[Introduction](index=4&type=section&id=INTRODUCTION) [Definitions](index=4&type=section&id=Definitions) This section provides definitions for key terms and abbreviations used throughout the annual report, ensuring clarity and consistent understanding of the document's content - The report defines key terms such as 'Company' (Forafric Global PLC), 'Business Combination' (Globis combined with Forafric Agro Holdings Limited on June 9, 2022), and various financial and legal terms like 'Ordinary Shares' (**$0.001 par value**) and 'Warrants' (**$11.50 exercise price**)[13](index=13&type=chunk)[16](index=16&type=chunk)[20](index=20&type=chunk)[37](index=37&type=chunk)[55](index=55&type=chunk) - The Company's equity is funded in U.S. dollars, while the majority of revenues and expenses are incurred in Moroccan Dirhams, which is pegged to the U.S. dollar and Euros[57](index=57&type=chunk) [Part I](index=8&type=section&id=PART%20I) [Item 1. Identity of Directors, Senior Management and Advisers](index=8&type=section&id=Item%201.%20Identity%20of%20Directors%2C%20Senior%20Management%20and%20Advisers) This item states that information regarding the identity of directors, senior management, and advisers is not applicable in this section - The section is marked 'Not Applicable', indicating no specific information is provided here[59](index=59&type=chunk) [Item 2. Offer Statistics and Expected Timetable](index=8&type=section&id=Item%202.%20Offer%20Statistics%20and%20Expected%20Timetable) This item indicates that information regarding offer statistics and expected timetable is not applicable - The section is marked 'Not Applicable', indicating no specific information is provided here[60](index=60&type=chunk) [Item 3. Key Information](index=8&type=section&id=Item%203.%20Key%20Information) This section outlines key information about the company, including its capitalization, indebtedness, and a comprehensive list of risk factors - The company faces significant risks that could materially adversely affect its business, financial condition, results of operations, and growth prospects[63](index=63&type=chunk) [A. [Reserved]](index=8&type=section&id=A.%20%5BReserved%5D) This sub-item is reserved and contains no specific information [B. Capitalization and Indebtedness](index=8&type=section&id=B.%20Capitalization%20and%20Indebtedness) This sub-item states that information regarding capitalization and indebtedness is not applicable in this section - The section is marked 'Not applicable', indicating no specific information is provided here[61](index=61&type=chunk) [C. Reasons for the Offer and Use of Proceeds](index=8&type=section&id=C.%20Reasons%20for%20the%20Offer%20and%20Use%20of%20Proceeds) This sub-item indicates that information regarding the reasons for the offer and use of proceeds is not applicable - The section is marked 'Not applicable', indicating no specific information is provided here[62](index=62&type=chunk) [D. Risk Factors](index=8&type=section&id=D.%20Risk%20Factors) This section details various significant risks that could adversely affect the company's business, financial condition, results of operations, and growth prospects [Risks Related to the Company's Securities](index=10&type=section&id=Risks%20Related%20to%20the%20Company%27s%20Securities) Risks related to the company's securities include potential dilution from future issuances and warrant exercises, market price volatility, and limitations on legal recourse - Sales of a substantial number of securities by existing securityholders could cause the price of Ordinary Shares and Warrants to fall[66](index=66&type=chunk) - Exercise of **15,750,842 outstanding warrants** (as of December 31, 2024) at an exercise price of **$11.50 per share** would increase shares eligible for resale and dilute existing holders[72](index=72&type=chunk) - The company is an 'emerging growth company' and a 'foreign private issuer', which provides reduced SEC reporting requirements but may make its securities less attractive to investors[86](index=86&type=chunk)[90](index=90&type=chunk) [Risks Related to Our Business](index=17&type=section&id=Risks%20Related%20to%20Our%20Business) Business risks include vulnerability to weather, raw material price fluctuations, dependence on a related party supplier, distribution disruptions, and economic/political risks - The international price of wheat is the main risk, influenced by weather and strategies of major producers, directly impacting margins as the company cannot control finished product selling prices[106](index=106&type=chunk)[109](index=109&type=chunk) - The company is dependent on Millcorp Geneve SA, a related party, for substantially all of its raw material (at least **80% of annual requirements**), with the supply agreement extended through March 31, 2026[112](index=112&type=chunk) - The Moroccan flour market is imbalanced with supply exceeding demand, forcing price competition and reduced margins to maintain market share[115](index=115&type=chunk) [Risks Related to Our Growth](index=21&type=section&id=Risks%20Related%20to%20Our%20Growth) Growth-related risks include the potential ineffectiveness of risk management strategies, failure to achieve anticipated benefits from initiatives, and challenges in integrating acquisitions - The company may not realize anticipated benefits from cost reduction, margin improvement, and business optimization initiatives due to unexpected delays, increased costs, or adverse effects on internal controls[134](index=134&type=chunk)[135](index=135&type=chunk) - Acquisitions and joint ventures, a part of the company's strategy, pose risks such as unanticipated delays, costs, diversion of management attention, and exposure to successor liability[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk) [Risks Related to Government Regulation](index=22&type=section&id=Risks%20Related%20to%20Government%20Regulation) The company operates in a highly regulated agricultural industry, facing risks from government policies affecting commodity production, trade flows, and subsidies - Agricultural commodity production and trade flows are significantly affected by government policies and regulations, including taxes, tariffs, duties, subsidies, and import/export restrictions[139](index=139&type=chunk) - The Moroccan market is highly regulated, with restrictions on soft wheat imports to protect local producers, and part of flour being government-subsidized[142](index=142&type=chunk) - Failure to comply with applicable laws and regulations, including obtaining ONSSA certification for wheat imports, could result in civil and criminal penalties, adversely affecting product sales, reputation, and financial results[140](index=140&type=chunk)[142](index=142&type=chunk) [Risks Related to Competition](index=23&type=section&id=Risks%20Related%20to%20Competition) The company faces intense competition in its businesses, particularly in the highly price-competitive global commodity markets, impacting market share and profitability - The company faces significant competition from numerous competitors, some larger and with greater financial resources, in highly price-competitive markets for its global commodity products[143](index=143&type=chunk) - Effective competition requires continuous focus on improving production and distribution efficiency, developing and maintaining market share, and strong customer relationships[143](index=143&type=chunk) [Risks Related to Data Security and Intellectual Property](index=23&type=section&id=Risks%20Related%20to%20Data%20Security%20and%20Intellectual%20Property) The company's operations rely heavily on IT systems, making it vulnerable to system failures, cybersecurity attacks, and data breaches, increasing legal and reputational risks - The company's business relies on IT systems and collects confidential information, but currently lacks written policies and procedures for information security and does not audit third-party vendors' systems[144](index=144&type=chunk)[145](index=145&type=chunk) - Cyberattacks and security incidents are expected to accelerate in frequency and impact, especially with increased AI use and sophisticated attacker techniques[145](index=145&type=chunk) - IT system failures, cybersecurity attacks, or vulnerabilities could result in legal liability, reputational damage, business interruption, and harm to competitive position[146](index=146&type=chunk) [Risks Related to Our Capital Requirements](index=24&type=section&id=Risks%20Related%20to%20Our%20Capital%20Requirements) The company is a capital-intensive business, requiring significant capital for operations and expansion, with working capital needs sensitive to agricultural commodity prices - The company is a capital-intensive business, requiring significant capital for operations, capital expenditures, and expansion[147](index=147&type=chunk) - Working capital needs are directly affected by agricultural commodity prices; increases in prices generally lead to higher borrowing levels[147](index=147&type=chunk) - Failure to generate sufficient cash flows or raise external financing could force the company to limit operations and growth plans, adversely impacting competitiveness and results[147](index=147&type=chunk) [Risks Related to Incorporation in Gibraltar](index=24&type=section&id=Risks%20Related%20to%20Incorporation%20in%20Gibraltar) Incorporation in Gibraltar limits U.S. investors' ability to enforce judgments and provides different corporate governance practices than Nasdaq, potentially offering less shareholder protection - As a Gibraltar-incorporated company with most operations and directors/officers outside the U.S., it may be difficult for U.S. investors to serve process or enforce U.S. judgments[148](index=148&type=chunk)[149](index=149&type=chunk) - Gibraltar's corporate governance practices differ from Nasdaq rules, and the company may rely on exemptions, potentially affording shareholders less protection than U.S. domestic issuers[101](index=101&type=chunk) [Item 4. Information on the Company](index=25&type=section&id=Item%204.%20Information%20on%20the%20Company) This section provides

Core Insights - Forafric Global has appointed Khalid Assari as Chairman of the Board, effective April 4th, 2025, replacing Saad Bendidi [1][2] - Khalid Assari has a strong background in the agricultural business, previously holding senior positions at Caisse de Dépôts (CDG Group) and holds an MBA in finance [2] - Forafric is a leading agribusiness in Africa, specializing in milling and exporting products to over 45 countries, with plans for further expansion in Morocco [3] Company Overview - Forafric operates in Morocco and Sub-Saharan Africa, focusing on flour, semolina, pasta, and couscous production [3] - The company has 12 industrial units and 2 logistics platforms, positioning itself as a leader in the milling industry [3] - Forafric aims to continue its growth trajectory within the Moroccan market [3]

Core Insights - Forafric Global PLC has adopted a new strategy focusing on strengthening its balance sheet with an emphasis on Morocco and soft wheat [1] - The company plans to divest non-core assets, including those outside Morocco and durum wheat-focused businesses, expecting to generate gross proceeds of between 80 and 100 million USD [1] - The divestment is aimed at improving the company's working capital position significantly [1] Management Changes - Mr. Khalid Assari has been appointed as the new CEO of Forafric Global PLC and its subsidiary Forafric Morocco, replacing Mr. Mustapha Jamaleddine who retired [2] - Mr. Assari has prior experience as CEO of Forafric Morocco from 2016 to 2018 and has been involved in the real estate and agribusiness sectors in Morocco [2] Company Overview - Forafric is a leading agribusiness player in Africa, particularly in Morocco and Sub-Saharan Africa, specializing in milling and processing products such as flour, semolina, pasta, and couscous [3] - The company operates 12 industrial units and 2 logistics platforms, exporting products to over 45 countries worldwide [3] - Forafric intends to continue its expansion efforts in Morocco [3]

Core Points - Forafric Global PLC received a notice from Nasdaq regarding non-compliance with Listing Rule 5250 (c) (2) due to the failure to file the Six Month Report by December 31, 2024 [1] - The Company filed its Six Month Report on January 16, 2025, and subsequently received confirmation from Nasdaq that it is now in compliance with the Rule [2] - Forafric is a leading agribusiness in Africa, specializing in milling and exporting products such as flour, semolina, pasta, and couscous to over 45 countries [3] Company Overview - Forafric operates 12 industrial units and 2 logistics platforms across Morocco and Sub-Saharan Africa [3] - The Company aims to expand its operations in Morocco and Africa while contributing to food security in the region [3]

[Condensed Consolidated Financial Statements](index=3&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents the company's financial position, operational performance, equity changes, and cash flows for the interim period [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The company's total assets decreased from $309,450 thousand at December 31, 2023, to $287,122 thousand at June 30, 2024, primarily driven by a decrease in cash and cash equivalents and prepaid expenses. Total liabilities also decreased, while stockholders' equity saw a significant reduction | Metric | June 30, 2024 ($k) | December 31, 2023 ($k) | | :-------------------------------- | :------------------- | :--------------------- | | Total Assets | 287,122 | 309,450 | | Cash and cash equivalents | 16,368 | 24,021 | | Total Current Liabilities | 245,281 | 253,259 | | Total Stockholders' Equity | 16,310 | 29,206 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For the six months ended June 30, 2024, the company reported increased revenues but also a higher net loss compared to the same period in 2023, primarily due to increased cost of sales and selling, general and administrative expenses | Metric | Six months ended June 30, 2024 ($k) | Six months ended June 30, 2023 ($k) | | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Revenues | 165,238 | 145,616 | | Cost of sales | 146,520 | 131,969 | | Gross profit | 18,718 | 13,647 | | Operating loss | (3,609) | (1,377) | | Net loss attributable to the Company | (12,756) | (8,622) | | Loss per ordinary shares outstanding | (0.45) | (0.32) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity decreased significantly from $29,206 thousand at January 1, 2024, to $16,310 thousand at June 30, 2024, mainly due to the net loss attributable to the Company and foreign exchange loss | Metric | June 30, 2024 ($k) | January 1, 2024 ($k) | | :------------------------- | :----------------- | :----------------- | | Total Stockholders' Equity | 16,310 | 29,206 | | Net (loss) income | (12,756) | - | | Foreign exchange loss | (794) | - | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities increased to $13,390 thousand for the six months ended June 30, 2024, compared to $10,492 thousand in the prior year. However, net cash used in financing activities significantly increased, leading to a net decrease in cash and cash equivalents | Cash Flow Activity | Six months ended June 30, 2024 ($k) | Six months ended June 30, 2023 ($k) | | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Net cash provided by operating activities | 13,390 | 10,492 | | Net cash used in investing activities | (664) | (4,187) | | Net cash used in financing activities | (20,099) | (3,685) | | Net (decrease) increase in cash and cash equivalents | (7,653) | 328 | | Cash and cash equivalents, end of period | 16,368 | 25,155 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's accounting policies, financial instrument valuations, lease obligations, debt, equity, and segment performance [1. Nature of Operations and Basis of Presentation](index=7&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20BASIS%20OF%20PRESENTATION) Forafric Global PLC is a market leader in the Moroccan milling industry, offering a comprehensive range of products including flours, semolina, pasta, couscous, rice, and starches. The condensed consolidated financial statements are prepared in accordance with US GAAP for interim financial information, including all necessary recurring adjustments Nature of Operations - Forafric Global PLC is a market leader in the milling industry in Morocco, offering flours, semolina, pasta, couscous, rice, and starches[13](index=13&type=chunk) Basis of Presentation - The financial statements are prepared in accordance with US GAAP for interim financial information, including all necessary recurring adjustments[16](index=16&type=chunk) - Results for the six months ended June 30, 2024, and 2023 are not necessarily indicative of full-year operating results[16](index=16&type=chunk) [2. Summary of Significant Accounting Policies](index=8&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) The company applies consistent accounting policies with its annual report, utilizing estimates and assumptions in financial statement preparation. Key policies include principles of consolidation, share-based compensation valuation using Black-Scholes, foreign currency translation, and fair value measurements classified under a three-level hierarchy. The company also maintains its Emerging Growth Company status, allowing for an extended transition period for new accounting standards, and management has assessed its ability to continue as a going concern for at least the next twelve months Use of Estimates - Management uses judgment to make estimates and assumptions affecting reported amounts, including allowance for credit losses, valuation of goodwill and intangible assets, useful lives of long-lived assets, and income tax assets[18](index=18&type=chunk) Principles of Consolidation - The condensed consolidated financial statements include all entities controlled by the Company, with intercompany accounts and transactions eliminated[19](index=19&type=chunk) Share-Based Compensation - Share-based awards (stock options and phantom options) are measured at grant date fair value (Black-Scholes model) and expensed over the vesting period[21](index=21&type=chunk)[22](index=22&type=chunk) - Phantom options are accounted for as liability awards and re-measured at fair value each reporting period[21](index=21&type=chunk) Foreign Currency Translation and Transactions - The Company's functional currency is the Moroccan dirham (MAD), and its presentation currency is the United States Dollar (USD)[23](index=23&type=chunk) - Translation adjustments are deferred as a separate component of equity in 'Accumulated other comprehensive income'[23](index=23&type=chunk) Credit Risk - Financial instruments subject to credit risk include cash and cash equivalents and trade accounts receivable. Management believes the company is not exposed to significant credit risk from depository institutions[24](index=24&type=chunk) Foreign Currency Forward Contracts - The company uses foreign currency forward contracts to manage exchange rate fluctuations, which are recorded on the balance sheet at fair value, with changes recognized in current period earnings as they are not designated as hedging instruments[25](index=25&type=chunk) Fair Value Measurements - The company follows ASC 820 for fair value measurements, maximizing observable inputs (Level 1 and 2) and minimizing unobservable inputs (Level 3)[26](index=26&type=chunk)[29](index=29&type=chunk) - Derivative liabilities/assets from foreign currency forward contracts and contingent consideration liability are measured at fair value on a recurring basis[28](index=28&type=chunk) Emerging Growth Company Status - The company is an Emerging Growth Company (EGC) and has elected to use the extended transition period for adopting new or revised accounting standards under the JOBS Act[30](index=30&type=chunk) Reclassifications - Certain prior period amounts have been reclassified to conform to the current period presentation[31](index=31&type=chunk) Liquidity and Going Concern - Management has assessed the company's ability to continue as a going concern for at least the next twelve months from the issuance date of the financial statements[32](index=32&type=chunk) - Considerations include **$12,802 thousand** in cash and cash equivalents as of December 31, 2024 (projected), a binding agreement for the sale of a subsidiary for **$10,000 thousand**, and active pursuit of additional financing[33](index=33&type=chunk)[39](index=39&type=chunk) [3. Recently Adopted Accounting Pronouncements](index=10&type=section&id=3.%20RECENTLY%20ADOPTED%20ACCOUNTING%20PRONOUNCEMENTS) The company is currently evaluating the impact of two new FASB ASUs: ASU 2023-07 on Segment Reporting, effective for fiscal years beginning after December 15, 2023, and ASU 2023-09 on Income Tax Disclosures, effective for annual periods beginning after December 15, 2024 - The company is evaluating the impact of ASU 2023-07 (Segment Reporting) and will adopt it for the year ended December 31, 2024[34](index=34&type=chunk) - The company is determining the impact of ASU 2023-09 (Income Taxes) which is effective for annual periods beginning after December 15, 2024[35](index=35&type=chunk) [4. Leases](index=10&type=section&id=4.