Sadot Group Inc.

Good afternoon and welcome to the Sadat Group Inc., formerly known as Musclemaker Inc. Q2 2023 Earnings Release and Conference Call. Today's call is being recorded and all participants will be in listen-only mode. After management's prepared remarks, we will open the call to questions from analysts. At this time, for opening remarks and introductions, I would like to turn the call over to Frank Pogubila, Sadat Group Inc.' 's Investor Relations Contact.

Thank you operator and welcome everyone to Sadat Group Inc's second quarter 2023 earnings call and webcast. Before we get started, we would like to state that this call may include forward-looking statements pursuant to the safe harbor provisions of the US Private Security Litigation Reform Act of 1995. To the extent that the information presented on this call discusses financial projections, information, or expectation about business plans, results of operations, products, or markets, or otherwise make statements about future events, Such statements may be forward-looking. Such forward-looking statements can be identified by the use of the words such as should, may, intends, anticipates, believes, estimates, projects, forecasts, expects, plans, and proposes. Although management believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. You are urged to carefully review and consider any cautionary statements and other disclosures, including the statements made under the heading Risk Factors and elsewhere in documents that the Sadat Group Inc. files from time to time with the SEC. Forward-looking statements speak only as of the date of the document in which they are contained, and Sadat Group Inc. does not undertake any duty to update any forward-looking statements except as may be required by law. For this call, All numbers disclosed have been rounded to the closest thousand and percentages have been rounded to the closest percent. On this call, we will refer to Sadat Group Inc. as Sadat Group or the company. With me on the call today are Sadat Group Inc.' 's Chief Executive Officer, Michael Roper, and Chief Financial Officer, Jennifer Black. Michael and Jennifer will be presenting prepared remarks related to Sadat Group's financials filed on August 9th, 2023. and those documents may be found on the company's website, Newswire feeds, and on the SEC's website linked from a Sadat Group IR pages at... At this point, I would like to turn the call over to Sadat Group Inc's CEO, Michael Roper.

