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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-39223
Sadot Group Inc.
(Exact name of registrant as specified in its charter)
Muscle Maker, Inc.
(Former name of registrant)

Nevada47-2555533
(State or other jurisdiction (I.R.S. Employer
of incorporation)Identification No.)
1751 River Run, Suite 200,
Fort Worth, Texas 76107
(Address of principal executive offices)
Registrant’s telephone number, including area code: (832) 604-9568
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par valueSDOT
The NASDAQ Capital Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):
Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☒Smaller reporting company☒
Emerging growth company☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The number of shares if the Registrant’s common stock, $0.0001 par value per share, outstanding as of August 9, 2023, was 46,098,386.

Muscle Maker, Inc.
Quarterly Report on Form 10-Q
For the Three and Six Months Ended June 30, 2023



Table of ContentsPage
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Muscle Maker, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)

June 30, 2023December 31, 2022
$’000$’000
Assets
Current assets:
Cash5,090 9,898 
Accounts receivable, net of allowance for doubtful accounts of $34.2 thousand and $23.4 thousand as of June 30, 2023 and December 31, 2022, respectively
47,502 135 
Inventory307 298 
Prepaid expenses and other current assets319 317 
Total current assets53,218 10,648 
Right to use assets2,059 2,433 
Property and equipment, net1,497 1,895 
Goodwill2,626 2,626 
Intangible assets, net4,019 4,611 
Deposit on farmland8,802 4,914 
Security deposits and other assets102 103 
Total assets72,323 27,230 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses40,967 1,953 
Accrued stock-based compensation expense - related party— 3,603 
Notes payable, current3,727 222 
Operating lease liability, current511 560 
Deferred revenue, current93 95 
Other current liabilities204 182 
Total current liabilities45,502 6,615 
Notes payable, non-current685 759 
Operating lease liability, non-current1,673 2,019 
Deferred revenue, non-current1,295 1,276 
Total liabilities49,155 10,669 
Commitments and Contingencies
Stockholders’ equity:
Common stock, $0.0001 par value, 150 million shares authorized, 36.0 million and 29.3 million shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively
4 3 
Additional paid-in capital103,395 95,913 
Accumulated deficit(80,231)(79,355)
Total stockholders’ equity23,168 16,561 
Total liabilities and stockholders’ equity72,323 27,230 


See Accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited)
4
Muscle Maker, Inc.
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
$’000$’000$’000$’000
Revenues:
Commodity sales157,559 — 367,925 — 
Company restaurant sales, net of discounts2,487 2,751 4,788 5,445 
Franchise royalties and fees238 163 522 371 
Franchise advertising fund contributions20 16 36 34 
Other revenues13 — 13 — 
Total revenues160,317 2,930 373,284 5,850 
Operating Costs and Expenses:
Commodity operating expenses:
Commodity cost153,240 — 358,295 — 
Labor852 — 1,472 — 
Other commodity operating expenses485 — 639 — 
Total commodity operating expenses154,577 — 360,406 — 
Restaurant operating expenses:
Food and beverage costs867 1,117 1,706 2,143 
Labor956 903 1,836 1,976 
Rent290 327 564 667 
Other restaurant operating expenses551 688 1,023 1,338 
Total restaurant operating expenses2,664 3,035 5,129 6,124 
Depreciation and amortization expenses441 489 1,074 965 
Franchise advertising fund expenses20 16 36 34 
Pre-opening expenses— — 36 — 
Post-closing expenses19 — 113 — 
Stock-based consulting expenses1,068 — 4,427 — 
Sales, general and administrative expenses1,888 1,127 4,030 2,451 
Total costs and expenses160,677 4,667 375,251 9,574 
Loss from operations(360)(1,737)(1,967)(3,724)
Other Income / (Expense):
Other income / (expense)251 (15)251 (34)
Interest income / (expense), net(22)(10)(19)(28)
Change in fair value of accrued compensation324 — 865 — 
Gain on debt extinguishment— — — 140 
Total other income / (expense), net553 (25)1,097 78 
Income / (Loss) Before Income Tax193 (1,762)(870)(3,646)
Income tax3 12 6 14 
Net income / (loss)190 (1,774)(876)(3,660)
Net Income / (Loss) Per Share:
Basic0.01 (0.06)(0.03)(0.13)
Diluted0.01 (0.06)(0.03)(0.13)
Weighted-Average # of Common Shares Outstanding:
Basic33,362,887 28,668,116 31,407,362 28,235,052 
Diluted33,567,719 28,668,116 31,407,362 28,235,052 
See Accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited)
5
Muscle Maker, Inc.
Condensed Consolidated Statement of Changes in Stockholders' Equity
(Unaudited)