%20LEASES) The company holds operating and finance leases for real estate, vehicles, equipment, and construction land. Total lease liabilities decreased from $4,467 thousand at December 31, 2023, to $3,864 thousand at June 30, 2024. The weighted-average discount rates are 5.0% for operating leases and 6.6% for finance leases as of June 30, 2024 Supplemental Balance Sheet Information | Metric | June 30, 2024 ($k) | December 31, 2023 ($k) | | :-------------------- | :------------------- | :--------------------- | | Total Right-of-use assets | 13,015 | 13,385 | | Total Lease Liabilities | 3,864 | 4,467 | Discount Rates | Lease Type | June 30, 2024 | December 31, 2023 | | :----------- | :------------ | :---------------- | | Operating leases | 5.0% | 5.0% | | Finance leases | 6.6% | 7.0% | Lease Payments - Lease payments under options to extend or terminate are included in the measurement of right-of-use assets and lease liabilities when reasonably certain to be exercised[43](index=43&type=chunk) Weighted-Average Remaining Lease Term | Lease Type | June 30, 2024 | December 31, 2023 | | :----------- | :------------ | :---------------- | | Operating leases | 6.6 years | 6.5 years | | Finance leases | 0.9 years | 1.4 years | Components of Lease Expense | Lease Cost Component | Six months ended June 30, 2024 ($k) | Six months ended June 30, 2023 ($k) | | :--------------------- | :---------------------------------- | :---------------------------------- | | Operating lease cost | 328 | 246 | | Finance lease cost: Amortization of right-of-use assets | 279 | 242 | | Finance lease cost: Interest on lease liabilities | 50 | 36 | | **Total lease cost** | **657** | **524** | Future Maturities of Lease Liabilities | Year | Operating Leases (in thousands) | Finance Leases (in thousands) | | :---------------- | :------------------------------ | :---------------------------- | | Remainder of 2024 | 400 | 506 | | 2025 | 665 | 497 | | 2026 | 625 | 98 | | 2027 | 591 | 68 | | 2028 | 179 | 26 | | Thereafter | 1,123 | - | | **Total lease payments** | **3,583** | **1,195** | | Less: Interest | (869) | (45) | | **Present value of lease liabilities** | **2,714** | **1,150** | Other Lease Information | Cash Flow Type | Six months ended June 30, 2024 ($k) | Six months ended June 30, 2023 ($k) | | :------------------------------------------ | :---------------------------------- | :---------------------------------- | | Operating cash flows used for operating leases | 328 | 246 | | Operating cash flows for finance leases | 279 | 242 | | Financing cash flows for finance leases | 50 | 36 | [5. Accounts Receivable, Net](index=13&type=section&id=5.%20ACCOUNTS%20RECEIVABLE,%20NET) Net accounts receivable increased to $36,271 thousand at June 30, 2024, from $34,716 thousand at December 31, 2023, with the allowance for credit losses also increasing | Metric | June 30, 2024 ($k) | December 31, 2023 ($k) | | :------------------------ | :------------------- | :--------------------- | | Accounts receivable | 51,603 | 49,695 | | Allowance for credit losses | (15,332) | (14,979) | | **Total** | **36,271** | **34,716** | - Current period provision for expected credit losses was **$(419) thousand** for the six months ended June 30, 2024[47](index=47&type=chunk) [6. Prepaid Expenses and Other Current Assets](index=13&type=section&id=6.%20PREPAID%20EXPENSES%20AND%20OTHER%20CURRENT%20ASSETS) Prepaid expenses and other current assets significantly decreased to $8,692 thousand at June 30, 2024, from $15,654 thousand at December 31, 2023, primarily due to a reduction in value-added tax receivable, prepaid income taxes, and the absence of insurance recoveries | Asset Type | June 30, 2024 ($k) | December 31, 2023 ($k) | | :-------------------------- | :------------------- | :--------------------- | | Value-added tax receivable | 800 | 1,547 | | Prepaid income taxes | 2,524 | 3,165 | | Advances to suppliers | 3,542 | 3,696 | | Prepaid expenses | 951 | 643 | | Insurance recoveries | - | 4,984 | | Other current assets | 875 | 1,619 | | **Total** | **8,692** | **15,654** | [7. Inventories](index=14&type=section&id=7.%20INVENTORIES) Total inventories remained relatively stable at $28,663 thousand at June 30, 2024, compared to $28,378 thousand at December 31, 2023, with no inventory reserves reported for either period | Inventory Type | June 30, 2024 ($k) | December 31, 2023 ($k) | | :-------------------------- | :------------------- | :--------------------- | | Merchandise | 777 | 874 | | Raw materials and consumable supplies | 23,845 | 22,821 | | Finished Goods | 4,041 | 4,683 | | **Total** | **28,663** | **28,378** | - The Company has no inventory reserves as of June 30, 2024, and December 31, 2023[49](index=49&type=chunk) [8. Property, Plant and Equipment, Net](index=14&type=section&id=8.%20PROPERTY,%20PLANT%20AND%20EQUIPMENT,%20NET) Net property, plant, and equipment decreased slightly to $114,028 thousand at June 30, 2024, from $116,920 thousand at December 31, 2023. Depreciation expense for the six months ended June 30, 2024, was $2,108 thousand | Asset Type | June 30, 2024 ($k) | December 31, 2023 ($k) | | :-------------------------- | :------------------- | :--------------------- | | Land | 25,191 | 25,389 | | Buildings | 63,278 | 63,200 | | Machinery and equipment | 65,760 | 63,284 | | Assets in progress | 6,753 | 10,354 | | Others | 9,409 | 9,393 | | Total | 170,391 | 171,620 | | Less accumulated depreciation | (56,363) | (54,700) | | **Total** | **114,028** | **116,920** | | Metric | Six months ended June 30, 2024 ($k) | Six months ended June 30, 2023 ($k) | | :------------------ | :---------------------------------- | :---------------------------------- | | Depreciation expense | 2,108 | 2,009 | [9. Goodwill and Other Intangible Assets](index=14&type=section&id=9.%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Goodwill decreased slightly to $48,009 thousand at June 30, 2024, from $48,488 thousand at December 31, 2023, primarily due to foreign currency exchange adjustments. Total intangible assets also decreased to $4,496 thousand from $4,648 thousand over the same period, with a weighted-average remaining amortization period of 8.8 years | Metric | June 30, 2024 ($k) | December 31, 2023 ($k) | | :-------------------- | :------------------- | :--------------------- | | Total Goodwill | 48,009 | 48,488 | | Total Intangible Assets | 4,496 | 4,648 | - Goodwill decreased due to foreign currency exchange adjustments of **$(479) thousand** for the six months ended June 30, 2024[51](index=51&type=chunk) - The weighted-average remaining amortization period for intangibles other than goodwill is **8.8 years** as of June 30, 2024, with future amortization expected to total **$3,552 thousand**[52](index=52&type=chunk) [10. Accrued Expenses](index=15&type=section&id=10.%20ACCRUED%20EXPENSES) Accrued expenses increased to $18,823 thousand at June 30, 2024, from $18,115 thousand at December 31, 2023, mainly driven by an increase in consideration payable to selling stockholder and accrued government taxes | Accrued Expense Type | June 30, 2024 ($k) | December 31, 2023 ($k) | | :-------------------------- | :------------------- | :--------------------- | | Consideration payable to selling stockholder | 9,159 | 8,840 | | Accrued government taxes | 5,821 | 5,580 | | Accrued interest | 2,158 | 2,047 | | Accrued salaries and benefits | 662 | 657 | | Accruals to social agencies | 507 | 669 | | Other accrued expenses | 516 | 322 | | **Total** | **18,823** | **18,115** | [11. Lines of Credit](index=15&type=section&id=11.%20LINES%20OF%20CREDIT) The company utilizes unsecured revolving credit agreements for working capital and asset-based credit facilities for wheat raw material purchases. Working capital lines of credit increased to $52,858 thousand at June 30, 2024, from $48,517 thousand at December 31, 2023, while wheat inventory lines of credit decreased Working Capital Lines of Credit - The company has unsecured revolving credit agreements for working capital up to approximately **$53,000 thousand**, with interest rates ranging from **5.6% to 7.5%**[54](index=54&type=chunk) | Metric | June 30, 2024 ($k) | December 31, 2023 ($k) | | :-------------------------- | :------------------- | :--------------------- | | Lines of credit – working capital | 52,858 | 48,517 | Wheat Inventories Lines of Credit - The company has asset-based credit facilities for wheat raw material purchases up to approximately **$135,000 thousand**, secured by inventory, with interest rates ranging from **2.75% to 7.5%**[55](index=55&type=chunk) | Metric | June 30, 2024 ($k) | December 31, 2023 ($k) | | :-------------------------- | :------------------- | :--------------------- | | Lines of credit – wheat inventories | 104,639 | 126,452 | [12. Long-Term Debt](index=16&type=section&id=12.%20LONG-TERM%20DEBT) Total outstanding debt decreased to $18,441 thousand at June 30, 2024, from $22,312 thousand at December 31, 2023. This includes term loans and lease obligations, with maturities extending through 2034 | Metric | June 30, 2024 ($k) | December 31, 2023 ($k) | | :-------------------- | :------------------- | :--------------------- | | Total outstanding debt | 18,441 | 22,312 | | Total long-term debt (net of current portion) | 10,585 | 11,841 | Term Loans - The company maintains unsecured term loans with fixed monthly payments and interest rates ranging from **5.5%-9.0%** per annum, maturing through 2034[57](index=57&type=chunk) Lease Obligations | Metric | June 30, 2024 ($k) | December 31, 2023 ($k) | | :--------------- | :------------------- | :--------------------- | | Lease obligations | 3,864 | 4,467 | - Lease obligations are payable in monthly installments of principal and interest and are collateralized by the related assets financed[58](index=58&type=chunk) Scheduled Maturities | Year | Total outstanding debt (in thousands) | | :---------------- | :---------------------------------- | | Remainder of 2024 | 5,763 | | 2025 | 4,112 | | 2026 | 3,022 | | 2027 | 2,431 | | 2028 | 969 | | Thereafter | 2,144 | | **Total outstanding debt** | **18,441** | [13. Foreign Currency Forward Contracts](index=16&type=section&id=13.%20FOREIGN%20CURRENCY%20FORWARD%20CONTRACTS) The company uses foreign currency forward contracts to manage exchange rate fluctuations, not designating them as hedging instruments. As of June 30, 2024, there were 18 contracts outstanding with a notional value of $15,200 thousand and €17,500 thousand ($18,800 thousand), all expiring by December 31, 2024. A loss of $552 thousand was recorded for the six months ended June 30, 2024 - The company had **18 foreign currency forward contracts** outstanding as of June 30, 2024, with a notional value of **$15,200 thousand** and **€17,500 thousand ($18,800 thousand equivalent)**[61](index=61&type=chunk) - All outstanding contracts will expire by **December 31, 2024**, and are presented within current liabilities[61](index=61&type=chunk) | Metric | Six months ended June 30, 2024 ($k) | Six months ended June 30, 2023 ($k) | | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Loss on foreign exchange forward contracts | 552 | 1,614 | [14. Contingent Consideration Liability](index=17&type=section&id=14.%20CONTINGENT%20CONSIDERATION%20LIABILITY) The contingent consideration liability, related to warrant exercises, decreased to $1,061 thousand at June 30, 2024, from $1,326 thousand at December 31, 2023. The fair value is determined using a Level 3 probability-weighted scenario-based model | Metric | June 30, 2024 ($k) | December 31, 2023 ($k) | | :------------------------------ | :------------------- | :--------------------- | | Contingent consideration liability | 1,061 | 1,326 | - The fair value of the contingent consideration is determined using a **Level 3 probability-weighted scenario-based model**, with a change in fair value of **$(265) thousand** for the six months ended June 30, 2024[66](index=66&type=chunk)[68](index=68&type=chunk) [15. Income Taxes](index=17&type=section&id=15.%20INCOME%20TAXES) Income tax expense increased to $1,696 thousand for the six months ended June 30, 2024, from $646 thousand in the prior year. The effective tax rate was -16% for 2024, lower than the Moroccan statutory rate due to unrecognized tax losses and minimum contribution. The company maintains a valuation allowance on deferred tax assets | Metric | Six months ended June 30, 2024 ($k) | Six months ended June 30, 2023 ($k) | | :------------------ | :---------------------------------- | :---------------------------------- | | Total income tax expense | 1,696 | 646 | - The effective tax rate was **-16%** for the six months ended June 30, 2024, compared to **-8%** in 2023, primarily due to unrecognized tax losses and minimum contribution[70](index=70&type=chunk) | Metric | June 30, 2024 ($k) | December 31, 2023 ($k) | | :-------------------------------- | :------------------- | :--------------------- | | Cumulative net operating losses | 45,199 | 37,228 | | Valuation allowance on deferred tax assets | 5,993 | 5,172 | [16. Stockholders' Equity](index=18&type=section&id=16.%20STOCKHOLDERS'%20EQUITY) The company has authorized Preferred Shares and Ordinary Shares, with 26,879,202 Ordinary Shares issued and outstanding. All Class Z Ordinary Shares were repurchased and retired in 2023. There are 11,461,120 public warrants and 4,289,722 private warrants outstanding, exercisable at $11.50 per share. Stockholder Earn-Out Rights exist for additional Ordinary Shares based on Adjusted EBITDA and Buyer Trading Price targets through 2024, with no Earnout Shares issued as of June 31, 2024 Capital Stock - The company is authorized to issue **1,000,000 Preferred Shares** and **100,000,000 Ordinary Shares**[74](index=74&type=chunk)[75](index=75&type=chunk) - As of June 30, 2024, **26,879,202 Ordinary Shares** were issued and outstanding[75](index=75&type=chunk) - All **30,000,000 authorized Class Z Ordinary Shares** were repurchased and retired during 2023[76](index=76&type=chunk) Warrants - There were **11,461,120 public warrants** and **4,289,722 private warrants** outstanding as of June 30, 2024, each entitling the holder to purchase one ordinary share at **$11.50 per share**[77](index=77&type=chunk)[79](index=79&type=chunk) - Public warrants may be redeemed by the company if the Ordinary Share price equals or exceeds **$16.50** for 20 trading days within a 30-day period[77](index=77&type=chunk) Stockholder Earn-Out Rights - The selling stockholder is entitled to receive up to **2,000,000 additional Ordinary Shares** (Earnout Shares) based on Adjusted EBITDA targets for 2022/2023 and a Buyer Trading Price target for 2024[80](index=80&type=chunk) - As of June 31, 2024, no Earnout Shares have been issued[80](index=80&type=chunk) [17. Equity Incentive Plan](index=19&type=section&id=17.%20EQUITY%20INCENTIVE%20PLAN) The Forafric 2022 Long Term Employee Share Incentive Plan allows for grants of nominal cost options or phantom options, with a maximum of 10% of issued share capital reserved. As of June 30, 2024, 64,705 stock options and 53,613 phantom options were outstanding, with unrecognized compensation expenses of $407 thousand and $325 thousand, respectively, to be recognized over 18 months - The Equity Incentive Plan reserves a maximum of **10%** of the company's issued share capital (not exceeding **2,645,684 shares**) for awards[82](index=82&type=chunk) | Metric | Stock Options (June 30, 2024) | Phantom Options (June 30, 2024) | | :------------------------------------ | :---------------------------- | :------------------------------ | | Outstanding | 64,705 | 53,613 | | Weighted Average Exercise Price | $0.001 | $0.001 | | Unrecognized Compensation Expense ($k) | 407 | 325 | | Recognition Period | 18 months | 18 months | [18. Earnings Per Share](index=20&type=section&id=18.%20EARNINGS%20PER%20SHARE) Basic and diluted loss per share were $(0.45) for the six months ended June 30, 2024, compared to $(0.32) for the same period in 2023. The computation excludes earnout, option shares, and warrants due to their anti-dilutive effect | Metric | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Loss per ordinary shares outstanding – basic and diluted | $(0.45) | $(0.32) | | Weighted average number of shares outstanding | 26,879,202 | 26,879,114 | - The computation of diluted loss per share excludes the effect of earnout, option shares, and warrants because their inclusion would be anti-dilutive[89](index=89&type=chunk) [19. Commitments and Contingencies](index=20&type=section&id=19.%20COMMITMENTS%20AND%20CONTINGENCIES) The company faces ongoing litigation incidental to its business but expects no material effect on financial statements. It has a five-year supply agreement with Millcorp for at least 80% of annual wheat requirements, amended to extend through March 2026. The war in Ukraine has impacted raw material prices but not caused shortages or affected firm commitments - The company has a five-year supply agreement with Millcorp Geneva SA, obligating it to obtain at least **80%** of its annual common wheat, durum wheat, or other cereal requirements, extended through **March 2026**[91](index=91&type=chunk) | Metric | Six months ended June 30, 2024 ($k) | Six months ended June 30, 2023 ($k) | | :----------------------- | :---------------------------------- | :---------------------------------- | | Purchases from Millcorp | 53,994 | 97,641 | - The war in Ukraine has decreased soft wheat availability and increased raw material prices, but the company has not experienced shortages and does not project issues fulfilling future orders[90](index=90&type=chunk) - The company has provided collateral and mortgages to banks totaling **$25,464 thousand** as of June 30, 2024[92](index=92&type=chunk) - No lawsuits or other proceedings are expected to have a material effect on the condensed consolidated financial statements at June 30, 2024[94](index=94&type=chunk) [20. Segment Information](index=22&type=section&id=20.%20SEGMENT%20INFORMATION) The company manages operations on a company-wide basis but reports three segments: Soft Wheat, Durum Wheat, and Couscous & Pasta, plus "All others." Total sales to external customers increased to $165,238 thousand for the six months ended June 30, 2024, from $145,616 thousand in 2023, with Soft Wheat being the largest contributor. The company reported an overall operating loss of $(3,609) thousand for the period. Approximately 15.9% of net sales were from customers outside Morocco Reportable Segments Overview - The company's reportable segments are Soft Wheat (flour for desserts/sauces), Durum Wheat (flour for pasta), and Couscous and Pasta (secondary processed products)[96](index=96&type=chunk)[97](index=97&type=chunk) Financial Information by Segment | Segment | Sales to external customers (Six months ended June 30, 2024, $k) | Sales to external customers (Six months ended June 30, 2023, $k) | | :---------------- | :------------------------------------------------------- | :------------------------------------------------------- | | Soft Wheat | 122,408 | 104,124 | | Durum Wheat | 26,012 | 24,980 | | Couscous & Pasta | 14,894 | 14,591 | | All others | 1,924 | 1,921 | | **Total** | **165,238** | **145,616** | | Segment | Direct Operating (loss) income (Six months ended June 30, 2024, $k) | Direct Operating (loss) income (Six months ended June 30, 2023, $k) | | :---------------- | :---------------------------------------------------------- | :---------------------------------------------------------- | | Soft Wheat | 729 | 2,340 | | Durum Wheat | (595) | 504 | | Couscous & Pasta | (827) | (384) | | All others | (2,916) | (3,837) | | **Operating loss** | **(3,609)** | **(1,377)** | Geographic Information - Net sales from customers outside Morocco accounted for approximately **15.9%** of total consolidated net sales for the six months ended June 30, 2024 (**10.4%** in Mali, **3.4%** in Burkina, and **2.1%** in other countries)[100](index=100&type=chunk) | Country | Long-lived assets (June 30, 2024, $k) | Long-lived assets (December 31, 2023, $k) | | :-------- | :------------------------------------ | :---------------------------------------- | | Morocco | 93,998 | 96,149 | | Burkina | 8,567 | 8,913 | | Mali | 6,697 | 6,991 | | Angola | 4,294 | 4,396 | | Other | 472 | 471 | | **Total** | **114,028** | **116,920** | [21. Related Parties](index=23&type=section&id=21.%20RELATED%20PARTIES) The company has ongoing related party transactions, including a building lease agreement with a parent-owned entity, and a supply agreement with Millcorp. Amounts due from related parties were $1,379 thousand and due to related parties were $1,504 thousand as of June 30, 2024. Share-based compensation of $250 thousand was recognized for non-executive directors - The company has a building lease agreement for its headquarters with a parent-owned subsidiary, with total rent of approximately **$420 thousand** per year through 2024[102](index=102&type=chunk) - The supply agreement with Millcorp (a related party) resulted in purchases of **$53,994 thousand** for the six months ended June 30, 2024, and accounts payable due to Millcorp of **$13,362 thousand** as of June 30, 2024[103](index=103&type=chunk) | Metric | June 30, 2024 ($k) | December 31, 2023 ($k) | | :-------------------------- | :------------------- | :--------------------- | | Amounts due from related parties | 1,379 | 1,358 | | Amounts due to related parties | 1,504 | 1,486 | - Share-based compensation expense of **$250 thousand** was recognized for non-executive members of the board of directors for the period ended June 30, 2024[104](index=104&type=chunk) [22. Subsequent Events](index=23&type=section&id=22.%20SUBSEQUENT%20EVENTS) Subsequent events include the grant of additional phantom options to new directors on August 8, 2024, a Nasdaq delinquency notification on January 14, 2025, for failure to file interim financial statements, and a binding agreement on January 15, 2025, for the sale of a wholly-owned subsidiary for $10,000 thousand - On August 8, 2024, the company granted **3,700 additional cash-settled stock options (phantom options)** to new directors[107](index=107&type=chunk) - On January 14, 2025, Nasdaq notified the company of non-compliance for failing to file its interim financial statements for the period ended June 30, 2024, by the **December 31, 2024** deadline[108](index=108&type=chunk) - On January 15, 2025, the company entered into a binding agreement for the sale of a wholly-owned subsidiary to a third party for total consideration of **$10,000 thousand**[109](index=109&type=chunk)