Good afternoon, everyone, and thank you for joining us today. I'm pleased and proud to report that Q2 was a strong continuation of the past two quarters, highlighted with Q2 being our first ever profitable quarter in the company's history. Let me say that again, highlighted with Q2 being our first ever profitable quarter in the company's history. But before diving into our second quarter results and key achievements, on July 26, 2023, we made the exciting announcement that MuscleMaker, Inc., has taken a significant step in its journey of becoming a key player in the global food supply chain by deciding to change the company's name to Sadat Group Inc. This name change recognizes the company's evolution of our core business and aligns with our strategic vision as we transform into a truly global agri-food supply chain organization that's focused on sourcing and providing sustainable foods and feeds. The company's common stock began trading on NASDAQ under the ticker symbol SDOT. That's S as in Sam, D as in David, O as in Ocean, T as in Tom. SDOT, Sadat, on Thursday, July 27, 2023. And we could not be prouder. It's been an extremely busy time for our organization over the past quarter and really over the last eight months since our corporate strategic pivot. As you may recall, in late 2022, we began the transformation from a US-centric restaurant business. And fast forward to today, we've rapidly evolved into a truly global food supply chain organization. I'd like to begin with a brief overview of our rapidly evolving company. As we expand into new verticals within the global food supply chain sector, we have strategically segmented our business into three operating units. Our first business unit is Sadat LLC, which we will refer to as Sadat Agri Foods. Its global operations include the origination and trading of food and feed products such as soybean meal, wheat, and corn. Our second business unit is our Sadat Farm Operations. Pending final government approval, we will close on an approximately 5,000-acre farm in Zambia. The farm produces the same commodities that are in constant demand, soybean, wheat, and corn, along with avocado and mango. We've started initial operations through a right-to-use notice and expect to receive final approval on the purchase later this month. Our third business unit is Sadat Food Service Operations, which operates our three restaurant concepts. This unit encompasses over 47 fast casual restaurants. As we'll detail later on the call, we've already started reaping the financial benefits of our global diversification strategy, which exemplifies our strategic approach to expanding into each of our three main business units. Now let me discuss some Q2 highlights. I'm pleased to announce that Sadat Group, Inc. achieved top line revenue of $160 million for Q2 2023, a significant increase compared to $3 million for Q2 2022. This revenue announcement marks the accomplishment of eight consecutive months above $45 million in revenue per month for our Sadat AgriFoods business unit and demonstrates our continued overall performance. with total revenues of over $515 million since November 2022, when we began our strategic pivot into the global food supply chain sector. Overall, our second quarter net income was $190,000 in 2023 compared to an approximate $1.8 million net loss in the second quarter of 22. As previously noted, this was the company's first profitable quarter in our history. The $2 million increase in net income is primarily attributable to Sadat Agri Foods as we continue to execute against our business plan. We see Q2's results along with other strategic actions as a foundation for our future growth and diversification within the global food supply chain. I would like to specifically highlight and review our updated working relationship with AGIA LLC FZ, who I will refer to as AGIA. As disclosed in an 8K filing on November 18, 2022, Sadat AgriFoods entered into a service agreement engaging AGIA to perform services related to the purchase and sale of physical food commodities. The service agreement allowed AGIA to nominate up to eight board members, one upon signing the service agreement, and an additional seven nominations upon Sadat AgriFoods generating specific net income targets, two at $3.3 million, two more at $6.6 million, and the final three at $9.9 million. Since its inception and through June 30, 2023, Sadat AgriFoods has generated over $11.3 million in net income for Sadat Group per U.S. GAAP. As our agri-foods unit easily surpassed the third and final threshold of $9.9 million in net income, Agia nominated and Sadat Group accepted three new board directors, Mark McKinney, David Errington, and Dr. Ahmed Khan. These new board directors bring industry-specific knowledge and a wealth of experience to the company. With the addition of these three board members, Sadat Group has added all eight AGIA-nominated board directors, as per the terms of our agreement, which brings the total number of board members to 15. I invite you to read the bios of our directors on our website, sadatgroupinc.com. In addition, in the second quarter, we announced that the company amended the original services agreement with Agya. The new amendment modifies the formula by which Sadat Group would issue shares of common stock earned by Agya for net income generated through our agri-foods unit from 80% of net income to 40% of net income on an accounting basis. as a result the quarterly non-cash expense related to stock issuances to agia was reduced by 50 percent following the amendment all shares to be earned by agia under the agreement have been issued and will retain voting rights vesting over time using the 40 of net income formula we believe the agreement with agia to be an intelligent and accretive investment in the strategic future of our company We are confident that agia will continue to provide valuable insight and expertise, as we grow our global food organization. We are committed to the execution of our strategic vision and to capitalize on the opportunities presented by the global food market. So that group success this quarter is a testament to the hard work and dedication of our team and we look forward to building on this momentum, as we move forward. Now I'd like to turn the call over to our CFO, Jennifer Black, to review the financial performance of the company for the second quarter of 2023. Jennifer?

