Good afternoon, and welcome to the Muscle Maker, Inc.'s Q1 2023 Earnings Call. Today's call is being recorded and all participants will be in listen-only mode. After managements prepared remarks, we will open the call to questions from analysts. At this time for opening remarks and introductions, I'd like to turn the call over to Frank Pogubila, Muscle Maker, Inc.'s Investor Relations Contact.

Thank you, operator, and welcome, everyone, to Muscle Maker, Inc.'s first quarter 2023 earnings call and webcast. Before we get started, I would like to say 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 can discuss financial projections, information or expectations about 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 sees 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 and Elsewhere in documents that Muscle Maker, 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 Muscle Maker, Inc. does not undertake any duty to update any forward-looking statements, except as may be required by law. For this call, all numbers and percentages disclosed have been rounded. On this call we will refer to Muscle Maker, Inc. as MMI. With me on the call today are MMI's Chief Executive Officer, Michael Roper; and Chief Financial Officer, Jennifer Black. Michael and Jennifer will be presenting prepared remarks related to MMI's financials filed on May 10, 2023, and those documents may be found on MMI's website, Newswire fees and on the SEC's website linked from the MMI IR pages at www.musclemakerinc.com. At this point, I would like to turn the call over to MMI's CEO, Michael Roper. Michael?

Thanks, Frank. Good afternoon, everyone. And thank you for joining us today. I'm pleased to report that Q1 was a strong continuation of Q4 and mark the first full quarter of MMI's significant pivot towards a diversified global food organization through the creation of our wholly owned subsidiary, Sadot LLC. As you may recall, in late 2022, we began a transformation from a U.S. centric restaurant business into a global food focused organization with two distinct business units. Sadot LLC and the MMI Restaurant Group. Our first business unit Sadot LLC is our newly formed international agri commodity subsidiary specializing in the trading and shipping of food and feed commodities such as soybean meal, meat and corn. Today, Sadot is our largest operating unit and has been instrumental in our performance for this quarter. This pivot into a new business and operations was done with a long term strategic view of the opportunities in the global food supply chain, instead of only focusing on food, retail or restaurants, we broadened our view and saw that there's an increasing need for companies that can build and operate sustainable supply chains and can take part in providing food security to global communities. Along with vast financial opportunities. This creates social and environmental values, and correlates with our long term values of providing food that is healthy and fresh around the globe. Our second business unit, the MMI Restaurant Group is our legacy business, which includes 50 plus restaurant units across two fast casual concepts. Pokemoto and Muscle Maker Grill, with Pokemoto being a high growth restaurant brand. The restaurant also includes the subscription based fresh meal prep service, Superfit Foods with 30 plus points of distribution. So let me take a couple of minutes here and discuss some of the Q1 highlights.…

Thanks, Mike. And thank you to everyone joining us here today. Before I begin, I would like to note that our financial results for the quarter ended March 31 2023 on Form 10-Q were filed with the SEC on May 10. And then a press release that same day. With that I'd like to give an overview of the financials for the first quarter of 2023. For the quarter ended March 31 2023, our company-wide revenue significantly increased in total $213 million, compared to $3 million for the prior quarter ended March 31 2022. Of the $213 million revenue increase, $210 million was primarily due to the commodity sales revenue generated by Sadot, and its servicing agreement with AGGIA. Sadot completed 19 transactions in Q1 with the average revenue per transaction of $11.1 million and an average cost of goods sold per transaction at $10.8 million. These 19 transactions were completed throughout 11 different countries. The MMI restaurant business unit, generated a total revenue of $3 million. This consisted a $2.7 million from company owned and operated locations and $300,000 in royalty fees collected from both Muscle Maker Grill and Pokemoto franchise locations for the quarter ended March 31 2023. Company owned and operated location revenue decreased to the closing of underperforming and non-profitable Muscle Maker Grill restaurants. Well, royalty revenue increased by 36.5% as the company continues to focus its restaurant business unit strategy on franchising the Pokemoto concept. As of today, the company has over 45 additional Pokemoto franchise agreements sold, but not yet open. The increase in franchise royalties is due to an increase in Pokemoto franchisees and a closure of one Muscle Maker Grill franchise. Overall, our first quarter non-GAAP adjusted EBITDA was $2.4 million in 2023, compared to a $1.5 million non-GAAP adjusted EBITDA loss…

