Sadot Group Inc

1. Business Organization and Nature of Operations

Sadot Group Inc. ("Sadot Group" or "SGI" or together with its subsidiaries, the “Company”), a Nevada corporation was incorporated in Nevada on October 25, 2019. In late 2022, SGI 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 Burleson, Texas with subsidiary operations throughout the United States, Brazil, Canada, Colombia, India, Israel, Singapore, Ukraine, United Arab Emirates and Zambia.

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 across the globe. Sadot Agri-Foods competes with the ABCD commodity companies (ADM, Bunge, Cargill, Louis-Dreyfus) as well as many regional organizations. Sadot Agri-Foods operates, through a majority owned subsidiary, a roughly 5,000 acre crop producing farm in Zambia with a focus on major commodities such as wheat, soy and corn alongside high-value tree crops such as avocado and mango. In addition, the Company has a deposit on farmland in Indonesia. Sadot Agri-Foods was formed as part of the Company’s diversification strategy to own and operate, through its subsidiaries, the business lines throughout the food supply chain. Sadot Agri-Foods seeks to diversify over time into a sustainable and forward-looking global agri-foods company.

2. Sadot Restaurant Group, LLC ("Sadot Food Services"): had three unique “healthier for you” concepts, including two fast casual restaurant concepts, Pokémoto and Muscle Maker Grill, During 2024, the Company operated a subscription-based fresh prep meal concept, SuperFit Foods, which was sold in August 2024. Throughout 2024 the remaining corporate owned restaurants were sold and converted into franchise locations or closed. As of the end of 2024 the Company only operates as the franchisor for Pokémoto and Muscle Maker Grill restaurants. The restaurants were founded on the belief of taking every-day menu options and converting them into “healthier for you” menu choices with the goal of satisfying consumers demand for healthier choices, customization, flavor and convenience. This entire operating segment was identified as held for sale and reported as discontinued operations. Please see Note 3 – Assets held for sale and Note 4 – Discontinued operations for further details.

Sadot Group Inc. and its subsidiaries are hereinafter referred to as the “Company”.

Recent Corporate Developments

On October 9, 2024, the Company filed a Certificate of Change Pursuant to NRS 78.209 with the Nevada Secretary of State to effect a reverse stock split of the Company’s common stock at a ratio of one for- ten (the “Reverse Stock Split”), which became effective 12:01 am eastern on October 18, 2024. As a result of the Reverse Stock Split, every 10 shares of the Company’s common stock issued and outstanding on the effective date were consolidated into one issued and outstanding share. All stockholders who were entitled to receive fractional shares as a result of the Reverse Stock Split received one whole share for their fractional share interest. There was no change in the par value of the Company's common stock.

Liquidity and Capital Resources

The Company's primary source of liquidity is cash on hand, working capital and borrowings. At December 31, 2024, working capital, which equals Total current assets less Total current liabilities, was $20.5 million an increase of $12.2 million, compared to working capital of $8.3 million at December 31, 2023. The Company believes that our existing cash on hand, current accounts receivable and future cash flows from our commodity trading and farming will be sufficient to fund our operations, anticipated capital expenditures and repayment obligations over the next 12 months.

Working Capital

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

(1) Consists of VAT, prepaid expenses, derivative assets, unrealized gain on derivative contracts and deposit on farmland

(2) See Note 3 for additional information

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

(4) See Note 3 for additional information

(5) Working Capital is defined as Total current assets less Total current liabilities

(6) 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.

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 wereno cash equivalents as of December 31, 2024 or 2023.

Accounts Receivable

Accounts Receivable consists of receivables related to Sadot Food Services and Sadot Agri-Foods of $18.0 million and $53.1 million net of doubtful accounts of $0.1 million and $0.2 million as of December 31, 2024, and 2023, respectively.

From time to time the Company may set aside and/or assign accounts receivables towards the acquisition of various assets. The net Accounts Receivable balance of $18.0 million at December 31, 2024 includes $13.4 million in receivables that the Company plans to assign to a third party, which is expected to be paid in assets other than cash. The Company and the third party are in negotiations regarding the timing and nature of the assets to be received, and the Company continues to evaluate the balance for expected losses. As of December 31, 2024, the Company deemed it would receive assets valued at the full balance.

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.

Inventory

Inventory, stated at the lower of cost or net realizable value related to Sadot Agri-foods was $0.7 million and $2.4 million as of December 31, 2024, and 2023, respectively andnil and $0.2 million related to Sadot Food Services as of December 31, 2024, and 2023, respectively. Cost is determined using the first-in, first-out method.

Assets held for sale

In the first quarter of 2024, the Company classified its Sadot Food Services segment as held for sale.

Assets and liabilities of disposal group(s) are classified as held for sale when:

•management, having the authority to approve action, commits to a plan to sell,

•the disposal group(s) are available for immediate sale in present condition,

•an active program to locate a buyer and other actions required to complete the plan to sell have been initiated,

•the sale is probable and expected to be completed within one year,

•the sale is actively marketed at a reasonable price reflecting its current fair value,

•and it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

The Company initially measures a disposal group that is classified as held for sale at the lower of its carrying value or fair value less cost to sell. Any impairment loss resulting from this initial measurement is recognized in the period in which the held for sale criteria described above, is met. Conversely, gains are not recognized on the sale of a disposal group until the date of sale. The Company assesses the fair value of a disposal group, less costs to sell, at each reporting period that it remains as held for sale, with any changes as a result of the assessment adjusting the carrying value of the disposal group, but not in excess of the cumulative loss previously recognized on the disposal group.

Following their classification as held for sale, assets are not depreciated or amortized. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognized. Refer to Note 3 – Assets held for sale for more details.

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:

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. The Company's goodwill and intangible assets with a finite life are 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 and intangible assets be tested for impairment at the reporting unit level (operating segment or one level below an operating segment). Application of the impairment testing requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill and intangible assets to reporting units, and determining the fair value. Significant judgment is required to estimate the fair value of 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 impairment. In the first quarter of 2024, the intangible assets were moved to assets held for sale. See Note 3 – Assets held for sale for additional information.

