{"url_path":"/sec/sdot/10-q/2026/item-7","section_key":"item-7","section_title":"Item 7 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors that May Affect Future","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1701756/0001731122-26-000746-index.html","accession_number":"0001731122-26-000746","cik":"0001701756","ticker":"SDOT","issuer_name":"Sadot Group Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1701756/0001731122-26-000746-index.html","primary_entity_key":"0001701756","primary_entity_name":"Sadot Group Inc."},"word_count":12032,"has_tables":true,"body_markdown":"Item 7 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors that May Affect Future\nResults and Financial Condition”) of our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC\non April 29, 2026. You should carefully review the risks described below as they identify important factors that could cause our\nactual results to differ materially from our forward-looking statements, expectations and historical trends. Any of the following risk\nfactors, either by itself or together with other risk factors, could materially adversely affect our business, results of operations,\ncash flows and/or financial condition. The risks described below are not the only risks facing the Company. Additional risks and uncertainties\nnot currently known or currently viewed to be immaterial may also materially and adversely affect business, financial condition or results\nof operations. These risks can be impacted by factors beyond management’s control.\n\n \n\n*We have had limited revenue generation and will\nbe required to engage in additional financing in order to maintain our business.*\n\n* *\n\nWe have no commodity sales revenue in the current\nquarter and limited current assets relative to liabilities. Our ability to continue operations depends on our success in executing management’s\nplans, including completing additional debt or equity financings, and pursuing strategic alternatives. There can be no assurance that\nthese initiatives will be successful.\n\n \n\n*We Face the Risk of Delisting from The Nasdaq Capital\nMarket Due to Failure to Meet the Minimum Shareholders’ Equity Requirement and the Minimum Bid Price Requirement*\n\n* *\n\nOn May 5, 2026, we received a notice from the Listing\nQualifications Department of The Nasdaq Stock Market LLC stating that we no longer satisfy the minimum shareholders’ equity requirement\nunder Nasdaq Listing Rule 5550(b)(1) because our shareholders’ equity as of December 31, 2025 was approximately $(54.7) million.\nWe have 45 calendar days to submit a compliance plan and, if accepted, may receive an extension of up to 180 days to regain compliance.\nIn addition, our common stock is currently trading below $1.00 per share, which places us at risk of failing to meet the minimum bid price\nrequirement under Nasdaq Listing Rule 5550(a)(2). If our compliance plan is not accepted, we fail to regain compliance with either the\nshareholders’ equity or minimum bid price requirements within the allotted time (including any applicable grace periods or extensions),\nor we otherwise fail to satisfy continued listing standards, our common stock may be delisted from The Nasdaq Capital Market. Delisting\nwould likely have a material adverse effect on the liquidity and market price of our common stock, our ability to raise additional capital,\nand our ability to continue as a going concern.\n\n \n\n57\n\n \n\n \n\n*We Face Substantial Doubt About Our Ability to\nContinue as a Going Concern, Which May Force Us to Scale Back or Cease Operations*\n\n* *\n\nAs of March 31, 2026, we had a working capital deficit\nof $57.8 million and an accumulated deficit of $181.5 million. We have incurred significant net losses and negative cash flows from operations.\nThese conditions, together with the defaults on our outstanding debt obligations (see below), raise substantial doubt about our ability\nto continue as a going concern within one year after the date these financial statements are issued. Our condensed consolidated financial\nstatements do not include any adjustments that might result from the outcome of this uncertainty. If we are unable to raise additional\ncapital on acceptable terms, we may be forced to scale back or cease operations altogether.\n\n \n\n*Defaults on Our Outstanding Debt Obligations May\nResult in Acceleration of Indebtedness, Foreclosure on Collateral, and Additional Litigation*\n\n* *\n\nSubstantially all of our outstanding notes payable\n(approximately $11.1 million net of discount as of March 31, 2026) matured on December 31, 2025 and remain unpaid. These obligations are\ncurrently in default. The defaults have triggered cross-default provisions and increase the risk of acceleration of indebtedness, foreclosure\non collateral (including any pledged accounts receivable under our factoring arrangement), and additional litigation. We are actively\nseeking to refinance or restructure these obligations, but there can be no assurance that we will be successful on acceptable terms or\nat all.\n\n \n\n*We face significant operational challenges in our\nglobal agri-foods operations, which have resulted in a significant curtailing of our operations and could materially adversely affect\nour business, financial condition, results of operations, and future prospects.*\n\n \n\nOur business involves farming, commodity trading,\nand shipping of food and feed products, such as soybean meal, wheat, and corn, via dry bulk cargo ships across global markets. We have\nrecently encountered substantial operational issues that have severely impacted our ability to conduct these activities effectively. These\nchallenges include, but are not limited to, disruptions in our supply chain, such as delays in sourcing raw materials, logistical bottlenecks\nin shipping and transportation, and inefficiencies in our farming operations due to adverse weather conditions, labor shortages, or equipment\nfailures. Additionally, geopolitical tensions, trade restrictions, fluctuating commodity prices, and increased competition in the agri-foods\nsector have compounded these issues, leading to halted or suspended trading activities and an inability to fulfill contracts or secure\nnew ones.\n\n \n\nAs a result of these operational difficulties, we\nhave had to curtail a significant portion of our operations, which has strained our liquidity, increased our reliance on external financing,\nand heightened the risk of default under our existing obligations. If we are unable to resolve these operational challenges in a timely\nmanner—through measures such as restructuring our supply chain, diversifying our sourcing strategies, or investing in improved infrastructure—our\nbusiness may continue to suffer prolonged periods of inactivity. This could lead to further erosion of our market position, loss of key\ncustomers and partners, regulatory scrutiny, or even insolvency. Moreover, our dependence on global markets exposes us to ongoing risks\nfrom external factors, including volatile commodity prices, changes in international trade policies, environmental regulations, and disruptions\nfrom events like pandemics, natural disasters, or political instability in key regions where we operate or source materials.\n\n \n\nThere can be no assurance that we will successfully\novercome these operational issues or resume revenue-generating activities. Failure to do so could result in a material adverse effect\non our financial condition, stock price, and ability to continue as a going concern, potentially leading to delisting from Nasdaq or other\nexchanges, reduced access to capital, and diminished investor confidence.\n\n \n\n58\n\n \n\n \n\n*We will need additional capital to fund our operations,\nwhich, if obtained, could result in substantial dilution or significant debt service obligations. We may not be able to obtain additional\ncapital on commercially reasonable terms, which could adversely affect our liquidity and financial position.*\n\n \n\nIn order to continue operating, we need to obtain\nadditional financing, either through borrowings, private placements, public offerings, or some type of business combination, such as a\nmerger or buyout, and there can be no assurance that we will be successful in such pursuits. We may be unable to acquire the additional\nfunding necessary to continue operating. Accordingly, if we are unable to generate adequate cash from operations, and if we are unable\nto find sources of funding, it may be necessary for us to sell one or more lines of business or all or a portion of our assets, enter\ninto a business combination, or reduce or eliminate operations. These possibilities, to the extent available, may be on terms that result\nin significant dilution to our shareholders or that result in our shareholders losing all of their investment in our Company.\n\n \n\nWe require significant capital in relation to our\nSadot operations, including continuing access to credit markets, to operate our current business and fund our growth strategy. Our working\ncapital requirements, including margin requirements on open positions on futures exchanges, are directly affected by the price of agricultural\ncommodities, which may fluctuate significantly and change quickly. Moreover, the expansion of our business and pursuit of acquisitions\nor other business opportunities may require significant amounts of capital. Access to credit markets and pricing of our capital is dependent\nupon maintaining sufficient credit ratings from credit rating agencies. We have been unable to maintain sufficiently high credit ratings,\nand, as a result, access to certain tier one commercial paper and other debt markets and costs of borrowings are not currently available.\nIf we are unable to generate sufficient cash flow or maintain access to adequate external financing, including as a result of significant\ndisruptions in the global credit markets, it could restrict our current operations and our growth opportunities. We manage this risk with\nconstant monitoring of credit/liquidity metrics, cash forecasting, and routine communications with credit rating agencies regarding risk\nmanagement practices.