8-K
Forafric Global PLC (AFRI)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d)
of
the Securities Exchange Act of 1934
Dateof Report (Date of Earliest Event Reported): June 9, 2022
FORAFRIC
GLOBAL PLC
(Exactname of registrant as specified in its charter)
| Gibraltar | 001-41416 | Not Applicable |
|---|---|---|
| (State or other jurisdiction<br><br> <br>of incorporation) | (Commission<br><br> <br>File Number) | (I.R.S. Employer<br><br> <br>Identification No.) |
| Unit 5.3, Madison Building**, Midtown, Queensway, Gibraltar** | GX11 1AA | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
011
350 20072505
Registrant’s
telephone number, including area code
GlobisAcquisition Corp.
7100W. Camino Real, Suite 302-48
BocaRaton, FL 33433
(Formername or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
| ☐ | Written<br> communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting<br> material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement<br> communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement<br> communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Ordinary<br> Shares, nominal value $0.001 per share | AFRI | The<br> Nasdaq Stock Market LLC |
| Warrants,<br> each warrant exercisable for one Ordinary Share at an exercise price of $11.50 | AFRIW | The<br> Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
INTRODUCTORY
NOTE
On June 9, 2022 (the “Closing Date”), Globis Acquisition Corp., a Delaware corporation (“Globis”), consummated the previously announced business combination pursuant to a securities purchase agreement, dated December 19, 2021 (as amended, modified or waived from time to time, the “Business Combination Agreement”) which provides for the Business Combination (as defined below) between Globis and Forafric Agro Holdings Limited, a Gibraltar private company limited by shares (“FAHL”).
In accordance with the Business Combination Agreement, the consummation of the following series of separate transactions took place (collectively, the “Business Combination”): (i) Globis formed a new holding company, Globis NV Merger Corp., a Nevada corporation (“Globis Nevada”), which changed its jurisdiction of incorporation by transferring by way of a redomiciliation and domesticating as a Gibraltar private limited company known as “Forafric Global Limited” (the “Redomiciliation”) and, following the Redomiciliation, altered its authorized and issued share capital and thereafter re-registering as a Gibraltar public company limited by shares and changed its name to “Forafric Global PLC” (referred to herein as “New Forafric”); (ii) New Forafric formed a new wholly-owned subsidiary, Globis NV Merger 2 Corp., a Nevada corporation (“Merger Sub”); (iii) Globis merged with and into Merger Sub, with Merger Sub surviving (the “Merger”); (iv) an agent was appointed to act on behalf of Globis stockholders such that, subject to and immediately following the completion of the Merger, the agent entered into a contribution and subscription agreement with New Forafric (the “Contribution Agreement”) pursuant to which the issued and outstanding shares of common stock of Merger Sub issued pursuant to the Merger will be exchanged (the “Exchange”), on a one-for-one basis, for ordinary shares, nominal value $0.001 per share, of New Forafric (the “Ordinary Shares”); and (v) on June 9, 2022, New Forafric acquired 100% of the equity interests in FAHL from Lighthouse Capital Limited (“Seller”) and FAHL became a direct subsidiary of New Forafric.
In connection with the special meeting of the stockholders of Globis held on June 7, 2022, which was adjourned and was reconvened on June 9, 2022 (the “Special Meeting”) and the Business Combination, holders of 9,612,536 shares of Common Stock, exercised their right to redeem their shares for cash at a redemption price of $10.30 per share, for an aggregate redemption amount of approximately $99 million, which was paid from Globis’ trust account established at the consummation of its initial public offering (the “Trust Account”).
As a result of the Business Combination, (i) Globis stockholders received one Ordinary Share for each issued and outstanding share of Common Stock, par value $0.0001 per share, of Globis (the “ Common Stock”) held prior to the Merger; (ii) the issued and outstanding redeemable warrants that were registered pursuant to the Registration Statement on Form S-1 (SEC File No. 333-250939) of Globis automatically became redeemable warrants to acquire Ordinary Shares at an exercise price of $11.50 per share on the terms and subject to the conditions set forth in the Warrant Agreement, dated December 10, 2020, between Globis and VStock Transfer, LLC (the “Warrant Agreement”), with the Warrant Agreement being assigned and novated by Globis to New Forafric but no other changes made to the terms of any issued and outstanding Public Warrants as a result of the Merger; (iii) each issued and outstanding warrant of Globis issued in a private placement automatically became warrants to acquire Ordinary Shares at an exercise price of $11.50 per share on the terms and subject to the conditions set forth in the Warrant Agreement (no other changes were made to the terms of any issued and outstanding private placement warrants as a result of the Merger); and (iv) each issued and outstanding unit of Globis that had not been previously separated into the underlying Common Stock and underlying warrant upon the request of the holder thereof, were cancelled and entitled the holder thereof to one Ordinary Share and one redeemable warrant to acquire one Ordinary Share at an exercise price of $11.50 per share on the terms and subject to the conditions set forth in the Warrant Agreement.
Further as a result of the Business Combination, the Seller will be paid the principal sum of $20,000,000 together with interest on the the outstanding amount from the Closing Date up to the date of payment (computed on the basis of a 360-day year consisting of twelve (12) months of thirty (30) days) accrued but unpaid thereon at the fixed per annum rate of 8%. The payment shall be made on the first anniversary of the the closing of the Business Combination. If any amount of principal and/or interest thereon is unpaid after such due date, Globis shall pay the Seller additional interest on the outstanding amount at the per annum rate of 12% (or at such lower rate as shall be the highest rate permitted under applicable usury laws).
As of the opening of trading on June 10, Ordinary Shares of New Forafric and warrants redeemable into Ordinary Shares, began trading on the Nasdaq Stock Market (“Nasdaq”) as “AFRI” and “AFRIW”, respectively.
A description of the Business Combination and the terms of the Business Combination Agreement are included in the proxy statement/prospectus filed with the Securities and Exchange Commission (the “SEC”) on May 12, 2022 in the section entitled “Proposal 3: The Business Combination Proposal” beginning on page 82 of the proxy statement/ prospectus incorporated herein by reference.
As previously disclosed, on December 31, 2021, Globis entered into a Subscription Agreement (the “PIPE Subscription Agreement”) with an accredited investor (the “PIPE Investor”), pursuant to which the PIPE Investor purchased Ordinary Share of New Forafric in a private placement following the Redomiciliation, Merger, and Exchange and prior to the closing of the Business Combination. Pursuant to the PIPE Subscription Agreement, the PIPE Investor purchased, at a purchase price of $10.50 per share, a number of Ordinary Shares (the “PIPE Shares”) that was equal to lesser of (i) 4.99% of all issued and outstanding ordinary shares, after taking into account the completion of the Business Combination and all ordinary shares issued pursuant to the FAHL Bonds (defined below) and other related subscription agreements, if any, and (ii) 1,904,761 ordinary shares (the “PIPE Investment”). The closing of the PIPE Investment was contingent upon, among other things, the substantially concurrent consummation of the Business Combination. On June 9, 2022, substantially concurrently with the Closing, the sale of the PIPE Shares was consummated, pursuant to which the PIPE Investor purchased an aggregate of 1,320,195 Ordinary Shares of New Forafric for total gross proceeds to New Forafric of approximately $13.9 million.
A description of the PIPE Subscription Agreement is included in the proxy statement/prospectus beginning on page 128 of the proxy statement/prospectus.
As previously disclosed, in connection with the Business Combination, between December 31, 2021 and January 3, 2022, investors (each a “BondInvestor”) subscribed for convertible bonds of FAHL, as issuer, in an aggregate principal amount of $11.5 million (the “FAHL Bonds”) in a private placement, issued pursuant to a Bond Subscription Deed (the “Bond SubscriptionDeed”), among FAHL, the Seller and the Bond Investors. Unless earlier converted or redeemed in accordance with the terms of the FAHL Bonds, the FAHL Bonds were to mature and be redeemed on June 15, 2026. Interest accrued on the FAHL Bonds at a rate of 6% per annum and the Bond Investors were entitled to certain customary information rights. Pursuant to the current terms of the FAHL Bonds, upon consummation of the Business Combination, the FAHL Bonds were novated to New Forafric and automatically convert into 1,248,426 Ordinary Shares of New Forafric (the “Bond Shares”) at a price per share of $9.45, which was a 10% discount to the PIPE Investment. The number of Ordinary Shares was equal to the quotient that results from dividing the aggregate principal amount of the respective FAHL Bond plus accrued but unpaid interest thereon by $9.45, subject to certain adjustments. The Bond Investors include affiliates Up and Up Capital, LLC and Globis SPAC LLC, the sponsors of Globis, who subscribed for an aggregate principal amount of $9 million of the FAHL Bonds, which converted into 977,659 Ordinary Shares of New Forafric.
As previously disclosed, certain parties affiliated with FAHL held outstanding loans issued to FAHL (the “FAHL Related Party Loans”), which, in the aggregate, equaled approximately $15.1 million as of the Closing of the Business Combination. The FAHL Related Party Loans were interest-free loans with no maturity date.
Upon
consummation of the Business Combination, all FAHL Related Party Loans were paid off or novated to New Forafric and converted into 1,445,164 Ordinary Shares of New Forafric at a price of $10.50 per share (the “Loan Shares”).
As used hereafter in this Current Report on Form 8-K, unless otherwise stated or the context indicates otherwise, the terms the “Company,” “Registrant,” “we,” “us” and “our” refer to New Forafric, after giving effect to the Business Combination.
Item1.01. Entry into a Material Definitive Agreement.
Forafric Maroc, a whollyowned subsidiary of FAHL, has entered into a Framework Agreement dated December 22, 2021 with ALAPALA Foreign Trade LLC. (ALAPALA), in for the extension of 3 existing mills and the construction of 3 new mills. This program will create a daily wheat and durum processing capacity of 2.370 metric tons within the next 30 months. Forafric Maroc’s present crushing capacity is 2.420 metric tons per day.
Item1.02. Termination of a Material Definitive Agreement
On June 9, 2022, in connection with the Business Combination, the FAHL Related Party Loans were repaid at the Closing of the Business Combination. Pursuant to the terms of the FAHL Related Party Loans, $15.1 million of the such loans was converted into 1,445,164 Ordinary Shares of New Forafric at a price of $10.50 per share at the option of the lender, the FAHL Related Party Loans were cancelled and terminated thereafter.
Item2.01. Completion of Acquisition or Disposition of Assets
The disclosure set forth in the “Introductory Note” above is incorporated by reference into this Item 2.01.
At the Special Meeting, Globis’ stockholders approved the Business Combination. On June 9, 2022, the parties to the Business Combination Agreement completed the Business Combination. Immediately after giving effect to the completion of the Business Combination (including the redemption of 9,612,536 shares of Common Stock), and the issuance of the PIPE Shares, the Bond Shares and the Loan Shares, New Forafric had the following outstanding securities:
| ● | approximately<br> 26,456,844 Ordinary Shares; |
|---|---|
| ● | approximately<br> 15,789,722 warrants, each exercisable for one Ordinary Share at a price of $11.50 per share. |
The material terms and conditions of the Merger Agreement are described in the section “Proposal 3: The Business Combination Proposal” beginning on page 82 of the proxy statement/prospectus, which are incorporated herein by reference.
FORM
10 INFORMATION
Item 2.01(f) of this Current Report on Form 8-K states that if the predecessor registrant was a shell company, as Globis was immediately before the Business Combination, then the registrant must disclose the information that would be required if the registrant were filing a general form for registration of securities on Form 10. Accordingly, New Forafric, as the successor registrant to Globis, is providing the information below that would be included in a Form 10 if it were to file a Form 10. Please note that the information provided below relates to the combined company after the consummation of the Business Combination unless otherwise specifically indicated or the context otherwise requires.
Forward-LookingStatements
Certain statements included in this Current Report on Form 8-K that are not historical facts are forward-looking statements within the meaning of the federal securities laws, including safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are sometimes accompanied by words such as “believe,” “continue,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “predict,” “plan,” “may,” “should,” “will,” “would,” “potential,” “seem,” “seek,” “outlook” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. These statements are based on various assumptions, whether or not identified in this Current Report on Form 8-K. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by an investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of New Forafric. Many factors could cause actual future events to differ from the forward-looking statements in this Current Report on Form 8-K, including but not limited to: (i) risks that the Business Combination disrupts current plans and operations of New Forafric and potential difficulties in Company employee retention as a result of the Business Combination, (ii) the outcome of any legal proceedings that may be instituted against New Forafric related to the Business Combination Agreement or the Business Combination, (iii) the ability to maintain the listing of New Forafric stock on Nasdaq, (iv) volatility in the price of New Forafric’s securities, (v) changes in competitive and regulated industries in which New Forafric operates, variations in operating performance across competitors, changes in laws and regulations affecting New Forafric’s business and changes in the combined capital structure, (vi) the ability to implement business plans, forecasts, and other expectations, and identify and realize additional opportunities, (vii) the potential inability of New Forafric to increase its manufacturing capacity or to achieve efficiencies regarding its manufacturing process or other costs, (viii) the enforceability of New Forafric’s intellectual property, including its trademarks and the potential infringement on the intellectual property rights of others, (ix) the risk of downturns and a changing regulatory landscape in the highly competitive industry in which New Forafric operates, and (x) costs related to the Business Combination and the failure to realize anticipated benefits of the Business Combination or to realize estimated pro forma results and underlying assumptions. These risks and uncertainties may be amplified by the COVID-19 pandemic and the war between Russia and Ukraine, which has caused significant economic uncertainty in general, and on the international wheat market in particular. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties described in the “Risk Factors” section of New Forafric’s the registration statement on Form S-4 and other documents filed by New Forafric from time to time with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and New Forafric assumes no obligation and do not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise. New Forafric does not give any assurance that it will achieve its expectations.
Businessand Properties
The business and properties of Globis and FAHL prior to the Business Combination are described in the proxy statement/prospectus in the sections entitled “Information About Globis” beginning on page 138 and “Information About FAHL” beginning on page 164 of the proxy statement/prospectus, which are incorporated herein by reference.
The Securities and Exchange Commission maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Securities and Exchange Commission. You may obtain copies of the materials described above at the commission’s internet site at www.sec.gov.
RiskFactors
The risks associated with New Forafric’s business are described in the proxy statement/prospectus in the section entitled “Risk Factors” beginning on page 49 of the proxy statement/prospectus, which is incorporated herein by reference.
UnauditedCondensed Consolidated Financial Statements
The unaudited condensed consolidated financial statements of Forafric Agro Holdings Limited as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 are set forth in Exhibit 99.1 hereto.
These unaudited condensed consolidated financial statements should be read in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included herein.
UnauditedPro Forma Condensed Combined Financial Information
The unaudited pro forma condensed combined balance sheet as of March 31, 2022 and the unaudited pro forma condensed combined statements of comprehensive loss for the three months ended March 31, 2022 and the year ended December 31, 2021 are set forth in Exhibit 99.2 hereto.
Management’sDiscussion and Analysis of Financial Condition and Results of Operations
Unlessotherwise indicated or the context otherwise requires, references in this section to “FAHL,” “we,” “us,”“our” and other similar terms refer to FAHL and its subsidiaries prior to the Business Combination and to New Forafric andits consolidated subsidiaries after giving effect to the Business Combination. The following discussion and analysis summarizes the significantfactors affecting the consolidated operating results, financial condition, liquidity and cash flows of FAHL as of and for the periodspresented below. The following discussion and analysis should be read in conjunction with the Management’s Discussion and Analysisof Financial Condition and Results of Operations of FAHL in the proxy statement/prospectus beginning on page 175, our consolidated financialstatements and the related notes thereto set forth in Exhibit 99.1 hereto and our unaudited consolidated financial statements and relatednotes and other information set forth in Exhibit 99.2 hereto. The discussion contains forward-looking statements that are based on thebeliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differmaterially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussedbelow and in the proxy statement/prospectus, particularly in the sections entitled “Risk Factors” beginning on page 49 ofthe proxy statement/prospectus, which is incorporated herein by reference. and “Cautionary Note Regarding Forward-Looking Statements”on page 8 of the proxy statement/prospectus, which is incorporated herein by reference. Additionally, FAHL’s historical resultsare not necessarily indicative of the results that may be expected for any period in the future.
Overview
KeyFactors Affecting Our Performance
The key factors affecting the performance of our business are described below:
Cost of Raw material. The cost of wheat is almost 90% of total cost in our business. Fluctuation on the price of the wheat has a direct impact on our performance. The cost of wheat depends on weather, supply and demand and strategies of main international producers. The cost of raw material depends also on freight cost and currency exchange rate fluctuations.
Industrial cost. The crushing cost is the second main factor affecting our performance. This cost includes equipment, labor and interest over financing. To perform on our business, we have to maintain this cost below 30 USD per ton produced. To achieve this performance, we have to monitor energy, equipment usage, logistics, human resources and financial cost.
Average selling price. The average selling price is based on the two components:
| ● | Price<br> of flour/Semolina |
|---|---|
| ● | Price<br> of Bran |
Bran is between 20% to 25% of the production of finished products. We have no impact on the price of the bran.
On the price of finished product, we can have a limited impact due to high concurrency on the market.
Impactof COVID-19
We believe that COVID-19 did not have any material impact on our sales. We believe that this is because we produce a staple food product, the demand for which was not materially affected by the pandemic. During the first three months of 2022, we experienced increases in raw material, freight and shipping costs, which may be attributable to general increases in shipping and logistics costs during the pandemic as a result of higher global demand for wheat and inflationary pressures; however, due to our ability to increase sale prices and the subsidies provided by the Government of Morocco, these increases in our costs of goods did not have a material adverse impact on our business.
The COVID-19 pandemic could impact our supply chain for products we sell, particularly as a result of mandatory shutdowns in locations where our products are manufactured or held for distribution. We could also see significant disruptions of the operations of our logistics, service providers, delays in shipments and negative impacts to pricing of certain of our products. To date, we have not experienced any significant disruptions of the operations of our logistics, service providers, or delays in shipments, and based on current trends, we do not anticipate supply chain disruptions through the end of 2022.
At this time, we do not foresee supply chain disruptions having a material adverse affect on our business goals, results of operations or capital resources.
TheWar in Ukraine
On February 24, 2022, Russia launched an invasion in Ukraine. The invasion may severely disrupt or depress wheat harvests in Ukraine and Ukraine’s ability to export wheat. In addition, as a consequence of the Russian invasion of Ukraine, the United States, the European Union and other countries have imposed sanctions against and penalties for doing business in Russia and with certain Russian-owned businesses. These sanctions may limit Russia’s ability to export wheat. Because Ukraine accounts for approximately 10% of the world’s wheat exports and Russa accounts for approximately 16% of the world’s wheat exports, the continuation of the war between Ukraine and Russia could lead to a material reduction in the availability of wheat on the international market which could in turn affect our ability to obtain raw materials or result in substantial increases in prices of raw materials, which could have a material adverse effect upon our business.
FAHL has not purchased, and has no contracts to purchase raw materials from either Ukraine or Russia in 2022. FAHL has also in recent years diversified its sources of supply, and purchases most of its raw materials from European countries, as well as Argentina and Brazil. New Forafric believes that as a result, it will have adequate sources of supply of raw materials for the 2022 calendar year. Although wheat prices have continued to rise since the beginning of 2022, New Forafric has not determined at this time that there is a clear trend that prices will continue to increase at the same pace for the remainder of 2022. Further, New Forafric its sales margins in Morocco. Further, because its products are staple food products, New Forafric believes it will be able to increase prices in other markets to offset currently anticipated changes in raw material and logistic costs in 2022.
Because New Forafric does not currently have any business operations in Russia and is not purchasing raw materials from suppliers in Russia in 2022, the sanctions regime imposed upon Russia does not currently directly impact New Forafric’s business.
KeyComponents of Results of Operations
Net sales, cost of goods sold and gross profit figures are calculated with the following method:
Net sales: Total consolidated sales;
Cost of goods sold: includes cost of raw materials, cost of freight, cost of foreign exchange and cost of improvements used in the production; and
Gross profit: the difference between net sales and cost of goods sold.
The key components of our results of operation are:
Price of raw materials, which is affected by many factors, including global and regional supply, which in turn is impacted by factors such as weather conditions, local planting decisions, crop failure, reduced harvests, governmental policies (including both tariffs and subsidies), and other agricultural conditions, as well as local, regional, and international demand. The price of raw materials increased during the first three months of 2022 over the same period for 2021.
Cost of freight, which is impacted by shipping availability, international demand, labor shortages, strikes, regional conflicts, inadequate or obsolete port infrastructure and other factors.
Foreign exchange rates, which are continually fluctuating due to the relative economic strengths or governmental policies of different countries.
Human resources productivity, which may be impacted by the training and skills of the available workforce, the nature of tools and facilities in place, financial incentives and other factors over which we do not have any control.
Power consumption and costs, which may be affected by governmental policies, including green energy initiatives and the age and efficiency of existing and newly acquired facilities.
Our Results of Operations depends primarily on the cost of raw materials and on our industrial cost.
In our business, most raw materials are imported from Europe, South America, Black Sea and Canada (for durum). In Morocco, there is production of wheat but the quality is generally not high enough for industrial usage. The variation of the cost of raw materials has a huge impact on our business and can explain the changes in the result of operation form period to period.
Industrial cost is the second main component of our result of operation. The industrial cost includes human resources, cost of equipment, maintenance, power consumption and financial cost as main components. We launched a huge restructuring plan in 2018 to reduce our industrial cost with success. We successfully reduced the industrial cost by 40% over the last three years.
Resultsof Operations
ThreeMonths Ended March 31, 2022 Compared to Three Months Ended March 31, 2021
The following table presents our condensed unaudited interim consolidated results of operations for the three months ended March 31, 2022 and 2021:
| Three Months Ended March 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| In thousands of USD | 2022 | 2021 | Change | |||||
| Revenues | $ | 89,071 | $ | 60,622 | ||||
| Cost of sales | 79,562 | 49,741 | ||||||
| Gross profit | 9,509 | 10,881 | ) | |||||
| Operating expenses: | ||||||||
| Selling, general and administrative expenses | 8,900 | 6,003 | ||||||
| Total operating expenses | 8,900 | 6,003 | ||||||
| Operating income | 609 | 4,878 | ) | |||||
| Other expense (income): | ||||||||
| Interest income | - | (220 | ) | |||||
| Interest expense | 2,580 | 1,593 | ||||||
| Foreign Exchange loss | 538 | 500 | ||||||
| Total other expense | 3,118 | 1,873 | ||||||
| (Loss) Income before income taxes | (2,509 | ) | 3,005 | ) | ||||
| Income tax expense | 970 | 610 | ||||||
| Net (loss) income | (3,479 | ) | 2,395 | ) |
All values are in US Dollars.
