Forafric Global PLC 6-K, filed Dec 12, 2023

Forafric Global PLC (AFRI)

6-K 2023-12-12 For: 2023-12-12

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Forafric Global PLC filed this 6-K on December 12, 2023.

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	(1)	the unaudited condensed interim consolidated financial statements and related notes as Exhibit 99.1;

	(2)	Management’s Discussion and Analysis of Financial Condition and Results of Operations as Exhibit 99.2;

99.1		Unaudited Consolidated Financial Statements and Related Notes as of June 30, 2023 and December 31, 2022 and for the Six Months Ended June 30, 2023 and 2022
99.2		Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Forafric Global PLC

Date: December 12, 2023	By:	/s/ Saad Bendidi
	Name:	Saad Bendidi
	Title:	Chairman and Director
		(Principal Executive Officer)

		Page(s)

Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets		2

Condensed Consolidated Statements of Operations and Comprehensive Loss		3

Condensed Consolidated Statements of Changes in Stockholders’ Equity		4

Condensed Consolidated Statements of Cash Flows		5

Notes to Condensed Consolidated Financial Statements		6-21

	June 30,			December 31,
	2023			2022
	UNAUDITED			AUDITED
ASSETS
Current assets:
Cash and cash equivalents	$	25,155		$	24,827
Accounts receivable, net of allowance for credit losses of $15,277 and $14,067, respectively		30,444			30,858
Amount due from related parties		2,444			2,366
Other receivables		24,294			41,958
Inventories, net		66,471			27,218
Prepaid expenses and other current assets		16,540			16,345
Total current assets		165,348			143,572
Property, plant, and equipment, net		107,427			100,527
Right-of-use assets		12,185			10,430
Goodwill		48,298			45,898
Intangible assets, net		3,867			3,723
Other assets, noncurrent		4,511			3,014
Total assets	$	341,636		$	307,164

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Lines of credit – working capital	$	50,417		$	46,954
Lines of credit – wheat inventories		139,746			137,457
Accounts payable		65,426			27,295
Accrued expenses		17,881			18,974
Contract liabilities		796			540
Current portion of long-term debt		6,031			5,417
Forward currency contracts liability		1,614			-
Contingent consideration liability		1,268			1,260
Other liabilities, current		213			284
Total current liabilities		283,392			238,181
Long-term debt		9,237			9,828
Loan from related party		1,399			1,801
Deferred tax liabilities		13,218			12,399
Other liabilities		27			-
Total liabilities		307,273			262,209
Commitments and contingencies (Note 19)

Stockholders’ equity:
Preferred Shares; $0.001 par value; 1,000,000 authorized, — and — issued and outstanding, at June 30, 2023 and December 31, 2022, respectively	$	-		$	-
Ordinary shares, $0.001 par value; 100,000,000 authorized; 26,879,202 and 26,879,102 issued and outstanding, at June 30, 2023 and December 31, 2022, respectively		27			27
Class Z ordinary shares, $0.001 par value; 30,000,000 authorized; — and 29,999,990 issued and outstanding, at June 30, 2023 and December 31, 2022, respectively		-			30
Additional paid-in capital		143,693			143,658
Accumulated deficit		(111,300	)		(102,678	)
Accumulated other comprehensive loss		(5,272	)		(2,984	)
Non-controlling interest		7,215			6,902
Total Stockholders’ equity		34,363			44,955
Total liabilities and Stockholders’ equity	$	341,636		$	307,164

	Six months ended
	June 30,			June 30,
	2023			2022

Revenues	$	145,616		$	154,992
Cost of sales		131,969			139,881
Gross profit		13,647			15,111

Operating expenses:
Selling, general and administrative expenses		15,024			14,696
Total operating expenses		15,024			14,696
Operating (loss) income		(1,377	)		415
Other expense (income):
Interest income		(55	)		-
Interest expense		6,529			4,857
Change in fair value of derivatives and contingent consideration		1,579			405
Foreign exchange (gain) loss		(1,500	)		1,913
Total other expense		6,553			7,175
Loss before taxes		(7,930	)		(6,760	)
Income tax expense		646			1,605
Net loss		(8,576	)		(8,365	)
Net income (loss) attributable to noncontrolling interest		46			(120	)
Net loss attributable to the Company	$	(8,622	)	$	(8,245	)

Loss per ordinary shares outstanding – basic and diluted	$	(0.32	)	$	(0.39	)

Weighted average number of shares outstanding - basic and diluted		26,879,114			21,566,289