\n\n \n\nWe need to raise additional capital, which could result\nin dilution or increased debt obligations.\n\n \n\nThe Company may seek to raise additional capital to\nfund operations, strategic initiatives, or other corporate purposes. On April 13, 2026, our shareholders approved an amendment to our\nArticles of Incorporation to increase the number of authorized shares of common stock from 2,000,000 to 250,000,000. This increase provides\nthe Company with flexibility to issue additional common stock for equity financing, acquisitions, or equity compensation.\n\n \n\nFuture issuances of common stock could dilute the\nownership and voting power of existing shareholders and may be issued at prices substantially below the prices at which our shares currently\ntrade. The Company may also seek to increase cash reserves through the issuance of convertible debt or other equity securities. The sale\nof convertible debt or additional equity securities could result in substantial dilution to existing shareholders.\n\n \n\nThe incurrence of indebtedness would result in additional\ndebt service obligations and could include operating and financial covenants that restrict our operations and liquidity. Additionally,\nour ability to obtain financing on acceptable terms is subject to market conditions, investor demand, and other uncertainties. There can\nbe no assurance that financing, whether through equity or debt, will be available in amounts or on terms acceptable to the Company, if\nat all. Any failure to raise additional funds on favorable terms could materially adversely affect our liquidity, financial condition,\nand results of operations.\n\n \n\n*Our indebtedness could negatively affect our financial\ncondition, decrease our liquidity and impair our ability to operate the business.*\n\n \n\nIf cash on hand is insufficient to pay our obligations,\nit could have an adverse effect on our ability to conduct our business. As we were not presented with cash generating opportunities in\nthe supply chain, we are seeking alternative lines of businesses. While we still maintain Sadot LLC and are scrutinizing occasional sporadic\ntrading offers, our focus on alternative sectors is picking up speed. Our ability to raise capital in the future will depend on a shareholder\napproval to increase the authorized shares of common stock, and to acquire an additional operating entity should we decide to spin off\nthe supply chain activity. There is no guarantee that the Company will successfully engage in such transactions in the commodity trading\nbusiness or if it does engage in such transactions that they will result in generating a profit. Further, there is no guarantee that the\nCompany will be able to acquire a new operating entity or if it does acquire such entity it will operate profitably.\n\n \n\n59\n\n \n\n \n\n*We are subject to global and regional economic\ndownturns and related risks.*\n\n \n\nThe level of demand for our products is affected by\nglobal and regional demographic and macroeconomic conditions, including population growth rates and changes in standards of living. A\nsignificant downturn in global economic growth, or recessionary conditions in major geographic regions, may lead to reduced demand for\nagricultural commodities and food products, which could adversely affect our business and results of operations. Further, deteriorating\neconomic and political conditions in our major markets, such as inflation, increased unemployment, decreases in disposable income, declines\nin consumer confidence, uncertainty about economic stability, or economic slowdowns or recessions, could cause a decrease in demand for\nour products.\n\n \n\nAdditionally, weak global economic conditions and\nadverse conditions in global financial and capital markets, including rising interest rates and constraints on the availability of credit,\nhave in the past adversely affected, and may in the future adversely affect, the financial condition and creditworthiness of the financial\ninstitutions that serve as our lenders and as counterparties to the over-the-counter derivative instruments we use to manage risks and\nsome of our customers, suppliers, and other counterparties, which in turn may negatively impact our financial condition and results of\noperations. Over the course of the last year, concerns have arisen with respect to the financial condition of a number of regional banking\norganizations in the United States and global financial institutions. Although our exposure has been de minimis to these financial institutions,\nwe continue to monitor our counterparty exposure across all of the financial services companies with which we conduct business. See “Item\n7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 7.A. Quantitative\nand Qualitative Disclosures About Market Risk” for more information.\n\n \n\nWe expect the pressures of input cost inflation to\ncontinue into 2026. Further, the various conflicts and wars in the Middle East and Europe have had a negative impact on the price per\nbarrel. United States has reported and is continuing to report weaker GDP growth, with some economists forecasting a continuation of these\nconditions in 2026.\n\n \n\n*We are exposed to adverse weather conditions, pandemic\noutbreaks, political events, war and terrorism that could disrupt business and may adversely affect the availability, quality and price\nof agricultural commodities and agricultural commodity products, as well as our operations and operating results.*\n\n \n\nOur headquarters, trade offices, and farms, as well\nas certain of our vendors and customers, are located in areas which have been and could be subject to natural disasters such as floods,\ndroughts, blizzards, hurricanes, tornadoes, fires or earthquakes.\n\n \n\nAdverse weather conditions have historically caused\nvolatility in the agricultural commodity industry and consequently in our operating results by causing crop failures or significantly\nreduced harvests, which may affect the supply and pricing of the agricultural commodities that we sell and use in our business, and negatively\naffect the creditworthiness of agricultural producers who do business with us. Our farming operations have solely been located in the\nMkushi region of Zambia. In this region, adverse weather during the fertilizer application, planting, and harvest seasons can have negative\nimpacts on our crop yields and planting cycles. Adverse crop conditions in the Mkushi region can increase the input costs or lower the\nmarket value of our products relative to other market participants that do not have the same geographic concentration. Furthermore we\nlearned the hard way, that entering transactions in Zambia are full of complexities and outcomes which are either unfavorable or at a\nminimum stretching into many months and years.\n\n \n\nSevere adverse weather conditions, such as hurricanes\nand severe storms, may also result in extensive property damage, extended business interruption, personal injuries, and other loss and\ndamage to us. Our operations also rely on dependable and efficient transportation services, including transportation by ocean vessel,\nriver barges, rail, and truck. A disruption in transportation services as a result of weather conditions, such as low river levels following\nperiods of drought, may also have a significant adverse impact on our operations and related supply chains.\n\n \n\nAdditionally, the potential physical impacts of climate\nchange are uncertain and may vary by region. These potential effects could include changes in rainfall patterns, water shortages, changing\nsea levels, changing storm patterns and intensities, and changing temperature levels that could adversely impact our costs and business\noperations, the location, costs and competitiveness of agricultural commodity production and related storage and processing facilities\nand the supply and demand for agricultural commodities.\n\n \n\n60\n\n \n\n \n\nThese events also could have indirect consequences\nsuch as increases in the cost of insurance if they result in significant loss of property or other insurable damage and the effect could\nbe material to our results of operations, liquidity or capital resources.\n\n \n\n*We are subject to economic, political, and other risks of doing business\nglobally and in emerging markets.*\n\n \n\nWe were trying to build a global business with a substantial\nmajority of our assets and operations located outside the United States. In addition, our business strategies may involve expanding or\ndeveloping our business in emerging market regions, including South American, Eastern Europe, Asia-Pacific, the Middle East, and Africa.\nDue to the international nature of our business, we are exposed to various risks of international operations, including:\n\n \n\n●adverse trade policies or trade barriers on agricultural commodities and commodity products;\n\n \n\n●new and developing requirements related to GHG emissions and other climate change initiatives and workforce\ndiversity;\n\n \n\n●and inclusion mandates;\n\n \n\n●inflation, hyperinflation, and adverse economic effects resulting from governmental attempts to control\ninflation, such as the imposition of wage and price controls and higher interest rates. For example, inflation rates in many countries\nin which we operate are currently at the highest levels in decades, resulting in tighter monetary policies, including higher interest\nrates;\n\n \n\n●changes in laws and regulations or their interpretation or enforcement in the countries in which we operate,\nincluding the effects of complying with tax law on us and our shareholders;\n\n \n\n●difficulties in enforcing agreements or judgments and collecting receivables in foreign jurisdictions;\n\n \n\n●exchange controls or other currency restrictions and limitations on the movement of funds, such as on\nthe remittance of dividends and/or reimbursements by subsidiaries;\n\n \n\n●inadequate infrastructure and logistics challenges;\n\n \n\n●sovereign risk and the risk of government intervention, including through expropriation, or regulation\nof the economy or natural resources, including restrictions on foreign ownership of land or other assets;\n\n \n\n●the requirement to comply with a wide variety of laws and regulations that apply to international operations,\nincluding, without limitation, economic sanctions regulations, labor laws, import and export regulations, anti-corruption and anti-bribery\nlaws, as well as other laws or regulations discussed in this “Item 1A. Risk Factors” section;\n\n \n\n●challenges in maintaining an effective internal control environment with operations in multiple international\nlocations, including language differences, varying levels of U.S. GAAP expertise in international locations and multiple financial information\nsystems;\n\n \n\n●changes in a country’s or region’s economic or political condition; and\n\n \n\n●labor disruptions, civil unrest, significant political instability, coup attempts, wars or other armed\nconflict or acts of terrorism.