Net sales increased 46.9% to $89.1 million for the three-month period ended March 31, 2022 compared to $60.6 million for the same period in 2021, due to increased sales primarily in our market share in Morocco.
Cost of goods sold increased 60.0% to $79.6 million for the three-month period ended March 31, 2022 compared to $49.7 million for the same period in 2021 as a result of higher volume of commodity acquired and an increase in the average global price of wheat in 2022 compared to 2021.
Gross profit decreased 12.6% to $9.5 million for the three-month period ended March 31, 2022 compared to $10.9 million for the same period in 2021, primarily driven by an increase in the cost of raw materials, freight changes, and changes in the foreign currency markets.
SG&A expenses were $8.9 million for the three-month period ended March 31, 2022 compared to $6.0 million for the same period in 2021, an increase of 48.3%. SG&A expenses increased for the three-months ended March 31, 2022 as a result of an increase in personnel costs and merger transaction related expenditures.
Other income (expenses) – Other expenses increased to $3.1 million for the three-month period ended March 31, 2022 compared to $1.9 million for the same period in 2021, with the increase in expenses attributable the increase in interest expense when compared period over period due to the increase in debt on hand as of March 31, 2022 when compared to March 31, 2021.
Segments
The following table presents revenue and operating income by segment for the three months ended March 31, 2022 and 2021:
| 2021 | ||||
| In thousands of | ||||
| Sales to external customers: | ||||
| Soft Wheat | 62,579 | $ | 40,191 | |
| Durum Wheat | 16,415 | 12,540 | ||
| Couscous & Pasta | 10,077 | 7,891 | ||
| Total | 89,071 | $ | 60,622 | |
| Direct operating income (loss): | ||||
| Soft Wheat | 1,641 | 2,917 | ||
| Durum Wheat | (260 | ) | 895 | |
| Couscous & Pasta | (772 | ) | 1,066 | |
| Operating income | 609 | $ | 4,878 |
All values are in US Dollars.
Net sales of soft wheat products increased 55.7% to $62.6 million for the three-month period ended March 31, 2022 compared to $40.2 million for the same period in 2021, due to an increased sales performance and an increase in selling prices primarily in our market share in Morocco.
Net sales of durum wheat products increased 30.9% to $16.4 million for the three-month period ended March 31, 2022 compared to $12.5 million for the same period in 2021, due to an increased sales performance and an increase in selling prices primarily in our market share in Morocco.
Net sales of couscous and pasta products increased 27.7% to $10.1 million for the three-month period ended March 31, 2022 compared to $7.9 million for the same period in 2021, due to an increased sales performance and an increase in selling prices primarily in our market share in Morocco.
Liquidityand Capital Resources
WorkingCapital and Working Capital Facilities. Working capital deficits were $78.2 million and $85.3 million at March 31, 2022 and December 31, 2021, respectively.
FAHL had available to it revolving working capital credit lines in the amount of $60.0 million and $80.0 million as of March 31, 2022 and December 31, 2021, respectively. As of March 31, 2022, FAHL had borrowed $59.5 million and had unused availability of $0.5 million under such credit lines. As of December 31, 2021, FAHL had borrowed $79.5 million and had unused availability of $0.5 million under such credit lines. FAHL has also entered into credit agreements 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 $105.0 million as of March 31, 2022 and $100.0 million as of December 31, 2021. The Wheat Credit Facilities are secured by inventory. The Wheat Credit Facilities must be renewed on a semi-annual basis. As of March 31, 2022, FAHL had borrowed $81.3 million under the Wheat Credit Facilities, with unused availability of approximately $23.7 million. As of December 31, 2021, FAHL had borrowed $70.4 million under the Wheat Credit Facilities, with unused availability of approximately $29.6 million.
Pursuant to the Business Combination Agreement, all FAHL Related Party Loans will be converted into Ordinary Shares upon consummation of the Business Combination. Pursuant to the Business Combination Agreement, all FAHL Related Party Loans will be converted into Ordinary Shares upon consummation of the Business Combination. As of March 31, 2022, FAHL has, in addition to its obligations under the working capital credit lines and the Wheat Credit Facilities, $6.4 million in lease obligations. FAHL believes it has sufficient capital available to it to fulfill such obligations.
Cashand Cash Equivalents - Cash and cash equivalents were $21.1 million and $14.4 million at March 31, 2022 and December 31, 2021, respectively. Cash balances are managed in accordance with our investment policy, the objectives of which are to preserve the principal value of our cash assets, maintain a high degree of liquidity and deliver competitive returns subject to prevailing market conditions.
Tradeaccounts receivable, net - Trade accounts receivable, net were $38.9 million and $32.3 million at March 31, 2022 and December 31, 2021, respectively.
Inventories- Inventories were $24.2 million and $37.6 million at March 31, 2022 and December 31, 2021, respectively.
COMMITMENTS
AND CONTINGENCIES
The Company has commitments with banks to finance its operating activities. FAHL has provided collateral and mortgages to banks of $25,464, as of March 31, 2022. From time to time FAHL has been 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, FAHL has recorded 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 FAHL 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 consolidated financial statements in 2022 and 2021. As of the three months ended March 31, 2022, there were no lawsuits or other proceedings commenced against FAHL, that in the opinion of management, individually or in the aggregate, had or are expected to have a material effect on the unconsolidated financial statements of FAHL as of such date, and, no such lawsuits and other proceedings had or are expected to have a material effect on such unconsolidated financial statements.
CriticalAccounting Policies and Estimates
Our accounting policies are more fully described in Note 2- Summary of Significant Accounting Policies to our consolidated financial statements included as part of this S-4 Registration Statement. As disclosed in Note 2, the preparation of financial statements in conformity with GAAP requires management to make substantial judgment or estimation in their application that may significantly affect reported amounts in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. We believe the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments.
Revenue Recognition – FAHL follows a policy of recognizing revenue at a single point in time when it satisfies its performance obligation by transferring control over a product or service to a customer. The majority of FAHL’s contracts with customers have one performance obligation and a contract duration of one year or less. FAHL applies the practical expedient in Accounting Standards Codification (“ASC”) paragraph 606-10-50-14 of ASC Topic 606, Revenue from Contracts with Customers and does not disclose information about remaining performance obligations that have original expected durations of one year or less. Trade discounts or volume rebates are recognized as a deduction in revenue. No payment terms beyond one year are granted at contract inception.
Revenue related to the sale of goods and equipment is measured based on consideration specified in a contract with a customer. FAHL recognizes revenue from these contracts at a point in time when it satisfies a performance obligation by transferring control of a product to a customer, generally when legal title and risks and rewards transfer to the customer. Sales terms typically provide for transfer of title at the time and point of delivery and acceptance of the product being sold.
Amounts received from customers prior to revenue recognition on a contract are recorded as contract liabilities on the consolidated balance sheets.
Shipping and Handling Costs – Shipping and handling costs related to contracts with customers for the sale of goods are accounted for as a fulfillment activity and are included in cost of sales. Accordingly, amounts billed to customers for such costs are included as a component of revenues.
Taxes Collected from Customers and Remitted to Governmental Authorities – FAHL does not include taxes assessed by governmental authorities that are (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers, in the measurement of transactions prices or as a component of revenues and cost of sales.
Accounts Receivable and Allowances for Credit Losses – We provide credit terms to customers in-line with industry standards, perform ongoing credit evaluations of our customers, and maintain allowances for potential credit losses based on historical experience recorded. We analyze the aging of customer accounts, customer concentrations, customer creditworthiness, current economic trends and changes in our customer payment patterns when evaluating the adequacy of the allowance for credit losses. Customer balances are written off after all collection efforts are exhausted. Estimated product returns, which have not been material, are deducted from sales at the time of shipment.
Other Receivables – Other receivables include government subsidies for the production and sale of flour. The Moroccan government provides a fixed subsidy based on production and customer. Subsidies are paid by the Moroccan government twice a year based on sales of flour for the previous six months. The Company records the flour subsidies as a credit against the related costs that the subsidies were intended to offset in the same periods that the costs were incurred within the consolidated statement of operations.
Income Taxes – The provision for income taxes includes income taxes currently payable in Morocco and local jurisdictions, and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities. Deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax bases of assets and liabilities using enacted tax rates. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Deferred income tax expenses or credits are based on the changes in the asset or liability from period to period. We account for uncertain tax positions using a “more-likely-than-not” threshold. A tax benefit from an uncertain tax position is recognized if it is more-likely-than-not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position, or the statute of limitations concerning such issues lapses.
Foreign Currency Translation and Transactions FAHL’s functional currency is the Moroccan dirham, 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 consolidated statements of operations and comprehensive income (loss).
Inventories
- Inventories are stated at the lower of cost or net realizable value. FAHL’s inventory is valued using the weighted average cost method. The costs of finished goods inventories include raw materials, labor, and overhead costs.
Property, Plant, and Equipment - Property, plant, and equipment are stated at acquisition cost, plus capitalized interest on borrowings during the actual construction period of major capital projects. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets as follows:
| Assets | Useful Lives |
|---|---|
| Buildings | 39<br> years |
| Machinery<br> and equipment (technical installations) | 30-50<br> years |
| Other<br> assets | 5-30<br> years |
Building improvements are depreciated over the shorter of the estimated useful life of the assets or the remaining useful life. Leasehold improvements are amortized over the shorter of their useful life or remaining lease term. Expenditures for repairs and maintenance, which do not improve or extend the life of the assets, are expensed as incurred.
We perform impairment tests when circumstances indicate that the carrying value of an asset may not be recoverable. Indicators of impairment include deteriorations in operating cash flows, the anticipated sale or disposal of an asset group, and other significant changes in business conditions. Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. FAHL’s assessment of recoverability of property, plant and equipment is performed on a reporting unit level. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of such asset to its estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of such asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value, less estimated costs to sell.
Goodwill and Other Intangible Assets - Identifiable intangible assets with finite lives are amortized over their estimated useful lives as follows:
| Assets | Useful Lives |
|---|---|
| Trademarks | Indefinite |
| Customer<br> relationships | 20<br> years |
| Patents<br> and licenses | 5-10<br> years |
| Computer<br> software | 5-10<br> years |
| Other<br> intangible assets | 3-10<br> years |
Recognized intangible assets, exclusive of goodwill, are amortized over the useful lives of the assets unless that life is determined to be indefinite. All of our intangible assets, exclusive of goodwill, are finite lived. All amortization expense related to intangible assets is recorded in selling, general, and administrative expense in the consolidated statements of operations. Intangible assets with finite lives are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If an evaluation of the undiscounted cash flows indicates impairment, the asset is written down to its estimated fair value, which is generally based on discounted future cash flows.
Goodwill is evaluated annually in the fourth quarter or more frequently, if events or changes in circumstances require an interim assessment. We assess goodwill for impairment (as of December 31) at the reporting unit level using income and market approaches, employing significant assumptions regarding growth, discount rates, and profitability at each reporting unit. Our estimates under the income approach are determined based on a discounted cash flow model. The market approach uses a market multiple methodologies employing earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and applies a range of multiples to those amounts in determining the indicated fair value. In determining the multiples used in this approach, we obtain the multiples for selected peer companies using the most recent publicly available information. In determining the indicated fair value of each reporting unit, FAHL concludes based on the income approach, and uses the market approach to corroborate, as FAHL believes the income approach is the most reliable indicator of the fair value of the reporting units. The resulting value is then compared to the carrying value of each reporting unit to determine if impairment is necessary.
RecentAccounting Pronouncements
Adopted
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance, which improves the transparency of government assistance received by most business entities by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity’s financial statements. This guidance is effective for the Company’s interim and annual reporting periods beginning after December 15, 2021. Adoption of the guidance had no impact on FAHL’s results of operations, balance sheet, or cash flows.
NotYet Adopted
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers. This guidance will be effective for the Company’s interim and annual reporting periods beginning after December 15, 2022. FAHL is currently evaluating the impact of the new guidance on its consolidated financial statements.
In March 2021, the FASB issued ASU 2021-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and the sale or transfer of debt securities classified as held-to-maturity. Entities may apply the ASU from March 12, 2021 through December 31, 2022. FAHL is currently evaluating the impact of this new ASU on its consolidated financial statements and related disclosures and expects no material impact.
Directorsand Executive Officers
Information with respect to New Forafric’s directors and executive officers after the Closing is set forth in the proxy statement/prospectus in the sections entitled “Management of New Forafric Following the Business Combination” beginning on page 189 which is incorporated herein by reference.
Directors
As previously disclosed, at the Special Meeting, on June 7, 2022, Saad Bendidi, Julien Benitah, Franco Cassar, James Lasry, Paul Packer, Ira Greenstein, and Rachel Bitan were elected to serve as directors of the Company for a term expiring at New Forafric’s 2025 annual general meeting or the earlier termination of his or her term of office. Biographical information for these individuals is set forth in the proxy statement/prospectus in the section entitled “Management of New Forafric Following the Business Combination” beginning on page 189 of the proxy statement/prospectus, which is incorporated herein by reference. Claude Benitah and Michael A. Ferguson resigned as directors of Globis effective on June 9, 2022.
Independenceof Directors
The board of directors has determined that Franco Cassar, Ira Greenstein, and Rachel Bitan qualify as independent directors, as defined under the listing rules of Nasdaq (the “Nasdaq listing rules”), and that the board of directors consists of a majority of “independent directors,” as defined under the rules of the SEC and Nasdaq listing rules relating to director independence requirements.
Committeesof the Board of Directors
The standing committees of the board of directors consist of an audit committee (the “Audit Committee”), a compensation committee (the “Compensation Committee”) and a nominating and corporate governance committee (the “NominatingCommittee”). Each of the committees reports to the board of directors.
Effective as of June 9, 2022, the board of directors appointed Franco Cassar, Ira Greenstein and Rachel Bitan to serve on the Audit Committee, with Franco Cassar serving as chair of the Audit Committee. The board of directors appointed Franco Cassar, Ira Greenstein and Rachal Bitan to serve on the Compensation Committee, with Rachel Bitan serving as chair of the Compensation Committee. The board of directors appointed Franco Cassar, Ira Greenstein and Rachel Bitan to serve on the Nominating Committee, with Ira Greenstein serving as chair of the Nominating Committee.
ExecutiveOfficers
In connection with the Business Combination, the board of directors appointed Mustapha Jamaleddine to serve as Chief Executive Officer, Julien Benitah to serve as Chief Financial Officer, Mustapha Ghazali to serve as Chief Technology Officer, Saad Bendidito serve as Chairman, and Oury Marciano to serve as Vice President Business Development, respectively, effective as of June 9, 2022. Biographical information for the new executive officers are set forth in the proxy statement/prospectus in the section entitled “Management of New Forafric Following the Business Combination” beginning on page 189 of the proxy statement/prospectus, which is incorporated herein by reference.
ExecutiveOfficer and Director Compensation
The historical compensation for New Forafric’s directors and named executive officers is described in the proxy statement/prospectus in the section entitled “Executive Compensation of FAHL” beginning on page 185 of the proxy statement/prospectus, which is incorporated herein by reference.
SecurityOwnership of Certain Beneficial Owners and Management
The following table sets forth information known to New Forafric regarding the beneficial ownership of the Company’s ordinary share immediately following the Closing, by:
| ● | each<br> person who is known by New Forafric to be the beneficial owner of more than five percent (5%) of the outstanding ordinary share; |
|---|---|
| ● | each<br> current named executive officer and director of New Forafric; and |
| ● | all<br> current executive officers and directors of New Forafric, as a group. |
Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC. A person is a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of the security, or “investment power”, which includes the power to dispose of or to direct the disposition of the security or has the right to acquire such powers within 60 days.
The beneficial ownership percentages set forth in the table below are based on 26,456,844 Ordinary Shares issued and outstanding as of immediately following the Closing.
Unless otherwise noted in the footnotes to the following table, and subject to applicable community property laws, the persons and entities named in the table have sole voting and investment power with respect to their beneficially owned common stock. Unless otherwise noted, the business address of each of the following entities or individuals is Forafric Global PLC, Unit 5.3, Madison Building, Midtown, Queensway, Gibraltar, GX11 1AA.
| Name of Beneficial Owners | Number of<br> Ordinary Share<br> Beneficially<br> Owned | Percentage<br> of<br> Outstanding<br> Ordinary Share | ||||
|---|---|---|---|---|---|---|
| 5% Stockholders: | ||||||
| Lighthouse Settlement ^(1)^ | 17,700,483 | 66.9 | % | |||
| Named Executive Officers and Directors: | ||||||
| Saad Bendidi | - | * | ||||
| Mustapha Jamaleddine | - | * | ||||
| Julien Benitah | - | * | ||||
| Paul Packer | 3,590,494 | ^(2)^ | 13.5 | % | ||
| Franco Cassar | - | * | ||||
| James Lasry | - | * | ||||
| Ira Greenstein | - | * | ||||
| Rachel Bitan | - | * | ||||
| All directors and executive officers as a group (10 individuals) | 3,590,494 | 13.5 | % |
(1) Consists of 17,068,869 shares owned by Lighthouse Capital Limited and 631,614 shares owned by Lighthouse Settlement. Lighthouse Settlement is the sole shareholder of Lighthouse Capital Limited. Lighthouse Settlement is a discretionary trust of which Yariv Elbaz and his family are the named potential beneficiaries. Lighthouse Corporation PTC, as trustee of Lighthouse Settlement, may be deemed to be the beneficial owner of the securities held by Lighthouse Settlement as trustee. Lighthouse Corporation PTC Limited is controlled by its three directors, Michael Elbaz, Joseph Levy Cazes and Moses Nahon Cohen. Lighthouse Corporation PTC Limited, Michael Elbaz, Joseph Levy Cazes and Moses Nahon Cohen each disclaim beneficial ownership over these securities except to the extent of their respective pecuniary interest therein.
(2) Consists of 2,830,000 shares owned by Globis SPAC LLC and 760,494 shares owned by Globis Capital Partners, LP. Excludes 3,628,889 shares underlying Private Placement Warrants held by Globis SPAC LLC that are subject to a 9.9% beneficial ownership limitation pursuant to the terms of such warrants. Such warrants may not be exercised to the extent that the holder or any of its affiliates would beneficially own in excess of 9.9% of the number of shares outstanding (as calculated in accordance with Section 13(d) of the Exchange Act). Mr. Packer may be deemed to control and have voting and investment power over these securities. Mr. Packer disclaims beneficial ownership over these securities except to the extent of his pecuniary interest therein. The business address of Mr. Packer, Globis SPAC LLC and Globis Capital Partners, LP is 7100 W. Camino Real, Suite 302-48, Boca Raton, FL, 33433.
CertainRelationships and Related Transactions
The certain relationships and related party transactions of New Forafric are described in the proxy statement/prospectus in the section entitled “Certain Relationships and Related Person Transactions” beginning on page 194 of the proxy statement/prospectus, which is incorporated herein by reference.
LegalProceedings
Information about legal proceedings is set forth in the proxy statement/prospectus in the section entitled “Information About FAHL—Legal Proceedings” on page 173 of the proxy statement/prospectus, which is incorporated herein by reference
Descriptionof Registrant’s Securities to be Registered
A description of New Forafric’s securities is included in the proxy statement/prospectus in the section entitled “Description of New Forafric’s Securities” beginning on page 156 of the proxy statement/prospectus, which is incorporated herein by reference.
Indemnificationof Directors and Officers
In connection with the Business Combination, New Forafric entered into indemnification agreements with each of its directors and executive officers. These indemnification agreements provide the directors and executive officers with contractual rights to indemnification and expense advancement.
Information about indemnification of the New Forafric’s directors and officers is set forth in the proxy statement/prospectus in the section entitled “Certain Relationships and Related Person Transactions—Indemnification of Officers and Directors” beginning on page 196 of the proxy statement/prospectus, which is incorporated herein by reference.
Item3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing
Prior to the Merger, each issued and outstanding Unit of Globis separated into their component parts of one share of Common Stock and one redeemable warrant to acquire one share of Common Stock at an exercise price of $11.50 per share on the terms and subject to the conditions of the Warrant Agreement, and the Units of Globis ceased trading on Nasdaq.
Item3.02 Unregistered Sales of Equity Securities
The disclosure set forth in the “Introductory Note” above is incorporated by reference into this Item 3.02.
The securities issued in connection with the PIPE Subscription Agreement, the Bond Subscription Deed and the FAHL Related Party Loans have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.
Item3.03 Material Modification to Rights of Security Holders
At the Special Meeting, the Globis stockholders considered and approved, among other things, Proposal 6: the Charter Proposal and Proposal 7: the Organizational Documents Proposals, which are described in greater detail in the proxy statement/prospectus beginning on pages 119 and 120, respectively, in the proxy statement/prospectus.
At the Special Meeting, Globis’ stockholders accepted the change in holding the authorized capital stock of Globis from (i) 100,000,000 shares of Common Stock and 1,000,000 shares of preference stock of Globis to (ii) 100,000,000 ordinary shares and 1,000,000 preferred shares in New Forafric as a consequence of the Merger and Exchange.
At the Special Meeting, the Globis stockholders approved and adopted the Memorandum and Articles of Association in the form attached hereto as Exhibit 3.3, authorizing all other changes in connection with such adoption, including (1) changing the corporate name from “Globis NV Merger Corp.” to “Forafric Global PLC” (which will occur as part of the Redomiciliation and the subsequent re-registration of Globis Nevada as a Gibraltar public company limited by shares in connection with the Business Combination), (2) making New Forafric’s corporate existence perpetual, and (3) removing certain provisions related to our status as a blank check company that will no longer be applicable upon consummation of the Business Combination, all of which the Globis Board believes are necessary to adequately address the needs of New Forafric after the Business Combination.
The description of and the general effect of the Memorandum and Articles of Association upon the rights of holders of the Company’s capital stock are included in the proxy statement/prospectus under the section titled “Description of New Forafric Securities” beginning on page 156 of the proxy statement/prospectus is incorporated herein by reference.
Item4.01 Changes in Registrant’s Certifying Accountant
On June 9, the Audit Committee of the Board of Directors of Globis dismissed Marcum LLP (“Marcum”), who served as Globis’ independent registered public accounting firm prior to the Business Combination, and approved the engagement of UHY LLP (“UHY”) as New Forafric’s independent registered public accounting firm to audit the Company’s consolidated financial statements for the year ended December 31, 2022. UHY had previously served as the independent registered public accounting firm for FAHL, which was acquired by New Forafric on June 9, 2022.
Marcum’s report on Globis’ financial statements as of December 31, 2021 and 2020, and for the year ended December 31, 2021 and for the period from August 21, 2020 (inception) through December 31, 2020 did not contain an adverse opinion or disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope or accounting principles. During the period of Marcum’s engagement by the Company, there were no disagreements with Marcum on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements if not resolved to the satisfaction of Marcum, would have caused it to make a reference to the subject matter of the disagreement in connection with its reports covering such periods. In addition, no “reportable events,” as described in Item 304(a)(1)(v) of Regulation S-K, occurred within the period of Marcum’s engagement and subsequent interim period preceding Marcum’s dismissal.
