v3.26.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2026
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

15.       Commitments and Contingencies

 

Consulting Agreements

 

On November 14, 2022 (the “Effective Date”), the Company, Sadot LLC and Aggia LLC FC, a company formed under the laws of United Arab Emirates (“Aggia”) entered into a Services Agreement (the “Services Agreement”) whereby Sadot LLC engaged Aggia to provide certain advisory services to Sadot Agri-Food for creating, acquiring and managing Sadot Agri-Foods’s business of wholesaling food and engaging in the purchase and sale of physical food commodities.

 

As consideration for Aggia providing the services to Sadot Agri-Food, the Company agreed to issue shares of common stock of the Company, par value $0.0001 per share, to Aggia subject to Sadot Agri-Food generating net income measured on a quarterly basis at per share price of $15.6250, subject to equitable adjustments for any combinations or splits of the common stock occurring following the Effective Date. Upon Sadot Agri-Food generating net income for any fiscal quarter, the Company shall issue Aggia a number of shares of common stock equal to the net income for such fiscal quarter divided by the per share price (the “Shares”). The Company may only issue authorized, unreserved shares of common stock. The Company will not issue Aggia in excess of 1,442,428 shares representing 49.999% of the number of issued and outstanding shares of common stock as of the Effective Date. Further, once Aggia has been issued a number of shares constituting 19.99% of the issued and outstanding shares of common stock of the Company, no additional shares shall be issued to Aggia unless and until this transaction has been approved by the shareholders of the Company. In the event that the shares cap has been reached, then the remaining portion of the net income, if any, not issued as shares shall accrue as debt payable by Sadot Group to Aggia until such debt has reached a maximum of $71.5 million. The Company will prepare the shares earned calculation after the annual audit or quarter review is completed by the auditors. The shares will be issued within 10 days of the final calculation.

 

On July 14, 2023 (the “Addendum Date”), effective April 1, 2023, the parties entered into Addendum 2 to the Services Agreement (“Addendum 2”) pursuant to which the parties amended the compensation that Aggia is entitled.

 

Pursuant to Addendum 2, on the Addendum Date, the Company issued 885,546 shares (the “Shares”) of common stock, par value $0.0001 per share, of the Company, which such Shares represent 1,442,428 Shares that Aggia is entitled to receive pursuant to the Services Agreement less the 556,882 Shares that have been issued to Aggia pursuant to the Services Agreement as of the Addendum Date. The Company will not issue Aggia in excess of 1,442,428 Shares representing 49.9% of the number of issued and outstanding shares of common stock as of the effective date of the Services Agreement. The Shares shall be considered issued and outstanding as of the Addendum Date and Aggia shall hold all rights associated with such Shares. The Shares vest on a progressive schedule, at a rate equal to the net income of Sadot Agri-Foods, calculated quarterly divided by $31.25, which for accounting purposes shall equal 40% of the net income of Sadot Agri-Foods, calculated quarterly divided by $12.50. During the 30 day period after July 14, 2028 (the “Share Repurchase Date”), Aggia may purchase any Shares not vested. All Shares not vested or purchased by Aggia, shall be repurchased by the Company from Aggia at per share price of $0.0001 per share. Further, the parties clarified that the Lock Up Agreement previously entered between the Company and Aggia dated November 16, 2022 shall be terminated on May 16, 2024 provided that any Shares that have not vested or been purchased by Aggia may not be transferred, offered, pledged, sold, subject to a contract to sell, granted any options for the sale of or otherwise disposed of, directly or indirectly. Following the Share Repurchase Date, in the event that there is net income for any fiscal quarter, then an amount equal to 40% of the net income shall accrue as debt payable by Sadot Group to Aggia (the “Debt”), until such Debt has reached a maximum of $71.5 million.

 

Additionally, for the years ended December 31, 2025 and 2024, the Company reimbursed Aggia for all operating costs related to Sadot Agri-Foods operating expenses including labor, operating expenses and general administrative expenses of $0.0 million, $0.0 million and $1.9 million, respectively and all operating costs related to Sadot Agri-Foods including labor, operating expenses and general administrative expenses of $1.8 million and $0.3 million and $1.7 million respectively.