Common Stock Additional
Paid-in
Capital		Accumulated
Deficit 		Total
Shares Amount
('000
$’000$’000$’000$’000
Balance at December 31, 202126,1103 95,760 (71,370)24,393 
Cumulative effect of change in accounting principal—— — (15)(15)
Cashless exercise of pre-funded warrants2,410 — — — — 
Common stock compensation to board of directors94 — 57 — 57 
Common stock issued as compensation for services30 — 16 — 16 
Net loss— — — (1,886)(1,886)
Balance at March 31, 202228,6443 95,833 (73,271)22,565 
Cumulative effect of change in accounting principal—— — (8)(8)
Stock-based compensation - options—— 4 — 4 
Reconciliation for shares outstanding per transfer agent31— — — — 
Common stock issued as compensation for services5— 2 — 2 
Common stock issued as compensation for employment20— 11 — 11 
Net loss—— — (1,774)(1,774)
Balance at June 30, 202228,700395,850(75,053)20,800 
Balance at December 31, 202229,2873 95,913 (79,355)16,561 
Common stock compensation to board of directors31— 28 — 28 
Common stock issued as compensation for services2,849— 3,020 — 3,020 
Stock-based compensation - options—— 27 — 27 
Net loss———(1,066)(1,066)
Balance at March 31, 202332,1673 98,988 (80,421)18,570 
Common stock compensation to board of directors30 — 32 — 32 
Common stock issued as compensation for services3,714 1 4,348 — 4,349 
Stock-based compensation - options— — 27 — 27 
Net income— — — 190 190 
Balance at June 30, 202335,9114103,395(80,231)23,168







See Accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited)
6
Muscle Maker, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
20232022
$’000$’000
Cash Flows from Operating Activities
Net loss(876)(3,660)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization1,074 965 
Stock-based compensation318 89 
Gain on extinguishments of debt— (140)
Stock-based consulting expenses4,427 — 
Change in fair value of compensation(865)— 
Loss on disposal of assets53 267 
Bad debt expense34 (59)
Changes in operating assets and liabilities:
Accounts receivable, net(47,401)(123)
Inventory(9)45 
Prepaid expenses and other current assets(2)1,194 
Security deposits and other assets1 (12)
Accounts payable and accrued expenses39,014 (611)
Deferred rent— (128)
Operating right of use asset and liability, net(21)131 
Deferred revenue17 228 
Other current liabilities22 (91)
Total adjustments(3,338)1,755 
Net cash used in operating activities(4,214)(1,905)
Cash Flows from Investing Activities
Deposit on farmland(3,888)— 
Purchases of property and equipment(247)(283)
Disposal of property and equipment110 — 
Net cash used in investing activities(4,025)(283)
Cash Flows from Financing Activities
Repayments of convertible note— (50)
Proceeds from other notes payable3,500 — 
Repayments of notes payables(69)(63)
Net cash provided by (used in) financing activities3,431 (113)
Net Decrease in Cash(4,808)(2,301)
Cash – beginning of period9,898 15,767 
Cash – end of period5,090 13,466 




See Accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited)
7
Muscle Maker, Inc.
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)

Six Months Ended June 30,
20232022
$’000$’000
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest20 87 


























See Accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited)
8
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)

1.    Business Organization and Nature of Operations

Muscle Maker, Inc. (“MMI”), a Nevada corporation was incorporated in Nevada on October 25, 2019. MMI was a wholly owned subsidiary of Muscle Maker, Inc (“MMI-Cal”), a California corporation incorporated on December 8, 2014, but the two merged on November 13, 2019, with MMI as the surviving entity. MMI wholly owns Muscle Maker Development, LLC (“MMD”), Muscle Maker Corp, LLC (“MMC”) and Muscle Maker USA, Inc (“Muscle USA”). MMD was formed on July 18, 2017, in the State of Nevada for the purpose of running our existing franchise operations and continuing to franchise the Muscle Maker Grill name and business system to qualified franchisees. MMC was formed on July 18, 2017, in the State of Nevada for the purpose of developing new corporate stores and operating new and existing corporate stores of MMI. Muscle USA was formed on March 14, 2019, in the State of Texas for the purpose of opening additional new corporate stores. Muscle Maker Development International LLC, a directly wholly owned subsidiary of MMI, which was formed in Nevada on November 13, 2020, to franchise the Muscle Maker Grill® name, trademarks and business system to qualified franchisees internationally. On March 25, 2021, MMI acquired the assets and trademarks of SuperFit Foods™, a subscription based fresh-prepared meal prep business located in Jacksonville, Florida. On May 14, 2021, MMI acquired the assets and trademarks of PKM Stamford, LLC, Poke Co., LLC, LB Holdings LLC, TNB Holdings, LLC, Poke Co Holdings LLC, GLL Enterprises, LLC, and TNB Holdings II, LLC, each a Connecticut limited liability company, an operator and franchisor of a fast casual restaurant chain concept, collectively known as “Pokémoto®.” On October 19, 2022, MMI formed Sadot LLC, a Delaware limited liability company and a wholly-owned subsidiary of MMI, ("Sadot Agri-Foods"), for the purpose of shipping and trading agri-commodities on a global basis.

With the formation of Sadot Agri-Foods in late 2022, MMI has evolved from a U.S.-centric restaurant business into a global, food-focused organization. As of June 30, 2023, MMI consisted of two distinct operating units:

1.SADOT LLC: MMI’s largest operating unit is a global agri-commodities company engaged in trading and shipping of food and feed (e.g., soybean meal, wheat, corn, etc.) via dry bulk cargo ships to/from markets such as Brazil, Canada, China, India, Japan, Malaysia, Philippines, Poland, Romania, Ukraine and Vietnam. Sadot Agri-Foods competes with the ABCD commodity companies (ADM, Bunge, Cargill, Louis-Dreyfus) as well as many regional organizations. Sadot Agri-Foods seeks to diversify over time into a sustainable and forward-looking global agri-foods company.
2.MMI RESTAURANT GROUP: This is MMI’s legacy business with two fast casual restaurant concepts, Pokémoto Hawaiian Poké® and Muscle Maker Grill®, plus a fresh-prep meal service, SuperFit Foods™, with 34 points of distribution plus in-home and national delivery. As of June 30, 2023, the MMI Restaurant Group included 19 company-owned restaurants, including the SuperFit Foods™ kitchen, and 29 franchise restaurants. The MMI Restaurant Group seeks to develop Pokémoto® into a national restaurant brand through franchising.