During the period from August 21, 2020 (inception) through December 31, 2021, neither the Company nor anyone on its behalf consulted UHY regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Globis’ financial statements, and neither a written report was provided to the Company or oral advice was provided that UHY concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing, or financial reporting issue; or (ii) any matter that was the subject of a disagreement (as described in Item 304(a)(1)(iv) of Regulation S-K) or a “reportable event,” as described in Item 304(a)(1)(v) of Regulation S-K.
The Company provided Marcum with a copy of the disclosures made pursuant to this Item 4.01 prior to the filing of this Current Report on Form 8-K and requested that Marcum furnish a letter addressed to the Securities and Exchange Commission, as required by Item 304(a)(3) of Regulation S-K, which is attached hereto as Exhibit 16.1, stating whether it agrees with such disclosures, and if not, stating the respects in which it does not agree.
Item5.01 Changes in Control of the Registrant
The information set forth in the section entitled “Introductory Note” and in the section entitled “Security Ownership of Certain Beneficial Owners and Management” in Item 2.01 of this Current Report on Form 8-K is incorporated herein by reference. The information set forth under in the section entitled “Proposal 3: The Business Combination Proposal” beginning on page 115 of the proxy statement/prospectus and “Introductory Note” and Item 2.01 in this Current Report on Form 8-K is incorporated herein by reference.
Item5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements ofCertain Officers
The information set forth in the sections entitled “Directors and Executive Officers” and “Certain Relationships and Related Transactions” in Item 2.01 of this Current Report on Form 8-K is incorporated herein by reference.
As previously disclosed at the Special Meeting, the stockholders of Globis considered and approved the Forafric 2022 Long Term Employee Share Incentive Plan (the “Equity Incentive Plan”). The Equity Incentive Plan was approved, subject to stockholder approval, by the board of directors on November 29, 2020. The Equity Incentive Plan became effective immediately upon the Closing.
A description of the Equity Incentive Plan is included in the proxy statement/prospectus in the section entitled “Proposal 4: The Equity Incentive Plan Proposal” beginning on page 115 of the proxy statement/prospectus, which is incorporated herein by reference. The foregoing description of the Equity Incentive Plan is qualified in its entirety by the full text of the Equity Incentive Plan, which is attached hereto as Exhibit 10.6 and incorporated herein by reference.
Item5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
The information set forth in Item 3.03 of this Current Report on Form 8-K is incorporated herein by reference.
Item5.05 Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics.
In connection with the Business Combination, on June 9, 2022, the board approved and adopted a new Code of Ethics applicable to all employees, officers and directors of the Company. A copy of the Code of Ethics can reviewed by accessing New Forafric’s public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without charge upon request from the Company.
Item5.06 Change in Shell Company Status
As a result of the Business Combination, which fulfilled the definition of a business combination as required by the Amended and Restated Certificate of Incorporation of Globis, as in effect immediately prior to the Closing, the Company ceased to be a shell company (as defined in Rule 12b-2 of the Exchange Act) as of the Closing. A description of the Business Combination and the terms of the Business Combination Agreement are included in the proxy statement/prospectus under the section entitled “Proposal 3: The Business Combination Proposal” beginning on page 115 of the proxy statement/prospectus and in the information set forth under “Introductory Note” and in the information set forth under Item 2.01 in this Current Report on Form 8-K, which are incorporated herein by reference.
Item9.01 Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
The audited consolidated financial statements of Forafric Agro Holdings Limited as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019 are included in the proxy statement/prospectus beginning on page F-22, which are incorporated herein by reference.
The unaudited condensed consolidated financial statements of Forafric Agro Holdings Limited as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 are set forth in Exhibit 99.1 hereto and are incorporated by reference herein.
(b) Pro Forma Financial Information
Unaudited pro forma condensed combined balance sheet as of December 31, 2021 and unaudited pro forma condensed combined statements of comprehensive loss for the year ended December 31, 2021 are included in the proxy statement/prospectus under the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 127 of the proxy statement/prospectus, which are incorporated herein by reference
Unaudited pro forma condensed combined balance sheet as of March 31, 2022 and unaudited pro forma condensed combined statements of comprehensive loss for the three months ended March 31, 2022 are set forth in Exhibit 99.2 hereto and are incorporated by reference herein.
(d) Exhibits
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated:<br> June 15, 2022 | Forafric<br> Global PLC | |
|---|---|---|
| By: | /s/ Paul Packer | |
| Name: | Paul Packer | |
| Title: | Director |
Exhibit10.6
FORAFRIC2022 LONG TERM
EMPLOYEESHARE INCENTIVE PLAN
Boardadoption: June 9, 2022
CONTENTS
CLAUSE
| 1. | Interpretation | 3 |
|---|---|---|
| 2. | Grant<br> of Awards | 8 |
| 3. | Performance<br> Condition | 9 |
| 4. | Overall<br> grant limits | 10 |
| 5. | Release<br> Date | 10 |
| 6. | Suspension<br> of Awards | 11 |
| 7. | Circumstances<br> in which malus and clawback can apply | 11 |
| 8. | Operation<br> of malus and clawback | 13 |
| 9. | Exercise<br> of Options | 15 |
| 10. | Manner<br> of exercise of Options | 15 |
| 11. | Settlement<br> of Awards | 16 |
| 12. | Holding<br> Period | 17 |
| 13. | Alternative<br> methods of settlement of Awards | 17 |
| 14. | Lapse<br> of Awards | 17 |
| 15. | Termination<br> of employment (Options) | 19 |
| 16. | Takeovers<br> and liquidations | 21 |
| 17. | Forafric<br> 2021 Long Term Employee Share Incentive Plan | 24 |
| 18. | Exchange<br> of Awards | 24 |
| 19. | Variation<br> of share capital | 24 |
| 20. | Tax<br> liabilities | 26 |
| 21. | Relationship<br> with employment contract | 27 |
| 22. | Notices | 28 |
| 23. | Administration<br> and amendment | 28 |
| 24. | Third<br> party rights | 30 |
| 25. | Data<br> protection | 30 |
| 26. | Governing<br> law | 30 |
| 27. | Jurisdiction | 30 |
| 2 |
| --- |
Rulesof the FORAFRIC 2022 LONG TERM EMPLOYEE SHARE INCENTIVE PLAN.
Established by resolution of the board of directors of the Company on June 9, 2022.
| 1. | Interpretation |
|---|
The following definitions and rules of interpretation apply in the Plan.
| 1.1 | Definitions |
|---|
Acquiror: a person who obtains Control of the Company either alone or together with persons acting in concert.
AdoptionDate: the date of the approval of the Plan by the Company’s shareholders.
AgreedPerformance Targets: shall mean the Company’s performance targets specified in Schedule 1 of this Plan which shall be included as Performance Conditions.
Award: any of the following:
| a) | a<br> Nominal Cost Option; or |
|---|---|
| b) | a<br> Phantom Option. |
AwardCertificate: a certificate setting out the terms of an Award, in accordance with rule 2.4.
AwardHolder: an individual who holds an Award or, where applicable, that individual’s personal representatives.
BasePrice: 50% of the nominal value of a Share, which is deducted from the Market Value of a Share in order to determine the amount due to the Award Holder who exercises a Phantom Option.
Board: the board of directors of the Company or a committee of directors appointed by that board to carry out any of its functions under the Plan.
BusinessDay: a day other than a Saturday, Sunday or public holiday in Gibraltar when banks in Gibraltar are open for business.
Cash-settledAward: means a Phantom Option.
ClawbackAmount: an amount of value determined in accordance with rule 8.
ClosedPeriod: has the same meaning as in GIB MAR.
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| --- |
Company: Forafric Global PLC, registered in Gibraltar with company number 122390.
Control: shall be as defined as follows (and the expression change of Control shall be construed accordingly):
In relation to a body corporate (“company A”), “control” means the power of a person (“P”) to secure—
(a) by means of the holding of shares or the possession of voting power in relation to that or any other body corporate, or
(b) as a result of any powers conferred by the articles of association or other document regulating that or any other body corporate,
that the affairs of company A are conducted in accordance with P’s wishes.
DealingDay: in the event that the shares of the Company are listed on a major stock exchange, a day on which such exchange is open for business.
**EBITDA:**Earnings before interest, taxes, depreciation and amortisation.
Employee: any individual who is an employee (including an executive director) of a Group Company.
EmployerCompany: the Award Holder’s employer or former employer as applicable.
EmploymentPeriod: the period that starts on the Grant Date and ends on such date as the Board may specify, not being earlier than the second anniversary of the date on which the Award Holder became an Employee.
ExerciseDate: in relation to an Option, the date on which it is exercised.
ExerciseNotice: a document in a form approved by the Board that the Award Holder must sign and return to the Company in order to exercise an Option.
ExercisePrice: the price at which each Share subject to a Nominal Cost Option may be acquired on the exercise of that Option.
ExistingAward: an option or any other right or award under which shares in the Company may be acquired or received, granted under any Share Incentive Scheme (including the Plan).
GIBMAR: the retained EU law version of the Market Abuse Regulation which applies in Gibraltar from the end of the Brexit transition period.
GrantDate: the date on which an Award is, was, or is to be granted.
Group: the Company and any Subsidiary from time to time.
GroupCompany: any member of the Group.
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| --- |
HoldingPeriod: the period set out in an Award Certificate that starts on the Release Date and ends on such date as the Board may specify, not being earlier than the date on which any restrictions which apply to Award Holders selling Shares received under a share incentive plan expire under any applicable Listing Rules .
ListingRules: the listing rules and requirements (as amended from time to time) issued by a major stock exchange upon which the Shares in the Company are listed.
MarketValue: whichever of the following applies:
a) For the purposes of calculating on any Exercise Date or Release Date on which Shares are listed on a major stock exchange: the payment due from a Phantom Option ; or the Market Value of a Share for the purposes of rule 13, the Company may use any actual price or the average price at which transactions in Shares took place on the relevant stock exchange on that day.
b) For the purposes of calculating the Market Value of Shares for the purposes of rule 8, Market Value means the middle-market quotation of a Share on the day on which the Market Value is measured (if Shares were listed on a major stock exchange on that day) or if that day is not a Dealing Day, on the immediately preceding Dealing Day.
c) If Market Value has to be determined in relation to any day on which Shares are not listed on a major stock exchange, the Board shall determine it to its satisfaction in accordance with applicable accounting principles.
NominalCost Option: an Option to acquire Shares for payment of an Exercise Price equal to 50% of their nominal value.
Nominee: the person (including a trustee) nominated from time to time by the Board to hold Shares on behalf of an Award Holder subject to the rules.
NomineeAgreement: a document in a form approved by the Board and executed by the Nominee, the Award Holder and the Company that sets out the terms on which the Nominee holds Shares.
Option: a Nominal Cost Option or a Phantom Option.
PerformanceCondition: a condition that complies with rule 3 and:
a) must be satisfied before an Award can be Released;
b) is linked to the achievement of challenging performance over a period of at least four years and has the intention of enhancing shareholder value; and
c) is specified in the Award Certificate under rule 2.4.
PerformanceMeasurement Date: the date on which the Board determines that any Performance Condition on the Release of the Award has been satisfied, unless an earlier event occurs to cause the Award to lapse or be Released. This date may not be:
a) earlier than the first day after the end of the Performance Period; or
b) later than the sixth anniversary of the Adoption Date.
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| --- |
For the avoidance of doubt, an Award may have more than one Performance Measurement Date.
PerformancePeriod: the period over which performance is measured to determine whether a Performance Condition has been achieved, which shall end no later than four years from the Adoption Date.
PhantomOption: an Option to receive a cash payment on exercise equal to the Market Value of a specified number of Shares minus the Base Price.
Plan: the employee share plan constituted and governed by these rules, as amended from time to time.
Release: means that an Option becomes exercisable in accordance with rule 9;
ReleasableNumber: has the meaning given in rule 16.1.
ReleaseDate: is the date on which Release takes place and is determined in rule 5.3.
RelevantRestriction: a restriction stated in an Award Certificate that applies to Shares issued or transferred pursuant to the Award.
RolloverPeriod: the period determined by the Board during which an Award Holder can release an Award as set out in rule 18.
Salary: in relation to an Employee at any time means the rate of basic annual salary payable to that Employee by Group Companies.
Share-settledAward: means a Nominal Cost Option.
ShareIncentive Scheme: any arrangement to provide Employees with Shares.
Shares: ordinary shares of USD 0.001 each in the Company (subject to rule 19).
SICs: social insurance contributions (or the equivalent in any jurisdiction).
Subsidiary: a subsidiary as defined in s2(1) of the Companies Act 2014.
TaxAuthority: the Income Tax Office in Gibraltar or, where relevant, the equivalent tax authority in another jurisdiction.
TaxableEvent: any event or circumstance that gives rise to a liability for the Award Holder to pay income tax and SICs or either of them (or their equivalents in any jurisdiction) in respect of or in connection with :
a. the Award, including its Release, exercise, assignment or surrender for consideration, any tax elections made, or the receipt of any benefit in connection with it;
b. any Shares (or other securities or assets):
| (i) | earmarked<br> or held to satisfy the Award; |
|---|---|
| (ii) | acquired<br> on Release or exercise of the Award; |
| (iii) | acquired<br> as a result of holding the Award; or |
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| --- | | (iv) | acquired<br> in consideration of the assignment or surrender of the Award; and | | --- | --- |
c. any securities (or other assets) acquired or earmarked as a result of holding Shares (or other securities or assets) mentioned in paragraph (b).
TaxLiability: the total of any income tax, SICs or further taxes (or their equivalents in any jurisdiction) for which any Employer Company is or may be liable to account (or reasonably believes it is or may be liable to account) as a result of any Taxable Event.
Year: a financial year of the Company.
| 1.2 | Rule<br> headings shall not affect the interpretation of the rules. |
|---|---|
| 1.3 | A<br> person includes a natural person, corporate or unincorporated body (whether or not having separate legal personality). |
| 1.4 | The<br> Schedules form part of the rules and shall have effect as if set out in full in the body of the rules. Any reference to the rules<br> includes the Schedules. |
| 1.5 | A<br> reference to a company shall include any company, corporation or other body corporate, wherever and however incorporated or<br> established. |
| 1.6 | Unless<br> the context otherwise requires, words in the singular shall include the plural and in the plural shall include the singular. |
| 1.7 | Unless<br> the context otherwise requires, a reference to one gender shall include a reference to the other genders. |
| 1.8 | A<br> reference to a statute or statutory provision is a reference to it as amended, extended or re-enacted from time to time. |
| 1.9 | A<br> reference to a statute or statutory provision shall include all subordinate legislation made from time to time under that statute<br> or statutory provision. |
| 1.10 | A<br> reference to writing or written includes fax and email. |
| 1.11 | A<br> reference to the Plan or to any other agreement or document referred to in the Plan is a reference to the Plan or such other agreement<br> or document as varied or novated (in each case, other than in breach of the provisions of the Plan) from time to time. |
| 1.12 | References<br> to rules are to rules of the Plan. |
| 7 |
| --- | | 1.13 | Any<br> words following the terms including, include, in particular, for example or any similar expression shall<br> be construed as illustrative and shall not limit the sense of the words, description, definition, phrase or term preceding those<br> terms. | | --- | --- | | 2. | Grant of Awards | | 2.1 | Subject<br> to the rules, the Company may grant an Award to any Employee it chooses during: | | (a) | the<br> period after the Adoption Date; | | --- | --- | | (b) | any<br> period of 42 days immediately following the end of a Closed Period; and | | (c) | any<br> other period in which the Board has decided to grant an Award due to exceptional circumstances which justify such a decision. | | 2.2 | The<br> Company may not grant Awards: | | --- | --- | | (a) | during<br> a Closed Period; or | | --- | --- | | (b) | after<br> the fourth anniversary of the Adoption Date. | | 2.3 | The<br> Company may not grant an Award that does not comply with any applicable directors’ remuneration policy which may be in place<br> among the Group. | | --- | --- | | 2.4 | The<br> Company shall grant an Award by executing an Award Certificate as a deed in a form approved by the Board. Each Award Certificate<br> shall (without limitation): | | (a) | state<br> the Grant Date of the Award; | | --- | --- | | (b) | state<br> the number of Shares in relation to which the Award is granted; | | (c) | state<br> whether the award is a Nominal Cost Option or a Phantom Share Option; | | (d) | if<br> the Award is a Nominal Cost Option, state the Exercise Price; | | (e) | if<br> the Award is a Phantom Share Option, state the Base Price; | | (f) | state<br> the date when the relevant Option will lapse, assuming that no event occurs to cause it to lapse earlier. This date may not be later<br> than the tenth anniversary of the Grant Date; | | (g) | specify<br> the Performance Conditions set under rule 3, any other conditions to which the Award is subject and the Performance Period; | | (h) | specify<br> the Employment Period; | | (i) | if<br> the Award is a Share-settled Award, specify the Holding Period (if any); |
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| --- | | (j) | include<br> a statement that the Award is subject to the rules (which shall be incorporated in the Award Certificate by reference); | | --- | --- | | (k) | state<br> any Relevant Restriction; | | (l) | state<br> that the Exercise Notice shall include the terms required by rule 8.9 and rule 20; and | | (m) | include<br> summaries of rule 14 and rule 20. | | 2.5 | No<br> amount shall be paid by an Employee for the grant of an Award. | | --- | --- | | 3. | Performance Condition | | 3.1 | On<br> the Grant Date of any Award, the Board shall include the Agreed Performance Targets as Performance Conditions for the Award and shall<br> specify any further appropriate Performance Conditions for the Award as the Board deems necessary. | | 3.2 | The<br> Board may vary or waive any Performance Condition, provided that any varied Performance Condition shall be (in the reasonable opinion<br> of the Board): | | (a) | a<br> fairer measure of performance than the original Performance Condition, as judged at the time of the variation; | | --- | --- | | (b) | no<br> more difficult to satisfy than the original Performance Condition was at the Grant Date; and | | (c) | not<br> materially easier to satisfy than the original Performance Condition was at the Grant Date, unless the variation of the Performance<br> Condition has been approved in advance by the Company in general meeting. | | 3.3 | rule<br> 3.2 shall not permit the general waiver by the Board of Performance Conditions on: | | --- | --- | | (a) | cessation<br> of employment; | | --- | --- | | (b) | the<br> occurrence of any event permitting the Release of Awards under rule 16; or | | (c) | the<br> exchange of Awards for New Awards under rule 18. | | 3.4 | The<br> Board shall determine whether, and to what extent, the Performance Condition has been satisfied: | | --- | --- | | (a) | on<br> the Performance Measurement Date, which shall be as soon as reasonably possible after the end of the Performance Period; | | --- | --- | | (b) | as<br> soon as reasonably possible following the death of an Award Holder in order to apply the reduction required by rule 15.3(b); or | | (c) | in<br> order to determine the Releasable Number in accordance with rule 16.1. |
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| --- | | 3.5 | The<br> Board shall notify the Award Holder within a reasonable time after the Board becomes aware of the relevant information: | | --- | --- | | (a) | whether<br> (and, if relevant, to what extent) the Performance Condition has been satisfied; | | --- | --- | | (b) | of<br> any subsequent change in whether, or the extent to which, the Performance Condition has been satisfied; | | (c) | when<br> that Performance Condition has become incapable of being satisfied, in whole or in part; and | | (d) | of<br> any waiver or variation of that Performance Condition under rule 3.2. | | 3.6 | If<br> the Board considers that a Performance Condition has become incapable of being satisfied, in whole or in part, that Award, or the<br> appropriate part of it, shall lapse immediately. | | --- | --- | | 4. | Overall grant limits | | 4.1 | The<br> total number of Shares reserved and available for issuance under the Plan shall not exceed 2,645,684. | | 4.2 | The<br> Company shall at all times keep available for issue sufficient authorised but unissued Shares to permit the exercise of all unexercised<br> Options under which Shares may be issued and allotted in satisfaction of the exercise of Options. | | 5. | Release Date | | 5.1 | The<br> Board shall specify in the Award Certificate the Employment Period, the Performance Period and the Holding Period (in relation to<br> Share-settled Awards which may require a Holding Period under any applicable Listing Rules). | | 5.2 | As<br> soon as reasonably practicable after the end of the Performance Period, the Board will determine the extent to which the Performance<br> Conditions have been satisfied. The date of that determination is the Performance Measurement Date and (subject to rule 5.3 and rule<br> 6.1), the Awards will be Released on the Release Date or lapse accordingly, in whole or in part. |
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| --- | | 5.3 | The<br> Release Date shall be the later of the Performance Measurement Date, and the first Dealing Day following the end of the Employment<br> Period. However, if that date falls in a Closed Period, the Release Date will be the first Dealing Day following the end of that<br> Closed Period. | | --- | --- | | 6. | Suspension of Awards | | 6.1 | Subject<br> to rule 6.2, an Award shall not be Released, and an Award Holder may not exercise an Option, at any time: | | (a) | while<br> disciplinary proceedings by any Group Company are underway against the Award Holder; or | | --- | --- | | (b) | while<br> any Group Company is investigating the Award Holder’s conduct and may as a result begin disciplinary proceedings. | | 6.2 | The<br> Company shall not unfairly frustrate a valid Release of an Award or exercise of an Option by the inappropriate application of any<br> provision of rule 6.1. | | --- | --- | | 6.3 | For<br> the avoidance of doubt, and subject to rule 5.3, an Award that was not Released on its expected Release Date due to the application<br> of rule 6.1 shall be Released if the Board so determines following the conclusion of the disciplinary proceedings or investigation.<br> The Release Date of that Award shall be the date of the Board’s determination, or, if that date falls in a Closed Period, the<br> first Dealing Day following the end of that Closed Period. | | 6.4 | An<br> Award Holder who gives or receives notice of termination of employment before the Release Date (whether or not lawful) may not exercise<br> an Option at any time while the notice remains effective. | | 6.5 | No<br> Award shall be Released during a period when the Award Holder is on notice of termination of employment (whether or not lawful).<br> An Award that would otherwise have been Released during such a period shall instead be Released when and if the notice ceases to<br> be effective. | | 7. | Circumstances in which malus and clawback can apply | | 7.1 | rule<br> 7 applies in relation to an Award if: | | (a) | either<br> or both rule 7.2 and rule 7.3 apply; and | | --- | --- | | (b) | rule<br> 7.4 applies. |
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| --- | | 7.2 | This<br> rule 7.2 applies in relation to an Award if the Board, at its discretion, determines that any of the following circumstances exist: | | --- | --- | | (a) | the<br> Award Holder has participated in or was responsible for conduct which resulted in significant losses to a Group Company; | | --- | --- | | (b) | the<br> Award Holder has failed to meet appropriate standards of fitness and propriety; | | (c) | the<br> Company has reasonable evidence of fraud or material dishonesty by the Award Holder; | | (d) | the<br> Company has become aware of any material wrongdoing on the part of the Award Holder; | | (e) | the<br> Award Holder has acted in any manner which in the opinion of the Board has brought or is likely to bring any Group Company into material<br> disrepute or is materially adverse to the interests of any Group Company; | | (f) | there<br> is a breach of the Award Holder’s employment contract that is a potentially fair reason for dismissal; | | (g) | the<br> Award Holder is in breach of a fiduciary duty owed to any Group Company; | | (h) | an<br> Award Holder who has ceased to be an Employee was in breach of their employment contract or fiduciary duties in a manner that would<br> have prevented the grant or Release of the Award had the Company been aware (or fully aware) of that breach, and of which the Company<br> was not aware (or not fully aware) until after both: | | (i) | the<br> Award Holder’s ceasing to be an Employee; and | | --- | --- | | (ii) | the<br> time (if any) when the Board decided to permit the Release of the Award or the exercise of the Option; or | | (i) | there<br> was a material error in: | | --- | --- | | (i) | determining<br> whether the Award should be made; | | --- | --- | | (ii) | determining<br> the size and nature of the Award; or | | (iii) | assessing<br> the extent to which any Performance Condition was satisfied on the Performance Measurement Date. | | 7.3 | This<br> rule 7.3 applies in relation to an Award if the Board, at its discretion, determines that either of the following circumstances exist: | | --- | --- | | (a) | a<br> Group Company mis-stated any financial information (whether or not audited) for any part of any Year that was taken into account<br> in: | | --- | --- | | (i) | determining<br> whether the Award should be made; | | --- | --- | | (ii) | determining<br> the size and nature of the Award; or | | (iii) | assessing<br> the extent to which any Performance Condition was satisfied on the Performance Measurement Date; or |
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| --- | | (b) | a<br> Group Company or business unit that employs or employed the Award Holder, or for which the Award Holder is responsible, has suffered<br> a material failure of risk management. | | --- | --- | | 7.4 | This<br> rule 7.4 applies in relation to an Award if the Board, at its discretion, determines that, if the circumstances mentioned in rule<br> 7.2 or rule 7.3 had existed, and the Board had been fully aware that they existed: | | --- | --- | | (a) | at<br> the Grant Date, or | | --- | --- | | (b) | in<br> the case of an Award that has already been Released, at the Release Date, |
then:
| (c) | the<br> Board would not have granted the Award; |
|---|---|
| (d) | the<br> Board would have granted the Award in relation to a smaller number of Shares; or |
| (e) | in<br> the case of an Award that has already been Released: |
| (i) | it<br> would not have been Released at all, or |
| --- | --- |
| (ii) | it<br> would have been Released in relation to a smaller number of Shares. |
| 7.5 | If<br> the Board makes a determination in relation to an Award under rule 7, it must do so within three years of its becoming aware of the<br> circumstances mentioned in rule 7.2 or rule 7.3. |
| --- | --- |
| 8. | Operation of malus and clawback |
| 8.1 | This<br> rule 8 applies to an Award if rule 7 applies to the Award. |
| 8.2 | If<br> at the date of the determination under rule 7.4, an Option comprising an Award has not yet been exercised, the Board may determine<br> to cancel the Award or reduce it by such number of Shares as the Board considers to be fair and reasonable, taking account of all<br> circumstances that the Board considers to be relevant. |
| 8.3 | If<br> at the date of the determination under rule 7.4, an Option comprising an Award has been exercised, the Board may determine a Clawback<br> Amount in relation to the Award. |
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| --- | | 8.4 | The<br> Clawback Amount shall be such amount as the Board considers to be fair and reasonable, taking account of all circumstances that the<br> Board considers to be relevant, but shall not be more than, in relation to an Option that has been exercised, the greater of: | | --- | --- | | (i) | the<br> Market Value of the Shares measured on the date the Option was exercised, and | | --- | --- | | (ii) | the<br> Market Value of the Shares measured on the date of the determination |
minus the Base Price or Exercise Price (as the case may be).
