Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the results of operations and financial condition of Sadot Group Inc. (“Sadot Group”), together with its subsidiaries (collectively, the “Company”) as of December 31, 2025 and 2024 and for the years ended December 31, 2025 and 2024 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Annual Report on Form 10-K following Item 16. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us,” “we,” “our,” and similar terms refer to Sadot Group. refers to the names under which our corporate and franchised restaurants do business depending on the concept. This Annual Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Annual Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “forecast,” “model,” “proposal,” “should,” “may,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. These risks and uncertainties include, among others, our liquidity and capital resources, our ability to obtain additional financing or refinance existing obligations, our ability to generate sufficient cash flows from operations, and conditions that raise substantial doubt about the Company’s ability to continue as a going concern. Reference is made to “Factors That May Affect Future Results and Financial Condition” in this Item 7 for a discussion of some of the uncertainties, risks and assumptions associated with these statements.
OVERVIEW
Sadot Group Inc. is our parent company and is headquartered in Burleson, Texas. In late 2022, Sadot Group began a transformation from a U.S.-centric restaurant business into a global organization focused on the Agri-foods supply-chain.
As of December 31, 2025, Sadot Group consisted of one distinct operating unit and one discontinued operation.
Sadot LLC (“Sadot Agri-Foods”): Sadot Group’s operating unit was intended to be a global Agri-Foods company engaged in farming, commodity trading and shipping of food and feed (e.g., soybean meal, wheat and corn) via dry bulk cargo ships across the globe. Sadot Agri-Foods competes with the ABCD commodity companies (ADM, Bunge, Cargill, Louis-Dreyfus) as well as many regional organizations. Sadot Agri-Foods operates, through a majority owned subsidiary, a roughly 5,000 acre farm in Zambia with a focus on major commodities such as wheat, soy and corn alongside high-value tree crops such as avocado and mango. A default judgment related to the farm was issued during the fourth quarter of 2025. While the company has appealed this ruling, it has recognized an impairment of $11.8 million on the Zambia farm to reflect the associated financial impact. In addition, the Company had a deposit on farmland in Indonesia which was written off during the fourth quarter of 2025. Sadot Agri-Foods was formed as part of the Company’s diversification strategy to own and operate, through its subsidiaries, the business lines throughout the food supply chain. Our business involved farming, commodity trading, and shipping of food and feed products, such as soybean meal, wheat, and corn, via dry bulk cargo ships across global markets. We have recently encountered substantial operational issues that have severely impacted our ability to conduct these activities effectively. These include, but are not limited to, in our supply chain, such as in sourcing raw materials, logistical in shipping and transportation, and in our farming operations due to regulatory environments including a legal system, weather conditions, labor , regulatory environments, various court proceedings or equipment . Additionally, geopolitical tensions, trade restrictions, fluctuating commodity prices, and increased competition in the agri-foods sector have compounded these issues, to or trading activities and an to fulfill contracts or secure new ones. Between November 2022 and October 2025, Aggia LLC FZ (“Aggia”) was providing consultancy in connection with the food supply chain activities which were designed to become the most important focus of the Company. However, as a result of performances in 2025, the Company decided to end the relationship with Aggia. On November 20, 2025, the Company entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”) with Aggia. Pursuant to the Settlement Agreement, the Company and Aggia agreed to the Services Agreement dated as of November 14, 2022, as amended (collectively, the “Agreement Documents”), and to fully settle, compromise, and discharge all , debts, obligations, and liabilities arising out of or related to the Agreement Documents. The Company is assessing the potential business surrounding supply chain, before making any decisions as to whether the Company wants to engage a replacement to the services previously provided by Aggia.