MMI and its subsidiaries are hereinafter referred to as the “Company”.

On May 19, 2023, the Company has expanded its Sadot Agri-Foods subsidiary within the agri-commodity sourcing and trading operations into North, Central and South America, further diversifying the Company’s geographic reach beyond its existing operations in Europe, Asia, the Middle East and Africa. The expansion was facilitated by a 5 year consulting agreement signed on June 14, 2023, with a fixed cost of 0.5 million per year and potential profit sharing calculated on a quarterly basis, between Sadot Agri-Foods’ operations and newly-formed Buenaventura Trading LLC (“Buenaventura”) based in Miami FL. Buenaventura’s team brings a wealth of experience and exposure to new trade routes throughout the Americas by adding multiple sourcing and trading consultants to Sadot Agri-Foods with backgrounds from several of the largest international food supply chain organizations.
In order to support the expansion into the Americas and our agreement with Buenaventura, Sadot LLC has formed a new subsidiary, Sadot Latam LLC. This agreement marks a significant milestone for Sadot Agri-Foods as it provides access to new trade routes originating in North America to markets in Central and South America. The planned Americas trade routes are intended to generate accretive value for the Company by tapping into the thriving market demand for agricultural products across Central and South America. This planned expansion is expected to further enhance Sadot Agri-Foods’ position as an emerging entity in the global commodity trading industry.
9
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Liquidity
Our primary source of liquidity is cash on hand. As of June 30, 2023, the Company had a cash balance, a working capital surplus and an accumulated deficit of $5.1 million, $7.7 million, and $80.2 million, respectively. During the three and six months ended June 30, 2023, the Company incurred a Pre-tax net income of $0.2 million and a Pre-tax net loss of $0.9 million, respectively. The Company had Net cash used in operations of $4.2 million for the six months ended June 30, 2023. The Company believes that our existing cash on hand and future cash flows from our commodity trading and franchise operations, will be sufficient to fund our operations, anticipated capital expenditures and repayment obligations over the next 12 months.
2.    Significant Accounting Policies

Basis of Presentation

The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the Unaudited Condensed Consolidated Financial Statements of the Company as of June 30, 2023, and for the three and six months ended June 30, 2023, and 2022. The results of operations for the three and six months ended June 30, 2023, and 2022 are not necessarily indicative of the operating results for the full year. It is suggested that these Unaudited Condensed Consolidated Financial Statements be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2022. The Balance Sheet as of December 31, 2022, has been derived from the Company’s audited Financial Statements.
Principles of Consolidation
The accompanying Unaudited Condensed 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 period balances have been reclassified in order to conform to current period 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.
10
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Estimates and assumptions are periodically reviewed, and the effects of any material revisions are reflected in the financial statements in the period that they are determined to be necessary. Actual results could differ from those estimates and assumptions.
Cash and Cash Equivalents
The Company considers all highly-liquid instruments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of June 30, 2023 or December 31, 2022.
Inventory
Inventory, which are stated at the lower of cost or net realizable value, consist primarily of commodity trade shipments in-transit, perishable food items and supplies. Cost is determined using the first-in, first-out method.