| 8.5 | If<br> the Award Holder has paid or is liable to pay any income tax or SICs in relation to the Award or the Shares and which cannot be recovered<br> from or repaid by the Tax Authority (whether directly or indirectly), the Board may in its discretion decide to reduce the Clawback<br> Amount to take account of this amount. In deciding whether to reduce the Clawback Amount, the Board shall take account of such factors<br> it thinks fit, which may include market practice, corporate governance rules and guidelines, and the expectations of shareholders. |
|---|---|
| 8.6 | For<br> the avoidance of doubt, the Board is not obliged to determine a Clawback Amount in relation to any particular Award, even if the<br> Board does determine a Clawback Amount in relation to other Awards to the same or other Award Holders which had the same Grant Date<br> or Release Date. |
| 8.7 | The<br> Award Holder shall reimburse the Company for the Clawback Amount, in any way acceptable to the Board, on or as soon as possible after<br> the Board determines a Clawback Amount in relation to the Award. If the Award Holder fails to reimburse the Company within 30 days<br> after the determination, the Company shall obtain reimbursement from the Award Holder in any (or any combination) of the following<br> ways: |
| (a) | by<br> reducing or cancelling any Options that the Award Holder has not exercised; |
| --- | --- |
| (b) | by<br> reducing or cancelling any cash bonus payable to the Award Holder by any Group Company; |
| (c) | by<br> reducing or cancelling any future or existing award made or option granted to the Award Holder under any other Share Incentive Scheme<br> or bonus scheme operated by any Group Company; |
| (d) | by<br> requiring the Award Holder to make a cash payment to a Group Company; or |
| (e) | by<br> reducing the Award Holder’s Salary. |
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| --- | | 8.8 | If<br> the Award Holder participates in another Share Incentive Scheme or bonus scheme operated by a Group Company, and that other scheme<br> contains a provision that has a similar effect to this rule 8, the Board may give effect to that provision by reducing or cancelling<br> any Options that the Award Holder has not exercised. | | --- | --- | | 8.9 | It<br> is a condition of the exercise of an Option that the Award Holder sign an Exercise Notice declaring an irrevocable agreement to the<br> terms of rule 8. | | 9. | Exercise of Options | | 9.1 | An<br> Award Holder may not exercise an Option before the later of: | | (a) | its<br> Release Date; | | --- | --- | | (b) | the<br> time when it becomes exercisable under rule 15; and | | (c) | the<br> time when it becomes exercisable under rule 16. | | 9.2 | An<br> Award Holder may only exercise an Option to the extent that the relevant Performance Conditions are achieved, and any other condition<br> stated in the Award Certificate is satisfied. | | --- | --- | | 9.3 | An<br> Award Holder may not exercise an Option at a time when its exercise is prohibited by, or would be a breach of, any applicable Listing<br> Rules or GIB MAR or any other law or regulation with the force of law, or other rule, code or set of guidelines (such as a personal<br> dealing code adopted by the Company). | | 9.4 | An<br> Award Holder may not exercise an Option without having signed the Exercise Notice and made any arrangements, or entered into any<br> agreements, that may be required and are referred to in rule 8 and rule 20. | | 10. | Manner of exercise of Options | | 10.1 | The<br> Award Holder shall exercise an Option by giving an Exercise Notice to the Company setting out the number of Shares over which the<br> Award Holder wishes to exercise the Option. If that number exceeds the number over which the Option may be validly exercised at the<br> time, the Company shall: | | (a) | treat<br> the Option as exercised only in respect of that lesser number; and | | --- | --- | | (b) | refund<br> any excess amount paid to exercise the Option or meet any Tax Liability. |
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| --- | | 10.2 | The<br> Exercise Notice shall be accompanied by both of the following: | | --- | --- | | (a) | in<br> relation to a Nominal Cost Option payment of an amount equal to the Exercise Price multiplied by the number of Shares specified in<br> the notice; | | --- | --- | | (b) | any<br> payment required under rule 20, |
unless the Award Holder has entered into binding alternative arrangements to secure the payment of those amounts which are satisfactory to the Board.
| 10.3 | The<br> Exercise Notice shall contain or be accompanied by: |
|---|---|
| (a) | (if<br> the Option is exercised before the end of an applicable Holding Period), the Nominee Agreement; and |
| --- | --- |
| (b) | any<br> documents relating to arrangements or agreements required under rule 8 and rule 20. |
| 10.4 | Any<br> Exercise Notice shall be invalid: |
| --- | --- |
| (a) | to<br> the extent that it is inconsistent with the Award Holder’s rights under these rules and the Award Certificate; |
| --- | --- |
| (b) | if<br> any of the requirements of rule 10.1, rule 10.2 or rule 10.3 are not met; or |
| (c) | if<br> any payment referred to in rule 10.2 is made by a cheque that is not honoured on first presentation or that fails in any other manner<br> to transfer the expected value to the Company. |
The Company may permit the Award Holder to correct any defect referred to in rule 10.4 (but shall not be obliged to do so). The date of any corrected Exercise Notice shall be the date of the correction rather than the original notice date for all other purposes of the Plan.
| 11. | Settlement of Awards |
|---|---|
| 11.1 | This<br> rule 11 is subject to rule 13. |
| 11.2 | Within<br> 30 days after the valid exercise of a Nominal Cost Option, the Company shall allot and issue the relevant Shares to the Award Holder<br> (or to the Nominee in the event that an Option is exercised prior to the expiry of an applicable Holding Period). |
| 16 |
| --- | | 11.3 | If<br> the Shares are listed or traded on any stock exchange, the Company shall apply to the appropriate body for any newly issued Shares<br> allotted to be listed or admitted to trading on that exchange as soon as practicable. | | --- | --- | | 11.4 | Within<br> 30 days after the valid exercise of a Phantom Option, the Company shall pay (or procure the payment) to the Award Holder of the amount<br> of cash due under the Award. The Company shall make such deductions from the payment as are required by law, including any withholding<br> taxes, in accordance with rule 20. | | 12. | Holding Period | | | During<br> a Holding Period, the Award Holder may not transfer, assign, charge or otherwise dispose of the beneficial interest in the Shares<br> Released under a Share-settled Award (including any Shares acquired on the exercise of an Option) except: | | (a) | with<br> the permission of the Board; | | --- | --- | | (b) | in<br> order to raise sufficient funds to pay a Tax Liability in relation to the Shares so Released; | | (c) | in<br> order to raise sufficient funds to pay the Exercise Price of a Nominal Cost Option; or | | (d) | where<br> rule 8, rule 16 or rule 18 apply. | | 13. | Alternative methods of settlement of Awards | | --- | --- | | 13.1 | Instead<br> of delivering the number of Shares specified in the relevant Exercise Notice the Company may settle the exercise of a Nominal Cost<br> Option in cash in the following manner: | | (a) | multiply<br> the number of Shares in relation to which the Award has been Released by the Market Value of a Share on the Release Date; | | --- | --- | | (b) | deduct<br> any Tax Liability and pay the resulting amount to the Award Holder; and | | (c) | refund<br> the amount of any payment the Award Holder may have made in respect of the Tax Liability. | | 14. | Lapse of Awards | | --- | --- | | 14.1 | Other<br> than pursuant to rule 12, an Award Holder may not transfer or assign, or create any charge or other security interest over an Award<br> (or any right arising under it). An Award shall lapse if the Award Holder attempts to do any of those things. However, this rule<br> 14.1 does not prevent the transmission of an Award to an Award Holder’s personal representatives on the death of the Award<br> Holder. |
| 17 |
| --- | | 14.2 | An<br> Award shall lapse on the earliest of the following: | | --- | --- | | (a) | any<br> attempted action by the Award Holder falling within rule 14.1; | | --- | --- | | (b) | when<br> the Board decides in accordance with rule 3.6, to the extent that the Performance Condition has become wholly or partly incapable<br> of being met; | | (c) | any<br> date on which the Award shall lapse, as specified in the Award Certificate; | | (d) | to<br> the extent necessary to give effect to any reduction or cancellation under rule 8; | | (e) | to<br> the extent required by rule 15, the date the Award Holder dies or ceases employment; | | (f) | the<br> first anniversary of the Award Holder’s death; | | (g) | the<br> end of the 90-day period, if rule 15.4 or rule 15.6 applies; | | (h) | if<br> the Board decides under rule 15.5 that it will not permit the Award Holder to exercise the Option, the date the Board so decides; | | (i) | the<br> end of the 90-day period during which exercise is permitted, if the Board decides under rule 15.5 that it will permit the Award Holder<br> to exercise the Option; | | (j) | if<br> the Award Holder ceases to be an Employee during the Employment Period in circumstances where rule 15.5 applies, 90 days after the<br> Award Holder so ceases to be an Employee, if the Board makes no decision under the applicable rule; | | (k) | if<br> the Award Holder ceases to be an Employee after the end of the Employment Period, 90 days after the later of: | | (i) | the<br> date of so ceasing; and | | (ii) | the<br> Release Date; | | (l) | the<br> time specified for the lapse of the Award under rule 16 if any part of that rule 16 applies; | | (m) | If<br> the Board so determines under rule 19.3; or | | (n) | when<br> the Award Holder becomes bankrupt, applies for an interim order, proposes or makes a voluntary arrangement under the Insolvency Act<br> 2011 of Gibraltar, or takes similar steps or is similarly affected under the laws of any jurisdiction. |
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| --- | |
|---|---|
| --- | --- |
| 15.1 | rule<br> 15 applies to Options. |
| 15.2 | If<br> an Award Holder: |
| (a) | dies<br> while an Employee; or |
| --- | --- |
| (b) | ceases<br> to be an Employee (whether or not following notice and for whatever reason) |
before the end of the Employment Period, the Option shall lapse immediately in respect of a number of Shares. That number is calculated in accordance with the formula N x (X/Y) where:
| (c) | N<br> = the number of Shares in relation to which the Option was originally granted, less any Shares in respect of which it has already<br> been exercised or has lapsed; |
|---|---|
| (d) | X<br> = the number of days between the date of death or cessation and the end of the Employment Period; and |
| (e) | Y<br> = the number of days in the Employment Period. |
| 15.3 | The<br> personal representatives of a deceased Award Holder may exercise the Option over a number of Shares during the period ending 12 months<br> after the death. If the Option is not exercised, it will lapse at the end of that period. That number of Shares shall be determined<br> as follows: |
| --- | --- |
| (a) | take<br> the number of Shares that remain after part of the Option has lapsed under rule 15.2; |
| --- | --- |
| (b) | if<br> the Award Holder dies during the Performance Period, the Board shall apply a further reduction to reflect the likelihood as at the<br> date of death of the Performance Condition not being achieved by the end of the Performance Period and the Option shall lapse to<br> that extent; and |
| (c) | if<br> the Award Holder dies after the end of the Performance Period, the number shall be equal to the number of Shares that the Award Holder<br> could have acquired on exercising the Option immediately before the death. |
| 15.4 | This<br> rule 15.4 applies if an Award Holder ceases to be an Employee before the Release Date due to any of the following reasons: |
| --- | --- |
| (a) | injury; |
| --- | --- |
| (b) | ill<br> health; |
| 19 |
| --- | | (c) | disability;<br> or | | --- | --- | | (d) | the<br> Employer Company ceasing to be a Group Company. |
An Award Holder who so ceases to be an Employee may exercise the remainder of the Option (after the application of rule 15.2 and subject to achieving the Performance Conditions) during the 90-day period beginning on the earlier of:
| (e) | the<br> Release Date; and |
|---|---|
| (f) | the<br> date on which the Option becomes exercisable under rule 16. |
If the Option is not exercised during the relevant 90-day period, it will lapse at the end of that period.
| 15.5 | This<br> rule 15.5 applies if an Award Holder ceases to be an Employee before the Release Date for any reason other than death and the reasons<br> set out in rule 15.4. |
|---|
The Board may in its absolute discretion permit the Award Holder to exercise the remainder of the Option (after the application of rule 15.2) during the 90-day period beginning on the earlier of:
| (a) | the<br> Release Date; and |
|---|---|
| (b) | the<br> date on which the Option becomes exercisable under rule 16. |
If the Option is not exercised during the relevant 90-day period, it will lapse at the end of that period.
Any decision by the Board to grant permission under this rule 15.5 shall be made in the 90-day period following the cessation of employment and if the Board does not make such a decision within that period, the Option will lapse immediately and in accordance with rule 14. The Award Holder may not exercise the Option before the Board makes such a decision.
| 15.6 | An<br> Award Holder who ceases to be an Employee on or after the Release Date may exercise the Option during the 90-day period following<br> the date of cessation. |
|---|---|
| 15.7 | The<br> Board shall notify the relevant Award Holder of any decision made under rule 15, including any decision not to permit the exercise<br> of an Option, within a reasonable time after making it. |
| 20 |
| --- | | 15.8 | If<br> the relevant Award Certificate specifies different Performance Periods or Employment Periods for different parts of an Option, each<br> part of that Option shall be treated as a separate Option for the purposes of rule 15. | | --- | --- | | 15.9 | An<br> Award Holder who continues to be an employee or director of any Group Company shall not be regarded as ceasing to be an Employee. | | 16. | Takeovers and liquidations | | 16.1 | The<br> Releasable Number of Shares in relation to an Award is the number of Shares that the Board shall determine as follows: | | (a) | If<br> the change of Control occurs during the Employment Period, multiply the number of Shares in relation to which the Award was originally<br> granted, less any Shares in respect of which it has already been Released (or, in the case of an Option, has already been exercised)<br> or has lapsed, by X/Y where: | | --- | --- | | (i) | X<br> = the number of days between the Grant Date and the date (or expected date) of the change of Control; and | | --- | --- | | (ii) | Y<br> = the number of days in the Employment Period. | | (b) | If<br> the change of Control occurs during the Performance Period, apply a further reduction to reflect the likelihood as at the date (or<br> expected date) of the change of Control of the Performance Condition not being achieved by the end of the Performance Period. | | --- | --- | | 16.2 | Where<br> the Board is required by rule 16.1 to determine the Releasable Number, and the relevant Award Certificate specifies different Performance<br> Periods or Employment Periods for different parts of an Award, the Board shall treat each part of that Award as a separate Award. | | --- | --- | | 16.3 | If<br> the Board considers that a change of Control is likely to occur, the Board may in its absolute discretion decide that: | | (a) | all<br> Awards shall be Released in relation to the Releasable Number of Shares; and | | --- | --- | | (b) | an<br> Award Holder may exercise all or any part of any Option (but not in respect of more than the Releasable Number of Shares) within<br> a reasonable period to be specified by the Board for that purpose and ending immediately before the Acquiror obtains Control of the<br> Company. The Board shall have discretion to determine that an Option that is not exercised by the end of that period shall lapse. |
| 21 |
| --- |
The Board may decide that the Release of Awards and exercise of Options shall be conditional on the change of Control actually occurring and shall be treated as having no effect if the change of Control does not occur.
| 16.4 | rule<br> 16.5, rule 16.6 and rule 16.7 apply if a change of Control occurs and the Acquiror declares that it is willing to make an agreement<br> under rule 18. |
|---|---|
| 16.5 | The<br> Board may in its absolute discretion decide that an Award Holder may exercise all or any part of any Option (but not in respect of<br> more than the Releasable Number of Shares) within a reasonable period to be specified by the Board for that purpose. Any part of<br> an Option that is not either exchanged under rule 18 or exercised by the end of that period shall lapse. |
| 16.6 | The<br> Board may at any time during the Rollover Period exchange the Award under rule 18. |
| 16.7 | The<br> Board has discretion to determine at any time before the end of the Rollover Period that some or all of any Awards that are not so<br> exchanged shall lapse at the end of the Rollover Period. |
| 16.8 | If<br> the Acquiror is not willing to exchange the award under rule 18: |
| (a) | all<br> Awards shall be Released immediately following the change of Control in relation to the Releasable Number of Shares and lapse in<br> relation to the balance; and |
| --- | --- |
| (b) | an<br> Award Holder may exercise all or any part of any Option (but not in respect of more than the Releasable Number of Shares) within<br> the period of 30 days following the change of Control. Any part of an Option that is not exercised by the end of that period shall<br> lapse. |
| 16.9 | If<br> the court sanctions a compromise or arrangement under part VIII of the Companies Act 2014, the Board may decide that: |
| --- | --- |
| (a) | all<br> Awards shall be Released in relation to the Releasable Number of Shares; and |
| --- | --- |
| (b) | an<br> Award Holder may exercise all or any part of any Option (but not in respect of more than the Releasable Number of Shares) within<br> a reasonable period to be specified by the Board for that purpose. The Board shall have discretion to determine that an Option that<br> is not exercised by the end of that period shall lapse. |
| 22 |
| --- | | 16.10 | If<br> any Shares, in one or a series of transactions, are sold resulting in the buyer and persons acting in concert with the buyer together<br> acquiring Control of the Company, but the buyer is a company and its shareholders and the proportion of its shares held by each of<br> them following completion of the sale are substantially the same as the shareholders and their shareholdings in the Company immediately<br> before the sale, the Board may determine that this does not constitute a change of Control. | | --- | --- |
If the buyer offers to make such arrangements as the Board, in its reasonable opinion, considers to be fair, for new awards to be offered under rule 18 in exchange for Awards, then the Board may decide that any Awards that are not so exchanged shall lapse on such date as the Board shall specify.