Thanks for the financial review, Jennifer. We're excited to report that our new diversification strategy and company pivot towards a diversified global food organization is starting to bear fruit. We firmly believe that adding a Sadot subsidiary has created significant value for the company. We are very pleased with Sadot performance to date and our diversification strategy into the agri commodity space. We've spoken a lot about Sadot and its impact on the overall company. Let me say a few words about our restaurant unit. As we've mentioned previously, we are focusing our strategy and growing the Pokemoto franchise business, while also optimizing our other restaurant concepts, which could include closing underperforming locations or investigating other strategic alternatives. We currently have over 45 Pokemoto franchise agreements sold, but not yet open, and also have recently launched a new dual concept unit that combines our Pokemoto brand, with our Muscle Maker Grill concept under the same roof. This leverages our existing infrastructure, reducing our overall costs while offering a wide variety of options for consumers, while potentially turning a negative impact location into a positive impact location. More to come on these types of initiatives. Investors may notice that our public company brand profile and investor communications have started to shift this quarter and will continue in the current quarter to better reflect a growth story around Sadot and focus on performance from that business unit. We believe there's an ability to become more vertically integrated with the goal of generating higher contribution margins and further diversification. These are opportunities we'll explore as we move forward. It should be noted that the agri commodity business is slightly seasonal during the U.S. winter months. So our last two quarters are a good indication of baselines for us to grow upon. Investors may also notice a growing disparity in the operating results between the two business units, while our management is committed to focusing our resources on the path that will create the most value for shareholders moving forward. In summary, we're extremely pleased with MMI's performance this quarter, fueled by Sadot, and our need diversification strategy. We're confident in our strategy, we look forward to continuing growth in the months and years to come. With that, let's open the call to questions from the analysts.

Thank you, Michael, we'll take our first question from Aaron Grey with Alliance Global Partners. Aaron, if you go ahead, please.

Hi, can you guys hear me okay?

We can, yes.

Hi. Great. Good evening. And thank you for the question. So first question for me just nice to see the revenue for quarter of Sadot, just on the margin side, still came in a bit lower 2.2% versus the 3%. could you offer a little bit more color in terms of maybe the reasoning for that margin coming in a bit and also in fact that you spoke to potentially giving some terms to help improve that margin? So further color in terms of a bad impact that it might have had, would be helpful? Thanks.

Okay. Hey, Aaron. It's Mike. How you doing?

Good.

So a couple of things that are in there. So first off, why did the margin come in a little bit lighter than it did in the previous quarter. One thing to consider, it's more than just the margins on the given trades, so that the trades themselves came in within the industry standards, and kind of what we expected, if you could just remember that the net income is also taking into effect, the overhead costs of MMI, that are attributable directly to Sadot. Right, so like increased audit fees, and all that kind of stuff kind of play into this first quarter as well, as long as, as well as some of those costs that AGGIA has, as we build that team out. So that's why you see some of the margins being a little bit slightly lower, because we had some of those higher costs in those areas. And then you had something, Jennifer?

Yes, when it comes to the ways to increase margins, it's we're now offering terms to some of our buyers where we may do it where the profit is extended 60 to 90 day terms, just to give us any additional edge we can have on margins.

Okay. Yes, just follow up on that quickly, if I'm just thinking about just straight margin just off of Sadot revenue and commodity expenses. So would that have been -- you're saying that would have also included some corporate expense within that.

So if you look at the commodity operating expenses, there's labor in there, and then there's other what's called other commodity operating expenses, those are to pay the traders to pay the office expense, general operational expenses to get those trades done? Is in that line?

Okay. Thanks for that. And then on the working capital needs kind of going forward, right. It sounds like these terms you're offering kind of change up from what we had seen in 4Q with the business. So what do you -- how do you think about working capital needs, as you potentially offer more terms to your customers?

