Exhibit 99.1
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2024, AND DECEMBER 31, 2023
AND FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| June 30, 2024 | December 31, 2023 | |||||||
| UNAUDITED | AUDITED | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 16,368 | $ | 24,021 | ||||
| Accounts receivable, net | 36,271 | 34,716 | ||||||
| Amount due from related parties | 1,379 | 1,358 | ||||||
| Other receivables | 12,699 | 17,115 | ||||||
| Inventories | 28,663 | 28,378 | ||||||
| Prepaid expenses and other current assets | 8,692 | 15,654 | ||||||
| Total current assets | 104,072 | 121,242 | ||||||
| Property, plant, and equipment, net | 114,028 | 116,920 | ||||||
| Right-of-use assets | 13,015 | 13,385 | ||||||
| Goodwill | 48,009 | 48,488 | ||||||
| Intangible assets, net | 4,496 | 4,648 | ||||||
| Other assets, noncurrent | 3,502 | 4,767 | ||||||
| Total assets | $ | 287,122 | $ | 309,450 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Lines of credit – working capital | $ | 52,858 | $ | 48,517 | ||||
| Lines of credit – wheat inventories | 104,639 | 126,452 | ||||||
| Accounts payable | 57,339 | 46,461 | ||||||
| Accrued expenses | 18,823 | 18,115 | ||||||
| Contract liabilities | 1,932 | 1,272 | ||||||
| Current portion of long-term debt | 7,856 | 10,471 | ||||||
| Contingent consideration liability | 1,061 | 1,326 | ||||||
| Other liabilities, current | 773 | 645 | ||||||
| Total current liabilities | 245,281 | 253,259 | ||||||
| Long-term debt | 10,585 | 11,841 | ||||||
| Loan from related party | 1,504 | 1,486 | ||||||
| Deferred tax liabilities, net | 10,780 | 10,982 | ||||||
| Other liabilities, noncurrent | 2,662 | 2,676 | ||||||
| Total liabilities | 270,812 | 280,244 | ||||||
| Commitments and contingencies (Note 19) | - | - | ||||||
| Stockholders’ equity: | ||||||||
| Preferred Shares; $ par value; authorized, and issued and outstanding, at June 30, 2024 and December 31, 2023, respectively | $ | - | $ | - | ||||
| Ordinary shares, $ par value; authorized; issued and outstanding, at June 30, 2024 and December 31, 2023 | 27 | 27 | ||||||
| Additional paid-in capital | 143,263 | 143,127 | ||||||
| Accumulated deficit | (128,110 | ) | (115,354 | ) | ||||
| Accumulated other comprehensive loss | (5,799 | ) | (5,005 | ) | ||||
| Non-controlling interest | 6,929 | 6,411 | ||||||
| Total Stockholders’ equity | 16,310 | 29,206 | ||||||
| Total liabilities and Stockholders’ equity | $ | 287,122 | $ | 309,450 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 2 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
(In thousands, except share and per share data)
| June 30, | June 30, | |||||||
| Six months ended | ||||||||
| June 30, | June 30, | |||||||
| 2024 | 2023 | |||||||
| Revenues | $ | 165,238 | $ | 145,616 | ||||
| Cost of sales | 146,520 | 131,969 | ||||||
| Gross profit | 18,718 | 13,647 | ||||||
| Operating expenses: | ||||||||
| Selling, general and administrative expenses | 22,327 | 15,024 | ||||||
| Total operating expenses | 22,327 | 15,024 | ||||||
| Operating loss | (3,609 | ) | (1,377 | ) | ||||
| Other expense (income): | ||||||||
| Interest income | - | (55 | ) | |||||
| Interest expense | 6,959 | 6,529 | ||||||
| Change in fair value of derivatives and contingent consideration | 287 | 1,579 | ||||||
| Foreign exchange gain | (504 | ) | (1,500 | ) | ||||
| Total other expense | 6,742 | 6,553 | ||||||
| Loss before taxes | (10,351 | ) | (7,930 | ) | ||||
| Income tax expense | 1,696 | 646 | ||||||
| Net loss | (12,047 | ) | (8,576 | ) | ||||
| Net income attributable to noncontrolling interest | 709 | 46 | ||||||
| Net loss attributable to the Company | $ | (12,756 | ) | $ | (8,622 | ) | ||
| Loss per ordinary shares outstanding – basic and diluted | $ | ) | $ | ) | ||||
| Weighted average number of shares outstanding - basic and diluted | ||||||||
| Net loss | (12,047 | ) | (8,576 | ) | ||||
| Other comprehensive loss net of tax: | ||||||||
| Foreign currency translation adjustments | (985 | ) | (2,021 | ) | ||||
| Total other comprehensive loss | (985 | ) | (2,021 | ) | ||||
| Comprehensive loss | (13,032 | ) | (10,597 | ) | ||||
| less: Comprehensive income attributable to non-controlling interest | 518 | 313 | ||||||
| Comprehensive loss attributable to the Company | $ | (13,550 | ) | $ | (10,910 | ) | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
(In thousands, except share and per share data)
| Shares | Amount | Shares | Amount | capital | Deficit | Income (Loss) | Interest | Equity | ||||||||||||||||||||||||||||
Ordinary shares | Class Z Ordinary shares | Additional paid-in | Accumulated | Accumulated Other Comprehensive | Non- Controlling | Total Stockholders’ | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | capital | Deficit | Loss | Interest | Equity | ||||||||||||||||||||||||||||
Balance, January 1, 2023 | 26,879,102 | $ | 27 | 29,999,990 | $ | 30 | $ | 143,658 | $ | (102,678 | ) | $ | (2,984 | ) | $ | 6,902 | $ | 44,955 | ||||||||||||||||||
| Shares repurchased and retired | - | - | (29,999,990 | ) | (30 | ) | - | - | - | - | (30 | ) | ||||||||||||||||||||||||
| Shares issued upon exercise of warrants | 100 | - | - | - | 1 | - | - | - | 1 | |||||||||||||||||||||||||||
| Share-based compensation | - | - | - | - | 34 | - | - | - | 34 | |||||||||||||||||||||||||||
| Net (loss) income | - | - | - | - | - | (8,622 | ) | - | 46 | (8,576 | ) | |||||||||||||||||||||||||
| Foreign exchange (loss) gain | - | - | - | - | - | - | (2,288 | ) | 267 | (2,021 | ) | |||||||||||||||||||||||||
Balance, June 30, 2023 | 26,879,202 | $ | 27 | - | $ | - | $ | 143,693 | $ | (111,300 | ) | $ | (5,272 | ) | $ | 7,215 | $ | 34,363 | ||||||||||||||||||
Balance, January 1, 2024 | 26,879,202 | $ | 27 | - | $ | - | $ | 143,127 | $ | (115,354 | ) | $ | (5,005 | ) | $ | 6,411 | $ | 29,206 | ||||||||||||||||||