If the buyer does not offer to make arrangements that the Board considers to be fair within 30 days after the buyer has acquired Control, then:
| (a) | all<br> Awards shall be Released on the 31st day following the buyer acquiring Control in relation to the Releasable Number of Shares and<br> lapse in relation to the balance; and |
|---|---|
| (b) | an<br> Award Holder may exercise all or any part of any Option (but not in respect of more than the Releasable Number of Shares) within<br> the period starting 31 days and ending 90 days following the buyer acquiring Control. Any part of an Option that is not exercised<br> by the end of that period shall lapse. |
| 16.11 | In<br> rule 16 and rule 18, a person shall be deemed to have obtained Control of a company if that person, and others acting in concert<br> with that person, have obtained Control of it together. |
| --- | --- |
| 16.12 | If<br> the shareholders of the Company receive notice of a resolution for the voluntary winding up of the Company, any Award Holder may<br> exercise an Option in respect of the Releasable Number of Shares at any time before that resolution is passed, conditional upon the<br> passing of that resolution, and if the Award Holder does not exercise the Option, it shall lapse when the winding up begins. |
| 16.13 | The<br> Board shall notify Award Holders of any event that is relevant to Awards under this rule 16 within a reasonable period after the<br> Board becomes aware of it. |
| 16.14 | For<br> the avoidance of doubt, rule 16 is subject to rule 6.4 and rule 6.5. |
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| --- | |
|---|---|
| --- | --- |
| 17.1 | The Board may at any time by notice in writing given to the holder require that the holders of an award made by Forafric Agro Holdings Limited under the Forafric 2021 Long Term Employee Share Incentive Plan adopted on 22 June 2022 (such holder a “2021 Award Holder”), to exchange the same for an Award under the Plan. |
| 17.2 | If the Board gives notice under clause 17.1 to a 2021 Award Holder, the said 2021 Award Holder shall surrender the same by way of a notice to Forafric Agro Holdings Limited and the Company, in a form to be determined by the Board, in exchange for the grant by the Company to him of a replacement right on substantially the same terms and in relation to such number of shares of the Company as the Board shall determine. |
| 18. | Exchange of Awards |
| 18.1 | The Board may within the Rollover Period require that an Award Holder surrender any Award (“Old Award”) in exchange for a replacement right (“New Award”). |
| 18.2 | A New Award shall be granted on substantially the same terms as the Old Award and in relation to such shares of such company as the Board and Acquiror shall determine. |
| 18.3 | The Rollover Period is a period specified by the Board within which Award Holders may be required to surrender their Awards. |
| 19. | Variation of share capital |
| 19.1 | This rule 19 applies where there is: |
| (a) | a<br> variation of share capital; or |
| --- | --- |
| (b) | an<br> extraordinary distribution to shareholders. |
| 19.2 | In<br> this rule 19: |
| --- | --- |
| (a) | A<br> variation of share capital includes a capitalisation issue, rights issue, consolidation, subdivision or reduction of capital, a vendor<br> placing with clawback, a vendor rights offer or a cash open offer. However, a scrip dividend is not a variation of share capital. |
| --- | --- |
| (b) | An<br> extraordinary distribution to shareholders includes a demerger or special dividend. |
| 24 |
| --- | | 19.3 | If<br> notice is given to shareholders of the Company of a proposed extraordinary distribution, the Board shall determine whether the interests<br> of Award Holders would or might be substantially prejudiced by the proposed extraordinary distribution. | | --- | --- |
If the Board does so decide, it may determine that:
| (a) | some<br> or all Awards shall be Released in relation to the Releasable Number of Shares; and |
|---|---|
| (b) | an<br> Award Holder may exercise all or any part of any Option (but not in respect of more than the Releasable Number of Shares) within<br> a reasonable period specified by the Board for that purpose and ending immediately before the record date for the extraordinary distribution.<br> The Board shall have discretion to determine that an Option that is not exercised by the end of that period shall lapse. |
The Board may decide that the Release of Awards and exercise of Options shall be conditional on the extraordinary distribution actually occurring and shall be treated as having no effect if the extraordinary distribution does not occur.
The Releasable Number shall be determined in accordance with rule 16.1 as if the extraordinary distribution were a change of Control.
For the avoidance of doubt, if the Board does not determine that Awards shall be Released and Options may be exercised, the Board may nevertheless make an adjustment to the Awards under rule 19.4.
| 19.4 | If<br> a variation of share capital or an extraordinary distribution occurs and the Board considers that it has affected the value of Awards,<br> the Board shall consider whether it is fair to adjust the terms of the Awards and, if so, the Board shall make such adjustment as<br> it considers appropriate to: |
|---|---|
| (a) | the<br> number of Shares subject to the Award; |
| --- | --- |
| (b) | the<br> class of Shares subject to the Award; and |
| (c) | subject<br> to rule 19.5, the Exercise Price. |
| 19.5 | The<br> Board may not reduce the Exercise Price of an Option below the nominal value of a Share, if the Option will or may be satisfied by<br> the issue of Shares, unless the Board is able, and resolves, to capitalise from reserves an amount sufficient (when aggregated with<br> the reduced Exercise Price payable) to pay up the Shares in full on the Option’s exercise. |
| --- | --- |
| 25 |
| --- | | 19.6 | The<br> Board shall notify all affected Award Holders of any decision made under rule 19 within a reasonable time after making it. | | --- | --- | | 20. | Tax liabilities | | 20.1 | The<br> Award Holder shall, to the extent permissible under applicable law, indemnify the Employer Company in respect of any Tax Liability. | | 20.2 | The<br> Exercise Notice shall include the Award Holder’s irrevocable agreement to: | | (a) | pay<br> the Tax Liability to the Employer Company; and | | --- | --- | | (b) | enter<br> into arrangements to the satisfaction of the Company or Employer Company to pay the Tax Liability. | | 20.3 | If<br> an Award Holder does not pay the Tax Liability within seven days of any Taxable Event, the Company or Employer Company (as appropriate)<br> may, to the extent permissible under applicable law: | | --- | --- | | (a) | if<br> the relevant Taxable Event is the exercise of an Option or the Release of an Award, and the Shares are readily saleable at the time,<br> retain and sell such number of Shares on behalf of the Award Holder as is necessary to meet the Tax Liability, and any costs of sale;<br> or | | --- | --- | | (b) | deduct<br> the amount of any Tax Liability from any payments of remuneration made to the Award Holder on or after the date on which the Tax<br> Liability arose. |
The Award Holder’s obligations under rule 20.1 shall not be affected by any failure of the Company or Employer Company to withhold shares or deduct from payments of remuneration under this rule 20.3.
| 20.4 | Each<br> Award Holder agrees that it is their responsibility to settle their own tax affairs in connection with the exercise of an Option<br> and, if required to do so by the Company or Employer Company, the Award Holder shall assist the Company or Employer Company in good<br> faith for purposes of settling any tax matters relating to an Award Holder’s exercise of an Option (such assistance to include<br> the signing of any relevant elections, documents or forms). |
|---|---|
| 20.5 | The<br> Exercise Notice in respect of a Share-settled Award shall include a power of attorney appointing the Company as the Award Holder’s<br> agent and attorney for the purposes of rule 20.3. |
| 26 |
| --- | |
|---|---|
| --- | --- |
| 21.1 | The rights and obligations of any Award Holder under the terms of an office or employment with any Group Company or former Group Company shall not be affected by being an Award Holder. |
| 21.2 | The value of any benefit realised under the Plan by Award Holders shall not be taken into account in determining any pension or similar entitlements. |
| 21.3 | Award Holders and Employees shall have no rights to compensation or damages on account of any loss in respect of Awards or the Plan where this loss arises (or is claimed to arise), in whole or in part, from: |
| (a) | termination<br> of office or employment with; or |
| --- | --- |
| (b) | notice<br> to terminate office or employment given by or to, |
any Group Company or any former Group Company. This exclusion of liability shall apply however termination of office or employment, or the giving of notice, is caused, and however compensation or damages are claimed.
| 21.4 | Award<br> Holders and Employees shall have no rights to compensation or damages from any Group Company or any former Group Company on account<br> of any loss in respect of Awards or the Plan where this loss arises (or is claimed to arise), in whole or in part, from: |
|---|---|
| (a) | any<br> company ceasing to be a Group Company; or |
| --- | --- |
| (b) | the<br> transfer of any business from a Group Company to any person that is not a Group Company. |
This exclusion of liability shall apply however the change of status of the relevant Group Company, or the transfer of the relevant business, is caused, and however compensation or damages are claimed.
| 21.5 | An<br> Employee shall not have any right to receive Awards, whether or not the Employee has previously been granted any. |
|---|
| 27 |
| --- | |
|---|---|
| --- | --- |
| 22.1 | Except as maintained in rule 22.3, any notice or other communication given under or in connection with the Plan shall be in writing and shall be: |
| (a) | delivered<br> by hand or by prepaid first-class post or other next working day delivery service at the Appropriate Address; |
| --- | --- |
For the purposes of this rule 22.1, the Appropriate Address means:
| (i) | Unit<br> 5.3, Madison Building, Midtown, Queensway, Gibraltar; |
|---|---|
| (ii) | an<br> Award Holder’s home address; and |
| (iii) | if<br> the Award Holder has died, and notice of the appointment of personal representatives is given to the Company, any contact address<br> specified in that notice. |
| (b) | sent<br> by fax to the fax number notified in writing by the recipient to the sender; or |
| --- | --- |
| (c) | sent<br> by email to the Appropriate Email Address. |
For the purposes of this rule 22.1, Appropriate Email Address means:
| (i) | in<br> the case of the Company, swahnon@forafric.gi; and |
|---|---|
| (ii) | in<br> the case of an Award Holder, their relevant work email address or such personal email address agreed with the Company in writing. |
| 22.2 | Any<br> notice or other communication given under this rule 22 shall be deemed to have been received: |
| --- | --- |
| (a) | if<br> delivered by hand, on signature of a delivery receipt, or at the time the notice is left at the appropriate address; |
| --- | --- |
| (b) | if<br> sent by prepaid first-class post or other next working day delivery service, at 9.00 am on the second Business Day after posting,<br> or at the time recorded by the delivery service; |
| (c) | if<br> sent by fax, at 9.00 am on the next Business Day after transmission; and |
| (d) | if<br> sent by email, at 9.00 am on the next Business Day after sending. |
| 22.3 | This<br> rule does not apply to: |
| --- | --- |
| (a) | the<br> service of any Exercise Notice; and |
| --- | --- |
| (b) | the<br> service of any proceedings or other documents in any legal action or, where applicable, any arbitration or other method of dispute<br> resolution. |
| 23. | Administration and amendment |
| --- | --- |
| 23.1 | The Board shall administer the Plan. |
| 28 |
| --- | | 23.2 | The<br> Plan is intended to comply with Listing Rules. Notwithstanding any other rule set out in this Plan and in the event that any rules<br> of the Plan or the terms of an Award Certificate do not comply with applicable Listing Rules, the Board shall follow a course of<br> action or, where required, be able to make the necessary minimum amendments to the rules or to an Award Certificate from time to<br> time (including, if required, the introduction or amendment of a Holding Period) in order to ensure that the Plan or any actions<br> under the Plan do not breach the applicable Listing Rules. | | --- | --- | | 23.3 | The<br> Board may amend the Plan from time to time, but: | | (a) | The<br> Board may not amend the Plan if the amendment: | | --- | --- | | (i) | applies<br> to Awards granted before the amendment was made; and | | --- | --- | | (ii) | materially<br> adversely affects the interests of Award Holders, |
except that an Award Holder whose Awards would be adversely affected may consent to the application of the amendment to those awards.
| (b) | the<br> Board may not make any amendment to the advantage of Award Holders if that amendment relates to: |
|---|---|
| (i) | the<br> definition of Employee; |
| --- | --- |
| (ii) | rule<br> 4; or |
| (iii) | rule<br> 19, |
without the prior approval of the Company in general meeting (except for minor amendments to benefit the administration of the Plan, to take account of a change in legislation, or to obtain or maintain favourable tax, exchange control or regulatory treatment for Award Holders or for a Group Company).
| 23.4 | The<br> cost of establishing and operating the Plan shall be borne by the Group Companies in proportions determined by the Board. |
|---|---|
| 23.5 | Any<br> decision under rule 7, rule 8, or rule 15.5, and whether to consider making such a decision, shall be entirely at the discretion<br> of the Board. |
| 23.6 | The<br> Board shall determine any question of interpretation and settle any dispute arising under the Plan, including determining whether<br> anything is material. In these matters, the Board’s decision shall be final. |
| 23.7 | In<br> making any decision or determination, or exercising any discretion under the rules, the Board shall act fairly and reasonably and<br> in good faith. |
| 29 |
| --- | | 23.8 | The<br> Company shall not be obliged to notify any Award Holder: | | --- | --- | | (a) | if<br> an Option is due to lapse; or | | --- | --- | | (b) | when<br> an Option is due to, or has, become exercisable. | | 23.9 | The<br> Company shall not be obliged to provide Award Holders with copies of any materials sent to the holders of Shares. | | --- | --- | | 23.10 | The<br> Board may establish sub-plans to operate in overseas territories (“overseas sub-plans”), provided that: | | --- | --- | | (a) | all<br> overseas sub-plans are subject to the limitations set out in rule 4 ; | | --- | --- | | (b) | no<br> Employee has an entitlement to awards under any overseas sub-plan greater than the maximum entitlement of an Employee under the Plan. |
Any overseas sub-plan must be governed by rules similar to the rules of the Plan, but modified to take account of applicable tax, social security, employment, company, exchange control, trust or securities (or any other relevant) law, regulation or practice.
| 24. | Third party rights |
|---|---|
| 24.1 | A person who is not a party to an Award shall not have any rights under or in connection with it except where these rights arise under any rule of the Plan for any Employer Company that is not a party to an Award. |
| 25. | Data protection |
For the purpose of operating the Plan, the Company will collect and process information relating to Employees and Award Holders in accordance with the Company’s Data Protection Policy.
| 26. | Governing law |
|---|
The Plan and any dispute or claim arising out of or in connection with it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the laws of Gibraltar.
| 27. | Jurisdiction |
|---|---|
| 27.1 | The courts of Gibraltar shall have jurisdiction to settle any dispute or claim arising out of or in connection with the Plan or its subject matter or formation (including non-contractual disputes or claims). The jurisdiction agreement contained in this rule is made for the benefit of the Company and the Group only, which accordingly retains the right to bring proceedings in any other court of competent jurisdiction. |
| 27.2 | Each party irrevocably consents to any process in any legal action or proceedings under rule 27.1 being served on it in accordance with the provisions of the Plan relating to service of notices. Nothing contained in the Plan shall affect the right to serve process in any other manner permitted by law. |
| 30 |
| --- |
Schedule1 – Agreed Performance Targets
| 31 |
| --- |
Exhibit16.1
June 15, 2022
Office of the Chief Accountant
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Ladies and Gentlemen:
We have read the statements made by Forafric Global PLC (formerly known as Globis NV Merger Corp) under Item 4.01 of its Form 8-K filed on June 15, 2022. We agree with the statements concerning our Firm under Item 4.01; we are not in a position to agree or disagree with other statements contained therein.
Very truly yours,
/s/Marcum LLP
Melville, NY
EXHIBIT22.1
LISTOF SUBSIDIARIES
Forafric Global PLC has the following subsidiaries:
| Subsidiary Name | Jurisdiction of<br> <br>Incorporation | Percentage of<br> <br>Ownership | |||
|---|---|---|---|---|---|
| 1. | Forafric Agro Holdings Limited | Gibraltar | 100 | % | |
| 2. | Forafric Maroc SA | Morocco | 100 | % | |
| 3. | Ojipar SA | Morocco | 100 | % | |
| 4. | Hanylac SA | Morocco | 99.99 | % | |
| 5. | Forafric SA | Morocco | 100 | % | |
| 6. | Maymouna Grain SA | Morocco | 100 | % | |
| 7. | Les Grands Moulins Du Tensift SA | Morocco | 100 | % | |
| 8. | Les Granes Semouleries du Maroc SA (GSM) | Morocco | 100 | % | |
| 9. | Arzak SA | Morocco | 100 | % | |
| 10. | Maymouna Food SA | Morocco | 100 | % | |
| 11. | Makhazines Rhamna SA | Morocco | 99.83 | % | |
| 12. | Selimport Sarl | Morocco | 50 | % | |
| 13. | TANGERMILL SARLAU | Morocco | 100 | % | |
| 14. | Domaine Azam Chtouka | Morocco | 100 | % | |
| 15. | Finaseed | Morocco | 100 | % | |
| 16. | Cerelis | Morocco | 100 | % | |
| 17. | Finalog SA | Morocco | 100 | % | |
| 18. | Tria Group SA | Morocco | 100 | % | |
| 19. | Les Grands Moulins d’Essaouira SA (GME) | Morocco | 75 | % | |
| 20. | Les Grandes Semouleries De Safi (GSS) | Morocco | 93.75 | % | |
| 21. | Ladis SA | Morocco | 100 | % | |
| 22. | Prodela | Morocco | 100 | % | |
| 23. | Multimix Sarl | Morocco | 100 | % | |
| 24. | La Méditerranée des Aromes SA | Morocco | 100 | % | |
| 25. | Prodiam’s SARL | Morocco | 100 | % | |
| 26. | MDS Mali | Mali | 70.35 | % | |
| 27. | MDS Burkina Faso | Burkina Faso | 78.21 | % | |
| 28. | GMT Niger | Niger | 37.14 | % | |
| 29. | Trigola LDA | Angola | 75 | % | |
| 30. | Forafric Portugal SGPS Unipessoal LDA | Portugal | 100 | % |
Exhibit99.1
FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS
ASOF MARCH 31, 2022 AND DECEMBER 31, 2021
ANDFOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
| Page(s) | |
|---|---|
| Condensed Consolidated Financial Statements | |
| Condensed<br> Consolidated Balance Sheets | 3 |
| Condensed<br> Consolidated Statements of Operations and Comprehensive Loss | 4 |
| Condensed<br> Consolidated Statements of Changes in Stockholder’s Equity | 5 |
| Condensed<br> Consolidated Statements of Cash Flows | 6 |
| Notes<br> to Condensed Consolidated Financial Statements | 7-23 |
| 2 |
| --- |
FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Inthousands, except share and per share data)
| Years ended | |||||
|---|---|---|---|---|---|
| December 31, | |||||
| 2021 | |||||
| AUDITED | |||||
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash<br> equivalents | 21,081 | $ | 14,393 | ||
| Accounts receivable, net<br> of allowance for credit losses of 15,406 and 15,737, respectively | 38,882 | 32,313 | |||
| Amount due from related<br> parties | 898 | 898 | |||
| Other receivables | 33,378 | 32,022 | |||
| Inventories, net | 24,210 | 37,563 | |||
| Other<br> assets, current | 24 | 359 | |||
| Total current assets | 118,473 | 117,548 | |||
| Property, plant, and equipment, net | 105,236 | 109,476 | |||
| Right-of-use assets | 15,390 | 16,359 | |||
| Goodwill | 49,580 | 51,571 | |||
| Intangible assets, net | 3,812 | 3,975 | |||
| Other assets, noncurrent | 1,171 | 973 | |||
| Total<br> assets | 293,662 | $ | 299,902 | ||
| LIABILITIES AND STOCKHOLDER’S<br> EQUITY | |||||
| Current liabilities: | |||||
| Lines of credit –<br> working capital | 59,507 | $ | 79,504 | ||
| Lines of credit –<br> wheat inventories | 81,344 | 70,361 | |||
| Accounts payable | 35,254 | 26,196 | |||
| Accrued expenses | 7,571 | 13,062 | |||
| Contract liabilities | 1,705 | 1,910 | |||
| Current portion of long-term<br> debt | 9,653 | 10,845 | |||
| Other<br> liabilities, current | 1,601 | 1,019 | |||
| Total current liabilities | 196,635 | 202,897 | |||
| Long-term debt | 21,291 | 14,129 | |||
| Loan from related party | 1,210 | 1,234 | |||
| Stockholder loans | 15,169 | 15,269 | |||
| Deferred tax liabilities | 18,032 | 18,721 | |||
| Total liabilities | 252,337 | 252,250 | |||
| Stockholder’s equity: | |||||
| Common stock, 1 par value;<br> 120,000,000 shares authorized; issued, and outstanding at March 31, 2022 and December 31, 2021 | 120,000 | $ | 120,000 | ||
| Accumulated deficit | (87,002 | ) | (83,550 | ) | |
| Accumulated other comprehensive<br> income | 1,012 | 3,685 | |||
| Non-controlling<br> interest | 7,315 | 7,517 | |||
| Total<br> stockholder’s equity | 41,325 | 47,652 | |||
| Total<br> liabilities and stockholder’s equity | 293,662 | $ | 299,902 |
All values are in US Dollars.
Theaccompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
| --- |
FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
(Inthousands, except share and per share data)
| Three<br> months ended | ||||||
|---|---|---|---|---|---|---|
| March 31, | March 31, | |||||
| 2022 | 2021 | |||||
| Revenues | $ | 89,071 | $ | 60,622 | ||
| Cost of sales | 79,562 | 49,741 | ||||
| Gross profit | 9,509 | 10,881 | ||||
| Operating expenses: | ||||||
| Selling,<br> general and administrative expenses | 8,900 | 6,003 | ||||
| Total<br> operating expenses | 8,900 | 6,003 | ||||
| Operating income | 609 | 4,878 | ||||
| Other expense (income): | ||||||
| Interest income | - | (220 | ) | |||
| Interest expense | 2,580 | 1,593 | ||||
| Foreign<br> Exchange loss | 538 | 500 | ||||
| Total<br> other expense | 3,118 | 1,873 | ||||
| (Loss) income before taxes | (2,509 | ) | 3,005 | |||
| Income tax expense | 970 | 610 | ||||
| Net (loss) income | (3,479 | ) | 2,395 | |||
| Net (loss) income attributable<br> to noncontrolling interest | (27 | ) | 31 | |||
| Net (loss) income attributable<br> to the Company | $ | (3,452 | ) | $ | 2,364 | |
| (Loss) income per common<br> share - basic and diluted | $ | (0.03 | ) | $ | 0.02 | |
| Weighted average number of shares outstanding - basic and diluted | 120,000,000 | 120,000,000 | ||||
| Net (loss) income | (3,479 | ) | 2,395 | |||
| Other comprehensive (loss) income net of tax: | ||||||
| Foreign<br> currency translation adjustments | (2,848 | ) | (623 | ) | ||
| Total other comprehensive<br> (loss) income | (2,848 | ) | (623 | ) | ||
| Comprehensive (loss)<br> income | (6,327 | ) | 1,772 | |||
| less: Comprehensive<br> (loss) income attributable to non-controlling interest | (202 | ) | 35 | |||
| Comprehensive (loss)<br> income attributable to the Company | $ | (6,125 | ) | $ | 1,737 |
Theaccompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
| --- |
FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY
(UNAUDITED)
(Inthousands, except share and per share data)
| Accumulated | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Other | Non- | |||||||||||||||
| Common<br> Stock | Accumulated | Comprehensive | Controlling | Total | ||||||||||||
| Shares | Amount | Deficit | Income<br> (Loss) | Interest | Equity | |||||||||||
| Balance,<br> December 31, 2020 | 120,000,000 | $ | 120,000 | $ | (74,397 | ) | $ | 6,309 | $ | 82 | $ | 51,994 | ||||
| Net income | - | - | 2,364 | - | 31 | 2,395 | ||||||||||
| Foreign exchange (loss)<br> income | - | - | - | (627 | ) | 4 | (623 | ) | ||||||||
| Balance, March 31,<br> 2021 | 120,000,000 | $ | 120,000 | $ | (72,033 | ) | $ | 5,682 | $ | 117 | $ | 53,766 | ||||
| Balance, December 31,<br> 2021 | 120,000,000 | $ | 120,000 | $ | (83,550 | ) | $ | 3,685 | $ | 7,517 | $ | 47,652 | ||||
| Net loss | - | - | (3,452 | ) | - | (27 | ) | (3,479 | ) | |||||||
| Foreign exchange loss | - | - | - | (2,673 | ) | (175 | ) | (2,848 | ) | |||||||
| Balance, March 31,<br> 2022 | 120,000,000 | $ | 120,000 | $ | (87,002 | ) | $ | 1,012 | $ | 7,315 | $ | 41,325 |
Theaccompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
| --- |
FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Inthousands, except share and per share data)
| Three<br> months ended | ||||||
|---|---|---|---|---|---|---|
| March 31, | March 31, | |||||
| 2022 | 2021 | |||||
| Cash flows from operating<br> activities: | ||||||
| Net (loss) income | $ | (3,479 | ) | $ | 2,395 | |
| Adjustments to reconcile net (loss) income<br> to net cash used in operating activities: | ||||||
| Depreciation of property,<br> plant and equipment | 1,117 | 852 | ||||
| Amortization of intangible<br> assets | 28 | 11 | ||||
| Amortization of right-of-use<br> assets | 309 | 295 | ||||
| Bad debt expense | 315 | 117 | ||||
| Deferred income taxes | 79 | 121 | ||||
| Changes in operating assets<br> and liabilities: | ||||||
| Accounts receivable | (10,596 | ) | (5,216 | ) | ||
| Other receivables | (2,117 | ) | (14,374 | ) | ||
| Inventories | 12,139 | (16,642 | ) | |||
| Accounts payable | 11,513 | 27,187 | ||||
| Other<br> payables and liabilities | (4,234 | ) | (1,240 | ) | ||
| Net cash provided by<br> (used in) operating activities | 5,074 | (6,494 | ) | |||
| Cash flows from investing<br> activities: | ||||||
| Purchases of property, plant, and equipment | (788 | ) | (762 | ) | ||
| Additions to intangible<br> assets | - | (5 | ) | |||
| Net cash used in investing<br> activities | (788 | ) | (767 | ) | ||
| Cash flows from financing<br> activities: | ||||||
| Stockholder loans | (100 | ) | 10,729 | |||
| Proceeds from issuance of convertible bonds | 11,000 | - | ||||
| Borrowings on financial debt | 139,246 | 23,411 | ||||
| Repayments on financial<br> debt | (146,546 | ) | (5,481 | ) | ||
| Net cash provided by financing<br> activities | 3,600 | 28,659 | ||||
| Effect of exchange rate<br> changes on cash and cash equivalents | (1,198 | ) | (133 | ) | ||
| Net increase in cash and cash equivalents | 6,688 | 21,265 | ||||
| Cash and cash equivalents,<br> beginning of period | 14,393 | 12,683 | ||||
| Cash and cash equivalents,<br> end of period | $ | 21,081 | $ | 33,948 | ||
| Supplemental cash flow disclosures: | ||||||
| Interest paid | $ | 3,100 | $ | 1,795 | ||
| Net income taxes paid | $ | 887 | $ | 489 |
Theaccompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
| --- |
FORAFRIC AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH31, 2022
1.NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Natureof Operations - Forafric Agro Holdings Limited and Subsidiaries (the “Company”, “we”, “us” or “our”) 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”). The Company is wholly owned by Lighthouse Capital Limited (the “Parent” or “Parent Company”).