Yes, look, I always view all this is really a cash flow scenario. And so, one way to look at it is, we've got plenty of cash on hand to take care of all of our operational needs here for the short term. And then we also have -- as we indicated, a little over $4 million coming in here in the next while we -- it was 60 days, a little bit less than that now, right as each day moves on. So, we started receiving some of that capital today, as a matter of fact, right at some of those deposits. So, we're not really too concerned about needing some of that to execute our business plan at this stage.

Okay, great. Thanks. I hope that's helpful. On the top line, you mentioned, some seasonality in the winter months. So get offer some further color, if you could, in terms of what to expect now going into summer. So sounds like that, that'd be a benefit. And then you could provide some more color, just in terms of the client tell, how diversified you and how you might be looking to increase that diverse stability, I think that'd be helpful to get better color on this about business things.

Okay. Yes. So a couple of things in there. And I'll let Jennifer talk about some of the clientele and the products and things with some stats in there. But when you start thinking about the revenue, just in general, there is a seasonality component to this, right. And that's really, where your clientele is, and the commodities you're trading, whether you're in the Northern Hemisphere, the southern hemisphere yet all kinds of different factors of that play in there. In the beginning of the year, you also have which was affected us the beginning of this quarter. You also have like New Years, right, that in different parts of the world, as it extends a lot longer than it is just here in United States. And so all that kind of plays into the seasonality role that's there. One thing to kind of look at and that I like to really kind of view this as, as we've had five consecutive months now since really since inception, that we've had 50 plus million dollars in revenue, and someone's going as high as $90 million. Right. And so we think that's a pretty good range to think about as we move forward, as kind of our maintain area, if you want to say, right, but look, we're trying to expand this, obviously, right and expand the revenue. And some of the ways to do that is through diversifying our operations. And we can do that by adding and I like to call it horizontal integration, you can do that by adding additional trade lines, or traders, different clientele that they have, across different countries and product types. And so you can start to level out if you want to say, these seasonality factors as you move forward. As you increase the different commodities in different areas in the world that you're trading with and working on. So, really it's kind of like, if I went and started trading in both hemispheres, I'd be able to reduce some of that seasonality. If we expanded our commodities into things like pulses and peas are just different commodities that we aren't trading today, you can start leveling out that fluctuation, I guess, is one way to view it. Do you want to talk about the financial?

Yes, absolutely. So if you take -- we'll take quarter one, for example. We completed 19 different trade transactions, and of those transactions that consisted of nine different products from four different suppliers. And we sold those to 15 different buyers throughout 11 countries.

Do that make sense?

Sorry. But because of that, as we were able to expand and we are able to use different buyers, different products, different suppliers in more countries, then that seasonality or that focus, it just expands it and gives you more a little bit more leverage on that. And then this last quarter, we also shipped multiple types of grains, both human and for animal consumption, the majority have focused on, wheat, corn, soybeans, we other did some palm oils and rice. And so, we only had a few different areas that we focused on in Q1. And so as we expand on that, the seasonality will decrease.

And I do think it's important to mention that, the AGGIA team that we're working with, they've got a huge level of experience and a wealth of knowledge that they're bringing to this equation. And that's, that's allowed us to get over the hump of some of these initial startup inefficiencies, if you want to say and allow us to hit the ground running and running pretty hard. And so it's really good that we've got that experience that's out there, and the know how, and it also allows us to grow, right, they've got, more experience in different commodity areas, for example, they got more experience in some of the vertical integration, stuff of farming and shipping and all the other things in between, right, so as we expand this business, and bring on these other revenue sources, they'll be able to expand right with us without having to have some of those inefficiencies, when you start up these businesses. We are going to be bringing in some additional, I'll just say personnel, really, it's more like traders. And those traders come with their own clientele and their own sources of product. And so it's kind of like bringing their -- I'm using old fashion from the Rolodex, right. I don't know if everyone knows what that is on the call, right. But they bring the list of contacts their LinkedIn file, I guess now, right. And so, you're able to start expanding your commodity trades and all that we're taking a look at some of these additional capabilities, specifically in like North America, probably the next area that we start to pull stuff in. So hope that answers your question, Aaron.