Balance, value | 26,879,202 | $ | 27 | - | $ | - | $ | 143,127 | $ | (115,354 | ) | $ | (5,005 | ) | $ | 6,411 | $ | 29,206 | ||||||||||||||||||
| Share-based compensation | - | - | - | - | 136 | - | - | - | 136 | |||||||||||||||||||||||||||
| Net (loss) income | - | - | - | - | - | (12,756 | ) | - | 709 | (12,047 | ) | |||||||||||||||||||||||||
| Foreign exchange loss | - | - | - | - | - | - | (794 | ) | (191 | ) | (985 | ) | ||||||||||||||||||||||||
| Foreign exchange (loss) gain | - | - | - | - | - | - | (794 | ) | (191 | ) | (985 | ) | ||||||||||||||||||||||||
Balance, June 30, 2024 | 26,879,202 | $ | 27 | - | $ | - | $ | 143,263 | (128,110 | ) | (5,799 | ) | $ | 6,929 | $ | 16,310 | ||||||||||||||||||||
Balance, value | 26,879,202 | $ | 27 | - | $ | - | $ | 143,263 | (128,110 | ) | (5,799 | ) | $ | 6,929 | $ | 16,310 | ||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands, except share and per share data)
June 30, 2024 | June 30, 2023 | |||||||
| Six months ended | ||||||||
June 30, 2024 | June 30, 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (12,047 | ) | $ | (8,576 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation of property, plant and equipment | 2,108 | 2,009 | ||||||
| Amortization of intangible assets | 175 | 68 | ||||||
| Amortization of right-of-use assets | 607 | 488 | ||||||
| Bad debt expense | 419 | 413 | ||||||
| Impairment of other assets | 4,921 | - | ||||||
| Change in fair value of derivatives and contingent consideration | 287 | 1,579 | ||||||
| Non-cash accretion of interest expense | 242 | - | ||||||
| Share-based compensation | 386 | 34 | ||||||
| Deferred income taxes | (116 | ) | 124 | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (2,392 | ) | 1,720 | |||||
| Other receivables | 4,263 | 19,464 | ||||||
| Prepaid expenses and other current assets | 92 | 467 | ||||||
| Inventories | (603 | ) | (36,975 | ) | ||||
| Other assets, noncurrent | 1,232 | (1,246 | ) | |||||
| Accounts payable | 11,359 | 35,834 | ||||||
| Lease liabilities | (351 | ) | (246 | ) | ||||
| Other payables and liabilities | 2,808 | (4,665 | ) | |||||
| Net cash provided by operating activities | 13,390 | 10,492 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property, plant, and equipment | (563 | ) | (4,121 | ) | ||||
| Sales of property, plant, and equipment | 1 | 5 | ||||||
| Additions to intangible assets | (102 | ) | (71 | ) | ||||
| Net cash used in investing activities | (664 | ) | (4,187 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from exercise of warrants | - | 1 | ||||||
| Borrowings on working capital facilities, net | 4,688 | 819 | ||||||
| Borrowings on lines of credit – Wheat inventories | 39,825 | 60,381 | ||||||
| Repayments on lines of credit – Wheat inventories | (60,564 | ) | (65,618 | ) | ||||
| Borrowings on loans | 1,440 | 3,750 | ||||||
| Repayments on loans | (5,488 | ) | (3,018 | ) | ||||
| Net cash used in financing activities | (20,099 | ) | (3,685 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (280 | ) | (2,292 | ) | ||||
| Net (decrease) increase in cash and cash equivalents | (7,653 | ) | 328 | |||||
| Cash and cash equivalents, beginning of period | 24,021 | 24,827 | ||||||
| Cash and cash equivalents, end of period | $ | 16,368 | $ | 25,155 | ||||
| Non-cash financing activities: | ||||||||
| Shares repurchased and retired | $ | - | $ | 30 | ||||
| Supplemental cash flow disclosures: | ||||||||
| Interest paid | $ | 6,848 | $ | 8,266 | ||||
| Net income taxes paid | $ | 1,812 | $ | 522 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements
| 5 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2023
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Nature of Operations - Forafric Global PLC and Subsidiaries (the “Company”, “we”, “us” or “our”), formerly known as Forafric Agro Holdings Limited, through its subsidiaries is a market leader in the milling industry in Morocco, with a complete offering of flours and semolina, secondary processing products including pasta and couscous, rice, and starches (“Milling Business”).
These condensed consolidated financial statements are the condensed consolidated financial statements of the Company and its subsidiaries, each of which is controlled, and is based on the financial position and results of operations of the Company as a standalone company. Intercompany balances and transactions between consolidated entities have been eliminated. Refer to Note 21 — Related Parties for further information regarding the Company’s related party transactions.
| 6 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Basis of Presentation - The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with US GAAP for interim financial information. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the Unaudited Condensed Consolidated Financial Statements of the Company as of June 30, 2024, and for the six months ended June 30, 2024, and 2023. The results of operations for the six months ended June 30, 2024, and 2023 are not necessarily indicative of the operating results for the full year. It is suggested that these Unaudited Condensed Consolidated Financial Statements be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2023. The Balance Sheet as of December 31, 2023, has been derived from the Company’s audited Financial Statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant Accounting Policies – The significant accounting policies used in preparing these condensed consolidated financial statements were applied on a basis consistent with those reflected in our consolidated financial statements that are included in the annual report on Form 20-F for the year ended December 31, 2023 that was filed with the U.S. Securities and Exchange Commission (“SEC”) on April 30, 2024.