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, 2024 and 2023, 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 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 judgments in identifying the promised goods or services in our contracts with franchisees that are distinct, and which represent separate performance obligations.

Seasonality

There is a degree of seasonality in the growing cycles, procurement and transportation of crops. The farming industry historically experiences seasonal fluctuations in revenues and net income. Typically, the Company has lower sales and net income during the non-harvest seasons and higher sales and net income during the harvest season.

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, 2024 and 2023, the Company recorded Commodity sales revenues of $700.9 million and $717.5 million, respectively, which is included in Commodity sales on the accompanying Consolidated Statements of Operations and Other Comprehensive Income / (Loss).

Restaurant Sales

Retail store revenue derived from company owned and operated locations 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. During the year ended December 31, 2024 and 2023, the Company recorded retail store revenues of $2.6 million and $8.1 million, respectively, which is included in Discontinued operations on the accompanying Consolidated Statements of Operations and Other Comprehensive Income / (Loss). See Note 3 – Assets held for sale and Note 4 – Discontinued operations for additional information.

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 $1.0 million during the years ended December 31, 2024 and 2023, respectively, which is included in Discontinued operations on the accompanying Consolidated Statements of Operations and Other Comprehensive Income /(Loss). See Note 3 – Assets held for sale and Note 4 – Discontinued operations for additional information.

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 $0.6 million and $0.2 million during the years ended December 31, 2024 and 2023, respectively, which is included in Discontinued operations on the accompanying Consolidated Statements of Operations and Other Comprehensive Income /(Loss). See Note 3 – Assets held for sale and Note 4 – Discontinued operations for additional information.

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, 2024 and 2023, respectively, which is included in Discontinued operations on the accompanying Consolidated Statements of Operations and Other Comprehensive Income /(Loss). 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. See Note 3 – Assets held for sale and Note 4 – Discontinued operations for additional information.

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 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, 2024 and 2023, which are included in Discontinued operations on the accompanying Consolidated Statements of Operations and Other Comprehensive Income /(Loss). See Note 3 – Assets held for sale and Note 4 – Discontinued operations for additional information.

Deferred Revenue

Deferred revenue primarily includes revenue from forward sales contracts and prepayments on incomplete trades. Deferred revenue related to Sadot Food Services includes initial franchise fees received by the Company and is recorded in Liabilities held for sale. Sadot Food Services Deferred revenue 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. See Note 3 – Assets held for sale and Note 4 – Discontinued operations for additional information.

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 17 – Commitments and contingencies for further details. For the years ended December 31, 2024 and 2023, $6.7 million and $6.2 million, respectively, are recorded as Stock-based expenses in the accompanying Consolidated Statements of Operations and Other Comprehensive Income /(Loss).

Net Income / (Loss) per Share

Basic income / (loss) per common share is computed by dividing net income / (loss/ attributable to Sadot Group Inc. by the weighted average number of common shares outstanding during the period. Diluted income / (loss) per common share is computed by dividing net income / (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, 2024 and 2023, respectively, because their inclusion would have been anti-dilutive:

The following table sets forth the computation of basic and dilutive net income / (loss) per share attributable to the Company’s stockholders:

Major Vendor

The following table sets forth the major vendors to purchase commodities for resale, purchase inputs for farming operations and distribute food products to their Company-owned restaurants:

Major Customers

The following table sets forth the major customers:

Derivative Instruments

The Company recognizes all derivatives in the balance sheet at fair value. During the years ended December 31, 2024 and 2023, the Company’s derivatives were comprised of Forward sales contracts for soybeans, carbon offset units, and futures and options of food and feed related commodities, traded on the Chicago Mercantile Exchange ("CME"). Derivatives that do not meet the requirements for hedge accounting to be applied per FASB ASC 815, Derivatives and Hedging, are adjusted to fair value through earnings. If the derivative does meet the criteria in ASC 815 to use hedge accounting, depending upon the nature of the hedge, the effective portion of changes in the fair value of the hedged assets, liabilities or firm commitments through earnings (fair value hedge), or recognized in other comprehensive income until the hedged item is recognized in earnings (cash flow hedge). The ineffective portion of a derivative’s change in fair value, if any, is immediately recognized in earnings. When a hedged item in a fair value hedge is sold, the adjustment in the carrying amount of the hedged item is recognized in earnings.

Refer to Fair Value of Financial Instruments below, Note 17 – Commitments and contingencies and Note 20 – Financial instruments for additional information regarding the Company’s derivative instruments.

Fair Value of Financial Instruments

The Company measures the fair value of financial assets and liabilities based on the guidance of the FASB 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 19 – Fair value measurement for a summary of financial liabilities held at carrying amount including unrealized gain on derivative contracts and the unrealized loss on derivative contracts. For details related to the fair value of the unrealized gain on derivative contracts and unrealized loss on derivative contracts measured using Level 2 inputs, refer to Note 17 – Commitments and contingencies and Note 20 – 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.

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 Income / (Loss).

Currency Translation Differences

Transactions in foreign currencies are remeasured in the functional currency of the related consolidated company at the average foreign exchange rates for income and expenses. Monetary assets and liabilities denominated in foreign currencies at the reporting date are remeasured 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 remeasured to the functional currency at foreign exchange rates ruling at the dates the fair value was determined. Foreign exchange differences arising on remeasurement are recognized in the Consolidated Statement of Operations and Other Comprehensive Income / (Loss) under Foreign exchange translation adjustment.

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 farming consolidated entity. The Company evaluates its ownership, contractual and other interests in entities to determine if it has any variable interest in a VIE (“variable interest entities”). These evaluations are complex and involve judgment and the use of estimates and assumptions based on available historical information, among other factors. The Company considers itself to control an entity if it is the majority owner of or has voting control over such entity. The Company also assesses control through means other than voting rights (“variable interest entities” or “VIEs”) and determines which business entity is the primary beneficiary of the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively. The Company has no VIEs at December 31, 2024 and 2023. The amount of net loss attributable to Non-controlling interests is disclosed in the Consolidated Statements of Income and Other Comprehensive Income / (Loss).

