Sadot Group Inc. (filing issuer: Muscle Maker, Inc.) — FY2022 Form 10-K
Reporting period: Year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing; the filing text does not provide clear Q4-only financial results. The registrant is identified throughout the filing as Muscle Maker, Inc. (Nasdaq: GRIL), not Sadot Group Inc. Sadot LLC was formed in October 2022 as a wholly owned subsidiary and new food-commodity business.
Business context and financial performance
The company operated restaurant and meal-prep concepts—Muscle Maker Grill, Pokemoto and SuperFit Foods—and began commodity trading through Sadot. At year-end, its restaurant system comprised 19 company-operated and 25 franchised restaurants, plus 34 SuperFit Foods pickup locations. It reported 46 Pokemoto franchise agreements sold but not yet opened in its overview.
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenue | $161.70 million | $10.35 million |
| Commodity sales | $150.59 million | None |
| Company restaurant sales | $10.30 million | $9.32 million |
| Operating loss | $8.12 million | $9.45 million |
| Net loss | $7.96 million | $8.18 million |
| Net loss per share, basic and diluted | $0.28 | $0.50 |
| Net cash used in operating activities | $0.20 million | $6.39 million |
FY2022 revenue growth was overwhelmingly attributable to Sadot’s first-year commodity sales. Commodity operating expenses were $146.04 million, leaving approximately $4.55 million of segment operating income before corporate/unallocated costs and the Aggia consulting expense. Commodity costs alone were 96.74% of commodity sales. Company restaurant sales rose 10.5%, attributed mainly to a full year of Pokemoto and SuperFit Foods operations; franchise royalties and fees declined 6.6% to $0.73 million.
Restaurant food and beverage costs were 38.25% of company restaurant sales, versus 37.90% in 2021. Restaurant labor was 37.32% versus 20.58%; the filing explains that 2021 labor benefited from approximately $1.92 million in employee retention tax credits and says labor as a share of sales would have been 41.17% without those credits. Restaurant rent was 11.56% of sales versus 13.53%, and other restaurant operating costs were 22.28% versus 25.14%.
Cash, liquidity, debt and balance sheet
- Cash was $9.90 million at December 31, 2022, down from $15.77 million a year earlier. Working capital surplus was $4.03 million, down from $15.04 million; accumulated deficit was $79.36 million.
- Cash used in investing was $5.44 million, including a $4.91 million deposit on intended farmland acquisition in Africa and $0.60 million of property and equipment purchases. Financing used $0.23 million, primarily debt repayments.
- Notes payable totaled $0.98 million: $0.22 million current and $0.76 million non-current. The filing lists interest rates of 3.75%–8% and maturities through 2026.
- Operating lease liabilities were $2.58 million ($0.56 million current and $2.02 million non-current); the filing reports $3.45 million of undiscounted future lease payments.
- Management said existing cash and expected cash flows from franchise and commodity-trading operations would fund operations, planned capital expenditures and repayments for the next 12 months. This is management’s assessment, not a guarantee.
Material changes, outlook and notable items
- Strategic shift: Sadot commenced food-commodity trading in 2022, producing a dramatic change in revenue scale and mix. The company’s stated strategy also emphasizes Pokemoto franchising and optimizing Muscle Maker Grill locations.
- Aggia arrangement: The company recorded $3.60 million of stock-based consulting expense and an equal accrued liability for Aggia, calculated at approximately 80% of Sadot segment net income; the filing says it was expected to be paid in stock in 2023. The services agreement provides for shares based on quarterly Sadot net income, subject to issuance caps and, once the 19.99% threshold is reached, shareholder approval. The agreement also provides for a maximum $71.52 million payable debt if the share cap is reached. Shareholders approved related matters in February 2023.
- Farmland: The $4.91 million deposit related to a letter of intent to acquire undeveloped farmland in Africa. At year-end the company remained in final negotiations and intended to finalize the agreement by the end of Q2 2023; completion was not assured.
- Non-cash and unusual costs: Intangible-asset impairment was $0.35 million (versus $1.14 million in 2021); there was no goodwill impairment in 2022. The Muscle Maker Grill trademark was changed from an indefinite to a three-year useful life, increasing amortization. FY2022 also included $0.20 million of post-closing costs and a $0.14 million gain on debt extinguishment, mainly related to PPP loan forgiveness.
- Franchise pipeline: The company reported 60 franchise agreements signed and 13 locations opened since August 2022, and more than 50 agreements sold but unopened. Another filing disclosure gives 46 Pokemoto agreements sold but unopened at year-end; investors should reconcile the differing counts and dates.
- Key risks: Management highlighted the need for additional capital as a potential risk; commodity-price volatility and working-capital demands; inflation, labor and supply availability; execution and franchisee financing/opening risks; food safety, delivery-platform and cybersecurity risks; and international regulatory, political and trade exposures. No formal numerical guidance was provided.
- Listing and governance developments: Nasdaq notified the company of a minimum-bid-price deficiency in January 2023; the company reported regaining compliance on March 2, 2023. Shareholders also approved increasing authorized common shares from 50 million to 150 million, creating potential capacity for significant future issuance. The filing reports 18.03 million warrants outstanding at year-end.
- Audit and controls: The auditor issued an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective as of year-end; the auditor did not provide an ICFR attestation.
Most important facts for investors to verify
- Confirm the correct issuer and security: the supplied filing is Muscle Maker, Inc. (GRIL), while the request metadata names Sadot Group Inc.
- Review Sadot’s underlying trading economics, customer/counterparty exposure, cash conversion and sustainability of its reported segment profit; FY2022 commodity revenue was high-volume and low-margin.
- Check the status, terms, recoverability and use of the $4.91 million farmland deposit and whether the planned acquisition was completed.
- Examine the Aggia fee calculation, accrued liability, share/debt settlement mechanics, dilution limits and consequences of future Sadot net income.
- Reconcile franchise agreement and opening counts, and assess whether signed agreements convert into opened, operating locations and recurring royalties.
- Assess liquidity after year-end, cash requirements, debt and lease maturities, potential financing needs, and dilution from warrants, authorized shares and equity compensation.
- Review the full audited financial statements and notes for segment allocations, impairment assumptions, contingencies and subsequent events; the filing summarizes several risks but does not quantify all potential exposures.