[PART I](index=8&type=section&id=PART%20I) [ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS](index=8&type=section&id=ITEM%201.%20IDENTITY%20OF%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20ADVISERS) This section is marked as 'Not Applicable', indicating no specific information on directors, senior management, and advisers - The section is marked as 'Not Applicable'[74](index=74&type=chunk) [ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE](index=8&type=section&id=ITEM%202.%20OFFER%20STATISTICS%20AND%20EXPECTED%20TIMETABLE) This section is marked as 'Not Applicable', indicating no information on offer statistics and expected timetable - The section is marked as 'Not Applicable'[75](index=75&type=chunk) [ITEM 3. KEY INFORMATION](index=8&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section provides key information on capitalization, indebtedness, offer reasons, use of proceeds, and significant risk factors [A. [Reserved]](index=8&type=section&id=A.%20%5BReserved%5D) This sub-section is reserved and contains no specific information - This sub-section is reserved[76](index=76&type=chunk) [B. Capitalization and Indebtedness](index=8&type=section&id=B.%20Capitalization%20and%20Indebtedness) This sub-section is marked as 'Not applicable', indicating no specific details on capitalization and indebtedness - The sub-section is marked as 'Not applicable'[76](index=76&type=chunk) [C. Reasons for the Offer and Use of Proceeds](index=8&type=section&id=C.%20Reasons%20for%20the%20Offer%20and%20Use%20of%20Proceeds) This sub-section is marked as 'Not applicable', indicating no specific details on reasons for the offer and use of proceeds - The sub-section is marked as 'Not applicable'[77](index=77&type=chunk) [D. Risk Factors](index=8&type=section&id=D.%20Risk%20Factors) The company faces significant risks from market price volatility, dilution, dependence on key suppliers, commodity price fluctuations, geopolitical events, and regulatory challenges - Sales of a substantial number of securities by Selling Securityholders and/or existing securityholders could cause the price of Ordinary Shares and Warrants to fall[81](index=81&type=chunk) - Exercise of Warrants would increase the number of shares eligible for future resale, resulting in dilution to shareholders[81](index=81&type=chunk)[88](index=88&type=chunk) - The company is dependent on a related party supplier (Millcorp Geneve SA) for substantially all of its raw materials, with a five-year supply agreement extended through March 31, 2026[127](index=127&type=chunk) - The international price of wheat is the main operational risk, influenced by weather, producer strategies, and geopolitical events like the Russia-Ukraine war, which could lead to raw material shortages or price increases[121](index=121&type=chunk)[133](index=133&type=chunk) - The Moroccan market, where most operations are located, is highly regulated, with restrictions on soft wheat imports and government subsidies affecting competition[160](index=160&type=chunk)[162](index=162&type=chunk) - As an 'emerging growth company' and 'foreign private issuer', the company benefits from reduced SEC reporting requirements but may be less attractive to investors due to different accounting standards and less extensive disclosure[103](index=103&type=chunk)[105](index=105&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) [ITEM 4. INFORMATION ON THE COMPANY](index=24&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section details the company's history, business operations, market position, strategic strengths, and future growth opportunities [A. History and Development of the Company](index=24&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Forafric Global PLC is an integrated global agricultural commodities business, formed through a Business Combination in 2022, listed on Nasdaq, and expanded through acquisitions - The company is an integrated, global business involved in the purchase, storage, transport, processing, and sale of agricultural commodities and commodity products, primarily flour, semolina, pasta, and couscous[170](index=170&type=chunk) - Completed a Business Combination on June 9, 2022, resulting in its Ordinary Shares and Warrants trading on Nasdaq under 'AFRI' and 'AFRIW'[172](index=172&type=chunk)[176](index=176&type=chunk) - Acquired **90% of Société Industrielle de Minoterie du Sud (SIMS)**, a soft wheat milling company in Marrakesh, on July 26, 2023, for approximately **$56 thousand cash** and assumption of **$5.3 million debt**[177](index=177&type=chunk) - Qualifies as an 'emerging growth company' and 'foreign private issuer', allowing exemptions from certain SEC reporting and corporate governance requirements[179](index=179&type=chunk)[182](index=182&type=chunk) [B. Business Overview](index=26&type=section&id=B.%20Business%20Overview) Forafric operates in the growing African food market, holding a leadership position in Moroccan wheat milling with a focus on sustainable growth and strong brands - Operates primarily in the African food market, providing staple products like flour, semolina, pasta, and couscous, with projected market growth driven by demographic increases and urbanization[191](index=191&type=chunk) - Leader in the Moroccan wheat milling business with a capacity of **3,000 metric tons per day** (up from 2,200 in 2022) and **300,000 metric tons of grain storage facilities**[197](index=197&type=chunk)[209](index=209&type=chunk) - Key brands in Morocco are MayMouna (popular for households) and Tria (popular for industrial clients), with Tria holding approximately **15% of the overall couscous market** and **9% of the pasta market**[199](index=199&type=chunk)[215](index=215&type=chunk) - Business strategy focuses on sustainable growth, value generation, and commitment to social well-being, diversity, environmental balance, and ethical conduct[203](index=203&type=chunk)[205](index=205&type=chunk) [C. Organizational Structure](index=37&type=section&id=C.%20Organizational%20Structure) This section refers to 'Item 4. Information on the Company – A. History and Development of the Company' for details on the organizational structure - Refers to 'Item 4. Information on the Company – A. History and Development of the Company' for organizational structure details[253](index=253&type=chunk) [D. Property, plant and equipment](index=37&type=section&id=D.%20Property%2C%20plant%20and%20equipment) As of December 31, 2023, the company owns and leases 12 refining, packing, and milling facilities globally with an aggregate production capacity of 3,750 metric tons per day - Owns and leases **12 refining, packing, and milling facilities globally** with an aggregate production capacity of **3,750 metric tons per day** as of December 31, 2023[253](index=253&type=chunk) - Includes **eight milling plants in Morocco** with a capacity of **3,000 metric tons per day** and **two storage facilities with 250,000 metric tons capacity**[253](index=253&type=chunk) [ITEM 4A. UNRESOLVED STAFF COMMENTS](index=38&type=section&id=ITEM%204A.%20UNRESOLVED%20STAFF%20COMMENTS) This section is marked as 'Not applicable', indicating no unresolved staff comments - The section is marked as 'Not applicable'[257](index=257&type=chunk) [ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS](index=38&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section analyzes the company's financial condition and operating results, highlighting factors like raw material costs, industrial costs, and liquidity [Overview](index=39&type=section&id=Overview) The company's performance is primarily driven by raw material costs (wheat), industrial costs, and average selling prices, with geopolitical events impacting supply and costs - Key performance factors include raw material cost (approximately **90% of total cost**), industrial cost (equipment, labor, interest over financing), and average selling price[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk) - The war in Ukraine could lead to material reduction in wheat availability and substantial price increases, though the company has diversified supply sources from European countries, Argentina, and Brazil[270](index=270&type=chunk)[271](index=271&type=chunk) [Key Components of Results of Operations](index=39&type=section&id=Key%20Components%20of%20Results%20of%20Operations) Key components influencing results are net sales, cost of sales, and gross profit, with raw material prices affected by global supply and demand, and industrial costs reduced by 50% through restructuring - Key components of results of operations are net sales, cost of sales (including raw materials, freight, depreciation, foreign exchange, and improvements), and gross profit[273](index=273&type=chunk)[274](index=274&type=chunk) - Raw material prices are influenced by global and regional supply, weather, crop conditions, government policies, and demand for biofuels[275](index=275&type=chunk) - Industrial cost, including human resources, equipment, maintenance, power, and financial cost, has been reduced by **50% over the last four years** due to a restructuring plan[280](index=280&type=chunk) [Year Ended December 31, 2023 Compared to Year Ended December 31, 2022](index=40&type=section&id=Year%20Ended%20December%2031%2C%202023%20Compared%20to%20Year%20Ended%20December%2031%2C%202022) In 2023, net revenues increased by 5.4% to $305.5 million, driven by higher sales volume and capacity expansion, while net loss decreased significantly due to reduced foreign exchange losses Operating Results (2023 vs 2022) | In thousands of USD | 2023 | 2022 | $ Change | % Change | | :----------------------------------- | :----- | :----- | :------- | :------- | | Revenues | 305,476 | 289,772 | 15,704 | 5.4% | | Cost of sales | 274,878 | 260,399 | 14,479 | 5.6% | | Gross profit | 30,598 | 29,373 | 1,225 | 4.2% | | Selling, general and administrative expenses | 29,465 | 30,795 | (1,330) | -4.3% | | Operating income (loss) | 1,133 | (1,422) | 2,555 | 179.7% | | Total other expense | 13,747 | 19,806 | (6,059) | -30.6% | | Loss before income taxes | (12,614) | (21,228) | 8,614 | -40.6% | | Income tax (benefit) expense | (106) | (2,058) | 1,952 | -94.8% | | Net loss | (12,508) | (19,170) | (6,662) | -34.8% | - Revenue increase of **5.4%** was a direct result of increased sales volume, capacity extension in two Moroccan regions, and the acquisition of SIMS[282](index=282&type=chunk)[288](index=288&type=chunk) - Decrease in other expense by **30.6%** was primarily attributable to a decrease in foreign exchange (gain) loss[286](index=286&type=chunk) Sales to External Customers by Segment (2023 vs 2022) | In thousands of USD | 2023 | 2022 | $ Change | % Change | | :------------------ | :----- | :----- | :------- | :------- | | Soft wheat | 218,761 | 213,775 | 4,986 | 2.3% | | Durum wheat | 51,755 | 44,447 | 7,308 | 16.4% | | Couscous and pasta | 31,410 | 27,159 | 4,251 | 15.7% | | All other | 3,550 | 4,391 | (841) | -19.1% | | Total | 305,476 | 289,772 | 15,704 | 5.4% | [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2023, the company had a working capital deficit of $132.0 million, relying on revolving credit lines and wheat credit facilities, and believes it has sufficient capital for at least one year Liquidity and Capital Resources (2023 vs 2022) | Metric | December 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------------- | :------------------------------- | :------------------------------- | | Working Capital Deficits | $132,000 | $94,600 | | Revolving Working Capital Credit Lines (Available) | $50,000 | $48,000 | | Revolving Working Capital Credit Lines (Borrowed) | $48,500 | $47,400 | | Wheat Credit Facilities (Available) | $142,000 | $148,000 | | Wheat Credit Facilities (Borrowed) | $126,500 | $137,000 | | Cash and Cash Equivalents | $24,021 | $24,827 | | Trade Accounts Receivable, net | $34,716 | $30,858 | | Inventories | $28,378 | $27,218 | - The company believes cash on hand, operations, and extended credit lines will provide sufficient liquidity for at least one year[309](index=309&type=chunk) - The exercise of **15,750,842 outstanding Warrants** (exercise price **$11.50**) is highly dependent on the Ordinary Share price, with no assurance of proceeds if the market price remains below the exercise price[302](index=302&type=chunk)[303](index=303&type=chunk) [Year Ended December 31, 2022 Compared to Year Ended December 31, 2021](index=44&type=section&id=Year%20Ended%20December%2031%2C%202022%20Compared%20to%20Year%20Ended%20December%2031%2C%202021) In 2022, net revenues increased by 10.7% to $289.8 million, but a significant rise in cost of sales led to a 30.6% decrease in gross profit and a net loss of $19.2 million Operating Results (2022 vs 2021) | In thousands of USD | 2022 | 2021 | $ Change | % Change | | :----------------------------------- | :----- | :----- | :------- | :------- | | Revenues | 289,772 | 261,679 | 28,093 | 10.7% | | Cost of sales | 260,399 | 219,311 | 41,088 | 18.7% | | Gross profit | 29,373 | 42,368 | (12,955) | -30.6% | | Selling, general and administrative expenses | 30,795 | 38,982 | (8,187) | -21.0% | | Operating (loss) income | (1,422) | 3,386 | (4,808) | -142.0% | | Total other expense | 19,806 | 11,259 | 8,547 | 75.9% | | Loss before income taxes | (21,228) | (7,873) | (13,355) | 169.6% | | Income tax (benefit) expense | (2,058) | (89) | (1,969) | 2212.4% | | Net loss | (19,170) | (7,784) | (11,386) | 146.3% | - Revenue increase was due to higher volume of soft wheat sales and acquisitions of MDS Mali, MDS Burkina Faso, and Sanabil SA[315](index=315&type=chunk) - Gross profit decreased significantly due to increases in raw material and shipping costs[311](index=311&type=chunk)[312](index=312&type=chunk) - Other expenses increased due to higher interest expense and foreign currency exchange losses, partially offset by a gain from derivatives and contingent considerations[314](index=314&type=chunk) Sales to External Customers by Segment (2022 vs 2021) | In thousands of USD | 2022 | 2021 | $ Change | % Change | | :------------------ | :----- | :----- | :------- | :------- | | Soft wheat | 213,775 | 173,085 | 40,690 | 23.5% | | Durum wheat | 44,447 | 53,546 | (9,099) | -17.0% | | Couscous and pasta | 27,159 | 28,819 | (1,660) | -5.8% | | All other | 4,391 | 6,229 | (1,838) | -29.5% | | Total | 289,772 | 261,679 | 28,093 | 10.7% | [Trend Information](index=46&type=section&id=Trend%20Information) The company has not identified any material adverse trends or uncertainties from January 1, 2023, to December 31, 2023, beyond those already disclosed - No material adverse trends, uncertainties, demands, commitments, or events identified for the period from January 1, 2023, to December 31, 2023, beyond what is already disclosed[325](index=325&type=chunk) [Critical Accounting Estimates](index=46&type=section&id=Critical%20Accounting%20Estimates) The company's critical accounting policies involve significant judgment in revenue recognition, accounts receivable, income taxes, foreign currency, share-based compensation, inventory valuation, and business combinations, with new FASB ASUs currently being assessed - Revenue is recognized at a single point in time when control over a product or service is transferred to a customer[327](index=327&type=chunk)[329](index=329&type=chunk) - Share-based compensation is measured at grant date fair value using the Black-Scholes model for stock options and re-measured at fair value each reporting period for phantom options[338](index=338&type=chunk)[339](index=339&type=chunk) - Inventories are valued at the lower of cost or net realizable value using the weighted average cost method[340](index=340&type=chunk) - The company is assessing the impact of new FASB ASUs 2023-07 (Segment Reporting) and 2023-09 (Income Tax Disclosures), effective for annual periods beginning after December 15, 2023, and December 15, 2024, respectively[352](index=352&type=chunk)[353](index=353&type=chunk) [ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES](index=50&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section outlines the company's executive officers, board of directors, their compensation, board practices, employee information, and share ownership [A. Directors and Senior Management](index=50&type=section&id=A.%20Directors%20and%20Senior%20Management) The company's executive officers include Saad Bendidi (Chairman) and Mustapha Jamaleddine (CEO), with a seven-member Board of Directors including independent members Executive Officers | Name | Age | Position(s) | | :--- | :-- | :--------------------- | | Saad Bendidi | 65 | Chairman | | Mustapha Jamaleddine | 62 | CEO | | Julien Benitah | 42 | CFO | | Mustapha Ghazali | 52 | CTO | | Oury Marciano | 40 | VP Business Development | Board of Directors | Name | Age | Position(s) | | :--- | :-- | :---------- | | Saad Bendidi | 65 | Director | | Julien Benitah | 42 | Director | | Franco Cassar | 64 | Director | | James Lasry | 56 | Director | | Paul Packer | 53 | Director | | Ira Greenstein | 65 | Director | | Rachel Bitan | 48 | Director | - Franco Cassar, Ira Greenstein, and Rachel Bitan are identified as independent directors under Nasdaq rules and SEC rules[373](index=373&type=chunk) [B. Compensation of Executive Directors and Executive Officers](index=53&type=section&id=B.%20Compensation%20of%20Executive%20Directors%20and%20Executive%20Officers) Executive officers received base salaries in 2023 with no cash bonuses, while non-employee directors receive annual cash compensation, shares, and meeting fees 2023 Summary Compensation Table (NEOs) | Name and Principal Position | Year | Salary ($) | Bonus ($) | All Other Compensation ($) | Total ($) | | :-------------------------- | :--- | :--------- | :-------- | :------------------------- | :-------- | | Saad Bendidi, Chairman | 2023 | 182,201 | — | 21,872 | 204,073 | | Mustapha Jamaleddine, CEO | 2023 | 392,000 | — | 97,254 | 489,254 | | Julien Benitah, CFO | 2023 | 249,166 | 0 | 14,076 | 263,242 | - No annual cash bonuses were awarded in 2023 based on company performance[381](index=381&type=chunk) - The Equity Incentive Plan allows for grants of nominal cost options or phantom options, with a maximum of **2,645,684 Ordinary Shares** reserved[383](index=383&type=chunk)[387](index=387&type=chunk) 2023 Non-Employee Director Compensation | Name | Fees earned or paid in cash ($) | Total ($) | | :----------- | :---------------------------- | :-------- | | Franco Cassar | 40,000 | 40,000 | | James Lasry | 40,000 | 40,000 | | Paul Packer | 40,000 | 40,000 | | Ira Greenstein | 40,000 | 40,000 | | Rachel Bitan | 40,000 | 40,000 | - Directors receive **$40,000 per annum**, shares equal to **$25,000** based on market price, and additional fees for attending board meetings and serving as committee chairpersons[395](index=395&type=chunk)[396](index=396&type=chunk) [C. Board Practices](index=56&type=section&id=C.%20Board%20Practices) The Board of Directors consists of seven members, with independent directors serving on key committees, and the company complies with Nasdaq's independence requirements despite qualifying as a 'controlled company' - The Board of Directors has seven members, with a focus on professional accomplishment and positive contribution to the collaborative culture[397](index=397&type=chunk) - The Audit Committee, Remuneration Committee, and Nominating and Corporate Governance Committee are composed of independent directors[401](index=401&type=chunk)[403](index=403&type=chunk)[407](index=407&type=chunk) - The company qualifies as a 'controlled company' under Nasdaq rules but has chosen to comply with Nasdaq listing standards without relying on the exemption[374](index=374&type=chunk)[375](index=375&type=chunk) - Directors are generally appointed for three-year terms and can be removed by ordinary or special resolution of shareholders[416](index=416&type=chunk)[417](index=417&type=chunk)[475](index=475&type=chunk)[479](index=479&type=chunk) [D. Employees](index=60&type=section&id=D.%20Employees) As of December 31, 2023, the company's subsidiaries employed approximately 600 people across four countries, with no union representation and good employee relations - As of December 31, 2023, subsidiaries had approximately **600 employees** across four countries[419](index=419&type=chunk) - None of the employees are represented by labor unions, and the company considers employee relations to be good, with a focus on welfare, development, and incentive programs[419](index=419&type=chunk) [E. Share Ownership](index=60&type=section&id=E.%20Share%20Ownership) Lighthouse Settlement is the major shareholder, beneficially owning 71.62% of Ordinary Shares, while all directors and executive officers as a group own 0.05% Beneficial Ownership of Ordinary Shares (as of report date) | Name of Beneficial Owners | Number of Ordinary Share Beneficially Owned | Percentage of Outstanding Ordinary Share | | :------------------------ | :---------------------------------------- | :--------------------------------------- | | Lighthouse Settlement | 19,250,483 | 71.62% | | Paul Packer | 2,166,758 | 8.0% | | All directors and executive officers as a group (8 individuals) | 13,200 | 0.05% | - Lighthouse Settlement, controlled by Lighthouse Corporation PTC, is the sole shareholder of Lighthouse Capital Limited, which owns **18,618,869 shares**[426](index=426&type=chunk) [ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS](index=61&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details major shareholders and significant related party transactions, including the Business Combination, various agreements, and the exclusive supply agreement with Millcorp Geneve SA [A. Major Shareholders](index=61&type=section&id=A.%20Major%20Shareholders) This sub-section refers to 'Item 6. Directors, Senior Management and Employees—E. Share Ownership' for information on major shareholders - Refers to 'Item 6. Directors, Senior Management and Employees—E. Share Ownership' for major shareholder information[428](index=428&type=chunk) [B. Related Party Transactions](index=61&type=section&id=B.%20Related%20Party%20Transactions) The Business Combination involved the Seller receiving Ordinary Shares and an $8 million principal sum, with PIPE financing and conversions of FAHL Bonds and Related Party Loans, alongside an exclusive supply agreement with Millcorp Geneve SA - The Business Combination on June 9, 2022, resulted in the Seller receiving **17,004,762 Ordinary Shares**, an additional **1,550,000 Ordinary Shares**, and an **$8 million principal sum** with **8% interest**[430](index=430&type=chunk) - PIPE financing generated approximately **$14.0 million in gross proceeds** from the sale of **1,320,195 Ordinary Shares**[436](index=436&type=chunk) - FAHL Bonds totaling **$11.5 million** were converted into **1,248,426 Ordinary Shares** at **$9.45 per share**[437](index=437&type=chunk) - FAHL Related Party Loans of approximately **$15.1 million** were converted into **1,445,164 Ordinary Shares** at **$10.50 per share**[439](index=439&type=chunk) - An exclusive supply agreement with Millcorp Geneve SA (a wholly-owned subsidiary of the Seller) obligates the company to obtain at least **80% of its annual wheat requirements**, extended through March 31, 2026[444](index=444&type=chunk) - The company adopted a formal written policy for review and approval of related person transactions exceeding **$120,000** by the audit committee[447](index=447&type=chunk) [C. Interests of Experts and Counsel](index=65&type=section&id=C.