PART I - FINANCIAL INFORMATION Financial Statements This section presents the company's unaudited condensed consolidated financial statements as of June 30, 2022 Unaudited Condensed Consolidated Balance Sheets Total assets decreased to $27.7 million while total liabilities increased, resulting in lower stockholders' equity Condensed Consolidated Balance Sheet Data (Unaudited) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash | $13,465,538 | $15,766,703 | | Total Current Assets | $14,627,642 | $17,969,983 | | Goodwill | $2,626,399 | $2,626,399 | | Intangible assets, net | $5,678,589 | $6,387,464 | | Total Assets | $27,672,627 | $29,431,883 | | Liabilities & Equity | | | | Total Current Liabilities | $2,696,913 | $2,928,649 | | Total Liabilities | $6,873,296 | $5,038,616 | | Accumulated deficit | $(75,052,859) | $(71,369,837) | | Total Stockholders' Equity | $20,799,331 | $24,393,267 | Unaudited Condensed Consolidated Statements of Operations Revenues grew 46% to $5.85 million in H1 2022, though the Q2 net loss widened due to prior-year gains Q2 2022 vs Q2 2021 Operating Results (Unaudited) | Metric | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | Total Revenues | $2,929,384 | $2,704,856 | | Loss from Operations | $(1,738,420) | $(2,325,698) | | Net Loss | $(1,774,144) | $(1,122,201) | | Net Loss Per Share (Basic & Diluted) | $(0.06) | $(0.16) | Six Months Ended June 30, 2022 vs 2021 Operating Results (Unaudited) | Metric | H1 2022 | H1 2021 | | :--- | :--- | :--- | | Total Revenues | $5,849,842 | $4,004,539 | | Loss from Operations | $(3,725,393) | $(6,025,836) | | Net Loss | $(3,660,223) | $(4,833,885) | | Net Loss Per Share (Basic & Diluted) | $(0.13) | $(0.70) | Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity declined to $20.8 million, primarily driven by a net loss of $3.7 million for the period - The accumulated deficit increased from $(71,369,837) at the end of 2021 to $(75,052,859) as of June 30, 2022, reflecting ongoing net losses13 - During the first six months of 2022, the company issued 2,409,604 shares from the cashless exercise of pre-funded warrants and for other compensation purposes13 Unaudited Condensed Consolidated Statements of Cash Flows Net cash decreased by $2.3 million during H1 2022, driven by operating and investing activities Cash Flow Summary for Six Months Ended June 30 (Unaudited) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(1,905,110) | $(3,700,395) | | Net Cash Used in Investing Activities | $(282,599) | $(3,412,847) | | Net Cash (Used in) Provided by Financing Activities | $(113,456) | $7,888,931 | | Net (Decrease) Increase in Cash | $(2,301,165) | $775,689 | | Cash - End of Period | $13,465,538 | $4,971,621 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail key accounting policies, segment operations, recent acquisitions, and regulatory matters - The company operates four segments: Muscle Maker Grill, Pokemoto Hawaiian Poke, Non-Traditional (Hybrid), and SuperFit Foods Meal Prep26 - In 2021, the company acquired SuperFit Foods and Pokemoto, which are key drivers of current revenue growth2324 - The company adopted lease accounting standard Topic 842 on January 1, 2022, recognizing $2.5 million in right-of-use assets and $2.7 million in lease liabilities70124 - The company received a notice from Nasdaq for failing to meet the $1.00 minimum bid price requirement and has until January 30, 2023, to regain compliance143169 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management analyzes revenue growth from acquisitions, segment performance, and liquidity amid rising costs Overview The company operates and franchises three 'healthier for you' concepts across four operating segments - The company's portfolio consists of three main brands: Muscle Maker Grill, SuperFit Foods, and Pokemoto174175176178 - As of June 30, 2022, the company's system comprised 19 company-owned restaurants and 18 franchise restaurants173 Results of Operations H1 2022 revenue grew 46% to $5.8 million, with a narrowed operating loss despite higher food costs - Q2 2022 revenue increased by $224,528 year-over-year, primarily due to sales from the acquired Pokemoto restaurants198199 - Food and beverage costs rose to 40.6% of restaurant sales in Q2 2022 from 34.7% in Q2 2021, attributed to inflationary pressures203 - For the six months ended June 30, 2022, revenue increased by $1.8 million (46%) year-over-year, mainly from acquisitions214215 - SG&A expenses for H1 2022 decreased by $2.5 million compared to 2021, primarily due to lower professional and consulting fees225 Segment Performance The Pokemoto and SuperFit Foods segments were profitable, partially offsetting losses in other segments Segment Operating (Loss) Income for Six Months Ended June 30, 2022 | Segment | Revenue | Operating (Loss) Income | | :--- | :--- | :--- | | Muscle Maker Grill Division | $2,412,657 | $(438,369) | | Pokemoto Division | $2,472,672 | $58,119 | | Non-Traditional (Hybrid) Division | $228,743 | $(269,439) | | SuperFit Foods Division | $735,770 | $84,504 | | Unallocated Corporate | N/A | $(3,160,208) | | Total | $5,849,842 | $(3,725,393) | Liquidity and Capital Resources The company maintains $13.5 million in cash, which management deems sufficient for the next 12 months Liquidity Metrics | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash | $13,465,538 | $15,766,703 | | Working Capital Surplus | $11,930,729 | $15,041,334 | - The company has an accumulated deficit of $75,052,859 and used $1,905,110 of cash in operating activities during H1 2022242 - Management believes current cash is sufficient for the next twelve months but may need to raise additional capital242243 Quantitative and Qualitative Disclosures About Market Risk This disclosure is not applicable as the company is a smaller reporting company - The company has indicated that this item is not applicable270 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2022 - The CEO and CFO concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective271 - No material changes to internal control over financial reporting were identified during the six months ended June 30, 2022272 PART II - OTHER INFORMATION Legal Proceedings The company discloses several legal matters, including settlements and accrued liabilities - The company entered an agreement to repay a $110,000 default judgment, with $50,000 remaining accrued as of June 30, 2022277 - The company has accrued for liabilities related to a contractor lawsuit ($30,000) and a judgment for a lease breach ($130,185)278279 - Past due sales taxes from 2017 and 2018 have been paid in full, and the company is current on payments since January 1, 2018280 Risk Factors This section refers to the company's 2021 Annual Report for a discussion of risk factors - The company states this item is not applicable and refers to its 2021 Form 10-K for risk factors281 Unregistered Sales of Equity Securities and Use of Proceeds The company details unregistered issuances of common stock for warrant exercises and compensation - In January and February 2022, the company issued a total of 2,409,604 shares of common stock upon the cashless exercise of pre-funded warrants282285 - Shares were issued to board members and an executive team member as compensation283285286 Defaults Upon Senior Securities The company reports no defaults upon senior securities during the period - None reported289 Mine Safety Disclosures This disclosure is not applicable to the company's operations - Not applicable290 Other Information No other material information was reported for the period Exhibits This section lists all exhibits filed with the report, including required certifications - Exhibits filed include CEO and CFO certifications and Inline XBRL documents291
Sadot (SDOT) - 2022 Q2 - Quarterly Report