What changed in Sadot Group Inc.'s 10-K — 2022 vs 2023

ITEM 1. BUSINESS Our Business Overview Muscle Maker, Inc. (referred to herein as “MMI” or “Company”), was incorporated under the laws of the state of Nevada on October 25, 2019. The principal corporate office of MMI is located at 1751 River Run, Suite 200, Fort Worth, Texas, 76107, and the telephone number at that location is (832) 604-9568.

Our website address is https://www.ir.musclemakergrill.com . MMI together with its subsidiaries, is referred to in this Form 10-K annual report (“Form 10-K”) as the Company. The terms “we”, “us” and “our” are also used in the Form 10-K to refer to the Company. Throughout the Form 10-K, the terms “restaurants”, “stores”, “eatery” and “locations” are used inter changeably.

While MMI, as the parent Company, does not directly own or operate any restaurants throughout this document we may refer to restaurants that are owned or operated by our subsidiaries as being Company-owned. MMI is our parent company.

Through our subsidiaries, we operate within the global food-supply chain, in an effort to integrate capabilities and create a sustainable and innovative company, that enhances the social, environmental and financial value to our Company.

We own and operate three unique “healthier for you” restaurant concepts within our portfolio of companies: Muscle Maker Grill restaurants, SuperFit Foods meal prep and Pokemoto Hawaiian Poke restaurants (“Restaurant Division”). Our Company was founded on the belief of taking every-day menu options and converting them into “healthier for you” menu choices.

Consumers are demanding healthier choices, customization, flavor and convenience. We believe our portfolio of companies directly satisfy these consumer needs. We focus on lean proteins, fresh fruits and vegetables, proprietary sauces, whole grains and various other items like protein shakes, meal plans, specialty drinks and super foods.

Each of our three concepts offers different menus that are tailored to specific consumer segments. We operate in the fast-casual and meal prep segments of the restaurant industry. We believe our “healthier for you” inspired concepts deliver a highly differentiated customer experience.

We also own and operate Sadot LLC (“Sadot”), a wholesaling food business, which engages in the purchase and sale of physical food commodities.

The goal of Sadot is to launch Muscle Maker into a new era by creating a comprehensive, global food company that stretches from sustainable farming, agricultural commodity shipping and trading, distribution, productions and ultimately reaches consumers through the restaurant, franchise and meal prep companies.

Muscle Maker Grill Restaurants (“Muscle Maker Grill”): our Muscle Maker Grill restaurants are fast-casual style restaurants specializing in “healthier for you” high quality, made to order, lean protein-based meals. These meals feature all-natural chicken breast, grass fed beef, lean turkey, shrimp and plant-based items.

We pair these lean proteins with super foods such as avocado, quinoa, spinach, kale and broccoli, while also offering cauliflower rice, whole wheat pasta, sweet potato fries and proprietary specialty sauces like zero carb, fat free or gluten free options. Our products are made to order. The menu features bowls, wraps, salads and burgers.

We also offer protein shakes and fruit smoothies along with meal plans and catering. Customers can dine in or take out or have their meals delivered to their door via Company delivery personnel or third-party services such as Uber Eats, DoorDash and GrubHub. SuperFit Foods Meal Prep (“SuperFit Foods”): On March 25, 2021, we acquired the assets of SuperFit Foods.

SuperFit Foods is a wholly owned meal prep division located in Jacksonville, Florida and focuses solely on meal plans. The terms meal prep and meal plans will be used interchangeably throughout this document. The business operates with a centralized kitchen that prepares all meals for distribution to consumers twice per week.

This is a subscription-based business model where consumers order their meals via the SuperFitfoods.com website and are charged automatically every week. There are over 150 meal plan options to choose from as well as various healthy juices, snacks and desserts. Meal plans focus on specific dietary needs such as vegetarian, high protein, gluten free and low calorie.

SuperFit Foods’ distribution process is different than most meal prep companies. The business operates with a centralized kitchen that prepares all meals for distribution to consumers twice per week. All meals are packaged in a temperature-controlled facility for food safety and quality controls.

While other meal plan companies ship meals directly to consumer’s homes, the SuperFit Foods model uses Company-owned coolers placed at designated pick-up locations throughout the Jacksonville, Florida market. Pick up locations are placed inside wellness centers such as gyms, yoga studios and various lifestyle locations.

SuperFit Foods delivers twice per week by independent contractors to these locations and consumers conveniently pick up their orders after their workouts or during their daily routines. This model allows us to keep food fresh and refrigerated (even in the summer months), reduces shipping costs to consumers and provides an easier distribution model for the Company.