Use of Estimates - The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to use judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of net sales and expenses during the reporting period. Significant accounting policy elections, estimates and assumptions include, among others, allowance for credit losses, valuation assumptions of goodwill and intangible assets, useful lives of long-lived assets, and measurement of income tax assets. Given the uncertainty of the global economic environment, our estimates could be significantly different than future performance. Actual results could differ from these estimates. Historically, the aggregate differences, if any, between our estimates and actual amounts in any year have not had a material effect on our condensed consolidated financial statements.
Principles of Consolidation – The accompanying condensed consolidated financial statements include all entities controlled by the Company. Intercompany accounts and transactions are eliminated.
Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive the benefits from its activities that could potentially be significant to the entity. In assessing control, potential voting rights that are currently exercisable or convertible are considered. The accounts of subsidiaries are included in the condensed consolidated financial statements from the date that control commences until the date that control ceases.
The Company uses the Black-Scholes option pricing model to determine the grant date fair value of its stock options and phantom options, respectively, as well as the fair value at each reporting period for liability classified awards. This model requires the Company to estimate the expected volatility and the expected term of the stock options, which are highly complex and subjective variables. The Company uses an expected volatility of its stock price during the expected life of the options that is based on the historical performance of the Company’s stock price as well as including an estimate using similar companies. The expected term is computed using the simplified method as the Company’s best estimate given its lack of actual exercise history. The Company has selected a risk-free rate based on the implied yield available on U.S. Treasury securities with a maturity equivalent to the expected exercise term of the stock option. The inputs to the valuation of phantom options are observable in the market, and as such are classified as Level 2 in the fair value hierarchy. The Company accounts for forfeitures of share-based awards as the occur.
| 7 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
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”). The functional currency is translated into U.S. dollars for balance sheet accounts using currency exchange rates in effect as of the balance sheet date, and for revenue and expense accounts using a weighted-average exchange rate during the fiscal year. The transactions in foreign currency (that is a different currency than the functional currency of the entity) are converted at the exchange rate prevailing to the date of the transaction. The assets and liabilities denominated in foreign currencies are evaluated in the current period on the date of the closing or at the opening rate, when applicable. The translation adjustments are deferred as a separate component of equity in “Accumulated other comprehensive income”. Gains or losses resulting from transactions denominated in foreign currencies and intercompany debt that is not of a long-term investment nature are included in (gain) loss on foreign currency exchange in the condensed consolidated statements of operations and comprehensive loss.
Credit Risk – Financial instruments potentially subject to concentration of credit risk consist primarily of cash and cash equivalents and trade accounts receivable. At times during the periods presented, the Company had funds in excess of Deposit Insurance programs in Morocco, on deposit at various financial institutions. Management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.
Foreign currency forward contracts –The Company is exposed to foreign currency exchange rate fluctuations in the normal course of its business, which the Company at times manages through the use of foreign currency forward contracts. The Company has entered into foreign currency forward contracts and accounts for these instruments in accordance with Accounting Standards Codification (“ASC”) Topic 815, “Derivatives and Hedging,” which establishes accounting and reporting standards requiring that derivative instruments be recorded on the balance sheet as either an asset or liability measured at fair value. The Company’s foreign currency contracts are not designated as hedging instruments under ASC 815; accordingly, changes in the fair value are recorded in current period earnings. For more information, refer to Note 13 - Foreign currency forward contracts.
Fair Value Measurements – The Company follows the guidance in ASC 820, “Fair Value Measurement,” for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period. The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).
The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used to value the assets and liabilities:
| - | Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| - | Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| - | Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The Company’s financial instruments include cash equivalents, accounts receivable from customers, other receivables, prepaid expenses and other current assets, accounts payable and accrued liabilities, all of which are typically short-term in nature. The Company believes that the carrying amounts of these financial instruments reasonably approximate their fair values due to their short-term nature.
The Company measures the derivative liabilities or assets related to foreign currency forward contracts at fair value on a recurring basis. Refer to Note 13 – Foreign currency forward contracts.
The Company measures the contingent consideration liability at fair value on a recurring basis. Refer to Note 14 – Contingent Consideration Liability for further information.
| 8 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Emerging Growth Company Status – the Company is an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). Under the JOBS Act, EGCs can delay adopting new or revised accounting standards issued until such time as those standards apply to private companies. The Company has elected to use this extended transition period. In providing this relief, the JOBS Act does not preclude the Company from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies. The Company will continue to use this relief until the earlier of the date that it (a) is no longer an emerging growth company or (b) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act.
Reclassifications – Certain prior period amounts have been reclassified to conform to the current period presentation.
Liquidity and going concern – The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. As of January 16, 2025, the Company’s management has assessed its ability to continue as a going concern and has concluded that it is able to do so for at least the next twelve months from the date of issuance of these condensed consolidated financial statements.
Management’s assessment is based on the following considerations:
| - | Cash and Liquidity: As of December 31, 2024, the Company had cash and cash equivalents of $12,802, which management believes is sufficient to fund its planned operations and meet its obligations for the next twelve months. Management continues to actively manage cash flows, including monitoring receivables and payables, and has implemented cost control measures to conserve cash. |
| - | 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 $10.0 million. The Company expects that the proceeds from this transaction will be used to fund its operations, reduce liabilities, and support its ongoing strategic initiatives. |
| - | Management is also actively pursuing several potential sources of additional financing, including negotiations with investors and financial institutions, as well as exploring cost-reduction initiatives and the potential sale of other non-core assets, which management believes could be utilized if additional capital is needed to support operations beyond the next twelve months. |
Based on the above considerations, management believes that the Company has sufficient financial resources to meet its obligations as they come due at least the next twelve months from the date of issuance of these condensed consolidated financial statements.
3. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In November 2023, the FASB issued ASU No 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 mainly requires more enhanced information about a reportable segment’s expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company is still evaluating the impact of this ASU on its condensed consolidated financial statements and related disclosures and will adopt it for the year ended December 31, 2024.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which enhances the transparency and decision usefulness of income tax disclosures by requiring; (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. For public business entities, the standard is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is determining the impact of the ASU 2023-09 on its condensed consolidated financial statements.
Other than as described above, no accounting pronouncements issued or effective during the six months ended June 30, 2024 has had or is expected to have a material impact on the condensed consolidated financial statements.
4. LEASES
The Company has operating leases for real estate and vehicles. The Company has finance leases for equipment and construction land space. Leases are classified as finance leases because ownership of the underlying assets transfers at the end the lease term. Remaining lease terms for these leases range from less than one year to six years.
The Company does not record leases with a term of 12 months or less on the balance sheet.
| 9 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Supplemental balance sheet information related to leases was as follows:
SCHEDULE OF BALANCE SHEET CLASSIFICATION
| June 30, | December 31, | |||||||||
| Balance Sheet | 2024 | 2023 | ||||||||
| Classification | (in thousands) | |||||||||
| Assets | ||||||||||
| Operating leases | Right-of-use assets | $ | 3,270 | $ | 3,377 | |||||
| Finance leases | Right-of-use assets | 9,745 | 10,008 | |||||||
| Total assets | $ | 13,015 | $ | 13,385 | ||||||
Liabilities Current liabilities | ||||||||||
| Operating leases | Current portion of long-term debt | $ | 627 | $ | 625 | |||||
| Finance leases | Current portion of long-term debt | 773 | 1,009 | |||||||
| Total current liabilities | 1,400 | 1,634 | ||||||||
| Noncurrent liabilities | ||||||||||
| Operating leases | Long-term debt | 2,087 | 2,191 | |||||||
| Finance leases | Long-term debt | 377 | 642 | |||||||
| Total noncurrent liabilities | 2,464 | 2,833 | ||||||||
| Total liabilities | $ | 3,864 | $ | 4,467 | ||||||
Right-of-use assets and their corresponding lease liabilities are measured and recognized based on the present value of the future minimum lease payments over the lease term at the commencement date.
Discount Rates
For the majority of its leases, the Company uses the rate implicit in the lease. For leases without an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments for those leases.
The weighted-average discount rates for the Company’s leases were as follows:
SCHEDULE OF WEIGHTED AVERAGE DISCOUNT RATES OF LEASES
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Operating leases | 5.0 | % | 5.0 | % | ||||
| Finance leases | 6.6 | % | 7.0 | % | ||||
Lease Payments
The Company includes lease payments under options to extend or terminate the lease in the measurement of the right-of-use asset and lease liability when it is reasonably certain that it will exercise such options. Fixed lease costs represent the explicitly quantified lease payments prescribed by the lease agreement and are included in the measurement of the right-of-use asset and corresponding lease liability.
The weighted-average remaining lease term of the Company’s leases were as follows:
SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERM
June 30, 2024 | December 31, 2023 | |||||||
| Operating leases | 6.6 years | 6.5 years | ||||||
| Finance leases | 0.9 years | 1.4 years |
| 10 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The components of lease expense for the six months ended June 30, 2024 and 2023 were as follows:
SCHEDULE OF LEASE EXPENSE
| 2024 | 2023 | |||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Operating lease cost | $ | 328 | $ | 246 | ||||
| Finance lease cost: | ||||||||
| Amortization of right-of-use assets | 279 | 242 | ||||||
| Interest on lease liabilities | 50 | 36 | ||||||
| Total lease cost | $ | 657 | $ | 524 | ||||
As of June 30, 2024, future maturities of lease liabilities were as follows:
SCHEDULE OF FUTURE OF LEASE LIABILITIES
Operating Leases | 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 | ||||
| 11 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Other information related to leases for the six months ended June 30, 2024 and 2023 were as follows:
SCHEDULE OF OTHER INFORMATION RELATED TO LEASES
| 2024 | 2023 | |||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| 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
The gross and realizable value of accounts receivable are detailed as follows:
SCHEDULE OF ACCOUNT RECEIVABLES
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Accounts receivable | $ | 51,603 | $ | 49,695 | ||||
| Allowance for credit losses | (15,332 | ) | (14,979 | ) | ||||
| Total | $ | 36,271 | $ | 34,716 | ||||
Changes in allowances for credit losses consisted of:
SCHEDULE OF CHANGES IN ALLOWANCES FOR CREDIT LOSSES
Allowance for Credit Losses | ||||
| (in thousands) | ||||
| Balance at December 31, 2022 | $ | (14,067 | ) | |
| Current period provision for expected credit losses | (87 | ) | ||
| Foreign currency exchange adjustments | (825 | ) | ||
| Balance at December 31, 2023 | $ | (14,979 | ) | |
| Current period provision for expected credit losses | (419 | ) | ||
| Foreign currency exchange adjustments | 66 | |||
| Balance at June 30, 2024 | $ | (15,332 | ) | |
6. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of:
SCHEDULE OF PREPAID EXPENSE AND OTHER CURRENT ASSETS
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| 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 | ||||
| 12 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
7. INVENTORIES
Inventories are detailed as follows:
SCHEDULE OF INVENTORIES
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| 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.
8. PROPERTY, PLANT AND EQUIPMENT, NET
SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT, NET
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| 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 | ||||
Depreciation expense was $2,108 and $2,009 for the six months ended June 2024 and 2023, respectively.