Deposit on Farmland

Deposit on farmland consists of funds paid as a deposit with the intent to acquire farmland in Africa by our Sadot Agri-Foods subsidiary. As of June 30, 2023, the Company recorded a deposit of $8.8 million and $4.9 million as of December 31, 2022. The Company has entered into a letter of intent with a deposit to purchase developed farmland. The Company is still in final negotiations, awaiting government approval to finalize the agreement.
On May 16, 2023, the Company through its wholly owned subsidiary, Sadot Agri-Foods, entered into a Purchase of Right and Variation Agreement (the “Variation Agreement”) with Zamproagro Limited, a Liberian corporation (“ZPG”) and Cropit Farming Limited, a Zambian corporation (“Cropit”) pursuant to which ZPG assigned all of its rights, liabilities and obligations of the Put and Call Option Agreement Over Land entered between ZPG and Cropit dated December 29, 2022 (the “Put Land Agreement”) to Sadot Agri-Foods, which provided ZPG with a one year call option to acquire 70% of 4,942 acres (2000 hectares) of producing agricultural land along with buildings and related assets located within the Mkushi Farm Block of Zambia’s Region II agricultural zone (the “Farm”) for a purchase price of approximately $8.5 million USD. The Put Land Agreement further provides that Cropit will continue to retain 30% of the Farm and that following closing, Cropit and the purchaser will form a special purpose vehicle in which both parties will contribute their ownership interest in the Farm to the special purpose vehicle for their respective percentage interest.
On May 16, 2023, Sadot Agri-Foods and Cropit entered into Joint Venture Shareholders Agreement pursuant to which the parties agreed to form a new entity in Zambia to serve as a joint venture with respect to the farming of the Farm. The joint venture is expected to be named Sadot Enterprises Limited (“Sadot Zambia”) with Sadot Agri-Foods holding 70% of the equity and Cropit holding 30% of the equity. Following its formation, Sadot Zambia will hold 100% of the Farm. Sadot Agri-Foods and Cropit will each have the right to appoint one director to the Board of Directors of Sadot Zambia. Further, upon formation, Sadot Agri-Foods contributed $3.5 million into escrow for the primary purpose of discharging a loan secured by the Farm held by ABSA Bank.
On May 16, 2023, Sadot Agri-Foods, Cropit and Chibesakunda & Co., as escrow agent (the “Escrow Agent”) entered into an Escrow Agreement pursuant to which the Escrow Agent is holding all documentation required to allot Sadot Agri-Foods 70% of Sadot Zambia, documentation required to transfer the Farm to Sadot Zambia and USD $3.5 million contributed by Sadot Agri-Foods. At closing, the Escrow Agent will release the required funds to ABSA Bank and release the required documentation with respect to the allocation of Sadot Agri-Foods’ interest in Sadot Zambia and the transfer of the Farm. Closing is subject to obtaining clearance from the Zambian Competition and Consumer Protection Commission.
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
11
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
improvements are amortized over the shorter of the estimated useful life or the lease term of the related asset. The estimated useful lives are as follows:
Furniture and equipment
3 – 7 years
Leasehold improvements
1 – 11 years
Intangible Assets
The Company accounts for recorded intangible assets in accordance with the Accounting Standards Codification (“ASC’) 350 “Intangibles – Goodwill and Other”. In accordance with ASC 350, the Company does not amortize intangible assets having indefinite useful lives. The Company determined that as of January 1, 2022, – the trademark – Muscle Maker had a finite life of 3 years and is amortizing the value over the new estimated life. The Company’s goodwill has an indefinite life and is not amortized, but 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 be tested for impairment at the reporting unit level (operating segment or one level below an operating segment). Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgment is required to estimate the fair value of reporting units which includes estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment.
The useful lives of the Company’s intangible assets are:
Franchisee agreements13 years
Franchise license10 years
Trademarks
3 – 5 years
Domain name, Customer list and Proprietary recipes
3 – 7 years
Non-compete agreements
2 – 3 years
Impairment of Long-Lived Assets
When circumstances, such as adverse market conditions, indicate that the carrying value of a long-lived asset may be impaired, the Company performs an analysis to review the recoverability of the asset’s carrying value, which includes estimating the undiscounted cash flows (excluding interest charges) from the expected future operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects of demand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized to the extent that the carrying value exceeds the estimated fair value. Any impairment losses are recorded as operating expenses, which reduce net income.
Convertible Instruments
The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with Topic 815 of the Financial Accounting Standards Board (“FASB”).
If the instrument is determined not to be a derivative liability, the Company then evaluates for the existence of a beneficial conversion feature by comparing the market price of the Company’s common stock as of the commitment date to the effective conversion price of the instrument.
As of June 30, 2023 and December 31, 2022, the Company deemed the conversion feature was not required to be bifurcated and recorded as a derivative liability.
Related Parties
12
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
A party is considered to be related to the Company if the party directly, indirectly, or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Revenue Recognition
The Company’s revenues consist of Commodity sales, Restaurant sales, Franchise royalties and fees, Franchise advertising fund contributions, and Other revenues. The Company recognizes revenues according to Topic 606 of FASB, “Revenue from Contracts with Customers”. Under the guidance, revenue is recognized in accordance with a five-step revenue model, as follows: (1) identifying the contract with the customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations; and (5) recognizing revenue when (or as) the entity satisfies a performance obligation. In applying this five-step model, we made significant judgments in identifying the promised goods or services in our contracts with franchisees that are distinct, and which represent separate performance obligations.
Commodity Sales
Commodity sale revenue is generated by our Sadot Agri-Foods subsidiary and is recognized when the commodity is delivered as evidenced by the bill of lading and the invoice is prepared and submitted to the customer. During the three and six months ended June 30, 2023, the Company recorded Commodity sales revenues of $157.6 million and $367.9 million, respectively. The Company did not have any Commodity sales revenue during the three and six months ended June 30, 2022.
Restaurant Sales
