Forafric PLC(AFRI) - 2023 Q4 - Annual Report

PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS 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] ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE This section is marked as 'Not Applicable', indicating no information on offer statistics and expected timetable - The section is marked as 'Not Applicable'[75] ITEM 3. KEY INFORMATION This section provides key information on capitalization, indebtedness, offer reasons, use of proceeds, and significant risk factors A. [Reserved] This sub-section is reserved and contains no specific information - This sub-section is reserved[76] B. Capitalization and Indebtedness 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] C. Reasons for the Offer and Use of Proceeds 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] D. Risk Factors 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] - Exercise of Warrants would increase the number of shares eligible for future resale, resulting in dilution to shareholders[81][88] - 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] - 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][133] - The Moroccan market, where most operations are located, is highly regulated, with restrictions on soft wheat imports and government subsidies affecting competition[160][162] - 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][105][108][109] ITEM 4. INFORMATION ON THE COMPANY This section details the company's history, business operations, market position, strategic strengths, and future growth opportunities A. History and Development of the Company 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] - Completed a Business Combination on June 9, 2022, resulting in its Ordinary Shares and Warrants trading on Nasdaq under 'AFRI' and 'AFRIW'[172][176] - 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] - Qualifies as an 'emerging growth company' and 'foreign private issuer', allowing exemptions from certain SEC reporting and corporate governance requirements[179][182] B. Business Overview 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] - 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][209] - 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][215] - Business strategy focuses on sustainable growth, value generation, and commitment to social well-being, diversity, environmental balance, and ethical conduct[203][205] C. Organizational Structure 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] D. Property, plant and equipment 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] - 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] ITEM 4A. UNRESOLVED STAFF COMMENTS This section is marked as 'Not applicable', indicating no unresolved staff comments - The section is marked as 'Not applicable'[257] ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS This section analyzes the company's financial condition and operating results, highlighting factors like raw material costs, industrial costs, and liquidity 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][267][268] - 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][271] Key Components of Results of Operations 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][274] - Raw material prices are influenced by global and regional supply, weather, crop conditions, government policies, and demand for biofuels[275] - 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] Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 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][288] - Decrease in other expense by 30.6% was primarily attributable to a decrease in foreign exchange (gain) loss[286] 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 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] - 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][303] Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 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] - Gross profit decreased significantly due to increases in raw material and shipping costs[311][312] - Other expenses increased due to higher interest expense and foreign currency exchange losses, partially offset by a gain from derivatives and contingent considerations[314] 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 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] Critical Accounting Estimates 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][329] - 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][339] - Inventories are valued at the lower of cost or net realizable value using the weighted average cost method[340] - 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][353] ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 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 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] B. Compensation of Executive Directors and Executive Officers 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] - 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][387] 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][396] C. Board Practices 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] - The Audit Committee, Remuneration Committee, and Nominating and Corporate Governance Committee are composed of independent directors[401][403][407] - 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][375] - Directors are generally appointed for three-year terms and can be removed by ordinary or special resolution of shareholders[416][417][475][479] D. Employees 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] - 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] E. Share Ownership 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] ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 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 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] B. Related Party Transactions 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] - PIPE financing generated approximately $14.0 million in gross proceeds from the sale of 1,320,195 Ordinary Shares[436] - FAHL Bonds totaling $11.5 million were converted into 1,248,426 Ordinary Shares at $9.45 per share[437] - FAHL Related Party Loans of approximately $15.1 million were converted into 1,445,164 Ordinary Shares at $10.50 per share[439] - 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] - The company adopted a formal written policy for review and approval of related person transactions exceeding $120,000 by the audit committee[447] C. Interests of Experts and Counsel 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] ITEM 8. FINANCIAL INFORMATION 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 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] - No current legal proceedings or investigations are expected to have a material adverse effect[451] - The company does not anticipate paying dividends for the foreseeable future, intending to retain funds for business development and growth[118][452] B. Significant Changes 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] ITEM 9. THE OFFER AND LISTING 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][456] - Sub-sections B, D, E, and F are marked as 'Not applicable'[455][457][458][459] A. Offering and Listing Details. 