Discontinued Operations

As part of the Company’s stated strategy to pivot its focus to the global food supply chain sector, we spent 2024 fully engaged in the restructuring of Sadot Food Services. By refranchising company-owned units and closing underperforming locations while growing Pokémoto through franchising, the Company continued its restructuring efforts with the goal of reducing annualized restaurant operating expenses and overhead while potentially increasing franchise royalty revenue at Pokémoto. In early Q4 of 2024 the Company was able to close its last two corporate owned stores and reclassified the rest of Sadot Food Services to discontinued operations. The amount of loss from discontinued operations is disclosed in the Consolidated Statements of Income and Other Comprehensive Income / (Loss). For details related to Discontinued operations, see Note 4 – Discontinued operations.

Recent Accounting Pronouncements

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 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 adoption of this guidance on December 31, 2024 did not have a material impact on the Company's Consolidated Financial Statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, which focuses on income tax disclosures by requiring public business entities, on an annual basis, to disclose specific categories in the rate reconciliation, provide information for reconciling items that meet a quantitative threshold, and certain information about income taxes paid. The standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The amendments should be applied on a prospective basis. Retrospective application is permitted. The adoption of this guidance on December 31, 2024 did not have a material impact on the Company's Consolidated Financial Statements and related disclosures.

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 23 – Subsequent events.

3. Assets Held For Sale

2024 Disposal group held for sale

After launching Sadot Agri-Foods, the Company made the decision to explore the option of selling a portion of our restaurant operations. During the first quarter of 2024, the Company entered into an agreement with a brokerage firm to have the exclusive rights to offer and sell the Muscle Maker Grill and Pokemoto franchise business and potentially some of the corporate-owned restaurants. Accordingly, the assets and liabilities related to the restaurant operations were classified as held for sale in the Company’s Consolidated Balance Sheets. Throughout most of 2024, the Company considered retaining some Company owned stores due to location and potential training centers that posed challenges for sale.

However, in the fourth quarter of 2024, the Company closed its last two corporate owned stores, and have a sale pending for the franchise business. Given the sale or pending sale of all of the restaurant operations as of December 31, 2024, we have deemed this to be a strategic shift in business structure as it will eliminate one of our two business segments, which triggered accounting for the restaurant operations as discontinued operations. The Company performed an impairment test on the net assets of the restaurant operations as of December 31, 2024, noting the carrying amount was less than the fair value less cost to sell.

The following presents the major classes of assets and liabilities for the Sadot Food Services reporting unit held for sale as of December 31, 2024:

Sadot Food Services had the following pre-tax losses:

Sadot Food Services was comprised of two fast casual restaurant concepts, Pokémoto and Muscle Maker Grill, as well as a subscription-based fresh prep meal concept. On August 1, 2024 SuperFit foods was sold for $0.2 million with a minimal gain on the sale.

4. Discontinued Operations

After launching Sadot Agri-Foods, the Company made the decision to explore the option of selling a portion of our restaurant operations. During the first quarter of 2024, the Company entered into an agreement with a brokerage firm to have the exclusive rights to offer and sell the Muscle Maker Grill and Pokemoto franchise business and potentially some of the corporate-owned restaurants. Accordingly, the assets and liabilities related to the restaurant operations were classified as held for sale in the Company’s Consolidated Balance Sheets. Throughout most of 2024, the Company considered retaining some Company owned stores due to location and potential training centers that posed challenges for sale.

However, in the fourth quarter of 2024, the Company closed its last two corporate owned stores, and have a sale pending for the franchise business. Given the sale or pending sale of all of the restaurant operations as of December 31, 2024, we have deemed this to be a strategic shift in business structure as it will eliminate one of our two business segments, which triggered accounting for the restaurant operations as discontinued operations. The Company performed an impairment test on the net assets of the restaurant operations as of December 31, 2024, noting the carrying amount was less than the fair value less cost to sell. The amount of loss from discontinued operations is disclosed in the Consolidated Statements of Income and Other Comprehensive Income / (Loss).

Discontinued operations were as follows:

5. Allowance for Credit Losses on Accounts Receivable

For the periods ended December 31, 2024 and 2023, a summary of the activity in the allowance for credit losses on accounts receivable appears below:

6. Other Current Assets

During the year ended December 31, 2024, the Company transferred $0.1 million of other current assets to Assets held for sale. See Note 3 – Assets held for sale for additional information.

At December 31, 2024 and 2023, the Company’s other current assets consists of the following:

Deposit on farmland consists of funds paid as a deposit with the intent to acquire farmland in Indonesia by Sadot Agri-Foods.

7. Other Non-Current Assets

During the year ended December 31, 2024, the Company transferred $0.2 million of other non-current assets to Assets held for sale. See Note 3 – Assets held for sale for additional information.

At December 31, 2024 and 2023, the Company’s other non-current assets consists of the following:

8. Property and Equipment, Net

During the year ended December 31, 2024, the Company transferred $6.0 thousand of property and equipment to Assets held for sale. See Note 3 – Assets held for sale for additional information.

As of December 31, 2024, and 2023, Property and equipment consist of the following:

Depreciation expense amounted to $0.3 million and $0.8 million for the years ended December 31, 2024 and 2023, respectively. During the years ended December 31, 2024 and 2023, the Company wrote off Property and equipment with an original cost value of $0.5 million and $1.6 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 ofnil and $0.2 million, respectively, for the years ended December 31, 2024 and 2023, respectively, in the Consolidated Statement of Operations and Other Comprehensive Income / (Loss).

9. 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. During the year ended 2024, the Company moved the remaining intangible assets to assets held for sale and as a result of the reclassification, the Company stopped amortizing these assets. See Note 3 – Assets held for sale for additional information.

A summary of the intangible assets is presented below:

Amortization expense related to intangible assets was $0.1 million and $1.0 million for the years ended December 31, 2024 and 2023, respectively.

A summary of the goodwill assets is presented below:

10. Accounts Payables and Accrued Expenses

During the year ended December 31, 2024, the Company transferred $0.1 million of Accounts payables and accrued expenses to Assets held for sale. See Note 3 – Assets held for sale for additional information.