9. GOODWILL AND OTHER INTANGIBLE ASSETS
Changes in the carrying amount of goodwill allocated to its reporting units for the six months ended June 30, 2024, and the year ended December 31, 2023, are as follows:
SCHEDULE OF GOODWILL
| Soft | Durum | Couscous | ||||||||||||||
| Wheat | Wheat | and Pasta | Total | |||||||||||||
| (in thousands) | ||||||||||||||||
| Balance at December 31, 2022 | $ | 31,410 | $ | 6,507 | $ | 7,981 | $ | 45,898 | ||||||||
| Foreign currency exchange adjustments | 1,741 | 381 | 468 | 2,590 | ||||||||||||
| Balance at December 31, 2023 | $ | 33,151 | $ | 6,888 | $ | 8,449 | $ | 48,488 | ||||||||
| Goodwill, Beginning balance | $ | 33,151 | $ | 6,888 | $ | 8,449 | $ | 48,488 | ||||||||
| Foreign currency exchange adjustments | (361 | ) | (53 | ) | (65 | ) | (479 | ) | ||||||||
| Balance at June 30, 2024 | $ | 32,790 | $ | 6,835 | $ | 8,384 | $ | 48,009 | ||||||||
| Goodwill, Ending balance | $ | 32,790 | $ | 6,835 | $ | 8,384 | $ | 48,009 | ||||||||
The Company performed the annual impairment assessment as of December 31, 2023, which did not result in impairment losses.
| 13 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Changes in the carrying amount of intangible assets for the six months ended June 30, 2024, and the year ended December 31, 2023, are as follows:
SCHEDULE OF INTANGIBLE ASSETS
| Trade | Customer | Other | Total Intangible | |||||||||||||
| names | relationships | intangibles | Assets | |||||||||||||
| (in thousands) | ||||||||||||||||
| Balance at December 31, 2022 | $ | 927 | $ | 1,796 | $ | 1,000 | $ | 3,723 | ||||||||
| Acquisitions | - | - | 987 | 987 | ||||||||||||
| Amortization | - | (92 | ) | (168 | ) | (260 | ) | |||||||||
| Foreign currency exchange adjustments | 40 | 71 | 87 | 198 | ||||||||||||
| Balance at December 31, 2023 | $ | 967 | $ | 1,775 | $ | 1,906 | $ | 4,648 | ||||||||
| Beginning balance | $ | 967 | $ | 1,775 | $ | 1,906 | $ | 4,648 | ||||||||
| Acquisitions | - | - | 102 | 102 | ||||||||||||
| Amortization | - | (46 | ) | (129 | ) | (175 | ) | |||||||||
| Foreign currency exchange adjustments | (23 | ) | (46 | ) | (10 | ) | (79 | ) | ||||||||
| Balance at June 30, 2024 | $ | 944 | $ | 1,683 | $ | 1,869 | $ | 4,496 | ||||||||
| Ending balance | $ | 944 | $ | 1,683 | $ | 1,869 | $ | 4,496 | ||||||||
As of June 30, 2024, the weighted-average remaining amortization period for intangibles other than goodwill is 8.8 years and future intangible amortization is expected to total the following:
SCHEDULE OF FUTURE INTANGIBLE AMORTIZATION
| (in thousands) | ||||
| Remainder of 2024 | $ | 245 | ||
| 2025 | 490 | |||
| 2026 | 490 | |||
| 2027 | 391 | |||
| 2028 | 292 | |||
| Thereafter | 1,644 | |||
| Total amortization | $ | 3,552 | ||
10. ACCRUED EXPENSES
Accrued expenses consist of:
SCHEDULE OF ACCRUED EXPENSES
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| 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
Lines of Credit – working capital
The Company has entered into unsecured revolving credit agreements with several financial institutions to fund working capital requirements (“WC Lines of Credit”). The WC Lines of Credit provide the Company with the ability to borrow funds under consolidated lines of credit of up to approximately $53,000. Interest rates range from 5.6% to 7.5%. The WC Lines of Credit renew automatically on an annual basis. The Company and certain of its subsidiaries are borrowers under the WC Lines of Credit, and their obligations are cross guaranteed by certain other subsidiaries.
| 14 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Lines of Credit – wheat inventories
The Company has entered into credit agreements with several financial institutions for asset-based credit facilities in order to fund wheat raw material purchases (“Wheat Credit Facilities”). The Wheat Credit Facilities provide the ability to borrow funds under consolidated lines of credit of up to approximately $135,000, subject to certain borrowing base criteria. The Wheat Credit Facilities are secured by the Company’s inventory. Interest rates range from 2.75% to 7.5% per annum. The Wheat Credit Facilities must be renewed on a semi-annual basis. The Company and certain of its subsidiaries are borrowers under the Wheat Credit Facilities, and their obligations are cross guaranteed by certain other subsidiaries.
12. LONG-TERM DEBT
The long-term debt of is presented as follows:
SCHEDULE OF LONG TERM DEBT
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Loans | $ | 14,577 | $ | 17,845 | ||||
| Leases | 3,864 | 4,467 | ||||||
| Total outstanding debt | 18,441 | 22,312 | ||||||
| Less current portion | (7,856 | ) | (10,471 | ) | ||||
| Total long-term debt | $ | 10,585 | $ | 11,841 | ||||
The term loans and other financial liabilities are evaluated according to the amortized cost method using the effective interest rate of the loan. The loan issuance costs and premiums are determined at inception and are amortized over the useful life of the loan via the effective interest rate.
Term Loans
The Company maintains term loans with several financial institutions (the “Term Loans”). The Term Loans are unsecured and have fixed monthly payments ranging from approximately $13 to $215. Interest on the Term Loans range from 5.5%-9.0% per annum. The Term Loans mature through 2034.
Lease Obligations
The Company owes $3,864 and $4,467 related to its leases as of June 30, 2024 and December 31, 2023, respectively. Lease obligations are payable in monthly installments of principal and interest and are collateralized by the related assets financed. Refer to Note 4 for additional information regarding the Company’s leases.