In 2025, the Company sold the assets relating to its U.S.-centric restaurant business. Sadot Restaurant Group, LLC (“Sadot Food Services”) held three concepts, including two fast casual restaurant concepts, Pokémoto and Muscle Maker Grill. During 2024, the Company operated a subscription-based fresh prep meal concept, SuperFit Foods, which was sold in August 2024. Throughout 2024 the remaining corporate owned restaurants were sold and converted into franchise locations or closed. On December 4, 2025, the Company and its wholly-owned subsidiaries, Pokemoto LLC, Poke Co Holdings, LLC, and Muscle Maker Development, LLC (collectively, the “Sellers”), completed the sale of substantially all of the assets related to the Pokemoto and Muscle Maker Grill franchise businesses (the “Business”) to MARV Brands of America LLC, a Delaware limited liability company, and MARV Brands Inc., an Ontario business corporation (collectively, the “Buyers”), pursuant to an Asset Purchase Agreement dated December 4, 2025 (the “Purchase Agreement”). Under the terms of the Purchase Agreement, the Buyers acquired the assets of the Business, including franchise agreements, intellectual property (such as trademarks, recipes, operations manuals, and brand standards), inventory, marketing funds, gift card balances, and other related assets, for a total purchase price of $2,900,000 (the “Purchase Price”). The Purchase Price consisted of: (i) a $100,000 earnest money deposit previously paid by the Buyers; (ii) $2,600,000 paid at closing; and (iii) a $200,000 holdback amount (the “Holdback Amount”) payable subject to certain conditions,
including the delivery of specified missing franchise and transfer agreements as outlined in a side letter agreement dated December 4, 2025 (the “Side Letter”). The Holdback Amount is contingent upon the Sellers delivering fully executed copies of various missing agreements on or before the holdback payment date. The deadline for delivery has lapsed and the Company has not delivered all required agreements. Accordingly, the $200,000 holdback receivable has been written off as of December 31, 2025. In connection with the closing, the parties also executed a Trademark Assignment Agreement dated December 4, 2025, pursuant to which the Company and Pokemoto LLC assigned all trademarks related to the Business to MARV Brands Inc. The transaction closed on December 4, 2025, and the Company received the closing payment in accordance with the wire instructions. The sale allowed the Company to divest its franchise restaurant operations and further focus on its agri-food operations. Please see Note 4 – Assets held for sale and Note 5 – Discontinued operations for further details.
On September 9, 2025, the Company filed a Certificate of Change Pursuant to NRS 78.209 with the Nevada Secretary of State to effect a reverse stock split of the Company’s common stock at a ratio of one-for-ten (the “Reverse Stock Split”), which became effective 12:01 am eastern on September 15, 2025. The Company did so to regain compliance with Nasdaq. As a result of the Reverse Stock Split, every 10 shares of the Company’s common stock issued and outstanding on the effective date were consolidated into one issued and outstanding share. All shareholders who would have otherwise received fractional shares as a result of the Reverse Stock Split received cash in lieu of any fractional share interests There was no change in the par value of the Company’s common stock. The Company previously effected a 1-for-10 reverse stock split effective October 18, 2024. All share and per share amounts included in these consolidated financial statements have been adjusted to reflect both reverse stock splits. Please see Note 18 – Commitments and contingencies for further details.
Key Financial Definitions
We review a number of financial and operating metrics, including the following key metrics and non-GAAP measures, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. Governmental and other economic factors affecting our operations may vary.
For the Years Ended December 31,
Commodity sales
Other revenues
Cost of goods sold
Gross profit
Depreciation and amortization expenses
Stock-based expenses
Sales, general and administrative expenses
Loss from continuing operations
EBITDA
EBITDA attributable to Sadot Group Inc.
Our key business and financial definitions are explained in detail below.
Revenues
Our revenues are derived from Commodity sales. Revenues from commodity sales have declined substantially since Q2. The business has experienced significant trading difficulties around capital to support new trades, disputes on settlement of existing trades and a number of legal disputes on historic trades. Following the financial performance during the third quarter of 2025, management of the Company began evaluating alternative business lines to address this situation. All options are being assessed. The management continues to focus on monetizing the current assets of Sadot Agri-Foods as efficiently as possible. It should be highlighted that the risk of future impairments on current assets is a possibility going forward. Impairments on assets of the Trading business cannot be excluded in the near future or in the long run.
Cost of Goods Sold
Cost of goods sold includes commodity costs, labor, rent and other operating expenses.