Thanks, Mike, and thank you to everyone joining us here today. Before I begin, I'd like to note that our financial results for the quarter ended June 30th, 2023 on Form 10Q were filed with the SEC yesterday, August 9th, along with the press release that same day. With that, I'd like to give an overview of the financials for the second quarter of 2023. As Mike mentioned in his opening comments, our Q2 2023 company-wide revenues increased significantly, totaling $160 million compared to $3 million for Q2 of 2022. At the $160 million in revenue increase, $157 million was primarily due to sales revenue from our agri-foods unit, which completed 21 transactions in Q2 with the average revenue per transaction of $7.5 million and the average cost of goods sold per transaction of $7.3 million. These 21 transactions were completed across 10 different countries. Importantly, as Mike mentioned earlier, and we don't want everybody to forget, the company delivered its first profitable quarter ever. We saw a $2 million increase in net income in Q2 2023 when compared to Q2 2022. Our second quarter net income was $190,000 compared to $1.8 million net loss a year ago. The $2 million improvement in net income is primarily due to Sedat AgriFoods. Sedat Food Service Operations generated total revenue of $2.8 million. This consisted of $2.5 million from company-owned and operated locations and $240,000 in royalties and fees collected from both Muscle Maker Grill and Pokemoto franchise locations for the quarter ended June 30, 2023. Revenue from company-owned and operated locations decreased due to closing underperforming and non-profitable Muscle Maker Grill restaurant locations, while the royalty revenue increased by 46% as the company continues to focus its restaurant business unit strategy on franchising the Pokemoto concept. Mike will provide additional details regarding our plan for Sadat food service operations a bit later. The third business unit is our farm operations. Since this unit is in its early development, we do not have financial results to share. However, I'd like to take this opportunity to speak to our goals and strategies for the farm. The expansion into farm operation aligns with the Sadat group's strategic vision of increasing margins through vertical integration. Our acquisition of an almost 5000 acre farm in Zambia, pending government approval, which is expected in Q3, has the potential to deliver multiple benefits. First, the farm has the potential to provide a steady and reliable supply of grains and tree crops, which are currently experiencing constant demand and yielding higher margin. In addition, The consistent production of these farmed products has the potential to elevate our trading operations with more sophisticated types of trades, along with the associated higher margins. Second, the farm could serve as an asset for collateral, potentially enabling access to credit facilities. This financial leverage could allow the company to pursue further growth opportunities and investments. Lastly, the farm has the potential to provide a fresh source of revenue by operating as a regional hub for smaller farmers. By providing future warehousing and distribution services for their products, the SADOC Group will not only aid these farmers in reaching wider markets, but may also help them optimize their agricultural practices. In conclusion, the strategic decision to vertically integrate through the farm acquisition is expected to yield multiple accretive benefits to SADOC Group. Let me now turn to the overall financial picture for Sadat Group. Even though we had amended the service agreement with AGIA, the issuance of common shares to AGIA for the stock-based consulting agreement was still a significant change in expenses in the second quarter of 2023 compared to the same period in 2022. The stock-based consulting expense of $1.1 million for the quarter ended June 30th, 2023 is a result of common stock shares issued as a consulting fee due to AGAIA for our agri-food subsidiary net income performance. Based on the service agreement with AGAIA, the stock-based consulting fees are now calculated at approximately 40% of the net income generated by the SADOC business unit. As of June 30, 2023, we had a cash balance of $5.1 million and working capital surplus of $7.7 million. The cash decrease in the second quarter of 2023 was due primarily to cash used in operations of $4.2 million. In addition, the company deployed capital into smaller-sized trades, which tend to generate higher margin. The company has over $7.6 million in net short-term receivables that are due in less than 60 days. With that, I'd like to turn the call back over to Michael Roper.

Thanks for the financial overview, Jennifer. Appreciate it. We're excited to report that our updated diversification strategy and emergence as a global agri-food supply chain organization are yielding positive results. The addition of Sadat Agri-Foods has undeniably generated substantial value for the company. Now I'd like to turn our attention to the food service operations. As we progress in our strategic pivot towards the global food supply chain sector, we announced previously that we'll be restructuring our three restaurant subsidiaries. We are reducing restaurant operating expense and overhead as well as working capital demands by closing underperforming restaurant locations while re-franchising or selling most of our remaining company owned locations. will shift to a franchise royalty generating model focused on our pokemodo concept with 32 units open two more scheduled to open next week and another 58 franchises sold but not yet open we are seeing significant interest and confidence in pokemodo in fact we just completed the sale of three additional pokemodo franchise locations in kansas and oklahoma just last week Franchisees of our Muscle Maker Grill restaurants will have the option to remain as a Muscle Maker Grill restaurant, convert to Pokemoto, or become a dual branded Pokemoto slash Muscle Maker Grill unit. Lastly, we're seeking strategic alternatives for our super fit foods concept. So we're making some significant changes inside this restaurant division that will reduce our costs and improve our overall cashflow. These actions will allow us to strengthen our balance sheet and reallocate funds towards growing the agri-food supply chain business, reinforcing our commitment to increasing shareholder value by focusing on our path to profitability, market diversification, and a strengthened brand presence. In summary, we are extremely pleased and proud with our performance this quarter. Before I finish, I would like to also note that that group was recently added to the Russell Micro Cap Index. We are proud to be added to the Russell Micro Cap Index as we believe it shows our continued progress and efforts towards becoming a more significant player in the global food supply chain sector. Looking back on the work accomplished to date, we're extremely proud of our achievements, but the real excitement lies in our future. Moreover, we're thrilled to share that in the coming days, weeks, and months will be filled with additional exciting news as we continue to grow and shape the future of Sadat Group, Inc. Your continued support and engagement are invaluable to us, and we eagerly anticipate sharing our progress and milestones with you. With that, let's open a call to questions from the analysts.