Retail store revenue at Company-operated restaurants is recognized when payment is tendered at the point of sale, net of sales tax, discounts and other sales-related taxes. The Company recorded retail store revenues of $2.5 million and $4.8 million during the three and six months ended June 30, 2023 and $2.8 million and $5.4 million for the three and six months ended June 30, 2022, respectively.
The Company sells gift cards which do not have an expiration date, and it does not deduct dormancy fees from outstanding gift card balances. The Company recognizes revenues from gift cards as restaurant revenues once the Company performs its obligation to provide food and beverage to the customer simultaneously with the redemption of the gift card or through gift card breakage, as discussed in Other revenues below.
Franchise Royalties and Fees
Franchise revenues consists of royalties, initial franchise fees and rebates. Royalties are based on a percentage of franchisee net sales revenue. The Company recognizes the royalties as the underlying sales occur. The Company recorded revenue from royalties of $0.2 million and $0.3 million during the three and six months ended June 30, 2023 and $0.1 million and $0.2 million during the three and six months ended June 30, 2022, respectively, which is included in Franchise royalties and fees on the accompanying Unaudited Condensed Consolidated Statements of Operations.
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
13
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
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 $23.0 thousand and $0.1 million during the three and six months ended June 30, 2023 and $15.3 thousand and $0.1 million for the three and six months ended June 30, 2022, respectively, which is included in Franchise royalties and fees on the accompanying Unaudited Condensed Consolidated Statements of Operations.
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 $30.0 thousand and $0.1 million during the three and six months ended June 30, 2023 and $26.2 thousand and $0.1 million for the three and six months ended June 30, 2022, respectively, which is included in Franchise royalties and fees on the accompanying Unaudited Condensed Consolidated Statements of Operations. Rebates earned on purchases by Company-owned stores are recorded as a reduction of Food and beverage costs during the period in which the related food and beverage purchases are made.
Franchise Advertising Fund Contributions
Under the Company’s franchise agreements, the Company and its franchisees are required to contribute a certain percentage of revenues to a national advertising fund. The Company’s national advertising services are provided on a 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 Unaudited Condensed Consolidated Statement of Operations in an amount that is greater than the revenue recorded for advertising contributions. Conversely, when an advertising contribution fund is under-spent at a period-end, the Company will accrue advertising costs up to advertising contributions recorded in revenue. The Company recorded contributions from franchisees of $20.0 thousand and $36.0 thousand, respectively, during the three and six months ended June 30, 2023 and $16.2 thousand and $34.3 thousand for the three and six months ended June 30, 2022, which are included in Franchise advertising fund contributions on the accompanying Unaudited Condensed Consolidated Statements of Operations.
Other Revenues
Gift card breakage is recognized when the likelihood of a gift card being redeemed by the customer is remote and the Company determines there is not a legal obligation to remit the unredeemed gift card balance to the relevant jurisdiction. The determination of the gift card breakage rate is based upon the Company’s specific historical redemption patterns. Gift card liability is recorded in other current liabilities on the Unaudited Condensed Consolidated Balance Sheets The Company had Other revenues of $13.0 thousand and $13.0 thousand for the three and six months ended June 30, 2023.
Deferred Revenue
Deferred revenue primarily includes initial franchise fees received by the Company, which are being amortized over the life of the Company’s franchise agreements. Deferred revenue is recognized in income over the life of the franchise agreements. 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.
Stock-Based Consulting Expense
Stock-based consulting expenses are for consulting fees due to Aggia related to ongoing Sadot Agri-Foods operations 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 the Sadot Agri-Foods business segment 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 the Sadot Agri-Foods business segment. See Note 15 – Commitments and contingencies for further details. For the three and
14
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
six months ended June 30, 2023, $1.1 million and $4.4 million, respectively, are recorded as Stock-based consulting expense in the accompanying Unaudited Condensed Consolidated Statements of Operations.
Advertising
Advertising costs are charged to expense as incurred. Advertising costs of $32.0 thousand and $0.1 million for the three and six months ended June 30, 2023 and $0.8 thousand and $0.1 million for the three and six months ended June 30, 2022, respectively, are included in Sales, general and administrative expenses. For the three and six months ended June 30, 2023 and 2022, $76.0 thousand, $0.1 million, $0.1 million and $0.2 million, respectively, are included in Other restaurant operating expenses in the accompanying Unaudited Condensed Consolidated Statements of Operations.
Net Income / Loss per Share
Basic earnings per common share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed using the weighted average number of common shares outstanding during the period plus any potentially dilutive common shares, resulting from the exercise of warrants, options or the conversion of convertible notes payable, calculated using the treasury stock method.
The following securities are excluded from the calculation of weighted average diluted common shares at June 30, 2023 and 2022, respectively, because their inclusion would have been anti-dilutive:
June 30,
20232022
('000
('000
Warrants18,034 17,874 
Options1,013 413 
Restricted stock awards8,001 — 
Convertible debt24 27 
Total potentially dilutive shares27,072 18,314
The following table sets forth the computation of basic and dilutive net loss per share attributable to the Company’s stockholders:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(In thousands, except for share count and per share data)
Net income / (loss) 190 (1,774)(876)(3,660)
Weighted-average shares outstanding:
Basic33,362,887 28,668,116 31,407,362 28,235,052 
Effect of potentially dilutive stock options204,832 — — — 
Diluted33,567,719 28,668,116 31,407,362 28,235,052 
Net income / (loss) per share:
Basic 0.01 (0.06)(0.03)(0.13)
Diluted0.01 (0.06)(0.03)(0.13)
Major Vendor
The Company engages various vendors to purchase commodities for resale and distribute food products to their Company-owned restaurants. Purchases from the Company’s three largest commodity suppliers totaled 96% for the three months ended June 30, 2023 and Purchases from the Company’s four largest commodity suppliers totaled 92% of the Company’s
15
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