During 2021, the Company owned common stock representing 100% ownership in Millcorp Geneva SA (“Millcorp”). Millcorp is a trading company that trades grains and oils for use as animal feed (“Grain Trading Business”). On June 1, 2021 (“Separation Date”), the Company distributed its 100% ownership in Millcorp to the Parent Company which resulted in the spin-off of its Grain Trading business (“Restructuring”). The Company did not receive any consideration from the Parent Company for distributing the 100% ownership in Millcorp. The assets, liabilities, and results of operations of Millcorp have been excluded from these condensed consolidated financial statements.
Based on an evaluation of the guidance under Staff Accounting Bulletin (“SAB”) Topic 5.Z.7, Accounting for the spin-off of asubsidiary, it was determined that the Restructuring should be reflected as a change in reporting entity. As such, the accompanying condensed consolidated financial statements of the Company retroactively reflect the Restructuring, including all distributions and transactions in conjunction therewith, and exclude Millcorp for all periods presented. These condensed consolidated financial statements are the 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 17 — Related Parties for further information regarding the Company’s related party transactions.
In June 2021, the Company signed a letter of intent to be acquired by Globis Acquisition Corp. (“Globis”). Globis is a special purpose acquisition company (“SPAC”) listed on the NASDAQ exchange in the United States. As of June 3, 2022, the transaction gained the approval by the SEC. The transaction is expected to close in June 2022, subject to approval by the shareholders of the SPAC.
On December 19, 2021, Globis and the Company entered into a Business Combination Agreement (the “Business Combination”). The Business Combination Agreement provides for the consummation of the following transactions (collectively, the “Business Combination”): (i) Globis will merge with and into Globis NV Merger Corp., a Nevada corporation and a wholly-owned subsidiary of Globis (“Globis Nevada”), with Globis Nevada surviving (the “Merger”); (ii) Globis Nevada will change its jurisdiction of incorporation by transferring by way of a redomiciliation and domesticating as a Gibraltar public company limited by shares (the “Redomiciliation”) and change its name to “Forafric Global PLC” (referred to herein as “New Forafric”); and (iii) immediately following the effectiveness of the Redomiciliation, New Forafric will acquire 100% of the equity interests in the Company from the Lighthouse Capital Limited (“Seller”) and the Company will become a direct subsidiary of New Forafric.
The total consideration to be paid to the Seller in the Business Combination will be (i) 15,100,000 Ordinary Shares, subject to reduction to the extent that the Closing Payment (as defined below) is less than $0, provided that the Seller may be issued up to 1,904,762 additional Ordinary Shares determined based on the amount of Remaining Cash (as defined in the Business Combination Agreement) at the Closing; plus (ii) an amount (the “Closing Payment”) equal to $20,000,000 minus the outstanding amount of all Funded Debt (as defined in the Business Combination Agreement) as of the Closing (other than Permitted Debt); provided that Seller may receive up to an additional $20,000,000 determined based on the amount of Remaining Cash (as defined in the Business Combination Agreement) at the Closing. The Closing Payment shall be funded by remaining funds in the Trust Account after giving effect to any Buyer Share Redemptions (as defined in the Business Combination Agreement) and the proceeds of any potential private placement financing.
In addition to the foregoing consideration, the Seller 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) 500,000 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) 500,000 Earnout Shares, if, during calendar year 2023, Adjusted EBITDA of New Forafric is equal to or greater than $33 million, and (C) 1,000,000 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 $16.50 for any 20 trading days within any period of 30 consecutive trading days.
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FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH31, 2022
(Continued)
Basisof Presentation - These condensed consolidated financial statements reflect the financial condition, results of operations and cash flows of the Company and have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).
The condensed consolidated financial statements and notes thereto are unaudited, and as permitted by the interim reporting rules and regulations set forth by the U.S. Securities and Exchange Commission (“SEC”), exclude certain financial information and note disclosures normally included in annual audited financial statements prepared in accordance with U.S. GAAP. The condensed consolidated financial statements reflect all material adjustments of a normal recurring nature that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2021.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SignificantAccounting Policies – The Company’s accounting policies used in the preparation of these condensed consolidated financial statements do not differ from those used in the audited consolidated financial statements as of and for the year ended December 31, 2021, unless otherwise noted.
Useof 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 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 and the impact of COVID-19, 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.
Principlesof Consolidation – The accompanying condensed consolidated financial statements include all entities controlled by the Company after reflecting the Restructuring previously described.
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 taken into account. The accounts of subsidiaries are included in the condensed consolidated financial statements from the date that control commences until the date that control ceases.
ForeignCurrency Translation and Transactions - The Company’s functional currency is the Moroccan dirham, 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 period. 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 income (loss).
GovernmentSubsidies – The Moroccan government provides certain subsidy programs based on production of affordable flour and import taxes. Subsidies are paid by the Moroccan government and are predicated on sales of flour and price of imported raw materials. The Company records the flour subsidies as a credit against the related costs that the subsidies were intended to offset in the same periods that the costs were incurred within the consolidated statement of operations. Outstanding government subsidies are included in other receivables on the balance sheet.
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FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH31, 2022
(Continued)
CreditRisk – 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.
The Company’s trade accounts receivable are unsecured and geographically dispersed. No single client’s trade accounts receivable balance as of March 31, 2022 and December 31, 2021 exceeded 10% of the Company’s consolidated accounts receivable, net.
VariableInterest Entities – Effective on October 7, 2021, the Company completed a share purchase acquisition of Moulins Sanabil SA (“Sanabil SA”) and has been since actively involved in their operations and has the power to direct the activities and significantly impact Sanabil SA’s economic performance. The Company also bears the risk of losses and has the right to receive 60% of the benefits from Sanabil SA. As such, in accordance with ASC 810-10-25-38A through 25-38J, Sanabil SA is considered a VIE of the Company and the financial statements of Sanabil SA were consolidated from the date that the control existed.
Effective on July 30, 2021, the Company completed a share purchase acquisition of Moulin du Sahel Burkina (“MDS Burkina”) and has since significant economic exposure to MDS Burkina. The Company also bears the risk of losses and has the right to receive 78.21% of the benefits from MDS Burkina. As such, in accordance with ASC 810-10-25-38A through 25-38J, MDS Burkina is considered a VIE of the Company and the financial statements of MDS Burkina were consolidated from the date that the control existed.
Effective on April 30, 2021, the Company completed a share purchase acquisition of MDS Mali and has been since actively involved in their operations and has the power to direct the activities and significantly impact MDS Mali’s economic performance. The Company also bears the risk of losses and has the right to receive 70.35% of the benefits from MDS Mali. As such, in accordance with Accounting Standards Codification (“ASC”) 810-10-25-38A through 25-38J, MDS Mali is considered a VIE of the Company and the financial statements of MDS Mali were consolidated from the date that the control existed.
EquityMethod Accounting – As of September 30, 2021, the Company owned 37.10% of the outstanding capital stock of Grands Moulins du Tenere Niger (“GMT Niger”) which was accounted for as an equity method investment. The Company applies the equity method of accounting for the investment, as the Company owns less than a 50% ownership interest and cannot exert significant influence. As such, this entity is not considered a variable interest entity. The equity method investment is included in other assets, noncurrent, on the accompanying consolidated balance sheets.
Non-ControllingInterests – Non-controlling interests on the consolidated statements of operations and comprehensive (loss) income represent the portion of a majority-owned subsidiary’s net income or loss that is attributed by non-controlling stockholders. Non-controlling interests on the consolidated balance sheets represent the portion of equity in a consolidated subsidiary owned by non-controlling stockholders.
3.RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance, which improves the transparency of government assistance received by most business entities by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity’s financial statements. This guidance is effective for the Company’s interim and annual reporting periods beginning after December 15, 2021. Refer to Note 6 for additional information disclosed by the Company.
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FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH31, 2022
(Continued)
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.
Supplemental balance sheet information related to leases was as follows:
| Balance Sheet | March 31, | December 31, | |||
|---|---|---|---|---|---|
| Classification | 2022 | 2021 | |||
| (in<br> thousands) | |||||
| Assets | |||||
| Operating leases | Right-of-use assets | $ | 1,795 | $ | 2,077 |
| Finance leases | Right-of-use assets | 13,595 | 14,282 | ||
| Total assets | $ | 15,390 | $ | 16,359 | |
| Liabilities | |||||
| Current liabilities | |||||
| Operating leases | Current portion of long-term debt | $ | 647 | $ | 685 |
| Finance<br> leases | Current portion of long-term<br> debt | 2,253 | 2,318 | ||
| Total current liabilities | 2,900 | 3,003 | |||
| Noncurrent liabilities | |||||
| Operating leases | Long-term debt | 1,299 | 1,529 | ||
| Finance<br> leases | Long-term debt | 2,228 | 2,923 | ||
| Total noncurrent liabilities | 3,527 | 4,452 | |||
| Total liabilities | $ | 6,427 | $ | 7,455 |
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.
DiscountRates
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:
| March 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Operating leases | 5.0 | % | 5.0 | % | ||
| Finance leases | 6.2 | % | 6.2 | % |
LeasePayments
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.
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FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH31, 2022
(Continued)
The weighted-average remaining lease term of the Company’s leases were as follows:
| March 31, | December 31, | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Operating leases | 6.4<br> years | 6.6<br> years | ||
| Finance leases | 1.8<br> years | 2.0<br> years |
The components of lease expense for the three months ended March 31, 2022 and 2021, were as follows:
| March 31, | March 31, | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| (in<br> thousands) | ||||
| Operating lease cost | $ | 202 | $ | 180 |
| Finance lease cost: | ||||
| Amortization of right-of-use<br> assets | 107 | 115 | ||
| Interest<br> on lease liabilities | 84 | 124 | ||
| Total lease cost | $ | 393 | $ | 419 |
As of March 31, 2022, future maturities of lease liabilities were as follows:
| Operating<br> Leases | Finance<br> Leases | |||||
|---|---|---|---|---|---|---|
| (in<br> thousands) | ||||||
| Remainder of 2022 | $ | 592 | $ | 1,908 | ||
| 2023 | 698 | 2,257 | ||||
| 2024 | 184 | 527 | ||||
| 2025 | 78 | - | ||||
| 2026 | 75 | - | ||||
| Thereafter | 746 | - | ||||
| Total lease payments | 2,373 | 4,692 | ||||
| Less: Interest | (427 | ) | (211 | ) | ||
| Present value of lease<br> liabilities | $ | 1,946 | $ | 4,481 |
Other information related to leases for the three months ended March 31, 2022 and 2021 were as follows:
| March 31, | March 31, | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| (in<br> thousands) | ||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||
| Operating cash<br> flows used for operating leases | $ | 202 | $ | 180 |
| Operating cash flows for<br> finance leases | $ | 107 | $ | 115 |
| Financing cash flows for<br> finance leases | $ | 84 | $ | 124 |
| 11 |
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FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH31, 2022
(Continued)
5.ACCOUNTS RECEIVABLE
The gross and realizable value of accounts receivable are detailed in the chart below:
| March 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| (in<br> thousands) | ||||||
| Accounts receivable | $ | 54,288 | $ | 48,050 | ||
| Allowance for credit<br> losses | (15,406 | ) | (15,737 | ) | ||
| Total | $ | 38,882 | $ | 32,313 |
Changes in allowances for credit losses consisted of:
| Allowance<br> for | |||
|---|---|---|---|
| Accounts<br> Receivable | |||
| (in thousands) | |||
| Balance at December 31, 2020 | (13,532 | ) | |
| Current period provision for expected credit<br> losses | (2,794 | ) | |
| Foreign currency exchange<br> adjustments | 589 | ||
| Balance at December<br> 31, 2021 | $ | (15,737 | ) |
| Current period provision for expected credit<br> losses | (315 | ) | |
| Foreign currency exchange<br> adjustments | 646 | ||
| Balance at March<br> 31, 2022 | $ | (15,406 | ) |
6.OTHER CURRENT RECEIVABLES
Other current receivables consist of:
| March 31, | December 31, | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| (in<br> thousands) | ||||
| Government subsidies | $ | 18,992 | $ | 18,824 |
| Value-added tax receivable | 3,848 | 3,916 | ||
| Advances to suppliers | 2,132 | 1,362 | ||
| Prepaid expenses | 2,629 | 2,712 | ||
| Other receivables | 5,777 | 5,208 | ||
| Total | $ | 33,378 | $ | 32,022 |
During the three months ended March 31, 2022, the Company received $9,367 in the aggregate of government subsidies for the production of affordable flour and relief from import tax on foreign sourced raw materials from the Moroccan government.
| 12 |
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FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH31, 2022
(Continued)
7.INVENTORIES, NET
Inventories, net, are detailed as follows:
| March 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| (in<br> thousands) | ||||||
| Merchandise | $ | 4,413 | $ | 9,244 | ||
| Raw materials and consumable supplies | 15,211 | 24,409 | ||||
| Finished products | 5,644 | 5,024 | ||||
| Inventory reserves | (1,058 | ) | (1,114 | ) | ||
| Total | $ | 24,210 | $ | 37,563 |
8.PROPERTY PLANT AND EQUIPMENT
| March 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| (in<br> thousands) | ||||||
| Land | $ | 24,145 | $ | 25,139 | ||
| Buildings | 58,005 | 60,384 | ||||
| Machinery and equipment | 54,232 | 56,275 | ||||
| Construction in progress | 6,119 | 5,417 | ||||
| Others | 10,532 | 10,863 | ||||
| Total | 153,033 | 158,078 | ||||
| Less accumulated depreciation | (45,702 | ) | (44,645 | ) | ||
| Foreign exchange difference | (2,095 | ) | (3,957 | ) | ||
| Total | $ | 105,236 | $ | 109,476 |
Depreciation expense was $1,117 and $852 for the three months ended March 2022 and 2021, respectively, included in cost of sales in the in the condensed consolidated statements of operations and comprehensive loss.
9.GOODWILL AND OTHER INTANGIBLE ASSETS
In connection with the establishment of reporting segments for each reporting period, the Company allocated goodwill between reporting units using a relative fair value allocation approach.
Goodwill on the balance sheet resulted from the acquisition of the following subsidiaries:
| - | Tria<br> Group and Maymouna Food Group acquired in 2015, |
|---|---|
| - | Sanabil<br> SA, MDS Burkina and MDS Mali acquired in 2021. |
| 13 |
| --- |
Changes in the carrying amount of goodwill allocated to its reporting units for the three months ended March 31, 2022 and the year ended December 31, 2021 are as follows:
| Soft | Durum | Couscous | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Wheat | Wheat | and<br> Pasta | Total | |||||||||
| (in<br> thousands) | ||||||||||||
| Balance at December 31, 2020 | $ | 31,058 | $ | 7,641 | $ | 9,373 | $ | 48,072 | ||||
| Business combinations | 5,607 | - | - | 5,607 | ||||||||
| Foreign currency exchange<br> adjustments | (1,471 | ) | (286 | ) | (351 | ) | (2,108 | ) | ||||
| Balance at December 31, 2021 | $ | 35,194 | $ | 7,355 | $ | 9,022 | $ | 51,571 | ||||
| Foreign currency exchange<br> adjustments | (1,325 | ) | (299 | ) | (367 | ) | (1,991 | ) | ||||
| Balance at March<br> 31, 2022 | $ | 33,869 | $ | 7,056 | $ | 8,655 | $ | 49,580 |
Changes in the carrying amount of intangible assets for the three months ended March 31, 2022 and the year ended December 31, 2021 are as follows:
| Intangible | |||
|---|---|---|---|
| Assets | |||
| (in thousands) | |||
| Balance at December 31, 2020 | $ | 363 | |
| Acquisitions | 3,915 | ||
| Amortization | (111 | ) | |
| Foreign currency exchange<br> adjustments | (192 | ) | |
| Balance at December<br> 31, 2021 | $ | 3,975 | |
| Acquisitions | - | ||
| Amortization | (28 | ) | |
| Foreign currency exchange<br> adjustments | (135 | ) | |
| Balance at March 31,<br> 2022 | $ | 3,812 |
As of March 31, 2022, the weighted-average remaining amortization period for intangibles other than goodwill is 15 years and future intangible amortization is expected to total the following:
| (in<br> thousands) | ||
|---|---|---|
| Remainder of 2022 | $ | 115 |
| 2023 | 253 | |
| 2024 | 253 | |
| 2025 | 253 | |
| Thereafter | 1,961 | |
| Total amortization | $ | 2,835 |
10.ACCRUED EXPENSES
Accrued expenses consist of:
| March 31, | December 31, | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| (in<br> thousands) | ||||
| Accrued government taxes | $ | 3,718 | $ | 8,647 |
| Accrued interest | 2,091 | 2,611 | ||
| Accrued salaries and benefits | 856 | 957 | ||
| Accruals to social agencies | 650 | 582 | ||
| Other accrued expenses | 256 | 265 | ||
| Total | $ | 7,571 | $ | 13,062 |
| 14 |
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FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH31, 2022
(Continued)
11.LINES OF CREDIT
Linesof 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 $60,000. Interest rates range from 5.6% to 6.4%. 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.
Linesof 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 $105,000, subject to certain borrowing base criteria. The Wheat Credit Facilities are secured by the Company’s inventory. Interest rates range from 1.4% to 6.4% 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:
| March 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| (in<br> thousands) | ||||||
| Convertible bonds | $ | 11,500 | $ | 500 | ||
| Loans | 13,017 | 17,019 | ||||
| Leases | 6,427 | 7,455 | ||||
| Total outstanding debt | 30,944 | 24,974 | ||||
| Less current portion | (9,653 | ) | (10,845 | ) | ||
| Total long-term debt | $ | 21,291 | $ | 14,129 |
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.
ConvertibleBonds
On December 31, 2021 the Company authorized the issuance of convertible bonds of up to $40,000 with an annual interest rate of 6.00% through June 15, 2026. As of March 31, 2022, the Company issued $11,500 in aggregate principal amount of 6.00% convertible bonds (the “Convertible Bonds”). The Convertible Bonds bear cash interest at a rate of 6.00% payable annually on each 12-month anniversary of the date of issuance and on the final redemption date of June 15, 2026, unless earlier redeemed or converted in accordance with the terms of the Convertible Bonds. The Convertible Bonds are unsecured obligations of the Company and are not transferable without the consent of the Company.
The Convertible Bonds will be redeemable, in whole or in part at the Company’s option at any time, and from time to time at a cash redemption price equal to the principal amount of the Convertible Bonds to be redeemed, plus accrued and unpaid interest without premium or penalty.
| 15 |
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FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH31, 2022
(Continued)
Pursuant to the terms of the Convertible Bonds, upon consummation of the Business Combination, the Convertible Bonds are subject to mandatory conversion into ordinary shares of New Forafric at a conversion price of $9.45 per share. The ordinary shares will be calculated by dividing the principal amount being converted, together with all accrued but unpaid interest thereon, but the conversion price of $9.45. The conversion price is subject to customary adjustments for stock dividends, stock splits, reclassifications, and the like, and is also subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances of common stock, or securities convertible, exercisable or exchangeable for, common stock at a price below the then-applicable conversion price (subject to certain exceptions).
The Convertible Bonds are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”) and ASC 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”). Under ASC 815-40, to qualify for equity classification (or nonbifurcation, if embedded) the instrument (or embedded feature) must be both (1) indexed to the issuer’s stock and (2) meet the requirements of the equity classification guidance. Based upon the Company’s analysis, it was determined the Convertible Bonds do contain embedded features indexed to its own stock, but do not meet the requirements for bifurcation and recognition as derivatives, and therefore do not need to be separately recognized. Accordingly, the proceeds received from the issuance of the Convertible Bonds were recorded as a single liability measured at amortized cost on the consolidated balance sheet.