%20Interests%20of%20Experts%20and%20Counsel) This section is marked as 'Not applicable', indicating no specific disclosures regarding the interests of experts and counsel - The section is marked as 'Not applicable'[449](index=449&type=chunk) [ITEM 8. FINANCIAL INFORMATION](index=65&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section confirms the inclusion of consolidated financial statements, addresses legal proceedings, and states the company's policy of not paying dividends in the foreseeable future [A. Consolidated Statements and Other Financial Information](index=65&type=section&id=A.%20Consolidated%20Statements%20and%20Other%20Financial%20Information) Consolidated financial statements are appended, no material adverse legal proceedings are expected, and the company does not anticipate paying dividends for the foreseeable future - Consolidated financial statements are appended to this annual report[450](index=450&type=chunk) - No current legal proceedings or investigations are expected to have a material adverse effect[451](index=451&type=chunk) - The company does not anticipate paying dividends for the foreseeable future, intending to retain funds for business development and growth[118](index=118&type=chunk)[452](index=452&type=chunk) [B. Significant Changes](index=65&type=section&id=B.%20Significant%20Changes) No significant changes have occurred since the date of the audited consolidated financial statements, other than those disclosed elsewhere in the report - No significant changes experienced since the date of audited consolidated financial statements, other than those disclosed elsewhere in the report[453](index=453&type=chunk) [ITEM 9. THE OFFER AND LISTING](index=65&type=section&id=ITEM%209.%20THE%20OFFER%20AND%20LISTING) The company's Ordinary Shares and Warrants are listed on the NASDAQ Global Market under "AFRI" and "AFRIW", with other sub-sections marked as 'Not applicable' - Ordinary Shares and Warrants are listed on NASDAQ Global Market under symbols "AFRI" and "AFRIW"[454](index=454&type=chunk)[456](index=456&type=chunk) - Sub-sections B, D, E, and F are marked as 'Not applicable'[455](index=455&type=chunk)[457](index=457&type=chunk)[458](index=458&type=chunk)[459](index=459&type=chunk) [A. Offering and Listing Details.](index=65&type=section&id=A.%20Offering%20and%20Listing%20Details.) The company's Ordinary Shares and Warrants are listed on NASDAQ Global Market under the symbols "AFRI" and "AFRIW" - Ordinary Shares and Warrants are listed on NASDAQ Global Market under symbols "AFRI" and "AFRIW"[454](index=454&type=chunk) [B. Plan of Distribution](index=65&type=section&id=B.%20Plan%20of%20Distribution) This sub-section is marked as 'Not applicable' - The sub-section is marked as 'Not applicable'[455](index=455&type=chunk) [C. Markets](index=65&type=section&id=C.%20Markets) The company's Ordinary Shares and Warrants are listed on NASDAQ Global Market under the symbols "AFRI" and "AFRIW" - Ordinary Shares and Warrants are listed on NASDAQ Global Market under symbols "AFRI" and "AFRIW"[456](index=456&type=chunk) [D. Selling Shareholders](index=65&type=section&id=D.%20Selling%20Shareholders) This sub-section is marked as 'Not applicable' - The sub-section is marked as 'Not applicable'[457](index=457&type=chunk) [E. Dilution](index=65&type=section&id=E.%20Dilution) This sub-section is marked as 'Not applicable' - The sub-section is marked as 'Not applicable'[458](index=458&type=chunk) [F. Expenses of the Issue](index=65&type=section&id=F.%20Expenses%20of%20the%20Issue) This sub-section is marked as 'Not applicable' - The sub-section is marked as 'Not applicable'[459](index=459&type=chunk) [ITEM 10. ADDITIONAL INFORMATION](index=66&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section provides additional details on share capital, corporate governance, material contracts, exchange controls, U.S. federal income tax considerations, and anti-takeover measures [A. Share Capital](index=66&type=section&id=A.%20Share%20Capital) This sub-section is marked as 'Not applicable', with further details on share capital provided in 'Exhibit 2.2 — Description of Securities' - The sub-section is marked as 'Not applicable', with details in 'Exhibit 2.2 — Description of Securities'[460](index=460&type=chunk)[463](index=463&type=chunk) [B. Memorandum and Articles of Association](index=66&type=section&id=B.%20Memorandum%20and%20Articles%20of%20Association) The company, registered in Gibraltar in 2022, has authorized Ordinary and Preferred Shares, with 26,879,202 Ordinary Shares outstanding as of December 31, 2023, and its corporate governance includes specific meeting procedures and anti-takeover provisions - Company registered as a public company in Gibraltar on May 26, 2022[462](index=462&type=chunk) - Authorized to issue **100,000,000 Ordinary Shares ($0.001 par value)** and **1,000,000 Preferred Shares ($0.001 par value)**[464](index=464&type=chunk)[465](index=465&type=chunk)[776](index=776&type=chunk) - As of December 31, 2023, **26,879,202 Ordinary Shares** were issued and outstanding[776](index=776&type=chunk) - Director meetings require a quorum of half the appointed directors, and directors are generally appointed for three-year terms[468](index=468&type=chunk)[470](index=470&type=chunk)[475](index=475&type=chunk) - Shareholder meetings require **7 days' prior written notice** for ordinary resolutions and **21 days' for special resolutions**[472](index=472&type=chunk) - Anti-takeover measures are regulated by Gibraltar legislation, including the Companies (Cross-Border Mergers) Regulations 2010 and the Gibraltar Companies Act 2014, which provide for schemes of arrangement and squeeze-out provisions[486](index=486&type=chunk)[488](index=488&type=chunk)[489](index=489&type=chunk) [C. Material Contracts](index=70&type=section&id=C.%20Material%20Contracts) The company has not entered into any material contracts other than in the ordinary course of business and those described in 'Item 7. Major Shareholders and Related Party Transactions – B. Related Party Transactions' or elsewhere in this annual report - No material contracts other than in the ordinary course of business and those described in 'Item 7. Major Shareholders and Related Party Transactions – B. Related Party Transactions' or elsewhere in this annual report[492](index=492&type=chunk) [D. Exchange Controls](index=70&type=section&id=D.%20Exchange%20Controls) There are currently no currency control restrictions on remittances of dividends, proceeds from share sales, or interest payments to non-residents of Gibraltar - No currency control restrictions on remittances of dividends, share sale proceeds, or interest payments to non-residents of Gibraltar[493](index=493&type=chunk) [E. Taxation](index=70&type=section&id=E.%20Taxation) This section details U.S. federal income tax consequences for owning and disposing of the company's securities, including potential Section 7874 implications and PFIC rules for U.S. and Non-U.S. Holders - The company is incorporated and tax resident in Gibraltar, but the IRS may assert it should be treated as a U.S. corporation under Section 7874 of the Code, though this is not expected based on current analysis[502](index=502&type=chunk)[505](index=505&type=chunk)[509](index=509&type=chunk) - If treated as a PFIC, U.S. Holders would be subject to special tax rules on 'excess distributions' and gains, unless a QEF or mark-to-market election is made[533](index=533&type=chunk) - Non-U.S. Holders are generally not subject to U.S. federal income tax on dividends or gains unless effectively connected with a U.S. trade or business or, for individuals, present in the U.S. for **183 days or more**[554](index=554&type=chunk) - Information reporting and backup withholding rules may apply to cash redemptions, dividends, and disposition proceeds for both U.S. and Non-U.S. Holders[560](index=560&type=chunk)[561](index=561&type=chunk) [F. Dividends and Paying Agents](index=83&type=section&id=F.%20Dividends%20and%20Paying%20Agents) This section is marked as 'Not applicable', indicating no specific disclosures regarding dividends and paying agents - The section is marked as 'Not applicable'[565](index=565&type=chunk) [G. Statement by Experts](index=83&type=section&id=G.%20Statement%20by%20Experts) This section is marked as 'Not applicable', indicating no specific disclosures regarding statements by experts - The section is marked as 'Not applicable'[565](index=565&type=chunk) [H. Documents on Display](index=83&type=section&id=H.%20Documents%20on%20Display) The company, subject to Exchange Act reporting, files annual Form 20-F reports with the SEC, available online, and is exempt from certain proxy and insider trading provisions as a foreign private issuer - Subject to Exchange Act reporting requirements, filing annual Form 20-F reports with the SEC[566](index=566&type=chunk) - Reports are available at SEC public reference facilities and on sec.gov[566](index=566&type=chunk) - As a foreign private issuer, exempt from certain proxy statement and Section 16 insider trading provisions[566](index=566&type=chunk) [I. Subsidiary Information](index=83&type=section&id=I.%20Subsidiary%20Information) This section refers to 'Item 4. Information on the Company — A. History and Development of the Company' for a listing of subsidiaries - Refers to 'Item 4. Information on the Company — A. History and Development of the Company' for subsidiary listing[568](index=568&type=chunk) [J. Annual Report to Security Holders](index=83&type=section&id=J.%20Annual%20Report%20to%20Security%20Holders) If required to provide an annual report to security holders in response to Form 6-K, the company will submit it in electronic format - Annual report to security holders, if required by Form 6-K, will be submitted in electronic format[568](index=568&type=chunk) [ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=83&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to foreign exchange, credit, and commodity risks, managing currency exposure with derivatives, monitoring credit risk, and facing unpredictable agricultural raw material price fluctuations - Primary foreign currency exposures are Moroccan Dirham, US Dollar, and Euro, managed through derivative instruments like foreign currency forward contracts[569](index=569&type=chunk) - Subject to credit and counterparty risks from commercial sales, monitored through exposure reporting and credit analysis[571](index=571&type=chunk) - Commodities risk arises from unpredictable price fluctuations of agricultural raw materials like flour, semolina, pasta, and couscous[573](index=573&type=chunk) - Inflation has not had a material impact recently, but future inability to recover increased labor, overhead, and raw material costs through price increases could adversely affect results[574](index=574&type=chunk)[575](index=575&type=chunk) [ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES](index=84&type=section&id=ITEM%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECURITIES) This section states that Items 12.D.3 and 12.D.4 are not applicable as the company does not have any American Depositary Shares, and other required information is included in Exhibit 2.3 - Items 12.D.3 and 12.D.4 are not applicable as the company does not have American Depositary Shares[576](index=576&type=chunk) - Other applicable information is included in Exhibit 2.3[576](index=576&type=chunk) [PART II](index=84&type=section&id=PART%20II) [ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES](index=84&type=section&id=ITEM%2013.%20DEFAULTS%2C%20DIVIDEND%20ARREARAGES%20AND%20DELINQUENCIES) This section states that there are no defaults, dividend arrearages, or delinquencies - No defaults, dividend arrearages, or delinquencies[576](index=576&type=chunk) [ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS](index=84&type=section&id=ITEM%2014.%20MATERIAL%20MODIFICATIONS%20TO%20THE%20RIGHTS%20OF%20SECURITY%20HOLDERS%20AND%20USE%20OF%20PROCEEDS) This section refers to 'Item 10. Additional Information' for a description of security holders' rights, which remain unchanged, and marks 'Use of Proceeds' as 'Not applicable' - Refers to 'Item 10. Additional Information' for security holders' rights, which are unchanged[577](index=577&type=chunk) - The 'Use of Proceeds' sub-section is marked as 'Not applicable'[578](index=578&type=chunk) [ITEM 15. CONTROLS AND PROCEDURES](index=85&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) As of December 31, 2023, management concluded that disclosure controls and internal control over financial reporting were effective, with no material changes in internal controls during the period - Disclosure controls and procedures were effective as of December 31, 2023[579](index=579&type=chunk) - Internal control over financial reporting was effective as of December 31, 2023[580](index=580&type=chunk) - No attestation report from the public accounting firm on internal control over financial reporting due to emerging growth company status[581](index=581&type=chunk) - No material changes in internal controls over financial reporting occurred during the period[582](index=582&type=chunk) [ITEM 16 [RESERVED]](index=85&type=section&id=ITEM%2016%20%5BRESERVED%5D) This section is reserved and contains no specific information - This section is reserved[583](index=583&type=chunk) [ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT](index=85&type=section&id=ITEM%2016A.%20AUDIT%20COMMITTEE%20FINANCIAL%20EXPERT) Franco Cassar, the audit committee chair, is identified as an independent "audit committee financial expert" satisfying SEC and Nasdaq requirements - Franco Cassar, Audit Committee chair, qualifies as an "audit committee financial expert" and is independent[583](index=583&type=chunk) [ITEM 16B. CODE OF ETHICS](index=85&type=section&id=ITEM%2016B.%20CODE%20OF%20ETHICS) Following the Business Combination, the company posted its Code of Conduct and Ethics and intends to disclose any amendments or waivers as required - Posted Code of Conduct and Ethics post-Business Combination and will disclose amendments/waivers as required[584](index=584&type=chunk) [ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES](index=86&type=section&id=ITEM%2016C.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Aggregate audit fees paid to the principal external auditors were $645,000 in 2023 and $480,000 in 2022, with no other fees reported, and all services are pre-approved by the audit committee Principal Accountant Fees and Services (in thousands) | For the years ended December 31, | 2023 | 2022 | | :------------------------------- | :--- | :--- | | Audit fees | $645 | $480 | | Audit-related fees | - | - | | Tax fees | - | - | | All other fees | - | - | | Total | $645 | $480 | - Audit committee policy is to pre-approve all audit and non-audit services[589](index=589&type=chunk) [ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES](index=86&type=section&id=ITEM%2016D.%20EXEMPTIONS%20FROM%20THE%20LISTING%20STANDARDS%20FOR%20AUDIT%20COMMITTEES) This section is marked as 'Not applicable', indicating no exemptions from listing standards for audit committees - The section is marked as 'Not applicable'[590](index=590&type=chunk) [ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS](index=86&type=section&id=ITEM%2016E.%20PURCHASES%20OF%20EQUITY%20SECURITIES%20BY%20THE%20ISSUER%20AND%20AFFILIATED%20PURCHASERS) This section is marked as 'Not applicable', indicating no purchases of equity securities by the issuer and affiliated purchasers - The section is marked as 'Not applicable'[591](index=591&type=chunk) [ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT](index=86&type=section&id=ITEM%2016F.%20CHANGE%20IN%20REGISTRANT%27S%20CERTIFYING%20ACCOUNTANT) On June 9, 2022, Marcum LLP was dismissed as Globis' auditor, and UHY LLP was engaged as the new independent registered public accounting firm for Forafric Global PLC, with no disagreements or reportable events - Marcum LLP was dismissed as Globis' auditor on June 9, 2022[592](index=592&type=chunk) - UHY LLP was engaged as the new independent registered public accounting firm for Forafric Global PLC[592](index=592&type=chunk) - No disagreements with Marcum on accounting principles or practices, and no reportable events occurred[593](index=593&type=chunk) [ITEM 16G. CORPORATE GOVERNANCE](index=87&type=section&id=ITEM%2016G.%20CORPORATE%20GOVERNANCE) As a foreign private issuer listed on NASDAQ, the company follows certain home country corporate governance practices, relying on exemptions for board and committee independence, which may offer less shareholder protection than U.S. domestic issuer rules - As a foreign private issuer listed on NASDAQ, the company follows certain home country corporate governance practices under NASDAQ Rule 5615(a)(3)[598](index=598&type=chunk) - Relied on exemptions for board majority independence, director nominee selection by independent directors, and composition of Corporate Governance and Nominating and Remuneration Committees[599](index=599&type=chunk) - Following home country practice may afford shareholders less protection than under U.S. domestic issuer rules[600](index=600&type=chunk) [ITEM 16H. MINE SAFETY DISCLOSURE](index=88&type=section&id=ITEM%2016H.%20MINE%20SAFETY%20DISCLOSURE) This section is marked as 'Not applicable', indicating no mine safety disclosure requirements - The section is marked as 'Not applicable'[601](index=601&type=chunk) [ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS](index=88&type=section&id=ITEM%2016I.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) This section is marked as 'Not applicable', indicating no foreign jurisdictions that prevent inspections - The section is marked as 'Not applicable'[601](index=601&type=chunk) [ITEM 16J. INSIDER TRADING POLICIES](index=88&type=section&id=ITEM%2016J.%20INSIDER%20TRADING%20POLICIES) The disclosure required by Item 16J will be applicable to the company from the fiscal year ending on December 31, 2024 - Disclosure for Item 16J will be applicable from the fiscal year ending December 31, 2024[602](index=602&type=chunk) [ITEM 16K. CYBERSECURITY](index=88&type=section&id=ITEM%2016K.%20CYBERSECURITY) The company is developing a cybersecurity risk management program with oversight from the CIO and audit committee, and has not experienced any material IT system failures or cybersecurity attacks to date - Developing a cybersecurity risk management program, integrated into overall risk management[603](index=603&type=chunk) - Oversight by Chief Information Officer and audit committee; policies are in place but not yet formally written or approved[603](index=603&type=chunk)[604](index=604&type=chunk) - No material IT system failures or cybersecurity attacks experienced to date[605](index=605&type=chunk) [PART III](index=89&type=section&id=PART%20III) [ITEM 17. FINANCIAL STATEMENTS](index=89&type=section&id=ITEM%2017.%20FINANCIAL%20STATEMENTS) The company has elected to provide its financial statements pursuant to Item 18 - Financial statements are provided pursuant to Item 18[607](index=607&type=chunk) [ITEM 18. FINANCIAL STATEMENTS](index=89&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section includes the consolidated financial statements of Forafric Global, PLC, and its subsidiaries, covering the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Changes in Stockholders' Equity, Cash Flows, and Notes for 2021-2023 - Consolidated financial statements of Forafric Global, PLC, and its subsidiaries are included[608](index=608&type=chunk) - The financial statements cover the years ended December 31, 2023, 2022, and 2021[624](index=624&type=chunk) Consolidated Balance Sheets (in thousands) | ASSETS | December 31, 2023 | December 31, 2022 | | :---------------------------------- | :---------------- | :---------------- | | Current assets: | | | | Cash and cash equivalents | $24,021 | $24,827 | | Accounts receivable, net | 34,716 | 30,858 | | Amount due from related parties | 1,358 | 2,366 | | Other receivables | 17,115 | 41,958 | | Inventories | 28,378 | 27,218 | | Prepaid expenses and other current assets | 15,654 | 16,345 | | Total current assets | 121,242 | 143,572 | | Property, plant, and equipment, net | 116,920 | 100,527 | | Right-of-use assets | 13,385 | 10,430 | | Goodwill | 48,488 | 45,898 | | Intangible assets, net | 4,648 | 3,723 | | Other assets, noncurrent | 4,767 | 3,014 | | Total assets | $309,450 | $307,164 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Current liabilities: | | | | Lines of credit – working capital | $48,517 | $47,371 | | Lines of credit – wheat inventories | 126,452 | 137,040 | | Accounts payable | 46,461 | 27,295 | | Accrued expenses | 18,115 | 18,974 | | Contract liabilities | 1,272 | 540 | | Current portion of long-term debt | 10,471 | 5,417 | | Contingent consideration liability | 1,326 | 1,260 | | Other liabilities, current | 645 | 284 | | Total current liabilities | 253,259 | 238,181 | | Long-term debt | 11,841 | 9,828 | | Loan from related party | 1,486 | 1,801 | | Deferred tax liabilities, net | 10,982 | 12,399 | | Other liabilities | 2,676 | - | | Total liabilities | 280,244 | 262,209 | | Total Stockholders' equity | 29,206 | 44,955 | | Total liabilities and Stockholders' equity | $309,450 | $307,164 | Consolidated Statements of Operations and Comprehensive Loss (in thousands) | | December 31, 2023 | December 31, 2022 | December 31, 2021 | | :------------------------------------------ | :---------------- | :---------------- | :---------------- | | Revenues | $305,476 | $289,772 | $261,679 | | Cost of sales | 274,878 | 260,399 | 219,311 | | Gross profit | 30,598 | 29,373 | 42,368 | | Selling, general and administrative expenses | 29,465 | 30,795 | 38,982 | | Operating income (loss) | 1,133 | (1,422) | 3,386 | | Total other expense | 13,747 | 19,806 | 11,259 | | Loss before taxes | (12,614) | (21,228) | (7,873) | | Income tax expense | (106) | (2,058) | (89) | | Net loss | (12,508) | (19,170) | (7,784) | | Net loss attributable to the Company | $(12,676) | $(19,128) | $(7,982) | | Loss per ordinary shares outstanding – basic and diluted | $(0.47) | $(0.72) | $(0.38) | | Weighted average number of shares outstanding - basic and diluted | 26,879,159 | 26,604,710 | 20,555,595 | | Total other comprehensive loss | (1,747) | (7,242) | (2,995) | | Comprehensive loss attributable to the Company | $(14,697) | $(25,797) | $(10,606) | Consolidated Statements of Cash Flows (in thousands) | Cash flows from operating activities: | December 31, 2023 | December 31, 2022 | December 31, 2021 | | :------------------------------------ | :---------------- | :---------------- | :---------------- | | Net cash provided by (used in) operating activities | $33,326 | $(57,569) | $(26,048) | | Cash flows from investing activities: | | | | | Net cash used in investing activities | $(9,837) | $(4,030) | $(14,514) | | Cash flows from financing activities: | | | | | Net cash (used in) provided by financing activities | $(21,182) | $74,991 | $42,754 | | Effect of exchange rate changes on cash and cash equivalents | $(3,113) | $(2,958) | $(482) | | Net (decrease) increase in cash and cash equivalent | $(806) | $10,434 | $1,710 | | Cash and cash equivalents, beginning of year | $24,827 | $14,393 | $12,683 | | Cash and cash equivalents, end of year | $24,021 | $24,827 | $14,393 | [ITEM 19. EXHIBITS](index=89&type=section&id=ITEM%2019.%20EXHIBITS) This section provides a comprehensive list of exhibits filed with the annual report, including corporate governance documents, various agreements, and certifications - Includes Memorandum and Articles of Association, specimen certificates for Ordinary Shares, Business Combination Agreement and amendments, Warrant Agreement, Subscription Agreement, Bond Subscription Deed, and Equity Incentive Plan[610](index=610&type=chunk)[611](index=611&type=chunk)[612](index=612&type=chunk)[613](index=613&type=chunk)[614](index=614&type=chunk)[616](index=616&type=chunk)