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] B. Plan of Distribution This sub-section is marked as 'Not applicable' - The sub-section is marked as 'Not applicable'[455] C. Markets 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] D. Selling Shareholders This sub-section is marked as 'Not applicable' - The sub-section is marked as 'Not applicable'[457] E. Dilution This sub-section is marked as 'Not applicable' - The sub-section is marked as 'Not applicable'[458] F. Expenses of the Issue This sub-section is marked as 'Not applicable' - The sub-section is marked as 'Not applicable'[459] ITEM 10. ADDITIONAL INFORMATION 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 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][463] B. Memorandum and Articles of Association 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] - Authorized to issue 100,000,000 Ordinary Shares ($0.001 par value) and 1,000,000 Preferred Shares ($0.001 par value)[464][465][776] - As of December 31, 2023, 26,879,202 Ordinary Shares were issued and outstanding[776] - Director meetings require a quorum of half the appointed directors, and directors are generally appointed for three-year terms[468][470][475] - Shareholder meetings require 7 days' prior written notice for ordinary resolutions and 21 days' for special resolutions[472] - 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][488][489] C. Material Contracts 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] D. Exchange Controls 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] E. Taxation 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][505][509] - 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] - 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] - 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][561] F. Dividends and Paying Agents This section is marked as 'Not applicable', indicating no specific disclosures regarding dividends and paying agents - The section is marked as 'Not applicable'[565] G. Statement by Experts This section is marked as 'Not applicable', indicating no specific disclosures regarding statements by experts - The section is marked as 'Not applicable'[565] H. Documents on Display 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] - Reports are available at SEC public reference facilities and on sec.gov[566] - As a foreign private issuer, exempt from certain proxy statement and Section 16 insider trading provisions[566] I. Subsidiary Information 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] J. Annual Report to Security Holders 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] ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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] - Subject to credit and counterparty risks from commercial sales, monitored through exposure reporting and credit analysis[571] - Commodities risk arises from unpredictable price fluctuations of agricultural raw materials like flour, semolina, pasta, and couscous[573] - 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][575] ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 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] - Other applicable information is included in Exhibit 2.3[576] PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES This section states that there are no defaults, dividend arrearages, or delinquencies - No defaults, dividend arrearages, or delinquencies[576] ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 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] - The 'Use of Proceeds' sub-section is marked as 'Not applicable'[578] ITEM 15. CONTROLS AND PROCEDURES 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] - Internal control over financial reporting was effective as of December 31, 2023[580] - No attestation report from the public accounting firm on internal control over financial reporting due to emerging growth company status[581] - No material changes in internal controls over financial reporting occurred during the period[582] ITEM 16 [RESERVED] This section is reserved and contains no specific information - This section is reserved[583] ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT 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] ITEM 16B. CODE OF ETHICS 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] ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES 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] ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES This section is marked as 'Not applicable', indicating no exemptions from listing standards for audit committees - The section is marked as 'Not applicable'[590] ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS 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] ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT 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] - UHY LLP was engaged as the new independent registered public accounting firm for Forafric Global PLC[592] - No disagreements with Marcum on accounting principles or practices, and no reportable events occurred[593] ITEM 16G. CORPORATE GOVERNANCE 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] - Relied on exemptions for board majority independence, director nominee selection by independent directors, and composition of Corporate Governance and Nominating and Remuneration Committees[599] - Following home country practice may afford shareholders less protection than under U.S. domestic issuer rules[600] ITEM 16H. MINE SAFETY DISCLOSURE This section is marked as 'Not applicable', indicating no mine safety disclosure requirements - The section is marked as 'Not applicable'[601] ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS This section is marked as 'Not applicable', indicating no foreign jurisdictions that prevent inspections - The section is marked as 'Not applicable'[601] ITEM 16J. INSIDER TRADING POLICIES 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] ITEM 16K. CYBERSECURITY 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] - Oversight by Chief Information Officer and audit committee; policies are in place but not yet formally written or approved[603][604] - No material IT system failures or cybersecurity attacks experienced to date[605] PART III ITEM 17. FINANCIAL STATEMENTS The company has elected to provide its financial statements pursuant to Item 18 - Financial statements are provided pursuant to Item 18[607] ITEM 18. FINANCIAL STATEMENTS 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] - The financial statements cover the years ended December 31, 2023, 2022, and 2021[624] 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 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][611][612][613][614][616]