Sadot Group Inc.

Welcome to the Sadat Group, Inc. Q4 Fiscal Year 2023 Earnings Conference Call. Today's call is being recorded and all participants will be in listen-only mode. After management's prepared remarks, we will take questions. 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 Q4 Physical Earnings 2023 conference 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 U.S. Private Securities Litigation Reform Act of 1995. To the extent that the information presented on this call discusses financial projections, information, or expectations about the 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 in Sadat Group Inc.' 's most recently filed Form 10-K and elsewhere in documents that 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. Unless otherwise noted, all numbers disclosed in this report are the amounts attributable to Sadat Group Inc. and exclude the portion related to non-controlling interests. 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's Chief Executive Officer, Michael Roper, Chief Financial Officer, Jennifer Black, and Chief Investment Officer and Chairman of the Board of Directors, Kevin Mohan. Michael and Jennifer will be presenting prepared remarks related to Sadat Group's financials filed on March 20th, 2024, and those documents may be found on the company's website, Newswire Feeds, and on the SEC's website linked from the Sadat Group's website at www.sadatgroupinc.com under the Investors tab. At this point, I'd like to turn the call over to Sadat Group's CEO, Michael Roper. Michael.

Thanks, Frank. Good morning, everyone, and thank you for joining us today as we present the results of our fourth quarter and full year earnings ending December 31st, 2023. Before diving into Q4 and the 2023 full year results and highlights, I'd like to acknowledge that it has been a truly transformative first 16 months since Sadat Group refocused and retooled the organization to become an emerging player in the global food supply chain. Beginning with our initial focus on agro-commodity origination and trading, we've embarked on a journey of diversification and growth. Allow me to give you a few headlines before we dive into the specifics. First, our 2023 total company revenue rose to $727 million from $162 million in 2022. Second, our 2023 full year adjusted EBITDA was slightly positive compared to a $2 million loss year over year for 2022. Third, our total assets increased from $27 million in 2022 to $178 million at the end of 2023. And lastly, we are now fully focusing the company on the agro commodities business as we've made the decision to explore alternatives, including potentially divesting the company of its restaurant operations. So let's jump into the details. I'm pleased to announce that Sadat Group Inc. achieved CHOP line revenue of $727 million for the full year of 2023. This marks a significant increase over the $162 million generated in 2022, noting that we had only commenced our Sadat Agri-Foods subsidiary operations in November of 2022. To be more precise, the Sadat Agri-Foods division accounted for 98.7% of our total company revenue for 2023. This is an extremely significant point, given where we were a year ago, where we are today and where we're heading. So, where are we heading? Our vision is to become a global food supply organization focused on origination and trading of agri commodities along with investments that have the potential to help improve our trading margins. Aligning to this goal, I can announce that we have formally engaged listed and associates in New York, specialists in the sale of restaurant concepts to facilitate and exploring the divestment of our remaining restaurant and meal prep assets, which have had a material impact on earnings over the past year. With our remaining restaurants still weighing on our P&L for 2023, I am pleased to report that we recorded full-year positive adjusted EBITDA of $89,000 for 2023 compared to a $2 million adjusted EBITDA loss for 2022. Pretty significant change. The adjustments to EBITDA were a series of non-cash items related to the restructuring of our legacy restaurant brands, our corporate name change to Sadat Group Inc., and overall financing strategies, among other items. While these charges did impact our bottom line, they were one-time charges essential for helping to fortify our long-term financial strength and growth opportunities for the company. We anticipate further non-cash items to affect our bottom line in the near future as we proceed with the sale of our restaurant operations, along with stock-based performance expenses as part of our consulting agreement with Agia FZ LLC with respect to our agricultural operations. Focusing on Sadat AgriFoods, The business unit serves as our economic engine, characterized by high dollar volume with narrow margins, which is typical for the agri-commodity trading industry. In 2023, Sadat AgriFoods generated $718 million in revenue and $9.3 million in net income for the company. You may have noticed that we've transitioned from disclosing monthly revenue numbers to a quarterly reporting cadence to better align revenues with the company's margins and profitability to present a more precise financial overview. It is also important to note that we trade exclusively in agri-foods for human and animal consumption, including soy, corn, wheat, oils, and oilseeds. The trades typically range in physical size from 130 to over 78,000 metric tons or 35,000 to 45 million per trade, and we averaged over 20 trades per quarter over the past year. In order to expand our global reach, we've recently increased our trading offices, adding Sadat Lattam in Miami, Florida, and Sadat Brazil in Sao Paulo, sorry if I mispronounced that, Sao Paulo, to our existing locations in Singapore and Dubai. Moreover, we remain open to exploring additional expansion opportunities in the future. While expanding our global presence is essential, our growth hinges on access to trade financing capital. The growth of our top line revenues and bottom line margins is directly linked to increasing our access to trade financing, particularly to execute larger trades. With a year of financial reporting behind us, we are now in a better position to potentially access new and larger trade financing facilities. I cannot emphasize how important these trade financing facilities are to our growth. Access to such financing would provide us with the flexibility to pursue more and larger agro-commodity trading opportunities, thereby increasing our top-line revenue and potentially enhancing our margins and net income. In August 2023, the company expanded its footprint in the global food supply chain with the acquisition of approximately 5,000 acres of farmland in the Makushi region of Zambia through our majority-owned subsidiary. This strategic move enables us to produce in-demand grains and tree crops such as soybean, wheat, corn, mango, and avocado, complementing our origination and trading operations to bolster our supply chain resilience and efficiency. Sadat's farm operations not only stand alone as a profit center, but it also serves as an integral part of the total supply chain operation. The farm crop allows the company to trade year round and the underlying commodity as a collateral in case the market turns negative to help insulate the market fluctuations. I'm happy to report that we have recently signed an agreement with the Republic of Zambia's Food Reserve Agency, reaffirming the company's dedication to combating global food security challenges. This agreement aims to support the Zambian government's efforts to safeguard national food security and bolster the supply and production of maize, a key staple in the region amidst growing demand. The agreement will facilitate the cultivation of high quality maize. In support of this agreement, we have started our fall harvest of both maize and soybeans and has, as of this recording, delivered over 96 metric tons of maize from 24 hectares with a full maize harvest of the remaining 513 planted hectares anticipated to take approximately seven to eight weeks to complete. The harvest for more than 348 hectares of soybeans will begin approximately three weeks from now and be completed in the mid to late May timeframe. In addition to the Sadat Agri-Food's current ongoing harvest, the company has also initiated the pilot program to help small farm owners in the region receive essential farm inputs such as seeds, fertilizers, et cetera, that they need in order to plant and farm their land. This contract farming program is in its pilot stage, engaging approximately 140 local farmers, covering over 1,400 Hextars. It's estimated that there are close to 3 million hectares, which actually converts to about 7 million acres of land in Zambia alone, belonging to small owners that are all in need of help to acquire the inputs needed to farm. The program allows for Sadat AgriFoods to secure the inputs from local suppliers on credit terms, allowing the small farmers to pay for them at a later date with the farm product at time of harvest. The company in turn collects a minimal management fee and increases its presence in the region. This initiative marks a significant contribution to local communities and the positive impact we can create as a large international company in rural Africa. Another new and exciting business line we've engaged in is carbon credits. Earlier this year, the company acquired a forward contract for carbon credits from an ongoing mangrove planting project in Indonesia. This move is aligned with Sadat Group's sustainability values and diversifies our product portfolio to open new markets and new opportunities. Carbon credits have become an inseparable part of agriculture and industry across the world, playing a major part in regulating and managing global environmental pollution. This asset is also part of the company's vision to potentially offer carbon neutral commodity trades in the future. Overall, for 2023, Sadat Group reported a net loss of approximately $7.8 million, in contrast to the net loss of approximately $8 million in the previous year ending December 31, 2022. As previously mentioned, there were a number of one-time charges that significantly impacted our results. While these charges necessitated short-term financial adjustments, they are essential steps towards our long-term objectives. What is important to understand is that our economic engine, Sadat AgriFoods continued to perform, generating $9.3 million in operating income in 2023, further validating the company's strategic direction to focus on this business moving forward. While some tough strategic decisions were made this year that have impacted our financial results, we recognize their necessity in order to potentially impact the long-term benefits for the overall strength of the company and our valued stakeholders. We remain dedicated to executing our strategic vision and harnessing the opportunities the global food supply chain presents, and we eagerly anticipate building upon 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 fourth quarter and full year results for 2023. Jennifer?

Thank you, Mike. Before I begin, I'd like to note that our financial results for the year ended December 31st, 2023, on Form 10-K were filed with the SEC yesterday, March 20th, along with the press release that same day. With that, I'd like to give an overview of the financials for the fourth quarter of 2023. Our Q4 2023 company-wide revenues increased significantly, totaling $171 million, compared to $153 million for Q4 of 2022. The $18 million revenue increase was primarily due to sales revenue from our Sadat Agri-Foods Division. which was only partially operational in Q4 of 2022. Sadat Agri Foods completed 24 transactions in Q4 with the average revenue per transaction of $7.1 million, with the average cost of goods sold of that transaction of $7 million. These 24 transactions were completed across 16 different countries. The company incurred approximately $525,000 in stock-based compensation expense in Q4 of 2023. These expenses are primarily the result of stock-based performance expenses as part of our consulting management agreement with our consultant, Aggia. Now, let me turn to the overall financial picture for the Sadat Group for the full year ending December 31st, 2023. For the year ending December 31st, 2023, our company-wide revenues significantly increased and totaled $727 million compared to $162 million for the prior year ended December 31st, 2022. The $565 million increase is primarily attributed to the commodity sales revenue generated by Sadat AgriFoods. Our adjusted EBITDA was a positive $89,000 in 2023 as compared to a loss of $2 million in 2022. I would now like to further discuss the financials for our two operating divisions of Sadat Group Inc. As Mike mentioned earlier, the company's main revenue and margin driver is Sadat AgriFoods. consisting of our origination and trading operations, as well as our farming operations in Zambia. Sadat AgriFoods generated commodity sales revenue of 718 million for the year end of December 31st, 2022, as compared to 151 million in 2022. The vast majority of the increase was due to its origination and trading operations with the farming operations contributing to a negligible amount. Our Sadat AgriFoods 2023 net income Sorry, Star Food's 2023 net income was $9.3 million. Moving on to the company's legacy restaurant operations consisting of Pokemoto, Muscle Maker Grill, and Superfoot Foods. The division generated revenue of $9.2 million for the year ended December 31st, 2023, compared to $11.1 million for the December 31st, 2022. This decline in revenue generated was mainly due to the closing and re-franchising of our corporately owned restaurant locations. the restaurant division reported a loss of $2.8 million in 2023 compared to a loss of $3.3 million in 2022. As of December 31st, 2023, we had a cash balance of $1.4 million compared to a cash balance of $9.9 million as of December 31st, 2022. This decline is a deliberate outcome of our strategic shift away from the restaurant business towards the agro-commodity trading sector. Historically, as a restaurant company, there was a limited use for our cash reserves. However, with our new focus, the deployment of cash is intrinsic to our business model for generating revenue and margins. Instead of maintaining large cash balance, our priority now is to actively utilize our cash to drive growth and profitability. This strategic approach aligns with our core objective of maximizing returns and creating value for our stakeholders. It is notable that our total assets increased from 27 million in 2022 to 178 million by the close of 2023. This substantial increase is attributed to strategic initiatives such as the acquisition of the farm by our majority-owned subsidiary, accounts receivable related to trades, and forward sales contracts for future delivery. These developments have significantly fortified our balance sheet, reflecting the strategic investment we've made to bolster our operations. While it is true that our cash reserves decreased by 8.3 million, it is essential to underscore that our overall asset base rose by 151 million. This shift underscores our commitment to deploying capital strategically to enhance our financial position and drive sustainable growth. It's important to remember that we continue to grow our overall revenue, increasing our working capital surplus, and build our balance sheet, all while making significant strategic changes in the company. With that, I'd like to turn the call back over to Michael Ripper.

Thanks, Jennifer, and thanks for that financial overview. In closing, I want to express my gratitude to all our investors and stakeholders for joining us today and for your continued support. Our 2023 full-year earnings call has shed light on a remarkable journey over the past year, showcasing our emergence as a key player in the global food supply chain. We've witnessed positive growth, particularly in our Sadat AgriFoods division, despite facing challenges along the way. Over the past six months, we've implemented our announced strategy to convert all of our corporately owned and operated locations into franchised owned locations. We believe this strategy will position the division, once complete, to potentially divest the restaurants. We believe this approach underscores our commitment to focus on our core operations and driving long-term value for our shareholders. We are currently evaluating additional opportunities in the global farming, trading, processing, shipping, and distribution to increase our market share and operational footprint. I'm proud of the resilience and dedication demonstrated by our team, whose hard work has propelled us towards amidst a dynamic landscape. As we move forward, we remain steadfast in our strategic vision, exploring new opportunities and partnerships to further strengthen our position in the market. Thank you once again for your trust in Sadat Group Inc. We look forward to the exciting journey ahead and delivering continued success for our investors, stakeholders and the communities we serve. With that, please give us a few seconds to open the call for questions.

Before we get to questions from our selected analysts, Michael Roper and Jennifer Black would like to address some questions which we've received from our stakeholders. Also on the call with us is one of SADOC Group's board members, Benjamin Patel. Mike, Jennifer, the floor is yours.

Great. Thanks, Alexa. Yeah, we got a few questions that came in previously that we wanted to go over and address before we turn it over to the live questions as well with the analysts. And so I'm going to read the questions and then we'll do the answers and then we'll transition after that. So the first question that we've received is, how is adjusted EBITDA calculated and why should we use this number? So I'm going to let Jennifer answer that one.

Okay, Mike. So we define adjusted EBITDA. We start with net loss, and then we adjust it for a few things like depreciation, amortization, net interest income expense, income taxes, impairment expenses, stock-based consulting expenses, other incomes, change in fair value of stock-based comp, gains on extinguishment, warrant modification expense, and gain on fair value measurement. These items are removed. They're either one-time transactions or they're non-cash transactions that have impacted our net loss position. We believe that adjusted EBITDA, which is a non-gap measure, it's a useful metric for investors to understand and evaluate our operating results and ongoing profitability because they permit investors to evaluate our recurring profitability from our ongoing operations.

Awesome. Thanks, Jennifer. Let me find the next question here. Here it is. How does the additional trading subsidiaries compete with or affect each other? OK, so we're talking about Sadat-Latam, Brazil, the MENA region, those type of things. How do they compete with each other or affect each other? So basically, you know, really the subsidiaries support each other. You know, and our strategy is establish these different trading offices and the important production and distribution geographies across the world. That'll work together to facilitate supply and demand as well as the specific needs of the different locations. So for example, our most recent subsidiary established in Brazil, those actually source commodities for our Dubai office, which in turn may supply the Asia area. So they're all kind of interacting and they support each other without necessarily being in competition. By expanding our global footprint, this plays a vital role in our overall diversification. It allows us to actually mitigate risks and enjoy multiple options rather than just relying on a limited source or client basis. Again, we're spread out across the world. There's different opportunities that pop up all the time. And don't forget that each one of our individual subsidiaries not only can trade internationally, but also trade domestically as well, right? So the time that's in the central area, they can trade throughout Latin America, Central America, South America, North America, they can trade and move product all over the world as well, just as an example. So there is no real competing against those different areas. Let's see, the next question, why is your cash on hand decreased year over year? And again, I'll throw that back towards Jennifer.

All right. Thanks, Mike. So this one, we've made multiple investments since we started our strategic pivot about 16 months ago. I mean, you can see this by looking at the increase in the balance sheet. We're investing in business to expand our operations and our business verticals. You know, for example, we purchased the farm in Zambia for cash. We also deployed cash into other various trades with cycles that are throughout the trade process. Many of our trades require capital components and contributions from the company to execute those. And just like Mike was just talking about, we also expanded our trading areas to include Brazil and Latam. Lastly, we also changed the company name, symbol, and we launched a new strategic direction. All of these areas are where capital has been deployed. The declining cash on hand, it's a deliberate outcome of our strategy shift away from the restaurant business towards the Siddharth Agri-Food Division. and the deploy of cash is intrinsic to the company's business model for generating revenue and margins.

Okay, thanks, Jennifer. Fourth question that we see here is, how can the company increase its overall margins, and then more specifically on the actual commodity trades being executed today? So how do we increase margins, basically, right, at the end of the day? So I think there's a few things to talk about here. So overall, I think it's important to remember that that we are building a business, right? And we are in expansion mode. So it's not an established, you know, whatever, I don't wanna say senior business, whatever the right word is, right? But it's new, right? And we're building this thing and we're building a very large corporation that's out there. And this takes some upfront expenditures and may not have an immediate impact on revenues and profits. So for example, Okay. It would be the farm in Zambia. The farm is a seasonal component of its operations, meaning there's an upfront expense that the products, you know, that, you know, you put in like planting and all that where it produces income at a later date. Again, we're seeing that in Zambia now as we just started the major harvest of maize and soybeans that will be completed over the next few months. The contract farmers also begin their harvest later, which again brings in revenue throughout the later months. We did incur expenses, not only in getting the farm integrated, but into the overall company, but then also incurred expenses for planting, for example. So again, pay money up front. Some of these things have a little bit of delay to come in. You know, now we're in those cycles as we've started our harvest for the farm. Another example would be the Brazil office. You know, as we build up the team and infrastructure, you know, you got to spend that money up front and then we'll start to execute trades, right? And we're getting into that mode where we should start seeing some trades now starting to come through the Brazil office as well. For trade specifically, this can fluctuate depending on the season, the type of commodity, market conditions, shipping costs, etc. We're in the process of looking to add different types of commodities to our portfolio, such as vanilla, lentils, and peas. Just, again, get a little bit of different... diversification going in there. In addition, we want to continue to open new trade areas beyond our current MENA, LATAM, and Brazil areas. This will all allow us to shift between regions as market conditions fluctuate. So again, we're going to be able to be, you know, selling stuff and doing things in Brazil while maybe the conditions are bad, you know, in wherever, right? And so, you know, we're gonna be able to shift around between all these different areas by expanding in these different roles, which that all combined should help drive some of the margins in the business. So I think that was the last of the kind of the pre-questions, if you want to say, that we received. So Alexa, do you want to turn it over to the different analysts?

Yes, thank you, Mike. Jennifer, we will go ahead and take the first question from our analyst, Aaron Gray with AGP. Do you have any questions, Aaron?

Yeah, great. Thanks for all the detailed prepared remarks and answers to questions so far. I'd like to pick off a little bit where you just left off in the last question. Just in terms of commodity trading environment for the quarter, right? So, gross margins were down slightly negative or flat based off some of the remarks I heard. Average $7 million, average cost $7 million. So was it one large trade that kind of led to the flat gross margins? And it seems like gross margins for commodity business have been trending that way for the past couple quarters now. So I know there can be volatility, but it seems like it might be a little more trend now. So can you speak towards the quarter? Was it more of a one-off sale that really weighed on margins? Was it accumulation of all the sales that weighed on it? And just to add that on to what you had just previously spoken towards.

Yeah. OK. All right. Thanks, Aaron. So a couple of pieces there. And I do have Benjamin Patel on the phone and I'll turn over to him in a second as well. But you had mentioned, you know, and yes, it's it's it's slim or whatever. Right. It's a narrow margin. But you said, you know, it was kind of seven seven million and seven million. It's really seven million. 7.1 million in revenue and 7 million costs. So it's not quite flat, but it's still not where we want it to ultimately be or whatever, just to clarify that. So Benjamin, do you want to kind of talk about this?

Sure. Hi. Hello, Aaron. Nice to talk to you again. I think in general, looking at the environment we're in right now is that there's a lot of strain or I'd say volatility in the trading world in general. I think that there's a few factors to that kind of piggybacking on the. tension in Ukraine, adding to that the tension in the Middle East, and also China, which is, of course, the largest consumer of the world, and they've been showing kind of signs of slowing down over the last quarter. But as Michael said throughout everything that was said here before, I think this is the main thing that diversification is very important for, and that we plan to increase those margins. basically getting into different verticals of the supply chain and of different products and of different geographies. So certain commodities or certain paths, certain geographies could be down or lower at times. This also depends greatly on the structure of which the trades have been done and the financing, as also Michael alluded to. So I think it's a We're striving and working so hard to put in new parts of the supply chain, be it geographies, products, financing, et cetera, in order to be able to mitigate and raise these margins.

Awesome. Thanks, Benjamin. Aaron, what else you got, man?

No, appreciate the color there, Michael Benjamin. Second question for me, just the trade financing. Can you speak on the timing when that was finalized? I may have missed it. So just further color on the timing and then any color in terms of the commodity transactions in a quarter to date in 1Q. We're almost done with the quarter, about nine days left. So just in terms of sales and margins, how that might have turned a quarter to date versus 4Q. Thanks.

Yeah, so I'll talk about the trade financing stuff. So we're always working on trade finance, right? Continue to expand things out. And we've got several finalized deals, I guess, is the way you want to look at it that we have been leveraging so far. You know, that's probably in the, what's the total you think now in the trade? I'm looking at Jennifer. Yeah, let's call it 15 to 20 million that we've already got, you know, secured, I guess is the right word. um, that we've been leveraging, um, in some of the trade finance so far, um, that continues to change, right. Meaning grow, right. As we keep moving forward, we're continuing to have different discussions that are out there in regards to that. When you take a look at the total quarter, um, that we're in so far, you know, I don't have the numbers that I can share necessarily at this stage. Right. Um, but I think it's, you know, I think you can say it's, you know, it's a pretty typical quarter just in general. Um,

numbers here in front of me or whatever that we can share without having um you know more details or whatever that are there what else you got man um okay great thanks um all right all right so yeah so uh i think that's helpful i guess just kind of bring it all together then um especially since we got benjamin online here so In terms of timing and line of sight, so you're talking about now being a typical quarter, you know, how are you seeing in terms of, are we in a longer term period of these more, you know, compressed margins? Do you think the trade financing is enough to get you in a normalized way? Or do you have the ability to be more nimble and get to some markets that are, you know, more favorable? How do we think about you know, the overall balance of top-line growth, but also profitable growth for you guys as we look for the longer-term 2024 in the environment out there. So if you could just kind of give a holistic outlook on that, that'd be helpful. Thanks.

Yeah, I think... I think we've got, how do I go through this? So yeah, we are nimble, right? We do have the ability to move around to different regions of the world. We actually cover a big chunk, you know, of the world now in the biggest markets, right? That are out there, you know, especially with Brazil coming online. You know, we obviously have the Americas through the time and then we've had the original stuff that was kind of in the MENA region, right? So we do control a lot of the different areas and have access to move between things, right? I think really a better way of looking at it is, you know, if there's a certain commodity that's not, you know, performing as well, let's say it's, you know, soy, right? We do have the ability to start moving into different areas like, you know, vanilla, you know, as an example, right? Or peas or whatever it might be, right? So... you know, we are, we are able to kind of move around between those type of things. Um, you know, when you look at the typical quarters and things that are there, you know, it's, it's interesting because you do have seasonality, you do have, you know, things with trade finance, all these things kind of tie together and, you know, help build this business. Right. And you are going to have ups and downs and everything in between, um, that's there, but, um, You know, you're here, Kevin, I think wanted to jump in. Yeah.

Hey, Aaron, it's Kevin. No, I was just saying, I think that another thing that's really going to be critical for our go forward is to continue to add these trade lines. Right. So I think if you look back at the history of this company, we kind of started off by doing a lot of net offs and back to backs. And I think that the company is now sort of transitioning to something that's a little bit more traditional. So I think that, you know, sort of as we implement that strategy and as we grow that side of the business, we are definitely hoping that things are going to improve.

Yeah, and one other thing to think of too, Aaron, it's not just necessarily the, we talk about trade financing a lot, right? But we also have supplier credit lines, you know, and that's, we kind of, you know, lump that stuff together when people talk about it, but they are kind of two distinct, you know, different areas. And so we are working on a lot of credit lines as well with the different suppliers.

If I could summarize for just one more sentence. Aaron, I think you used the word nimble and we usually use the word agile, but I think that's really the main thing here is to be agile and to be able to seize opportunities opportunities that are in line with our strategy. And if we see that there's a slowdown in our typical commodity cycles, which are very short term and our return on equity is usually quite significant, it's just we're dealing here with very large volumes with a very large ticket size of which there are limited margins to begin with. But there are Different products, and there are different geographies, as Michael kind of alluded to, which are things that we are very much involved in examining and in different stages of bringing into the group that will potentially do a lot to increase these margins and also secure different kinds of trades and flows that will make us not depend on one geography, one product, one financing and so on. So I think that agile is definitely the word and we look forward to diversification and diversifying into these other areas.

Perfect. Thanks. Really appreciate the color and detail in the answers there, guys. I'll jump back in the queue.

Okay. Alexa, do you want to go to the next?

Yep. Thank you, Aaron. We'll move to Tom Kerr with Zax for questions.

Good morning, guys. Can you hear me?

Hi, Tom. Yep, I hear you fine.

Just a couple clarifications. Most of my questions have been covered, but one second.

Hold on. Anybody have any jokes they want to say? All right.

Sorry about that. No problem, Tom. Somebody said the word Alexa, and my Alexa turned on and started talking to me. Oh, that's funny. Just a clarification on the trade finance. Who is it or what is it? Is it going to be multiple sources? Is it a bank? Is it private investors? Who is arranging the trade financing? And what does it qualify? How do you qualify for that?

Oh, I'll take this one. Oh, do you want to go ahead, Benjamin?

No, no, please, Jennifer, please.

Okay. So these, as you said, these are a bunch of different sources. It's not, we, it's not all banks. It's not all, some of them are other trade companies. Some of them are other, some of them are banks. Some of them are, you know, private. It's a combination of all of them that we put together, mainly because we don't want to rely on one source. Hey, we wanted to, you know, we want to diversify this, just like we diversify everything else. And, you know, kind of, you don't want to put all your eggs in one basket. And so we have, you know, there are different sources on that. Benjamin, did you want to add to that?

No, I think that basically covers it. Again, it is a very vast kind of term, trade finance. And in our line of business, oftentimes it could also come from the counterparts, either suppliers or customers or so on, where you have different terms with them, where in essence, they're providing you with the finance to do the trade, depending on the way you negotiate it and the timeline and so on. In the banking or institutional world, there are banks that provide, there are funds that provide. And then there's, as Jennifer said, there's private or pseudo family offices and so on that also are involved in this business. So we have a blend of some of those at the moment and always looking to find more that fit within our matrix of finance and what we're looking for.

Got it. In the 15 to 20 million you referenced, that's just the collective number of all those sources you mentioned?

That's correct.

Okay, got it. And back to the margins, just to beat that dead horse for a second, we had talked about 3% margins in that commodity business over time, or that's a goal at 3% or better. I know you guys aren't providing guidance, but is there a timeframe perhaps we can look for that 3% goal? Is it 2024, 2025, or any other color on that?

Well, I think number one, this is Kevin. I think number one, I think we were, you know, one to three is kind of, I think what we've, you know, historically talked about, but I think that they're, are a lot of creative ways being the type of company that we are, a smaller company where we've had success in getting much higher margins than that. So sometimes you're going to have fluctuations in the business where you may have some of these higher margin deals that you can facilitate, and then you may have, you know, a quarter where you don't make a whole lot, right? So the whole goal is to try to balance those out as the year goes on and as things change, whether it's market fluctuations, whether, you know, trade finance opportunities, et cetera.

I'll continue if possible. And just say that I'm not going to give a date here, but I think that all the things we've mentioned so far with the entering into new verticals, which allow us to not only hedge ourselves against the volatility of the market, but also add margins every step of the way. So if it's just for an example, if it's getting into shipping where we're not into shipping right now, That would make a significant difference today already if we had a shipping arm already in the company and were able to mitigate shipping costs and so on and so forth, because those are also commoditized and they also go up and down depending on conditions. That's what we're trying to do and not rely on the good fortune of the market, if I would say, of the commodity prices and so on, where we see that it's unreliable. We need to diversify and we need to open ourselves to new products, new geographies, and new verticals that will all form this picture together and will hopefully increase the margins to the point we want them to get to.

Great. That's helpful. And last question for me on the restaurant business. Can you kind of give us any more color on where we are in that process? I mean, do you have to wait for those corporate things to be repranchised or is there? Open solution in strong interest? I mean, are you guys looking at bids or what ending are we in?

Yeah, I get what you're going. Let me jump in there. So there was always two phases to looking at the restaurants, right? And should we divest them or not, right? First phase was take the corporate locations and convert them over to franchise locations, right? That is, for all practical purposes, been complete, okay? We still have a few out there that we're working on, but it's pretty much been complete. And that positioned the restaurants then and positioned the whole overall structure to now go out and investigate, you know, and hire somebody to go do this, right? And so we actually hired licits and associates who part of their expertise is, you know, selling restaurant chains and I've been doing it for about 40 years. They've been out there for a long time doing this stuff, right? And so we have hired them recently, you know, as we're now moving into the second phase, right? Which is where we are today. So the first phase has already done a complete, we're now into the second phase of, you know, looking to divest these restaurants. From a, you know, timing perspective on it, you know, we recently just hired them, right? In the last, you know, call it last 30 days, two weeks, whatever, somewhere in that timeframe as we work things out. We are now in the process of creating the data room and all that to be able to put things in there. We do have some people already showing interest. We have some general discussions that have already started, but I don't have necessarily a timeline on it per se, other than it's an important thing for us and we're working against it pretty quickly.

And I would add something also to that, Tom, and I would say that licitins specifically, they are very specific in terms this particular business sale and they are intimately knowledgeable about the brand specifically. So they are up in the Northeast. They know the brand extremely well. We've known them for a long time. That was actually the firm that we purchased, uh, Pokemono from. And so I know that there was, I can, I can disclose this. There was a lot of people that were bidding on that when we first bought it. And so, uh, it made sense after interviewing, you know, several other firms to go with Lizard, but we're very comfortable with that decision.

Great. That's all I have for this morning. Thanks.

Okay. All right.

I think that's basically it. Alexa, do we have anything else that's out there from an analyst perspective or questions?

That is all. I believe that concludes our Q&A portion of this call. Mr. Roper, any final comment?

Yeah. I just want to thank everybody again, as always. We've got a lot of things that are changing in this business. We're growing it. It's pretty exciting. There's You know, we're, you know, obviously started our farm stuff with the harvest in Zambia, which is pretty exciting. I don't know if anybody saw, but we had the president of Zambia actually was on our farm this week, you know, doing some press work and some festival activities as well. So, you know, getting some, you know, some high profile type of visits from people as well that are out there. So very exciting stuff and more to come soon. I appreciate it, everybody.