While we do offer direct shipment to homes, this represents a small percentage of overall Company revenue. 4 Pokemoto Hawaiian Poke restaurants (“Pokemoto”): On May 14, 2021, MMI acquired the Pokemoto chain.

This consisted of purchasing PKM Stamford LLC, Poke Co, LLC, LB Holdings LLC, and TNB Holdings LLC, Poke Co Holdings LLC, GLL Enterprises LLC, and TNB Holdings II, LLC, each a Connecticut limited liability company (collectively, Pokemoto”).

Pokemoto Orange Park FL LLC and Pokemoto Kansas LLC (included in “Pokemoto”) were formed in 2022 for the purposes of developing new corporate Pokemoto stores. Pokemoto restaurants are fast-casual style restaurants that specialize in Hawaiian inspired poke bowls, wraps and salads.

Poke is native Hawaiian cuisine made up of diced fresh fish served as an appetizer or main course with strong influences of Japanese and Korean cuisine. Think of it as deconstructed sushi that a consumer can customize into a bowl, salad or wrap every time. Hawaiian Poke is trending in the restaurant industry.

It is a unique segment that is healthy, customizable, popular with millennials and Gen-Zs, offers unique flavor profiles and is “Instagrammable.” Pokemoto offers consumers the possibility to customize their order every time. Consumers move down a linear production line (similar to Chipotle or Subway customer interaction and operations) customizing their bowl from a wide selection of ingredients.

Pokemoto offers six types of protein including sushi grade tuna, salmon, chicken, shrimp, lobster seafood salad or tofu.

Consumers pick a base of white/brown rice or salad, select from over 25 mix-ins/toppings including avocado, kani salad, pickled daikon, hijiki seaweed, masago, caviar, mandarin oranges, edamame, mango, roasted cashews or wonton crisps to name a few and topped off with over eight proprietary sauces that are made in house.

All this gets mixed together creating a flavor explosion that is customized for every consumer. In select locations, we offer Boba tea in a variety of flavors. Pokemoto requires little to no cooking. Everything is either raw (tuna, salmon, veggies and fruits) or comes in pre-cooked (chicken and shrimp). The only cooking we do is preparing soup and rice.

It’s that simple. Because we have little cooking and consumers customize their orders, our labor requirements compared to most restaurants may be reduced. In addition, we believe training becomes much easier when you are not cooking or requiring recipes to be followed while consumers customize their menu options.

This creates a consistent product across all our Pokemoto restaurants as we expand into more markets. Finally, because we have little to no cooking, our build outs usually do not require expensive hoods, fire suppression systems, deep fryers, grills, ovens, etc. making the potential cost of building out a location more favorable when compared to a traditional restaurant.

Sadot LLC: Sadot was formed on October 19, 2022, in Delaware and is a wholly owned subsidiary of MMI. Sadot is focused on international Agri-food commodity shipping, farming, sourcing and production of key ingredients such as soy meal, corn, wheat, food oils, etc. A typical shipment contains 25,000 to 75,000 metric tons of product, although some transactions can be smaller.

Sadot was formed as part of the Company’s diversification strategy while still remaining within the overall food industry. Our Industry Muscle Maker Grill and Pokemoto restaurants operate within the Limited-Service Restaurant, or LSR, segment, of the United States restaurant industry, which includes quick service restaurants, or QSR, and fast-casual restaurants.

We offer fast-casual quality food combined with quick-service speed, convenience and value across multiple dayparts. We believe our differentiated, high-quality healthy-inspired menu delivers great value all day, every day and positions us to compete against both QSR and fast-casual concepts. SuperFit Foods operates within the pre-made, ready-to-eat meal prep segment.

We offer pre-made, ready-to-eat meals that focus on specific dietary needs like keto, vegetarian, high protein, low sugars, etc. SuperFit Foods offers over 150 different meal plan options to choose from as well as various healthy juices, snacks and desserts. Sadot operates within the international food commodity shipping, sourcing, farming and production segment of the overall food supply chain industry.

Our current primary focus is on shipping food commodity items such as soy meal, corn and wheat between countries via cargo ships. These shipments provide raw materials and ingredients to various food manufacturers as part of the overall food supply chain. 5 Our Strategy Our strategy for the restaurant division concentrates on expansion through franchising.

However, in order to “seed” new markets for franchising we may open Company-owned and operated locations in key markets. We believe franchising is the future of the restaurant division. This strategy uses the franchising experience of the management team with the goal of expanding more quickly.

