Business Context and Reporting Period
This Form 8-K, filed on November 14, 2022, by Muscle Maker, Inc. (trading symbol: GRIL), details a strategic pivot into the food commodities sector. The Company formed a wholly-owned subsidiary, Sadot LLC, on October 19, 2022, to engage in the wholesaling of food and the purchase and sale of physical food commodities. On November 14, 2022, the Company entered into a Services Agreement with Aggia LLC FC ("Aggia"), a UAE-based entity, to provide advisory services for Sadot's operations.
Key Financial Metrics and Agreements
This filing does not report historical revenue, profit, or cash flow figures for the Company or Sadot LLC. Instead, it outlines the financial structure of a new strategic partnership and executive compensation packages:
- Equity Compensation to Aggia: Aggia will receive shares of Common Stock based on Sadot's quarterly net income, calculated at a fixed price of $1.5625 per share.
- Issuance Caps:
- Shares Cap: Maximum of 14,424,275 shares (approx. 49.999% of outstanding shares as of the Effective Date).
- Shareholder Approval Threshold: Issuance pauses at 19.99% of outstanding shares until shareholder approval is obtained.
- Debt Cap: If the Shares Cap is reached, remaining net income obligations accrue as non-interest-bearing debt payable over seven years, capped at $71,520,462.
- Expense Reimbursement: Aggia's employee and travel costs will be reimbursed by Sadot after Sadot generates $9.9 million in net income.
- Executive Compensation (Annualized Base Salaries):
- Michael Roper (CEO): $350,000
- Kenn Miller (COO): $275,000
- Kevin Mohan (CIO): $200,000
- Jennifer Black (CFO): $190,000
- Aimee Infantee (CMO): $175,000
- Board Compensation: $22,000 cash plus $8,000 in stock annually per director, with additional stock for committee service.
Material Changes and Governance
The filing represents a material change in the Company's business strategy and governance structure:
- New Subsidiary: Establishment of Sadot LLC to manage food commodity trading.
- Board Expansion: Aggia has the right to nominate up to eight directors to the Board of Directors based on Sadot's net income milestones ($3.3M, $6.6M, and $9.9M). Benjamin Petel has been appointed as the initial Designated Director and Managing Member Representative.
- Shareholder Action Required: The Company must hold a shareholder meeting to approve an increase in authorized shares to 150,000,000, the issuance of shares to Aggia exceeding 19.99%, and the Board changes.
- Termination Provisions: The Services Agreement may terminate if Sadot fails to generate net income for three consecutive quarters within two years, or if the Debt Cap is not reached within two years. Upon termination, Aggia may elect to receive a payment equal to Sadot's net income less costs, or retain shares already issued.
Guidance, Risks, and Contingencies
Outlook and Milestones: The agreement is contingent on Sadot generating specific net income thresholds to unlock further equity issuance and board seats. The Company has not provided specific revenue or profit guidance for the upcoming fiscal periods.
Risks and Contingencies:
- Shareholder Approval Risk: If shareholders do not approve the "Shareholder Matters," the Services Agreement terminates automatically, and the new executive employment agreements revert to prior terms.
- Performance Risk: Failure to generate net income for three consecutive quarters within two years allows the Company to terminate the agreement.
- Dilution Risk: The potential issuance of up to ~50% of outstanding shares to Aggia represents significant dilution to existing shareholders.
- Severance Obligations: Executive agreements include substantial severance packages (up to 36 months of salary) and full acceleration of equity compensation upon termination without cause or resignation for good reason.
- Unregistered Securities: Shares issued to Aggia are unregistered and subject to resale restrictions under Section 4(a)(2) and Rule 506 of Regulation D.
Key Facts for Investor Verification
- Verify the current number of issued and outstanding shares to calculate the exact dilution impact of the 14,424,275 share cap.
- Confirm the date and outcome of the shareholder meeting required to approve the transaction and Board changes.
- Review the audited financial statements of Sadot LLC (if available) to assess the feasibility of the $3.3 million net income milestone.
- Assess the total potential liability of the $71.5 million Debt Cap if the equity issuance cap is reached.
- Monitor the Company's cash position to ensure it can fund the increased executive compensation and potential severance obligations.