Reclassification
During the year ended December 31, 2025, the Company reclassified gains previously recognized in Other income related to the fair value remeasurement of certain financial instruments into Cost of goods sold (“COGS”). The reclassification was made to better reflect the nature and function of these instruments, which are economically linked to the Company’s inventory procurement, sales activities and to be consistent with our competitors. Management determined that presenting the related gains in COGS more accurately reflects the impact of these instruments on the Company’s gross margin and provides more decision-useful information to financial statement users. This change in presentation had no impact on net income, total comprehensive income, or earnings per share for the period.
Depreciation and Amortization Expenses
Depreciation and amortization expenses primarily consist of the depreciation of property and equipment.
Stock-based Expenses
Stock-based expenses include all expenses that are paid with stock. This includes stock-based consulting fees due to Aggia and other consultants, stock compensation paid to our board of directors, and stock compensation paid to employees. The consulting fees due to Aggia related to ongoing Sadot Agri-Foods and expansion of the global Agri-Foods commodities business. Based on the initial Services Agreement with Aggia LLC FZ, a Company formed under the laws of United Arab Emirates (“Aggia”), the consulting fees were calculated at approximately 80.0% of the Net Income generated by Sadot Agri-Foods through March 31, 2023. As of April 1, 2023 the consulting agreement was amended to calculate consulting fees on 40.0% of the Net income generated by Sadot LLC.
On November 20, 2025, the Company and Aggia entered into a settlement agreement that terminated the services agreement and extinguished all remaining obligations thereunder. Accordingly, no further stock-based consulting fees are expected to be incurred under this arrangement following its termination.
For the years ended December 31, 2025 and 2024, $2.1 million and $6.7 million, respectively, are recorded as Stock-based expenses in the accompanying Consolidated Statements of Operations and Other Comprehensive (Loss) / Income.
Sales, General and Administrative Expenses
Sales, general and administrative expenses include expenses associated with corporate and administrative functions that support our operations, including wages, benefits, travel expense, legal and professional fees, training, investor relations and other corporate costs. We incur incremental Sales, general and administrative expenses as a result of being a publicly listed company on the NASDAQ capital market.
Total Other (Expense) / Income Accounts
Total Other (expense) / income listed below the Loss from operations in the accompanying Unaudited Consolidated Statements of Operations and Other Comprehensive (Loss) / Income consists of Change in fair value of stock-based compensation, loss on debt extinguishment and Interest expense, net.
Income Tax Benefit /(Expense)
Income tax benefit / (expense) represent federal, state and local current and deferred income tax expense.
Net Loss Attributable to Non-controlling Interests
Net loss attributable to non-controlling interests was $0.5 million and $0.3 million for the years ended December 31, 2025 and 2024, respectively. During the year ended December 31, 2023 the Company created a joint-venture in Zambia in which the Company has a 70% interest and the third-party equity ownership has a 30% Non-controlling interest. As described above, following the December 11, 2025 judgment by the High Court for Zambia, the Company lost possession, control, and ownership of the underlying farmland assets, which have been fully impaired. However, the Company retains a controlling interest in the Zambian entity, and therefore continues to consolidate the entity. The Company is appealing the judgment.
Non-GAAP Measures
EBITDA and EBITDA Margin are non-GAAP measures. We define EBITDA as Net loss, adjusted for depreciation, amortization, interest income / (expense), and income taxes. We believe that EBITDA and EBITDA Margin, (collectively, the “Non-GAAP Measures”) are useful metrics for investors to understand and evaluate our operating results and ongoing profitability because they permit investors to evaluate our recurring profitability from our ongoing operating activities.
EBITDA and EBITDA Margin, have certain limitations, and you should not consider them in isolation or as a substitute for analysis of our results of operations as reported under U.S. GAAP. We caution investors that amounts presented in accordance with our definitions of any of the Non-GAAP Measures may not be comparable to similar measures disclosed by other issuers, because some issuers calculate certain of the Non-GAAP Measures differently or not at all, limiting their usefulness as direct comparative measures.