 

On November 24, 2025, the Services Agreement with Aggia was terminated and the parties’ ongoing consulting and performance-based compensation arrangement was ended. As a result of the termination, no further services will be provided by Aggia and no additional performance-based share issuances or related contingent compensation will be earned under the agreement. Any previously issued shares and any residual rights or obligations, if applicable, will continue to be governed by the terms of the agreement as amended prior to termination. On November 20, 2025, the Company entered into a Settlement Agreement with Aggia. Pursuant to the Settlement Agreement, the Company and Aggia agreed to terminate the Services Agreement dated as of November 14, 2022, as amended, and to fully settle, compromise, and discharge all claims, debts, obligations, and liabilities arising out of or related to the Agreement Documents.

 

Litigations, Claims and Assessments

 

Lombard Trading International Corp. commenced two related proceedings against Sadot Latam, LLC and the Company and in the 11th Judicial Circuit of Florida in and for Miami-Dade County, Florida (Case No.: 2024-020971-CA-01 & 2025-021675-CA-01). In each case, plaintiff alleges a breach of contract claim related to an agricultural commodities transaction against Sadot Latam, LLC and seeks damages in the approximate amount of $7.4 million and $17 million, respectively. The plaintiff also alleges an alter ego and contract guaranty claim against the Company related to the alleged breach of contract. The original claims have been substantially narrowed through the Company’s successful motions practice. The Company denies the allegations and has filed its Answer, Affirmative Defenses, and Counterclaim, asserting a counterclaim of approximately $1.6 million against the plaintiff for amounts paid by the Company for which no goods were delivered. The Company has also filed a motion to dismiss the alter ego and contract guaranty claims. While the Company believes it has meritorious defenses, it cannot predict the outcome of this matter or reasonably estimate the range of potential loss at this time. Based on the assessment of the Company’s legal counsel, a loss in respect of the plaintiff’s claim is reasonably possible but not probable, and the amount or range of potential loss cannot be reasonably estimated at this time. Accordingly, no contingent liability has been accrued in accordance with ASC 450 as of March 31, 2026.

 

In August 2023, the Company closed on the acquisition of approximately 5,000 acres of farmland in the Mkushi Region of Zambia through Sadot Zambia. Sadot Zambia is 100% owned by Sadot Enterprises Limited, which is 70% owned by Sadot LLC. On December 11, 2025, the High Court for Zambia (Commercial Division) delivered a judgment in the case of Cropit Farming Limited v. Sadot LLC (2025/HPC/0184). The Court declared the Pre-Conditional Offer Agreement, the Purchase of Receivables and Validation Agreement, and the Joint Venture Agreement between the parties to be invalid, non-binding, and unenforceable. As a result, the Company, has lost possession, control, and ownership of approximately 5,000 acres of farmland in Mkushi, Zambia, which had been placed in escrow pursuant to the invalidated agreements. The Court dismissed Cropit Farming Limited’s claims for monetary damages but ordered Sadot LLC, a wholly owned subsidiary of the Company, to pay Cropit Farming Limited’s litigation costs. The Company’s counterclaims were also dismissed. The Company has filed an appeal seeking recovery of $3.5 million. The appeal process is expected to take in excess of one year. There is no guarantee that the Company will be successful in such appeal. While the Court has ordered the Company to pay Cropit Farming Limited’s litigation costs, the amount of such costs has not yet been determined. Accordingly, no liability has been accrued as of March 31, 2026, as the amount of the obligation is not reasonably estimable.

 

Zen-Noh Grain Corporation commenced commodity arbitration proceedings against Sadot Group Inc. and Sadot Latam LLC claiming non-delivery under a grain sales contract. The Company denies liability on the basis that Sadot Group Inc. was not a party to the underlying contract and that Sadot Latam LLC performed its obligations. A further final round of submissions was allowed by the Tribunal, the final of which will be made in May 2026 by the Claimant. The Company believes it has meritorious defenses, including jurisdictional grounds for dismissal of the claim against Sadot Group Inc., but the outcome of arbitration proceedings is inherently uncertain and cannot be predicted. Based on the assessment of the Company’s legal counsel, a loss is reasonably possible but not probable, and the amount or range of potential loss cannot be reasonably estimated at this time. Accordingly, no contingent liability has been accrued in accordance with ASC 450 as of March 31, 2026.