We believe franchising has the potential to propel growth without our Company having to spend its capital on Company-owned brick and mortar locations. Our franchising efforts will continue to be concentrated on expanding the Pokemoto brand. We believe there is a unique opportunity to grow the Pokemoto brand within the Hawaiian Poke segment of the restaurant industry.

The Hawaiian Poke segment is fragmented with the largest company having approximately 65-85 locations today. The industry is full of independently owned “mom-and-pop” locations and we expect that the industry is ready for a company to enter the market and become a significant player in the segment. We are positioning Pokemoto with the goal of playing this role.

While Pokemoto franchising is the focus, we will also open Company-owned Pokemoto locations strategically placed in key markets where we are focusing our franchising efforts. Franchisee prospects need to experience Pokemoto locally versus having to travel long distances. This approach is critical to selling franchises. Each Company location should be considered as “seeding” the market.

Eventually, when the market begins to open franchise locations, the intent is to franchise the original “seed” Company location and then turn to building and franchising the next market. This is a leapfrog strategy that has traditionally been used to drive franchise growth more aggressively. Our strategy for our Muscle Maker Grill restaurants is to optimize the brand.

This will be performed through cost reductions, co-branding locations with Pokemoto or converting the location to a Pokemoto restaurant. We will continue to evaluate profitability at each location while staying current with market trends in each specific location.

On or about March 7, 2019, the Company was listed as a defendant to a lawsuit filed by a contractor in the State of Texas in El Paso County #2019DCV0824. The contractor is claiming a breach of contract and is seeking $32,809 in damages for services claimed to be rendered by the contractor.

As of December 31, 2022, the Company accrued $30,000 for the liability in accounts payable and accrued expenses.

As a result, we do not anticipate paying any cash dividends in the foreseeable future. Warrants As of December 31, 2022 and 2021, we had warrants to purchase an aggregate of 18,033,640 and 20,284,016 shares of common stock, respectively, outstanding with a weighted average exercise price of $1.93 and $1.66 per share, respectively.

Unregistered Sales of Equity Securities and Use of Proceeds Issuance of Stock On February 3, 2021, the Company issued an aggregate of 20,000 shares of common stock of the Company to a digital marketing consultant with an aggregate fair value of $42,600.

On February 3, 2021, the Company issued an aggregate of 16,126 shares of common stock of the Company to the members of the board of directors as compensation earned through the end of the fourth quarter of 2020.

On February 7, 2021, the Company entered into a Consulting Agreement with consultants as a strategy business consultant to provide the Company with business and marketing advice as needed. The term of the agreement is for five months from the effective date on February 7, 2021.

Pursuant to the terms of the agreement the Company agreed to pay the consultant a total of 100,000 shares of the Company’s common stock. The Company issued 60,000 shares of common stock upon the effective date of the agreement with the remaining 40,000 to be issued upon the successful completion of the agreement.

As of December 31, 2022, the Company issued the remaining 40,000 shares of common with a grant date fair value of $42,400 pursuant to the terms of the agreement.

On February 11, 2021, the Company issued an aggregate of 221,783 shares of common stock the Company to various executives and an employee pursuant to the approval of the compensation committee under the 2020 Plan.

On March 8, 2021, the Company entered into a Consulting Agreement with consultants as a strategy business consultant to provide the Company with financial and business. The term of the agreement is for five months from the effective date on March 8, 2021.

Pursuant to the terms of the agreement the Company agreed to pay the consultant a total of 100,000 shares of the Company’s common stock. The Company issued 70,000 shares of common stock upon the effective date of the agreement with the remaining 30,000 to be issued upon the successful completion of the agreement.

As of December 31, 2022, the Company issued the remaining 30,000 shares of common with a grant date fair value of $31,800 pursuant to the terms of the agreement. On March 22, 2021, the Company entered into a Consulting Agreement with consultants with experience in the area of investor relations and capital introductions.

The term of the agreement is for six months from the effective date on March 22, 2021. Pursuant to the terms of the agreement the Company paid $250,000 in cash and issued 150,000 shares of the Company’s common stock.

On March 25, 2021, the Company entered into an asset purchase agreement with SuperFit Foods, LLC a Florida limited liability company and SuperFit Foods LLC, a Nevada limited liability company (the “SuperFit Acquisition”).

The purchase price of the assets and rights was $1,150,000 which included $475,000 that was paid at closing and the remaining $625,000 paid in 268,240 shares of common stock. The remaining $25,000, which was to be issued in the Company’s common stock, was forfeited as the Company and former owner agreed that not all obligations were met.