Reconciliations of EBITDA and Other Non-GAAP Measures
The following table presents a reconciliation of EBITDA from the most comparable U.S. GAAP measure, Net loss, and the calculations of the Net loss Margin and EBITDA Margin for the years ended December 31, 2025 and 2024:
For the Years Ended December 31,
Net (Loss) / Income
Adjustments to EBITDA:
Depreciation and amortization expenses
Interest expense, net
Income tax (benefit) / expense
EBITDA
EBITDA attributable to non-controlling interest
EBITDA attributable to Sadot Group Inc.
Gross Profit
Gross Profit attributable to Sadot Group Inc.
Net (Loss) / Income Margin attributable to Sadot Group Inc.
EBITDA Margin attributable to Sadot Group Inc.
Consolidated Results of Operations - Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
The following table represents selected items in our Consolidated Statements of Operations for the years ended December 31, 2025 and 2024, respectively:
For the Years Ended December 31,
Variance
Commodity sales
Other Revenues
Cost of goods sold
Gross profit
Depreciation and amortization expenses
Stock-based expenses
Sales, general and administrative expenses
(Loss) income from continuing operations
Interest expense, net
Change in fair value of stock-based compensation
Loss on impairment
Loss on litigation
Loss on debt extinguishment
(Loss) / Income for continuing operations before income tax
Income tax benefit / (expense)
Net (Loss) / Income for continuing operations
Net loss for discontinued operations
Net loss attributable to non-controlling interest
Net (Loss) / Income attributable to Sadot Group Inc.
NM= not meaningful
The following table sets forth our results of operations as a percentage of total revenue for each period presented preceding:
For the Years Ended December 31,
Commodity sales
Cost of goods sold
Gross profit
Depreciation and amortization expenses
Stock-based expenses
Sales, general and administrative expenses
(loss) income from continuing operations
Interest expense, net
Change in fair value of stock-based compensation
Loss on impairment
Loss on litigation
Loss on debt extinguishment
(Loss) / Income for continuing operations before income tax
Income tax benefit / (expense)
Net (Loss) / Income for continuing operations
Net loss for discontinued operations
Net loss attributable to non-controlling interest
Net (Loss) / Income attributable to Sadot Group Inc.
Gross Profit
For the Years Ended December 31,
Variance
Commodity sales
Other revenues
Cost of goods sold
Gross profit
NM= not meaningful
Our gross profit totaled $4.6 million for the year ended December 31, 2025, compared to $22.7 million for the year ended December 31, 2024. The $18.2 million decrease is primarily attributed to a decrease in Commodity sales and corresponding decrease in Cost of goods sold.
We generated Commodity sales of $246.9 million for the year ended December 31, 2025, compared to $700.9 million for the year ended December 31, 2024. The $454.0 million decrease or 64.8% is attributable to a decline in global prices of staple commodities, market seasonality, the largest global consumer being out of the market for the beginning of 2024. Furthermore, it is attributable to a much stronger scrutinization process which the company adhered to starting in Q3 2025. The Company was seeking to minimize the risks prior to engaging in large transactions unless these transactions can also guarantee a cash profit.
We generated Other revenues of $0.1 million for the years ended December 31, 2025, compared to nil for the year ended December 31, 2024. This represented an increase of $0.1 million, which is attributable to management fees income due to a new management service offered.
Cost of goods sold for the years ended December 31, 2025 and 2024 totaled $242.4 million and $678.2 million, respectively. The $435.8 million change is primarily due to a direct result of the decrease in sales, reclassifying Sadot Agri-Foods consulting fees to sales, general and administrative cost in 2025 and the reclass of gain on derivative contracts.
Depreciation and Amortization Expenses
For the Years Ended December 31,
Variance
Depreciation and amortization expenses
Depreciation and amortization expenses for the years ended December 31, 2025 and 2024 totaled $0.1 million and $0.3 million, respectively. The $0.2 million decrease is mainly attributed to Farm related assets being fully depreciated in 2024.