That's helpful. Appreciate the detail, and I'll go and jump back in the queue.

Thanks, Aaron. Thanks, Michael. Thanks, Jennifer. We're going to take the next question from Tom Kerr with Zacks Research. Tom, if you want to ask questions.

Sounds good. Can you guys hear me?

We can. Yes. Thank you.

All right, just one quick follow up on the Sadot business and a few on Pokemoto, but I just wanted to beat the dead horse again, on the revenue line. You said that the $90 million is a monthly base that you're trying to achieve, but there's still lumpiness. So does that mean the $270 million a quarter but it might be $200 million, linked quarter might be $350 million. But you're sticking to $90 million as an average monthly basis? If I heard that right?

Well, we don't like to really provide guidance on that per se, but just general discussions, I think it's safe to say that, we've achieved at least 50 million per month, right, since inception. And we've had a couple of months as high as a little over the 90s. And so I know that's a pretty wide range, and it can fluctuate like that, depending on the quarter and the season that you're in, but somewhere in that range is what we're expecting to have as a base, and then we'll start growing off of that by adding all these different verticals into the equation.

Okay, just follow up on that. So there's not an extreme lumpiness, it might be a little bit up and down, but it's not where you'd see. 210 Last quarter, 150 next quarter, 350 in the third quarter, can we think like that?

I'm not sure I have enough experience in history since we started this to really dictate how it looks for the rest of the year. But I think it's pretty safe to say you'll be in that that range, right? And yes, it will be a little bit lumpy depending on the season. But we'll kind of watch that out as we kind of move forward.

Alright, helps a little bit. Quickly on the Pokemoto, there's 45 that are expected to be open. Do you have a timeframe on that as a first part question, how many will be open and operating by the end of the year? Could you do that even by quarter? And then second part of that is any headwinds that in these openings? Is inflation a problem, labor, real estate, anything like benefits that might slowdown these openings?

Ye, let me kind of go into that a little bit. So Pokemoto is part of our restaurant division. As you guys know, we have Muscle Maker Grill restaurants, Pokemoto restaurants and Superfit Foods. Pokemoto is what we're focusing on. That's all of our strategy and our growth on the restaurant side of the equation. As you mentioned, we've got right now today we have roughly, it's actually a little bit more than 45 locations are agreements that have been sold, but haven't been opened yet. As a matter of fact, we just sold for more locations here in the last couple of weeks, we sold a three pack in Houston about a week ago, which adds to that market. And then we also sold are sold our first franchise agreement out of Alabama in Maubilla I think it was that we sold as well. So we're expanding into more states there. So a lot of growth that's happening in Pokemoto. There are fluctuations from when you sell a location to when it actually opens. And that is totally strictly dependent upon the individual franchisee, and the real estate availability in their market. Some franchisees will already have a location lined up, they've already negotiated the lease, they're ready to go. So when they sign the franchise agreement, they're often running and you can open that in two to four months, right. You're going through their training and ordering their equipment and the build out and they're up and running, right? Other franchisees will wait to start looking for real estate until they sign the agreement. And obviously, that will take a little bit longer. In those instances, on average, it's somewhere between six and nine months before they open couldn't be sooner could be later get it all depends…

Just the general input into whether it's affecting these openings that have already been signed, or is it just all part of it playing?

Yes, I don't think it's right and like I said, we've already got the 15 to 20 that we got pretty much on the books we're really confident in those, those are people that have either the most of have already got their funding, they're already in some kind of a process with opening up, construction or finish finalizing off their negotiations with the landlords, we're pretty confident in those for come across. And so we haven't seen really anything slowing that down per se. But again, if interest rates go through the roof or whatever, then that could be a problem but not anticipating that happening right now.

Great. That's helpful. I'll get back in the queue.

Thank you, Tom. Thanks, Mike. We'll go ahead and take the next question from Rob Goldman, with Goldman Small Cap Research.

Hello, can you hear me?

Yes.

Great. Thank you. Great job on the quarter. Couple of questions on Sadot and one on MMI. With respect to Sadot during the quarter, was there any notable concentration of business and specific food or commodity, or geography? I know Jennifer went through some of those numbers, but I didn't know if there was a heavy concentration in one particular segment there?