Accounts payables and accrued expenses consist of the following:

11. Notes Payable

Line of Credit

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. 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 thefive 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 thethree 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 $100,000 in funding and assuming an applicable VWAP of $11.00 and, in turn, a purchase price of $10.67 (97% of the VWAP), the Company would be required to issue 9,372 shares of common stock and Yorkville would receive a profit of approximately $0.3201 per share, or approximately $2,999.98, if it sold all of such shares at $11.00 per share.

In connection with the SEPA, and subject to the condition set forth therein, Yorkville 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 in the principal amount of $3.0 million and the balance of $1.0 million on October 30, 2023. 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 is 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 $11.1495 or 95% of the lowest daily VWAP during theseven consecutive trading days immediately preceding the conversion (the “Conversion Price”), which in no event may the Conversion Price be lower than $3.30 (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 49.9% 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 forseven trading days during a period ofnine 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 theseventh trading day after the Trigger and continuing monthly in the amount of $500,000 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 occurred as of December 31, 2024. As of December 31, 2024,607,527 shares of common stock have been converted and the note has been paid in full.

Notes Payable

The Company repaid a total amount of $10.5 million, $8.8 million in cash and $1.7 million were converted stock during the year ended December 31, 2024, and $5.7 million during the year ended December 31, 2023, respectively, of the notes payable. The company entered into new loans in the amount of $11.1 million and $12.1 million for the year ended December 31, 2024 and December 31, 2023, respectively.

As of December 31, 2024, the Company had an aggregate amount of $7.4 million in notes payable, net. The notes had interest rates ranging between 3.75% -25.80% per annum, due on various dates through May 2025.

As of December 31, 2024, the Company has outstanding short-term secured debt in the form of notes payable totaling $1.9 million, which is included in the $7.4 million in notes payable, net. The effective interest rate on the short-term secured debt is 21.2%.

During the year ended December 31, 2024, the Company transferred $0.6 million of notes payable to Liabilities held for sale. See Note 3 – Assets held for sale for additional information.

The maturities of notes payable as of December 31, 2024, are as follows:

12. Leases

The Company’s leases consist of restaurant locations and a corporate office. We determine if a contract contains a lease at inception. The leases generally have remaining terms of 1-5 years and most leases include the option to extend the leases for an additional 5 years.

The total lease cost associated with Right of use assets and Operating lease liabilities for the year ended December 31, 2024, was $0.2 million and has been recorded in the Consolidated Statement of Operations and Other Comprehensive Loss within Cost of goods sold.

During the year ended December 31, 2024, all of the Company's lease liabilities of $0.1 million were moved to Liabilities held for sale. See Note 3 – Assets held for sale and Note 4 – Discontinued operations for additional information. Right to use asset and operating lease liabilities decreased due to the refranchising, sale and closure of all corporate owned locations by December 31, 2024.

The Company's assets and liabilities related to the Company’s leases were as follows:

The table below presents the future minimum lease payments under the noncancellable operating leases as of December 31, 2024:

The Company’s lease term and discount rates were as follows:

13. Deferred Revenue

During the year ended December 31, 2024, the Company transferred $1.2 million of deferred revenue to Liabilities held for sale. See Note 3 – Assets held for sale for additional information.

The Company's deferred revenue consists of the following:

Deferred revenue related to commodity forward sales contracts and prepayments received on incomplete trade of $2.3 million and $1.4 million, for the years ended December 31, 2024 and 2023, respectively. Deferred revenue related to deferred franchise fees ofnil and $1.4 million, respectively, for the years ended December 31, 2024 and 2023, respectively.

14. Other Current Liabilities

During the year ended December 31, 2024, the Company transferred $0.2 million of other current liabilities to Liabilities held for sale. See Note 3 – Assets held for sale for additional information.

Other current liabilities consist of the following:

15. Other Non-Current Liabilities

During the year ended December 31, 2024, the Company transferrednil of other non-current liabilities to Liabilities held for sale. See Note 3 – Assets held for sale for additional information.

Other non-current liabilities consist of the following:

16. Income Taxes

The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2024 and 2023 are presented below:

The income tax (benefit) / expense for the periods shown consist of the following:

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the periods shown, are as follows:

The Company has filing obligations in what it considers its U.S. major tax jurisdictions as follows: Connecticut, Kansas, 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 $81.9 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, 2024 and 2023, 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 $12.0 million and $12.8 million, respectively. The valuation allowance decreased by approximately $0.8 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.

17. 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 180,000 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 the VCUs between 2025 and 2027 at a price of $35.69 per VCU, or $6.4 million in total, which was paid on September 23, 2023, and recorded as “Prepaid forward on carbon offsets” on the balance sheet. Delivery of the VCUs is expected within 14 days from credit issuance annually, with delivery to occur no later than December each year. On September 13, 2023, the Company also entered into a separate forward sales agreement, where the purchaser agreed to acquire 180,000 VCUs between 2025 and 2026 at a price of $44.62 per VCU, or $8.0 million. These VCUs were expected to be generated from the same conservation project, with payment due by 2025. Additionally, Sadot Agri-Foods had the right to repurchase any VCUs during the contract term at the current market price, determined by an independent marketplace, and this contract was classified as a derivative under ASC 815. On September 20, 2024, the Company sold the right to both contracts for $9.3 million, recorded in Commodity sales, and the $6.4 million prepaid amount was recorded in Cost of goods sold. Partially offsetting the $2.9 million gain on the prepaid asset, the Company derecognized the $1.4 million derivative asset related to the fair value of the forward contract and recorded a loss for that amount in the line item Gain on fair value remeasurement on the Consolidated Statement of Operations and Other Comprehensive Income / (Loss).

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. The Gain on fair value remeasurement recorded during the years ended December 31, 2024 and 2023 were $8.6 million and $0.7 million, respectively.

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 July 2025, 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. The Gain on fair value remeasurement recorded during the years ended December 31, 2024 and 2023 were $9.1 million and $0.2 million, respectively.

Refer to Note 2 – Significant accounting policies, Note 19 – Fair value measurement and Note 20 – Financial instruments for additional information regarding the Unrealized gain on derivative contracts.