The scheduled maturities of outstanding debt as of June 30, 2024, are as follows:
SCHEDULE OF MATURITIES OF 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
Our global operations require active participation in foreign exchange markets. From the beginning of 2023, the Company entered into foreign currency forward contracts to reduce the risk arising from foreign exchange rate fluctuations.
We do not utilize hedge accounting and as such value open foreign currency forward contracts at fair value with the change in unrealized gain or loss recorded in “Change in fair value of derivatives and contingent consideration” on the Company’s condensed consolidated statements of operations.
| 15 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The Company had 18 foreign currency forward contracts outstanding as of June 30, 2024, with a notional value of $15,200 and €17,500 ($18,800), respectively. All of these contracts will expire by December 31, 2024. These instruments are typically short term in duration and as such are presented within current liabilities.
Foreign currency forward contracts are marked-to-market based on the difference between the forward rate and the exchange rate as of the reporting period; thus, the Company measures the fair value of these contracts under a Level 2 input.
The foreign currency forward contract liabilities totaled $462 as of June 30, 2024. The foreign currency forward contract assets and liabilities totaled $430 and $337, respectively at December 31, 2023. These assets and liabilities are recorded within prepaid expenses and other current assets, and other liabilities, current, respectively on the condensed consolidated balance sheets. The Company recorded a loss on foreign exchange forward contracts of $552 and $1,614 for the six months ended June 30, 2024, and 2023, respectively.
14. CONTINGENT CONSIDERATION LIABILITY
In accordance with the terms of the Business Combination Agreement, the Company will pay to the Seller 20% of any cash proceeds received by Company before the five-year anniversary of the Closing resulting from the exercise of Company Warrants outstanding as of June 9, 2022.
The contingent consideration liability is included in “Contingent consideration liability” on the consolidated balance sheet. Changes in the fair value of the liability are included in “Change in fair value of derivatives and contingent consideration” on the Consolidated Statements of Operations.
The Company utilized a probability weighted scenario-based model under level 3 to determine the fair value of the contingent consideration. Based on this valuation model, the Company determined the fair value of the contingent consideration to be $1,061 and $1,326 as of June 30, 2024, and December 31, 2023, respectively. The assumptions used in the analysis are inherently subjective; therefore, the ultimate amount of the liability may differ materially from the current estimate.
The significant unobservable inputs used in the fair value measurement of the contingent consideration liability are measures of the estimated payouts over a five-year period based on internally generated financial projections on a probability-weighted basis and a discount rate which was in a range of 4.52% to 5.33% with a weighted average of 4.52% as of June 30, 2024.
The following table presents a summary of the changes in the fair value of the contingent consideration liability:
SCHEDULE OF FAIR VALUE MEASUREMENT OF CONTINGENT CONSIDERATION LIABILITY
| (in thousands) | ||||
| December 31, 2022 | $ | 1,260 | ||
| Change in fair value | 66 | |||
| December 31, 2023 | $ | 1,326 | ||
| Change in fair value | (265 | ) | ||
| June 30, 2024 | $ | 1,061 | ||
15. INCOME TAXES
The following table presents the components of the six months ended June 30, 2024 and 2023 provision for income taxes:
SCHEDULE OF COMPONENTS OF PROVISION FOR INCOME TAX
| 2024 | 2023 | |||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Current | $ | 1,812 | $ | 522 | ||||
| Deferred | (116 | ) | 124 | |||||
| Total income tax expense | $ | 1,696 | $ | 646 | ||||
| 16 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The Company’s effective tax rate was -16% and -8% for the six months ended June 30, 2024, and 2023, respectively. The effective tax rate was lower than the Moroccan statutory rate primarily due to unrecognized tax losses and the minimum contribution due to the Moroccan tax authorities levied on turnover and other specific revenue.
During the six months ended as of June 30, 2024, and the year ended December 31, 2023, the Company has $45,199 and $37,228, respectively, as cumulative net operating losses of which $26,475 and $23,546 that begin to expire within four years, respectively.
In assessing the realizability of these deferred tax assets, management considers whether it is more-likely-than-not that some portion or all the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating loss carryforwards can be utilized. The Company considers the level of historical taxable income, scheduled reversal of temporary differences, tax planning strategies, and projected future taxable income in determining whether a valuation allowance is warranted.
As of each reporting date, we consider existing evidence, both positive and negative, that could impact our view with regard to future realization of deferred tax assets. We continue to believe it is more likely than not that the benefit for certain net operating loss carryforwards will not be realized. In recognition of this risk, we continue to provide a valuation allowance on the deferred tax assets in the amount of $5,993 and $5,172 as of June 30, 2024 and December 31, 2023, respectively. These allowance amounts correspond mainly to the carryforward losses that are not indefinite.
16. STOCKHOLDERS’ EQUITY
Capital stock
Preferred Shares - The Company is authorized to issue Preferred Shares with a par value of $ per share. The authorized Preferred Shares will be available for issuance by the Board upon the passing of an ordinary resolution of the holders of the ordinary shares. The ordinary resolutions of the stockholders of the Company will stipulate the powers, preferences and relative, participating, optional and other rights or special rights, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as well as any restrictions, of the class of preferred shares as a whole, which has not yet been determined.
Ordinary Shares - The Company is authorized to issue Ordinary Shares with a par value of $ per share. As of June 30, 2024 and December 31, 2023, a total of ordinary shares were issued and outstanding. In the event of the liquidation of the Company, after satisfaction of liabilities to creditors, the assets of the Company will be distributed to the holders of the ordinary shares in the Company in proportion to their respective shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders of a class of preferred shares with preferential rights that may be authorized by ordinary resolution in the future. The holders of ordinary shares have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the ordinary shares. The rights, preferences and privileges of holders of the ordinary shares may be subject to those of the holders of any preferred shares the Company may issue in the future.