Stock-Based Expenses
For the Years Ended December 31,
Variance
Stock-based expenses
Stock-based expenses for the year ended December 31, 2025, totaled $2.1 million compared to $6.7 million for the year ended December 31, 2024. The decrease in Stock-based expenses is primarily the result of the settlement with Aggia entered in November 2025, in which Aggia was willing to waive their previously agreed consulting fees. Based on the original servicing agreement with Aggia, the consulting fees were calculated at approximately 40.0% of the Net income generated by Sadot Agri-Foods. This expense was supposed to be paid in the vesting of restricted stock that was issued to Aggia. In November 2025 the services agreement was terminated pursuant to a settlement agreement which extinguished all remaining obligations under the arrangement.
Sales, General and Administrative Expenses
For the Years Ended December 31,
Variance
Sales, general and administrative expenses
Sales, general and administrative expenses for the years ended December 31, 2025 and 2024 totaled $42.9 million and $9.7 million, respectively. The $33.2 million increase was primarily attributable to an increase in bad debt expense due to a higher allowance for accounts receivable, reflecting changes in collectability assessments during the period. A portion of the increase was also attributable to an increase in consulting fees as a result of reclassifying Sadot Agri-Foods consulting fees from cost of goods sold. This change was made during the three months ended March 31, 2025 when the Company reclassified gains previously recognized in Other income related to the fair value remeasurement of certain financial instruments into Cost of goods sold (“COGS”). The reclassification was made to better reflect the nature and function of these instruments, which are economically linked to the Company’s inventory procurement, sales activities and to be consistent with our competitors. Management determined that presenting the related gains in COGS more accurately reflects the impact of these instruments on the Company’s gross margin and provides more decision-useful information to financial statement users. This change in presentation had no impact on net income, total comprehensive income, or earnings per share for the period.
Total Other Income / (Expense) Accounts, Net
For the Years Ended December 31,
Variance
Total other income / (expense), net
Other (loss) income for the years ended December 31, 2025 and 2024 totaled $(53.0) million and $(0.5) million, respectively. The other income was primarily attributable to the recognition of impairment of significant assets of $31.0 million, loss on litigation of $13.5 million, loss on debt extinguishment of $3.6 million, all of which were not present in the prior year, as well as a decrease of $3.4 million in the change in fair value of accrued compensation due to the difference in the stock price at the time of the stock issuance and agreed upon price to Aggia, partially offset by a $1.0 million increase in Interest expense, net.
Liquidity and Capital Resources
Working Capital
We measure our liquidity in a number of ways, including the following:
December 31, 2025
December 31, 2024
Cash (includes $0.27 million of restricted cash as of December 31, 2025 and 2024)
Accounts Receivable, net
Inventory
Other current assets (1)
Assets held for sale (2)
Total current assets
Accounts payable and accrued expenses
Notes payable, net
Other current liabilities (3)
Liabilities held for sale (4)
Total current liabilities
Working capital (deficit) (5)
Current ratio (not in $’000’s) (6)
(1) Consists of VAT, prepaid expenses, and current notes receivable.
(2) See Note 4 for additional information
(3) Consists of current operating lease liability, current deferred revenue, and other current liabilities.
(4) See Note 4 for additional information
(5) Working Capital is defined as Total current assets less Total current liabilities
(6) Current ratio is defined as Total current assets divided by Total current liabilities
Availability of Additional Funds
Our main financial objectives are to prudently manage financial risk, ensure access to liquidity and minimize cost of capital in order to efficiently finance our business and maintain balance sheet strength. We generally finance our ongoing operations with cash flows generated from operations, borrowings under various credit facilities and term loans.
At December 31, 2025, current ratio, which equals Total current assets divided by Total current liabilities, was 0.05, a decrease of 1.11, compared to current ratio of 1.16 at December 31, 2024. At December 31, 2025, working capital (deficit), which equals Total current assets less Total current liabilities, was $(54.8) million, a decrease of $75.3 million, compared to working capital of $20.5 million at December 31, 2024. The decrease in current ratio and working capital was primarily due to an increase in accounts payable, a decrease in net accounts receivable due to large allowances, partially offset by a decrease in other current assets, a decrease in assets held for sale, a decrease in inventory, a decrease in other current liabilities and a decrease in liabilities held for sale.