\n\n \n\nThese risks could adversely affect our operations,\nbusiness strategies, and operating results.\n\n \n\nAs a result of our international operations, we are\nalso exposed to currency exchange rate fluctuations. Changes in exchange rates between the U.S. dollar and other foreign currencies, particularly\nthe Brazilian Real, Canadian dollar, Zambian Kwacha, and the euro affect our revenues and expenses that are denominated in local currencies,\naffect farm economics in those regions and may also have a negative impact on the value of our assets located outside of the United States.\n\n \n\nAdditionally, there continues to be a great deal of\nuncertainty regarding U.S. and global trade policies for companies with multinational operations like ours. In recent years, there has\nbeen an increase in populism and nationalism in various countries around the world and consequently historical free trade principles are\nbeing challenged. As we continue to operate our business globally, our success will depend, in part, on the nature and extent of any such\nchanges and how well we are able to anticipate, respond to and effectively manage any such changes.\n\n \n\n61\n\n \n\n \n\n*Our Company is subject to numerous laws, regulations,\nand mandates globally which could adversely affect our operating results and forward strategy.*\n\n \n\nOur Company does business globally, connecting crops\nand markets in various countries, and is required to comply with laws and regulations administered by the United States federal government\nas well as state, local, and non-U.S. governmental authorities in numerous areas including: accounting and income taxes, anti-corruption,\nanti-bribery, global trade, trade sanctions, environmental, product safety, and handling and production of regulated substances. Our Company\nmight face challenges from U.S. and foreign tax authorities regarding the amount of taxes due including questions regarding the timing,\namount of deductions, the allocation of income among various tax jurisdictions and further risks related to changing tax laws domestically\nand globally. Any failure to comply with applicable laws and regulations or appropriately resolve these challenges could subject our Company\nto administrative, civil, and criminal remedies, including fines, penalties, disgorgement, injunctions, and recalls of its products and\ndamage to its reputation.\n\n \n\n*Government policies, mandates, and regulations\nspecifically affecting the agricultural sector and related industries; regulatory policies or matters that affect a variety of businesses;\ntaxation polices; and political instability could adversely affect our Company’s operating results.*\n\n \n\nAgricultural production and trade flows are subject\nto government policies, mandates, regulations and trade agreements, including taxes, tariffs, duties, subsidies, incentives, foreign exchange\nrates and import and export restrictions, including policies related to genetically modified organisms, traceability standards, sustainable\npractices, product safety and labeling, renewable fuels, and low carbon fuel mandates. These policies can influence the planting of certain\ncrops; the location and size of crop production; whether unprocessed or processed commodity products are traded; the volume and types\nof imports and exports; the availability and competitiveness of feedstocks as raw materials; the viability and volume of production of\ncertain of our products; and industry profitability. International trade regulations can adversely affect agricultural commodity trade\nflows by limiting or disrupting trade between countries or regions. Regulations of financial markets and instruments, including the Dodd-Frank\nAct, Consumer Protection Act, and the European Market Infrastructure Regulation, create uncertainty and may lead to additional risks and\ncosts, and could adversely affect our futures commission merchant business and our agricultural commodity risk management practices. Future\ngovernment policies may adversely affect the supply of, demand for, and prices of our products; adversely affect our ability to deploy\nadequate hedging programs; restrict our ability to do business in our existing and target markets; and adversely affect our revenues and\noperating results.\n\n \n\nOur Company’s operating results could be affected\nby political instability and by changes in monetary, fiscal, trade, and environmental policies, laws, regulations, and acquisition approvals,\ncreating risks including, but not limited to: changes in a country’s or region’s economic or political conditions, local labor\nconditions and regulations, and safety and environmental regulations; reduced protection of intellectual property rights; changes in the\nregulatory or legal environment; restrictions on currency exchange activities; currency exchange fluctuations; burdensome taxes and tariffs;\nenforceability of legal agreements and judgments; adverse tax, administrative agency or judicial outcomes; and regulation or taxation\nof greenhouse gases. International risks and uncertainties, including changing social and economic conditions as well as terrorism, political\nhostilities, and war, could limit our ability to transact business in these markets. Our Company benefits from the free flow of agricultural\nand food and feed ingredient products from the U.S. and other sources to markets around the world. Increases in tariff and restrictive\ntrade activities around the world (e.g., the U.S.-China trade relations dispute, Iran sanctions) could negatively impact our ability to\nenter certain markets or the price of products may become less competitive in those markets. Proposed tariffs on imports into the United\nStates, potential retaliatory tariffs on U.S. exports, and potential renegotiation of trade deals may impact our existing or planned operations\nor strategic ventures and could adversely affect our business, financial condition, results of operations and cash flows.\n\n \n\nOur strategy involves expanding the volume and diversity\nof crops it merchandises and processes, expanding the global reach of our core model, expanding our value-added product portfolio, and\nexpanding the sustainable agriculture programs and partnerships it participates in. Government policies including, but not limited to,\nantitrust and competition law, trade restrictions, food safety regulations, sustainability requirements and traceability, can impact our\nability to execute this strategy successfully.\n\n \n\nUpon the expansion of our operations internationally,\nwe have been and could continue to be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide\nanti-bribery and anti-kickback laws.\n\n \n\nWe have expanded our operations outside the United\nStates. The U.S. Foreign Corrupt Practices Act, and other similar anti-bribery and anti-kickback laws and regulations, generally prohibit\ncompanies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business.\nWe cannot assure you that we will be successful in preventing our franchisees or other agents from taking actions in violation of these\nlaws or regulations. Such violations, or allegations of such violations, could disrupt our business and result in a material adverse effect\non our financial condition, results of operations and cash flows.\n\n \n\n62\n\n \n\n \n\n*The availability and prices of the agricultural\ncommodities and agricultural commodity products we procure, transport, store, process, and merchandise can be affected by climate change,\nweather conditions, disease, government programs, competition, and various other factors beyond our control and could adversely affect\nour operating results**.***\n\n \n\nThe availability and prices of agricultural commodities\nare subject to wide fluctuations, including impacts from factors outside our control, such as changes in weather conditions, climate change,\nrising sea levels, crop disease, plantings, government programs and policies, competition and changes in global demand, which could adversely\naffect our operating results. Our Company uses a global network of procurement, processing, as well as robust communications between global\ncommodity merchandiser teams, to continually assess price and basis opportunities. Management-established limits (including a corporate\nwide value-at-risk metric), with robust internal reporting, help to manage risks in pursuit of driving performance. Additionally, we depend\nglobally on agricultural producers to ensure an adequate supply of agricultural commodities.\n\n \n\nReduced supply of agricultural commodities could adversely\naffect our profitability by increasing the cost of raw materials and/or limiting our ability to procure, transport, store, process, and\nmerchandise agricultural commodities in an efficient manner. High and volatile commodity prices can place more pressures on short-term\nworking capital funding. Conversely, if supplies are abundant and crop production globally outpaces demand for more than one or two crop\ncycles, price volatility is somewhat diminished. This could result in reduced operating results due to the lack of supply chain dislocations\nand reduced market spread and basis opportunities.