
On March 21, 2023, the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement dated November 16, 2022. Pursuant to the Black Agreement, Ms. Black will continue to be employed as Chief Financial Officer of the Company on an at will basis. During the term of the Black Agreement, Ms. Black is entitled to a base salary at the annualized rate of $0.3 million. Ms. Black will be eligible for a discretionary performance bonus up to 50% of her annual salary. Further, Ms. Black will be entitled to an additional bonus of $0.1 million upon the Company obtaining approval of the Shareholder Matters and $25.0 thousand upon the Designated Directors representing a majority of the Board of Directors. If Ms. Black is terminated for any reason, she will be entitled to receive accrued salary and vacation pay, accrued bonus payments, all expense reimbursements and shall be entitled to exercise any equity compensation rights through the last day of the term applicable to such stock option. If Ms. Black is terminated by the Company for any reason other than cause or resigns for a good reason, Ms. Black will be entitled to a severance payment equal to 36 months of salary, which will be reduced to six months following the second anniversary of the Black Agreement, and all equity compensation shall be fully accelerated. In the event the Shareholder
Matters are not approved by the shareholders, the Black Agreement will automatically terminate and the prior employment agreement will again be in full effect.
On March 27, 2023, the Company authorized the issuance of 2.8 million shares of common stock to a consultant for services rendered.
On April 5, 2023 the Company authorized the issuance of 29.7 thousand shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2023.
On May 10, 2023 the Company authorized the issuance of 0.1 million shares of common stock to a consultant for services rendered.
On May 25, 2023, the Company authorized the issuance of 2.7 million shares of common stock to a consultant for services rendered.
On June 30, 2023, the Company vested 0.9 million shares of common stock to a consultant for services rendered.
On July 11, 2023, the Company authorized the issuance of an aggregate of 32.9 thousand shares of common stock to the members of the board of directors as compensation earned during the second quarter of 2023.
On July 14, 2023, the Company issued $8.9 million Restricted Share Awards, with an effective issuance date of April 1, 2023.
On July 27, 2023, the Company authorized the issuance of 2.2 million shares of common stock to Altium in exchange for the exercise of warrants.
On August 15, 2023, the Company authorized the issuance of 0.1 million shares of common stock to a consultant for services rendered.
On September 25, 2023, the Company authorized the issuance of 0.2 million shares of common stock in fees to a consultant for services rendered related to the SEPA.
On September 30, 2023, the Company vested 0.5 million shares of common stock to to a consultant for services rendered.
On October 2, 2023, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the third quarter of 2023.
On October 20, 2023, the Company authorized the issuance of 0.1 million shares of common stock to consultants for services rendered.
On November 6, 2023, the Company authorized the issuance of 0.1 million shares of common stock in connection with the conversion of note payables.
On November 14, 2023, the Company authorized the issuance of 0.2 million shares of common stock in connection with the conversion of note payables.
On November 29, 2023, the Company authorized the issuance of 0.2 million shares of common stock in connection with the conversion of note payables.
On December 13, 2023, the Company authorized the issuance of 0.3 million shares of common stock in connection with the conversion of note payables.
On December 19, 2023, the Company authorized the issuance of 0.3 million shares of common stock in connection with the conversion of note payables.
On December 19, 2023, the Company issued 2.0 million RSA's to certain members of the board of directors, consultants and employees. Total RSA vested as a result of the departure of certain members of the board of directors were 0.2 million for 2023. The remaining RSA vest ratably over 12 quarters with the first vesting starting on March 31, 2024.
At December 31, 2023, there were 9.1 million restricted share awards outstanding.
On December 31, 2023, the Company vested 0.2 million shares of common stock to Aggia as consulting fees earned during the fourth quarter of 2023.
On January 4, 2024, the Company authorized the issuance of an aggregate of 0.1 million shares of common stock to the members of the board of directors as compensation earned during the fourth quarter of 2023. The Company accrued for the liability as of December 31, 2023.
We have entered into indemnification agreements with each of our directors and entered into such agreements with certain of our executive officers. These agreements require us, among other things, to indemnify these individuals for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts reasonably incurred by such person in any action or proceeding, including any action by or in our right, on account of any services undertaken by such person on behalf of our Company or that person’s status as a member of our Board of Directors to the maximum extent allowed under Nevada law.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
Kreit & Chiu CPA LLP has served as our independent registered public accountants for the years ended December 31, 2023 and 2022.
The following is a summary of the fees billed or expected to be billed to us by our independent registered public accountants, for professional services rendered by Kreit & Chiu CPA LLP for the fiscal years ended December 31, 2023 and 2022:
December 31, 2023 December 31, 2022
$’000 $’000
Audit fees (1)
277 265
Audit-related fees (2)
- 2
277 267
(1)Audit Fees consist of fees billed and expected to be billed for services rendered for the audit of our Consolidated Financial Statements for the fiscal years ended December 31, 2023 and 2022 and in connection with the filing of our Form 10-K, Form 10-Qs and multiple Forms S-1 and Forms S-3s.
(2)Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit of our financial statements and are not reported under “Audit Fees.”