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 $15.6250, 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 1,442,428 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 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 885,546 shares (the “Shares”) of common stock, par value $0.0001 per share, of the Company, which such Shares represent 1,442,428 Shares that Aggia is entitled to receive pursuant to the Services Agreement less the 556,882 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 1,442,428 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 $31.25, which for accounting purposes shall equal 40% of the net income of Sadot Agri-Foods, calculated quarterly divided by $12.50. 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, 2024 and 2023, the Company reimbursed Aggia for all operating costs related to Sadot Agri-Foods operating expenses including labor, operating expenses and general administrative expenses of $1.8 million, $0.3 million and $1.7 million, respectively and all operating costs related to Sadot Agri-Foods including labor, operating expenses and general administrative expenses of $2.6 million and $0.5 million and $0.1 million respectively.

Franchising

During the years ended December 31, 2024 and 2023, the Company entered into various Pokémoto franchise agreements for a total of 27 and 20, respectively, potentially new Pokémoto locations with various franchisees. The Franchisees paid the Company an aggregate of $0.4 million and $0.2 million and this has been recorded in liabilities held for sale as of December 31, 2024 and 2023, respectively. See Note 3 – Assets held for sale for additional information.

Sales Taxes

The Company had accrued a sales tax liability for approximately $2.0 thousand and $27.8 thousand as of December 31, 2024, and December 31, 2023, respectively. As of December 31, 2024 and December 31, 2023, the Company has accrued for the liability in accounts payable and accrued expenses.

Litigations, Claims and Assessments

On November 7, 2024, Lombard Trading International Corp. filed an Amended Complaint against the Company and Sadot Latam, LLC in the 11th Judicial Circuit of Florida in and for Miami-Dade County, Florida (Case No.: 2024-020971-CA-01). The Amended Complaint alleges unjust enrichment, conversion, fraud, conspiracy and civil theft related to a commodities transaction. The plaintiff claims that the Company failed to pay upon delivery of certain goods and is seeking damages in the amount of $7.4 million. The Company has not received the goods and has not received the Bills of Lading that were contractually required for the transaction to be completed. The Company denies these allegations and intends to vigorously defend against the claims. While the Company believes it has meritorious defenses, it cannot predict the outcome of this matter or reasonably estimate the potential loss at this time. Therefore, no contingent liability has been recorded as of December 31, 2024.

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.

On February 10, 2025, the Company and Sadot Brasil Ltda. (“Sadot Brasil”), the Company’s wholly owned subsidiary, entered into an Employment Agreement with Catia Jorge effective February 10, 2025. During the term of the Employment Agreement, Ms. Jorge will serve as Chief Executive Officer for both the Company and Sadot Brasil and will be entitled to a base salary at the annualized rate of $0.3 million. In addition, Ms. Jorge will be entitled to a one time bonus of $0.5 million of which half will be payable upon the 90 day anniversary of her engagement and the balance to be paid on the 180 day anniversary (the “Bonus”). Ms. Jorge will also receive a one time grant of $0.1 million in restricted stock grants. Further, the Company will make a contribution of up to $16.0 thousand per annum contribution to a private pension plan. The restricted stock grant vests quarterly over one year in equal quarterly installments commencing January 1, 2025, which shall be priced and issued on the third trading day immediately following the filling the Form 10K Annual Report for such applicable year. The per share price will be the closing price immediately prior to the date of each grant. If Ms. Jorge is terminated by the Company for any reason other than cause Ms. Jorge will be entitled to a severance package of 18 months of salary. Ms. Jorge’s compensation, which, except for the Bonus, is denominated in Brazilian Real, has been converted to U.S. Dollars for the purpose of this disclosure. Please note that the conversion rate used for disclosure purposes is is 6 Reais to every 1 U. S. Dollar as of February 10, 2025. Actual payments to Ms. Jorge will be made in Brazilian Real, and the amounts received may vary based on fluctuations in the exchange rate at the time of payment. This disclosure is intended to provide transparency regarding the compensation agreed upon in the Brazilian Real currency, which is the operational currency for Mr. Jorge’s compensation unless noted otherwise.

On February 9, 2025 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 transition to the role of Chief Governance and Compliance Officer, reporting directly to the Company’s Chief Executive Officer. During the term of the Roper Agreement, Mr. Roper is entitled to a base salary at the annualized rate of $0.4 million consisting of an annual cash salary of $0.3 million and an annual restricted stock grant of $0.1 million vesting quarterly over one year in equal quarterly installments commencing January 1, 2025 which shall be priced and issued on the third trading day immediately following the filing of the Form 10K Annual Report for such applicable year. Mr. Roper will be eligible for a discretionary performance bonus to be determined by the Board annually with the annual bonus for the year ended December 31, 2025 to be equal to 75% of the cash salary. 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 equity grant. 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 18 months of the annual compensation, all bonuses earned and all equity compensation shall be fully accelerated.

On February 9, 2025 the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement. Pursuant to the Executive Employment Agreement entered with Ms. Black (the “Black Agreement”), Ms. Black will continue to serve as Chief Financial Officer, reporting directly to the Company’s Chief Executive Officer. During the term of the Black Agreement, Ms. Black is entitled to a base salary at the annualized rate of $0.4 million consisting of an annual cash salary of $0.3 million and an annual restricted stock grant of $0.1 million vesting quarterly over one year in equal quarterly installments commencing January 1, 2025 which shall be priced and issued on the third trading day immediately following the filing of the Form 10K Annual Report for such applicable year. Ms. Black will be eligible for a discretionary performance bonus to be determined by the Board annually with the annual bonus for the year ended December 31, 2025 to be equal to 75% of the cash salary. 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 equity grant. 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 12 months of the annual compensation, all bonuses earned and all equity compensation shall be fully accelerated.

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.

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 tosix months following the second anniversary of the Mohan Agreement, and all equity compensation shall be fully accelerated.

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 tosix months following the second anniversary of the Infante Agreement, and all equity compensation shall be fully accelerated.

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.