Thank you, Michael. I would like everyone to please note that Kevin Mohan, Chairman of the Board of Stock Group, is on the call and will be participating in the Q&A portion. We'll take the first question from Erin Gray with Alliance Global Partners. Erin?

Hi, good afternoon and thank you for the questions. Congrats on all the initiatives and strategic actions. First question for me just on the quarter. I know it's still very early days for Sadat revenues. I'm still seeing good monthly revenues, you know, above the 45, you know, each month, but it is down a little bit from the prior quarter. So, You know, just from a high level perspective, if you could provide some, you know, commentary of what you're seeing in terms of transactions and size. And I know sometimes it can be a thin margin business. So, you know, are there some times where you're passing up some revenue opportunities, just given the lower margins associated with it? And do you think you getting some credit terms might offer you greater opportunity for those revenues? So any color in terms of, you know, the sales outlook that you're expecting in terms of, you know, the size of the monthly revenues. And if you think, that 50 monthly revenue is a better run right going forward or not. Thanks. Okay.

Thanks, Aaron. And this is Mike. And just before I start, I apologize to everybody. I am actually at the end of my isolation from COVID. So we are all in different rooms right now. So if we sound like we're talking over each other i apologize but i'm having to isolate um around that if you hear me cough and all that that's that's that's me trying to get through it so i apologize in advance and aaron uh thanks for your question you worked in about nine of them um all this one question that are in there um but i will uh i'll start addressing some of those you know at at the beginning you know the biggest question kind of summarizing all if you're talking about revenue And what's the revenue look like as we move forward on things? And I like to look at revenue in a couple of different ways. Revenue can definitely be impacted by the size of the transaction, the type of the transaction, the price of the commodity, all kinds of different things that are in there. And what we have noticed in the last quarter is that really what drives a lot of the revenue numbers is the price of the commodity itself. So as commodity prices drop in general, you know, your revenue can drop with it and vice versa. Okay, now we're still shipping basically the same tonnage, a product. It's just that if corn is, you know, 10 cents a ton cheaper than what it was, you know, the previous quarter, your revenue could go down. So a little bit is fluctuating through the commodity world like that. You did mention things about margin and, you know, what does it look like in the future and kind of what our run rate might be as we're looking out into the next quarters. If I take a look back over the last eight months, our highest quarter was call it 93 million that we reported in revenue. Our lowest was about 46, 45, 46 that we reported, but our average is around 63 million. We kind of view that as that's really where we see things kind of moving forward in the future, right, is to that level. However, that's where we are today, not including adding things like new orders or new trades coming in through LATAM. If you remember, we announced about a month ago, a month and a half ago, that we started a new venture and called it Sedat Latam, which is, you know, Latin America, the North Americas, right? North Central and South America trade routes. And so those are just starting to come online now. We've actually just initiated our first trade. You know, we'll be talking a little more about that, you know, in the next week or two here, a little more details. But, you know, we did just start initiating our first trade through there. So you'll start seeing that layer in on top. of the averages that we've been seeing so far. So that, you know, call it the 60 million on average and they start layering LATAM on top of it. Those are some pretty good numbers. You did ask, you know, about margins and trades that are out there. And I'll let you know that, you know, there are instances where we just pass up on a trade, right? I mean, it's very conceivable that, you know, and I'll use an example. There was one that was out there that was for about $15 million, right? And at the end of the day, when you looked at it, the margin on it was literally like $20,000. It's just not worth doing it or whatever. It's not worth taking the risks or anything like that. So yes, we do take a look at those type of things in regards to picking up trades. Jennifer, do you want to throw anything in there about margins?

Yes, absolutely. So on the Sadat agri-foods, the margins today are solely dependent on the trade business that we're doing right now. Like Mike said, that doesn't include the Sadat Latam that has recently started. It also doesn't include any of the other verticals that we've done. Moving forward, we mentioned before, we're going to incorporate the Zambia farm in there. We will use them to control the originations. We also want to be able to control the destinations and the logistics of all of our trades. And by controlling all manners of those, we'll potentially be able to create more consistent and higher margins across the board. Anything else on there?