TermLoans
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 $881. Interest on the Term Loans range from 5.8%-8.0% per annum. The Term Loans mature and will be fully repaid throughout 2022 and 2034.
LeaseObligations
The Company owes $6,427 and $7,455 related to its leases as of March 31, 2022 and December 31, 2021, respectively. Lease obligations are payable in monthly installments of principal and interest and are collateralized by the related assets financed. Refer to Note 5 for additional information regarding the Company’s leases.
The scheduled maturities of outstanding debt as of March 31, 2022 are as follows:
| (in<br> thousands) | ||
|---|---|---|
| Remainder of 2022 | 7,812 | |
| 2023 | 4,181 | |
| 2024 | 2,322 | |
| 2025 | 2,071 | |
| 2026 | 1,055 | |
| Thereafter | 13,503 | |
| Total outstanding debt | $ | 30,944 |
13.INCOME TAXES
The Company’s effective tax rate was -39% and 20% for the three months ended March 31, 2022 and 2021, 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 periods ended March 31, 2022 and December 31, 2021, the Company has $6,161 and $7,265, respectively, as unrecognized net operating losses.
In assessing the realizability of these deferred tax assets, management considers whether it is more-likely-than-not that some portion or all of 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.
The Company maintained a valuation allowance of $6,161 and $7,265 respectively as of March 31, 2022 and December 31, 2021 against its net operating losses.
| 16 |
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FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH31, 2022
(Continued)
14.VARIABLE INTEREST ENTITIES AND ACQUISITIONS
SanabilSA
Effective on October 7, 2021, the Company completed a share purchase acquisition of Moulins Sanabil SA (“Sanabil SA”). By way of the acquisition, the Company acquired a 60% stake in a wheat milling business in the region of Meknes, Morocco.
Pursuant to the terms of the agreement, the purchase price of the acquisition was $331, fully paid in cash.
The following table represents the final allocation of the purchase consideration among assets acquired and liabilities assumed at their estimated acquisition date fair values:
| Consideration paid: | |||
|---|---|---|---|
| Cash | $ | 332 | |
| Assumed debt | 6,548 | ||
| Noncontrolling<br> interest | 221 | ||
| Total<br> consideration paid | $ | 7,101 | |
| Net assets acquired: | |||
| Current assets | 4,665 | ||
| Current liabilities | (4,416 | ) | |
| Property, plant and<br> equipment | 5,413 | ||
| Tradename | 323 | ||
| Customer<br> relationship | 453 | ||
| Total net assets acquired | 6,438 | ||
| Goodwill | 663 | ||
| Total<br> consideration paid | $ | 7,101 |
The valuation of the acquired intangible assets is inherently subjective and relies on significant unobservable inputs. The Company used an income approach to value the acquired customer relationships intangible assets. The method used for the acquired trade name intangible assets was the Relief from Royalty Method. The valuation for each of these intangible assets was based on estimated projections of expected cash flows to be generated by the assets, discounted to the present value at discount rates commensurate with perceived risk. The valuation assumptions take into consideration the Company’s estimates of customer attrition and revenue growth projections. The Company is amortizing the identifiable intangible assets arising from the Sanabil SA acquisition in relation to the expected cash flows from the individual intangible assets over their respective useful lives, which have a weighted average life of 20 years (see Note 9). Goodwill represents Sanabil SA’s market presence and its experienced workforce as well as future potential to generate cash flows and other economic benefits and results from assets that are not separately identifiable as part of the transaction and is not deductible for tax purposes.
The Company incurred no material transaction costs for the acquisition of Sanabil SA.
The carrying amount of Sanabil SA’s assets and liabilities included in the consolidated financial statements are as follows at March 31, 2022 and December 31, 2021:
| March<br> 31, | December<br> 31, | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| (in<br> thousands) | (in<br> thousands) | |||
| Cash | $ | 2,035 | $ | 2,670 |
| Accounts receivable | 1,664 | 1,944 | ||
| Inventory | 539 | 936 | ||
| Other current assets | 2,762 | 3,950 | ||
| Property, plant, and equipment | 4,945 | 5,233 | ||
| Intangible assets | 728 | 777 | ||
| Goodwill | 621 | 636 | ||
| Total assets | $ | 13,294 | $ | 16,146 |
| Accounts payable | $ | 5,184 | $ | 3,896 |
| Other current liabilities | 1,727 | 6,807 | ||
| Long-term debt | 1,270 | 1,061 | ||
| Total liabilities | $ | 8,181 | $ | 11,764 |
| 17 |
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FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH31, 2022
(Continued)
ProForma information
The following unaudited pro forma information presents the impact of the results of operations of Sanabil SA on the Company revenue and net income for the three months ended March 31, 2022 and 2021 as if the Sanabil SA acquisition had been completed on January 1, 2021, with adjustments to give effect to pro forma events that are directly attributable to the Sanabil SA acquisition.
The unaudited pro forma information does not reflect any operating efficiencies or potential cost savings that may result from the consolidation of the operations of the Company and Sanabil SA. Accordingly, this unaudited pro forma information is presented for illustrative purposes and are not intended to represent or be indicative of the actual impact on the results of operations of the Company that would have been achieved had the Sanabil SA acquisition occurred at January 1, 2021, nor are they intended to represent or be indicative of impact on future results of operations:
| March<br> 31, | March<br> 31, | ||||
|---|---|---|---|---|---|
| 2022 | 2021 | ||||
| (in<br> thousands) | (in<br> thousands) | ||||
| Revenues | $ | 5,977 | $ | 5,064 | |
| Net income | $ | 87 | $ | (263 | ) |
MDSBurkina
Effective on July 30, 2021, the Company completed a share purchase acquisition of MDS Burkina. By way of the acquisition, the Company acquired a 78.21% stake in a wheat milling business in Burkina.
Pursuant to the terms of the agreement, the Company will provide financial investments to MDS Burkina in the form of a cash consideration for a total amount of $6,153 fully paid in cash as of March 31, 2022. The amount invested will be used first to recapitalize the company and finance working capital.
The Company thus agreed to fund MDS Burkina for operational cash flow needs and bear the risk of its losses from operations and MDA Burkina agrees that the Company has rights to 78.21% of MDS Burkina’s net profits, if any.
The following table represents the preliminary allocation of the purchase consideration among assets acquired and liabilities assumed at their estimated acquisition date fair values:
| Consideration paid: | |||
|---|---|---|---|
| Cash | $ | 6,153 | |
| Assumed debt | 7,348 | ||
| Noncontrolling<br> interest | 1,714 | ||
| Total<br> consideration paid | $ | 15,215 | |
| Net assets acquired: | |||
| Current assets | 4,559 | ||
| Current liabilities | (1,144 | ) | |
| Property,<br> plant and equipment | 9,970 | ||
| Total net assets acquired | 13,385 | ||
| Goodwill | 1,830 | ||
| Total<br> consideration paid | $ | 15,215 |
Goodwill represents MDS Burkina’s market presence and its experienced workforce as well as future potential to generate cash flows and other economic benefits and results from assets that are not separately identifiable as part of the transaction and is not deductible for tax purposes.
The Company incurred no material transaction costs for the acquisition of MDS Burkina.
| 18 |
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FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH31, 2022
(Continued)
The carrying amount of MDS Burkina’s assets and liabilities included in the consolidated financial statements are as follows at March 31, 2022 and December 31, 2021:
| March<br> 31, | December<br> 31, | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| (in<br> thousands) | (in<br> thousands) | |||
| Cash | $ | 1,825 | $ | 170 |
| Accounts receivable | 128 | 189 | ||
| Inventory | 565 | 1,038 | ||
| Other current assets | 224 | 2,126 | ||
| Property, plant, and equipment | 9,230 | 9,449 | ||
| Goodwill | 1,709 | 1,744 | ||
| Total assets | $ | 13,681 | $ | 14,716 |
| Accounts payable | $ | 355 | $ | 476 |
| Other current liabilities | 385 | 507 | ||
| Long-term debt | 4,955 | 6,621 | ||
| Total liabilities | $ | 5,695 | $ | 7,604 |
ProForma information
The following unaudited pro forma information presents the impact of the results of operations of MDS Burkina on the Company revenue and net income for the three months ended March 31, 2022 and 2021 as if the MDS Burkina acquisition had been completed on January 1, 2021, with adjustments to give effect to pro forma events that are directly attributable to the MDS Burkina acquisition.
The unaudited pro forma information does not reflect any operating efficiencies or potential cost savings that may result from the consolidation of the operations of the Company and MDS Burkina. Accordingly, this unaudited pro forma information is presented for illustrative purposes and are not intended to represent or be indicative of the actual impact on the results of operations of the Company that would have been achieved had the MDS Burkina acquisition occurred at January 1, 2021, nor are they intended to represent or be indicative of impact on future results of operations:
| March<br> 31, | March<br> 31, | |||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| (in<br> thousands) | (in<br> thousands) | |||||
| Revenues | $ | 1,132 | $ | - | ||
| Net loss | $ | (241 | ) | $ | (185 | ) |
MDSMali
Effective on April 30, 2021, the Company completed a share purchase acquisition of MDS Mali. By way of the acquisition, the Company acquired a 70.35% stake in a wheat milling business in Mali.
Pursuant to the terms of the agreement, the Company will provide financial investments to MDS Mali in the form of a cash consideration for a total amount of $9,579 fully paid in cash as of March 31, 2022. The amount invested will be used first to recapitalize the company and finance working capital.
| 19 |
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FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH31, 2022
(Continued)
The following table represents the final allocation of the purchase consideration among assets acquired and liabilities assumed at their estimated acquisition date fair values:
| Consideration paid: | |||
|---|---|---|---|
| Cash | $ | 9,579 | |
| Assumed debt | 9,723 | ||
| Noncontrolling<br> interest | 4,037 | ||
| Total<br> consideration paid | $ | 23,339 | |
| Net assets acquired: | |||
| Current assets | 16,715 | ||
| Current liabilities | (7,293 | ) | |
| Property, plant and<br> equipment | 8,289 | ||
| Tradename | 734 | ||
| Customer relationship | 1,760 | ||
| Other<br> intangible assets | 20 | ||
| Total net assets acquired | 20,225 | ||
| Goodwill | 3,114 | ||
| Total<br> consideration paid | $ | 23,339 |
The valuation of the acquired intangible assets is inherently subjective and relies on significant unobservable inputs. The Company used an income approach to value the acquired customer relationships intangible assets. The method used for the acquired trade name intangible assets was the Relief from Royalty Method. The valuation for each of these intangible assets was based on estimated projections of expected cash flows to be generated by the assets, discounted to the present value at discount rates commensurate with perceived risk. The valuation assumptions take into consideration the Company’s estimates of customer attrition and revenue growth projections.
The Company is amortizing the identifiable intangible assets arising from the MDS Mali acquisition in relation to the expected cash flows from the individual intangible assets over their respective useful lives, which have a weighted average life of 20 years (see Note 9).
Goodwill represents MDS Mali’s market presence and its experienced workforce as well as future potential to generate cash flows and other economic benefits and results from assets that are not separately identifiable as part of the transaction and is not deductible for tax purposes.
The Company incurred no material transaction costs for the acquisition of MDS Mali.
The carrying amount of MDS Mali’s assets and liabilities included in the consolidated financial statements are as follows at March 31, 2022 and December 31, 2021:
| March<br> 31, | December<br> 31, | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| (in<br> thousands) | (in<br> thousands) | |||
| Cash | $ | 1,545 | $ | 1,011 |
| Accounts receivable | 1,458 | 1,790 | ||
| Inventory | 4,223 | 3,132 | ||
| Other current assets | 4,006 | 7,571 | ||
| Property, plant, and equipment | 7,042 | 7,320 | ||
| Intangible assets | 2,228 | 2,287 | ||
| Goodwill | 2,861 | 2,919 | ||
| Total assets | $ | 23,363 | $ | 26,030 |
| Accounts payable | $ | 3,918 | $ | 4,493 |
| Other current liabilities | 1,128 | 1,017 | ||
| Long-term debt | 5,150 | 7,121 | ||
| Total liabilities | $ | 10,196 | $ | 12,631 |
| 20 |
| --- |
FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH31, 2022
(Continued)
ProForma information
The following unaudited pro forma information presents the impact of the results of operations of MDS Mali on the Company revenue and net income for the three months ended March 31, 2022 and 2021 as if the MDS Mali acquisition had been completed on January 1, 2021, with adjustments to give effect to pro forma events that are directly attributable to the MDS Mali acquisition.
The unaudited pro forma information does not reflect any operating efficiencies or potential cost savings that may result from the consolidation of the operations of the Company and MDS Mali. Accordingly, this unaudited pro forma information is presented for illustrative purposes and are not intended to represent or be indicative of the actual impact on the results of operations of the Company that would have been achieved had the MDS Mali acquisition occurred at January 1, 2021, nor are they intended to represent or be indicative of impact on future results of operations:
| March<br> 31, | March<br> 31, | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| (in<br> thousands) | (in<br> thousands) | |||
| Revenues | $ | 7,014 | $ | 2,909 |
| Net income | $ | 35 | $ | 8 |
Trigola
Effective on November 5, 2020, pursuant to an investment and shareholders agreement dated November 5, 2020, the Company entered into an agreement with Trigola, an entity incorporated in the Republic of Angola and owned by the Parent for a majority for a share in Trigola’s equity of 75%. Pursuant to the terms of the agreement, the Company will provide financial investments for the construction, commissioning and operation of a new industrial facility for the processing of wheat and the production of wheat flour, management services and other services on an exclusive basis in relation to Trigola’s business. The Company agrees to fund Trigola for operational cash flow needs and bear the risk of Trigola’s losses from operations and Trigola agreed that the Company has rights to 75% of Trigola’s net profits, if any.
The carrying amount of the Trigola’s assets and liabilities included in the consolidated financial statements are as follows at March 31, 2022 and December 31, 2021:
| March<br> 31, | December<br> 31, | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| (in<br> thousands) | (in<br> thousands) | |||
| Cash | $ | 303 | $ | 98 |
| Other current assets | 254 | 400 | ||
| Property, plant,<br> and equipment | 4,870 | 4,124 | ||
| Total assets | $ | 5,427 | $ | 4,622 |
| Accounts payable | $ | 5,067 | $ | 4,122 |
| Other current liabilities | 144 | 161 | ||
| Total liabilities | $ | 5,211 | $ | 4,283 |
The operating results of Trigola included in the consolidated financial statements are as follows for the three months ended March 31, 2022 and 2021:
| March<br> 31, | March<br> 31, | ||||
|---|---|---|---|---|---|
| 2022 | 2021 | ||||
| (in<br> thousands) | (in<br> thousands) | ||||
| Revenues | $ | - | $ | 155 | |
| Net loss | $ | (178 | ) | $ | 125 |
| 21 |
| --- |
FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH31, 2022
(Continued)
On September 30, 2021, the Company acquired 37.10% of the capital stock of GMT Niger headquartered in Niger, which is a non-operational wheat milling facility. The Company has accounted for this investment as an equity method investment. GMT Niger was non-operational for the three months ending March 31, 2022, as such, no gain or loss representing the Company’s portion of ownership was recorded.
15.EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the number of weighted average common shares outstanding during the reporting period. The Company’s weighted average number of shares outstanding used in calculating earnings per share are 120,000, for the periods ended March 31, 2022 and 2021, respectively. Because there was no activity to cause dilution in the weighted average common shares, basic and diluted earnings per share are disclosed together in each of the reporting periods.
16.COMMITMENTS AND CONTINGENCIES
In 2018, The Company entered into a five-year supply agreement with 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 until March 31, 2023. Millcorp is currently providing 100% of the Company’s imported grain needs. The purchases incurred were $37,031 and $59,539 for the three months ended March 31, 2022 and 2021, 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 March 31, 2022 and December 31, 2021.
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 March 31, 2022.
17.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 CODM.
The principal products that comprise each segment are as follows:
SoftWheat – The Soft Wheat segment includes the production and sale of soft wheat yielding flour that is used to make desserts and sauces.
DurumWheat - The Durum Wheat segment includes the production and sale of hard wheat yielding flour that is used to make pasta.
Couscousand 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). The accounting policies of the Company’s segments are the same as those described in the summary of significant accounting policies set forth in Note 2.
| 22 |
| --- |
FORAFRICAGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH31, 2022
(Continued)
Financial information relating to the Company’s reportable segments is as follows:
| March<br> 31, | March<br> 31, | ||||
|---|---|---|---|---|---|
| 2022 | 2021 | ||||
| (in<br> thousands) | |||||
| Sales to external customers: | |||||
| Soft Wheat | $ | 62,579 | $ | 40,191 | |
| Durum Wheat | 16,415 | 12,540 | |||
| Couscous & Pasta | 10,077 | 7,891 | |||
| Total | $ | 89,071 | $ | 60,622 | |
| Direct operating income (loss): | |||||
| Soft Wheat | 1,641 | 2,917 | |||
| Durum Wheat | (260 | ) | 895 | ||
| Couscous & Pasta | (772 | ) | 1,066 | ||
| Operating income | $ | 609 | $ | 4,878 |
GeographicInformation — The Company had net sales from customers outside of Morocco of approximately 11.7% (7.9% in Mali, 1.3% in Burkina and 2.5% in different other countries) and 3.5% of total consolidated net sales from continuing operations for the three months ended March 31, 2022 and 2021, respectively. 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:
| March<br> 31, | December<br> 31, | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| (in<br> thousands) | ||||
| Morocco | $ | 83,993 | $ | 88,479 |
| Burkina | 9,230 | 9,449 | ||
| Mali | 7,042 | 7,320 | ||
| Angola | 4,870 | 4,124 | ||
| Other | 101 | 104 | ||
| Total | $ | 105,236 | $ | 109,476 |
18.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.
Millcorp provides 100% of the imported grain to the Company. The purchases incurred were $37,031 and $59,539 for the three months ended March 31, 2022 and 2021, respectively.
The Company’s amounts due from related parties were $898 as of March 31, 2022 and 2021, respectively.
The Company maintains an interest-free loan with no maturity date to the sole stockholder of the Parent in the amount of $15,169 and $15,269 as of March 31, 2022 and December 31, 2021, respectively.
The Company has not entered into any significant transactions with other related parties.
19.SUBSEQUENT EVENTS
In preparing the consolidated financial statements through the March 31, 2022, the Company has evaluated subsequent events for recognition and disclosure through June 3, 2022, the date that these consolidated financial statements and accompanying notes were available for issuance.
| 23 |
| --- |
Exhibit99.2
UNAUDITEDPRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On June 9, 2022 (“Closing Date”), Globis consummated the previously announced business combination pursuant to a securities purchase agreement, dated December 19, 2021 (as amended, modified or waived from time to time, the “Business Combination Agreement”) which provides for the Business Combination (as defined below) between Globis and Forafric Agro Holdings Limited, a Gibraltar private company limited by shares (“FAHL”).
In accordance with the Business Combination Agreement, the consummation of the following series of separate transactions took place (collectively, the “Business Combination”): (i) Globis formed a new holding company, Globis NV Merger Corp., a Nevada corporation (“Globis Nevada”), which changed its jurisdiction of incorporation by transferring by way of a redomiciliation and domesticating as a Gibraltar private limited company known as “Forafric Global Limited” (the “Redomiciliation”) and, following the Redomiciliation, altered its authorized and issued share capital and thereafter re-registered as a Gibraltar public company limited by shares and changed its name to “Forafric Global PLC” (referred to herein as “New Forafric”); (ii) New Forafric formed a new wholly-owned subsidiary, Globis NV Merger 2 Corp., a Nevada corporation (“Merger Sub”); (iii) Globis merged with and into Merger Sub, with Merger Sub surviving (the “Merger”); (iv) an agent was appointed to act on behalf of Globis stockholders such that, subject to and immediately following the completion of the Merger, the agent entered into a contribution and subscription agreement with New Forafric (the “Contribution Agreement”) pursuant to which the issued and outstanding shares of common stock of Merger Sub issued pursuant to the Merger were exchanged (the “Exchange”), on a one-for-one basis, for ordinary shares, nominal value $0.001 per share, of New Forafric (the “Ordinary Shares”); and (v) New Forafric acquired 100% of the equity interests in FAHL from Lighthouse Capital Limited (“Seller”) and FAHL became a direct subsidiary of New Forafric.
The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X, as amended by the final rule, Release No. 33-10786, “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” and presents the combination of the historical financial information of Globis and FAHL adjusted to give effect to the Business Combination, the PIPE Investment, the Forward Puchase Agreements and the purchase of the Convertible Bonds.
The unaudited pro forma condensed combined balance sheet as of March 31, 2022 combines the unaudited historical consolidated balance sheet of Globis as of March 31, 2022 with the unaudited historical consolidated balance sheet of FAHL as of March 31, 2022, giving effect to the Business Combination, the PIPE Investment, the Forward Purchase Agreements and the purchase of the Convertible Bonds, as if each had been consummated as of that date.
The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2022 combines the unaudited historical consolidated statement of operations of Globis for the three months ended March 31, 2022 with the unaudited historical consolidated statement of operations of FAHL for the three months ended March 31, 2022, giving effect to the Business Combination, the PIPE Investment, the Forward Purchase Agreements and the purchase of the Convertible Bonds, as if each had been consummated as of January 1, 2021, the earliest period presented.
The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2021 combines the audited historical statement of operations of Globis for the year ended December 31, 2021 with the audited historical consolidated statement of operations of FAHL for the year ended December 31, 2021, giving effect to the Business Combination, the PIPE Investment, the Forward Purchase Agreements and the purchase of the Convertible Bonds, as if each had been consummated as of January 1, 2021, the earliest period presented.
The historical financial information has been adjusted to give pro forma effect to events that relate to material financing transactions consummated after March 31, 2022 and pro forma adjustments that are directly attributable to the Business Combination, the PIPE Investment, the Forward Purchase Agreements and the purchase of the Convertible Bonds. The adjustments presented on the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the Business Combination, the PIPE Investment, the Forward Purchase Agreements and the purchase of the Convertible Bonds.
The unaudited pro forma condensed combined financial information is for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience. Globis and FAHL have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies. This information should be read together with the following:
| ● | the<br> historical unaudited consolidated financial statements of Globis as of and for the three months ended March 31, 2022 and 2021; |
|---|---|
| ● | the<br> historical audited financial statements of Globis as of and for the year ended December 31, 2021; |
| ● | the<br> historical unaudited consolidated financial statements of FAHL as of and for the three months ended March 31, 2022 and 2021; |
| ● | the<br> historical audited consolidated financial statements of FAHL as of and for the years ended December 31, 2021 and December 31, 2020; |
| ● | the<br> sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Globis,”<br> and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of FAHL” and<br> other financial information included elsewhere in this Current Report on Form 8-K; and |
| ● | other<br> information relating to Globis and FAHL included in this Current Report on Form 8-K, including the Business Combination Agreement. |
Descriptionof the Business Combination
As a result of the Business Combination, the Seller received (i) 17,004,762 Ordinary Shares and (b) will be paid the principal sum of $20,000,000 together with interest on the outstanding amount from the Closing Date up to the date of payment (computed on the basis of a 360-day year consisting of twelve (12) months of thirty (30) days) accrued but unpaid thereon at the fixed per annum rate of 8%. The payment shall be made on the first anniversary of the Closing Date.