The notice indicated that the Company will have 180 calendar days, until May 6, 2024, to regain compliance with this requirement. On April 29, 2024, the Company submitted a request to Nasdaq requesting an additional 180 days to regain compliance. On May 7, 2024, the Company received notice from Nasdaq that the request for an additional 180 days to regain compliance was approved. The Company was eligible to 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. To qualify, the Company was required to meet the continued listing requirement for market value of the Company's publicly held shares and all other Nasdaq initial listing standards, except the bid price requirement, and was required to provide written notice to Nasdaq of its intention to cure the deficiency during the second compliance period.

On October 9, 2024, the Company filed a Certificate of Change Pursuant to NRS 78.209 with the Nevada Secretary of State to effect the Reverse Stock Split, which became effective 12:01 am eastern on October 18, 2024. As a result of the Reverse Stock Split, every 10 shares of the Company’s common stock issued and outstanding on the effective date were consolidated into one issued and outstanding share. All stockholders who would be entitled to receive fractional shares as a result of the Reverse Stock Split received one whole share for their fractional share interest. There was no change in the par value of our common stock.

The Company effectuated a Reverse Stock Split to raise the per share bid price of the Company’s Common Stock above $1.00 per share with the goal of bringing the Company back into compliance with Nasdaq Listing Rule 5550(a)(2). The Company received notice from Nasdaq on November 1, 2024, indicating that the Company regained compliance with the minimum bid price requirement under the Rule.

The Company’s common stock began trading on a split-adjusted basis on Nasdaq at the commencement of trading on October 18, 2024 under the Company’s existing symbol “SDOT.” The Company’s common stock has been assigned a new CUSIP number of 627333305 in connection with the Reverse Stock Split.

18. Reportable Operating Segments

See Note 1 – Business organization and nature of operations for descriptions of our operating segments.

The Company’s reportable segments are determined based on the management approach, consistent with the way the Chief Operating Decision Maker (CODM) evaluates financial performance and allocates resources. The CODM, identified as the Chief Executive Officer, regularly reviews discrete financial information for the Sadot Food Services and Sadot Agri-Foods segments to assess performance and make operational decisions.

The following table sets forth the results of operations for the relevant segments for the years ended December 31, 2024 and 2023:

During the year ended December 31, 2024, assets related to our Sadot Food Services segment met the criteria for classification as Assets Held for Sale. See Note 2 – Significant accounting policies and Note 3 – Assets held for sale and Note 4 – Discontinued operations for additional information.

In late 2022, Sadot Group transformed from a U.S.-centric restaurant business into a global organization focused on the Agri-Foods supply-chain. As a result, we have reevaluated and changed our operating segments late in 2023 to align with ourtwo distinct segments. Previously we split out Muscle Maker Grill, Pokémoto, 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 intwo distinct business segments Sadot Agri-Foods and Sadot Food Service.

The Company will continue to evaluate its operating segments and update as necessary.

19. 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, 2024 and 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.

There were no transfers between fair value levels during the year ended December 31, 2024.

See Note 17 – Commitments and contingencies and Note 20 – Financial instruments for details related to the unrealized gain on derivative contracts being fair valued using Level 2 inputs.

The fair value of the unrealized loss on derivative contracts, unrealized gain on derivative contracts, 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. Please refer to Note 2 – Significant accounting policies for additional information on ASC 815 leveling.

20. Financial Instruments

Inherent in our business is the risk of matching the timing of our purchase and sales contracts. The prices of food and feed commodities (e.g., soybeans, wheat, corn, etc.) and carbon offset units we buy and sell are based on a constantly moving terminal market price determined by various exchanges (e.g., CME, Chicago Board of Trade ("CBOT") and Dalian Commodity Exchange ("DCE"), etc.). Were we not to hedge such exposures, we could be exposed to significant losses due to the continually changing commodity prices.

We use commodity futures contracts to manage our exposure to this commodity price risk. It is generally our policy to hedge such risks to the extent practicable. We enter into hedges to limit our exposure to volatile price fluctuations that we believe would impact our gross margins on firm purchase and sales commitments. As an example, if we enter into fixed price contracts with our suppliers and variable priced sales contracts with our customers, we will generally enter into a futures contract to sell the commodity for future delivery in the month when we expect the commodity price to be fixed according to the sales contract terms. We repurchase this position once the pricing has been fixed with our customer. If the underlying commodity price increases, we suffer a hedging loss and have an unrealized loss on derivative contracts, but the sales price to the customer is based on a higher market price and offsets the loss. Conversely, if the commodity price decreases, we have a hedging gain and recognize an unrealized gain on derivative contracts, but the sales price to the customer is based on the lower market price and offsets the gain.

In accordance with FASB ASC 815, Derivatives and Hedging, we designate these derivative contracts as fair value hedges and recognize them on our balance sheet at fair value. We also recognize offsetting changes in the fair value of the related firm purchase and sales commitment to which the hedge is attributable in earnings upon revenue recognition, which occurs at the time of delivery to our customers.

The potential for losses related to our hedging activities, given our hedging methodology, arises from the exchanges for our commodity hedges or customer defaults. In the event of a customer default, we might be forced to sell the commodities in the open market and absorb losses for the commodities. Our results of operations could be materially impacted by any counterparty or customer default, as we might not be able to collect money owed to us and/or our hedge might effectively be cancelled.

We use hedges for no purpose other than to avoid exposure to changes in commodity prices between when we buy a shipment of commodities from a supplier and when we deliver it to a customer. Our derivatives are not for purposes of trading in the futures market. We earn our gross profit margin through our business operations and not from the movement of commodity prices.

The Company’s assets and liabilities related to unrealized gains or losses on fair value hedges measured at fair value at December 31, 2024 and 2023 are as follows:

The table below summarizes the realized gain or (loss) on the Company’s derivative instruments and their location in the Consolidated Statement of Operations and Other Comprehensive Income / (Loss):

From time to time we may enter into forward sales contracts that do not meet the definition or qualify for hedge accounting. Forward sales contracts are derivatives that were entered into to sell goods at a later date at a fixed or determinable price for a specific period. Forward sales contracts are recognized on the balance sheet at the value of the contract and the difference in the fair value and derivative liability is recorded as an unrealized gain on derivative contracts or unrealized loss on derivative contracts. If the underlying commodity price increases, we suffer a mark to market loss and have a derivative liability. Conversely, if the commodity price decreases, we have a hedging gain and recognize a unrealized gain on derivative contract.