Thanks, Michael and Jennifer. Thanks, Michael and Jennifer. I really appreciate that on the revenue and then some of the margin color there too. Wanted to dig a little bit deeper on the margin side. You know, last quarter, you had spoken to some seasonality in the margins for the sit off business. It was in the low twos were about 2% again. For this quarter. So just wondering, where's there still some seasonality in there and seasonality then get get stronger. In the back half of the year, just to familiar ourselves with the business familiar ourselves with it and then Speaking towards LATAM, with the partnership, anything to think about in terms of the margin of that revenue and the structure of the economics of that partnership that might impact the margins being lower than for the rest of the business?

Thank you. Yeah, let me talk about, and again, I never know if I pronounce it right. It's LATAM, LATAM, LATAM. It's L-A-T-A-M, however you want to pronounce that, right? But I'm from Chicago. I say things funny. sometimes. But looking at that, look, those trades are pretty typical trades of what we've been seeing. So they're still going to be in the corn, the wheat, the soy, those type of areas. And basically some of the sizes as well. The key point about it is it gives us a different hemisphere than what we've been doing before. So if we're in a seasonality you know, issue in one hemisphere, then this can pick up, you know, sales in the other hemisphere and vice versa, right? So it helps smooth some of this stuff out, you know, from a seasonality perspective. So I expect moving forward that seasonality will start playing a lower, a lower, I guess, effect, if you want to say. Now, not that we're still gonna have seasonality in a certain hemisphere, but the other one will start picking up for it to give you a little bit more consistency as you move forward. Jennifer, you got anything else on that?

No, I mean, I think that kind of addresses most of it. And then as we continue to build our trade business and extend into different areas, that will continue to smooth itself out.

Okay, great. Thanks for that color. Last one for me then, just in terms of optimization of the restaurant business, any color you can provide on timing of some of the initiatives, you know, namely kind of closing of the underperforming stores when you expect to sell some of those own stores to franchises and then, you know, when you might come to a resolution on those strategic alternatives for super fit. So just any color on expected time of those would be helpful. Thanks.

Okay, sure. Let me jump into there. So we've already started the initiative, right? We've already started closing a few locations that were underperforming. We've actually sold one of our locations in the Connecticut market for Pokemoto to a franchisee. And we've gotten discussions with a bunch of other people as well for some of the remaining units there. So we're already in the motion of doing this. And you're starting to see some of those results as, you know, Q2 loss in the restaurant group is less than Q1 loss as we start to roll through some of these things. Right. And so, you know, we're aggressively pursuing it. And again, it's a little bit different depending on, you know, each location. There'll be some locations that we close. I think most of those, there might be one more location. that's in there that we might just purely close. The rest is going to be trying to convert them over to franchise locations. And like I said, we've already got one of them converted over. We've got discussions with multiple people and others as well. So throughout Q3, you're going to be seeing all those impacts happening. And then throughout Q4 as well, as we finalize it out. I like to look at it almost from a run rate When you take a look at year to date on the restaurant side of the business, we lost, call it $600,000, a little bit less than that, but let's just round it to 600K. So if I annualize that, you're over a million dollars a year in savings as we convert all these things. Now that's assuming we can execute at 100% of each location. You know that's in there and successfully sell them so you know we think there's there's a pretty good. You know impact on the bottom line just from doing some of this restructuring and then you have your corporate overhead that's part of it as well. Right you've got you know, obviously, you know, as you start doing these things you don't have to have as much from a corporate perspective, meaning. You know, health insurance gets reduced payroll processing gets reduced and you know regular insurance gets reduced those type of things. I'll start falling into the corporate overhead bucket and you'll see some reductions there as well. And we think that could be as high as an additional half million to one million on top of it. So there should be some pretty good impact on the bottom line as we move forward and allowing us to shift resources more into the SADAT side of the equation. Regarding Superfit, we just started that process, right? And so we have had some inquiries. We're following up on those inquiries right now. Don't have a lot to report there yet, other than we are aggressively pursuing that and following up with everybody that's out there. So, you know, we have had some pretty decent interest just from making the announcement, you know, a couple of weeks ago. So it's looking pretty good from that perspective.

Okay, great. Thanks. Thanks for detailing.

I'll jump back in the queue. Thanks, Aaron.

Thanks, Michael. Thanks, Jennifer. Thanks, Aaron. Next question is from Bill Gregozeski with Green Ridge Global.