On March 31, 2021, the Company authorized the issuance of an aggregate of 12,711 shares of common stock to the members of the board of directors as compensation earned during the first quarter of 2021. 37 On April 7, 2021, the Company entered into a Securities Purchase Agreement with an accredited investor for a private placement pursuant to which the investor agreed to purchase from the Company for an aggregate purchase price of approximately $10,000,000 (i) 1,250,000 shares of common stock of the Company (ii) a common stock purchase warrant to purchase up to 4,115,227 shares of common stock (the “common warrant”) and (iii) a pre-funded common stock purchase warrant to purchase up to 2,865,227 shares of common stock (the “pre-funded warrant”).

Each share and accompanying common warrant were sold together at a combined offering price of $2.43 per share and common warrant, and each pre-funded warrant and accompanying common warrant is being sold together at a combined offering price of $2.42 per pre-funded warrant and accompanying common warrant.

The pre-funded warrant is immediately exercisable, at a nominal exercise price of $0.01 per share, and may be exercised at any time until the pre-funded warrant is fully exercised. The common warrant has an exercise price of $2.43 per share, are immediately exercisable and will expire 5.5 years from the date of issuance.

The private placement closed on April 9, 2021. On April 30, 2021, the Company issued an aggregate of 10,000 shares of common stock of the Company to a digital marketing consultant, pursuant to their service agreement, with an aggregate fair value of $14,700.

On May 6, 2021, the Company issued an aggregate of 150,000 shares of common stock of the Company to a digital marketing consultant with an aggregate fair value of $214,500. The Company accrued for the liability as accrued compensation expense on the books as of June 30, 2021, as the share were fully earned pursuant to their service agreement.

On May 14, 2021, the Company and the former owners of the Poke Entities II (as defined below) entered into a Membership Interest Exchange Agreement pursuant to which the Company acquired Poke Co Holdings LLC, GLL Enterprises LLC, and TNB Holdings II, LLC, each a Connecticut limited liability company (collectively, the Poke Entities II”) in exchange for shares of common stock of the Company valued at $1,250,000.

The Company issued 880,282 shares of common stock of the Company. The price per share was determine by using the 10-day trading average preceding the date of closing. On May 27, 2021, the Company cancelled 11,879 shares of common stock previously issued to an investor pursuant to a settlement agreement.

The cancellation of the 11,879 shares was part of the settlement agreement. On August 24, 2021, the Company issued an aggregate of 15,000 shares of common stock of the Company to a digital marketing consultant, pursuant to their service agreement, with an aggregate fair value of $20,999.

On October 11, 2021, the Company issued an aggregate of 40,000 shares of common stock of the Company to a consultant for general consulting services, pursuant to their service agreement, with an aggregate fair value of $40,800.

On October 22, 2021, the Company issued an aggregate of 15,000 shares of common stock of the Company to a digital marketing consultant, pursuant to their service agreement, with an aggregate fair value of $15,150.

On November 17, 2021, the Company entered into a Securities Purchase Agreement with accredited investors for a private placement pursuant to which the investors (the “Purchasers”) purchased from the Company for an aggregate purchase price of approximately $15,000,000 (i) 6,772,000 shares (the “shares”) of common stock of the Company, (ii) a common stock purchase warrant to purchase up to 10,830,305 shares of common stock (the “November common warrant”) and (iii) a pre-funded common stock purchase warrant to purchase up to 4,058,305 shares of common stock (the “pre-funded warrant”).

Each share and accompanying November common warrant was sold together at a combined offering price of $1.385 per share and November common warrant, and each pre-funded warrant and accompanying November common warrant was sold together at a combined offering price of $1.3849 per pre-funded warrant and accompanying November common warrant.

The November pre-funded warrant is immediately exercisable, at a nominal exercise price of $0.0001 per share, and may be exercised at any time until the November pre-funded warrant is fully exercised. The November common warrant will have an exercise price of $1.385 per share, are immediately exercisable and will expire 5 years from the date of issuance.

The private placement closed on November 22, 2021. 38 On December 3, 2021, the Company issued 82,500 shares of common stock of the Company to a consultant for business strategy consulting with a fair value of $84,975.

On December 7, 2021, the Company issued an aggregate of 160,000 shares of common stock of the Company to a consultant for strategic advisory and digital marketing services with an aggregate fair value of $177,600. On December 27, 2021, the Company issued 10,000 shares of common stock of the Company to a consultant with a fair value of $7,400.

On April 4, 2022, the Company authorized the issuance of 20,000 shares of common stock to a member of the executive team per the employment agreement. The stock was not fully earned until April 4, 2022.