Class Z non-redeemable and non-convertible ordinary shares - The Company is authorized to issue Class Z non-redeemable and non-convertible ordinary shares (“Class Z Ordinary Shares”) with a par value of $ per share. As of June 30, 2024 and December 31, 2023, the Company had Class Z Ordinary Shares issued and outstanding. All outstanding Class Z non-redeemable and non-convertible ordinary shares were repurchased and retired during 2023.
Warrants
Public Warrants - There were 11,461,120 public warrants outstanding at June 30, 2024 and December 31, 2023. Each public redeemable warrant entitles the registered holder to purchase one ordinary share at a price of $11.50 per share. The Company may call the outstanding public warrants for redemption in whole and not in part, at a price of $ per warrant:
| - | at any time while the warrants are exercisable; | |
| - | upon not less than 30 days’ prior written notice of redemption to each warrant holder; | |
| - | if, and only if, the reported last sale price of the Ordinary Share equals or exceeds $16.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30-day trading period ending on the third business day prior to the notice of redemption to warrant holders, and | |
| - | if, and only if, there is a current registration statement in effect with respect to the Ordinary Share underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption. |
| 17 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
Private Warrants - At June 30, 2024 and December 31, 2023, there were 4,289,722 private warrants outstanding. Each private warrant entitles the registered holder to purchase one ordinary share at a price of $11.50 per share.
Stockholder Earn-Out Rights
As a part of the Business Combination consideration, the selling stockholder shall be entitled to receive, as additional consideration, and without any action on behalf of the Company or the Company’s stockholders, additional ordinary shares (the “Earnout Shares”), to be issued as follows during the period from and after the Closing until the end of calendar year 2024 (A) Earnout Shares, if, during calendar year 2022, Adjusted EBITDA (as defined in the Business Combination Agreement) of the Company is equal to or greater than $27 million, (B) Earnout Shares, if, during calendar year 2023, Adjusted EBITDA of the Company is equal to or greater than $33 million, and (C) Earnout Shares, if, during calendar year 2024, the Buyer Trading Price (as defined in the Business Combination Agreement) during the standard market trading hours of a trading day is greater than or equal to $ for any 20 trading days within any period of 30 consecutive trading days. As of June 31, 2024, there have been Earnout Shares issued.
The Earnout have been deemed financial instruments to be issued upon the occurrence of contingent earn out provisions. The Earnout Shares are accounted for under ASC Topic 815-40, “Derivatives and Hedging”, pursuant to which the Earnout Shares are considered to be indexed to the Company’s own stock and therefore will be classified as equity instruments.
17. EQUITY INCENTIVE PLAN
In connection with the Business Combination, the Stockholders of the Company considered and approved the Forafric 2022 Long Term Employee Share Incentive Plan (the “Equity Incentive Plan”) which provides for the grant of awards, consisting of nominal cost options or phantom options to employees, directors and consultants of the Company or any of its subsidiaries. The maximum number of shares which may be the subject of awards under the Equity Incentive Plan may not exceed 10% of the issued share capital of the Company from time to time and the maximum number of shares reserved and available for issuance shall not exceed . No award can be exercised after the tenth anniversary of the date of grant. With the exception of certain special circumstances, an award can only be exercised while the award holder is employed or engaged by the Company or any of its subsidiaries. Subject to certain provisions, a vested award may be exercised in whole or in part at any time after its date of grant.
SCHEDULE OF STOCK OPTION ACTIVITY
| Stock Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (thousands) | |||||||||||||
| Outstanding as of December 31, 2023 | 64,705 | $ | 0.001 | $ | 685 | |||||||||||
| Granted | - | - | - | - | ||||||||||||
| Exercised | - | - | - | - | ||||||||||||
| Forfeited/Expired | - | - | - | - | ||||||||||||
| Outstanding as of June 30, 2024 | 64,705 | $ | 0.001 | $ | 690 | |||||||||||
| Exercisable as of June 30, 2024 | - | $ | - | $ | - | |||||||||||
The weighted-average grant-date fair value of options granted during the period ended June 30, 2024, was $.
| 18 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
As of June 30, 2024, the unrecognized compensation expense associated with the stock options is $ and it will be recognized over months from the end of June 30, 2024.
SCHEDULE OF STOCK OPTIONS VALUATION ASSUMPTIONS
| Expected term | years | |||
| Volatility | % | |||
| Expected dividend yield | % | |||
| Risk-free interest rate | % |
SCHEDULE OF STOCK OPTION ACTIVITY
| Phantom Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (thousands) | |||||||||||||
| Outstanding as of December 31, 2023 | 53,613 | $ | 0.001 | $ | 568 | |||||||||||
| Granted | - | - | - | - | ||||||||||||
| Exercised | - | - | - | - | ||||||||||||
| Forfeited/Expired | - | - | - | - | ||||||||||||
| Outstanding as of June 30, 2024 | 53,613 | $ | 0.001 | $ | 572 | |||||||||||
| Exercisable as of June 30, 2024 | - | $ | - | $ | - | |||||||||||
The weighted-average fair value of the phantom stock options for the period ended June 30, 2023 was $. The liability for outstanding phantom stock options as of June 30, 2023 was $243 and is included in other liabilities in the consolidated balance sheet.
As of June 30, 2024, the unrecognized compensation expense associated with the phantom options is $ and it will be recognized over months from the end of June 30, 2024.
SCHEDULE OF STOCK OPTIONS VALUATION ASSUMPTIONS
| Expected term | years | |||
| Volatility | % | |||
| Expected dividend yield | % | |||
| Risk-free interest rate | % |
Basic earnings per share is computed by dividing net income by the number of weighted average ordinary shares outstanding during the reporting period. The Company’s weighted average number of shares outstanding used in calculating earnings per share are and for the periods ended June 30, 2024 and 2023, respectively. Because there was no activity to cause dilution in the weighted average ordinary shares, basic and diluted earnings per share are disclosed together in each of the reporting periods.