Hi, thanks. Great quarter. I have kind of a handful of questions about the farm operations. For just looking at Zambia, you know, you've given a range of crops. Should we expect this to be kind of a diversified planting farm on an annual basis? And then how should we look at the margins for that? And then also, you mentioned storage and other services you're going to provide to area farmers. What's the CapEx need and timing for that and margins for that?

So let me talk about quickly about some of the crops and all that that's there. So we currently have wheat that's planted. We expect to harvest that wheat end of September, beginning of October timeframe. That's kind of when the harvest season is. As we mentioned earlier, you know, we don't have the final approval from the government authorities yet. That should happen hopefully any day now. But we do have the right to use, right? And so, you know, we're farming it almost like a lease to a certain degree, I guess. It's probably a bad analogy for it. But, you know, we do have the right to, you know, be operating that farm. And so we've started those initial operations so we don't miss anything. the harvest season that's coming up. Now on top of wheat, we also have mangoes, we've got avocados, and we can plant different crops as we move through. And just to be clear, the farm itself as it is today is not 100% planted, right? So we're gonna be able to increase some of the crops and some of the harvest numbers, whatever that come out of there over time as well, right? As we fully integrate that farm from where it is today. So things are looking up from that perspective. Regarding margins and all that, I'm going to throw out a rough number. It's really in that 25% range on those. But that can drastically move or whatever, depending on, obviously, the quality of the harvest and the crop and the commodity prices and everything at that time. But you definitely have a lot higher margins there than you do, you know, through our normal trading cycle. And that's why when we talk about vertical integration, you know, that's what helps the overall margins of the business, right? As you start incorporating, you know, all the way down to the source, right? The origination side of the equation. And then you can, you know, so you control the source, you can control some of the logistics as you might get into shipping and those type of things you can control um you know some of the distribution you can control you know obviously you know out of those at the store levels as well right so you know you got the origination your logistics and the um and the destination type of stuff that you can control that's in there did i did i answer all your questions sorry i want to make sure i didn't miss one

Yeah, sorry, I asked a lot in there. On the additional services like storage and things for other farmers in the area, what's the plan for CapEx on that? And, you know, what you see from revenue margin potential from that service business?

Yeah, so a couple things there. So, you know, we're looking at one of the advantages of the farm and where it's located is you have, you know, other local farms all around you, right? And where we're located is actually really pretty strategic. We've got, you know, some really good roads and some railroads and all that stuff that are right there running, you know, either adjacent to our property or through our property, right? we'll be able to start you know and we've had discussions with some of the local farmers already about warehousing some of their crop you know whatever that's in there as well right so you know kind of being a hub you know whatever to be able to distribute this stuff and so we're just in the initial stages on that right um i don't have a real true unless jennifer do you remember i don't i don't have a true cap x number on that yet do you have something i can't remember it's it's still too early to discuss right now we we have some numbers but they're

it's still too early for us to kind of go out and lay out the exact numbers.

If I could jump into, this is Kevin Mohan, that's all going to be predicated on, you know, the different deals that we have working in those areas. And they can all change based on the size of the farms. And so I think that's information though, that we will be able to get a little bit more detailed on at another time. We're just probably a little premature at this point.

Okay. And then is this kind of a model you want to replicate for other farms? Or would you look at other things like commodity processing as well?

Yeah, I would say this is kind of a model as we look at some of the other farms that are out there, right? I mean, we want to kind of be the... you know, I guess it's a hub and spoke kind of model, you know, for a certain degree. So you can kind of accumulate, you know, different farms around you, not only from purchasing yourself, but then also, you know, through some of the different warehousing and distribution, like we just talked about. So that's a pretty, you know, common structure that's there.

That's how you create the consistency and the margins for this business. Because like Mike mentioned earlier with seasonality, You know, the more verticals that you can integrate into your business, the easier you're able to capture these margins, maybe in smaller increments, just that you can kind of achieve those numbers that you've created as far as an expectation.

Okay. All right. And last question. Did you guys buy any shares back from the buyback flame?