So when you actually look at that, like I said, we were in 11 different countries and stuff like that. It wasn't -- there wasn't two countries where all of it went to, it was pretty evenly spread amongst the different countries that we worked in and same with the suppliers and the buyers. There weren't just -- it wasn't one buyer or one supplier that made it the bulk of it, it was it was pretty spread evenly between those.

Okay, so perhaps then given this, albeit short experience, the ability to reduce some of the variability in revenue might be then some of these initiatives that Michael mentioned earlier on, whether it be the product side, or geography, I guess, kind of making that flat, so to speak, would be a combination of both? Or are you leaning more toward growth in a product line first, and geography second? Or is it just too early to give us that information?

I think it's actually going to be combination. Looking to expand, when you expand the traders, you add traders, those are adding different commodities, different areas, different countries, it's adding all of it. And so when picking up new products that we are buying and selling and going into new geographical areas, I think that combined will actually level it out. Does that answer your question?

Yes. And then on the legacy business? What type of metrics does Grill plan to use for some of the combination Muscle Maker Grill Pokemoto locations, to be considered a success? And is there a number that you have in mind that you plan to open this year next year?

Yes, so let me jump in here. The -- I guess the way to look at, the way I look at these dual concepts, right, and just so everyone's on the same page, what this means is we take an existing Muscle Maker Grill restaurant, like we just did this in Fort Sill, in Lawton, Oklahoma, there was a Muscle Maker Grill restaurant. And so then we add a Pokemoto to it. Right. So it's two restaurants running under the same roof, you get the leverage the same manager, you get the leverage the same facilities like freezers, and coolers and all that kind of stuff. So you get and you get not a lot of the product per se a little bit, but you get the leverage those type of things right, which gives you better efficiencies and helps reduce your costs. So, the first thing that we did, we had, we just launched this first one about 30 to 45 days ago. And the numbers we're seeing are very impressive so far, I mean, we literally are, at this stage, probably three to four times the revenue at the Pokemoto than we had at the Muscle Maker, right, which is significant. So, we're looking at revenue, we are looking at overall blended food costs, really, it's trying to take, locations that are underperforming, and get them to be performing, for lack of a better definition, right. So that's our first measurement, to get these things at least to breakeven, and then start making money afterwards. And so again, only being 45 days into it. We don't have a whole lot of data behind it yet. But so far, it looks pretty encouraging from that. So we'll be looking at the standard revenue in food costs and labor costs and the bottom line on these. Then you also asked about how many we're thinking to doing here. So, we have our second one opening up here soon, if not this week, then next week. It we're just literally waiting for our final inspection, basically. And it shifts around a little bit, but in Chelsea, New York, right, so we'll have that in the Chelsea area for anybody that might be up there. And then we've got a couple other ones that we're contemplating on a couple of the military bases, that we have locations. And so that'll be -- kind of how we started dressing the legacy business. As we mentioned earlier, we're looking at each one of the different locations we're trying to figure out, if there's underperforming locations, can we close it? Or what can we do to make it performing, and this is one of those ways of looking at it. So we're aggressively trying to analyze some of that legacy business.

Great. Thank you.

Perfect. Thank you, Bob. I guess we'll go ahead and move on to Mr. William Gregozeski. Hopefully I pronounced that right. Mr. William, we'll take your questions now. And you are with Greenridge Global LLC. You have any questions for us?

Yes. Just on your restaurant business. What is the plan, I guess, near term and then after AGGIA effectively takes control the board of that restaurant business in general, you mentioned strategic alternatives? But is that something where you might sell all of them off or part of it or divest in some way? What's what is their kind of planning for that business?