[Condensed Consolidated Financial Statements](index=3&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The company's balance sheet as of June 30, 2023, shows an increase in total assets, primarily driven by a significant rise in inventories, while total liabilities also increased substantially, leading to a decrease in total stockholders' equity compared to December 31, 2022 | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :---------------------- | :--------------------------- | :------------------------------- | | Total Assets | $341,636 | $307,164 | | Total Liabilities | $307,273 | $262,209 | | Total Stockholders' Equity | $34,363 | $44,955 | | Inventories, net | $66,471 | $27,218 | | Accounts payable | $65,426 | $27,295 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For the six months ended June 30, 2023, the company reported a net loss attributable to the Company of $(8,622) thousand, an increase from $(8,245) thousand in the prior year period, with revenues decreasing and a shift from operating income to an operating loss | Metric | Six months ended June 30, 2023 (in thousands) | Six months ended June 30, 2022 (in thousands) | | :----------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Revenues | $145,616 | $154,992 | | Gross profit | $13,647 | $15,111 | | Operating (loss) income | $(1,377) | $415 | | Net loss attributable to the Company | $(8,622) | $(8,245) | | Loss per ordinary shares outstanding – basic and diluted | $(0.32) | $(0.39) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total stockholders' equity decreased from $44,955 thousand at January 1, 2023, to $34,363 thousand at June 30, 2023, primarily due to net loss and foreign exchange losses, partially offset by share-based compensation and shares issued upon warrant exercise | Metric | June 30, 2023 (in thousands) | January 1, 2023 (in thousands) | | :----------------------------------- | :--------------------------- | :----------------------------- | | Total Stockholders' Equity | $34,363 | $44,955 | | Accumulated deficit | $(111,300) | $(102,678) | | Accumulated other comprehensive loss | $(5,272) | $(2,984) | - Net loss for the six months ended June 30, 2023, was **$(8,576) thousand**, contributing to the accumulated deficit[12](index=12&type=chunk) - Foreign exchange loss for the six months ended June 30, 2023, was **$(2,288) thousand**[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company experienced a significant improvement in cash flows from operating activities, shifting from a net cash usage of $(50,133) thousand in H1 2022 to a net cash provision of $10,738 thousand in H1 2023, while cash used in investing activities increased and financing activities shifted to a usage due to reduced borrowings and debt repayments | Metric | Six months ended June 30, 2023 (in thousands) | Six months ended June 30, 2022 (in thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by (used in) operating activities | $10,738 | $(50,133) | | Net cash used in investing activities | $(4,187) | $(3,192) | | Net cash (used in) provided by financing activities | $(3,931) | $77,157 | | Net increase in cash and cash equivalents | $328 | $21,903 | | Cash and cash equivalents, end of period | $25,155 | $36,296 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION](index=7&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20BASIS%20OF%20PRESENTATION) Forafric Global PLC is a market leader in the Moroccan milling industry, offering a range of products, and completed a business combination on June 9, 2022, accounted for as a reverse recapitalization, with its unaudited condensed consolidated financial statements prepared in accordance with US GAAP for interim financial information - Forafric Global PLC is a market leader in the milling industry in Morocco, with a complete offering of flours, semolina, pasta, couscous, rice, and starches[17](index=17&type=chunk) - The business combination with Globis Acquisition Corp. was consummated on June 9, 2022, and accounted for as a reverse recapitalization, with FAHL as the accounting acquirer[19](index=19&type=chunk)[21](index=21&type=chunk) - The accompanying Unaudited Condensed Consolidated Financial Statements are prepared in accordance with US GAAP for interim financial information[24](index=24&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section details the company's significant accounting policies, including the use of estimates, principles of consolidation, and accounting for share-based compensation, foreign currency, and fair value measurements, noting its status as an Emerging Growth Company (EGC) and management's assertion of sufficient liquidity for at least one year - Significant accounting policy elections, estimates, and assumptions include allowance for credit losses, valuation of goodwill and intangible assets, useful lives of long-lived assets, and measurement of income tax assets[26](index=26&type=chunk) - The company's functional currency is the Moroccan dirham (MAD), and its presentation currency is the United States Dollar (USD)[32](index=32&type=chunk) - Foreign currency forward contracts are not designated as hedging instruments; changes in fair value are recorded in current period earnings[34](index=34&type=chunk) - The company is an **Emerging Growth Company (EGC)** and has elected to use the extended transition period for adopting new or revised accounting standards[42](index=42&type=chunk) - Management believes that cash on hand, cash from operations, and proceeds from extended credit lines will provide sufficient liquidity to fund operations for at least **one year**[44](index=44&type=chunk) [3. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS](index=10&type=section&id=3.%20RECENTLY%20ADOPTED%20ACCOUNTING%20PRONOUNCEMENTS) No new accounting pronouncements issued or effective during the six months ended June 30, 2023, are expected to have a material impact on the condensed consolidated financial statements - No accounting pronouncements issued or effective during the six months ended June 30, 2023, have had or are expected to have a material impact on the condensed consolidated financial statements[45](index=45&type=chunk) [4. LEASES](index=10&type=section&id=4.%20LEASES) The company holds both operating and finance leases for various assets, including real estate and equipment, with total lease liabilities increasing to $3,489 thousand as of June 30, 2023, and weighted-average remaining lease terms of 5.3 years for operating leases and 0.8 years for finance leases | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :---------------------- | :--------------------------- | :------------------------------- | | Total Right-of-use assets | $12,185 | $10,430 | | Total Lease Liabilities | $3,489 | $2,901 | | Lease Type | June 30, 2023 | December 31, 2022 | | :--------------- | :------------ | :---------------- | | Operating leases | 5.3 years | 6.4 years | | Finance leases | 0.8 years | 0.8 years | | Lease Cost Component | Six months ended June 30, 2023 (in thousands) | Six months ended June 30, 2022 (in thousands) | | :------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Operating lease cost | $246 | $342 | | Finance lease cost | $278 | $371 | | Total lease cost | $524 | $713 | [5. ACCOUNTS RECEIVABLE](index=13&type=section&id=5.%20ACCOUNTS%20RECEIVABLE) Accounts receivable, net of allowance for credit losses, slightly decreased to $30,444 thousand at June 30, 2023, from $30,858 thousand at December 31, 2022, with the allowance for credit losses increasing by $1,210 thousand during the six months ended June 30, 2023 | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------------------------ | :--------------------------- | :------------------------------- | | Accounts receivable | $45,721 | $44,925 | | Allowance for credit losses | $(15,277) | $(14,067) | | Total | $30,444 | $30,858 | - Current period provision for expected credit losses was **$(413) thousand** for the six months ended June 30, 2023[55](index=55&type=chunk) [6. PREPAID EXPENSES AND OTHER CURRENT ASSETS](index=13&type=section&id=6.%20PREPAID%20EXPENSES%20AND%20OTHER%20CURRENT%20ASSETS) Prepaid expenses and other current assets saw a slight increase to $16,540 thousand at June 30, 2023, from $16,345 thousand at December 31, 2022, primarily driven by increases in value-added tax receivable and advances to suppliers | Component | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------------------------- | :--------------------------- | :------------------------------- | | Value-added tax receivable | $933 | $602 | | Prepaid income taxes | $1,307 | $1,763 | | Advances to suppliers | $4,792 | $4,000 | | Prepaid expenses | $1,352 | $1,445 | | Insurance recoveries | $4,971 | $4,708 | | Other current assets | $3,185 | $3,827 | | Total | $16,540 | $16,345 | [7. INVENTORIES, NET](index=14&type=section&id=7.%20INVENTORIES,%20NET) Inventories, net, significantly increased to $66,471 thousand at June 30, 2023, from $27,218 thousand at December 31, 2022, primarily due to a substantial growth in raw materials and consumable supplies | Component | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------------------------------ | :--------------------------- | :------------------------------- | | Merchandise | $1,004 | $825 | | Raw materials and consumable supplies | $60,133 | $21,537 | | Finished Goods | $5,334 | $4,856 | | Total | $66,471 | $27,218 | [8. PROPERTY, PLANT AND EQUIPMENT](index=14&type=section&id=8.%20PROPERTY,%20PLANT%20AND%20EQUIPMENT) Property, plant, and equipment, net, increased to $107,427 thousand at June 30, 2023, from $100,527 thousand at December 31, 2022, with depreciation expense for the six months ended June 30, 2023, totaling $2,009 thousand | Component | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------------------------------ | :--------------------------- | :------------------------------- | | Land | $25,321 | $23,988 | | Buildings | $58,517 | $55,542 | | Machinery and equipment | $55,471 | $51,374 | | Assets in progress | $10,968 | $8,458 | | Others | $9,224 | $8,679 | | Total | $159,500 | $148,041 | | Less accumulated depreciation | $(52,073) | $(47,514) | | Total, net | $107,427 | $100,527 | - Depreciation expense was **$2,009 thousand** for the six months ended June 30, 2023, compared to **$2,185 thousand** for the same period in 2022[58](index=58&type=chunk) [9. GOODWILL AND OTHER INTANGIBLE ASSETS](index=14&type=section&id=9.%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Goodwill increased to $48,298 thousand at June 30, 2023, from $45,898 thousand at December 31, 2022, primarily due to foreign currency exchange adjustments, while intangible assets, net, also saw a slight increase to $3,867 thousand, with no impairment losses identified in the annual assessment as of December 31, 2022 | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------------------------------------ | :--------------------------- | :------------------------------- | | Goodwill | $48,298 | $45,898 | | Intangible assets, net | $3,867 | $3,723 | - Goodwill increased by **$2,400 thousand** due to foreign currency exchange adjustments for the six months ended June 30, 2023[60](index=60&type=chunk) - The weighted-average remaining amortization period for intangibles other than goodwill is **10.6 years** as of June 30, 2023[61](index=61&type=chunk) [10. ACCRUED EXPENSES](index=15&type=section&id=10.%20ACCRUED%20EXPENSES) Accrued expenses decreased to $17,881 thousand at June 30, 2023, from $18,974 thousand at December 31, 2022, mainly driven by a decrease in accrued interest, partially offset by an increase in consideration payable to the selling stockholder | Component | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------------- | :--------------------------- | :------------------------------- | | Consideration payable to selling stockholder | $8,517 | $8,200 | | Accrued government taxes | $5,825 | $5,517 | | Accrued interest | $2,044 | $3,781 | | Accrued salaries and benefits | $729 | $600 | | Accruals to social agencies | $540 | $664 | | Other accrued expenses | $226 | $212 | | Total | $17,881 | $18,974 | [11. LINES OF CREDIT](index=15&type=section&id=11.%20LINES%20OF%20CREDIT) The company utilizes unsecured revolving credit agreements for working capital, providing approximately $51,000 thousand, and asset-based credit facilities for wheat inventory purchases, providing approximately $166,000 thousand, secured by inventory - The company has unsecured revolving credit agreements for working capital, providing up to approximately **$51,000 thousand**, with interest rates ranging from **5.6% to 7.5%**[63](index=63&type=chunk) - Asset-based credit facilities for wheat raw material purchases provide up to approximately **$166,000 thousand**, secured by the company's inventory, with interest rates ranging from **1.4% to 7.5%**[65](index=65&type=chunk) [12. LONG-TERM DEBT](index=16&type=section&id=12.%20LONG-TERM%20DEBT) Total outstanding debt slightly increased to $15,268 thousand at June 30, 2023, from $15,245 thousand at December 31, 2022, comprising term loans and lease obligations, with a significant portion scheduled to mature in the remainder of 2023 and 2024 | Component | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------- | :--------------------------- | :------------------------------- | | Loans | $11,779 | $12,344 | | Leases | $3,489 | $2,901 | | Total outstanding debt | $15,268 | $15,245 | | Less current portion | $(6,031) | $(5,417) | | Total long-term debt | $9,237 | $9,828 | - Term loans are unsecured with fixed monthly payments and interest rates ranging from **5.5%-7.5%**, maturing through **2034**[67](index=67&type=chunk) | Maturity Period | Amount (in thousands) | | :---------------- | :-------------------- | | Remainder of 2023 | $3,268 | | 2024 | $3,831 | | 2025 | $2,799 | | 2026 | $2,331 | | 2027 | $1,728 | | Thereafter | $1,311 | | Total | $15,268 | [13. FOREIGN CURRENCY FORWARD CONTRACTS](index=16&type=section&id=13.%20FOREIGN%20CURRENCY%20FORWARD%20CONTRACTS) The company uses foreign currency forward contracts to mitigate foreign exchange rate fluctuations, with 58 outstanding contracts as of June 30, 2023, having a notional value of $31.6 million and €32.4 million ($35.2 million) expiring by December 31, 2023, resulting in a recorded loss of $1,614 thousand for the six months ended June 30, 2023 - The company entered into foreign currency forward contracts from the beginning of 2023 to reduce foreign exchange rate fluctuation risk[70](index=70&type=chunk) - These contracts are not designated as hedging instruments, and changes in fair value are recorded in current period earnings[71](index=71&type=chunk) - As of June 30, 2023, there were **58 outstanding contracts** with a notional value of **$31.6 million** and **€32.4 million ($35.2 million)**, all expiring by **December 31, 2023**[73](index=73&type=chunk) - A loss on foreign exchange forward contracts of **$1,614 thousand** was recorded for the six months ended June 30, 2023[74](index=74&type=chunk) [14. CONTINGENT CONSIDERATION LIABILITY](index=17&type=section&id=14.%20CONTINGENT%20CONSIDERATION%20LIABILITY) The contingent consideration liability, stemming from the Business Combination Agreement, represents 20% of cash proceeds from warrant exercises payable to the seller, valued at $1,268 thousand as of June 30, 2023, and measured at fair value using a Level 3 probability-weighted scenario-based model - The contingent consideration liability obligates the company to pay the seller **20%** of cash proceeds from the exercise of Company Warrants[75](index=75&type=chunk) - The fair value of the contingent consideration liability was **$1,268 thousand** as of June 30, 2023[77](index=77&type=chunk) - The liability is measured using a probability weighted scenario-based model under **Level 3 inputs**, with a weighted average discount rate of **4.94%** as of June 30, 2023[77](index=77&type=chunk)[78](index=78&type=chunk) [15. INCOME TAXES](index=17&type=section&id=15.%20INCOME%20TAXES) Income tax expense decreased to $646 thousand for the six months ended June 30, 2023, from $1,605 thousand in the prior year, with an effective tax rate of -8% due to unrecognized tax losses and minimum contribution, and the company holds $12,313 thousand in net operating losses with a valuation allowance for indefinite carryforward losses | Component | Six months ended June 30, 2023 (in thousands) | Six months ended June 30, 2022 (in thousands) | | :--------------------- | :-------------------------------------------- | :-------------------------------------------- | | Current | $522 | $1,366 | | Deferred | $124 | $239 | | Total income tax expense | $646 | $1,605 | - The effective tax rate was **-8%** for the six months ended June 30, 2023, primarily due to unrecognized tax losses and minimum contribution[81](index=81&type=chunk) - The company has **$12,313 thousand** in net operating losses as of June 30, 2023, with a valuation allowance maintained for all losses to be carried forward indefinitely[82](index=82&type=chunk)[83](index=83&type=chunk) [16. STOCKHOLDERS' EQUITY](index=18&type=section&id=16.%20STOCKHOLDERS'%20EQUITY) This note details the company's capital structure, including authorized and outstanding Preferred, Ordinary, and Class Z Ordinary Shares, with 26,879,202 Ordinary Shares outstanding as of June 30, 2023, and Public and Private Warrants outstanding, though no Earnout Shares have been issued - The company is authorized to issue **1,000,000 Preferred Shares** and **100,000,000 Ordinary Shares**[84](index=84&type=chunk)[85](index=85&type=chunk) - As of June 30, 2023, **26,879,202 Ordinary Shares** were issued and outstanding[85](index=85&type=chunk) - Class Z Ordinary Shares, previously **29,999,990 outstanding** at December 31, 2022, were retired by June 30, 2023[12](index=12&type=chunk)[86](index=86&type=chunk) - There were **11,461,120 Public Warrants** and **4,289,722 Private Warrants** outstanding as of June 30, 2023, each entitling the holder to purchase one ordinary share at **$11.50**[87](index=87&type=chunk)[90](index=90&type=chunk) - No Earnout Shares have been issued as of June 31, 2023, under the Stockholder Earn-Out Rights provisions[91](index=91&type=chunk) [17. EQUITY INCENTIVE PLAN](index=19&type=section&id=17.%20EQUITY%20INCENTIVE%20PLAN) The company's Equity Incentive Plan allows for the grant of stock options and phantom options to employees, directors, and consultants, with 64,705 stock options and 53,613 phantom options outstanding as of June 30, 2023, and unrecognized compensation expense of $712 thousand for stock options and $561 thousand for phantom options to be recognized over 30 months - The Equity Incentive Plan reserves a maximum of **10%** of the issued share capital, not exceeding **2,645,684 shares**, for awards[93](index=93&type=chunk) | Metric | Stock Options (June 30, 2023) | Phantom Options (June 30, 2023) | | :-------------------------------------- | :---------------------------- | :------------------------------ | | Outstanding | 64,705 | 53,613 | | Weighted Average Exercise Price | $0.001 | $0.001 | | Weighted Average Remaining Contractual Term (years) | 9.88 | 9.89 | | Aggregate Intrinsic Value (thousands) | $712 | $588 | - Unrecognized compensation expense for stock options is **$712 thousand** and for phantom options is **$561 thousand**, both to be recognized over **30 months** from June 30, 2023[97](index=97&type=chunk)[99](index=99&type=chunk) [18. EARNINGS PER SHARE](index=20&type=section&id=18.%20EARNINGS%20PER%20SHARE) Basic and diluted loss per ordinary share was $(0.32) for the six months ended June 30, 2023, an improvement from $(0.39) in the prior year, despite an increased net loss, due to a higher weighted average number of shares outstanding, with earnout, option shares, and warrants excluded from diluted EPS calculations as their inclusion would be anti-dilutive | Metric | Six months ended June 30, 2023 | Six months ended June 30, 2022 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Loss per ordinary shares outstanding – basic and diluted | $(0.32) | $(0.39) | | Weighted average number of shares outstanding – basic and diluted | 26,879,114 | 21,566,289 | - The computation of diluted loss per share excludes the effect of earnout and option shares and warrants because their inclusion would be anti-dilutive[102](index=102&type=chunk) [19. COMMITMENTS AND CONTINGENCIES](index=20&type=section&id=19.