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Food Supply Company Restructures in Shareholders' Favor

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Muscle Maker Inc. has restructured an agreement with AGGIA in favor of shareholders. Read on to see how this works in favor of investors.

Muscle Maker Inc. (GRIL:NASDAQ) works in the global food supply chain, delivering agricultural commodities from the Americas, Africa, and the Black Sea to consumer markets in Asia, China, and the Middle East/North Africa region.

Sadot LLC is a subsidiary of Muscle Maker Inc. and operates with the company within two verticals of the global food supply chain, including soybean meal, wheat, and corn, and food service operations with over 50 restaurants in the U.S.

The Services Agreement Amendments

Muscle Maker Inc. has announced that it has made amendments to its Services Agreement with the AGGIA LLC FZ. The change modifies the formula through which the company will issue shares of common stock earned by AGGIA for net income generated through the company's Sadot division from 80% of net income to 40% of net income. The change is intended to reduce the quarterly non-cash expenses related to stock issuances to AGGIA by 50%, streamline the reporting process, and is expected to have a favorable impact on the company's financial performance.

According to Analyst Tom Kerr,  the company has seen significant growth driven by its subsidiary, Sadot.

According to CEO Michael Roper, "This addendum reflects AGGIA's continued support and confidence in their performance going forward. We believe this addendum will significantly clarify our financial reporting and improve our quarterly reported net income. While the fundamental terms of the agreement have not changed, i.e., AGGIA has nominated eight new board members; they still have the opportunity to earn up to 14,424,275 shares of stock, etc."

The AGGIA earned shares based on the net income generated by Sadot under the previous agreement. 80% of Sadot's net income was used to calculate AGGIA's earned shares, and it had the potential to earn up to 14,424,275 shares of the company's common stock. So far, AGGIA has earned 5,568,823 shares through Q1 of 2023.

Under the new agreement, AGGIA can continue to earn shares using net income generated in Sadot, but instead of 80%, the company will allocate 40% of Sadot's net income (US$9.9 million) for stock issuance. This is expected to reduce the quarterly non-cash-based stock-based expense by 50%, improving the bottom line for Muscle Maker Inc. The portion of net income that will be allocated to Muscle Maker Inc. is expected to increase to 60% under the new addendum.

Rob Goldman of the Small Cap Research report thinks that it is "a currently undervalued company experiencing record growth."

According to Michael Roper, "The new addendum, however, is expected to cut our quarterly stock-based expense in half and more than triple the amount of net income from Sadot that will accrue to MMI's bottom line. This is a significant improvement in our reporting processes and efforts to enhance shareholder value."

Roper added, "We are excited about the alignment between GRIL and AGGIA. This agreement amendment allows us to continue to drive shareholder value while still preserving the intent of what we are all trying to accomplish."

A Market Ripe for the Picking

Several analysts consider investing in food stocks to be a steady option. According to Nathan Reiff, there are three factors that make food stocks attractive, the first of which is that food stocks will likely continue to rise as the global population grows larger.

Food companies tend to pass inflation costs on to consumers. Finally, food stocks allow investors to be adaptable and choose between any number of entities in the supply chain.

Richard Mills of Ahead of the Herd believes that food costs are only likely to rise, citing rising input costs, inflationary pressures, supply chain risks, extreme weather, and struggling food brands. 

A Fruitful Opportunity

Analyst Tom Kerr notes that Muscle Maker Inc could represent returns for investors, as it "is currently trading at about US$1.11 per share, the upside to the US$5 per share target price represents a material potential gain of 202%."

Streetwise Ownership Overview*

Muscle Maker Inc. (GRIL:NASDAQ)

*Share Structure as of 5/19/2023

According to Kerr, this is a conservative target. The company has seen significant growth driven by its subsidiary, Sadot.

Rob Goldman of the Small Cap Research report thinks that it is "a currently undervalued company experiencing record growth."

Ownership and Share Structure

Joey Giamichael owns 5.04% of the company with 1.62 million shares, Kevin James Mohan owns 0.59% with 0.19 million, and Michael John Roper owns 0.57% with 0.18 million.

AGGIA LLC FZ owns 11.29% of the company with 3.64 million shares, Catalytic Holdings, L.L.C. owns 3.51% with 1.13 million, Thoroughbred Diagnostics, L.L.C. owns 3.04% with 0.98 million, The Vanguard Group, Inc., owns 1.67% with 0.54 million, Geode Capital Management, L.L.C. owns 0.99% with 0.32 million, BNY Mellon Asset Management owns 0.53% with 0.17 million, and Citadel Advisors LLC owns 0.51% with 0.16 million.

There are 32.2 million shares outstanding and 23.72 million free-float traded shares. The company has a market cap of US$37.03 million. It trades in the 52-week period between US$0.30 and US$1.60.

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Important Disclosures:

  1. Muscle Makers Inc. has a consulting relationship with an affiliate of Streetwise Reports, and pays a monthly consulting fee between US$8,000 and US$20,000. 
  2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Muscle Makers Inc.
  3. Amanda Duvall wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. 
  4. The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

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