As part of our business we also engage in the purchase, sale and distribution of food and feed products. If we do not have a matching sales contract related to such products, (for example, any commodity products that are unsold in our inventory), we have price risk that we currently do not or are unable to hedge. As such, any decline in pricing for such products may adversely impact our profitability.

The follow table sets forth the fair value of derivatives not designated as hedging instruments as of at December 31, 2024 and 2023:

The table below summarizes the realized gain or (loss) on the Company’s derivative instruments and their location in the Consolidated Statement of Operations and Other Comprehensive Income / (Loss):

21. 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”) 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 150,000 shares of common stock for issuance. As of December 31, 2024,65,643 shares have been issued and 74,357 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 250,000 shares of common stock for issuance. As of December 31, 2024,242,404 shares have been issued and 6,893 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 750,000 shares of common stock for issuance. As of December 31, 2024,401,936 shares have been issued under the 2024 Plan andnil option to purchase shares have been awarded under the 2024 Plan.

Common Stock Issuances

On January 5, 2023, the Company authorized the issuance of an aggregate of 3,131 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 284,881 shares of common stock to a Aggia for services rendered.

On May 10, 2023 the Company authorized the issuance of 13,965 shares of common stock to a consultant for services rendered.

On May 25, 2023, the Company authorized the issuance of 272,002 shares of common stock to Aggia for services rendered.

On June 30, 2023, the Company vested 85,472 shares of common stock to a consultant for services rendered.

On July 11, 2023, the Company authorized the issuance of an aggregate of 3,298 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 885,545 Restricted Share Awards to Aggia, with an effective issuance date of April 1, 2023.

On July 27, 2023, the Company authorized the issuance of 215,331 shares of common stock to Altium in exchange for the exercise of warrants.

On August 15, 2023, the Company authorized the issuance of 5,000 shares of common stock to a consultant for services rendered.

On September 25, 2023, the Company authorized the issuance of 22,727 shares of common stock in fees to a consultant for services rendered related to the SEPA.

On September 30, 2023, the Company vested 53,831 shares of common stock to to a consultant for services rendered.

On October 2, 2023, the Company authorized the issuance of an aggregate of 6,365 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 8,550 shares of common stock to consultants for services rendered.

On November 6, 2023, the Company authorized the issuance of 8,043 shares of common stock in connection with the conversion of notes payables.

On November 14, 2023, the Company authorized the issuance of 15,911 shares of common stock in connection with the conversion of notes payables.

On November 29, 2023, the Company authorized the issuance of 23,732 shares of common stock in connection with the conversion of notes payables.

On December 13, 2023, the Company authorized the issuance of 27,132 shares of common stock in connection with the conversion of notes payables.

On December 19, 2023, the Company authorized the issuance of 26,791 shares of common stock in connection with the conversion of notes payables.

On December 19, 2023, the Company issued 202,260 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 17,640 shares for 2023. The remaining RSA vest ratably over 12 quarters with the first vesting starting on March 31, 2024.

On December 31, 2023, the Company vested 20,986 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 10,564 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 27,694 shares of common stock in connection with the conversion of notes payable.

On January 11, 2024, the Company authorized the issuance of 27,891 shares of common stock in connection with the conversion of notes payable.

On January 22, 2024, the Company authorized the issuance of 30,577 shares of common stock in connection with the conversion of notes payable.

On January 29, 2024, the Company authorized the issuance of 30,443 shares of common stock in connection with the conversion of notes payable.

On February 16, 2024 the Company authorized the issuance of 300 shares of common stock to a consultant for services rendered.

On February 16, 2024, the Company authorized the issuance of 30,572 shares of common stock in connection with the conversion of notes payable.

On March 15, 2024, the Company authorized the issuance of 60,885 shares of common stock in connection with the conversion of notes payable.

On March 20, 2024, the Company authorized the issuance of 76,077 shares of common stock in connection with the conversion of notes payable.

On March 28, 2024 the Company authorized the issuance of 7,950 shares of common stock to a consultant for services rendered.

On March 31, 2024, the Company vested 50,094 shares of common stock to Aggia as consulting fees earned during the first quarter of 2024.

On June 30, 2024, the Company vested 139,899 shares of common stock to Aggia as consulting fees earned during the second quarter of 2024.

On August 14, 2024, the Company authorized the issuance of 54,981 shares of common stock in connection with the conversion of notes payable.

On August 19, 2024, the Company authorized the issuance of 104,249 shares of common stock in connection with the conversion of notes payable.

On August 26, 2024 the Company authorized the issuance of 47,500 shares of common stock to a consultant for services rendered.

On September 27, 2024, the Company authorized the issuance of 62,549 shares of common stock in connection with the conversion of notes payable.

On September 30, 2024, the Company vested 121,149 shares of common stock to Aggia as consulting fees earned during the third quarter of 2024.

On December 3, 2024, the Company entered into a Purchase Agreement (the “Purchase Agreement”) and Registration Rights Agreement (the “Registration Rights Agreement”) with institutional investors (“Purchasers”) and issued an aggregate of $3.75 million aggregate principal amount of convertible senior notes due in 2025 (the “Notes”) for aggregate gross proceeds of approximately $3.0 million, before deducting fees to the placement agent and other expenses payable by the Company (the “Offering”). RBW Capital Partners LLC, offering all securities through Dominari Securities LLC, served as the exclusive placement agent for the Offering. The Offering closed on December 4, 2024. Pursuant to the Purchase Agreement, the Notes were issued with an original issue discount of 20%. The Notes will mature on December 4, 2025, unless earlier converted upon the satisfaction of certain conditions. The conversion price of the Notes is $4.10 per share of common stock. The Notes include a “Most Favored Nation” clause which grants to the Purchasers the right to claim better conversion terms should the Company provide such to any as long as the Notes are outstanding. The Purchasers will be prohibited from effecting a conversion of the Notes to the extent that, as a result of such conversion, a Purchaser would beneficially own more than 9.99% of the shares of common stock outstanding immediately after giving effect to such conversion. The Company agreed to register the shares of common stock underlying the Notes for resale under a Registration Statement on Form S-3, pursuant the Securities Act of 1933. The Notes contain a covenant prohibiting the Company to incur, guarantee or assume any indebtedness, other than certain permitted indebtedness, create or allow or suffer any mortgage, lien, security interest or other encumbrance on its property or assets , other than permitted liens, redeem, defease, repurchase, repay or make any payments in respect of any indebtedness if at the time such payment is due or is otherwise made or, after giving effect to such payment, an event of default under the Notes has occurred and is continuing, declare or pay any cash dividend or distribution on any stock or other equity interest of the Company, or make, any change in the nature of its business or modify its corporate structure or purpose. The Notes contain customary events of default and customary penalties for the Company’s failure to issue conversion shares on a timely basis. The Registration Rights Agreement contains customary penalties for our failure to file the registration statement or cause it to become effective on a timely basis and for certain other events.

