Forafric PLC(AFRI) - 2024 Q4 - Annual Report

Introduction 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][16][20][37][55] - 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] Part I Item 1. Identity of Directors, Senior Management and Advisers 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] Item 2. Offer Statistics and Expected Timetable 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] Item 3. Key Information 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] A. [Reserved] This sub-item is reserved and contains no specific information B. Capitalization and Indebtedness 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] C. Reasons for the Offer and Use of Proceeds 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] D. Risk Factors 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 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] - 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] - 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][90] Risks Related to Our Business 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][109] - 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] - The Moroccan flour market is imbalanced with supply exceeding demand, forcing price competition and reduced margins to maintain market share[115] Risks Related to Our Growth 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][135] - 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][137][138] Risks Related to Government Regulation 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] - The Moroccan market is highly regulated, with restrictions on soft wheat imports to protect local producers, and part of flour being government-subsidized[142] - 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][142] Risks Related to Competition 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] - Effective competition requires continuous focus on improving production and distribution efficiency, developing and maintaining market share, and strong customer relationships[143] Risks Related to Data Security and Intellectual Property 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][145] - Cyberattacks and security incidents are expected to accelerate in frequency and impact, especially with increased AI use and sophisticated attacker techniques[145] - IT system failures, cybersecurity attacks, or vulnerabilities could result in legal liability, reputational damage, business interruption, and harm to competitive position[146] Risks Related to Our Capital Requirements 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] - Working capital needs are directly affected by agricultural commodity prices; increases in prices generally lead to higher borrowing levels[147] - 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] Risks Related to Incorporation in Gibraltar 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][149] - 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] Item 4. Information on the Company This section provides