\n\n \n\nAdvances in technology, such as seed and crop protection,\nfarming techniques, storage and logistics, and speed of information flow, may reduce the significance of dislocations and arbitrage opportunities\nin the agricultural global markets, which may reduce the earnings potential of agricultural merchandisers and processors.\n\n \n\n*We are required to carry significant amounts of\ninventory across all of our businesses. If a substantial portion of our inventory becomes damaged or obsolete, its value would decrease,\nand have an adverse impact on the Company’s financial results.*\n\n \n\nWe are exposed to the risk of a decrease in the value\nof our inventories due to a variety of circumstances in all of our businesses. For example, within our Sadot Agri-Foods business, there\nis the risk that the quality of our inventory could deteriorate due to damage, moisture, insects, disease or foreign material. If the\nquality of our inventory were to deteriorate below an acceptable level, the value of our inventory could decrease significantly. In our\nSadot farming operations business, planted acreage, and consequently the volume of fertilizer and crop protection products applied, is\npartially dependent upon government programs and the producer’s perception of demand. Technological advances in agriculture, such\nas genetically engineered seeds that resist disease and insects, or that meet certain nutritional requirements, could also affect the\ndemand for our crop nutrients and crop protection products. Either of these factors could render some of our inventory obsolete or reduce\nits value.\n\n \n\n*We face increasing exposure to country risk in\ncountries that face financial, political, and economic unrest through unsecured credit, inventory, forward contract risk or payment origination\nthat could adversely affect our future results of operations, financial position, and cash flows.*\n\n \n\nWe have increased our international supply chain operations\nand exposure. With the increased international presence comes additional country risk through trade flows around the globe with direct\nexposure to the counterparty, via contract mark-to-market exposure, unsecured accounts receivable or inventory in the country. In certain\nareas in which we trade (both origination and destination) country risk is more prevalent given the country’s political and/or economic\nsituations. The addition of purchases and sales of grain in vessel sized quantities to support the Sadot Agri-Foods business including\nfarming operations increases the size and potential severity of our country risk. Additionally, there could be a rapid increase in interest\nrates creating difficulty for our counterparties to access U.S. dollars making it difficult to collect accounts receivable timely.\n\n \n\n*We are exposed to potential business disruption\nincluding, but not limited to, disruption of transportation services, disruption in the supply, and other impacts resulting from acts\nof terrorism or war, natural disasters, pandemics, severe weather conditions, accidents, or other planned disruptions, which could adversely\naffect our operating results.*\n\n \n\nOur operations rely on dependable and efficient transportation\nservices the disruption of which could result in difficulties supplying materials to our facilities and impair our ability to deliver\nproducts to our customers in a timely manner. Certain factors which may impact the availability of agricultural commodity raw materials\nare out of our control including, but not limited to, disruptions resulting from weather, high or low river water conditions, economic\nconditions, manufacturing delays or disruptions at suppliers, shortage of materials, interruption of energy supply and unavailable or\npoor supplier credit conditions.\n\n \n\n63\n\n \n\n \n\nWe are continuing to enhance and deploy additional\nfood safety and security procedures and controls to appropriately mitigate the risks of any adulteration of the Company’s products\nin the supply chain.\n\n \n\n*Our business is seasonal, and our results may fluctuate\ndepending on the harvest cycle of the crops upon which we rely and seasonal fluctuations related to the sale of our consumer products.*\n\n \n\nAs with any agricultural business enterprise, our\nbusiness operations are seasonal in nature. This creates price fluctuations, which result in fluctuations in our inventories and a degree\nof seasonality in our gross profit. In addition, certain of our consumer food products are other annual events. Seasonality could have\na material adverse effect on our business and financial performance. In addition, our quarterly results may vary as a result of the effects\nof fluctuations in commodities prices, production yields and costs.\n\n \n\n*We are vulnerable to the effects of supply and\ndemand imbalances in our industries.*\n\n \n\nHistorically, the market for some agricultural commodities\nand fertilizer products has been cyclical, with periods of high demand and capacity utilization stimulating new plant investment and the\naddition of incremental processing or production capacity by industry participants to meet the demand. The timing and extent of this expansion\nmay then produce excess supply conditions in the market, which, until the supply/demand balance is again restored, negatively impacts\nproduct prices and operating results. During times of reduced market demand, we may suspend or reduce production at some of our facilities.\nThe extent to which we efficiently manage available capacity at our facilities will affect our profitability.\n\n \n\n*Our Company may fail to realize the benefits of\nor experience delays in the execution of its growth strategy, which encompasses organic and inorganic initiatives, including those outside\nthe U.S. and in businesses where our Company does not currently have a large presence**.***\n\n \n\nAs we began executing our growth strategy, through\nboth organic and inorganic growth, we have encountered and may encounter risks which could result in increased costs, decreased revenues\nand delayed synergies. Growth in new geographies outside the U.S. can expose us to volatile economic, political and regulatory risks that\nmay negatively impact our operations and ability to achieve our growth strategy. Expanding businesses where we have limited presence may\nexpose us to risks related to the inability to identify an appropriate partner or target and favorable terms, inability to retain/hire\nstrategic talent or integration risks that may require significant management resources that would have otherwise been available for ongoing\ngrowth or operational initiatives. Acquisitions may involve unanticipated delays, costs and other problems. Due diligence performed prior\nto an acquisition may not identify a material liability or issue that could impact our reputation or adversely affect results of operations\nresulting in a reduction of the anticipated acquisition benefits. Additionally, acquisitions may involve integration risks such as: internal\ncontrol effectiveness, system integration risks, the risk of impairment charges related to goodwill and other intangibles, ability to\nretain acquired employees and other unanticipated risks.\n\n \n\n*Failure to manage our growth effectively could\nharm our business and operating results.*\n\n \n\nOur growth plan included expansion into multiple verticals\nof the food supply chain, including expansion into new commodity trade routes and geographies, farming & warehousing, logistics &\ntransportation, food processing, sustainability and carbon offsets. Our existing management systems, financial and management controls\nand information systems may be inadequate to support our planned expansion. Managing our growth effectively will require us to continue\nto enhance these systems, procedures and controls and to hire, train and retain managers and team members. We may not respond quickly\nenough to the changing demands that our expansion will impose on our management, which could harm our business, financial condition and\nresults of operations.\n\n \n\n*The Company may not be able to effectively integrate\nbusinesses it acquires.*\n\n \n\nWe continuously look for opportunities to enhance\nour existing businesses through strategic acquisitions. The process of integrating an acquired business into our existing business and\noperations may result in unforeseen operating difficulties and expenditures as well as require a significant amount of management resources.\nThere is also the risk that our due diligence efforts may not uncover significant business flaws or hidden liabilities. In addition, we\nmay not realize the anticipated benefits of an acquisition and they may not generate the anticipated financial results. Additional risks\nmay include the inability to effectively integrate the operations, products, technologies and personnel of the acquired companies. The\ninability to maintain uniform standards, controls, procedures and policies would also negatively impact operations.\n\n \n\n64\n\n \n\n \n\n*Failure to manage our growth effectively could\nharm our business and operating results.*\n\n \n\nOur growth plan included expansion into multiple verticals\nof the food supply chain, including expansion into new commodity trade routes and geographies, farming & warehousing, logistics &\ntransportation, food processing, sustainability and carbon offsets. Our existing management systems, financial and management controls\nand information systems may be inadequate to support our planned expansion. Managing our growth effectively will require us to continue\nto enhance these systems, procedures and controls and to hire, train and retain managers and team members. We may not respond quickly\nenough to the changing demands that our expansion will impose on our management, and existing infrastructure, which could harm our business,\nfinancial condition and results of operations.\n\n \n\n*We may not realize the anticipated benefits of\nacquisitions, divestitures or joint ventures.