While the Company maintains a base of current assets, including inventories and receivables, the timing and certainty of converting these assets into cash has presented operational challenges and led the business to increase borrowing to cover collection delays. During the year ended December 31, 2025 the company increased its net borrowing by $2.8 million. These short-term borrowings, together with the equity line of credit, are expected to provide interim credit support.
The Company is currently experiencing delays in converting receivables into cash, which has impacted the timing of available liquidity. Management continues to actively manage collections, review credit facilities, and negotiate repayment arrangements with certain creditors to support liquidity requirements.
The Company is required to obtain additional financing—whether through borrowings, private placements, public offerings, or strategic transactions such as mergers or asset sales. There can be no assurance that such efforts will be successful. Failure to obtain adequate funding could require us to sell one or more business lines or assets, enter into a business combination, or reduce or cease operations. Any such transactions, to the extent available, could result in significant dilution to existing shareholders or the loss of their investment in our Company.
We will need to raise additional capital. Such additional capital may not be available nor may the terms of such capital be generally acceptable. In addition, any future sale of our equity securities could dilute the ownership and control of your shares and could be at prices substantially below prices at which our shares currently trade. We may seek to increase our cash reserves through the sale of additional equity or debt securities. The sale of convertible debt securities or additional equity securities could result in additional and potentially substantial dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity. In addition, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. Any failure to raise additional funds on favorable terms could have a material adverse effect on our liquidity and financial condition.
Management has performed a going concern assessment covering a period of twelve months from the issuance date of these audited consolidated financial statements. While there is no assurance that existing borrowings and the equity line of credit will provide sufficient funding to support operations for the full assessment period, management believes it remains appropriate to prepare the financial statements on a going-concern basis. Management believes the actions described above, if successfully executed, will provide sufficient liquidity to meet obligations as they become due. However, there can be no assurance that such plans will be realized or that additional financing will be available on acceptable terms. Accordingly, substantial doubt exists about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued.
The accompanying audited consolidated financial statements do not include any adjustments relating to the recoverability or classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
Helena Purchase Agreement Impact on Liquidity
The September 23, 2025 Helena Purchase Agreement provides potential access to up to $10 million but carries material cash obligations: $100,000 liquidated damages per 30-day period if the $2 million Threshold Amount is not met within six months of registration effectiveness, plus 2.0% monthly penalties for registration delays. These cash payments, combined with the Company’s negative working capital ($(6,982) thousand as of December 31, 2025 and debt maturities, increase liquidity pressure. The registration statement was initially filed but subsequently withdrawn. The original filing deadline was October 8, with the Form S-1 ultimately filed on November 14 and an effectiveness deadline of December 23. As a result of not meeting the required timelines, a penalty equal to 2% of the commitment amount was incurred, payable on the date of the triggering event and continuing on a monthly basis thereafter. As of December 31, 2025, the Company has accrued approximately $0.6 million related to these penalties, which is included in accrued expenses.
Settlement Agreement Impact on Capital Resources
On November 20, 2025, the Company entered into a settlement agreement with Aggia LLC FZ that requires a cash payment of $75,000 and the issuance of 1,050,000 shares of common stock. The Company has issued 257,000 shares to date, with the remaining 793,000 shares subject to shareholder approval under Nasdaq Rule 5635(d). As of December 31, 2025, the Company has accrued a liability for the remaining 793,000 shares within accrued expenses. The settlement also resulted in the cancellation of outstanding promissory notes previously issued to Aggia. From a liquidity perspective, the settlement required a modest cash outflow of $75,000, with no additional contractual cash obligations, and therefore does not represent a significant ongoing use of cash resources. However, the settlement impacts capital resources by reducing outstanding debt obligations through the cancellation of the promissory notes and increasing reliance on equity-based financing. The issuance of the remaining shares will result in dilution to existing shareholders and may impact the Company’s ability to raise additional equity capital. Subsequent to December 31, 2025, the Company received shareholder approval for the issuance of the remaining 793,000 shares, satisfying the approval requirement under Nasdaq Rule 5635(d).