The Audit Committee is responsible for the appointment, compensation and oversight of the work of the independent registered public accountants and approves in advance any services to be performed by the independent registered public accountants, whether audit-related or not. The Audit Committee reviews each proposed engagement to determine whether the provision of services is compatible with maintaining the independence of the independent registered public accountants. The fees shown above were pre-approved either by our Board or our Audit Committee.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
Exhibit
No. Exhibit Description
3.1+ Articles of Incorporation of Muscle Maker, Inc., a Nevada corporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 14, 2019)
3.2+ Bylaws of Muscle Maker, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 14, 2019)
3.3+ Certificate of Change Pursuant to NRS 78.209 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on December 11, 2019)
3.4+ Certificate of Amendment to Articles of Incorporation of Muscle Maker, Inc., a Nevada corporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 16, 2020)
3.5+ Certificate of Amendment to Articles of Incorporation of Muscle Maker, Inc. (incorporated by reference to Exhibit 3.1 to the Registrants Current Report on Form 8-K filed on March 7, 2023)
3.6+ Articles of Merger (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 26, 2023).
4.1+ Form of Warrant to Purchase Common Stock dated April 9, 2021 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021)
4.2+ Form of Pre-Funded Warrant to Purchase Common Stock dated April 9, 2021 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021)
4.3+ Form of Warrant to Purchase Common Stock issued to A.G.P./Alliance Global Partners dated April 9, 2021 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021)
4.4+ Form of Warrant to Purchase Common Stock dated November 22, 2021 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021)
4.5+ Form of Pre-Funded Warrant to Purchase Common Stock dated November 22, 2021 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021)
4.6+ Form of Placement Agent Warrant to Purchase Common Stock issued to A.G.P./Alliance Global Partners dated November 22, 2021 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021)
4.7+ 2021 Equity Incentive Plan (incorporated by reference to Exhibit 4.8 to the Registrant’s Annual Report on Form 10-K filed on March 17, 2022)
4.8+ 2023 Equity Incentive Plan
4.9* Description of Securities
4.10+ Form of Additional Warrant - Altium Growth Fund Ltd. (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 27, 2023.)
10.1+ Form of Securities Purchase Agreement, dated April 7, 2021, between Muscle Maker, Inc. and the Purchaser* (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021)
10.2+ Form of Securities Purchase Agreement, dated November 17, 2021, between Muscle Maker, Inc. and the Purchasers* (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021)
10.3+ Form of Registration Rights Agreement, dated November 17, 2021, between Muscle Maker, Inc. and the Purchasers (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021)
10.4+ Form of Securities Purchase Agreement, dated April 7, 2021, between Muscle Maker, Inc. and the Purchaser* (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 12, 2021)
10.5+ Form of Director Agreement dated July 16, 2019 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 10, 2019)
10.6+ Services Agreement between Muscle Maker, Inc., Sadot LLC and Aggia LLC FC dated November 14, 2022 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.7+ Addendum 1 to Services Agreement between Muscle Maker, Inc., Sadot LLC and Aggia LLC FC dated November 17, 2022 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.8+ Limited Liability Operating Agreement of Sadot LLC dated November 16, 2022 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.9+ Executive Employment Agreement between Muscle Maker, Inc. and Michael Roper dated November 16, 2022 (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.10+ Executive Employment Agreement between Muscle Maker, Inc. and Jennifer Black dated November 16, 2022 (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.11+ Executive Employment Agreement between Muscle Maker, Inc. and Kevin Mohan dated November 16, 2022 (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.12+ Executive Employment Agreement between Muscle Maker, Inc. and Kenn Miller dated November 16, 2022 (incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.13+ Executive Employment Agreement between Muscle Maker, Inc. and Aimee Infante dated November 16, 2022 (incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed on November 18, 2022)
10.14+ Standby Equity Purchase Agreement dated September 22, 2023 between Sadot Group, Inc. and YA II PN, Ltd. (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 26, 2023)
10.15+ Form of Convertible Promissory notes issued to YA II PN, Ltd. (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 26, 2023)
10.16+ Global Guaranty Agreement dated September 22, 2023 between Sadot Group, Inc. and YA II PN, Ltd. (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 26, 2023)
10.17+ Registration Rights Agreement dated September 22, 2023 between Sadot Group, Inc. and YA II PN, Ltd. (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 26, 2023)
10.18+ Addendum 2 to the Service Agreement entered between Muscle Maker Inc., Sadot LLC and Aggia LLC FX dated July 14, 2023 (Incorporated herein by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 18, 2023)
21.1* List of Subsidiaries
23.1* Consent of Kreit & Chiu CPA LLP
31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97.1* Policy for the Recovery of Erroneously Awarded Compensation adopted February 1, 2024
101.INS Inline XBRL Instance Document*
101.SCH Inline XBRL Schema Document*
101.CAL Inline XBRL Calculation Linkbase Document*
101.DEF Inline XBRL Definition Linkbase Document*
101.LAB Inline XBRL Label Linkbase Document*
101.PRE Inline XBRL Presentation Linkbase Document*
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
†Includes management contracts and compensation plans and arrangements
*Filed herewith.
+Previously filed.