purchases for the six months ended June 30, 2023. Purchases from the Company’s largest supplier totaled 19% and 30% for the three and six months ended June 30, 2022, respectively.
Fair Value of Financial Instruments
The Company measures the fair value of financial assets and liabilities based on the guidance of the FASB Accounting ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”).
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets or liabilities.
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable.
Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The carrying amounts of accrued liabilities approximate fair value due to the short-term nature of these instruments. The carrying amounts of our short–term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates, taken together with other features such as concurrent issuance of common stock and warrants, are comparable to rates of returns for instruments of similar credit risk.
See Note 17 – Equity for details related to accrued compensation liability being fair valued using Level 1 inputs.
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 Unaudited Condensed Consolidated Statements of Operations.
Stock-Based Compensation
The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally recorded on the grant date and re-measured on financial reporting dates
16
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
and vesting dates until the service period is complete. The fair value amount of the award is then recognized over the period services are required to be provided in exchange for the award, usually the vesting period.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires companies to recognize lease liabilities and corresponding right-of-use leased assets on the Balance Sheets and to disclose key information about leasing arrangements. Qualitative and quantitative disclosures will be enhanced to better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2021, with early adoption permitted.
Additionally, in 2018 and 2019, the FASB issued the following Topic 842–related ASUs:
•ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842, which clarifies the applicability of Topic 842 to land easements and provides an optional transition practical expedient for existing land easements;
•ASU 2018-10, Codification Improvements to Topic 842, Leases, which makes certain technical corrections to Topic 842;
•ASU 2018-11, Leases (Topic 842): Targeted Improvements, which allows companies to adopt Topic 842 without revising comparative period reporting or disclosures and provides an optional practical expedient to lessors to not separate lease and non-lease components of a contract if certain criteria are met; and
•ASU 2019-01, Leases (Topic 842): Codification Improvements, which provides guidance for certain lessors on determining the fair value of an underlying asset in a lease and on the cash flow statement presentation of lease payments received; ASU No. 2019-01 also clarifies disclosures required in interim periods after adoption of ASU No. 2016-02 in the year of adoption.
The Company adopted Topic 842 as of January 1, 2022 and recognized a cumulative-effect adjustment to the opening balance of accumulated deficit of $15.0 thousand as of the adoption date, and recognized an additional $7.8 thousand during the second quarter of 2022, based on updated information on two of our leases, for an aggregate cumulative-effect adjustment to accumulated deficit of $22.8 thousand. See Note 11 – Leases for further details.
In October 2021, the FASB issued ASU 2021-08 Business Combinations (“Topic 805”): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers”, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The adoption of this guidance did not have a material impact on the Company’s Unaudited Condensed Consolidated Financial Statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended subsequently by ASUs 2018-19, 2019-04, 2019-05, 2019-10, 2019-11 and 2020-03. The guidance in the ASUs requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used. The standard also establishes additional disclosures related to credit risks. This standard is effective for fiscal years beginning after December 15, 2022. The adoption of this guidance on January 1, 2023 did not have a material impact on the Company's Unaudited Condensed 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 19 – Subsequent events.
17
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
3.    Loans Receivable
The Company had no loan receivable balance at June 30, 2023 and December 31, 2022. Loans receivable include loans to franchisees totaling, in the aggregate, net of reserves for uncollectible loans. There were no reserves for uncollectible loans at June 30, 2023 and December 31, 2022. Loans receivable were paid in full during the third quarter of 2022 and the corresponding reserve for loan loss was reversed.
4.    Prepaid Expenses and Other Current Assets
At June 30, 2023 and December 31, 2022, the Company’s prepaid expenses and other current assets consists of the following:
As of
June 30, 2023December 31, 2022
$’000$’000
Prepaid expenses314 89 
Other receivables5 228 
Prepaid and Other Current Assets319 317 
Included in prepaid and other current assets is a receivable of $5.0 thousand and $0.2 million as of June 30, 2023 and December 31, 2022, respectively.
5.    Deposit on Farmland
At December 31, 2022, the Company's deposit on farmland balance was $4.9 million. During the six months ended June 30, 2023, the Company gave an additional $3.9 million deposit, totaling $8.8 million deposit on farmland balance. Deposit on farmland consists of funds paid as a deposit with the intent to acquire farmland in Africa by our Sadot Agri-Foods subsidiary. The Company has entered into a letter of intent with a deposit to purchase developed farmland. The Company is still in final negotiations awaiting government approval with the intent to finalize the agreement by the end of the third quarter of 2023.
On May 16, 2023, the Company through its wholly owned subsidiary, Sadot Agri-Foods, entered into the “Variation Agreement with ZPG and Cropit pursuant to which ZPG assigned all of its rights, liabilities and obligations of the Put Land Agreement to Sadot Agri-Foods, which provided ZPG with a one year call option to acquire 70% of the Farm for a purchase price of approximately $8.5 million USD. The Put Land Agreement further provides that Cropit will continue to retain 30% of the Farm and that following closing, Cropit and the purchaser will form a special purpose vehicle in which both parties will contribute their ownership interest in the Farm to the special purpose vehicle for their respective percentage interest.
On May 16, 2023, Sadot Agri-Foods and Cropit entered into Joint Venture Shareholders Agreement pursuant to which the parties agreed to form Sadot Zambia with Sadot Agri-Foods holding 70% of the equity and Cropit holding 30% of the equity. Following its formation, Sadot Zambia will hold 100% of the Farm. Sadot Agri-Foods and Cropit will each have the right to appoint one director to the Board of Directors of Sadot Zambia. Further, upon formation, Sadot Agri-Foods contributed $3.5 million into escrow for the primary purpose of discharging a loan secured by the Farm held by ABSA Bank.