Sources and Uses of Cash for the Years Ended December 31, 2025 and December 31, 2024
For the years ended December 31, 2025 and 2024, Net cash used in continuing operating activities was $8.7 million and $2.8 million, respectively, in operations and $3.8 million was provided by and $0.5 million was used in operations, respectively, in discontinued operations. Our Net cash used for the year ended December 31, 2025, was primarily attributable to our Net loss of $94.0 million, adjusted for net non-cash expense in the aggregate amount of $85.3 million offset by $13.7 million of Net cash used in changes in the levels of operating assets and liabilities. Our Net cash used for the year ended December 31, 2024, was primarily attributable to our Net loss of $3.7 million, adjusted for net non-cash expenses in the aggregate amount of $14.0 million, partially offset by $7.5 million of Net cash used in changes in the levels of operating assets and liabilities.
For the year ended December 31, 2025, Net cash used in investing activities was nil. For the year ended December 31, 2024, Net cash used in investing activities was $4.0 thousand, of which $37.0 thousand was used to purchase Property and equipment partially offset by disposal of property and equipment of $33.0 thousand. Net cash provided by investing activities for discontinued operations was $1.0 million for the year ended December 31, 2024.
For the year ended December 31, 2025, Net cash provided by financing activities was $3.8 million, consisting of proceeds from notes payable of $11.7 million, partially offset by the repayments of notes payable of $9.4 million. Net cash used in financing activities for discontinued operations was nil for the year ended December 31, 2025. For the year ended December 31, 2024, Net cash provided by financing activities was $2.8 million, consisting of proceeds from notes payable of $11.1 million and proceeds from exercise of warrants of $— million partially offset by the repayments of notes payable of $8.3 million. Net cash used in financing activities for discontinued operations was $0.1 million for the year ended December 31, 2024.
Derivative Financial Instruments
Inherent in our business is the risk of matching the timing of our purchase and sales contracts. The prices of food and feed commodities (e.g., soybeans, wheat, corn, etc.) and carbon offset units we buy and sell are based on a constantly moving terminal market price determined by various exchanges (e.g., Chicago Board of Trade, Dalian Commodity, Exchange, etc.). Were we not to hedge such exposures, we could be exposed to significant losses due to the continually changing commodity prices.
We use commodity futures contracts to manage our exposure to this commodity price risk. It is generally our policy to hedge such risks to the extent practicable. We enter into hedges to limit our exposure to volatile price fluctuations that we believe would impact our gross margins on firm purchase and sales commitments. As an example, if we enter into fixed price contracts with our suppliers and variable priced sales contracts with our customers, we will generally enter into a futures contract to sell the commodity for future delivery in the month when we expect the commodity price to be fixed according to the sales contract terms. We repurchase this position once the pricing has been fixed with our customer. If the underlying commodity price increases, we suffer a hedging loss and have a unrealized loss on derivative contracts, but the sales price to the customer is based on a higher market price and offsets the loss. Conversely, if the commodity price decreases, we have a hedging gain and recognize a unrealized gain on derivative contracts, but the sales price to the customer is based on the lower market price and offsets the . At December 31, 2025 and 2024 we had an unrealized on derivative contracts of nil and $0.1 million, respectively, on the books related to our hedging policy to manage our exposure to commodity price risk.
In accordance with generally accepted accounting principles in the U.S., we designate these derivative contracts as fair value hedges and recognize them on our balance sheet at fair value. We also recognize offsetting changes in the fair value of the related firm purchase and sales commitment to which the hedge is attributable in earnings upon revenue recognition, which occurs at the time of delivery to our customers.
As further described under “Risk Factors,” the potential for losses related to our hedging activities, given our hedging methodology, arises from the exchanges for our commodity hedges or customer defaults. In the event of a customer default, we might be forced to sell the commodities in the open market and absorb losses for the commodities. Our results of operations could be materially impacted by any counterparty or customer default, as we might not be able to collect money owed to us and/or our hedge might effectively be cancelled.