*\n\n \n\nPart of our strategy involves acquisitions, alliances\nand joint ventures designed to expand or optimize our portfolio of businesses. Our ability to benefit from acquisitions, joint ventures,\nand alliances depends on many factors, including our ability to identify suitable prospects, access funding sources on acceptable terms,\nnegotiate favorable transaction terms, and successfully consummate and integrate any businesses we acquire. In addition, we proactively\nreview our portfolio of businesses in order to identify opportunities to enhance shareholder value and may decide as a result of such\nreviews or otherwise, from time to time, to divest certain of our assets or businesses by selling them or entering into joint ventures.\nOur ability to successfully complete a divestiture will depend on, among other things, our ability to identify buyers that are prepared\nto acquire such assets or businesses on acceptable terms and to adjust and optimize our retained businesses following the divestiture.\n\n \n\nOur acquisition, joint venture, or divestiture activities\nmay involve unanticipated delays, costs, and other problems. If we encounter unexpected problems with acquisitions, joint ventures, or\ndivestitures, our senior management may be required to divert attention away from other aspects of our businesses to address these problems.\nAdditionally, we may fail to consummate proposed acquisitions, joint ventures or divestitures, after incurring expenses and devoting substantial\nresources, including management time, to such transactions.\n\n \n\nAcquisitions also pose the risk that we may be exposed\nto successor liability relating to actions by an acquired company and its management before the acquisition. The due diligence we conduct\nin connection with an acquisition, the controls and policies we implement at acquired companies, and any contractual guarantees or indemnities\nthat we receive from the sellers of acquired companies, may not be sufficient to protect us from, or compensate us for, actual liabilities.\nA material liability associated with an acquisition could adversely affect our reputation and results of operations and reduce the benefits\nof the acquisition. Additionally, acquisitions involve other risks, such as differing levels of management and internal control effectiveness\nat the acquired entities, systems integration risks, the risk of impairment charges relating to goodwill and intangible assets recorded\nin connection with acquisitions, the risk of significant accounting charges and expenses resulting from the completion and integration\nof a sizable acquisition, the need to fund increased capital expenditures and working capital requirements, our ability to retain and\nmotivate employees of acquired entities, compliance and reputational risks and other unanticipated problems and liabilities. Although\nthe Company does not currently carry material goodwill or intangible assets on its balance sheet, this risk factor is relevant to the\nextent the Company completes future acquisitions that give rise to such assets.\n\n \n\nDivestitures may also expose us to potential liabilities\nor claims for indemnification, as we may be required to retain certain liabilities or indemnify buyers for certain matters, including\nlegal, environmental, or litigation matters associated with the assets or businesses that we sell. The magnitude of any such retained\nliability or indemnification obligation may be difficult to quantify at the time of the transaction and its cost to us could ultimately\nexceed the proceeds we receive for the divested assets or businesses. Divestitures also have other inherent risks, including possible\ndelays in closing transactions (including potential difficulties in obtaining regulatory approvals), the risk of lower-than-expected sales\nproceeds for the divested businesses and unexpected costs or other difficulties associated with the separation of the businesses to be\nsold from our information technology systems and other management processes, including the loss of key personnel. Further, expected cost\nsavings or other anticipated efficiencies or benefits from divestitures may also be difficult to achieve or maximize.\n\n \n\nAdditionally, we entered into joint ventures and investments\nin which we have limited control over governance, financial reporting, and operations. As a result, we face certain operating, financial,\nand other risks relating to these investments, including risks related to the financial strength of our joint venture partners or their\nwillingness to provide adequate funding for the joint venture, having differing objectives from our partners, the inability to implement\nsome actions with respect to the joint venture’s activities that we may believe are favorable if the joint venture partner does\nnot agree, compliance risks relating to actions of the joint venture or our partners, and the risk that we will be unable to effectively\nwork with or resolve disputes with the joint venture partner. As a result, these investments may contribute significantly less than anticipated\nto our earnings and cash flows.\n\n \n\n65\n\n \n\n \n\n*We face increasing competition and pricing pressure from other companies\nin Sadot Agri-Foods operations. If we are unable to compete effectively with these companies, our sales and profit margins would decrease,\nand our earnings and cash flows would be adversely affected.*\n\n \n\nThe markets for our products in the Sadot Agri-Foods\noperations is highly competitive. Our competitors are significantly larger, compete in wider markets, have greater purchasing power, and\nhave considerably larger financial resources. Competitive pressures could affect the price of, and customer demand for, our products,\nthereby negatively impacting our profit margins and resulting in a loss of market share.\n\n \n\n*The failure to enforce and maintain our trademarks\nand protect our other intellectual property could materially adversely affect our business, including our ability to establish and maintain\nbrand awareness.*\n\n \n\nWe have registered Sadot® as trademarks\nor service marks with the United States Patent and Trademark Office. In addition, the Sadot logos, website name and addresses (www.sadotgroupinc.com)\nand Facebook, Instagram, Linkedin, Twitter and other social media and internet accounts are our intellectual property. The success of\nour business strategy depends on our continued ability to use our existing trademarks and service marks. If our efforts to protect our\nintellectual property are not adequate, or if any third-party misappropriates or infringes on our intellectual property, whether in print,\non the Internet or through other media, the value of our brands may be harmed, which could have a material adverse effect on our business,\nincluding the failure of our brands and branded products to achieve and maintain market acceptance. There can be no assurance that all\nof the steps we have taken to protect our intellectual property in the United States and in foreign countries will be adequate. In addition,\nthe laws of some foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States.\n\n \n\n*Third-party claims with respect to intellectual\nproperty assets, if decided against us, may result in competing uses or require adoption of new, non-infringing intellectual property,\nwhich may in turn adversely affect sales and revenues.*\n\n \n\nThere can be no assurance that third parties will\nnot assert infringement or misappropriation claims against us, or assert claims that our rights in our trademarks, service marks, trade\ndress and other intellectual property assets are invalid or unenforceable. Any such claims could have a material adverse effect on us\nif such claims were to be decided against us. If our rights in any intellectual property were invalidated or deemed unenforceable, it\ncould permit competing uses of intellectual property which, in turn, could lead to a decline in overall revenues. If the intellectual\nproperty became subject to third-party infringement, misappropriation or other claims, and such claims were decided against us, we may\nbe forced to pay damages, be required to develop or adopt non-infringing intellectual property or be obligated to acquire a license to\nthe intellectual property that is the subject of the asserted claim. There could be significant expenses associated with the defense of\nany infringement, misappropriation, or other third-party claims.\n\n \n\n*We are subject to significant pending litigation\nthat, if resolved unfavorably, could result in substantial monetary damages exceeding our current financial resources and potentially\nlead to bankruptcy.*\n\n* *\n\nWe are involved in multiple material legal proceedings\nwith aggregate claimed damages that would exceed our cash availability (excluding interest, punitive damages, and counterclaim-related\nexposures). We are involved in material litigation and regulatory proceedings, including but not limited to:\n\n \n\n- An adverse judgment in Zambian courts regarding\nour majority-owned farm operations resulting in the loss of our interest in approximately 5,000 acres; we have appealed the judgment and\nare seeking recovery of approximately $3.5 million. The appeals process is ongoing and the ultimate outcome is uncertain.\n\n \n\n●A dispute with our factoring company regarding amounts owed under a recourse factoring arrangement secured\nby $3.9 million of accounts receivable, which is the subject of pending litigation.\n\n \n\n●Other claims, including those related to former executives and service providers.\n\n \n\nThese matters could result in significant monetary\njudgments, loss of assets, or other adverse outcomes that would materially adversely affect our financial condition, results of operations,\nand liquidity.\n\n \n\nAlthough we believe we have meritorious defenses and\nhave asserted substantial counterclaims, litigation outcomes are inherently uncertain. An adverse judgment or series of judgments in one\nor more of these matters could require payments that exceed our available cash, insurance coverage, and access to capital, which could\nmaterially impair our liquidity, force us to seek additional financing on unfavorable terms, or result in insolvency or bankruptcy proceedings.