%20COMMITMENTS%20AND%20CONTINGENCIES) The company is involved in litigation with no expected material impact, has a five-year supply agreement with Millcorp extended through March 2026 for at least 80% of annual cereal requirements, holds bank commitments with collateral and mortgages totaling $25,464 thousand, and expects insurance recoveries of $4,708 thousand for 2022 wheat quality damages - The company has a **five-year supply agreement** with Millcorp Geneva SA, extended through **March 2026**, to obtain at least **80%** of its annual common wheat, durum wheat, or other cereal requirements[104](index=104&type=chunk) | Purchases from Millcorp | Six months ended June 30, 2023 (in thousands) | Six months ended June 30, 2022 (in thousands) | | :---------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total | $97,641 | $126,065 | - The company has provided collateral and mortgages to banks totaling **$25,464 thousand** as of June 30, 2023[105](index=105&type=chunk) - Insurance recoveries of **$4,708 thousand** are expected for damages caused by non-conforming quality of imported wheat in 2022[108](index=108&type=chunk) [20. SEGMENT INFORMATION](index=21&type=section&id=20.%20SEGMENT%20INFORMATION) The company manages its operations across three reportable segments: Soft Wheat, Durum Wheat, and Couscous & Pasta, with total sales to external customers decreasing to $145,616 thousand in H1 2023 from $154,992 thousand in H1 2022, all segments reporting operating losses, and approximately 11.4% of net sales generated from customers outside Morocco in H1 2023 - The company's reportable segments are Soft Wheat (flour for desserts/sauces), Durum Wheat (flour for pasta), and Couscous & Pasta (secondary processed products)[110](index=110&type=chunk)[111](index=111&type=chunk) | Segment | Sales to external customers (H1 2023, in thousands) | Sales to external customers (H1 2022, in thousands) | | :------------------ | :------------------------------------------------ | :------------------------------------------------ | | Soft Wheat | $105,386 | $115,856 | | Durum Wheat | $25,347 | $22,316 | | Couscous & Pasta | $14,883 | $16,820 | | Total | $145,616 | $154,992 | | Segment | Direct Operating (loss) income (H1 2023, in thousands) | Direct Operating (loss) income (H1 2022, in thousands) | | :------------------ | :--------------------------------------------------- | :--------------------------------------------------- | | Soft Wheat | $(187) | $2,884 | | Durum Wheat | $(225) | $(653) | | Couscous & Pasta | $(965) | $(1,816) | | Operating (loss) income | $(1,377) | $415 | - Net sales from customers outside of Morocco constituted approximately **11.4%** of total consolidated net sales for the six months ended June 30, 2023 (**8.4% in Mali, 1.2% in Burkina, and 1.8% in other countries**)[114](index=114&type=chunk) [21. RELATED PARTIES](index=22&type=section&id=21.%20RELATED%20PARTIES) The company engages in various related party transactions, including a building lease agreement with a parent-owned company and a supply agreement with Millcorp, which provides 100% of the company's imported grain, with amounts due from related parties totaling $2,444 thousand and amounts due to related parties at $1,399 thousand as of June 30, 2023 - The company has a building lease agreement for its headquarters with a parent-owned company, with total rent of approximately **$420 thousand** per year through **2024**[116](index=116&type=chunk) - Millcorp, a related party, provides **100%** of the imported grain to the company, with purchases of **$97,641 thousand** for the six months ended June 30, 2023[117](index=117&type=chunk) | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------- | :--------------------------- | :------------------------------- | | Amounts due from related parties | $2,444 | $2,366 | | Amounts due to related parties | $1,399 | $1,801 | [22. SUBSEQUENT EVENTS](index=22&type=section&id=22.%20SUBSEQUENT%20EVENTS) In July 2023, the company completed the acquisition of a 90% stake in Société Industrielle de Minoterie du Sud (SIMS), a soft wheat milling company, for approximately $1.0 million plus assumed debt, aligning with its strategy to double crushing capacity in Morocco over the next two years - In July 2023, the company acquired a **90% stake** in Société Industrielle de Minoterie du Sud (SIMS), a soft wheat milling company[122](index=122&type=chunk) - The acquisition cost was approximately **$1.0 million**, plus the assumption of SIMS' outstanding debt[123](index=123&type=chunk) - This acquisition is part of the company's strategy to double crushing capacity in Morocco over the next **two years**[122](index=122&type=chunk)

[Introduction and Definitions](index=4&type=section&id=INTRODUCTION) This section defines key terms and abbreviations used in the annual report, including details on the Business Combination, company entities, and financial standards, noting equity funding in U.S. dollars and primary revenues/expenses in Moroccan Dirhams pegged to USD and Euros - The report defines key terms such as **'Business Combination'** (Globis combined with Forafric Agro Holdings Limited on June 9, 2022), **'Company'** (Forafric Global PLC), and **'FAHL'** (Forafric Agro Holdings Limited, now a fully owned subsidiary)[8](index=8&type=chunk)[9](index=9&type=chunk)[11](index=11&type=chunk)[15](index=15&type=chunk) - The company's equity is funded in **U.S. dollars**, while the majority of revenues and expenses are incurred in **Moroccan Dirhams**, which is pegged to the U.S. dollar and Euros[35](index=35&type=chunk) [Part I: Company Information](index=7&type=section&id=PART%20I) This section provides an overview of the company's identity, key financial information, risk factors, business operations, and organizational structure [Item 1. Identity of Directors, Senior Management and Advisers](index=7&type=section&id=ITEM%201.%20IDENTITY%20OF%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20ADVISERS) This item is not applicable for the registrant - This item is marked as **'Not Applicable'**[36](index=36&type=chunk) [Item 2. Offer Statistics and Expected Timetable](index=7&type=section&id=ITEM%202.%20OFFER%20STATISTICS%20AND%20EXPECTED%20TIMETABLE) This item is not applicable for the registrant - This item is marked as **'Not Applicable'**[36](index=36&type=chunk) [Item 3. Key Information](index=7&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section provides key information about the company, including its capitalization, indebtedness, and a comprehensive overview of risk factors that could materially affect its business, financial condition, results of operations, and growth prospects [A. [Reserved]](index=7&type=section&id=ITEM%203.A.%20%5BReserved%5D) This sub-item is reserved - This sub-item is marked as **'[Reserved]'**[36](index=36&type=chunk) [B. Capitalization and Indebtedness](index=7&type=section&id=ITEM%203.B.%20Capitalization%20and%20Indebtedness) This sub-item is not applicable for the registrant - This sub-item is marked as **'Not applicable'**[36](index=36&type=chunk) [C. Reasons for the Offer and Use of Proceeds](index=7&type=section&id=ITEM%203.C.%20Reasons%20for%20the%20Offer%20and%20Use%20of%20Proceeds) This sub-item is not applicable for the registrant - This sub-item is marked as **'Not applicable'**[36](index=36&type=chunk) [D. Risk Factors](index=8&type=section&id=ITEM%203.D.%20Risk%20Factors) The company faces significant risks across various domains, including market volatility for its securities, operational dependencies on raw materials and related parties, geopolitical events like the Russia-Ukraine war, and regulatory challenges in its primary market, Morocco - Sales of a substantial number of securities by Selling Securityholders or existing securityholders could cause the price of Ordinary Shares and Warrants to fall[38](index=38&type=chunk)[39](index=39&type=chunk) - The company is dependent on a related party supplier (Millcorp Geneve SA) for substantially all of its raw material, with a five-year supply agreement extended through March 31, 2026[45](index=45&type=chunk)[107](index=107&type=chunk) - The continuation of the war between Russia and Ukraine could lead to raw material shortages or substantial increases in raw material costs, as Ukraine and Russia account for approximately **10%** and **16%** of the world's wheat exports, respectively[51](index=51&type=chunk)[113](index=113&type=chunk) - The Moroccan market, where the bulk of the company's business originates, is highly regulated, with restrictions on soft wheat imports and government subsidies for flour, which are expected to change[141](index=141&type=chunk)[142](index=142&type=chunk) - The company is an **'emerging growth company'** and a **'foreign private issuer,'** which allows for reduced SEC reporting requirements, but this could make its securities less attractive to investors and limit shareholder protections compared to U.S. domestic public companies[42](index=42&type=chunk)[43](index=43&type=chunk)[77](index=77&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) - The company does not anticipate paying dividends for the foreseeable future, as it expects to operate at a loss and retain funds for business development and growth[97](index=97&type=chunk)[98](index=98&type=chunk) [Item 4. Information on the Company](index=25&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section details the company's history, business operations, market position, and strategic initiatives, highlighting its integrated role in agricultural commodities, strong presence in the Moroccan market, and expansion into other African regions [A. History and Development of the Company](index=25&type=section&id=ITEM%204.A.%20History%20and%20Development%20of%20the%20Company) Forafric Global PLC is an integrated global business in agricultural commodities, formed through the combination of Forafric (Maymouna) and Tria Group, which completed a Business Combination on June 9, 2022, resulting in its Ordinary Shares and Warrants trading on Nasdaq - The company is an integrated, global business involved in the purchase, storage, transport, processing, and sale of agricultural commodities, primarily flour, semolina, pasta, and couscous[154](index=154&type=chunk)[169](index=169&type=chunk) - On June 9, 2022, the company completed a **Business Combination**, leading to its Ordinary Shares and Warrants commencing trading on the Nasdaq Stock Market LLC under symbols **'AFRI'** and **'AFRIW'** respectively[156](index=156&type=chunk)[160](index=160&type=chunk) - The company qualifies as an **'emerging growth company'** and a **'foreign private issuer'**, allowing it to take advantage of reduced SEC reporting and disclosure requirements[162](index=162&type=chunk)[166](index=166&type=chunk) [B. Business Overview](index=27&type=section&id=ITEM%204.B.%20Business%20Overview) Forafric operates primarily in the growing African food market, focusing on staple products like flour, semolina, pasta, and couscous, holding a leadership position in the Moroccan wheat milling sector with a capacity of **2,200 tons per day** - The company operates primarily in the African food market, providing staple products such as flour, semolina, pasta, and couscous, anticipating continued market growth due to demographic increases and urbanization[176](index=176&type=chunk) - The company is a leader in the Moroccan wheat milling business, with a milling capacity of **2,200 tons per day** and a total volume of **550,000 tons per year**, giving it significant bargaining power for raw materials[181](index=181&type=chunk)[182](index=182&type=chunk) - Key brands include **MayMouna** (popular for Moroccan households) and **Tria** (popular for industrial clients in Morocco), with Tria holding approximately **15%** of the overall couscous market and **9%** of the overall pasta market in Morocco[184](index=184&type=chunk)[196](index=196&type=chunk)[198](index=198&type=chunk) - The company's business strategy focuses on sustainable growth, value generation, and commitment to social well-being, diversity, environmental balance, and ethical conduct[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) - Significant events include the acquisition of majority ownership in **MDS Mali** and **MDS Burkina Faso** in 2021, and **Sanabil SA** in Morocco, expanding its footprint in West Africa and central Morocco[173](index=173&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk)[222](index=222&type=chunk) - The company has a unique storage infrastructure in Morocco, with **2 units** dedicated to storage and over **250,000 tons** of grain storage capacity, including Finalog's multimodal platform linked to the port of Casablanca by rail[214](index=214&type=chunk)[215](index=215&type=chunk) [C. Organizational Structure](index=37&type=section&id=ITEM%204.C.%20Organizational%20Structure) The organizational structure is detailed in Item 4.A, which describes the company's history and development, including the Business Combination and its subsidiaries - The organizational structure refers to the details provided in **'Item 4. Information on the Company – A. History and Development of the Company'**[235](index=235&type=chunk) [D. Property, plants and equipment](index=37&type=section&id=ITEM%204.D.%20Property%2C%20plants%20and%20equipment) As of December 31, 2022, the company owns and leases **12 refining, packing, and milling facilities** globally, with an aggregate production capacity of **3,050 metric tons per day**, including **eight milling plants** in Morocco with a capacity of **2,400 metric tons per day** and **two storage facilities** with **250,000 metric tons capacity** - As of December 31, 2022, the company owns and leases **12 refining, packing, and milling facilities** worldwide, with a total production capacity of **3,050 metric tons per day**[235](index=235&type=chunk) - Eight of these milling plants are located in Morocco, contributing an aggregate capacity of **2,400 metric tons per day**[235](index=235&type=chunk) - The company also possesses two storage facilities in Morocco, offering a combined storage capacity of **250,000 metric tons**[235](index=235&type=chunk) [Item 4A. Unresolved Staff Comments](index=37&type=section&id=ITEM%204A.%20UNRESOLVED%20STAFF%20COMMENTS) This item is not applicable for the registrant - This item is marked as **'Not applicable'**[237](index=237&type=chunk) [Item 5. Operating and Financial Review and Prospects](index=37&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section provides a detailed analysis of the company's financial condition, results of operations, liquidity, and cash flows for the years ended December 31, 2022, 2021, and 2020, highlighting key factors affecting performance and the impact of global events [Overview](index=38&type=section&id=ITEM%205.Overview) The overview sets the stage for the financial review, emphasizing that the discussion is based on consolidated financial statements and includes forward-looking statements subject to various risks, clarifying the company's identity before and after the Business Combination - The discussion is based on consolidated financial statements for the years ended December 31, 2022, 2021, and 2020[239](index=239&type=chunk) - The report contains forward-looking statements based on management's beliefs and assumptions, which involve known and unknown risks and uncertainties[241](index=241&type=chunk)[242](index=242&type=chunk)[243](index=243&type=chunk) [Key Factors Affecting Our Performance](index=38&type=section&id=ITEM%205.Key%20Factors%20Affecting%20Our%20Performance) The company's performance is primarily driven by the cost of raw materials (wheat, accounting for almost **90%** of total cost), industrial costs (equipment, labor, interest), and average selling prices, which are influenced by market competition and bran prices - The cost of raw material (wheat) is the main factor, accounting for almost **90%** of total cost, influenced by weather, supply/demand, international producers' strategies, freight, and currency exchange rates[246](index=246&type=chunk)[258](index=258&type=chunk) - Industrial cost is the second main factor, including equipment, labor, and interest over financing, with a target to maintain it below **$30 USD per ton** produced[247](index=247&type=chunk)[259](index=259&type=chunk) - Average selling price is based on flour/semolina and bran prices, with limited impact on finished product prices due to high market concurrency[248](index=248&type=chunk) [Impact of COVID-19](index=39&type=section&id=ITEM%205.Impact%20of%20COVID-19) The COVID-19 pandemic did not materially impact sales due to the staple nature of the company's food products, but it led to increases in raw material, freight, and shipping costs in 2021 and 2022, partially offset by sales price increases and Moroccan government subsidies - COVID-19 did not materially impact sales due to the staple nature of the company's food products[249](index=249&type=chunk) - The company experienced increases in raw material, freight, and shipping costs in 2021 and 2022, attributable to global demand and inflationary pressures[249](index=249&type=chunk) - These cost increases were partially offset by the company's ability to raise sale prices and subsidies from the Government of Morocco[249](index=249&type=chunk) - No significant supply chain disruptions are anticipated through the end of 2023 based on current trends[251](index=251&type=chunk) [The War in Ukraine](index=39&type=section&id=ITEM%205.The%20War%20in%20Ukraine) The war in Ukraine poses a risk of material reduction in global wheat availability and substantial price increases, as Ukraine and Russia are significant wheat exporters, but the company has diversified its supply sources, primarily from European countries, Argentina, and Brazil, mitigating direct impact - The war in Ukraine could lead to a material reduction in global wheat availability and substantial increases in raw material prices, given Ukraine and Russia's significant share of world wheat exports (**10%** and **16%** respectively)[252](index=252&type=chunk) - The company has diversified its raw material sources, primarily purchasing from European countries, Argentina, and Brazil, and has not bought from Ukraine or Russia in 2023[253](index=253&type=chunk)[254](index=254&type=chunk) - The price of soft wheat and durum began to decrease in the first three months of 2023, but a sustained trend is not yet clear[253](index=253&type=chunk) [Key Components of Results of Operations](index=39&type=section&id=ITEM%205.Key%20Components%20of%20Results%20of%20Operations) The key components influencing the company's results are net sales, cost of goods sold (including raw materials, freight, foreign exchange, and production improvements), and gross profit, with industrial costs successfully reduced by **40%** over the last three years - Net sales, cost of goods sold (raw materials, freight, foreign exchange, improvements), and gross profit are the primary components[255](index=255&type=chunk) - Raw material prices are affected by global/regional supply, weather, government policies, and demand, with imported wheat being a major factor[255](index=255&type=chunk)[258](index=258&type=chunk) - Industrial costs, including human resources, equipment, maintenance, power, and financial costs, were successfully reduced by **40%** over the last three years through a restructuring plan[259](index=259&type=chunk) [Year Ended December 31, 2022 Compared to Year Ended December 31, 2021](index=40&type=section&id=ITEM%205.Year%20Ended%20December%2031%2C%202022%20Compared%20to%20Year%20Ended%20December%2031%2C%202021) In 2022, the company saw a **10.7%** increase in net revenues to **$289.8 million**, but cost of sales rose by **18.7%** to **$260.4 million**, leading to a **30.7%** decrease in gross profit to **$29.4 million**, with operating loss widening to **$1.4 million** and net loss increasing to **$19.2 million** Operating Results (2022 vs. 2021) | In thousands of USD | 2022 | 2021 | Change ($) | Change (%) | | :------------------ | :-------- | :-------- | :--------- | :--------- | | Revenues | $289,772 | $261,679 | $28,093 | 10.7% | | Cost of sales | $260,399 | $219,311 | $41,088 | 18.7% | | Gross profit | $29,373 | $42,368 | $(12,995) | (30.7%) | | Operating (loss) income | $(1,422) | $3,386 | $(4,808) | (141.9%) | | Net loss | $(19,170) | $(7,784) | $(11,386) | (146.3%) | - Revenues increased by **$28.1 million** (**10.7%**) year-over-year, driven by higher sales volume and average sales prices due to increased global commodity prices following the Ukraine-Russia war[261](index=261&type=chunk) - Cost of sales increased by **$41.1 million** (**18.7%**) year-over-year, primarily due to rising raw material costs, increased shipping and logistics costs, and unfavorable mark-to-market results[262](index=262&type=chunk) - Selling, general and administrative expenses decreased by **$8.2 million** (**21.0%**) year-over-year, mainly due to lower compensation costs and reduced bad debt expense[263](index=263&type=chunk) - Other expense increased by **$8.5 million** (**75.9%**) year-over-year, driven by higher interest expense and foreign transaction losses, partially offset by a **$4.7 million** net gain from changes in fair value of derivatives and contingent consideration[264](index=264&type=chunk) Sales to External Customers by Segment (2022 vs. 2021) | In thousands of USD | 2022 | 2021 | Change ($) | | :------------------ | :-------- | :-------- | :--------- | | Soft wheat | $216,659 | $177,175 | $39,484 | | Durum wheat | $45,286 | $54,737 | $(9,451) | | Couscous and pasta | $27,827 | $29,767 | $(1,940) | | Total | $289,772 | $261,679 | $28,093 | - Soft wheat revenues increased by **22.3%** due to higher sales volume and full-year operations from 2021 acquisitions (MDS Mali, MDS Burkina Faso, Sanabil SA)[266](index=266&type=chunk)[267](index=267&type=chunk) - Durum wheat and