Yes. Sounds a little bit of trouble here. And you and I think I got it, you're asking about what is the plan for the restaurant business, or just in general. So the way the way to look at it, again, there's three segments that are in there, you've got Muscle Maker Grill, you've got Super Fit Foods, and you have Pokemoto, Pokemoto is what we're focusing on. We're trying our strategy there, is to grow Pokemoto for franchising, and I keep mentioning franchising over and over again, because we are taking a look at our legacy business, when it comes to corporately owned and operated locations, in a lot of those instances, those are underperforming. And some of them are old locations that have been around for a long time. And so we're taking a look at those to see whether or not we should close them. Or if not, if leases don't allow us to do that, or it just doesn't make sense. Because that is an issue to consider. Then we look at, making a dual location or even in some cases, a complete conversion. So we're going through that from the Muscle Maker Grill locations, one at a time trying to figure out how we can optimize those. Now we do talk about strategic alternatives, or initiatives that are out there and look, we can take a look at that's really more of a longer term thing, is there a way for us to eventually, if the business warrants it to spin off the restaurants or a portion of the restaurants, again, we're still looking at all that stuff, but our immediate fix now is to sit there and try to get these locations profitable and or if we can't, to close them down and cut some costs from that perspective. So we are taking a look to cut costs in that area, that side of the business allows us to focus in just on Pokemoto itself, and then also the Sadot business.

Okay, and then on the cash that's being generated now from Sadot, what is the plan for that cash, if you guys foresee any need to go back to the market to raise more money?

Yes, so right now we're not, we're not going back to the markets to raise money, we don't need that, today, we're able to execute our business plan, the cash that's being generated out of Sadot. What we're really doing is, taking a look at it from a strategic perspective. That money is going to get reinvested in Sadot and one capacity to another. So we've got a share buyback program that we announced, some of the cash can go towards that. We do want to be hiring and some additional trade personnel. As we mentioned earlier, that's kind of the horizontal integration of the business, right, as we add more of those trade personnel, we bring in their clients or their Rolodex, whatever it might be for that to come in. So, we take a look at that as well.

We're also using some of that money that cash in there to give additional terms. To give us a little bit of leeway, so we can offer terms to our customers to kind of build our margin. And we're usually using the cash that way to reinvest in Sadot.

Yes. Now, when I do say, we were not going back to raise capital, or whatever, we are opportunistic, right. So as we look at the vertical integration, stuff that's out there and some opportunities that could require us to maybe take on some debt or something like that to acquire some of these things. But again, we're analyzing all that stuff as we speak. And it's a little bit early for us to talk through more than that, just that at this stage.

Okay, and last question is, you mentioned adding the traders for Sadot. How much -- how many traders do they have now? And then how many, are you looking to add, just to get a sense of how fast the revenue might grow?

Yes, well, I think a good way of looking at it is, how many people are in AGGIA, because a lot of these guys aren't just pure traders, right? They do other facets of the business as well. And…

We have roughly 20 people on the AGGIA consulting team, they consist traders, operational people.

Is there any like number you're looking to add on that?

I don't think I have an exact number because again, I'm oversimplifying, but by saying add the trader. So it's more than just one person, sometimes you're making a partnership are an agreement with a trading company, or whatever to do stuff. So it's a little bit of a gray area to answer, I guess, right directly. So it's not one to one. But it's really more of looking at the different businesses that are out there to do it.

Okay, all right. Thank you.

Thank you, William. And I think we have run out of time today. That's all the time we have. Let's go ahead and wrap up the Q&A. Thank you, everyone, for your questions. Mr. Roper, do you have any final comments?

Yes, look, just in closing, I do want to thank all of our shareholders and stakeholders for their support, and supporting our initiatives that are out there. I know, we've done a major pivot, and there can be a lot of questions that are there. And we're doing our best to get the narrative out there of exactly kind of what we're doing. And we do feel that, the message is getting better, and people understanding kind of what's happening here and things. So, I do appreciate the patience. And I do want to thank our employees for everything they do. I do think we got an incredible team, not only at MMI, but also at AGGIA, who are working with us, we're working really well together. And, between the two, they're really, who deserve all the credit for our successful so far and as far as being part of what we built, and we're going to continue to build here and move forward. So with that, I'd like to thank everybody. And one last final thing go Blackhawks, they got first in the draft, and you get kind of a dart.

Wonderful. Thank you all for joining. We'll go ahead and conclude the call. Thank you.