On December 31, 2024, the Company vested 160,413 shares of common stock to Aggia as consulting fees earned during the fourth quarter of 2024.

Preferred Stock

Our authorized preferred stock consists of 10,000,000 shares of preferred stock, $0.0001 par value per share. As of December 31, 2024 there areno shares of preferred stock currently issued and outstanding.

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 2024 were 471,555.

At December 31, 2024, there were 640,329 restricted share awards outstanding awarded to employees, consultants and the board of directors.

A summary of the activity related to the restricted share awards is presented below:

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, 2024, Change in fair value of stock-based compensation was a gain of $4.1 million. For the year ended December 31, 2023, Change in fair value of stock-based compensation was a gain of $1.3 million.

See Note 17 – 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 February 27, 2023, we issued options to purchase an aggregate of 53,107 shares of our common stock. The options had an exercise price of $15.05 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 6,893 shares of our common stock. The options had an exercise price of $15.05 per share and vest ratably over 20 quarters with the first vesting occurring on March 31, 2023.

On November 27, 2023, there were 10,000 shares forfeited upon the expiration of the options.

A summary of option activity is presented below:

The Company has estimated the fair value of the options using the Black-Scholes model using the following assumptions:

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 215,331 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 215,331 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 $13.85 to $10.00 per share.

In connection with the exercise of the Original Warrants, we issued an additional warrant to Altium that is exercisable to acquire 215,331 shares of common stock (the “Additional Warrant”) exercisable at a per share price of $24.00.

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 toone 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 $24.00. 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:

Stock-Based Compensation Expense

Stock-based compensation related to restricted stock issued to employees, directors and consultants, warrants and warrants to consultants amounted to $6.7 million and $6.2 million, respectively for the years ended December 31, 2024 and 2023, of which $5.9 million and $5.4 million were stock-based consulting expenses paid to related party, $0.4 million and $0.5 million were given to consultants for services rendered, $0.1 million and $0.3 million were given to the board of directors and $0.3 million and $0.1 million were executive compensation.

22. Related Party Transactions

The Company held a Special Shareholder Meeting on February 28, 2023. At the meeting, the shareholders approved (i) the Services Agreement whereby Sadot LLC engaged Aggia, to provide certain advisory services to Sadot Agri-Food for managing Sadot Agri-Food’s business of wholesaling food and engaging in the purchase and sale of physical food commodities; (ii) an amendment of the Company’s articles of incorporation to increase the number of authorized shares of common stock from 5,000,000 to 15,000,000; (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 1,442,428 Shares of Common Stock to Aggia pursuant to the Services Agreement and net income generated thresholds; (v) the right of Aggia to nominate up toeight 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. The shareholders of the Company subsequently approved an increase in the authorized shares of common stock from 15,000,000 to 20,000,000 at the Company’s Annual Meeting held on December 20, 2023.

As of December 31, 2024, Aggia owned 11.5% of the Company's common stock.

During the year ended December 31, 2024 and 2023, the Company recorded Stock-based consulting expense of $5.9 million and $5.4 million, respectively to its related party, Aggia for consulting services rendered.

Additionally, for the year ended December 31, 2024 and 2023, the Company reimbursed Aggia for all operating costs related to Sadot Agri-Foods of $3.8 million and $3.2 million, respectively. See Note 17 – Commitments and contingencies for additional information.

On September 19, 2024, the Company received a loan from a related party, in an arms length transaction, of $0.6 million, with a discount of $0.1 million, that matures insix months.

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.

23. Subsequent Events

Board of Directors

On February 4, 2025, Jeff Carl resigned from the Board of Directors due to his professional experience being primarily focused on the restaurant industry. This will allow the Company to appoint a new director to the Board with experience that would better reflect the Company’s new business focus.

On February 20, 2025, the Company appointed Claudio Torres to its Board of Directors to fill a vacancy. Mr. Torres brings over 25 years of experience in the global agriculture industry, including senior leadership roles at Syngenta Group, Advanta Seeds and Monsanto.

On March 7, 2025, Kevin Mohan stepped down from his position as Chairman of the Board to allow Mark McKinney to assume the role of Chairman of the Board. Mr. McKinney has over 30 years of executive experience across multiple industries, having served as CEO, CFO and President for global organizations such as Local Bounti, Fruit Growers (Sunkist Cooperative), Dole Food Company and Al Ghurair Foods spanning six countries and three continents.

On February 10, 2025, the Company and Sadot Brasil Ltda. (“Sadot Brasil”), the Company’s wholly owned subsidiary, entered into an Employment Agreement with Catia Jorge effective February 10, 2025, to serve as Chief Executive Officer of both the Company and Sadot Brasil. See Note 17 – Commitments and contingencies for further details.

On February 9, 2025 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 transition to the role of Chief Governance and Compliance Officer, reporting directly to the Company’s Chief Executive Officer. See Note 17 – Commitments and contingencies for further details.

On February 9, 2025 the Company entered into an Executive Employment Agreement with Jennifer Black (the “Black Agreement”), which replaced her prior employment agreement. See Note 17 – Commitments and contingencies for further details.