couscous/pasta sales decreased by **17.3%** and **6.5%** respectively, primarily due to decreased volume[266](index=266&type=chunk)[267](index=267&type=chunk) - Working capital deficits were **$94.6 million** at December 31, 2022, compared to **$85.3 million** in 2021[268](index=268&type=chunk) - The company had **$48.0 million** in revolving working capital credit lines and **$148.0 million** in Wheat Credit Facilities available as of December 31, 2022[269](index=269&type=chunk) - Cash and cash equivalents increased to **$24.8 million** at December 31, 2022, from **$14.4 million** in 2021[271](index=271&type=chunk) - The Business Combination generated approximately **$19.4 million** in gross proceeds from the Trust Account and **$13.9 million** from PIPE Investment[273](index=273&type=chunk) - The Seller received **17,004,762 Ordinary Shares** and **1,550,000 Ordinary Shares**, plus an **$8 million** payment and **516,666 warrants**[274](index=274&type=chunk)[275](index=275&type=chunk) [Year Ended December 31, 2021 Compared to Year Ended December 31, 2020](index=45&type=section&id=ITEM%205.Year%20Ended%20December%2031%2C%202021%20Compared%20to%20Year%20Ended%20December%2031%2C%202020) In 2021, net revenues increased by **33.1%** to **$261.7 million**, but cost of sales rose by **40.4%** to **$219.3 million**, leading to a modest **4.9%** increase in gross profit to **$42.4 million**, while operating income decreased significantly by **40.4%** to **$3.4 million** and net loss reached **$7.8 million** Operating Results (2021 vs. 2020) | In thousands of USD | 2021 | 2020 | Change ($) | Change (%) | | :------------------ | :-------- | :-------- | :--------- | :--------- | | Revenues | $261,679 | $196,596 | $65,083 | 33.1% | | Cost of sales | $219,311 | $156,188 | $63,123 | 40.4% | | Gross profit | $42,368 | $40,408 | $1,960 | 4.9% | | Operating income | $3,386 | $9,891 | $(6,505) | (65.8%) | | Net loss | $(7,784) | $(139) | $(7,645) | (5499.9%) | - Net revenues increased by **33.1%** to **$261.7 million**, while cost of sales increased by **40.4%** to **$219.3 million**, reflecting higher raw material and shipping costs[287](index=287&type=chunk)[288](index=288&type=chunk) - Selling, general and administrative expenses increased to **$39.0 million** from **$30.5 million**, mainly due to higher compensation costs, professional fees, and bad debt expense[289](index=289&type=chunk) - Other expenses increased by **13.9%** to **$11.3 million**, driven by a **51.3%** increase in interest expense to **$10.4 million**, partially offset by a **52.7%** reduction in foreign currency exchange losses[290](index=290&type=chunk) Sales to External Customers by Segment (2021 vs. 2020) | In thousands of USD | 2021 | 2020 | Change ($) | | :------------------ | :-------- | :-------- | :--------- | | Soft wheat | $177,175 | $129,096 | $48,079 | | Durum wheat | $54,737 | $37,571 | $17,166 | | Couscous and pasta | $29,767 | $29,930 | $(163) | | Total | $261,679 | $196,597 | $65,082 | - Soft wheat sales increased by **37.2%** due to higher volume and acquisitions (MDS Mali, MDS Burkina Faso, Sanabil SA)[292](index=292&type=chunk)[293](index=293&type=chunk) - Durum wheat sales increased by **45.7%** due to higher selling prices, while couscous and pasta sales slightly decreased by **0.5%**[292](index=292&type=chunk)[293](index=293&type=chunk) - Working capital deficits increased to **$85.3 million** at December 31, 2021, from **$66.5 million** in 2020[294](index=294&type=chunk) - Revolving working capital credit lines were **$80.0 million**, and Wheat Credit Facilities were **$100.0 million**[295](index=295&type=chunk) - Cash and cash equivalents increased to **$14.4 million** at December 31, 2021, from **$12.7 million** in 2020[297](index=297&type=chunk) [Trend Information](index=47&type=section&id=ITEM%205.Trend%20Information) The company is not aware of any trends, uncertainties, demands, commitments, or events from January 1, 2022, to December 31, 2022, that are reasonably likely to have a material adverse effect on its net revenue, income, profitability, liquidity, or capital resources, other than those already disclosed - No new material adverse trends or uncertainties identified for the period from January 1, 2022, to December 31, 2022, beyond those already disclosed[299](index=299&type=chunk) [Critical Accounting Estimates](index=47&type=section&id=ITEM%205.Critical%20Accounting%20Estimates) The preparation of financial statements requires significant management judgment and estimates, particularly for revenue recognition, accounts receivable allowances, income taxes, foreign currency translation, inventory valuation, property/plant/equipment depreciation and impairment, goodwill, and other intangible assets - Significant accounting policy elections, estimates, and assumptions include allowance for credit losses, valuation of goodwill and intangible assets, useful lives of long-lived assets, and measurement of income tax assets[300](index=300&type=chunk)[571](index=571&type=chunk) - Revenue is recognized when control of a product or service is transferred to a customer, typically at the point of delivery and acceptance[301](index=301&type=chunk)[302](index=302&type=chunk)[596](index=596&type=chunk)[598](index=598&type=chunk) - Inventories are valued at the lower of cost or net realizable value using the weighted average cost method, including raw materials, labor, and overhead[310](index=310&type=chunk)[576](index=576&type=chunk) - Goodwill and other intangible assets are evaluated for impairment annually, using qualitative or quantitative assessments, with fair value determined by income and market approaches[315](index=315&type=chunk)[582](index=582&type=chunk)[583](index=583&type=chunk)[584](index=584&type=chunk) - The company's functional currency is the Moroccan Dirham, and its presentation currency is the U.S. Dollar, with foreign currency transactions translated using exchange rates at transaction dates and balance sheet accounts at period-end rates[309](index=309&type=chunk)[594](index=594&type=chunk) [Recent Accounting Pronouncements](index=49&type=section&id=ITEM%205.Recent%20Accounting%20Pronouncements) The company adopted ASU 2021-10, Government Assistance (Topic 832), in November 2021, which requires enhanced disclosures about government assistance received, with no material impact on the company's financial statements - ASU 2021-10, Government Assistance (Topic 832), was adopted, requiring disclosure of types, accounting, and effects of government assistance[316](index=316&type=chunk)[622](index=622&type=chunk) - The adoption of this guidance had no material impact on the company's results of operations, balance sheet, or cash flows[316](index=316&type=chunk)[622](index=622&type=chunk) [Item 6. Directors, Senior Management and Employees](index=50&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section outlines the company's leadership, including executive officers and directors, their compensation, and corporate governance practices, detailing the board's composition, committee structures, and policies regarding related person transactions and employee relations [A. Directors and Senior Management](index=50&type=section&id=ITEM%206.A.%20Directors%20and%20Senior%20Management) The company's executive officers include Saad Bendidi (Chairman), Mustapha Jamaleddine (CEO), Julien Benitah (CFO), Mustapha Ghazali (CTO), and Oury Marciano (VP Business Development), with a Board of Directors consisting of seven members, including independent directors Franco Cassar, Ira Greenstein, and Rachel Bitan Executive Officers | Name | Age | Position(s) | | :----------------- | :-- | :---------------------- | | Saad Bendidi | 64 | Chairman | | Mustapha Jamaleddine | 61 | CEO | | Julien Benitah | 41 | CFO | | Mustapha Ghazali | 51 | CTO | | Oury Marciano | 39 | VP Business Development | Board of Directors | Name | Age | Position(s) | | :--------------- | :-- | :---------- | | Saad Bendidi | 64 | Director | | Julien Benitah | 41 | Director | | Franco Cassar | 63 | Director | | James Lasry | 55 | Director | | Paul Packer | 52 | Director | | Ira Greenstein | 64 | Director | | Rachel Bitan | 47 | Director | - Franco Cassar, Ira Greenstein, and Rachel Bitan are considered **'independent directors'** under Nasdaq rules and applicable SEC rules[339](index=339&type=chunk) [B. Compensation of Executive Directors and Executive Officers](index=53&type=section&id=ITEM%206.B.%20Compensation%20of%20Executive%20Directors%20and%20Executive%20Officers) Executive officers' compensation for 2022 included base salaries and, for some, cash bonuses, with the company also having an Equity Incentive Plan, adopted in June 2022, allowing for grants of nominal cost or phantom options, reserving a maximum of **2,645,684 Ordinary Shares** 2022 Summary Compensation Table for NEOs | Name and Principal Position | Year | Salary ($) | Bonus ($) | All Other Compensation ($) | Total ($) | | :-------------------------- | :--- | :--------- | :-------- | :------------------------- | :-------- | | Saad Bendidi, Chairman | 2022 | 174,419 | — | 21,140 | 195,559 | | Mustapha Jamaleddine, CEO | 2022 | 377,291 | — | 83,116 | 460,407 | | Julien Benitah, CFO | 2022 | 176,465 | 96,300 | 10,262 | 283,027 | - The Forafric 2022 Long Term Employee Share Incentive Plan was adopted on June 9, 2022, reserving a maximum of **2,645,684 Ordinary Shares** for awards[348](index=348&type=chunk)[352](index=352&type=chunk) - Non-employee directors are compensated with **$40 thousand** per annum, shares equivalent to **$25 thousand** annually, and additional fees for attending board meetings and serving as committee chairpersons[359](index=359&type=chunk)[360](index=360&type=chunk) [C. Board Practices](index=56&type=section&id=ITEM%206.C.%20Board%20Practices) The Board of Directors consists of seven members and has established an Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee, all composed of independent directors, and has adopted a formal policy for reviewing and approving related person transactions - The Board of Directors has seven members and maintains an Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee[362](index=362&type=chunk)[364](index=364&type=chunk) - All members of the Audit Committee (Franco Cassar, Ira Greenstein, Rachel Bitan) are independent, with Franco Cassar qualifying as an **'audit committee financial expert'**[365](index=365&type=chunk) - The company qualifies as a **'controlled company'** under Nasdaq rules but has chosen not to rely on the associated exemptions, maintaining a majority of independent directors and fully independent committees[341](index=341&type=chunk)[342](index=342&type=chunk) - A formal written policy for Related Person Transactions (exceeding **$120 thousand**) was adopted, requiring Audit Committee approval[375](index=375&type=chunk)[376](index=376&type=chunk)[377](index=377&type=chunk) - Directors are generally appointed for three-year terms and may be removed by ordinary or special resolution of shareholders[382](index=382&type=chunk)[383](index=383&type=chunk) [D. Employees](index=59&type=section&id=ITEM%206.D.%20Employees) As of December 31, 2022, the company's subsidiaries employed approximately **750 individuals** across four countries, with employee relations considered good and no labor union representation, focusing on employee welfare, development, and incentive programs - As of December 31, 2022, the company had approximately **750 employees** across four countries[384](index=384&type=chunk) - None of the employees are represented by labor unions, and employee relations are considered good[384](index=384&type=chunk) - The company is dedicated to promoting employee welfare, development, and personal growth through incentive programs[384](index=384&type=chunk) [E. Share Ownership](index=59&type=section&id=ITEM%206.E.%20Share%20Ownership) As of the report date, Lighthouse Settlement is the largest beneficial owner, holding **71.62%** of the Ordinary Shares, while all directors and executive officers as a group beneficially own less than **1%** of the total outstanding Ordinary Shares Beneficial Ownership of Ordinary Shares | Name of Beneficial Owners | Number of Ordinary Share Beneficially Owned | Percentage of Outstanding Ordinary Share | | :------------------------ | :---------------------------------------- | :--------------------------------------- | | Lighthouse Settlement | 19,250,483 | 71.62% | | All directors and executive officers as a group (8 individuals) | 13,200 | 0.05% | - Lighthouse Settlement, controlled by Lighthouse Corporation PTC, is the sole shareholder of Lighthouse Capital Limited, which holds the majority of shares[390](index=390&type=chunk) - Beneficial ownership percentages are based on **26,879,102 Ordinary Shares** outstanding as of the report date[386](index=386&type=chunk) [Item 7. Major Shareholders and Related Party Transactions](index=60&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details the company's major shareholders and significant transactions with related parties, elaborating on the Business Combination's impact on share distribution and outlining various related agreements, including PIPE financing, convertible bonds, related party loans, and lock-up agreements [A. Major Shareholders](index=60&type=section&id=ITEM%207.A.%20Major%20Shareholders) Information regarding major shareholders is provided in Item 6.E. Share Ownership - This section refers to **'Item 6. Directors, Senior Management and Employees—E. Share Ownership'** for major shareholder information[391](index=391&type=chunk) [B. Related Party Transactions](index=60&type=section&id=ITEM%207.B.%20Related%20Party%20Transactions) The Business Combination on June 9, 2022, involved the Seller receiving **17,004,762 Ordinary Shares**, **1,550,000 Ordinary Shares** from a subscription agreement, an **$8 million** payment, and **516,666 warrants**, with related agreements including a PIPE Investment of **$14.0 million**, conversion of **$11.5 million FAHL Bonds** into **1,248,426 Ordinary Shares**, and conversion of **$15.1 million FAHL Related Party Loans** into **1,445,164 Ordinary Shares** - As a result of the Business Combination, the Seller received **17,004,762 Ordinary Shares** on the Closing Date, an additional **1,550,000 Ordinary Shares**, an **$8,000,000** principal payment, and **516,666 warrants**[393](index=393&type=chunk)[394](index=394&type=chunk) - The PIPE Investment resulted in the purchase of **1,320,195 Ordinary Shares** for approximately **$14.0 million** in gross proceeds[397](index=397&type=chunk) - FAHL Bonds totaling **$11.5 million** were converted into **1,248,426 Ordinary Shares** at **$9.45 per share** upon consummation of the Business Combination[399](index=399&type=chunk) - Approximately **$15.1 million** in FAHL Related Party Loans were repaid or converted into **1,445,164 Ordinary Shares** at **$10.50 per share**[400](index=400&type=chunk) - A Lock-Up Agreement restricts the Seller and Sponsors from selling **20,574,702 Ordinary Shares** for **180 days** post-closing or until specific price conditions are met[401](index=401&type=chunk) - The company has an exclusive supply agreement with Millcorp Geneve SA (a wholly-owned subsidiary of the Seller) to obtain at least **80%** of its annual wheat requirements, which was extended through March 31, 2026[406](index=406&type=chunk)[713](index=713&type=chunk) - Purchases from Millcorp were **$207.2 million** in 2022[406](index=406&type=chunk)[713](index=713&type=chunk) [C. Interests of Experts and Counsel](index=64&type=section&id=ITEM%207.C.%20Interests%20of%20Experts%20and%20Counsel) This item is not applicable for the registrant - This item is marked as **'Not applicable'**[410](index=410&type=chunk) [Item 8. Financial Information](index=64&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section confirms the inclusion of consolidated financial statements in the annual report and provides details on legal proceedings and dividend policy, stating the company is not currently involved in any material legal proceedings and does not anticipate paying dividends in the foreseeable future [A. Consolidated Statements and Other Financial Information](index=64&type=section&id=ITEM%208.A.%20Consolidated%20Statements%20and%20Other%20Financial%20Information) The consolidated financial statements are appended to this annual report, and the company is not currently a party to any material legal proceedings, with no dividends declared in the past and none expected in the foreseeable future as earnings will be retained for business growth - Consolidated financial statements are included as part of this annual report[410](index=410&type=chunk) - The company is not currently a party to any legal proceeding or investigation likely to have a material adverse effect on its business[411](index=411&type=chunk) - The company has not declared any dividends in the past and does not expect to pay cash dividends in the foreseeable future, intending to retain funds for business development and growth[412](index=412&type=chunk) [B. Significant Changes](index=64&type=section&id=ITEM%208.B.%20Significant%20Changes) No significant changes have occurred since the date of the audited consolidated financial statements, other than those disclosed elsewhere in this annual report - No significant changes have been experienced since the date of the audited consolidated financial statements, except as disclosed elsewhere in the report[412](index=412&type=chunk) [Item 9. The Offer and Listing](index=65&type=section&id=ITEM%209.%20THE%20OFFER%20AND%20LISTING) The company's Ordinary Shares and Warrants are listed on the NASDAQ Global Market under the symbols **"AFRI"** and **"AFRIW,"** respectively, with other sub-items related to offering and listing details not applicable [A. Offering and Listing Details](index=65&type=section&id=ITEM%209.A.%20Offering%20and%20Listing%20Details) The company's Ordinary Shares and Warrants are listed on the NASDAQ Global Market under the symbols **"AFRI"** and **"AFRIW"** - Ordinary Shares and Warrants are listed on NASDAQ Global Market under symbols **"AFRI"** and **"AFRIW"**[413](index=413&type=chunk) [B. Plan of Distribution](index=65&type=section&id=ITEM%209.B.%20Plan%20of%20Distribution) This item is not applicable for the registrant - This item is marked as **'Not applicable'**[413](index=413&type=chunk) [C. Markets](index=65&type=section&id=ITEM%209.C.%20Markets) The company's Ordinary Shares and Warrants are listed on the NASDAQ Global Market under the symbols **"AFRI"** and **"AFRIW"** - Ordinary Shares and Warrants are listed on NASDAQ Global Market under symbols **"AFRI"** and **"AFRIW"**[413](index=413&type=chunk) [D. Selling Shareholders](index=65&type=section&id=ITEM%209.D.%20Selling%20Shareholders) This item is not applicable for the registrant - This item is marked as **'Not applicable'**[413](index=413&type=chunk) [E. Dilution](index=65&type=section&id=ITEM%209.E.%20Dilution) This item is not applicable for the registrant - This item is marked as **'Not applicable'**[413](index=413&type=chunk) [F. Expenses of the Issue](index=65&type=section&id=ITEM%209.F.%20Expenses%20of%20the%20Issue) This item is not applicable for the registrant - This item is marked as **'Not applicable'**[413](index=413&type=chunk) [Item 10. Additional Information](index=65&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section provides additional information on the company's share capital, corporate governance, and legal framework, detailing the Memorandum and Articles of Association, including rules for director and shareholder meetings, voting requirements, and anti-takeover measures under Gibraltar law [A. Share Capital](index=65&type=section&id=ITEM%2010.A.%20Share%20Capital) This item is not applicable, with details referring to Exhibit 2.2 - This item is marked as **'Not applicable'** and refers to **'Exhibit 2.2 — Description of Securities'**[414](index=414&type=chunk)[415](index=415&type=chunk) [B. Memorandum and Articles of Association](index=65&type=section&id=ITEM%2010.B.%20Memorandum%20and%20Articles%20of%20Association) The company was registered in Gibraltar on May 26, 2022, with its governance defined by its Memorandum and Articles of Association and the Companies Act, including rules for director and shareholder meetings, voting requirements, and anti-takeover measures under Gibraltar law - The company was registered as a public company limited by shares in Gibraltar on May 26, 2022[414](index=414&type=chunk) - Directors are generally appointed for three-year terms and can be removed by ordinary or special resolution[418](index=418&type=chunk)[421](index=421&type=chunk)[426](index=426&type=chunk)[427](index=427&type=chunk) - A quorum for directors' meetings is half the appointed directors, rounded up, and for general meetings, it's **33 1/3%** of issued and outstanding share capital[416](index=416&type=chunk)[428](index=428&type=chunk) - Ordinary resolutions require a simple majority (more than **50%**) of voting rights, while extraordinary resolutions require at least **75%** majority[429](index=429&type=chunk) - Gibraltar law includes anti-takeover measures such as the Companies (Cross-Border Mergers) Regulations 2010 and **'Squeeze Out provisions'** (s.208 of the Companies Act 1930 and s.352(A) of the Companies Act)[433](index=433&type=chunk)[435](index=435&type=chunk)[436](index=436&type=chunk) [C. Material Contracts](index=69&type=section&id=ITEM%2010.C.%20Material%20Contracts) The company has not entered into any material contracts outside the ordinary course of business, other than those described in Item 7.B. Related Party Transactions or elsewhere in this annual report - No material contracts outside the ordinary course of business, other than those described in **'Item 7. Major Shareholders and Related Party Transactions – B. Related Party Transactions'** or elsewhere in the report[438](index=438&type=chunk) [D. Exchange Controls](index=69&type=section&id=ITEM%2010.D.%20Exchange%20Controls) There are currently no currency control restrictions on remittances of dividends, proceeds from share sales, or interest payments to non-residents of Gibraltar - No currency control restrictions exist on remittances of dividends, share sale proceeds, or interest payments to non-residents of Gibraltar[439](index=439&type=chunk) [E. Taxation](index=69&type=section&id=ITEM%2010.E.