 

Kevin Mohan v Sadot Group Inc., formerly Muscle Maker, Inc. (AAA Case No. 01-25-0003- 4507). Former Chairman’s employment claims under Texas law exceeding $0.3 million (excluding unvested stock). The Claimant failed to pay the arbitrator’s deposit. The arbitration was suspended on 5 March 2026 (Preliminary Order No. 3) and terminated without prejudice on 31 March 2026 (Preliminary Order No. 4, Arbitrator John Allen Chalk, Sr.) pursuant to AAA Rule 56(d). No award was made and no liability was determined. The Claimant retains the right to refile until approximately March 2029 (limitation). It is too early to assess whether there would be a continuation to this claim, resulting in a loss and even if there was a loss the amount of such a loss cannot be estimated. On April 2, 2026, Mr. Mohan filed a complaint against the Company in the United States District Court for the District of Texas alleging breaches of employment contract and damages in the amount greater than $250,000 and less than $1,000,000 relating to alleged unpaid performance bonuses. The Company believes the plaintiffs’ positions are without merit and intends to vigorously defend itself in all respects. No contingent liability has been recorded as of March 31, 2026.

 

Nuval Trade S.A. v. Sadot Latam LLC (GAFTA No. 19-403) is a GAFTA arbitration arising from two soybean meal contracts. On April 17, 2026, a partial award was issued in favor of Nuval Trade S.A. against Sadot Latam LLC (not Sadot Group Inc.). The award relates to contracts dated February 27, 2024 and April 9, 2024, and grants approximately $12.0 million in damages. In addition, the award provides for interest at 5% per annum, compounded quarterly, on approximately $11.1 million from August 13, 2024 and on approximately $1.0 million from February 11, 2025 until the date of payment, as well as reimbursement of Nuval’s legal fees and arbitration costs. As of March 31, 2026, the total estimated liability, including interest and costs, was approximately $12.9 million, which has been accrued.

 

The Andersons, Inc. v Sadot LLC. On September 26, 2025, The Andersons, Inc. filed an admiralty and maritime action in the United States District Court for the Southern District of Ohio in aid of an arbitration proceeding against the Company’s subsidiaries, Sadot LLC and Sadot Latam, alleging breach of a contract for the sale of Argentine wheat and seeking approximately $521,641 plus alleged dispatch, pre-award interest, and other fees. In February 2026, The Andersons initiated a related GAFTA arbitration against the same parties. On March 9, 2026, The Andersons amended its complaint to add the Company as a defendant. The Company intends to defend these claims. Based on the assessment of the Company’s legal counsel, a loss is reasonably possible, but not probable, and the amount or range of any potential loss cannot be reasonably estimated at this time. Accordingly, no contingent liability has been accrued under ASC 450 as of March 31, 2026.

 

Star Fund commenced proceedings alleging that Sadot Group Inc. guaranteed Sadot Latam LLC’s obligations under a factoring agreement and claiming approximately $2.9 million. The claim against Sadot Group Inc. was based solely on a 2023 board resolution authorizing management to guarantee subsidiary debt with specified lenders. No executed guaranty document exists and Star Fund was not named in the resolution. The guaranty count was dismissed by agreement on December 9, 2025. A motion for summary judgment by a codefendant was heard on February 25, 2026 and remains under advisement. Following the dismissal by agreement of the guaranty count on December 9, 2025, the only count remaining against Sadot Group Inc. is a derivative unjust enrichment claim, in respect of which the Company maintains it has meritorious defenses on the basis that no executed guaranty document exists, no benefit was received by Sadot Group Inc., and Star Fund was not a party identified in the underlying 2023 board resolution. The matter remains pending against Sadot Group Inc. and Sadot Latam LLC. Based on the assessment of the Company’s legal counsel, a loss in respect of the residual claim against Sadot Group Inc. is reasonably possible but not probable, and the amount or range of potential loss cannot be reasonably estimated at this time. Accordingly, no contingent liability has been accrued in accordance with ASC 450 as of March 31, 2026.