\n\n \n\n66\n\n \n\n \n\n*Our information technology systems, processes and\nsites may suffer interruptions, security breaches or failures that may adversely affect our ability to conduct our business*\n\n \n\nWe rely on certain key information technology systems,\nsome of which are dependent on services provided by third parties, to provide critical data and services for internal and external users,\nincluding procurement and inventory management, transaction processing, financial, commercial and operational data, human resources management,\nlegal and tax compliance, and other information and processes necessary to operate and manage our business. If we or our third party service\nproviders do not respond or perform effectively in connection with a cybersecurity breach or system failure, our business may be impacted.\n\n \n\nIncreased global cybersecurity vulnerabilities, threats\nand more sophisticated and targeted cybersecurity attacks pose a potentially significant risk to the security of our information technology\nsystems, networks and services, as well as the confidentiality, availability and integrity of our data and the confidential data of our\nemployees, customers, suppliers and other third parties that we may hold. Such vulnerabilities include, among other things, social engineering\nthreats and more sophisticated computer crime, including advanced persistent threats and zero-day vulnerability exploits. We may incur\nsignificant costs in protecting against potential security breaches, cyber-based attacks, or other cybersecurity incidents. We and our\nthird-party service providers are targeted by malicious actors and expect such incidents to continue and the frequency and severity of\nsuch attacks to increase. While we have implemented cybersecurity and data protection measures, our efforts to minimize the risks and\nimpacts of cyberattacks and protect our information technology systems may be insufficient and we may experience significant breaches\nor other failures or disruptions that could compromise our systems and the information we store and, ultimately, affect our business operations\nand results of operations. Additionally, hybrid or remote work arrangements among our employees and employees of our third-party providers\npresent additional operational risks to our information technology systems, including, but not limited to, increased risks of cyberattacks\nand security breaches. We are also exposed to the risk of insider threat attacks. New technology that could result in greater operational\nefficiency may further expose our computer systems to the risk of cyberattacks.\n\n \n\nIn addition, the risk of cybersecurity incidents,\nincluding cyberattacks against the Ukrainian government and other countries in the region, has increased in connection with the ongoing\nUkraine-Russia war, driven by justifications such as retaliation for the sanctions imposed in conjunction with the war, or in response\nto certain companies’ continued operations in Russia. It is possible that these attacks could have collateral effects on additional\ncritical infrastructure and financial institutions globally. While we no longer have operations in Russia, we do have operations in the\nregion that, along with our operations globally, could be adversely affected by these attacks, including cyber-based attacks against our\ninformation technology systems, or be at risk to collateral effects of such attacks. While we have taken actions to mitigate such potential\nrisks, the proliferation of malware from the war into systems unrelated to the war, or cyberattacks against U.S. companies in retaliation\nfor U.S. sanctions against Russia, or U.S. support of Ukraine, could also adversely affect our operations.\n\n \n\nWe have implemented security policies, training programs,\nmeasures and disaster recovery plans designed to prevent, detect and mitigate cyber-based attacks, and to protect the security and continuity\nof our networks and critical systems. These measures may not adequately prevent adverse events such as breaches or failures from occurring,\nor mitigate their severity if they do occur.\n\n \n\nIf our information technology systems are breached,\ndamaged or fail to function properly due to any number of causes, such as security breaches or cyber-based attacks, systems implementation\ndifficulties, catastrophic events or power outages, and our security, contingency disaster recovery, or other risk mitigation plans do\nnot effectively mitigate these occurrences on a timely basis, we may experience a material disruption in our ability to manage our business\noperations and produce financial reports, as well as significant costs and lost business opportunities until they are remediated. Further,\nour sensitive information may be compromised and we may suffer representational harm.\n\n \n\nWe are also subject to a variety of laws and regulations\nregarding data privacy, data protection, and data security, including laws related to the collection, storage, handling, use, disclosure,\ntransfer, and security of personal information. Data privacy regulations continue to evolve, and non-compliance with such regulations,\nincluding as a result of adoption of emerging technologies, such as artificial intelligence, could subject the Company to legal claims\nor proceedings, potential regulatory fines and penalties and damage to our reputation. These factors may adversely impact our business,\nresults of operations, and financial condition, as well as our competitive position.\n\n \n\n67\n\n \n\n \n\n*Human capital requirements may not be sufficient to effectively support\nglobal operations.*\n\n \n\nOur global operations were intended to function with\ntrained individuals necessary for the warehousing, and shipping of raw materials for products used in other areas of manufacturing or\nsold as inputs or products to third-party customers. Our Company may lack the necessary methods and tactics to mitigate potential shortfalls.\n\n \n\n*Matters relating to employment and labor law may\nadversely affect our business.*\n\n \n\nVarious federal and state labor laws govern our relationships\nwith our employees and affect operating costs. These laws include employee classifications as exempt or non-exempt, minimum wage requirements,\nunemployment tax rates, workers’ compensation rates, citizenship requirements and other wage and benefit requirements for employees\nclassified as non-exempt. Significant additional government regulations and new laws, including mandating increases in minimum wages,\nchanges in exempt and non-exempt status, or mandated benefits such as health insurance could materially affect our business, financial\ncondition, operating results or cash flow. Furthermore, if our or our franchisees’ employees unionize, it could materially affect\nour business, financial condition, operating results or cash flow.\n\n \n\nWe are also subject in the ordinary course of business\nto employee claims against us based, among other things, on discrimination, harassment, wrongful termination or violation of wage and\nlabor laws. Such claims could also be asserted against us by employees of our franchisees. Moreover, claims asserted against franchisees\nmay at times be made against us as a franchisor. These claims may divert our financial and management resources that would otherwise be\nused to benefit our operations. The ongoing expense of any resulting lawsuits, and any substantial settlement payment or damage award\nagainst us, could adversely affect our business, brand image, employee recruitment, financial condition, operating results or cash flows.\n\n \n\nIn addition, various states in which we operate are\nconsidering or have already adopted new immigration laws or enforcement programs, and the United States Congress and Department of Homeland\nSecurity from time to time consider and may implement changes to federal immigration laws, regulations or enforcement programs as well.\nSome of these changes may increase our obligations for compliance and oversight, which could subject us to additional costs and make our\nhiring process more cumbersome or reduce the availability of potential employees. Although we require all workers to provide us with government-specified\ndocumentation evidencing their employment eligibility, some of our employees may, without our knowledge, be unauthorized workers. Unauthorized\nworkers are subject to deportation and may subject us to fines or penalties, and if any of our workers are found to be unauthorized, we\ncould experience adverse publicity that negatively impacts our brand and may make it more difficult to hire and keep qualified employees.\nTermination of a significant number of employees who were unauthorized employees may disrupt our operations, cause temporary increases\nin our labor costs as we train new employees and result in additional adverse publicity. We could also become subject to fines, penalties\nand other costs related to claims that we did not fully comply with all recordkeeping obligations of federal and state immigration compliance\nlaws. These factors could have a material adverse effect on our business, financial condition and results of operations.\n\n \n\nFinally, the Company has employees who reside in different\ncountries around the world who have specific labor law requirements we are subject to follow.\n\n \n\n*We depend on our executive officers, the loss of\nwhom could materially harm our business.*\n\n \n\nWe rely upon the accumulated knowledge, skills and\nexperience of our executive officers, significant employees and expertise of our hired consultants. Our executive officers, significant\nemployees and hired consultants have significant experience in international and agri-foods industries. If they were to leave us or become\nincapacitated, we might suffer in our planning and execution of business strategy and operations, impacting our brand and financial results.\nWe also do not maintain any key man life insurance policies for any of our employees.\n\n \n\n*Our risk management strategies may not be effective.