%20Taxation) This section provides a detailed analysis of U.S. federal income tax considerations for holders of the company's Ordinary Shares and Warrants, addressing the potential for the company to be treated as a U.S. corporation under Section 7874 of the Code, the tax treatment of distributions, sales, and exercises of warrants, and the complex Passive Foreign Investment Company (PFIC) rules - The company is incorporated and tax resident in Gibraltar, but the IRS may assert it should be treated as a U.S. corporation under Section 7874 of the Code, though this is not expected based on current analysis[449](index=449&type=chunk)[452](index=452&type=chunk)[453](index=453&type=chunk) - Distributions on Ordinary Shares are treated as dividends to the extent of earnings and profits, then as a tax-free return of capital, and any excess as capital gain[463](index=463&type=chunk) - Dividends are generally not eligible for the dividends received deduction for U.S. corporations[463](index=463&type=chunk) - The company does not believe it is a **Passive Foreign Investment Company (PFIC)** for its current taxable year and does not expect to become one, but this determination is annual and subject to change[480](index=480&type=chunk)[481](index=481&type=chunk) - If the company were a PFIC, U.S. Holders would be subject to special tax rules (excess distribution rules) unless a Qualified Electing Fund (QEF) or mark-to-market election is made[484](index=484&type=chunk)[487](index=487&type=chunk)[494](index=494&type=chunk) - Non-U.S. Holders are generally not subject to U.S. federal income tax on dividends or gains unless effectively connected with a U.S. trade or business, or if certain presence requirements are met for individuals[504](index=504&type=chunk) [F. Dividends and Paying Agents](index=83&type=section&id=ITEM%2010.F.%20Dividends%20and%20Paying%20Agents) This item is not applicable for the registrant - This item is marked as **'Not applicable'**[515](index=515&type=chunk) [G. Statement by Experts](index=83&type=section&id=ITEM%2010.G.%20Statement%20by%20Experts) This item is not applicable for the registrant - This item is marked as **'Not applicable'**[515](index=515&type=chunk) [H. Documents on Display](index=83&type=section&id=ITEM%2010.H.%20Documents%20on%20Display) The company is subject to SEC periodic reporting requirements under the Exchange Act, filing annual reports on Form 20-F, which are available for inspection at the SEC's public reference facilities and on its EDGAR website, and as a foreign private issuer, the company is exempt from certain proxy statement and insider trading rules - The company files annual reports on Form 20-F with the SEC, available at SEC public reference facilities and on EDGAR[515](index=515&type=chunk) - As a foreign private issuer, the company is exempt from certain Exchange Act rules, including those for proxy statements and Section 16 insider trading provisions[515](index=515&type=chunk) [I. Subsidiary Information](index=83&type=section&id=ITEM%2010.I.%20Subsidiary%20Information) Information regarding the company's subsidiaries is provided in Item 4.A. History and Development of the Company - This section refers to **'Item 4. Information on the Company — A. History and Development of the Company'** for subsidiary information[516](index=516&type=chunk) [J. Annual Report to Security Holders](index=83&type=section&id=ITEM%2010.J.%20Annual%20Report%20to%20Security%20Holders) If required to provide an annual report to security holders under Form 6-K, the company will submit it in electronic format according to the EDGAR Filer Manual - Annual reports to security holders, if required under Form 6-K, will be submitted electronically via EDGAR[516](index=516&type=chunk) [Item 11. Quantitative and Qualitative Disclosures About Market Risk](index=84&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to various market risks, including foreign exchange risk (primarily MAD, USD, EUR), credit risk from commercial sales, and commodity price risk for agricultural products, which it manages through derivative instruments, credit monitoring, and policies limiting unhedged commodity positions - Primary foreign currency exposures are the Moroccan Dirham, US Dollar, and Euro, with potential use of derivative instruments to reduce risk[518](index=518&type=chunk) - The company faces credit and counterparty risks from commercial sales, actively monitored through exposure reporting and credit analysis[519](index=519&type=chunk)[520](index=520&type=chunk) - Agricultural commodities (Flour, Semolina, Pasta, Couscous) are subject to price fluctuations, managed through derivative contracts and policies limiting unhedged fixed price positions[521](index=521&type=chunk)[522](index=522&type=chunk) - Inflation has not had a material impact on the company's results of operations in recent years[524](index=524&type=chunk) [Item 12. Description of Securities Other Than Equity Securities](index=84&type=section&id=ITEM%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECURITIES) Items 12.D.3 and 12.D.4 are not applicable as the company does not have any American Depositary Shares, with other required information included in Exhibit 2.3 - Items 12.D.3 and 12.D.4 are not applicable due to the absence of American Depositary Shares[524](index=524&type=chunk) - All other applicable information for this item is provided in Exhibit 2.3[524](index=524&type=chunk) [Part II: Other Information](index=85&type=section&id=PART%20II) This section covers defaults, modifications to security holder rights, controls and procedures, audit committee expertise, code of ethics, principal accountant fees, and changes in certifying accountant [Item 13. Defaults, Dividend Arrearages and Delinquencies](index=85&type=section&id=ITEM%2013.%20DEFAULTS%2C%20DIVIDEND%20ARREARAGES%20AND%20DELINQUENCIES) There are no defaults, dividend arrearages, or delinquencies to report - This item is marked as **'None'**[525](index=525&type=chunk) [Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds](index=85&type=section&id=ITEM%2014.%20MATERIAL%20MODIFICATIONS%20TO%20THE%20RIGHTS%20OF%20SECURITY%20HOLDERS%20AND%20USE%20OF%20PROCEEDS) The rights of security holders remain unchanged, as described in Item 10, and the use of proceeds section is not applicable - Rights of security holders remain unchanged, as described in **'Item 10. Additional Information'**[525](index=525&type=chunk) - The **'Use of Proceeds'** section is marked as **'Not applicable'**[525](index=525&type=chunk) [Item 15. Controls and Procedures](index=85&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) As of December 31, 2022, the company's disclosure controls and procedures were deemed effective, with management not yet providing an assessment of internal control over financial reporting due to the recent Business Combination in June 2022, and no material changes in internal controls occurred during the reporting period - Disclosure controls and procedures were evaluated and deemed effective as of December 31, 2022[525](index=525&type=chunk) - Management has not yet provided an assessment of internal control over financial reporting due to the recent Business Combination in June 2022[526](index=526&type=chunk) - An attestation report from the registered public accounting firm is not required because the company is a non-accelerated filer and an **'emerging growth company'**[527](index=527&type=chunk) - No material changes in internal controls over financial reporting occurred during the period covered by this annual report[527](index=527&type=chunk) [Item 16. [RESERVED]](index=86&type=section&id=ITEM%2016.%20%5BRESERVED%5D) This item is reserved - This item is marked as **'[RESERVED]'**[529](index=529&type=chunk) [Item 16A. Audit Committee Financial Expert](index=86&type=section&id=ITEM%2016A.%20AUDIT%20COMMITTEE%20FINANCIAL%20EXPERT) Franco Cassar, the chair of the audit committee, has been determined to qualify as an **'audit committee financial expert'** as defined by SEC rules and satisfies the financial sophistication requirements of The NASDAQ Global Market, and is also independent - Franco Cassar, chair of the audit committee, is qualified as an **'audit committee financial expert'** and is independent[529](index=529&type=chunk) [Item 16B. Code of Ethics](index=86&type=section&id=ITEM%2016B.%20CODE%20OF%20ETHICS) Following the Business Combination, the company posted its Code of Conduct and Ethics and plans to disclose any amendments or waivers as required by SEC or securities exchange rules - The company posted its Code of Conduct and Ethics after the Business Combination and will disclose any amendments or waivers[530](index=530&type=chunk) [Item 16C. Principal Accountant Fees and Services](index=86&type=section&id=ITEM%2016C.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) The aggregate audit fees billed by the principal external auditors were **$480 thousand** in 2022 and **$555 thousand** in 2021, with the audit committee's policy to pre-approve all audit and non-audit services Principal Accountant Fees | Category | 2022 (In thousand) | 2021 (In thousand) | | :--------------- | :----------------- | :----------------- | | Audit fees | $480,000 | $555,000 | | Audit-related fees | - | - | | Tax fees | - | - | | All other fees | - | - | | Total | $480,000 | $555,000 | - The audit committee pre-approves all audit and non-audit services provided by the principal auditor[534](index=534&type=chunk) [Item 16D. Exemptions from the Listing Standards for Audit Committees](index=86&type=section&id=ITEM%2016D.%20EXEMPTIONS%20FROM%20THE%20LISTING%20STANDARDS%20FOR%20AUDIT%20COMMITTEES) This item is not applicable for the registrant - This item is marked as **'Not applicable'**[534](index=534&type=chunk) [Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers](index=86&type=section&id=ITEM%2016E.%20PURCHASES%20OF%20EQUITY%20SECURITIES%20BY%20THE%20ISSUER%20AND%20AFFILIATED%20PURCHASERS) This item is not applicable for the registrant - This item is marked as **'Not applicable'**[535](index=535&type=chunk) [Item 16F. Change in Registrant's Certifying Accountant](index=86&type=section&id=ITEM%2016F.%20CHANGE%20IN%20REGISTRANT%27S%20CERTIFYING%20ACCOUNTANT) On June 9, 2022, Marcum LLP was dismissed as Globis' independent registered public accounting firm, and UHY LLP was engaged as the new independent registered public accounting firm for Forafric Global PLC, with no disagreements or reportable events during their engagement - Marcum LLP was dismissed as Globis' independent registered public accounting firm on June 9, 2022[536](index=536&type=chunk) - UHY LLP was engaged as Forafric Global PLC's independent registered public accounting firm for the year ended December 31, 2022[536](index=536&type=chunk) - No adverse opinions, disclaimers, qualifications, or modifications were issued by Marcum LLP, and there were no disagreements or reportable events[537](index=537&type=chunk) [Item 16G. Corporate Governance](index=87&type=section&id=ITEM%2016G.%20CORPORATE%20GOVERNANCE) Further information on corporate governance is provided in Item 6. Directors, Senior Management and Employees - This section refers to **'Item 6. Directors, Senior Management and Employees'** for more information on corporate governance[539](index=539&type=chunk) [Item 16H. Mine Safety Disclosure](index=87&type=section&id=ITEM%2016H.%20MINE%20SAFETY%20DISCLOSURE) This item is not applicable for the registrant - This item is marked as **'Not applicable'**[539](index=539&type=chunk) [Item 16I. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections](index=87&type=section&id=ITEM%2016I.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) This item is not applicable for the registrant - This item is marked as **'Not applicable'**[539](index=539&type=chunk) [Part III: Financial Statements and Exhibits](index=87&type=section&id=PART%20III) This section presents the audited consolidated financial statements, including balance sheets, statements of operations, cash flows, and detailed notes, along with a list of all filed exhibits [Item 17. Financial Statements](index=87&type=section&id=ITEM%2017.%20FINANCIAL%20STATEMENTS) The company has elected to provide financial statements pursuant to Item 18 - The company has elected to provide financial statements under Item 18[539](index=539&type=chunk) [Item 18. Financial Statements](index=87&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents the audited consolidated financial statements of Forafric Global PLC and its subsidiaries for the years ended December 31, 2022, 2021, and 2020, including the Independent Registered Public Accounting Firm's Report, Consolidated Balance Sheets, Statements of Operations and Comprehensive (Loss) Income, Statements of Changes in Stockholders' Equity, Statements of Cash Flows, and detailed Notes to Consolidated Financial Statements [Report of Independent Registered Public Accounting Firm](index=92&type=section&id=ITEM%2018.Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) UHY LLP, the independent registered public accounting firm, audited the consolidated financial statements of Forafric Global PLC for the years ended December 31, 2022, 2021, and 2020, issuing an unqualified opinion that the financial statements present fairly, in all material respects, the financial position and results of operations in conformity with U.S. GAAP - UHY LLP audited the consolidated financial statements for 2022, 2021, and 2020[546](index=546&type=chunk)[550](index=550&type=chunk) - An unqualified opinion was issued, confirming fair presentation of financial position, results of operations, and cash flows in conformity with U.S. GAAP[546](index=546&type=chunk) - The audit did not include an opinion on the effectiveness of the company's internal controls over financial reporting[548](index=548&type=chunk) [Consolidated Balance Sheets](index=93&type=section&id=ITEM%2018.Consolidated%20Balance%20Sheets) The consolidated balance sheets show total assets of **$307.2 million** in 2022, up from **$299.9 million** in 2021, with total liabilities increasing to **$262.2 million** in 2022 from **$252.3 million** in 2021, and total stockholders' equity decreasing to **$45.0 million** in 2022 from **$47.7 million** in 2021 Consolidated Balance Sheet Highlights (in thousands USD) | Category | Dec 31, 2022 | Dec 31, 2021 | | :------------------------ | :----------- | :----------- | | Total current assets | $143,572 | $117,548 | | Property, plant, and equipment, net | $100,527 | $109,476 | | Goodwill | $45,898 | $51,571 | | Total assets | $307,164 | $299,902 | | Total current liabilities | $238,181 | $202,897 | | Total liabilities | $262,209 | $252,250 | | Total Stockholders' equity | $44,955 | $47,652 | - Cash and cash equivalents increased from **$14.4 million** in 2021 to **$24.8 million** in 2022[552](index=552&type=chunk) - Lines of credit for wheat inventories significantly increased from **$70.4 million** in 2021 to **$137.5 million** in 2022[552](index=552&type=chunk) [Consolidated Statements of Operations and Comprehensive (Loss) Income](index=95&type=section&id=ITEM%2018.Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20(Loss)%20Income) The company reported a net loss of **$19.2 million** in 2022, an increase from **$7.8 million** in 2021 and **$0.1 million** in 2020, with revenues growing to **$289.8 million** in 2022 from **$261.7 million** in 2021, but gross profit decreased due to a higher increase in cost of sales, and operating income turned into a loss in 2022 Consolidated Statements of Operations Highlights (in thousands USD) | Category | 2022 | 2021 | 2020 | | :------------------------ | :--------- | :-------- | :-------- | | Revenues | $289,772 | $261,679 | $196,596 | | Cost of sales | $260,399 | $219,311 | $156,188 | | Gross profit | $29,373 | $42,368 | $40,408 | | Operating (loss) income | $(1,422) | $3,386 | $9,891 | | Net loss | $(19,170) | $(7,784) | $(139) | | Loss per ordinary shares outstanding – basic and diluted | $(0.72) | $(0.38) | $(0.22) | - Revenues increased by **10.7%** from 2021 to 2022, but cost of sales increased by **18.7%**, leading to a **30.7%** decrease in gross profit[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk) - Operating income shifted from a profit of **$3.4 million** in 2021 to a loss of **$1.4 million** in 2022[555](index=555&type=chunk) - Net loss significantly widened to **$19.2 million** in 2022, primarily due to increased interest expense and foreign exchange losses[555](index=555&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=96&type=section&id=ITEM%2018.Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Total stockholders' equity decreased from **$47.7 million** in 2021 to **$45.0 million** in 2022, reflecting a net loss of **$19.2 million** and a foreign exchange loss of **$7.2 million**, partially offset by a merger and recapitalization that added **$45.0 million** to additional paid-in capital and the issuance of Ordinary and Class Z shares Stockholders' Equity Changes (in thousands USD) | Category | Dec 31, 2022 | Dec 31, 2021 | | :---------------------------------------- | :----------- | :----------- | | Ordinary Shares (Amount) | $27 | $21 | | Class Z Ordinary Shares (Amount) | $30 | $0 | | Additional paid-in capital | $143,658 | $119,979 | | Accumulated deficit | $(102,678) | $(83,550) | | Accumulated other comprehensive (loss) income | $(2,984) | $3,685 | | Non-controlling interest | $6,902 | $7,517 | | Total Stockholders' equity | $44,955 | $47,652 | - The merger and recapitalization in 2022 resulted in the issuance of **7,451,249 Ordinary Shares** and **29,999,990 Class Z Ordinary Shares**, contributing **$44.9 million** to additional paid-in capital[557](index=557&type=chunk) - Net loss of **$19.1 million** and a foreign exchange loss of **$7.2 million** were significant factors impacting equity in 2022[557](index=557&type=chunk) [Consolidated Statements of Cash Flows](index=97&type=section&id=ITEM%2018.Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased to **$57.6 million** in 2022 from **$26.0 million** in 2021, while net cash provided by financing activities significantly increased to **$75.0 million** in 2022 from **$42.8 million** in 2021, driven by cash acquired in merger, proceeds from forward share purchase agreements, and increased borrowings on financial debt Consolidated Statements of Cash Flows Highlights (in thousands USD) | Category | 2022 | 2021 | 2020 | | :---------------------------------------- | :--------- | :-------- | :-------- | | Net cash used in operating activities | $(57,569) | $(26,048) | $(11,482) | | Net cash used in investing activities | $(4,030) | $(14,514) | $(699) | | Net cash provided by financing activities | $74,991 | $42,754 | $18,766 | | Net increase in cash and cash equivalents | $10,434 | $1,710 | $3,689 | | Cash and cash equivalents, end of year | $24,827 | $14,393 | $12,683 | - Operating cash outflows increased significantly in 2022, mainly due to changes in accounts receivable and other receivables[559](index=559&type=chunk) - Financing activities provided substantial cash in 2022, including **$14.0 million** from merger, **$6.7 million** from forward share purchase agreements, and **$11.0 million** from convertible bonds[559](index=559&type=chunk)[570](index=570&type=chunk) - Total borrowings on financial debt were **$193.0 million** in 2022, with repayments of **$146.9 million**[559](index=559&type=chunk) [Notes to Consolidated Financial Statements](index=98&type=section&id=ITEM%2018.Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's nature of operations, basis of presentation, significant accounting policies, and specific financial statement line items, covering areas such as the reverse recapitalization, lease obligations, accounts receivable, inventories, property/plant/equipment, goodwill/intangible assets, accrued expenses, lines of credit, long-term debt, forward share purchase agreements, contingent consideration, income taxes, variable interest entities and acquisitions, stockholders' equity, equity incentive plan, earnings per share, commitments/contingencies, segment information, related parties, and subsequent events [1. Nature of Operations and Basis of Presentation](index=98&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20BASIS%20OF%20PRESENTATION) Forafric Global PLC operates as a market leader in the Moroccan milling industry, offering flours, semolina, pasta, couscous, rice, and starches, and underwent a restructuring in 2021, spinning off its Grain Trading business (Millcorp), and completed a Business Combination with Globis Acquisition Corp. in June 2022, which was accounted for as a reverse recapitalization - The company is a market leader in the Moroccan milling industry, offering a range of wheat-based products[561](index=561&type=chunk) - A restructuring in June 2021 involved the spin-off of the Grain Trading business (Millcorp) to the Parent Company, with Millcorp's financials excluded retroactively[562](index=562&type=chunk)[563](index=563&type=chunk) - The Business Combination on June 9, 2022, with Globis Acquisition Corp. was accounted for as a reverse recapitalization, with FAHL as the accounting acquirer, continuing FAHL's financial statements[564](index=564&type=chunk)[566](index=566&type=chunk) Ordinary Shares Reconciliation (Dec 31, 2022) | Item | Shares | | :---------------------------------------------------------------- | :----------- | | FAHL existing shares at closing date - converted | 20,555,595 | | Issuance of ordinary shares upon exercise of warrants | 1,887,464 | | Ordinary shares issued in PIPE | 1,320,195 | | Conversion of convertible bonds to ordinary shares | 1,248,426 | | Consideration and accrued interest paid to selling shareholder in ordinary shares | 1,550,000 | | Conversion of shareholder loans to ordinary shares | 1,445,164 | | Total Recapitalization | 7,451,249 | | Total ordinary shares outstanding as of December 31, 2022 | 26,879,102 | [2. Summary of Significant Accounting Policies](index=100&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) The company's financial statements are prepared in accordance with U.S. GAAP, requiring signif