We use hedges for no purpose other than to avoid exposure to changes in commodity prices between when we buy a shipment of commodities from a supplier and when we deliver it to a customer. Our derivatives are not for purposes of trading in the futures market. We earn our gross profit margin through our business operations and not from the movement of commodity prices.
From time to time we may enter into forward sales contract that do not meet the definition or qualify for hedge accounting. Forward sales contracts are derivatives that were entered into to sell goods at a later date at a fixed or determinable price for a specific period. Forward sales contracts are recognized on the balance sheet at the value of the contract and the difference in the fair value and derivative liability is recorded as a unrealized gain on derivative contracts or unrealized loss on derivative contracts. If the underlying commodity price increases, we suffer a mark to market loss and have a unrealized loss on derivative contracts. Conversely, if the commodity price decreases, we have a hedging gain and recognize a unrealized gain on derivative contracts. At December 31, 2025 and 2024 we had derivative liabilities of nil and $92.1 million, with a corresponding unrealized gain on derivative contracts of nil and $18.6 million, respectively.
As part of our business we also engage in the purchase, sale and distribution of food and feed products. If we do not have a matching sales contract related to such products, (for example, any commodity products that are unsold in our inventory), we have price risk that we currently do not or are unable to hedge. As such, any decline in pricing for such products may adversely impact our profitability.
Critical Accounting Policies and Estimates
We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to apply estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates that involve a higher degree of judgment include, among others, the determination of allowance on accounts receivable, assessment of impairment of assets, and provisions related to legal proceedings. Management evaluates these estimates on an ongoing basis and updates them as circumstances evolve. Actual results could differ from those estimates, and such differences may be material.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (Topic 280). The standard requires incremental disclosures related to reportable segments, including disaggregated expense information and the title and position of the company’s chief operating decision maker (“CODM”), as identified for purposes of segment determination. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Entities must adopt the changes to the segment reporting guidance on a retrospective basis. Early adoption is permitted. The adoption of this guidance on December 31, 2024 did not have a material impact on the Company’s Consolidated Financial Statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, which focuses on income tax disclosures by requiring public business entities, on an annual basis, to disclose specific categories in the rate reconciliation, provide information for reconciling items that meet a quantitative threshold, and certain information about income taxes paid. The standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The amendments should be applied on a prospective basis. Retrospective application is permitted. The adoption of this guidance on January 1, 2025 did not have a material impact on the Company’s Consolidated Financial Statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”). The standard is intended to enhance transparency of income statement disclosures, primarily through additional disaggregation of relevant expense captions. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim reporting periods within fiscal years beginning after December 15, 2027. Entities can adopt the change prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of the standard on its consolidated financial statements.
In September 2025, the FASB issued ASU No. 2025-07, Derivatives and Hedging and Revenue from Contracts with Customers - Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract (“ASC 2025-07”) which applies to all entities that enter into non-exchange-traded contracts with underlyings based on operations or activities specific to one of the parties to the contract. The new guidance excludes from derivative accounting non-exchange-traded contracts with underlyings that are based on operations or activities specific to one of the parties to the contract. ASU 2025-07 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact of the standard on its consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Improvements to Interim Disclosure Requirements. The amendments are intended to enhance interim reporting disclosures by applying a more principles-based and materiality-driven approach. ASU 2025-11 is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. The Company has not adopted this guidance as of December 31, 2025 and is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU 2025-12, Codification Improvements. The amendments include various targeted improvements to the FASB Accounting Standards Codification. The effective dates vary by amendment; however, many are effective for fiscal years beginning after December 15, 2026. The Company has not adopted this guidance as of December 31, 2025 and does not expect it to have a material impact on its consolidated financial statements and related disclosures.
Seasonality
There is a degree of seasonality in the growing cycles, procurement and transportation of crops. The farming industry historically experiences seasonal fluctuations in revenues and net income. Typically, the Company has lower sales and net income during the non-harvest seasons and higher sales and net income during the harvest season and as such, must have sufficient working capital to fund its operations at a reduced level. Failure to generate or obtain sufficient working capital during the winter may have a material adverse effect on the Company.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Item 7.A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