*\n\n \n\nOur business is affected by fluctuations in agricultural\ncommodity prices, transportation costs, energy prices, interest rates, and foreign currency exchange rates. We engage in hedging transactions\nto manage these risks. However, our exposures may not always be fully hedged, and our hedging strategies may not be successful in minimizing\nour exposure to these fluctuations. In addition, our risk management strategies may seek to position our overall portfolio relative to\nexpected market movements. While we have implemented a broad range of risk monitoring and control procedures and policies to mitigate\npotential losses, they may not in all cases be successful in anticipating a significant risk exposure and protecting us from losses that\nhave the potential to impair our financial position. See “Item 7.A. Quantitative and Qualitative Disclosures About Market Risk”.\n\n \n\n68\n\n \n\n \n\n*Approval of the Amendment to Increase Authorized\nCommon Stock Enhances Our Ability to Finance Operations and Pursue Strategic Transactions.*\n\n \n\nOn April 13, 2026, at our Annual Meeting of Shareholders,\nour shareholders approved an amendment to our Articles of Incorporation to increase the number of authorized shares of our common stock\nfrom 2,000,000 to 250,000,000. This approval provides the Company with significantly greater flexibility to raise capital, explore M&A\nopportunities, issue equity for strategic initiatives, and grant equity awards under our equity incentive plans.\n\n \n\nAs of the date of the annual meeting, a substantial\nportion of our previously authorized shares was either issued and outstanding or reserved for issuance under our equity incentive plans,\noutstanding warrants, or other commitments. With the increase in authorized shares, the Company now has sufficient capacity to issue new\ncommon stock in connection with future equity financings, including public offerings, at-the-market programs, private placements, or other\ncapital-raising transactions.\n\n \n\nWhile this approval enhances strategic and financing\nflexibility, future issuances of common stock, whether for financing, acquisitions, or equity compensation, may result in substantial\ndilution to existing shareholders. Such dilution could materially reduce net income (loss) per share and impact shareholder ownership\npercentages.\n\n \n\nIn addition, the increase in authorized shares strengthens\nour ability to pursue mergers, acquisitions, joint ventures, strategic partnerships, or other business combinations that may enhance our\nmarket position, expand our product or service offerings, or generate long-term shareholder value. The availability of additional shares\nallows the Company to use equity as consideration in transactions where potential targets or partners require or prefer equity, improving\nour competitiveness for such opportunities.\n\n \n\nOverall, the shareholder approval of this amendment\nmaterially enhances the Company’s ability to finance operations and pursue strategic initiatives, while also introducing potential\ndilution that shareholders should consider.\n\n \n\n**Risks Related to Ownership of Our Common Stock\nand Lack of Liquidity**\n\n \n\n*As a smaller reporting company, we are exempt from\ncertain disclosure requirements, which could make our Common Stock less attractive to the potential investors.*\n\n \n\nRule 12b-2 of the Exchange Act defines a “smaller\nreporting company” as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent\nthat is not a smaller reporting company and that:\n\n \n\n●had a public float of less than $250 million as of the last business day of its most recently completed\nsecond fiscal quarter, computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held\nby non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity,\nin the principal market for the common equity; or\n\n \n\n●in the case of an initial registration statement under the Securities Act, or the Exchange Act of 1934,\nas amended, which we refer to as the Exchange Act, for shares of its common equity, had a public float of less than $250 million as of\na date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number\nof such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number\nof such shares included in the registration statement by the estimated public offering price of the shares; or\n\n \n\n●in the case of an issuer whose public float as calculated under paragraph (1) or (2) of this definition\nwas zero, had annual revenues of less than $100 million during the most recently completed fiscal year for which audited financial statements\nare available.\n\n \n\nAs a smaller reporting company, we will not be required\nand may not include a Compensation Discussion and Analysis section in our proxy statements; we will provide only two years of financial\nstatements; and we need not provide the table of selected financial data. We also will have other “scaled” disclosure requirements\nthat are less comprehensive than issuers that are not smaller reporting companies which could make our Common Stock less attractive to\npotential investors, which could make it more difficult for our shareholders to sell their shares.\n\n \n\n69\n\n \n\n \n\n*As a public company, we will incur significant\nincreased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance\ninitiatives.*\n\n \n\nAs a public company, we have incurred significant\nlegal, accounting and other expenses that we did not incur as a private company. In addition, the rules of the SEC and those of The NASDAQ\nStock Market LLC (“NASDAQ”), NASDAQ Capital Market has imposed various requirements on public companies including requiring\nestablishment and maintenance of effective disclosure and financial controls. Our management and other personnel will need to devote a\nsubstantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased and will continue to\nincrease our legal and financial compliance costs and will make some activities more time-consuming and costlier. For example, we expect\nthat these rules and regulations may make it more difficult and more expensive for us to obtain directors’ and officers’ liability\ninsurance, which could make it more difficult for us to attract and retain qualified members of our board of directors. We cannot predict\nor estimate the amount of additional costs we will incur as a public company or the timing of such costs.\n\n \n\nThe Sarbanes-Oxley Act requires, among other things,\nthat we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform\nsystem and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness\nof our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. In addition, we will be required\nto have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting\nthe later of our second annual report on Form 10-K or the first annual report on Form 10-K following the date on which we are no longer\nan emerging growth company. Our compliance with Section 404 of the Sarbanes-Oxley Act will require that we incur substantial accounting\nexpense and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional\naccounting and financial staff with appropriate public company experience and technical accounting knowledge. If we are not able to comply\nwith the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies\nin our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline\nand we could be subject to sanctions or investigations by the exchange we are listed on, the SEC or other regulatory authorities, which\nwould require additional financial and management resources.\n\n \n\nOur ability to successfully implement our business\nplan and comply with Section 404 requires us to be able to prepare timely and accurate financial statements. We expect that we will need\nto continue to improve existing, and implement new operational and financial systems, procedures and controls to manage our business effectively.\nAny delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls, may cause our\noperations to suffer and we may be unable to conclude that our internal control over financial reporting is effective and to obtain an\nunqualified report on internal controls from our auditors as required under Section 404 of the Sarbanes-Oxley Act. This, in turn, could\nhave an adverse impact on trading prices for our common stock, and could adversely affect our ability to access the capital markets.\n\n \n\n*The Financial Industry Regulatory Authority (“FINRA”)\nsales practice requirements may limit a shareholder’s ability to buy and sell our stock.*\n\n \n\nIn addition to the “penny stock” rules\ndescribed above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable\ngrounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities to their\nnon-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status,\ntax status, investment objectives and other information. The FINRA requirements may make it more difficult for broker-dealers to recommend\nthat their customers buy our Common Stock, which may have the effect of reducing the level of trading activity in our Common Stock. As\na result, fewer broker-dealers may be willing to make a market in our common stock, reducing a shareholder’s ability to resell shares\nof our Common Stock.\n\n \n\n*Our stock price may be volatile.*\n\n \n\nThe market price of our Common Stock has been highly\nvolatile and could fluctuate widely in price in response to various potential factors, many of which will be beyond our control, including\nthe following:\n\n \n\n \n●\nservices by us or our competitors;\n\n \n\n \n●\nadditions or departures of key personnel;\n\n \n\n \n●\nour ability to execute our business plan;\n\n \n\n \n●\noperating results that fall below expectations;\n\n \n\n \n●\nloss of any strategic relationship;\n\n \n\n70\n\n \n\n \n\n \n●\nindustry developments;\n\n \n\n \n●\neconomic and other external factors; and\n\n \n\n \n●\nperiod-to-period fluctuations in our financial results.\n\n \n\nIn addition, the securities markets have from time-to-time\nexperienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market\nfluctuations may also materially and adversely affect the market price of our common stock.\n\n \n\n*If securities or industry analysts do not publish\nresearch or reports about our business, or publish negative reports about our business, our share price and trading volume could decline.