On May 16, 2023, Sadot Agri-Foods and the Escrow Agent entered into an Escrow Agreement pursuant to which the Escrow Agent will hold all documentation required to allot Sadot Agri-Foods 70% of Sadot Zambia, documentation required to transfer the Farm to Sadot Zambia and USD $3.5 million contributed by Sadot Agri-Foods. At closing, the Escrow Agent will release the required funds to ABSA Bank and release the required documentation with respect to the allocation of Sadot Agri-Foods’ interest in Sadot Zambia and the transfer of the Farm. Closing is subject to obtaining clearance from the Zambian Competition and Consumer Protection Commission.
18
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
6.    Property and Equipment, Net
As of June 30, 2023 and December 31, 2022, Property and equipment consist of the following:
As of
June 30, 2023December 31, 2022
$’000$’000
Furniture and equipment1,170 1,266 
Vehicles55 55 
Leasehold improvements1,774 2,062 
Construction in process— 5 
Property and equipment, gross2,999 3,388 
Less: accumulated depreciation(1,502)(1,493)
Property and equipment, net1,497 1,895 
Depreciation expense amounted to $0.2 million and $0.5 million for the three and six months ended June 30, 2023 and $0.1 million and $0.3 million during the three and six months ended June 30, 2022, respectively. During the three and six months ended June 30, 2023 the Company wrote off property and equipment with an original cost value of $0.5 million and $0.5 million, respectively and $36.7 thousand and $0.4 million for the three and six months ended June 30, 2022. For the three and six months ended June 30, 2022, the Company wrote off Property and equipment related to closed locations and future locations that were terminated due to the economic environment as a result of COVID-19 and recorded a loss on disposal of $26.9 thousand and $0.3 million, respectively, and $0.1 million and $0.1 million for the three and six months ended June 30, 2023, respectively, in the Unaudited Condensed Consolidated Statement of Operations.
7.    Goodwill and Other Intangible Assets, Net
The Company’s intangible assets include trademarks, franchisee agreements, franchise license, domain names, customer list, proprietary recipes and non-compete agreements. Intangible assets are amortized over useful lives ranging from 2 to 13 years.
19
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
A summary of the intangible assets is presented below:
Intangible
assets,
net at
December 31,
2021		Impairment of
intangible assets		Amortization
expense		Intangible
assets,
net at
June 30,
2022		Intangible
assets,
net at
December 31,
2022		Impairment of
intangible assets		Amortization
expense		Intangible
assets,
net at
June 30,
2023
$’000$’000$’000$’000$’000$’000$’000$’000
Trademark Muscle Maker Grill1,526 — (252)1,274 670 — (167)503 
Franchise Agreements Muscle Maker Grill162 — (13)149 136 — (13)123 
Trademark SuperFit38 — (4)34 29 — (4)25 
Domain Name SuperFit106 — (12)94 81 — (12)69 
Customer List SuperFit118 — (14)104 90 — (14)76 
Proprietary Recipes SuperFit135 — (16)119 103 — (16)87 
Non-Compete Agreement SuperFit193 — (43)150 107 — (43)64 
Trademark Pokemoto153 — (17)136 118 — (17)101 
Franchisee License Pokemoto2,599 — (138)2,461 2,322 — (138)2,184 
Proprietary Recipes Pokemoto1,029 — (80)949 867 — (80)787 
Non-Compete Agreement Pokemoto328 — (119)209 88 — (88)— 
6,387 — (708)5,679 4,611 — (592)4,019 
Amortization expense related to intangible assets was $0.3 million and $0.6 million for the three and six months ended June 30, 2023 and $0.4 million and $0.7 million for the three and six months ended June 30, 2022, respectively.
20
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
The estimated future amortization expense is as follows:
Six Months Ended June 30,
20242025202620272028ThereafterTotal
$’000$’000$’000$’000$’000$’000$’000
Trademark Muscle Maker Grill169 334 — — — — 503 
Franchise Agreements Muscle Maker Grill14 27 27 27 27 1 123 
Trademark SuperFit5 9 9 2 — — 25 
Domain Name SuperFit13 25 25 6 — — 69 
Customer List SuperFit14 28 28 6 — — 76 
Proprietary Recipes SuperFit16 32 32 7 — — 87 
Non-Compete Agreement SuperFit44 20 — — — — 64 
Trademark Pokemoto18 35 35 13 — — 101 
Franchisee License Pokemoto140 278 277 277 277 935 2,184 
Proprietary Recipes Pokemoto81 162 161 161 161 61 787 
Non-Compete Agreement Pokemoto— — — — — — — 
514 950 594 499 465 997 4,019 
The Company determined that no impairment testing of the Company’s intangible assets was required as of June 30, 2023. Therefore, no impairment charge was recorded.
A summary of the goodwill assets is presented below:
Muscle Maker GrillPokemotoSuperFit FoodTotal
$’000$’000$’000$’000
Goodwill, net at December 31 2021570 1,798 258 2,626 
Impairment of goodwill— — — — 
Goodwill, net at June 30, 2022570 1,798 258 2,626 
Goodwill, net at December 31 2022570 1,798 258 2,626 
Impairment of goodwill— — — — 
Goodwill, net at June 30, 2023570 1,798 258 2,626 
The Company determined that no impairment testing of the Company’s goodwill was required as of June 30, 2023. Therefore, no impairment charge was recorded.
21
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
8.    Accounts Payables and Accrued Expenses
Accounts payables and accrued expenses consist of the following:
As of
June 30, 2023December 31, 2022
$’000$’000
Accounts payable860 1,085 
Accrued payroll and bonuses95 551 
Accrued expenses170 87 
Accrued interest expenses21 — 
Accrued professional fees166 185 
Accounts payable commodities39,615 — 
Sales taxes payable (1)
40 45 
40,967 1,953 
(1)See Note 15 – Commitments and contingencies for details related to delinquent sales taxes.
9.    Accrued Stock-Based Consulting Expenses Due to Related Party
At June 30, 2023, there were no Accrued stock-based consulting expenses due to related party. At December 31, 2022, Accrued stock-based consulting expenses were $3.6 million. Accrued stock-based consulting expenses were related to consulting fees due to our newly established related party, Aggia, for Sadot Agri-Foods operations. See Note 18 – Related party transactions for details. Based on the servicing agreement with Aggia, the consulting fees were calculated at approximately 80.0% of the Net income generated by the Sadot Agri-Foods business segment. For the three and six months ended June 30, 2023, $1.1 million and $4.4 million are also recorded as Stock-based consulting expense in the accompanying Unaudited Condensed Consolidated Statements of Operations. The Stock-based consulting expense that was due to related party was paid in stock in 2023.
10.    Notes Payable
Line of Credit
On April 28, 2023 the Company entered into a line of credit agreement with a bank whereby it may borrow up to $3.5 million at 3.00% per year. The line of credit commitment expires August 2023. At June 30, 2023, the balance outstanding on the line of credit was $3.5 million.
Convertible Notes Payable
On April 6, 2018, the Company issued a $0.5 million convertible promissory note (the “2018 ARH Note”) to the Former Parent for services rendered and expense paid on behalf of the Company. The 2018 ARH Note has no stated interest rate or maturity date and is convertible into shares of the Company’s common stock at a conversion price of $3.50 per share at a time to be determined by the lender.