Net loss		(8,576	)		(8,365	)
Other comprehensive loss net of tax:
Foreign currency translation adjustments		(2,021	)		(6,517	)
Total other comprehensive loss		(2,021	)		(6,517	)
Comprehensive loss		(10,597	)		(14,882	)
less: Comprehensive income (loss) attributable to non-controlling interest		313			(751	)
Comprehensive loss attributable to the Company	$	(10,910	)	$	(14,131	)

	Ordinary shares				Class Z Ordinary shares						Additional paid-in			Accumulated			Accumulated Other Comprehensive			Non-Controlling			Total Stockholders’
	Shares		Amount		Shares			Amount			capital			Deficit			Income (Loss)			Interest			Equity

Balance, January 1, 2022		20,555,595	$	21		-		$	-		$	119,979		$	(83,550	)	$	3,685		$	7,517		$	47,652
Merger and recapitalization		6,256,055		6		29,999,990			30			31,221			-			-			-			31,227
Transaction costs		-		-		-			-			(2,606	)		-			-			-			(2,606	)
Derivative liability for forward purchase agreement		-		-		-			-			(4,685	)		-			-			-			(4,685	)
Net loss		-		-		-			-			-			(8,245	)		-			(120	)		(8,365	)
Foreign exchange loss		-		-		-			-			-			-			(5,886	)		(631	)		(6,517	)
Balance, June 30, 2022		26,811,650	$	27		29,999,990		$	30		$	143,909		$	(91,795	)	$	(2,201	)	$	6,766		$	56,706

Balance, January 1, 2023		26,879,102	$	27		29,999,990		$	30		$	143,658		$	(102,678	)	$	(2,984	)	$	6,902		$	44,955
Shares repurchased and retired		-		-		(29,999,990	)		(30	)		-			-			-			-			(30	)
Shares issued upon exercise of warrants		100		-		-			-			1			-			-			-			1
Share-based compensation		-		-		-			-			34			-			-			-			34
Net (loss) income		-		-		-			-			-			(8,622	)		-			46			(8,576	)
Foreign exchange (loss) gain		-		-		-			-			-			-			(2,288	)		267			(2,021	)
Balance, June 30, 2023		26,879,202	$	27		-		$	-		$	143,693		$	(111,300	)	$	(5,272	)	$	7,215		$	34,363

	-	Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

	-	Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

	-	Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

		June 30,		December 31,
	Balance Sheet	2023		2022
	Classification	(in thousands)
Assets
Operating leases	Right-of-use assets	$	3,036	$	1,816
Finance leases	Right-of-use assets		9,149		8,614
Total assets		$	12,185	$	10,430

Liabilities
Current liabilities
Operating leases	Current portion of long-term debt	$	1,507	$	621
Finance leases	Current portion of long-term debt		642		1,380
Total current liabilities			2,149		2,001
Noncurrent liabilities
Operating leases	Long-term debt		970		665
Finance leases	Long-term debt		370		235
Total noncurrent liabilities			1,340		900
Total liabilities		$	3,489	$	2,901

	Allowance for
	Credit Losses
	(in thousands)
Balance at December 31, 2021	$	(15,737	)
Current period provision for expected credit losses		(150	)
Foreign currency exchange adjustments		1,820
Balance at December 31, 2022	$	(14,067	)
Current period provision for expected credit losses		(413	)
Foreign currency exchange adjustments		(797	)
Balance at June 30, 2023	$	(15,277	)

	Soft			Durum			Couscous
	Wheat			Wheat			and Pasta			Total
	(in thousands)
Balance at December 31, 2021	$	35,194		$	7,355		$	9,022		$	51,571
Foreign currency exchange adjustments		(3,784	)		(848	)		(1,041	)		(5,673	)
Balance at December 31, 2022	$	31,410		$	6,507		$	7,981		$	45,898
Foreign currency exchange adjustments		1,591			363			446			2,400
Balance at June 30, 2023	$	33,001		$	6,870		$	8,427		$	48,298

	Trade			Customer			Other			Total Intangible
	names			relationships			intangibles			Assets
	(in thousands)
Balance at December 31, 2021	$	1,011		$	2,041		$	923		$	3,975
Acquisitions		-			-			262			262
Amortization		-			(90	)		(53	)		(143	)
Foreign currency exchange adjustments		(84	)		(155	)		(132	)		(371	)
Balance at December 31, 2022	$	927		$	1,796		$	1,000		$	3,723
Acquisitions		-			-			71			71
Amortization		-			(36	)		(32	)		(68	)
Foreign currency exchange adjustments		28			47			66			141
Balance at June 30, 2023	$	955		$	1,807		$	1,105		$	3,867

	(in thousands)
Remainder of 2023	$	256
2024		256
2025		256
2026		256
2027		256
Thereafter		1,632
Total amortization	$	2,912