*\n\n \n\nThe trading market for our common stock will, to some\nextent, depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control\nover these analysts. If one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share\nprice would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could\nlose visibility in the financial markets, which could cause our share price or trading volume to decline.\n\n \n\n*We do not intend to pay dividends for the foreseeable\nfuture, which could reduce the attractiveness of our stock to some investors.*\n\n \n\nWe currently intend to retain any future earnings\nto finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future.\nAs a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases. In\naddition, we may incur debt financing to further finance our operations, the governing documents of which may contain restrictions on\nour ability to pay dividends.\n\n \n\n*If we are unable to maintain listing of our securities\non the NASDAQ Capital Market or another reputable stock exchange, it may be more difficult for our shareholders to sell their securities.*\n\n \n\nNASDAQ requires listing issuers to comply with certain\nstandards in order to remain listed on its exchange. The Company has received two notices from the Listing Qualifications Staff of The\nNasdaq Stock Market LLC (“Nasdaq”) as follows:\n\n \n\n \n●\nOn January 8, 2026, the Company received a letter from Nasdaq notifying the Company that it is no longer in compliance with Nasdaq Listing Rule 5620(a), which requires the Company to hold an annual meeting of shareholders within twelve months of the end of the Company’s fiscal year end. The Company submitted a plan of compliance on February 16, 2026. On March 9, 2026, Nasdaq advised the Company that it granted the Company an extension until June 29, 2026, to regain compliance with Nasdaq Listing Rule 5620(a) by holding an annual meeting of shareholders.\n\n \n\n \n●\nOn March 9, 2026, the Company received a letter from Nasdaq notifying it of non-compliance with Listing Rule 5640 arising from the voting rights of the Series A Preferred Stock issued February 11, 2026. On March 2, 2026, the Company filed the First Amendment to Stock Purchase Agreement and Certificate of Amendment reducing the stated value to $5.1596 per share and voting rights to 5.1596 votes per share. On March 13, 2026, Nasdaq confirmed the Company had regained compliance and closed the matter.\n\n \n\nFollowing the approval of the amendment to increase\nthe number of authorized shares of common stock at the Annual Meeting on April 13, 2026, the Company has additional flexibility to issue\ncommon stock for financing, strategic transactions, or equity compensation. While this approval strengthens the Company’s ability\nto maintain compliance with Nasdaq listing requirements related to capital structure and shareholder transactions, if, for any reason,\nNasdaq should delist our securities from trading on its exchange and we are unable to obtain listing on another reputable national securities\nexchange, a reduction in some or all of the following may occur, each of which could materially adversely affect our shareholders.\n\n \n\n71\n\n \n\n \n\n*If our shares of Common Stock become subject to\nthe penny stock rules, it would become more difficult to trade our shares.*\n\n \n\nThe Commission has adopted rules that regulate broker-dealer\npractices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price per share of less\nthan $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated\nquotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the\nexchange or system. If we do not obtain or retain a listing on the NYSE American or NASDAQ Capital Market and if the price of our Common\nStock is less than $5.00 per share, our Common Stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before\neffecting a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing\nspecified information. In addition, the penny stock rules require that, before effecting any such transaction in a penny stock not otherwise\nexempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the\npurchaser and receive; (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written\nagreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure\nrequirements may have the effect of reducing the trading activity in the secondary market for our Common Stock, and therefore shareholders\nmay have difficulty selling their shares.\n\n \n\n*Provisions in our articles of incorporation and\nbylaws and Nevada law may discourage, delay or prevent a change of control of our Company and, therefore, may depress the trading price\nof our stock.*\n\n \n\nOur articles of incorporation and bylaws contain certain\nprovisions that may discourage, delay or prevent a change of control that our shareholders may consider favorable. These provisions:\n\n \n\n \n●\nprohibit shareholders action to elect or remove directors by majority written consent;\n\n \n\n \n●\nprovide that the board of directors is expressly authorized to make, alter or repeal our bylaws;\n\n \n\n \n●\nprohibit our shareholders from calling a special meeting of shareholders; and\n\n \n\n \n●\nestablish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by shareholders at shareholder meetings.\n\n \n\n*We may be subject to securities litigation, which\nis expensive and could divert management attention.*\n\n \n\nIn the past companies that have experienced volatility\nin the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation\nin the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources,\nwhich could seriously hurt our business. Any adverse determination in litigation could also subject us to significant liabilities.\n\n \n\n*We Face Material Liquidated Damages Obligations\nand Dilution Risk Under the Purchase Agreement with Helena Global Investment Opportunities I Ltd., Which Could Adversely Affect Our Liquidity,\nFinancial Condition, and Stock Price.*\n\n \n\nOn September 23, 2025, the Company entered into a\nPurchase Agreement (the “Helena Purchase Agreement”) with Helena Global Investment Opportunities I Ltd. (“Helena”),\npursuant to which the Company has the right, but not the obligation, to sell up to $10,000,000 (the “Commitment Amount”) of\nits common stock to Helena from time to time, subject to certain limitations and conditions. Sales occur through Advance Notices at a\npurchase price equal to 97% of the lowest daily closing VWAP during the Pricing Period (subject to further downward adjustments if intra-day\nVWAP volatility exceeds 7%), resulting in immediate dilution to existing shareholders.\n\n \n\nPursuant to the Helena Purchase Agreement, if the\nCompany has not submitted Advance Notices in an aggregate amount of at least $2,000,000 (the “Threshold Amount”) prior to\nthe date that is six (6) months following the effective date of the registration statement covering the shares, the Company shall pay\nHelena liquidated damages of **$100,000** for every 30-day period thereafter until the Threshold Amount is met. Additionally, if the\nregistration statement is not filed by the Filing Deadline or declared effective by the Effectiveness Deadline, the Company must pay Helena\npartial liquidated damages equal to 2.0% of the Commitment Amount on each such Event Date and on each monthly anniversary thereafter.\nThese liquidated damages are payable in cash and are not penalties, but they represent non-operating cash outflows that could materially\nstrain the Company’s already limited liquidity and exacerbate the substantial doubt about its ability to continue as a going concern\n\n \n\nThe Helena Purchase Agreement also contains strict\nlimitations, including an Ownership Limitation (Helena cannot exceed 4.99% beneficial ownership), a Registration Limitation, and an Exchange\nCap (19.99% of outstanding shares unless shareholder approval is obtained). Failure to satisfy these conditions or the registration requirements\ncould prevent the Company from accessing the facility entirely, forcing it to seek alternative (and potentially more expensive) financing.\nMoreover, the issuance of 13,849 Commitment Fee Shares (plus potential Make-Whole Shares if the post-effectiveness closing price is below\nthe reference price) and the 1.25% cash fee to the Placement Agent further dilute existing shareholders.\n\n \n\n72\n\n \n\n \n\nAny payment of liquidated damages, inability to draw\non the facility, or perception of ongoing dilution could have a material adverse effect on the Company’s liquidity, financial condition,\nresults of operations, and the market price of its common stock. There can be no assurance that the Company will meet the Threshold Amount\nor registration deadlines, or that it will be able to utilize the facility on favorable terms.\n\n \n\n*Defaults Under Our Debt Obligations Could Adversely\nAffect Our Financial Condition and Result in Significant Dilution to Shareholders*\n\n \n\nThe Company is currently in default under certain\nof its debt obligations. As a result of these defaults, the applicable lenders may impose default interest rates, penalties, and other\ncharges, which could significantly increase the Company’s outstanding indebtedness. In addition, such defaults may accelerate repayment\nobligations and limit the Company’s ability to access additional financing.\n\n \n\nCertain of the Company’s debt instruments also\nprovide creditors with the ability to convert outstanding amounts, including accrued interest and penalties, into shares of the Company’s\ncommon stock. Any such conversions could result in substantial dilution to existing shareholders, particularly if conversions occur at\ndiscounted prices relative to the market price of the Company’s common stock.\n\n \n\nThe Company is actively evaluating alternatives to\naddress its outstanding debt, including potential restructurings, settlements, or exchanges; however, there can be no assurance that such\nefforts will be successful or on terms acceptable to the Company. If the Company is unable to effectively manage or resolve its debt defaults,\nits financial condition, liquidity, and results of operations could be materially adversely affected."}