Yeah. So if you don't mind, Mike, I'm going to take that one. Yeah, so as far as the stock buyback program, you know, we did implement our stock buyback program. I think it's really important, William, that everybody that's on this call understands that, you know, one of the challenges that you have as a public company is that if you have material non-public information that's ongoing, and I would use just as one small example of that, the services agreement with Agia. When you have something that you make a material change on like that, you can't trade on that. And so, you know, because of the bulk of what we've had going as far as material non-public events that are working on in the background, we've been fairly limited. But I think it's important for the investors to know that we do have the plan in place and we have every intention of taking advantage of it when the time is right and when we are not in a blackout period.

Okay. All right. Thank you, guys.

Wonderful. Thank you, Bill. Next, we have Tom Kerr with Zacks Research. Please go ahead.

Hi, Tom. Hi. Good morning, guys. Just a follow-up question on the overall Sadat business as it pertains to commodity prices. You mentioned that a high commodity price would be higher revenue, but does it affect margins? And I just noticed that rice prices were at 12 year highs i mean would something like that be positive negative or neutral because you're just looking at a spread business on margins for profits you guys want me to take it again we're in different rooms

Jennifer, Kevin?

Sorry, I was on mute. I apologize on that. I was trying not to everybody. So it just depends on the traits because when you're doing trades, sometimes you're executing on the contracts. Now, sometimes you're executing later. Are they locked in prices? Are you doing longer term prices? Are you hedging those risks? There's all different types of variables that come into play. And it depends on the type of trade. And just because rice prices are up, Doesn't mean that spread is necessarily there. It can depend on the type of trading situation. Mike, Kevin, do you want to add anything to that?

No, I think that really kind of sums it up, right? I mean, so you've got it. Sorry. OK, sorry. Jumping on top of each other. Like Jennifer said, when people look at just pure revenue, remember there's a lot more tied into it from the margin perspective and how you can drive margin through there. It's not necessarily linear to the revenue side of the equation. It's the type of trade, the timing of trade, all that kind of stuff that's in there. I just want to make sure we're a little bit careful on just focusing on the commodity price up or down, but that's not necessarily what drives the margin.

Got it. Okay, that makes sense. And on the restaurant business, and sorry if I missed this, the franchisees or your corporatives, I'm seeing problems with food price inflation or the ability to raise prices to cover that big issue of the day.

Yeah, so I'm sure we all know on the call, right? Last year, especially, there was a huge increase in food prices, right? Across the board, right? Retail side, wholesaler side, everything and virtually all, you know, commodities and items that were out there. And it also went into paper goods and everything as well. have seen though recently in the last you know quarter or so that is that is basically stabilized you know now now it's really more of certain commodities might be up while certain other ones are down you know or whatever right and so it's overall it's kind of stabilized and as a matter of fact when you look at our food cost percentage as a percentage of sales of the restaurants our food costs actually as you know as a percentage you know decreased in this quarter versus the previous quarter in the previous year So, you know, we are, you know, attacking some of that food stuff. But, you know, overall, I would say that the food prices are stable. We did take price increases back in the first quarter and in Q4 of last year as well to offset some of that stuff. So as as the prices of the food comes down, it helps us manage that in a lot easier way. You know, we do it through menu management. And like I said, we've also done it through some price increases. So right now we're not seeing a huge impact or push on food prices going up. It's pretty stable. We aren't planning right now to take a price increase. We are monitoring not only just what we think the consumer can handle, because they're getting hit from all angles, obviously, right, with inflation and everything else going on out there. But we're also looking at our competitors to see what they're doing as well. And so we're kind of in a hold mode right now from that perspective. But again, we're not seeing any increases. We're actually seeing a little bit of improvement that's out there. And that's not only just for our corporate stores, but also for the franchisees. One area we are seeing an increase though on, as most can probably imagine, is in the labor side of the equation. So we're having to try to manage through some of that. Luckily enough, our model at the restaurant level doesn't require a lot of labor. There's not a lot of labor for just running the restaurant, because there's no cooking and all the other stuff involved. There's not a lot of labor for training either. So, it's becoming more stable, but there is pressure going up. We just don't have as much of an impact as some other type of concepts may have.

Got it. That's helpful. One more quick one from me. I'm still confused on the stock consulting expense. If there's $1 million in the quarter, does that... maintain the next two quarters, or does that eventually go away? I'm just kind of confused on the timing of that, of how and when it goes away completely.

Do you want me to speak on that, Mike?

Sure, if you want.