	(in thousands)
Remainder of 2023	$	3,268
2024		3,831
2025		2,799
2026		2,331
2027		1,728
Thereafter		1,311
Total outstanding debt	$	15,268

	(in thousands)
June 9, 2022	$	1,308
Change in fair value		(48	)
December 31, 2022	$	1,260
Change in fair value		8
June 30, 2023	$	1,268

	June 30,
	2023		2022
	(in thousands)
Operating lease cost	$	246	$	342
Finance lease cost:
Amortization of right-of-use assets		242		214
Interest on lease liabilities		36		157
Total lease cost	$	524	$	713

	Operating Leases			Finance Leases
	(in thousands)
Remainder of 2023	$	344		$	681
2024		622			229
2025		495			103
2026		464			83
2027		447			65
Thereafter		428			19
Total lease payments		2,800			1,180
Less: Interest		(323	)		(168	)
Present value of lease liabilities	$	2,477		$	1,012

	June 30,		December 31,
	2023		2022
	(in thousands)
Merchandise	$	1,004	$	825
Raw materials and consumable supplies		60,133		21,537
Finished Goods		5,334		4,856
Total	$	66,471	$	27,218

	June 30,			December 31,
	2023			2022
	(in thousands)
Land	$	25,321		$	23,988
Buildings		58,517			55,542
Machinery and equipment		55,471			51,374
Assets in progress		10,968			8,458
Others		9,224			8,679
Total		159,500			148,041
Less accumulated depreciation		(52,073	)		(47,514	)
Total	$	107,427		$	100,527

	2023		2022
Current	$	522	$	1,366
Deferred		124		239
Total income tax (benefit) expense	$	646	$	1,605

	-	at any time while the warrants are exercisable;
	-	upon not less than 30 days’ prior written notice of redemption to each warrant holder;
	-	if, and only if, the reported last sale price of the Ordinary Share equals or exceeds $16.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30-day trading period ending on the third business day prior to the notice of redemption to warrant holders, and
	-	if, and only if, there is a current registration statement in effect with respect to the Ordinary Share underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption.

	Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (thousands)
Outstanding as of December 31, 2022		-	$	-		-	$	-
Granted		64,705		0.001		9.88		712
Exercised		-		-		-		-
Forfeited/Expired		-		-		-		-
Outstanding as of June 30, 2023		64,705	$	0.001		9.88	$	712
Exercisable as of June 30, 2023		-	$	-		-	$	-

Expected term	5 years
Volatility	3.52	%
Expected dividend yield	0.00	%
Risk-free interest rate	62.39	%

	Phantom Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (thousands)
Outstanding as of December 31, 2022		-	$	-		-	$	-
Granted		53,613		0.001		9.89		588
Exercised		-		-		-		-
Forfeited/Expired		-		-		-		-
Outstanding as of June 30, 2023		53,613	$	0.001		9.89	$	588
Exercisable as of June 30, 2023		-	$	-		-	$	-

	Six months ended June 30,
	2023			2022
	(in thousands)
Sales to external customers:
Soft Wheat	$	105,386		$	115,856
Durum Wheat		25,347			22,316
Couscous & Pasta		14,883			16,820
Total	$	145,616		$	154,992
Direct Operating (loss) income:
Soft Wheat	$	(187	)	$	2,884
Durum Wheat		(225	)		(653	)
Couscous & Pasta		(965	)		(1,816	)
Operating (loss) income	$	(1,377	)	$	415

	●	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 economies and/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 and availability of financial incentives.

	●	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.

	Six months ended June 30,
In thousands of USD	2023			2022			$ Change

Revenues	$	145,616		$	154,992		$	(9,376	)
Cost of sales		131,969			139,881			(7,912	)
Gross profit		13,647			15,111			(1,464	)
Operating expenses:
Selling, general and administrative expenses		15,024			14,696			328
Total operating expenses		15,024			14,696			328
Operating income		(1,377	)		415			(1,792	)
Other expense (income):
Interest income		(55	)					(55	)
Interest expense		6,529			4,857			1,672
Change in fair value of derivative		1,579			405			1,174
Foreign exchange loss		(1,500	)		1,913			(3,413	)
Total other expense		6,553			7,175			(622	)
Loss before income taxes		(7,930	)		(6,760	)		(1,170	)
Income tax expense		646			1,605			(959	)
Net loss	$	(8,576	)	$	(8,365	)	$	(211	)

Assets		Useful Lives
Buildings		39 years
Machinery and equipment (technical installations)		30-50 years
Other assets		5-30 years

Assets		Useful Lives
Trademarks		Indefinite
Customer relationships		20 years
Patents and licenses		5-10 years
Computer software		5-10 years
Other intangible assets		3-10 years