 

Rocket Capital NY LLC v. Sadot Latam LLC. The plaintiff commenced proceedings in connection with a merchant cash advance arrangement entered into by Sadot Latam LLC. The claim is against Sadot Latam LLC only. The matter is at a preliminary stage. The Company denies the allegations and will defend the proceedings. Based on the assessment of the Company’s legal counsel, a loss is reasonably possible but not probable, and the amount or range of potential loss cannot be reasonably estimated at this time. Accordingly, no contingent liability has been accrued in accordance with ASC 450 as of March 31, 2026.

 

Centurion MPP Pte. Ltd. v. Sadot Latam LLC. The claimant commenced proceedings in Singapore arising out of an alleged breach of a commodity sale and purchase contract. The claim is against Sadot Latam LLC only. The matter is at a preliminary stage. The Company denies the allegations and will defend the proceedings. Based on the assessment of the Company’s legal counsel, a loss is reasonably possible but not probable, and the amount or range of potential loss cannot be reasonably estimated at this time. Accordingly, no contingent liability has been accrued in accordance with ASC 450 as of March 31, 2026.

 

OSR Rotterdam BV filed a maritime attachment claim against Sadot Latam LLC on April 14, 2025 arising from an alleged breach of a charter party. OSR claims a contractual cancellation fee of $250,000 plus interest. The Company has recorded $250,000 within accounts payable as of March 31, 2026 in respect of the principal claim. Based on the assessment of the Company’s legal counsel, a loss is probable and the principal amount has been accrued; the amount of any further interest, costs, and enforcement charges in excess of the accrued sum cannot be reasonably estimated at this time.

 

On April 4, 2026, a former employee of the Company filed a complaint against the Company and its chief executive officer in the United States District Court for the District of New Jersey alleging breaches of employment contract and damages in the amount of $144,212 plus punitive damages relating to alleged unpaid performance bonuses, vacation time, and severance. The Company believes the plaintiff’s positions are without merit and intends to vigorously defend itself in all respects. In early May 2026 the employee agreed to dismiss the complaint and move to an arbitration in Texas.

 

On February 18, 2026, Lisiten Associates Inc. filed a complaint against the Company in the Supreme Cout of the State of New York, County of New York, alleging unpaid brokerage fees in connection with the sale of the Company’s restaurant business in the amount of $319,000 plus treble damages. The Company believes the plaintiff’s positions are without merit and intends to vigorously defend itself in all respects.

 

In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. In the opinion of management after consulting legal counsel, such matters are currently not expected to have a material impact on the Company’s financial statements.

 

The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements after consulting legal counsel.

 

NASDAQ Notice

 

On January 8, 2026, the Company received notice that it was not in compliance with Nasdaq Listing Rule 5620(a) due to the failure to hold an annual meeting within twelve months of fiscal year-end. The Company submitted a compliance plan on February 16, 2026, and on March 9, 2026 Nasdaq granted an extension until June 29, 2026 to regain compliance. Subsequent to quarter-end, the Company held its annual meeting of shareholders on April 13, 2026, thereby satisfying the requirements of Nasdaq Listing Rule 5620(a).

 

On May 5, 2026, Sadot Group Inc. (the “Company”) received a letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it no longer satisfies the minimum shareholders’ equity requirement for continued listing on the Nasdaq Capital Market set forth in Nasdaq Listing Rule 5550(b)(1). Specifically, the Company’s shareholders’ equity as reported in its Annual Report on Form 10-K for the fiscal year ended December 31, 2025 was ($54,745,000). The Company does not meet the alternative compliance standards of either a market value of listed securities of $35 million or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years. Under Nasdaq rules, the Company has 45 calendar days from the date of the letter (until June 22, 2026) to submit a plan to regain compliance. If the plan is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the letter to evidence compliance. The letter has no immediate effect on the listing or trading of the Company’s common stock, which will continue to trade on The Nasdaq Capital Market under the symbol “SDOT,” subject to the Company’s continued compliance with other listing requirements. The Company intends to submit a compliance plan to Nasdaq within the required timeframe and is evaluating various strategic options to regain compliance. There can be no assurance that the plan will be accepted by Nasdaq, that any extension will be granted, or that the Company will regain compliance within the allotted period.