In addition to the foregoing consideration, the Seller 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) 500,000 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) 500,000 Earnout Shares, if, during calendar year 2023, Adjusted EBITDA of New Forafric is equal to or greater than $33 million, and (C) 1,000,000 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 $16.50 for any 20 trading days within any period of 30 consecutive trading days.
On June 9, 2022, substantially with the Closing, the sale of a number of ordinary shares of New Forafric at a purchase price of $10.50 per shares (the “the PIPE Shares”) was consummated, pursuant to which an accredited investor (the “PIPE Investor”) purchased an aggregate of 1,320,195 Ordinary Shares of New Forafric for total gross proceeds to New Forafric of approximately $13.9 million.
In connection with the Business Combination, between December 31, 2021 and January 3, 2022, investors (each a “Bond Investor”) subscribed for convertible bonds of FAHL, as issuer, in an aggregate principal amount of $11.5 million (the “FAHL Bonds”) in a private placement, issued pursuant to a Bond Subscription Deed (the “Bond Subscription Deed”), among FAHL, the Seller and the Bond Investors. Unless earlier converted or redeemed in accordance with the terms of the FAHL Bonds, the FAHL Bonds were to mature and be redeemed on June 15, 2026. Interest accrued on the FAHL Bonds at a rate of 6% per annum and the Bond Investors were entitled to certain customary information rights. Pursuant to the current terms of the FAHL Bonds, upon consummation of the Business Combination, the FAHL Bonds were novated to New Forafric and automatically converted into 1,248,426 Ordinary Shares of New Forafric (the “Bond Shares”) at a price per share of $9.45, which was a 10% discount to the PIPE Investment. The number of Ordinary Shares was equal to the quotient that results from dividing the aggregate principal amount of the respective FAHL Bond plus accrued but unpaid interest thereon by $9.45, subject to certain adjustments. The Bond Investors include affiliates Up and Up Capital, LLC and Globis SPAC LLC, the sponsors of Globis, who subscribed for an aggregate principal amount of $9 million of the FAHL Bonds, which converted into 977,659 Ordinary Shares of New Forafric.
AnticipatedAccounting Treatment
The Business Combination will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, Globis will be treated as the “acquired” company for accounting purposes and FAHL will be treated as the accounting acquirer. Accordingly, the Business Combination will be treated as the equivalent of FAHL issuing shares at the closing of the Business Combination for the net assets of Globis as of the closing date, accompanied by a recapitalization. The net assets of Globis will be stated at historical cost, with no goodwill or other intangible assets recorded.
FAHL has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:
| ● | FAHL’s<br> stockholders will have the largest voting interest in New Forafric under both the no redemption and maximum redemption scenarios; |
|---|---|
| ● | The<br> board of directors of the post-combination company has seven members, and FAHL stockholders have the ability to nominate at least<br> the majority of the members of the board of directors; |
| ● | FAHL’s<br> senior management is the senior management of the post-combination company; |
| ● | The<br> business of FAHL will comprise the ongoing operations of New Forafric; and |
| ● | FAHL<br> is the larger entity, in terms of substantive operations and employee base. |
Basisof Pro Forma Presentation
Included in the shares outstanding and weighted average shares outstanding as presented in the pro forma combined financial statements are the following:
| ● | An<br> aggregate of 17,004,762 combined company shares issued to the Seller; the PIPE Investment of $13.9 million in proceeds for the sale<br> of 1,320,195 PIPE Shares to PIPE Investor and 1,248,426 shares issued upon the conversion of the FAHL Bonds upon the consummation<br> of the Business Combination. |
|---|---|
| ● | The<br> Earnout Shares have not been included, as these have been deemed financial instruments to be issued upon the occurrence of contingent<br> earn out provisions. The Earnout Shares will be accounted for under ASC Topic 815-40, “Derivatives and Hedging”, pursuant<br> to which the Earnout Shares are considered to be indexed to the Company’s own stock and therefore will be classified as equity<br> instruments. |
The following presents the calculation of basic and diluted weighted average shares outstanding. The computation of diluted loss per share excludes the effect of (1) 2,000,000 Earnout Shares and (2) warrants to purchase 15,789,722 shares to be issued because the inclusion of any of these securities would be anti-dilutive.
| Weighted average shares calculation, basic and diluted | |
|---|---|
| Globis public shares | 1,887,464 |
| Globis Sponsor and director shares | 3,148,333 |
| Globis underwriter shares | 402,500 |
| PIPE Investor | 1,320,195 |
| Bond Investors | 1,248,426 |
| Conversion of Related Party Loans | 1,445,164 |
| Combined company shares issued in Business Combination | 17,004,762 |
| Weighted average shares outstanding | 26,456,844 |
UNAUDITEDPRO FORMA CONDENSED COMBINED BALANCE SHEET
Asof March 31, 2022
(inthousands)
| (A) | (B) | Transaction | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| FAHL | Globis | Accounting | Pro Forma | ||||||||||
| (Historical) | (Historical) | Adjustments | Combined | ||||||||||
| Assets | |||||||||||||
| Current assets: | |||||||||||||
| Cash and cash equivalents | $ | 21,081 | $ | - | $ | 118,467 | (1) | $ | 29,561 | ||||
| (99,009 | ) | (2) | |||||||||||
| 13,862 | (3) | ||||||||||||
| (4,313 | ) | (4) | |||||||||||
| 460 | (8) | ||||||||||||
| (4,787 | ) | (9) | |||||||||||
| (16,200 | ) | (10) | |||||||||||
| Restricted cash | 16,200 | (10) | 16,200 | ||||||||||
| Accounts receivable, net | 38,882 | - | - | 38,882 | |||||||||
| Amounts due from related party | 898 | - | - | 898 | |||||||||
| Other receivables | 33,378 | - | - | 33,378 | |||||||||
| Inventories | 24,210 | - | - | 24,210 | |||||||||
| Prepaid expenses and other current assets | 24 | 82 | 450 | (4) | 556 | ||||||||
| Total Current Assets | 118,473 | 82 | 25,130 | 143,685 | |||||||||
| Property, plant and equipment | 105,236 | - | - | 105,236 | |||||||||
| Right-of-use assets | 15,390 | - | - | 15,390 | |||||||||
| Goodwill | 49,580 | - | - | 49,580 | |||||||||
| Intangible assets, net | 3,812 | - | - | 3,812 | |||||||||
| Other assets, noncurrent | 1,171 | - | - | 1,171 | |||||||||
| Marketable securities held in Trust Account | - | 118,467 | (118,467 | ) | (1) | - | |||||||
| Total Assets | $ | 293,662 | $ | 118,549 | $ | (93,337 | ) | $ | 318,874 | ||||
| Liabilities and Stockholders’ Equity | |||||||||||||
| Current Liabilities | |||||||||||||
| Accounts payable and accrued expenses | $ | 42,825 | $ | 1,379 | $ | (50 | ) | (4) | $ | 63,856 | |||
| - | 20,000 | (5) | |||||||||||
| - | (298 | ) | (6) | ||||||||||
| Lines of credit - working capital | 59,507 | - | - | 59,507 | |||||||||
| Lines of credit - wheat inventories | 81,344 | - | - | 81,344 | |||||||||
| Contract liabilities | 1,705 | - | - | 1,705 | |||||||||
| Current portion of long-term debt | 9,653 | - | 9,653 | ||||||||||
| Promissory note - related party | - | 4,327 | 460 | (8) | - | ||||||||
| (4,787 | ) | (9) | |||||||||||
| Derivative liability | - | - | 3,320 | (10) | 3,320 | ||||||||
| Other liabilities | 1,601 | - | - | 1,601 | |||||||||
| Total current liabilities | 196,635 | 5,706 | 18,645 | 220,986 | |||||||||
| Long-term debt | 21,291 | - | (11,500 | ) | (6) | 9,791 | |||||||
| Loan from related party | 1,210 | - | - | 1,210 | |||||||||
| Stockholder loan | 15,169 | - | (15,169 | ) | (7) | - | |||||||
| Deferred tax liabilities | 18,032 | - | - | 18,032 | |||||||||
| Total Liabilities | 252,337 | 5,706 | (8,024 | ) | 250,019 | ||||||||
| Common stock subject to possible redemption | - | 118,450 | (118,450 | ) | (2) | - | |||||||
| Stockholders’ Equity | |||||||||||||
| Common stock | 120,000 | - | 2 | (2) | 26 | ||||||||
| 1 | (3) | ||||||||||||
| (120,000 | ) | (5) | |||||||||||
| 21 | (5) | ||||||||||||
| 1 | (6) | ||||||||||||
| - | - | 1 | (7) | ||||||||||
| Additional paid in capital | 19,439 | (2) | |||||||||||
| - | - | 13,861 | (3) | 151,317 | |||||||||
| 94,372 | (5) | ||||||||||||
| 11,797 | (6) | ||||||||||||
| 15,168 | (7) | ||||||||||||
| (3,320 | ) | (10) | |||||||||||
| Accumulated other comprehensive income | 1,012 | - | - | 1,012 | |||||||||
| Accumulated deficit | (87,002 | ) | (5,607 | ) | (3,813 | ) | (4) | (90,815 | ) | ||||
| 5,607 | (5) | ||||||||||||
| Non-controlling interest | 7,315 | - | - | 7,315 | |||||||||
| Total Stockholders’ Equity | 41,325 | (5,607 | ) | 33,137 | 68,855 | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | 293,662 | $ | 118,549 | $ | (93,337 | ) | $ | 318,874 |
UNAUDITEDPRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
ThreeMonths Ended March 31, 2022
(inthousands, except share and per share data)
| (A) | (B) | Transaction | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| FAHL | Globis | Accounting | Pro Forma | ||||||||||
| (Historical) | (Historical) | Adjustments | Combined | ||||||||||
| Revenue | $ | 89,071 | $ | - | $ | - | $ | 89,071 | |||||
| Cost of sales | 79,562 | - | - | 79,562 | |||||||||
| Gross profit | 9,509 | - | - | 9,509 | |||||||||
| Selling, general and administrative expenses | 8,900 | 1,066 | - | (1) | 9,966 | ||||||||
| Total operating expenses | 8,900 | 1,066 | - | 9,966 | |||||||||
| Operating income (loss) | 609 | (1,066 | ) | - | (457 | ) | |||||||
| Interest income | - | - | |||||||||||
| Interest expense | (2,580 | ) | - | (2,580 | ) | ||||||||
| Foreign exchange loss | (538 | ) | - | - | (538 | ) | |||||||
| Interest earned on marketable securities held in Trust Account | - | 10 | (10 | ) | (2) | - | |||||||
| Loss before taxes | (2,509 | ) | (1,056 | ) | (10 | ) | (3,575 | ) | |||||
| Income tax expense | (970 | ) | - | - | (3) | (970 | ) | ||||||
| Net loss | $ | (3,479 | ) | $ | (1,056 | ) | $ | (10 | ) | $ | (4,545 | ) | |
| Net income attributable to noncontrolling interest | (27 | ) | - | - | (27 | ) | |||||||
| Net loss attributable to the company | $ | (3,452 | ) | $ | (1,056 | ) | $ | (10 | ) | $ | (4,518 | ) | |
| Weighted average shares outstanding, basic and diluted | - | 15,050,833 | 11,406,011 | (4) | 26,456,844 | ||||||||
| Basic and diluted net loss per share | $ | - | $ | (0.07 | ) | $ | (0.17 | ) |
UNAUDITEDPRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YearEnded December 31, 2021
(inthousands, except share and per share data)
| (C) | **** | (D) | **** | Transaction | **** | **** | **** | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| FAHL | **** | Globis | **** | Accounting | **** | **** | Pro Forma | **** | |||||
| (Historical) | **** | (Historical) | **** | Adjustments | **** | **** | Combined | **** | |||||
| Revenue | $ | 261,679 | **** | $ | - | **** | $ | - | **** | **** | $ | 261,679 | **** |
| Cost<br> of sales | 219,311 | - | - | **** | 219,311 | ||||||||
| Gross profit | **** | 42,368 | **** | **** | - | **** | **** | - | **** | **** | **** | 42,368 | **** |
| Selling,<br> general and administrative expenses | 38,982 | 2,679 | 3,813 | (1) | 45,474 | ||||||||
| Total<br> operating expenses | 38,982 | 2,679 | 3,813 | **** | 45,474 | ||||||||
| Operating income (loss) | **** | 3,386 | **** | **** | (2,679 | ) | **** | (3,813 | ) | **** | **** | (3,106 | ) |
| Interest<br> income | 543 | - | - | **** | 543 | ||||||||
| Interest<br> expense | (10,362 | ) | - | **** | (10,362 | ) | |||||||
| Foreign<br> exchange loss | (1,440 | ) | - | - | **** | (1,440 | ) | ||||||
| Interest<br> earned on marketable securities held in Trust Account | - | 8 | (8 | ) | (2) | - | |||||||
| Loss before taxes | **** | (7,873 | ) | **** | (2,671 | ) | **** | (3,821 | ) | **** | **** | (14,365 | ) |
| Income<br> tax expense | 89 | - | - | (3) | 89 | ||||||||
| Net loss | $ | (7,784 | ) | $ | (2,671 | ) | $ | (3,821 | ) | **** | $ | (14,276 | ) |
| Net<br> income attributable to noncontrolling interest | 198 | - | - | 198 | |||||||||
| Net loss attributable to the company | $ | (7,982 | ) | $ | (2,671 | ) | $ | (3,821 | ) | **** | $ | (14,474 | ) |
| Weighted<br> average shares outstanding, basic and diluted | - | 15,050,833 | 11,406,011 | (4) | 26,456,844 | ||||||||
| Basic and diluted net loss per share | $ | - | **** | $ | (0.18 | ) | **** | **** | **** | **** | $ | (0.54 | ) |
NOTESTO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
| 1. | Basis of Presentation |
|---|
The unaudited pro forma condensed combined financial information has been adjusted to give effect to transaction accounting adjustments related to the Business Combination linking the effects of the Business Combination to the historical financial information.
The Business Combination will be accounted for as a reverse recapitalization in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 805, Business Combinations. Globis has been determined to be the accounting acquirer under both the no redemption and the maximum redemption scenarios. Under the reverse recapitalization model, the Business Combination will be treated as FAHL issuing equity for the net assets of Globis, with no goodwill or intangible assets recorded.
The pro forma adjustments have been prepared as if the Business Combination had been consummated on March 31, 2022, in the case of the unaudited pro forma condensed combined balance sheet, and on January 1, 2021, the beginning of the earliest period presented, in the case of the unaudited pro forma condensed combined statements of operations.
The pro forma combined balance sheet as of March 31, 2022 has been prepared using the following:
| ● | FAHL’s<br> historical unaudited consolidated balance sheet as of March 31, 2022, included as an Exhibit in this Form 8-K. |
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| ● | Globis’<br> historical unaudited consolidated balance sheet as of March 31, 2022, included in Globis’ Quarterly Report on Form 10-Q filed<br> on May 15, 2022. |
The pro forma combined statement of operations for the three months ended March 31, 2022 has been prepared using the following:
| ● | FAHL’s<br> historical unaudited consolidated statement of operations for the three months ended March 31, 2022 and 2021, included as an Exhibit<br> in this Form 8-K. |
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| ● | Globis’<br> historical unaudited consolidated statement of operations for the three months ended March 31, 2022 and 2021, included in Globis’<br> Quarterly Report on Form 10-Q filed on May 15, 2022. |
The pro forma combined statement of operations for the year ended December 31, 2021 has been prepared using the following:
| ● | FAHL’s<br> historical consolidated statement of operations for the year ended December 31, 2021 and 2020, included in Globis’proxy statement/prospectus<br> filed on May 12, 2022. |
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| ● | Globis’<br> historical statement of operations for the year ended December 31, 2021, included in Globis’proxy statement/prospectus filed<br> on May 12, 2022. |
The adjustments presented in the unaudited pro forma condensed combined financial information have been identified and presented to provide relevant information necessary for an accurate understanding of New Forafric after giving effect to the Business Combination. Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.
The pro forma adjustments reflecting the consummation of the Business Combination are based on certain currently available information and certain assumptions and methodologies that management believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. Management believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination based on information available to management at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the post-combination company. They should be read in conjunction with the historical financial statements and notes thereto of FAHL and Globis.
Unaudited Condensed Combined Pro Forma Adjustments to the Balance Sheet
(inthousands, except share and per share data)
| 2. | Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2022 |
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The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.
The Transaction Accounting Adjustments included in the unaudited pro forma condensed combined balance sheet as of March 31, 2022 are as follows:
| (A) | Derived<br> from the unaudited consolidated balance sheet of FAHL as of March 31, 2022. |
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| (B) | Derived<br> from the unaudited consolidated balance sheet of Globis as of March 31, 2022. |
| (1) | To<br> reflect the release of cash from marketable securities held in the Trust Account. |
| --- | --- |
| (2) | To<br> reflect (a) the redemption of 9,612,536 shares of common stock for cash payment of $99.0 million and (b) the reclassification of<br> 1,887,464 shares of common stock subject to redemption to permanent equity for stockholders who did not exercise their redemption<br> rights. |
| (3) | To<br> reflect proceeds received of $13.9 million from the PIPE Investor in exchange for the issuance of 1,320,195 PIPE Shares at a price<br> of $10.50 per share. The PIPE Shares represent 5% of all issued and outstanding ordinary shares. |
| (4) | To<br> reflect the payment of an aggregate of $4.3 million of legal, financial advisory and other professional fees related to the Business<br> Combination, the prepayment of $0.45 million of directors and officers’ insurance premium and the payment of $0.05 million<br> of accounts payable and accrued expenses. The direct, incremental costs of the Business Combination related to the legal, financial<br> advisory, accounting and other professional fees of approximately $3.8 million is reflected as an adjustment to accumulated deficit. |
| (5) | To<br> reflect the recapitalization of FAHL through (a) the contribution of all the share capital in FAHL to New Forafric ordinary shares<br> (b) the issuance of 17,004,762 New Forafric shares, (c) the elimination of the historical accumulated deficit of Globis of $5.6 million,<br> the legal acquiree, (d) the obligation to pay the Seller a cash payment of $20.0 million. |
| (6) | Reflects<br> the conversion of the $11.5 million in FAHL Bonds, along with accrued interest of $0.3 million, into 1,248,426 ordinary shares of<br> New Forafric at $9.45 per share. |
| (7) | Reflects<br> the conversion of the $15.2 million in FAHL stockholder loans into 1,445,164 ordinary shares of New Forafric at $10.50 per share. |
| (8) | Reflects<br> the additional funds received under the promissory note from related parties in the aggregate amount of $0.46 million. |
| (9) | Reflects<br> the repayment of the promissory note due to related parties in the aggregate amount of $4.8 million. |
| (10) | Reflects<br> the establishment of an escrow account ($16.2 million) and a derivative liability ($3.3 million) for New Forafric’s contingent<br> obligation to purchase 1,500,000 Ordinay Shares at $10.80 from certain shareholders, if those shares are not sold in the open market<br> during the three-month period from the close of the Business Combination. |
UnauditedCondensed Combined Pro Forma Adjustments to the Statements of Operations
(inthousands, except share and per share data)
| 3. | Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations for the Three and Twelve Months Ended March 31, 2022 and December 31, 2021 |
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The transaction accounting adjustments included in the unaudited pro forma condensed combined statements of operations for the three and twelve months ended March 31, 2022 and December 31, 2021 are as follows:
| (A) | Derived<br> from the unaudited consolidated statement of operations of FAHL for the three months ended March 31, 2022. |
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| (B) | Derived<br> from the unaudited consolidated statement of operations of Globis for the three months ended March 31, 2022. |
| (C) | Derived<br> from the audited consolidated statement of operations of FAHL for the year ended December 31, 2021. |
| (D) | Derived<br> from the audited statement of operations of Globis for the twelve months ended December 31, 2021. |
| (1) | Represents<br> an adjustment to eliminate the effect of the pro forma balance sheet adjustment presented in Entry #2(4) above in the aggregate amount<br> of $3.8 million for the direct, incremental costs of the Business Combination, assuming those adjustments were made as of the beginning<br> of the fiscal year presented. |
| (2) | Represents<br> an adjustment to eliminate interest income on marketable securities held in the trust account as of the beginning of the period. |
| (3) | Although<br> the blended statutory rate for the redomesticated entity post business combination would be 21%, the consolidated combined pro forma<br> information under both scenarios results in a net loss for tax purposes. As such, a full valuation allowance has been applied resulting<br> in no adjustment. |
| (4) | The<br> calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that Globis’ initial public<br> offering occurred as of the beginning of the earliest period presented. In addition, as the Business Combination is being reflected<br> as if it had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic<br> and diluted net loss per share assumes that the shares have been outstanding for the entire period presented. This calculation is<br> retroactively adjusted to eliminate the number of shares redeemed for the entire period. |
| 4. | Net Loss per Share |
Represents the net loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination and related transactions, assuming the shares were outstanding since January 1, 2021. As the Business Combination and related transactions are being reflected as if they had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issued in connection with the Business Combination have been outstanding for the entire period presented.
The unaudited pro forma condensed combined financial information has been prepared assuming two alternative levels of redemption of Globis’ public shares:
| Three Months Ended March 31, 2022 | |||
|---|---|---|---|
| Net loss | $ | (4,518 | ) |
| Weighted average shares outstanding – basic and diluted | 26,456,844 | ||
| Basic and diluted net loss per share | $ | (0.17 | ) |
| Year Ended December 31, 2021 | |||
| Net loss | $ | (14,276 | ) |
| Weighted average shares outstanding – basic and diluted | 26,456,844 | ||
| Basic and diluted net loss per share | $ | (0.54 | ) |
| Weighted average shares calculations, basic and diluted | |||
| --- | --- | ||
| Globis public shares | 1,887,464 | ||
| Globis initial stockholders’ | 3,148,333 | ||
| Globis underwriters | 402,500 | ||
| PIPE Investor | 1,320,195 | ||
| Bond Investors | 1,248,426 | ||
| Conversion of Related Party Loans | 1,445,164 | ||
| FAHL stockholders | 17,004,762 | ||
| Weighted average shares outstanding – basic and diluted | 26,456,844 |