On April 11, 2018, the Former Parent elected to partially convert the 2018 ARH Note for the principal of $0.4 million into 0.1 million shares of the Company’s common stock.

The Company had an aggregate gross amount of $0.1 million and $0.1 million of convertible notes payable as of June 30, 2023 and December 31, 2022, respectively.
Other Notes Payable
22
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
During the three and six months ended June 30, 2023, the Company repaid a total amount of $0.1 million and $0.1 million, and $0.1 million and $1.2 million for the three and six months ended June 30, 2022, respectively, of the other notes payable.
As of June 30, 2023, the Company had an aggregate amount of $4.4 million in other notes payable. The notes had interest rates ranging between 3.00% - 8.00% per annum, due on various dates through May 2027.
The maturities of notes payable as of June 30, 2023, are as follows:
Principal Amount
$’000
20233,727 
2024105 
2025580 
2026— 
Thereafter— 
4,412 
11.    Leases
The Company’s leases consist of restaurant locations. We determine if a contract contains a lease at inception. The leases generally have remaining terms of 1-10 years and most leases included the option to extend the lease for an additional 5 years.
The total lease cost associated with right of use assets and operating lease liabilities for the three and six months ended June 30, 2023, was $0.2 million and $0.4 million and $0.2 million and $0.5 million for the three and six months ended June 30, 2022, respectively, and has been recorded in the Unaudited Condensed Consolidated Statement of Operations as Rent expense within Restaurant operating expenses.
The assets and liabilities related to the Company’s leases were as follows:
As of
June 30, 2023December 31, 2022
$’000$’000
Assets
Right to use asset2,059 2,433 
Liabilities
Operating leases – current511 560 
Operating leases – non-current1,673 2,019 
Total lease liabilities2,184 2,579 
23
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
The table below presents the future minimum lease payments under the noncancellable operating leases as of June 30, 2023:
Operating Leases
$’000
Fiscal Year:
2023378 
2024706 
2025556 
2026386 
2027300 
2028222 
Thereafter367 
Total lease payments2,915 
Less imputed interest(731)
Present value of lease liabilities2,184 
The Company’s lease term and discount rates were as follows:
As of June 30, 2023
Weighted-average remaining lease term (in years)
Operating leases4.89
Weighted-average discount rate
Operating leases12.0 %
12.    Deferred Revenue
The Company's deferred revenue consists of the following:
As of
 June 30, 2023December 31, 2022
$’000$’000
Deferred revenues, net1,388 1,371 
Less: deferred revenue, current(93)(95)
Deferred revenues, non-current1,295 1,276 
24
Muscle Maker, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
13.    Other Current Liabilities
Other current liabilities consist of the following:
As of
June 30, 2023December 31, 2022
$’000$’000
Gift card liability13 25 
Co-op advertising fund liability99 79 
Marketing development brand liability55 35 
Advertising fund liability37 43 
204 182 
See Note 2 – Significant accounting policies for details related to the gift card liability and advertising fund liability.
14.    Income Taxes
The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of June 30, 2023 and December 31, 2022 are presented below:
As of
June 30, 2023December 31, 2022
$’000$’000
Deferred tax assets:
Net operating loss carryforwards10,690 10,615 
Receivable allowance7 5 
Stock-based compensation17 15 
Intangible assets386 314 
Right to use asset471 — 
Deferred revenues267 204 
Leases— 32 
Gross deferred tax asset11,838 11,185 
Deferred tax liabilities: