Sadot Group Inc.

Welcome to the Sadat Group Inc. Q1 2024 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 from selected analysts. 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 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 Heating Risk Factors in Sadat Group Inc.' 's most recently filed Form 10-Q and 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. And all numbers disclosed in this report are the amounts associated with Sadat Group Inc. and exclude the portion related to the 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 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 May 15, 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 Inc's website at sadatgroupinc.com under the Investor tab. At this point, I would like to turn it over to Sadat Group's Michael Roper. Michael?

Thanks, Operator. Good morning, everyone. Thank you for joining us today as we present the results of our first quarter ending March 31, 2024. For the quarter ending March 31, 2024, our net loss improved by approximately 801,000 as compared to Q1, 2023. The company had Q1, 2024 revenues of $108 million, resulting in a net loss of approximately $265,000, a considerable improvement compared to a net loss of approximately $1.1 million for Q1 2023. In addition, the company's Q1 2024 EBITDA improved, showing a gain of $458,000, marking a positive shift from a $433,000 EBITDA loss in the first quarter of 2023. Jennifer Black, our CFO, will discuss the financials in further detail here shortly. Overall market conditions in the agri-commodity sector presented challenges in Q1. One of the largest challenges was China's unexpected absence in the wheat market. As the world's largest buyer of wheat, China's pause on wheat had a material impact on the market. In addition to the China situation, we also saw softness in overall agri-commodity prices combined with expected seasonality factors. Because of these challenges, we did see a reduction in total revenue for stock group in Q1. Despite the revenue drop to other areas of our business, we were able to improve our net income, improve our EBITDA, increase our total assets, and improve our working capital surplus. Importantly, we believe the market is showing indications that the headwinds on revenue may begin to subside in Q2 and Q3. As a matter of fact, I am pleased to announce that revenue for the month of April 2024 has already shown improvements with 56 million in revenue coming in for the agri-foods division. I am pleased to report that while we worked to manage trading operations through the Q1 headwinds, we made significant progress on five of our strategic initiatives. First, we initiated the process to sell the Sadat food services segment. Recently, in Q2, we signed non-binding LOIs for the sale of Kokimoto and Superfit foods. Both are in the respective due diligence phases. The sale of these assets are subject to customary closing conditions and remain subject to the satisfactory completion of due diligence by any buyer, negotiation and resolution of business and legal issues, negotiation and completion of a mutually satisfactory definitive agreements and corporate approvals by the parties. There is no guarantee that these transactions will result in the signing of a definitive agreement or a final sale. Second, we plan to expand the role of Fausto Plaza, consultant and manager at Sadat Latam. to play a significant role in the overall company's global trading and farm operations. Fausto brings over two decades of experience in agri-commodity trading and management. Prior to Sadat, he held operational and managerial positions with the global trading powerhouse, Fungi. Third, we opened a new trading office in Brazil with a team of eight experienced agri-commodity traders with revenue expected to come online in late Q2. In the short time since establishment, the team has made significant headway in sourcing products from the upcoming harvest and financing from multinational Brazilian banks. Led by Flavio de Campos and Paulo de Sá, both seasoned executives in international sourcing and trade, we expect the Brazilian subsidiary to substantiate itself in the region and expand SEDAT's operations globally. Fourth, we began actively harvesting and have shipped 1,700 metric tons to date of corn under our agreement with the Food Reserve Agency, which was established by the Republic of Zambia. This agreement aims to support the Zambian government's efforts to safeguard national food security. We expect the majority of the revenue from this agreement to be realized in Q2 and potentially in the Q3. Lastly, and importantly, we finalized terms with various institutions, providing us with approximately 27M dollars in trade financing for Sadat Agri Foods operations moving forward. As we discussed in the past, the immediate growth of Sadat Group hinges on access to trade financing capital for our Sadat Agri Foods operations. The growth of our top line revenues and bottom line margins is directly linked to increasing our access to trade financing. I cannot emphasize enough how important these trade financing facilities are to our growth. Access to such financing would provide us with the flexibility to pursue more agro commodity trading opportunities, thereby increasing our top line revenue, with the goal of potentially enhancing the company's margins and net income. We are actively working on obtaining more trade finance lines to further support our growth initiatives. Now I'd like to turn the call over to our CFO, Jennifer Black, to review more specifics on the financial performance of the company for the first quarter of 2024. Jennifer?

Thank you, Mike. Before I begin, I'd like to note that our financial results for the quarter ending March 31st, 2024 on Form 10-Q were filed with the SEC yesterday, May 15th, 2024, along with the press release on the same day. With that, I'd like to give an overview of the financials for the first quarter of 2024. As Mike mentioned in his opening comments, we reported an improvement in the company's net loss by approximately $801,000 year-over-year. We reported a net loss of approximately $265,000, an improvement compared to a net loss of approximately $1.1 million for the Q1 of 2023, on revenue of $108 million. This revenue was generated by our two business segments, Sadat AgriFoods and Sadat Food Services Operations. Additionally, our Q1, 2024 EBITDA showed a gain of 458,000, marking a positive shift from a 433,000 EBITDA loss in the first quarter of 2023. Our first business segment is Sadat Agri Foods. Sadat Agri Foods contributed 106.5 million in revenue in the first quarter and completed 24 transactions in Q1 from our Sadat LLC and Sadat LATAM trading lines. These 24 transactions were completed across 14 different countries. Sedat Agri Foods also contains the farming operations. The farm is in harvest season with the majority of the revenue from the current harvest expected to be realized in Q2 and potentially into Q3, depending on weather conditions. We have harvested to date over 1,700 metric tons of corn and 500 metric tons of soy that have been delivered to customers and our contract farmer pilot program is just now starting its first deliveries. Our second business segment is Sadat Food Services Operation. As Mike mentioned before, during the first quarter of 2024, the company began actively marketing the sale of the various food service concepts and identified Sadat Food Services as a disposal group that meets the requirements of ASC 360-10. Accordingly, it was classified as health for sale in the company's financials. In Q1, this division's revenue was $1.4 million for the three months ended March 31, 2024, compared to $2.6 million for the three months ended March 31, 2023. This decrease was mainly due to the conversion of certain corporate-owned Pokemoto locations to franchise locations to prepare for this divestiture. Now let me turn to the overall financial picture of Sadat Group. As of March 31, 2024, the company had a cash balance of 1.2 million and a working capital surplus of 13.2 million respectively. This compares to a cash balance of 1.4 million and a working capital surplus of 8.3 million as of December 31st, 2023. Our current cash balance is in line with our commitment to deploying capital strategically to enhance our financial position and drive sustainable growth. Our total assets in the first quarter grew to $150.5 million from $62.6 million in the same time in 2023. This was due to significant increases in property and equipment, other current assets, and our receivables, accounts receivables. Our total assets did decrease $27.6 million from December 31st, 2023. This is due to the timing of payments on accounts receivable and the corresponding accounts payable related to trades. Stock-based expenses for the three months ended March 31st, 2024 totaled $800,000 compared to $3.4 million for the three months ended March 31st, 2023. The $2.6 million decreased in stock-based expenses is primarily the result of consulting fees due to Aggia for Sadat agri-food segment. Based on the renegotiated service agreement with Aggia, the consulting fees are calculated at approximately 40% of the net income income generated by Sedat Agri Foods, which is a decrease from the 80% in 2023. This expense is paid in the vesting and restricted stock that was issued to Agia in 2023. As part of the business plan for Sedat Agri Foods, we also enter into forward purchase and sales agreements. We currently have several forward purchases and sales agreements, one for the carbon credit offsets. And in Q4, we entered into two forward sales agreements for soybeans to be delivered in the future. We can enter into forward sales agreements and internally hedge these transactions with the soy grown on the farm. The mark-to-market gain on these derivative transactions resulted in income of approximately $3.3 million in Q1 of 2024. It is important to note that we have strong revenue streams, have increased our working capital surplus, and we are building our balance sheet, all while making significant strategic changes and achievements in the company. These developments are fortifying our balance sheet, reflecting the strategic investment we've made to bolster our operations. With that, I'd like to turn the call back over to Michael Roper.