The computation of diluted loss per share excludes the effect of earnout and option shares and warrants to purchase the Company’s shares because their inclusion would be anti-dilutive.
19. COMMITMENTS AND CONTINGENCIES
Since February 2022, the quantity of soft wheat available on the international market has decreased by 35% due to the ongoing war in Ukraine, causing the price of raw materials to increase. Despite this situation, we have not had any shortages on raw materials, and do not project to have any issuing fulfilling future orders. We have no firm and irrevocable commitments that will be affected by the war in Ukraine, and we will continue to assess the impact the war may have on our business.
The Company entered into a five-year supply agreement with Millcorp Geneva SA (“Millcorp”), pursuant to which the Company is obligated to obtain at least 80% of the Company’s annual requirements of common wheat, durum wheat, or any other cereal, from Millcorp. The agreement expired on March 31, 2023 and was subsequently amended to extend through March 2026. The purchases incurred were $53,994 and $97,641 for the periods ended June 30, 2024 and 2023, respectively.
The Company has commitments with banks to finance its operating activities. The Company has provided collateral and mortgages to banks of $25,464 as of June 30, 2024 and December 31, 2023.
| 19 |
FORAFRIC GLOBAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
From time to time the Company is involved in litigation incidental to the conduct of its business. These matters may relate to employment and labor claims, patent and intellectual property claims, claims of alleged non-compliance with contract provisions and claims related to alleged violations of laws and regulations. When applicable, the Company records accruals for contingencies when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. Defense costs are expensed as incurred and are included in professional fees. While the outcome of lawsuits and other proceedings against the Company cannot be predicted with certainty, in the opinion of management, individually or in the aggregate, no such lawsuits and other proceedings had or are expected to have a material effect on the condensed consolidated financial statements at June 30, 2024.
20. SEGMENT INFORMATION
The Company manages operations on a company-wide basis, thereby making determinations as to the allocation of resources in total rather than on a segment-level basis. The Company has designated reportable segments based on how management views its business. The Company does not segregate assets between segments for internal reporting. Therefore, asset-related information has not been presented. The reportable segments, as presented below, are consistent with the manner in which the Company reports its results to the Chief Operating Decision Maker (“CODM”).
The principal products that comprise each segment are as follows:
Soft Wheat – The Soft Wheat segment includes the production and sale of soft wheat yielding flour that is used to make desserts and sauces.
Durum Wheat - The Durum Wheat segment includes the production and sale of hard wheat yielding flour that is used to make pasta.
Couscous and Pasta – The Couscous and Pasta segment includes the secondary processing of products including couscous and pasta sold to end customers.
The Company evaluates the performance of its segments based on sales and operating income. Operating income is defined as gross profit less sales & marketing costs, direct selling, general, and administrative expenses, and other operating expenses. The amounts in the following tables are obtained from reports used by senior management and do not include income taxes. Other expenses not allocated include unallocated corporate expenses (other operating expenses).
Financial information relating to the Company’s reportable segments is as follows:
SCHEDULE OF COMPANY REPORTABLE SEGMENTS
| 2024 | 2023 | |||||||
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Sales to external customers: | ||||||||
| 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 | ||||
| Sales to external customers | $ | 165,238 | $ | 145,616 | ||||
| Direct Operating (loss) income: | ||||||||
| 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 | ) | ||
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FORAFRIC GLOBAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Geographic Information — The Company had net sales from customers outside of Morocco of approximately 15.9% (10.4% in Mali, 3.4% in Burkina and 2.1% in other countries) of total consolidated net sales from continuing operations for the six months ended June 30, 2024. Net sales are determined based on the customer destination where the products are shipped.
Long-lived assets consist of net property, plant, and equipment. The geographic location of long-lived assets is as follows:
SCHEDULE OF LONG-LIVED ASSETS NET PROPERTY, PLANT AND EQUIPMENT
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| 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
The following discussion summarizes activity between the Company and related parties:
In 2015, the Company entered into a building lease agreement for the headquarters of Forafric Maroc, a wholly owned subsidiary, with a lease term through 2024. The Company’s Parent owns 100% of the company that owns the building. Total rent is approximately $420 per year.
The purchases incurred were $53,994 and $97,641 for the periods ended June 30, 2024 and 2023, respectively. Effective on April 1, 2023, the Company amended its supply agreement with Millcorp to extend through March 2026. As of June 30, 2024, the Company had accounts payable due to Millcorp of $13,362.
The Company grants share-based payments to non-executive members of its board of directors in exchange for directors’ services. For the period ended June 30, 2024, the share-based compensation expense recognized was $.
The Company’s amounts due from related parties were $1,379 and $1,358 as of June 30, 2024, and December 31, 2023, respectively.
The Company’s amounts due to related parties were $1,504 and $1,486 as of June 30, 2024, and December 31, 2023, respectively.
The Company has not entered into any significant transactions with other related parties.
22. SUBSEQUENT EVENTS
In preparing the condensed consolidated financial statements through the June 30, 2024, the Company has evaluated subsequent events for recognition and disclosure through January 16th, 2024, the date that these condensed consolidated financial statements and accompanying notes were available for issuance.
On August 8, 2024, the Company granted additional share-based awards to new directors. The total number of options granted rises to in the form cash-settled stock options, referred to as “phantom options”.
On January 14, the Company received a delinquency letter (the “Letter”) from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”) notifying the Company that it is not in compliance with Nasdaq’s Listing Rule 5250(c)(2) due to the Company’s failure to file its interim financial statements for the period ended June 30, 2024, on Form 6-K with the Securities and Exchange Commission. Pursuant to Nasdaq Listing Rule 5250(c)(2), the Company was required to file its interim financials no later than six months following the end of its second quarter ended June 30, 2024, or December 31, 2024. The Letter received from Nasdaq has no immediate effect on the listing or trading of the Company’s ordinary shares and warrants. The Company will regain compliance upon the filing of these condensed consolidated financial statements on Form 6-K.
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.
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