Okay, so the agreement, you know, was 80% of the CDOT agri-foods net income, which was reduced now to 40%. That, what happens then is in the agreement to reduce those shares, we provided those shares, issued those shares to Aggie, so they have the shares fully issued. Those will vest based off of the percentage of income. So those shares, I believe it's 8 million shares right now, a little over 8 million, will vest quarterly until they are fully earned. Once they are fully earned, then there is the debt component where we can accumulate debt up to roughly $71 million. That expense will not go away until the shares have been fully issued and that debt has been fully utilized as long as we want to continue this agreement, the two parties do.

Got it. And it's just kind of impossible to predict when that will be, right?

It will depend on how fast and how large we grow.

and how much the unit is profitable. Okay. All right. That's all I have. Thanks. Okay.

Alexa.

Sorry about that. I was on mute. Thank you so much. We will take the next question from Ben Cleave with Lake Street Capital Markets.

Sorry, I was on mute. I had a bunch of questions on your vertical integration strategy, but those have generally been addressed. So I appreciate you calling on me. Congratulations on such a dynamic period, but I think I'm in good shape for now. Great. Thanks, Ben.

Thanks, Ben. Lastly, we have Rob Goldman with Goldman Small Cap Research. Rob?

Hello. Nice quarter. Most of my questions have been answered, but just a couple quick ones regarding your new business in the Americas. Mike, you'd mentioned that you just executed your first trade. Congratulations on that. And my question with respect to that is, is that a little bit early in the cycle? I probably would have thought maybe your first transaction might not be until the next quarter. So that's certainly a positive. And just one more color on there, if you could provide that as well.

Yeah, so a couple of things. One, you know, we initiated the trade. I don't want to say we've, I don't like to say executed until it's done, right? Until all the stuff's done, you know, we've got all the boats, it's done, it's been delivered and everybody can just, you know, say this thing is completely fully done. But yes, it's been initiated, meaning we're loading boats and starting the process. We've got the agreements in place and we're starting to make that happen. And yeah, it is earlier than we kind of thought. You know, it takes a little bit of time to, you know, obviously set everything up, right? You know, not only just, you know, from a trade perspective, but also, you know, just from a... corporate governance operational type of perspective, if you want to say, right? So it is a little bit earlier than we thought, but, you know, we're hitting the ground running and it's all good news of things that are happening out there. So we're pretty pleased with what's been going on there so far and expect more than just obviously these initial ones that are coming through. So now it should be relatively consistent as we start moving forward.

Sure. And with respect to that, Do you anticipate the category of business, if you will, from that location to be similar to the traditional trading type of business you've been doing, or might there be more of an emphasis on logistics or shipping?

Yeah, I don't know if Jennifer's got any more insight than I do on this, but as far as I like to look at it, it's pretty similar to what we're doing everywhere else. Right. You know, meaning the same type of crops, the same type of, you know, model that's out there, except now it's in a different hemisphere. Right. And we're focusing on the Americas, you know, on this one. Right. So, you know, I don't know if that's answering your question, but that's that's that's kind of how I view it. Okay, great. Thank you.

Okay.

Wonderful. That concludes our Q&A portion of the call. Mr. Roper, do you have any final comments?

Yeah, let me just throw out there a little bit. I do want to express my gratitude and thanks for all the stakeholders and shareholders that are believing in what we're doing and where we're going. We've obviously done a really big pivot in the company and in a very short period of time have made a lot of progress and are moving in a pretty rapid pace being part of this overall global food supply chain. It's a big endeavor. It's not just you know, one facet of the supply chain. It's all of it, right? And so, you know, we're getting into the farming side of the equation, obviously. We're already in the trade. We already have the consumer side. We'll be filling in other pieces in there as well, not only new verticals, but also expanding on existing verticals. And so we get deeper and deeper into that supply chain. So I just want to say thanks for everyone for you know, believing in the company where we're going. And then I also want to send out a quick thanks to all of our employees and vendors and partners that are out there. You know, really, they're the ones doing all the work. And, you know, there's a saying we have internally that, you know, sometimes we feel like we're drinking out of a fire hose because there's so much going on and all the employees are putting in extensive hours and efforts and doing everything they can to really make this company something special. So I wanted to thank everybody from there as well. So that's all I had, Alexa. I appreciate it.

Thank you so much, everyone. We will go ahead and conclude today's meeting.

Thanks, everybody.